FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1994 OR
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from Not Applicable to
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Commission file number 0-17840
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HANDEX ENVIRONMENTAL RECOVERY, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 22-2941704
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(State of other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
500 Campus Drive, Morganville, New Jersey 07751
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 536-8500
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
Not Applicable -----------------------------------------
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Not Applicable -----------------------------------------
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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Title of Class
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Title of Class
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.
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The aggregate market value of the Common Stock held by non-affiliates of the
Registrant as of March 1, 1995 was approximately $24,802,968, computed on the
basis of the last reported sales price per share ($7.25) of such stock on the
NASDAQ National Market System.
The number of shares of the Registrant's Common Stock outstanding as of March 1,
1995 was 6,865,212.
DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE
Part of Form 10-K Documents Incorporated
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Part III (Items 10, 11, 12 and 13) by Reference
Portions of the Registrant's definitive
Proxy Statement to be used in connection
with its Annual Meeting of Stockholders
to be held on May 9, 1995
HANDEX ENVIRONMENTAL RECOVERY, INC.
INDEX TO ANNUAL REPORT
ON FORM 10K
PART I
Item 1. Business
General 1
Environmental
Services 2
Customers and Marketing 3
Competition 4
Environmental Legislation 4
Permits, Licenses and Regulatory Approval 5
Insurance 5
Employees 5
Educational
Wholly-owned centers and franchising 6
Services 6
Customers 6
Marketing 7
Competition 7
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Registrant's Common Equity
and Related Shareholder Matters 9
Item 6. Selected Consolidated Financial Data 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 16
PART III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
+Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8K 16
SIGNATURES 18
PART I
ITEM 1. BUSINESS
GENERAL
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On August 15, 1994, a newly organized subsidiary of Handex Environmental
Recovery, Inc. ("Company"), New Horizons Education Corporation, acquired all of
the issued and outstanding shares of New Horizons Franchising, Inc.
Simultaneously, a newly organized subsidiary of New Horizons Education
Corporation, acquired substantially all of the assets of New Horizons Computer
Learning Center, Inc. As a result of these acquisitions, the Company now
conducts two distinct lines of business and will report its results in two
segments, environmental and educational. The acquisitions mark the Company's
first step towards diversification outside its core environmental business.
The discussion that follows and note 10 to the consolidated financial statements
(see Item 8) highlight the business conditions and certain financial information
specific to each of the two business segments.
ENVIRONMENTAL BUSINESS SEGMENT
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The Company, through subsidiaries of a newly organized subsidiary, Handex
Environmental, Inc., (collectively "Handex Environmental") provides a
comprehensive solution to hydrocarbon contamination of groundwater and soil due
to leaking underground storage tanks, petroleum distribution systems and related
contamination sources. Handex Environmental's full service approach addresses
the entire remediation process, from detection and delineation to recovery and
treatment. Specific services include detailed site assessments, analysis of
groundwater and soil contamination, development and installation of on-site
recovery systems, permitting services, maintenance and monitoring of recovery
systems and complete documentation of all services and systems. Handex
Environmental also provides environmental dewatering services to petroleum
producers and suppliers. In late 1988 Handex Environmental introduced
environmental site assessment services at industrial sites, primarily in the
State of New Jersey. During 1990, Handex Environmental also increased its
capability to perform other types of remediation projects through the
acquisition of sludge dewatering equipment.
Handex Environmental's primary clients continue to be the major petroleum
companies which store petroleum products in underground storage tanks. While
the bulk of Handex Environmental's underground storage tank and related services
remained concentrated at retail gasoline stations during the fiscal year ended
December 31, 1994 ("1994"), Handex Environmental continued to pursue and
obtained additional work at bulk petroleum storage terminals, refineries and
industrial sites. During 1994, Handex Environmental performed services on over
100 terminals, pipelines and refineries which generated gross revenues of
approximately $5,600,000. Handex Environmental intends to continue its marketing
efforts in these directions.
Through 1991, Handex Environmental's net operating revenues grew
substantially while it operated primarily in New Jersey, Florida, New England,
Maryland and surrounding states. In 1990, Handex Environmental opened area
offices in eastern Pennsylvania, Virginia and Gainesville, Florida. In 1991,
Handex Environmental continued its expansion by opening area offices in western
Pennsylvania; Long Island, New York; Jacksonville, Florida; Chicago, Illinois
and Charlotte, North Carolina. Handex Environmental also acquired, through a
merger, a small groundwater remediation business in Palm Springs, Florida. In
1993, Handex Environmental opened area offices in Cincinnati, Ohio and Atlanta,
Georgia. In 1994, Handex Environmental opened area offices in Golden, Colorado;
Wixom, Michigan; Mobile, Alabama; Kansas, Missouri and Batavia, New York. The
area offices differ from Handex Environmental's other locations in that they do
not have their own remediation capability. When such services are needed, they
are provided by Handex Environmental's larger offices or by subcontractors.
Improved economic conditions in 1994, and an increased demand for
environmental services combined with Handex Environmental's sustained marketing
efforts contributed to the growth in its net operating revenues compared to
1993. However, price competition remained intense during the year and is
expected to continue in the future.
Handex Environmental believes that the quality and comprehensive nature of
its services, its focus on well defined markets, both geographically and in
terms of services offered, and the response of governmental authorities to
public concern with groundwater contamination are material to the success of its
business. Handex Environmental intends to continue its strategy of focusing on
its primary service market -- hydrocarbon contamination of groundwater and soil
due to leaking underground storage tanks and related contamination sources --
and to grow by entering new geographic markets where there is active enforcement
of environmental protection statutes and significant petroleum industry
presence, by expanding its focus to include bulk petroleum storage terminals and
refineries; by offering its services to a broader range of customers and by
continuing to improve operating efficiencies while maintaining a high level of
technical quality. In addition, Handex Environmental is expanding its expertise
and operations beyond the hydrocarbon remediation contamination services market.
Handex Environmental currently conducts its groundwater remediation
business through eight wholly-owned subsidiaries, Handex of New Jersey, Inc.,
Handex of Maryland, Inc., Handex of Florida, Inc., Handex of New England, Inc.,
Handex of the Carolinas, Inc., Handex of Illinois, Inc., Handex of Ohio, Inc.
and Handex of Colorado, Inc. In addition, Handex Environmental performs other
remediation services, such as sludge dewatering and facility decontamination,
through its wholly owned subsidiary, Handex Environmental Management, Inc.
SERVICES
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Site Remediation Services. Handex Environmental provides its clients with
comprehensive groundwater and soil remediation services directed at
contamination resulting from leaking underground storage tanks, petroleum
distribution systems and related contamination sources. A Handex
Environmental project team includes hydrogeologists, geologists and other
professionals working in connection with its operations department, which
includes licensed well drillers, treatment system installers and operators.
A Handex Environmental remediation project begins with the investigation of
the contaminated site. Handex Environmental's hydrogeologists and geologists
develop a hydrogeological profile of the site by obtaining soil and groundwater
samples through a diagnostic monitoring well system. This diagnostic system is
designed by the hydrogeologist, installed by a licensed well-drilling team and
monitored by staff environmental technicians. The collected samples are sent to
independent laboratories for analysis. Through analysis of field data and the
results of laboratory analysis of soil and groundwater samples, hydrogeologists
determine the extent of the contamination, soil characteristics (such as
porosity and permeability) and groundwater flow rate and direction. This
information forms the basis for the design of a site recovery system.
Based on the information generated from its diagnostic monitoring well
system and using its technical operational expertise, Handex Environmental
designs recovery systems to meet the needs of each site. A typical Handex
Environmental groundwater recovery system generally includes hydrocarbon
recovery wells, equipped with either double or single pump recovery systems, and
water treatment systems designed to address site specific water soluble
contamination. Equipment used in a recovery system is often modified by Handex
Environmental to enhance its performance and to provide an integrated system.
Installation of the recovery system is performed by Handex Environmental's
licensed drillers and trained installation technicians. Applicable provisions
of Federal, state and local laws require various permits and governmental
approvals prior to the installation of the recovery system, and Handex
Environmental's permitting department generally obtains the necessary permits
and approvals for its customers.
Once the recovery system is installed, Handex Environmental's environmental
technicians monitor the depth and thickness of hydrocarbons above the water
table, collect water and soil samples and perform routine inspection, adjustment
and maintenance of the recovery system to insure proper operation. Handex
Environmental monitors the progress of the recovery system until a remediation
project is complete. A project may continue for five to seven years before
applicable governmental cleanup standards are achieved. Handex Environmental
has over 600 projects currently being monitored. It provides groundwater data
and analysis of such data to its customers and in some cases to various
regulatory bodies to comply with certain individual state and local regulations.
Generally, hydrocarbons are recovered by pumping groundwater out of the
aquifer in order to induce hydrocarbon flow into the recovery system.
Hydrocarbons recovered by pumping are separated from the groundwater and stored
on site until properly disposed. However, because certain petroleum products,
particularly gasoline, contain water soluble compounds such as benzene, toluene
and xylene, the groundwater must be treated prior to discharge back into the
environment.
While several different groundwater treatment techniques may be utilized at
a particular site, Handex Environmental's principal water treatment technique is
carbon adsorption. In this process, the contaminated water is pumped through
one or more vessels containing activated carbon which adsorbs the contaminants.
Handex Environmental's carbon vessels are manufactured to its specifications and
operate at higher pressures than standard carbon tanks, permitting system
operations to remain at desired flow rates. Flow rates below the desired rate
may cause a loss of hydraulic control of the contaminant plume and its spread to
a larger area of groundwater.
When carbon adsorption is not an economically feasible water treatment
technique, Handex Environmental will use air stripping. Air stripping involves
pumping the contaminated water through a spray nozzle and over plastic packing
material contained in a steel or fiberglass tower approximately 1 to 4 feet in
diameter and up to 20 feet tall. A fan blows air through the tower counter
current to the flow of the water, stripping off the contaminants. Due to air
quality standards in some states, the contaminants released through air
stripping must also be treated.
An important aspect of the problems caused by hydrocarbon contamination is
the vapors that develop in the sediments above the water table. Left unabated,
potentially explosive vapors can develop in nearby buildings and utilities.
Also, rainwater percolating through soils containing residual hydrocarbons can
contribute additional contamination to the aquifer. Accordingly, Handex
Environmental performs vapor extraction services as part of the recovery
program. Vapor extraction accelerates the recovery program since it removes a
potential source of further groundwater contamination from the soil. In order
to comply with applicable air pollution regulations, vapors extracted from the
soil are often processed through a catalytic converter, which breaks the vapors
down into non-hazardous components.
Emergency Response Capabilities. As a result of Handex Environmental's
ability to provide comprehensive groundwater remediation services and the
equipment necessary to perform such services, Handex Environmental is often
called upon to respond to emergency spills or leaks by its customers or by state
or local governmental bodies or agencies. Emergency situations involve the
application of the various techniques used by Handex Environmental in providing
groundwater remediation services in non-emergency situations. However, due to
the need for prompt action as a result of the higher level of contamination
which may be present and publicity concerning the problem, Handex
Environmental's emergency response services typically involve a substantially
greater initial commitment of personnel and equipment than routine projects.
Environmental Dewatering Services. Handex Environmental provides
environmental dewatering services to petroleum producers and suppliers who
desire to replace underground storage tanks or petroleum distribution systems in
areas where groundwater is located near the surface. Dewatering consists of
pumping groundwater in order to reduce the water table elevation in a given area
to a level sufficient to permit installation of new underground storage tanks or
systems. Water generated during the dewatering process is generally
contaminated with soluble components of gasoline and is treated through the use
of mobile water treatment units employing separation and carbon adsorption prior
to its discharge back into the environment.
General Site Assessment and Remediation Services. Handex Environmental
provides environmental site assessment services to its customers. The areas of
environmental concern that need to be investigated in connection with a site
assessment include underground storage tanks, groundwater and soil quality,
areas of known hazardous spills, drum storage areas, lagoons and loading and
unloading areas. In addition, the interiors of buildings on the site must also
be examined. As areas of contamination are discovered, a cleanup plan is
designed, approved by the appropriate regulatory authorities and implemented.
Customers for environmental site assessment services have included
potential buyers, owners and operators of various industrial and commercial
facilities. In addition, banks and other financial institutions that provide
financing to such owners and operators, as well as potential acquirers of such
facilities, have requested environmental site assessments.
CUSTOMERS AND MARKETING
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Handex Environmental's principal customers are major petroleum companies,
which accounted for approximately 86.2%, 84.0% and 80.2% of Handex
Environmental's net operating revenues in 1992, 1993 and 1994. Handex
Environmental's four largest petroleum company customers, Amoco Oil Company,
Exxon Company, U.S.A., Shell Oil Company and Star Enterprises, accounted for
18.3%, 16.2%, 13.2% and 10.3%, respectively, of Handex Environmental's net
operating revenues in 1994. Handex Environmental's level of business with those
customers increased over its 1993 level, reflecting improved economic conditions
and availability of funds for environmental services. The loss of business from
any of its major customers could have a material adverse effect on Handex
Environmental.
Handex Environmental currently performs approximately 80% of its work for
petroleum companies at retail gasoline stations, although it does perform work
at bulk petroleum terminals, pipelines, refineries and industrial sites from
time to time. Handex Environmental's non-petroleum customers are primarily
industrial clients and/or state and local governmental bodies or agencies which
engage Handex Environmental to provide emergency response services. Most of
Handex Environmental's jobs for petroleum companies are performed pursuant to
purchase orders or non-exclusive contracts, neither of which provide for any
minimum purchase requirements. Most customers now require Handex Environmental
to bid on certain phases of recovery projects, and Handex Environmental believes
that this trend will continue in the future. In addition, many customers of
Handex Environmental now purchase certain services and equipment historically
provided by or through Handex Environmental as part of its full service approach
from other contractors. Handex Environmental believes the unbundling of
services, such as laboratory testing and analysis, is an indication of the
increasing focus by its customers on containing costs associated with
environmental remediation projects.
Handex Environmental historically charged its customers for the services of
its employees on an hourly basis with few budgetary limitations, as well as for
the cost of materials and equipment used in connection with its services.
Starting in 1993 and continuing into 1994, a majority of Handex Environmental's
work was performed under fixed price contracts and unit prices, and it is
expected that this trend will continue.
Handex Environmental historically marketed through its senior professional
staff and executives who have focused primarily on existing customers. Since
competition in the groundwater remediation services industry has increased
substantially the past few years and is likely to continue to increase further,
Handex Environmental has significantly increased its marketing function. In
August 1993, Handex Environmental hired a Vice President of Sales and Marketing
and has committed significantly more monies for sales and marketing activities.
COMPETITION
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While many companies are engaged in various aspects of the soil and
groundwater remediation services industry, only a few provide the full service
approach to groundwater remediation provided by Handex Environmental in its
principal geographic markets. There are, however, a large number of firms which
provide consulting and assessment services with respect to hydrocarbon recovery
and soil/groundwater remediation. In addition, a large number of firms perform
remediation services, but these firms concentrate their operations on major
spills, Superfund site cleanups, and the removal of substances such as
polychlorinated biphenols ("PCBs") and asbestos. There are also numerous small
independent pump and tank contractors which remove contaminants and transport
them to hazardous waste sites or other storage facilities. These contractors
collectively have a significant share of the market for such services.
The increasing focus on lower remediation costs by major consumers of
environmental services has heightened competition in the soil/groundwater
remediation services industry and this trend will likely continue as the
industry matures, as other companies enter the market and expand the range of
services which they offer and as Handex Environmental and its competitors move
into new geographic markets. For example, major engineering and consulting
companies are becoming increasingly involved in the engineering related aspects
and subsequent remediation of hazardous waste sites. It is also likely that
some of the major consulting firms will expand their groundwater remediation
services and compete directly with Handex Environmental. Competition from these
larger companies could have a materially adverse effect on Handex
Environmental's business. Further, competition from small firms which offer a
more limited range of services but which can compete effectively on price has
and may continue to adversely affect Handex Environmental's profitability by
reducing its margins.
Handex Environmental historically responded to competition on the basis of
its ability to provide a comprehensive response to the problems of
soil/groundwater contamination and the quality of its services, rather than on
the price of its services. However, Handex Environmental believes that price
has now become of primary importance to its customers, and believes that it must
compete on this basis. Handex Environmental also believes that, over the long
term, the quality of its services will continue to be an important competitive
advantage. Accordingly, in attempting to respond to price competition, Handex
Environmental will attempt to maintain a high level of technical quality in its
services.
ENVIRONMENTAL LEGISLATION
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The current demand for Handex Environmental's soil/groundwater remediation
services is a result of a number of overlapping Federal, state and local laws
concerned with the protection of human health and the environment, as well as
regulations promulgated by administrative agencies thereunder. The principal
Federal statutes affecting groundwater include the Safe Drinking Water Act of
1974, the Resource Conservation and Recovery Act of 1976 ("RCRA") and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
One of the more important Federal regulatory developments relating to Handex
Environmental's business occurred in September 1988 when the EPA issued
comprehensive regulations under RCRA governing underground storage tanks
containing hazardous substances or petroleum. Such regulations require the
owners of underground storage tanks to upgrade or close existing tanks within 10
years, and to install release detection equipment on existing tanks over a five-
year period. Such regulations also require all new tanks which are installed
to have protection against spills, overflows and corrosion. In addition,
such regulations also prescribe the procedures by which tank owners and
operators should investigate and report confirmed or suspected releases from
tanks, and if applicable, proceed with corrective actions.
Many of the foregoing Federal statutes encourage significant state
involvement in their administration and enforcement, and various states have
been authorized by the Environmental Protection Agency to implement their own
underground storage tank programs. Various states have also enacted their own
statutes designed to protect and restore environmental quality and to deal
directly with the problem of soil and groundwater contamination. The state
statutes and regulations are in some cases, different or more stringent than the
other Federal statutes, and Handex Environmental believes that statutes and
regulations enacted at the state level have had a greater impact on the demand
for its services than those enacted at the Federal level. Some examples of such
state statutes include New Jersey's Spill Compensation and Control Act,
Environmental Clean Up Responsibility Act and its Underground Storage of
Hazardous Substances Act, Maryland's Hazardous Substance Spill Response Law,
Florida's Water Quality Assurance Act and the Florida Inland Protection Trust
Fund. The Florida Inland Protection Trust Fund has recently been revised by the
Florida legislature to require site prioritization and prior approval of costs
by the Florida Department of Environmental Protection for reimbursement of
cleanup expenditures. These revisions of the fund are intended to assure its
economic integrity. It is likely that such revisions will have a material
adverse effect on Handex Environmental's operations in Forida, and may have a
material adverse effect on the Company given the size of Handex Environmental's
operations in that state.
PERMITS, LICENSES AND REGULATORY APPROVALS
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The installation and operation of remediation systems are subject to
various licensing, permitting, approval and reporting requirements imposed by
Federal, state and local laws. For example, National Pollutant Discharge
Elimination System ("NPDES") permits and other regulatory program permits are
typically required in connection with the installation of the recovery system,
and the terms of these permits often require ongoing reporting to governmental
agencies concerning the operation of the recovery system. Approvals of
corrective action plans by the appropriate regulatory agency is increasingly
being required before a recovery system can be installed to address contaminated
soil and/or groundwater due to a release from an underground storage tank.
Various state and local laws require the monitoring wells and wells used in
the recovery process to be installed by licensed well drillers, and installation
of the recovery system may also require compliance with applicable provisions of
construction and zoning laws. Some of the states in which Handex Environmental
operates require that groundwater recovery systems installed at a facility be
operated by licensed wastewater treatment plant operators. Some states have
also adopted testing and licensing programs to regulate professionals who
typically conduct subsurface investigations and propose remedial action
workplans.
In order to provide a full service approach to subsurface remediation,
Handex Environmental employs licensed well drillers, and many of its
environmental technicians are licensed wastewater treatment plant operators. In
addition, Handex Environmental employs individuals who specialize in obtaining
the required Federal, state and local environmental and operational permits
necessary for Handex Environmental and its customers to install and operate
remediation systems. Handex Environmental also provides the documentation of
the recovery process necessary to assist its customers in satisfying applicable
reporting requirements.
INSURANCE
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In 1992, the Company purchased an interest in a trade association captive
insurance group through which it obtains comprehensive general liability
insurance, with coverage limits of $5,000,000, including losses for sudden and
accidental pollution damage. While Handex Environmental believes that it
operates its business safely and prudently, there can be no assurance that
liabilities incurred from a claim for professional liability or some other risk
will be covered by insurance or, if covered, that the dollar amount of such
liabilities will not exceed coverage limits.
EMPLOYEES
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As of December 31, 1994, Handex Environmental, including the Corporate
offices, employed 611 employees. Of these, 329 are skilled professionals
(hydrogeologists, geologists, environmental scientists and field technicians),
131 are non-professional technical support personnel, and 151 are administrative
and executive personnel.
Handex Environmental believes that a key factor in its success will be its
ability to continue to attract and retain highly skilled professionals. Handex
Environmental attempts to meet its need for these professionals both by training
hydrogeologists and geologists in the field of hydrocarbon recovery and
groundwater cleanup and by recruiting qualified candidates from other companies,
governmental agencies and colleges and universities.
None of Handex Environmental's employees are represented by a labor
organization. Handex Environmental considers relations with its employees to be
satisfactory.
EDUCATIONAL BUSINESS SEGMENT
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The Company's educational segment is operated through subsidiaries of its
newly organized subsidiary, New Horizons Education Corporation (collectively,
"New Horizons"). The education segment is comprised of two distinct businesses:
one operates computer training centers, while the other supplies a system of
instructions, sales and management concepts concerning computer training to
independent franchisees.
New Horizons Training Centers. New Horizons operates computer training
facilities in Santa Ana, California; Chicago, Illinois; and New York, New York.
In addition, New Horizons holds a minority interest in a joint venture which
operates a facility in Cleveland, Ohio. Prior to the Company's acquisition of
New Horizons, it operated a single training center in Santa Ana. The other
centers were acquired from franchisees subsequent to the acquisition as part of
New Horizons' strategic plan to operate training centers in selected major
United States markets.
Through its computer training centers, New Horizons offers comprehensive
instruction in the use of personal computers and computer software, including
instructor-led courses in software applications, networking and work stations.
Each training center is equipped with computer hardware, software, and
peripherals, in order to provide students with hands-on training. Students are
provided with internally developed coursewares and other training materials
purchased by New Horizons from leading software manufacturers under license
agreements. Revenues from the computer training centers are derived from
training fees paid by clients and proceeds from the sale of training materials
related to the computer courses.
The Company believes there is a nationwide trend toward out-sourcing of
computer training. Typical students in a New Horizons' classroom consist of
individuals from private employers or various government agencies, which
contract with New Horizons to provide training in personal computer and software
applications to their personnel. Most of the classes are held at New Horizons'
facilities. However, in response to the needs of their customers, New Horizons
also provides instructions at client's offices. All training is instructor-led,
with approximately 70% being conducted at the training centers and 30% at the
client locations.
Franchising Operations. New Horizons began offering franchise territories
in 1992, and as of March 1, 1995, there were 42 operating franchises in the
United States, 11 additional franchises sold but not yet operational and 21
operating franchise locations outside the United States. New Horizons sells
only one franchise within a defined geographic area. Franchisees pay an initial
franchise fee, and royalty fee based on both gross training revenues and gross
sales of course materials and publications.
A new franchise owner undergoes an intensive training program, receiving
in-depth instruction in sales, marketing, computer training and the management
of a computer training facility. New Horizons also provides franchisees with
sales, management and advertising support.
Customers. Customers for the training provided at New Horizons' operated
and franchised training centers are employer-sponsored individuals from a wide
range of corporations, professional service organizations, government agencies
and municipalities. No single customer accounted for more than 10% of New
Horizons revenues during fiscal 1994.
Marketing. According to the survey conducted by International Data
Corporation, the information technology training and education industry
generates domestic revenues of approximately $6 billion annually, and will grow
approximately 15% annually through 1997. The majority of all company-sponsored
computer education and training is currently supplied through the use of in-
house training staffs. The Company believes that there is a trend in the United
States toward out-sourcing non-core operations such as computer training, as a
means of increasing corporate efficiency and competitiveness.
New Horizons markets its services through the use of aggressive selling
formulas. Account executives utilize telemarketing technologies to target
potential customers. New Horizons has recently established a national account
program designed to market computer training services to Fortune 500 companies
throughout the United States.
Competition The information technology training and education industry is
highly fragmented. Computer education and training is supplied primarily by in-
house training departments, regional personal computer application specialists,
such as ExecuTrain, Catapult and Productivity Point International, small local
independents, computer dealers and superstores and computer resellers. None of
the Company's competitors currently have a national presence.
The instructor-led computer training markets are locally oriented.
Although national marketing efforts are conducted, a training center's success
depends upon execution at the local level. Although competitive pricing is
important, New Horizons believes that it is a less important competitive factor
than the quality of training, flexibility and convenience of service.
Training Authorization. New Horizon is authorized to provide training by
more than 30 software publishers, including Microsoft, Novell, Apple and Sun
Microsystems. The authorization agreements are typically short-term in nature
and are renewable at the option of the publisher. While New Horizons believes
that its relationship with software publishers are good, the loss of any one of
these agreements could have a material adverse impact on its business.
Employees. As of December 31, 1994, the Company's educational business
segment employed 245 individuals, consisting of 73 computer instructors, 67
account executives and 105 in the administration and executive areas. None of
these employees are represented by a labor organization. The Company considers
relations with its employees to be satisfactory.
ITEM 2. PROPERTIES
The Company's corporate headquarters occupy a portion of a 33,000 square
foot facility in Morganville, New Jersey, which it shares with two wholly owned
subsidiaries, pursuant to a lease which expires in 2003. The lease gives the
Company an option to extend its tenancy for the entire facility for an
additional five-year period.
As of December 31, 1994, Handex Environmental conducted business at
twenty-one facilities located in the states of New Jersey, New York,
Pennsylvania, Maryland, North Carolina, Ohio, Florida, Georgia, Illinois,
Massachusetts, Colorado, Michigan, Alabama, and Missouri. Handex Environmental
owns facilities in New Jersey and Maryland, while leasing facilities in all
locations. Handex's main facility in Florida is owned by a general partnership
whose partners are executive officers and Directors of the Company and is
covered by a lease which expires in 1999.
New Horizons' headquarters and primary training center are located in Santa
Ana, California, pursuant to a lease which expires in 1997.
As of December 31, 1994, New Horizons conducted business at leased
facilities located in California, Ohio, and Illinois. In February 1995, New
Horizons leased a facility in New York where it operates a computer training
center.
The Company believes that its properties are well maintained and are
adequate to meet current requirements and that suitable additional or substitute
space will be available as needed to accommodate any expansion of operations and
for additional offices if necessary.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several lawsuits incidental to the ordinary
conduct of its business. The Company does not believe that the outcome of any
or all these claims will have a material adverse effect upon its business or
financial condition or result of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT*
The following is a list of the executive officers of the Company. The
executive officers are elected each year and serve at the pleasure of the Board
of Directors.
NAME AGE POSITION
Curtis Lee Smith, Jr. 67 Chairman of the Board and
Chief Executive Officer
Thomas J. Bresnan 42 President and Chief Operating Officer
P. Craig Modesitt 38 Vice President, Sales and Marketing
Nelson Mossholder 49 Vice President, Operations
Stuart O. Smith 62 Vice Chairman of the Board, Chief Development
Officer and Secretary
John T. St. James 48 Vice President, Treasurer and Chief Financial
Officer
*The description of executive officers called for in this Item is included
pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K.
Set forth below is a brief description of the background of those executive
officers of the Company who are not Directors of the Company. Information with
respect to the background of those executive officers who are also Directors of
the Company is incorporated herein by reference as set forth in Part III, Item
10, of the Company's Annual Report on Form 10-K.
JOHN T. ST. JAMES joined the Company in December 1988 and was elected its
Treasurer in January 1989, Chief Financial Officer in February 1989 and Vice
President in February 1991. Prior to joining the Company, Mr. St. James served
as Vice President and Chief Financial Officer for B.A.T.U.S., Inc., an operator
of retail concerns, from 1984 to 1987, as Vice President and Chief Financial
Officer for the Henri Bendel division of The Limited, Inc., an operator of
retail clothing stores, from 1987 to 1988; and as Vice President - Financial
Operations/Control for Brooks Fashions, Inc., an operator of retail clothing
stores, for a brief period during 1988.
P. CRAIG MODESITT joined the Company in August 1993 and was elected Vice
President, Sales and Marketing. From 1979 until that time, he was with Ejector
Systems, Inc. as both a founder and Vice President of Sales and Marketing.
Ejector Systems, Inc. is a privately-held manufacturer of groundwater
remediation equipment.
NELSON MOSSHOLDER joined the Company in August 1994 and was elected Vice
President, Operations. Prior to joining the Company, Mr. Mossholder served as
Senior Vice President at Envirite Corporation, where he managed their $40
million hazardous waster management business. His twenty-four years of
experience includes business development, technical and sales and marketing
positions with Laidlaw Environmental, Stablex Corporation and Celanese
Corporation.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Common stock is traded on the NASDAQ National Market System under the
symbol HAND. The following table sets forth the range of high and low bid
quotations per share of Common stock from January 1, 1993 through December 31,
1994, as reported by the NASDAQ system.
1994 HIGH LOW
1st Quarter (January 2 - April 2) 8-1/2 6-1/4
2nd Quarter (April 3 - July 2) 7-1/2 6
3rd Quarter (July 3 - October 1) 9-3/8 7
4th Quarter (October 2 - December 31) 8-5/8 6-1/4
1993
1st Quarter (January 1 - April 3) 9-3/4 6-1/2
2nd Quarter (April 4 - July 3) 9 5-3/4
3rd Quarter (July 4 - October 2) 7-3/4 6-1/4
4th Quarter (October 3 - January 1, 7-1/2 6-1/2
1994)
As of March 1, 1995, the Company's Common stock was held by 297 holders of
record. The Company has never paid cash dividends on its Common stock and has
no present intention to pay cash dividends in the foreseeable future. The
Company currently intends to retain any future earnings to finance the growth of
the Company.
<TABLE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Summary Consolidated Financial Data (in thousands, except per share)
<CAPTION>
SELECTED CONSOLIDATED 1994(2) 1993 1992 1991 1990
------- ------ ------- ------ -----
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME
DATA:(1)
Total operating revenues $ 64,773 $ 48,194 $52,098 $62,245 $ 49,860
Subcontractor costs 12,202 9,481 9,657 12,522 10,854
--------- --------- --------- --------- ---------
Net operating revenues 52,571 38,713 42,441 49,723 39,006
Cost of net operating 33,796 25,911 28,730 27,308 21,357
revenues --------- --------- --------- --------- ---------
Gross profit 18,775 12,802 13,711 22,415 17,649
Selling, general and 15,216 10,983 10,935 10,517 8,167
administrative expenses --------- --------- --------- --------- ---------
Operating income 3,559 1,819 2,776 11,898 9,482
Other income (expense), net 343 424 417 134 245
--------- --------- --------- --------- ---------
Income before income taxes 3,902 2,243 3,193 12,032 9.727
Provision for income taxes 1,571 869 1,260 4,717 3,881
--------- --------- --------- --------- ---------
Net income $ 2,331 $ 1,374 $ 1,933 $ 7,315 $ 5,846
========= ========= ========= ========= =========
Net income per share of
Common stock(3) $ .34 $ .20 $ .28 $ 1.06 $ .88
========= ========= ========= ========= =========
<CAPTION>
SELECTED CONSOLIDATED BALANCE SHEET DATA
DECEMBER 31, JANUARY 1, DECEMBER 31,
----------- --------- --------------------------
SELECTED CONSOLIDATED 1994 1994 1992 1991 1990
BALANCE SHEET DATA: ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital $24,666 $38,194 $36,129 $34,524 $28,096
Total assets 61,920 52,393 50,629 50,839 43,757
Long-term obligations,
excluding current 464 ---- --- 17 3,260
installments
Total stockholders' 49,637 47,060 46,253 45,040 34,280
equity
(1) Certain reclassifications were made in 1993, 1992, 1991 and 1990 to conform
with the presentation in 1994.
(2) Includes the operating results of New Horizons for the period August 15,
1994 through December 31, 1994.
(3) Net income per share of Common stock is computed based on the weighted
average number of common shares outstanding during the year as adjusted for
the five-for-four stock split in March 1991 and stock repurchase described
in Note 1 of Notes to Consolidated Financial Statements. Inclusion of the
incremental shares applicable to outstanding stock options in the
computation would have no material effect.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes and "SELECTED FINANCIAL DATA" included
elsewhere in this report.
The following table presents, for the periods indicated (i) the percentage
relationship which certain items in the Company's Consolidated Statements of
Income bear to net operating revenues and (ii) the percentage change in the
dollar amount of such items. All references to 1993 in the financial statements
refer to the fiscal year ended January 1, 1994.
PERCENTAGE RELATIONSHIP
TO NET OPERATING REVENUES PERIOD TO PERIOD CHANGE
1994 1993 1992
VS. VS. VS.
1994 1993 1992 1993 1992 1991
Net operating revenues 100.0% 100.0% 100.0% 35.8% (8.8)% (14.6)%
Cost of net operating revenues 64.3 66.9 67.7 30.4 (9.8) 5.7
Gross profit 35.7 33.1 32.3 46.6 (6.6) (38.8)
Selling, general and
administrative expenses 28.9 28.4 25.8 38.5 .4 4.0
Operating income 6.8 4.7 6.5 95.6 (34.5) (76.7)
Interest income 1.5 2.0 1.4 (0.5) 32.0 11.3
Income before income taxes 7.4 5.8 7.5 73.9 (29.7) (73.5)
Provision for income taxes 3.0 2.2 2.9 80.7 (31.0) (73.3)
Net income 4.4 3.5 4.6 69.6 (28.9) (73.6)
GENERAL
-------
On August 15, 1994, a newly organized subsidiary of Handex Environmental
Recovery, Inc. ("Company"), New Horizons Education Corporation, acquired all of
the issued and outstanding shares of New Horizons Franchising, Inc.
Simultaneously, a newly organized subsidiary of New Horizons Education
Corporation, acquired substantially all of the assets of New Horizons Computer
Learning Center, Inc. As a result of these acquisitions, the Company now
conducts two distinct lines of business and will report its results in two
segments, environmental and educational. The acquisitions mark the Company's
first step towards diversification outside its core environmental business.
The discussion that follows and note 10 to the consolidated financial statements
highlight the business conditions and certain financial information specific to
each of the two business segments.
ENVIRONMENTAL BUSINESS SEGMENT
------------------------------
Net operating revenues include fees for services provided directly by
Handex Environmental, Inc. ("Handex Environmental") and fees for arranging for
subcontractors' services, as well as proceeds from the rental and sale of
equipment. Handex Environmental, in the course of providing its services,
routinely subcontracts for outside services such as soil cartage, laboratory
testing and other specialized services. These costs are generally passed
through to clients and, in accordance with industry practice, are included in
total operating revenues. Because subcontractor services can change
significantly from project to project, changes in total operating revenues may
not be truly indicative of business trends. Accordingly, Handex Environmental
views net operating revenues, which is total operating revenues less the cost of
subcontractor services, as its primary measure of revenue growth.
Cost of net operating revenues includes professional salaries, other direct
labor, material purchases and certain direct and indirect overhead costs.
Selling, general and administrative expenses include management salaries, sales
and marketing salaries and expenses, and clerical and administrative overhead.
During 1993 and 1994, several trends continued to develop which Handex
Environmental believes will have a direct impact on its future results of
operations. Handex Environmental believes that expenses for administration,
computerization, marketing and engineering will continue to increase.
Administrative costs have increased and will continue to increase as a result of
the increasing desire of Handex Environmental's customers for more detailed
information concerning the status of their environmental projects. Handex
Environmental's marketing costs will continue to increase due to the effects of
increased competition in the environmental industry and Handex Environmental's
strategy to diversify its client base.
Handex Environmental's customers have become increasingly cost conscious
during recent periods in part due to their own financial constraints. To date,
this cost consciousness on the part of customers has manifested itself primarily
in three areas: (i) the manner in which Handex Environmental obtains its
business and charges for its services; (ii) the use of other contractors to
provide certain services traditionally provided by Handex Environmental; and
(iii) an increasing preference to purchase, rather than lease, remediation
equipment.
Over the last three years, Handex Environmental has experienced a
significant increase in customer demand for competitive bidding and/or fixed
price contracts. During 1993 and 1994, a majority of Handex Environmental's
work was performed under fixed price contracts and unit prices. However,
management believes that, over the long term, the quality and cost effectiveness
of its services will continue to be an important competitive advantage.
Accordingly, in responding to price competition, Handex Environmental will
attempt to maintain a high level of technical quality in its services.
A majority of Handex Environmental's major customers now purchase from
other contractors equipment and certain services, such as laboratory analyses,
which were formerly provided by or through Handex Environmental as part of its
full service approach. Management believes that this trend will continue.
Handex Environmental's quarterly results may fluctuate from period to
period. Among the principal factors influencing quarterly variations are
weather, which may limit the amount of time Handex Environmental's professional
and technical personnel have in the field; the addition of new professionals who
require training and initially bill a lower percentage of their time; the timing
of receipt of discharge and other permits necessary to install dewatering and
recovery systems, and the opening of new offices, which initially have higher
expenses relative to revenues than established offices.
In recent years, Handex Environmental's business has been helped
considerably by the cost reimbursement program maintained by the State of
Florida through the Florida Inland Protection Trust Fund. The Florida Inland
Protection Trust Fund has recently been revised by the Florida legislature to
require site prioritization and prior approval of costs by the Florida
Department of Environmental Protection for reimbursement of cleanup
expenditures. These revisions of the fund are intended to assure its economic
integrity. It is likely that such revisions will have a material adverse effect
on Handex Environmental's operations in Florida, and may have a material adverse
effect on the Company given the size of Handex Environmental's operations in
that state.
EDUCATIONAL BUSINESS SEGMENT
----------------------------
The Company, through its newly organized subsidiary, New Horizons Education
Corporation ("New Horizons"), operates the educational segment of its business.
The education segment is comprised of two distinct businesses, one operates
wholly-owned training centers, and the second, supplies systems of instruction,
sales and management concepts concerning computer training to independent
franchisees.
Revenues for the wholly-owned training centers consist primarily of
training fees and fees derived from sales of courseware materials. Cost of
sales consists primarily of instructors' salaries and benefits, facilities costs
such as rent, utilities and classroom equipment, courseware, and computer
hardware, software and peripherals. Selling, general and administrative
expenses consist primarily of costs associated with technical support personnel,
facilities support personnel, scheduling personnel, training personnel,
accounting and finance support and sales executives.
