FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 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 033-78252
AMERICAN DRUG COMPANY
(Exact name of registrant as specified in its charter)
Delaware 13-3729186
(State of Incorporation) (I.R.S. Employer Identification No.)
9 West 57th Street, New York, NY 10019
(Address of principle executive offices) (Zip code)
Registrant's telephone number, including area code: (212) 826-8976
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers to item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10- K. /X/
As of March 15, 1999, the aggregate market value of the outstanding shares of
the Registrant's Common Stock, par value $.01 per share, held by non-affiliates
was approximately $2,365,473 based on the closing price of the Common Stock on
the OTC Bulletin Board, which is operated by the NASDAQ Stock Market on March
15, 1999.
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 15, 1999
- ----- -----------------------------
Common Stock, par value $.01 per share 13,020,155 shares
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates certain information by reference from the Registrant's
definitive proxy statement to be filed for its 1999 Annual Meeting of
Shareholders.
<PAGE>
TABLE OF CONTENTS
PART I Page
Item 1. Business 1
Item 2. Properties................................................7
Item 3. Legal Proceedings.........................................7
Item 4. Submission of Matters to a Vote of Security Holders.......7
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters............................8
Item 6. Selected Financial Data...................................9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................10
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk. .16
Item 8. Financial Statements and Supplementary Data..............17
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure...............40
PART III
Item 10. Directors and Executive Officers of the Registrant......40
Item 11. Executive Compensation..................................40
Item 12. Security Ownership of Certain Beneficial
Owners and Management............................................40
Item 13. Certain Relationships and Related Transactions..........41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K..............................................42
<PAGE>
PART I
Item 1. Business
(a) General Development of Business
On September 30, 1998, a newly formed wholly owned subsidiary of
American Drug Company (the "Company"), Five Star Group, Inc. ("Five Star")
purchased from JL Distributors, Inc. ("JL"), a wholly owned subsidiary of GP
Strategies Corporation ("GP Strategies"), substantially all of the operating
assets of JL. The assets were purchased for $16,476,000 in cash and a $5,000,000
unsecured senior note. The unsecured senior note bears interest at the rate of
8% payable quarterly, with the principal due on September 30, 2003. Five Star is
a leading distributor of home decorating, hardware and finishing products in the
northeast. For the year ended December 31, 1997 and the nine months ended
September 30, l998, Five Star had sales of approximately $82,300,000 and
$64,148,000, respectively.
The Company was organized in 1993, as a wholly-owned subsidiary of GP
Strategies to initiate marketing and sales activities for generic pharmaceutical
and medical products in Russia and the Commonwealth of Independent States (the
"CIS"). NPD Trading (USA) Inc. ("NPD Trading") was formed in January 1990 as a
wholly-owned subsidiary of GP Strategies to provide consulting services to
American and Western corporations in Russia and Eastern Europe. The Company now
has two wholly owned subsidiaries, Five Star and NPD Trading.
The purchase by the Company of the assets of Five Star has changed the
focus of the Company. The Company plans to focus its efforts on growing the
distribution business and has taken several steps to reduce its traditional
operations from both a business and cost perspective. As a result of the
purchase of the assets of Five Star, the Company has shut down its Moscow
office. In addition, the Company closed its Washington, DC office and scaled
back the operations of its Prague office with respect to the business of NPD
Trading.
(b) Financial Information about Industry Segments
This item is not applicable because the Company has only a single line
of business.
(c) Narrative Description of Business
<PAGE>
Five Star
Five Star is engaged in the wholesale distribution of home decorating,
hardware and finishing products. Five Star is composed of two strategically
located warehouse distribution centers and office locations in New Jersey and
Connecticut with over 360,000 square feet of space which enables Five Star to
service the market from Maine to Maryland. All operations are coordinated by
senior management from the headquarters in New Jersey, with each strategically
located facility having its own sales force.
Five Star is a leading distributor in the United States of paint sundry
items, interior and exterior stains, brushes, rollers, caulking compounds and
hardware products and offers products from leading manufacturers such as Cabot
Stain, William Zinsser & Company, Dap, General Electric Corporation, American
Tool, USG, Stanley Tools, Minwax and Minnesota Mining Company. Five Star
distributes its products to retail dealers, which include lumber yards, "do-it
yourself" centers, hardware stores and paint stores principally in the northeast
region. It carries an extensive inventory of the products it distributes and
provides delivery, generally within 24 to 72 hours. Five Star has grown to be
the largest independent distributor in the Northeast by providing a complete
line of competitively priced products, timely delivery and attractive pricing
and financing terms to its customers. Much of Five Star's success can be
attributed to a continued commitment to provide customers with the highest
quality service at reasonable prices.
As the largest distributor of paint sundry items in the Northeast, Five
Star enjoys cost advantages and favorable supply arrangements over the smaller
distributors in the industry. This enables Five Star to compete as a "low cost"
provider. Five Star uses a fully computerized warehouse system to track all
facets of its distribution operations. Five Star has enhanced the sophistication
of its warehouse and office facilities to take full advantage of economies of
scale, speed the flow of orders and to compete as a low cost distributor. Nearly
all phases of the selling process from inventory management to receivable
collection are automated and tracked at each facility. Furthermore, all
operations are overseen by senior management at the New Jersey facility. Five
Star is able to capitalize on manufacturer discounts by strategically timing
purchases involving large quantities.
Management takes a proactive approach in coordinating all phases of the
Company's operations. For example, sales managers require all sales
representatives to call on customers once every week. Each representative
transmits their orders through Five Star's automated sales system, to the IBM
AS400 computer located at the New Jersey facility. The salesperson system
combines the ability to scan product codes in the stores and download the
information to a laptop computer for final transmission. Based on the floor plan
of each warehouse and the location of products therein, the computer designs the
most efficient pattern for the orders to be picked. The orders are then relayed
to the appropriate location and picked in the evening. The warehouse facilities
are well-maintained and skillfully organized. A bar-coded part number attached
to the racking shelves identifies the location of each of the approximately
22,000 stock keeping units (SKUs). This numbering system allows the computer to
arrange picking in the most efficient order. The products are loaded onto Five
Star's trucks in the evening in the order that they will be unloaded, and are
then delivered directly to the customers' locations.
<PAGE>
Customers
Five Star's largest customer accounted for approximately 2.4% of its sales
in 1998 and its 10 largest customers accounted for approximately 11% of such
sales. All such customers are unaffiliated and Five Star does not have a
long-term contractual relationship with any of them.
Management Information System
All of Five Star's inventory control, purchasing, accounts payable and accounts
receivable are now being fully automated on an IBM AS400 computer system. The
Computer Associates Warehouse Boss System installed in 1994 located at the New
Jersey and the Connecticut facilities allows Five Star to obtain maximum
efficiency and cost savings by coordinating the processing of orders, the
selection of optimal picking routines and the tracking of inventory levels. In
addition, Five Star's software alerts buyers to purchasing needs, and monitors
payables and receivables. This system allows senior management to closely
control all phases of Five Star's operations. Five Star recently implemented a
new salesperson-order-entry system, which allows the salesman to scan product
and then download the information to a laptop. The laptop will contain all
product and customer information and will interact with the AS400.
Five Star has developed strong, long-term relationships with the leading
suppliers since its predecessor company, J. Leven was founded in 1912. As a
major distributor of paint sundry items, suppliers rely on Five Star to
introduce new products to market. Furthermore, suppliers have grown to trust
Five Star's ability to penetrate the market. As a result, Five Star is often
called on first by manufacturers to introduce new products into the marketplace.
For example, Minwax, Best Liebco and Cabot Stain have utilized Five Star to
introduce and distribute some of their new product innovations.
Five Star is utilizing both internal and external resources to identify, correct
or reprogram and test systems for year 2000 compliance. During the third quarter
of 1998, Five Star entered into an agreement to purchase new software that will
be year 2000 compliant. This previously planned software upgrade will manage the
financial operations of Five Star, including order entry, inventory control and
accounts receivable and payable. Five Star has an implementation team led by the
Director of Information Systems, which began the project on November 1, 1998.
Five Star anticipates that they will complete the implementation of the new
software by September 1, 1999. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Recent Accounting
Pronouncements-Year 2000" for a discussion of the Company's preparations with
respect to the risks presented by the year 2000 issue.
Purchasing
Five Star relies heavily upon its purchasing capabilities to gain a competitive
advantage relative to its competitors. Five Star's capacity to stock the
necessary products in sufficient volume and its ability to deliver them promptly
upon demand is one of the strongest components of service in the distribution
business, and is a major factor in Five Star's success.
<PAGE>
Since retail outlets depend upon their distributor's ability to supply products
quickly upon demand, inventory is the primary working capital investment for
most distribution companies, including Five Star. Through its strategic
purchasing decisions, Five Star carries large quantities of inventory relative
to its competitors and thus can boast fill ratios of approximately 95%, as
compared to industry averages as reported in trade publications of approximating
85%.
All purchasing decisions based on current inventory levels, sales projections,
manufacturer discounts and recommendations from sales representatives, are made
by the merchandising group, located in New Jersey, in order to effectively
coordinate Five Star's activities. Notwithstanding senior management's active
involvement, the sales managers play an extremely critical role in this
day-to-day process.
Marketing
The do-it-yourself industry relies on distributors to effectively link
manufacturer's products to the various retail networks. The do-it-yourself
market operates on this two-step distribution process, i.e., manufacturers deal
through distributors who in turn service retailers. This occurs principally
because most retailers are not equipped to carry sufficient inventory in order
to be cost effective in their purchases from manufacturers. Thus, distributors
add significant value by effectively coordinating and transporting products to
retail outlets on a timely basis. Five Star distributes and markets products
from hundreds of manufacturers to all of the various types of retailers from
regional paint stores, to lumber yards to independent paint and hardware stores.
The marketing efforts are directed by the Vice President of Sales at each
facility. These individuals are responsible for designing, implementing and
coordinating marketing policies. The Vice President of Sales at each facility
works closely with senior management to coordinate company-wide marketing plans
as well as to service Five Star's major multi-state customers. In addition, each
Vice President of Sales is responsible for overseeing the effort of his sales
representatives.
The sales representatives, by virtue of daily contact with Five Star's
customers, are the most integral part of Five Star's marketing strategy. It is
their responsibility to generate revenue, ensure customer satisfaction and
expand the customer base. Each representative covers an assigned geographic
area. The representatives are compensated based on a draw plus commission. Five
Star has experienced a very low turnover in its sales force as evidenced by the
fact that most representatives have over five years of experience with Five
Star. Many sales reps often have retail experience in the paint or hardware
industry when they are hired by Five Star.
Five Star's size, solid reputation for service, large inventory and attractive
financing terms provide sales representatives with tremendous advantages
relative to competing sales representatives from other distributors. In
addition, the representatives' efforts are strengthened by company-sponsored
marketing events. For example, each year in January, Five Star invites all of
its customers to a special trade show for Five Star's major suppliers, so that
suppliers may display their products and innovations. Customers are able to
order products directly from manufacturers at the show and in 1999 customers
placed orders totaling well over $6 million worth of merchandise. Five Star also
<PAGE>
participates in a profitable advertising circular program in the spring and the
fall which contains discount specials and information concerning new product
innovations.
Five Star has continually enhanced its growth through complementary acquisitions
which have allowed it to preempt much of its competition as a high-quality,
competitively priced producer.
Industry Dynamics
The Do-It-Yourself Industry
The paint sundry items distribution industry is closely related to the
do-it-yourself market which has tended to exhibit elements of
counter-cyclicality. In times of recession, consumers tend to spend more on
home-improvements because they cannot afford contractor services or the cost to
trade up to bigger homes and in times of economic strength consumers spend
heavily in home improvements because they believe they can afford to complete
their home improvement projects. In 1998, according to the American Express
Retail Index, Americans spent more than $112 billion on home improvement and
expenditures are expected to reach $137 billion in 2003. In addition, 36% of
households are planning home improvement or redecorating projects in 1999 with
an average household expenditure of $2,747.
Painting is the quintessential do-it-yourself project. Painting has to be done
more frequently than most remodeling jobs, and it is a relatively inexpensive
way to update the appearance of a home. For these reasons, the paint and paint
sundry items industry tends to be counter-cyclical and a solid growth segment of
the do-it-yourself market.
Competition
Competition within the industry is intense. There are much larger national
companies commonly associated with national franchises such as Ace and TruServ
as well as smaller regional distributors, all of whom offer similar products and
services. Other than paint sundry item distributors, Five Star faces stiff
competition from Home Depot, which purchases directly from manufacturers and
dealer-owned distributors such as Ace and TruServ. Additionally, in some
instances manufacturers will bypass the distributor and choose to sell and ship
their products directly to the retail outlet. The principal means of competition
for Five Star are its strategically placed distribution centers and its
extensive inventory of quality name brand products. Five Star will continue to
focus its efforts on supplying its products to its customers at a competitive
price and on a timely, and consistent basis. In the future, Five Star will
attempt to acquire complementary distributors and to expand the distribution of
its line of private-label products sold under the "Five Star" name. Through
internal growth and acquisitions, Five Star has captured a leading share in its
principal market, the Northeast. This growth-oriented acquisition strategy of
acquiring complementary distributors has allowed Five Star to effectively
compete against a substantial number of its competitors. While other paint
sundry items distributors sell to the same retail networks as Five Star, they
are at a distinct disadvantage versus Five Star's experience, sophistication and
size.
<PAGE>
Concomitantly, hardware stores that are affiliated with the large, dealer-owned
distributors such as Ace also utilize Five Star's services because they are
uncomfortable with relying solely on their dealer network. Most cooperative-type
distributors lack the level of service and favorable credit terms that
independent hardware stores enjoy with Five Star. Five Star effectively competes
with the dealer-owned distributors because it provides more frequent sales
calls, faster deliveries, better financing terms and a full line of vendors and
products to chose from.
NPD Trading
NPD Trading provides consulting services to American and Western
corporations doing business in Eastern Europe through an office in Prague. NPD
Trading's on-going efforts on behalf of ICF Kaiser International ("ICF") and
their associated company, Kaiser Engineers, secured for these companies
contracts to perform feasibility studies in the areas of hazardous waste
management and steel industry modernization in the Czech Republic. NPD Trading
is providing ICF with technical and commercial assistance on a contract for a
$250 million hot strip mini mill in the Czech Republic. To date, the Company has
received $1 million for this assistance, including $840,000 received in
September 1997. The Company expects to receive another $1 million payment
contingent upon the completed construction on the mini mill in 1999.
On March 17, 1998 and April 2, 1998, the Company was informed by
holders of an aggregate of $1,000,000 of the Company's convertible notes (the
"Notes") that they had elected to convert $1,000,000 of the Notes into an
aggregate of 82,306 shares of GP Strategies common stock. In accordance with the
terms of the original agreement, the Company and GP Strategies had agreed that
if the Notes were used to exercise the warrants issued by GP Strategies in
connection with the Note offering, GP Strategies had the right to receive from
the Company in exchange for the Notes shares of the Company's common stock at a
price equal to 60% of its then current market value. However, on April 30, 1998,
the Company and GP Strategies agreed that instead of issuing additional shares
of the Company's common stock which GP Strategies was entitled to, the Company
would assign to GP Strategies its expected future payments in the amount of
approximately $1,000,000 from ICF as a success fee in connection with the
completion of the Company's consulting project in the Czech Republic which is
anticipated to be completed in 1999.
Employees
The Company employs 265 people, 264 of whom are employees of Five Star.
Management-employee relations are considered excellent at both of Five Star's
warehouse facilities. Approximately 111 of Five Star's employees, warehouse
personnel and drivers are represented by unions. The 111 union employees at New
Jersey are represented by the Teamsters union. Connecticut is completely
non-unionized. Five Star has never experienced a labor strike at its facilities.
Five Star's contract with Local No. 11, affiliated with the International
Brotherhood of Teamsters expires on December 15, 2000.
<PAGE>
As a result of the Company's decision to concentrate on its
distribution business, the Company closed its Washington, D.C. office, scaled
back the Prague office and eliminated the Moscow office.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
Not Applicable.
Item 2. Properties
Five Star leases 250,000 square feet in New Jersey and 110,000 square
feet in Connecticut. Five Star's operating lease for the New Jersey facility
expires in March 2007 and the annual rent is $885,731. Five Star's lease for the
Connecticut facility expires in February 2001 and its annual rent is $379,780.
The Company's New York office space is provided by GP Strategies pursuant to the
Management Services Agreement. As part of the Management Services Agreement, GP
Strategies receives $10,000 a month for services provided by GP Strategies
employees, such as management, legal, tax, accounting, insurance and employee
benefit administration services.
The facilities leased by the Company and Five Star are considered to be
suitable and adequate for their intended uses and are considered to be well
maintained and in good condition.
Item 3. Legal Proceedings
There are currently no material legal proceedings pending to which the
Company is a party or to which any of its properties are subject.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
<PAGE>
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The following table presents the high and low prices for the Common
Stock for 1998 and 1997. The Company's Common Stock, $.01 par value, is quoted
on the OTC Bulletin Board, which is operated by the NASDAQ Stock Market.
Quarter High Low
1998 First $0.14 $0.05
Second $0.42 $0.11
Third $0.45 $0.25
Fourth $0.45 $0.30
1997 First $0.31 $0.13
Second $0.28 $0.16
Third $0.22 $0.09
Fourth $0.17 $0.08
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The number of shareholders of record of the Common Stock as of March
15, 1999 was 4,646. On March 15, 1999, the average of the closing bid and asked
prices on the OTC Bulletin Board was $0.34. The Company has not declared any
cash dividends during or since its two most recent fiscal years. The current
policy of the Company's Board of Directors is to retain earnings, if any, to
finance the operation of the Company's business. The payment of cash dividends
on the Common Stock in the future will depend on the Company's earnings,
financial condition and capital needs and on other factors deemed pertinent by
the Company's Board of Directors.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Item 6. Selected Financial Data
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)
<TABLE>
Years Ended December 31,
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenue $17,184 $2,047 $ 1,104 $ 529 $ 799
Cost of goods sold 13,686 936 496 155 456
General and administrative
expenses 3,187 1,385 1,674 1,690 1,355
Net loss (664) (857) (1,498) (1,604) (1,302)
Loss per share:
Basic and diluted
before extraordinary item (.03) (.07) (.12) (.12) (.10)
Basic and diluted (.05) (.07) (.12) (.12) (.10)
December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Balance Sheet Data:
Current assets $ 32,291 $ 514 $1,018 $ 550 $ 70
Current liabilities 27,596 199 152 356 73
Non current liabilities 5,000 4,933 4,739 2,633 955
Working capital (deficiency) 4,695 315 866 194 (3)
Total assets 33,179 552 1,088 602 161
Total stockholders' equity (deficiency) 583 (4,580) (3,803) (2,387) (867)
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Overview
On September 30, 1998, a newly formed wholly-owned subsidiary of the Company,
the Five Star Group, Inc. (Five Star) purchased from JL Distributors, Inc. (JL),
(formerly Five Star Group, Inc.) certain operating assets of JL. JL is a
wholly-owned subsidiary of GP Strategies Corporation (GP Strategies). The assets
were purchased for $16,476,000 in cash and a $5,000,000 unsecured five year
senior note. Five Star is a leading distributor of home decorating, hardware and
finishing products in the northeast. For the year ended December 31, 1997 and
the nine months ended September 30, 1998, Five Star had sales of approximately
$82,300,000 and $64,148,000, respectively.
The purchase by the Company of certain assets of Five Star has changed the focus
of the Company. The Company plans to focus its efforts in the future on growing
the distribution business, and has taken several steps to reduce its traditional
operations from both a business and cost perspective.
As a result of the purchase of the assets of Five Star, the Company has shut
down its Moscow office, and in the short-term, the Company will sell its
existing inventory of generic products in Moscow warehouses through a Russian
company, Akorta and other third parties. No such additional products will be
purchased in the United States. In addition, the Company has closed its
Washington, DC office and scaled back the operations of its Prague office with
respect to the business of NPD Trading.
Liquidity and Capital Resources
During the third quarter of 1998, GP Strategies deemed that the Company would
not have the ability to repay its loan to GP Strategies, and therefore made the
decision to contribute the amount due to Capital in excess of par value.
Therefore GP Strategies did not charge the Company interest in the third quarter
of 1998.
At December 31, 1998, the Company had cash of $119,000. On September 30, 1998,
Five Star entered into a $25,000,000 loan and security agreement with a group of
banks. The credit facility allowed Five Star to borrow up to 50% of eligible
inventory and up to 80% of eligible accounts receivable. The Company borrowed
$16,476,000 on September 30, 1998 to fund the cash portion of the purchase price
in connection with the purchase of JL. At December 31, 1998, the Company had
borrowed $16,971,000 and had $1,194,000 of additional availability under the
loan agreement.
The Company believes it has sufficient borrowing availability under existing
credit agreements, and through the operations of the Company, to fund the
working capital requirements of Five Star as well as the limited operations of
the Company's Prague office.
<PAGE>
Results of operations
In 1998, loss before income taxes and extraordinary item was $(420,000), as
compared to a loss of $(857,000) before income taxes and extraordinary item for
1997. The reduced loss for 1998 was principally the result of the income earned
by Five Star since September 30,1998, as well as reduced selling, general and
administrative expenses incurred by the Company due to the curtailing of their
operations in Moscow during the year. The income earned by Five Star and the
reduced cost structure of the Company was partially offset by the effect of the
consulting revenues earned by the Company in 1997 totaling $840,000 relating to
a success fee attributable to a project with ICF Kaiser International in the
Czech Republic.
The Company's net loss decreased to $857,000 for 1997 from $1,498,000 incurred
for 1996 due to increased consulting fees and decreased general and
administrative expenses, partially offset by increased interest expenses
Sales
The Company had sales of $17,080,000 in 1998, compared to sales of $1,123,000 in
1997 and $842,000 in 1996. The increased sales in 1998 were the result of
$16,476,000 of sales earned by Five Star since September 30, 1998. The increased
sales in 1997 were generated by increased sales of medical equipment, partially
offset by reduced sales of generic drugs in the Commonwealth of Independent
States.
Consulting revenues
In 1998, the Company had consulting revenues of $104,000, compared to $924,000
in 1997 and $262,000 in 1996. The decrease in consulting revenues from 1997 to
1998 and the increase in consulting revenues from 1996 to 1997 was primarily due
to $840,000 in the form of a success fee related to a project with ICF Kaiser
International in the Czech Republic during 1997.
Gross margin
The Company had gross margin of $3,394,000 in 1998, compared to $187,000 in 1997
and $346,000 in 1996. The increased gross margin in 1998 was due to the gross
margin earned on the sales volume generated by Five Star since September 30,
1998.
<PAGE>
Selling, general and administrative expense
The Company had Selling, general and administrative (SG&A) expense of $3,187,000
in 1998 compared to $1, 385,000 in 1997 and $1,674,000 in 1996. The increased
SG&A in 1998 is due the acquisition of substantially all the operating assets of
Five Star on September 30, 1998, partially mitigated by reduced SG&A incurred by
the rest of the Company due to reduced consulting, personnel costs and facility
costs in both Washington D.C. and Moscow. The decrease in general and
administrative expenses in 1997 compared to 1996 was primarily due to reduced
consulting, marketing expense and facility costs, partially offset by costs
associated with consulting projects.
Interest expense
The Company had interest expense of $611,000 in 1998, $463,000 in 1997 and
$312,000 in 1996. The increased interest expense in 1998 is the result of both
the short-term borrowings incurred by Five Star (see Note 3 to the consolidated
financial statements), as well as interest incurred on the $5,000,000 unsecured
senior note (see Note 1 to the consolidated financial statements). The increased
interest expense in 1998 was partially offset by reduced interest expense due to
GP Strategies as a result of the contribution to Capital in excess of par value
of the amount owed to GP Strategies by the Company during the third quarter of
1998. The increased interest expense in 1997 as compared to 1996 was the result
of the increased balance due to GP Strategies in 1997.
Recent accounting pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 130, (SFAS 130), "Reporting Comprehensive Income", in
June 1997 which requires a statement of comprehensive income to be included in
the financial statements for fiscal years beginning after December 15, 1997. The
Company has adopted this Statement and has no other comprehensive income;
therefore comprehensive income is the same as net income (loss).
In addition, in June of 1997, the FASB issued SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS 131 requires disclosure
of certain information about operating segments and about products and services,
geographic areas in which a company operates and their major customers. The
Company operates in one principal business segment, and accordingly, SFAS 131
had no impact on the Company's December 31, 1998 financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This Statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This Statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company will adopt SFAS No. 133 by January 1, 2000. The
<PAGE>
Company is currently evaluating the impact the adoption of SFAS No. 133 will
have on the consolidated financial statements.
Year 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Company is utilizing both internal and external resources to identify,
correct or reprogram and test systems for year 2000 compliance. The Company's
primary operating subsidiary, Five Star has during the third quarter of 1998
entered into an agreement to purchase new software that will be year 2000
compliant. This previously planned software upgrade will manage the financial
operations of Five Star including order entry, inventory control and accounts
receivable and payable. Five Star has an implementation team led by the Director
of Information Systems, which began the project on November 1, 1998. Five Star
anticipates that they will complete the implementation of the new software by
September 1, 1999. The cost of the new software, including implementation, is
estimated to be approximately $400,000. Five Star has arranged financing for
approximately $250,000 of the estimated cost over a four year period. In
addition, Five Star's other major information system is its warehouse management
system. Five Star is currently updating this system to a current release that is
year 2000 compliant. There will be no additional cost to this upgrade since all
upgrades related to the warehouse system are included in yearly maintenance.
Five Star has also identified various ancillary programs that need to be updated
and has contracted with third parties for this work to be completed within the
next six months. It is expected that the cost of these modifications will be
approximately $10,000.
In addition Five Star is examining their exposure to the year 2000 in other
areas of technology. These areas include telephone and E-mail systems, operating
systems and applications in free standing personal computers and other areas of
communication. A failure of these systems may impact the ability of Five Star to
service their customers which could have a material effect on their results of
operations. These issues are being handled by the information systems and
finance team at Five Star by identifying the problems and obtaining from vendors
and service providers either the necessary modifications to the software or
assurances that the systems will not be disrupted. Five Star believes that the
cost of the programming and equipment upgrades will not be in excess of $50,000.
In addition, certain personal computers and other equipment that is not year
2000 compliant will be upgraded through Five Star's normal process of equipment
upgrades. Five Star believes that the evaluation and implementation process will
be completed no later than the second quarter of 1999. Over the next year, Five
Star plans to concentrate its efforts on the implementation of its new data
processing systems, but it will also continue to develop and implement other
information technology projects needed in the ordinary course of business.
<PAGE>
Five Star expects to finance these expenditures from a combination of working
capital and operating leases for a portion of the new computer equipment and
software. Therefore, Five Star does not expect the year 2000 issue to have a
material adverse impact on its financial position or results of operations.
Like other companies, the Company relies on its customers for revenues and on
its vendors for products and services of all kinds; these third parties all face
the year 2000 issue. An interruption in the ability of any of them to provide
goods or services, or to pay for goods or services provided to them, or an
interruption in the business operations of our customers causing a decline in
demand for services, could have a material adverse effect on the Company in
turn.
In addition, there is a risk, the probability of which the Company is not in a
position to estimate, that the transition to the year 2000 will cause wholesale,
perhaps prolonged, failures of electrical generation, banking,
telecommunications or transportation systems in the United States or abroad,
disrupting the general infrastructure of business and the economy at large. The
effect of such disruptions on the Company could be material.
The Company's various departments will communicate with their principal
customers and vendors about their year 2000 readiness, and expect this process
to be completed no later than the third quarter of 1999. None of the responses
received to date suggests that any significant customer or vendor expects the
year 2000 issue to cause an interruption in its operations which would have a
material adverse impact on the Company. However, because so many firms are
exposed to the risk of failure not only of their own systems, but of the systems
of other firms, the ultimate effect of the year 2000 issue is subject to a very
high degree of uncertainty.
The Company believes that its preparations currently under way are adequate to
assess and manage the risks presented by the year 2000 issue, and does not have
a formal contingency plan at this time.
The statements in this section regarding the effect of the year 2000 and the
Company's responses to it are forward-looking statements. They are based on
assumptions that the Company believes to be reasonable in light of its current
knowledge and experience. A number of contingencies could cause actual results
to differ materially from those described in forward-looking statements made by
or on behalf of the Company.
Forward-Looking Statements. This report contains certain forward-looking
statements reflecting management's current views with respect to future events
and financial performance. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements, all of which are
difficult to predict and many of which are beyond the control of the Company,
but not limited to the risk that the acquisition of Five Star will achieve the
projected levels of profitability and revenues, as well as the Company's ability
to further scale down its operations in Prague, the risk that the Company's
preparations with respect to the risks presented by the year 2000 issue will not
be adequate, and those risks and uncertainties detailed in the Company's
periodic reports and registration statements filed with the Securities and
Exchange Commission.
<PAGE>
Inflation
Inflation is not expected to have a significant impact on the Company's
business.
<PAGE>
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by Item 7A is not applicable to the
Company's business.
<PAGE>
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Reports 18
Financial Statements:
Consolidated Balance Sheets - December 31, 1998 and
1997 20
Consolidated Statements of Operations - Years ended
December 31, 1998, 1997 and 1996 22
Consolidated Statements of Changes in Stockholders'
Equity (Deficiency) - Years ended December 31,
1998, 1997 and 1996 23
Consolidated Statements of Cash Flows - Years ended
December 31, 1998, 1997 and 1996 24
Notes to Consolidated Financial Statements 25
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board Directors and Stockholders
American Drug Company
We have audited the accompanying consolidated balance sheet of American
Drug Company and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the consolidated financial position
of American Drug Company and subsidiaries at December 31, 1998, and the
consolidated results of its operations and its cash flows for the year
then ended, in conformity with generally accepted accounting
principles.
Richard A. Eisner & Company, LLP
New York, New York
March 5, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
American Drug Company:
We have audited the consolidated balance sheet of AMERICAN DRUG COMPANY AND
SUBSIDIARIES as of December 31, 1997, and the related consolidated statements of
operations, changes in stockholders' equity (deficiency) and cash flows for each
of the years in the two-year period ended December 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AMERICAN DRUG
COMPANY AND SUBSIDIARIES at December 31, 1997, and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
The consolidated financial statements referred to above have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 3 accompanying the 1997 consolidated financial statements, the Company has
suffered recurring losses from operations and has an accumulated deficit t
hat raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in the
Notes to those consolidated financial statements. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
KPMG LLP
New York, New York
March 27, 1998
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share information)
December 31, December 31,
1998 1997
ASSETS
Current assets
Cash $ 119 $ 225
Accounts receivable, trade, less allowance
for doubtful accounts of $1,630 and $90
in 1998 and 1997 9,697 139
Inventory 22,446 149
Prepaid expenses and other current assets 29 1
--------- -------
Total current assets 32,291 514
-------- ------
Machinery and equipment, at cost 985 113
Less accumulated depreciation (173) (113)
--------- -------
812
Other assets 76 38
--------- -------
$ 33,179 $ 552
========= =======
See accompanying notes to the consolidated financial statements.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except shares and per share information)
December 31, December 31,
1998 1997
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Short-term borrowings $ 16,971 $
Accounts payable and accrued expenses 10,625 199
---------- --------
Total current liabilities 27,596 199
---------- --------
7% convertible notes 1,000
------------ -------
Long-term debt to GP Strategies 5,000 3,933
--------- -------
Stockholders' equity (deficiency)
Common stock, authorized 30,000,000 shares,
par value $.01 per share
13,020,155 shares issued and outstanding 130 130
Capital in excess of par value 7,589 1,762
Accumulated deficit (7,136) (6,472)
--------- -------
Total stockholders' equity (deficiency) 583 (4,580)
---------- --------
$ 33,179 $ 552
======== =========
See accompanying notes to the consolidated financial statements.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
Year Ended December 31,
<TABLE>
1998 1997 1996
<CAPTION>
-------- --------- ---------
<S> <C> <C> <C>
Sales $ 17,080 $ 1,123 $ 842
Cost of goods sold 13,686 936 496
--------- ---------- --------
Gross margin 3,394 187 346
Selling, general and
administrative expenses (3,187) (1,385) (1,674)
Management fee to GP Strategies (120) (120) (120)
Consulting revenues 104 924 262
Interest expense (611) (463) (312)
-------- ------- -------
Loss before income taxes
and extraordinary item (420) (857) (1,498)
Income tax expense (40)
Loss before extraordinary item (460) (857) (1,498)
Extraordinary item
Early extinguishment of debt (204)
Net loss $ (664) $ (857) $(1,498)
======== ======= ==========
Loss per share
Basic and diluted before extraordinary item $(.03) $(.07) $(.12)
----- ----- -----
Basic and diluted net loss per share (.05) (.07) (.12)
------ ------ ------
Weighted average number of
shares outstanding 13,020 13,020 13,020
======== ======== =========
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIENCY)
Years Ended December 31, 1998, 1997 and 1996
(in thousands, except number of shares)
<TABLE>
<CAPTION>
Shares of Capital in Total
Common Stock Common Excess of Deferred Stockholders'
Outstanding Stock Par Value Deficit Compensation Deficiency
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 13,020,155 $130 $1,682 $(4,117) $(82) $(2,387)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss (1,498) (1,498)
Amortization of deferred compensation 82 82
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 13,020,155 130 1,682 (5,615) (3,803)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss (857) (857)
Officers' compensation 80 80
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 13,020,155 130 1,762 (6,472) (4,580)
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss (664) (664)
Contribution to capital by GP Strategies 5,407 5,407
Deferred finance cost-contribution to
capital by GP Strategies 330 330
Issuance of compensatory stock options 90 90
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 13,020,155 $130 $7,589 $(7,136) $ $ 583
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
Years Ended December 31,
<CAPTION>
1998 1997 1996
Cash flows used in operations:
<S> <C> <C> <C>
Net loss $ (664) $(857) $(1,498)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 191 33 37
Non cash compensation 90 80 82
Loss from extinguishment of debt 204
Changes in other operating items:
Accounts receivable 2,310 (55) 20
Inventory (1,906) 177 3
Prepaid expenses and other assets 235 20 29
Accounts payable, accrued expenses
and accrued interest (1,608) 338 73
--------- -------- ---------
Net cash used in operations (1,148) (264) (1,254)
---------- ----- -------
Cash flows from financing activities:
Net proceeds from short-term borrowings 16,971
Net proceeds from issuance of 7% convertible notes 950
Loans from GP Strategies 474 829
Repayment of loans from GP Strategies (97)
------------- -------- ---------
Net cash (used for) provided by financing activities 17,445 (97) 1,779
-------- -------- ------
Cash flows from investing activities:
Net assets of Five Star, less cash acquired (16,291)
Additions to machinery and equipment (112) (5)
------------ ----------- ----------
Net cash used in investing activities (16,403) (5)
--------- ----------- ---------
Net (decrease) increase in cash (106) (361) 520
Cash at beginning of period 225 586 66
---------- -------- ---------
Cash at end of period $ 119 $ 225 $ 586
========== ======== ========
Non cash financing and investing activities:
Senior note issued in Five Star acquisition $ 5,000
---------
7% convertible notes retired by
issuance of GP Strategies common stock 1,000
Contributions to capital by GP Strategies 5,737
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Acquisition of the assets and business of Five Star
American Drug Company (the "Company") has two subsidiaries, NPD Trading
(USA), Inc. (NPD Trading) and Five Star Group, Inc. (Five Star). NPD
Trading provides consulting services in Eastern Europe through an
office in Prague.
