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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31,1997
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from
__________________ to __________________
Commission file number: 0-24640
COMMUNITY MEDICAL TRANSPORT, INC.
(Exact name of small business issuer in its charter)
Delaware 13-3507464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 Gannett Drive, White Plains, New York 10604
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 697-9233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Redeemable Warrants expiring on September 29, 1999
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the issuer was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes...X... No........
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained herein, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for the year ended December 31, 1997 are
$22,814,000.
The aggregate market value of the voting and non-voting common stock
held by nonaffiliates of the issuer is $4,440,156 (as of March 30, 1998).
The number of shares outstanding of the issuer's common stock is
5,993,652 (as of March 30, 1998).
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format: Yes........ No...X...
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PART I
Item 1. Description of Business
Introduction
Community Medical Transport, Inc. (the "Company"), through its
subsidiaries, provides medical transportation and other specialized
transportation services in the New York-New Jersey metropolitan area. These
services include specialized transportation for the handicapped, disabled,
mentally retarded, elderly and chronically ill to and from day treatment
centers, day care programs, hospitals, nursing homes, dialysis centers, and
other health care facilities. This service is provided in ambulettes --
specialized vans that contain ramps and other equipment designed to secure and
safely transport wheelchair bound passengers. These services also include
emergency and non-emergency ambulance transportation services, including
limited "911" emergency service, for patients who require basic medical care
or supervision during transport to and from hospitals, nursing homes and other
health care facilities.
As overall demand for ambulance and ambulette services is increasing,
contracting parties and regulatory authorities are imposing more stringent
requirements in terms of quality of care and cost of service. Ambulance and
ambulette service providers are facing increasing demand to deploy vehicles
more efficiently, employ more highly trained personnel and otherwise operate
more cost- efficiently. These requirements and their associated costs are
producing consolidation opportunities as smaller service providers seek to
combine with larger providers to gain access to greater financial,
technological and managerial resources to improve dispatch systems, fleet
maintenance, training of personnel, accounts receivable recovery and marketing
capability. In addition, there are significant barriers to entry into this
industry, particularly with respect to ambulance services. As a result, the
Company believes that well-established transportation providers with a strong
customer base, a reputation for high quality service, and profitable
operations will have considerable opportunity to expand their operations
through acquiring and consolidating smaller local providers.
The principal executive offices of the Company are located at 4
Gannett Drive, White Plains, New York 10604 and its telephone number is (914)
697-9233.
Unless the context otherwise requires, references to the "Company"
contained in this Annual Report include the subsidiaries of the Company.
Recent Developments
In May 1997, the Company completed its purchase of the Hudson Valley
companies (the Hudson Valley companies) by acquiring all the shares of an
affiliated company, Richards Decker Operating Company (RDO), and issuing
shares and notes for the balance of the purchase price pursuant to an
amendment dated as of December 31, 1996 ("December Amendment") to a Purchase
Agreement dated February 28, 1996 and amended on August 12, 1996 (the
"Original Agreement"), among the Company, Alan McGeorge, Harvey H. McGeorge
Co., Inc. and Hudvalco, Inc. Pursuant
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to the December Amendment the balance of the purchase price for the Hudson
Valley companies was increased by $125,000 to $1,175,000 leaving a balance of
$1,132,772 after adjustments. The unpaid purchase price was paid by (i)
issuing 153,846 shares of the Company's Common Stock to Alan McGeorge pursuant
to a conversion right of the original note (ii) issuing 7,979 additional
shares of the Company's Common Stock and (iii) issuing a five month note (the
New Note) in the amount of $566,386 payable in five equal installments
convertible into shares of the Company's Common Stock in certain
circumstances. The Company through the issuance of additional shares or cash
payment guaranteed the price of its Common Stock at $3.50 per share.
In July 1997, the Company renegotiated the amount due on the New Note
and the New Note was repaid in full for the amount of $500,000. In conjunction
with the repayment of the New Note, the Company issued 166,667 shares of its
Common Stock to a third party, Ronald Davis, in consideration for $500,000.
On July 29, 1997, the Company entered into an Asset Purchase
Agreement with John Gillen, the sole shareholder of Fox Ridge Transportation,
Inc. ("Fox Ridge"), to acquire certain vehicles owned by Fox Ridge. The
consummation of such agreement was subject to the delivery of certain
documents by Fox Ridge and the assumption by the Company of Fox Ridge's
outstanding indebtedness and leasehold obligations relating to the vehicles,
all of which were completed by October 1, 1997. Pending delivery of such
documents, the Company operated the business of Fox Ridge and received the
revenues since July 29, 1997. Pursuant to the terms of the Asset Purchase
Agreement, the Company paid Mr. Gillen upon consummation a purchase price of
$1,140,000, by (i) issuing 130,969 shares of the Company's Common Stock to Mr.
Gillen and (ii) assuming approximately $485,000 of outstanding debt of Fox
Ridge, which debt was refinanced by the Company. The Asset Purchase Agreement
also provides for the issuance of additional shares, up to a maximum of 65,485
shares, to Mr. Gillen if Mr. Gillen is unable to sell the shares received in
this transaction at $5.00 per share. Any additional shortage will be paid in
cash by the Company.
The Company is currently consolidating its separate operating
entities into one company with separate operating divisions. The Company has
taken a charge to earnings for the fiscal year ended December 31, 1997 in the
amount of $1,371,000, which is primarily the result of a writedown of accounts
receivable of certain of the acquired companies arising subsequent to the
acquisitions, and $1,239,000 for costs relating to this consolidation,
including severance and other costs previously deferred for future
acquisitions, the completion of which, in the opinion of management, is not
likely to occur. The consolidation of the companies was substantially
completed during the first quarter of 1998. The Company expects the remainder
of the consolidation to be completed during the second quarter of 1998.
The Company has also taken a charge to earnings of $5,400,000 for the
year ended 1997 for the write-down of intangibles, which is the result of
reduced operating results of the Hudson Valley companies and the corresponding
measurement of its expected future discounted cash flows. The increased costs
of the Hudson Valley companies, particularly higher personnel costs and the
reductions in service revenues, caused by, among other things, changes in
relations with certain customers and increased competition, has led the
Company to reduce its carrying amount of its intangible assets to net present
value of the expected future cash flows.
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The intangible writedown referred to above arose out of the acquired
operations of the Hudson Valley companies. This writedown resulted from a
significant reduction in revenues of the Hudson Valley companies, thereby
reducing income derived from and the value of that acquisition as represented
in the Original Agreement. The Company anticipates taking legal action against
the former owners of the Hudson Valley companies for failure to make
appropriate disclosures.