Revenues for the franchising operation consist primarily of initial
franchise fees associated with the sale of a franchise, royalty and advertising
fees based on a percentage of franchisee gross training revenues, and percentage
royalties received on the gross sales of courseware. Cost of sales consists
primarily of costs associated with franchise support personnel who provide
system guidelines and advice on daily operating issues including sales,
marketing, instructor training and general business problems. Selling, general
and administrative expenses consist primarily of technical support, courseware
development, accounting and finance support, national account sales support, and
advertising expenses.
RESULTS OF OPERATIONS
----------------------
1994 VERSUS 1993
NET OPERATING REVENUES
----------------------
The Company's net operating revenues increased $13,858,000 or 35.8% in 1994
compared to 1993. Net operating revenues of $52,571,000 in 1994 included New
Horizons net operating revenues of $5,989,000 for the period August 15, 1994
through December 31, 1994. These revenues represented 11.4% of the Company's
total net operating revenues for 1994. Handex Environmental's net operating
revenues of $46,582,000 reflect the improved market for environmental services
during 1994, the impact of Handex Environmental's focused marketing initiatives,
disciplined geographical expansion program and comprehensive personnel training
programs which enhanced its competitiveness. Handex Environmental's net
operating revenues increased $7,869,000 or 20.3% in 1994 compared to 1993. Each
of Handex Environmental's subsidiaries which were in operation prior to 1993
reported revenue growth which totaled 13.5% in 1994 compared to 1993.
New Horizons combined with Handex Environmental's subsidiaries which began
operations in 1994 and 1993, contributed over 17% of the Company's net operating
revenues for 1994.
COST OF NET OPERATING REVENUES
-------------------------------
The Company's cost of net operating revenues for 1994 increased $7,886,000
or 30.4% compared to 1993. As a percentage of net operating revenues, the
Company's cost of net operating revenues declined to 64.3% in 1994, from 66.9%
in 1993. Cost of net operating revenues for New Horizons for 1994 amounted to
$3,269,000 (54.6% of New Horizons' revenues) and accounted for 12.6% of the
increase over last year. Handex Environmental's cost of net operating revenues,
as a percentage of net operating revenues decreased to 65.5% from 66.9% in 1993.
The increase in Handex Environmental's cost of net operating revenues in
absolute dollars was primarily due to the hiring of additional employees,
increases in materials and supplies purchased, other expenses related to the
increase in the level of business and new offices opened in 1993 and 1994. As a
percentage of net operating revenues, Handex Environmental's cost of net
operating revenues declined mainly due to the growth in net operating revenues
and improved utilization of staff resulting from its comprehensive training
programs.
GROSS PROFIT
-------------
The Company's gross profit for 1994 increased $5,972,000 or 46.6% compared
to 1993. As a percentage of net operating revenues, the Company's gross profit
increased to 35.7% in 1994, from 33.1% in 1993. Gross profit from New Horizons
included in 1994 amounted to $2,720,000 (45.4% of New Horizons' revenues) and
accounted for 21.2 % of the increase over last year. Handex Environmental's
gross profit, as a percentage of net operating revenues, grew to 34.5%, from
33.1% in 1993. The improvement in Handex Environmental's gross profit, both in
absolute dollars and as a percentage of its net operating revenues was due
mainly to the growth in net operating revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
The Company's selling, general and administrative expenses for 1994
increased $4,233,000 or 38.5% compared to the same period last year. As a
percentage of net operating revenues, the Company's selling, general and
administrative expenses increased to 28.9% in 1994, from 28.4% in 1993. New
Horizons' operations incurred $2,233,000 in selling, general and administrative
expenses (37.3% of New Horizons' revenues) and accounted for 20.3% of the
increase over last year. Handex Environmental's selling, general and
administrative expenses, as a percentage of environmental net operating revenues
declined to 27.9% in 1994 from 28.4% in 1993. The increase in Handex
Environmental's selling, general and administrative expenses in absolute dollars
was due mainly to the increase in its marketing expenses, legal and professional
fees, fees associated with the hiring of professional staff and expenses related
to new offices opened in 1993 and 1994. The decrease in Handex Environmental's
selling, general and administrative expenses as a percentage of net operating
revenues was due largely to the growth in net operating revenues.
OTHER INCOME/EXPENSE
--------------------
Interest expense for 1994 increased to $37,000 from $9,000 in 1993. The
increase was primarily due to interest expense on New Horizons loan obligations.
As a percentage of net operating revenues, interest expense increased to .1% in
1994 from 0% in 1993 primarily due to New Horizons' loan obligations. The
Company did not use its credit facility with a commercial bank.
Interest income of $789,000 in 1994 decreased slightly from $793,000 in
1993. As a percentage of net operating revenues, interest income decreased to
1.5% in 1994 from 2.0% in 1993. The Company's interest income generated by its
investment in tax-free notes and bonds declined significantly in 1994 compared
to 1993 primarily due to the use of investment funds in the acquisition of New
Horizons. This was offset largely by the increase in interest income generated
under a financing agreement between Handex Environmental and one of its
customers. The decline in interest income as a percentage of net operating
revenues in 1994 was due to a combination of higher net operating revenues and
lower interest income from the Company's tax-free investments.
Other expenses in 1994 increased to $409,000 from $360,000 in 1993.
Included in other expenses for 1994 was goodwill amortization expense of
$132,000 arising from the acquisition of New Horizons. Other expenses in 1994
also included a charge in the amount of $240,000 representing advances to a bio-
remediation contractor whose operations ceased during the year. This was offset
by the reversal to income of excess accrual for litigation expenses. As a
percentage of Handex Environmental's net operating revenues, Handex
Environmental's other expenses declined from .9% in 1993 to .6% in 1994, mainly
due to the higher level of net operating revenues and lower provision for
litigation expenses.
INCOME TAXES
------------
The provision for income taxes as a percentage of income before income
taxes increased to 40.3% in 1994 from 38.7% in the year ago period. The increase
in the provision for income taxes was due primarily to the reduction in the
Company's tax-free interest income.
NET INCOME
-----------
Net income for 1994 increased $957,000 or 69.6% from the same period last
year. Included in net income for 1994 was New Horizons' contribution which
amounted to $174,000 (2.9% of New Horizons' revenues) and which represented
12.7% of the percentage increase over last year. Excluding the revenue and net
income contributions of New Horizons, net income for Handex Environmental as a
percentage of net operating revenues, increased to 4.6% in 1994 from 3.5% for
the same period last year.
RESULTS OF OPERATIONS
---------------------
1993 VERSUS 1992
NET OPERATING REVENUES
----------------------
The Company's net operating revenues decreased $3,728,000 or 8.8% in 1993
when compared to the prior year. Net operating revenues for 1993 followed the
trends that began in the second quarter of 1992 namely; increased price-based
competition resulting from a less active approach on the part of environmental
service market customers and direct procurement by customers of equipment and
services historically provided by or through the Company. Except for the
Company's Florida and Illinois subsidiaries, which reported increases in net
operating revenues of 32.9% and 10.3% respectively, all other subsidiaries
experienced a decline in net operating revenues compared to the previous year.
During 1993, The Company started operations in Cincinnati, Ohio, and
Atlanta, Georgia. These two operations combined, contributed minimally to the
total net operating revenues for 1993.
COST OF NET OPERATING REVENUES
------------------------------
Cost of net operating revenues for 1993 decreased $2,821,000 or 9.8%
compared to 1992. As a percentage of net operating revenues, cost of net
operating revenues decreased to 66.9% in 1993 from 67.7% in 1992. The decrease
in net operating revenues both in absolute dollars and as a percentage of net
operating revenues was due primarily to lower payroll and associated costs and
lower level of purchases resulting from a lower level of net operating revenues.
GROSS PROFIT
------------
Gross profit for 1993 decreased $908,000 or 6.6% compared to 1992. As a
percentage of net operating revenues, gross profit for 1993 increased to 33.1%
from 32.3% in 1992. The decrease in gross profit dollars was attributable to
the lower net operating revenues for 1993. The increase in gross profit as a
percentage of net operating revenues was due mainly to lower personnel costs
resulting from fewer employees and lower level of purchases.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
Selling, general and administrative expenses for 1993 increased $49,000 or
.4% compared to 1992. As a percentage of net operating revenues, selling,
general and administrative expenses increased to 28.4% for 1993 from 25.8% for
1992, reflecting the decrease in net operating revenues. The increase in
selling, general and administrative expenses was due mainly to the new offices
opened during 1993 and the addition of personnel to the marketing staff. This
was offset by lower expenses for legal and professional fees and lower provision
for bad debts.
OTHER INCOME/EXPENSE
---------------------
Interest expense for 1993 increased to $9,000 from $6,000 in 1992 and
remained at less than 1% of net operating revenues for both periods. The Company
has not utilized its credit facility with a commercial bank since June 1991.
Interest income increased from $601,000 in 1992 to $793,000 for 1993. As a
percentage of net operating revenues, interest income increased from 1.4% in
1992 to 2.0% in 1993. The increase in interest income for 1993 was due primarily
to the interest income generated under a financing agreement between the Company
and one of its major customers. This increase, combined with a lower level of
net operating revenues, was the primary contributor to the increase in interest
income as a percentage of net operating revenues.
Other expenses increased from $178,000 in 1992 to $360,000 in 1993. As a
percentage of net operating revenues, other expenses increased to .9% in 1993
from .4% in 1992. The increase in other expenses was due primarily to the higher
provision for litigation expenses which was partially offset by gains realized
from the disposition of excess operating equipment. Combined with a lower level
of net operating revenues, other expenses as a percentage of net operating
revenues increased compared to last year.
INCOME TAXES
------------
The provision for income taxes for 1993 was 38.7% of income before income
taxes compared with 39.5% for 1992. The decrease in the provision for income
taxes as a percentage of income before income taxes was due primarily to the
Company's tax-free interest income.
NET INCOME
-----------
Net income for 1993 decreased $559,000 or 28.9% compared to 1992. As a
percentage of net operating revenues, net income declined to 3.5% from 4.6% in
1992. The decline in net income both in absolute dollars and as a percentage of
net operating revenues was due mainly to the lower level of net operating
revenues.
LIQUIDITY AND CAPITAL RESOURCES
--------------------------------
As of December 31, 1994, the Company's working capital was $24,666,000 and
its cash, cash equivalents and short-term investments totaled $6,835,000.
Working capital as of December 31, 1994 reflected a decrease of $13,528,000 from
$38,194,000 as of January 1, 1994. The Company's cash flow from operating
activities was lower than last year primarily due to the higher receivable
balance resulting from improved sales during the year. The Company also has
available a $5,500,000 unsecured credit facility with a commercial bank. This
facility bears interest at either the bank's prime rate (8.5% as of December 31,
1994), or the bank's short-term money market rate, whichever the Company elects.
The Company has not utilized this facility since June 1991.
The full service approach to Handex Environmental's hydrocarbon recovery
business in certain markets and its continuing geographic expansion require
Handex Environmental to make capital expenditures for machinery and equipment
and to incur costs associated with the establishment of new office locations.
During 1994, the Company spent approximately $2,490,000 on capital equipment and
anticipates spending up to $3,750,000 during 1995.
On August 15, 1994, the Company, through New Horizons, acquired the assets
of New Horizons Computer Learning Center, Inc. and all the stock of New Horizons
Franchising, inc. for a combined cash price of $14,000,000. Cash expenses
related to the transaction were approximately $600,000 and non-cash expenses
were approximately $179,000. Included in the acquisition were certain debt
obligations. The rapid changes in information technology require New Horizons
to make capital expenditures for computer equipment, software and facilities.
During the period since the acquisition, New Horizons has spent approximately
$970,000 for capital equipment and leasehold improvements and anticipates
spending up to $1,500,000 during 1995.
Management believes that current cash and cash equivalents together with
cash generated by operations, and its funds available under its revolving credit
facility will provide the liquidity necessary to support its current and
anticipated capital expenditures through the end of 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following pages contain the Financial Statements and supplementary data
specified for Item 8 of Part II of Form 10K.
HANDEX ENVIRONMENTAL RECOVERY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
Page
REPORT OF INDEPENDENT AUDITORS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-15
SCHEDULES
Schedule VIII - Valuation and Qualifying
Accounts and Reserves 19
All other schedules have been omitted because the material is not applicable or
is not required as permitted by the rules and regulations of the Commission, or
the required information is included in Notes to Consolidated Financial
Statements.
KPMG Peat Marwick LLP
1500 National City Center
1900 East Ninth Street
Cleveland, OH 44114-3495
Independent Auditors' Report
The Board of Directors and Stockholders
Handex Environmental Recovery, Inc.:
We have audited the consolidated financial statements of Handex Environmental
Recovery, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Handex Environmental
Recovery, Inc. and subsidiaries as of December 31, 1994 and January 1, 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1994 in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
s/s
--------------------------------------
Cleveland, Ohio
February 17, 1995
CONSOLIDATED BALANCE SHEETS
HANDEX ENVIRONMENTAL RECOVERY, INC. AND SUBSIDIARIES
DECEMBER 31, 1994 AND JANUARY 1, 1994
ASSETS 1994 1993
------
Current assets:
Cash and cash equivalents $ 2,895,478 $ 882,823
Marketable securities 3,940,000 23,095,000
Accounts receivable, less allowance
for doubtful accounts of $934,560
in 1994 and $840,091 in 1993 (note 3) 26,854,906 16,810,586
Inventories 298,326 156,513
Prepaid expenses 214,198 312,050
Refundable income tax 388,682 131,998
Deferred income tax assets (notes 1 and 4) 609,668 595,669
Other current assets 394,948 696,713
-------------- --------------
Total current assets 35,596,206 42,681,352
-------------- --------------
Property, Plant and equipment, at cost:
(note 2)
Land 518,478 516,378
Buildings and improvements 2,347,918 1,785,597
Machinery and equipment 12,479,364 9,649,761
Furniture and fixtures 2,284,281 1,685,458
Motor vehicles 5,087,435 4,679,758
-------------- --------------
22,717,476 18,316,952
Less accumulated depreciation and 13,980,868 11,764,508
amortization -------------- --------------
Net property, plant and equipment 8,736,608 6,552,444
Excess of cost over net assets of acquired
companies, net of accumulated amortization 15,921,530 1,710,512
of $421,357 in 1994 and $239,298 in 1993
Cash surrender value of life insurance 1,054,426 961,134
Other assets (notes 5 and 12) 611,367 487,329
-------------- --------------
$ 61,920,137 $ 52,392,771
============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
-----------------------------------
Current liabilities:
Current installments of long-term
obligations (note 2) $ 579,991 $ --
Accounts payable 4,523,848 1,714,874
Accrued expenses (note 6) 5,826,066 2,772,766
-------------- --------------
Total current liabilities 10,929,905 4,487,640
Long-term obligations, excluding current 464,357 --
installments (note 2)
Deferred income tax liability (notes 1 888,516 844,811
and 4)
Stockholders' equity:
Preferred stock, without par value,
2,000,000 shares authorized, no shares
issued, Common stock, $.01 par value,
15,000,000 shares authorized; 7,050,212
shares in 1994 and 7,040,212 shares in
1993 70,502 70,402
Additional paid in capital 24,365,566 24,119,669
Retained Earnings 26,499,416 24,168,374
Treasury stock at cost - 185,000 shares in (1,298,125) (1,298,125)
1994 and 1993 (note 1) -------------- --------------
Total stockholders' equity 49,637,359 47,060,320
Commitments and contingencies (notes 9, 11 -- --
12) ------------- -------------
$ 61,920,137 $ 52,392,771
============== ==============
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
Handex Environmental Recovery, Inc. and Subsidiaries
Years ended December 31, 1994, January 1, 1994 and December 31, 1992
1994 1993 1992
---- ---- ----
Total operating revenues $64,772,555 $48,194,334 $52,097,761
Subcontractor costs 12,201,809 9,481,455 9,656,508
------------- ------------ -------------
Net operating revenues 52,570,746 38,712,879 42,441,253
(note 3)
Cost of net operating revenues 33,795,664 25,910,121 28,730,737
------------- ------------ -------------
Gross profit 18,775,082 12,802,758 13,710,516
Selling, general and 15,216,108 10,983,284 10,934,636
administrative expenses ------------- ------------ -------------
Operating income 3,558,974 1,819,474 2,775,880
Other income (expense):
Interest expense (37,042) (8,601) (5,791)
Interest income 789,097 792,743 600,520
Other (409,190) (360,260) (177,606)
------------- ------------ -------------
342,865 423,882 417,123
------------- ------------ -------------
Income before income taxes 3,901,839 2,243,356 3,193,003
Provision for income taxes 1,570,797 869,144 1,259,837
(note 4) ------------- ------------ -------------
Net income $ 2,331,042 $1,374,212 $ 1,933,166
============ ============ =============
Net income per share of Common
stock $ .34 $ .20 $ .28
============ ============ =============
See accompanying notes to consolidated financial statements
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Handex Environmental Recovery, Inc. and Subsidiaries
Years ended December 31, 1994, January 1, 1994, and December 31, 1992
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 7,039,712 $ 70,397 $24,109,168 $ 20,860,996 $ -- $45,040,561
1, 1992
Issuance of Common
stock for stock 500 5 7,145 -- -- 7,150
options
Income tax benefit
from the exercise of -- -- 3,356 -- -- 3,356
stock options
Repurchase of (100,000) -- -- -- (731,250) (731,250)
Treasury stock
Net income, year
ended December 31, -- -- -- 1,933,166 -- 1,933,166
1992 ----------- ----------- ------------ ------------ ----------- ----------
<CAPTION>
BALANCE AT DECEMBER 6,940,212 70,402 24,119,669 22,794,162 (731,250) 46,252,983
31, 1992
Repurchase of (85,000) -- -- -- (566,875) (566,875)
Treasury stock
Net income, year
ended January 1, -- -- -- 1,374,212 -- 1,374,212
1994 ----------- ---------- ------------ ------------ ------------- -----------
<CAPTION>
BALANCE AT JANUARY 6,855,212 70,402 24,119,669 24,168,374 (1,298,125) 47,060,320
1, 1994
Issuance of Common
stock for stock 10,000 100 64,900 -- -- 65,000
options
Income tax benefit
from the exercise of -- -- 1,997 -- -- 1,997
stock options
Issuance of warrants
on Common stock -- -- 179,000 -- -- 179,000
Net income, year
ended December 31, -- -- -- 2,331,042 -- 2,331,042
1994 ----------- ---------- ------------ ------------ ------------- ------------
<CAPTION>
BALANCE AT DECEMBER 6,865,212 $ 70,502 $24,365,566 $ 26,499,416 $ (1,298,125) $ 49,637,359
31, 1994 ========== ========== ============ ============ ============= ============
</TABLE>
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
Handex Environmental Recovery, Inc. and Subsidiaries
Years ended December 31, 1994, January 1, 1994, and December 31, 1992
1994 1993 1992
------ ----- -----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $2,331,042 $1,374,212 $1,933,166
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and amortization 2,664,871 2,685,448 2,731,583
Gain on disposal of equipment (42,711) (33,325) (54,320)
Deferred taxes 29,706 (327,102) (112,642)
Cash provided (used) from the
change in:
Accounts receivable (10,044,320) (1,384,659) 11,071,595
Inventories (141,813) 41,143 328
Prepaid expenses 97,852 (270,838) 84,204
Other current assets 301,765 (246,712) 60,480
Other assets and cash
surrender value of life
insurance (219,656) (714,131) (332,016)
Accounts payable 2,808,974 417,745 (1,465,366)
Accrued expenses and
income taxes payable/
refundable 2,798,433 1,047,595 546,050
------------- ------------ ------------
Net cash provided
(used) by operating
activities 584,143 2,589,376 14,463,376
------------- ------------- -------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of marketable
securities, (17,855,000) (40,570,000) (29,270,000)
Redemption of marketable
securities 37,010,000 39,865,000 16,231,000
Additions to property, plant
and equipment (4,621,759) (541,096) (1,803,699)
Investment in captive
insurance company -- -- (158,750)
Excess of cost over net
assets of acquired company (14,214,077) -- --
------------- ------------- -----------
Net cash provided (used)
in investing activities 319,164 (1,246,096) (15,001,449)
------------ ------------- -------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
common stock 65,000 -- 7,150
Debt obligations assumed from 1,198,308 -- --
acquisition
Repurchase of treasury stock -- (566,875) (731,250)
Principal payments on debt
obligations (153,960) -- (57,919)
---------- ---------- ----------
Net cash provided (used)
in financing activities 1,109,348 (566,875) (782,019)
---------- ----------- ----------
Net increase (decrease) in cash
and cash equivalents 2,012,655 776,405 (1,320,406)
Cash and cash equivalents at
beginning of period 882,823 106,418 1,426,824
---------- ------------- -------------
Cash and cash equivalents at
end of period $ 2,895,478 $ 882,823 $ 106,418
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash was paid for:
Interest $ 37,042 $ 8,601 $ 5,791
============= ============= =============
Income taxes $ 2,144,135 $ 872,390 $ 1,172,807
============= ============= =============
Investing and financing activities
----------------------------------
The Company acquired certain assets and liabilities of a computer training
school and all the issued and outstanding shares of stock of a computer training
franchising company in August, 1994 at an aggregate cash price of $14,000,000
and related cash expenses of approximately $600,000 and non-cash expenses of
$179,000. The non-cash expenses represent the excess of the fair market value
over the issue price on warrants on 40,000 shares of Handex's Common stock.
See accompanying notes to consolidated financial statements
HANDEX ENVIRONMENTAL RECOVERY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, January 1, 1994, and December 31, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
(a) Basis of Accounting and Principles of Consolidation
---------------------------------------------------
The consolidated financial statements include the accounts of Handex
Environmental Recovery, Inc., and its subsidiaries, all of which are
wholly owned. All significant intercompany balances and transactions
have been eliminated in consolidation.
In August 1992, the Company's Board of Directors authorized the
purchase of up to 500,000 shares of Handex's Common stock in the open
market or in private transactions. The repurchase program lasted
through June 30, 1993, and was limited to an aggregate expenditure of
$4,500,000. The Company had repurchased 185,000 shares of the Common
stock under this program at an aggregate cost of $1,298,125.
(b) Revenue Recognition
-------------------
Revenue is recognized at the time work is performed and services are
rendered.
(c) Marketable Securities
---------------------
Funds retained for future use in the business are temporarily invested
in tax-exempt bonds and municipal funds.
Effective January 2, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in
debt and Securities" ("SFAS 115"). SFAS 115 requires the accounting
for certain investments in debt and equity securities based on
certain specific guidelines.
The Company's investments are presented at their aggregate face value.
Amounts paid over face value are amortized through maturity.
Unamortized premiums amounted to $8,946 and are included in other
current assets. As of December 31, 1994 and January 1, 1994, the
Company's security portfolio had aggregate fair market values of
$3,945,350 and $23,168,951, respectively. Unrealized gains and
losses as of December 31, 1994, amounted to $21,854 and $25,450,
respectively. For the year ended December 31, 1994, securities with
an aggregate face value of $37,010,000, were redeemed at maturity.
There were neither gains nor losses realized from the redemption.
(d) Inventories
-----------
Inventories are stated at the lower of cost or market. Inventory
costs are determined using the first-in, first-out (FIFO) method.
(e) Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the
respective assets,
principally 3 to 25 years using the straight-line method.
(f) Income Taxes
-------------
The Company accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and
operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years when those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(g) Excess of Cost Over Net Assets Acquired
---------------------------------------
The excess of cost over net assets acquired is being amortized on a
straight-line basis over a period of 40 years.
(h) Asset Impairments
-----------------
The Company periodically reviews the carrying value of certain of its
assets in relation to historical results, current business conditions
and trends to identify potential situations in which the carrying
value of assets may not be recoverable. Such assets would include,
cost in excess of fair market value of net assets of acquired
businesses and other identifiable intangible assets. If such reviews
indicate that the carrying value of such assets may not be
recoverable, the Company would estimate the undiscounted sum of the
expected future cash flows to determine if they are less than the
carrying value of such assets to ascertain if a permanent impairment
has occurred. The carrying value of any impaired assets will be
reduced to fair market value.
(i) Cash and Cash Equivalents
--------------------------
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments with purchased maturities of three
months or less to be cash equivalents.
(j) Net Income Per Share
---------------------
The computation of net income per share of Common stock is based on
the average number of shares outstanding during each year. Inclusion
of the incremental shares applicable to outstanding stock options in
the computation would have no material effect.
The average number of shares outstanding used in determining net
income per share was 6,863,069 in 1994, 6,881,267 in 1993, and
7,006,599 in 1992.
(k) Reclassification
----------------
Certain items on the 1993 and 1992 consolidated statements of income
have been reclassified to conform to the 1994 presentation.
2. LONG-TERM OBLIGATIONS
---------------------
The Company's debt and capital lease obligations represent indebtedness of New
Horizons, either existing at the time of or entered into, subsequent to the
acquisition.
A summary of these obligations is as follows:
1994
------
Notes payable to bank with interest rates adjusted
to prime (8.5% at December 31, 1994), plus up to
2.5%, paid in full in February 1995, secured by
assets of New Horizons $ 304,776
Note payable to bank at 9.99% interest rate, payable
in monthly installments of $9,306, secured by assets
of New Horizons 253,349
Note payable to a former franchisee, non-interest
bearing, unsecured, paid in full in January 1995 35,000
Amounts due under noncancelable leases accounted for as
capital leases. These leases have effective interest
rates ranging from 8.5% to 12.3% per annum 520,838
Amount of capital leases representing interest (69,615)
------------
Present value of minimum lease payments 451,223
------------
1,044,348
------------
Less: current portion of notes payable and lease
obligations 579,991
------------
$ 464,357
============
The following is a summary of future payments required under the above
obligations:
DEBT LEASE
----- ------
1995 $430,206 $194,378
1996 99,889 192,798
1997 63,030 104,712
1998 -- 15,791
1999 -- 13,159
2000 and after -- --
Included in the Company's plant, property and equipment is New Horizons'
equipment under capital leases amounting to $373,321, net of accumulated
amortization of $45,992.
The Company has available an unsecured credit facility which provides a
maximum credit of $5,500,000 through June 30, 1995. The revolving credit
facility bears interest at the Company's preference of either the prime rate
(8.5% at December 31, 1994), or the bank's short-term money market rate. The
Company is required to pay a fee of 1/4 of 1% of the unused balance of the
facility. The Company has not used this facility since June 1991.
3. BUSINESS AND CREDIT CONCENTRATIONS
----------------------------------
The Company's primary, environmental customers are major petroleum companies
who store petroleum products in underground storage tanks.
Handex Environmental has four major customers which account for 10% or more
of both its total and net operating revenues. The approximate total and net
operating revenues for these customers are as follows:
1994 1993 1992
----- ----- -----
Total operating revenues:
Customer 1 $ 10,567,000 $ 9,049,000 $ 8,230,000
Customer 2 8,592,000 7,391,000 7,861,000
Customer 3 7,306,000 7,241,000 12,021,000
Customer 4 6,138,000 5,359,000 4,877,000
------------ ----------- ------------
Total $ 32,603,000 $29,040,000 $ 32,989,000
============ =========== ============
Net operating revenues:
Customer 1 $ 8,544,000 $ 7,294,000 $ 7,163,000
Customer 2 7,542,000 6,489,000 6,395,000
Customer 3 6,131,000 6,415,000 9,547,000
Customer 4 4,812,000 4,244,000 3,924,000
------------ ------------- -------------
Total $ 27,029,000 $ 24,442,000 $ 27,029,000
============ ============ ============
As of December 31, 1994 Handex Environmental's receivables from such customers
amounted to approximately $10,621,000.
New Horizons has no customer which accounts for 10% or more of its operating
revenues for 1994.
4. INCOME TAXES
-------------
Income tax expense for the periods below differs from the amounts computed by
applying the U.S. federal income tax rate of 34 percent to the pretax income
as a result of the following:
1994 1993 1992
------ ------ ------
Computed "expected" tax
expense $ 1,326,625 $ 762,741 $ 1,085,621
Amortization of excess
cost over net assets acquired 22,450 16,950 16,950
State and local tax expense,
net of Federal income tax
effect 291,400 232,100 270,100
Interest income from tax-
free investments (149,800) (205,200) (182,600)
Other 80,122 62,553 69,766
------------- ----------- ------------
Income tax expense $ 1,570,797 $ 869,144 $ 1,259,837
============= =========== ===========
Effective rates 40.3% 38.7% 39.5%
============= ============ ===========
Income tax expense
consists of:
1994 1993 1992
----- ----- ------
Federal
Current $ 1,131,620 $ 760,000 $ 930,000
Deferred (2,281) (242,509) (79,326)
State and local 441,458 351,653 409,163
------------- ---------- -----------
$ 1,570,797 $ 869,144 1,259,837
============= =========== ============
In 1994 and 1993, respectively, deferred tax expense resulted from tax over
book depreciation of $74,000 and $142,000, litigation (benefit) expense of
($27,000) and $71,000 and amortization (benefit) expense of cost over net
assets of acquired companies of ($83,000) in 1994.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1994 and
January 1, 1994 are presented below:
DECEMBER 31, JANUARY 1,
1994 1994
------ ------
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts $ 373,824 336,036
Reserve for uninsured losses and
litigations 188,250 219,562
Other 47,594 40,071
----------- ----------
Total gross deferred tax assets 609,668 595,669
Less valuation allowance -- --
----------- -----------
Net deferred tax assets 609,668 595,669
----------- -----------
Deferred tax liability:
Property, plant and equipment,
principally due to differences in
depreciation (805,920) (844,811)
Excess of cost over net assets of (82,596) --
acquired company ------------- -----------
Deferred tax liability (888,516) (844,811)
------------- ------------
Net deferred tax liability $ (278,848) $ (249,142)
============= ============
There is no valuation allowance required at December 31, 1994 and January 1,
1994.
5. NOTE RECEIVABLE FROM OFFICER
----------------------------
Included in other assets is a note receivable from an officer of the Company
for an interest-free loan in the amount of $250,000. The loan is payable on
or before September 30, 1997 and is fully secured by a mortgage on real
estate to which the loan proceeds were applied.
6. ACCRUED EXPENSES
----------------
Accrued expenses consist of:
1994 1993
------ ------
Sales taxes payable $ 713,617 $ 470,560
Salaries, wages and bonuses 1,264,405 891,804
payable
Amounts received on behalf of a 1,346,665 472,564
customer
Deferred revenues 994,167 --
Allowance for uninsured claims 270,624 268,904
Allowance for litigation expenses 200,000 280,000
Other 1,036,588 388,934
------------ ------------
$ 5,826,066 $ 2,772,766
=========== ============
7. EMPLOYEE SAVINGS PLAN
----------------------
The Company has a 401(k) Profit Sharing Trust and Plan in which all employees
in its environmental business segment not currently covered by a collective
bargaining agreement are eligible to participate. None of the Company's
employees are covered by any collective bargaining agreement. The Company,
at its option, matches each participant's contribution to the Plan at the
rate of 50% of up to 6% of each participant's compensation, up to the maximum
allowable under the Internal Revenue Code. Employer contributions for the
years ended December 31, 1994, January 1, 1994 and December 31, 1992 totaled
$269,068 $235,384 and $296,392 respectively. Employees vest in the Company
contributions at a rate of 20% per year based upon years of service. The
Company is in the process of developing a 401K plan for New Horizons'
employees.
8. STOCK OPTION PLAN
------------------
The Company maintains a key employee stock option plan which provides for the
issuance of non qualified options, incentive stock options and stock
appreciation rights. The plan currently provides for the granting of options
to purchase up to 1,200,000 shares of common stock. Incentive stock options
are exerciseable for up to ten years, at an option price of not less than the
market price on the date the option is granted or at a price of not less than
110% of the market price in the case of an option granted to an individual
who, at the time of grant, owns more than 10% of the Company's Common stock.
Nonqualified stock options may be issued at such exercise price and on such
other terms and conditions as the Compensation Committee of the Board of
Directors may determine. Optionees may also be granted stock appreciation
rights under which they may, in lieu of exercising an option, elect to receive
cash or Common stock, or a combination thereof, equal to the excess of the
market price of the Common stock over the option price. All options were
granted at fair market value at dates of grant.
The stock option plan for directors who are not employees of the Company
provides for the issuance of up to 75,000 shares of Common stock and may be
issued at such price per share and on such other terms and conditions as the
Compensation Committee may determine. All options were granted at fair market
value at dates of grant.
The following table summarizes all transactions during 1994 and 1993 under the
Stock Option Plans.
1994 1993
----- ------
Options granted (number of
shares):
Key employees 253,000 166,500
Outside directors -- --
Average grant price:
Key employees $ 7.96 $ 8.10
Outside directors -- --
Options exercised (number of
shares):
Key employees 10,000 --
Outside directors -- --
Average exercise price:
Key employees $ 6.50 --
Outside directors -- --
Options exerciseable (number of
shares):
Key employees 279,700 214,250
Outside directors 24,750 24,750
Aggregate price of exerciseable
options
Key employees $2,011,345 $1,552,500
Outside directors 230,200 230,200
Option canceled (number of
shares):
Key employees 25,600 36,500
Outside directors -- --
9. LEASES
------
The Company, is obligated under operating leases primarily for office space
and training facilities, with rental arrangements for various periods of time
ending through 2003. These leases provide for minimum fixed rents for the
following fiscal years as follows: 1995, $1,666,016; 1996, $1,445,331; 1997,
$1,071,689; 1998, $848,287; 1999, $801,811; and 2000 and after, $1,797,035
excluding the related-party lease described below. Rent expense was
$1,370,365, $1,287,231, and $1,081,502 during the years ended December 31,
1994, January 1, 1994, and December 31, 1992, respectively.
A subsidiary of the Company leases a building from a partnership comprised of
related parties. Rent under this lease, which commenced in June 1987 and
expires in June 1999, was $36,000 for each of the years ended December 31,
1994, January 1, 1994 and December 31, 1992.
10. SEGMENT INFORMATION AND REPORTING
---------------------------------
On August 15, 1994, the Company, through New Horizons, acquired substantially
all of the assets of New Horizons Computer Learning Center, Inc. and all of
the issued and outstanding shares of stock of New Horizons Franchising, Inc.
for an aggregate cash price of $14,000,000. During 1994, New Horizons also
acquired certain assets of franchises covering the Chicago and Cleveland
markets. In February 1995, New Horizons contributed the Cleveland assets to
a newly formed joint venture in exchange for a minority interest. The joint
venture operates the Cleveland franchise. Also in February 1995, New
Horizons acquired certain assets of the franchise covering the metropolitan
New York market. New Horizons specializes in providing instructor-led
training in the use of computers and computer software, offering courses in
PC software applications, networking, and work stations. Training is provided
at New Horizons' owned training centers located in Santa Ana, California,
Chicago, Illinois, and New York, New York. Franchising is engaged in the
business of offering systems of instructions, sales and management concepts
for training in the use of computers and computer system through the sale of
franchises throughout the United States and internationally.
These acquisitions have been accounted for as purchases, and accordingly the
purchase prices have been allocated to assets and liabilities based upon New
Horizon's estimate of their fair market values. The aggregate purchase price
and related expenses exceeded the net assets and liabilities by $14,393,077
and are included in Goodwill. The excess will be amortized on a straight line
basis over 40 years from the acquisition date.
Prior to August 15, 1994, the Company's business operations were concentrated
in the environmental services industry. With the acquisition of New Horizons,
the Company extended its operations into the computer training industry.
Information about the Company's segment operating data for 1994 follows:
HANDEX
ENVIRONMENTAL NEW HORIZONS CORPORATE CONSOLIDATED
------------- ------------- --------- ------------
Net operating $46,581,612 $5,989,134 $ -- $52,570,746
revenues
--
Operating income (a) 3,761,475 486,676 -- 4,248,151
--
Identifiable assets 35,196,487 17,501,727 9,221,923 61,920,137
(b)
Capital expenditures 2,057,407 2,382,446(c) 181,906 4,621,759
Depreciation and 2,160,473 325,271 179,127 2,664,871
amortization
(a) Operating income is shown before corporate selling, general and
administrative expenses, interest income, interest and other
income/expenses.
(b) Identifiable assets are those used in the operation of each segment.
Corporate assets consist primarily of cash and short-term marketable
securities.
(c) Includes plant, property and equipment at acquisition.
A reconciliation of operating income to income before income taxes follows:
1994
------
Operating income before corporate selling,
general and administrative expenses $ 4,248,151
Corporate selling, general and administrative (5,294,768)
expenses
Operating income 3,558,974
Interest expense (37,042)
Interest income 789,097
Other (409,190)
Income before income taxes 3,901,839
New Horizons has no assets outside the United States and derives revenues
from the sale of franchises and royalties based on certain revenues of
licensed franchises. From acquisition date through December 31, 1994,
revenues derived from the sale of franchises and royalties derived from
franchised operations outside the United States amounted to approximately
$99,000.
The assets, liabilities and results of New Horizons have been included in the
consolidated financial statements from acquisition date. The following pro
forma summary presents the consolidated results of operations for the fiscal
years ended December 31, 1994 and January 1, 1994, as if the acquisition had
occurred at the beginning of the respective periods, as adjusted for certain
expenses such as salaries, depreciation, goodwill amortization, interest
income and income taxes.
1994 1993
----- -----
Net operating revenues $ 60,440,000 $ 49,176,000
Net income 2,575,000 1,774,000
Earnings per share $ .38 $ .26
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
Summarized quarterly financial data for 1994 and 1993 are as follows (in
thousands, except per share data):
NET
OPERATING GROSS INCOME NET EARNINGS
YEAR QUARTER REVENUES PROFIT BEFORE INCOME PER
---- ------ -------- ------- INCOME ------ SHARE
TAXES -------
--------
1994 First $ 9,806 $ 2,993 $ 83 $ 60 $.01
Second 11,876 4,311 1,112 677 .10
Third 14,338 5,269 1,437 858 .12
Fourth 16,551 6,202 1,270 736 .11
1993 First $ 9,784 $ 3,033 $ 348 $ 211 $.03
Second 9,553 3,186 526 320 .05
Third 9,838 3,265 553 333 .05
Fourth 9,538 3,319 816 510 .07
The fourth quarter of 1994 reflects adjustments aggregating to approximately
$200,000 for excess provision for vacation, holiday, major medical and dental
expenses. The quarter also reflects the write-off to expense of advances to a
bio-remediation contractor amounting to $240,000 which was partially offset by
the reversal to income of excess provision for litigation expenses.