On September 30, 1998, a newly formed wholly-owned subsidiary of the
Company, the Five Star Group, Inc. (Five Star) purchased from JL
Distributors, Inc. (JL), (formerly the Five Star Group, Inc.)
substantially all the operating assets of JL, for approximately
$16,476,000 in cash and a $5,000,000 unsecured senior note. The
unsecured senior note bears interest at the rate of 8% payable
quarterly, with the principal due on September 30, 2003. Five Star is a
distributor of home decorating, hardware and finishing products in the
northeast. As part of this transaction, GP Strategies Corporation (GP
Strategies) sold a 16.5% interest in the Company to the employees and
management of Five Star. GP Strategies currently owns approximately 37%
of the Company. JL is a wholly-owned subsidiary of GP Strategies. The
acquisition was accounted for as a purchase. The excess of the fair
value of the net assets acquired over the purchase price was applied to
reduce the recorded value of fixed assets. Since the acquisition of
Five Star occurred on September 30, 1998, the results of operations for
Five Star prior to that date have not been included in the operations
of the Company for the periods presented.
The following shows on a proforma basis the results of operations of
the Company had the above transaction occurred on January 1, 1997 and
1998 (in thousands, except per share data):
December 31,
(unaudited)
1998 1997
Sales $81,091 $83,423
Income before extraordinary item 371 49
Net income 167 24
Basic income per share .01 -
Diluted income per share .01 -
Such information is not indicative of what actual results might have
been nor of what future results would be.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
2. Summary of significant accounting policies
Inventory. Inventory is valued at the lower of cost, using the
first-in, first-out (FIFO) method, or market. Inventory consists solely
of finished products.
Fixed assets. Fixed assets are carried at cost. Major additions and
betterments are capitalized, while maintenance and repairs that do not
extend the lives of the assets are expensed currently. Gain or loss on
the disposition of fixed assets is recognized currently in operations.
Depreciation is calculated on a straight-line basis over the estimated
useful lives of the assets.
Principles of consolidation. The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries,
NPD Trading and Five Star. All significant intercompany balances and
transactions have been eliminated in consolidation.
Income taxes. Income taxes are provided for based on the asset and
liability method of accounting pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are
expected to be recovered or settled. Under SFAS 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Statement of cash flows. For purposes of the statement of cash flows,
the Company considers all liquid investments with original maturities
of three months or less to be cash equivalents.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Concentration of credit risk. Financial instruments that potentially
subject the Company to significant concentrations of credit risk
consist primarily of accounts receivable. Sales are made principally to
independently owned paint and hardware stores, and therefore, there are
no significant concentrations of credit risk.
Financial instruments. The carrying amounts of financial instruments
including cash, trade accounts receivable and trade accounts payable
approximated fair value as of December 31, 1998 and 1997 because of the
relatively short maturity of these instruments. The carrying amount of
short-term borrowings and of long-term debt to GP Strategies
approximated fair value because interest is charged at market rates.
Stock based compensation. The Company has adopted SFAS No. 123,
Accounting for Stock-Based Compensation, which permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123
also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings per
share disclosures for employee stock option grants made in 1995 and
subsequent years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
2. Summary of significant accounting policies (Continued)
Earnings per share. The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share", which
established standards for computing and presenting earnings per share
(EPS). The statement simplifies the standards for computing EPS,
replaces the presentation of primary EPS with a presentation of basic
EPS and requires a dual presentation of basic and diluted EPS on the
face of the income statement. Basic EPS are based upon the weighted
average number of common shares outstanding during the period. Diluted
EPS are based upon the weighted average number of common shares
outstanding during the period assuming the issuance of common shares
for all dilutive potential common shares outstanding. For the years
ended December 31, 1998, 1997 and 1996 the Company did not include any
potential common stock in its calculation of diluted EPS, because all
options and warrants are anti-dilutive.
3. Short-term borrowings
On September 30, 1998, the Company's wholly-owned subsidiary Five Star
entered into a new three year Loan and Security Agreement dated as of
September 30, 1998 (the "Loan Agreement") by and among three banks. The
Loan Agreement provides for a $25,000,000 revolving credit facility,
which allows Five Star to borrow based upon a formula of up to 50% of
eligible accounts inventory and 80% of eligible accounts receivable, as
defined in the Loan Agreement. The interest rate on any loan under the
Loan Agreement is based on an adjusted prime rate or LIBOR rate, as
described in the Loan Agreement. At December 31, 1998, $16,971,000 was
outstanding under the Loan Agreement and approximately $1,194,000 was
available to be borrowed. Substantially all of the Company's assets are
pledged as collateral for these borrowings.
4. 401(k) plan
The Company's employees are included in the GP Strategies 401(k)
pension plan. The Company pays its allocable share of costs as
incurred. Such costs, including administrative expenses and the
employer's contributions, amounted to approximately $36,000, $13,000
and $13,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
5. Machinery and equipment
Major classes of machinery and equipment consist of the following (in
thousands):
December 31, Estimated
1998 1997 useful lives
---- ---- ------------
Machinery and equipment $ 50 $ 16 3 years
Furniture and fixtures 318 97 5 years
Leasehold improvements 617 3-9 years
-----------------
985 113
Less accumulated depreciation (173) (113)
$ 812 $
======= =========
Depreciation expense for the years ended December 31, 1998, 1997 and
1996 was $60,000, $10,000 and $17,000, respectively.
6. Long-term debt
On March 17, 1998 and April 2, 1998, the Company was informed by
holders of an aggregate of $1,000,000 of the Company's convertible
notes (the "Notes") that they had elected to convert all the Notes into
an aggregate of 82,306 shares of GP Strategies common stock. In
accordance with the terms of the original agreement the Company and GP
Strategies had agreed that if the Notes were used to exercise the
warrants issued by GP Strategies in connection with the Note offering,
GP Strategies had the right to receive from the Company in exchange for
the Notes, shares of the Company's common stock at a price equal to 60%
of its then current market value.
The company has recorded during 1998 the $330,000 fair value of the
warrants issued by GP Strategies to the noteholders as a credit to
capital in excess of par value. The unamortized balance of the related
debt issuance expense at the date of conversion of the Notes in the
amount of $204,000 has been recorded as an extraordinary charge upon
early extinguishment of debt.
On April 30, l998, the Company and GP Strategies agreed that instead of
issuing additional shares of the Company's common stock, the Company
would assign to GP Strategies its expected future payments in the
amount of approximately $1,000,000 from ICF Kaiser International as a
success fee in connection with the completion of the Company's
consulting project in the Czech Republic, which is anticipated to be
completed in l999.
Since this fee is contingent upon the successful completion of the
project, it has not been recorded by the Company. Only the amount of
the fee, if any, collected by the Company is required to be remitted to
GP Strategies. Accordingly, no liability to GP Strategies has been
recorded for any amount which may ultimately be collected in connection
with this project
7. Transactions with affiliates
Transactions with GP Strategies and its subsidiaries, other than loans
and capital contributions received, as disclosed elsewhere in the
financial statements, during the years ended December 31, 1998, 1997,
and 1996 are summarized below (in thousands):
December 31,
----------------------------
1998 1997 1996
---- ---- ----
Consulting fees earned from affiliate $ 101 $ 65 $ 25
======== ======= =======
Transactions with GP Strategies
Management fees incurred $ 120 $ 120 $ 120
Interest expense incurred 177 291 277
From inception through September 30, 1998, the Company was financed by
GP Strategies, by means of capital contributions, short-term
non-interest bearing advances and long-term interest bearing
obligations. The Company received $2,500,000 under its $2,500,000 loan
agreement with GP Strategies, plus additional funding totaling
$5,407,000 including accrued interest through September 30, 1998 (see
Note 12).
The management fee charged to the Company by GP Strategies covers
services provided by GP Strategies such as management, legal, tax,
accounting, insurance and employee benefit administration services.
The Company provided services to GSE Systems, Inc. (GSES), an affiliate
of GP Strategies, in assisting that affiliate to obtain a contract to
provide the Temelin Nuclear Power Plant and the St. Petersburg Nuclear
Power Plant with full scope simulators. GSES is a successor to General
Physics International Engineering and Simulation, Inc. Revenues from
GSES amounted to $101,000, $65,000 and $25,000, respectively, for the
years ended December 31, 1998, 1997, and 1996.
In 1994 the Company commenced paying $150,000 annually as compensation
to an officer of GP Strategies, in view of the additional time
allocated by this officer to the Company. This agreement was terminated
effective December 31, 1998.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
7. Transactions with affiliates (Continued)
As of January 1, 1994, the Company and GP Strategies entered into a
three-year Management Services Agreement pursuant to which certain
direct and indirect services will be provided to the Company by GP
Strategies. The services to be provided by GP Strategies include legal,
tax, accounting, insurance and employee benefit administration
services. The Company paid GP Strategies a fee of $10,000 per month
during the term of the agreement. The Agreement is automatically
renewable for successive one-year terms unless one of the parties
notifies the other in writing at least six months prior to the end of
the initial term of any renewal thereof. The Agreement was renewed for
1998 and 1999.
8. Income taxes
The Company and its subsidiaries have had net losses for years ended
December 31, 1998, 1997 and 1996, respectively. No Federal or State tax
expense has been provided for the years ended December 31, 1997 and
1996. For the year ended December 31, 1998, the Company has recorded a
current state and local tax provision of $40,000 that relates to the
Company's new subsidiary Five Star.
A reconciliation between the Company's effective tax rate and the U.S.
statutory rate follows:
Years ended December 31, 1998 1997 1996
-----------------------------------------------------------------------
Tax at U.S. statutory rate $(212) $(283) $(557)
State and local taxes net of
Federal benefit 40
Net operating loss utilization 1,608
Valuation allowance
adjustment (1,396) 283 557
-----------------------------------------------------------------------
Taxes $40
-----------------------------------------------------------------------
Under SFAS No. 109, a valuation allowance is provided when it is more
likely than not that some portion of deferred tax assets will not be
realized. The Company has determined, based upon the Company's history
of operating losses, that 100% valuation reserves are required as of
December 31, 1998 and 1997.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
8. Income taxes (Continued)
As of December 31, 1998 and 1997, the Company had approximately
$304,000 and $1,700,000, respectively, of deferred tax assets and no
deferred tax liabilities. The tax effects that gave rise to these
deferred tax assets and the valuation allowance consist of the
following (in thousands):
December 31, December 31,
1998 1997
Deferred tax assets
Organization costs $ 3 $ 7
Allowance for doubtful accounts 40 34
Net operating loss carryforwards 42 1,525
Machinery and equipment 21 9
Deferred compensation 160 125
Inventory 38
-------- ---------
Deferred tax assets 304 1,700
------- ------
Valuation allowance (304) (1,700)
------- ---------
Net deferred tax assets after
valuation allowance $ $
========== =========
The change in the valuation allowance for the year ended December 31,
1997 amounted to an increase of $283,000, primarily attributable to an
increase of the Company's net operating loss. The change in the
valuation allowance for the year ended December 31,1998 amounted to a
decrease of $1,396,000, primarily attributable to utilization of the
net operating loss.
As of December 31, 1998, the Company has approximately $110,000 of net
operating loss carryovers, that expire in the year 2013. The decrease
to the net operating loss of approximately $4,407,000 results from
cancellation of indebtedness income, in connection with forgiveness of
certain obligations to GP Strategies.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
9. Employment and consulting agreement
(a) Employment agreement
As of January 1, 1994, the Company entered into an employment agreement
with its President and Chief Executive Officer. Pursuant to the
Employment Agreement, the officer devoted approximately one-half of his
time to serve as the Company's Chief Executive Officer and President.
The agreement had a three-year term with an option to renew for
successive one-year periods. It provided that the officer would
receive, in connection with services rendered to the Company, a base
salary in the amount of $150,000, subject to adjustment by the
Compensation Committee of the Board of Directors. In addition, the
officer received options to purchase an aggregate of 500,000 shares of
Common Stock at an exercise price per share of $.50 under the Company's
Stock Option Plan.
The Company determined not to renew the Employment Agreement and the
Employment Agreement terminated on December 31, 1998.
(b) Consulting agreement
As of January 1, 1994, the Company entered into a consulting agreement
with its Chairman of the Board. Pursuant to the agreement, the Chairman
served as a consultant to the Company for a period of three years. In
lieu of consulting fees or other payments, the Company granted the
Chairman options to purchase an aggregate of 250,000 shares of Common
Stock at an exercise price per share of $.50, which options vested in
equal installments over a three year period commencing August 5, 1994.
The Chairman, who is the President of GP Strategies, was granted
options to purchase an additional 250,000 shares of Common Stock from
GP Strategies, pursuant to the GP Strategies American Drug Company
Stock Option Plan, on the same terms and subject to the same conditions
as those granted to him by the Company.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
9. Employment and consulting agreement (Continued)
(b) Consulting agreement (Continued)
The Company estimated the fair value of the services of the Chairman
for the initial three year period beginning January 1, 1994 to be
approximately $250,000. The Company estimated the fair value of the
options granted to the Chairman by the Company and by GP Strategies to
be approximately $250,000 in the aggregate. Such amount was recorded as
deferred compensation and as capital in excess of par value. The
deferred compensation was amortized over the three year vesting period
of the options. Amortization for the year ended December 31, 1996
amounted to $82,000 and is included in general and administrative
expenses. The unamortized balance of deferred compensation was
reflected as a deduction from stockholders' equity.
The Company valued the Chairman's services at $80,000 for the year
ended December 31, 1997, and has recorded this amount as a contribution
to capital and compensation expense. This agreement was terminated in
1998.
10. Major customers and customers' deposits
Several customers each accounted for more than 10% of the Company's
revenues as follows:
For the year ended December 31, 1998, no customer accounted for more
than 10% of the Company's revenue.
1997 Two customers accounted for 41% and 27 % of revenues,
respectively.
1996 One customer accounted for 18% of revenue.
Export revenues represented approximately $84,000, $1,123,000 and
$842,000 of the Company's revenues in 1998, 1997 and 1996.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
11. Stock options and warrants
(a) Stock option plan
On January 1, 1994, the Company's Board of Directors and sole
stockholder adopted the American Drug Company 1994 Stock Option Plan
(the "Stock Option Plan"), which became effective August 5, 1994. Under
the Stock Option Plan, a total of 2,000,000 shares of Common Stock have
been reserved for issuance, subject to adjustment in the event of stock
splits, stock dividends, recapitalizations, reclassifications or other
capital adjustments. Unless designated as "incentive stock options"
intended to qualify under Section 422 of the Internal Revenue Code,
options granted under the Stock Option Plan are intended to be
nonqualified options. Options may be granted to any director, officer
or other key employee of the Company and its subsidiary, and to
consultants and other individuals providing services to the Company.
The Compensation Committee of the Board of Directors will administer
the Stock Option Plan and will determine, among other things, the
persons to be granted options, the number of shares to be subject to
each option, the exercise price and vesting schedule of each option,
whether to accelerate the exercise date of the option for any reason,
and whether to cause the Company to make loans which enable an optionee
to pay the purchase price of any option. No options are transferable by
the optionee other than by will.
The term of any option granted under the Stock Option Plan will not
exceed ten years from the date of the grant of the option and, in the
case of incentive stock options granted to a 10% or greater holder in
the total voting stock of the Company, three years from the date of
grant. The exercise price of any option will not be less than the fair
market value of the Common Stock on the date of grant or, in the case
of incentive stock options granted to a 10% or greater holder in the
total voting stock, 110% of such fair market value.
In June 1998, the Company cancelled 1,440,000 options and issued
1,500,000 common stock options at a price of $.13 per share to both
employees of the Company and employees of GP Strategies who provide
services to the Company under the management services agreement. The
Company recorded a deferred compensation expense of $90,000 related to
the issuance of the options to the employees of GP Strategies.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
11. Stock options and warrants (Continued)
(a) Stock option plan (Continued)
At December 31, 1998 and 1997, the per share weighted-average fair
value of stock options granted during 1998 and 1996 was $.06 and $.40,
on the date of grant using the modified Black Scholes option-pricing
model with the following assumptions: 1998 - expected dividend yield
0%, risk-free interest rate of 5.6%, expected volatility of 66.7% and
an expected life of 3 years; 1996 - expected dividend yield 0%,
risk-free interest rate of 6.6%, expected volatility of 105.6%, and an
expected life of 5 years. There were no stock options granted during
the year ended December 31, 1997.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized in the financial
statements for stock options issued to employees of the Company. Had
the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net
loss would have been increased to the pro forma amounts indicated
below:
1998 1997
---- ----
Net loss As reported $(664) $(857)
Pro forma (670) (869)
Basic and diluted
loss per share As reported (.05) (.07)
Pro forma (.05) (.07)
Pro forma net income reflects only options granted in 1995 through
1998. Therefore, the full impact of calculating compensation cost for
stock options under SFAS No. 123 is not reflected in the pro forma net
income amounts presented above because compensation cost is reflected
over the options' vesting period of 5 years and compensation cost for
options granted prior to January 1, 1995 is not considered.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
11. Stock options and warrants (Continued)
Stock option activity during the periods indicated is as follows:
Number of Weighted-Average
Shares Exercise Price
Balance at December 31, 1995 1,510,000 $ .50
Granted 90,000 .50
---------- --------
Balance at December 31, 1996 1,600,000 .50
----------- ---------
Expired (60,000) .50
------------ --------
Balance at December 31, 1997 1,540,000 .50
----------- --------
Granted 1,500,000 .13
Cancelled (1,440,000) .50
----------- --------
Balance at December 31, 1998 1,600,000 .15
=========== ========
At December 31, 1998 and 1997, the range of exercise prices and
weighted-average remaining contractual life of outstanding options was
$.13 to $.50 and $.50 and 3 years and 3 years, respectively.
At December 31, 1998, 1997 and 1996, the number of options exercisable
was 1,350,000, 1,509,996 and 1,539,999, respectively, and the
weighted-average exercise price of exercisable options was $.17, $.50
and $.50, respectively.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
11. Stock options and warrants (Continued)
(b) Warrants to purchase common stock
In August 1994, GP Strategies entered into a Transfer and Distribution
Agreement with the Company whereby GP Strategies transferred to the
Company (the "Distribution") immediately prior to the closing of the
Distribution, all of its interest in NPD Trading in exchange for (i)
the issuance by the Company of 6,990,900 shares of Common Stock to GP
Strategies (ii) the issuance of 6,017,775 shares of Common Stock to be
distributed to GP Strategies stockholders, and (iii) the issuance of
6,017,775 warrants to be distributed to GP Strategies stockholders.
Each warrant was initially exercisable for a period of two years from
August 5, 1994 at an exercise price per share of $1.00. In August 1996,
the Board of Directors approved an extension of the Company's warrants
until August 5, 1998 and a reduction of the exercise price to $.50 per
share, subject to adjustment in certain circumstances and in August
1998, the Board of Directors approved a two-year extension of the
Company's warrants until August 5, 2000 and an increase in the exercise
price to $.75 per share, subject to adjustment in certain
circumstances.
The Company has the right to cancel the warrants if the closing price
of the Company's common stock as quoted by the OTC Bulletin Board
during any ten consecutive trading days shall equal or exceed $1.00 per
share.
12. Loans and advances from GP Strategies
In August 1994, GP Strategies entered into a $2.5 million loan
agreement with NPD Trading, under which GP Strategies would fund the
loan with either securities or cash, at its option. At September 30,
1998, the Company had borrowed the full $2,500,000 under its loan
agreement with GP Strategies and therefore had no remaining borrowing
availability under this agreement. GP Strategies advanced additional
funds to the Company, until the third quarter of 1998, when the total
amount due to GP Strategies, including accrued interest totaled
approximately $5,407,000. During the third quarter of 1998, GP
Strategies deemed that the Company would not have the ability to repay
its loan to GP Strategies, and therefore made the decision to
contribute the amount due to capital in excess of par value.
<PAGE>
AMERICAN DRUG COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
13. Commitments and contingencies
The Company has several noncancellable leases which cover real property,
machinery and equipment. Such leases expire at various dates with, in some
cases, options to extend their terms.
Minimum rentals under long-term operating leases are as follows(in thousands):
Real Machinery and
property equipment Total
1999 $ 1,266 $ 1,291 $ 2,557
2000 1,266 1,019 2,285
2001 949 602 1,551
2002 886 404 1,290
2003 886 97 983
After 2003 3,031 20 3,051
- ------------------------------------------------------------------------------
Total $ 8,284 $3,433 $11,717
- ------------------------------------------------------------------------------
During 1998, 1997 and 1996, the Company incurred $804,000, $158,000 and
$164,000, respectively, of rental expenses.
<PAGE>
Item 9. Changes in and Disagreements with Accountants and Financial Disclosure.
KPMG LLP was previously the Company's and its subsidiaries principal
accountants. On November 10, 1998, that firm's appointment as principal
accountants was terminated and Richard A. Eisner & Company, LLP was engaged as
principal accountants to audit the accounts of the Company and subsidiaries for
the year ending December 31, 1998. The decision to change accountants was
recommended by the Board of Directors of the Company.
In connection with the audits of the fiscal years ended December 31,
1996 and December 31, 1997, and the subsequent interim periods through June 30,
1998, there were no disagreements through November 10, 1998 with KPMG LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures, which disagreements, if not resolved to their
satisfaction, would have caused them to make reference in connection with their
opinion to the subject matter of the disagreement.
The audit reports of KPMG LLP on the consolidated financial statements
of the Company as of and for the years ended December 31, 1997 and December 31,
1996 did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles,
except as follows: KPMG LLP's auditors' report on the consolidated financial
statements of the Company and its subsidiary as of and for the years ended
December 31, 1997 and 1996 contained a separate paragraph stating that "the
Company has suffered recurring losses from operations and has an accumulated
deficit that raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty."
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors of the Company is
incorporated herein by reference to the Company's definitive proxy statement
pursuant to Regulation 14A, which proxy statement will be filed no later than
120 days after the end of the fiscal year covered by this Report.
Item 11. Executive Compensation
Information with respect to Executive Compensation is incorporated
herein by reference to the Company's definitive proxy statement pursuant to
Regulation 14A, which proxy statement will be filed no later than 120 days after
the end of the fiscal year covered by this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information with respect to Security Ownership of Certain Beneficial
Owners is incorporated herein by reference to the Company's definitive proxy
statement pursuant to Regulation 14A, which proxy statement will be filed no
later than 120 days after the end of the fiscal year covered by this Report.
Item 13. Certain Relationships and Related Transactions
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to the Company's definitive
proxy statement pursuant to Regulation 14A, which proxy statement will be filed
no later than 120 days after the end of the fiscal year covered by this Report.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following financial statements are included in Part II, Item 8:
Page
Independent Auditors' Reports.......................................18
Financial Statements:
Consolidated Balance Sheets -
December 31, 1998 and 1997..........................................20
Consolidated Statements of
Operations - Years ended
December 31, 1998, 1997 and 1996....................................22
Consolidated Statements of Changes in
Stockholders' Equity (Deficiency)- Years
ended December 31, 1998, 1997 and 1996..............................23
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996........................24
Notes to Consolidated Financial Statements..........................25
(a)(2) Schedules have been omitted because they are not required
or are not applicable, or the required information has been
included in the financial statements or the notes thereto.
(a)(3) See accompanying Index to Exhibits
(b) On November 10, 1998, the Registrant filed a Report on Form 8-K
reporting a change in the Registrant's Certifying Accountants in
response to Item 4.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN DRUG COMPANY
Richard T. Grad, President
and Chief Executive Officer
Dated: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title
Richard T. Grad President, Chief Executive Officer and Director
(Principal Executive and Operating Officer)
Jerome I. Feldman Chairman of the Board
Cindy Krugman Vice President and Controller
(Principal Financial and Accounting Officer)
Scott N. Greenberg Director
Charles Dawson Director
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Document Page
3. Amended Certificate of Incorporation of the
Registrant. Incorporated herein by reference to
Exhibit 3 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996.
3.1 By-laws of the Registrant. Incorporated herein by
reference to Exhibit 3.2 of the Registrant's
Registration Statement on Form S-1 filed on July 22,
1994, Registration Statement No. 33-78252.
10. 1994 Stock Option Plan of the Registrant. Incorporated herein by
reference to Exhibit 10.1 of the Registrant's Registration
Statement on Form S-1 filed on July 22, 1994, Registration
Statement No. 33-78252.
10.1 Management Services Agreement, dated as of August 5, 1994,
between GP Strategies Corporation and the Registrant.
Incorporated herein by reference to Exhibit 10.3 of the
Registrant's Registration Statement on Form S-1 filed on July
22,1994, Registration Statement No. 33-78252.
10.2 Employment Agreement, dated as of January 1, 1994, between Martin
M. Pollak and the Registrant. Incorporated herein by reference to
Exhibit 10.4 of the Registrant's Registration Statement on Form
S-1 filed on July 22, 1994, Registration Statement No. 33-78252.
10.3 Consulting Agreement, dated as of January 1, 1994,
between Jerome I. Feldman and the Registrant.
Incorporated herein by reference to Exhibit 10.5 of
the Registrant's Registration Statement on Form S-1
filed on July 22, 1994, Registration Statement No.
33-78252.
10.4 Form of Warrant Agreement, dated as of August 5,
1994, between the Registrant, The Harris Trust
Company of New York, as Warrant Agent, and the holder
of Warrants from time to time. Incorporated herein by
reference to Exhibit 10.8 of the Registrant's
Registration Statement on Form S-1 filed on July 22,
1994, Registration Statement No.
33-78252.
10.5 Voting Agreement, dated as of August 31, 1998, from GP Strategies
Corporation.*
10.6 Lease dated as of February 1, 1986 between Vernel Company and
Five Star Group, Inc., as amended on July 25, 1994.*
10.7 Lease dated as of May 4, 1983 between Vornado, Inc., and Five
Star Group, Inc.*
10.8 Lease Modification and Extension Agreement dated July 6, 1996
between Hanover Public Warehousing, Inc. and Five Star Group,
Inc.*
10.9 Agreement between Five Star Group and Local No. 11 affiliated
with International Brotherhood of Teamsters.*
10.10 Form of 7% Convertible Note due 2001 of the Registrant.
Incorporated herein by Reference to Exhibit 4.1 of the
Registrant's Form 10-Q for the second quarter ended June 30,
1996.
10.11 Asset Purchase Agreement dated as of August 31, 1998 between
American Drug Company and Five Star Group, Inc. Incorporated
herein by Reference to Exhibit 10 of the Registrant's Form 8-K
dated September 15, 1998.
10.12 Loan and Security Agreement by and among Fleet Bank, National
Association in its capacity as Agent for the ratable benefit of
Lenders named Within and The Lenders named Herein and Five Star
Group, Inc. formerly Five Star Acquisition Group Incorporated
herein by reference to the Registrant's Form 10-Q for the third
quarter ended September 30, 1998.
16 Letter from KPMG Peat Marwick re change in certifying accountant.
Incorporated by reference to Exhibit 16 to the Registrant's
Report on Form 8-K filed in November 18, 1998
21 Subsidiaries.*
22 N/A
23 Consent of Independent Auditors*
*Filed herewith
Exhibit 10.5
August 31, 1998
American Drug Company
9 West 57th Street
Suite 4170
New York, NY 10019
Ladies and Gentlemen:
GP Strategies Corporation ("GP Strategies") hereby agrees, for a period
commencing on the date hereof and ending three years thereafter, that:
(a) GP Strategies shall vote all of the shares of American Drug Company
("ADC") common stock, par value $.01 per share (the "Common Stock")
owned by it, directly or indirectly, in a manner such that not more
than 50% of the members of the Board of Directors of ADC shall be
officers or directors of GP Strategies; and
(b) on all other matters submitted to a vote of stockholders of ADC, GP
Strategies shall vote its shares of ADC Common Stock in the same
manner and in the same proportion as the remaining stockholders of
ADC vote.
Very truly yours,
GP STRATEGIES CORPORATION
BY:
Jerome I. Feldman, President and
Chief Executive Officer
Exhibit 10.6
LEASE
KNOW YE THIS LEASE, made as of the first day of February, 1986, between VERNEL
COMPANY, a limited partnership organized and existing under the laws of the
State of Connecticut and having its principal office and place of business at 50
Close Road, Greenwich, Connecticut, 06830 hereinafter called "Lessor" and E.
RABINOWE & CO. OF CONN. INC., a Connecticut corporation which corporation is a
Subsidiary of NATIONAL PATENT DEVELOPMENT CORPORATION, a Delaware corporation
having an office and principal place of business at 375 Park Avenue, New York,
New York 10 152, hereinafterter called "Lessee";
WITNESSETH:
IN CONSIDERATION of the mutual terms and conditions herein, the parties
mutually agree as follows:
(1) DEFINITION OF CERTAIN TERMS
For the purposes of this lease, and unless otherwise provided,
the terms listed below have and shall be construed and interpreted to have the
following meanings:
(a)"Gross Area"or"Gross Rentable Area"shall mean the area of an
entire structure or structures, and all component parts thereof, measured to and
from the exterior of outside walls and to and from the center line of party
walls, as the case may be. In computing Gross Area there shall be no exclusion
by reason of stairs, partitions, halls, or interior construction or equipment.
(b) The term "Lessor". shall mean and refer to the owner of the
fee estate as to the premises demised herein whosoever such owner may be from
time to time or to the person or entity named as Lessor above or its successors
or assigns, as the case may be; and upon any conveyance or transfer of the
interest of such person or entity as Lessor, such person or entity shall be
thereupon released and discharged from any and all liability under this lease or
otherwise to Lessee, and any and all others whomsoever, provided, however, the
new owner assumes hereunder.
(c) A pro rata share" or "pro rata" or "proportionate share"
shall mean a fraction having as numerator the Gross Rentable Area of the
dernised premises, which is 79,506 square feet and as its denominator the Gross
Rentable Area of the entire building of which said premises forms a part which
is 178,916 square feet. Commencing on the ate (the "Additional Space Date")
which is the later to occur of March 1, 1987 or the date the additional space is
available for occupancy, a "pro rata share" or , pro rata" or "proportionate
share" shall mean a fraction having as its numerator the Gross Rentable Area of
the demised premises, which is 105,000 square feet and as it denominator the
Gross Rentable Area of the entire building of which said premises forms a part
which is 178,916 square feet. The additional space shall be deemed available for
occupancy on such date as the space is tendered to Lessee vacant, broom clean
and free of the personal property, equipment and claims of third parties and
Lesson and at Lessee's option, Lessor shall either remove the existing wall
separating the additional space from the existing demised premises or construct
up to their standing door openings in such existing demising wall. If the Lessee
requests Lessor to remove such wall, each party shall pay one-half the cost of
said removal.
(2) GRANT OF LEASE
(a) Lessor hereby lease and demises to Lessee, and Lessee hereby
rents and takes from Lessor, approximately 79,506 square feet of Gross Rentable
Area, consisting of 79,506 square feet of sprinklered warehouse space located at
81Alumni Drive, in the Town of Newington, County of Hartford, and State of
Connecticut, together with the right to us the employee parking area, which
space is more specifically delineated in Exhibit A annexed hereto and
incorporated herein, hereinafter referred to as the "demised premises".
Commencing on the AdditionalSpace Date, the "demised premises" shall increased
by the addition thereto of approximately 25,494 square feet of gross rentable
area, consisting of 25,494 square feet of sprinklered warehouse space located at
81 Alumni Drive, in the town of Newington, County of Hartford, and State of
Connecticut, which space is more specifically delineated in Exhibit A annexed
hereto and incorporated herein, and as used in this lease shall thereafter
consist of 105,000 square feet of space located at 81 Alumni Drive, Connecticut
cut.
(b) Lessor hereby grants to Lessee the right to use in common
with other lessees of said building the means of vehicle and pedestrian
ingress and egress to and from the demised premises; all subject to any
reasonable and non discriminatory written rules and/or regulations of Lessor
now or hereinafter in effect as to the same, provided, however, that no such
rules and/or regulations shall increase Lessee's cost of doing business at the
dernised premises and to the extent such rules and/or regulations conflict
with the terms of this Lease, the terms of this ease shall control.
(c) TO HAVE AND TO HOLD the same for the term set forth in
paragraph 3 of this lease upon the terms and conditions set forth in this
instrument, which is hereinafter referred to as the "Lease"; and Lessee hereby
expressly covenants and agrees to fully and timely keep, perform, and observe
all the terms and conditions of this Lease on its part to be kept, performed,
and observed.
(d) Lessor represents and warrants that Lessor is the fee owner
of the demised premises and all improvements located thereon, and has full right
and authority to lease the demised premises to Lessee on the terms and
conditions set forth herein.
(3) TERM
The term of this Lease shall commence March 1, 1986, and shall
terminate on February 28, 1996, unless sooner terminated as hereinafter
provided.
