<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
-----------
Commission File Number 0-20612
-----------
JUST TOYS, INC.
(Exact Name of Registrant as specified in its Charter)
-----------
Delaware 13-3677074
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
20 Livingstone Avenue, Dobbs Ferry, New York 10522
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(914) 674-8697
Indicate by check mark whether the Registrant (1) has filed all reports 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 ___
The aggregate number of the Registrant's shares outstanding on May 12, 1998 was
4,282,690 shares of Common Stock, par value $.01 per share.
- --------------------------------------------------------------------------------
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
INDEX
Page
Part I - FINANCIAL INFORMATION ----
Item 1. Financial Statements:
Consolidated Balance Sheets - March 31, 1998
and 1997 (unaudited) and December 31, 1997................... 1
Consolidated Statements of Operations (unaudited)
for the Three Months Ended March 31, 1998 and 1997........... 2
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended March 31, 1998 and 1997........... 3
Notes to Consolidated Financial Statements (unaudited)....... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 7
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 10
SIGNATURES.................................................................. 12
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
------------------------------------- -------------------
1998 1997 1997
---- ---- ----
<S> <C> <C> <C>
ASSETS (Unaudited)
Current Assets:
Cash...................................................... $ 220,536 $ 120,504 $ 213,789
Accounts receivable, net of allowances of $267,000,
$732,000 and $688,000 (Note 2)......................... 89,550 60,800 97,778
Inventories (Note 3)...................................... 3,976,102 4,475,589 3,713,981
Prepaid and refundable income taxes....................... 39,269 41,776 39,269
Prepaid expenses and other current assets................. 1,874,400 1,342,555 1,710,888
--------- --------- ---------
Total current assets................................... 6,199,857 6,041,224 5,775,705
Property and equipment, at cost, net of accumulated
depreciation and amortization ............................ 3,253,680 3,483,448 3,223,172
Goodwill, net of accumulated amortization..................... 603,451 648,991 614,836
Other assets.................................................. 114,276 112,299 114,535
---------- ---------- ----------
TOTAL.............................................. $ 10,171,264 $ 10,285,962 $ 9,728,248
========== ========== =========
LIABILITIES
Current liabilities:
Due to factor............................................. $ 1,367,330 $ 909,663
Accounts payable.......................................... 1,742,389 1,943,364 $ 1,853,246
Accrued liabilities....................................... 562,140 843,153 897,153
---------- ---------- ----------
Total current liabilities.............................. 3,671,859 3,696,180 2,750,399
Series B Convertible Redeemable Preferred
Stock, 650,000 shares authorized,
520,659, 538,243 and 521,854 shares issued
and outstanding (liquidation value $1,887,389,
$1,951,131 and $1,891,721) (Note 5)....................... 1,036,503 991,768 1,018,990
--------- ---------- ---------
Total liabilities and Series B Stock................... 4,708,362 4,687,948 3,769,389
--------- --------- ---------
Commitments and contingencies.................................
STOCKHOLDERS' EQUITY
Stockholders' equity (Note 4):
Preferred stock, $1.00 par value, 1,000,000 shares
authorized:
Series A Convertible Redeemable Preferred
Stock, 150,000 shares authorized, 120,000
shares issued and outstanding (liquidation
value $120,000)................................ 120,000 120,000 120,000
Common stock, par value $.01 per share, 15,000,000
shares authorized, 4,179,362, 4,150,000 and
4,178,167 issued and outstanding....................... 41,794 41,500 41,782
Additional paid-in capital................................ 29,851,394 29,795,768 29,849,043
Accumulated deficit....................................... (24,550,286) (24,359,254) (24,051,966)
---------- ---------- ----------
Total stockholders' equity............................. 5,462,902 5,598,014 5,958,859
---------- ---------- -----------
TOTAL.............................................. $ 10,171,264 $ 10,285,962 $ 9,728,248
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-1-
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Net sales................................................ $ 3,875,635 $ 4,457,826
Cost of goods sold....................................... 2,313,004 2,743,769
--------- ---------
Gross profit............................................. 1,562,631 1,714,057
--------- ---------
Expenses:
Merchandising, selling, warehousing and
distribution...................................... 870,721 904,041
Royalties............................................ 160,517 161,504
General and administrative........................... 844,429 919,696
--------- ---------
Total......................................... 1,875,667 1,985,241
--------- ---------
Operating loss........................................... (313,036) (271,184)
--------- ---------
Other income (expenses):
Interest expense..................................... (130,578) (128,505)
Other income......................................... - 674
--------- ---------
Net loss................................................. (443,614) (399,015)
Preferred stock dividends and accretion (Note 4)......... (54,706) (56,790)
--------- ---------
Net loss attributable to common stockholders............. $ (498,320) $ (455,805)
========= =========
Weighted average common shares outstanding............... 4,178,413 4,150,000
========= =========
Per share data:
Basic loss per share attributable to common
stockholders............................................. $ (0.12) $ (0.11)
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................... $ (443,614) $ (399,015)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization....................... 203,752 244,840
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable............................. 8,228 226,778
Inventories..................................... (262,121) (362,289)
Prepaid and refundable income taxes............. - (12,862)
Prepaid expenses and other current assets....... (163,512) (224,427)
Other assets.................................... 259 7,351
Increase (decrease) in:
Accounts payable................................ (110,857) 304,861
Accrued liabilities............................. (335,013) (477,868)
--------- -------
Net cash used in operating activities .............. (1,102,878) (692,631)
--------- -------
Cash flows from investing activities:
Acquisition of property and equipment................... (222,875) (212,435)
--------- -------
Net cash used in investing activities............... (222,875) (212,435)
--------- -------
Cash flows from financing activities:
Borrowings from factor.................................. 1,367,330 909,663
Dividends paid.......................................... (34,830) (37,800)
--------- -------
Net cash provided by financing activities........... 1,332,500 871,863
--------- -------
Net increase (decrease) in cash................................ 6,747 (33,203)
Cash - beginning of period..................................... 213,789 153,707
--------- -------
Cash - end of period........................................... $ 220,536 $ 120,504
========= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
JUST TOYS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies
In the opinion of management, the accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included. The
results of operations for the interim periods are not necessarily indicative
of the results for a full year. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
(1) Basic loss per share attributable to common stockholders:
Basic loss per share was calculated by dividing net loss attributable
to common stockholders by the weighted average number of shares of Common
Stock outstanding. All options, warrants and preferred stock issued by the
Company were antidilutive.
(2) Comprehensive Income:
As of January 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income ("SFAS 130"). SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's financial
statements.
(3) Reclassifications
Certain previously reported amounts have been reclassified to conform
to the 1998 presentation and that of the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
-4-
<PAGE>
Note 2 - Accounts Receivable
Accounts receivable and amounts due from factor consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
--------------------------------- -------------
1998 1997 1997
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Accounts receivable - factor......................... $ 2,146,261 $ 2,254,732 $ 5,047,225
Borrowings from factor............................... (2,146,261) (2,254,732) (5,023,147)
----------- ---------- -----------
Net due from factor.................................. 0 0 24,078
Accounts receivable - trade.......................... 356,550 792,800 761,700
----------- ---------- ----------
Total accounts receivable......................... 356,550 792,800 785,778
Less: Accounts receivable allowances................. (267,000) (732,000) (688,000)
----------- ---------- ----------
Total accounts receivable, net of
allowances.................................... $ 89,550 $ 60,800 $ 97,778
====== ======== ==========
</TABLE>
Note 3 - Inventories
The inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
--------------------------------- -------------
1998 1997 1997
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Finished goods....................................... $ 2,560,263 $ 2,987,663 $ 2,643,941
Material components and supplies..................... 1,415,839 1,487,926 1,070,040
--------- --------- ---------
Total............................................. $ 3,976,102 $ 4,475,589 $ 3,713,981
========= ========= =========
</TABLE>
Note 4 - Stockholders' Equity
Stockholders' equity consists of the following:
<TABLE>
<CAPTION>
Additional Paid-
Preferred Common in Accumulated
Stock Stock Capital Deficit Total
--------- ------ ----------------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997............. $ 120,000 $ 41,782 $ 29,849,043 $ (24,051,966) $ 5,958,859
Conversion of Series B Stock to
Common Stock......................... 12 2,351 2,363
Net loss (unaudited).................. (443,614) (443,614)
Preferred Stock dividends and
accretion............................ (54,706) (54,706)
------- ------ ---------- ----------- ---------
Balance March 31, 1998
(unaudited).......................... $ 120,000 $ 41,794 $ 29,851,394 $ (24,550,286) $ 5,462,902
======= ====== ========== =========== =========
</TABLE>
-5-
<PAGE>
Note 5 - Subsequent Event
On April 9, 1998, the Company offered to pay and exchange $.5075 in
cash and one share of the Company's Common Stock for each share of Series B
Stock (the "Exchange Offer"). This offer expires on June 22, 1998 unless
extended by the Company.
Accordingly, the Company will increase its stockholders equity and
reduce its Series B Stock to reflect this transaction. Additionally, the
Company will no longer record accretion or pay dividends on the shares
received pursuant to the Exchange Offer. This transaction will be recorded in
the June 30, 1998 financial statements.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward looking
information and describes the expectations of the Company concerning future
business conditions and the outlook for the Company based on currently
available information. Wherever possible, the Company has identified these
forward looking statements by words such as "anticipates," "believes,"
"estimates," "expects" and similar expressions. These forward looking
statements are subject to risks and uncertainties which could cause the
Company's actual results or performance to differ materially from those
expressed in these statements. These risks and uncertainties include the
following: reliance on manufacturers based in China, seasonality and quarterly
fluctuations, government regulation, changes in consumer preferences, reliance
on new product introduction, dependence on a limited number of customers,
customer inventory management, the impact of competition on revenues, margins
and pricing and other risks and uncertainties as may be disclosed from time to
time in the Company's public announcements and filings with the Securities and
Exchange Commission. The Company assumes no obligation to update publicly any
forward looking statements, whether as a result of new information, future
events or otherwise.
Results of Operations
Three Months Ended March 31, 1998 and 1997
Net sales for the three months ended March 31, 1998 decreased 13.1%
to $3,876,000 from $4,458,000 in the comparable period in 1997. The decrease
in sales is due primarily to (a) a change in the Company's product mix related
to the acquisition in 1996 of the doll carriage and stroller product lines and
PlayTable product lines which are seasonal in nature and (b) the significant
reduction in inventories and increased seasonality of purchasing patterns at a
number of the Company's larger customers during the three months ended March
31, 1998. Net sales of the Company's Sports toys decreased 54.7% to $1,147,000
during the first quarter of 1998 from $2,530,000 in the comparable period in
1997. This decrease was offset by an increase in the Toys category of 41.5% to
$2,729,000 in the first three months of 1998 from $1,928,000 in the same
period of 1997. The change in sales in these categories was primarily
attributable to (a) changes in product mix which have resulted from the
Company selectively discontinuing products it believes will not achieve an
acceptable return on investment in the future and (b) the Company's
investments in new products, primarily in the Toys category.