The Company has determined not to pursue any additional acquisitions
pending consolidation of its separate operating entities into one operation,
which consolidation commenced in the third quarter of 1997 and is expected to
be completed in the second quarter of 1998. If the Company makes any
acquisitions thereafter, the completion of any such acquisitions will increase
the revenues and expenses of the Company. However, there can be no assurance
that future net income will be positively impacted. Additional financing,
however, may be required in the future in connection with any future
acquisitions.
At December 31, 1997, the Company was not in compliance with several
financial covenants from its lenders. The lenders have provided a waiver in
connection with an amendment to the loan agreement, which was completed on
April 14, 1998.
Industry Background
Based on the Company's review of publicly available documents
produced by other service providers, the Company believes that costs of
operating ambulance and ambulette services in the United States have grown
approximately 10% per year over the last decade. Although the ambulance
service industry has recently experienced an increase in consolidation by
large national companies, the Company believes that the medical transportation
industry continues to be highly fragmented, with over 2,000 privately-owned
companies.
The Company believes that the increase in costs for ambulance
services has been a result of an increase in both the number of ambulance
transports and the average expenditures per transport. The growth and aging of
the U.S. population have increased demand for medical services, including
general ambulance and ambulette services. In addition, a greater emphasis on
cost containment through earlier hospital discharge and on the use of
outpatient facilities and home care therapy has resulted in an increased need
for ambulance and ambulette services to provide patients with transportation
under medical supervision. The enactment of the Americans with Disabilities
Act in 1990 has also resulted in a greater need for para-transit services.
Strategy
As overall demand for ambulance and ambulette services increases,
contracting parties and regulatory authorities are imposing more stringent
requirements in terms of quality of care and cost of service. Ambulance and
ambulette service providers are facing increasing demand to deploy vehicles
more efficiently, employ more highly trained personnel and otherwise operate
more cost- efficiently. These requirements and their associated costs are
producing consolidation opportunities as smaller service providers seek to
combine with larger providers to gain access to greater financial,
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technological and managerial resources to improve dispatch systems, fleet
maintenance, training of personnel, accounts receivable recovery and marketing
capability. In addition, there are significant barriers to entry into this
industry, particularly with respect to ambulance services. As a result, the
Company believes that well-established transportation providers with a strong
customer base, a reputation for high quality service, and profitable
operations will have considerable opportunity to expand their operations
through acquiring and consolidating smaller local providers.
The Company believes that the fragmented nature of its industry
combined with increasing performance requirements and cost burdens imposed on
smaller companies creates favorable acquisition and expansion opportunities
for the Company.
In the New York-New Jersey metropolitan and surrounding area the
Company had intended, through such acquisitions and expansion, to build a
network of and become a significant provider of ambulette and ambulance
services. The Company believes it is now a significant medical transportation
provider in the New York-New Jersey metropolitan area. The Company has
determined not to pursue any additional acquisitions pending consolidation of
its separate operating entities into one operation.
The Company intends to further expand through internal growth and,
after its consolidation of its separate operating entities into one operation,
acquisitions. The Company intends to achieve this by:
o Continuing its commitment to high quality, specialized and medical
transportation services provided by qualified personnel;
o Expansion of services through increased marketing efforts to day
care centers, nursing homes, hospitals, and other health care
facilities and providers;
o Preserving ties to the local community and providing continuity of
service and community relations, which may include retaining
management of its acquired service providers, where necessary.
o Acquiring ambulance and ambulette service providers in the New
York-New Jersey metropolitan area, and integrating and consolidating
these companies and their operations with the operations of the
Company. The Company believes such acquisitions and consolidations
will improve the efficiency of existing operations;
The Company may also seek to expand through the acquisition of
ambulance and ambulette providers outside of the New York-New Jersey
metropolitan area with high quality management and strong performance records.
The Company will consider acquisition candidates that it believes offer
attractive opportunities for intrinsic growth and expansion into nearby
service areas and where the Company believes it may become a significant
provider.
Management believes that such acquisitions would enable it to achieve
economies of scale, improve its gross margins and increase its ability to
compete with other service providers. The
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Company may retain senior management of acquired companies outside of the New
York-New Jersey metropolitan area after the acquisition to manage local
operations. The Company will also consider acquiring businesses that provide
related health care services including the distribution of durable medical
equipment and supplies.
Ambulette Services
The Company provides specialized transportation for the handicapped,
disabled, mentally retarded, elderly and chronically ill to and from day
treatment centers, day care programs, hospitals, nursing homes, dialysis
centers, and other health care facilities in the New York-New Jersey
metropolitan area. This service is provided in ambulettes -- specialized vans
that contain ramps and other equipment designed to secure and safely transport
wheelchair bound passengers as well as ambulatory passengers. The Company
provides two principal types of ambulette services to its customers:
"pre-scheduled day treatment" and "scheduled daily in advance."
The "pre-scheduled day treatment" services, which accounted for over
37% of the Company's revenues during 1996 and approximately 29% of the
Company's revenues during 1997, are provided to customers both with and
without contracts. Under this service, the customer or provider typically
retains the Company to provide regularly scheduled transportation services for
patients who attend the provider's facilities on a daily or other regularly
scheduled basis. Transportation is generally between the patient's residence
and the customer's health care facility and is provided five days a week
except for long term care and other specialized situations in which service is
provided seven days a week. Users of such services include health care
facilities such as dialysis centers, adult day centers that service the
elderly, day treatment programs that service individuals with mental
retardation and, in certain cases, other developmental disabilities, and
comprehensive health care facilities which serve as a long-term, "day care"
alternative to nursing homes.
The "scheduled daily in advance" services are provided to nursing
homes and other health care facilities on an "as-needed basis" pursuant to
direct calls from the customer. Transportation for this service is generally
between residences or nursing homes and hospitals or other health care
facilities and is generally requested by the customer not more than one day in
advance.
The Company has entered into an agreement with Union County, New
Jersey in connection with para-transit services (including medical and
non-medical transportation) provided by the county. Drivers required by the
county are provided by the Company pursuant to this agreement. Commencing
January 1, 1998, these services were expanded pursuant to a separate agreement
to include dispatching of the vehicles.
Ambulance Services
The Company, through its subsidiaries, provides general ambulance
services to patients requiring various levels of medical supervision during
transfer to and from residences and health care facilities. The Company's
ambulance business commenced in February 1994 and was significantly augmented
as a result of recent acquisitions and marketing efforts.