During the fourth quarter of 1993, adjustments aggregating to approximately
$284,000 for excess provision for vacation, holiday and depreciation expenses
and the reduction of its accrual for bonuses under its incentive plan were
recognized. In addition, the Company reduced its provision for liability
insurance in the amount of $95,000.
12. CAPTIVE INSURANCE COMPANY
-------------------------
In February 1992, the Company purchased stock in a holding company which owns
a captive insurance company through which the Company obtains its general
liability insurance coverage. The stock purchase price of $476,250 was paid by
$158,750 in cash, which is reflected in other non-current assets in the
accompanying financial statements, and the balance is secured by an
irrevocable letter of credit. As of December 31, 1994, there has not been any
draw against the letter of credit. The Company has no obligations to the
holding company/captive insurance group other than the amount represented by
the letter of credit and as a shareholder and director of the holding company.
The Company owns 1 share (4.2%) of the 24 shares of common stock, and 466.25
shares of 1,731.48 shares of Preferred stock, Series A, issued and outstanding
as of December 31, 1994.
13. COMMITMENTS AND CONTINGENCIES
------------------------------
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
14. CHANGE IN FISCAL YEAR
----------------------
On December 18, 1992, the Board of Directors approved a change in the
Company's fiscal year from one ending on December 31st of each year to a 52-
53 week fiscal year ending on the Saturday nearest the last day of December.
Fiscal 1994 ended on December 31, 1994. Fiscal 1993, the first fiscal year
under this change, ended on January 1, 1994. Fiscal 1992 ended on December
31, 1992. All references to 1993 in the financial statements refer to the
fiscal year ended January 1, 1994. The Company filed a Form 8-K report on
December 31, 1992.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 as to the Directors of the Company
is incorporated herein by reference to the information set forth under the
caption "Election of Directors" in the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on May 9, 1995, since such
Proxy Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A. Information required by this Item 10 as to the executive
officers of the Company is included in Part I of this Annual Report on Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference to the
information set forth under the caption "Compensation of Directors and
Executive Officers" in the Company's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on May 9, 1995, since such Proxy
Statement will be filed with the Securities and Exchange Commission not later
than 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference to the
information set forth under the caption "Share Ownership of Principal
Holders and Management" in the Company's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on May 9, 1995, since such Proxy
Statement will be filed with the Securities and Exchange Commission not later
than 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated by reference to the
information set forth under the caption "Certain Transactions" in the
Company's definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on May 9, 1995, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of
the Company's fiscal year pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Registrant and its
subsidiaries are included in Part II, Item 8:
Page
Report of Independent Auditors F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to F-15
(A) (2) FINANCIAL STATEMENTS SCHEDULES
The following Consolidated Financial Statement Schedules of the Registrant
and its subsidiaries are included in Item 14 hereof:
Page
Report of Independent Auditors as to Schedules F-2
Schedule VIII Valuation and Qualifying Accounts and
Reserves 19
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(A) (3) EXHIBITS
Reference is made to the Exhibit Index at sequential page hereof.
-----
For purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into the registrant's Registration Statement on Form S-8 (Reg. No.
33-32239):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 is permitted to Directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized at Morganville, New Jersey
this 31st day of March, 1995.
HANDEX ENVIRONMENTAL RECOVERY, INC.
By:/s/Curtis Lee Smith, Jr.
----------------------------
Curtis Lee Smith, Jr., Chairman
and Chief Executive Officer
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
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
----------- ----- -----
/s/Curtis Lee Smith, Jr. Chairman, and )
Curtis Lee Smith, Jr. Chief Executive Officer )
(Principal Executive )
Officer) )
)
/s/John T. St. James Vice President, )
John T. St. James Treasurer and )
Chief Financail Officer )
(Principal Financial )
and )
Accounting Officer) )
/s/Stuart O. Smith Director )
Stuart O. Smith )
) March 31, 1995
)
/s/Thomas J. Bresnan Director )
Thomas J. Bresnan )
)
)
/s/Gregory J. Reuter Director )
Gregory J. Reuter )
)
)
/s/David A. Goldfinger Director )
David A. Goldfinger )
)
)
/s/Richard L. Osborne Director )
Richard L. Osborne )
)
)
/s/Scott R. Wilson Director )
Scott R. Wilson )
)
)
/s/William H. Heller Director )
William H. Heller )
)
)
SCHEDULE VIII
---------------
HANDEX ENVIRONMENTAL RECOVERY, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years ended December 31, 1994, January 1, 1994 and December 31, 1992
Allowance
for
Doubtful
Accounts
Balance at January 1, 1992 $ 727,933
Additions - Charged to costs and expenses 692,463
Deductions (A) (528,562)
-----------
Balance at December 31, 1992 891,834
Additions - Charged to costs and expenses 192,943
Deductions (A) (244,686)
-----------
Balance at January 1, 1994 840,091
Additions - Charged to costs and expenses 195,552
Deductions (A) (101,083)
-----------
Balance at December 31, 1994 $ 934,560
===========
(A) - Accounts charged off, less recoveries
EXHIBIT INDEX
PAGINATION
BY
SEQUENTIAL
EXHIBIT EXHIBIT NUMBERING
NUMBER DESCRIPTION SYSTEM
-------- ----------- -------
3.1 Amended Certificate of Incorporation of the Registrant(1)
3.2 By-Laws of the Registrant(1)
4.1 Specimen Certificate for Share of Common Stock, $.01
par value, of the Registrant(1)
4.2 Unsecured Revolving Loan Agreement(4)
4.3 First Amendment to Unsecured Revolving Loan Agreement (7)
4.4 Working Capital Line of Credit Note (7)
10.1 Key Employees Stock Option Plan of the Registrant(1)*
10.2 Amendment No. 1 to Key Employees Stock Option Plan of the
Registrant(7)*
10.3 Form of Stock Option Agreement executed by recipients of
options under Key Employees Stock Option Plan(6)
10.4 Stock Option Agreement dated August 6, 1992, between the
Registrant and Thomas J. Bresnan (7)*
10.5 Outside Directors Stock Option Plan of the Registrant(1)*
10.6 Amendment No. 1 to the Outside Directors Stock Option
Plan of the Registrant (7)*
10.7 Form of Stock Option Agreement executed by recipients of
options under the Outside Directors Stock Option Plan(7)
10.8 Amended and Restated 401(k) Profit sharing Trust and
Plan of the Registrant(1)*
10.9 Amendment No. 1 to the Registrant's Amended and
Restated 401(k) Profit Sharing Trust and Plan(2)*
10.10 Amendment No. 2 to the Registrant's Amended and Restated
401(k) Profit Sharing Trust and Plan(3)*
10.11 Amendment No. 3 to the Registrant's Amended and Restated
401(k) Profit Sharing Trust and Plan(6)*
10.12 Form of Indemnity Agreement with Directors and Officers of the
Registrant(6)
10.13 Employment Agreement dated August 3, 1992, between the
Registrant and Thomas J. Bresnan(7)*
10.14 Lease Agreement dated April 26, 1988, between Jocama
Construction Inc. and the Registrant(1)
EXHIBIT INDEX
PAGINATION
BY
SEQUENTIAL
EXHIBIT EXHIBIT NUMBERING
NUMBER DESCRIPTION SYSTEM
-------- ------------ -------
10.15 Addenda to the Lease Agreement dated April 6, 1988
between Jocama Construction and the Registrant (8)
10.16 Indenture of Lease dated June 17, 1987, between
Xednah Investments and Handex of Florida, as amended(1)
10.17 Lease Agreement dated March 25, 1991, between Handex
of New England, Inc. and Metro Park Marlboro Realty
Trust, as amended(6)
10.18 Lease Agreement dated January 20, 1992, between Handex
of Maryland, Inc. and Winmeyer Commons II
Limited Partnership (6)
10.19 Lease Agreement dated between New Horizons Learning
Center of Metropolitan New York Inc. and Mid City
Associates, guaranteed by the Registrant
10.20 Lease Agreement dated February 24, 1995, between New Horizons Learning
Centers of Cleveland Ltd., and Realty One Property Management, guaranteed
by the Registrant
10.21 Consulting Agreement between the Registrant and
The Nassau Group, Inc. dated December 17, 1993 (9)
10.22 Warrants for the purchase of 25,000 shares of
Common Stock $.01 par value per share of the
Registrant issued to The Nassau Group, Inc. on
December 17, 1993 (9)
10.23 Warrants for the purchase of 40,000 shares of common stock
$.01 par value per share of the registrant issued to
The Nassau Group, Inc. on August 15, 1994.
10.24 Asset Purchase Agreement, dated as of August 15, 1994, by
and among New Horizons Computer Learning Centers, Inc.
a Delaware Corporation, New Horizons Learning Center, Inc.,
a California Corporation and Michael A. Brinda (10)
10.25 Stock Purchase Agreement dated as of August 15, 1994
by and among New Horizons Education Corporation, a
Delaware Corporation and Michael A. Brinda (10)
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
99.1 Directors and Officers and Company Indemnity Policy(5)
--------------------------------------------------------------
(1) Incorporated herein by reference to the appropriate exhibits to the
Registrant's Registration Statement on
Form S-1 (File No. 33-28798).
(2) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1989.
(3) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
1990.
(4) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report or Form 10-Q for the period ended June 30,
1990.
(5) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1990.
(6) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.
(7) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31,1992.
(8) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended July 3,
1993.
(9) Incorporated herein by reference to the appropriate exhibit to the
Registrants Annual Report on Form 10-K for the year ended January 1, 1994.
(10) Incorporate herein by reference to the appropriate exhibit to the
Registrants Form 8-K dated August 15, 1994.
* Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14 of Form 10-K.
SUBSIDIARIES OF HANDEX
--------------------------
Handex Environmental Recovery, Inc. has the following subsidiaries, all of which
are incorporated in the State of Delaware.
1. Handex of New Jersey, Inc.
2. Handex of Maryland, Inc.
3. Handex of Florida, Inc.
4. Handex of New England, Inc.
5. Handex Environmental Management, Inc.
6. Handex of the Carolinas, Inc.
7. Handex of Illinois, Inc.
8. Handex of Ohio, Inc.
9. Handex of Colorado, Inc.
10. Handex Environmental, Inc.
11. New Horizons Computer Learning Centers, Inc.
12. New Horizons Education Corporation
13. New Horizons Franchising, Inc.
14. New Horizons Computer Learning Center of Chicago, Inc.
15. New Horizons Computer Learning Center of Metropolitan New York,
Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,895,478
<SECURITIES> 3,940,000
<RECEIVABLES> 27,789,466
<ALLOWANCES> 934,560
<INVENTORY> 298,326
<CURRENT-ASSETS> 35,596,206
<PP&E> 22,717,476
<DEPRECIATION> 13,980,868
<TOTAL-ASSETS> 61,920,137
<CURRENT-LIABILITIES> 10,929,905
<BONDS> 464,357
<COMMON> 70,502
0
0
<OTHER-SE> 49,566,857
<TOTAL-LIABILITY-AND-EQUITY> 61,920,137
<SALES> 52,570,746
<TOTAL-REVENUES> 52,570,746
<CGS> 33,795,664
<TOTAL-COSTS> 49,011,772
<OTHER-EXPENSES> (379,907)
<LOSS-PROVISION> 195,552<F1>
<INTEREST-EXPENSE> 37,042
<INCOME-PRETAX> 3,901,839
<INCOME-TAX> 1,570,797
<INCOME-CONTINUING> 2,331,042
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,331,042
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
<FN>
<F1>Included in Total-Cost
</FN>
</TABLE>
LEASE
SUITE NO. 100
REALTY ONE CORPORATE CENTER
FROM
REALTY ONE PROPERTY MANAGEMENT,
a division of Realty One, Inc.
as Managing Agent for Aveni Bros. Development Co.
TO
NEW HORIZONS COMPUTER LEARNING CENTERS OF CLEVELAND LTD,
a Delaware limited liability company
NOTICE
Rent and other charges are to be paid by the Tenant on the first day of the
month. The Landlord has the right to exercise his remedies as set forth in
Section 15 of the Lease if the rent and other charges are not paid when due.
The Tenant cannot assign or sublease the Premises until all provisions of
Section 13 of the Lease have been fulfilled.
This language is intended to notify the Tenant of specific obligations
under the Lease and shall in no way be considered a modification of the language
as set forth in the body of the Lease Agreement.
g:\map\rocc\newhozn3
INDEX
SECTION PAGE
1. PREMISES ................................................ 1
2. TERM .................................................... 1
3. RENT .................................................... 1
4. REAL ESTATE TAXES ....................................... 2
5. CONSTRUCTION ............................................ 3
6. COMMON AREAS ............................................ 4
7. SERVICE/UTILITIES ....................................... 5
8. USE OF PREMISES BY TENANT ............................... 5
9. TENANT'S COVENANTS WITH RESPECT TO OCCUPANCY ............ 5
10 REPAIRS AND ALTERATIONS ................................. 7
(A) Repairs by Landlord ............................... 7
(B) Repairs by Tenants ................................ 7
(C) Alterations or Improvements by Tenant ............. 7
(D) Removal of Improvements ........................... 8
11. INDEMNITY AND INSURANCE ................................ 8
(A) Indemnification by Tenant ......................... 8
(B) Public Liability Insurance ........................ 8
(C) Landlord's Liability .............................. 9
(D) Fire and Extended Coverage Insurance .............. 9
(E) Mutual Waiver of Subrogation ...................... 9
12. DAMAGE AND DESTRUCTION ................................ 10
13. ASSIGNING AND SUBLETTING .............................. 10
14. EMINENT DOMAIN ........................................ 11
15. DEFAULT BY TENANT ..................................... 11
16. SECURITY DEPOSIT ...................................... 12
17. NOTICES ................................................ 13
18. MORTGAGE SUBORDINATION ................................ 13
19. ESTOPPEL CERTIFICATES ................................. 14
20. QUIET ENJOYMENT ....................................... 14
21. LIABILITY OF LANDLORD ................................. 14
22. MISCELLANEOUS PROVISIONS .............................. 15
(A) Accord and Satisfaction ........................... 15
(B) Waiver ............................................ 15
(C) Broker's Commission ............................... 15
(D) No Partnership .................................... 15
(E) Section Headings .................................. 15
(F) Lease Inures to the Benefit of Assignees .......... 15
(G) Entire Agreement .................................. 15
(H) Surrender and Holding Over ........................ 15
(I) No Option ......................................... 16
(J) Additional Rent ................................... 16
(K) Severability ...................................... 16
(L) Option to Renew ................................... 16
(M) Right of First Refusal ............................ 17
(N) Temporary Space ................................... 17
23. ENVIRONMENTAL COMPLIANCE .............................. 18
24. COMPLIANCE WITH LAWS .................................. 18
LEASE
THIS LEASE, entered into as of this 24th day of February, 1995, by and
between REALTY ONE PROPERTY MANAGEMENT, a division of Realty One, Inc., Managing
Agent ("Landlord"), having an office at 6000 Rockside Woods Boulevard, Suite
220, Cleveland, Ohio 44131-2350, and NEW HORIZONS COMPUTER LEARNING CENTERS of
CLEVELAND LTD., a Delaware limited liability company, (Tenant") having an
office at 500 Campus Drive, Morganville, New Jersey 07751.
WITNESSETH
1. PREMISES
--------
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
premises (the "Premises") described as follows:
The space within the Realty One Corporate Center known as Suite 100 located
on the first (1st) and second (2nd) floors of the Building, containing
approximately Twelve Thousand Five Hundred Fifty Seven (12,557) square
feet of gross leasable area, consisting of approximately (i) Eight
Thousand Five Hundred Seventy (8,570) square feet of gross leasable area on
the first (1st) floor and (ii)Three Thousand Nine Hundred Eighty Seven
(3,987) square feet of gross leasable area on the second (2nd) floor as
outlined in red on the site plan, attached hereto as Exhibit "A" and made a
part hereof for the purposes of more specifically locating the Premises in
the building (the "Building") located on Landlord's property (the
"Property"),(the Building and the Property are sometimes hereinafter
collectively referred to as the "Property"), provided, however, for
purposes of calculating Rent pursuant to Section 3 hereof and Tenant's
Share of real estate taxes pursuant to Section 4 hereof the gross leasable
area referred to above shall be multiplied by 1.15 representing a common
area factor for the non-exclusive right to use the Common Areas of the
Building granted to Tenant in Section 6 of this Lease.
2. TERM
-----
(A) TO HAVE AND TO HOLD the Premises unto Tenant for a term of sixty-five
(65) months commencing upon substantial completion of Landlord's Work
(as hereinafter defined) on that portion of the Premises located on
the first (1st) floor of the Building (such date being hereinafter
called the "Commencement Date").
(B) At the time the Commencement Date is established, the parties will
promptly execute a written instrument stipulating the Commencement
Date and expiration date of the term of this Lease.
3. RENT
-------
Tenant agrees to pay to Landlord, at its office or other place as Landlord
may from time to time designate, as "Rent" for the Premises during the term
of this Lease, without any deduction or set off, the sum of Two Hundred
Fifty Nine Thousand Nine Hundred Twenty and 00/100 Dollars ($259,920.00)
per annum, computed at the rate of Eighteen and 00/100 Dollars ($18.00) per
factored square foot of leasable area, payable in equal monthly
installments, in advance, at the rate of Twenty One Thousand Six Hundred
Sixty and 00/100 Dollars ($21,660.00) per month.
Notwithstanding any language to the contrary contained herein, and in
conjunction with Section 22(N) of this Lease, on the Commencement Date
Tenant shall be issued credit in the amount of One Hundred Eight Thousand
Three Hundred and 00/100 Dollars ($108,300.00) to be applied against Rent
accruing hereunder (the "Free Rent Period"). Upon the expiration of the
Free Rent Period, Tenant's obligation to pay rent shall commence. In the
event the Free Rent Period ends on a day other than the last day of the
calendar month, Minimum Rent shall be prorated on the basis of a thirty
(30) day month, for the period commencing upon the expiration of the Free
Rent Period and ending on the first (1st) day of the calendar month in
which the Free Rent Period expires and shall be paid on the first (1st) day
following expiration of the Free Rent Period.
4. REAL ESTATE TAXES.
-----------------
For purposes of this provision, the following terms, whenever set forth in
initial capital letters herein, shall have the meaning set forth below:
(i) Base Year: The full calendar year commencing January 1, 1996, and
ending December 31, 1996.
(ii) Comparison Year: The first full calendar year following the Base Year
and each subsequent full calendar year thereafter during which this
Lease shall continue in effect.
(iii)Tenant's Share: The percentage (currently 15.84%) which the factored
square footage of the Premises (currently 14,440 sq. ft.) is of the
total factored square footage of the Building (currently 91,145 sq.
ft.) as of the end of each calendar year. In the event that
additional areas shall be included under this Lease, or that the total
factored square footage of the Building is changed the percentage
shall be proportionately adjusted.
(iv) Taxes: The real estate taxes and assessments, special or otherwise,
(including, without limitation , all expenses incurred in connection
with contesting or disputing the amounts thereof) levied or assessed
for the year in question, whether the Base Year or a Comparison Year,
upon or with respect to the Property by the Federal, State or local
government. Should any governmental authority having jurisdiction
levy or assess a special tax assessment against the Property during
the term of this Lease, Tenant shall be permitted to extend payment of
that portion of Taxes relating to the special tax assessment over the
longest period of time permitted by law. Should any governmental
authority having jurisdiction hereafter impose a tax or assessment, or
either (other than an income tax or a franchise tax), upon or against
the Rent payable hereunder or on the privilege of renting, leasing or
letting real property, either in substitution for, or in lieu of, the
real estate taxes and assessments now levied or assessed against the
Property or in addition thereto, such tax or assessment, or either,
shall be deemed to constitute a real estate tax and assessment against
the Property for the purposes of this subparagraph.
Tenant shall pay to Landlord, without deduction or set off, a "Tax Charge"
based upon Tenant's Share of the net aggregate increase, if any, in the
amount of Taxes for the Comparison Year over those for the Base Year.
During the term of this Lease, Tenant shall pay the Tax Charge to Landlord
on a monthly basis, in advance, in an amount equal to one-twelfth (l/12th)
of Tenant's Share of the Tax Charge for the current year, as reasonably
estimated by Landlord. If Tenant's Share of the Tax Charge with respect to
any tax year is less than the total amount theretofore paid by Tenant for
such period, the excess shall be credited against the payments with respect
to real estate taxes next becoming due, provided, however, that if the
Lease is in the last year of the term, any overage due Tenant shall be paid
directly to Tenant at the same time as the security deposit. If Tenant's
Share of the Tax Charge for any tax year exceed the total amount
theretofore paid by Tenant for such period, Tenant shall, upon receipt of
an invoice from Landlord, pay the difference between the actual amount paid
by Tenant and Tenant's Share of the Tax Charge. Notwithstanding any
language to the contrary contained herein, Tenant shall not be responsible
for payment of any portion of operating expenses incurred by Landlord in
the operation, repair and maintenance of the Property.
5. CONSTRUCTION
--------------
(A) Landlord's Work
Landlord, at its sole cost and expense, agrees to perform or cause to be
performed such work ("Landlord's Work") in the construction of the Premises
as may be set forth in the drawings (the "Drawings") dated ______________
prepared by ------------, consisting of pages ---------- and approved in
writing by Tenant, such work to be substantially completed in a good and
workmanlike manner, in accordance with the specifications set forth
therein as well as in compliance with all applicable codes, ordinances,
rules and regulations. Landlord and Tenant acknowledge that Landlord's
Work consists of construction to certain areas located on the first (1st)
floor of the Building (the "First Floor Area") and certain areas located on
the second (2nd) floor of the Building (the "Second Floor Area"). The
First Floor Area shall be substantially completed within one hundred
twenty (120) days after a building permit for Landlord's Work has been
issued by the City of Independence, Ohio. The Second Floor Area shall be
substantially completed on or before October 1, 1995. In the event
Landlord does not substantially complete Landlord's Work in either Area of
the Premises by the date(s) referenced above, Tenant shall receive a rent
credit of two (2) free days for each day after the agreed substantial
completion date Landlord does not have Landlord's Work in that area
substantially completed. Upon substantial completion of Landlord's Work
in the First Floor Area as well as upon substantial completion of
Landlord's Work on the Second Floor Area, Landlord shall notify Tenant in
writing that Landlord's Work is substantially completed and thereupon
deliver possession of that portion of the Premises to Tenant. For
purposes of this provision "substantial completion" or "substantially
complete" shall mean when Landlord has completed that portion of the work
which can be accomplished prior to and independent of any construction or
installation by Tenant. Tenant shall, at Tenant's expense, perform all work
("Tenant's Work") and supply all installations and, shall fully equip the
Premises with all trade fixtures, furniture, furnishings, special
equipment, and other items necessary for the proper operation of Tenant's
business. Landlord shall, prior to delivery of the Premises, make the
Premises available to Tenant for commencement of Tenant's Work, at Tenant's
sole risk, and so long as such work and installations do not interfere
with completion of Landlord's Work.
(B) Change Orders
Tenant shall have the right at any time or times whether prior to or during
the construction of the Premises to eliminate any feature, item or detail
provided or to be provided for in the Drawings and/or to substitute and/or
to add other features, items or details for which provision has not been
made (the "Change Orders"), in which event Landlord shall make such
changes, provided, however, that Tenant shall pay for any net increase i.e.
total increases after offsetting total decreases in the total cost of said
improvements resulting from Change Orders requested by Tenant.
(C) Punch List
Within thirty (30) days after possession of the Premises is delivered to
Tenant, Tenant shall deliver to Landlord a list of the items, if any, which
are not substantially constructed or completed in accordance with
Landlord's Work (the "Punch List Items"). In the event Tenant fails to
deliver a Punch List to Landlord within thirty (30) days after possession
of the Premises is delivered to Tenant, Tenant shall be deemed to have
approved and accepted Landlord's Work in the condition existing at the time
possession of the Premises is delivered to Tenant. In the event a Punch
List is delivered to Landlord by Tenant, Landlord shall promptly commence
to complete any such Punch List Items within thirty (30) days after
Landlord's receipt of the Punch List items from Tenant, provided,
however, in the event any Punch List Item shall require more than thirty
(30) days to correct, the time to correct such Punch List Item shall be
extended provided that Landlord promptly and diligently carries through
with the correction or completion thereof. Upon correction or completion
of the Punch List Items, in accordance with the plans and
specifications, Tenant shall be deemed to have approved construction of
the Premises in accordance with the Drawings. In the event that a dispute
shall arise as to whether or not Landlord's Work is substantially
completed, a certification of an architect mutually acceptable to Landlord
and Tenant that the work is substantially completed in accordance with
plans and specifications therefor shall be conclusive and binding upon the
partes hereto, with cost thereof split equally between Landlord and
Tenant. If Tenant has taken possession of the Premises as substantially
completed, Landlord agrees that it will diligently carry forward Landlord's
Work in the Premises to final completion in accordance with its
obligations as required by Subsection 5(A). If Landlord fails to commence
or complete any Punch List Item as set forth above, Tenant may complete
said work and Landlord shall pay the cost thereof to Tenant upon demand.
6. COMMON AREAS.
-------------
Tenant shall have access to the Building twenty-four (24) hours a day,
three hundred sixty-five (365) days per year. In conjunction
therewith, Landlord grants to Tenant, Tenant's employees, customers
and invitees the non-exclusive right to use, in common with all others
to whom Landlord has or may hereafter grant rights to use the same,
the Common Areas located within the Property. The term "Common Areas"
as used in this Lease, shall mean the parking areas, roadways,
pedestrian sidewalks, loading docks, delivery areas, landscaped
areas, exercise facilities, cafeteria, hallways, elevators, patios,
hallways, fire corridors, meeting areas and public restrooms, and all
other areas or improvements which may be provided by Landlord for the
common use of the tenants of the Property. Landlord hereby reserves
the following rights with respect to the Common Areas:
(i) To establish reasonable rules and regulations from time to
time for the use thereof;
(ii) To close all or any portion thereof as may be deemed
necessary by Landlord's counsel to prevent a dedication
thereof or the accrual of any rights to any person or the
public therein;
(iii) To change the layout of such Common Areas, including
the right to reasonably add to or subtract from their
shape and size, whether by the addition of building
improvements or otherwise, and may make installations and/or
construct or erect buildings, structures, booths therein or
thereon and move or remove the same; and
(iv) Landlord shall operate, manage, equip, light, repair and
maintain said Common Areas for their intended purposes in
such manner as Landlord shall in its sole discretion from
time to time determine, and may from time to time
change the size, location, elevation, nature and/or use
of any Common Areas.
7. SERVICE/UTILITIES.
------------------
Landlord covenants and agrees to furnish Tenant the following
services and utilities at Landlord's cost: Janitorial
services on a daily basis (five (5) days per week), automatic
elevator service, hot and cold water for ordinary office
purposes reasonable electric for general office purposes and
reasonable air conditioning and heating for general office
purposes, when required; it being the intent of the parties
that the heating and air conditioning system shall be
functioning from 7:00 A.M. to 10:00 P.M., Monday through
Friday and 7:00 A.M. to 5:00 P.M. on weekends , including
Martin Luther King Day, Memorial Day, Veterans Day, Columbus
Day and President's Day. Electrical usage within the Premises
shall be sub metered and Tenant shall pay for electric current
together with any taxes or other charges levied thereon by the
electrical utility company.
8. USE OF PREMISES BY TENANT.
---------------------------
Tenant shall use the Premises only for the operation of a computer
learning center, including but not limited to, teaching classes,
assembly of certain computers, storage, repair and maintenance of
computers and computer diagnostic functions.
9. TENANT'S COVENANT WITH RESPECT TO OCCUPANCY.
---------------------------------------------
Tenant agrees:
(A) To occupy the Premises in a safe and careful manner and in
compliance with all laws, ordinances, rules, regulations and
orders of any governmental bodies having jurisdiction over the
Premises, and without committing or permitting waste;
(B) To neither do nor suffer anything to be done or kept in or about
the Premises which contravenes Landlord's insurance policies
or increases the premiums therefor;
(C) To prohibit Tenant's customers, employees and invitees from
smoking within the Building;
(D) To permit no reproduction of sound which is audible outside of
the Premises nor permit odors to be unreasonably dispelled
from the Premises;
(E) To place no sign on the Property, the exterior of the Building or
on any of the windows of the Premises and to place no window
treatments on any of the windows of the Premises except the
Building standard window treatments; notwithstanding the
foregoing, Tenant shall be permitted to install one (1) building
standard, individual gold letter, Tenant identification signage
in the alcove area on the first (1st) floor of the Building
immediately adjacent to the Building rotunda, Building standard
rotunda directory identification; Building standard interior
directional signage and three (3) Building standard entrance
door signs;
(F) To place no sign or other thing of any kind in the entry of the
Premises or on the sidewalks or other Common Areas adjacent
thereto except for identification signage consistent with
Building standards on the Building directory, the entry into
the first (1st) floor hallway and on the entrance door area to
the Premises located on the first (1st) and second (2nd) floors
of the Building;
(G) To park Tenant's vehicles and to require all employees to park
only in such places as may be designated from time to time by
Landlord for the use of Tenant and its employees, and
specifically not to permit parking by any of them in any reserved
or visitors area;
(H) To keep any refuse in proper containers in the interior of the
Premises until the same is removed and to permit no refuse to
accumulate around or within the Premises;
(I) To neither load nor unload or permit the loading or unloading of
heavy equipment or other property from any of the front doors of
the Building that open on to the front sidewalk areas, nor from
any other doors except from the service area at the rear of the
Building;
(J) To permit Landlord free access to the Premises at all reasonable
times upon prior notice to Tenant (except in the case of an
emergency in which event no notice shall be required) for the
purpose of examining the same or making alterations or repairs
to the Premises that Landlord may deem necessary for the
safety or preservation thereof;
(K) To adequately maintain a reasonable level of heating and cooling
within the Premises;
(L) To permit no lien, notice of intention to file lien or other
charges (whether arising out of work of any contractor,
mechanic, laborer or material man or any mortgage, conditional
sale, security agreement or chattel mortgage or otherwise) which
might be or become a lien, encumbrance or charge upon the
Premises or any part thereof or the income therefrom, and to
suffer no other matter or thing whereby the estate, right and
interest of Landlord in the Premises or any part thereof might be
impaired;
(M) To solicit no business in the Common Areas, nor
distribute handbills or other advertising matter on the Property;
(N) To comply with all reasonable rules and regulations which
Landlord may from time to time establish for the use and care of
the Premises, the Common Areas, the Building and other facilities
on the Property;
(O) To prohibit the Premises or the Property to be used in any way
which will injure the reputation of the same or the Property or
may be an unreasonable nuisance, annoyance, inconvenience or
damage to the tenants of the Property or of the neighborhood
including, without limiting the generality of the foregoing,
noise by the playing of any musical instrument or radio or
television, or the use of a microphone, loudspeaker, electrical
equipment, or utilizing flashing lights or search lights or any
other equipment which in the judgment of Landlord might cause
disturbance, impairment or interference with the use or enjoyment
by any other tenant in the Property;
(P) To not subject any fixtures, furnishings or equipment in or on
the Premises which are affixed to the realty to any mortgages,
liens, conditional sales agreements, security interests or
encumbrances;
10. REPAIRS AND ALTERATION.
-----------------------
(A) Repairs, Replacements and Maintenance by Tenant. Tenant shall at its
expense throughout the term of this Lease, and any renewal thereof,
maintain and make all repairs and replacements to the interior of
the Premises necessary to keep it in good order, condition and repair
(excepting reasonable wear and tear and insured casualty) including
but not limited to:
(1) routine periodic maintenance to any electrical, plumbing,
heating, air conditioning and ventilating system(s) or
apparatus (the "HVAC") located within or used solely in
connection with the Premises;
(2) maintaining all lighting fixtures, including replacement of
light bulbs, within the Premises;
(3) maintaining all windows and doors either in the Premises or
located on the perimeter of the Premises; and
(4) shall not do or suffer any waste or damage, disfigurement or
injury to the Premises and all improvements thereon.
Notwithstanding any language to the contrary contained herein, Tenant shall
not be required to make any repairs and/or replacements which would, under
generally accepted accounting principals, be considered a capital
expenditure for the Landlord.
(B) Repairs, Replacements and Maintenance by Landlord. Landlord shall
at its expense, throughout the term of this Lease, and any renewal
thereof, maintain, repair and replace all items which are not the
responsibility of the Tenant pursuant to Section 10(A) hereof which
shall include, but shall not be limited to the following:
(1) maintain in good condition and make all necessary
repairs to the exterior of the Building except for
windows and doors;
(2) make all necessary exterior and interior structural
repairs to the Building and Premises; and
(3) provide and maintain in good repair all water, gas and
electric services to the points where the Tenant ties into
said services above the floor slabs within the four (4) side
walls and below the roof of the Premises.
(C) Alterations or Improvements by Tenant. Tenant shall not, without
Landlord's prior written consent, make, nor permit to be made,
any alterations, additions or improvements to the Premises. Any
alterations which may be permitted by Landlord shall be upon the
condition that Tenant shall promptly pay all costs, expenses, and
charges thereof, shall make such alterations and improvements in
accordance with all applicable laws, building codes and ordinances, in
a good and workmanlike manner, and shall fully and completely
indemnify and defend Landlord, which indemnification shall be in a
form acceptable to Landlord and which indemnification may include but
not be limited to a full performance and completion bond from Tenant's
contractor, against any mechanic's lien or other liens or claims in
connection with the making of such alterations, additions, or
improvements. Tenant shall promptly repair any damages to the
premises, or to the buildings of which the Premises are a part,
caused by any alterations, additions or improvements to the Premises
by Tenant.
(D) Removal of Improvements. All items of Landlord's Work, all heating
and air conditioning equipment, and all alterations, additions and
other improvements by Tenant shall become the property of Landlord and
shall not be removed from the Premises. All trade fixtures,
furniture, furnishings, and signs installed in the Premises by
Tenant and paid for by Tenant shall remain the property of Tenant and
may be removed upon the expiration of the term of this Lease; provided
(i) that any of such items as are affixed to the Premises and require
severance may be removed only if Tenant repairs any damage caused by
such removal and (ii) that Tenant shall have fully performed all of
the covenants and agreements to be performed by Tenant under the
provisions of this Lease. If Tenant fails to remove such items from
the Premises prior to the expiration or earlier termination of
this Lease, all such trade fixtures, furniture, furnishings, and
signs shall become the property of Landlord unless Landlord elects
to require their removal in which case Tenant shall promptly remove
same and restore the Premises to its prior condition. In the event
Tenant fails to remove all such trade fixtures, furniture,
furnishings, and signs within ten (10) days after Landlord elects to
require their removal, Landlord shall have the right to remove same
and sell such trade fixtures, furniture, furnishings, and signs to pay
for the cost of removal.
Tenant further agrees that all personal property of every kind or
description which may at any time be in the Premises shall be at the
Tenant's sole risk, or at the risk of those claiming under Tenant.
Landlord shall not be responsible or liable to Tenant for any loss or
damage that may be occasioned by the acts or omissions of persons
occupying any space adjacent to or adjoining Tenant's Premises, or any
part thereof. Landlord shall not be responsible or liable to Tenant
for any loss or damage resulting to Tenant or its property from roof
leaks, water, gas, steam, fire, or the bursting, stoppage, or
leaking of sewer pipes, or from the heating or plumbing fixtures, or
from electric wires, or from gas or odors, or caused in any manner
whatsoever.
11. INDEMNITY AND INSURANCE.
-------------------------
(A) Indemnification by Tenant. Tenant will indemnify, defend and hold
Landlord harmless from and against all claims, demands, loss,
cost, expense, and liability whatsoever (including Landlord's
cost of defending against the foregoing, such cost to include
attorney's fees) resulting or occurring by reason of
Tenant's construction, use or occupancy of the Premises.
(B) Public Liability Insurance. Tenant agrees to carry public
liability insurance covering the Premises and Tenant's use
thereof, together with contractual liability endorsements
covering Tenant's obligations set forth in Subsection 10(A), in
companies and in a form satisfactory to Landlord, with minimum
limits of Five Hundred Thousand and 00/100 Dollars ($500,000.00)
on account of bodily injuries to or death of one person, One
Million and 00/100 Dollars ($1,000,000.00) on account of
bodily injuries to or death of more than one person as a result
of any occurrence and Fifty Thousand and 00/100 Dollars
($50,000.00) coverage for property damage, and to deposit said
policy or policies (or certificates thereof) with Landlord prior
to the date of and use or occupancy of the Premises by Tenant;
said policy or policies shall name Landlord, Tenant and such
other parties as Landlord may from time to time notify Tenant in
writing to be named as additional insureds, as insured parties
under such insurance policy and shall bear endorsements to the
effect that the insurer agrees to notify Landlord and such other
parties designated by Landlord as additional insureds not less
than thirty (30) days in advance of any modification or
cancellation thereof.
(C) Landlord's Liability. Landlord shall not be liable (i) for any
damage to Tenant's property located in the Premises, regardless
of the cause of such damage, (ii) for any acts or omissions of
other tenants of the Building, nor (iii) for any condition of
the Premises whatsoever unless Landlord is responsible for the
repair thereof, and has failed to make such repair after notice
from Tenant of the need therefor, and expiration of a reasonable
time for the making of such repair.
(D) Fire and Extended Coverage Insurance. Landlord agrees to carry
policies insuring the improvements on the Property against fire
and such other perils as are normally covered by extended
coverage endorsements in the county where the Premises are
located, in an amount equal to at least eighty percent (80%) of
the insurable value of such improvements, together with insurance
against such other risks (including loss of rent) and in such
amounts as Landlord deems appropriate. Tenant agrees to notify
Landlord in writing on the date of completion regarding the cost
of any improvements installed in the Premises during the term of
this Lease other than trade fixtures, inventory, furniture,
furnishings, signs or personal property of Tenant. Tenant's
failure to advise Landlord regarding the value of said
improvements as provided herein shall constitute a waiver of
Tenant's right to be reimbursed for said improvements in the
event of destruction of the Premises. Tenant agrees that the
total cost of the foregoing insurance shall be included in the
Operating Expense provided for in Subsection 4(B) of this Lease
and that Tenant shall pay its proportionate share of the
foregoing insurance per said Subsection; provided, however, that
Tenant shall have no rights in said policy or policies maintained
by Landlord and shall not, by reason of such reimbursement, be
entitled to be a named insured thereunder. In the event
any of Landlord's policies insures premises or risks other than
the Property or the rents therefrom, the statement of the insurer
shall be conclusive as to the portion of the total premium
attributable to the Property. Tenant agrees to carry insurance
against fire and such other risks as are, from time to time,
included in standard extended coverage endorsements, insuring
Tenant's stock-in-trade, trade fixtures, furniture, furnishings,
special equipment, floor and wall coverings, and all other items
of personal property of Tenant located on or within the Premises,
such coverage to be in an amount equal to at least eighty percent
(80%) of replacement cost thereof. Prior to the Commencement Date
of this Lease, Tenant shall furnish Landlord with a certificate
evidencing such coverage.