Gross profit as a percentage of net sales increased to 40.3% for the
three months ended March 31, 1998 compared to 38.5% for the three months ended
March 31, 1997. This increase resulted primarily from a change in product mix
which is partially a result of the Company selectively discontinuing products
it believes will not achieve an acceptable return on investment in the future.
Gross profit decreased 8.8% to $1,563,000 in the first quarter of 1998 from
$1,714,000 in the comparable period in 1997 as a result of the decrease in
sales.
The Company's net sales and gross margin, as a percentage of sales,
is dependent on its mix of business during a given time period. Variables
include such factors as whether merchandise is shipped from a domestic
warehouse or directly from the Orient, whether the merchandise is purchased
from
-7-
<PAGE>
overseas sources or is produced domestically and the specific blend of products
shipped to the Company's customers.
Merchandising, selling, warehousing and distribution expenses
decreased 3.7% to $871,000 for the first quarter of 1998 compared to $904,000
in the comparable 1997 period. The decrease in expenses is primarily
attributable to lower sales commissions associated with the decreased sales
for the period ended March 31, 1998.
Royalty expense increased as a percentage of net sales to 4.1% in the
period ended March 31, 1998 from 3.6% for the period ended March 31, 1997
primarily due to an increase in net sales of products subject to royalties.
General and administrative expenses decreased 8.2% to $844,000 for
the first quarter of 1998 from $920,000 in the comparable period in 1997. As a
result of the cost controls implemented in 1997, the Company had a decrease in
payroll and other overhead costs during the period.
Operating loss increased to $313,000 in the three months ended March
31, 1998 from $271,000 in the comparable period in 1997.
Net loss was $444,000 in the first quarter of 1998 as compared to
$399,000 in the comparable period in 1997. During the first quarter of 1998
and 1997, the Company recorded the dividends paid on its preferred stock
outstanding and the accretion of the Series B Stock issued in 1996 to its
redemption value as a change in stockholder's equity and deducted these
expenses in computing net loss attributable to common stockholders. Basic loss
per share attributable to common stockholders increased to $0.12 per share
from $0.11 per share on 4,178,000 and 4,150,000 weighted average shares
outstanding in the three months ended March 31, 1998 and 1997, respectively.
Backlog
Total order backlog at March 31, 1998 and 1997 was approximately
$1,242,000 and $1,363,000, respectively. The Company expects substantially all
of such orders to be filled during 1998. Cancellations may materially reduce
the amount of sales realized from the Company's backlog. The business of the
Company is characterized by customer order patterns which vary from one year
to the next largely because of the different levels of consumer acceptance of
a product line, product availability, marketing strategies, inventory levels
of retailers and differences in overall economic conditions. The use of
just-in-time/quick response inventory techniques and replenishment programs by
larger retailers has resulted in fewer orders being placed in advance of
shipment and more orders for immediate delivery. This distorts the comparisons
of unshipped orders at any given date. The Company expects these trends to
continue. Additionally, it is a general industry practice that orders are
subject to amendment or cancellation by customers prior to shipment.
Therefore, comparisons of unshipped orders in any specific period in any given
year with those same periods in preceding years are not necessarily indicative
of sales for an entire year. Order backlog is also impacted by a shift in the
Company's revenues to the second half of the year with fourth quarter revenues
becoming increasingly significant. The Company does not consider total order
backlog to be a meaningful indicator of future sales.
-8-
<PAGE>
Liquidity and Capital Resources
The Company's working capital at March 31, 1998 was $2,528,000 as
compared to $3,025,000 at December 31, 1997.
Inventory levels were $500,000 lower at March 31, 1998 compared with
March 31, 1997 partially as a result of the Company selectively discontinuing
products it believes will not achieve an acceptable return on investment in
the future and the implementation of new inventory control systems.
Cash used in operating activities for the three months ended March
31, 1998 was $1,103,000 as compared with $693,000 in the comparable period in
1997. The increase in cash needs was caused by the increased seasonality of
the Company's product lines and the decreased sales for the first three months
of the year.
Cash used in investing activities was $223,000 and $212,000 in the
three month periods ended March 31, 1998 and 1997, respectively, which was
primarily attributable to capital expenditures for fixed assets, including
molds and tooling for new products.
Cash provided by financing activities was $1,333,000 and $872,000 in
the first three months of 1998 and 1997, respectively, primarily from
borrowings from the Company's factor.
The Company's factoring agreement with Milberg Factors, Inc.
("Milberg") provides for advances equal to the lesser of 85% of total accounts
receivable or $5,000,000. The factoring charge is 0.65% of receivables.
Advances bear interest at the rate of prime plus one percent. Milberg has also
agreed to advance to the Company, at the Company's request, the lesser of
$2,000,000 or 50% of the Company's inventory located in the United States.
Such advances will also bear interest at the rate of prime plus one percent.
Additionally, the factoring arrangement with Milberg is secured by a mortgage
on the real property owned by the Company's manufacturing subsidiary.
During the three months ended March 31, 1998, 1,195 shares of Series
B Stock were converted into an equivalent number of shares of Common Stock.
The Company believes that its cash flow from operations and available
borrowings will be adequate to meet its obligations for the ensuing year.
Seasonality
The toy industry is typically seasonal in nature due to the heavy
demand for toy products during the Christmas season. During the past several
years, the Company has experienced a shift in its revenues to the second half
of the year with fourth quarter revenues becoming increasingly significant.
The Company expects that this trend will continue due to industry changes and
due to changes to its product mix related to the doll carriage and stroller
product lines and the PlayTable product lines which were acquired in 1996.
This concentration increases the risk of (a) underproduction of popular items,
(b) overproduction of less popular items and (c) failure to achieve tight and
compressed shipping schedules.
-9-
<PAGE>
As a result of the shift in the Company's revenues to the second half
of the year, the Company anticipates that it may experience decreased sales
and increased losses during the second quarter of 1998 compared to the second
quarter of 1997.
Other Information
Effective February 23, 1998, new continued listing standards were
adopted for securities trading on the Nasdaq National Market. The standards
include a $5,000,000 market value of public float and a one dollar minimum bid
price. Under applicable Nasdaq rules, the Company was advised on February 27,
1998 of its non-compliance with each such standard and was given until May 28,
1998 to achieve compliance. The Company has not regained compliance with these
standards. To be eligible for listing on the Nasdaq SmallCap Market, the
Company's stock must, among other things, maintain a one dollar minimum bid
price for at least 10 consecutive trade days. The Company anticipates
determining prior to May 28, 1998 whether listing on the Nasdaq National Market
will continue or what actions it must take to qualify for listing on the Nasdaq
SmallCap Market.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation, incorporated by reference to
Exhibit 3.1 to the Registration Statement on Form S-1 (File No.
33-50878).
3.2 Certificate of Amendment of Certificate of Incorporation
incorporated by reference to Exhibit 3.5 of the Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission on November 8, 1996 (the "1996 3rd Quarter 10-Q").
3.3 Certificate of Designations, Preferences and Rights of the
Series A Convertible Redeemable Preferred Stock (included in
Exhibit 4.1 hereof).
3.4 Certificate of Designations, Preferences and Rights of the
Series B Convertible Redeemable Preferred Stock (included in
Exhibit 4.2 hereof).
3.5 Amended and Restated By-laws incorporated by reference to
Exhibit 3.4 to the 1996 3rd Quarter 10-Q.
4.1 Certificate of Designations, Preferences and Rights of the
Series A Convertible Redeemable Preferred Stock, incorporated
by reference to Exhibit 4 of the Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on
November 7, 1995.
4.2 Certificate of Designations, Preferences and Rights of the
Series B Convertible Redeemable Preferred Stock, incorporated
by reference to Exhibit 3.2 of the Current Report on From 8-K
filed with the Securities and Exchange Commission on July 10,
1996 (the "July 1996 Form 8-K").
4.3 Form of Warrant, dated June 26, 1995, issued to various
parties in respect of the aggregate of 60,000 shares of the
Company's Common Stock, incorporated by reference to Exhibit
4.2 of the July 1996 Form 8-K.
*10 Lease dated December 16, 1997 between the Company and Akzo Nobel
Chemicals, Inc.
+27 Financial Data Schedule
- --------------------------
* Filed herewith
+ Filed with the Securities and Exchange Commission only pursuant
to Article 5 of Regulation S-X.
(b) Reports on Form 8-K -- None
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 14, 1998
JUST TOYS, INC.,
a Delaware corporation
By: /s/ Barry Shapiro
-----------------------
Barry Shapiro
Chief Executive Officer
By: /s/ David Schwartz
-----------------------
David Schwartz
Chief Financial Officer and
Principal Accounting Officer
-11-
<PAGE>
LEASE
THIS LEASE is made this 16th day of December, 1997 between Akzo Nobel Chemicals
Inc., a Delaware Corporation, having a place of business at Livingstone
Avenue, Dobbs Ferry, New York ("Akzo Nobel"), and Just Toys, Inc., a Delaware
Corporation, having a place of business at 50 West 23rd Street, New York, New
York 10010("Tenant").
WITNESSETH:
WHEREAS, Akzo Nobel owns real estate and several buildings on Livingstone
Avenue in Dobbs Ferry, New York, ("Akzo Nobel's Site"); and
WHEREAS, Akzo Nobel's Site has vacant space which Akzo Nobel would like to
Lease to Tenant; and
WHEREAS, Tenant would like to lease space from Akzo Nobel.
NOW THEREFORE, for good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereby agree to the following terms and
conditions:
1. PREMISES:(a) Akzo Nobel hereby leases to Tenant and Tenant hereby
leases from Akzo Nobel the entire first floor in Building C of Akzo Nobel's
Site consisting of approximately twelve thousand, five hundred (12,500) square
feet of rentable floor area (the "Premises"). Attached hereto as Exhibit A is
a floor plan of the Premises and attached hereto as Exhibit B is a diagram of
Akzo Nobel's Site. The Premises shall include the appurtenant right to use, in
common with others, the lobbies, entrances, stairs, elevators, restrooms and
other public portions of Building C as the same may change from time to time.