(4) ANNUAL RENT
(a) In consideration of the premises demised herein, commencing on
March 1, 1986, Lessee shall pay an annual rent to Lessor for the term March 1,
1986, to February 28, 1987, at an annual rate of Two and 851100 Dollars ($2.85)
per square foot or Two Hundred Twenty-Six Thousand Five Hundred Ninety.-Two and
10/100 Dollars ($226,592.10) per annum, payable in successive equal monthly
installments of Eighteen Thousand Eight Hundred Eighty-Two and 68/100 Dollars
($18,882-68) per month on the first day of each month in advance, without
offset, deduction, demand, or abatement whatsoever, in lawful money of the
United States which is legal tender for payment of all public or private debts
at the time, and paid to Lessor, c/o Howard Nelson, 50 Close Road, Greenwich,
Connecticut 06830, or to such other payee and at such other address as Lessor
may from time to time designate by written notice to the Lessee prior to any
such payment. The Lessee Lessor concurrently with the execution of this Lease
the first month's amount of Eighteen Thousand Eight Hundred Eighty-Two and 6
($18,882.68).
(b) In consideration of the premises demised herein, commencing the
Additional Space Date, Lessee shall pay an annual rent to Lessor March 1, 1987,
to February 28, 1991, at an annual rate of Two and ($2.85) per square foot or
Two Hundred Ninety-Nine Thousand Two and 00/100 Dollars ($299,250.00) per annum,
payable in successive installments of Twenty-Four Thousand Nine Hundred
Thirty-Seven Dollars ($24,937.50) per month on the first day of each month in
advance offset, deduction, demand, or abatement whatsoever, in lawful money
States which is legal tender for payment of all public or private debt and paid
to Lessor, c/o Howard Nelson, 50 Close Road, Greenwich 06830, or to such other
payee and at such other address as Lessor may time designate by written notice
to the Lessee prior to any such payment however, that in the event that the
Additional Space Date has no March 1, 1987, Lessee shall pay the same rent as
set forth in Section Lease until the occurrence of the Additional Space Date at
which time set forth hereinbefore in this Section (4)(b) shall be paid.
(c) In consideration of the premises demised herein, co March 1, 199 1,
Lessee shall pay an annual rent to Lessor for the term March 1, 1991 to February
28, 1996, (Provided the Additional Space Date has theretofore at an annual rate
of Three and 051100 Dollars ($3.05) per square foot or Three Hundred Twenty
Thousand Two Hundred Fifty and 00/100 Dollars ($320,250.00) per annum, payable
in successive equal monthly installments of Twenty-Six Hundred Eighty-Seven and
50/100 Dollars ($26,687.50) per month on the each month in advance, without
offset, deduction, demand, or abetement whatsoever, in lawful money of the
United States which is legal tender for payment of all public or private debts
at the time, and paid to Lessor, c/o Howard Close Road, Greenwich, Connecticut
06830, or to such other payee and address as Lessor may from time to time
designate by written notice prior to any such payment, provided, however, that
in the event that the Additional Space Date has not occurred by March 1, 1991,
Lessee shall pay an annual rent for the term March 1, 199 1, to February 28,
1996 at an annual rate of Three and 051100 Dollars ($3.05) per square foot or
Two Hundred Forty-Two Thousand Four Hundred Ninety-Three and 30/100
($242,493.30) per annum, payable in successive equal monthly installments of
Twenty Thousand Two Hundred Seven and 78/100 ($20,207.78) per month on the first
day of each month in advance and in accordance with the applicable terms of this
Section (4)(b) until the occurrence of the Additional Space Date at which time
the rental first set forth in this Section (4)(c) shall be paid.
(5) NET LEASE
Except as expressly otherwise provided herein, this is a
net-net-net Lease, and Lessee shall also bear, pay, and satisfy any and all
costs and expenses whatsoever, ordinary or extraordinary, with respect to the
dernised premises as defined in paragraph 2 (a) herein and/or use or occupancy
of the same, as items of additional rent.
(6) USE OF THE DEMISED PREMISES
Throughout the term of this Lease and any renewal hereof, Lessee
and its permitted subtenants and assigns may use and occupy the dernised
premises for warehousing, office and distribution purposes and purposes
incidental thereto and for no other business or other purpose without Lessor's
prior written consent, which consent shall not be unreasonably withheld. Lessee
shall neither use nor suffer the use of all or any part of the demised premises
for any illegal or immoral use, or in any manner which in whole or in part is in
violation of any local, state, or federal law, ordinance, regulation, or other
governmental authority now or hereafter made.
(7) SAVING CLAUSE
Nothing in this Lease shall create or be construed to create a partnership
between Lessee and Lessor, or make them joint venturers, or bind or make Lessor
in any way liable or responsible for any acts, omissions, negligence, debts or
obligations of Lessee. In the event this Lease is terminated by Lessor because
of Lessee's default or abandonment of this Lease, the demised premises, or the
business conducted therein, Lessee shall be and remain liable for any and all
defaults and deficiencies in payment of the annual rent, additional rent, and
any and all othersums described by this instrument as payable by Lessee during
all of any portion of the scheduled term of the Lease. Lessor shall have the
duty and obligation to mitigate damages in a commercially reasonably manner in
the event of said default or abandonment by Lessee.
(8) MAINTENANCE OF THE DEMISED PREMISES
Throughout the term of this Lease and any renewal hereof, the
parties hereto, as designated, shall do and perform each and all of the
following:
(a) Lessee shall maintain and keep in good repair, good working
order and free of litter and refuse the interior of the dernised premises and
make any and all repairs and. replacements thereto as and when required, to
anything exclusively serving the demised premises, be they interior structural
or non-structural, ordinary or extraordinary, foreseeable or unforseeable,
including but not limited to any and all furnishings, fixtures, leasehold
improvements, exterior entrances, windows, electrical wiring, lighting fixtures,
heating or plumbing fixtures and systems, pipes, air conditioning or heating
systems; keep unclogged and in good repair all drains, traps and sewer pipes and
maintain and leave same in good working order, subject to ordinary wear and tear
and damage by fire or other casualty. Lessor represents that as of the
commencement date of this Lease the demised premises and the fixtures and
equipment serving the same will be in good working order.
(b) Lessor will make repairs to the roof, the exterior of the
dernised premises and the Building and all other necessary repairs that Lessee
is not required to make pursuant to the terms of this Lease when necessary after
receipt of written notice from Lessee specifying the need therefor. Lessee shall
pay for its proportionate share of the cost of illumination of the exterior of
the demised premises; its proportionate share of the cost of maintenance of
gardening and landscaping; its proportionate share of the cost of removal of
snow, ice, dirt, and refuse, striping, repair and/or replacement of all
blacktopping relating to the parking lot and pedestrian walks; water and sewer
rents; the cost of supplying -any additional gas service to the demised
premises; any cost incurred in adding to or increasing the water pressure for
the sprinkler system; its proportionate share of the cost of maintenance of the
sprinkler alarm system; maintenance, insurance on, and repair of the railroad
spur located to the rear of the dernised premises in the event that said spur is
connected to the main rail track for use if Lessee requires such use; its
proportionate share of the cost of liability and hazard insurance premiums; its
proportionate share of the cost of wages, payroll expenses, worker's
compensation insurance, fidelity bonding, and unemployment taxes of labor used
to perform the functions described herein and for direct supervision thereof;
its proportionate share of the cost of fees for licenses and permits, if any;
its proportionate share of the cost of supplies; utility services and charges;
repair, maintenance, operation, replacement, and debt service of any equipment
used in operation and maintenance of the demised premises; and other costs and
expenses. Except for those affirmative undertakings by Lessor as are
specifically set forth in this Lease, Lessee accepts the dernised premises "as
is"; provided however, nothing contained in this Lease shall reduce Lessor's
obligations to complete the work set forth in Schedule B hereto. Lessee may, at
its option and upon written notice to Lessor, erect antennae on that portion of
the roof covering the dernised premises. In the event that Lessee exercises that
option, Lessee shall upon the exercise of said option and thereafter for the
term of this lease and any renewal hereof, bear full responsibility for the
maintenance of the roof for the entire building of which the demised premises
are a part.
(c) All maintenance and repairs performed by Lessee shall be
done timely and diligently, using materials of equal or better quality than
original construction, and in a good and workmanlike manner, without demand as
and when such work is required or forthwith upon demand of Lessor, whichever
first occurs. If Lessee fails or refuses to do any or all of its maintenance and
repair work and do it in the manner, time, and quality designated, Lessor, in
the exercise of reasonable discretion may, at Lessee's cost and expense, enter
upon the dernised premises and do any portion or all of such work, or require
Lessee to do the same by appropriate actions or proceedings, and Lessee shall
promptly and fully reimburse and pay to Lessor its attorneys' fees and its
entire out-of-pocket costs and expenses with respect to the same, within fifteen
(15) days next following Lessor's demand for the same.
(9) LESSEE'S ALTERATIONS
Lessee may make non-structural additions and alterations
within the interior of the dernised premises, but shall make no structural
alterations nor any exterior additions or alterations without the prior written
consent of the Lessor which consent shall not be unreasonably withheld, however,
when Lessor gives its prior written consent, it shall also notify Lessee if
Lessor desires that the alterations or additions be removed by Lessee at the
expiration or any earlier termination of this lease and any renewal hereof,
whichever first occurs. As to any and all such work for which Lessor's prior
written consent was required and which consent was specifically conditioned on
restoration, Lessee shall promptly restore the demised premises to its original
configuration (or such configuration as may be agreed to by Lessor) at Lessor's
request whenever any such alteration or addition made by Lessee shall no longer
be used or at the expiration or any earlier termination of this Lease and any
renewal hereof, whichever first occurs. All work, alterations, and additions
referred to herein (hereinafter "the work") shall be subject to the following
terms and conditions:
(i) All work shall be performed in a good and workmanlike
manner, at the cost and expense of the Lessee which shall be timely and fully
paid and satisfied, and all structural alterations or exterior additions or
alterations shall be of materials of a grade and quality reasonably
satisfactory to Lessor, at the cost and expense of the Lessee which shall be
timely and fully paid and satisfied.
(ii) Prior to commencement of the work, Lessee shall comply with
any and all rules and regulations of all applicable governmental and other
authorities, including but not limited to zoning, building, and environmental
authorities; obtain any and all licenses and permits required; and comply with
any and all applicable rules and regulations of all local, state, or national
fire underwriter authorities, and obtain any and all approvals required by such
authorities with respect to the work.
(iii) The premises shall be kept free and clear of any and all
liens and encumbrances with respect to the work, whether for labor or
materials, and Lessee shall pay, bond, or vacate each and all of the same
within twenty (20) days next following any notice of filing or levying of any
such lien or encumbrance.
(iv) Any and all increases in insurance premiums, taxes, or
other costs or expenses relating to the dernised premises by reason of the work,
shall be timely and fully paid and satisfied by Lessee throughout the term of
this Lease and any renewal hereof.
(v) No work shall create a hazard, jeopardy or risk to the
building or the demised premises during the performance of the work or after the
completion of the work.
(iv) Any and all structural additions and alterations to the
demised premises shall be made only upon Lessor's prior written consent, in a
manner and upon terms and conditions reasonably acceptable to Lessor, and the
work shall be performed by contractors or subcontractors first approved by
Lessor, which approval shall not be unreasonably withheld. Title to such
structural additions and alterations shall automatically vest in the Lessor
upon the making of the same without payment from Lessor and be subject and
subordinate to any and all encumbrances incurred by Lessor as to the demised
premises, and shall at the option of Lessor upon expiration or any earlier
termination of the Lease and any renewal hereof, whichever is last to occur,
either remain upon and be surrendered with the demised premises as a part
thereof at such time, or as to any and all work for which Lessor's prior
written consent was required and which approval was specifically conditioned
on restoration, be removed from the demised premises by Lessee and the demised
premises restored by Lessee to the condition existing next prior to the making
of the same.
(10) LESSOR'S ALTERATIONS AND IMPROVEMENTS
(a) Lessor hereby agrees to provide, at its cost and expense, on
or before April 1, 1986, the improvements to the demised premises in accordance
with the description of the improvements to be made set forth on Exhibit B
annexed hereto, incorporated herein and made a part hereof. Included in Lessor's
alterations is a wall to be erected separating Lessee from Roytype, another
tenant of Lessor in the building of which the demised premises are a part.
Lessee agrees to pay for one quarter of the cost (not to exceed $20,000) of the
erecting of said wall and Lessor will pay for three-quarters (3/4) of the cost
of the erection of the wall. For purposes of this Lease the term "cost of the
erecting of said wall" shall mean the actual aggregate third party cost and
expense of erecting the required demising wall in compliance with governmental
requirements. If during the term of this Lease and any renewal hereof, any
governmental authority requires that certain additional improvements be made to
the demised premises because of the nature of the materials Lessee is storing on
the demised premises, Lessee agrees that it will pay one-half (1/2) of the cost
of such improvements and Lessor agrees that it will pay one-half (1/2) of the
cost of such improvements. Lessee further agrees that the payment of its cost of
the erecting of said wall shall be made ten days after bills have been submitted
to Lessee by Lessor. Lessee agrees that in the event that Lessor is unable to
complete the improvements on the date set forth in this paragraph, that any
claims that Lessee may assert are limited to claims for monetary damages (and
rights of self help) and nothing herein can be construed as providing to Lessee
a right to terminate this lease based upon Lessors' failure to complete the
improvements in accordance with this Paragraph 10a.
(b) Lessor hereby reserves the right at any time to enter upon
demised premises (subject to the provisions of Section 22 hereof) and make
alterations or additions thereat or to any or all of the site improvements,
buildings, improvements, or personality comprising a part thereof; but in no
event shall the Gross Rentable Area of the demised premises under this Lease be
diminished by Lessor to less than that demised at the time of execution of this
Lease, and in no event shall any change or alteration in the demised premises
interfere with any permitted use of the demised premises by Lessee.
11) SIGNS
Lessee will not place, maintain, display, or mount at, on, or
about the outside of the building or any exterior door, wall, window, or portion
of the demised premises, nor suffer the same to be done, any sign, awning or
canopy, advertising display, decoration, lettering or advertising matter, or
other thing of any kind, without the expressed written permission of Lessor
which will not be unreasonably withheld. Lessee hereby unconditionally and
irrevocably authorizes Lessor to enter upon the demised premises at Lessee's
expense and without liability or penalty. And to remove anything in violation of
the provisions of this paragraph.
12) UTILITIES
(a) Lessor shall furnish, install, hook up, and be responsible
for metering. Lessee shall promptly pay its pro rata share of all bills, costs,
expenses, charges, assessments, meter charges, fuel adjustments, penalties, and
interest as to the same as or when the same become due or payable, including but
not limited to heat, oil, water and sewer, hot water, gas, electricity, air
conditioning, telephone, garbage disposal, fire hydrant maintenance charge and
any and all other services or utilities supplied to or consumed at or in the
demised premises throughout the term of this Lease and any renewal hereof
whether or not measured by meter; and in the event said costs, charges, and
expenses shall not be paid when due, Lessor shall have the right, without any
obligation, to advance and pay the same for Lessee, and such amounts shall be
paid and reimbursed to Lessor by Lessee within fifteen (15) days next following
Lessor's demand therefor, and be deemed and be additional rent under this Lease.
For purposes of this clause in computing the proration of all of said costs,
charges and expenses, except oil, the formula to be used shall be a fraction in
which the numerator is the square footage leased to Lessee herein and the
denominator shall be the total square footage of the building. For purposes of
this clause in computing the proration for oil expenses, the cost to Lessee
shall be an adjustment that equitably reflects Lessee's fair share of said oil
expenses.
(b) Lessor shall be entitled to install in or through the
demised premises, (subject to the provisions of Section 22 hereof) and the Lot,
and/or the building in which the demised premises are located, and repair,
maintain, and replace pipes, conduits, wires, and other utility lines serving
other tenants of the building in which the demised premises are located.
(13) DEFAULT BY LESSEE
In the event Lessee defaults in the full and timely payment of
any or all sums payable under the Lease whether as annual rent, additional
rent, utilities or service charges premiums or expenses, real estate taxes, or
any other sum whatsoever, and said default continues for fifteen (15) days
after written notice; or in the event Lessee defaults in the full and timely
performance of any and all terms and conditions of this Lease apart from a
default in the full and timely payment of any or all sums due under this
Lease, and if such default shall continue for fifteen (15) days after written
notice, and in the event said default cannot with due diligence be cured
within said fifteen (15) day period and the continuance of which for the
period required for cure will not subject Lessor to the risk of criminal
liability or termination of any lease or foreclosure of any mortgage, Lessee
shall not be in default under this Lease if Lessee commences such cure within
said fifteen (15) day period and thereafter diligently prosecutes such cure to
completion; or in the event Lessee vacates the demised premises or abandons
the demised premises of this Lease or any of its obligations hereunder or
removes a substantial portion or all of its fixtures or furnishings from the
demised premises; or if Lessee does anything constituting a default under the
section of this Lease relating to Lessee's Bankruptcy, then in any or all such
events Lessor shall be entitled to exercise any and all remedies under this
Lease and/or those available at law and/or equity with respect to such default
or defaults, and those remedies shall include and not be limited to the
following:
(a) Any and all other remedies available in the State of
Connecticut at law and/or equity to recover possession of the demised
premises, remove Lessee and its personality therefrom, and recover damages
from Lessee as to the balance of the Lease term described in the Lease; and/or
(b) Whether as agent for the Lessee or for Lessor's own account,
the right in its discretion (but not the obligation) to enter in and upon the
demised premises and clean up, repair, remodel, and do or make *any and all
other commercially reasonable preparation of the demised premises for
rerental, advertise for and obtain a tenant for the same whether directly or
through brokers or otherwise, and rerent the demised premises on the same or
other terms and/or other terms and/or conditions as contained in the Lease;
and, if as agent for the Lessee, then to recover from Lessee any and all costs
and expenses of the foregoing and/or any deficiency in annual rent, additional
rent, and other sums payable under the Lease by Lessee had Lessee duly and
timely performed all terms and conditions of the Lease on its part to be
performed throughout the entire term of the Lease; and, if for Lessor's own
account, then to recover any and all costs and expenses of the foregoing;
and/or
(c) To terminate the Lease by an additional written notice of no
less than five (5) days to Lessee to that effect (sent registered or certified
mail) in the event any or all of the above-described defaults are not fully
remedied within any grace period (if any) expressly provided above, and, if no
time is so provided, then to terminate the Lease by such notice upon the
issuance of the notice; and to recover from Lessee any and all damages to which
Lessor would be entitled at law and/or equity under the laws of the State of
Connecticut; and/or
(d) To seek and obtain any and all provisional remedies,
ancillary remedies, and/or equitable relief by summary proceedings and/or
actions at law and/or equity to restrain or enjoin Lessee from any threatened,
anticipated, committed, existing, continuing, or repeated breach or breaches of
the Lease, and/or to require Lessee to perform or specifically perform any and
all terms or conditions of the Lease on Lessee's part to be performed, and/or in
aid of any other remedy sought by Lessor under this Lease or at law and/or
equity and at the option of Lessor, to take physical possession of any and all
property, equipment, goods, supplies, raw materials and inventory of Lessee
located on the demised premises to satisfy any judgment Lessor might obtain
against Lessee for any default set forth herein; and/or
(e) To recover any and-all damages from Lessee to which Lessor
shall be entitled with respect to any breach or breaches of the Lease by
Lessee and/or termination of the Lease and/or of Lessee's occupancy and/or
possession of the demised premises by reason of Lessee's breach or breaches
thereof, together with interest at the maximum legal rate allowed by law in
the State of Connecticut, any and all costs, expenses, statutory costs, and
other sums allowed by such law, and reasonable attorneys' fees with respect to
any and all such events, remedies, actions, litigations, and/or appeals;
and/or
(f) To recover from Lessee the difference, if any, at the time of
a termination of the Lease between the amount of rents and other sums payable
under the Lease for the remainder of the stated term as compared to the
reasonable rental value at that time of the demised premises, if less, for the
remainder of the stated term; provided, however, Lessor has made an effort to
mitigate damages in a commercially reasonable manner; and/or
(g) To perform any and all of the terms and conditions of this
Lease on Lessee's part to be performed at Lessee's cost and expense, and enter
upon the demised premises for such purpose, if so required, to perform the same
(except for payment of annual rent) in the event Lessee fails or refuses to
perform the same within ten (10) days next following written notice from Lessor
to Lessee demanding the same; provided that in the event physical damage is
immediately threatened to the demised premises as from flood, fire, gas leak,
water leak, pipe bursting, or the like, no notice or demand by Lessor is
required, and Lessee shall fully reimburse and pay to Lessor any and all costs
and/or expenses incurred by Lessor as to such selfhelp together with any and all
attorneys' fees and/or costs of litigation required to enforce Lessor's rights
hereunder.
(h) The remedies set forth in this Lease are cumulative and not
exclusive and are in addition to and not in substitution for any remedies
available at law or equity.
(14) BANKRUPTCY
At any time during the term of this Lease, whether prior to or
after Lessee takes occupancy or possession of the demised premises, or' before
or after the date of commencement of rent, in the event Lessee files or suffers
the filing of any writ or petition or proceedings in bankruptcy, for
Reorganization, for an Arrangement, for an assignment for the benefit of
creditors, or for the appointment of any receiver or trustee, under any federal
or state law or other governmental authority or makes or suffers any transfer,
assignment, conveyance, sale, pledge, or disposition of all or a substantial
portion of its furnishings or fixtures; or removes or transfers a substantial
portion or all of its furnishings or fixtures from the demised premises; or in
the event of any levy, execution, or foreclosure upon, at, or with respect to
the estate, property, personality, rights or interest of Lessee in, under, or to
this Lease and/or the demised premises; each and all of such events or
occurrences shall constitute and shall be deemed to constitute a material and
substantial default in the Lease by Lessee, and this Lease shall at the option
of Lessor (exercised in its discretion) be terminated and cancelled by reason of
such default or defaults, and Lessor shall be entitled to exercise any and all
remedies at law and equity and/or under this Lease with respect thereto and, in
addition thereto and not in substitution thereof, also be entitled to exercise
any or all of the remedies elsewhere described under this Lease as to a default
by Lessee.
(15) INSURANCE
(a) At its own cost and expense, Lessee shall obtain and
maintain throughout the term of this Lease and any renewal hereof the
following insurance coverage:
(i) Comprehensive general liability insurance insuring Lessor and Lessee
against injury to persons or property occurring in or about the demised
premises, or arising out of ownership, maintenance, use, or occupancy
thereof, with minimum limits of at least $1,000,000 for any one event and
$500,000 for injury to any one individual, and property damage insurance
with minimum limits of at least $500,000, each to be written on an
occurrence basis.
(ii) All risk insurance including and not limited to fire, extended
coverage, vandalism and maliciou's mischief insurance, covering all of the
Lessor's building and improvements and any and all of the Lessee's
improvements, equipment, trade fixtures, tools, inventory, and personal
property in, at, or about the demised premises, in the full amount of the
replacement cost of any and all of the same. Lessor agrees that it will
reimburse to Lessee a pro rata share of Lessee's cost for such insurance
coverage on Lessor's building and improvements as and when billed for the
same, which billing will furnish reasonable detail as to the forms of
coverage carried and the costs and expenses as to the same, and set forth a
calculation of Lessor's pro rata share of such costs and expenses. For
purposes of this insurance
<PAGE>
cost reimbursement, Lessor's pro rata share shall equal 100% less Lessee's
pro rata share expressed as a percentage.
(iii) Worker's Compensation Coverage and all other insurance coverages for
employees, agents, servants, and others at or about the demised premises in
compliance with any and all applicable governmental authorities.
(b) Lessee shall not use, keep, sell, or offer for sale at the demised
premises any article or substance, nor do or permit anything to be done,
which shall increase insurance premiums with respect to all or any part of
the demised premises or the building of which they are a part.
(c) All insurance to be procured by Lessee under this Lease shall be
obtained from financially responsible companies licensed to do business in
Connecticut and rated at least A+ Class XV in Best's Insurance Guide (as
amended to date), and the content of the policies and companies from which
the same are obtained shall be subject to Lessor's prior approval exercised
in its discretion with obligation. Any and all such policies shall be in
the names of Lessor, Lessee, and mortgagees as to the property and/or
improvements, as their respective interests may appear, and the policies
shall be non-cancellable as to Lessor, and mortgagees by reason of any act
or omission as negligence of Lessee, and in no event shall any such
policies be cancelled or cancellable for any reason without at least ten
(10) days prior written notice to Lessor from the insurer. Binders for any
and all coverages to be obtained by Lessee shall be delivered to Lessor
upon Lessee's execution of this Lease, and the original policies and any
endorsements thereof or certificates of insurance or blanket policies with
detailed coverages shall be promptly delivered to Lessor thereafter, with
renewals in each instance delivered to Lessor within twenty (20) days next
prior to expiration of such coverage. In the event Lessee fails or refuses
to obtain and maintain any or all of the foregoing coverages, or in the
event Lessor in its discretion elects to obtain and maintain any or all
such coverages at Lessee's expense, Lessor may obtain any or all such
coverages and Lessee shall promptly and fully reimburse Lessor for any and
all premiums, costs, and expenses paid or incurred by Lessor in that regard
within five (5) days next following issuance of Lessor's invoice to Lessee
for the same. Any policy which does not name Lessor as an insured shall
contain an express waiver of subrogation against Lessor, its officers,
employees, agents, and other representatives. Lessee hereby releases Lessor
of and from any and all liability for any cause or thing to the extent of
any insurance coverage which Lessee is required to maintain under this
Lease and for any event or less not covered by such coverage.
(d) Lessor shall also be entitled at any time and from time to time to
elect to carry insurance coverage upon the demised premises and/or the
building, improvements, in addition to and apart from any insurance
coverages carried or required to be carried by Lessee as to such property,
and Lessee shall contribute to Lessor as additional rent under this Lease a
pro rata share of any and all costs and expenses of such coverages so
carried by Lessor as and when billed for the same, which billing will
furnish reasonable detail as to the forms of coverage carried and the costs
and expenses as to the same, and set forth a calculation of Lessee's pro
rata share of such costs and expenses.
(e) Lessor and Lessee and all parties claiming under them hereby mutually
release and discharge each other from all liability, whether for negligence
or otherwise, in connection with loss covered by any insurance policies
which the releasor carries with respect to the building, demised premises
or any interest or property therein or thereon (whether or not such
insurance is required to be carried under this Lease), but only to the
extent that such loss is collected under said insurance policies. Such
release is also conditioned upon the inclusion in the policy or policies of
a provision whereby any such release shall not adversely affect said
policies or prejudice any right of the releasor to recover thereunder. Each
party agrees that its insurance policies will include such a provision so
long as the same shall be obtainable without extra cost, or if extra cost
shall be charged therefor, so long as the Lessee shall pay such extra cost.
(16) NOTICES
All notices to be given hereunder shall be in writing and delivered by
registered or certified mail, addressed to the Lessor in care of Howard
Nelson, 29 Broadway, New York, New York, 10006 and in care of Howard
Nelson, 50 Close Road, Greenwich, Connecticut 06830, and to the Lessee, at
the demised premises with a copy to Attention: General Counsel, 375 Park
Avenue, New York, New York 10152, or to such other address as such party
shall from time to time designate by written notice to the other sent
registered or certified mail. Notices will be deemed properly given upon
receipt.
(17) CONDEMNATION
(a) If, prior to commencement of rent or otherwise, the entire parcel of
which the demised premises are a part shall be taken under any condemnation
or eminent domain proceedings (each such occurrence being hereinafter
referred to as a "Taking") by any governmental authority during the term
hereof, or in the event twenty-five percent (25%) or more of the demised
premises is taken in any such proceedings and the remaining portion shall
not be suitable or adequate (in the reasonable opinion of the Lessee
exercised in good faith) for the uses described in this Lease, and Lessee
notifies Lessor of such determination within thirty (30) days next
following the taking of physical possession of such portion of the demised
premises by the governmental authority or the date upon which title vests
in the Taking authority, whichever is first to occur, then in any such
event this Lease and the term hereof shall terminate as of the date
physical possession of the property is taken by the Taking authority, and
Lessee shall be liable for the payment of 'rent and performance of the
other terms and conditions of this Lease on Lessee's part to be performed
only up to the date of such termination, and any rent paid in advance for
periods following such date shall be apportioned and promptly refunded to
Lessee.
(b) If less than the entire parcel of which the demised premises are a
part, or less than twenty-five percent (25%) of the demised premises, shall
be acquired or taken by condemnation or eminent domain as aforesaid, or if
the mortgagee of the property taken shall not make the proceeds of any
awards or payable as to the Taking available for restoration and repair of
vie balance of the property, or in the event the Taking occurs within the
last twenty-four (24) months of the Lease term (or of a renewal term, if
any), Lessor shall be entitled to terminate this Lease without liability by
reason of such Taking. If Lessor does not so terminate this Lease, this
Lease shall not cease and terminate and Lessor shall rebuild and restore
the demised premises as nearly as possible to the condition existing next
preceding such Taking, with due allowance for the portion so taken; Lessee
shall promptly restore or repair any improvements made by it in the demised
premises; and this Lease shall be and remain in full force and effect and
be unaffected by the Taking, except that from the date possession of the
taken portion of the demised premises is acquired by the Taking authority
the rate of rent under the Lease shall be diminished by a percentage equal
to the 'percentage of the demised premises so taken. The restoration or
repair work to be done by Lessee shall be done subject to any and all terms
and conditions elsewhere set forth in this Lease governing alterations or
work on Lessee's part to be performed.
(c) Lessor will seek to have any mortgagee of the building housing the
demised premises provide for application of the proceeds of any Taking
awards to restoration, repair, and reconstruction of the portion of such
property remaining after the Taking. Notwithstanding the amount of the
land, building, or improvements taken by condemnation or eminent domain or
the termination or continuance of this Lease with respect thereto, Lessee
shall not participate or share in any recovery, award, or damages payable
or paid as to such Taking, nor have or assert any right, claim, or cause of
action against Lessor, or mortgagee of the dernised premises or the
governmental authority making such Taking whether for the loss of, or
diminution in value of the unexpired term of this Lease, or as to the
Taking of any such land, building, and/or improvements or otherwise; and
Lessee for itself and its successors and assigns hereby waives, surrenders,
and releases to Lessor any and all claims or rights to claim or receive all
or any portion of any and all recovery, awards, and/or damages as to such
Taking. In the event this Lease is terminated or terminates by reason of
such Taking, the provisions of the Lease applicable upon expiration of the
Lease shall govern the parties.
(d) If permitted by statute, Lessee may assert a separate and independent
claim for and recover from the Taking authority, but not from Lessor any
compensation as may be separately awarded or recoverable by Lessee in its
own name and right for any damage to Lessee's portable fixtures and
equipment, or on account of any expenses which it shall incur in removing
its merchandise, furnishings, and equipment from the demised premises, but
in no event shall any such claims or recoveries be claimed or asserted in
the event the same would, may, or shall diminish, offset, or bar any
damages, recovery, or award to Lessor or the fee owner of the demised
premises.
18) HAZARD LOSS OR DAMAGE
(a) Lessor shall not be liable for any loss, theft, or damage to property
of Lessee or others located on, at, or about the demised premises, nor for
any injury or damage to persons or property resulting from any event,
hazard, or Act of God including but not limited to fire, explosion, falling
plaster, steam, gas, electricity, water, rain, snow or leaks of any natural
or manufactured substance from any part of the demised premises or from the
pipes, appliances, or plumbing or from the roof, street or sub-surface or
from any other place or by any other damage or cause of whatsoever nature,
nor for any personal injury or property damage caused by other lessees or
persons in or about the demised premises, or caused during construction of
any private, public, or quasi-public work. All personal property or
improvements of Lessee at or about the demised premises shall be installed,
used, or enjoyed at the risk of Lessee, and Lessee shall defend, indemnify
and hold Lessor harmless from any and all claims and/or causes of action
pertaining to or arising out of damage to the same, including but not
limited to subrogation claims by Lessee's insurance carrier. Lessee shall
give immediate notice to Lessor, promptly confirmed in writing, of any and
all of the following occurring at or with respect to the demised premises;
fires, other casualties, accidents, or vandalism; and any disrepair,
removal, damage, or defects as to any fixtures, equipment, or improvements
in or about such property. In the event the repair or reconstruction of the
demised premises, in the estimation of an independent contractor selected
by the Lessor and reasonably satisfactory to the Leasee, shall require more
than 120 days to complete or, if estimated to take less than 120 days,
actually takes more than 150 days to complete Leasee shall have the right
to terminate this Lease on ten days prior written notice to Lessor.
(b) Lessor will seek to have the first mortgage of the demised premises, if
any, provide for application of hazard insurance loss proceeds to the
repair or reconstruction of the demised premises upon any hazard loss.
Subject to the mortgagee (if any) at the demised premises making the hazard
loss insurance proceeds available for restoration and to Lessor's receipt
of such proceeds for that purpose, the Lessor shall repair, reconstruct, or
cause to be repaired or reconstructed, such damage or destruction.
Notwithstanding the foregoing, in the event such hazard loss occurs within
the last twenty-four (24) months of the term of the Lease, or within the
last twenty-four (24) months of the Renewal Term (if any) of the Lease, or
if the said mortgagee shall not make the insurance loss proceeds available
for repair or restoration, Lessor shall not be required to repair or
reconstruct the demised premises and shall notify Lessee within thirty (30)
days next following such hazard loss, of its election in this respect;
provided, however, in order for Lessor to effectively exercise its election
not to restore the demised premises after such casualty, Lessor must also
elect not to restore any other premises in the Building similarly affected
by the casualty.
In the event the damage or destruction to the demised premises shall be
restored by Lessor, this Lease shall not terminate, however, there shall be
an equitable abatement of rent and other sums payable under the Lease.
Lessee shall, at its cost and expense, restore, repair, and replace any
improvements in the demised premises made by Lessee as nearly as possible
to the condition existing next prior to such damage or destruction, using
materials of an equal or better quality than the original, and also restore
and repair, or replace, any of its equipment, fixtures, or furnishings
damaged or destroyed by the casualty occurrence. Such restoration and
repairs shall be commenced by Lessee promptly, be prosecuted with diligence
and continuously until completed, and be performed in a good and
workmanlike manner and in compliance with all applicable fire underwriting
and governmental authorities, and subject to the provisions of this Lease
relating to any work or alterations by Lessee. Any restoration and repairs
required or undertaken (whether or not required) by Lessor after a casualty
shall be prosecuted with diligence and continuously until completed and be
performed in a good and workmanlike manner and in compliance with all
applicable fire underwriting and governmental authorities.