(E) Mutual Waiver of Subrogation. All insurance policies carried by
either party covering the Premises, including but not limited
to contents, fire, and casualty insurance, shall to the
extent permitted by law expressly waive any right on the part of
the insurer against the other party. The parties hereto
agree that their policies will include such waiver clause or
endorsement. To the extent that the policy of insurance of each
party so provides, Tenant and Landlord further agree to waive all
claims, causes of action and rights of recovery against the
other, and their respective agents, officers, and employees; for
any damage or destruction of persons, property or business which
shall occur on or about the Premises originating from any cause
whatsoever including the negligence of either party and their
respective agents, officers, and employees.
12. DAMAGE AND DESTRUCTION.
-----------------------
If any portion of the Premises shall be damaged or destroyed by fire or
other casualty, shall give prompt written notice thereof to Landlord
("Tenants Notice of Damage"). In the event the Premises are damaged by
any peril covered by standard policies of fire and extended coverage
insurance to an extent which can be repaired or restored in less than one
hundred (120) days from the date of Tenant's Notice of Damage, the damage
shall, except as hereinafter provided, promptly be repaired by Landlord, at
Landlord's expense, provided that in no event shall Landlord be required to
repair or replace Tenant's stock-in-trade, trade fixtures,
furniture, furnishings, equipment or personal property. In the event (a)
the Premises are damaged to an extent which can not be repaired or restored
in less than one hundred twenty (120) days from the date of Tenant's Notice
of Damage, (b) the Building is damaged to the extent of fifty percent
(50%) or more of the cost of replacement, notwithstanding the extent of
damages to the Premises, or (c) any damage to the Premises occurs during
the last two (2) years of the term of this Lease, Landlord or Tenant may
elect to terminate this Lease by written notice to the other, such
termination to be effective as of the tenth (10th) day after the date of
said notice. In the event neither party shall elect to terminate the
Lease, Landlord shall commence repair or rebuild the Premises or the
Building such repair and restoration to be completed within a reasonable
time considering the scope of the repair and restoration work to be
undertaken by Landlord. If the casualty, repairing, or rebuilding shall
render the Premises untenantable, in whole or in part, a proportionate
abatement of the Minimum Rent shall be allowed until the date Landlord
completes the repairs or rebuilding. If Landlord is required or elects to
repair the Premises, Tenant shall repair or replace its stock-in-trade,
trade fixtures, furniture, furnishings, equipment, and personal property
in a manner and to at least a condition equal to that prior to its damage
or destruction and the proceeds of all insurance carried by Tenant shall be
held in trust by Tenant for the purpose of such repair and replacement.
13. ASSIGNING AND SUBLETTING.
-------------------------
Tenant shall not sublet the Premises or any part thereof, assign this
Lease, or permit any business to be operated in or from the Premises by any
concessionaire or licensee without in each case the prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed.
Any merger, consolidation or liquidation of Tenant or any other transfer of
this Lease by operation of law shall constitute an assignment of
this Lease. Acceptance of rent from, or performance of any other
obligation under this Lease by any person other than Tenant shall not be
deemed to be a waiver of any of the provisions of this Lease nor shall it
be deemed to be a consent to the assignment of this Lease, the subletting
of the Premises or the operation by a concessionaire or licensee. In the
event that Tenant shall seek Landlord's consent, Tenant shall provide to
Landlord the name, address and financial statement together with such other
information as Landlord requires concerning the proposed assignee, sub
lessee, concessionaire or licensee. It shall be a condition to any
consent by Landlord that Tenant shall reimburse Landlord for any
and all cost and expense, including, but not limited to, reasonable
attorney's fees for the review and preparation of documents, which may be
incurred by Landlord in connection with any of the foregoing. Any consent
by Landlord to any assignment or subletting, or to the operation by a
concessionaire or licensee, shall not constitute a waiver of the
necessity for such consent to any subsequent assignment or subletting or
operation by a concessionaire or licensee. No consent by Landlord shall
operate to relieve Tenant from primary liability for the performance of
Tenant's obligations under this Lease.
14. EMINENT DOMAIN.
---------------
In the event the Building or any part thereof shall be taken or condemned
either permanently or temporarily for any public or quasi public use or
purpose by any authority in appropriate proceedings or by any right of
eminent domain, the entire compensation award thereof, including, but not
limited to, all damages as compensation for diminution in value of
the leasehold, reversion and fee, shall belong to Landlord, without
any deduction therefrom for any present or future estate of Tenant, and
Tenant hereby assigns to Landlord all its right, title, and interest to any
such award. However, Tenant shall have the right to recover from the
condemning authority, but not from Landlord, such compensation as may be
separately awarded to Tenant on account of interruption of Tenant's
business and for moving and relocation expenses.
In the event of a taking under the power of eminent domain of (i) more than
twenty-five percent (25%) of the Premises or (ii) a sufficient portion of
the Building so that after such taking less than fifty percent (50%) of the
floor area within the Building (as constituted prior to such taking)
are occupied by tenants, either Landlord or Tenant shall have the right to
terminate this Lease by notice in writing given within ninety (90) days
after the condemning authority takes possession, in which event all rents
and other charges shall be prorated as of the date of such termination.
In the event of a taking of any portion of the Premises not resulting in a
termination of this Lease, Landlord shall use so much of the proceeds of
Landlord's award for the Premises as is required therefor to restore the
Premises to a complete architectural unit and this Lease shall continue in
effect with respect to the balance of the Premises, with a reduction of
Minimum Rent in proportion to the portion of the Premises taken.
15. DEFAULT BY TENANT.
------------------
If (i) Tenant defaults in the payment of Minimum Rent, Additional Rent or
any other charges or in the performance of any other of Tenant's
obligations hereunder, and fails to remedy such default within fifteen
(15) days after written notice from Landlord (unless the default relates to
matters other than the payment of money and cannot be remedied within
fifteen (15) days; Tenant commences to remedy such default within fifteen
(15) days after written notice from Landlord and thereafter diligently
pursues correction thereof, in which event the time to remedy such default
shall be extended to the time reasonably required therefor), (ii) a
receiver of any property of Tenant on the Premises is appointed,
(iii) Tenant's interest in the Premises is levied upon by legal process,
(iv) Tenant be adjudged bankrupt and Tenant fails within thirty (30)
days to cause the vacation of such appointment, levy or
adjudication, or (v) Tenant files a voluntary petition in bankruptcy,
disposes of all or substantially all of its assets in bulk, or
makes an assignment for the benefit of its creditors, then and in any such
instance, without further notice to Tenant, Landlord may enter upon the
Premises and terminate this Lease. In the event of such termination, the
obligations of Landlord hereunder shall cease, without prejudice,
however, to the right of Landlord to recover from Tenant any sums due
Landlord for Minimum Rent, Additional Rent and other charges payable by
Tenant hereunder, including reasonable attorney's fees to the date of such
entry, and also liquidated damages equal to any deficiency between the then
rental value of the Premises for the unexpired portion of the term and the
Minimum Rent provided for that portion of the term, discounted at four
percent (4%) per annum to present net worth. In addition, Landlord may
enter upon the Premises without terminating this Lease and may relet them
in its own name for the account of Tenant for the remainder of the term at
the highest rent then obtainable and immediately recover from Tenant any
deficiency for the balance of the term between the amount for which the
Premises were relet, less expense of reletting, and the rent provided
hereunder. If Landlord submeters electric current, gas, or water to the
Premises, then if at any time Tenant fails to pay rent or other charges for
same within five (5) days after they are due, Landlord may, at its
option, in addition to the foregoing remedies and without further notice
to Tenant, cease furnishing such electric current, gas or water. No
failure of Landlord to enforce its right or remedies upon default of
Tenant shall prejudice or effect the rights of Landlord upon any subsequent
or similar default.
All sums payable by Tenant to Landlord under this Lease, if not paid when
due, shall accrue interest at the rate of fifteen percent (15%) (or the
highest rate of interest allowable by law, whichever is the lesser) from
their due date until paid, said interest to be so much additional rent
under this Lease and shall be paid to Landlord by Tenant upon demand.
All rights and remedies of Landlord herein enumerated shall be cumulative,
and none shall exclude any other remedies allowed at law or in equity.
16. SECURITY DEPOSIT.
------------------
Tenant has deposited with Landlord the sum of Seventy Five Thousand and
00/100 Dollars ($75,000.00) (the "Security Deposit"), receipt of
which is hereby acknowledged by Landlord. The Security Deposit shall
be held by Landlord, without liability for interest, as security for the
faithful performance by Tenant of the terms of this Lease which are to be
observed and performed by Tenant. Landlord shall not be obligated to hold
the Security Deposit as a separate fund and may commingle the Security
Deposit with other funds. The Security Deposit shall not be mortgaged,
assigned, transferred or encumbered by tenant and any such act on the part
of Tenant shall be without force and effect and shall not be binding upon
Landlord. If any of the rents herein reserved or any other sum payable by
Tenant to Landlord shall be overdue and unpaid or should Landlord make
payments on behalf of Tenant, or should Tenant fail to perform any of the
terms of this Lease, then Landlord may, at its option and without prejudice
to any other remedy which Landlord may have on account thereof,
appropriate and apply the Security Deposit or so much thereof as may be
necessary to compensate Landlord toward the payment of rent or any sum
payable by Tenant to Landlord of loss or damage sustained by Landlord due
to such breach on the part of Tenant, and Tenant shall forthwith upon
demand restore the Security Deposit to the original sum deposited. Should
Tenant comply with all of said terms and promptly pay all rentals they
fall due and all other sums payable by Tenant to Landlord, the Security
Deposit shall be returned in full to Tenant at the expiration or
termination of this Lease. In the event of bankruptcy or other
debtor/creditor proceedings against Tenant, the Security Deposit shall be
deemed to be applied first to the payment of rent and other charges due
Landlord for all periods prior to the filing of such proceedings.
Landlord may deliver the Security Deposit to the purchaser of Landlord's
interest in the premises in the event that such interest be sold and
thereupon Landlord shall be discharged from any further liability with
respect to the Security Deposit and this provision shall also apply to any
subsequent transferees. Notwithstanding any language to the contrary
contained herein, provided Tenant is not in default of the terms and
conditions contained herein, Landlord shall apply a portion of the
Security Deposit totalling (i) $21,660.00 against Rent accruing for the
sixth (6th) full calendar month following the Commencement Date and
(ii) $3,340.00 against Rent accruing for the seventh (7th) full calendar
month following the Commencement Date.
17. NOTICES.
---------
Any notice or consent required to be given by or on behalf of either party
to the other shall be deemed given when mailed by registered or certified
mail, return receipt requested, addressed to Landlord at the address
hereinabove specified, and to Tenant at the address hereinabove specified
or at the Premises, with a copy to Handex Environmental Recovery, Inc. 500
Campus Drive, P.O. Box 451, Morganville, N.J. 07751-0451; Attn: Chief
Financial Officer, or at such other address as either party may specify,
from time to time, by notice to the other in the manner herein set forth.
18. MORTGAGE SUBORDINATION.
-------------------------
This Lease is and shall at all times, unless Landlord shall otherwise
elect, be subject and subordinate to all covenants, restrictions,
easements and encumbrances now or hereafter affecting the fee title of the
Property and to all ground or underlying leases, mortgages, deeds of trust,
financings or refinancings in any amounts which may now or hereafter be
placed against or affect any or all of the land or any or all of the
building and improvements now or at any time hereafter constituting part of
or adjoining the Property. The aforesaid provision shall be self-operative
and no further instrument or document shall be required to effectuate said
subordination unless otherwise requested. Tenant also agrees that any
mortgagee or trustee may elect to have this Lease prior to the lien of its
mortgage or deed of trust, and upon notification by such mortgagee or
trustee to Tenant to that effect, this Lease shall be deemed prior in lien
to the said mortgage or deed of trust, whether this Lease is dated prior
to or subsequent to the date of said mortgage or trust deed. Tenant agrees
that if Landlord or any ground or underlying lessor, mortgagee or trustee
requests confirmation of such subordination, within ten (10) days after
receipt of written request therefor, Tenant shall execute and deliver
whatever instruments which may be required for such purposes and to carry
out the intent of this Section.
Notwithstanding any language to the contrary contained in this Lease,
Landlord covenants and agrees to use best efforts to obtain from any
mortgagee, beneficiary or trustee, lessor or other secured party under any
existing mortgage, deed of trust, lease or other agreement, security
instrument, or arrangement presently placed upon the Premises, an
agreement, in recordable form, which provides that in the event of any
foreclosure, sale under power of sale or lease termination, or transfer in
lieu of any of the foregoing or the exercise of any remedy pursuant to
any such agreement, security instrument, or arrangement (a) the Tenant's
use, possession and enjoyment of the Premises shall not be disturbed and
this Lease shall continue in full force and effect so long as Tenant is not
in default beyond the applicable cure periods hereunder, and (b) that
such successor to the Landlord's interest will assume the obligations of
Landlord under this Lease accruing subsequent to any such
foreclosure, termination, sale or transfer.
19. ESTOPPEL CERTIFICATE.
----------------------
At any time and from time to time, Tenant agrees, upon request in writing
from Landlord, to execute and deliver to Landlord, for the benefit of such
persons as Landlord names in such request, a statement in writing and in
form and substance satisfactory to Landlord certifying to such of the
following information as Landlord shall request: (i) that this Lease
constitutes the entire agreement between Landlord and Tenant and is
unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and
stating the modifications); (ii) the dates to which the Minimum Rent,
Additional Rent, and other charges hereunder have been paid, and the
amount of any security deposited with Landlord; (iii) that the Premises
have been completed on or before the date of such letter and that all
conditions precedent to the Lease taking effect have been carried out; (iv)
that Tenant has accepted possession of the Premises, that the Lease term
has commenced, that Tenant is occupying the Premises, that Tenant knows of
no default under the Lease by Landlord and that there are no defaults or
offsets which Tenant has against enforcement of this Lease by Landlord; (v)
the actual commencement date of the Lease and the expiration date of the
Lease; and (vi) that Tenant's store is open for business, provided that
such facts are true and ascertainable.
20. QUIET ENJOYMENT.
-----------------
Landlord hereby covenants and agrees that if Tenant shall perform all the
covenants and agreements herein stipulated to be performed on Tenant's
part, Tenant shall at all times during the continuance hereof have
peaceable quiet enjoyment and possession of the Premises without any
hindrance from Landlord or any person or persons lawfully claiming the
Premises, subject, however, to the terms and conditions of this Lease, and
to any mortgages, ground or underlying leases, deeds, and encumbrances of
record to which this Lease is or may be subordinated.
21. LIABILITY OF LANDLORD.
------------------------
Notwithstanding anything to the contrary provided in this Lease, it is
specifically understood and agreed, such agreement being a primary
consideration for the execution of this Lease by Landlord, that if Landlord
shall fail to perform any covenant, term or condition of this Lease upon
Landlord's part to be performed and, as a consequence of such default,
Tenant shall recover a money judgment against Landlord, such judgment shall
be satisfied only out of the proceeds of sale received upon execution of
such judgment and levy thereon against the right, title, and interest of
Landlord in the Property, as the same may then be encumbered, and neither
Landlord, nor, if Landlord be a partnership, any of the partners
comprising such partnership shall be liable for any deficiency. It is
understood that in no event shall Tenant have any right to levy execution
against any property of Landlord other than Landlord's interest in the
Property as herein before expressly provided. In the event of the sale or
other transfer of Landlord's right, title and interest in the Premises or
the Property, Landlord shall be released from all liability and obligations
hereunder.
22. MISCELLANEOUS PROVISIONS.
---------------------------
(A) Accord and Satisfaction. No payment by Tenant or receipt by Landlord
of a lesser amount than the rentals herein stipulated shall be deemed
to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement on any check or any letter accompanying
any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy provided for in this Lease or available at law
or in equity.
(B) Waiver No waiver of any condition or legal right or remedy shall be
implied by the failure of Landlord to declare a forfeiture, or for any
other reason, and no waiver of any condition or covenant shall be
valid unless it be in writing and signed by Landlord. No waiver by
Landlord with respect to one or more tenants or occupants of the
Building shall constitute a waiver in favor of any other tenant, nor
shall the waiver of a breach of any condition be claimed or pleaded to
excuse a future breach of the same condition or covenant.
(C) Broker's Commission. Landlord and Tenant warrant that, except for any
amounts payable by Landlord to its agents, Realty One Commercial
Division and Joseph Skilken Realty, Inc., there are no claims for
broker's commissions for finder's fees in connection with its
execution of this Lease, and each party agrees to indemnify and save
the other harmless from any liability that may arise from such claims,
including reasonable attorney's fees.
(D) No Partnership. Landlord does not, in any way or for any purpose,
become a partner of Tenant in the conduct of its business, or
otherwise, or a joint venture or a member of a joint enterprise with
Tenant.
(E) Section Headings. The section headings are inserted only as a matter
of convenience and for reference and in no way define, limit or
describe the scope or intent of this Lease nor in any way affect this
Lease.
(F) Lease Inures to the Benefit of Assignees. This Lease and all of the
covenants, provisions, and conditions herein contained shall inure to
the benefit of and be binding upon the heirs, personal
representatives, successors and assigns respectively, of the parties
hereto, provided, however, that no assignment by, from, through, or
under Tenant in violation of the provisions hereof shall vest in the
assigns any right, title, or interest whatever.
(G) Entire Agreement. This Lease and the exhibits attached hereto set
forth all the covenants, promises, agreements, conditions, and
understandings between Landlord and Tenant concerning the
Premises, and there are no covenants, promises agreements,
conditions or understandings, either oral or written, between them
other than are herein set forth. Except as herein otherwise provided,
no subsequent alteration, amendment,change or addition to this Lease
shall be binding upon Landlord or Tenant unless reduced to writing and
signed by them.
(H) Surrender and Holding Over. Tenant shall deliver up and surrender to
Landlord possession of the Premises upon the expiration of the Lease,
or its termination in any way, in as good condition and repair as the
same shall be at the commencement of said term (damage by fire and
other perils covered by standard fire and extended coverage insurance
and ordinary wear and decay only excepted). Should Tenant remain in
possession of the Premises after any termination of this Lease, no
tenancy or interest in the Premises shall result therefrom, but such
holding over shall be an unlawful detainer and all such parties shall
be subject to immediate eviction and removal, and Tenant shall upon
demand pay to Landlord, as liquidated damages, a sum equal to one
hundred ten percent (110%) of the Minimum Rent payable during the
calendar month immediately preceding the termination of this Lease for
any period during which Tenant shall hold the Premises after the
stipulated term of this Lease may have terminated.
(I) No Option. The submission of this Lease for examination does not
constitute a reservation of or option for the Premises, and shall vest
no right in either party. This Lease becomes effective as a Lease
only upon execution and delivery thereof by the parties hereto.
(J) Additional Rent. Any amounts to be paid by Tenant to Landlord
pursuant to the provisions of this Lease, whether such payments are
to be periodic and recurring or not, shall be deemed to be
"Additional Rent" and otherwise subject to all provisions of this
Lease and of law as to the default in the payment of rent.
(K) Severability. In the event that any provision or section of this
Lease is rendered invalid by the decision of any court or by the
enactment of any law, ordinance or regulation, such provision of this
Lease shall be deemed to have never been included therein, and the
balance of this Lease shall continue in effect in accordance with its
terms.
(L) Option to Renew. Provided Tenant is not in default under any of the
terms and provisions herein contained, Landlord hereby grants to
Tenant the option to renew this Lease for one (1) additional five (5)
year period. The "Renewal Term" shall commence upon the expiration of
the initial term. It is the intention to grant to Tenant herein a
basic five (5) year Lease with an option to renew the Lease for one
(1) additional five (5) year period. The Renewal Term shall be upon
all the terms and conditions contained in this Lease except that rent
shall be based on ninety five percent (95%) of the then existing
fair market rental rate for buildings similar to the Building along
the Rockside Road Business Corridor at the time the option is
exercised by Tenant. Landlord shall notify Tenant in writing, not
less than seven (7) months prior to the expiration of the original
term of the Lease, of the then existing fair market rental rate for
buildings similar to the Building along the Rockside Road Business
Corridor as well as the rental rate for the renewal period for
Tenant's consideration. If Landlord and Tenant are unable to mutually
agree on the existing fair market rental rate for buildings similar to
the Building along the Rockside Business Corridor within thirty (30)
days after the date of Landlord's written notice, Landlord and Tenant
shall select an appraiser mutually acceptable to both to determine the
fair market rental rate for buildings similar to the Building along
the Rockside Road Corridor. Both parties agree that the decision of
such appraiser shall be binding and conclusive. The costs
incurred by the appraiser shall be split equally between the parties.
The foregoing option to renew shall be exercised by Tenant by written
notice to Landlord given not less than six (6) months prior to the
expiration of the original term of the Lease, or any renewal thereof.
(M) Right of First Refusal. Provided Tenant is not in default of the
terms and conditions contained in this Lease, in the event certain
premises in the Building shown on Exhibit "A" as Tenant Space "A",
Tenant Space "B" and the common area hallway(s) immediately adjacent
thereto (hereinafter collectively referred to as the "RFR Space")
consisting of approximately Two Thousand Six Hundred Thirty Nine
(2,639) square feet of gross leasable area located immediately
adjacent to that portion of the Premises located on the second
(2nd) floor of the Building become available for lease and Landlord
procures a prospective tenant willing to lease all or a portion of the
RFR Space, Landlord hereby grants to Tenant an exclusive right of
first refusal to lease all or a portion of the RFR Space upon all of
the terms and conditions contained herein throughout the entire term
of this Lease, including any renewals thereof.
Landlord shall notify Tenant in writing of the availability of
the RFR Space, that Landlord has procured a prospective tenant for all
or a portion of the RFR Space and all of the rental terms and
conditions of the prospective tenant's tenancy ("Landlord's RFR
Notice"). Tenant shall have seven (7) days after receipt of
Landlord's RFR Notice in which to notify Landlord in writing whether
or not Tenant will exercise its right of first refusal to lease the
RFR Space.
In the event Tenant elects to exercise its right of first refusal, (i)
all of the terms and conditions contained in this Lease shall apply to
the RFR Space except that rent for the RFR Space shall be based on the
rental terms and conditions set forth in Landlord's RFR Notice
(ii) Landlord shall, at it sole cost and expense, commence and
complete a build out of the RFR Space consistent with that of the
existing Premises pursuant to plans and specifications approved by
Tenant and (iii) Landlord and Tenant shall execute an amendment to the
Lease confirming Tenant's exercise of the right of first refusal and
setting forth such terms and conditions as may be appropriate,
including, but not limited to, adjustments in the gross leasable area
of the Premises, annual and monthly Rent, and Tenant's adjusted
proportionate share of costs set forth in Section 4 of the Lease.
In the event Tenant fails to exercise its right of first refusal
within seven (7) days after receipt of Landlord's RFR Notice or Tenant
fails to execute the amendment to lease referenced in subsection (iii)
above within thirty (30) days after Tenant's notice to Landlord
exercising its right of first refusal to lease the RFR Space, Tenant
shall be deemed to have waived its right of first refusal to lease the
RFR Space and Landlord may proceed to lease the RFR Space to its
prospective tenant.
(N) Temporary Space. Landlord and Tenant acknowledge that portion of the
Premises located on the second (2nd) floor of the Building
consisting of approximately Three Thousand Nine Hundred Eighty
Seven (3,987) square feet of gross leasable area, will not be
immediately available for occupancy on the Commencement Date. To that
extent, (i) the Rent set forth in Section 3 of the Lease for that
portion of the Premises located on the second (2nd) floor of the
Building shall be abated until such time as possession thereof is
delivered by Landlord to Tenant and (ii) Landlord shall provide Tenant
with temporary space (the "Temporary Space") consisting of
approximately three thousand one hundred fifty (3,150) square
feet, as outlined in green on Exhibit "A" pursuant to all of the
terms and conditions contained in the Lease except as hereinafter
provided. The temporary space shall be constructed by Landlord
pursuant to Landlord's plans and specifications at Landlord's sole
cost and expense and all interior walls shall be painted by Landlord
prior to occupancy. Landlord shall not be required to undertake or
complete any other work within the Temporary Space. Tenant shall not
be required to pay rent for occupancy of the Temporary Space.
23. ENVIRONMENTAL COMPLIANCE.
---------------------------
A. With respect to Tenant's operations in or on the Premises,
Tenant, at its sole cost and expense, shall operate its business in
the Premises in such a manner so as to comply with all laws, statutes,
ordinances, rules and regulations of any governmental authorities
having jurisdiction concerning environmental matters including but not
limited to any discharge into the air, surface, water, sewers, soil or
groundwater of Hazardous Materials (as defined in SECTION 22(B)),
whether within or outside the Premises or on the Property.
B. As used herein, the term "HAZARDOUS MATERIALS" means any hazardous or
toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of Ohio or the United
States Government. The term "HAZARDOUS MATERIALS" includes, without
limitation, any material or substance which is (i) designated as a
"HAZARDOUS SUBSTANCES pursuant to SECTION 1331 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), (ii) defined as a
"hazardous waste" pursuant to SECTION 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C. SECTION 6901 et seq.) (42
U.S.C. SECTION 6903), or (iii) defined as a "HAZARDOUS
SUBSTANCES" pursuant to SECTION 101 of the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq. (42 U.S.C. Section 9601).
C. Landlord and Tenant acknowledge that Landlord may become legally
liable for the costs of complying with certain matters including, but
not limited to any discharge into the air, surface, water, sewers,
soil or groundwater of Hazardous Material. Landlord's responsibility
shall include, but shall not be limited to, responsibility for the
following: (i) Hazardous Materials that migrate, flow, percolate,
diffuse or in any way move on to or under the Premises, Building, or
Property before or after the commencement of the Lease term; (ii)
Hazardous Materials present on or under the Premises, Building, or
Property as a result of any discharge, dumping or spilling
(whether accidental or otherwise), by Landlord or prior or other
lessees, if any, or their agents, employees, contractors or
invitees; and (iii) Hazardous Materials present on or under the
Premises, Building or Property prior to the Commencement Date
regardless of its origin.
D. Tenant hereby covenants and agrees to indemnify, defend and hold
Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses which Landlord may
incur which arise out of contamination of the Premises or real estate
or other property not a part of the Property which contamination
arises as a result of the presence of Hazardous Materials in or under
the premises, the presence of which is cause by Tenant operations as
defined in SECTION 22(A). The foregoing indemnification and hold
harmless provision shall survive any termination of this Lease.
E. Landlord hereby covenants and agrees to indemnify, defend and hold
Tenant harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses which Tenant may incur
which arise out of contamination of the Premises or real estate or
other property not a part of the Premises which contamination arises
as a result of the presence of Hazardous Materials in or under the
Premises, the presence of which is caused by Landlord a result of any
cause listed in Subsection 22(B) of this Lease. The foregoing
indemnification and hold harmless provision shall survive any
termination of this Lease.
24. COMPLIANCE WITH LAWS.
----------------------
Landlord represents and warrants that the Premises, Building and Property
are currently in compliance with all applicable laws, statutes,
ordinances, rules and regulations of any governmental authority having
jurisdiction over the same. Landlord hereby covenants and agrees to
indemnify, defend and hold Tenant harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities or losses which
Tenant may incur arising out of a breach of this representation and
warranty.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be signed,
in quintuplicate, as of the date and year first above written.
WITNESS AS TO LANDLORD: LANDLORD: REALTY ONE PROPERTY MANAGEMENT,
division of Realty One, Inc., an
Ohio corporation
Virginia E. Nichols s/s By: Joseph T.Aveni s/s
------------------------- ----------------------------
Joseph T. Aveni
President
Mary Ann Piscioneri s/s
--------------------------
WITNESSES AS TO TENANT: LANDLORD: NEW HORIZONS COMPUTER LEARNING
CENTERS, OF CLEVELAND LTD, a
Delaware limited liability company
-------s/s------------- By: Robert Spisak s/s
(As to both) ----------------------
General Partner
--------s/s------------- And:------------------------
(As to both)
General Partner
STATE OF OHIO )
) ss.
COUNTY OF CUYAHOGA)
BEFORE ME, a Notary Public, in and for said County and State, personally
appeared Joseph T.Aveni of the REALTY ONE PROPERTY MANAGEMENT DIVISION, a
division of Realty One, Inc., an Ohio corporation, who acknowledged that he did
sign the foregoing instrument and that the same is the free act and deed of said
corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
24th day of February, 1995.
Mary Ann Piscioneri s/s
------------------------------
Notary Public
Mary Ann Pisgioneri
STATE OF OHIO )
) ss.
COUNTY OF CUYAHOGA )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared Robert W. Spisak and _____________ know to me to be the General Parnter
and ___________ of New Horizons Learning Center of Cleveland Ltd., a Delaware
limited liability company, who acknowledged that they did sign the foregoing
instrument, that the same is their fee act and deed and the free act and deed of
said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal this
20th day of February, 1995.
s/s
---------------------------
Notary Public
Atty at Law:
My Commission does not expire
FLOOR PLAN
FLOOR PLAN
GUARANTY
---------------
HANDEX ENVIRONMENTAL RECOVERY, INC. (hereinafter referred to singularly as
"Guarantor"), whose address is 500 Campus Drive, Morganville, New Jersey 07751
as a material inducement to Realty One Property Management, a division of Realty
One, Inc., as Managing Agent for Aveni Bros. Development Co., to enter into a
Lease (the "Lease") with New Horizons Computer Learning Centers of Cleveland
Ltd., ("Tenant"), dated as of February 24, 1995, wherein Landlord leased to
Tenant and Tenant leased from Landlord certain premises in the REALTY ONE
CORPORATE CENTER (the "Building") located in Cleveland, Ohio described as that
certain space within the Building, containing approximately 12,557 square fee
(the "Premises") and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Guarantor hereby makes the
following Guaranty with Landlord:
1. Guarantor hereby covenants agrees and promises, to an for the benefit
of Landlord, its successors and assigns, that (a) Tenant shall make the due and
punctual payment of all rent, additional rent and any and all sums and charges
payable to Landlord by tenant, its successors or assigns, under the lease during
the term of the Lease and any renewals thereof; (b) Tenant shall effect prompt
and complete performance of all of the terms, conditions, covenants and
provisions contained in the Lease to be kept, observed, and performed by Tenant,
its successors and assigns, during the term of the Lease and any renewals
thereof, and (c) Guarantor shall indemnify, defend and save Landlord, its
successors or assigns, harmless from any claims, demands, loss, costs or damages
arising out of any failure by Tenant, its successors and assigns, to pay the
aforesaid rent, additional rent and any and all sums and charges payable to
Landlord by Tenant, its successors and assigns, under the Lease and/or the
failure by Tenant to perform any of the terms, covenants, conditions and
provisions contained in the Lease. Notwithstanding any language to the contrary
contained herein, Guarantor shall be fully released and discharged of all the
obligations and liabilities contained in this Guaranty upon the expiration of
the third (3rd) lease year of the term of the Lease (as defined in the Lease)
and thereafter this Guaranty shall be of no further force and effect.
3. The provisions of the Lease may be changed, amended, supplemented or
modified by agreement between Landlord and Tenant at any time or by course of
conduct without the prior written consent of the Guarantor provided that
Guarantor is provided written notice thereof and this Guaranty shall guarantee
the performance of each and every obligation of Tenant under the Lease as
changed, amended, supplemented or modified. Guarantor hereby expressly waives
notice of the acceptance of this Guaranty, presentments, demands, protests and
all notice of protests, dishonor, non-performance, non-payment or non-observance
by Tenant of any of the terms, convenants, conditions and provisions of the
Lease.
4. In the event of a default under the Lease, Landlord, its successors
and assigns can proceed first and directly against the Guarantor, without
proceeding against or exhausting any other remedies it may have under the Lease,
or it may proceed against Tenant or the Guarantor and Tenant. Moreover, in the
event of a default under the Lease or this Guaranty, Guarantor waives any right
to require Landlord to (i) proceed against tenant or pursue any rights or
remedies provided for in the Lease, (ii) proceed against or exhaust any
security of Tenant held by Landlord, or (iii) pursue any other right or remedy
available to Landlord by law, in equity or otherwise. Landlord shall have the
right to enforce this Guaranty regardless of the acceptance of additional
security from Tenant and regardless of any release or discharge of Tenant by
Landlord, its successor or assigns, or by others or by operation of any laws.
5. The liability of Guarantor under this Guaranty shall not be waived,
released, discharged, impaired or affected by reason of the release and
discharge of any other Guarantor or any disability of the Tenant or Guarantor
including, but not limited to, discharge of the Tenant or Guarantor in any
receivership, bankruptcy, winding-up, insolvency or other creditor's proceeding
or the rejection, disaffirmance or disclaimer of the Lease in any proceeding,
and shall continue, with respect to any periods of time prior thereto and
thereafter, for the entire term of the Lease. The liability of the Guarantor
shall not be affected by any repossession of the Premises by Landlord. Until
all of Tenant's obligations to Landlord have been discharged in full by tenant
or the Guarantor, Guarantor has no right to exoneration, subrogation,
reimbursement or indemnity against Tenant.
6. No action or proceeding brought or instituted under this Guaranty and
no recovery in pursuance thereof shall be a bar or defense to any further action
or proceeding against the Guarantor, its successors or assigns, which may be
brought under this Guaranty by reason of any further default, or defaults, by
Tenant under the Lease or in the performance and observance of any terms,
covenants,
conditions and provisions in the Lease. If the Lease terminates
and Landlord or its successor and assigns has any rights it can
enforce against Tenant after termination, Landlord or its successor and assigns
can enforce these rights against the Guarantor, its successors or assigns, or
without making demand on either of them.
7. No waiver by Landlord, its successors and assigns, of any provision or
right under the Lease shall be implied from any omission by Landlord to take any
action on account of Landlord's rights under such provision. Any express waiver
by Landlord of any provision or right under the Lease shall not act as a waiver
of any provision or right elsewhere contained in the Lease, and shall only act
as a waiver as specifically expressed in said waiver, and only for the time and
to the extend stated therein. One or more waivers, by Landlord of any provision
or right under the Lease shall not be construed as a waiver of a subsequent
breach of the same provision or right.
8. The rights and remedies given to Landlord by this Guaranty shall
be deemed to be cumulative and not one of such rights and remedies shall be
exclusive at law or in equity of the rights and remedies which Landlord might
otherwise have by virtue of a default under this Guaranty, and the exercise of
any one of such rights or remedies by Landlord shall not impair Landlord's
standing to exercise any other rights or remedies.
9. If Landlord or its successor or assigns are required to enforce the
obligations of Guarantor by legal proceedings, the guarantor shall pay to
Landlord all costs incurred, including, without limitation, reasonable
attorneys' fees.
10. If any term or provision of this Guaranty or the application thereof
to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Guaranty, or the application of such
term or provisions to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall not be affected thereby, and each term
and provision of this Guaranty shall be valid and be enforced to the fullest
extent permitted by law.
ll. This Guaranty shall continue to be effective, or be reinstated, as
the case may be, if at any time payment, or any part thereof, or any of the
obligations of Tenant are rescinded or must otherwise be restored or returned by
landlord upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Tenant, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer or, Tenant
or any substantial part of its property, or otherwise, all as though such
payments had not been made.
12. Any modification of the Guaranty shall not be effective unless the
same be in writing and signed by Guarantor and Landlord.
3
13. All the terms, agreements and conditions of the Guaranty shall be
extended to and be binding upon Guarantor and its successors and assigns, and
shall inure to the benefit of and may be enforced by Landlord and its successors
and assigns.
14. This Guaranty shall be governed by, construed in accordance with and
enforced pursuant to the laws of the State of Ohio.
15. Whenever in this agreement reference is made to either Landlord or
Tenant such reference shall be deemed to apply also to the respective successors
and assigns of the Landlord and Tenant named in the Lease.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as
of the day and year first above written in he Lease, the 24th day of February,
1995.
SIGNED IN THE PRESENCE OF: GUARANTORS:HANDEX ENVIRONMENTAL RECOVERY, INC.
s/s Thomas J. Bresnan s/s
----------------------- ------------------------
(As to both) Thomas J. Bresnan
s/s
----------------------
(As to both)
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
On February 23, 1995, before me, the undersigned, a Notary Public in and
for said State, personally appeared Thomas J. Bresnan, personally know to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument, and he acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument, the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Tiffany Milby s/s
----------------------
(Notary)
THESE WARRANTS, AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED IN
ACCORDANCE WITH SAID ACT, OR IT IS ESTABLISHED TO THE
SATISFACTION OF THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
Void after 5:00 p.m., New York, New York Time,
on August 16, 1999
WARRANTS FOR THE PURCHASE OF
40,000 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE
OF
HANDEX ENVIRONMENTAL RECOVERY, INC.
This Is To Certify That, FOR VALUE RECEIVED, The Nassau Group, Inc.,
or its successors and permitted assigns ("Holder"), is entitled to purchase,
subject to the provisions of these Warrants, from Handex Environmental Recovery,
Inc., a Delaware corporation ("Company"), Forty Thousand (40,000) duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
$.01 par value per share, of the Company ("Common Stock"), at Three Dollars and
Fifty-Two and One-Half Cents ($3.525) per share, at any time or from time to
time during the period from August 16, 1994 to August 16, 1999, but not later
than 5:00 p.m., New York, New York time on August 16, 1999. The number of
shares of Common Stock which the Holder is entitled to purchase upon the
exercise of each Warrant and the exercise price to be paid for each share of
Common Stock may be adjusted from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, as adjusted from time to
time, are hereinafter sometimes referred to as "Warrant Shares" and the exercise
price for one (1) Warrant Share in effect at any time and as adjusted from time
to time is hereinafter sometimes referred to as the "Exercise Price".
1. EXERCISE OF WARRANTS.
(a) These Warrants may be exercised in whole or in part at any
time or from time to time on or after August 16, 1994 and until August 16, 1999.