(b) Akzo Nobel will perform the work and make the
installations in accordance with the schematic previously provided to Tenant
and initialed as of the date hereof as well as the work letter as set forth in
Exhibit C ("Landlord's Work"). Any changes or additions which Tenant requests
to the Landlord's Work, which increase the cost or scope of Landlord's Work,
1
<PAGE>
shall be at the sole cost and expense of Tenant. In addition, Akzo Nobel will
install a unisex bathroom in the Demised Premises which shall be in compliance
with the Americans with Disabilities Act.
(c) Landlord represents that upon substantial completion of
the Landlord's Work, the Premises may be lawfully occupied by Tenant for the
use set forth in Section 2. Landlord represents that upon completion of
Landlord's Work, the Premises will comply with applicable laws.
2. USE: The Premises shall be used and occupied by Tenant for
administrative, general office and showroom purposes and uses related thereto
including incidental storage. Tenant shall not do or permit to be done in or
about the Premises, nor bring or keep or permit to be brought or kept therein,
anything which is prohibited by or will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force or which
may hereafter be enacted or promulgated or which is prohibited by the standard
form of fire insurance policy, or will in any way increase the existing rate
of or affect any fire or other insurance upon Akzo Nobel's Site or any part
thereof or any of its contents, or cause a cancellation of any insurance
policy covering Akzo Nobel's Site or any part thereof or any of its contents.
Tenant shall not do or permit anything to be done in or about the Premises
which will in any way obstruct or interfere with the rights of other tenants
at Akzo Nobel's Site or injure or unreasonably annoy them, or use or allow the
Premises to be used for any immoral, unlawful or objectionable purpose, nor
shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises or commit or suffer to be committed any waste in, on or about the
Premises.
3. TERM: (a) The term of this Lease shall be for a period of ten (10)
years, two (2) months commencing on the later of (i) substantial completion of
Landlord's Work or (ii) March 1, 1998 ("Commencement Date") and terminating
April 30, 2008 ("Term"). Akzo Nobel will permit Tenant access to the Premises
two (2) weeks prior to the Commencement Date in order to install wiring and
work stations.
(b) Except as set forth in Section 3(c), should (i) the
Commencement Date be delayed past (i) April 1, 1998, Tenant shall be entitled
to two (2) days free rent for each day of delay past April 1 and (ii) should
2
<PAGE>
the Commencement Date be delayed past May 1, 1998, Tenant shall have the
option to terminate this lease and have its Letter of Credit promptly
returned.
(c) Should Tenant be responsible for any delay in the
Commencement Date for reasons including, but not limited to, (i) failing to
approve construction documents within five (5) days of presentation or (ii)
requests made by Tenant to change Landlord's Work, than the April 1 and May 1
dates set forth above shall be moved back one day for each day of delay caused
by Tenant.
4. RENT: (a) During the Term Tenant shall pay the base rent for the
Premises ("Base Rent") in accordance with the following schedule:
Period Annual Rent Monthly Rent
- ------ ----------- ------------
March 1, 1998 - April 30, 1998 -0- -0-
May 1, 1998 - February 28, 1999 $15,594
March 1, 1999 - February 29, 2000 $190,625 15,885
March 1, 2000 - February 28, 2001 200,375 16,698
March 1, 2001 - February 28, 2002 203,875 16,990
March 1, 2002 - February 28, 2003 213,625 17,802
March 1, 2003 - February 29, 2004 217,125 18,094
March 1, 2004 - February 28, 2005 226,875 18,906
March 1, 2005 - February 28, 2006 230,375 19,198
March 1, 2006 - February 28, 2007 240,125 20,010
March 1, 2007 - February 29, 2008 243,625 20,302
March 1, 2008 - April 30, 2008 20,594
(b) The Base Rent shall include all real estate taxes,
heating and cleaning expenses (in accordance with Section 6) but does not
include charges for electricity for the Premises. The base charge for
electricity (Electricity Charge) shall be Twenty-Eight Thousand, One Hundred,
Twenty-Five Dollars ($28,125) per year which is Two Dollars and Twenty-Five
cents ($2.25) per square foot per year payable monthly along with the Base
Rent in the amount of Two Thousand, Three Hundred, Forty Four Dollars ($2,344)
commencing March 1, 1998. Akzo Nobel may increase the Electricity Charge if it
conducts a survey and determines that Tenant's actual usage exceeds Two
Dollars and Twenty-Five cents ($2.25) per square foot per year. Such increase
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shall reflect Tenant's actual consumption. Akzo Nobel may perform such survey
as often as it deems appropriate. Tenant may conduct an independent survey of
electrical consumption if it contests Akzo Nobel's determination.
(c) Tenant will pay the Base Rent and Electricity Charge in
equal monthly installments on or before the first day of the month. Additional
Charges (i.e., HVAC during extra hours, maintenance costs payable by Tenant,
charges for amenities) shall be payable within ten (10) days following receipt
of invoice from Akzo Nobel. Tenant will pay all such amounts to:
Akzo Nobel Chemicals Inc.
1 Livingstone Avenue
Dobbs Ferry, N.Y., 10522
Attn: Site Controller
5. MAINTENANCE: (a) Akzo Nobel shall perform all maintenance and make
all repairs and replacements to Building C including the Premises, not
otherwise specifically imposed upon Tenant by the provisions of this Lease or
occurring, as a result of Tenant's willful act or negligence. Without limiting
the generality of the foregoing sentence, Akzo Nobel shall maintain, repair
and replace, as necessary, and keep in good order, safe and clean condition:
(1) the plumbing, HVAC, electrical and mechanical lines and equipment
associated therewith, and elevators and boilers, all of which are located in
or serve the Premises and common areas of Building C; (2) underground utility
lines and transformers and interior and exterior structure of Building C,
including the roof, exterior walls, bearing walls, support beams, foundations,
columns, exterior doors and windows and lateral support to Building C; (3) the
interior walls, ceilings, floors and floor coverings (including carpets and
tiles) of the common areas of Building C but excluding the interior walls,
ceilings, floor and floor covering of the Premises which shall be the sole
responsibility of Tenant and repaired and maintained at Tenant's sole cost and
expense (except if such areas need repair as a result of construction defects
or damages caused by Akzo Nobel); (4) the exterior improvements to the
property surrounding Building C, including landscaping; and (5) the common
areas located within or outside Building C, including the common area
entrances, corridors, doors and windows, stairways and the parking facility
and access ways therefor.
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(b) During the term of this Lease, Tenant shall conform to
all laws, rules, ordinances, orders and regulations of any federal, state and
local authority which are applicable to the use and occupancy of the Premises.
(c) During the term of this Lease Tenant shall take good
care of the Premises and Akzo Nobel's fixtures and appurtenances thereto.
Tenant shall at the end of the Lease surrender to Akzo Nobel the Premises and
all alterations, additions and improvements thereto in as good or better
condition as when received, ordinary wear and tear, damage thereto by fire,
earthquake, Act of God excepted.
(d) If Tenant requests Akzo Nobel to provide maintenance or
repair services which are not Akzo Nobel's responsibility pursuant to this
Section 5, or if such maintenance or repair becomes necessary due to the
actions of Tenant, such service shall be provided by Akzo Nobel and charged to
Tenant as an Additional Charge. Tenant agrees that all maintenance and repairs
on the Premises shall be provided by Akzo Nobel at competitive costs. Akzo
Nobel will provide Tenant with written estimates for all work requested by
Tenant. Tenant shall approve such estimates prior to commencement of the work.
(e) Akzo Nobel shall, upon advance oral notice to Tenant
(except in any emergency), have the right at all reasonable times during
normal business hours to inspect the Premises and show the same to prospective
mortgagees and, at all times to make repairs or replacements as required by
this Lease or as may be necessary; provided, however, that Akzo Nobel shall
use all reasonable efforts not to disturb Tenant's use and occupancy of the
Premises.
6. SERVICES: (a) Akzo Nobel shall, unless otherwise specifically
provided, furnish to Tenant at Akzo Nobel's expense the following services,
utilities, supplies and facilities:
(1) access to the Premises twenty-four (24) hours a day, seven (7)
days a week (except if Akzo Nobel's Site is closed due to inclement
weather);
(2) heat, ventilation and air conditioning (from May 15 through
October 15 of each year) on Akzo Nobel's business days from 6:30 a.m.
to 6:30 p.m. Monday through Thursday and from 6:30 a.m. to 5:30 p.m.
on Friday and, at Tenant's request, at all other times as hereinafter
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provided in this Paragraph. Attached as Exhibit D, is Akzo Nobel's
Holiday Schedule for 1998, which is provided as an example only, it
being understood that Akzo Nobel may change the holidays it observes
in later years. Such heating, ventilation and air conditioning shall
be supplied from Akzo Nobel's system. Akzo Nobel shall furnish air
conditioning beyond the above stated hours if maintenance personnel
will be available to oversee the provision of such service, provided
that notice requesting such service is delivered to Akzo Nobel on the
business day prior to when such service is required for the evening,
and two business days prior to when such service is required on a
Saturday, Sunday or holiday of Akzo Nobel's. Akzo Nobel's reasonable
cost of supplying such additional service shall be paid by Tenant as
an Additional Charge. Akzo Nobel shall bill Tenant on or before the
last day of the month following the month in which such charges are
incurred, and shall submit with its invoice a tabulation of the hours
and the dates on which the overtime HVAC was furnished. Attached as
Exhibit E, are the current charges for air conditioning during hours
outside of Akzo Nobel's normal business hours. Akzo Nobel will make a
reasonable effort to obtain the services of maintenance personnel to
make air conditioning available outside of Akzo Nobel's normal
business hours.
(3) cleaning and janitor services, including removal of refuse and
rubbish and the furnishing of washroom supplies, shall be provided by
Akzo Nobel at Akzo Nobel's cost and expense and will be provided in
accordance with Exhibit F "Cleaning Specifications";
(4) hot and cold running fresh water adequate for Tenant's purposes;
(5) vermin extermination;
(b) It is understood that Akzo Nobel does not warrant that
any of the services referred to above, or any other services which Akzo Nobel
may supply, will be free from interruption. Akzo Nobel agrees to use a
reasonable effort to assure that services are not interrupted. Tenant
acknowledges that any one or more such services may be suspended or reduced by
reason of severe weather condition, accident or repairs, alterations or
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improvements necessary to be made, by strikes or accident or by any cause
beyond the reasonable control of Akzo Nobel, or by orders or regulations of
any federal, state, county or municipal authority. Any such interruption or
suspension of services shall never be deemed an eviction or disturbance to
Tenant's use and possession of the Premises or any part thereof, or render
Akzo Nobel liable to Tenant for damages by abatement of rent or relieve Tenant
of performance of Tenant's obligations under this Lease.