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Ambulance operations generated approximately 37% and 49% of the
Company's total revenues during the years ended December 31, 1996 and 1997,
respectively. Presently, the Company's ambulance services are provided
primarily in New York City, particularly Manhattan and the Bronx, as well as
the Hudson Valley and Westchester area of the New York-New Jersey Metropolitan
area. The Company initiated limited ambulance services in northern New Jersey
in 1996 and significantly expanded such services in 1997. While limited to
basic life support ("BLS") services under New Jersey regulation, the Company
intends to expand the northern New Jersey operations to a 24 hour, 7 days per
week basis in early 1998.
The Company is licensed to provide ambulance services in New York
City, Westchester, Rockland, Orange, Putnam, Dutchess, northern New Jersey and
other counties in southeastern New York State. The Company's ambulances
provide both BLS services and advanced life support services ("ALS"). BLS
service is utilized by patients requiring a basic level of medical supervision
during transport. BLS services may include basic airway management, hemorrhage
control and stabilization of fractures. ALS service requires advanced life
support systems such as cardiac monitors, defibrillators, oxygen delivery
systems and specialty pharmaceutical and medical supplies.
The Company currently provides only limited "911" emergency services
because such services are provided by municipal authorities in the geographic
areas in which the Company operates. The Company provides exclusive 911
services to two townships in Rockland County.
Ambulance units are staffed by two EMTs and equipped with medical
supplies, oxygen delivery systems, and equipment necessary to administer first
aid and other medical treatment. ALS ambulance units, staffed by crews of
specially certified EMTs (paramedics), are equipped with advanced life support
equipment, such as cardiac monitors, defibrillators, specialty pharmaceuticals
and medical supplies. The Company's ambulance services are typically provided
pursuant to arrangements with health care facilities and are either scheduled
in advance or provided on an as- needed basis.
Marketing and Sales
The Company markets it's services on the basis of quality of care,
reliability, reputation and cost. As part of its strategy, the Company
substantially expanded its marketing efforts in 1997. During the year the
Company retained several sales representatives each responsible for a
particular area. The representatives receive a base salary and additional
compensation based upon increased revenues in the territory for which they are
responsible. In addition, the Company retains several customer care
representatives (CCRs) who are based at major hospitals that the Company
services. In addition to serving as liaison between the hospitals staff and
the Companys ambulance dispatch/billing personnel, the CCRs also market the
Companys services to area nursing homes and smaller hospitals.
The Company markets its ambulette services principally to day
treatment centers and day care programs which provide programs for the
handicapped, disabled and elderly, as well as other health care facilities
that require a stable and reliable source of medical transportation for its
patients. The Company provides its ambulance services to several major
hospitals and nursing homes in New York
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City, Rockland and Westchester counties. As part of its marketing strategy,
the Company has developed more than two dozen managed care provider contracts
and is seeking to enter into arrangements to become a single source
transportation provider for medical institutions.
Personnel Training and Quality Assurance
As of December 31, 1997, the Company employed 141 EMTs and 74
paramedics. In general, EMTs furnish basic and emergency treatment while
transporting patients in ambulances. EMTs must be state certified to perform
basic and emergency care services. Certification as an EMT in the geographic
area in which the Company provides services requires completion of a training
program designed by the state. Paramedics providing ALS are required to
complete advanced training courses for more advanced emergency care services.
The Company carefully screens all job applicants and is committed to providing
consistently high quality transport and other services. All of the Company's
ambulette drivers are subject to state regulation. They must have a commercial
driver's license with a designation to transport passengers. Each new driver
must undergo a physical examination and testing for controlled substance
abuse. Additionally, the Company verifies the driving record of each new
driver.
Billing and Collection
The Company derives a substantial majority of its revenue from
reimbursement by third-party payors, particularly Medicaid and Medicare,
typically invoicing and collecting payments directly from the third party
payor. During the fiscal years ended December 31, 1996 and 1997, the Company
derived approximately 60% and 44%, respectively, of its net revenues from
Medicaid and Medicare; 11% and 9%, respectively, of its net revenues pursuant
to contracts with Beth Abraham Hospital (the Company's only fixed-cost
provider); and 29% and 47%, respectively, of its net revenues from private
insurers and other non-governmental sources.
The Company has only two contracts with municipalities or health care
facilities which require the Company to provide services without regard to a
patient's insurance coverage or ability to pay. Such requirements are
generally imposed on ambulance services which provide "911" or other emergency
services on an exclusive basis. The Company provides 911 services to two towns
in Rockland County. Overall, the Company believes that on an ongoing basis,
uncompensated trips will not be significant. See Description of Business
Recent Developments.
The Company has developed an expertise in processing claims to
third-party payors. The Company uses specialized software systems to
specifically tailor and electronically submit most claims to Medicaid,
Medicare and certain other third-party payors. The Company believes that its
expertise in processing third-party claims reduces the collection time on its
receivables and results in fewer rejected claims based on incomplete or
inaccurate information. Through this expertise and its consolidation of the
billing and collection departments of its recent acquisitions, the Company has
written down $1,371,000 of its accounts receivables and as a result has taken a
charge to earnings for the year ended December 31, 1997. See Description of
BusinessRecent Developments and Management's Discussion and Analysis of
Financial Condition and Results of Operations for
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information with respect to this writedown.
Principal Customers
During 1997 the majority of the Company's services are provided
pursuant to oral arrangements or short-term, non-exclusive contracts with its
customers. However, the Company provides ambulette services to a significant
customer, Beth Abraham Hospital (and affiliates) located in Bronx County, New
York, pursuant to written contracts since 1988. Under these contracts, the
Company provides ambulette services on an exclusive basis for two programs of
the hospital: an adult day treatment center and a comprehensive care
management center, an innovative alternative to nursing home care for many
people who are elderly and have physical disabilities. These agreements, as
amended, will expire on December 31, 1998. During the years ended December 31,
1996 and 1997, the Company derived approximately 13% and 10%, respectively, of
its revenues from services provided on behalf of Beth Abraham Hospital and its
affiliates including amounts reimbursed by third parties. Dean Sloane,
President of the Company, serves as honorary director of Beth Abraham
Hospital, without compensation. As the Company's other business expands and
acquired businesses are operational for a full year, it is anticipated that
Beth Abraham will account for an increasingly lower percentage of revenues in
1998 and in the future.
The Company provides para-transit transportation services to the
County of Union, New Jersey pursuant to written contracts, which have been
extended through December 31, 1998. During the years ended December 31, 1996
and 1997, the Company derived approximately 8% and 6%, respectively, of its
revenues from services provided to the County of Union, New Jersey. The
Company expects that these revenues will increase for the fiscal year ending
1998 since the Company commenced additional services to the County of Union,
New Jersey as of January 1, 1998.