If these Warrants shall be exercised on any day on which banking institutions in
the State of New York are authorized or required by law to close, then these
Warrants shall be deemed exercised on the next succeeding day which shall not be
such a day. These Warrants may be exercised by presentation and surrender
hereof to the Company at its principal office (or to the stock transfer agent,
if any, of the Company at its office), with the Purchase Form annexed hereto
duly executed and accompanied by payment of the aggregate Exercise Price for the
number of Warrant Shares specified in such Purchase Form. The aggregate
Exercise Price for such Warrant Shares may be tendered to the Company in cash,
by certified check or bank draft, by conversion of any indebtedness outstanding
at such time of the Company to the Holder, if the Common Stock is then publicly
traded, in Warrants (valued for this purpose at their fair market value
determined as provided in subparagraph (b) below), or by any combination
thereof. Any request for exercise must be accompanied by such investment
representations as are reasonably requested by the Company. As soon as
practicable after each such exercise of a Warrant, but not later than 30 days
from the date of such exercise, the Company shall issue and deliver to the
Holder a certificate or certificates for the Warrant Shares issuable upon such
exercise, in such denomination or denominations and registered in such name or
names as the Holder shall have specified in the Purchase Form; provided, that if
a certificate or certificates for Warrant Shares are to be registered in a name
or names other than the name of the Holder, and the transfer of such Warrant
Shares is not made pursuant to a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), the Holder shall deliver to the
Company a legal opinion reasonably satisfactory to the Company to the effect
that such transfer is not required to be registered under the Securities Act.
If these Warrants should be exercised in part only, the Company shall, upon
surrender of these Warrants for cancellation, execute and deliver new Warrants
substantially in the form hereof evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares covered by these Warrants. Upon
receipt by the Company of these Warrants at its office, or by the stock transfer
agent of the Company at its office, in proper form for exercise, the Holder or
its designee shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be physically delivered to the Holder or
its designee.
(b) Payment for the Exercise Price tendered in Warrants under
subparagraph (a) above shall be by presentation and surrender of such Warrants,
and the Warrants so delivered shall be valued at an amount equal to the product
of (x) the number of Warrant Shares deliverable upon exercise of such Warrants
and (y) the excess, if any, of (i) the average of the closing price of the
Common Stock on the principal exchange on which the Common Stock is traded for
the trading days (during which the Common Stock actually traded) during the 90-
day period preceding the date of exercise or, if the Common Stock is not traded
on an exchange, the average closing price of the Common Stock in the over-the-
counter market for the trading days (during which the Common Stock actually
traded) during the 90-day period preceding the date of exercise over (ii) the
Exercise Price.
2. RESERVATION OF SHARES. The Company shall at all times reserve
and keep available, free from preemptive rights, for issuance and/or delivery
upon exercise of these Warrants, such number of shares of its duly authorized
and unissued Common Stock, as shall be required for issuance and delivery of
Warrant Shares upon exercise in full of all outstanding Warrants. All shares of
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and non-assessable and free from all taxes, liens and
charges.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of these Warrants. In lieu
of issuing a fraction of a share, the number of Warrant Shares to be received
upon any exercise shall be rounded up to the next whole share.
4. ASSIGNMENT OR LOSS OF WARRANT. These Warrants are not assignable
without the prior written consent of the Company, except that the Holder may
assign these Warrants, in whole or in part, to any affiliate of the Holder
without the consent of the Company. Further, any assignee of such Warrants
(except for affiliates of the Holder) shall provide the Company with such
investment representations as the Company may reasonably request and the Holder
shall provide the Company with a legal opinion reasonably satisfactory to the
Company that such transfer may be effected without registration under the
Securities Act. Subject to the Company's consent and receipt of the foregoing
(if required), upon surrender of these Warrants to the Company at its principal
office or at the office of its stock transfer agent, if any, with an Assignment
Form reasonably acceptable to the Company duly executed and funds sufficient to
pay any transfer tax, the Company shall, without charge to the assignor or the
assignee, execute and deliver a new Warrant or Warrants of like tenor as these
Warrants in the name or names of the assignee or assignees and in the denomina
tion or denominations specified in such instrument of assignment, and these
Warrants shall promptly be cancelled. If less than all of these Warrants are
being assigned, new Warrants of like tenor as these Warrants shall be issued and
delivered to the Holder hereof for the portion of these Warrants not being
assigned.
Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of these Warrants, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of these Warrants, if mutilated, the Company will
execute and deliver new Warrants of like tenor and date exercisable for an
equivalent number of shares of Common Stock.
5. RIGHTS OF THE HOLDER. The Holder shall not by virtue hereof be
entitled to any rights as a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed or incor
porated in these Warrants and are not enforceable against the Company except to
the extent set forth or incorporated herein.
6. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any
time and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price shall
be adjusted, effective immediately after the record date for such dividend or
distribution or the effective date of such subdivision, combination or reclas
sification, to a price determined by multiplying the Exercise Price in effect
immediately prior to such record date or effective date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately before giving effect to such dividend, distribution, subdivision,
combination or reclassification, and the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such
dividend, distribution, subdivision, combination or reclassification.
(b) Whenever the Exercise Price payable upon exercise of a
Warrant is adjusted pursuant to subparagraph (a) above, the number of Warrant
Shares purchasable upon exercise of a Warrant shall simultaneously be adjusted
by multiplying the number of Warrant Shares purchasable immediately prior to any
adjustment by the Exercise Price in effect immediately prior to any adjustment
and dividing the product so obtained by the Exercise Price as adjusted.
(c) The provisions of this paragraph 6 shall not apply to (i)
the issue, sale, distribution or grant of any shares of Common Stock, any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or any securities convertible into or exchangeable for shares of Common Stock to
officers, directors or employees of the Company pursuant to a compensation plan
that currently exists and has been, or in the future may exist and will be,
approved by the stockholders of the Company or (ii) the issuance of shares of
Common Stock to officers, directors or employees of the Company upon any
exercise of rights, warrants or options, or any conversion or exchange of
convertible or exchangeable securities, described in clause (i) above. No
adjustment to the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least five cents ($.05) in such price;
provided, however, that any adjustments which by reason of this subparagraph (h)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment made under this paragraph 6. All calculations under
this paragraph 6 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. Anything in this paragraph 6 to the
contrary notwithstanding, the Company shall be entitled, but shall not be
required, to reduce the Exercise Price, in addition to those required reductions
by this paragraph 6, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any federal income tax liability to the
holders of Common Stock or securities convertible into Common Stock (including
Warrants).
(d) Whenever the Exercise Price is adjusted as herein provided,
the Company shall promptly cause a notice setting forth the adjusted Exercise
Price and adjusted number of Warrant Shares issuable upon exercise of a Warrant
to be mailed to the Holder, at its last address appearing in the Warrant
Register (as hereinafter defined), and shall cause a certified copy thereof to
be mailed to the Company's stock transfer agent, if any. The Company may retain
a firm of nationally recognized independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this paragraph 6, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(e) In the event that at any time, as a result of an adjustment
made pursuant to subparagraph (a) above, the Holder of a Warrant thereafter
shall become entitled to receive any shares of the Company other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
a Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in subparagraph (a).
(f) Irrespective of any adjustments in the Exercise Price or the
number or kind of Warrant Shares purchasable upon exercise of a Warrant,
Warrants issued in substitution or replacement of these Warrants may continue to
express the same Exercise Price and number and kind of Warrant Shares as are
stated in such substituted or replaced Warrants.
(g) As a condition precedent to the taking of any action which
would require an adjustment pursuant to this paragraph 6, the Company shall take
any action which may be necessary in order that the Company may thereafter
validly and legally issue as fully paid and nonassessable all Warrant Shares
which the Holder of these Warrants is entitled to receive upon the exercise
thereof.
(h) In case of any consolidation or merger to which the Company
is a party, other than a consolidation or merger in which the Company is a
continuing corporation and which does not result in any reclassification or
conversion of, or change in, the outstanding shares of Common Stock, or any sale
or conveyance of the property of the Company as an entirety or substantially as
an entirety (any such event being called a "Capital Reorganization") the Company
shall cause effective provisions to be made so that the Holder shall have the
right thereafter by exercising these Warrants at any time prior to their
expiration, to receive (in lieu of the number of shares of Common Stock
theretofore deliverable) cash in an amount per share of Common Stock equal to
the excess, if any, of (x) the fair market value per share of Common Stock of
the consideration received in the Capital Reorganization over (y) the Exercise
Price.
7. REGISTRATION RIGHTS
(a) Upon a written request to register all, but not less than
all, of the Warrant Shares issued or issuable upon exercise of all of these
Warrants pursuant to the Securities Act from the holders thereof, the Company
will use its best efforts to register all such Warrant Shares pursuant to Form
S-8 promulgated under such Securities Act or any similar registration statement
then available ("S-8 Registration"). In the event the Company is unable to
register all of the Warrant Shares on such form, then upon the request of the
holder to register all, but not less than all, of the Warrant Shares, it shall
use its best efforts to cause such shares to be registered for resale by the
holder thereof on Form S-3 or any other registration form then available ("S-3
Registration"). The Company hereby agrees to use its best efforts to continue
to qualify for the use of Form S-3.
(b) If and whenever one or more holders of these Warrants and
any Warrant Shares have requested pursuant to the provisions of subparagraph (a)
above that the Company effect the registration of all of the Warrant Shares
under the Securities Act, the Company will:
(1) prepare and file with the SEC at the earliest
practicable date the appropriate registration statement with respect to such
Warrant Shares and use all reasonable efforts to cause such registration
statement to become effective as soon as practicable thereafter and to remain
effective for such period as may be reasonably necessary to effect the sale of
the Warrant Shares, but in any event no longer than three years from the date of
issuance of the Warrant Shares in the case of an S-3 Registration;
(2) prepare and file with the SEC such amendments and
supplements to such registration statement and to the prospectus contained
therein as may be reasonably necessary to keep such registration statement
effective for such period set forth in subparagraph (1) above, and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(3) use all reasonable efforts to (i) register or qualify
the Warrant Shares, concurrently with the effectiveness of the registration
statement, under the Blue Sky or securities laws of any jurisdiction such holder
thereof reasonably requests, and (ii) do any and all other acts and things which
may be reasonably necessary or advisable to enable such holders to consummate
the disposition in such jurisdictions of the Warrant Shares in compliance with
such laws; provided, that the Company will not be required to (x) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (y) subject itself to taxation in
any jurisdiction in which it is not otherwise so subject or (z) file any general
consent to service of process in any such jurisdiction;
(4) furnish to the holders who participate in such
registration such number of copies of the registration statement, each amendment
and supplement thereto, the preliminary prospectus, the final prospectus and
such other documents as such holders may reasonably request in order to
facilitate the public offering of such Warrant Shares;
(5) notify the holders who participate in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(6) notify any seller or sellers of Warrant Shares covered
by such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances then existing, not misleading and at the request
of such seller or sellers, prepare and furnish to such seller or sellers a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of the Warrant Shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances then existing, not misleading; and
(7) With respect to an S-3 Registration, furnish, at the
request of any holder or holders who participate in such registration, on the
date that the registration statement with respect to such Warrant Shares becomes
effective, (i) an opinion, dated such date, of counsel representing the Company
for the purpose of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
holder or holders making such request; and (ii) a letter dated such date, from a
firm of nationally recognized independent certified public accountants which
represents the Company, in form and substance as is customarily given by indepen
dent certified public accountants to underwriters in an underwritten public
offering, addressed to the holder or holders making such request.
(c) Notwithstanding anything contained herein to the contrary,
the Company shall not be obligated to use its best efforts to have more than one
registration statement declared effective under the Securities Act pursuant to
these Warrants.
(d) (1) With respect to an S-8 Registration the Company shall
bear all of the following fees, costs and expenses (collectively "Registration
Expenses"): all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel for the Company and all independent accountants for the
Company, underwriters (excluding discounts and commissions) and other persons
retained by the Company, messenger and delivery fees, transfer agent and
registrar fees and expenses, and the expenses and fees for any listing of the
securities to be registered on each securities exchange (or NASDAQ) on which
similar securities issued by the Company are then listed; and expenses and fees
incurred in connection with registration or qualification of the Warrant Shares
under Blue Sky or securities laws of the jurisdictions specified by the holders
thereof pursuant to subparagraph (b)(3) above.
(2) With respect to an S-3 Registration, the Company shall
bear the first Ten Thousand Dollars ($10,000.00) of Registration Expenses and
one-half (1/2) of such expenses in excess of such amount, but in no event more
than Twenty-Five Thousand Dollars ($25,000.00) in the aggregate.
(e) (1) The Company will indemnify and hold harmless each
holder of Warrant Shares participating in a registration pursuant to these
provisions, and each broker or any other person acting on behalf of such holder
and each person, if any, who controls any of the foregoing persons within the
meaning of the Securities Act, from and against any and all loss, claim, damage,
liability, cost or expense to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, liabilities, costs or expenses are caused by, are based upon, or arise
out of any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or any document furnished or prepared by
the Company incident to the registration or qualification of the Warrant Shares
pursuant to this paragraph 7 or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or any violation by the Company of the Securities Act or state
securities or Blue Sky laws applicable to the Company or relating to action or
inaction required of the Company in connection with such registration or
qualification under such state securities or Blue Sky laws; and shall reimburse
such holder, such broker or other person acting on behalf of such holder and
each controlling person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage,
liability, cost or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in strict
conformity with written information furnished by such holder, such broker, such
other person acting on behalf of such holder or such controlling person
specifically for use in the preparation of such documents.
(2) Each holder participating in a registration hereunder
will indemnify and hold harmless the Company, and its officers, directors and
each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any and all loss, claim, damage, liability,
cost or expense to which the Company or such officer, director or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or any document furnished or prepared by the Company
incident to the registration or qualification of the Warrant Shares pursuant to
this paragraph 7 or the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
but only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by such holder specifically for
use in the preparation of such documents.
(3) Each party entitled to indemnification under this
subparagraph (d) (the "Indemnified Party") shall give notice to the party that
allegedly is obligated hereunder to indemnify the Indemnified Party (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom; provided, however, that counsel for the Indemnifying Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party); and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
subparagraph (d). No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(f) Notwithstanding anything to the contrary contained herein,
the holders of Warrant Shares shall have no registration rights hereunder with
respect to any proposed sale of Warrant Shares if an exemption from registration
pursuant to Rule 144(k) promulgated under the Securities Act is available for
the offer and sale of all of the Warrant Shares proposed to be sold.
8. MISCELLANEOUS
(a) All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telex or cable communication) and
shall become effective (i) when personally delivered on a business day during
normal business hours at the place of receipt to the party to be given such
notice, (ii) on the third business day following the day when deposited, if
mailed by certified or registered mail with return receipt requested and postage
thereon fully prepaid, (iii) on the business day following the day when
deposited if sent by overnight courier, fully prepaid, or (iv) on the business
day such notice shall have been sent by telex, telegram, telecopier, cable or
similar electronic device, fully prepaid. The addresses for such notice shall
be:
if to the Company, to:
Handex Environmental Recovery, Inc.
500 Campus Drive
P.O. Box 451
Morganville, New Jersey 07751
Attention: Chief Financial Officer
if to the Holder, to:
The Nassau Group, Inc.
18 Kings Highway
Westport, Connecticut 06880
Attention: J. Francis Lavelle
or at such other address as any of the foregoing parties shall from time to time
designate in writing to the other party in accordance herewith.
(b) No failure or delay of the Holder in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof, or any abandonment or discontinuance of
steps to enforce such a right, power or privilege, preclude any other further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of these Warrants may
be amended, modified or waived if, but only if, such amendment, modification or
waiver is in writing and is signed by the Holders of a majority of the Warrants
outstanding; provided, that no amendment, modification or waiver may change the
Exercise Price or the number of Warrant Shares subject to purchase upon exercise
of each Warrant (including without limitation any adjustments or any provisions
with respect to adjustments or the manner of exercise) without the consent in
writing of all of the Holders of the Warrants outstanding.
(c) All covenants, agreements and provisions of these Warrants
by or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder.
(d) THESE WARRANTS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Handex Environmental Recovery, Inc. has caused
this Warrant to be manually executed by its duly authorized President and
attested by its duly authorized Secretary.
HANDEX ENVIRONMENTAL RECOVERY, INC.
By: Thomas J. Bresnan s/s
--------------------------------
Thomas J. Bresnan, President
Dated: August 16, 1994
Attest:
Gary T. Gann s/s
---------------------------------
Gary T. Gann, Assistant Secretary
ar\10k\exhibits\nassau.doc
PURCHASE FORM
Dated:
--------------, --------
The undersigned hereby irrevocably elects to exercise the within
Warrants to the extent of purchasing --------- Warrant Shares and hereby tenders
payment of the aggregate Exercise Price therefor by the following means: ------
-------------------------------------. Any cash payments to be made in lieu of
issuing fractional shares should be payable to the order of the undersigned and
delivered at the indicated address.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
-----------------------------------------------------------------
(Please typewrite or print in block letters)
Address
------------------------------------------------------------
Signature
-----------------------------------------------
Address -----------------------------------------------
ar\10k\exhibits\nassau.doc
AGREEMENT OF LEASE
BETWEEN
MID-CITY ASSOCIATES
Landlord
AND
NEW HORIZONS COMPUTER LEARNING
CENTER OF METROPOLITAN NEW YORK. INC.
Tenant
Premises in One Penn Plaza
New York, New York 10119
Dated: March 1, 1995
WIEN, MALKIN & BETTEX
Attorneys for Landlord Attorney for Tenant
60 East 42nd Street
New York, New York 10165
TABLE OF CONTENTS
____________________
ARTICLE PAGE
1 Rent 2
2 Occupancy 2
3 Alterations and Installations 2
4 Repairs 5
5 Requirements of Law; Fire Insurance 6
6 Subordination 7
7 Loss, Damage, Reimbursement, Liability, Etc.. 8
8 Destruction--Fire or Other Cause 10
9 Eminent Domain 12
10 Assignment & Subletting 15
11 Access to Demised Premises 20
12 Certificate of Occupancy ..................... 21
13 Bankruptcy ................................... 21
14 Default ...................................... 24
15 Remedies of Landlord: Waiver of Redemption 25
16 Fees and Expenses; Interest .................. 27
17 No Representations by Landlord ............... 27
18 End of Term................................... 28
19 Quiet Enjoyment............................... 28
20 Definitions................................... 29
21 Adjacent Excavation--Shoring ................. 29
22 Rules and Regulations......................... 30
23 No Waiver .................................... 31
24 Waiver of Trial by Jury ...................... 32
25 Inability to Perform ......................... 32
26 Notices ...................................... 33
27 Services...................................... 34
30 Condition of Premises ........................ 47
31 Arbitration .................................. 48
32 Indemnity..................................... 48
33 Vault and Basement Space ..................... 48
34 Occupancy and Use by Tenant................... 49
35 Name of Building ............................. 50
36 Invalidity of Any Provision, Etc.............. 50
37 Captions ..................................... 51
38 Certificate of Tenant ........................ 51
39 Security Deposit 53
40 Broker 54
41 Possession 54
42 Submission of Lease .. 55
43 Memorandum of Lease 55
44 Successors and Assigns 55
Exhibit A 59
Exhibit B 60
Exhibit C 65
Article 45 67
Article 46 75
Article 47 78
AGREEMENT OF LEASE made as of this 1st day of March 1995 , between MID-CITY
ASSOCIATES, a general partnership with its office at 60 East 42nd Street, New
York, New York 10165, hereinafter referred to as "Landlord", or "Lessor", and
NEW HORIZONS COMPUTER LEARNING CENTER OF METROPOLITAN NEW YORK, INC., A DELAWARE
CORPORATION WITH AN OFFICE AT 500 CAMPUS DRIVE, MORGANVILLE, NEW JERSEY 07751.
hereinafter referred to as "Tenant", or "Lessee".
W I T N E S S E T H:
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, in
the building known as One Penn Plaza in the Borough of Manhattan, City of New
York (hereinafter referred to as the "Building"), the following space:
approximately 13,534 rentable square feet on the 50th floor (Rooms 5001-5010),
(which space is hereinafter referred to as "the demised premises" or "the
premises") approximately as shown on the plan or plans or diagram or diagrams
annexed hereto as ''Exhibit A'' (or incorporated by reference into this Lease as
though physically attached hereto);
for the term of ten (10) years, four (4) mos. to commence as of March 1, 1995
and to end on June 30, 2005 (plus, if the term hereof commences on a day other
than the first day of a month, so many days as are necessary for the term to end
on the last day of the last month of the term) or until such term shall sooner
cease and terminate as hereinafter provided; at a fixed annual rental
rates(without electricity) of $365,418 a year. from March 1, 1995 through June
30, 1998; $392,486 a year from July 1, 1998 through June 30, 2001; and $419,554
a year from July 1, 2001 through June 30, 2005. (See Rider Article 46 for fixed
rent credit.)
The first month's rent due under this Lease shall be paid by Tenant upon
execution of this Lease.
Tenant agrees to pay said fixed annual rent in lawful money of the United
States, in equal monthly installments in advance on the first day of each
calendar month during said term, at the office of Landlord or such other place
in the United States of America as Landlord may designate, without any set off
or deduction whatsoever, except such deduction as may be occasioned by the
occurrence of any event permitting or requiring a deduction from or abatement of
rent as specifically set forth herein. Should the obligation to pay rent
commence on any day other than on the first day of a month, then the fixed rent
for the unexpired portion of such month shall be adjusted and prorated on a per
diem basis.
The parties hereto, for themselves, their heirs, distributes, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
ARTICLE 1
RENT
1.01. Tenant shall pay the fixed annual rent and additional rent as above
and as hereinafter provided, in United Stales legal tender, by cash or by good
and sufficient check drawn on a New York City bank which is a member of the New
York Clearing House or a successor thereto. All sums other than fixed annual
rent payable by Tenant hereunder shall be deemed additional rent and payable on
demand, unless other payment dates are hereinafter provided.
ARTICLE 2
OCCUPANCY
2.01. Tenant may not use or occupy the demised premises as a savings bank,
state or Federal savings and loan association, commercial bank or trust company.
Tenant shall use and occupy the demised premises solely for executive and
general offices relating to Tenant's business,
and for no other purpose.
ARTICLE 3
ALTERATIONS AND INSTALLATIONS
SEE RIDER
ARTICLE 47
3.01. Tenant shall make no alterations, installations, additions or
improvements in or to the demised premises without Landlord's prior written
consent; all such work shall be done only by contractors or mechanics designated
by Landlord as approved for the Building. All such work, alterations,
installations, additions and improvements shall be done at Tenant's sole expense
and at such times and in such manner as Landlord may from time to time
designate. Prior to commencement of such work, Tenant shall obtain and deliver
to Landlord a written letter of authorization, in form satisfactory to
Landlord's counsel, signed by all architects, engineers, surveyors and designers
to become involved in such work, which shall confirm that any of their drawings
or plans are to be removed from any filing with governmental authorities on the
request of Landlord.
3.02. Any mechanic's lien, filed against the demised premises or the
Building for work claimed to have been done for or materials claimed to have
been furnished to Tenant shall be discharged by Tenant at its expense within
thirty (30) days, by payment, filing of the bond required by law, or otherwise.
Notice is hereby given that Landlord shall not be liable for any labor or
materials furnished or to be furnished to Tenant upon credit, and that no
mechanic's or other lien for any such labor or materials shall attach to or
affect the reversion or other estate or interest of Landlord in and to the
demised premises.
3.03. All alterations, installations, additions and improvements made and
installed by Landlord, shall become and be the property of Landlord and shall
remain upon and be surrendered with the demised premises as a part thereof at
the end of the term of this Lease.
3.04. All alterations, installations, additions and improvements made and
installed by Tenant, or at Tenant's expense, upon or in the demised premises
which are of a permanent nature and which cannot be removed without damage to
the demised premises or Building, and all wiring and conduits, supplemental
electrical cabling and wiring (except wiring related to Tenant's data processing
equipment, which shall remain Tenant's property), and related items, shall
become and be the property of Landlord and shall remain upon and be surrendered
with the demised premises as a part thereof at the end of the term of this
Lease, except that Landlord shall have the right and privilege at any time prior
to the expiration of the term of this Lease (or, in the event this Lease is
sooner terminated, then at any time within three (3) months after such
termination), to serve notice upon Tenant requiring that any or all of such
alterations, installations, additions and improvements, wiring, cabling and
conduits, shall be removed and, in the event of service of such notice, Tenant
will, at Tenant's own cost and expense, promptly remove the same in accordance
with such request, and restore the premises to its original condition, ordinary
wear and tear excepted. The obligations under this Section shall survive the
expiration or sooner termination of the term of this Lease.
3.05. Where furnished by or at the expense of Tenant, all furniture,
furnishings and trade fixtures, including without limitation, murals, business
machines and equipment, counters, screens, grille work, special paneled doors,
cages, partitions, metal railings, closets, paneling, lighting fixtures and
equipment, drinking fountains, refrigerators, and any other movable property
shall remain the property of Tenant which may at its option remove all or any
part thereof at any time prior to the expiration of the term of this Lease. In
case Tenant shall decide not to remove any part of such property, Tenant shall
notify Landlord in writing not less than three (3) months prior to the
expiration of the term of this Lease, specifying the items of property which it
has decided not to remove. If, within thirty (30) days after the service of such
notice, Landlord shall request Tenant to remove any of the said property, Tenant
shall at its expense remove the same in accordance with such request. As to such
property, which Landlord does not request Tenant to remove, the same shall be,
if left by Tenant, deemed abandoned by Tenant and thereupon the same shall
become the property of the Landlord.
3.06. If any alterations, installations, additions, improvements or other
property which Tenant shall have the right to remove or be requested by Landlord
to remove as provided hereinabove (herein in this Section 3.06 called the
"property") are not removed on or prior to the expiration of the term of this
Lease, Landlord shall have the right to remove said property and to dispose of
the same without accountability to Tenant and at the sole cost and expense of
Tenant. In case of any damage to the demised premises or the Building resulting
from the removal of the property, Tenant shall repair such damage or, in default
thereof, shall reimburse Landlord for Landlord's cost in repairing such damage.
The obligations under this Section shall survive the expiration or sooner
termination of the term of this Lease.
3.07. Tenant shall keep records of Tenant's alterations, installations,
additions and improvements, and the cost thereof. Tenant shall, within 45 days
after demand by Landlord, furnish to Landlord copies of such records and cost if
Landlord shall require same in connection with any proceeding to reduce the
assessed valuation of the Building, or in connection with any proceeding
instituted pursuant to Article 9 hereof.
ARTICLE 4
REPAIRS
4.01. Tenant shall take good care of the demised premises and the fixtures
and appurtenances therein and shall promptly, at its sole cost and expense, make
all repairs necessary to keep the demised premises in good working order and
condition, and shall be liable for those structural repairs when those are made
necessary by the act, omission or negligence of Tenant or its agents or
employees (subject to Section 7.05 hereof). Except as otherwise provided in
Section 3.05 of this Lease, all damage or injury to the demised premises and to
its fixtures, glass, appurtenances and equipment or to the Building or to its
fixtures, glass, appurtenances and equipment caused by the moving of Tenant's
property in or out of the Building, or by the installation or use of Tenant's
property, or by the use of the demised premises in a manner contrary to the
purposes for which same are leased to Tenant, shall be repaired, restored or
replaced promptly by Tenant at its sole cost and expense, which repairs,
restorations and replacements shall be in quality and class equal to the
original work or installations. If Tenant fails to make such repairs,
restorations or replacements, same may be made by Landlord at the expense of
Tenant and such expense shall be collectible as additional rent and shall be
paid by Tenant within 15 days after rendition of a bill therefor. Landlord, at
Landlord's expense, shall effect all necessary repairs in and to the demised
premises which are not the obligation of Tenant hereunder.
4.02. Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which such floor was designed to
carry and which is allowed by law. Landlord certifies that the floor of the
demised premises will carry 50 pounds live load per square foot of floor space
and 20 pounds for partitions per square foot of floor space. If Tenant shall
desire a floor load in excess of that set forth above, Landlord agrees (provided
Landlord's architects, in their sole discretion, find that the work necessary to
increase such floor load does not adversely affect the structure of the
Building, and further provided that such work will not interfere with the amount
or availability of any space adjoining alongside, above or below the demised
premises, or interfere with the occupancy of other tenants in the Building), to
strengthen and reinforce the same so as to give the live load desired, provided
Tenant shall submit to Landlord the plans showing the locations of and the
desired floor live load for the areas in question and provided further that
Tenant shall agree to pay for or reimburse Landlord on demand for the cost of
such strengthening and reinforcement as well as any other costs to and expenses
of Landlord occasioned by or resulting from such strengthening or reinforcement.
4.03. Business machines and mechanical equipment belonging to Tenant which
cause vibration, noise, cold or heat that may be transmitted to the Building
structure or to any leased space to such a degree as to be objectionable to
Landlord or to any other tenant in the Building shall be placed and maintained
by Tenant at its expense in settings of cork, rubber or spring type vibration
eliminators sufficient to absorb and prevent such vibration or noise, cold or
heat. The parties hereto recognize that the operation of elevators, air
conditioning and heating equipment will cause some vibration, noise, heat or
cold which may be transmitted to other parts of the Building and demised
premises. Landlord shall be under no obligation to endeavor to reduce such
vibration, noise, heat or cold beyond what is customary in current good building
practice for a building such as One Penn Plaza.
4.04. Except as provided in Article 25 hereof and except as otherwise
provided in this Lease there shall be no allowance to Tenant for a diminution of
rental value and no liability on the part of Landlord by reason of
inconvenience, annoyance or injury to business arising from the making of any
repairs, alterations, additions or improvements in or to any portion of the
Building or the demised premises or in or to fixtures, appurtenances or
equipment thereof. Landlord shall seek to minimize any interference with
Tenant's business operations. Tenant understands that work will be effected on
business days during normal business hours.
ARTICLE 5
REQUIREMENTS OF LAW; FIRE INSURANCE
5.01. Tenant, at its expense, shall comply with all laws, orders and
regulations of Federal, State, County and Municipal authorities, and with any
direction of any public officer or officers, pursuant to law, which shall impose
any violation, order or duty upon Landlord or Tenant with respect to the demised
premises, or the use or occupation thereof, provided such compliance is
necessitated by Tenant's particular manner of use of the demised premises (as
distinguished from general office use thereof).
5.02. Tenant shall not do or permit to be done any act or thing upon said
premises, which will invalidate or be in conflict with New York Standard fire
insurance policies covering the Building, and fixtures and property therein, or
which would increase the rate of fire
insurance applicable to the Building to an amount higher than it otherwise would
be; and Tenant shall neither do nor permit to be done any act or thing upon said
premises which shall or might subject Landlord to any liability or
responsibility for injury to any person or persons or to property by reason of
any business or operation being carried on upon said premises (subject to
Section 7.05 hereof); but nothing in this Section 5.02 shall prevent Tenant's
use of the demised premises for the purposes stated in Article 2 hereof.
5.03. If, as a result of any act or omission by Tenant or violation of this
Lease, the rate of fire insurance applicable to the Building shall be increased
to an amount higher than it otherwise would be, Tenant shall reimburse Landlord
for all increases of Landlord's fire insurance premiums so caused; such
reimbursement to be additional rent payable upon the first day of the month
following any outlay by Landlord for such increased fire insurance premiums. In
any action or proceeding wherein Landlord and Tenant are parties, a schedule or
"make up" of rates for the Building or demised premises issued by the body
making fire insurance rates for said premises, shall be presumptive evidence of
the facts therein stated and of the several items and charges in the fire
insurance rate then applicable to said premises.
ARTICLE 6
SUBORDINATION
6.01. This Lease is subject and subordinate to that certain Agreement
Restating Indenture of Lease, dated July 10, 1970 between The Bowery Savings
Bank, as Lessor, and Mid-City Associates, as Lessee (hereinafter sometimes
called "The Ground Lease") and to the rights of Lessor thereunder, and to all
first mortgages which may now or hereafter encumber The Ground Lease, and to all
renewals, modifications, consolidations, replacements and extensions of The
Ground Lease and of such mortgages.
6.02. In the event of a termination of The Ground Lease, or if the
interests of Landlord under this Lease are transferred by reason of or assigned
in lieu of foreclosure or other proceedings for enforcement of any such
mortgage, or if the holder of any such mortgage acquires a lease in substitution
therefor, then the Tenant under this Lease will, at the option to be exercised
in writing by the Lessor under said Ground Lease or such purchaser, assignee or
lessee, as the case may be, (i) attorn to it and will perform for its benefit
all the terms covenants and conditions of this Lease on the Tenant's
part to be performed with the same force and effect as if said Lessor or such
purchaser, assignee or lessee, were the landlord originally named in this Lease,
or (ii) enter into a new lease with said Lessor or such purchaser, assignee or
lessee, as landlord, for the remaining term of this Lease and otherwise on the
same terms and conditions and with the same options then remaining.
ARTICLE 7
Loss, DAMAGE, REIMBURSEMENT, LIABILITY, ETC.
7.01. Landlord or its agents shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling plaster, steam,
gas,. electricity, water, rain or snow or leaks from any part of the Building,
or from the pipes, appliances or plumbing works or from the roof, street or
subsurface or from any other place or by dampness or by any other cause of
whatsoever nature, unless any of the foregoing shall be caused by or due to the
negligence of Landlord, its agents, servants or employees.
7.02. Tenant shall reimburse Landlord for all expense, damages or fines
incurred or suffered by Landlord, and for which Landlord has not been or will
not be reimbursed by insurance, by reason of any breach, violation or
nonperformance by Tenant, or its agents, servants or employees, of any covenant
or provision of this Lease, or by reason of damage to persons or property caused
by moving property of or for Tenant in or out of the Building, or by the
installation or removal of furniture or other property of or for Tenant except
as provided in Section 3.05 of this Lease, or by reason of or arising out of the
carelessness, negligence or improper conduct of Tenant, or its agents, servants
or employees, in the use or occupancy of the demised premises.
7.03. Tenant shall give Landlord notice in case of fire or accidents in the
demised premises promptly after Tenant is aware of such event.
7.04. Tenant agrees to look solely to Landlord's estate and interest in
the land and Building, or the lease of the Building, or of the land and
Building, and the demised premises (or the proceeds thereof), for the
satisfaction of any right or remedy of tenant for the collection of a judgment
(or other judicial process) requiring the payment of money by Landlord, in the
event of any liability by Landlord, and no other property or assets of Landlord
shall be subject to levy, execution, attachment, or other enforcement procedure
for the satisfaction of Tenant's remedies
under or with respect to this Lease, the relationship of landlord and tenant
hereunder, or Tenant's use and occupancy of the demised premises, or any other
liability of Landlord to Tenant (except for negligence).
7.05. (a) Landlord agrees that, if obtainable at no additional cost, it
will include in its fire insurance policies appropriate clauses pursuant to
which the insurance companies (i) waive all right of subrogation against Tenant
with respect to losses payable under such policies and/or (ii) agree that such
policies shall not be invalidated should the insured waive in writing prior to a
loss any or all right of recovery against any party for losses covered by such
policies. But should any additional premiums be exacted for any such clause or
clauses, Landlord shall be released from the obligation hereby imposed unless
Tenant shall agree to pay such additional premium.
(b) Tenant agrees to include, if obtainable at no additional cost,
in its fire insurance policy or policies on its furniture, furnishings, fixtures
and other property removable by Tenant under the provisions of its lease of
space in the Building appropriate clauses pursuant to which the insurance
company or companies (i) waive the right of subrogation against Landlord and any
tenant of space in the Building who shall have executed a similar waiver as set
forth in this section 7.05(b), with respect to losses payable under such policy
or policies and/or (ii) agree that such policy or policies shall not be
invalidated should the insured waive in writing prior to a loss any or all right
of recovery against any party for losses covered by such policy or policies. But
should any additional premium be exacted for any such clause or clauses, Tenant
shall be released from the obligation hereby imposed unless Landlord or the
other tenants shall agree to pay such additional premium.
(c) Provided that Landlord's right of full recovery under its policy
or policies aforesaid is not adversely affected or prejudiced thereby, Landlord
hereby waives any and all right of recovery which it might otherwise have
against Tenant, its servants, agents and employees, for loss or damage occurring
to the Building and the fixtures, appurtenances and equipment therein, to the
extent the same is covered by Landlord's insurance, notwithstanding that such
loss or damage may result from the negligence or fault of Tenant, its servants,
agents or employees. Provided that Tenant's right of full recovery under its
aforesaid policy or policies is not adversely affected or prejudiced thereby,
Tenant hereby waives any and all right of
10
recovery which it might otherwise have against Landlord, its servants, and
employees, and against every other tenant in the Building who shall have
executed a similar waiver as set forth in this Section 7.05(c) for loss or
damage to Tenant's furniture, furnishings, fixtures and other property removable
by Tenant under the provisions hereof to the extent that same is covered by
Tenant's insurance, notwithstanding that such loss or damage may result from the
negligence or fault of Landlord, its servants, agents or employees, or such
other tenant and the servants, agents or employees thereof.
(d) Landlord and Tenant hereby agree to advise the other promptly if
the clauses to be included in their respective insurance policies pursuant to
subparagraphs (a) and (b) above cannot be obtained. Landlord and Tenant hereby
also agree to notify the other promptly of any cancellation or change of the
terms of any such policy which would affect such clauses.