7. IMPROVEMENTS AND ALTERATIONS: (a) Tenant will not make or suffer to be
made any alterations, additions or improvements to or of the Premises or any
part thereof, or attach any fixtures or equipment thereto, without first
obtaining Akzo Nobel's written approval which approval shall not be
unreasonably withheld. Any alterations, additions or improvements to the
Premises consented to by Akzo Nobel shall be made by Tenant at Tenant's sole
cost and expense, and any contractor or other person selected by Tenant to
make the same shall be subject to Akzo Nobel's prior written approval which
approval shall not be unreasonably withheld. At Akzo Nobel's option, all
alterations, additions, fixtures and improvements (exclusive of Tenant's
office furniture, business machinery, and trade fixtures), whether temporary
or permanent in character, made in or upon the Premises either by Tenant, or
by Akzo Nobel on behalf of Tenant, shall immediately become Akzo Nobel's
property and, at the end of the Term hereof, shall remain on the Premises
without compensation to Tenant. Akzo Nobel upon written notice to Tenant at
the expiration or other termination of this Lease shall have the option to
require Tenant to remove any additions, improvements, alterations, fixtures
and/or installations made by Tenant, or by Akzo Nobel on behalf of Tenant, at
Tenant's sole cost and expense and shall restore the Premises to their
original condition as delivered to Tenant by Akzo Nobel at the commencement of
the Lease, ordinary wear and tear, damage thereto by fire, earthquake, Act of
God excepted. If Tenant should fail to restore the Premises to their original
condition after notice from Akzo Nobel, then Akzo Nobel may, at Akzo Nobel's
option, restore the Premises to their original condition and Tenant shall
promptly reimburse Akzo Nobel for the cost of such work. Tenant may remove any
of Tenant's office furniture, business machinery, or trade fixtures from the
Premises which can be removed without damage to the Premises. Tenant shall
promptly repair, at Tenant's expense, any damage to the Premises caused by the
removal of such office furniture, business machinery, or trade fixtures.
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Notwithstanding anything to the contrary above (i) Tenant will not be required
or permitted to remove Landlord's Work and (ii) if Tenant seeks to make any
improvements to the Premises, Akzo Nobel must advise Tenant at the time it
approves Tenant's plans, whether Akzo Nobel will require the improvements to
be removed at the end of the Lease.
(b) Any alteration, addition, or improvement shall, when
completed, be of such a character as not to lessen the value of the Premises
or such improvements as may be then located thereon. Any alteration, addition,
or improvements shall be made promptly and in a good workmanlike manner and in
compliance with all applicable permits and authorizations and building and
zoning laws and with all other laws, ordinances, orders, rules, regulations
and requirements of all federal, state and municipal governments, departments,
commissions, boards and offices. The costs of any such alteration, addition or
improvement shall be paid by Tenant, so that the Premises and any improvements
at anytime located thereon shall at all times be free of liens for services
performed, labor and material supplied or claimed to have been supplied.
Before any alteration, addition or improvement shall be commenced, Tenant
shall pay the amount of any increase in premiums on insurance policies
(provided for under this Lease) on account of endorsements to be made thereon
covering the risk during the course of such alteration, addition or
improvement.
8. REMOVAL OF GOODS AND TENANT'S REPAIRS: At the expiration or
earlier termination of this Lease, Tenant will remove its goods and effects
(except as elsewhere provided in this Lease) and will peaceably yield up to
Akzo Nobel the Premises broom clean and in good order and condition, excepting
ordinary wear and tear.
9. CASUALTY: (a) In the event any portion of the Premises, common
areas of Building C, or equipment or systems serving the Premises or common
areas (hereinafter collectively referred to as the "damaged property") is
damaged by fire or other casualty, earthquake or flood or by any other cause
of any kind or nature and the damaged property can, in the opinion of Akzo
Nobel's architect, be repaired within ninety (90) consecutive days from the
date of the damage, Akzo Nobel shall proceed immediately to make such repairs.
This Lease shall not terminate, but Tenant shall be entitled to a
proportionate abatement of Base Rent and Electricity Charges payable during
the period commencing on the date of the damage and ending on the date the
damaged property is repaired as aforesaid and the Premises are delivered to
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Tenant. The extent of rental abatement shall be based upon the portion of the
Premises rendered untenantable, unfit or inaccessible for use by Tenant during
such period. If the damage to the Premises results in Tenant being unable to
effectively utilize the Premises, the abatement of rent shall be one hundred
percent (100%) during such period. When required by this Paragraph the
architect's opinion shall be delivered to Tenant within thirty (30)
consecutive days from the date of damage.
(b) If (1) in the opinion of Akzo Nobel's architect, damage
to the property cannot be repaired within ninety (90) consecutive days from
the date of the damage, or (2) in the opinion of Akzo Nobel's architect, the
cost of repair will exceed thirty (30%) percent of the replacement cost
(exclusive of architectural and engineering fees, excavation, footings and
foundations) of Building C, either party may terminate this Lease by notice to
the other within twenty (20) consecutive days from the date on which the
architect's opinion is delivered to Tenant. If Akzo Nobel fails to complete
the repair of the damaged property within the time periods required by this
Section, subject to an extension of time allowed for an excusable delay (as
hereinafter defined), Tenant may terminate this Lease. When termination is
based on the architect's opinion, and otherwise by such notice within twenty
(20) consecutive days from the end of the ninety (90) day period, as it may
have been extended by an excusable delay, Base Rent and Electricity Charges
shall be apportioned as of the date of the damage and all prepaid rent shall
be repaid.
(c) In the event neither party exercises its option to
terminate hereunder Akzo Nobel shall, with due diligence, repair, alter and
restore the damaged property as a complete architectural unit of substantially
the same proportionate usefulness, design and construction as existing
immediately prior to the date of the damage; with the exception of
improvements made after the date of this Lease pursuant to Section 7.
(d) If Akzo Nobel is prevented from complying with its
obligations set forth in this Section because of delays caused by strikes,
riots, fire, Acts of God, governmental intervention, or the like which are not
within the reasonable control of Akzo Nobel (hereinafter referred to in this
Lease as an "excusable delay") the time for completion of Akzo Nobel's
obligation, if adversely affected by an excusable delay, shall be extended by
one day for each day of an excusable delay. Whenever Akzo Nobel is of the
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opinion that there has been an excusable delay it shall, within five (5)
business days thereafter, notify Tenant thereof.
(e) If Akzo Nobel undertakes but fails to repair and restore
the damaged property as required by the provisions of this Paragraph and
deliver the Premises to Tenant within one hundred fifty (150) consecutive days
from the date of the damage, for any reason other than a delay caused by an
act or omission of Tenant, Tenant may terminate this Lease by notice to Akzo
Nobel within one hundred sixty (160) consecutive days from the date of the
damage. In such event, this Lease and the term hereof shall terminate on the
date specified in the notice and Base Rent and Electricity Charges shall be
apportioned as of the date of the damage and all prepaid Base Rent and
Electricity Charges shall be repaid.
10. INSURANCE: (a) Tenant shall purchase or cause to be purchased,
and cause to be maintained in effect for the term of this Lease, with
insurance carriers reasonably acceptable to Akzo Nobel the following:
i) Workers' Compensation (or the equivalent) Insurance as required
by the Statutes of the State of New York and Employers' Liability Insurance in
the amount of not less than One Million Dollars ($1,000,000).
ii) Comprehensive General Liability Insurance, including
Premises/Operations Liability, fire legal liability, and contractual
liability, in the amount of not less than One Million Dollars ($1,000,000) per
occurrence combined single limit and Two Million Dollars ($2,000,000) annual
aggregate.
iii) Comprehensive Automobile Liability for owned, leased, and hired
automobiles in the amount of not less than One Million Dollars ($1,000,000).
(b) The liability insurance required above may be provided
under one or more occurrence-based primary and excess policies. If coverage is
maintained under claims made policies, Tenant agrees to maintain the
continuity of such insurance policies for a period of three years following
the termination of this Lease and/or vacancy by Tenant of the Premises.
(c) Tenant's insurance policy or policies shall include and
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provide coverage for Tenant's indemnity obligations under Section 14 of this
Agreement. Tenant shall provide satisfactory proof of valid insurance coverage
by way of Certificates of Insurance showing Akzo Nobel as an additional
insured to all liability insurance policies, except Worker's Compensation, and
further providing that such policies shall not be materially altered or
canceled except upon at least thirty (30) days prior written notice to Akzo
Nobel.
(d) Tenant shall be responsible for insuring its own
personal property and equipment on the Premises, and Tenant shall purchase and
maintain insurance as Tenant deems adequate with respect to the Premises to
protect its property and its business, it being understood that Akzo Nobel
shall not be liable for damages to Tenant's property or business interruption
unless occasioned by the willful or negligent misconduct of Akzo Nobel.
(e) Tenant shall not store any materials or engage in any
practices other than an accepted use in accordance with Section 2 which would
have the effect of increasing the insurance rates on Building C or Akzo
Nobel's Site or its contents above what they would be if Tenant were not in
occupancy of the Premises. Tenant shall not store any materials or rubbish
outside the Premises.
11. CONDEMNATION: (a) If at any time during the term the whole of the
Premises shall be taken for any public or quasi-public use, under any statue,
or by right of eminent domain, except as provided in subparagraph (c), this
Lease shall terminate on the date of such taking.
(b) If less than all the Premises shall be taken and, in
Tenant's reasonable opinion communicated by notice to Akzo Nobel within sixty
(60) consecutive days after notice of such taking, Tenant is able to gain
access to and continue the conduct of its business in the part not taken, this
Lease shall remain unaffected, except that Tenant shall be entitled to a pro
rata abatement of Base Rent and Electricity Charge based on the proportion
which the area of the space so taken bears to the area of the space demised
hereunder immediately prior to such taking.
(c) If the use and occupancy of the whole or any part of the
Premises is temporarily taken for a public or quasi-public use for a period
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greater than two (2) months but less than the balance of the term, at Tenant's
option to be exercised in writing and delivered to Akzo Nobel not later than
sixty (60) consecutive days after the date Tenant is notified of such taking,
this Lease and the term hereby granted shall terminate on the date specified
in Tenant's notice or shall continue in full force and effect. If this Lease
remains in effect, Tenant shall be entitled to a proportionate abatement of
the Base Rent and Electricity Charge in the manner and to the extent provided
in paragraph (b).
(d) Akzo Nobel shall be entitled to receive the entire award
or awards in any condemnation proceeding without deduction therefrom for any
estate vested in Tenant and Tenant shall receive no part of such award or
awards from Akzo Nobel. Tenant shall be entitled to receive any separate award
for the taking of Tenant's trade fixtures and/or for its relocation costs.