If Lessor elects not to repair or reconstruct the damage or destruction to
the demised premises, Lessee shall be entitled to terminate this Lease as
of the date of said hazard loss without liability on the part of either
party herein, and any rent paid in advance by Lessee to Lessor for periods
after the date of such cancellation shall be pro rated to the date of such
termination of the Lease and an appropriate refund thereof (if any) made by
Lessor to Lessee. Upon such termination, this Lease and the term hereof
shall cease and come to an end and Lessee shall fully pay and satisfy to
Lessor any and all rent and other sums payable by Lessee under the Lease up
to the date of such termination and promptly vacate and surrender the
demised premises to Lessor.
(19) EXPIRATION OR TERMINATION
Upon the expiration date or any earlier termination of this Lease and any
renewal hereof, whichever last occurs, Lessee shall at its own expense
promptly surrender and deliver the demised premises to Lessor broom clean,
in good order and good repair (normal wear and tear by the elements
excepted), removing all of its personal property and leasehold
improvements, and also removing any alterations, installations, work, or
additions to the premises as required Lessor's prior written consent and
which consent was specifically conditioned on restoration and are requested
by Lessor; and Lessee shall forthwith fully repair and restore the demised
premises with respect to any damage therein or thereat whether resulting
from removal of Lessee's personality or improvements or its use or
occupancy or otherwise; fully pay and satisfy any and all costs and
expenses for any damage caused by any such removal. and fully pay any and
all sums to Lessor remaining to be paid by Lessee under the terms of this
Lease. Notwithstanding the foregoing provisions, if Lessee shall fail or
refuse to promptly do or perform any or all of the foregoing, Lessor shall
be entitled at its option in its discretion to enter upon the demised
premises by force or otherwise without liability to Lessee, and to effect
such removal and/or repairs for and at the expense of Lessee, and Lessee
shall fully pay and satisfy any and all costs, expenses, and attorneys'
fees of Lessor as to the same and as to recovery of such sum from Lessee,
and Lessee hereby waives demand and notice of every kind and description
whatsoever with respect to Lessor obtaining possession of said premises. If
Lessee remains in possession of the demised premises or any part thereof
after the described date of expiration of the term of the Lease or any
subsequent renewal or extension thereof, or after five (5) days next
following any earlier termination of the Lease by Lessor, Lessor may
exercise any remedies available at law or equity as to such holding over,
and/or any or all of the remedies set forth in this Lease as to Lessee's
defaults. Notwithstanding expiration or termination of the Lease, and prior
thereto throughout the term of the Lease and any renewal or extension
thereof, Lessee shall defend, hold harmless, and indemnify Lessor against
any and all claims, causes of action, damages, judgments, losses,
liability, costs, expenses, attorneys' fees, and penalties arising from or
out of any act, event, damage, omission, destruction, loss, injury,
negligence, or occurrence in, at, or about the demised premises, or the use
or occupancy of Lessee of all or any part thereof, or occasioned wholly or
in part by any act, omission, or negligence of Lessee, its agents,
contractors, invitees, guests, employees, servants, lessees,
concessionaires, or others under its direction or control, or with' respect
to this Lease; the negligent acts of Lessor, Lessor's agents, servants
and/or employees are expressly excluded from Lessee's obligations pursuant
to this paragraph. Lessee shall also pay to and reimburse Lessor as to any
and all costs, expenses, and attorneys' fees that may be incurred or paid
by Lessor in enforcing any terms or conditions of this Lease. Nothing
herein shall preclude Lessee from seeking indemnity from other tenants of
Lessor. In connection with any indemnity by Lessee hereunder, Lessor agrees
to give Lessee prompt notice of any claim upon which any indemnity may be
based and Lessee may defend said claim by counsel of Lessee's choice and
Lessor shall not settle such claim without prior written consent of Lessee,
which prior written consent shall not be unreasonably withheld. Lessor
agrees that Lessor will exercise all indemnity rights available to Lessor
pursuant to other leases relating to the building. Lessor agrees that
Lessee's obligations to indemnify Lessor pursuant to this paragraph (19)
shall only be exercised to the extent insurance coverage is not available.
(20) ASSIGNMENT AND SUBLETTING
Lessee may not assign this Lease in whole or part or sublet a portion or
all of the demised premises, without Lessor's prior written consent, which
consent shall not be unreasonably withheld. In the event of any assignment
or subletting, any rental or additional rental that is in excess of the
aggregate of (a) the amounts due from Lessee to Lessor hereunder and (b)
costs and expenses incurred by Lessee in connection with the consummation
of any such assignment or subletting, shall be paid to Lessor when they are
paid to Lessee. Any attempt to assign or sublet in contravention of the
terms herein shall be void and without force or binding effect and
constitute a material breach of the Lease. Nothing herein shall prevent the
Lessee from assigning this Lease in whole or in part or subletting all or
any part of the demised premises without the prior consent of Lessor to
subsidiaries and affiliates of Lessee or Guarantor, expressly provided,
however, that Lessee and the Guarantor shall continue to be obligated under
this Lease and the Guaranty annexed hereto. For purposes of this paragraph,
a consolidation or merger by Lessee or the sale of all or substantially all
of the assets of Lessee shall not be construed as an assignment and shall
not require Lessor's consent or otherwise be subject to the provisions of
this Section 20. Commencing on the Additional Space Date, Lessee shall have
the right to sublet up to, but not exceeding, in the aggregate, the same
25,494 square feet, of the demised premises, which will become subject to
the terms of this Lease on the Additional Space Date as set forth in
Section 2 of this Lease, without Lessor's prior written consent and without
being required to pay to Lessor any excess rental pursuant to the second
sentence of this Section 20.
(21) PAYMENT OF TAXES
(a) By "real estate taxes" the parties to this Lease mean any and all real
estate taxes, charges, and assessments, extraordinary as well as ordinary,
levied, imposed, or assessed during the term of this Lease by governmental
authorities upon or attributable to the demised premises and any and all
personality installed in or about the same by Lessor and Lessee.
(b) Commencing on March 1, 1986, for the term March 1, 1986 to February 28,
1987, Lessee shall pay to Lessor the real estate taxes imposed as to the
entire demised premises as shown on Exhibit A, as and when billed by
Lessor; and all such sums on Lessee's part to be paid hereunder shall be
deemed and be additional rent, and be payable within ten (10) days next
following Lessor's billing of the same. Lessee's payment of taxes shall be
calculated according to the ratio borne by the Gross Rentable Area of
Lessee's demised premises to the Gross Rentable Area of the entire building
of which the demised premises form a part. Lessee agrees that it is
responsible for the payment of 44.44 per cent of such taxes. In the event
the Lessor shall desire to contest the validity or amount of any such tax,
the Lessor may defer payment thereof as long as the validity or amount
thereof shall be contested by the Lessor in good faith and by proper
proceedings. The Lessor may also make payments under protest or take such
other steps with regard to said tax as will not prejudice its opportunity
to successfully contest the validity or amount thereof. The Lessee agrees
to render the Lessor full assistance timely and without expense to the
Lessor in contesting the validity or amount of any such tax, including but
not limited to joining in and signing any protest or pleading which the
Lessor may deem it advisable to file, provided, Lessor will not incur any
expenses on behalf of Lessee without Lessee's prior approval. Should any
rebate be made on account of any tax, a portion of which has been paid by
the Lessee to the Lessor hereunder, the Lessor shall refund to the Lessee a
proportionate share of such rebate to the extent of the amount paid by the
Lessee to the Lessor, less any and all legal fees, costs, and expenses
incurred by Lessor in such contest and/or in obtaining such rebate, said
proportionate share to be computed in the same manner in which the Lessee's
payments to the Lessor hereunder are computed. 1% 1 1917 and for the
remainder of the term
(c) Commencing on the Additional Space Date, and for the remainder of this
Lease, Lessee shall pay to Lessor the real estate taxes imposed as to the
entire demised premises, as and when billed by Lessor; provided, however,
in the event that the Additional Space Date has not occurred by March 1,
19876, Leasee shall pay the real estate taxes as set forth in Section 21(b)
of this Lease until the occurrence of the time the real estate taxes as set
forth in this Section 21(c) shall be paid. and all such sums on Lessee's
part to be paid hereunder shall be deemed and be additional rent, and be
payable within ten (10) days next following Lessor's billing of the same.
Lessee's payment of taxes shall be calculated according to the ratio borne
by the Gross Rentable Area of Lessee's demised premises to the Gross Re
table Area of the entire building of which the demised premises form a
part. Lessee agrees that it is responsible for the payment of 58.69 per
cent of such taxes. In the event the Lessor shall desire to contest the
validity or amount of any Such tax, the Lessor may defer payment thereof as
long as the validity or amount hereof shall be contested by the Lessor in
good faith and by proper proceedings. The Lessor may also make payments
under protest or take such other steps with regard to said tax as will not
prejudice its opportunity to successfully contest the validity or amount
thereof. The Lessee agrees to render the Lessor full assistance timely and
without expense to the Lessor in contesting the validity or amount of any
such tax, including but not limited to joining in and signing any protest
or pleading which the Lessor may deem it advisable to file, provided,
Lessor wilI not incur any expenses on behalf of Lessee without Lessee's
prior approval. Should any rebate be made on account of any tax, a portion
of which has been paid by the Lessee to the Lessor hereunder, the Lessor
shall refund to the Lessee a proportionate share of such rebate to the
extent of amount paid by the Lessee to the Lessor, less any and all legal
fees, costs, and expenses incurred by Lessor in such contest and/or in
obtaining such rebate, said proportionate share to be computed in the same
manner in which the Lessee payments to the Lessor hereunder are computed.
(d) Lessee shall promptly pay directly to the applicable government;
authorities, and prior to any interest or penalties accruing or being due
as to. Such taxes, any and all taxes with re respect to any and all
property, or improvement additions or alterations, real or personal, which
at any time are made, installed, situated by Lessee or anyone on its behalf
in, at, on, or about the demised premises including but not limited to
Lessee's alterations, installations, additions' improvements, fixtures, and
personal property (whether or not title to same shall have vested in Lessor
by reason of any provision of this Lease), and also pay any and all taxes
with respect to its Lease and/or leasehold estate and any sales taxes or
the like on any rents or other sums payable by Lessee under the Lease.
(e) If at any time after the date of this Lease the methods of taxation of
real estate prevailing at the date of this Lease shall be altered and there
shall be levied, assessed, or imposed in substitution in whole or in part
for or in addition to the present general real estate ,axes, a capital levy
tax, or a tax upon revenues or rents derived from real estate, or a
corporation franchise tax, or any other tax howsoever denominated by
whatsoever authority (including but not limited to any municipal, county,
state, or federal authority) which shall be measured or based in whole or
in part upon the value of the property or by the revenues or rents derived
therefrom, then all such taxes shall be deemed to be included in the term
"taxes" or "real estate taxes" for the purposes of this Lease and Lessee's
obligation to pay real estate taxes hereunder. For purposes of this
paragraph, the real estate containing the building of which the demised
premises are a part, shall be treated as the sole real estate asset of
Lessor.
(f) No capital levy tax, income tax, gross receipts tax, franchise tax or
inheritance tax shall be deemed a "real estate tax" for any purpose
hereunder.
(22) RIGHT OF ENTRY
Lessor and its successors, assigns, agents, and designees shall have the
right to enter into and upon the demised premises upon reasonable notice to
Lessee at all times during business hours for the purpose of examining or
determining whether Lessee is performing or abiding by the Lease. With
respect to emergencies, Lessor shall also and in addition thereto have the
right to enter the demised premises at any time whether or not Lessee be
present or open for business or the time be during Lessee's business hours.
Except in case of emergencies, Lessor shall give Lessee reasonable notice
of its intent to enter in and upon the demised premises; the entry shall be
at a reasonable time; Lessee shall have the right to have its
representative accompany Lessor; any work performed by Lessor shall be in a
good workmanlike manner with minimal interference to Lessee's business;
Lessor shall not cause any diminution of the area of the demised premises;
and Lessor, after performance of its work, shall restore the demised
premises to a tenantable condition. Lessor shall also have the right within
six (6) months before the expiration of the said term and any renewal
hereof to affix to any part of the damaged premises, or to post or erect
thereat, a notice offering said premises for rent, and to keep the same so
affixed, posted, or erected without obstruction, interference, removal, or
defacement.
(23) SUBORDINATION, ESTOPPEL AND ATTORNMENT This Lease shall be subject to
any and all recorded easements, rights of way, encumbrances, or
restrictions, granted or accepted by Lessor, Lessee agrees that Lessor may
at any time and from time to time borrow any sum of money, and/or in whole
or in part repay, extend, increase, renew, or modify such borrowings on
such terms and in such amounts as Lessor may deem proper, and secure the
same by one or more mortgages, ground leases, underlying leases, and/or
sale-leasebacks as to all or any portion of the demised premises, and at
Lessor's option, exercised in its discretion without obligation, this Lease
shall be subject and subordinate to any or all of the same and to any or
all renewals, modifications, replacements, and extensions of the same.
Lessor shall give Lessee written notice of its exercise or exercises of
such option to have this Lease subordinated, and no further notice,
consent, or instrument shall be required to bind Lessee as to such
subordination; however, at the request of Lessor and without charge or
penalty, Lessee shall execute and deliver to Lessor or its designee within
five (5) days next following Lessor's submission to Lessee of the same, any
and all instruments, agreements, or certificates to evidence such
subordination, and Lessee hereby unconditionally and irrevocably designates
and appoints Lessor as its attorney-in-fact to execute and deliver any such
instruments for an on behalf of Lessee in the fails or refuses to do so
within such time.Lessee's subordination is conditioned upon Lessee's
receipt of a non-disturbance agreement. Lessee shall also furnish during
the term of the lease any and all financial statements of Lessee requested
by the holder of any mortgage or mortgages covering the demised premises,
Lessee shall attorn to the new owner or assignee .upon such event and
accept and acknowledge such person firm, or entity as the Lessor under this
Lease; and Lessee shall, without charge or penalty and within ten (10) days
after any request by the Lessor, prepare, execute, acknowledge, and deliver
to Lessor or its designee an instrument in a form requested, including but
not limited to the following:
(a) the date of this Lease, the date when the term of this Lease commenced,
and the date when rent commenced to accrue hereunder;
(b) that this Lease is unmodified, not amended, and in full force and
effect; or, if there have been any amendments or modifications, that the
Lease is in full force and effect as so amended or modified and stating the
amendments or modifications and the dates thereof;
(c) based on Lessee's actual knowledge whether or not there are then
existing any setoffs or defenses against the enforcement of any of the
terms and/or conditions of the Lease and any amendments or modifications
hereof on the part of Lessee to be performed, and, if so, specifying the
same;
(d) the dates, if any, to which the annual rent, additional rent,
and other sums on Lessee's part to be paid hereunder have been paid and/or paid
in advance;
(e) the date of expiration of the Lease term;
(f) the rate of rent then payable under this Lease; and
(g) that, if true at the time of the request, Lessee accepts the demised
premises and any and all improvements in the condition then existing as
being complete and in accordance with Lessee's agreements as to the same
and in accordance with the Lease, and that Lessee waives any and all claims
or causes of action at, to Like same as against Lessor, the fee owner
thereof, and such new owner or assignee. Lessor agrees that Lessor shall,
without charge or penalty and within ten (10) after any request by the
Lessee, prepares execute, acknowledge and deliver to Lessee or its designee
an instrument in form similar to that required to be delivered by Lessee to
Lessor or its designee with respect to the matters set forth in (a) through
(g) above.
(24) NO BROKERS
Lessee represents and warrants that no brokers were retained, used, or
referred to with respect to this Lease and/or leasing, except for Hurwit &
Simons Realtors and that no claims based upon the acts of Lessee or
Lessee's agents for brokerage commissions or finder's fees are valid or
warranted with respect to or in connection with this Lease, except for the
claim of Hurwit & Simons Realtors and that it shall defend, indemnify, and
hold Lessor harmless from any and all costs, claims or causes of action for
such commissions or fees made by anyone other than Hurwit & Simons
Realtors. Lessor shall pay any brokerage fee which may be due to Hurwit &
Simons Realtors.
(25) WAIVER
No waiver by either party to this Lease as to any occurrence or of any
condition or term of the Lease shall be effective unless it is in writing
and signed by the waiving currence or of any other condition or term.party,
nor shall it constitute a waiver by such party as to any repetition of such
occurrence or as to any other oc
(26) MECHANICS' LIENS
Notice is hereby given that Lessor shall not be liable for any work or
materials furnished to Lessee on credit and no mechanics' or other. lien
for any such .work or material shall attach to or affect Lessor's interest
in the demised premises. In the event any lien shall at any time or times
be filed or levied against the demised premises as to any work, labor, or
materials supplied to Lessee or anybody claiming through Lessee, Lessee
shall bond, pay, or vacate the same within twenty (20) days next following
such filing or levying of the same.
(27) ADDITIONAL PREMISES
Lessee agrees that commencing on the Additional Space Date, the additional
premises described in Exhibit C annexed hereto, incorporated herein and
made a part hereof, shall be rented to Lessee and included in the damaged
premises of this Lease subject to each and every term and condition of this
Lease.
(28) EXCULPATION
Neither Lessor nor any officer, director, shareholder, general partner,
limited partner, affiliate, subsidiary, corporate parent, employee, agent,
successor, or assign of Lessor shall at any time or times have any personal
liability for or under this Lease, and in the event of any default by
Lessor in the performance or observance of any of the terms or conditions
of this Lease on Lessor's part to be performed, Lessee shall only be
entitled to assert any claim or cause of action as to such default or
defaults against the building of which the demised($37,765.36) premises
form a part and to recover or realize any remedy, if successful, only in
rem against such real property.
(29) SECURITY DEPOSIT
Lessee shall deposit with Lessor, concurrently with the execution of this
Lease, the sum of Thirty-Seven Thousand Seven Hundred 51xty-Five and 36/100
Dollars ($37,765.36) to be held in an interest bearing account with
interest payable to the Lessee annually and applied by Lessor as security
for the full and timely performance and observance of any and all of the
terms and conditions of the Lease on Lessee's part to be performed and
observed. Lessor in its discretion and from time to time and at any time
shall be entitled to apply any portion or all of said security to
reimbursement or satisfaction of any and all defaults in Lessee's
performance and observance of the Lease and/or any and all damages, losses,
attorneys' fees, costs or expenses incurred or to be incurred by Lessor as
to any default or defaults in the Lease by Lessee, including those not
remedied by Lessee within the period, if any, expressly provided in the
Lease for such remedial action. Upon Lessor's giving Lessee notice of any
such application of the security, Lessee shall within five (5) days
thereafter pay to Lessor a sum sufficient to restore the amount of such
security de deposit to a total sum of Thirty-Seven Thousand Seven Hundred
Sixty-Five and 36/100 Dollars ($37,765.36). On or before March 1, 1991,
and/or in the event that Lessee shall lease the additional premises, as the
case may be, Lessee shall pay to Lessor a sum sufficient that will, when
added to the security then being held by Lessor, equal two (2) months of
the rental due during the term and/or for the additional premises so
leased. Within fifteen (15) days next following
expiration of the term of this Lease, Lessor shall refund to Lessee any
balance of the security remaining on deposit with Lessor which has not been
applied to reimbursement or satisfaction of the foregoing items, and Lessor
shall have no further liability with respect to such security.
If Lessor shall cease to be the landlord of the demised premises, Lessor
may deliver the balance of the security then on deposit with Lessor to its
successorin-interest to such premises; and upon such delivery and written
notice to Lessee giving the name and mailing address of such
successor-in-interest, Lessor shall have no further liability with respect
to such security.
(30) SECURITY SHACK
Lessee understands that until February 28, 1987, Roytype, another tenant in
the Lessor's building of which the demised premises are a part, will at
Roytype's sole cost and expense retain and maintain the existing security
shack on the exterior grounds. Lessee further understands that Roytype is
entitled to check in and out at the security shack all trucks going to or
from the loading docks, including docks used by Lessee. Nothing herein
shall prevent Lessee from having access at all times to its loading docks.
Furthermore, nothing herein shall prevent Lessee from operating said
security shack when Roytype is not operating it or for Lessee to have keys
to the gates and the security shack. Lessor further agrees that reasonable
safety rules will be enforced.
(31) RENEWAL OPTION
If this lease shall be in full force and effect and Lessee shall not be in
material default beyond any applicable grace period provided herein for the
cure thereof of any of the covenants and provisions hereof, Lessee shall
have the right to extend the term of this lease for one (1) period of five
(5) years commencing on the termination date of this lease, provided that
it shall give Lessor written advance notice of its election to so extend
said term at least twelve (12) months prior to the expiration of the
original term of this lease. If Lessee shall have exercised the option, as
aforementioned, the term of this lease shall be extended for said
additional period upon all of the same terms, provisions and conditions as
are contained in this lease except as hereinafter provided. Commencing on
March 1, 1997, and terminating on February 28, 2002, (provided the
Additional Space Date has theretofore occurred, Lessee shall pay an annual
rent to Lessor throughout said extended term at an annual rate of Three and
751100 Dollars ($3.75) per square foot or Three Hundred Ninety-Three
Thousand Seven Hundred Fifty and 00/100 Dollars ($393,751.00) per annum,
payable in successive monthly installments of Thirty-Two Thousand Eight
Hundred Twelve and 501100 Dollars ($32,812.50) per month, without offset,
deduction, demand, or abatement whatsoever, in lawful money of the United
States which is legal tender for payment of all public or private debts at
the time, and paid to Lessor, c/o Howard Nelson, 50 Close Road, Greenwich,
Connecticut 06830, or to such other payee and at such other address as
Lessor may from time to time designate by written notice to the Lessee
prior to any such payment.
(32) MISCELLANEOUS
(a) The captions of this Lease and any table of contents or index set forth
as part of the Lease are for convenience and reference only and shall not
be deemed or construed to bind, modify, increase, or decrease the terms and
conditions of this Lease, or any interpretation or construction thereof.
Any reference in the Lease to the singular or to any gender shall similarly
apply to the plural or to every other gender if and when the sense
requires.
(b) The terms and conditions contained in this Lease shall apply to and be
binding upon the parties herein and their respective successors and
assigns, except as expressly otherwise provided.
(c) This Lease shall be governed by the law of the State of Connecticut and
shall be deemed to have been made, executed, delivered, and accepted by the
respective parties in that State.
(d) In the event any portion of this Lease is determined by applicable
governmental authorities to be against public policy and void, or otherwise
unenforceable or invalid, Lessor shall be entitled to cancel the Lease
within sixty (60) days next following such determination by written notice
to that effect hand delivered or sent to Lessee by Lessor by certified or
registered mail, and the parties herein shall thereupon be governed by the
provisions of the Lease relating to surrender of the demised premises upon
expiration. If Lessor does not elect to terminate the Lease, the terms and
conditions of the Lease, except for the express provisions declared void,
shall continue to govern the parties.
(e) Lessee shall not record this Lease, and at the request of either party,
Lessor and Lessee shall execute, acknowledge, deliver, exchange, and record
at Lessee's expense a Notice of Lease or other short-form instrument
permitted under applicable state law and prepared by Lessor.
(f) This Lease and any and all exhibits and riders attached hereto and made
a part of this Lease constitute the entire agreement of the parties
concerning this Lease, and any and all other or prior agreements,
representations, or warranties are hereby terminated, cancelled, and agreed
to be void and of no force or effect. No change, amendment, deletion, or
addition to this Lease shall be effective unless in writing and signed by
the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed, delivered, acknowledged, and exchanged by their respective duly
authorized officers or representatives and their respective seals, if any,
to be affixed hereto by order of their respective Boards of Directors, if
any, the day and year first above written.
Signed, Sealed and Delivered in the Presence of` LESSOR:
VERNEL COMPANY, acting herein by
MARKAN SIXTY-NINE CORPORATION,
Genera artner
By
Howard Nelson
Its President
LESSEE:
E. RABINOWE & CO. OF CONN. INC.,
a Subsidiary of
NATIONAL PATENT DEVELOPMENT
CORPORATION
Its Vice President
STATE OF NEW YORK
ss.
COUNTY OF NEW YORK
On this 18th day of February, 1986, before me, _____________________.
the undersigned officer, personally appeared HOWARD NELSON, who acknowledged
himself to be the President of MARKAN SIXTY-NINE CORPORATION, General Partner
of VERNEL COMPANY and that he as such President, being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as President.
In Witness Whereof, I hereunto et my hand and official seal.
Notary Public
My commission expires
STATE OF
SS.
COUNTY OF
On this 18th day of February 1986, before me, the undersigned
officer, personally appeared Lawrence M. Gordon, who acknowledged himself to be
the Vice President of E. RABINOWE& CO. OF CONN. INC., a subsidiary of NATIONAL
PATENT CORPORATION, a corporation, and that he as such being authorized so to
do, executed the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as Vice President.
In Witness Whereof, I hereunto set my hand and official seal.
Notary Public y commission expires
<PAGE>
GUARANTY
FOR VALUE RECEIVED, The undersigned NATIONAL PATENT DEVELOPMENT
CORPORATION (hereinafter designated as "Guarantor"), hereby unconditionally
guarantees to Lessor, its successors and assigns, the full and prompt
performance and observance by Lessee and its successors or assigns of all the
terms and conditions in the lease dated February 1, 1986, (hereinafter the
"Lease"), between VERNEL COMPANY, as Lessor, and E. RABINOWE & CO. OF CONN.
INC., a Connecticut corporation, which corporation is a subsidiary of NATIONAL
PATENT DEVELOPMENT CORPORATION, as Lessee, on the part of the Lessee thereunder
to be performed or observed, and if at any time default shall be made by said
Lessee or its successors or assigns in the full and prompt performance or
observance of any of the terms or conditions of said Lease on Lessee's part to
be performed or observed, Guarantor will thereupon perform and observe the same,
as the case may be, in place and stead of Lessee, without demand or notice. No
waiver, modification, amendment, extension of time, indulgence, forebearance,
release, or discharge granted or permitted by Lessor as to any of the terms or
conditions of said Lease shall release or modify the obligations of Guarantor
hereunder, nor shall Lessor be required to give any notice thereof to Guarantor.
The liability and obligation of the Guarantor hereunder to Lessor and
its successors and assigns shall not be diminished, released, or in any way
affected by: (a) the release or discharge of Lessee in any creditors',
receivership, bankruptcy, insolvency, or other proceedings; (b) the impairment,
limitation or modification of the liability of Lessee or its estate in
bankruptcy; (c) the existence or exercise of any remedy for enforcement of
Lessee's liability under the Lease; (d) the limitation or discharge of Lessee's
liability under the Lease by reason of the operation of any present or future
provisions of any Bankruptcy Statute of the United States of America or any
Rules with respect thereto of any state law and/or statute or any decision of
any court, and/or or the rejection or disattirmance of the Lease in any such
proceedings; (e) any assignment or transfer of the Lease by Lessee; (f) any
disability or other defense of Lessee; or (g) the release from any cause
whatsoever of the liability of Lessee under the Lease.
Until all the covenants and conditions of the Lease on Lessee's part to
be performed and observed are fully performed and observed, Guarantor
subordinates any liability or indebtedness of Lessee now or hereafter held by
Guarantor to the obligations of Lessee under said Lease.
This Guaranty shall apply to the said Lease and to any and all renewals
or extensions thereof.
Guarantor hereby appoints the Secretary of the State of Connecticut as
agent to accept service of process in any suit against it for alleged breach of
this Guaranty and Guarantor hereby submits to the jurisdiction of the courts of
the State of Connecticut and the United States of America for the purpose of any
such suit.
This instrument may not be changed, modified, discharged or terminated
orally or in any manner other than by an agreement in writing signed by
Guarantor and the Lessor.
IN WITNESS WHEREOF, the Guarantor has executed this instrument or caused
this instrument to be executed by its duly authorized officer this first day of
February, 1986.
Signed, Sealed and Delivered in the Presence of
GUARANTOR:
NATIONAL PATENT DEVELOPMENT
CORPORATION
BY
Its President
<PAGE>
STATE OF
ss.
COUNTY F
On this the 18th day of February, 1986, before me , ____the
undersigned officer, personally appeared Jerome I. Feldman, who acknowledged
himself to be the President of NATIONAL PATENT DEVELOPMENT CORPORATION, a
corporation, and that he as such Presidnet , being authorized so to do, executed
the foregoing instrument for the purposes therein contained, by signing the name
of the corporation by himself as President.
In Witness Whereof, I hereunto se my hand and official seal.
Comissioner of the Superior Court
Notary Public
My commission expires
<PAGE>
FIVE
STAR.
GROUP
Distributors of home decorating. hardware and finishing products
July 25, 1994
Mr. Howard Nelson
General Partner
Vernel Company
50 Close Road
Greenwich, CT 06830
Re: E. Rabinowe & Co.
Dear Mr. Nelson:
The Purpose of this letter is to set-forth the terms of an amendment to
the Lease, dated February 1, 1986, as amended on October 5, 1989, between Vernel
Company and E. Rabinowe & Co. (the "Lease") with respect to the renewal option.
All terms, provisions and conditions contained in the Lease shall remain the
same, except as hereinafter provided.
1. Lessee is Five Star Group, Inc. ("Five Star"). On December 31, 1989, E.
Rabinowe & Co. of Connecticut, Inc. merged into Five Star Group, Inc. E.
Rabinowe is now a division, not a subsidiary, of Five Star Group, Inc.
2. Paragraph 32 - Renewal Option shall be replaced in its entirety by the
following:
If this lease shall be in full force and effect and Lessee shall not be in
material default beyond any applicable grace period provided herein for the
cure thereof of any of the covenants and provisions hereof, Renewal Option
shall be amended in the following manner: Lessee shall have the right to
extend the terms of the lease for two periods commencing on June 1, 1994.
The first. period will commence on June 1, 1994 and terminate on February
28, 2001 (eighty-one months). Lessee shall pay an annual rent to Lessor
throughout the first extended term at an annual rate of ($3.40) per square
foot, (111,700 square feet) or Three Hundred Seventy-Nine Thousand Seven
Hundred Eighty and 00/100 dollars ($379,780) per annum, payable in
successive monthly installments of Thirty-One Thousand Six Hundred
<PAGE>
Forty-Eight and 33/100 dollars ($31,648.33) per month. The second period
will commence on March 1, 2001 and terminate on February 28, 2006 (sixty
months), provided that Lessee shall give Lessor written advance notice of
its election to so extend said term for the second period at least six (6)
months prior to March 1, 2001. If Lessee shall have exercised the renewal
option for the second period, the term of this lease shall be extended for
said additional period upon all of the same terms, provisions and
conditions as are contained in this lease. Lessee shall pay an annual rent
to Lessor throughout the second extended term at an annual rate of ($3.75)
per square foot (111,700) or Four Hundred Eighteen Thousand Eight Hundred
Seventy-Five and 00/100 dollars ($418,875) per annum, payable in successive
monthly installments of Thirty-Four Thousand Nine Hundred Six and 25/100
dollars ($34,906.25) per month.
If you are in agreement with the foregoing, please sign the duplicate copy
of this letter.
ACCEPTED AND AGREED:
VERNEL COMPANY FIVE STAR GROUP, INC.
By: By:
Title:- Title:
Exhibit 10.7
LEASE dated May 14 , 1983 between Vornado, Inc., a Delaware
corporation, whose addresses 174 Passaic Street, Garfield, New Jersey 07026
("Landlord") and J. Leven & Co., a New Jersey corporation, whose address is 109
South 20th Street, Irvington, New Jersey 07111 ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby rents from
Landlord the Demised Premises (as defined in Article I) for the Term provided
for in Article IV hereof at the rent provided for in Article V hereof and on all
of the terms and conditions set forth herein. Intending to be legally bound
hereunder and in consideration of $1.00 and other good and valuable
consideration, Landlord and Tenant hereby agree with each other as follows:
ARTICLE I. LEASE SCHEDULE.
The following terms shall be applicable to the various provisions
of this Lease which refer to them:
Section 1.01.Demised Premises and the Complex:
Demised Premises means a portion of the Building at a warehousing
complex located in East Hanover, New Jersey. The portion of the building leased
to Tenant consists of approximately 75,000 square feet of floor area and is
designated as "Demised Premises" on Exhibit A. Exhibit A is attached hereto and
made a part hereof. The Demised Premises includes any alterations, additions or
repairs made thereto. The warehousing complex is referred to in this agreement
as the "Complex".
Section 1.02.Building: Means the Building in which the Demised
Premises is locates, as shown on Exhibit A.
Section 1.03. Expiration Date: Means December 31, 1993.
Section 1.04. Rent:
Minimum Rent: Minimum Rent shall be payable as follows: (i) the
sum of $168,750.00 per annum during the first two (2) years of the Term; (ii)
the sum of $187,500.00 per annum during the third 3rd) through the fourth (4th)
years of the Term; (iii) the sum of $206,250.00 per annum during the fifth (5th)
through the sixth (6th) years of the Term; and (iv) $225,000.00 per annum during
the balance of the Term.
Section 1.05.Taxes:
Tax Contributions: See Section 5.03.
Section 1.06.Tenant's Contribution (Common Area Expenses): See
Section 11.04.
Section 1.07.Security: None.
Section 1.08. Use:
(a) Permitted Uses: See Section 9.01.
(b) Tenant's Operation: Distribution of paint and garden supplies
and related products.
(c) Tenant's Business Name: J. Leven & Co.
Section 1.09. Broker: Archie Schwartz Company.
Section 1.10.Notice Addresses:
(a) Landlord's Notice Address:
174 Passaic Street
Garfield, New Jersey 07026
Attn: Vice President, Real Estate
(b) Landlord's Notice Copy Address:
Finley, Kumble, Wagner, Heine, Underberg & Casey
425 Park Avenue
New York, New York 10022
Attention: Neil Underberg, Esq.