The Company provides transportation services to several day treatment
centers. In some cases, the majority of the people transported live in group
homes, which are operated by either voluntary or state agencies. The Company
negotiates separate arrangements with the group homes and day treatment
centers for the transportation needs of their clients.
As a result of acquisitions and trends in the medical transportation
industry the Company has entered into additional agreements for medical
transportation services. In the New York-New Jersey metropolitan area, large
hospitals and health institutions are seeking to enter into single source
medical transportation contracts and the Company has entered into such
agreements with several hospitals.
Competition
The ambulance and ambulette service industry is highly competitive.
Principal participants include government entities, large regional ambulance
service providers, hospitals and numerous local providers. The Company
competes with several large firms in its New York City market, including
American Medical Response (a subsidiary of Laidlaw), Transcare and
Metropolitan Ambulance as well as Mobile Life Support in the Hudson Valley
region. The Company also encounters competition, particularly with respect to
ambulette services, from small commercial
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providers operating in the New York - New Jersey metropolitan area. The
Company believes that health care facilities in the geographic area serviced
by the Company consider quality of care, reliability and reputation to be the
most important factors in utilizing a medical transportation provider,
although other factors such as financial stability, personnel policies and
practices and cost are also considered. In addition to present competition,
other companies that do not currently operate ambulance or ambulette services
may enter the ambulance or ambulette service business. There can be no
assurance that health care facilities that presently contract for ambulance or
ambulette services will not choose to provide ambulance or ambulette services
directly in the future.
Persons or entities seeking to enter the ambulance industries have
typically been required to acquire an existing entity already in possession of
an ambulance license. Consequently, the Company believes that competition has
been occurring in the environment of a substantially fixed number of ambulance
licenses.
The Company believes that it may encounter significant competition
for acquisitions of other medical transportation service providers,
particularly as the industry consolidates. There are many companies with
greater capital and other resources than the Company which are actively
seeking to acquire ambulance service providers. Prospective acquirors of
ambulance and ambulette service providers compete primarily on the basis of
price, form of consideration, operating synergy opportunities and management.
Competition for acquisition candidates is intensifying within the ambulance
service industry as the industry consolidates. Such competition may result in
the inflation of purchase prices to levels which exceed the Company's
financial capability or otherwise inhibit its acquisition program.
Government Regulation
The ambulance and ambulette service industry is subject to
governmental regulation at the federal, state and local levels. At the federal
level, the Company is subject to regulations under the Occupational Safety and
Health Act designed to protect employees of the Company. The federal
government also recommends standards for ambulance design and construction,
medical training curriculum, and designation of appropriate trauma facilities,
which standards may be modified by state agencies.
Various aspects of the Company's operations are subject to and
regulated by New York State law. State requirements govern the licensing or
certification of ambulance service providers, training and certification of
medical personnel, the scope of services that may be provided by medical
personnel, staffing requirements, medical control, medical procedures,
communication systems, license and qualification of drivers and vehicles and
equipment.
In addition, the operation of the Company's ambulette services are
subject to regulation by various state and local agencies. These regulations
encompass the licensing and qualification of drivers, vehicles, and equipment.
Applicable federal, state and local laws and regulations are subject
to change. The Company currently believes that it is substantially in
compliance with regulatory requirements applicable to
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its ambulance and ambulette service business. These regulatory requirements,
however, may require the Company in the future to increase its capital and
operating expenditures in order to maintain current operations or initiate new
operations.
Reimbursement
The Company must comply with various requirements in connection with
its participation in the Medicaid and Medicare programs. Medicaid is a
combined federal-state program for medical assistance to impoverished
individuals who are aged, blind, disabled or members of families with
dependent children. The various authorities of Medicare/Medicaid, including
the New York State Department of Social Services have the authority to set
levels of reimbursement within federal guidelines. The Company receives from
its customers that are covered by Medicaid, only the reimbursement permitted
by Medicaid and is not permitted to collect from the patient any difference
between its customary charge to such customers and the amount reimbursed. Any
difference between the Company's customary charge to its customers that are
covered by Medicaid and amounts reimbursed by Medicaid are not material to the
Company's operating results because the Company's customary charges to such
customers generally do not exceed amounts reimbursable by Medicaid.
Medicare is a federal health insurance program for the elderly and
for chronically disabled individuals, which pays for ambulance services when
medically necessary. Medicare uses a charge- based reimbursement system for
ambulance services and reimburses 80% of charges determined to be reasonable
by Medicare, subject to the limits fixed for the particular geographic area.
The patient is responsible for paying the balance of the bill, and Medicare
requires the Company to expend reasonable efforts to collect the balance.
Medicare does not reimburse the Company for amounts the Company can not
collect from the patient. In determining reasonable charges, Medicare
considers and applies the lowest of various charge factors including the
actual charge, the customary charge, the prevailing charge in the same
locality, the amount of reimbursement for comparable services or the
inflation-indexed charge limit.
The Company, like other Medicaid and Medicare providers, is subject
to governmental audits of its Medicaid and Medicare reimbursement claims, but
to date the Company has not experienced significant adjustments as a result of
any such audit. As a provider of services under the Medicaid and Medicare
programs, the Company is also subject to the Medicaid and Medicare fraud and
abuse laws. The laws prohibit any bribe, kickback or rebate in return for the
referral of Medicaid or Medicare patients. Violations of these prohibitions
may result in civil and criminal penalties and exclusion from participation in
the Medicaid and Medicare programs.
Pursuant to the federal/state statutory schemes for the regulation
and administration of the Medicaid program, each state has a Medicaid Fraud
Control Unit. The Company believes that it has complied with all appropriate
regulations. Nevertheless, the State of New York disputed certain claims for
which the Company received reimbursement during a four and one-half year
period. In August 1997, the Company entered into a stipulation pursuant to
which it paid $97,000 for disputed claims and received a release from the
State.
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Government funding for health care programs is subject to statutory
and regulatory changes, administrative rulings, interpretations of policy,
determinations by intermediaries and governmental funding restrictions, all of
which could materially increase or decrease program reimbursements for
ambulance services. In recent years, Congress has consistently attempted to
curb federal spending on such programs. Amounts under reimbursement programs
are subject to administrative interpretation and enforcement policies.