(e) If there is a taking hereunder and this Lease is
continued, Akzo Nobel shall, at its expense, proceed with reasonable diligence
to repair, alter and restore the Premises as a complete architectural unit of
substantially the same proportionate usefulness, design and construction
existing immediately prior to the date of taking.
(f) Taking by condemnation or eminent domain hereunder shall
include the exercise of any similar governmental power and any sale, transfer
or other disposition of the Premises or Akzo Nobel's Site in lieu or under
threat of condemnation.
12. SIGNS: Tenant shall not place any signs on Akzo Nobel's Site or
exterior of the Premises. Akzo Nobel shall place Tenant's name on an exterior
sign as well as on the interior lobby directory.
13. PARKING: Akzo Nobel shall provide and maintain for Tenant's
employees, thirty-nine (39) general unassigned parking spaces in Akzo Nobel's
North Lot. Tenant agrees that it will not use any other of Akzo Nobel's
parking facilities. Use of any other parking lot by Tenant's employees, agents
or invitees will result in such vehicles being towed at Tenant's expense.
14. INDEMNIFICATION: Tenant hereby agrees to indemnify and hold Akzo
Nobel harmless against and from any and all claims of damages or injury
arising from Tenant's use of the Premises, Akzo Nobel's Site, common areas and
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parking facilities, or the conduct of its business or from any activity, work,
or thing(s) done, permitted or suffered by Tenant in the Premises, Akzo
Nobel's Site, common areas and parking facilities, and shall further indemnify
and hold harmless Akzo Nobel against and from any and all claims of third
parties arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising from any act, neglect, fault or omission of Tenant, or of its agents,
employees, visitors, invitees, contractors, or licensees, and from and against
all costs, attorneys' fees, expenses, and liabilities incurred in or about any
such claim or any action or proceeding brought thereon; and in case any action
or proceeding be brought against Akzo Nobel by reason of such claim, Tenant,
upon notice from Akzo Nobel, shall defend the same at Tenant's expense by
counsel reasonably approved by Akzo Nobel. Tenant, as a material part of the
consideration to Akzo Nobel, hereby assumes all risk of damage to Tenant's
property or injury to Tenant's employees, agents, visitors, invitees and
licensees in or upon the Premises, and parking facilities, and Tenant hereby
waives all claims in respect thereof, from any cause whatsoever, against Akzo
Nobel, except claims for personal injury or property damage which are caused
primarily by the negligence, fault or omission of Akzo Nobel, or of its agents
or employees. Neither party shall be liable to the other for any unauthorized
or criminal entry of third parties into the Premises, Akzo Nobel's Site, or
parking facilities, or for any damage to person or property, or loss of
property in and about the Premises, Akzo Nobel's Site, parking facilities and
the approaches, entrances, streets, sidewalks or corridors thereto, by or from
any unauthorized or criminal acts of third parties, regardless of breakdown,
malfunction or insufficiency of any security measures, practices or equipment
provided by Akzo Nobel or Tenant. Tenant shall immediately notify Akzo Nobel
in writing of any breakdown or malfunction of any security measures, practices
or equipment provided by Akzo Nobel as to which Tenant has knowledge. Akzo
Nobel shall not be liable to Tenant for interference with the light or other
incorporeal hereditaments intangible, real, or mixed property or for any
damage therefrom to Tenant or Tenant's property from any cause beyond Akzo
Nobel's reasonable control. Tenant hereby agrees that in no event shall Akzo
Nobel be liable for consequential damages, including injury to Tenant's
business or any loss of income therefrom, nor shall Akzo Nobel be liable to
Tenant for any damages caused by the act or neglect of any other tenant at
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Akzo Nobel's Site. The provisions of Section 14 shall survive the termination
of this Lease with respect to any damage, injury or death occurring prior to
such termination.
15. DEFAULT: (a) If Tenant shall default in the payment of Base Rent,
Electricity Charge and/or Additional Charges and such default shall continue
for ten (10) consecutive days after notice thereof from Akzo Nobel, or if
Tenant shall default in the performance of any of its other obligations under
this Lease, and if such default shall continue thirty (30) consecutive days
after notice thereof from Akzo Nobel specifying in what manner Tenant has
defaulted (except that if such default cannot be cured within said thirty (30)
day period, this period shall be extended for a reasonable additional time,
not to exceed an additional thirty (30) days, provided that Tenant commences
to cure such default within the thirty (30) day period, and proceeds
diligently thereafter to effect such cure), Tenant will be deemed to have
materially breached this Lease.
(b) Upon the occurrence of any of the aforesaid events of
default, Akzo Nobel shall have the option to pursue any one or more of the
following remedies with written notice as provided for herein: (i) terminate
this Lease in which event Tenant shall immediately surrender the Premises to
Akzo Nobel and if Tenant fails to do so, Akzo Nobel may without prejudice to
any other remedy which it may have for possession or arrearages in rent, enter
upon and take possession of the Premises and expel or remove Tenant and any
other person who may be occupying said Premises or any part thereof, by force,
if necessary, without being liable for prosecution or any claim of damages
therefore, and Tenant hereby agrees to pay Akzo Nobel on demand the amount of
all loss and damage which Akzo Nobel may suffer by reason of such termination,
whether through inability to relet the Premises on satisfactory terms or
otherwise; (ii) enter upon and take possession of the Premises by appropriate
judicial proceedings (unless the Premises have been abandoned) and expel or
remove Tenant and any other person who may be occupying said Premises or any
part thereof, if necessary, without being liable for prosecution or any claim
of damages therefore and, if Akzo Nobel so elects, relet the Premises on such
terms as Akzo Nobel may deem advisable, without advertisement, and by private
negotiations, and receive the rent therefore, and Tenant hereby agrees to pay
to Akzo Nobel the deficiency, if any, between all rent and charges reserved
hereunder and the total rental applicable to the term hereof obtained by Akzo
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Nobel's reletting, and Tenant shall be liable for Akzo Nobel's expenses in
restoring the Premises and all costs incident to such reletting including
without limitation, brokerage fees and attorney's fees; (iii) enter upon the
Premises by force, if necessary, without being liable for prosecution or any
claim of damages therefore, and do whatever Tenant is obligated to do under
the terms of this Lease; and Tenant agrees to reimburse Akzo Nobel on demand
for any expenses including, without limitation, reasonable attorney's fees
which Akzo Nobel may incur in thus effecting compliance and Akzo Nobel shall
not be liable for any damages resulting to Tenant from such action.
(c) Pursuit of any of the foregoing remedies shall not
preclude pursuit of any other remedy herein provided or any other remedy
provided by law or at equity, nor shall pursuit of any remedy herein provided
constitute an election of remedies thereby excluding the later election of an
alternate remedy, or a forfeiture or waiver of any Base Rent, Electricity
Charge or Additional Charge and assessments payable by Tenant and due to Akzo
Nobel hereunder or of any damages accruing to Akzo Nobel by reason of
violation of any of the terms, covenants, warranties and provisions herein
contained. No action taken by or on behalf of Akzo Nobel shall be construed to
be an acceptance of a surrender of this Lease. Forbearance by Akzo Nobel to
enforce one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of such default. In
determining the amount of loss or damage which Akzo Nobel may suffer by reason
of termination of this Lease or the deficiency arising by reason of any
reletting of the Premises by Akzo Nobel as above provided, allowance shall be
made for the expenses of repossession. In the event a lawsuit is instituted
between Akzo Nobel and Tenant in connection with this Lease, the
non-prevailing party shall pay the prevailing party's reasonable attorneys
fees.
16. HOLDOVER: If the Tenant remains in the Premises beyond the
expiration date or earlier termination of the term of this Lease, such holding
over in itself shall not constitute a renewal or extension of this Lease, but
in such event, a tenancy from month to month shall arise at one hundred and
fifty percent (150%) of the then monthly Base Rent, and one hundred percent
(100%) of the then monthly Electricity Charge. In the event of any such
holding over, Tenant shall also indemnify Akzo Nobel against all claims by any
other person or entity to whom Akzo Nobel may have leased or agreed to lease
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all or any part of the Premises effective upon or after the expiration or
termination of the Lease provided if the Lease is terminated pursuant to
Section 4 on April 30, 2008, Tenant shall not be responsible for hold-over
claims occurring before it has received at least thirty (30) days notice of
such other lease and in no event earlier than June 1, 2008.
17. SUBORDINATION: This Lease, at Akzo Nobel's option, shall be
subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation for security now or hereafter placed upon Akzo Nobel's Site and
to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof. If any
mortgagee, trustee or ground lessor shall in writing, elect to have this Lease
prior to the lien of its mortgage deed of trust or ground lease, then this
Lease shall be deemed prior to such mortgage, deed or trust or ground lease,
whether this Lease is dated prior or subsequent to the date of said mortgage,
deed of trust or ground lease or the date of recording thereof. Tenant agrees
to execute any documents required to effectuate such subordination or to make
this Lease prior to the lien of any mortgage, deed of trust or ground lease,
as the case may be. As of the date of this Lease, there is no mortgage on the
Site.
18. NOTICES: Any notice, request, communication or demand under this
Lease shall be in writing and shall be considered properly delivered when
addressed as hereinafter provided, given or served personally, by recognized
overnight courier service which provides written evidence of delivery or by
registered or certified mail (return receipt requested) and deposited in the
United States general or branch post office. Any notice, request,
communication or demand by Tenant to Akzo Nobel shall be addressed to the Site
Services Manager at Akzo Nobel Chemicals Inc., 1 Livingstone Avenue, Dobbs
Ferry, New York 10522. Any notice, request, communication or demand by Akzo
Nobel to Tenant shall be addressed to Tenant at the Premises, attention
corporate secretary. If a notice is served personally, there must be a receipt
evidencing service. If notice is delivered by mail, the effective date of
delivery will be the third business day after mailing. A copy of any notice
provided to Tenant must also be sent to:
16
<PAGE>
Donald D. Shack, Esq.
Shack & Siegel P.C.
530 Fifth Avenue
New York, NY 10036
19. ASSIGNMENT: (a) Without the prior written consent of Akzo Nobel
in each case, which consent will not be unreasonably withheld, there shall be
no assignment, mortgaging, pledging, encumbrance, or other transfer by Tenant,
by operation of law or otherwise, of this Lease or the term and estate hereby
granted, or any part or the interest of Tenant in any Lease or the rentals
thereunder, and the Premises shall not be encumbered in any manner by reason
of any act or omission on the part of Tenant or anyone claiming under or
through Tenant, or sublet or used or occupied or permitted to be used or
occupied, or utilized for desk space or for mailing privileges, by anyone
other than Tenant for any purpose. If at any time during the term Tenant or
any assignee of the Lease, or any subleasee from Tenant or from any such
assignee shall not be an individual, then (i) Tenant shall give Akzo Nobel
prompt written notice of any change in the control of Tenant or any such
assignee and shall require any such subleasee to so notify Akzo Nobel and (ii)
any such change in control which results in Tenant or an assignee or subleasee
being controlled by a competitor of Akzo Nobel shall permit Akzo Nobel to
restrict the access of Tenant (or of such assignee or subleasee, as the case
may be) to all buildings at Akzo Nobel's Site, other than Building C.