(c) Tenant's Notice Address until January 1, 1984:
J. Leven & Co.
109 South 20th Street
Irvington, New Jersey 07111
(d) Tenant's Notice Address after January 1, 1984:
J. Leven & Co.
Ridgedale Industrial Campus
Ridgedale Avenue and Murray Road
Building #903
East Hanover, New Jersey 07936
(e) Tenant's Notice Copy Address:
National Patent Development Corporation
375 Park Avenue
New York, New York 10152
Attention: David A. Rapaport, General Counsel
ARTICLE II. DEFINITIONS.
As used herein, the following words and phrases have the following
meanings:
Section 2.01. Common Area:
Means the portions of the Complex designated for common use from
time to time by Landlord. References to the Common Area include the parts of the
Complex designated as a Parking Area by Landlord from time to time.
Section 2.02. Expiration Date:
Means the last day of the Term. If the Term has been extended or
this Lease has been renewed, the Expiration Date shall be the last day of the
Term as so extended or renewed. If this Lease is cancelled or terminated prior
to the originally fixed Expiration Date, then the Expiration Date shall be the
date on which this Lease is so cancelled or terminated. But if this Lease is
cancelled or terminated prior to the-originally fixed Expiration Date by reason
of Tenant's Default, Tenant's liability under the provisions of this Lease shall
continue until the date the Term would have expired and such cancellation or
termination not occurred.
Section 2.03. Force Majeure:
Means any of the following events: Acts of God; strikes,
lock-outs, or labor difficulty; explosion, sabotage, accident, riot or civil
commotion; act of war; fire or other casualty; legal requirements; delays caused
by the other party; any causes beyond the reasonable control of a party.
Section 2.04. Insurance Requirements:
Means the applicable provisions of the insurance policies carried
by Landlord covering the Demised Premises, the Complex, or any part of either;
all requirements of the issuer of any such policy; and all orders, rules,
regulations and other requirements of any insurance service office which serves
the community in which the Complex is situated.
Section 2.05. Landlord's Work:
Means the construction and other work designated as Landlord's
Work set forth in Exhibit B.
Section 2.06. Master Lease:
Means a lease of the Demised Premises or the Complex, as the case
may be, or a lease of the ground underlying the Demised Premises or the Complex,
between the owner thereof, as lessor, and Landlord, as lessee, giving rise to
Landlord's rights and privileges in the Demised Premises, the Complex or such
underlying land.
Section 2.07.Master Lessor:
Means the owner of the Lessor's interest under the Master Lease.
Section 2.08.Mortgage:
Means any mortgage, deed to secure debt, trust indenture, or deed
of trust which may now or hereafter affect, encumber or be a lien upon the
Demised Premises, the Complex, the real property of which the Complex forms a
part, or Landlord's interest therein; and any spreading agreements, renewals,
modifications, consolidations, replacements and extensions thereof.
Section 2.09.Mortgagee:
Means the holder of any Mortgage, at anytime.
Section 2.10.Parking Area:
Means those portions of the Complex which are designated as such
by Landlord from time to time.
Section 2.11.Person:
Means an individual, fiduciary, estate, trust, partnership, firm,
association, corporation, or other organization, or a government or governmental
authority.
Section 2.12.Pro Rata Share:
Means the proportion that the ground floor area of the Demised
Premises bears to the ground floor area of all of the rentable space of the
buildings situated in the Complex. Such floor area shall be computed to the
outside faces of exterior walls and the center line of party walls.
Section 2.13.Repair:
Includes the words "replacement and restoration", "replacement or
restoration", "replace and restore", "replace or restore", as the case may be.
Section 2.14.Tenant's Agents:
Includes Tenant's employees, servants, licensees, tenants,
subtenants, assignees, contractors, heirs, successors, legatees, and devisees.
Section 2.15.Tenant's Work:
Tenant's Work means the construction and other work designated as
Tenant's Work set forth in The Plans and Specifications.
Section 2.16.Term:
Includes any extensions and renewals of the term hereof and any
period during which Tenant is in possession of the Demised Premises.
ARTICLE III. CONDITION OF DEMISED PREMISES.
Section 3.01.Landlord's Work:
(a) Within a reasonable time after this lease is executed by both
parties and counterparts exchanged, Landlord shall apply to the appropriate
governmental authorities for any building permit which shall be required in
connection with the performance of Landlord's Work.
(b) Within a reasonable time after the issuance of a building
permit referred to in subsection (a), or if no building permit is required,
within a reasonable time after the execution of this Lease, Landlord shall
commence to perform Landlord's Work.
Landlord shall diligently prosecute Landlord's Work to completion.
(c) Except for the performance of Landlord's Work, Tenant shall
accept possession of the Demised Premises in its present "as is" condition.
Section 3.02. Delivery of Possession:
Delivery of Possession shall be deemed to have occured when
Landlord shall have tendered possession of the Demised Premises to Tenant.
Section 3.03.Tenant's Right of Entry:
Tenant may enter the Demised Premises after September 1, 1983 and
before January 1, 1984. Upon and after any such entry to the Demised Premises by
Tenant, all of Tenant's obligations under this Lease shall be applicable, except
for Tenant's obligations to pay Rent. In lieu of Rent, until the Commencement
Date, Tenant shall pay the sum of $10,000.00, which sum shall be payable in four
(4) equal monthly installments of $2,500.00 each commencing on September 1,
1983.
Section 3.04.Tenant's Work:
(a) Within 30 days after the date of this Lease, Tenant shall
submit to Landlord proposed detailed specifications and working drawings for the
performance of Tenant's Work, if any. The proposed detailed plans and working
drawings are referred to in this Lease as "Proposed Specifications". Landlord
shall have a period of 15 days either to approve or to disapprove the Proposed
Specifications. If Landlord does not approve the Proposed Specifications,
Landlord shall return the Proposed Specifications to Tenant and notify Tenant of
any changes it desires to the Proposed Specifications, in which event, Tenant
shall modify the Proposed Specifications in accordance with Landlord's
requirements and shall return them as modified to Landlord within the following
ten days. The approved Proposed Specifications shall be a part of this Lease and
shall be referred to as the "Plans and Specifications".
(b) Promptly after the Proposed Specifications have been approved
by Landlord, Tenant shall apply for all approvals and permits legally required
in connection with the performance of Tenant's Work. If necessary, Landlord
shall join in the execution of the applications. At Tenant's request, Landlord
shall cooperate with the prosecution of the application. Tenant shall bear all
expenses in connection with the applications including any expenses incurred by
Landlord. Tenant shall prosecute the applications diligently and use its best
efforts to seek the approvals and permits applied for. Tenant shall advise
Landlord of its progress from time to time and upon request by Landlord.
(c) Promptly after all requisite approvals have been granted and
after Delivery of Possession, Tenant shall commence the performance of Tenant's
Work and shall diligently prosecute Tenant's Work to completion.
(d) Tenant shall perform all of Tenant's Work in accordance with
the Plans and Specifications, all legal requirements, all Insurance Requirements
and in a good and workmanlike manner.
(e) If any governmental authority requires that a certificate of
occupancy be issued with respect to the Demised Premises, Tenant shall apply
for, and obtain a certificate of occupancy.
ARTICLE IV. TERM.
Section 4.01.Term:
The Term of this Lease shall commence on January 1, 1984. The Term
shall expire on the date designated as Expiration Date in Article I. The date
upon which the Term commences is referred to in this Lease as the "Commencement
Date".
Section 4.02. Short Form Lease:
Upon request of either party the other shall execute (a) a
document in recordable form setting forth the exact Commencement Date of the
Term hereof or (b) a short form lease or memorandum of lease in proper form for
recording, setting forth such Commencement Date and any provision hereof other
than Article V, Sections 1.04, 1.05, 1.06, 1.07, 11.04 and 19.10.
ARTICLE V. RENT, SECURITY, TAX CONTRIBUTIONS.
Section 5.01. Minimum Rent:
Tenant shall pay Minimum Rent to Landlord. Minimum Rent shall be
payable without notice or demand. Minimum Rent shall be payable at the rates set
forth in Article I. Minimum Rent shall be payable in equal monthly installments.
Each monthly installment shall be due in advance. The first monthly installment
shall be due on the Commencement Date. Each subsequent installment shall be due
on the first day of each month during the Term. If the Commencement Date is a
day other than the first day of the month, the first installment shall be one
thirtieth of a normal monthly installment for each day during the period
commencing with the Commencement Date up to and including the last day of that
month. If the Expiration Date occurs on a day other than the last day of any
month, Minimum Rent for the last month during the Term shall be pro-rated in the
same manner.
Section 5.02. Tax Contributions:
(a) In addition to all other charges Tenant is required to pay
hereunder, Tenant shall pay "Tax Contributions" to Landlord.
(b) The following terms have the following meanings:
(i) "Tax Contributions" means Tenant's Pro Rata Share of
Impositions.
(ii) "Impositions" means all taxes, assessments (special or
otherwise, foreseen or unforeseen) and all other governmental charges assessed,
levied or imposed against the Demised Premises and the Complex during any Tax
Fiscal Year occurring wholly or partially within the Term. If any governmental
authority imposes, assesses or levies tax on rent or any other tax upon Landlord
as a substitute in whole or in part for real estate taxes or assessments, the
substitute tax shall be deemed to be an Imposition.
(c) If any Tax Fiscal Year occurs partially within and without the
Term, then, within a reasonable time after the Commencement Date or Expiration
Date, Landlord and Tenant shall adjust Tax Contributions with respect to any
such Tax Fiscal Year so that Tenant shall bear Tax Contributions which are
attributable to the Term and Landlord shall bear the remainder thereof.
(d) Tenant shall pay Tenant's Tax Contributions to Landlord as
follows:
(i) Tenant shall pay monthly installments on account of Tax
Contributions to Landlord. Installments shall be paid in the same manner and at
the same time as Minimum Rent. Until the actual amount of Tax Contributions
payable with respect to the first Tax Fiscal Year are actually determined,
estimated monthly installments with respect to that Tax Fiscal Year shall be
determined by Landlord in Landlord's reasonable discretion. After Tax
Contributions for the first Tax Fiscal Year are finally determined, each monthly
installment shall be a fraction of Tenant's Tax Contributions for the previous
Tax Fiscal Year. The numerator of the fraction shall be one. The denominator of
the fraction shall be the number of months in the previous Tax Fiscal Year.
(ii) 1If the installments payable with respect to any Tax Fiscal
Year shall exceed Tax Contributions for that Tax Fiscal Year, Landlord shall
refund the difference to Tenant promptly. If the installments payable with
respect to any Tax Fiscal Year shall be less than Tax Contributions for that Tax
Fiscal Year, Tenant shall reimburse Landlord for the difference promptly after
Landlord renders a bill with respect thereto.
(e) If any building at the Complex is assessed as part of a
separate tax lot from the tax lot of which the Building is a part, at Landlord's
election, for the purpose of calculating Tenant's Tax Contributions the floor
area of such other building and the Impositions attributable to the assessed
valuation of that other building shall be excluded.
(f) "Tax Fiscal Year" means the applicable fiscal year(s) of the
taxing authorities having jurisdiction over the Demised Premises.
Section 5.03. Contribution Year:
(a) Except as provided in subsection (b), "Contribution Year"
shall mean each period during the Term commencing on February lst and ending on
January 31st.
(b) W The first Contribution Year shall commence on the
Commencement Date and shall end on the January 31st next following the
Commencement Date. The last Contribution Year shall end on the Expiration Date.
(ii) Landlord shall have the option to change the Contribution
Year at any time. The option may be exercised by giving a notice of the change
to Tenant. The parties recognize that if the Contribution Year is changed, there
will be a period of time between the last full Contribution Year as it was
before the change and the first full Contribution Year after giving effect to
the change. This period is referred to in this Lease as the "Interim Period". If
the Interim Period consists of less than six months, the Interim Period shall be
added to the first Contribution Year to occur after giving effect to the change.
If the Interim Period consists of six months or more, the Interim Period shall
be treated as a Contribution Year.
Section 5.04. Payment of Rent:
(a) "Rent" means Minimum Rent, Tenant's Contribution and Tax
Contributions.
(b) Rent shall be paid without notice, demand, counterclaim,
offset, deduction, defense, or abatement.
(c) All Rent payable under this Lease shall be payable at
Landlord's address as set forth in Section 1.10 or at such other address as
Landlord shall designate by giving notice to Tenant.
(d) It is intended that this Lease shall yield to Landlord a net
return from the Demised Premises equal to the Rent. If Tenant shall fail to pay
any Tax Contributions or Tenant's Contributions, Landlord shall have all
remedies provided for in this Lease or at law in the case of nonpayment of
Minimum Rent. Tenants obligations under Article V (other than Section 5.01) and
Section 11.04 hereof, shall survive the expiration or sooner termination of this
Lease.
ARTICLE VI. CONDITION OF DEMISED PREMISES AND SIGNS.
Section 6.01. No Representation, Etc.:
Landlord has made no representation, covenants or warranties with
respect to the Demised Premises except as expressly set forth in this Lease.
Section 6.02. Mechanics' Liens:
If any mechanic's or materialman's lien is filed against the
Demised Premises or the Complex as a result of any additions, alterations,
repairs, installations or improvements made by Tenant, or any other work or act
of Tenant, Tenant shall discharge or bond same within twenty days from the
filing of the lien. If Tenant shall fail to discharge or bond the lien, Landlord
may bond or pay the lien or claim for the account of Tenant without inquiring
into the validity of the lien or claim.
Section 6.03. Signs:
(a) Tenant shall have the right to install and maintain a sign
affixed to the exterior of the Demised Premises subject to (i) the written
approval of Landlord as to dimensions, material, content, location and design,
(ii) applicable legal requirements, and (iii) Insurance Requirements. Tenant
shall obtain and pay for all required permits and licenses relating to such
signs. Copies of all such permits and licenses shall be delivered to Landlord
within a reasonable time after they are issued.
(b) Tenant shall not have the right to maintain or install any
other signs in or at the Complex or visible from the outside of the Demised
Premises.
(c) If Landlord shall deem it necessary to remove any sign in
order to paint or to make repairs, alterations or improvements in or upon the
Demised Premises, Landlord shall have the right to do so.
(d) Tenant may not install signs, lamps or other illumination
devices in or upon the Demised Premises if the lamps, signs or devices flash or
go on and off intermittently.
Section 6.04. Insurance Covering Tenant's Work:
Tenant shall not make any alterations, repairs or installations,
or perform Tenant's Work or any other work to or on the Demised Premises unless
prior to the commencement of such work Tenant shall obtain (and during the
performance of such work keep in force) public liability and workmen's
compensation insurance to cover every contractor to be employed. Such policies
shall be non-cancellable without ten days notice to Landlord. The policies shall
be in amounts and shall be issued by companies reasonably satisfactory to
Landlord. Prior to the commencement of such work, Tenant shall deli-ver
duplicate originals of certificates of such insurance policies to Landlord.
ARTICLE VII. REPAIRS, ALTERATIONS, COMPLIANCE, SURRENDER.
Section 7.01. Repairs by Landlord:
Upon reasonable notice from Tenant, Landlord shall make or cause
to be made necessary repairs to the roof and structural repairs to the
foundation, exterior walls and any load-bearing interior walls of the Demised
Premises (but excluding all windows, plate glass, doors and any fixtures and
appurtenances composed of glass) excepting any damage caused by any act,
omission or negligence of Tenant, Tenant's Agents or Tenant's invitees.
Section 7.02. Repairs and Maintenance by Tenant:
Except for repairs Landlord is specifically obligated to make or
cause to be made hereunder, Tenant shall make all repairs to the Demised
Premises necessary or desirable to keep the Demised Premises in good order and
repair and in a safe, dry and tenantable condition. Without limiting the
generality of the foregoing, Tenant shall be specifically required to make
repairs (a) to that portion of any pipes, lines, ducts, wires, or conduits that
service Tenant and are contained within the Demised Premises; (b) to windows,
plate glass, doors, and any fixtures or appurtenances composed of glass; (c) to
Tenant's sign, (d) to any heating or air conditioning equipment installed in or
servicing the Demised Premises; and (e) to the Demised Premises or the Complex
when repairs to the same are necessitated by any act or omission of Tenant, or
the failure of Tenant to perform its obligations under this Lease. Tenant shall
keep the Demised Premises in a clean and sanitary condition, free from vermin
and escaping offensive odors.
Section 7.03. Approval by Landlord of Repairs and Alterations:
Tenant may not make alterations to the Demised Premises, without
the prior written consent of Landlord. If Landlord grants consent, any such
alterations shall be performed in a good and workmanlike manner in accordance
with all applicable legal and Insurance Requirements.
Tenant shall give Landlord prompt notice of any repair or
alteration required or permitted to be performed by Tenant under any provision
of this Lease if the reasonable cost of the repair or alteration exceeds
$1,000.00. Except in the event of an emergency, if within ten days after
Tenant's notice is given, Landlord shall give notice to Tenant that it desires
to approve detailed specifications and working drawings with respect to the
proposed repair or alterations, then Tenant shall not commence the repair or
alteration until Tenant has submitted detailed specifications and working
drawings of the proposed repair or alteration and Landlord has approved them.
All work shall be commenced promptly after Tenant has obtained all necessary
permits and approvals. Tenant shall perform all work in accordance with the
approved detailed specifications and working drawings and prosecute the work
diligently to completion. Any work performed by Tenant, irrespective of cost,
shall be subject to Landlord's inspection and approval after completion to
determine whether the work complies with the requirements of this Lease.
Section 7.04. Compliance:
Tenant shall observe and comply promptly with all present and
future legal requirements and Insurance Requirements relating to or affecting
the Demised Premises, the Building or any sign of Tenant, or the use and
occupancy thereof, or any appurtenance thereto.
Section 7.05. Electrical Lines:
If the Tenant installs any electrical equipment that overloads the
lines in the Demised Premises or the Complex, Landlord may require Tenant to
make whatever changes to such lines as may be necessary to render the lines in
good order and repair and in compliance with all Insurance Requirements and
applicable legal requirements.
Section 7.06. Emergency Repairs:
If, in an emergency, it shall become necessary to make promptly any
repairs or replacements required to be made by Tenant, Landlord may re-enter the
Demised Premises and proceed to have such repairs or replacements made and pay
the cost of such repairs or replacements. Within thirty days after Landlord
renders a bill for such repairs or replacements, Tenant shall reimburse Landlord
for the cost of making such repairs.
Section 7.07. Surrender of Premises:
On the Expiration Date, Tenant shall quit and surrender the Demised
Premises broom clean, and in good condition and repair, together with all
alterations, fixtures, installations, additions and improvements which may have
been made in or attached on or to the Demised Premises. Landlord may require
Tenant to restore the Demised Premises to the condition the Demised Premises was
in on the date of Delivery of Possession. Notwithstanding the foregoing, Tenant
may remove its trade fixtures, furniture and all other items of personal
property installed in the Demised Premises, provided that Tenant promptly
repairs any damages to the Demised Premises caused by such removal. Tenant's
obligations under this Section shall survive the Expiration Date.
ARTICLE VIII. SERVICE AND UTILITIES.
Section 8.01. Electricity:
Landlord shall install an electric meter to measure electricity
consumed at the Demised Premises and shall perform such other work as shall be
necessary so that consumption of electricity at the Demised Premises shall be
measured separately. Tenant shall make its own arrangements with the utility
company supplying electricity for that service. Tenant shall pay for all
electrical service and charges relating to the Demised Premises and Tenant's
sign.
Section 8.02. Gas Service:
If Gas Service is available to the Demised Premises, Landlord shall
install a gas meter to measure gas consumed at the Demised Premises and shall
perform such other work as shall be necessary so that consumption of gas at the
Demised Premises shall be measured separately. Tenant shall make its own
arrangements with the utility company supplying gas for that service. Tenant
shall pay for all gas service and charges relating to the Demised Premises.
Section 8.03. Water:
Landlord may (a) install a water meter at Landlord's expense, or
(b) at Landlord's option, Tenant shall pay to Landlord its "proportionate share"
of the cost of water consumed in the Complex based upon the actual consumption
of water at the Demised Premises. Payments shall be due within ten (10) days
after a bill is rendered. If any sewer or water rent, charge, tax or levy is
imposed against the Complex, Tenant shall pay its proportionate share thereof
within ten (10) days after Landlord renders a bill therefor.
Section 8.04. Heat, Hot Water, Air-Conditioning:
Landlord shall not be required to supply heat, hot water or
air-conditioning to the Demised Premises. Tenant shall supply its own
requirements of heat, hot water and air-conditioning.
ARTICLE IX. USE AND OPERATION.
Section 9.01. Use:
Tenant shall use the Demised Premises for the distribution of
paint and garden supplies and related products, and for no other purpose.
Section 9.02. Demised Premises Operations:
(a) Keeping Demised Premises Clean: Tenant shall keep the Demised
Premises, including exterior and interior portions of all windows, doors and all
other glass, in neat and clean condition.
(b) Paying Taxes: Tenant shall pay before delinquency any and all
taxes, assessments and public charges levied, assessed or imposed upon Tenant's
business or upon Tenant's fixtures, furnishings or equipment in the Demised
Premises.
(c) Paying License Fees: Tenant shall pay promptly all license
fees, permit fees and charges of a similar nature for the conduct by Tenant or
any subtenant of any business or undertaking authorized hereunder to be
conducted in the Demised Premises.
(d) Exclusive Delivery Facilities: Tenant shall keep and maintain
in good order, condition and repair any loading platform, truck dock or truck
maneuvering space which is used by Tenant or to which Tenant has the right of
exclusive use notwithstanding the fact that the same may be deemed to be a
portion of the Common Area.
(e) Garbage: Tenant agrees not to permit the accumulation (unless
in concealed metal containers) or burning of any rubbish or garbage in, on or
about any part of the Complex. Tenant shall cause and pay for all garbage or
rubbish to be collected or disposed of from the Demised Premises.
(f) Rules and Regulations: Tenant shall observe all reasonable
rules and regulations established by Landlord from time to time for the Complex,
provided that Tenant has been given actual notice thereof and provided further
that same do not prohibit Tenant from using the Demised Premises in accordance
with the provisions of this Lease.
(g) Restrictive Covenants: Tenant agrees that it will comply with
and observe all restrictive covenants which affect or are applicable to the
Complex, the Demised Premises and the Common Area, provided that Tenant has been
given actual notice thereof and provided further that same do not prohibit
Tenant from using the Demised Premises in accordance with the provisions of this
Lease.
Section 9.03. Restriction on Tenant's Activities at Complex:
(a) Sidewalk Use: Tenant shall not use the sidewalk adjacent to or
any other space outside the Demised Premises for display, sale or any other
similar undertaking without the prior consent of Landlord in each instance.
(b) Loud Speaker Use: Tenant shall not use any advertising medium
which may be heard outside the Demised Premises.
(c) Plumbing Facility Use: If the plumbing facilities of the
Demised Premises are connected to the plumbing facilities of the Complex, the
following shall apply: Tenant shall not use the plumbing facilities of the
Demised Premises for any purpose other than the purpose for which they are
intended. Accordingly, Tenant may not dispose of any substances there which may
clog, erode or damage the pipelines and conduits of the Complex.
(d) Floor Load: Tenant shall not place a load on any floor
exceeding the floor load per square foot which such floor was designed to carry.
Tenant shall not install, operate or maintain any heavy item of equipment in the
Demised Premises except in such manner as to achieve a proper distribution of
weight.
(e) Exterior or Roof: Tenant shall not use for any purpose all or
any portion of the roof or exterior walls of the Demised Premises. Tenant shall
not cause a violation or do any act which may result in a violation of the roof
bond with respect to the Demised Premises.
(f) Freight Handling Equipment: Tenant shall use only rubber
wheeled forklift trucks and tow trucks for handling freight.
Section 9.04. Insurance Rate:
Tenant agrees to comply with all Insurance Requirements relating
to or affecting the Demised Premises or the Complex. If the insurance rates
applicable to the Complex are raised: (x) as a result of, or in connection with,
any failure by Tenant to comply with the Insurance Requirements; or (y) as a
result of, or in connection with, any use to which the Demised Premises are put
other than the Permitted Uses; then Tenant shall pay to Landlord on demand, the
portion of the premiums for all insurance policies applicable to the Complex as
shall be attributable to the higher rates. For the purposes of this Section, any
finding or schedule of the fire insurance rating organization having
jurisdiction over the Complex shall be deemed to be conclusive.
Section 9.05. Illegal Purposes:
Tenant shall not use the Demised Premises for any illegal trade,
manufacture, or other business, or any other illegal purpose.
ARTICLE X. TRANSFER OF INTEREST, PRIORITY OF LIEN.
Section 10.01. Assignment, Subletting, etc.:
(a) Tenant shall not sublet the Demised Premises or any part
thereof, or assign, mortgage or hypothecate, or otherwise encumber this Lease or
any interest therein nor grant concessions or licenses for the occupancy of the
Demised Premises or any part thereof, without Landlord's prior written consent,
Any attempted transfer, assignment or subletting shall be void and confer no
rights upon any third person. No assignment or subletting shall relieve Tenant
of any obligations herein. The consent by Landlord to any transfer, assignment
or subletting shall not be deemed to be a waiver on the part of Landlord of any
prohibition against any future transfer, assignment or subletting. No transfer,
or subletting shall be effective unless and until (x) Tenant gives notice
thereof to Landlord, and (y) the transferee, assignee or sublessee shall deliver
to Landlord (1) a written agreement in the form and substance satisfactory to
Landlord pursuant to which the transferee, assignee or sublessee assumes all of
the obligations and liabilities of Tenant under this Lease, and (2) a copy of
the assignment agreement or sublease.
(b) In the event that Tenant shall desire Landlord's consent to
the subletting of the Demised Premises or the assignment of this Lease, Tenant
shall give Landlord twelve (12) months prior written notice thereof. Such notice
shall be deemed to be an offer by Tenant to assign this Lease to Landlord. In
the event Landlord wishes to accept said offer, Landlord shall give Tenant
notice thereof within said twelve (12) months ("Landlord's Notice"), in which
event the assignment shall become effective on the date specified in Landlord's
Notice, which date shall be not less than thirty (30) nor more than ninety (90)
days after the date of Landlord's Notice, and Tenant shall vacate the Demised
Premises in accordance with Section 7.07 hereof by such date and on such date
this Lease shall terminate and Landlord and Tenant shall be released from all
liability accruing thereafter under this Lease, as if such date were the
Expiration Date originally set forth herein. The sending of Landlord's Notice
shall, ipso facto, and without the necessity of any further act or instrument,
be sufficient to effectuate said assignment. However, if Landlord shall request,
Tenant shall execute such documents as Landlord may reasonably request in
confirmation thereof. In the event that Landlord does not accept said offer
within the twelve (12) months, as aforesaid, Landlord's said right to recapture
the Demised Premises by assignment shall be deemed to be waived, but nothing
herein contained shall be deemed to be a consent by Landlord to any subletting
or assignment unless Landlord delivers to Tenant its written consent thereto.
Notwithstanding Landlord's failure to recapture on any one occasion, the right
to recapture as aforesaid shall apply to any further subletting or assignment.
(c) In the event that Tenant requests Landlord's consent to assign
this Lease or sublet the Demised Premises and Landlord does not exercise the
right of recapture as set forth in the preceding paragraph, then Landlord shall
not unreasonably withhold its consent to a proposed assignment or subletting,
submitted to Landlord either within said twelve (12) month period or within
three (3) months after Landlord fails to recapture, as aforesaid, provided the
following terms and conditions are fully complied with:
(i) Tenant shall not be in default under this Lease at the time
Landlord's consent is requested or at the effective date of the assignment or
subletting.
(ii) The proposed assignee or subtenant shall have a net worth at
the time of the assignment or subletting at least equal to the sum of the net
worth of Tenant and Tenant's Guarantor at such time and the proposed assignee or
subtenant shall be of a character in keeping with the standards of the other
tenants of the Complex. Tenant shall furnish Landlord with such financial data
and other information as Landlord may reasonably request.
(iii) The Demised Premises shall be used by the assignee
or subtenant solely for warehousing purposes and
otherwise in accordance with the requirements of Article IX.
(iv) Tenant shall pay to Landlord a sum equal to (1) fifty (50%)
percent of any rent or other consideration paid to Tenant by any assignee or
subtenant which is in excess of the Rent then being paid by Tenant to Landlord
pursuant to the terms of this Lease, and (2) fifty (50%) percent of any other
profit or gain realized by Tenant, as additional rent immediately upon receipt
thereof by Tenant. Tenant may deduct from any such payments fifty (50%) percent
of Tenant's alteration costs and brokerage fees, incurred with respect to any
such assignment or sublease.
(v) Tenant shall pay the reasonable fee and disbursements of
Landlord's attorney in connection with any assignment or subletting (whether
proposed or effected).
(vi) In the case of an assignment, it shall provide for the
assignment of Tenant's entire interest of this Lease and the acceptance by the
assignee of said assignment and its assumption and agreement to perform directly
for the benefit of Landlord all of the terms and provisions of this Lease on
Tenant's part to be performed.
(vii) In the case of a subletting, it shall be for the entire
Demised Premises and it shall be expressly subject to all of the obligations of
Tenant under this Lease and the further condition and restriction that the
sublease shall not be assigned, encumbered or otherwise transferred or the
subleased premises further sublet by the sublessee in whole or in part, or any
part thereof suffered or permitted by the sublessee to be used or occupied by
others, without the prior written consent of Landlord in each instance.
(d) Landlord shall be furnished with a duplicate original of the
assignment or sublease within (i) ten (10) days after its execution, or (ii)
prior to its effective date, whichever is earlier.
(e) Anything contained in this Article X to the contrary
notwithstanding, J. Leven & Co. shall have the right to assign this Lease or
sublet the Demised Premises (i) to a corporation which is a parent, affiliate or
subsidiary of J. Leven & Co.; or (ii) to a corporation which is a successor to
J. Leven & Co. and National Patent Development Corporation and their respective
subsidiaries and affiliates, by way of merger, consolidation or corporate
reorganization, or by the purchase of substantially all of the assets of J.
Leven & Co. and National Patent Development Corporation and their respective
subsidiaries and affiliates, or (iii) to a corporation which is a successor to
J. Leven & Co. by the purchase of substantially all of the assets of J. Leven &
Co., which assets must be substantially comprised of property other than the
leasehold estate created by this Lease, without obtaining Landlord's prior
written consent thereto; provided: (a) Tenant is not then in default under the
terms of this Lease; (b) within five (5) days prior to the effective date of any
such assignment or subletting, a fully executed and acknowledged assignment or
sublease agreement, in proper form, is delivered to Landlord, which assignment
shall contain an assumption agreement by the assignee in favor of Landlord of
the terms and provisions of this Lease; (c) Tenant and Tenant's Guarantor shall
remain liable under this Lease and the Guaranty respectively; and (d) in the
case of an assignment pursuant to clause (iii), both J. Leven & Co. and the
assignee are viable, operating businesses. In the event of any such assignment
or subletting as set forth in the preceding sentence, Landlord shall not have
the right to recapture the Demised Premises as elsewhere provided in this
Article X.
Section 10.02. Master Lease:
Tenant acknowledges that it has been informed that Landlord may
hold a leasehold interest in the Complex under the Master Lease.
Section 10.03. Subordination:
At Landlord's election this Lease shall be subordinate or superior
to the lien of any present or future Mortgage or Master Lease irrespective of
the time of recording of such Mortgage or Master Lease. If, from time to time,
Landlord shall elect that this Lease be subordinate to the lien of any Mortgage
or Master Lease, Landlord may exercise such election by giving notice thereof to
Tenant. However, from time to time thereafter, Landlord may elect that this
Lease be paramount to the lien of such Mortgage, and may exercise such election
by giving notice thereof to Tenant. The exercise of any of the elections
provided in this Section shall not exhaust Landlord's right to elect differently
thereafter, from time to time. At the election of Landlord, this clause shall be
self-operative and no further instrument shall be required. Upon Landlord's
request, from time to time, Tenant shall (a) confirm in writing and in
recordable form that this Lease is so subordinate or so paramount (as Landlord
may elect) to the lien of any Mortgage or Master Lease and/or (b) execute an
instrument making this Lease so subordinate or so paramount (as Landlord may
elect) to the lien.of any Mortgage or Master Lease, in such form as may be
required by an applicable Mortgagee or Master Lessor.
Section 10.04. Attornment:
(a) If the Demised Premises or the Complex are encumbered by a
Mortgage and such Mortgage is foreclosed, or if the Demised Premises or Complex
are sold pursuant to such foreclosure or by reason of a default under said
Mortgage, then notwithstanding such foreclosure, such sale, or such default W
Tenant shall not disaffirm this Lease or any of its obligations hereunder, and
(ii) at the request of the applicable Mortgagee or purchaser at such foreclosure
or sale, Tenant shall attorn to such Mortgagee or purchaser and execute a new
lease for the Demised Premises setting forth all of the provisions of this Lease
except that the term of such new lease shall be for the balance of the Term.
(b) If Landlord's interest in the Demised Premises is a leasehold
interest, at any time, and if Landlord's leasehold interest is terminated for
any reason; then notwithstanding such termination the dispossession of Landlord
from the Demised Premises or the Complex, or any default by Landlord, as lessee,
under any Master Lease, (i) Tenant shall not disaffirm this Lease or any of its
obligations contained within this Lease, and (ii) at the request of the Master
Lessor, Tenant shall attorn to the applicable Master Lessor and execute a new
lease for the Demised Pemises setting forth all of the provisions of this Lease
except that the term of such new lease shall be for the balance of the Term.
Section 10.05. Transfer of Landlord's Interest:
(a) Fee Interest: The following language shall apply if the
Landlord's interest in the Demised Premises is a fee interest: The term
"Landlord" as used in this Lease means only the owner for the time being or the
Mortgagee in possession for the time being of the Demised Premises. In the event
of any sale of the Demised Premises, or in the event the Demised Premises are
leased to any person (subject to this Lease), said Landlord shall be and hereby
is entirely freed and relieved of all of its covenants, obligations and
liability hereunder. This subsection shall be applicable to each owner of the
Demised Premises, from time to time, and shall not be limited to the first owner
of the Demised Premises.
(b) Master Lease: The following Language shall apply if the
Landlord's interest in the Demised Premises is a leasehold interest: The term
"Landlord" as used in this Lease means only the owner for the time being of the
leasehold estate demised by the Master Lease. In the event of any transfer or
assignment of Landlord's interest in said Master Lease, then the Landlord whose
interest is thus assigned or transferred shall be and hereby is entirely freed
and relieved of all covenants, obligations and liability of Landlord hereunder.