Currently, several agencies have taken restrictive positions concerning
Medicaid reimbursement. It is likely that future funding levels for Medicare
and Medicaid programs will be reduced from present levels. The current
Congress and various states are considering proposals to reduce expenditures
under various reimbursement programs. Government agencies in the areas in
which the Company operates have proposed extensive budgetary reductions and
rules changes for these programs. The Company can not predict the overall
effect on it as a result of any budget or policy cuts, but such actions could
adversely affect the Company.
Moreover, the Company anticipates that Congress and state and local
legislatures will continue to review and assess alternative health care
delivery systems and cost-control measures, and public debate of these issues
will likely continue in the future. The Company cannot predict the effect any
measures, if adopted in the future, will have on the Company's business.
Insurance
The Company carries a broad range of general liability, comprehensive
property damage, worker's compensation, professional liability, automobile and
other insurance coverage that management considers adequate for the protection
of its assets and operations, although there can be no assurance that the
coverage limits of such policies will be adequate. A successful claim against
the Company in excess of its insurance coverage could have a material adverse
effect on the Company and its financial condition. Claims against the Company,
regardless of their merit or outcome, may also have an adverse effect on the
Company's reputation and business. The Company is also subject to accident
claims as a result of the normal operation of its fleet of vehicles.
Equipment
As of December 31, 1997, the Company's fleet included 166 ambulettes
and 66 ambulances. Except for 31 leased vehicles, the Company owns all of its
vehicles.
Employees
As of December 31, 1997, the Company had a total of 564 employees of
which approximately 431 were full-time and 133 were part-time employees. Of
these, 504 employees were involved in medical transport services and 60
management, administrative and clerical personnel. Prior to the acquisition of
A-1 Ambulance Service, Inc. (A-1), the Company was not a party to any
collective bargaining agreements. The drivers, EMTs and paramedics of A-1 were
subject to a collective bargaining agreement until 1997 when they voted to
decertify the union. During 1997, ambulance drivers located in Yonkers, New
York and ambulette drivers located in Yonkers, New York and Union, New Jersey
voted to be unionized. The Company is currently negotiating a formal agreement
with the unions. The Company considers its relations with employees to be
good.
11
<PAGE>
Item 2. Description of Property
The Company leases approximately 7,600 square feet in a facility
located in White Plains, New York, utilized for the Company's executive
offices and administrative purposes (accounts receivable collection, dispatch
and related functions). The base rental expense for the facility is currently
$159,600 per year, increasing $1,896 per year each second year commencing in
2000. The lease for the facility expires in March 2005.
The Company leases a facility located in Yonkers, New York, for
dispatch and vehicle basing, garaging and maintenance. The base rental expense
for the facility is currently $120,000 per year, increasing approximately
$3,600 per year each year commencing in 1998. The lease for the facility
expires in March 2002.
In 1997 the Company leased a small office in Union, New Jersey for
the administration, including dispatch, of its Union County para-transit
contract.
In conjunction with certain acquisitions, subsidiaries of the Company
entered into leases for garage and operating facilities in Bedford Hills, New
York, Haverstraw, New York and Orange, New Jersey. These facilities typically
consisted of garage, dispatch and office facilities. However, the Company has
been consolidating certain of these facilities. At December 31, 1997, these
facilities consisted of the following: (a) the facility in Bedford Hills is
5,000 square feet for office space at an annual rental of $37,000 pursuant to
a lease that expires in August 1998; (b) the facility in Haverstraw is 13,000
square feet for office space and a garage at an annual rental of $72,000
pursuant to a lease that expires in August 2001; and (c) the facility in
Orange is 16,000 square feet for office space and a garage at an annual rental
of $57,000 pursuant to a lease that expires in March 1999.
Item 3. Legal Proceedings
In April 1997, a former employee of a subsidiary of the Company
commenced an action against the Company and the subsidiary entitled Allen
Bemus v. Community Medical Transport, Inc. and Empire Ambulance and Ambulette,
Inc., in the Superior Court of Connecticut (the "Bemus Action"). The Bemus
Action alleges breach of an employment agreement and a covenant not to
compete, a breach of the covenant of good faith and fair dealing in connection
with the aforesaid agreements, defamation, lost wages and negligent infliction
of emotional distress. The Bemus Action seeks damages of approximately
$250,000, plus punitive damages. The Company believes that it has valid and
meritorious defenses to the Bemus Action, as well as offsets against the
claims asserted in the complaint, and has prepared an appropriate answer. The
trial, which commenced on March 25, 1998, will be continuing in May 1998.
A second action was filed against the Company and the subsidiary by
two former officers and shareholders of A-1 Ambulance Service ("A-1
Ambulance"). In June 1996, the Company had acquired from A-1 Ambulance certain
assets pursuant to an asset purchase agreement dated December 29, 1995. That
action, entitled A-1 Ambulance Service, Inc., David J. Warburg and Helen
12
<PAGE>
H. Hendrie v. Community Medical Transport, Inc. and Empire Ambulance and
Ambulette, Inc. (the "Warburg Action"), was filed on June 25, 1997 in the
Supreme Court of the State of New York, County of Westchester and was served
upon the Company on July 10, 1997. The Warburg Action alleges breach of the
employment agreements entered into between the Company and the former
shareholders of A-1 Ambulance and seeks damages, in the aggregate, of
approximately $325,000. On September 8, 1997, the Company served a motion to
stay the action and to compel arbitration since the written agreements upon
which the claims in the Warburg Action are based provide that disputes under
those agreements are subject to arbitration. On October 22, 1997, the Companys
motion was granted and the Company was awarded statutory motion costs. As of
this date, the plaintiffs in the Warburg Action have not commenced
arbitration. In the event that plaintiffs do commence an arbitration, the
Company believes that it has valid and meritorious defenses to the Warburg
Action, as well as offsets against the claims asserted in the complaint, and
it will continue to vigorously oppose that action.
In February 1998, the Company filed an action against a provider of
day treatment and/or day rehabilitation services for which the Company
previously had provided ambulette and transportation services pursuant to a
transportation agreement. That action, entitled Community Medical Transport,
Inc. v. Professional Service Centers For The Handicapped, Inc. (the CMTI
Action), was filed on February 4, 1998 in Supreme Court of the State of New
York, County of Westchester. The CMTI Action alleges breach of contract by
Professional Service Centers For The Handicapped, Inc. (PSCH) as a result of
its failure and refusal to pay the Company an outstanding balance of $187,422
for the Companys services and quantum meruit based upon the reasonable value
of those services. On March 16, 1998, PSCH served an answer which contains one
counterclaim for unspecified damages based upon the PSCHs claim that the
Company breached the transportation agreement. The answer which was served was
defective. PSCHs counsel was promptly notified of the deficiency and requested
to serve a properly signed pleading. As of March 31, 1998, such a pleading has
not been received. The Company intends to vigorously prosecute this action and
oppose the counterclaim.