Notwithstanding anything to the contrary above, to the extent that Tenant
sells all or substantially all of its assets, to a party which does not
compete against Akzo Nobel or any Akzo Nobel affiliate, no consent will be
required for an assignment of this Lease. To the extent the purchaser competes
against Akzo Nobel or an affiliate, consent will not be unreasonably withheld.
(b) If this Lease is assigned, whether or not in violation
of the provisions of this Lease, Akzo Nobel may collect rent from the
assignee. If the Premises or any part thereof, are sublet or are used or
occupied by anybody other than Tenant, whether or not in violation of this
Lease, Akzo Nobel may, after default by Tenant and expiration of Tenant's time
to cure such default, collect rent from the subtenant or occupant. In either
event, Akzo Nobel may apply the net amount collected to the rents herein
reserved, but no such assignment, subletting, occupancy or collection shall be
deemed a waiver of any of the provisions of Section 19(a), or the acceptance
of the assignee, subtenant or occupant as tenant, or a release of obligations
17
<PAGE>
under this Lease. The consent by Akzo Nobel to any assignment, mortgaging,
subletting or use or occupancy by others shall not in any wise be considered
to relieve Tenant from the necessity of obtaining the express written consent
of Akzo Nobel to any other or further assignment, mortgaging, or subletting or
use or occupancy by others not expressly permitted by this Article. Tenant
agrees to pay all reasonable counsel fees incurred by Akzo Nobel in connection
with any proposed assignment of Tenant's interest in this Lease or any
proposed subletting of the Premises or any part thereof requiring Akzo Nobel's
consent. References in this Lease to use or occupancy by anyone other than
Tenant shall be construed not as limited to subtenants and those claiming
under or through subtenants but as including those persons as well as
licensees and others claiming under or through Tenant, immediately or
remotely.
(c) With respect to any proposed assignment of this Lease or
proposed subletting to all or a portion of the Premises, Tenant shall submit
to Akzo Nobel a request for consent to such assignment or Sublease together
with the name and address of the proposed assignee or subleasee and such
information as to its financial responsibility and standing as Akzo Nobel may
require. Upon receipt of such request and upon the furnishing of such
information by Tenant, Akzo Nobel shall have the option to cancel and
terminate this Lease (i) completely, if the request was for an assignment of
this Lease or for a subletting of all or substantially all (i.e., over 75%) of
the Premises, for the balance of the Lease, or (ii) if such request was for a
subletting of less than substantially all of the Premises, for the balance of
the Term, then with respect to such portion.
(d) Akzo Nobel shall exercise such option to cancel and
terminate by notice in writing to that effect to Tenant on or before the
thirtieth (30th) business day after the date of Akzo Nobel's receipt of
Tenant's request and of the information set forth above, and Akzo Nobel's
notice shall set forth the date of cancellation, which date shall be not less
than sixty (60) and not more than ninety (90) days from the date of the
service of Akzo Nobel's notice. If such option is so exercised, then upon such
date of cancellation the Lease, as to the entire Premises or the specified
portion thereof, as the case may be, shall cease and terminate with the same
force and effect as though the date set forth in the notice were the date set
forth in this Lease as the expiration of the Term, and Tenant shall surrender
18
<PAGE>
possession of the entire Premises, or portion thereof, as the case may be, in
accordance with the provisions of the Lease relating to surrender of the
Premises at the expiration of the term. If Akzo Nobel exercises the option to
cancel this Lease as to a portion of the Premises only, then this Lease shall
remain in full force as to the remainder of the Premises, for the balance of
the Term, except that the area of the Premises shall be reduced and Tenant's
obligation to pay Base Rent and Electricity Charges shall be equitably abated.
(e) If Akzo Nobel does not exercise its option to cancel as
aforementioned, then Tenant may assign or sublet all or a portion of the
Premises, provided that Akzo Nobel has given its prior written consent and
provided further that: (i) Tenant is not then in default hereunder; (ii) there
shall be delivered to Akzo Nobel a duplicate original of an instrument in
writing assigning this lease or subletting the Premises, duly executed by the
assignor or subleasor and assignee or subleasee, as the case may be, in
recordable form, containing therein an assumption by said assignee or an
agreement by said subleasee to take subject to (and an agreement by Tenant to
remain liable to Akzo Nobel for) all the terms and conditions of this Lease on
the part of Tenant to be performed.
(f) The provisions of this Article 19 shall apply to each
such proposed subletting, none of which shall be effective until all of the
foregoing shall have been complied with. Notwithstanding any subletting,
Tenant and any future subleasor shall remain liable for the full performance
of all the terms and conditions of this Lease on the part of Tenant to be
performed.
(g) Tenant specifically agrees that it will not, at any
time, without giving Akzo Nobel prior notice, advertise or publicize in any
way the availability of all or part of the Premises, or list or publicly
advertise the Premises for subletting, through a broker, agent, or
representative or otherwise.
(h) Anything to the contrary contained in this Article
notwithstanding, Tenant may assign this Lease or sublet all or part of the
Premises without Akzo Nobel's consent to any wholly-owned subsidiary or to any
affiliate of Tenant which controls, is controlled by, or is under common
control with Tenant (except if such entity competes with Akzo Nobel or an
affiliate of Akzo Nobel as set forth above), provided, however, that no such
19
<PAGE>
assignment or subletting shall be effective against Akzo Nobel until Tenant
has delivered to Akzo Nobel (i) a copy, certified by Tenant to be true,
correct, and complete, of all instruments or documents or other writings
executed or delivered in connection with such assignment or subletting and
(ii) evidence sufficient, in Akzo Nobel's reasonable judgment, to establish
that such subleasee or assignee is a wholly-owned subsidiary of Tenant or is
an affiliate of Tenant which controls, is controlled by, or is under common
control with Tenant; and provided, further that Tenant shall remain fully
liable for the performance of all the terms and conditions of this Lease on
the part of Tenant to be performed. If the business of any such assignee or
subleasee is the same as or substantially similar to the business conducted by
Tenant and its affiliates on the date of this Lease, such assignee or
subleasee shall be deemed not to be competing with Akzo Nobel or an affiliate
of Akzo Nobel, for purposes of this Article. (i) Regarding any and all
assignments or Leases to which Akzo Nobel does give its consent, Akzo Nobel
shall be entitled to receive from Tenant, at the time or times such sums are
received by Tenant, (i) fifty percent (50%) of the amount by which the rental
received by Tenant from its assignee/subleasee exceeds the rental paid by
Tenant to Akzo Nobel for such space and (ii) fifty percent (50%) of all other
payments by such assignee or subleasee to Tenant which are attributable to the
Premises or to its use or occupancy in excess of the fair market value (with
regard to items such as furniture and trade fixtures), in either case net of
Tenant's transaction costs (that is, legal fees, brokerage, free rent and
costs of any work done by Tenant). In this connection, Tenant shall submit to
Akzo Nobel, within ten (10) days after its execution, a copy, certified by
Tenant to be true, correct, and complete, of any agreement of assignment or
Lease for space in the Premises, and of each related agreement, setting forth
in detail the rental and all other amounts paid or payable to Tenant.
20. QUIET ENJOYMENT: Tenant, on paying the Base Rent, Electricity
Charges and any Additional Charges and performing the covenants of this Lease
on its part to be performed, may peaceably and quietly have, hold and enjoy
the Premises for the term of this Lease.
21. RULES AND REGULATIONS: Tenant shall abide by and observe the
rules and regulations attached hereto as Exhibit G, as well as such other
reasonable rules and regulations as may be promulgated from time to time by
20
<PAGE>
Akzo Nobel for the operation, safety, security and maintenance of the Akzo
Nobel Site within which the Premises are located; provided the same are not
inconsistent with the provisions of this Lease, and provided further that a
copy thereof is received by Tenant.
22. ESTOPPEL CERTIFICATE: Tenant agrees, at any time and from time to
time, upon not less than seven (7) business days' prior notice from Akzo
Nobel, to execute, acknowledge and deliver to Akzo Nobel a statement in
writing: (1) certifying that this Lease is unmodified and in full force and
effect (or if there have been modifications, that this Lease is in full force
and effect as modified and stating the modifications); (2) stating the dates
to which the Base Rent, Electricity Charges and Additional Charges hereunder
have been paid by Tenant; (3) stating whether or not Tenant has knowledge that
Akzo Nobel is in default in the performance of any covenant, agreement or
condition contained in this Lease, and, if Tenant has knowledge of such a
default, specifying each such default and (4) stating the address to which
notices to Tenant shall be sent.
23. COUNTERPARTS: This Lease has been executed in several
counterparts, all of which constitute one and the same instrument. This Lease
shall not be binding and in effect until at least one counterpart, duly
executed by Akzo Nobel and Tenant, has been delivered to each party hereto.
24. MECHANICS' LIENS: During the term of this Lease, Tenant shall
promptly discharge by payment, bond or otherwise mechanics' liens filed
against the Premises for work, labor, services or materials claimed to have
been performed at or furnished to the Premises for or on behalf of Tenant,
except when the mechanics' liens are filed by a contractor, subcontractor,
materialman or laborer of Akzo Nobel. Akzo Nobel will provide, if possible,
Tenant with at least ten (10) days notice prior to incurring an expense for
Tenant's account under this section. Tenant shall, within ten (10) business
day after receipt of demand from Akzo Nobel reimburse Akzo Nobel for all costs
(including, without limitation, court costs and reasonable attorneys' fees)
incurred by Akzo Nobel in connection with any mechanics' liens filed against
the Premises for work, labor, service or materials claimed to have been
performed at or furnished to the Premises for or on behalf of Tenant.
21
<PAGE>
25. BROKERAGE: Akzo Nobel and Tenant each represent and warrant that
no broker or agent negotiated or was instrumental in negotiating or
consummating this Lease except Benson Commercial Realty and Cushman &
Wakefield of Long Island, Inc. Akzo Nobel covenants and agrees to pay
brokerage commission to said brokers in accordance with the agreement attached
hereto as Exhibit H. Akzo Nobel hereby agrees to indemnify, defend and hold
harmless Tenant from and against any claims by any persons claiming by through
or under Akzo Nobel, for brokerage or agent's commissions, finder's or other
fees relative to the negotiation and consummation of this Lease. Except as to
Cushman & Wakefield in accordance with Exhibit H, Tenant agrees to indemnify,
defend and hold harmless Akzo Nobel from and against any claims by any persons
claiming by, through or under Tenant for brokerage, or agent's commissions,
finder's or other fees relative to the consummation of this Lease.