ARTICLE 8
DESTRUCTION--FIRE OR OTHER CAUSE
8.01. If the Building shall be partially damaged or destroyed or if the
demised premises shall be partially or totally damaged or destroyed by fire,
casualty or other cause, then, whether or not the damage or destruction shall
have resulted from the fault or neglect of Tenant, or its servants, employees,
agents, visitors or licensees (and if this Lease shall not have been cancelled
as in this article hereinafter provided), Landlord will repair the damage, and
restore, replace, and rebuild the Building and the demised premises at its
expense, with reasonable dispatch and continuity after notice to it of the
damage or destruction; provided, however, that Landlord shall not be required to
repair or replace any installation made by Tenant. If the demised premises shall
be partially damaged or partially destroyed, the rent and additional rent
payable hereunder shall be abated to the extent that the demised premises shall
have been rendered untenantable or unfit for Tenant's use and Tenant does not
occupy such damaged or destroyed part of the premises on other than an emergency
basis for the period from the date of such damage or destruction to the date
that the damage shall be repaired or restored. If the demised premises or a
major part thereof shall be totally, or substantially totally, damaged or
destroyed or rendered completely, or substantially completely, untenantable on
account of fire, casualty or other cause, the rent and additional rent shall
completely abate as of the date of the damage or
11
destruction and until Landlord shall repair, restore, replace and rebuild the
demised premises (subject to Landlord's right to elect not to restore the same
as hereinafter provided); provided, however, that should Tenant reoccupy a
portion of the demised premises for the purpose of conducting business during
the period the restoration work is taking place and prior to the date that the
same is made completely tenantable, rent and additional rent shall be
apportioned and payable by Tenant in proportion to the part of the demised
premises occupied by it. Nevertheless, in case of any substantial damage or
destruction to the demised premises, Tenant, in addition to and without waiver
of any other rights or remedies available to it, may cancel this Lease by
written notice to Landlord, if (i) within 60 days from the date of the damage or
destruction, Landlord does not file a proof of loss with its insurer; (ii)
within 90 days of the date of damage or destruction Landlord does not let a
contract or contracts one which shall provide for the complete restoration of
the demised premises within a period of one year from the date of the damage or
destruction; (iii) work under such contract or contracts has not commenced
within 120 days of the date of said damage or destruction; or (iv) said work is
not prosecuted with reasonable diligence to its completion; provided that Tenant
shall not be entitled to cancel this Lease pursuant to this sentence more than
thirty (30) days after Landlord shall have given written notice to Tenant that
the state of facts specified in clause (i), (ii) or (iii) of this sentence, as
the case may be, has occurred. The period for the commencement or completion of
the required repairs and restoration work shall be extended by the number of
days lost (not to exceed, however, one year) in the event such loss results from
strike, act of God, war, governmental action, national or state or municipal
emergency, or any cause beyond the reasonable control of Landlord.
8.02. In case the Building or the demised premises shall be substantially
damaged or destroyed by fire or other cause at any time during the last two
years of the term of this Lease, then Landlord may cancel this Lease upon
written notice to Tenant given within ninety (90) days after such damage or
destruction.
8.03. If the Building shall be so damaged at any time during the term of
this Lease that Landlord shall decide to demolish it or to rebuild it, then in
either of such events, Landlord may, within ninety (90) days after such fire or
other casualty, elect to cancel this Lease by giving Tenant a notice in writing
of such decision, and thereupon the
term of this Lease shall expire by lapse of time upon the thirtieth day after
such notice is given, and Tenant shall vacate the demised premises and surrender
the same to Landlord.
8.04. In the event of the termination of this Lease pursuant to the
provisions of this Article, this Lease shall expire as fully and completely on
the date fixed in such notice of termination as if that were the date definitely
fixed for the expiration of this Lease, but the rent and additional rent shall
be apportioned and shall be paid up to and including the date of such damage or
destruction, and any prepaid rent or prepaid additional rent shall be refunded
to Tenant.
8.05. No damages, compensation or claim shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the demised premises or of the Building.
8. 06. The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Building or the
demised premises by fire or other casualty and Section 227 of the Real Property
Law of the State of New York, and any other law of like import now or hereafter
in force providing for such contingency shall have no application.
ARTICLE 9
EMINENT DOMAIN
9.01. In the event that the whole of the demised premises shall be lawfully
condemned or taken in any manner for any public or quasi-public use or purpose,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title (hereinafter referred to as the
"date of taking"), and Tenant shall have no claim against Landlord for, or make
any claim for, the value of any unexpired term of this Lease, and the rent and
additional rent shall be apportioned as of such date.
9.02. In the event that any part of the demised premises shall be so
condemned or taken, then this Lease shall be and remain unaffected by such
condemnation or taking, except that the rent and additional rent allocable to
the part so taken shall be apportioned as of the date of taking, provided,
however, that Tenant may elect to cancel this Lease in the event that more than
twenty-five (25%) percent of the demised premises should be so condemned or
taken, provided such notice of election is given by Tenant to Landlord not later
than thirty
13
(30) days after the date when title shall vest in the condemning authority. Upon
the giving of such notice, this Lease shall terminate on the thirtieth day
following the date of such notice and the rent and additional rent shall be
apportioned as of such termination date. Upon such partial taking and this Lease
continuing in force as to any part of the demised premises, the rent and
additional rent shall be diminished by an amount representing the part of said
rent and additional rent properly applicable to the portion or portions of the
demised premises which may be so condemned or taken. If as a result of the
partial taking (and this Lease continuing in force as to the part of the demised
premises not so taken), any part of the demised premises not taken is damaged,
Landlord agrees with reasonable promptness to commence the work necessary to
restore the damaged portion to the condition existing immediately prior to the
taking, and prosecute the same with reasonable diligence to its completion. In
the event Landlord and Tenant are unable to agree as to the amount by which the
rent and additional rent shall be diminished, the matter shall be determined by
arbitration in accordance with the provisions of Article 31 of this Lease.
Pending such determination, Tenant shall pay to Landlord the rent as fixed by
Landlord, subject to adjustment in accordance with the arbitration.
9.03. Nothing hereinabove provided shall preclude Tenant from appearing,
claiming, proving and receiving in the condemnation proceeding, Tenant's moving
expenses, and the value of Tenant's fixtures, or tenant's alterations,
installations and improvements which do not become part of the Building, or
property of Landlord, provided Landlord's award is not thereby diminished.
9.04. In the event that more than twenty-five (25%) percent of the demised
premises shall be so taken and Tenant shall not have elected to cancel this
Lease as above provided, the entire award for a partial taking shall be paid to
Landlord, and Landlord, at Landlord's own expense, shall to the extent of the
net proceeds (after deducting reasonable expenses including attorneys' and
appraisers' fees) of the award restore the unaffected part of the Building to
substantially the same condition and tenant ability as existed prior to the
taking.
Until said unaffected portion is restored, Tenant shall be entitled to a
proportionate abatement of rent for that portion of the premises which is being
restored and is not usable until the completion of the restoration or until the
said portion of the premises is used by Tenant, whichever occurs sooner. Said
unaffected portion shall be restored
14
within a reasonable time but not more than six (6) months after the taking
provided, however, if Landlord is delayed by strike, lockout, the elements, or
other causes beyond Landlord's control, the time for completion shall be
extended for a period equivalent to the delay. Should Landlord fail to complete
the restoration within the said six (6) months or the time as extended, Tenant
may elect to cancel this Lease and the term hereby granted in the manner and
with the same results as set forth in the next two sentences of this Section
9.04. If such partial taking shall occur in the last two years ~f the term
hereby granted, either party, irrespective of the area of the space remaining,
may elect to cancel this Lease and the term hereby granted, provided such party
shall, within thirty (30) days after such taking, give notice to that effect,
and upon the giving of such notice, the rent shall be apportioned and paid to
the date of expiration of the term specified and this Lease and the term hereby
granted shall cease, expire and come to an end upon the expiration of said
thirty days specified in said notice. If either party shall so elect to end this
Lease and the term hereby granted, Landlord need not restore any part of the
demised premises and the entire award for partial condemnation shall be paid to
Landlord, and Tenant shall have no claim to any part thereof, except as to the
items set forth in Section 9.03 where same are applicable.
9.05. In the event all or any part of the demised premises shall be taken
for a temporary use or occupancy, (a) demised term shall not be reduced or
affected in any way except as provided in (d) below, (b) Tenant shall continue
to be responsible for all of its obligations hereunder and shall continue to pay
all rents and additional rents when due, (c) Tenant shall be entitled to receive
that portion of the award which represents reimbursement for the cost of
restoration of the demised premises, compensation for the use and occupancy of
the demised premises and for any taking of Tenant's property, except that, if
the temporary period of taking shall extend banned the expiration of the term of
this Lease, the portion of the award representing compensation for the use and
occupancy of the demised premises shall be apportioned between Landlord and
Tenant as of said expiration date of said term and Landlord shall receive that
portion of the award which represents reimbursements for the cost of restoration
of the demised premises, and (d) if the date of temporary taking of more than
25% of the demised premises shall occur during the last three (3) years of the
term of this Lease, Tenant may elect to cancel this Lease by notice of election
given by Tenant to Landlord not later than thirty (30) days after the date when
title shall vest in the condemning authority. Upon the giving of such notice,
this Lease shall terminate on the thirtieth day following the date of such
notice and the rent and additional rent shall be apportioned as of such
termination date, with Landlord, and not
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Tenant, to receive the portion of the award which represents reimbursement for
the cost of restoration of the demised premises and the portion of the award
representing compensation for the use and occupancy of the demised premises for
the time subsequent to the cancellation date.
ARTICLE 10
ASSIGNMENT AND SUBLETTING
10.01. Tenant, for itself, its heirs, distributes, executors, admin
istrators, legal representatives, successors and assigns, expressly covenants
that it shall not assign, mortgage or encumber this Lease, nor underlet, or
suffer or permit the demised premises or any part thereof to be used or occupied
by others, without the prior written consent of Landlord in each instance. The
merger or consolidation of a corporate lessee or sub lessee where the NET WORTH
OF THE RESULTING corporation is less than the net worth of the lessee or sub
lessee immediately prior to such merger or consolidation shall be deemed an
assignment of this lease or of such sublease. If this Lease be assigned, or if
the demised premises or any part thereof be underlet or occupied by anybody
other than Tenant, Landlord may, after default by Tenant, collect rent from the
assignee, under tenant or occupant, and apply the net amount collected to the
rent herein reserved, but no assignment, under letting, occupancy or collection
shall be deemed a waiver of the provisions hereof, the acceptance of the
assignee, under tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Landlord to an assignment or under letting shall not
in any wise be construed to relieve Tenant from obtaining the express consent in
writing of Landlord to any further assignment or under letting. In no event
shall any permitted sub lessee assign or encumber its sublease or further sublet
all or any portion of its sublet space, or otherwise suffer or permit the sublet
space or any part thereof to be used or occupied by others, without Landlord's
prior written consent in each instance. A modification, amendment or extension
of a sublease shall be deemed a sublease.
10.02. If Tenant desires to assign this Lease or to sublet all or any
portion of the demised premises, it shall first submit in writing to Landlord
the documents described in Section 10.03 hereof, and shall offer in writing, (i)
with respect to a prospective assignment, to assign this Lease to Landlord
without any payment of moneys or other consideration therefor, or, (ii) with
respect to a prospective subletting, to sublet to Landlord the portion of the
demised premises involved "Lease back Area") for the term specified by Tenant in
its offer and at the lower of (a) Tenant's proposed sub rental or (b) at the
same rate of fixed rent and additional rent; and otherwise on the same terms,
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covenants and conditions (including provisions relating to escalation rents), as
are contained herein and as are allocable and applicable to the portion of the
demised premises to be covered by such subletting. The offer shall specify the
date when the Leaseback Area will be made available to Landlord, which date
shall be in no event earlier than ninety (90) days nor later than one hundred
eighty ( 180) days following the acceptance of the offer. If an offer of
sublease is made, it shall in addition specify the duration of the term of the
proposed sublease as fixed by Tenant, except that if the proposed sublease will
result in all or substantially all of the demised premises being sublet, then
Landlord shall have the option to extend the term of the proposed sublease for
the balance of the term of this Lease less one ( 1 ) day.
Landlord shall have a period of forty-five (45) days from the receipt of
such offer to either accept or reject the same. Landlord or its agents or
designees shall have the right, during such time, at reasonable times during
business hours, to enter the demised premises to exhibit same to prospective
subtenants. If Landlord shall accept such offer, Tenant shall then execute and
deliver to Landlord, or to anyone designated or named by Landlord, an assignment
or sublease, as the case may be, in either case in a form reasonably
satisfactory to Landlord's counsel.
If a sublease is so made to Landlord or its designee, it shall expressly:
(a) permit Landlord to make further subleases of all or any part of the
Leaseback Area and (at no cost or expense to Tenant) to make and authorize any
and all changes, alterations, installations and improvements in such space as
Landlord may deem necessary for such subletting, at Landlord's expense;
(b) provide that Tenant will at all times permit reasonably appropriate
means of ingress to and egress from the Leaseback Area;
(c) negate any intention that the estate created under such sublease be
merged with any other estate held by either of the parties;
(d) provide that Landlord shall accept the Leaseback Area "as is" except
that Landlord, at Tenant's expense, shall perform all such work and make all
such alterations as may be required physically to separate the Leaseback Area
from the remainder of the demised premises and to permit lawful occupancy, it
being
intended that Tenant shall have no other cost or expense in connection with the
subletting of the Leaseback Area;
(e) provide that at the expiration of the term of such sublease Tenant
will accept the Leaseback Area in its then existing condition, subject to the
obligations of Landlord to make such repairs thereto as may be necessary to
preserve the Leaseback Area in good order and condition, ordinary wear and tear
excepted.
Landlord shall indemnify and save Tenant harmless from all obligations
under this Lease as to the Leaseback Area during the period of time it 1S SO
sublet, except for fixed annual rent and additional rents, if any, due under the
within Lease, which are in excess of the rent and additional rents due under
such sublease.
Subject to the foregoing, performance by Landlord, or its designee, under a
sublease of the Leaseback Area shall be deemed performance by Tenant of any
similar obligation under this Lease and any default under any such sublease
shall not give rise to a default under a similar obligation contained in this
Lease, nor shall Tenant be liable for any default under this Lease or deemed to
be in default hereunder if such default is occasioned by or arises from any act
or omission of the tenant under such sublease or is occasioned by or arises from
any act or omission of any occupant holding under or pursuant to any such
sublease.
10.03. If Tenant requests Landlord's consent to a specific assignment or
subletting, it shall submit in writing to Landlord (i) the name and address of
the proposed assignee or sub lessee, (ii) a duly executed counterpart of the
proposed agreement of assignment or sublease, (iii) reasonably satisfactory
information as to the nature and character of the business of the proposed
assignee or sub lessee, and as to the nature of its proposed use of the space,
and (iv) banking, financial or other credit information relating to the proposed
assignee or sub lessee reasonably sufficient to enable Landlord to determine the
financial responsibility and character of the proposed assignee or sub lessee.
10.04. If Landlord shall not have accepted Tenant's offer, as provided in
Section 10.02, then Landlord will not unreasonably withhold or delay its consent
to Tenant's request for consent to such specific assignment or subletting (where
Tenant will not move the conduct of its business to another building in New York
City in violation of Article 34 hereof). Any consent of Landlord under this
Article shall be subject to the terms of this Article and conditional upon there
being no default by Tenant, beyond any grace period,
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under any of the terms, covenants and conditions of this Lease at the time that
Landlord's consent to any subletting or assignment is requested and on the date
of the commencement of the term of any proposed sublease or the effective date
of any proposed assignment.
10.05. Tenant understands and agrees that whether Landlord's written
consent thereto is required or not required, no assignment or subletting shall
be effective unless Tenant causes to be delivered to Landlord a duly executed
copy of the sublease or assignment (unless it was theretofore delivered to
Landlord). Any such sublease shall provide that the sub lessee shall comply with
all applicable terms and conditions of this Lease to be performed by the Tenant
hereunder. Any such assignment of lease shall contain an assumption by the
assignee of all of the terms, covenants and conditions of this Lease to be
performed by the Tenant.
10.06. If Landlord shall not have accepted any required Tenant's offer
and/or Tenant effects any assignment or subletting, then Tenant thereafter shall
pay to Landlord a sum equal to (a) any rent or other consideration paid to
Tenant by any subtenant which (after deducting the costs of Tenant, if any, in
effecting the subletting, including reasonable alteration costs, commissions and
legal fees) is in excess of the rent allocable to the subleased space which is
then being paid by Tenant to Landlord pursuant to the terms hereof; and (b) any
other profit or gain (after deducting any necessary expenses incurred) realized
by Tenant from any such subletting or assignment. All sums payable hereunder by
Tenant shall be payable to Landlord as additional rent upon receipt thereof by
Tenant.
10.07. Anything herein contained to the contrary notwithstanding:
(a) Tenant shall not advertise (but may list with brokers) its
space for assignment or subletting at a rental rate lower than the greater of
the then Building rental rate for such space or the rental rate then being paid
by Tenant to Landlord.
(b) The transfer of a majority of the issued and outstanding capital
stock of, or of a controlling interest in, any corporate tenant or subtenant of
this Lease or a majority of the total interest in any partnership tenant or
subtenant, however accomplished, and whether in a single transaction or in a
series of related or unrelated transactions, shall be deemed an assignment of
this Lease or of such sublease. The transfer of outstanding capital stock of any
corporate tenant, for purposes of this Article, shall not include sale of such
stock by persons other than those deemed "insiders" within the meaning of the
Securities Exchange Act of 1934 as amended, and which sale is effected through
"over-the-counter market" or through any recognized stock exchange.
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(c) No assignment or subletting shall be made:
(i) To any person or entity which shall at that time be a tenant,
subtenant or other occupant of any part of the Building of which the demised
premises form a part, or from whom Landlord or Landlord's agent received an
offer (directly or indirectly), or who was negotiating with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
building during the six (6) months immediately preceding Tenant's request for
Landlord's consent;
(ii) By the legal representatives of the Tenant or by any person to
whom Tenant's interest under this Lease passes by operation of law, except in
compliance with the provisions of this }article;
(iii) To any person or entity for the conduct of a business which is
not in keeping with the standards and the general character of the Building of
which the demised premises form a part.
10.08. Anything hereinabove contained to the contrary notwithstanding, the
offer-back to Landlord provisions of Section 10.02 hereof shall not apply to,
and Landlord will not unreasonably withhold or delay its consent to, an
assignment of this Lease, or sublease of all or part of the demised premises,
to: the parent of Tenant or to a wholly-owned subsidiary of Tenant or of said
parent of Tenant, provided the net worth of the transferor or sub lessor, after
such transaction, is equal to or greater than its net worth immediately prior to
such transaction, and provided also that any such transaction complies with the
other provisions of this Article.
10.09. Anything hereinabove contained to the contrary notwithstanding, the
offer-back to Landlord provisions of Section 10.02 hereof shall not apply to,
and Landlord will not unreasonably withhold or delay its consent to, an
assignment of this Lease, or sublease of all or part of the demised premises,
to: any corporation (i) to which substantially all the assets of Tenant are
transferred or (ii) into which Tenant may be merged or consolidated, provided
that the net worth, experience and reputation of such transferee or of the
resulting or surviving corporation, as the case may be, is equal to or greater
than the net worth experience and reputation of Tenant and of any guarantor of
this Lease immediately prior to such transfer and provided, also, that any such
transaction complies with the other provisions of this Article.
10.10. No consent from Landlord shall be necessary under Sections 10.08 and
10.09 hereof where (i) reasonably satisfactory proof is delivered to Landlord
that the net worth and other provisions of 10.08 and 10.09, as the case may be,
and the other provisions of this Article, have been satisfied and (ii) Tenant,
in a writing reasonably satisfactory to Landlord's attorneys, agrees to remain
primarily liable jointly and severally with any transferee or assignee, for the
obligations of Tenant under this Lease.
0/89
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10.11. In no event shall Tenant be entitled to make, nor shall Tenant make,
any claim, and Tenant hereby waives any claim, for money damages (nor shall
Tenant claim any money damages by way of set-off, counterclaim or defense) based
upon any claim or assertion by Tenant that Landlord has unreasonably withheld or
unreasonably delayed its consent or approval to a proposed assignment or
subletting as provided for in this Article. Tenant's sole remedy shall be an
action or proceeding to enforce any such provision, or for specific performance,
injunction or declaratory judgment
ARTICLE 11
ACCESS TO DEMISED PREMISES
11.01. Tenant shall permit Landlord, or its agents or designees, to erect,
use and maintain pipes, ducts and conduits in and through the demised premises,
provided the same are installed adjacent to or concealed behind walls, floors
and ceilings of the demised premises and are installed by such methods and at
such locations as will not materially interfere with or impair Tenant's layout
or use of the demised premises or damage the appearance thereof. Landlord or its
agents or designees shall have the right, but only upon reasonable prior request
made to Tenant or any authorized employee of Tenant at the demised premises to
enter the demised premises, other than vaults or other enclosures where money,
securities or other valuables or confidential documents are kept, at reasonable
times during business hours, for the making of such repairs or alterations as
Landlord shall be required or shall have the right to make by the provisions of
this Lease or any other lease in the Building and, subject to the foregoing,
shall also have the right to enter the demised premises for the purpose of
inspecting them or exhibiting them to prospective purchasers or lessees of the
entire Building or to prospective mortgagees of the fee or of the Landlord's
interest in the property of which the demised premises are a part or to
prospective assignees of any such mortgages or to the holder of any mortgage on
the Landlord's interest in the property, its agents or designees. Landlord shall
be allowed to take all material into and upon the demised premises that may be
required for the repairs or alterations above mentioned as the same is required
for such purpose without the same constituting an eviction of Tenant in whole or
in part, and the rent reserved shall in no wise abate, except as otherwise
provided in this Lease, while said repairs or alterations are being made, by
reason of loss or interruption of the business of
Tenant because of the prosecution of any such work. Landlord shall seek to
minimize any interference with Tenant's business operations, as in Section 4.04
provided.
11.02. Landlord or its agents or designees may, during the nine (9) months
prior to the expiration of the term of this Lease, at reasonable times during
business hours, after reasonable prior notice (which may be oral) enter the
demised premises tea exhibit same to prospective tenants.
11.03. If Tenant shall not be personally present to open and permit an
entry into the demised premises at any time when for any reason an entry therein
shall be urgently necessary by reason of fire or other emergency, Landlord or
Landlord's agents may forcibly enter the same without rendering Landlord or such
agents liable therefor (if during such entry Landlord or Landlord's agents shall
accord reasonable care to Tenant's property) and without in any manner affecting
the obligations and covenants of this Lease.
ARTICLE 12
CERTIFICATE OF OCCUPANCY
12.01. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the Building. Landlord
represents that the certificate of occupancy for the Building will permit the
use of the demised premises for the purposes specified in this Lease. Landlord
will make no changes in the Building which would result in a change in the
certificate of occupancy which prevents Tenant from using the demised premises
for the purposes specified in this Lease.
ARTICLE 13
BANKRUPTCY
13.01. Subject to then applicable law and to the provisions of Section
13.03, if at any time prior to the date herein fixed as the commencement of the
term of this Lease there shall be filed by or against Tenant in any court
pursuant to any statute either of the United States or of any State a petition
in bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or a trustee of all or a portion of Tenant's property, or if Tenant
makes an assignment for the benefit of creditors, or petitions for or enters
into an arrangement with creditors, this Lease shall ipso facto be cancelled and
terminated, in which event neither Tenant nor any person
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claiming through or under Tenant or by virtue of any statute or of an order of
any court shall be entitled to possession of the demised premises and Landlord,
in addition to the other rights and remedies given by Section 13.04 hereof and
by virtue of any other provision herein or elsewhere in this Lease contained or
by virtue of any statute or rule of law, may retain as liquidated damages any
rent, security deposit or monies received by it from Tenant or others in behalf
of Tenant upon the execution hereof.
13.02. Subject to then applicable law and to the provisions of Section
13.03, if at the date fixed as the commencement of the term of this Lease or if
at any time during the term hereby demised there shall be filed by or against
Tenant in any court pursuant to any statute either of the United States or of
any State a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Tenant's
property, or if Tenant makes an assignment for the benefit of creditors, or
petitions for or enters into an arrangement with creditors, Landlord may at
Landlord's option, serve upon Tenant or any such trustee, receiver, or assignee,
a notice in writing stating that this Lease and the term hereby granted shall
cease and expire on the date specified in said notice, which date shall be not
less than ten days after the serving of said notice, and this Lease and the term
hereof shall then expire on the date so specified as if that date had originally
been fixed in this Lease as the expiration date of the term herein granted.
Thereupon, neither Tenant nor any person claiming through or under Tenant by
virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the demised premises but shall
forthwith quit and surrender the premises, and Landlord, in addition to the
other rights and remedies Landlord has by virtue of any other provision
herein or elsewhere in this Lease contained or by virtue of any statute or
rule of law, may retain as liquidated damages any rent, security, deposit or
monies received by it from Tenant or others in behalf of Tenant.
13.03. In the event that at any times mentioned in either Sections 13.01 or
13.02 there shall be instituted against Tenant an involuntary proceeding for
bankruptcy, insolvency, reorganization or any other relief described in Sections
13.01 and 13.02, Tenant shall have ninety (90) days in which to vacate or
stay the same before this Lease shall terminate or before Landlord shall have
any right to terminate this Lease, provided the rent and additional rent then
in arrears, if any, are paid within fifteen (15) days after the institution of
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such proceeding, and further provided that the rent and additional rent which
shall thereafter become due and payable are paid when due, and Tenant shall not
otherwise be in default in the performance of the terms and covenants of this
Lease.
13.04. In the event of the termination of this Lease pursuant to Sections
13.01, 13.02 or 13.03 hereof, Landlord shall forthwith, notwithstanding any
other provisions of this Lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the then fair and reasonable rental value of the demised premises for the
same period, if lower than the rent reserved at the time of termination.
If such premises or any part thereof be re-let by Landlord for the unexpired
term of said Lease, or any part thereof, before presentation of proof of such
liquidated damages to any court, commission or tribunal, the amount of rent
reserved upon such re-letting shall be prima facie the fair and reasonable
rental value for the part or the whole of the premises so re-let during the term
of the re-letting. Nothing herein contained shall limit or prejudice the
right of Landlord to prove for and obtain as liquidated damages by reason of
such termination, an amount equal to the maximum allowed by any statute or
rule of law in effect at the time when, and governing the proceedings in
which such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.
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ARTICLE 14
DEFAULT
14.01. If Tenant defaults in fulfilling any of the covenants of this Lease,
including the payment of rent or additional rent, or if the demised premises
become vacant or deserted, then, in any one or more of such events, upon
Landlord serving a written 15 days' notice upon Tenant specifying the nature of
said default and upon the expiration of said 15 days, if Tenant shall have
failed to comply with or remedy such default, or if the said default or omission
complained of shall be of such a nature that the same cannot be completely cured
or remedied within said 15-day period and if Tenant shall not have diligently
commenced to take action towards curing such default within such 15-day period
and shall not thereafter with reasonable diligence and in good faith proceed to
remedy or cure such default, or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the demised premises shall
be occupied by someone other than Tenant and such occupancy shall continue for a
period of thirty (30) days after written notice from Landlord, then Landlord may
serve a written 5 days' notice of cancellation of this Lease upon Tenant, and,
upon the expiration of said 5 days, this Lease and the term hereunder and any
rights of renewal or extension thereof shall end and expire as fully and
completely as if the date of expiration of such 5-day period were the day herein
originally fixed for the end and expiration of this Lease and the term hereof
and Tenant shall then quit and surrender the demised premises to Landlord but
Tenant shall remain liable as hereinafter provided. If Tenant shall at any time
default hereunder, and if Landlord shall institute an action or summary
proceedings against Tenant based upon such default, then Tenant will reimburse
Landlord for the expense of reasonable attorney's fees and disbursements thereby
incurred by Landlord.
14.02. If the notices provided for in Section 14.01 hereof shall have been
given, and the term shall expire as aforesaid, or if Tenant shall make default
in the payment of the rent reserved herein or any item of additional rent herein
provided or any part of either or in making any other payment herein provided
for, then and in any of such events Landlord may, without notice, re-enter the
demised premises either by force or otherwise, and dispossess Tenant, the legal
representatives of Tenant or other occupant of the demised premises, by summary
proceedings or otherwise and remove their effects and
25
hold the premises as if this Lease had not been made, and Tenant hereby waives
the service of notice of intention to re-enter or to institute legal proceedings
to that end.
14.03. Notwithstanding any lease term expiration or termination under this
Article 14 prior to the Lease expiration date originally fixed herein, Tenant's
obligation to pay any and all rent and additional rent under this Lease shall
continue to and cover all periods up to the date originally fixed for the
expiration of the term hereof.
14.04. Notwithstanding the provisions of Section 14.01 hereof, Tenant, at
its own cost and expense, in its name and/or (wherever necessary) Landlord's
name, may contest, in any manner permitted by law (including appeals to a court,
or governmental department or authority having jurisdiction in the matter), the
validity or the enforcement of any governmental act, regulation or directive
with which Tenant is required to comply pursuant to this Lease, and may defer
compliance therewith provided that:
(a) such non-compliance shall not subject Landlord to criminal
prosecution or subject the land and/or Building at One Penn Plaza, New York City
to lien or sale;
(b) such non-compliance shall not be in violation of any fee
mortgage, or of any ground of underlying lease or any mortgage thereon;
(c) Tenant shall first deliver to Landlord a surety bond issued by a
surety company of recognized responsibility, or other security satisfactory to
Landlord, indemnifying and protecting Landlord against any loss or injury by
reason of such non-compliance; and
(d) Tenant shall promptly and diligently prosecute such contest.
Landlord, without expense or liability to it, shall cooperate with Tenant and
execute any documents or pleadings required for such purpose, provided that
Landlord shall reasonably be satisfied that the facts set forth in any such
documents or pleadings are accurate.
ARTICLE 15
REMEDIES OF LANDLORD; WAIVER OF REDEMPTION
15.01. In case of such re-entry, expiration and/or dispossess by summary
proceedings or otherwise as set forth in Article 14 hereof (a)
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the rent shall become due thereupon and be paid up to the time of such re-entry,
dispossess and/or expiration, together with such expenses as Landlord may incur
for legal expenses, reasonable attorneys' fees, brokerage, and/or putting the
demised premises in good order, or for preparing the same for re-rental; (b)
Landlord may re-let the premises or any part or parts thereof, either in the
name of Landlord or otherwise, for a term or terms, which may at Landlord's
option be less than or exceed the period which would otherwise have constituted
the balance of the term of this Lease and may grant concessions or free rent;
and/or (c) Tenant shall also pay Landlord as damages for the failure of Tenant
to observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this Lease. The failure or refusal of
Landlord to re-let the premises or any part or parts thereof shall not release
or affect Tenant's liability for damages. In computing such damages there shall
be added to the said deficiency such expenses as Landlord may incur in
connection with re-letting, such as legal expenses, reasonable attorneys'
fees, brokerage and for keeping the demised premises in good order or for
preparing the same for re-letting. Any such damages shall be paid in monthly
installments by Tenant on the rent days specified in this Lease and any suit
brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Landlord to collect the deficiency for any
subsequent month by a similar proceeding. Landlord, at Landlord's option, may
make such alterations, repairs, replacements and/or decorations in the demised
premises as Landlord, in Landlord's sole judgment, considers advisable and
necessary for the purpose of re-letting the demised premises; and the making of
such alterations and/or decorations shall not operate or be construed to release
Tenant from liability hereunder as aforesaid. Landlord shall in no event be
liable in any way whatsoever for failure or refusal to re-let the demised
premises or any parts thereof, or, in the event that the demised premises are
re-let, for failure to collect the rent thereof under such re-letting. In the
event of a breach or threatened breach by Tenant of any of the covenants or
provisions hereof, Landlord shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
Lease of any particular remedy, shall not preclude Landlord from any other
remedy, in law or in equity.
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15.02. Tenant hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of Tenant being
evicted or dispossessed for any cause, or in the event of Landlord obtaining
possession of demised premises, by reason of the violation by Tenant of any
of the covenants and conditions of this Lease or otherwise.
ARTICLE 16
FEES AND EXPENSES; INTEREST
16.01. If Tenant shall default in the observance or performance of any term
or covenant on Tenant's part to be observed or performed under or by virtue of
any of the covenants, terms or provisions in any Article of this Lease, (a)
Landlord may remedy such default for the account of Tenant, immediately and
without notice in case of emergency, or in any other case only provided that
Tenant shall fail to remedy such default with all reasonable dispatch after
Landlord shall have notified Tenant in writing of such default and the
applicable grace period for curing such default shall have expired; and (b)
if Landlord makes any expenditures or incurs any obligations for the payment
of money in connection with such default including, but not limited to,
reasonable attorneys' fees in instituting, prosecuting or defending any
action or proceeding, such sums paid or obligations incurred, with interest,
shall be deemed to be additional rent hereunder and shall be paid by Tenant
to Landlord upon rendition of a bill to Tenant therefor.
If Tenant is late in making any payment due to Landlord from Tenant under
this Lease, then interest shall become due and owing to Landlord on such payment
from the date when it was due, computed as provided in Section 20.04 hereof.
ARTICLE 17
NO REPRESENTATIONS BY LANDLORD
17.01. Landlord or Landlord's agents have made no representations or
promises with respect to the said Building or demised premises except as herein
expressly set forth.
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ARTICLE 18
END OF TERM
18.01. Upon the expiration or other termination of the term of this Lease,
Tenant shall quit and surrender to Landlord the demised premises, broom clean,
in good order and condition, ordinary wear and tear and damage by fire, the
elements or other casualty excepted, and Tenant shall remove all of its property
as herein provided. Tenant's obligation to observe or perform this covenant
shall survive the expiration or sooner termination of the term of this Lease.
18.02. Tenant agrees it shall indemnify and save Landlord harmless against
all costs, claims, loss or liability resulting from delay by Tenant in so
surrendering the premises, including, without limitation, any claims made by any
succeeding tenant founded on such delay. Additionally, the parties recognize and
agree that other damage to Landlord resulting from any failure by Tenant timely
to surrender the premises will be substantial, will exceed the amount of monthly
rent theretofore payable hereunder, and will be impossible of accurate
measurement. Tenant therefore agrees that if possession of the premises is not
surrendered to Landlord within one (1) day after the day of the expiration or
sooner termination of the term of this Lease, then Tenant will pay Landlord, as
liquidated damages, for each month and for each portion of any month during
which Tenant holds over in the two premises after, expiration or termination of
the term of this Lease, a sum equal to two times the average rent and additional
rent which was payable per month under this Lease during the last six months of
the term thereof. The aforesaid obligations shall survive the expiration or
sooner termination of the term of this Lease.
ARTICLE 19
QUIET ENJOYMENT
19.01. Landlord covenants and agrees with Tenant that upon Tenant paying
the rent and additional rent and observing and performing all the terms,
covenants and conditions, on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this Lease, and to the ground
eases, underlying leases and mortgages herein before mentioned.
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ARTICLE 20
DEFINITIONS
20.01. The term "Landlord" as used in this Lease means only the owner, or
the mortgagee in possession, for the time being of the land and Building (or the
owner of a lease of the Building or of the land and Building), so that in the
event of any transfer of title to said land and Building or said lease, or in
the event of a lease of the Building, or of the land and Building, upon
notification to Tenant of such transfer or lease the said transferor Landlord
shall be and hereby is entirely freed and relieved of all existing or future
covenants, obligations and liabilities of Landlord hereunder, 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 said land and Building or said lease, or
the said lessee of the Building, or of the land and Building, that the
transferee or the lessee has assumed and agreed to carry out any and all such
covenants, obligations and liabilities of Landlord hereunder.
20.02. The words "re-enter" and "re-entry" as used in this Lease are not
restricted to their technical legal meaning.
20.03. The term "business days" as used in this Lease shall exclude
Saturdays, Sundays and all days observed by the Federal, State or local
government as legal holidays as well as all other days recognized as holidays
under applicable union contracts.
20.04. Except as otherwise specifically provided in this Lease, whenever
payment of interest is required by the terms hereof, it shall be computed as
follows: for an individual or partnership tenant, computed at the maximum legal
rate of interest; for a corporate tenant, computer at one and one-half (1-1/2%)
per month unless there is an applicable maximum legal rate of interest which
then shall be used.
ARTICLE 21
ADJACENT EXCAVATION--SHORING
21.01. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing
30
such work as shall be necessary to preserve the wall of or the Building of which
the demised premises form a part from injury or damage and to support the same
by proper foundations without any claim for damages or indemnity against
Landlord, or diminution or abatement of rent.
ARTICLE 22
RULES AND REGULATIONS
22.01. Tenant and Tenant's servants, employees and agents shall observe
faithfully and comply strictly with the Rules and Regulations set forth in
Exhibit B attached hereto and made part hereof entitled "Rules and Regulations"
and such other and further reasonable Rules and Regulations as Landlord or
Landlord's agents may from time to time adopt provided, however, that in case of
any conflict or inconsistency between the provisions of this Lease and of any of
the Rules and Regulations as originally or as hereafter adopted, the provisions
of this Lease shall control. Reasonable written notice of any additional Rules
and Regulations shall be given to Tenant. In case Tenant disputes the
reasonableness of any additional Rule or Regulation hereafter made or adopted by
Landlord or Landlord's agents, the parties hereto agree to submit the question
of the reasonableness of such Rule or Regulation for decision to the Chairman of
the Board of Directors of the Management Division of the Real Estate Board of
New York, Inc., or to such impartial person or persons as he may designate,
provided however, if Tenant objects to submitting the question to such Chairman
or to his designee or designees, the same shall be submitted to arbitration as
set forth in Article 31 hereof, and the determination of the Chairman, his
designee or designees, or the arbitrators as the case may be, shall be final and
conclusive upon the parties hereto. The right to dispute the reasonableness of
any additional Rule or Regulation upon Tenant's part shall be deemed waived
unless the same shall be asserted by service of a notice in writing upon
Landlord within 30 days after written notice to Tenant of the adoption of any
such additional Rule or Regulation. Nothing in this Lease contained shall be
construed to impose upon Landlord any duty or obligation to enforce the Rules
and Regulations or the terms, covenants or conditions in any other lease,
against any other tenant of the Building, and Landlord shall not be liable to
Tenant for violation of the same by any other tenant, its servants, employees,
agents, visitors or licensees.
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ARTICLE 23
NO WAIVER
23.01. No agreement to accept a surrender of this Lease shall be valid
unless in writing signed by Landlord. No employee of Landlord or of Landlord's
agents shall have any power to accept the keys of said premises prior to the
termination of this Lease. The delivery of keys to any employee of Landlord or
of Landlord's agent shall not operate as a termination of this Lease or a
surrender of the premises. In the event of Tenant at any time desiring to have
Landlord sublet the premises for Tenant's account, Landlord or Landlord's agents
are authorized to receive said keys for such purpose without releasing Tenant
from any of the obligations under this Lease. The failure of Landlord to seek
redress for violation of, or to insist upon the strict performance of, any
covenant or condition of this Lease or any of the Rules and Regulations set
forth herein, or hereafter adopted by Landlord, shall not prevent a subsequent
act, which would have originally constituted a violation, from having all the
force and effect of an original violation. The receipt by Landlord of rent with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. The failure of Landlord to enforce any of the Rules and
Regulations set forth herein, or hereafter adopted, against Tenant and/or any
other tenant in the Building shall not be deemed a waiver of any such Rules and
Regulations. No provision of this Lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord. No payment by
Tenant or receipt by Landlord of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment of rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in this Lease provided.