In an action entitled Medical Transportation Corp. v. Community
Medical Transport, Inc., and Community Ambulette Service, Inc., Medical
Transportation Corp. (Med-Trans) alleges that during the 12 month period
commencing December 1, 1996 and ending November 30, 1997, the Company
willfully, voluntarily and deliberately terminated relationships with numerous
customers and unilaterally ceased to provide services to said customers.
Med-Trans is the holder of promissory note from the Company, the principal of
which is subject to adjustment based on total annual revenues from an
ambulette business acquired from Med-Trans. Med-Trans is seeking a payment in
the amount of $228,000. The Company filed an answer to the complaint on March
30, 1998, together with affirmative defenses, stating, among other things,
that at no time did the Company voluntarily decide not to service a customer.
The Company intends to vigorously oppose this action.
An action entitled Kenneth P. Silverman, Esq., Trustee of the Estate
of BR Ambulance Service, Inc. d/b/a American Ambulance and Oxygen Service,
Inc. v. Community Medical Transport, Inc., et al., was filed in the Bankruptcy
Court for the Eastern District of New York. By complaint dated February 12,
1998, the Chapter 7 Trustee of BR Ambulance Service, Inc. (BR) has sued the
Company alleging that the Company was the recipient of fraudulent conveyances
from BR arising out of an asset purchase agreement between the Company and BR,
dated March 12, 1995, wherein
13
<PAGE>
the Company allegedly agreed to purchase the assets of BR for a base purchase
price of $2,000,000 plus additional consideration to be calculated pursuant to
a specified formula. The complaint further alleges that subsequently BR
transferred various assets to the Company but the Company did not pay the
specified consideration and accordingly owes the Trustee of BR not less than
$2,000,000. The Companys time to respond to the complaint has been extended to
April 21, 1998. The Company vigorously disputes the material allegations of
the complaint.
In March 1998, the landlord for the Companys facilities in
Haverstraw, New York commenced an action against a subsidiary of the Company
in the Justice Court of the Village of Haverstraw, County of Rockland entitled
Tor Avenue Realty, Inc. v. Century Ambulance & Ambulette, Inc. (the Tor
Action). The Tor Action alleges unpaid rent tax and utility payments in the
amount of approximately $57,000. The owner of Tor Avenue Realty, Inc. is one
of the former owners of the Hudson Valley companies. The Company intends to
vigorously oppose this action and is currently considering a counterclaim.
From time to time the Company is a party to litigation arising in the
ordinary course of business. There can be no assurance that the Company's
insurance coverage will be adequate to cover all liabilities occurring out of
such claims. In the opinion of management and except as described above, the
Company is not engaged in any legal proceedings expected to have a material
adverse effect on the financial condition or results of operations of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended December 31, 1997.
14
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock and redeemable warrants are currently
traded on The Nasdaq SmallCap Market under the symbols "CMTI" and "CMTIW",
respectively.
Between July 1995 and August 1997, the Company's common stock and
redeemable warrants were listed on The Nasdaq National Market. Although the
Company did not agree with the decision to terminate the listing of the
Company's securities from The Nasdaq National Market, in the view of The
Nasdaq Stock Market Inc., the Company did not comply with certain Nasdaq
criteria not related to the financial condition of the Company.
Set forth below are the high and low bids for the Company's common
stock and redeemable warrants on The Nasdaq SmallCap Market between August 1,
1997 and December 31, 1997. Such quotations reflect interdealer prices without
retail mark-up, mark-down or commissions, and may not reflect actual
transactions. Also set forth below are the high and low sales prices for the
Company's common stock and redeemable warrants on The Nasdaq National Market
between January 1, 1996 and July 31, 1997.
<TABLE>
<CAPTION>
Common Stock Redeemable Warrants
------------------------------------ -----------------------------------
High Low High Low
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
1997
First Quarter $4-1/4 $3-3/16 1-3/8 -11/16
Second Quarter 3-5/16 2-3/4 -13/16 -21/32
Third Quarter 3 2 -21/32 -7/16
Fourth Quarter 2-1/8 1-3/32 -15/32 -1/8
1996
First Quarter $8-3/4 $6-7/8 $3 $1-5/8
Second Quarter 8-5/8 5-1/8 2-11/16 1
Third Quarter 7 4-13/16 1-13/16 1-1/4
Fourth Quarter 5 2-15/16 1-7/16 -27/32
</TABLE>
As of December 31, 1997, there were approximately 66 recordholders of
the Company's common stock and 7 record holders of redeemable warrants,
although the Company believes that there are more than 1,000 beneficial owners
of its common stock.
During the three months ended December 31, 1997, the Company issued
294,320 shares of Common Stock, without registration under the Securities Act
of 1933 (the Securities Act), to two non-affiliate entities upon their
conversion of 1,030.1 shares of the Companys Series BB Convertible Preferred
Stock. The Company claimed Section 3(9) of the Securities Act as the exemption
from registration of such transaction.
15
<PAGE>
The Company plans to retain any future earnings for use in its
business and, accordingly, the Company does not anticipate paying dividends in
the foreseeable future to its common stockholders. Payment of dividends is
within the discretion of the Company's Board of Directors and will depend,
among other factors, upon the Company's earnings, financial condition and
capital requirements.
Item. 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
For all periods presented, the financial information includes the
accounts of all operating subsidiaries of the Company acquired prior to 1996.
Between May and August 1996, the Company completed five acquisitions (the 1996
Acquisitions) by wholly-owned subsidiaries of the Company. The operations for
the 1996 Acquisitions were accounted for by purchase method accounting and
revenues and expenses from those operations are only included for a portion of
1996 but for all of 1997. The Company did not complete any significant
acquisitions in 1997.
The Company's total revenue, which is comprised primarily of
ambulette and ambulance service fees charged to Medicare, Medicaid, other
third party payors such as private insurance carriers and health maintenance
organizations, and directly to patients, is presented net of contractual
adjustments.
Forward Looking Statements
The following statements and certain other statements contained in this annual
report on Form 10- KSB are based on current expectations. Such statements are
forward looking statements that involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially include, but are
not limited to the following (i) general economic conditions, (ii) competitive
market influences, (iii) third party reimbursement rate changes (iv)
availability of insurance at reasonable costs (v) customer relations and (vi)
increased competition.