In the event the owner of the leasehold estate demised by the Master Lease shall
acquire the fee interest in the premises demised by the Master Lease, subsection
(a) of this Section 10.05 shall be applicable. This subsection shall be
applicable to each person who owns a leasehold estate demised by a Master Lease.
Section 10.06. Mortgagee's Rights:
If Landlord shall notify Tenant that the Demised Premises or the
Complex are encumbered by a Mortgage and in such notice set forth the name and
address of the Mortgagee thereof; then, notwithstanding anything to the
contrary, no notice intended for Landlord shall be deemed properly given unless
a copy thereof is simultaneously sent to such Mortgagee by certified or
registered mail, return receipt requested. If any Mortgagee shall perform any
obligation that Landlord is required to perform hereunder, such performance by
Mortgagee, insofar as Tenant is concerned, shall be deemed performance on behalf
of Landlord and shall be accepted by Tenant as if performed by Landlord.
ARTICLE XI. COMMON AREA AND COMPLEX.
Section 11.01. Use of Common Areas:
During the Term the following privileges to use certain portions
of the Complex in common with Landlord and any designee of Landlord, subject to
Landlord's rules and regulations, are hereby granted to Tenant: (a) the
non-exclusive license to permit its customers to use the sidewalks and customer
Parking Areas designated by Landlord from time to time; (b) the non-exclusive
license to permit its employees to use the sidewalks and employee Parking Areas
designated by Landlord from time to time; and (c) the non-exclusive privilege to
permit its employees and customers to use the entrance and exit ways designated
by Landlord from time to time for access to the Demised Premises from a public
street or highway adjacent to the Complex through the appropriate entrances and
exits so designated. Notwithstanding the foregoing, Landlord agrees that,
throughout the Term, there shall always be at least 100 parking spaces in the
area designated as "Parking" on Exhibit A and that within the area designated as
"Tenant's Parking Area" on Exhibit A, 50 parking spaces shall be reserved for
Tenant's exclusive use. Landlord shall not be responsible for the policing of
such exclusive use.
Section 11.02. Landlord's Rights:
Notwithstanding anything to the contrary, Landlord shall have the
following rights: (a) to close all or any portion of the Common Area, including
the Parking Area to such extent as may in the opinion of Landlord's counsel be
necessary to prevent a dedication thereof or the accrual of any rights of any
person or the public therein; (b) to close all or any portion of the Common Area
temporarily to discourage non-customers use; (c) to prohibit parking or passage
of motor vehicles in areas previously designated for such; (d) to expand,
decrease or alter the size of the Complex or Building; and (e) to erect
additional buildings on the Common Area, or to change the location of buildings
or other structures to any location in the Complex including the Common Area
(and upon such erection or change of location the portion upon which such
buildings or structures have been erected shall no longer be deemed to be a part
of the Common Area).
Section 11.03. INTENTIONALLY OMITTED.
Section 11.04. Tenant's Contribution:
(a) "Common Area Expenses" means all reasonable costs and expenses
of every kind and nature paid or incurred by Landlord or its designees in
connection with the following:
(i) the management, operation, replacement, maintenance, repair,
redecorating, refurbishing, conforming with rules and regulations of authorities
having jurisdiction and the Fire Insurance Rating Organization and Board of Fire
Underwriters; utilities and other services and all other costs and expenses of
every kind and nature, foreseeable or unforseeable, required or desired,
suggested or recommended for the operation, maintenance or otherwise with
respect to the Common Areas in a manner deemed by Landlord in Landlord's
discretion (to be exercised in accordance with sound industrial complex
management standards in the northern New Jersey area), to be appropriate for the
best interests of the Complex, as conclusively determined by Landlord in
accordance with Landlord's method of accounting (provided the same is a
generally accepted method of accounting), including the supply by Landlord of
electricity and other utilities to the Common Areas; and the salaries and other
compensation of the Complex manager, security, and any other personnel
(exclusive of home office personnel) who implement the aforesaid management,
maintenance, security, operation, replacement, etc. of the Common Areas and
related costs including workmen's compensation insurance and the cost of office
space, supplies and equipment;
(ii) the maintenance, repair and replacement (except to
the extent of Landlord's receipt of the proceeds of
Insurance therefor) of all portions of the Complex, buildings and improvements
(excluding the roofs and structural portions of the leaseable buildings in the
Complex) and the sprinkler system other than as set forth in subparagraph (i)
above, or such maintenance, repair and replacement Landlord may perform on the
interior of any tenants' premises; and
(iii) the maintenance of all Insurance (including but not
limited to fire, broad form extended coverage, rent,
war risk, liability, products liability, flood, etc.) carried by and in the
discretion of Landlord or its designees covering the Complex, buildings and
improvements, the Common Areas and every other facility or property used or
required or deemed necessary in connection with any of them.
In addition, Common Area Expenses shall include fifteen percent
(15%) of all costs set forth in the foregoing subparagraphs (i), (ii) and (iii)
to cover Landlord's administrative and overhead costs.
(b) "Tenant's Contribution" means Tenant's Pro Rata Share of
Common Area Expenses plus an annual reserve fund charge equal to the amount
obtained by multiplying the floor area of the Demised Premises by twelve (12)
cents per square foot.
(c) Tenant shall pay monthly installments on account of Tenant's
Contribution to Landlord. During the first Contribution Year each monthly
installment shall be based upon Landlord's reasonable estimate of Tenant's
Contribution for that Contribution Year. Thereafter, the installments shall be
calculated in accordance with subsection M. Installments shall be paid in the
same manner and at the same time as Minimum Rent.
(d) Landlord shall maintain records of Common Area Expenses. These
records may be kept in the form of books of account or computer memory.
(e) Within a reasonable time after each Contribution Year,
Landlord shall send a statement to Tenant setting forth Common Area Expenses for
that Contribution Year. Each statement shall be final and conclusive between the
parties, their successors and assigns, or to the matters set forth therein, if
no objection is raised with respect thereto within ninety (90) days after
submission of each such statement to Tenant. If Tenant's Contribution exceeds
the installments paid by Tenant under subsection (c), Tenant shall pay to
Landlord the difference between Tenant's Contribution for that Contribution Year
and the aggregate amount paid by Tenant on account of Tenant's Contribution for
that Contribution Year. The payments shall be made within thirty (30) days after
Landlord renders a statement. If Tenant's Contribution for any Contribution Year
is less than the aggregate monthly installments paid under subsection (c) with
respect to that Contribution Year, Landlord's statement shall be accompanied by
Landlord's good check subject to collection in the amount of the difference.
(f) If Tenant's Contribution for any Contribution Year is greater
or less than the installments payable on account of Tenant's Contribution in
accordance with section (c), monthly installments payable on account of Tenant's
Contribution for the subsequent Contribution Year shall be one-twelfth (1/12th)
of Tenant's Contribution for the immediately prior Contribution Year.
Section 11.05. Landlord's Obligation with Respect to Parking Area:
Landlord shall keep the Parking Area properly paved and in good
order and repair throughout the Term. Landlord shall keep the Parking Area
properly drained and shall provide painted stripes to designated parking spaces.
Within a reasonable time after the end of a snowfall and from at least 10:00
a.m. to 10:00 p.m. Monday through Saturday, Landlord will commence to remove
accumulated snow and ice from the Parking Area and diligently prosecute the same
to completion so that, to the extend practicable, the Parking Area shall be
reasonably free of snow and ice. Landlord may deposit accumulated snow on
portions of the Common Area as may be necessary under the circumstances. If any
ice cannot be removed with reasonable effort on the part of Landlord, it will be
sufficient for Landlord to spread sand or other abrasive substance over the ice.
ARTICLE XII. DESTRUCTION AND FIRE INSURANCE.
Section 12.01. Rent Abatement:
If the whole or any portion of the Demised Premises is damaged by
fire or other casualty, Rent shall not abate. Notwithstanding the foregoing, if
this Lease has not been terminated and if Landlord has not completed the
restoration of the Demised Premises as provided in Section 12.03, within twelve
(12) months following the fire or other casualty, thereafter Rent shall abate
until such restoration is substantially completed. In the event of partial
damage to the Demised Premises, such abatement shall be in the same percentage
as the floor area of the Demised Premises that is damaged as of the floor area
of the Demised Premises.
Section 12.02. Option to Terminate:
If all or a substantial portion of the Demised Premises or the
Building (even if the Demised Premises is not damaged) shall be damaged by fire
or other casualty, this Lease shall not be terminated, except that Landlord
shall have the option to terminate this Lease upon giving notice of such
termination within forty-five (45) days following such occurrence. Tenant hereby
waives all rights to terminate this Lease it may have by reason of damage to the
Demised Premises as a result of fire or other casualty pursuant to any presently
existing or hereafter enacted statute or other law. Notwithstanding the
foregoing, if this Lease has not been terminated and if Landlord has not
substantially completed the restoration of the Demised Premises, as provided in
Section 12.03, within twelve (12) months following the fire or other casualty,
Tenant may, as its sole remedy, terminate this Lease, by notice to Landlord
within ten (10) days after the expiration of said twelve (12) month period. In
addition, if a "Substantial Casualty" (as hereinafter defined) shall occur
during the last two (2) years of the original Term or the Renewal Term, either
party may terminate this Lease by notice to the other within thirty (30) days
after such occurrence, provided, however, that Tenant may negate Landlord's
termination, if Tenant, within ten (10) days after receipt of Landlord's notice
of termination, exercises its renewal option, as set forth in Section 19.11.For
the purpose of this Section, "Substantial Casualty" means a fire or other
casualty resulting in damage to the Demised Premises to the extent of fifty
(5096) percent or more of the replacement value thereof.
Section 12.03. Landlord's Obligation to Rebuild:
If all or any portion of the Demised Premises is damaged by fire
orother casualty and this Lease is not terminated, Landlord shall, within
areasonable time after such occurrence, repair or rebuild the Demised Premises
or such portion to its or their condition immediately prior to Delivery of
Possession and repair or rebuild Landlord's Work, as set forth on Exhibit B.
Section 12.04. Tenant's Obligation to Rebuild:
If this Lease is not terminated, Tenant shall, at its own cost and
expense, repair and restore the entire Demised Premises, to the extent Landlord
is not obligated to repair or rebuild pursuant to Section 12.03, in accordance
with the provisions of Section 3.04. Tenant shall commence the performance of
its work when notified by Landlord that the work to be performed by Landlord has
proceeded to the point where the work to be performed by Tenant can, in
accordance with good construction practices, then be commenced. Tenant shall
perform such work in a manner that will restore the Demised Premises to its
condition immediately prior to such occurrence.
Section 12.05. Waiver of Subrogation:
Landlord and Tenant each hereby releases the other, its officers,
directors, employees and agents, from liability or responsibility (to the other
or anyone claiming through or under them by way of subrogation or otherwise) for
any loss or damage to property covered by valid and collectible fire insurance
with standard extended coverage endorsement, even if such fire or other casualty
shall have been caused by the fault or negligence of the other party, or anyone
for whom such party may be responsible. However, this release shall apply only
to loss or damage occurring during such time as the releasor's fire or extended
coverage insurance policies shall contain a clause or endorsement to the effect
that any such release shall not adversely affect or impair such policies or
prejudice the right of the releasor to recover thereunder. Landlord and Tenant
each agrees that any fire and extended coverage insurance policies carried by
each of them respectively and covering the Demised Premises or their contents
will include such a clause or endorsement as long as the same shall be
obtainable without extra cost, or, if extra cost shall be charged therefor, so
long as the other party pays such extra cost. If an extra cost shall be
chargeable therefor, each party shall advise the other of the amount of the
extra cost.
ARTICLE XIII. CONDEMNATION.
Section 13.01. Definitions:
Within the meaning of Article XIII, the following words have the
following meaning:
(a) Award: means the award for or proceeds of any Taking, less all
expenses in connection therewith, including reasonable attorney's fees.
(b) Taking: means the taking of or damage to the Demised Premises
or the Complex or any portion thereof, as the case may be, as the result of the
exercise of any power of eminent domain, condemnation, or purchase under threat
thereof in lieu thereof.
(c) Taking Date: means, with respect to any Taking, the date on
which the condemning authority shall have the right to possession of the Demised
Premises or the Complex or any portion thereof, as the case may be.
Section 13.02. Total or Substantial Partial Taking of Demised
Premises:
In the event of a Taking of the whole of the Demised Premises,
other than a Taking for temporary use, this Lease shall automatically terminate
as of the Taking Date. In the event of a Taking of any portion of the Demised
Premises, Landlord may, at its option, terminate this Lease by giving notice to
Tenant within six months of the date of such Taking.
Section 13.03. Restoration:
In the event of a Taking of a portion of the Demised Premises
other than a Taking for temporary use and this Lease shall not terminate or be
terminated under the provisions of Section 13.02 hereof, Minimum Rent shall be
reduced in the proportion that the area so Taken bears to the entire area
contained within the Demised Premises. If a part of the Demised Premises are
taken, Landlord may restore or cause to be restored the remainder to the extend
practical. However, Landlord may refuse to restore the remainder. If Landlord
refuses to restore the remainder and gives notice of its refusal to Tenant,
either party may cancel this Lease by giving notice to the other within ninety
(90) days after Landlord shall have given notice of its determination not to
repair the damage.
Section 13.04. Taking for Temporary Use:
If there is a Taking of the Demised Premises for temporary use,
this Lease shall continue in full force and effect, and Tenant shall continue to
comply with all of the provisions thereof, except as such compliance shall be
rendered impossible or impracticable by reason of such Taking and rent shall be
abate during the course of such Taking.
Section 13.05. Disposition of Awards:
All awards arising from a total or partial Taking of the Demised
Premises, the Building, or of Tenant's leasehold interest, shall belong to
Landlord without any participation by Tenant. Tenant hereby assigns to Landlord
any share of such Award which may be awarded to Tenant.
ARTICLE XIV. INDEMNITY AND LIABILITY.
Section 14.01. Indemnity:
(a) Definition: Within the meaning of Article XIV, "Claims" means
any claims, suits, proceedings, actions, causes of action, responsibility,
liability, demands, judgments, and executions.
(b) Tenant hereby indemnifies and agrees to save harmless
Landlord, any Master Lessor and Mortgagee from and against any and all Claims,
which either (i) arise from or are in connection with the possession, use,
occupation, management, repair, maintenance or control of the Demised Premises,
or any portion thereof; (ii) arise from or are in connection with any act or
omission of Tenant, or Tenant's Agents' (iii) result from any Default, breach,
violation or non-performance of this Lease or any provision therein by Tenant;
or (iv) result in injury to person or property or loss of life sustained in or
about the Demised Premises. Tenant shall defend any actions, suits and
proceedings which may be brought against Landlord, any Master Lessor or
Mortgagee with respect to the foregoing or in which they may be impleaded.
Tenant shall pay, satisfy and discharge any judgements, orders and decrees which
may be recovered against Landlord, any Master Lessor, or Mortgagee in connection
with the foregoing.
Section 14.02. Liability Insurance:
(a) Tenant shall provide on or before it enters the Demised
Premises for any reason and shall keep in force during the Term for the benefit
of Landlord and Tenant, liability insurance naming Landlord and any designee of
Landlord as additional insureds. The policy shall protect Landlord, Tenant and
any designee of Landlord against any liability occasioned by any occurrence on
or about the Demised Premises or any appurtenance thereto, or arising from any
of the items indicated in Section 14.01 against which Tenant is required to
indemnify Landlord. Such policy is to be written (i) by a good and solvent
insurance company satisfactory to Landlord, and (ii) in a combined single limit
of at least $3,000,000.00 for injury or death to one or more than one person
arising from any one occurrence and in the amount of $1,000,000.00 with respect
to property damages.
(b) If it becomes customary for a significant number of similar
tenants to be required to provide liability insurance policies to their
landlords with coverage limits higher than the foregoing limits, Tenant shall be
required, on demand of Landlord, to provide Landlord with an insurance policy
whose limits are not less than the then customary limits.
Section 14.03. Fire Insurance:
(a) Tenant shall insure and keep its personal property and all
leasehold improvements installed in the Demised Premises or elsewhere in the
Complex by Tenant insured against damage by fire, vandalism and malicious
mischief. Tenant's insurance policy shall also contain the following
endorsements "Difference Of Condition", and "Demolition Cost Which May Be
Necessary To Comply With Building Laws". The coverage limits shall not be less
than the actual replacement value of the Leasehold Improvements. Replacement
value shall be determined not less than every three years by the insurer or a
reputable insurance appraiser satisfactory to the insurer. Tenant shall deliver
a true copy of the determination of replacement value to Landlord at least once
every three years.
(b) Tenant shall also carry rental value insurance in the amount
of one year's Minimum Rent, estimated Tax Contributions and Tenant's
Contribution; and insurance against such other hazards and in such amounts as
may be customarily carried by tenants, owners and operators of similar
properties as Landlord may reasonably require for its protection from time to
time.
Section 14.04. General Provisions with Respect to Insurance:
(a) Upon the execution of this Lease and before any insurance
policy shall expire, Tenant shall deliver to Landlord such policy or a renewal
thereof, as the case may be, together with evidence of payment of applicable
premiums. Any insurance required to be carried hereunder may be carried under a
blanket policy covering the Demised Premises and other locations of Tenant; and,
if Tenant includes the Demised Premises in such blanket coverage, Tenant may
deliver to Landlord a duplicate original of such policy.
(b) All insurance policies required to be carried hereunder by or
on behalf of Tenant shall provide (and any certificate evidencing the existence
of any insurance policies, shall certify that): unless Landlord shall have been
given ten days' written notice of any cancellation failure to renew, or material
change as the case may be, (i) the insurance shall not be cancelled and shall
continue in full force and effect, (ii) the insurance carrier shall not fail to
renew the insurance policies for any reason, and (iii) no material change may be
made in the insurance policy.
(c) Each insurance policy shall be issued by an insurer of
recognized responsibility reasonably satisfactory to Landlord; shall be
satisfactory to Landlord in form and substance; and shall be carried in favor of
Landlord, Tenant and all Mortgagees as their respective interests may appear.
Within the meaning hereof, the term "insurance policy" shall include any
extensions or renewals of such insurance policy.
Section 14.05. Inability to Perform:
(a) Landlord shall not be required to carry out any of its
obligations hereunder, nor be liable for loss or damage for failure to do so,
nor shall the Tenant thereby be released from any of its obligations hereunder,
where such failure arises by reason of delays caused by Force Majeure.
(b) If Landlord is so delayed or prevented from performing any of
its obligations, the period of such delay or such prevention shall be added to
the time herein provided for the performance of any such obligation.
Section 14.06. Brokerage:
Tenant represents that there was no broker (other than any person
designated as Broker in Article I) instrumental in consummating this Lease, and
that no conversations or prior negotiations were had with any broker (other than
the Broker) concerning the renting of the Demised Premises. Tenant agrees to
hold Landlord harmless against any claims for brokerage commission or
compensation arising out of any conversations or negotiations had by Tenant with
any broker (other than the Broker).
ARTICLE XV. COVENANT OF QUIET ENJOYMENT.
Landlord covenants that if Tenant pays the Rent and all other
charges provided for herein, performs all of its obligations provided for
hereunder, and observes all of the other provisions hereof, Tenant shall at all
times during the Term peaceably and quietly have, hold and enjoy the Demised
Premises, without any interruption or disturbance from Landlord, subject to the
terms hereof.
ARTICLE XVI. FAILURE TO PERFORM, DEFAULTS, REMEDIES.
Section 16.01. Defaults, Conditional Limitation:
(a) Each of the following events shall constitute a Default:
(i) If Tenant, or any Tenant's Guarantor, shall (x) make an
assignment for the benefit of creditors, (y) file or acquiesce to a petition in
any court (whether or not pursuant to any statute of the United States or of any
state) in any bankruptcy, reorganization, composition, extension, arrangement or
insolvency proceedings, (z) make an application in any such proceedings for or
acquiesce to the appointment of a trustee or receiver for it or all of any
portion of its property.
(ii) If any petition shall be filed against Tenant, or any
Tenant's Guarantor, to which neither of them acquiesce in any court (whether or
not pursuant to any statute of the United States or any state) in any
bankruptcy, reorganization, composition, extension, arrangement or insolvency
proceedings, and (x) Tenant or any Tenant's Guarantor shall thereafter be
adjudicated a bankrupt, or (y) such petition shall be approved by any such
court, or W such proceedings shall not be dismissed, discontinued or vacated
within thirty days.
(iii) If, in any proceeding, pursuant to the application of any
person other than Tenant, or any Tenant's Guarantor to which neither of them
acquiesce, a receiver or trustee shall be appointed for Tenant, or any Tenant's
Guarantor or for all or any portion of the property of either and such
receivership or trusteeship shall not be set aside within thirty days after such
appointment.
(iv) If Tenant shall refuse to take possession of the Demised
Premises upon Delivery of Possession or shall vacate the Demised Premises and
permit the same to remain unoccupied and unattended.
(v) If Tenant is a corporation and any part or all of its shares
of stock shall be transferred by sale, assignment, operation of law or other
disposition so as to result in a change in the present effective voting control
of Tenant by the person owning a majority of the shares of stock on the date of
this Lease; provided that a transfer of such stock in connection with a merger
or purchase permitted under Section 10.01(e) shall not constitute a Default.
(vi) If Tenant shall fail to pay any Rent, or any other charge
required to be paid by Tenant hereunder, when the same shall become due and
payable, and such failure shall continue for ten days after Landlord shall give
notice of the failure to Tenant.
(vii) If Tenant shall fail to perform or observe any other
requirement of this Lease to be performed or observed by Tenant but not
specifically referred to in this Section, and such failure shall continue for
twenty days after Landlord shall give notice of the failure to Tenant.
(b) This Lease is subject to the following limitation: If at any
time, a Default shall occur, then upon the happening of any one or more of the
aforementioned Defaults, Landlord may give to Tenant a notice of intention to
end the Term of this Lease at the expiration of five days from the date of
service of such notice of termination. At the expiration of such five days this
Lease and the Term as well as all of the right, title and interest of the Tenant
hereunder shall wholly cease and expire, and Tenant shall then quit and
surrender the Demised Premises to the Landlord. But notwithstanding such
termination, surrender, and the expiration of Tenant's right, title, and
interest, Tenant's liability under all of the provisions of this Lease shall
continue.
Section 16.02. Landlord's Re-Entry:
If this Lease shall be terminated as herein provided, Landlord, or
its agents or employees, may re-enter the Demised Premises at any time and
remove therefrom Tenant, Tenant's Agents, and subtenants, and any licensees,
concessionaires or invitees, together with any of its or their property, either
by summary dispossess proceedings or by any suitable action or proceeding at law
or by force or otherwise. In the event of such termination, Landlord may
repossess and enjoy the Demised Premises. Landlord shall be entitled to the
benefits of all provisions of law respecting the speedy recovery of lands and
tenements hold over by Tenant, or proceedings in forceable entry and detainer.
Tenant waives any rights to the service of any notice of Landlord's intention to
re-enter provided for by any present or future law. Landlord shall not be liable
in any way in connection with any action it takes pursuant to the foregoing.
Notwithstanding any such re-entry, repossession, dispossession or removal,
Tenant's liability under all of the provisions of this Lease shall continue.
Section 16.03. Deficiency:
(a) In case of re-entry, repossession or termination of this
Lease, whether the same is the result of the institution of summary or other
proceedings or not, Tenant shall remain liable (in addition to accrued
liabilities) to the extent legally permissible for (i) the (x) Rent, and all
other charges provided for herein until the date this Lease would have expired
had such termination, re-entry or repossession not occurred; and (y) expenses to
which Landlord may be put in re-entering the Demised Premises repossessing the
same; making good any Default of Tenant; painting, altering or dividing the
Demised Premises; combining or placing the same in proper repair; protecting and
preserving the same by placing therein watchmen and caretakers; reletting the
same (including attorney's fees and disbursements, marshal's fees, brokerage
fees, in so doing); and any expenses which Landlord may incur during the
occupancy of any new tenant; minus (ii) the net proceeds of any reletting.
Tenant agrees to pay to Landlord the difference between items (i) and (ii)
hereinabove with respect to each month, at the end of such month. Such payment
shall be made to Landlord at Landlord's notice address or such other address as
Landlord may designate by giving notice to Tenant. Any suit brought by Landlord
to enforce collection of such difference for any one month shall not prejudice
Landlord's right to enforce the collection of any difference for any subsequent
month. In addition to the foregoing, Tenant shall pay to Landlord such sums as
the court which has jurisdiction thereover may adjudge reasonable as attorney's
fees with respect to any successful lawsuit or action instituted by Landlord to
enforce the provisions hereof.
(b) Landlord may relet the whole or any part of said Demised
Premises for the whole of the unexpired period of this Lease, or longer, or from
time to time for shorter period, for any rental then obtainable, giving such
concessions of rent and making such special repairs, alterations, decorations
and paintings for any new tenant as it may in its sole and absolute discretion
deem advisable. Tenant's liability as aforesaid shall survive the institution of
summary proceedings and the issuance of any warrant thereunder. Landlord shall
be under no obligation to relet or to attempt to relet the Demised Premises.
Section 16.04. Agreed Final Damages:
If Landlord so elects, Tenant shall pay Landlord, on demand, as
liquidated, agreed final damages, the Rent and all other charges which would
have been payable by Tenant from the date of such demand to the date when this
Lease would have expired if it had not been terminated as aforesaid, minus the
fair rental value of the Demised Premises for the same period. Upon payment of
such liquidated and agreed final damages, Tenant shall be under no further
liability with respect to the period after the date of such demand.
Section 16.05. Waiver of Right of Redemption:
Tenant hereby expressly waives (to the extent legally
permissible), for itself and all persons claiming by, through, or under it, any
right of redemption or for the restoration of the operation to this Lease under
any present or future law in case Tenant shall be dispossessed for any cause, or
in case Landlord shall obtain possession of the Demised Premises as herein
provided.
Section 16.06. Landlord's Right to Perform for Account of Tenant:
If Tenant shall be in Default hereunder, Landlord may, at any time
thereafter, cure said Default for the account and at the expense of Tenant.
Tenant shall pay, with interest at the minimum legal rate, on demand, to
Landlord, the amount so paid, expended, or incurred by the Landlord and any
expense of Landlord including attorney's reasonable fees incurred in connection
with such Default; and all of the same shall be deemed to be additional rent.
Section 16.07. Additional Remedies, Waivers, Etc.:
With respect to the rights and remedies of and waivers by
Landlord: (a) the rights and remedies of Landlord set forth herein shall be in
addition to any other right and remedy now and hereafter provided by law. All
such rights and remedies shall be cumulative and not exclusive of each other.
Landlord may exercise such rights and remedies at such times, in such order, to
such extent, and as often as Landlord deems advisable without regard to whether
the exercise of one right or remedy precedes, concurs with or succeeds the
exercise of another. (b) A single or partial exercise of a right or remedy shall
not preclude U) a further exercise thereof, or (ii) the exercise of another
right or remedy, from time to time. (c) No delay or omission by Landlord in
exercising a right or remedy shall exhaust or impair the same or constitute a
waiver of, or acquiescence to a Default. (d) No waiver of a Default shall extend
to or affect any other Default or impair any right or remedy with respect
thereto. (e) No action or inaction by Landlord shall constitute a waiver of a
Default. (f) No waiver of a Default shall be effective, unless it is in writing.
Section 16.08. Distraint:
In addition to all other rights and remedies, if Tenant shall be
in Default hereunder, Landlord shall, to the extent permitted by law, have a
right of distress for Rent and a lien on all of Tenant's fixtures, merchandise,
and equipment in the Demised Premises, as security for Rent and all other
charges payable hereunder.
ARTICLE XVII. TENANT'S CERTIFICATE.
At any time within ten (10) days after request by Landlord, by
written instrument, duly executed and acknowledged, Tenant shall certify to
Landlord, any Mortgagee, assignee of a Mortgagee, any purchaser, or any other
person, specified by Landlord, to the effect (a) whether or not Tenant is in
possession of the Demised Premises; (b) whether or not this Lease is unmodified
and in full force and effect (or if there has been modification, that the same
is in full force and effect as modified and setting forth such modification);
(c) whether or not there are then existing set-offs or defenses against the
enforcement of any right remedy of Landlord, or any duty or obligation of Tenant
(and if so, specifying the same); and (d) the dates, if any, to which any Rent
or other charges have been paid in advance.
ARTICLE XVIII. RIGHT OF ACCESS.
Section 18.0l.. Entry:
During any reasonable time before and after the Commencement Date,
Landlord may enter upon the Demised Premises, any portion thereof and any
appurtenances thereto (with men and materials, if required) for the purpose of:
(a) inspecting same; (b) making such repairs, replacements or alterations which
it may be required to perform as herein provided or which it may deem desirable
for the Demised Premises; and (c) showing the Demised Premises to prospective
purchasers or lessees.
Section 18.02. Easement for Pipes:
Tenant shall permit Landlord to erect, use, maintain and repair
pipes, cables, conduits, plumbing, vents and wires in, to and through the
Demised Premises as and to the extent that Landlord may now or hereafter deem to
be necessary or appropriate for the proper operation and maintenance of the
Complex, provided that Landlord shall use reasonable efforts and proceed with
due diligence, in order to minimize interference with the conduct of Tenant's
business. In addition, Landlord shall not place or install any utility lines,
pipes, ducts, conduits or the like in the Demised Premises, unless such work is
performed along walls, below the floor or not lower than 18 inches below the
ceiling joists. If Landlord installs, repairs, replaces or maintains any such
items and any damage is done to the Demised Premises, Landlord shall
cosmetically repair such damage.
ARTICLE XIX. INTERPRETATION, NOTICE, MISCELLANEOUS.
Section 19.01. Interpretation:
(a) Every term, condition, agreement or provision contained in
this Lease which imposes an obligation on Tenant, shall be deemed to be also a
covenant by Tenant.
(b) Any reference herein to subtenants or licensees shall not be
deemed to imply that any subtenants or licensees are permitted hereunder. Any
references herein to any extensions or renewals of the Term or any period during
which licensee may be in possession after the Expiration Date shall not be
deemed to imply that any extension or renewal of the Term is contemplated hereby
or that licensee shall be permitted to remain in possession after the expiration
of the Term.
(c) If any provision of this Lease or the application thereof to
any person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
(d) The captions and headings used throughout this Lease are for
convenience of reference only and shall not affect the interpretation of this
Lease.
(e) Anything in this Lease to the contrary notwithstanding:
(i) Any provision which permits or requires a party to take any
particular action shall also be deemed to permit or require a party to cause
such action to be taken; and
(ii) Any provision which requires any party not to take
any particular action shall be deemed to require the party not to permit such
action to be taken by any person or by operation of law.
(f) This Lease has been executed in several counterparts; but the
counterparts shall constitute but one and the 'same instrument.
(g) Wherever a requirement is imposed on any party hereto, it
shall be deemed that such party shall be required to perform such requirement at
its own expense unless it is specifically otherwise provided herein.
(h) The singular includes the plural and the plural includes the
singular.
(i) This Lease shall be construed and enforced in accordance with
the laws of the State in which the Demised Premises are situated.
Section 19.02. Construing Various Words and Phrases:
(a) Wherever it is provided herein that a party may perform an act
or do anything, it shall be construed that that party may, but shall not be
obligated to, so perform or so do.
(b) The words "reenter" and "reentry" as used herein are not
restricted to their technical legal meaning.
(c) The following words and phrases shall be construed as follows:
(i) "At any time" shall be construed as, "at any time or from time
to time".
(ii) "Any" shall be construed as "any and all".
(iii) "Including" shall be construed as "Including but not limited
to".
Section 19.03. No Oral Changes:
This Lease may not be changed or terminated orally.
Section 19.04. Communications:
No notice, request, consent, approval, waiver or other
communication under this Lease shall be effective unless, but any such
communication shall be effective and shall be-deemed to have been given if, the
same is in writing and is mailed by registered or certified mail, postage
prepaid, addressed:
(a) If to Landlord, to the address designated as Landlord's Notice
Address in Article I, or such other address as Landlord designates by giving
notice thereof to Tenant, with a copy thereof to the address designated as
Landlord's Notice Copy Address in Article I or to such other person or party as
Landlord shall designate by notice to Tenant, and
(b) If to Tenant, to the address designated as Tenant's Notice
Address in Article I, or such other address as Tenant shall designate by giving
notice thereof to Landlord, with a copy of the address designated as Tenant's
Notice Copy Address in Article I or to such other person or party as Tenant
shall designate by giving notice thereof to Landlord.
Section 19.05. Method of Payment:
Except as herein otherwise expressly provided, all amounts payable
under this Lease shall be payable in coin or currency of the United States of
.America which at the time of payment is legal tender for public and private
debts.
Section 19.06. Successors and Assigns:
Subject to the provisions hereof, this Lease shall bind and inure
to the benefit of the parties and their respective successors, representatives,
heirs and assigns.
Section 19.07. Responsibility of Tenant:
Any restriction on or requirement imposed upon Tenant hereunder
shall be deemed to extend to Tenant's Guarantor, Tenant's subtenants,
concessionaires and licensees and it shall be Tenant's obligation to cause the
foregoing persons to comply with such restriction or requirement.
Section 19.08. Hold Over:
If Tenant shall hold-over after the end of the Term, such holding
over shall be construed as a tenancy from month-to-month, subject to all of the
provisions, conditions and obligations of this Lease, except that monthly
Minimum Rent shall be twice the monthly installment of Minimum Rent payable for
the last month of the Term.
Section 19.09. Size of Demised Premises:
Notwithstanding anything to the contrary contained in this Lease,
in the event that the actual floor area of the Demised Premises, as determined
by Landlord's Architect in accordance with the provisions of the last sentence
of Section 2.12, is greater or less than 75,000 square feet, the Minimum Rent
per annum shall be increased or decreased to reflect the actual floor area of
the Demised Premises based upon the rate of W $2.25 per square foot during the
first two (2) years of the Term; (ii) $2.50 per square foot during the third
(3rd) through the fourth (4th) years of the Term; (iii) $2.75 per square foot
during the fifth (5th) through the sixth (6th) years of the Term; and (iv) $3.00
per square foot during the balance of the Term. For the purposes of this Lease,
the floor area of the Demised Premises shall be deemed to be 75,000 square feet
unless Landlord's architect determines otherwise prior to the first anniversary
of the Commencement Date.