23.02. This Lease contains the entire agreement between the parties, and
any executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in part unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
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ARTICLE 24
WAIVER OF TRIAL BY JURY
24.01. Landlord and Tenant do hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other on any matters whatsoever arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the
demised premises, and/or any other claims (except claims for personal injury or
property damage), and any emergency statutory or any other statutory remedy. It
is further mutually agreed that in the event Landlord commences any summary
proceeding for non-payment of rent, Tenant will not interpose and does hereby
waive the right to interpose any counterclaim of whatever nature or description
in any such proceeding, provided Tenant does not thereby waive any defense or
the right to assert such claim in a separate action or proceeding.
ARTICLE 25
INABILITY TO PERFORM
25.01. If, by reason of (1) strike, (2) labor troubles, (3) governmental
pre-emption in connection with a national emergency, (4) any rule, order or
regulation of any governmental agency, (5) conditions of supply or demand which
are affected by war or other national, state or municipal emergency, or (6) any
cause beyond Landlord's control, Landlord shall be unable to fulfill its
obligations under this Lease or shall be unable to supply any service which
Landlord is obligated to supply, this Lease and Tenant's obligation to pay rent
hereunder shall in no wise be affected, impaired or excused. As Landlord shall
learn of the happening of any of the foregoing conditions, Landlord shall
promptly notify Tenant of such event and, if ascertainable, its estimated
duration, and will proceed promptly and diligently with the fulfillment of its
obligations as soon as reasonably possible.
If, for any reason whatsoever, unless the result of the causes set forth in
numbers (1)-(6) of the first paragraph of this Section 25.01, or because of
failure of the public utility supplying electricity or heat to the Building to
supply such service: (a) all of the elevators in the banks of elevators which
service the floor or floors on which the demised premises are located be
inoperative for more than seven (7) consecutive business days so that to obtain
access to any floor of the demised premises it would be necessary to walk up or
down more than four flights of stairs (a flight of stairs shall consist of all
stairs in a
33
public stairway of the Building between one floor and the floor above or
below), unless elevators in a bank of elevators which service floors above or
below the floors upon which the demised premises are located are in operation
and if Tenant used same it would not be necessary to walk up or down more than
four flights of stairs, or (b) if the heating or air conditioning system which
services the demised premises be inoperative for a period of more than seven (7)
consecutive business days during the days when said system would normally be
operating to service the Building, so that Tenant and its employees cannot and
do not use, except on an emergency basis, part or all of the demised premises
for the purposes for which the premises are leased, Tenant shall be entitled to
an abatement of rent for each day after said seven (7) day period for such
portion of the demised premises which is inaccessible or which cannot be used as
above set forth.
ARTICLE 26
NOTICES
26.01. Any notice or demand, consent, approval or disapproval required to
be given by the terms and provisions of this Lease, or by any law or
governmental regulation, either by Landlord to Tenant or by Tenant to Landlord,
shall be in writing. Unless otherwise required by such law or regulation such
notice or demand shall be given, and shall be deemed to have been served and
given by Landlord and received by Tenant, when Tenant shall have received or
refused to accept such notice or demand, provided it has been sent by
registered or certified mail enclosed in a securely closed post-paid wrapper, in
a United States Government general or branch post office, or official depository
with the exclusive care and custody thereof, addressed to Tenant, at the address
set forth after Tenant's name on page 1 of this Lease, with a copy of any
default notice or notice of a change or addition to the Rules and Regulations
hereunder to Tenant at 500 Campus Drive, Morganville, New Jersey 07751,
Attention: General Counsel (provided that the failure to send or receive such
copy shall not affect the validity or effectiveness of such notice). After
Tenant shall occupy the demised premises, the address of Tenant for notices,
demands, consents, approvals or disapprovals shall be One Penn Plaza, New York,
N.Y., 10119. Such notice, demand, consent, approval or disapproval shall be
given, and shall be deemed to have been served and given by Tenant and received
by Landlord, when Landlord shall have received or refused to accept such notice
or demand, provided it has been sent by registered or certified mail enclosed in
a securely closed postpaid wrapper, in a United States Government general or
branch post office or, official depository with the exclusive care and custody
thereof, addressed to Landlord at 60 East 42nd Street, New York, N.Y. 10165.
Either party may, by notice as aforesaid, designate a different address or
addresses for notices, demands, consents, approvals or disapprovals.
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ARTICLE 27
SERVICES
27.01. Landlord shall provide necessary elevator facilities on business
days from 8:00 A.M. to 6:00 P.M. and shall have sufficient elevators available
at all other times. At Landlord's option, the elevators shall be operated by
automatic control or by manual control, or by a combination of both of such
methods.
27.02. Landlord shall cause the space in the demised premises other than
any space used for the preparation or consumption of food or for storage to be
kept clean in accordance with the standards set forth in Exhibit C attached
hereto and made a part hereof entitled "Cleaning Schedule".
27.03. (a) Landlord shall, through the air conditioning system of the
Building, furnish to the demised premises, on an all year round basis, air
conditioning, ventilation and heating during the hours from 8:00 A.M. to 6:00
P.M. on business days. Provided Tenant shall comply with Building Regulations,
the air conditioning system will be designed to provide summer interior
conditions of 78 degrees Fahrenheit when outside conditions are 95 degrees
Fahrenheit and winter interior conditions of 68 degrees Fahrenheit with
outside conditions of 10 degrees Fahrenheit.
(b) Landlord will maintain the air conditioning system in a manner
befitting a first class building and will use all reasonable care to keep the
same in proper and efficient operating condition. Tenant acknowledges that it
has been advised that the conditions herein before described cannot be
maintained in the event of the occupancy of the demised premises by more than an
average of one person for each 100 square feet of usable area or if Tenant
installs and operates lighting, machines and appliances the total connected
electrical load of which exceeds 4-1/2 watts per square foot of usable area.
(c) Tenant agrees to keep and cause to be kept closed all the
windows in and the exterior doors to the demised premises at all times, and
Tenant agrees to cooperate fully with Landlord and to abide by all the
regulations and requirements which Landlord may reasonably prescribe for the
proper functioning and protection of said air conditioning system.
(d) The Tenant acknowledges it has been advised that the Building
has sealed windows and that, therefore, the air in the
35
demised premises can become stale and even unbreathable when the ventilating,
air-conditioning, and heating system is not operating. Tenant agrees that
Landlord shall not be obligated to operate such ventilating, air-conditioning,
and heating system after or before regular business hours as set forth in
Section 27.03(a) except after prior written notice from and payment by Tenant as
hereinafter specified. Tenant agrees that Landlord's failure to operate such
system in the absence of such notice and payment shall not be deemed a partial
or other eviction, or disturbance of Tenant's use, enjoyment, or possession of
the premises, and shall not render Landlord liable for damages, by abatement of
rent or otherwise, and Tenant shall not be relieved from any obligation under
this Lease. Landlord will provide Tenant with ventilation, air-conditioning, or
heating at times other than during regular business hours, at the hourly rate
hereinafter set forth, provided that Tenant shall give written notice prior to
1:00 P.M. in the case of such service on business days and prior to 1:00 PM. on
Fridays in the case of such service on Saturdays and Sundays (or 3:00 P.M. on
the preceding business day, in the case of holidays). The hourly rate for such
ventilating, air-conditioning, or heating service shall be the Landlord's actual
operating cost per hour plus 10%.
27.04. (a) Landlord shall furnish to Tenant the electric energy which
Tenant requires in the demised premises on a "rent inclusion" basis. There shall
be no charge to Tenant therefor by way of measuring the same on any meter or
otherwise, electric current being included as an additional service in the fixed
annual rent payable hereunder. Landlord shall not in anywise be liable or
responsible to Tenant for any loss or damage or expense which Tenant may sustain
or incur if either the quantity or character of electric service is changed or
is no longer available or suitable for Tenant's requirements, unless such change
is caused by the willful or negligent act of Landlord.
(b) If and so long as Landlord provides electricity to the demised premises
on a rent inclusion basis, Tenant agrees that the fixed annual rent shall be
increased by the amount of the Electricity Rent Inclusion Factor (the "ERIF"),
as hereinafter defined, to compensate Landlord as hereinafter provided, for its
obtaining and making available to Tenant the redistribution of electric current
as an additional service, through the presently installed electrical facilities,
for Tenant's reasonable use of ordinary lighting and light office equipment,
during ordinary business hours. The "Electricity Rent Inclusion Factor" shall
36
mean the amount determined by applying the estimated connected electrical load
of Tenant, which shall be deemed to be the demand (KW), and hours of use
thereof, which shall be deemed to be the energy (KWH), as determined by the
electrical consultant as hereinafter provided to the rate charged for such load
and energy usage in the SC-4, Rate I Service Classification in effect on May 1,
1994 (and not the time-of-day rate schedule, if any), as increased or decreased
by all electricity cost changes of Landlord since May 1, 1994 as hereinafter
provided.
The parties acknowledge that the fixed annual rent hereinabove set forth has
not yet been, but is to be, increased by the ERIF. Tenant, therefore, agrees to
have the fixed annual rent hereinabove set forth so increased by an ERIF of
$3.2l per rentable square foot, to be paid in equal monthly installments, in
advance, from the date when Landlord commenced to furnish electricity to Tenant
on a rent inclusion basis.
If the cost to Landlord of electricity shall have been, or shall be, increased
or decreased subsequent to May 1, 1994 (whether such change occurs prior to or
during the term of this Lease), by change in Landlord's electric rates or
service classifications, or by any increase, subsequent to the last such
electric rate or service classification change, in fuel adjustments or charges
of any kind, or by taxes, imposed on Landlord's electricity purchases, or on
Landlord's electricity redistribution, or for any other such reason, then the
aforesaid ERIF portion of the fixed annual rent shall be changed in the same
percentage as any such change in cost due to changes in electric rates or
service classifications, and, also, Tenant's payment obligation, for electricity
redistribution, shall change from time to time so as to reflect any such
increase in fuel adjustments or charges, and such taxes.
Any such percentage change in Landlord's cost due to change in Landlord's
electric rates or service classifications, shall be computed on the basis of the
average consumption of electricity for the Building for the twelve full months
immediately prior to the rate change or other such change in cost, energy and
demand, and any changed methods of or rules on billing for same, applied on a
consistent basis to the new electric rate or service classification and to the
immediately prior existing electric rate or service classification. The parties
acknowledge that they understand that it is anticipated that electric rates,
charges, etc., may be changed by virtue of time-of-day rates or other methods of
billing, and that the foregoing reference to changes in methods of or rules on
billing is intended to include any such change.
37
The parties agree that a reputable, independent electrical consultant firm,
selected by Landlord ("Landlord's consultant"), may from time to time make
surveys in the demised premises covering the electrical equipment and fixtures
and use of current therein. If such survey shall disclose a change in Tenant's
connected electrical load or hours of energy use, then the connected electrical
load and energy usage portion of the ERIF shall be changed in accordance with
such survey, and the ERIF redetermined, accordingly, by Landlord's consultant.
The fixed annual rent shall be appropriately adjusted effective as of the date
of any such change in connected load and/or energy usage, as disclosed by said
survey. In no event, whether because of surveys, rate changes or for any other
reason, is such originally specified $3.21per square foot ERIF portion of the
fixed annual rent (plus any net increase thereof, but not decrease, by virtue of
all electricity rate or service classification changes of Landlord subsequent to
May 1, 1994) to be reduced.
The determination of changes in the ERIF by Landlord's consultant shall be
binding and conclusive on Landlord and on Tenant unless within fifteen (15) days
after the delivery of copies of such determination to Landlord and Tenant,
either Landlord or Tenant disputes such determination by written notice to the
other. If either party disputes the determination, it shall, at its own expense,
within forty five (45) days after advising the other of such dispute, obtain
from a reputable independent electrical consultant its own survey of Tenant's
electrical lighting and power load and hours of energy use, and a determination
of such change in the ERIF in accordance with the provisions of this Article.
Tenant's consultant and Landlord's consultant then shall seek to agree on a
finding of such determination of such change in the ERIF. If they cannot agree,
they shall choose a third reputable electrical consultant whose cost shall be
shared equally by Landlord and Tenant, to make a similar survey, and the
determination of such ERIF change by such third electrical consultant shall be
controlling. (If they cannot agree on such third consultant, within ten (10)
days, then either party may apply to the Supreme Court in the County of New York
for the appointment of such third consultant.) However, pending such
determination, Tenant shall pay to Landlord the amount of ERIF as determined by
Landlord's consultant; provided, however, if the amount of ERIF determined as
aforesaid is different from that determined by Landlord's consultant, then
Landlord and Tenant shall make adjustment for any deficiency owed by Tenant or
overage paid by Tenant pursuant to the determination of Landlord's consultant.
38
(c) Landlord reserves the right to discontinue furnishing electric
energy to Tenant at any time upon sixty (60) days' written notice to Tenant, and
from and after the effective date of such termination, Landlord shall no longer
be obligated to furnish Tenant with electric energy, provided, however, that
such termination date may be extended for a time reasonably necessary for Tenant
to make arrangements to obtain electric service directly from the public utility
company servicing the Building. If Landlord exercises such right of termination,
this Lease shall remain unaffected thereby and shall continue in full force and
effect; and thereafter Tenant shall diligently arrange to obtain electric
service directly from the public utility company servicing the Building, and may
utilize the then existing electric feeders, risers and wiring serving the
demised premises to the extent available and safely capable of being used for
such purpose and only to the extent of Tenant's then authorized connected load.
Landlord shall be obligated to pay no part of any cost required for Tenant's
direct electric service. Commencing with the date when Tenant receives such
direct service and as long as Tenant shall continue to receive such service, the
fixed annual rental rate payable under this Lease shall be reduced by the amount
of the ERIF portion thereof which was payable hereunder immediately prior to the
date when Tenant received such direct service.
(d) Tenant agrees that at all times its use of electric current shall
not exceed the capacity of existing feeders to the Building or the risers or
wiring installation. Tenant agrees not to connect any additional electrical
equipment of any type to the Building electric distribution system, other than
typewriters, lamps and small office machines which consume comparable amounts of
electricity, without Landlord's prior written consent, which consent shall not
be unreasonably withheld. Any additional risers, feeders, or other equipment
proper or necessary to supply Tenant's electrical requirements, upon written
request of Tenant, will be installed by Landlord, at the sole cost and expense
of Tenant, if, in Landlord's judgment, the same are necessary and will not cause
permanent damage or injury to the Building or the demised premises or cause or
create a dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other tenants or
occupants.
(e) Supplementing Section 36.03 hereof, if all or part of the ERIF
payable in accordance with subdivision (b) of this Section 27.04 becomes
uncollectible or reduced or refunded by virtue of any law, order or regulation,
the parties agree that, at Landlord's option, in lieu of the ERIF, and in
consideration of Tenant's use of the building's electrical distribution system
and receipt of redistributed electricity and payment by Landlord of consultants'
fees and other
39
redistribution costs, the fixed annual rental rate(s) to be paid under this
Lease shall be increased by an "alternative charge" which shall be a sum equal
to $3.21 per year per rentable sq. ft. of the demised premises, changed in the
same percentage as any increases in the cost to Landlord for electricity for the
entire building subsequent to May 1, 1994, because of rate changes, such
percentage change to be computed as in subdivision (b) of this Section 27.04
provided.
(f) Anything hereinabove to the contrary notwithstanding, in no event is
the ERIF or any "alternate charge" to be less than an amount equal to the total
of Landlord's payment to the public utility for the electricity consumed by
Tenant (and any taxes thereon or on redistribution of same) plus 5% thereof for
transmission line loss, plus 15% thereof for other redistribution costs.
27.05. Subject to the provisions of Section 25.01, Landlord reserves the
right to stop services on the air conditioning, elevator, plumbing and electric
systems when necessary by reason of accident or emergency or for repairs,
alterations, replacements or improvements, provided that except in case of
emergency, Landlord will notify Tenant in advance, if possible, of any such
stoppage and, if ascertainable, its estimated duration, and will proceed
diligently with the work necessary to resume such service as promptly as
possible and in a manner so as to minimize interference with the Tenant's use
and enjoyment of the demised premises.
27.06. Landlord will supply Tenant with an adequate quantity of hot and
cold water for lavatory, cleaning, and drinking purposes. If Tenant requires
water for any additional purpose, Tenant shall pay the cost thereof at the cost
to Landlord as the same is measured by a meter to be installed and maintained at
Tenant's expense.
27.07. In the event Tenant shall employ any contractor to do in the demised
premises any work permitted by Section 3.01 of this Lease, such contractor and
any subcontractor shall agree to employ only such labor as will not result in
jurisdictional disputes or strikes. Tenant will inform Landlord in writing of
the names of any contractor or subcontractor Tenant proposes to use in the
demised premises at least five (5) days prior to the beginning of work by such
contractor or subcontractor.
27.08. If Tenant is permitted hereunder to and does have a separate area
for the preparation or consumption of food in the demised premises, Tenant shall
pay to Landlord the cost of removal from the Building of any refuse or rubbish
from such area and the cost of employing on a regular basis, an exterminator to
keep the demised premises free from vermin; and Tenant shall provide a
refrigerated garbage storage room, the plans and specifications thereof to be
40
approved by Landlord, or other means of disposing of garbage reasonably
satisfactory to Landlord's architects.
27.09. It is expressly agreed that only Landlord or any one or more
persons, firms or corporations authorized in writing by Landlord will be
permitted to furnish: laundry, linen, towels, drinking water, ice and other
similar supplies and services to tenants and licensees in the Building.
Landlord may fix, in its own absolute discretion, at any time and from time
to time, the hours during which and regulations under which such supplies and
services are to be furnished. Landlord expressly reserves the right to act as or
to designate, at any time and from time to time, an exclusive supplier of all or
any one or more of the said supplies and services, provided that the quality
thereof and the charges therefor are reasonably comparable to that of other
suppliers; and Landlord furthermore expressly reserves the right to exclude from
the Building any person, firm or corporation attempting to furnish any of said
supplies or services but not so designated by Landlord.
27.10. It is expressly agreed that only Landlord or any one or more
persons, firms or corporations authorized in writing by Landlord will be
permitted to sell, deliver or furnish any food or beverages whatsoever for
consumption within the demised premises or elsewhere in the Building. Landlord
expressly reserves the right to act as or to designate at any time, or from time
to time, an exclusive supplier or suppliers of such food and beverages; and
Landlord further expressly reserves the right to exclude from the Building any
person, firm or corporation attempting to deliver or purvey any such food or
beverages but not so designated by Landlord. It is understood, however, that
Tenant or regular office employees of Tenant who are not employed by any
supplier of such food or beverages or by any person, firm or corporation engaged
in the business of purveying such food or beverages, may personally bring food
or beverages into the Building for consumption within the demised premises by
the said Tenant or employees of Tenant, but not for resale to or for consumption
by any other tenant, or the employees or guests of any other tenant. Landlord
may fix in its absolute discretion, at any time and from time to time, the hours
during which, and the regulations under which food and beverages may be brought
into the Building by Tenant or its regular employees.
27.11. Tenant acknowledges that it has been advised that the cleaning
contractor for the Building may be a division or affiliate of
41
Landlord. Tenant agrees to employ such contractor or such other office
maintenance contractor as Landlord may from time to time designate, for all
waxing, polishing, lamp replacement, cleaning and maintenance work of or in the
demised premises, and Tenant's furniture, fixtures and equipment, provided that
the quality thereof and the charges therefor are reasonably comparable to that
of other contractors or individuals. Tenant shall not employ any other such
contractor or individual without Landlord's prior written consent, but nothing
herein contained shall prohibit Tenant from performing such work for itself by
use of its own regular employees.
27.12. Landlord will not be required to furnish any other services, except
as provided in this Article 27, and except that Landlord agrees to provide on
business days (not including Saturdays, Sundays and holidays) the cleaning set
forth in Exhibit C hereof. Tenant shall pay to Landlord, on demand, a reasonable
charge for the removal from the demised premises of any refuse and rubbish of
Tenant as shall not be contained in the waste receptacles described in Exhibit
C. Landlord, its cleaning contractor and their employees shall have after-hours
access to the demised premises and the use of tenant's light, power and water in
the demised premises as may be reasonably required for the purpose of cleaning
the demised premises.
27.13. If Tenant contests the reasonableness of any charges made by any
supplier or contractor designated by Landlord as set forth in any section of
this Article 27, Landlord and Tenant shall each obtain two bona fide bids for
such work from independent reputable contractors, and not controlled directly or
indirectly by Landlord or affiliated with Landlord or Landlord's Managing Agent,
or by or with Tenant, and the average of the four bids thus obtained shall be
the standard of comparison in determining the reasonableness of such charges. If
the supplier or contractor designated by Landlord is unwilling to accept the
average of such bids as full payment for its suppliers or services, Landlord may
substitute another supplier or contractor who will accept such average as full
payment, or if Landlord fails to make such substitution within fifteen (15) days
after the ascertainment of the average of the bids, Tenant shall be free to make
its own arrangements for such work or supplies for the remainder of the term.
27.14. Landlord shall manage and maintain the Building as a first class
office building. Tenant and its employees shall occupy and use the demised
premises in a manner befitting such building.
42
ARTICLE 30
CONDITION OF PREMISES
30.01. Tenant expressly acknowledges that it has inspected the demised
premises and is fully familiar with the physical condition thereof. Tenant
agrees to accept the demised premises in its "as is" condition. Tenant
acknowledges that Landlord shall have no obligation to do any work in and to the
demised premises in order to make them suitable and ready for occupancy and use
by Tenant. (SEE RIDER ARTICLE 46 ATTACHED)
48
ARTICLE 31
ARBITRATION
31.01. In each case specified in this Lease in which resort to arbitration
shall be required, such arbitration (unless otherwise specifically provided in
other Sections of this Lease) shall be in New York City in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and the
provisions of this Lease, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
ARTICLE 32
INDEMNITY
32.01. Subject to Section 7.05 hereof, Tenant shall indemnify and save
Landlord harmless from and against any liability or expense caused by the use or
occupation of the demised premises by Tenant or anyone on the premises with
Tenant's permission, or from any breach of this Lease.
ARTICLE 33
Vault AND BASEMENT SPACE
33.01. Landlord shall have the right from time to time, to substitute for
the basement space, if any, then occupied by Tenant, comparable space in the
basement, provided Landlord shall give at least thirty (30) days' prior written
notice to Tenant of its intention so to do. No vault or basement space not
within the property line of the Building is leased hereunder, anything to the
contrary indicated elsewhere in this Lease notwithstanding. Any vault or
basement space not within the property line of the Building, which Tenant may be
permitted to use or occupy, shall be used or occupied under revocable license
and if the amount of such space be diminished or required by any governmental
authority having jurisdiction, Landlord shall not be subject to any liability
nor shall Tenant be entitled to abatement of rent, nor shall such diminution or
abatement be deemed a constructive or actual eviction. Any fee or license charge
or tax of municipal authorities for such vault or basement space shall be paid
by Tenant to Landlord as additional rent within five (5) days after written
demand therefor. If such fee, tax or charge shall be for vault or basement space
greater in area than that occupied by Tenant, the charge to Tenant shall be
pro-rated.
49
ARTICLE 34
OCCUPANCY AND USE BY TENANT
34.01. (a) Tenant acknowledges that its continued occupancy of the demised
premises, and the regular conduct of its business therein, are of utmost
importance to the Landlord in the renewal of other leases in the building, in
the renting of vacant space in the building, in the providing of electricity,
air conditioning, steam and other services to the tenants in the building, and
in the maintenance of the character and quality of the tenants in the building.
Tenant therefore covenants and agrees that it will occupy the entire demised
premises, and will conduct its business therein in the regular and usual manner,
throughout the term of this Lease. Tenant acknowledges that Landlord is
executing this Lease in reliance upon these covenants and that these covenants
are a material element of consideration inducing the Landlord to execute this
Lease. Tenant further agrees that if it vacates the demised premises or fails to
so conduct its business therein, at any time during the term of this Lease,
without the prior written consent of the Landlord, then all rent and additional
rent reserved in this Lease from the date of such breach to the expiration date
of this Lease shall become immediately due and payable to Landlord.
(b) The parties recognize and agree that the damage to Landlord
resulting from any breach of the covenants in subdivision (a) hereof will be
extremely substantial, will be far greater than the rent payable for the balance
of the term of this Lease, and will be impossible of accurate measurement. The
parties, therefore, agree that in the event of a breach or threatened breach of
the said covenants, in addition to all of Landlord's other rights and remedies,
at law or in equity or otherwise, Landlord shall have the right of injunction to
preserve Tenant's occupancy and use. The words "become vacant or deserted" as
used elsewhere in this Lease shall include Tenant's failure to occupy or use as
by this Article required.
(c) If Tenant breaches either of the covenants in subdivision (a)
above, and this Lease be terminated because of such default, then, in addition
to Landlord's rights of re-entry, restoration, preparation for and rerental, and
anything elsewhere in this Lease to the contrary notwithstanding, Landlord shall
retain its right to judgment on and collection of Tenant's aforesaid obligation
to make a single payment to Landlord of a sum equal to the total of all rent and
additional rent reserved for the remainder of the original term of
50
this Lease, subject to future credit or repayment to Tenant in the event of any
reorienting of the premises by Landlord, after first deducting from rerental
income all expenses incurred by Landlord in reducing to judgment or otherwise
collecting Tenant's aforesaid obligation, and in obtaining possession of,
restoring, preparing for and re-letting the premises. In no event shall tenant
be entitled to a credit or repayment for rerental income which exceeds the sums
payable by Tenant hereunder or which covers a period after the original term of
this Lease.
ARTICLE 35
NAME OF BUILDING
35.01. Landlord shall have the full right at any time to name and change
the name of the Building and to change the designated address of the Building.
The Building may be named after any person, firm, or otherwise, whether or not
such name is, or resembles, the name of a tenant of the Building.
ARTICLE 36
INVALIDITY OF ANY PROVISION, ETC.
36.01. If any term, covenant, condition or provision of this Lease or the
application thereof to any circumstance or to any person, firm or corporation
shall be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions and provisions of this Lease or the application thereof to any
circumstances or to any person, firm or corporation other than those as to which
any term, covenant, condition or provision is held invalid or unenforceable,
shall not be affected thereby and each remaining term, covenant, condition and
provision of this Lease shall be valid and shall be enforceable to the fullest
extent permitted by law.
36.02. If any term, covenant, condition or provision of this Lease is found
invalid or unenforceable to any extent, by a final judgment or award which shall
not be subject to change by any appeal, then either party to this Lease may
initiate an arbitration in accordance with the provisions of Article 31, which
arbitration shall be by three (3) arbitrators each of whom shall have at least
ten (10) years' experience in the supervision of the operation and management of
major office buildings in Manhattan. Said arbitrators shall devise a valid and
enforceable substitute term, covenant, condition or provision
51
for this Lease which shall as nearly as possible carry out the intention of the
parties with respect to the terms, covenant, condition or provisions theretofore
found invalid or unenforceable. Such substitute term, covenant, condition or
provision, as determined by the arbitrators, shall thereupon be deemed a part of
this Lease.
36.03. In the event the fixed annual rent or additional rent or any part
thereof provided to be paid by Tenant under the provisions of this Lease during
the demised term shall become uncollectible or shall be reduced or required to
be reduced or refunded by virtue of any Federal, State, County or City law,
order or regulation, or by any direction of a public officer or body pursuant to
law, or the orders, rules, code or regulations of any organization or entity
formed pursuant to law, whether such organization or entity be public or
private, then Landlord, at its option, may at any time thereafter terminate this
Lease, by not less than thirty (30) days' written notice to Tenant, on a date
set forth in said notice, in which event this Lease and the term hereof shall
terminate and come to an end on the date fixed in said notice as if the said
date were the date originally fixed herein for the termination of the demised
term. Landlord shall not have the right so to terminate this Lease if Tenant
within such period of thirty (30) days shall in writing lawfully agree that the
rentals herein reserved are a reasonable rental and agree to continue to pay
said rentals, and if such agreement by Tenant shall then be legally enforceable
by Landlord.
ARTICLE 37
CAPTIONS
37.01. The captions are inserted only as a matter of convenience and for
reference, and in no way define, limit or describe the scope of this Lease nor
the intent of any provision thereof.
ARTICLE 38
CERTIFICATE OF TENANT
38.01. Tenant shall, without charge, at any time and from time to time,
within ten (10) days after request by Landlord, deliver a written instrument to
Landlord or any other person, firm or corporation specified by Landlord, duly
executed and acknowledged, certifying:
(a) That this Lease is unmodified and in full force and effect or, if there
has been any modification, that the same is in full force and effect as modified
and stating any such modification;
52
(b) Whether or not there are then existing any setoffs or defenses against
the enforcement of any of the agreements, terms, covenants, or conditions of
this Lease and any modification thereof upon the part of Tenant to be performed
or complied with, and, if so, specifying the same;
(c) The dates to which the basic rent, and additional rent, and other charges
hereunder, have been paid; and
(d) Whether the term of this Lease has commenced and rent become payable
thereunder; and whether Tenant has accepted possession of the demised premises;
and whether Landlord has substantially completed its required work under Article
30 hereof.
38.02. Tenant agrees that, except for the first month's rent hereunder, it
will pay no rent under this Lease more than thirty (30) days in advance of its
due date, and, in the event of any act or omission by Landlord, Tenant will not
exercise any right to terminate this Lease or to remedy the default and deduct
the cost thereof from rent due hereunder until Tenant shall have given written
notice of such act or omission to the Ground Lessor and to the holder of any
first mortgage on the Ground Lease who shall have furnished such holder's last
address to Tenant, and until a reasonable time for remedying such act or
omission shall have elapsed following the giving of such notices, during which
time such Lessor or holder shall have the right, but shall not be obligated, to
remedy or cause to be remedied such act or omission.
38.03. Anything in this Lease contained to the contrary notwithstanding,
under no circumstances shall the holder of any first mortgage on the Ground
Lease or, if the interests of Landlord under this Lease are transferred by
reason of, or assigned in lieu of, foreclosure or other proceedings for
enforcement of such mortgage, or if the holder of such mortgage acquires a lease
in substitution therefor, then such purchaser, assignee, or lessee, as the case
may be, whether or not it shall have succeeded to the interests of the landlord
under this Lease, be subject to or liable for any offsets or deductions from
rent, claims or defenses which the Tenant might have against any prior landlord
under this lease.
53
ARTICLE 39
SECURITY DEPOSIT
39.01. Tenant has deposited with Landlord the sum of $69,925.66 as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this Lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions of and conditions of this Lease,
including, but not limited to, the payment of rent and additional rent, Landlord
may (but shall not be required to) use, apply or retain the whole or any part of
the security so deposited to the extent required for the payment of any rent and
additional rent or any other sum as to which Tenant is in default or for any sum
which Landlord may expend or may be required to expend by reason of Tenant's
default in respect of any of the terms, covenants and conditions of this Lease,
including but not limited to, any damages or deficiency in the reletting of the
premises, whether such damages or deficiency accrued before or after summary
proceedings or other re-entry by Landlord. Tenant shall, upon demand, deposit
with Landlord the full amount of security deposit so used or applied by
Landlord, in order that Landlord shall have the full security deposit on hand at
all times during the term of this Lease. In the event that Tenant shall fully
and faithfully comply with all of the terms, provisions, covenants and
conditions of this Lease, the security shall be returned to Tenant after the
date fixed as the end of the Lease and after delivery of entire possession of
the demised premises to Landlord. In the event of a sale of the land and
building or leasing of the building, of which the demised premises form a part,
Landlord shall have the right to transfer the security to the vendee or lessee
and Landlord shall thereupon be released by Tenant from all liability for the
return of such security: and Tenant agrees to look to the new Landlord solely
for the return of said security; and it is agreed that the provisions hereof
shall apply to every transfer or assignment made of the security to a new
Landlord. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and that
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
54
ARTICLE 40
BROKER
40.01. Tenant represents and warrants that it neither consulted nor
negotiated with any broker or finder with regard to the demised premises other
than Koll Leasing Services and Helmsley-Spear, Inc.
Tenant agrees to indemnify, defend and save Landlord harmless from and against
any claims for fees or commissions from anyone other than Koll Leasing Services
and Helmsley-Spear, Inc.
with whom Tenant has dealt in connection with the demised premises or this
Lease. Landlord agrees to pay any commission or fee owing to the aforesaid Koll
Leasing Services and Helmsley-Spear, Inc.
ARTICLE 41
POSSESSION
41.01. Supplementing Articles 25 and 30 hereof, if Landlord shall be unable
to give possession of the premises on the commencement date of the term of this
Lease, because of the holding-over or retention of possession of any tenant or
occupant, or for any other reason, Landlord shall not be subject to any
liability for such failure. In such event, this Lease shall stay in full force
and effect, without extension of its term. However, the rent hereunder shall not
commence until the premises are made available for occupancy by Tenant (with the
substantial completion in the premises of any work required by this Lease to be
completed therein by Landlord at Landlord's expense prior to the commencement
date of the term of this Lease). If Landlord is unable to give possession of the
premises on the commencement date of the term, because changes, repairs or
decorations being made for Tenant's use at Tenant's expense have not been
completed, there shall be no abatement of rent and the rent shall commence on
the date specified herein. If permission is given to Tenant to occupy the
premises, or other premises, prior to the commencement date of the term, such
occupancy shall be deemed to be pursuant to the terms of this Lease, except that
the parties shall separately agree as to the obligation of Tenant to pay rent
for such occupancy. The provisions of this Article are intended to constitute an
"express provision to the contrary" within the meaning of Section 223-a of the
New York Real Property Law.
55
ARTICLE 42
SUBMISSION OF LEASE
42.01. It is understood and agreed that this Lease is submitted to Tenant
on the understanding that it shall not be considered an offer and shall not bind
Landlord in any way until (i) Tenant has duly executed and delivered duplicate
originals to Landlord and (ii) Landlord has executed and delivered one of said
originals to Tenant.
ARTICLE 43
MEMORANDUM OF LEASE
43.01. This lease shall not be recorded without the prior written consent
of Landlord. At the request of either party, Landlord and Tenant shall promptly
execute, acknowledge and deliver a memorandum with respect to this Lease
sufficient for recording. Such memorandum shall not in any circumstances be
deemed to change or otherwise affect any of the obligations or provisions of
this Lease.
ARTICLE 44
SUCCESSORS AND ASSIGNS
44.01. The covenants, conditions and agreements contained in this Lease
shall bind and inure to the benefit of Landlord and Tenant and their respective
heirs, distributees, executors, administrators, successors, and, except as
otherwise provided in this Lease, their assigns.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
SEE RIDERS ANNEXED HERETO AND MADE A PART HEREOF
MID-CITY ASSOCIATES
BY: HELMSLEY-SPEAR, INC., Agent
Witness: (as to Landlord) (Landlord)
s/s By: s/s
----------------------- -----------------------------
HELMSLEY-SPEAR, INC. AS AGENT
DANIEL E. NORTH
VICE PRESIDENT
NEW HORIZONS COMPUTER LEARNING CENTER OF
METROPOLITAN NEW YORK, INC.
(Tenant)
Attest: (as to Tenant)
Gary T. Gann By: John T. St. James s/s
--------------------- ----------------------------
Gary T. Gann John T. St. James
Secretary Treasurer
Tenant's Federal I.D. Number 13-3806313
56
STATE OF NEW YORK )
) ss: (Landlord)
COUNTY OF NEW YORK )
On the ------ day of -------------, 19---, before me personally came ------
------------------------, residing at ------------------ ------------------, to
me known and known to me to be a member of MID-CITY ASSOCIATES, a general
co-partnership and the person described in and who executed the fore-going
instrument in the name of MID-CITY ASSOCIATES and he duly acknowledged to me
that he executed the same as and for the act and deed of MID-CITY ASSOCIATES.
------------------------------
(Notary Public)
STATE OF NEW YORK )
) ss: (Landlord)
COUNTY OF NEW YORK )
On the ------- day of ---------, 19----, before me personally came --------
----------------------------, to me know, who being by me duly sworn, did depose
and say that he resides at ---------------------- ----------------------, that
he is the ------------------------------- of HELMSLEY-SPEAR, INC., a New York
corporation mentioned in, and which executed the foregoing instrument; and that
he singed his name thereto by order of the Board of Directors of said
corporation.
-----------------------------
(Notary Public)
57
STATE OF NEW YORK )
) ss: (Corporate Tenant)
COUNTY OF NEW JERSEY)
On the 17 day of March, 1995, before me personally came John T. St. James,
to me known, who being by me duly sworn, did depose and say that he resides at
500 Campus Drive, Morganville, New Jersey, that he is the Treasurer of New
Horizons Computer Learning Center of Metropolitan New York, Inc. a Delaware
corporation, the corporation mentioned in, and which executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
Clara Lauro s/s
-------------------------------
(Notary Public)
Clara A. Lauro
Notary Public of New Jersey
My Commission Expires August 22, 1995
STATE OF NEW YORK )
) ss: (Partnership Tenant)
COUNTY OF NEW YORK )
On the ------ day of ------------------, 19------, before me personally
came ---------------------, residing at ----------------- -------------, to me
known and known to me to be a member of ----------------------------- a --------
----------------------------- co-partnership and the person described in and who
executed the foregoing instrument in the name of -----------------------------
and he duly acknowledged to me that he executed the same as and for the act and
deed of -----------------------------------.
---------------------------
(Notary Public)
58
STATE OF NEW YORK )
) ss: (Individual Tenant)
COUNTY OF NEW YORK )
On the -------- day of ------------, 19-----, before me personally came ---
------------------, to me known and known to me to be the individual described
in, and who executed the foregoing instrument, and acknowledged to me that he
executed the same.
---------------------------
(Notary Public)
59
EXHIBIT A
The plan(s) or diagram(s) comprising this Exhibit are attached hereto at
the back cover of this Lease.
60
EXHIBIT B
RULES AND REGULATIONS
1. The sidewalks, and public portions of the Building, such as entrances,
passages, courts, elevators, vestibules, stairways, corridors or halls
shall not be obstructed or encumbered by any tenant or used for any purpose
other than ingress and egress to and from the demised premises.
2. No awnings or other projections shall be attached to the outside walls of the
Building. No curtains, blinds, shades, louvered openings or screens shall
be attached to or hung in, or used in connection with, any window or door
of the demised premises, without the prior written consent of Landlord,
unless installed by Landlord.
3. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any tenant on any part of the outside of
the demised premises or Building or on corridor walls. Signs on entrance
door or doors shall conform to building standard signs, samples of which
are on display in Landlord's rental office. Signs on doors shall, at the
tenant's expense, be inscribed, painted or affixed for each tenant by sign
makers approved by Landlord. In the event of the violation of the foregoing
by any tenant, Landlord may remove same without any liability, and may
charge the expense incurred by such removal to the tenant or tenants
violating this rule.