Results of Operations
Year Ended December 31, 1997 as Compared with Year Ended
December 31, 1996
Revenues increased by $7,282,000, or 46.9%, to $22,814,000 in 1997
from $15,532,000 in 1996. The increase is due substantially to the additional
revenues resulting from a full year inclusion of the 1996 Acquisitions, and to
a lesser extent, increased volume generated from its customer base prior to
such acquisitions. These acquisitions have resulted in a shift of the Companys
revenues from predominantly an ambulette based Company to virtually an even
mix of ambulette and ambulance revenues. In addition to the revenue mix
change, the payor mix has also changed. The reimbursement from Medicare and
Medicaid has been reduced significantly as a percentage of revenues, from 60%
in 1996 to 44% in 1997 while the reimbursement from private insurers and other
non governmental agencies has increased from 29% in 1996 to 47% in 1997. The
Company during 1997 began to decline certain trips previously performed by
operations of the
16
<PAGE>
businesses acquired, as a result of the Companys stricter interpretations of
the reimbursement regulations. The stricter interpretations caused changes in
relationships with certain customers, thereby reducing revenues and increasing
competition.
Operating expenses increased by $6,647,000, or 67.7%, to $16,466,000
in 1997 from $9,819,000 in 1996. This percentage increase was greater than the
percentage increase in revenue due to the inherently lower margins of the
acquired companies. As a result of the increase in ambulance services, the
Company's overall costs of providing services also increased during the year
ended December 31, 1997. Ambulances require at least two employees who are
more highly trained, (either EMTs and or Paramedics), for the transport of a
single patient while ambulettes transport multiple patients with less skilled
employees, typically with one driver, and in certain circumstances a matron.
The increase in operating costs has been slightly offset by a reduction in
insurance expenses. The Company significantly reduced its insurance costs
while maintaining the same levels of coverage, as a result of consolidating
certain policies, particularly the automobile, general liability and
professional liability policies. The other operating costs of the Company
(fleet maintenance, rent and depreciation and amortization) have remained
relatively constant as a percentage of revenues. As a result of the foregoing,
gross profit as a percentage of revenues decreased from 36.8% to 27.8%, even
though gross profit increased by $635,000, or 11.1%, to $6,348,000 in 1997
from $5,713,000 in 1996.
Selling, general and administrative expenses increased by $2,256,000,
or 47.6%, to $6,996,000 in 1997 from $4,740,000 in 1996, primarily as a result
of the increased depreciation, amortization of the intangibles and bad debt
reserves, as well as additional personnel and marketing costs. This increase
in costs was offset by the elimination of certain redundant expenses
associated with the acquisitions. These costs as a percentage of revenues
remained basically constant as revenues increased proportionally.
The charge to earnings for the intangibles write-down of $5,400,000
for the year ended December 31, 1997 is the result of the reduced operating
results of the Hudson Valley companies and the corresponding measurement of
its expected future discounted cash flows. The increased costs of the Hudson
Valley companies, particularly higher personnel costs and the reductions in
service revenue, caused by, among other things, changes in relations with
certain customers and increased competition, has led the Company to reduce its
carrying amount of its intangible assets to net present value of expected
future cash flows as required by general accepted accounting principles.
The Company is currently consolidating its separate operating
entities into one company with separate operating divisions, which includes a
consolidation of the billing process. In connection with this process, a
re-evaluation of outstanding accounts receivable resulted in a write-down of
$1,371,000 principally relating to the Hudson Valley companies, for revenues
billed subsequent to its acquisition. The Company also charged operations for
$396,000 primarily relating to severance costs and $843,000 for costs
previously deferred in connection with potential acquisitions which management
believes are unlikely to be completed. This consolidation, which is
substantially complete, is intended, among other items, to obtain better
overall utilization of its operating personnel by increasing efficiency and
reduce costs in future periods.
17
<PAGE>
Income from operations (exclusive of the intangible and the accounts
receivable write-downs and the additional charge to earnings described above
aggregating $8,010,000) decreased by $1,621,000, or 166.6%, to a loss from
operations of $648,000 in 1997 from income of $973,000 in 1996. This decrease
was a result of the factors described above, primarily the lower margins of
the acquired companies operations and the disproportionate increases in
operating expenses.
Interest expense increased by $199,000, or 43.0%, to $662,000 in 1997
from $463,000 in 1996. This increase is primarily due to the additional
borrowing and debt incurred in connection with acquisitions completed in 1996.
Interest income decreased by $65,000, or 46.4%, to $75,000 in 1997
from $140,000 in 1996. The reduction in interest income is primarily due to
significant expenditures in connection with acquisitions which reduced
available cash.
The Company's income taxes amounted to a benefit of $977,000 for the
year ended December 31, 1997, compared with a tax provision of $298,000 for
the year ended December 31, 1996. The 1997 tax benefit resulted from the
Company incurring a taxable loss for the year ended December 31, 1997.
The Company's net loss amounted to $8,224,000, or $1.57 per share,
for the year ended December 31, 1997, as compared to net income of $394,000,
or $0.10 per share, for the year ended December 31, 1996. This decrease in net
income and earnings per share is attributable to the factors described above,
primarily the increase in operating expenses, particularly the higher cost of
operating personnel, the intangible write-downs, the accounts receivable
write-down and the restructuring and other costs.
The Company has determined not to pursue any additional acquisitions
pending consolidation of its separate operating entities into one operation.
If the Company makes any acquisitions thereafter, the completion of any such
acquisitions will increase the revenues and expenses of the Company, however,
there can be no assurance that future net income will be positively impacted.
Additional financing, however, may be required in connection with any future
acquisitions.
In January 1997, the New York State Medicaid reimbursement rates were
changed. The base rates were reduced, while certain other reimbursement rates
were added or increased. These rate changes principally effected the ambulette
business, and the Company has taken certain courses of action, including the
elimination of certain operations which had become less profitable or
unprofitable particularly where customers refused or were unable to permit the
Company to provide the services efficiently to meet the new regulations.
Liquidity and Capital Resources
Cash provided by operating activities was $96,000 in 1997 compared
with cash used in operating activities of $1,167,000 in 1996. The increase in
cash provided by operating activities was largely the result of a decrease in
accounts receivable due mainly to increased reserves which is primarily
attributable to the companies acquired in the prior year, as well as a change
in the payment
18
<PAGE>
schedule of governmental agencies, and an increase in depreciation and
amortization in connection with the acquisitions.
Cash used in investing activities in 1997 and 1996 was $705,000 and
$5,766,000, respectively. The decrease in cash used in investing activities
was largely the result of cash being utilized in the prior year for
acquisitions. This was offset by capital expenditures associated with the
purchase of vehicles and equipment, and a decrease in short term investments.