Section 19.10. Liability of Landlord:
Landlord (and, in case Landlord shall be a joint venture,
partnership, tenancy-in-common association or other form of joint ownership) and
the members of any such joint venture, partnership, tenancy-in-common,
association or other form of joint ownership shall have absolutely no personal
liability with respect to any provision of this Lease, or any obligation or
liability arising therefrom or in connection therewith. Tenant shall look solely
to the equity of the then owner of the Demised Premises in the Demised Premises
(or if the interest of the Landlord is a leasehold interest, Tenant shall look
solely to such leasehold interest) for the satisfaction of any remedies of
Tenant in the event of a breach by the Landlord of any of its obligations. Such
exculpation of liability shall be absolute and without any exception whatsoever.
With respect to any provision of this Lease which provides, in
effect, that Landlord shall not unreasonably withhold or unreasonably delay any
consent or any approval, Tenant, in no event, shall be entitled to make, nor
shall Tenant make, any claim for, and Tenant hereby waives any claim for money
damages; nor shall Tenant claim any money damages by way of setoff, counterclaim
or defense, based upon any claim or assertion by Tenant that Landlord has
unreasonably withheld or unreasonably delayed any consent or approval; but
Tenant's sole remedy shall be an action or proceeding to enforce any such
provision, or for specific performance, injunction or declaratory judgment.
All property (whether real, personal or mixed) at any time located
in or upon the Demised Premises shall be at the risk of the Tenant only, and
Landlord shall not become liable for any damage to said property or to Tenant,
or to any other person or property, caused by water leakage, steam, sewerage,
gas or odors or for any damage whatsoever done or occasioned by or from any
boiler, plumbing, gas, water, steam or other pipes, or any fixtures or equipment
or appurtenances whatsoever, or for any damage arising from any act or neglect
or arising by reason of the use of, or any defect in, the Demised Premises or
any of the fixtures, equipment or appurtenances therein contained, or by the act
or neglect of any other person or caused in any other manner whatsoever.
Section 19.11. Renewal Term:
(a) Provided that Tenant is not then in default under the terms of
this Lease and provided further that this Lease has not theretofore been
terminated pursuant to the provisions hereof, Tenant shall have the option to
renew this Lease for one additional period of five (5) years (the "Renewal
Term"). The option to renew shall expire and be of no force or effect unless
exercised by Tenant giving written notice thereof to Landlord sent not earlier
than the first day of the last month of the year immediately preceding the last
year of the original Term and not later than the end of the first month of the
last year of the original Term.
(b) All of the terms, conditions and provisions of this Lease
shall remain in full force and effect during the Renewal Term, except that the
Minimum Rent shall be at an annual rate equal to the greater of the amount
obtained by multiplying the floor area of the Demised Premises by $3.75 per
square foot or ninety (90%) percent of the fair market rental value of the
Demised Premises determined as provided in subsection (c) of this Section, and
except that Tenant shall have no further right to renew this Lease.
(c) If Tenant shall exercise its option to renew the Term of this
Lease, then the fair market rental value of the Demised Premises for the first
year of the Renewal Term shall be determined as follows:
(i) If the parties cannot agree upon a fair market rental
value, then each shall select an appraiser to make an
individual judgment as to the fair market rental value. If the two appraisers
cannot agree upon the fair market rental value, they shall select a third
appraiser, whose judgment as to fair market rental value shall be binding upon
the parties. In the event of the failure of Landlord or Tenant to designate an
appraiser within thirty (30) days after Tenant exercises any such option, or in
the event of the failure of the two appraisers designated to select a third
appraiser, either party shall have the right to apply to the Morris County
Superior Court of the State of New Jersey to designate an appraiser or
appraisers.
(ii) All appraisers designated under this subsection (c)
shall be members of the American Institute of Real
Estate Appraisers.
(iii) The determination of the appraisers shall be final
and binding on the parties and shall be retroactive to
the first day of the Renewal Term. Until said Minimum Rent has been determined,
as provided in this subsection (c), Tenant shall continue to pay the Minimum
Rent stipulated during the original Term.
(d) No option granted to Tenant to renew this Lease, nor the
exercise of any such option by Tenant, shall prevent Landlord from exercising
any right granted or reserved to Landlord in this Lease or which Landlord may
have by virtue of any law to terminate this Lease, either during the original
Term or during the Renewal Term. Any termination of this Lease shall serve to
terminate any renewal option whether or not Tenant shall have exercised same.
Any right on the part of Landlord to terminate this Lease shall continue during
the Renewal Term, and no option granted to Tenant to renew this Lease shall be
deemed to give Tenant any further option to renew beyond the Renewal Term.
Section 19.12. Execution:
This Lease shall be of no force and effect unless and until it is
executed by both Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to
be executed as of the day and year first above written.
ATTEST: LANDLORD: Vornado,
Inc.
By:
ATTEST: TENANT: J. Leven & Co.
By:
STATE OF New York
SS.:
COUNTY OF New York
On this 4th day of May 1983,before me personally came to me David
A. Rapaport, known, who, being by me duly sworn, did depose and
say that resides at at 26 Navajo Road, E. Brunswick, NJ that he is
the Vice President, Legal of J. Leven & Co., the corporation
described in and which executed the foregoing Lease; that he knows
the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order
of the board of directors of said corporation, and that he signed
his name thereto by like order.
In witness whereof I hereunto set my hand and official seal.
Notary Public
(Notarial Seal) LYDIA M. DeSANTIS
Notary Public State of New York
No. 31-4724309
Qualified in New York County
Term Expires March 30, 125
GUARANTY
In consideration of, and as an inducement for the granting, execution and
delivery of the foregoing lease, dated , 1983 ("Lease"), by Vornado, Inc.,
Landlord therein named ("Landlord", which term shall be deemed to include the
named Landlord and its successors and assigns) to J. Leven & Co., Tenant therein
named ("Tenant", which term shall be deemed to include the named Tenant and its
successors and assigns), and in further consideration of the sum of One ($1.00)
Dollar and other good and valuable consideration paid by Landlord to the
undersigned, the receipt and sufficiency of which are hereby acknowledged, the
undersigned, National Patent Development Corporation, ("Guarantor", which term
shall be deemed to include the named Guarantor and its successors and assigns),
hereby guarantees, absolutely and unconditionally, to Landlord the full and
prompt payment of Rent and other charges and sums (including, without
limitation, Landlord's legal expenses and reasonable attorneys' fees and
disbursements) payable by Tenant under the Lease, and hereby further guarantees
the full and timely performance and observance of all the covenants, terms,
conditions and agreements therein provided to be performed and observed by
Tenant; and Guarantor hereby covenants and agrees to and with Landlord that if
default shall at any time be made by Tenant in the payment of any Rent or other
charges and sums, or if Tenant should default in the performance and observance
of any of the terms, covenants and conditions contained in the Lease, Guarantor
shall and will forthwith pay Rent and all other charges and sums, to Landlord
and any arrears thereof, and shall and will forthwith faithfully perform and
fulfill all of such terms, covenants and conditions and will forthwith pay to
Landlord all damages that may arise in consequence of any default by Tenant
under the Lease, including, without limitation, all reasonable attorneys' fees,
and disbursements incurred by Landlord or caused by any such default or the
enforcement of this Guaranty.
This Guaranty is an absolute and unconditional guaranty of payment (and
not of collection) and of performance. The liability of Guarantor is
co-extensive with that of Tenant and this Guaranty shall be enforceable against
Guarantor without the necessity of any suit or proceeding on Landlord's part of
any kind or nature whatsoever against Tenant and without the necessity of any
notice of non-payment, non-performance or non-observance or of any notice of
acceptance of this Guaranty or of any other notice or demand to which Guarantor
might otherwise be entitled, all of which Guarantor hereby expressly waives.
Guarantor hereby expressly agrees that the validity of this Guaranty and the
obligations of Guarantor hereunder shall in no way be terminated, affected,
diminished or impaired by reason of (a) the assertion or the failure to assert
by Landlord against Tenant of any of the rights or remedies reserved to Landlord
pursuant to the terms, covenants and conditions of the Lease, or (b) any
non-liability of Tenant under the Lease, whether by insolvency, discharge in
bankruptcy, or any other defect or defense which may now or hereafter exist in
favor of Tenant.
This Guaranty shall be a continuing guaranty, and the liability of
Guarantor hereunder shall in no way be affected, modified or diminished by
reason of (a) any assignment, renewal, modification, amendment or extension of
the Lease, or (b) any modification or waiver of or change in any of the terms,
covenants and conditions of the Lease by Landlord and Tenant, or (c) any
extension of time that may be granted by Landlord to Tenant, (d) any consent,
release, indulgence or other action, inaction or omission under or in respect of
the Lease, or (e) any dealings or transactions or matter or thing occurring
between Landlord and Tenant, or (f) any bankrupt., insolvency, reorganization,
liquidation, arrangement, assignment for the benefit of creditors, receivership,
trusteeship or similar proceeding affecting Tenant, whether or not notice
thereof or of any thereof is given to Guarantor.
Should Landlord be obligated by any bankruptcy or other law to repay to
Tenant or to Guarantor or to any trustee, receiver or other representative of
either of them, any amounts previously paid, this Guaranty shall be reinstated
in the amount of such repayments. Landlord shall not be required to litigate or
otherwise dispute its obligations to make such repayments if it in good faith
believes that such obligation exists.No delay on the part of Landlord in
exercising any right, power or privilege under this Guaranty or failure to
exercise the same shall operate as a waiver of or otherwise affect any such
right, power or privilege, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
No waiver or modification of any provision of this Guaranty nor any
termination of this Guaranty shall be effective unless in writing, signed by
Landlord; nor shall any such waiver be applicable except in the specific
instance for which given.
All of Landlord's rights and remedies under the Lease and under this
Guaranty, now or hereafter existing at law or in equity or by statute or
otherwise, are intended to be distinct, separate and cumulative and no exercise
or partial exercise of any such right or remedy therein or herein mentioned is
intended to be in exclusion of or a waiver of any of the others.
Guarantor agrees that whenever at any time or from time to time Guarantor
shall make any payment to Landlord or perform or fulfill any term, covenant or
condition hereunder on account of the liability of Guarantor hereunder,
Guarantor will notify Landlord in writing that such payment or performance as
the case may be, is for such purpose. No such payment or performance by
Guarantor pursuant to any provision hereof shall entitle Guarantor by
subrogation or otherwise to the rights of Landlord to any payment by Tenant or
out of the property of Tenant, except after payment of all sums or fulfillment
of all covenants, terms, conditions or agreements to be paid or performed by
Tenant.
Guarantor agrees that it will, at any time and from time to time, within
ten (10) business days following written request by Landlord, execute,
acknowledge and deliver to Landlord a statement certifying that this Guaranty is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating such
modification). Guarantor agrees that such certificate may be relied on by anyone
holding or proposing to acquire any interest in the "Complex" (as defined in the
Lease) from or through Landlord or by any mortgagee or prospective mortgagee of
the Complex or of any interest therein.
As a further inducement to Landlord to make and enter into the Lease and
in consideration thereof, Landlord and Guarantor covenant and agree that in any
action or proceeding brought on, under or by virtue of this Guaranty, Landlord
and Guarantor shall and do hereby waive trial by jury. Without regard to
principles of conflicts of laws, the validity, interpretation, performance and
enforcement of this Guaranty shall be governed by and construed in accordance
with the internal laws of the State in which the Complex is located.
Guarantor warrants and represents to Landlord that it has the legal right
and capacity to execute this Guaranty. In the event that this Guaranty shall be
held ineffective or unenforceable by any court of competent jurisdiction, then
Guarantor shall be deemed to be a tenant under the Lease with the same force and
effect as if Guarantor were expressly named as a joint tenant therein.
As used herein, the term "successors and assigns" shall be deemed to
include the heirs and legal representatives of Tenant and Guarantor, as the case
may be. If there is more than one Guarantor, the liability hereunder shall be
joint and several. All terms and words used in this Guaranty, regardless of the
number or gender in which they are used, shall be deemed to include any other
number and any other gender as the context may require.
If Guarantor is an individual, Guarantor warrants and represents that it
is owner of more than fifty percent (50%) of the issured and outstanding shares
of voting stock of Tenant, and is a principal officer of Tenant. If Guarantor is
a corporation, Guarantor warrants and represents that Tenant is a wholly-owned
subsidiary of Guarantor (or a wholly-owned subsidiary of another wholly-owned
subsidiary of Guarantor) and that the execution and delivery of this Guaranty is
not in contravention of its charter or by-laws or applicable state laws and has
been duly authorized by its Board of Directors. Upon request of Landlord,
Guarantor agrees to deliver to Landlord a Secretary's certification and
corporate resolution authorizing the execution and delivery of this Guaranty.
If Guarantor fails to pay any amount payable under this Guaranty when due,
interest on such amount shall accrue at the highest legal rate chargeable to
Guarantor in the state in which the Complex is located.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty as of
The 4th day of 1983.
National Patent Development
Corporation
By:
STATE OF New York
ss.:
COUNTY OF New York
On this 4th day of May 1983,before me personally came to me David A. Rapaport
known who, being by me duly sworn, did depose and say that he resides at 26
Navajo Road, E. Brunswick, NJ, that he is the Vice President, Legal of National
Patent Development Corporation, the corporation described in and which executed
the foregoing Guaranty; that he knows the seal of said corporation, that the
seal affixed to said instrument is such corporate seal, that it was so affixed
by order of the board of directors of said corporation, and that he signed his
name thereto by like order.
In witness whereof I hereunto set my hand and official seal.
Notary Public
(Notarial Seal)
Exhibit 10.8
LEASE MODIFICATION AND EXTENSION AGREEMENT
THIS AGREEMENT, made this 6th day of June, 1996, by and
between Hanover Public Warehousing, Inc., a New Jersey corporation, having an
office at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663 ("Landlord"),
and Five Star Group, Inc., a Delaware corporation (successor by corporate merger
to J. Leven & Co.), having an address at 903 Murray Road, P.O. Box 1960, East
Hanover, New Jersey 07936 ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord's predecessor in interest and Tenant's
predecessor in interest entered into a lease, dated May 11, 1983, (as same may
have been amended from time to time, the "Lease"), covering certain premises
consisting of 192,513 square feet of floor area (the "Demised Premises") in the
"Building" (as defined in the Lease) located in the "Complex" (as defined in the
Lease) situated in East Hanover, New Jersey; and
WHEREAS, all of the right, title and interest of Vornado, Inc.
as Landlord under the Lease was heretofore acquired by Hanover Public
Warehousing, Inc.; and
WHEREAS, Landlord and Tenant desire to modify the Lease so as
to increase the floor area of the Demised Premises, to increase the "Rent" (as
defined in the Lease) payable by Tenant, and to change the Lease in other
respects, all as hereinafter set forth in this Agreement; and
NOW, THEREFORE, in consideration of the terms and provisions
herein contained, the Lease is modified as follows:
1. From and after the "Fourth Additional Space Commencement Date" (as
hereinafter defined), Exhibit A attached to the Lease shall be deleted in its
entirety and all references to Exhibit A in the Lease shall be deemed to refer
to Exhibit A-4 attached hereto and made a part hereof.
2. From and after the Fourth Additional Space Commencement Date the size of the
Demised Premises, presently consisting of 192,513 square feet of floor area,
shall be changed and increased to 236,195 square feet of floor area. The changed
and increased Demised Premises is shown on Exhibit A-4. The floor area hereby
added to the Demised Premises is hereinafter sometimes referred to as the
"Fourth Additional Space".
3. Except for "Landlord's Work" as described on Exhibit B attached hereto and
made a part hereof, Tenant shall accept possession of the Fourth Additional
Space in its present "As Is" condition and shall, at its own expense, perform
all work necessary to make the Second Additional Space suitable for Tenant's
business operation at the Demised Premises. Such work shall be performed by
Tenant in accordance with the provisions of Section 3.04 of the Lease. Landlord
shall commence Landlord's Work as soon as the current tenant vacates the Fourth
Additional Space.
4. Effective as of the Fourth Additional Space Commencement Date, Section 1.03
of the Lease shall be deemed to be deleted in its entirety and the following
shall be deemed to be inserted in its place and stead:
"Section 1.03. Expiration Date: Means March 14, 2007."
5. Effective as of the Fourth Additional Space Commencement Date, the "Minimum
Rent" (as defined in the Lease) shall be increased as follows and Section 1.04
of the Lease shall be deemed to be amended accordingly
"(i) From the Fourth Additional Space Commencement Date
through March 14, 1997, Minimum Rent shall be the sum of $767,633.75 per annum;
and
(ii) From March 15, 1997 through March 14, 2002, Minimum Rent
shall be the sum of $885,731.25; and
(iii) From March 15, 2002 through March 14, 2007, Minimum Rent
shall be the sum of $944,780.00 per annum."
6. Effective as of the Fourth Additional Space Commencement Date, the
floor area of the entire Demised Premises (236,195 square feet) shall be
included in the numerator and denominator of Tenant's "Pro Rata Share" (as
defined in the Lease).
7. "Fourth Additional Space Commencement Date" means the later to occur of: (i)
September 1, 1996; or (ii) the date that the current Tenant vacates the
Fourth Additional Space.
8. As herein expressly modified and supplemented, all of the terms,
covenants and conditions of the Lease shall remain in full force and effect and
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the date and the year first above written.
ATTEST: LANDLORD: Hanover Public
Warehousing, Inc.
By: _______________________ By: _______________________________
Susan D. Schmider Joseph Macnow
Secretary Vice President
Chief Financial Officer
ATTEST: TENANT: Five Star Group, Inc.
_____________________________ By: ______________________________
CONSENTED TO: ATTEST:
National Patent Development Corporation
By: _________________________ __________________________________
Dated: June 6th, 1996
STATE OF New York )
) SS:
COUNTY OF New York )
On this 6th day of June, 1996, before me personally came to me
Richard Grad known, who, being by me duly sworn, did depose and say that he
resides at 903 Murray Road, East Hanover, New Jersey that he is President the of
Five Star Group, Inc., the corporation described in and which executed the
foregoing Lease Modification and Extension Agreement; that he knows the seal of
said corporation, that the seal affixed to said instrument is such corporate
seal, that it was so affixed by order of the board of directors of said
corporation, and that he signed his name thereto by like order.
In witness whereof I hereunto set my hand and official seal.
(Notarial Seal) __________________________________
Notary Public
STATE OF New York )
) SS:
COUNTY OF New York)
On this 6th day of June, 1996, before me personally came to me
Scott. N. Greenberg known, who, being by me duly sworn, did depose and say that
he resides at 9 West 57th Street, New York, New York, that he is the V.P. &
Chief Financial Officer of National Patent Development Corporation, the
corporation described in and which executed the foregoing Lease Modification and
Extension Agreement, that he knows the seal of said corporation, that the seal
affixed to said instrument is such corporate seal, that it was so affixed by
order of the board of directors of said corporation, and that he signed his name
thereto by like order.
In witness whereof I hereunto set my hand and official seal.
(Notarial Seal) __________________________________
Notary Public
<PAGE>
EXHIBIT "B"
Landlord's Work
J. Leven
1. Landlord to demolish entire demising wall.
2. All electric, plumbing, lighting and heating to be in working order.
3. Leave fenced area in place.
Exhibit 10.9
AGREEMENT
between
FIVE STAR GROUP
and
LOCAL NO. 11, affiliated with
INTERNATIONAL BROTHERHOOD OF TEAMSTERS
- --------------------------------------------------------------------------------
December 14, 1997 through December 15, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE SUBJECT PAGE
1 RECOGNITION 1
2 UNION SECURITY 1
3 CHECK-OFF 2
4 HOURS OF WORK, OVERTIME AND SHIFT PREMIUM 3
REPORT PAY 3
SHIFT DIFFERENTIAL 4
OVERTIME 4
RETURN FROM LAY-OFF AND/OR LEAVE OF
ABSENCE 4
5 PROBATIONARY PERIOD 4
6 SENIORITY 5
7 FORCE REDUCTION5
8 TRANSFERS 6
9 GRIEVANCE PROCEDURE AND ARBITRATION 6
10 PAYPRACTICE 7
11 DISCHARGE AND DISCIPLINARY MEASURES 8
12 HOLIDAYS 8
13 VACATIONS 9
14 MANAGEMENT RIGHTS 10
15 SHOP STEWARD 10
16 WELFARE BENEFITS 11
17 BEREAVEMENT PAY13
18 SAFETY AND HEALTH 13
19 UNION REPRESENTATION & VISITATION 14
20 SICK DAYS 14
21 LEAVE OF ABSENCE 15
MATERNITY LEAVE 15
FAILURE TO RETURN FROM LEAVE 15
22 JURY DUTY 15
23 TRUCK DRIVERS 15
WEEKEND WORK NOTICE 15
PYRAMIDING 16
24 WAGE RATES AND CLASSIFICATIONS 16
SUPPLEMENTAL BONUS 17
25 STRIKES OR LOCKOUTS 17
PROTECTION OF RIGHTS 17
PICKET LINES 17
STRUCK GOODS 17
<PAGE>
ARTICLE SUBJECT PAGE
26 MISCELLANEOUS WORKING CONDITIONS 18
INDIVIDUAL AGREEMENTS 18
BULLETIN BOARD 18
MILITARY SERVICE 18
LIFE OF AGREEMENT 18
NON-DISCRIMINATION 18
SEPARATION OF EMPLOYMENT 18
PREVIOUS BENEFITS 18
LIE DETECTOR TEST 19
SEVERANCE PAY 19
WORK BY SUPERVISORS 19
TEAM GROUP PROGRAM 20
EMPLOYEES OF THE MONTH 20
27 EDUCATIONAL PROGRAM 20
28 JOB POSTING PROCEDURE 20
29 ESTABLISHING JOB DESCRIPTION AND
CLASSIFICATION ON NEW OR CHANGED JOBS 21
30 TEAMSTERS NATIONAL 401(k) PLAN 22
31 DRIVE 22
32 DURATION 23
<PAGE>
THIS AGREEMENT made this 19th day of December, 1997, by and between
FIVE STAR GROUP, with its principal of f ice at 903 Murray Road, East Hanover,
New Jersey 07936, and any other establishments within the State of New Jersey,
hereinafter referred to as the "EMPLOYER", and LOCAL NO. 11, affiliated with the
INTERNATIONAL BROTHERHOOD OF TEAMSTERS, located at 830 Belmont Avenue, North
Haledon, New Jersey, hereinafter referred to as the "UNION", and the respective
successors and assigns of the parties.
WITNESSETH:
WHEREAS, it is the intent and desire of the parties hereto to foster
and promote sound, stable and peaceful labor relations among the Employer, its
employees covered by this Agreement, and the Union.
WHEREAS, it is the further intent and desire of the parties to
establish harmonious relationships to the end that continuous and efficient
service will be rendered to the mutual benefit of the parties hereto.
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE 1. RECOGNITION
The Employer hereby recognizes the Union as the sole and exclusive
collective bargaining agent for all its production workers and drivers,
excluding all office and clerical employees, watchmen, guards, pricers,
supervisors, and professional employees as defined in the Labor Management
Relations Act of 1947.
ARTICLE 2. UNION SECURITY
Section 1. All present employees who are members of the Local Union on
the effective date of this subsection or on the date of execution of this
Agreement, whichever is the later, shall remain members of the Local Union in
good standing as a condition of employment. All present employees who are not
members of the Local Union and all employees who are hired hereafter shall
become and remain members in good standing of the Local Union as a condition of
employment on and after the 31st day following the beginning of their employment
or on and after the 31st day following the effective date of this subsection or
the date of this Agreement, whichever is the later. This provision shall be made
and become effective as of such time as it may be made and become effective
under the provisions of the National Labor Relations Act, but not retroactively.
Section 2. The failure of any person to become a member of the Union at
the required time shall obligate the Employer, upon written notice from the
Union to such effect and to the further effect that Union membership was
available to such person on the same terms and conditions generally available to
other members, to forthwith discharge such person. Further, the failure of any
person to maintain his Union membership in good standing as required herein
shall, upon written notice to the Employer by the Union to such effect, obligate
the Employer to discharge such person.
Section 3. In the event of any change in the law during the term of
this Agreement, the Employer agrees that the Union will be entitled to receive
the maximum Union security which may be lawfully permissible.
Section 4 No provision of this Article shall apply in any State to the
extent that it may be prohibited by State law. If under applicable State law
additional requirements must be met before any such provision may become
effective, such additional requirements shall first be met.
Section 5. If any provision of this Article is invalid under the law of
any State wherein this Agreement is executed, such provision shall be modified
to comply with the requirements of State law or shall be re-negotiated for the
purpose of adequate replacement.
ARTICLE 3. CHECK-OFF
Section 1. The Employer, after receipt of written authorization from
each employee, shall deduct the initiation fees and regular dues from each Union
member's pay check due to him or her on the first pay day of each month, and
shall transmit them, in alphabetical order, within a week, but not later than
the 15th of the month, to the Secretary-Treasurer of the Union. Any member who
does not receive a pay check on the first pay day of the month shall have these
deductions made from the first pay he receives in the month. Dues not already
deducted for the current month must be deducted from the last pay check of a
Union member when he leaves the employ of the Employer, or is discharged. The
Employer agrees to forward the full name and address of any employee for whom
initiation fee is deducted. The Employer agrees to notify the Union weekly when
members are discharged, granted leaves of absence, leave the employ of the
Employer for any reason whatsoever.
Section 2. In making the deductions and transmittal as above specified,
the Employer shall rely upon the most recent communication from the Union as to
the rate of regular monthly dues and the proper amount of initiation fees.
ARTICLE 4. HOURS OF WORK, OVERTIME AND SHIFT PREMIUM
Section 1. The normal work week may be from Monday to Friday, both
inclusive, and may be comprised of five (5) days of eight (8) hours each.
Section 2. All work performed in excess of forty (40) hours in any work
week shall be paid for at the rate of one and one-half (1-1/2) times the
employee's regular hourly rate. All time off with pay including holidays and
vacation days, under the terms of this agreement shall be considered as time
worked when calculating overtime. Any time the Employer fails to schedule a
worker in during the regular work week of forty (40) hours and days the plant
does not work because of bad weather, shall be considered as time worked for
calculating overtime.
Section 3. All work performed on Saturday shall be paid for at the rate
of one and one half (1-1/2) times the employee's regular hourly rate of pay.
Section 4. All work performed on Sunday shall be paid for at double
(2X) the employee's regular hourly rate of pay.
Section 5. All employees who work more than ten (10) continuous hours
shall be paid $2.50 as meal allowance, except when a meal is provided by the
Company.
Section 6. REPORT PAY - The Employer agrees that if an employee reports
for work or is permitted to come to work, without having been previously
notified that there will be no work, the employee shall receive four (4) hours
pay or four (4) hours work at the employee's regular hourly rate of pay. This
Section shall not apply where work is not available because of general
breakdown, power or heating failure, fire, storm, flood, Act of God, failure of
public utilities, labor dispute or other conditions beyond the control of the
Employer. Employees who do not keep the Personnel Manager informed of a
telephone number at which they can be reached or at which messages may be given
for them shall not be entitled to reporting pay.
Section 7. In the event an employee is called back to work after the
conclusion of his normal work shift, the employee will be entitled to a minimum
of four (4) hours work or four (4) hours pay. Employees will be paid one and one
half (1-1/2) times their regular rate of pay for all hours worked on call back.
Section 8. If the Employer starts a second or third shift, the Employer
agrees to negotiate same with the Union.
Section 8(a). Shift Differential - Employees scheduled to work on the
second shift shall be paid a shift differential of twenty five cents ($.25) per
hour for all hours worked by them.
Section 9. OVERTIME - A supervisor will declare overtime when it
appears the necessary work for that shift will not be completed. The procedure
will be for the supervisor to call for mandatory overtime and all employees on
that shift are expected to stay till the work is completed, or they may receive
permission to leave from a supervisor. Overtime will be enforced for all
employees on that shift with no preference given based on seniority or previous
overtime worked.
A. Overtime shall be distributed as equally as possible among employees
in the classification.
B. One overtime list shall be maintained in each overtime unit and
shift. Daily, Saturday and Sunday overtime will be recorded by the number of
overtime hours worked or refused to work.
C. If employee for any reason cannot work his turn, employee shall be
charged and credited with the same time as if the hours had actually been
worked by the employee.
D. Employee who accepts work on a premium day and does not report for
work, will be charged double the overtime hours the employee would have worked,
unless a good and sufficient cause is given for not reporting to work in the
opinion of management.
E. RETURN FROM LAY-OFF AND/OR LEAVE OF ABSENCE
Any employees returning to their seniority unit shall be charged with
the hours credited to them at the time of lay-off and/or leave of absence, plus
any hours they would have worked in the group in which they were qualified to
share overtime while they were out.
ARTICLE-5. PROBATIONARY PERIOD
The first thirty (30) days of employment for all new employees will be
considered as a probationary period and if they prove unsatisfactory, they may
be terminated at the discretion of the Employer during such period without
appeal by the Union. The Company, through its representatives, may request of
the Union, an extension for any additional thirty (30) day probationary period
in such instances where the Company believes the thirty (30) day probationary
period is insufficient, and in all cases where this request is reasonably
justified, the same will be granted.
<PAGE>
ARTICLE 6. SENIORITY
Section 1. New employees retained beyond the probationary period shall
be considered steady employees and their names placed on the Seniority List and
their length of service with the Employer shall begin with the original date of
their employment. Such Seniority List shall be kept up to date with additions
and subtractions. A copy of the Seniority List shall be forwarded to the Union
office and a copy given to the Shop Steward.
Section 2. Seniority shall cease under the following conditions:
a. When an employee quits or resigns his position.
b. When an employee is discharged for just cause.
c. When an employee is laid off for a period exceeding six (6) months.
d. When a laid off employee fails to return to work within three (3)
working days after receiving notice to return to work by
registered mail or telegram addressed to the last known address
of the employee. The failure of the employee to report for work
after such notification or to make arrangements with the Company
to report at an early date after furnishing reasonable grounds
for not reporting within the three (3) day period shall cause him
to be dropped from the seniority list.
Section 3. The Employer, when employees are permanently re-classified
and permanently transferred from one job site to another, shall be responsible
for submitting an updated seniority list and a current lay off list.
ARTICLE 7. FORCE REDUCTION
Section 1. The Employer agrees that it will not engage any new
employees in the plant unless all of the employees presently employed are
working the scheduled hours noted in this Agreement. This provision shall apply
only if said employees are capable of performing the work desired. All non-union
part-timers to be laid off before any full time employees.
Section 2. The Shop Steward and the employees involved shall receive
twenty four (24) clock hours notice prior to any lay-off, however, this shall
not apply in cases of emergency. A list of employees to be laid off shall be
given to the Shop Steward.
Section 3. In the reduction or restoration of the working force, the
rule to be followed shall be the length of service with the Employer, qualified
only by the ability and experience of the senior employee to perform the
available work in a normal or average manner. Seniority shall be applied within
the classification on a plant-wide basis.
section 4. An employee having a continuous service status who after
having been laid off is recalled to work and the job available to him on such
recall is a lower paid job than that held by him when he was laid off, may
refuse such a job without otherwise affecting his position on the continuous
service list.
ARTICLE 8. TRANSFERS
Section 1. The Employer shall have the right to transfer employees from
one job to another. Employees may not unjustifiably refuse to assist or work on
temporary assignments even though not part of their usual work or assignment, as
the business of the Employer requires.
Section 2. If an employee performs work in a higher rated
classification on a permanent basis said employee shall receive the higher rate
for all hours worked.
Section 3. A temporary transfer shall not exceed more than five (5)
days, except for vacation time and sick time.
Section 4. An employee who is permanently promoted to a higher rated
classification shall receive the higher rate of pay while in said higher
classification. However, if an employee is transferred back to his former
classification for just cause, he shall receive the maximum rate of pay for that
classification.
ARTICLE 9. GRIEVANCE PROCEDURE AND ARBITRATION
Section 1. PURPOSE - The purpose of this Article is to provide an
opportunity for discussion of any request or complaint and to establish a
procedure for the processing and settling of grievances, as defined in section
2.
Section 2. DEFINITION - A Grievance is hereby jointly defined to be any
controversy, complaint, misunderstanding and/or any difference between the
Employer and employees or Union as to the interpretation or application of or
compliance with this Agreement respecting wages, hours or conditions of
employment. Any dispute over whether a complaint is subject to these procedures
shall be handled as a Grievance in accordance with the procedures prescribed
herein.
Section 3. The Shop Steward will have the right to take up with the
Employer, at all reasonable times, any grievances that may have been presented
to him in writing by the employees, within two (2) work days of occurrences, and
a serious effort will be made to adjust such grievance as quickly as possible by
successive steps as follows:
A. Within three (3) days after the grievance has been submitted, it
shall be taken up between the Shop Steward, the aggrieved party and a supervisor
of the plant or such other Management employee as may be designated by the
Employer.
B. In case of failure to reach an agreement as to such grievance in
Step A, it shall be reviewed three (3) days thereafter at a conference between
representatives of the Employer and the Union. If such representatives of the
Union and the Employer shall agree upon a decision with respect to such
grievance, it shall be reduced to writing and signed by the representatives of
the Employer, the Union and the Shop Steward, and copies thereof furnished to
both parties and the grievances shall be deemed to be finally settled.
C. In case of failure to reach an agreement as to such grievances in
Step B, it can be submitted for arbitration within ten (10) days thereafter.
Within five (5) work days after a decision is made to submit the grievance to
arbitration, the parties shall endeavor to select a mutually acceptable
Arbitrator and if no one is selected, either party may request a panel from the
New Jersey State Board of Mediation.
Section 4. The Arbitrator shall be selected from a list of names
requested from the New Jersey State Board of Mediation and the Arbitrator's
decision shall be final and binding on both parties. However, the Arbitrator
shall have no authority to alter, amend or otherwise depart from the terms and
provisions of this Agreement.