26. SECURITY: Tenant shall deliver to Akzo Nobel as soon as
practicable following the execution of this Lease as security for Tenant's
performance of all the terms, convenants and conditions contained in this
Lease, an unconditional irrevocable commercial letter of credit ("LC") issued
by a New York commercial bank which is a member of the New York Clearing House
Association or a New York bank reasonably approved by Akzo Nobel ("Qualified
Institution") in the amount of one hundred and twenty thousand dollars
($120,000) payable to the order Akzo Nobel with an expiration date of
September 1, 1999. On or prior to September 1, 1999 Tenant shall deliver to
Akzo Nobel a replacement LC with an expiration date of September 1, 2000, from
a Qualified Institution in the amount of eighty thousand dollars ($80,000). On
or prior to September 1, 2000, Tenant should deliver a replacement LC with an
expiration date of September 1, 2001 from a Qualified Institution in the
amount of forty thousand dollars ($40,000). In each instance, upon Tenant
providing a replacement LC, Akzo Nobel shall simultaneously return to Tenant
the prior LC. Each LC shall provide that it is payable to Akzo Nobel by one or
more sight drafts accompanied by a writing purportedly signed by Akzo Nobel's
President, Vice President or Treasurer stating that Tenant has defaulted
beyond any applicable grace or cure period provided under this Lease. Each LC
and replacement LC shall be consistent with this Section 26 and in such
issuing bank's then standard form. Failure to provide timely the LC or any
replacement LC shall constitute a default under this Lease. Akzo Nobel shall
22
<PAGE>
be authorized to draw upon and use the LC as security for Tenant's performance
of all the terms, covenants and conditions contained in this Lease after the
giving of any notice of default and the expiration of any applicable grace or
cure period. The LC and any replacement LC may be transferred by Akzo Nobel to
it's successors and assigns. The LC and each replacement LC shall remain in
full force and effect notwithstanding any assignment of this Lease or
subletting of the Demised Premises or any portion thereof by Tenant.
27. MISCELLANEOUS: (a) No remedy or election given by any provision
in this Lease shall be deemed exclusive unless so indicated, but each shall
wherever possible, be cumulative in addition to all other remedies in law or
equity which either party may have arising out of the default of the other
party and failure to cure such default within the applicable grace period.
(b) Failure of either party to cure a default of the other
under this Lease shall not render such non-defaulting party in any way liable
therefor, or relieve the defaulting party from any of its obligations
hereunder.
(c) If there is a conflict between the provisions of this
Lease and the provisions of existing or future rules and regulations
promulgated for Building C, the provisions of this Lease shall prevail and be
binding on the parties.
(d) Tenant shall be permitted to use Akzo Nobel's cafeteria
and conference center upon the terms and fees attached hereto as Exhibit I,
which terms and fees may be reasonably amended by Akzo Nobel from time to
time.
28. BINDING AGREEMENT: This Lease shall bind and inure to the benefit
of the parties hereto and their respective executors, distributees, heirs,
representatives, and successors.
29. ENTIRE AGREEMENT: This Lease contains the entire agreement of the
parties and may not be modified except by an instrument in writing, which is
signed by both parties.
23
<PAGE>
IN WITNESS WHEREOF, this Lease has been duly executed by the parties
hereto as of the day and year first above written.
WITNESS: JUST TOYS, INC.
/s/ Seymour Rosenthal By: /s/ Barry Shapiro
- ------------------------- ---------------------------------
/s/ Robert J. Pagano Title: President & CEO
- ------------------------- ------------------------------
WITNESS: AKZO NOBEL CHEMICALS INC.
/s/ Michele Evans By: /s/ Richard A. Lendecky
- ------------------------- ---------------------------------
Title: Site Controller
- ------------------------- ------------------------------
/s/ By: /s/ Kelly Triplett
- ------------------------- ---------------------------------
Title: V.P. of R&D, Location Manager
- ------------------------- ------------------------------
24
<PAGE>
STATE OF NEW YORK )
COUNTY OF WESTCHESTER ) ss:
On this 16th day of December, 1997, before Leslie A. Diamond, a
Notary Public in and for the State of New York, duly commissioned and sworn,
personally appeared Barry Shapiro and known to me to be the President, and the
CEO, respectively of the corporation described in and that executed the
foregoing instrument, and also known to me to be the persons who executed the
foregoing instrument on behalf of the corporation therein named, and
acknowledged to me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal in the County of Westchester, State of New York, the day and
year in this certificate first above written.
/s/ Leslie A. Diamond
------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF WESTCHESTER ) ss:
On this 16th day of December, 1997, before Ann Magnotta, a Notary
Public in and for the State of New York, duly commissioned and sworn,
personally appeared Richard F. Lendecky, known to me to be the Site
Controller, the corporation described in and that executed the foregoing
instrument, and also known to me to be the person who executed the foregoing
instrument on behalf of the corporation therein name, and acknowledged to me
that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal in the County of Westchester, State of New York, the day and
year in this certificate first above written.
/s/ Ann Magnotta
--------------------------
Notary Public
25
<PAGE>
EXHIBITS TO LEASE
A. Floor Plan of the Premises
B. Site Plan
C. Work Letter
D. 1998 Akzo Nobel Holiday Schedule
E. Akzo Nobel 1998 Rates for Optional Air Conditioning
F. Cleaning Specifications / Janitorial Services
G. Rules and Regulations
H. Brokerage Agreement
I. Amenities
26
<PAGE>
EXHIBIT A
---------
Floor Plan of the Premises
Attached.
<PAGE>
EXHIBIT B
---------
Site Plan
Attached.
<PAGE>
EXHIBIT C
Work Letter - JUSTOYS Inc.
--------------------------
LANDLORD'S WORK
Landlord agrees at its sole expense and without charge to Tenant to do the
following work, all of which shall be of new material, manufacture, design,
capacity and finish selected by Landlord as Standard of the Building
("Building Standard"). Final plans shall be prepared at Landlord's sole
expense by The Milowitz Office, Architecture & Planning, P.C., Landlord's
architect. The final plans shall be substantially in accordance with
Preliminary Layout dated November 20, 1997.
1. PARTITIONS
----------
A. Tenant Interior Partitions
Partitions shall consist of 3-5/8" 25 gauge metal sutds
spaced 16" o.c. with one layer of 1/2" gypsum board each
side as per final plans. Metal studs shall extend from floor
to ceiling height. Each side to be taped, compounded and
prepared for paint or wallcovering.
B. Showroom
Partitions within showroom to be finished with "slatwall"
around perimeter screwed through the gypsum board to the
studs.
2. DOORS, FRAMES AND HARDWARE
--------------------------
A. Main entrance shall be a pair of glass Herculite doors.
B. All interior partition doors will be 6'-8" in height by
1-3/4" in thickness, stain grade wood solid core, birch
veneer with stain or clear urethane finish and width of
3'-0", and shall have lever handle passage latchsets and
templated butt hinges.
C. All door bucks are to be aluminum or steel knockdown type.
All jointed heads on knockdown door bucks to be flush type.
D. Landlord shall supply, in addition to exterior doors, up to
three locksets on interior office doors. All keying shall
conform to Landlord's master keying system.
<PAGE>
3. PAINTING AND WALL COVERING
--------------------------
A. Landlord shall paint all walls, non-acoustically treated
ceilings, metal doors and door bucks, and all other masonry
or metal surfaces. This painting shall consist of water
base, flat on walls, and semi-gloss on doors, bucks and
other metal surfaces. Colors for the initial painting of the
dry walls partitioning may be selected by Tenant from
Landlord's color chart. A finish schedule shall be provided
to Landlord by Tenant.
B. Landlord shall provide the Tenant with vinyl wallcovering
for all wall surfaces in Reception and Executive suite.
Tenant shall select form Landlord's Building Standard
material list and samples.
C. All walls shall receive 1 coat of primer and two coats of
paint. Color to be selected by tenant.
4. CARPENTRY
---------
A. All tenant office partitions commencing at the window must
about a window mullion.
B. Landlord shall furnish and install coat closets indicated on
the Tenant's plans consisting of one (1) stock wood shelf
and one (1) standard chrome finished metal coat rod.
5. FLOORS
------
A. Furnish and install concrete floors in a good and
workmanlike manner. All floors to be reasonably level,
smooth and clean to receive their respective floor finish.
Flash patching if required, for pitted and ridged areas will
be done by Landlord at Landlord's expense.
B. The Landlord shall furnish and install building standard
carpet and vinyl base throughout the demised premises. The
carpet shall be Spellbinder 26 ounce solution dyed nylon
(same as ADL on second floor) or equal.
C. In addition, the Tenant, at its option, may select as a
substitute on, for installation in those areas so designated
by the Tenant, a vinyl composition floor title (color
throughout, standard grade) 12" x 12" x 1/8".
D. Tenant may select one color for each room and a maximum of
three colors for the floor. In addition, carpet borders
similar to ADL will be installed where requested.
<PAGE>
6. CEILING
-------
A. All building standard acoustical ceilings to be a direct
suspension Tee Bar grid system.
B. Grid finish to be white enamel.
C. Tile to be 2' x 4' x 3/4" fissured board.
D. All acoustic ceiling tile and grids are to be new.
7. LIGHTING
A. Relocate existing light fixtures to provide for adequate lighting
(1 fixture per 80 square fee) as per tenants plans.
B. Furnish and install up to 16 light tracks with 3 heads each in
showroom.
C. Located of lighting fixtures shall conform to the ceiling grid,
and shall not conflict with main "T's".
D. Furnish and install all initial incandescent and flourescent lamps
for all fixtures.
E. Furnish and install all miscellaneous building standard fixtures,
either flourescent or incandescent for such areas as mechanical
spaces, toilets, stairwells, exits, etc., in the quantities to
conform with the applicable Building Code.
G. Landlord shall install up to eight high hats in the reception
area.
8. ELECTRICAL
----------
A. Furnish and install in the locations designated in Tenant's Plans,
standard electrical duplex wall receptacles with the required
associated wiring facilities.
B. Furnish and install all quiet type switches and associated wiring
facilities required to service the ceiling lighting fixtures in the
locations designated on Tenant's Plans.