4. The sashes, sash doors, skylights, windows, heating, ventilating and air
conditioning vents and doors that reflect or admit light and air into the
halls, passageways or other public places in the Building shall not be
covered or obstructed by any tenant, nor shall any bottles, parcels, or
other articles be placed on the window sills.
5. No show cases or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the public halls,
corridors or vestibules without the prior written consent of Landlord.
6l
6. Whenever Tenant shall submit to Landlord any plan, agreement or other
document for Landlord's consent or approval, or review and acceptance,
Tenant agrees to pay Landlord as additional rent, on demand, a processing
fee in a sum equal to the reasonable fee of any architect, engineer or
attorney employed by Landlord to review said plan, agreement or document.
7. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the
Tenant who, or whose servants, employees, agents, visitors or licensees,
shall have caused the same.
8. No tenant shall in any way deface any part of the demised premises or the
Building of which they form a part. No tenant shall lay linoleum, or other
similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used, an interlining of builder's deadening felt
shall be first affixed to the floor, by a paste or other material, soluble
in water, the use of cement or other similar adhesive material being
expressly prohibited.
9. No bicycles, vehicles or animals of any kind shall be brought into or kept
in or about the premises. No cooking shall be done or permitted by any
Tenant on said premises except in conformity to law and then only in the
utility kitchen, if any, as set forth in Tenant's layout, which is to be
primarily used by Tenant's employees for heating beverages and light
snacks. No tenant shall cause or permit any unusual or objectionable odors
to be produced upon or permeate from the demised premises.
10. No space in the Building shall be used for manufacturing, distribution, or
for the storage of merchandise or for the sale of merchandise, goods or
property of any kind at auction.
11. No tenant shall make, or permit to be made, any unseemly or disturbing
noises or disturb or interfere with occupants of the Building or
neighboring buildings or premises or those having business with them,
whether by the use of any musical instrument,
62
radio, talking machine, unmusical noise, whistling, singing, or in any
other way. No tenant shall throw anything out of the doors, windows or
skylights or down the passageways.
12. No tenant, nor any of the tenant's servants, employees, agents, visitors or
licensees, shall at any time bring or keep upon the demised premises any
inflammable, combustible or explosive fluid, or chemical substance, other
than reasonable amounts of cleaning fluids and solvents required in the
normal operation of tenant's business offices.
13. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in existing
locks or the mechanism thereof, without the prior written approval of the
Landlord and unless and until a duplicate key is delivered to Landlord.
Each tenant must, upon the termination of his tenancy, restore to the
Landlord all keys of stores, offices and toilet rooms, either furnished to,
or otherwise procured by, such tenant, and in the event of the loss of any
keys, so furnished, such tenant shall pay to Landlord the cost thereof.
14. All removals, or the carrying in or out of any safes, freight, furniture or
bulky matter of any description, must take place during the hours and
pursuant to such procedures as Landlord or its agent may determine from
time to time. Landlord reserves the right to inspect all freight to be
brought into the Building and to exclude from the Building all freight
which violates any of these Rules and Regulations or the Lease of which
these Rules and Regulations are a part.
l5. No tenant shall occupy or permit any portion of the premises demised to it
to be occupied as an office for a public stenographer or typist, or for the
possession, storage, manufacture, or sale of liquor, narcotics, tobacco in
any form, or as a barber or manicure shop or as a public employment bureau
or agency, or for a public finance (personal loan) business. No tenant
shall engage or pay any employees on the demised premises, except those
actually working for such tenant on said premises, nor advertise for
laborers giving an address at said premises.
16. Landlord shall have the right to prohibit any advertising by any tenant,
mentioning the Building, which, in Landlord's reasonable opinion, tends to
impair the reputation of the Building or its
63
desirability as a building for offices, and upon written notice from
Landlord, tenants shall refrain from or discontinue such advertising.
17. Landlord reserves the right to exclude from the Building between the hours
of 6:00 P.M. and 8:00 A.M. and at all hours on Sundays and legal holidays
all persons who do not present a pass to the Building signed by a tenant.
Each tenant shall be responsible for all persons for whom such pass is
issued and shall be liable to Landlord for all acts of such persons.
18. At the option of Landlord, the Tenant agrees to purchase from Landlord or
its agents all lamps and bulbs used in the demised premises and to pay for
the cost of installation thereof.
19. The premises shall not be used for lodging or sleeping or for any immoral
or illegal purpose.
20. Tenant shall pay to Landlord the cost of an exterminator to keep the
demised premises free from vermin.
21. The requirements of tenants will be attended to only upon application at
the office of the Building. Building employees shall not perform any work
or do anything outside of their regular duties, unless under special
instructions from the office of Landlord.
22. Canvassing, soliciting and peddling in the Building are prohibited and each
tenant shall cooperate to prevent the same.
23. There shall not be used in any space, or the public halls of any building,
either by any tenant or by jobbers or others, in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and
side guards. No hand trucks shall be used in passenger elevators.
24. Tenants, in order to obtain maximum effectiveness of the cooling system,
shall lower and/or close Venetian or vertical blinds or drapes when the
sun's rays fall directly on windows of demised premises and shall permit
Landlord to install and maintain on the interior of said windows mylar or
other such insulating materials.
25. In order that the Building can and will maintain a uniform appearance to
those outside of same, each Tenant in building perimeter areas shall (a)
use only building standard lighting in
64
areas where lighting is visible from the outside of the Building and (b)
use only building standard venetian or vertical blinds in window areas
which are visible from the outside of the Building.
26. Replacement of ceiling tiles after they are removed for Tenant by telephone
company installers, in both the demised premises and the public corridors,
will be charged to Tenant on a per tile basis.
27. All paneling, grounds or other wood products not considered furniture shall
be of fire retardant materials. Before installation of any such materials,
certification of the materials' fire retardant characteristics shall be
submitted to Landlord, or its agents, in a manner satisfactory to the
Landlord.
Whenever the above rules conflict with any of the rights or obligations of
Tenant pursuant to the provisions of the Articles of this Lease, the provisions
of the Articles shall govern.
65
EXHIBIT C
CLEANING SCHEDULE
GENERAL
All linoleum, rubber, asphalt tile and other similar types of hard surfaced
flooring to be swept nightly, using approved dust-check type of mop.
All carpeting and rugs to be vacuum-cleaned nightly.
Hand dust and wipe clean all furniture, fixtures and window sills nightly;
wash sills when necessary.
Empty and clean nightly all waste receptacles of customary office size
Empty and clean all ash trays and screen all sand urns nightly.
Dust interior of all waste disposal cans and baskets nightly; damp-dust as
necessary.
Wash clean all water fountains and coolers nightly.
Dust all telephones as necessary.
Sweep all private stairway structures nightly.
LAVATORIES IN THE CORE
Sweep and wash all lavatory floors nightly using proper disinfectants. Wash
and polish all mirrors, powder shelves, bright work and enameled surfaces
in all lavatories nightly.
Wash and disinfect all basins, bowls and urinals throughout all lavatories,
nightly.
Wash all toilet seats, nightly.
Empty paper towel receptacles and transport waste paper to designated area
in basement, nightly.
Fill toilet tissue holders, towel receptacles and soap dispensers, nightly.
Empty sanitary disposal receptacles, nightly
Thoroughly wash and polish all wall tile and stall surface as often as
necessary.
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HIGH DUSTING
Do all high dusting quarterly which includes the following:
Dust all pictures, frames, charts, graphs and similar wall hangings not
reached in nightly cleaning.
Cleaning of light fixtures shall be for account of Tenant.
Hand dust all door and other ventilating louvres within reach, as
necessary.
GLASS
Exterior windows to be cleaned inside and outside as necessary, but at
least two times a year, weather permitting.
Interior glass doors and glass partitions to be cleaned when necessary.
RIDER ATTACHED TO AND FORMING
A PART OF LEASE BETWEEN
MID-CITY ASSOCIATES, LANDLORD
AND NEW HORIZONS COMPUTER LEARNING CENTER
OF METROPOLITAN NEW YORK, INC., TENANT
67
ARTICLE 45
TAX AND OPERATING EXPENSE ESCALATION
Tenant shall pay to Landlord, as additional rent, tax escalation and
operating expense escalation in accordance with this Article:
(a) Definitions: For the purpose of this Article, the following definitions
shall apply:
(i) The term "base year" as hereinafter set forth for the
determination of expense escalation, shall mean the calendar year 1995 .
(ii) The term "base tax year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the average of the New
York City real estate tax years commencing July 1, 1994 and ending June 30, 1995
and commencing July 1, 1995 and ending June 30, 1996 (i.e. "base tax year"
representing an amount of taxes).
(iii) The term "The Percentage" shall mean .6351 percent (.6351%) for
real estate tax escalation and shall mean .7018 percent (.7018%) for expense
escalation. The Percentage has been computed on the basis of a fraction, the
numerator of which is the rentable square foot area of the presently demised
premises and the denominator of which is the total rentable square foot area of
the office and commercial space in the building project (excluding garage
space), for tax escalation and the denominator of which is the total rentable
square foot area of the office space in the building project, for expense
escalation. The parties acknowledge and agree that the total rentable square
foot area of the presently demised premises shall be deemed to be 13,534
sq. ft., and that the rentable square foot area of the office and commercial
space in the building project shall be deemed to be 2,072,136 sq. ft. and that
of its office space shall be deemed to be 1,928,539 sq. ft.
(iv) The term "the building project" shall mean all of the land together
with the improvements in which Landlord has an interest below 33rd Street, in
Pennsylvania Station and below, on and above ground level in the block bounded
by 34th Street, 8th Avenue, 33rd Street, and 7th Avenue, exclusive of the
frontage 100 feet deep west of 7th Avenue and the frontage 52 feet 5-1/2 inches
deep east of 8th Avenue.
(v) The term "comparative year" for tax escalation shall mean the New
York City real estate tax year commencing July 1, 1995 and each subsequent
period of twelve (12) months; or such other period of twelve (12) months
occurring during the term of this Lease as hereafter may be duly adopted as the
fiscal year for real estate tax purposes by the City of New York for expense
68
escalation "comparative year" shall mean the twelve (12) months following the
base year and each subsequent period of twelve (12) months.
(vi) The term "real estate taxes" shall mean the total of all taxes and
special or other assessments levied, assessed or imposed at any time by any
governmental authority upon or against the building project, and also any tax or
assessment levied, assessed or imposed at any time by any governmental authority
in connection with the receipt of income or rents from said building project to
the extent that same shall be in lieu of all or a portion of any of the
aforesaid taxes or assessments, or additions or increases thereof, upon or
against said building project. If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason, a franchise,
income, transit, profit or other tax or governmental imposition, however
designated, shall be levied against Landlord in substitution in whole or in part
for the real estate taxes, or in lieu of additions to or increases of said real
estate taxes, then such franchise, income, transit, profit or other tax or
governmental imposition shall be deemed to be included within the definition of
"real estate taxes" for the purposes hereof. As to special assessments which are
payable over a period of time extending beyond the term of this Lease, only a
pro rata portion thereof, covering the portion of the term of this Lease
unexpired at the time of the imposition of such assessment, shall be included in
"real estate taxes". If, by law, any assessment may be paid in installments,
then, for the purposes hereof (a) such assessment shall be deemed to have been
payable in the maximum number of installments permitted by law and (b) there
shall be included in real estate taxes, for each comparative year in which such
installments may be paid, the installments of such assessment so becoming
payable during such comparative year, together with interest payable during such
comparative year.
(vii) Where a "transition assessment" is imposed by the City of New York
for any tax (fiscal) year, then the phrases "assessed value" and "assessments"
shall mean the transition assessment for that tax (fiscal) year.
(viii) The phrase "real estate taxes payable during the base tax year"
shall mean that amount obtained by multiplying the assessed value of the
building project for each of tax year 1994 /95 and tax year 1995 /96 by the
applicable tax rate for such year and then obtaining the average of the taxes
for such two tax years.
69
(ix) The term "Expenses" shall mean the total of all the costs and
expenses incurred or borne by Landlord with respect to the operation and
maintenance of the building project and the services provided tenants therein,
including, but not limited to, the costs and expenses incurred for and with
respect to: steam and any other fuel; water rates and sewer rents;
air-conditioning; ventilation and heating; cleaning, by contract or otherwise,
window washing (interior and exterior); elevators; escalators; porter and matron
service; Building electric current; i.e. Building electric current shall be
deemed to mean all electricity purchased for the Building except that which is
redistributed to tenants in the Building; the parties acknowledge and agree that
Forty percent (40%) of the Building's payment to the public utility for the
purchase of electricity shall be deemed to be payment for Building electric
current; protection and security; lobby decoration, repairs; association fees or
dues: maintenance; painting of non-tenant areas: replacements and improvements
which are appropriate for the continued operation of the building project; fire,
extended coverage, boiler and machinery, sprinkler, apparatus, public liability
and property damage, rental and plate glass insurance and any insurance required
by a mortgagee; management fees; supplies; wages, salaries, disability benefits,
pensions, hospitalization, retirement plans and group insurance respecting
employees of the Landlord up to and including the building manager; uniforms and
working clothes for such employees and the cleaning thereof; expenses imposed on
the Landlord pursuant to any law or to any collective bargaining agreement with
respect to such employees; workmen's compensation insurance, payroll, social
security, unemployment and other similar taxes with respect to such employees.
Provided, however, that the foregoing costs and expenses shall exclude or
have deducted from them, as the case may be and as shall be appropriate:
(a) leasing commissions
(b) Managing agents' fees or commissions in excess of the rates then
customarily charged for building management for buildings of like class and
character;
(c) executives' salaries above the grade of building manager;
(d) expenditures for capital improvements except those which under
generally applied real estate practice are expensed or regarded as deferred
expenses and except for capital expenditures
70
required by law, in either of which cases the cost thereof shall be included in
Expenses for the comparative year in which the costs are incurred and subsequent
comparative years, on a straight line basis, to the extent that such items are
amortized over an appropriate period, but not more than ten years, with an
interest factor equal to the prime rate of the Chemical Bank of New York at the
time of Landlord's having incurred said expenditure.
(e) amounts received by Landlord through proceeds of insurance to the
extent the proceeds are compensation for expenses which were previously included
in Expenses hereunder:
(f) cost of repairs or replacements incurred by reason of fire or
other casualty, but only to the extent to which Landlord is compensated therefor
through proceeds of insurance, or caused by the exercise of the right of eminent
domain;
(g) advertising and promotional expenditures;
(h) legal fees for disputes with tenants and legal and auditing fees,
other than legal and auditing fees reasonably incurred in connection with the
maintenance and operation of the Building or in connection with the preparation
of statements required pursuant to additional rent or lease escalation
provisions;
(i) costs incurred in performing work or furnishing services for
individual tenants (including this Tenant) at such tenant's expense to the
extent that such work or service is in excess of any work or service Landlord at
its expense is obligated to furnish to this Tenant; costs of performing work or
furnishing services for tenants other than this Tenant at Landlord's expense to
the extent that such work or service is in excess of any work or service
Landlord is obligated to furnish to this Tenant at Landlord's expense; if any
work or service is performed or furnished by Landlord to or for any tenant other
than this Tenant at such tenant's expense, then, but only to the extent that
Landlord is obligated to perform such work or furnish such service to or for
this Tenant at Landlord's expense, such work or service shall be deemed to have
been performed or furnished to such other tenant at Landlord's expense and shall
therefore be included in Expenses.
If Landlord shall purchase any item of capital equipment or make any
capital expenditure designed to result in savings or reductions in Expenses,
then the costs for same shall be included in Expenses. The costs of capital
equipment or capital expenditures are
so to be included in Expenses for the comparative year in which the costs are
incurred and subsequent comparative years, on a straight line basis, to the
extent that such items are amortized over such period of time as reasonably can
be estimated as the time in which such savings or reductions in Expenses are
expected to equal Landlord's costs for such capital equipment or capital
expenditure, with an interest factor equal to the prime rate of the Chemical
Bank of New York at the time of Landlord's having incurred said costs. If
Landlord shall lease any such item of capital equipment designed to result in
savings or reductions in Expenses, then the rentals and other costs paid
pursuant to such leasing shall be included in Expenses for the comparative year
in which they were incurred.
If during all or part of any comparative year, Landlord shall not
furnish any particular items(s) of work or service (which would constitute an
Expense hereunder) to portions of the building project, due to the fact that
such portions are not occupied or leased, or because such item of work or
service is not required or desired by the tenant of such portion, or such tenant
is itself obtaining and providing such item of work or service, or for other
reasons, then, for the purposes of computing the additional rent payable
hereunder, the amount of the expenses for such item for such period shall be
increased by an amount equal to the additional operating and maintenance
expenses which would reasonably have been incurred during such period by
Landlord if it had at its own expense furnished such item of work or services to
such portion of the building project.
(b) Real Estate Taxes:
1. In the event that the real estate taxes payable for any comparative
year shall exceed the amount of such real estate taxes payable during the base
tax year, Tenant shall pay to Landlord, as additional rent for such comparative
year, an amount equal to The Percentage of the excess. By or after the start of
the comparative year following the base tax year, and by or after the start of
each comparative year thereafter, Landlord shall furnish to Tenant a statement
of the real estate taxes payable for such comparative year, and a statement of
the real estate taxes payable during the base tax year. If the real estate taxes
payable for such comparative year exceed the real estate taxes payable during
the base tax year, additional rent for such comparative year, in an amount equal
to The Percentage of the excess, shall be due from Tenant to Landlord, and such
additional rent shall be payable by Tenant to Landlord within ten (10) days
after receipt of the aforesaid statement.
72
2. Should the real estate taxes payable during the base tax year be
reduced by final determination of legal proceedings, settlement or otherwise,
then, the real estate taxes payable during the base tax year shall be
correspondingly revised, the additional rent theretofore paid or payable
hereunder for all comparative years shall be recomputed on the basis of such
reduction, and Tenant shall pay to Landlord as additional rent, within ten (10)
days after being billed therefor, any deficiency between the amount of such
additional rent as theretofore computed and the amount thereof due as the result
of such recomputations. Should the real estate taxes payable during the base tax
year be increased by such final determination of legal proceedings, settlement
or otherwise, then appropriate recomputation and adjustment also shall be made.
3. If, after Tenant shall have made a payment of additional rent under
this subdivision (b), Landlord shall receive a refund of any portion of the real
estate taxes payable for any comparative year after the base tax year on which
such payment of additional rent shall have been based, as a result of a
reduction of such real estate taxes by final determination of legal proceedings,
settlement or otherwise, Landlord shall within ten (10) days after receiving the
refund pay to Tenant The Percentage of the refund less The Percentage of
expenses (including attorneys' and appraisers' fees) incurred by Landlord in
connection with any such application or proceeding. If, prior to the payment of
taxes for any comparative year, Landlord shall have obtained a reduction of that
comparative year's assessed valuation of the building project, and therefore of
said taxes, then the term "real estate taxes" for that comparative year shall be
deemed to include the amount of Landlord's expenses in obtaining such reduction
in assessed valuation including attorneys' fees and appraisers' fees.
(c) Expenses:
1. If the Expenses for any comparative year shall be greater than the
Expenses for the base year, Tenant shall pay to Landlord, as additional rent for
such comparative year, in the manner hereinafter provided, an amount equal to
The Percentage of the excess of the Expenses for such comparative year over the
Expenses for the base year (such amount being hereinafter called the "Expense
Payment").
Following the expiration of each comparative year and after receipt
thereof from Landlord's certified public accountant, Landlord shall submit to
Tenant a statement, certified by Landlord, setting forth the Expenses for the
preceding comparative year, the
73
Expenses for the base year, and the Expense Payment, if any, due to Landlord
from Tenant for such comparative year. The rendition of such statement to Tenant
shall constitute prima facie proof of the accuracy thereof and, if such
statement shows an Expense Payment due from Tenant to Landlord with respect to
the preceding comparative year then (i) Tenant shall make payment of any unpaid
portion thereof within ten (10) days after receipt of such statement; and (ii)
Tenant shall also pay to Landlord, as additional rent, within ten (10) days
after receipt of such statement, an amount equal to the product obtained by
multiplying the total Expense Payment for the preceding comparative year by a
fraction, the denominator of which shall be twelve (12) and the numerator of
which shall be the number of months of the current comparative year which shall
have elapsed prior to the first day of the month immediately following the
rendition of such statement; and (iii) Tenant shall also pay to Landlord, as
additional rent, commencing as of the first day of the month following the
rendition of such statement and on the first day of each month thereafter until
a new statement is rendered, one twelfth (1/12) of the total Expense Payment for
the preceding comparative year. The aforesaid monthly payments based on the
total Expense Payment for the preceding comparative year shall be adjusted to
reflect, if Landlord can reasonably so estimate, known increases in rates, for
the current comparative year, applicable to the categories involved in computing
Expenses, whenever such increases become known prior to or during such current
comparative year. The payments required to be made under (ii) and (iii) above
shall be credited toward the Expense Payment due from Tenant for the then
current comparative year, subject to adjustment as and when the statement for
such current comparative year is rendered by Landlord.
(d) The statements of the real estate taxes and of the Expenses to be
furnished by Landlord as provided in subdivisions (b) and (c) above shall be
certified by Landlord, and shall be prepared in reasonable detail for the
Landlord by a certified public accountant (who may be the CPA now or then
currently employed by Landlord for the audit of its accounts); said certified
public accountant may rely on Landlord's allocations and estimates wherever
operating cost allocations or estimates are needed for this Article. The
statements thus furnished to Tenant shall constitute a final determination as
between Landlord and Tenant of the real estate taxes and Expenses for the
periods represented thereby, unless Tenant within thirty (30) days after they
are furnished shall give a written notice to Landlord that it disputes their
accuracy or their appropriateness, which notice shall specify the
74
particular respects in which the statement is inaccurate or inappropriate.
If Tenant shall so dispute said statements then, pending the resolutions
of such dispute, Tenant shall pay the additional rent to Landlord in accordance
with the statements furnished by Landlord.
(e) In no event shall the fixed annual rent under this Lease be reduced by
virtue of this Article.
(f) If the term of this Lease commences on a day which is not the first day
of a comparative year, then the additional rent due hereunder for such
comparative year shall be a proportionate share of said additional rent for the
entire comparative year, said proportionate share to be based upon the length of
time that the term of this Lease will be in existence during such comparative
year. Upon the date of any expiration or termination of this Lease (except
termination because of Tenant's default), whether the same be the date
hereinabove set forth for the expiration of the term or any prior or subsequent
date, a proportionate share of said additional rent for the comparative year
during which such expiration or termination occurs shall immediately become due
and payable by Tenant to Landlord, if not theretofore already billed and paid.
The said proportionate share shall be based upon the length of time that this
Lease shall have been in existence during such comparative year. Landlord shall,
as soon as reasonably practicable, compute the additional rent due from Tenant,
as aforesaid, which computations shall either be based on that comparative
year's actual figures or be an estimate based upon the most recent statements
theretofore prepared by Landlord and furnished to Tenant under subdivisions (b)
and (c) above. If an estimate is used, then Landlord shall cause statements to
be prepared on the basis of the comparative year's actual figures as soon as
they are available, and within ten (10) days after such statement or statements
are prepared by Landlord and furnished to Tenant, Landlord and Tenant shall make
appropriate adjustments of any estimated payments theretofore made.
(g) Landlord's and Tenant's obligation to make the adjustments referred to in
subdivision (f) above shall survive any expiration or termination of this Lease.
(h) Any delay or failure of Landlord in billing for any additional rent
hereunder shall not constitute a waiver of or in any way impair the continuing
obligation of Tenant to pay such additional rent.
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RIDER ATTACHED TO AND FORMING A PART OF
LEASE BETWEEN MID-CITY ASSOCIATES, LANDLORD,
AND NEW HORIZONS COMPUTER LEARNING CENTER
OF METROPOLITAN NEW YORK. INC., TENANT
Article 46
Rent Credit; Initial
Alteration Work: Temporary space: Etc.
A. Rent Credits.
If and so long as Tenant is not in default under this Lease beyond any
grace period, Tenant shall be entitled to the following rent credits:
(a) a rent credit in the amount of all fixed annual rent and
escalation additional rent due under this Lease from March 1. 1995 through June
30, 1995; and
(b) a rent credit in the amount of all fixed annual rent (without
electricity) due under this Lease from July 1, 1995 through August 31, 1995;
except that Tenant shall nevertheless be obligated to pay any escalation
additional rent and the ERIF portion of the fixed annual rent under Section
27.04 hereof, during such period.
Anything contained herein to the contrary notwithstanding, if Tenant,
at any time during the term of this Lease after Tenant has been granted all or a
portion of the rent credits described in this Subdivision A or Landlord's Work
contribution described in Subdivision C of this Article, breaches any covenant,
condition or provision of this Lease and fails to cure such breach within any
applicable grace period, and provided that this Lease is terminated by Landlord
because of such default, then, in addition to all other damages and remedies
herein provided and to which Landlord may otherwise be entitled, Landlord shall
also be entitled to the repayment of any such rent credit or work contribution
theretofore enjoyed by Tenant, which sum shall be deemed additional rent
hereunder and shall be due upon demand by Landlord. The obligation of Tenant to
pay such additional rent (or damages) to Landlord shall survive the expiration
or sooner termination of the term of this Lease.
B. Initial Alteration Work.
Tenant agrees that Tenant will effect all alterations, additions and
improvements in and to the demised premises that are necessary for Tenant to
conduct its business therein (the "Initial Alteration Work").
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Within thirty (30) days after the execution of this Lease by Tenant,
Tenant shall furnish Landlord for its approval a complete set of architectural
and engineering plans and specifications for the Initial Alteration Work.
Landlord, promptly upon receipt of same, shall approve such plans and
specifications, or return them with advice as to what changes are required for
its approval to be forthcoming. In the event such plans and specifications are
so returned to Tenant, Tenant shall revise them to incorporate such changes as
are required for Landlord's approval to be forthcoming and shall resubmit such
revised plans and specifications to Landlord, within five (5) days after they
are returned (unapproved) by Landlord. Such approval process shall continue
until a complete set of plans and specifications for the Initial Alteration Work
has been fully approved by Landlord.
Tenant, at its own cost and expense (except as herein provided), will
cause the Initial Alteration Work to be effected in a good and workmanlike
manner, in accordance with Tenant's approved plans and specifications, in
accordance with the provisions of Article 3, as supplemented by Article 47, and
all other applicable provisions of this Lease, and in compliance with all ap
plicable laws, rules and regulations (as provided in paragraph (c) of said
Article 47).
Tenant agrees that the Initial Alteration Work shall include, but not
be limited to, all work which is necessary to properly and legally demise the
within demised premises, including, without limitation, the installation of any
needed demising walls and fire dampers.
C. Landlord's Reimbursement Obligation.
If and so long as Tenant is not in default under this Lease beyond any
grace period, Landlord will reimburse Tenant for up to the first $208,010 of the
out-of-pocket costs of labor and materials in effecting the Initial Alteration
Work, including architectural and engineering fees, but excluding the costs of
Tenant's personal property (as described in Section 3.04). If such costs are
lower than $208,010, then Landlord's aforedescribed reimbursement obligation
shall be satisfied by its reimbursing Tenant for such amount lower than
$208,010. Any such costs in excess of $208,010 shall be paid promptly by
Tenant.
In connection with the Initial Alteration Work, Tenant shall provide
Landlord with true copies of paid bills, showing the cost of the items of the
Initial Alteration Work to be included in the aforesaid total up to $208,010,
and Landlord shall reimburse Tenant for the amount set forth in said bills in
accordance with Landlord's obligation hereunder.
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D. Temporary Space.
It is acknowledged (i) that Tenant purchased certain assets of to New
Horizons, Inc., as tenant under a certain lease (the "Existing Lease") with
Landlord, covering approximately 1,919 rentable square feet of space on the 53rd
floor (Room 5328) of the Building, for a term expiring on February, 28, 1995;
and (ii) that Tenant is currently occupying the premises demised under the
Existing Lease pursuant to a separate agreement with New Horizons, Inc.
It is agreed that Tenant may continue to occupy, on a temporary basis,
said Room 5328 (the "Temporary Space"), until July 31, 1995 (or until such
sooner date that the term of this Lease shall terminate as herein provided).
Tenant agrees to take and continue possession of the Temporary Space in its "as
is" condition with no obligation in Landlord to do any work therein or thereto
to make such space suitable and ready for Tenant's continued occupancy and use.
Tenant shall surrender broom-clean possession to Landlord of the Temporary Space
on or before said July 31, 1995. For the Temporary Space, Tenant shall pay
fixed rent in the total sum of $20,000, which shall be payable by Tenant in a
single installment on August 1, 1995 (subject to the rent credit described
below), plus an ERIF under Section 27.04 of $3.21 per rentable square foot per
month, for electricity. Otherwise, Tenant's occupancy and use of the Temporary
Space shall be pursuant to all of the applicable provisions of this Lease.
In the event that Tenant shall vacate and deliver to Landlord
broom-clean possession of the Temporary Space on or before said July 31, 1995,
and provided Tenant is not then in default under this Lease beyond any grace
period, Tenant shall be entitled to a rent credit in the amount of $20,000, to
be applied against the aforedescribed payment of the fixed rent for the Tem
porary Space which is due on August 1, 1995.
It is acknowledged (i) that New Horizons, Inc. is presently in arrears
in the payment of certain rent and additional rent due under the Existing Lease,
in the total sum of $23,355.70; and (ii) that, upon execution and delivery of
this Lease, the security deposit under the Existing Lease, plus any accrued
interest thereon (presently in the sum of $8,019.60), will be applied to such
arrears. Tenant agrees that, upon such execution and delivery of this Lease, it
will pay to Landlord any then remaining balance of such arrears (after the
application of such security).
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ARTICLE 47
ALTERATIONS
Supplementing Article 3 hereof, Landlord will not unreasonably withhold
or delay approval of written requests of Tenant to make non-structural interior
alterations, decorations, additions and improvements (herein referred to as
"alterations") in and to the demised premises, provided that such alterations do
not adversely affect utility services or plumbing and electrical lines or other
systems of the Building. All alterations shall be performed in accordance with
the following terms and conditions:
(a) All such alterations costing more than $5,000 shall be
performed in accordance with plans and specifications first submitted to
Landlord for its prior written approval. Landlord shall be given, in writing, a
good description of all other alterations.
(b) All alterations shall be done in a good and workmanlike
manner. Tenant shall, prior to the commencement of any such alterations, at its
sole cost and expense, obtain and exhibit to Landlord any governmental permit
required in connection with such alterations. In connection with the Initial
Alteration Work, Landlord agrees that it will cooperate with Tenant by signing
Tenant's application for such permit, prior to Landlord's approval of a complete
set of plans and specifications for such work; provided, however, that (i)
Tenant shall not commence to effect any such work until such plans and
specifications have been so approved by Landlord, and (ii) Tenant shall modify
its application (and any plans submitted therewith) to reflect any changes to
such plans and specifications required by Landlord in order to obtain its
approval.
(c) All alterations shall be done in compliance with all other
applicable provisions of this Lease and with all applicable laws, ordinances,
directions, rules and regulations of governmental authorities having
jurisdiction, including, without limitation, The Americans with Disabilities Act
of 1990 and New York City Local Law No. 58/87 and similar present or future
laws, and rules and regulations issued pursuant thereto, and also No. 76 and
similar present or future laws, and rules and regulations issued pursuant
thereto, on abatement, storage, transportation and disposal of asbestos, which
work, if required, shall be effected at Tenant's sole cost and expense, by
contractors and consultants approved by Landlord and in strict compliance with
the aforesaid laws and regulations and with Landlord's rules and regulations
thereon.
(d) All work shall be performed with union labor having the
proper jurisdictional qualifications.
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(e) Tenant shall keep the Building and the demised premises fee
and clear of all liens for any work or material claimed to have been furnished
to Tenant or to the demised premises.
(f) Prior to the commencement of any work by or for Tenant,
Tenant shall furnish to Landlord certificates evidencing the existence of the
following insurance:
(i) Worker's compensation insurance covering all persons
employed for such work and with respect to whom death or
bodily injury claims could be asserted against Landlord,
Tenant or the demised premises.
(ii) Broad form general liability insurance written on an
occurrence basis naming Tenant as an insured and naming
Landlord and its designees as additional insured, with
limits of not less than $3,000,000 combined single limit
for personal injury in any one occurrence, and with
limits of not less than $500,000 for property damage.
(The foregoing limits may be revised from time to time by
Landlord to such higher limits as Landlord from time to
time reasonably requires.) Tenant, at its sole cost and
expense, shall cause all such insurance to be maintained
at all times when the work to be performed for or by
Tenant is in progress. All such insurance shall be in a
company authorized to do business in New York and all
policies, or certificates therefor, issued by the insurer
and bearing notation evidencing the payment of premiums,
shall be delivered to Landlord. Blanket coverage shall
be acceptable, provided that coverage meeting the
requirements of this paragraph is assigned to Tenant's
location at the demised premises.
(g) All work to be performed by Tenant SHALL BE done in manner
which will not unreasonably interfere with or disturb other tenants and
occupants of the Building.
(h) Any alterations or other work and installations in and for
the demised premises, which shall be consented to by Landlord as provided
herein, excluding the Initial Alteration Work, shall be effected on Tenant's
behalf by Landlord, its agents or contractors, and shall be paid for by Tenant
promptly when billed, at cost plus ten (10%) percent thereof for supervision and
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overhead, plus ten (10%) percent for general conditions, as additional rent
hereunder.
(i) Landlord agrees that, in connection with the Initial
Alteration Work, Landlord shall be solely responsible for and shall, at
Landlord's expense, cause to be effected any removal, encapsulation, encasement
or other treatment of asbestos required by laws, rules, regulations or
ordinances of any governmental authority having jurisdiction over the demised
premises. Landlord and Tenant further agree that any such compliance made
necessary by any alteration effected by or for Tenant after Tenant opens for
business at the demised premises, shall be effected at Tenant's expense.
EXHIBIT A
FLOOR PLAN
ONE PENN PLAZA
NEW YORK, NEW YORK
GUARANTEE
------------
For value received and in consideration of and in order to induce the
execution of that certain lease, dated as of March 1, 1995, between Mid-City
Associates, as Landlord, and New Horizon Computer Learning Center of
Metropolitan New York, Inc., as Tenant, for space at One Penn Plaza, New York,
New York (hereinafter called the "Lease"), and other good and valuable
consideration, the undersigned (hereinafter sometimes called "Guarantor"),
acting not only as surety but also as principal, hereby absolutely and
unconditionally, for itself and its legal representatives, successors and
assigns, guarantees to Mid-City Associates (hereinafter called "Landlord") and
to its legal representatives, successors and assigns, the prompt and full
performance and observance by the Tenant (hereinafter called "Tenant") and by
its legal representatives, successors and assigns, of all of the covenants,
terms, provisions, conditions and agreements required to be performed by the
Tenant under the Lease, whether prior to, during the term of or after the
termination of the term of the Lease. This guarantee is an absolute, continuing
and unconditional guarantee of payment (and not of collection) and of
performance. Notice of all defaults is waived and consent is hereby given to
all extensions of time that Landlord may grant to Tenant in the performance of
any of the terms of the Lease and/or to the waiving in whole or in part of any
such performance, and/or to the releasing of Tenant in whole or in part from any
such performance, and/or to the adjusting of any dispute in connection with the
Lease, and/or to the assignment of the Lease to any other entity; and no such
defaults, extensions, waivers, releases, adjustments, or assignments, with or
without the knowledge of the undersigned, shall affect or discharge the
liability of the undersigned; and the undersigned hereby waives any and all
right to a trial by jury in any action or proceeding to enforce such liability
hereafter instituted by Landlord, or its successors or assigns, to which the
undersigned may be a party. The undersigned further agrees to pay all expenses,
including legal fees and disbursements paid or incurred by Landlord in seeking
to enforce this guarantee.
This guarantee shall not be impaired by, and the undersigned hereby
consents to (i) any modification, supplement, extension or amendment of the
Lease to which the parties thereto may hereafter agree and (ii) any assignment
of the Lease. The liability of the Guarantor hereunder is direct, unconditional
and coextensive with that of the Tenant and may be enforced without requiring
Landlord first to resort to any other right, remedy or security. The
enforceability of this guarantee shall not be affected by any bankruptcy
proceeding or other proceeding affecting the rights of creditors of Tenant, nor
by discharge or modification of Tenant's liability under the Lease in any
bankruptcy proceeding. An assignment of the Lease or any subletting thereunder
shall not release or relieve the undersigned from its liability
hereunder. The Guarantor shall have no right of subrogation, reimbursement or
indemnity whatsoever, nor any right of recourse to security for the debts and
obligations of Tenant to Landlord, unless and until all of said debts and
obligations have been satisfied; in full.
This guarantee is a continuing guarantee which shall remain effective
during the term of all or any portion of the Lease and as to any surviving
provisions that remain effective after the termination of the Lease.
This guarantee shall be governed by and interpreted in accordance with
the laws of the State of New York, shall be deemed to have been made and
performed in New York, and shall be enforceable in New York.
Dated: March 1, 1995
HANDEX ENVIRONMENTAL RECOVERY, INC.
Guarantor
By: John T. St. James s/s
--------------------------------
Name: John T. St. James
Title: Vice President
Address of Guarantor:
500 Campus Drive
Morganville, NJ 07751
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MONMOUTH )
On the 17th day of March, 1995, before me
personally came John T. St. James, to me known, who being by me duly sworn, did
depose and say that he resides at 500 Campus Drive, Morganville, NJ, that he is
the Vice President of Handex Environmental Recovery, Inc., the corporation
mentioned in, and which executed the foregoing instrument; and that he signed
his name thereto by order of the Board of Directors of said corporation.
Clara Lauro
----------------------------------
Notary Public
Clara A. Lauro
Notary Public of New Jersey
My Commission Expired Aug. 22, 1995
The Board of Directors and Stockholders
Handex Environmental Recovery, Inc.:
We consent to incorporation by reference in the Registration Statement (No. 33-
32239) on Form S-8 of Handex Environmental Recovery, Inc. of our report dated
February 17, 1995, relating to the consolidated balance sheets of Handex
Environmental Recovery, Inc. and subsidiaries as of December 31, 1994 and
January 1, 1994, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, and all related schedules, which report appears
in the December 31, 1994 annual report on Form 10-K of Handex Environmental
Recovery, Inc.
KPMG Peat Marwick LLP s/s
-------------------------------
Cleveland, Ohio
March 30, 1995