Section 5. Should any and all disputes or controversies arising under,
or in connection with the terms and provisions of this Agreement, or in respect
to anything not herein expressly provided for, but germane to the general
subject matter of this Agreement, and which difference cannot be adjusted by the
representatives of the Union and the Employer, the same shall be submitted to
arbitration. No strikes, lockouts, labor holidays, walkouts or slowdown shall
take place pending the decision by the Arbitrator.
Section 6. Arbitration costs shall be divided equally between the Union
and the Employer.
Section 7. However, before arbitration is requested, the Union and the
Employer shall make every effort to adjust the matter between themselves.
ARTICLE 10. PAY.PRACTICE
Section 1. The Company shall pay employees in the bargaining unit on a
weekly basis, every Friday.
Section 2. The Company shall make arrangements with a local bank,
whereby employees can cash their weekly check.
ARTICLE 11. DISCHARGE AND DISCIPLINARY MEASURES
Section 1. The Employer reserves the right to discharge or discipline
any regular employee for just cause. When an employee is discharged or
disciplined by the Employer, the Employer shall immediately give written notice
thereof to the Shop Steward and the employee involved, giving the reason for the
discharge or discipline. A Shop Steward must be present when an employee is
warned or disciplined.
Section 2. If an employee contends that discharge or discipline has
been unjust, such employee must make application for re-instatement by giving
notice thereof, in writing, to the Shop Steward within three (3) working days
from the time of discharge or discipline, and the matter shall be adjusted in
accordance with the provisions under Grievance Procedure and Arbitration.
ARTICLE 12. HOLIDAYS
Section 1_ The Employer agrees to grant to all of its full time
employees within the bargaining unit the following holidays with full pay for
eight (8) hours, though no work is performed on such days:
New Year's Day Labor Day
George Washington's Birthday Thanksgiving Day
Good Friday Day before Christmas Day
Memorial Day Christmas Day
Fourth of July Day before New Year's Day
One (1) Floating Holiday
Employees may choose Martin Luther King's Birthday in lieu of one of
the floating holidays. Employer shall be given two weeks' notice of intent to
take a floating holiday. No floating holiday shall be taken in any week where
another holiday occurs.
Section 2. Employees who work on any of the before mentioned holidays
shall be compensated for all such work at one and one half (1-1/2) times the
employee's regular straight time rate of pay, in addition to receiving the
holiday pay provided in Section 1.
Section 3. Employees, in order to be eligible for holiday pay, must
work eight (8) hour work day immediately before and eight (8) hours immediately
after a holiday except that employees who are out due to illness or in a state
of lay-off within thirty (30) days before or after a holiday shall] be entitled
to the holiday pay, at the discretion of the Employer.
Section 4. All holidays stipulated above shall be guaranteed. If a
holiday falls on a Saturday or Sunday, it may be celebrated on the day preceding
or the Monday following such holiday.
Section 5. If a holiday falls within the vacation period of an
employee, the employee shall receive pay for same or time off if so desired by
employee, provided the employee informs the Employer prior to going on vacation
they wish the time off instead of pay.
ARTICLE-13. VACATIONS
Section 1. The Employer agrees to grant to all of its employees within
the bargaining unit vacations in accordance with the following schedule upon
completion of four weeks of employment.
Period of Employment Vacation Allowed one (1) year One (1) week
with pay Two (2) years Two (2) weeks with pay Nine (9) years
Three (3) weeks with pay Fifteen (15) years Four (4) weeks with
pay
Section 2. The fourth week may be scheduled separately from the first
three weeks, upon consultation between employee and Employer.
Section 3. Vacation period shall commence on January 1st of a given
year and end on the following December 31st.
Section 4. The Employer will endeavor to allot vacations upon a
seniority basis and the needs of the Employer.
Section 5. The Employer agrees that in the event an employee is laid
off or voluntarily leaves the employ of the Company before the vacation period,
he shall be compensated for any accrued vacation time that may be due him in
accordance with the above schedule. In the event that a laid-off employee is
called back to work before the vacation period starts, at the time of vacation
period, he shall be granted the difference between his accrued vacation pay and
whatever he had been paid at the time of the layoff. The vacation pay in such
instances shall be computed on a pro-rated basis of one twelfth (1/12) of each
month or part of a month worked.
Section 6. If during the employee's vacation period, a recognized
holiday occurs, he will receive an extra day of vacation with pay or in lieu
thereof, an extra day's pay at the straight time rate. The extra day of vacation
shall be taken in conjunction with the employee's regular scheduled vacation.
Whether an employee receives an extra day of paid vacation or an extra day's pay
in lieu thereof will be determined by the Company.
Section 7. The vacation schedule shall be posted by the Employer on
January 2nd of each year on the bulletin board and shall remain until April 15th
for employees to select vacation periods. All vacations must be selected by
April 15th. In preparing the final vacation schedules, the Employer shall
endeavor to assign vacations on the basis of seniority of its employees. The
Employer must post the final authorized vacation list by May 1st. Any employee
not requesting a specific vacation period by the April 15th removal date set
forth above shall take whatever weeks are still available.
ARTICLE 14. MANAGEMENT RIGHTS
Section 1. The Employer retains the exclusive right to hire, direct and
schedule the working force; to plan, direct and to control operations; to
discontinue, reorganize or combine any job, department or operation, to hire,
promote and lay off employees; to promulgate rules and regulations; to introduce
new or improved methods or facilities, and in all respects, to carry out the
ordinary functions of management.
Section 2. The Union, on behalf of the employees, agrees to cooperate
with the Employer to attain and maintain maximum efficiency and services and, in
that regard, the Union agrees to use all reasonable efforts to assure that each
employee performs a productive full day's work, to combat absenteeism, and to
strengthen good will among the Employer, the Union and the Public.
ARTICLE 15. SHOP STEWARD
Section 1. The Union may appoint one or more of their accredited
members to act as Shop Stewards. It shall be his duty to receive complaints, and
dispose of them in the manner provided under Grievance Procedure and
Arbitration. It is the intention of the parties hereto that the Steward will, to
the best of his ability, attempt to carry out the terms, provisions and
intentions of this Agreement, and to that end will cooperate with management to
the fullest extent. It is understood and agreed, however, that the Steward shall
have no authority of any kind save that given under this Agreement.
Section 2. The Shop Steward shall not be discriminated against, because
of his faithful performance of duties as such.
Section 3. The authority of the Shop Steward and Alternate so
designated by the Union shall be limited to, and shall not exceed the following
duties and activities:
A. The investigation and presentation of Grievances in accordance
with the provisions of the collective bargaining Agreement.
B. The transmission of such messages and information which shall
originate with, and are authorized by the Local Union or its
officers, provided such messages and information:
1. Have been reduced to writing, or
2. If not reduced to writing, are of a routine nature and do
not involve work stoppages, slowdowns, refusal to handle
goods or any other interference with the Employer's
business.
Section 4. Shop Stewards and Alternates have no authority to take
strike action, or any other action interrupting the Employer's business, except
as authorized by official action of the Union.
Section 5. The Employer shall have the authority to impose proper
discipline, including discharge, in the event the Shop Steward has taken
unauthorized strike action, slowdown, or work stoppage in violation of the
Agreement.
Section 6. Stewards shall be permitted to investigate, present and
process Grievances on the property of the job site, without loss of time or pay,
provided the Shop Steward does not interrupt production.
Section 7. The Shop Steward shall have seniority preference for lay-off
purpose ONLY provided he can do the work.
ARTICLE 16. WELFARE BENEFITS
Section 1. Effective February 1, 1998, the Employer agrees to
contribute to Northern New Jersey Teamsters Benefit Plan the sum of Thirty Seven
Dollars ($37.00) per week for Single coverage and Ninety Three Dollars ($93.00)
per week for Family coverage for each employee in the bargaining unit, under the
Preferred Provider Organization (PPO), "Plan D111 and shall include
Prescription, Dental, Optical and Life Insurance. Such payments are to be made
for any employee covered by the terms of this Agreement and who has been
employed any part of the week. Such Fund is to continue to be administered in
accordance with the current Trust Agreement by an equal number of Employer and
Employee Trustees. The Employer hereby ratifies all of the acts of the Trustees
and further authorizes and agrees that the Trustees have the power to amend the
Trust Agreement in order to carry out all of the purposes authorized by law.
Section 1(a). The Employer further agrees to increase his weekly
contributions per employee to the amount listed below on the following dates:
Single/wk. Family/wk.
Effective February 1, 1999 $39.00 $ 97.00
Effective February 1, 2000 $42.00 $103.00
Section 2(a). The Employer hereby agrees to file appropriate
contribution reports as authorized by the Trustees of the Benefit Fund together
with the Employer contributions, as are required herein, and do so on or before
fifteen (15) days following the end of the month for which the payment is being
made.
Section 2(b). The Employer further agrees that should they fail to pay
their contributions to the Benefit Fund on or before the fifteen (15) days
mentioned in this Section, the Employer shall pay a penalty of twelve per cent
(12%) for each additional month or part of a month for which the Employer fails
to pay the contribution.
section 2(c). The Employer further agrees that contributions received
later than thirty (30) days following the end of the month for which the payment
is being made, shall be credited to the month immediately preceding the month in
which the payment is received.
Section 3. The Trustees shall have the right to expend monies as
provided by the Trust Agreement, to set aside and maintain a Reserve Fund, and
to establish additional benefits that are authorized by law. No employer or
employee covered by this Agreement, or the Union, shall have any right, title or
vested interest or claim against any of said Funds.
Section 4. The Employer hereby agrees to permit an authorized
representative of the Union, as well as an authorized representative of the
Benefit Fund to inspect its payroll records for the purpose of checking the
accuracy of the contributions required to be made by the Employer to said Fund.
If the Employer fails to make the contributions provided for herein within the
time required by this Agreement and the rules and regulations of the Benefit
Fund, then the Trustees may, in addition to any other remedies, cancel out the
insurance coverage for such employees on whose account the Employer has failed
to contribute, and if that occurs, the Employer shall be responsible to each of
such employees for any claims which may arise because of the loss of coverage.
Section 5. PENALTIES FOR FAILURE TO MAKE CONTRIBUTIONS: The failure of
the Employer to pay required contributions to the Benefit Fund shall authorize
the Trustees to conduct an audit of the Employer's records for the purpose of
determining the amount due the Benefit Fund. The Trustees may waive an audit and
select the highest number of employees appearing on any previous Employer's
report in computing the amount due the Fund from the Employer, and charge such
Employer with such amount, unless the Employer submits records to the contrary.
Section 6. LEGAL ACTION: In the event the Employer fails or refuses to
make contributions within the time provided for herein, then the Trustees of the
Benefit Fund are authorized to take any and all legal action, including
arbitration under the Arbitration Clause provided for in this Agreement for the
purpose of collecting the delinquency from the Employer. In the event the matter
is referred by the Trustees to an Attorney for legal action and suit or
arbitration is instituted ' then the Fund may have judgment entered based upon
the average number of employees reported by the Employer on any report filed by
him during the one (1) year period preceding the institution of arbitration or
Court action. In the event legal action is taken as provided for herein, the
Employer shall become responsible for the following:
a. A legal fee of twenty per cent (20%) of the gross amount due from the
Employer.
b. Cost of making an audit.
c. Interest at the rate of twelve per cent (12%) per annum of each monthly
delinquency.
d. All arbitration and court costs.
ARTICLE 17. BEREAVEMENT PAY
Section 1. Each employee who suffers a death in his immediate family
will be permitted to take time off as may be necessary for attendance at funeral
and mourning from the time the employee receives notice of death up to and
including the date of the funeral. He will be paid on the basis of his regular
hourly rate of such part of that time as he would otherwise have been regularly
scheduled for work, but not exceeding eight (8) hours in any one day or a
maximum of twenty-four (24) hours. Such time off will not be regarded as time
worked for the purpose of computing overtime.
Section 2. In the case of death in the immediate family of any employee
requiring the employee's absence from his regularly scheduled assignments, the
employee shall be granted a leave of absence of three (3) days, and shall be
paid for each scheduled day of such absence. The immediate family shall be
defined as parent, a spouse, child, brother, sister of any employee. One day's
absence with eight (8) hours pay for parent-in-law and grandparents.
ARTICLE 18. SAFETY AND HEALTH
Section 1. The Employer will maintain working conditions in accordance
with the health and safety provisions of both the Department of Health and the
Department of Safety of the State of New Jersey. All reasonable suggestions for
improvements will be considered and acted upon where practical when it involves
the health, safety, welfare, sanitary and working conditions of the employees.
Section 2. An employee who is injured while at work in an industrial
accident must promptly report such injury to their immediate supervisor. such
employee will be paid at their straight time hourly wage rate for all hours lost
while receiving medical attention on the day on which the injury occurred, and,
if as a result of such reported injury, they are unable to continue to work in
the opinion of the attending physician, they shall be paid for the balance of
their scheduled straight time hours for that day.
Section 3. All employees shall be trained in the use of safety
equipment and what must be done in an emergency.
Section 4. All truck drivers shall be given a complete physical once a year
at no cost to employees, if the I.C.C. request it.
Section 5. The Company shall continue to provide adequate locker room
and bathroom facilities for the safety and health of all employees.
ARTICLE 19. UNION REPRESENTATION & VISITATION
The officials or any authorized representative of the officials of the
Union shall have admission to the Employer's place of business for the purpose
of ascertaining whether or not this Agreement is being observed by the parties
hereto, or for assisting in the adjustment of grievances. The officials or
representatives of the Union in such cases shall notify the Employer upon their
arrival. The Union Delegate shall have access to the job sites providing he
gives the Employer reasonable notice so that arrangements can be made to allow
the delegate visitation on the job.
ARTICLE 20. SICK DAYS
Section 1. As of January 1 of any year, all employees who have been
employed for more than one (1) year shall be entitled to six (6) paid sick days,
based on one day for every two (2) months which shall be taken in that year.
However, the unused portion shall be paid no later than the 15th of December.
Section 2. Employees with less than one (1) year of service shall earn
sick days on the basis of one (1) sick day per two (2) months completed service,
until one year of service is earned. Then employee will be entitled to six (6)
paid sick days.
Section 3. Employees shall not abuse this provision. In such event, the
Employer may require substantiation of illness.
Section 4. If an employee is terminated or quits, Section 2 of this
Article shall become applicable with respect to payment of sick days, if the
employee has used more than his allotted number of sick days, the Employer shall
have the right to recover payment for such days out of the employee's remaining
pay.
ARTICLE 21. LEAVE OF ABSENCE
Section 1.- Any employee who desires a leave of absence for a period
not to exceed three (3) months due to personal or family emergency, may be
granted such leave without pay at the Employer's discretion and shall be without
loss of seniority. Such leave of absence must be requested in writing two (2)
weeks prior to the date on which the leave of absence is scheduled to begin and
must be obtained in writing from the Employer to be valid.
Section 2. MATERNITY LEAVE: Leave of absence for up to one (1) year or
less may be granted in cases of pregnancy. An employee returning to work after a
Maternity leave of absence must give the Employer a doctor's certificate showing
that she is physically capable of going back to her normal duties.
Section 3.- FAILURE TO RETURN FROM LEAVE: An employee granted leave
under this Article will be considered as having quit if employee does not return
to work at the end of the leave, or if the employee has taken a job elsewhere.
Exception to this is mentioned in Section 2 above.
ARTICLE 22. JURY DUTY PAY
Section 1. An employee who is called for Jury Duty shall be paid eight
(8) hours straight time pay for scheduled time lost less the daily jury fee
allowed by the court.
Section 2. In the matter of Jury Duty payment, the employee must submit
evidence as to Jury Duty requirement within the County of his residence. The
employee must submit evidence of his formal request to serve, and actual time
served. It is understood that the employee will be reimbursed only for the
actual time served on Jury Duty, less the Jury fee.
ARTICLE 23. TRUCK DRIVERS
The following provisions shall apply for those employees classified as
"Truck Drivers" only.
Section 1. WEEKEND WORK NOTICE - Whenever the Employer has advance
knowledge that weekend work will be required, notice of such work will be given
prior to 2:00 P.M. on Thursday, if possible.
Section 2. PYRAMIDING - There shall be no pyramiding of overtime or
premium pay for the same hours worked under any provision of this Agreement.
ARTICLE 24. WAGE RATES AND CLASSIFICATIONS
Section 1. New jobs or classifications may be established as considered
necessary by the Company, and the Union will be notified when such new jobs or
classifications are established. The rate for such new jobs is considered a
proper subject for negotiations between the Company and the Union.
Section 1(a). Classifications:
(Forklift Drivers, Checkers)
(Selectors, Packers, Loaders)
(Material Handlers, Receiving)
The Company, at its discretion, will grant merit raises to employees
who they feel are qualified. However, all jobs are to be interchangeable
depending on qualification without any mandatory wage differential.
Section 2. Effective December 15, 1997, each employee in the Warehouse
bargaining unit shall receive an increase of 3% per hour, and Truck Drivers
shall receive an increase of 4% per hour.
Section 3. Effective December 21, 1998, each employee in the Warehouse
bargaining unit shall receive an increase of 3% per hour, and Truck Drivers
shall receive an increase of 4% per hour
Section 4. Effective December 20, 1999, each employee in the Warehouse
bargaining unit shall receive an increase of 3% per hour, and Truck Drivers
shall receive an increase of 4% per hour.
Section 5. Employees will receive the rate for the classification in
which they are working immediately upon assuming the duties thereof.
A. An employee assigned to work in more than one classification
during his regular shift and who works four (4) or more hours at
the highest classification shall be paid for the full time
worked during such shift at the highest classification rate.
B. An employee assigned to work in more than one classification
during his regular shift and who works less than four (4) hours
at the highest classification shall be paid four (4) hours at
the highest classification rate and the balance of his hours
during that regular shift at the next highest classification
rate worked.
Section 6. SUPPLEMENTAL BONUS - The Employer agrees to pay to each
employee in the bargaining unit, who received pay for at least ten (10) days in
the previous month, a monthly supplemental bonus of nine dollars ($9.00), which
will be payable on the first pay day of each month. If the employee does not
receive a pay check on the first pay day of the month, the bonus will be paid on
the first pay he receives in the month.
ARTICLE 25. STRIKES OR LOCKOUTS
Section 1. There shall be no strikes, slowdowns, work stoppages, or
interruption of production. The Union agrees that it will not authorize,
instigate, aid, condone or ratify any such activity. The Company will not lock
out any of its employees. The Company retains the right to discharge or
otherwise discipline any employee who violates this provision; it being
understood that the question of whether an employee violated this provision may
be made the subject of the Grievance and Arbitration Procedure of this
Agreement.
Section 2. It is further agreed that in all cases of an unauthorized
strike, walkout, slowdown, or any other unauthorized cessation of work in
violation of this Agreement, the Union shall not be liable for damages
resulting from such unauthorized acts by its members.
Section 3. PROTECTION OF RIGHTS
A. Picket Lines - It shall not be a violation of this Agreement, and
it shall not be cause for discharge or disciplinary action in the event an
employee refuses to enter upon any property involved in a primary labor
dispute, or refuses to go through or work behind any primary picket line,
including the primary picket line of Unions party to this Agreement, and
including primary picket lines at the Employer's places of business.
B. Struck Goods - It shall not be a violation of this Agreement and it
shall not be a cause for discharge or disciplinary action if any employee
refuses to perform any service which his Employer undertakes to perform as an
ally of an Employer or person whose employees are on strike, and which service,
but for such strikes, would be performed by the employees of the Employer or
person on strike.
ARTICLE 26. MISCELLANEOUS WORKING CONDITIONS
Section 1. INDIVIDUAL AGREEMENTS - The Employer will not enter into any
other written or oral agreement with any employee or group of employees covered
by this Agreement which conflicts with the terms and provisions of this
Agreement.
Section 2. BULLETIN BOARD - The Employer agrees to provide a bulletin
board in a conspicuous place in the Employer's place of business for the posting
of notices pertaining to the Union and its members.
Section 3. MILITARY SERVICE - Any employee leaving the Company to join
the Armed Forces of the United States shall suffer no loss of seniority rights,
provided the employee complies with the re-employment conditions of the
Selective service and Training Act of 1951, as amended, or any other applicable
laws. The Employer agrees to pay an employee for all reasonable time involved in
reporting for a physical examination for Military Service.
Section 4. LIFE OF AGREEMENT - The Employer agrees that if he moves his
place of business during the life of this Agreement, said Agreement shall remain
in full force and effect.
Section 5. NON-DISCRIMINATION - In accordance with applicable law, the
Employer and the Union agree not to discriminate against any individual with
respect to hiring, compensation, terms or conditions of employment because of
such individual's race, color, religion, sex, national origin, pregnancy, or
age, nor will they limit, segregate or classify employees in any way to deprive
any individual employee of employment opportunities because of race, color,
religion, sex, national origin, pregnancy, or age.
A. The Company and the Union agree that there will be no discrimination
by the Company or the Union against any employee because of his or her
membership in the Union or because of any employee's lawful activity and/or
support of the Union.
B. The term "he" or "his" as used in this Agreement is not meant to be
discriminatory and shall apply equally to male and female employees.
Section 6. SEPARATION OF EMPLOYMENT - Upon discharge, the Employer
agrees to pay all money due to an employee. Upon quitting, the Employer shall
pay all money due to the employee on the pay day in the work week following such
quitting. Earned vacation time shall be included in such payment.
Section 7. PREVIOUS BENEFITS - It is mutually agreed that any and all
past practices and benefits in effect prior to this agreement shall be
maintained in addition to conditions contained in this Agreement.
Section 8. There shall be one (1) rest period of fifteen (15) minutes in
the morning. There shall also be one (1) ten (10) minute break in the afternoon,
if working a one half (1/2) lunch.
Section 9. LIE DETECTOR TEST - The Employer shall not require, request,
or suggest that an employee or applicant for employment take a polygraph or any
other form of lie detector test.
Section 10. SEVERANCE PAY - Should the Employer desire to or
voluntarily be forced to liquidate his business, he must notify the Union at
least thirty (30) days in advance and the employees shall be retained on the job
until liquidation is completed. In the event of such liquidation, severance pay
shall be paid to the employees in the following manner:
All employees shall receive severance pay at the rate of one (1) week
for each five (5) years of employment.
Any future place of business owned or operated by the Employer shall be
covered by this clause.
Section 11. The Union will be given a three (3) months notice prior to
a plant shutdown, if possible.
Section 12. The Company shall grant a five (5) minute wash up time
prior to quitting time.
Section 13. Anyone employed 20 hours or more shall be considered a
full-time employee.
Anyone employed under 20 hours shall be considered part-time employees.
All benefits in this agreement shall apply to part-time employees on a pro-rata
basis.
Section 14. Work rules promulgated by the Employer which have been in
effect at the Employer's premises and all new work rules promulgated by the
Employer and agreed to by the Union must be observed by all employees. Any
employee who violates these work rules is subjected to discharge in accordance
with the provisions of this contract.
Section 15. WORK BY SUPERVISORS - Non-bargaining unit employees shall
be permitted to perform work they customarily performed in the past or in an
emergency.
Section 16. Employees are required to be able to pick 45-55 lines per
hour.
Section 17. The Company will make available the following Bonus
Programs:
A. Team Group Program - The Company will continue merit raises based on
individual employee's job performance.
B. Employees of the Month - Every month the Company shall award four
(4) employees, based on performance, an extra day off with pay. Any unused days
shall be paid at the end of the year.
All employees are expected to participate in these Programs.
Section 18. The Employer shall provide uniforms for all truck drivers.
New drivers shall be entitled to uniforms after sixty (60) days of employment.
ARTICLE 27. EDUCATIONAL PROGRAM
The Employer agrees to contribute one cent ($.01) per hour to Teamster
Local 11 Educational Program for all hours an employee receives pay. Such Fund
is to be administered in accordance with the Local 11 Benefit Plan Trust
Agreement by an equal number of Employer and Employee Trustees.
ARTICLE 28. JOB POSTING PROCEDURE
Section 1. In the event of a vacancy, such vacancy shall be posted for
five (5) working days. The successful candidate's name will be posted on the
Board the day following the job award.
Section 1(a). The day of the posting shall be considered the first day.
The job posting shall have a brief description of the duties involved and the
rate range of the classification.
Section 1(b). Any employee interested in the job may sign the posting
and the senior employee shall be given the opportunity to fill the vacancy, if
qualified.
Section 2. An employee who successfully bids for a job shall have the
right to return to his previous job if he is removed or elects to give it up
within thirty (30) calendar days from the date of the award. The open job will
not be re-posted but will be filled by the next senior employee on the original
posting providing they have the necessary qualifications.
Section 3. An employee who completes thirty (30) calendar days trial
period on his successful bid shall give up all claim to his former
classification after the thirty (30) days trial except for layoff purposes and
seniority entitles him to the job.
Section 4. On all job bids for vacancies, in no instance will any job
vacancy bid for in this manner be left open for more than thirty (30) calendar
days.
Section 5. In reference to job postings vacancies, when the selection
is made, the Steward will counter-sign to insure that the proper job posting
procedure was followed.
Section 6. A probationary who may bid for a vacancy shall have no claim
nor be eligible for said vacancy unless no employees on the seniority roster
have signed for the job.
ARTICLE 29. ESTABLISHING JOB DESCRIPTION AND CLASSIFICATION ON NEW OR
CHANGED JOBS
When and if the Company from time to time at its discretion establishes
a new job or changes the job content of a job, they shall be required to
establish a new job description and classification in accordance with the
following procedure:
1. They shall prepare the proposed job description and submit same to
the Union.
2. The Union will meet with the Company and promptly review the
proposed job description.
3. If the parties agree that the new job description accurately
describes the job and that there is a proper rate, a copy of the
new job change shall be forwarded to the Union.
4. If the parties cannot agree on the new job being accurately described, the
Employer shall:
a. Issue copies of the proposed description and classification to the
Union.
b. Install the proposed classification, and
C. Install the standard hourly rate of the job class to which the job is
thus assigned.
5. The Union shall be exclusively responsible for filing the Grievance
involving the inaccuracy of the description and/or classification of jobs.
Said Grievance shall be filed within seven (7) days after the installation
date of the job.
ARTICLE 30. TEAMSTERS NATIONAL 401M PLAN
Section 1. The Employer hereby agrees to participate in the
Teamsters-National 401(k) Savings Plan (the Plan) on behalf of all employees
represented for the purposes of collective bargaining under this agreement.
Section 2. The Employer will make or cause to be made payroll
deductions from participating employees' wages, in accordance with each
employee's salary deferral election subject to compliance with ERISA and the
relevant tax code provisions. The Employer will forward withheld sum to State
Street Bank or its successor at such time, in such form and manner as required
pursuant to the Plan and Declaration of Trust (Trust).
Section 3. The Employer will execute a Participation Agreement with
Local 11 and the Trustees of the Plan evidencing Employer participation in the
Plan effective prior to any employee deferral being received by the Plan.
Section 4. In addition, the Employer agrees to require the payroll
system to provide separate paycheck deductions so that the Plan may allow
participant loans. The Employer further agrees, at such time as it is
administratively feasible, to require the payroll system to provide separate
paycheck deductions so that the Plan may allow after-tax contributions.
ARTICLE 31. DRIVE
Section 1. The Employer agrees to deduct from the pay check of all
employees covered by this Agreement voluntary contributions to the Democrat
Republican Independent Voter Education (DRIVE). DRIVE shall notify the Employer
of the amounts designated by each contributing employee that are to be deducted
from his/her pay check on a weekly basis for all weeks worked. The phrase
"weeks worked" excludes any week other than a week in which the employee earned
a wage. The Employer shall remit to DRIVE National Headquarters, on a monthly
basis, in one check, the total amount deducted along with the name and social
security number of each employee on whose behalf a deduction is made, and the
amount deducted from the employee's pay check.
Section 2. The Union and DRIVE agree to indemnify the Employer and to
hold the Employer harmless for all monies which are deducted in accordance with
DRIVE instructions, and, which are disputed by the involved employee. The
Union, DRIVE, and the employee further agree that all disputed deductions are
to be resolved between the Union, DRIVE, and the employees themselves without
the involvement of the Employer.
ARTICLE 32. DURATION
This Agreement shall become effective on the 14th day of December,
1997, and shall remain in full force and effect until the 15th day of December,
2000, and shall automatically renew itself from year to year thereafter, unless
written notice of desire to modify or terminate is given by either party to the
other sixty (60) days prior to the expiration of this Agreement or any
subsequent annual period. If such notice is given, negotiations for a new
Agreement shall begin promptly, but not sooner than sixty (60) days prior to the
expiration of the then currant period and shall continue until a new agreement
is reached. During such negotiations, this Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the Employer and the Union have caused this
agreement to be executed by their duly authorized officers.
LOCAL NO. 11, affiliated with the
INTERNATIONAL BROTHERHOOD OF
FIVE STAR GROUP TEAMSTERS
BY:____________________________ BY:_____________________________
Richard T. Grad, President Peter McGourty, President
Rey Lopez, Business Agent
COMMITTEE:
- ------------------------------ -----------------------------
- ------------------------------ -----------------------------
<PAGE>
DRUG FREE WORKPLACE & REHABILITATION POLICY
STIPULATION OF AGREEMENT effective___________
J. Leven Company and Teamsters Local #11 have agreed to establish and implement
a "Drug, Free Workplace & Rehabilitation Policy" for all present and future
employees as follows:
J. Leven Company and Teamsters Local 11 recognize the need to commit to a drug
free workplace environment, and promote high standards of employee health and
safety.
In order to develop and enhance this objective into a measurable and workable
practice, the company has established, in full support and cooperation with
Teamsters Local #11, the following provisions as its Drug Free Workplace Policy
as provided for and according to applicable State and Federal law.
J. Leven Company and Teamsters Local 11 encourages every employee to voluntarily
obtain treatment counseling and rehabilitation whenever he/she feels they have a
problem with alcohol and/or drugs.
All applicants who have been offered and accepted employment with J. Leven
Company Must submit to and pass a drug screening test as partof a
pre-employment physical and as a condition of commencement of employment. If
initial and confirmatory tests are positive the offer of employment will be
withdrawn. The Company acknowledges that this paragraph has not been agreed to
by the Union; the Union acknowledges the Company's tight to engage in
pre-employment testing.
J. Leven Company will also conduct testing for drugs or alcohol when has just
cause to believe that an individual is under the influence on drugs or
alcohol.
An employee who violates this Policy could be subject to termination
Specifically:
1. The use of, Possession, distribution, manufacture, and/or sale of alcohol
and/or illegal drugs, and/or controlled substances, during working hours, on
company property, on company business, and/or which utilizing company owned,
rented, or- leased property is strictly prohibited. Any employee who engages
in such conduct or activity in subject to corrective action up -to and
including termination
2. Employees that experience a job-related accident and/or injury requiring
doctor's treatment may be subject to a blood alcohol and, urine drug test.
A. Specimens for such tests may be taken by the treating physician at
the physician's medical facility, clinic, or hospital.
<PAGE>
B. Specimens will be taken and conducted according to the chain of
custody" method and tested by a certified, independent laboratory (forensic
toxicology N.I.D.A. certified). Lab results will be quantitative and
qualitative. Additional confirmation testing may be done to confirm validity.
(Split test).
C. Initial and subsequent confirmation test levels for drugs will be
determined by N.I.D.A. standards, which are incorporated therein.
3. An employee's refusal or failure to take a test for sobriety and/or
drug use when required as provided for by this policy, may result in corrective
action up to and including termination.
4. Employees that test positive for drugs, controlled substances, and/or
alcohol, will be reprimanded with a five (5) work day suspension without pay; be
placed an twelve (12) months of probation; be required to enroll in a supervised
drug/alcohol rehabilitation program (and after care as determined by the
treating physician or certified agency). (Timing of such suspension can run
concurrent with rehabilitation upon mutual agreement of the Union and
Management.
A.l. Employees who fail to successfully complete the specified
supervised drug/alcohol rehab program (and after care) will be terminated.
A.2. Employees that fail to meet requirements of an after care program
will be terminated within the probationary period; inclusive to alcohol/drug
testing as specified in any after care commitment agreed to by the employee.
B.1. Employees that are dropped from the supervised rehabilitation
program for violation of the program requirements will be terminated.
B.2. Employees may be permitted to take a medical leave of absence for
the purpose of undergoing treatment pursuant to an approved supervised program
for alcoholism and/or drug use. Such leave request must be made before any lab
testing procedure or in advance of any disciplinary' action. A medical release
to return to work must be provided to the employer, and the employee is subject
to further conditions of this policy. Such medical leave of absence request must
be voluntarily made in writing and may be subject to the approval of Company
Management.
5. Employees that successfully complete the drug/alcohol rehab program
will be on twelve (12) months probation, and upon completion of probation, have
the appropriate reprimands removed from their personnel file.
<PAGE>
December 18, 1997
Mr. Richard Grad, President
Five Star Distributors
903 Murray Road
P.O. Box 357
East Hanover, New Jersey 07936
Dear Mr. Grad:
As a follow up to our conversation on December 18, 1997, the Trustees
of the Northern New Jersey Teamsters Benefit Plan have been given new rates by
the Actuary to consider for all future contract negotiations. They are as
follows:
Single Family
1998 $37.00 per week $93.00 per week
1999 $39.00 per week $97.00 per week
2000 $42.00 per week $103.00 per week
As I have told you, these rates were rejected by the Board of Trustees
and the Actuary was requested to do a further study to ensure that the new rates
are, in fact, the best possible rate the Plan can offer.
With that in mind, your Company can consider these rates now, or until
a more favorable rate is issued, as the rate that would be negotiated in your
current contract. I hope this will be of some assistance to you in deciding to
accept the Northern New Jersey Teamsters Benefit Plan as your employees' health
provider.
Should you have any further questions, please feel free to contact me.
Very truly yours,
Peter McGourty
President
PM/em
cc: Rey Lopez, Bus. Agent
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction
Of
Incorporation
Five Star Group, Inc. Delaware
NPD Trading, Inc. Delaware
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
AMERICAN DRUG COMPANY
We consent to incorporation by reference in the Registration Statement on Form
S-3 of our report dated March 5, 1999 on the financial statements of American
Drug Company and subsidiaries, included in the 1998 Annual Report on Form 10-K.
Richard A. Eisner & Company, LLP
New York, New York
March 31, 1999
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