C. Above described wall receptacles will be furnished and installed
on an average on one (1) per every seventy (70) feet of Tenant's
Floor Space on the Demised Premises. Light switches in each room,
and sufficient in number in open areas.
<PAGE>
D. In addition, to above, furnish and install four separate
circuit 15 AMP outlets, as per final plans.
E. Landlord shall supply, as required, necessary power supply
and circuits to interconnect with Tenant's Systems
Furniture.
F. Notwithstanding anything to the contrary elsewhere
contained, any and all installations pertaining to telephone
and data communication installations such as power
requirements, conduits, wire, outlets, etc., shall be
performed by Tenant at Tenant's own cost and expense.
Landlord shall provide tenant with 10 working days notice as
to when tenants contractor can start installing telephone
and data communications. Tenants contractor's shall complete
work within 7 working days.
9. PLUMBING
--------
A. Furnish and install pantry unit to consist of 6' wide by 2'
deep plastic laminate counter with base and upper hanging
cabinet, installation to include all roughing and piping,
stainless steel sink with single lever and hot and cold
water supply faucet. Included in above will be tap for water
to coffee maker to be installed by Tenant's vendor.
10. HEATING, VENTILATING AND AIR CONDITIONING
-----------------------------------------
A. Furnish and install a complete heating, ventilating and air
conditioning system adapted to meet Tenant's partition
plans.
11. MISCELLANEOUS
-------------
A. Window Treatment: Landlord shall provide building standard
blinds for all windows. All vanes shall be new.
B. Perimeter Heat: All perimeter heating "covers" shall be
cleaned, repaired and painted.
C. Retrofit existing bathrooms.
D. All permits shall be filed by the landlord.
E. All construction shall meet all Local and State Building
Codes.
<PAGE>
EXHIBIT D
1998 Akzo Nobel Holiday Schedule
--------------------------------
- ------------------------------------------------------------------------------
HOLIDAY DATES OBSERVED
- ------------------------------------------------------------------------------
New Years Day (1998) January 1, 1998 (Thursday)
- ------------------------------------------------------------------------------
Good Friday April 10, 1998 (Friday)
- ------------------------------------------------------------------------------
Memorial Day May 25, 1998 (Monday)
- ------------------------------------------------------------------------------
Independence Day July 3, 1998 (Friday)
- ------------------------------------------------------------------------------
Labor Day September 7, 1998 (Monday)
- ------------------------------------------------------------------------------
Thanksgiving Day November 26, 1998 (Thursday)
- ------------------------------------------------------------------------------
Day after Thanksgiving November 27, 1998 (Friday)
- ------------------------------------------------------------------------------
Christmas Eve December 24, 1998 (Thursday)
- ------------------------------------------------------------------------------
Christmas Day December 25, 1998 (Friday)
- ------------------------------------------------------------------------------
New Years Day January 1, 1999 (Friday)
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT E
AKZO NOBEL
1998 RATES FOR
OPTIONAL AIR CONDITIONING
- ------------------------------------------------------------------------------
Labor Per Hour Utilities Per Hour Total Cost
- ------------------------------------------------------------------------------
Weekday $57.00 $56.00 $113.00
(after 4:30 PM)
- ------------------------------------------------------------------------------
Saturday $57.00 $56.00 $113.00
(4 hours minimum
- ------------------------------------------------------------------------------
Sunday/Holiday $76.00 $56.00 $132.00
(4 hours minimum)
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT F
Cleaning Specifications
Janitorial Services
- -------------------
Offices and Hallways
1. Empty trash containers - plastic liners supplied by Akzo must be in all
trash containers.
2. Empty and clean ashtrays.
3. Sweep and dust mop using a treated cloth all tile floors.
4. Remove finger marks from doors, walls, woodwork and partitions.
Weekly Services
- ---------------
1. Vacuum all carpeted areas.
As Needed
- ---------
1. Spray buff all tile floors (as needed to maintain appearance).
Semi-Annual Services
- --------------------
2. Strip and wax floors.
Restrooms
- ---------
Daily Services
- --------------
1. Empty trash containers - plastic liners supplied by Akzo must be in all
trash containers.
2. Thoroughly scrub and disinfect all toilets, sinks, urinals and showers, and
bright work.
3. Sweep and dust mop all tile floors.
4. Damp mop floors.
5. In the ladies room, vacuum and wipe and couches/carpets.
<PAGE>
6. Wipe top of vanity.
Weekly Services
- ---------------
1. Spray buff tile floors (as needed to maintain high appearance).
Semi-Annual Services
- --------------------
1. Strip and wax tile floors.
<PAGE>
EXHIBIT G
Rules and Regulations
---------------------
1. Tenant's employees shall contact Security during off-hours with
reports of malfunctions, complaints or inquiries regarding
operations.
2. Tenant's employees shall report their first arrival on and last
departure from the premises to Security on off-hours and on weekends
and holidays.
3. Tenant's employees shall be limited to their Premises, Cafeteria,
Conference Facility, Private Dining Room, and areas providing access
to these facilities.
4. Tenant's employees shall use the parking area provided according to
the rules that may be established.
5. Tenant's employees shall wear prominently displayed identification
provided by Landlord when in Landlord's facilities.
6. Automobiles of Tenant's employees shall display an identification tag
to be provided by Landlord.
7. Tenant shall be informed of landlord's schedule of holidays when
selected services will not be available.
8. Tenant shall inform Landlord of their holiday schedule.
9. Tenant's employees, as well as its visitors and vendors, shall
refrain from parking on Livingstone Avenue.
<PAGE>
EXHIBIT H
BCR
Benson
Commercial
Realty, Inc.
December 15, 1997
Mr. Richard Lendecky
Akzo-Nobel
5 Livingstone Avenue
Dobbs Ferry, NY 10522
Re: Commission Agreement for the Proposed Transaction with Just Toys, Inc.
as Tenant at 20 Livingstone Avenue, Dobbs Ferry, NY
In the event that a lease is fully executed and delivered between Just Toys,
Inc. and Akzo-Nobel, then Akzo-Nobel agrees to pay Benson Commercial Realty,
Inc. ("BCR") and Cushman & Wakefield of Long Island, Inc. ("C&W") a commission
as calculated below:
COMMISSION CALCULATION FOR PROPOSED TRANSACTION WITH JUST TOYS, INC.
<TABLE>
<CAPTION>
Gross Rent Square Feet Annual Rent Commission Report
<S> <C> <C> <C> <C>
$14.97 12,500 $155,937.50 $ 155,937.50
$15.25 12,500 $190,625.00 $ 190,625.00
$16.03 12,500 $200,375.00 $ 200,375.00
$16.31 12,500 $203,875.00 $ 203,875.00
$17.09 12,500 $213,625.00 $ 213,625.00
$17.37 12,500 $217,125.00 $ 217,125.00
$18.15 12,500 $226,875.00 $ 226,875.00
$18.43 12,500 $230,375.00 $ 230,375.00
$19.21 12,500 $240,125.00 $ 240,125.00
$19.49 12,500 $243,625.00 $ 243,625.00
$19.77 12,500 $ 41,187.50 $ 41,187.50
Total Rent $2,163,750.00
Average Annual Rent $ 218,375.00
Commission Rates: Year 1 through and including 3: 6%
Commission Rates: Year 4 through and including 11: 3%
Total for Term: 39.5% 39.5%
Commission: $ 85,468.13
Discounted Override to BCR @ 40% $ 34,187.25
Total Commission payable by Akzo $ 119,655.38
</TABLE>
<PAGE>
In the event that additional landlord work is amortized into the transaction,
then the commission calculated shall be adjusted accordingly.
Commission is due and payable fifty percent (50%) upon the execution and
delivery of leases and fifty percent (50%) upon occupancy of the leased
premises.
Akzo-Nobel shall pay both BCR and C&W by separate checks.
This agreement shall not be changed orally and shall insure to the benefit of
each parties heir, assigns and successors.
If this expresses the agreement between the parties, then each party shall
sign where indicated below.
Agreed and Accepted by:
/s/ December 18, 1997
- --------------------------------------- -----------------
Akzo-Nobel Date
/s/ December 16, 1997
- --------------------------------------- -----------------
Benson Commercial Realty, Inc. Date
/s/ December 16, 1997
- --------------------------------------- -----------------
Cushman & Wakefield of Long Island, Inc. Date
<PAGE>
EXHIBIT I
Amenities
A. Cafeteria and Catering
1. Display of Name Tags
--------------------
Just Toys, Inc. employees shall wear prominently displayed
identification, to be provided by Akzo Nobel, when using the
Cafeteria.
2. Meal Charges
------------
Charges for meals served to Just Toys, Inc. employees shall
be at either of two rates: a) the published, Akzo Nobel -
subsidized rate, with Just Toys, Inc. paying an incremental
charge of 67% of the subsidized rate, or b) the published
rate escalated by 67% to be charged to Just Toys, Inc.
employees, the method of charging to be at Just Toys, Inc.
option.
3. Catering
--------
The Cafeteria contractor shall provide catering services to
the Just Toys, Inc. Premises at a cost to be calculated as
the published cost plus a surcharge of 67% of that cost.
B. Conference Facilities
---------------------
Meeting facilities are available on the site for Just Toys, Inc. employees on
a first-come, first-serve basis. Reservations must be in writing to the Site
Controller/Site Service Manager at least one week in advance. Use fees for the
various meeting rooms are shown on the schedule below. The fees include labor
to set up and take down chair and table arrangements, provide projection
equipment, etc. Rental of special tables, chairs and other equipment from
outside vendors is not included. The fees shown are for periods from four
hours duration to a full day. The fees may be changed by Akzo from time to
time upon notice to Just Toys, Inc.
Facility Fee
- -------- ---
Auditorium $450.00
Cafeteria (after 2:00 PM) 350.00
Main Research Building 3rd Floor Training Room 150.00
Private Dining Room 150.00
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 220,536
<SECURITIES> 0
<RECEIVABLES> 356,550
<ALLOWANCES> 267,000
<INVENTORY> 3,976,102
<CURRENT-ASSETS> 6,199,857
<PP&E> 7,405,175
<DEPRECIATION> 4,151,495
<TOTAL-ASSETS> 10,171,264
<CURRENT-LIABILITIES> 3,671,859
<BONDS> 0
1,036,503
120,000
<COMMON> 41,782
<OTHER-SE> 5,301,108
<TOTAL-LIABILITY-AND-EQUITY> 10,171,264
<SALES> 3,875,635
<TOTAL-REVENUES> 3,875,635
<CGS> 2,313,004
<TOTAL-COSTS> 1,875,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130,578
<INCOME-PRETAX> (443,614)
<INCOME-TAX> 0
<INCOME-CONTINUING> (443,614)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (443,614)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