Cash provided by financing activities amounted to $497,000 for the
year ended December 31, 1997 as compared to $7,945,000 for the same period in
1996. The decrease in cash provided by financing activities was the result of
proceeds in the prior period, primarily from the issuance of Common Stock in a
private placement in 1996.
In December 1996, the Company entered into a $10,000,000 credit
facility to replace its previously existing $3,200,000 credit facility for
working capital and capital expenditures. A portion of the $10,000,000 credit
facility consists of a $6,500,000 revolving credit arrangement, which may only
be drawn down if the Company has sufficient qualified accounts receivable. The
balance of the credit facility is available under term notes. The Company, in
the past, and may in the future, be temporarily unable to draw down desired
amounts because of slow payment by reimbursement agencies and as a result of
delays in collection. In addition, the Company may be required from time to
time to repay a portion of this facility under the provisions of the credit
agreement. At December 31, 1997, there was $6,260,000 outstanding under this
facility consisting of $4,000,000 under the revolving credit arrangement and
$2,260,000 under the term notes.
At December 31, 1997, the Company was not in compliance with several
financial covenants from its lenders. The lenders have provided a waiver in
connection with an amendment to the loan agreement, which was completed on
April 14, 1998. As a result of such amendment, the lenders amended certain
financial covenants at future measurement dates to accommodate the Company's
current financial status. Further, the lenders have extended the maturity date
of the revolving credit arrangement to January 18, 1999 and in conjunction
which such revisions, reduced the amount under the revolving credit
arrangement from $6,500,000 to $3,500,000. The Company intends to refinance
such credit facility prior to January 1999.
At December 31, 1997, the Company had working capital of $3,092,000
as compared to working capital of $4,984,000 at December 31, 1996.
The Company believes that internally generated funds and bank loans
will provide sufficient liquidity and enable it to meet its currently
foreseeable working capital requirements for operations for at least the next
12 months, with the exception of the revolving credit arrangement, which
management intends to refinance as described above.
The Company intends to consider making additional acquisitions after
the consolidation of the Company's operations. Additional financing, however,
may be required in the future in connection with the Company's acquisition
program.
Inflation
The Company believes that the relatively moderate rates of inflation
in recent years have not had a significant impact on its net revenues or its
profitability.
19
<PAGE>
Year 2000 Compliance
The Company leases its billing software from an outside vendor. The
Company believes that this software is currently in compliance with year 2000
issues. The Company is presently assessing the impact of these issues as they
relate to other applications. As the Company is considering upgrading its
information system, such upgrade will encompass any year 2000 compliance
issues. Therefore, the Company believes that the cost of complying with year
2000 issues will not be material.
Item 7. Financial Statements
Reference is made to pages F-1 through F-24 comprising a portion of
this Annual Report on Form 10-KSB.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in accountants or disagreements on
accounting and financial disclosure during the 24 months prior to December 31,
1997.
20
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------------ ------------ --------------------------------------------------------------
<S> <C> <C>
Dean L. Sloane 52 President, Chairman of the Board, Chief
Executive
Officer and Director
Joseph A. Connell, Sr. 45 Chief Operating Officer
Donald J. Panos 37 Vice President of Finance, Chief Financial
Officer
Craig V. Sloane 47 Vice President-Operations, Secretary and Director
Steven R. Fittante 44 Vice President, Corporate Development
Bernard M. Kruger, M.D. 55 Director
Lucius J. Riccio, Ph.D. 50 Director
</TABLE>
Dean L. Sloane has served as Chairman of the Board, President and
Chief Executive Officer, and a Director of the Company since December 1988.
Mr. Sloane served as Chief Executive Officer of Prime Medical Services Inc.
(formerly known as C.P. Rehab Corp.), a public specialty medical management
service company from 1973 through 1988. Mr. Sloane co-founded and served as
Chairman of the Board of National Home Health Care Corp., a public medical
management and home care company, from 1983 to 1986. Mr. Sloane also served as
a director of EPIC Health Group, Inc., a public mail order pharmaceutical
company, from 1984 to 1986. He is currently a director of Community Care
Services, Inc. a medical equipment and goods supplier. Mr. Sloane is a
Certified Public Accountant but does not practice.
Joseph A. Connell, Sr. has served as Chief Operating Officer of the
Company since August 1997. From 1992 to August 1997, Mr. Connell was Director
of Clinical Services for American Medical Response-MedTrans of New York (AMR)
supervising the employee health, quality assurance, advanced life support and
general training departments of AMRs Brooklyn and Yonkers facilities. From
1989 to 1992 was a practicing attorney. Mr. Connell is also a certified
Physician Assistant and a certified Emergency Medical Technician-Paramedic in
the State of New York.
Donald J. Panos has been employed by the Company since November 1995
and is Vice President of Finance, and Chief Financial Officer. From August
1994 to November 1995, Mr. Panos was employed as a manager with an accounting
firm, Herman J. Dobkin & Company, L.L.P. From 1989 to 1994, Mr. Panos was
employed by Horsehead Industries, Inc., a $750 million private company with a
public subsidiary and publicly traded debt as Manager of Financial Reporting.
From
21
<PAGE>
1987 to 1989 he was a Senior Accountant with Ernst & Young. Mr. Panos is a CPA.
Craig V. Sloane has served as Vice President-Operations and a
Director of the Company since December 1990. From 1985 through October 1990,
he was a futures analyst at Smith Barney Harris & Upham. He is currently a
director of Community Care Services, Inc. a medical equipment and goods
supplier.
Steven R. Fittante has been employed by the Company since July 1995
and is Vice President of Corporate Development. From June 1993 until June 1995
he was employed by Mayflower Laidlaw Transit, Inc., serving most recently as
North East Regional Manager. From 1985 to 1993 he was director of Monmouth
County Department of Transportation.
Bernard M. Kruger, M.D. has been in the private practice of internal
medicine and medical oncology since 1979, and is affiliated with Lenox Hill
Hospital, Beth Israel Hospital, Mount Sinai Hospital and the Orthopedic
Institute. He is currently a director of Community Care Services, Inc.
a medical equipment and goods supplier.
Lucius J. Riccio has served as a management consultant on
transportation issues since January 1994. From February 1990 to December 1993
he served as Commissioner of the New York City Department of Transportation.
From 1986 to 1990 he served as Deputy Commissioner, Highway Operations, of the
New York City Department of Transportation.
Dean L. Sloane and Craig V. Sloane are brothers.
Section 16(a) of the Securities Exchange Act of 1934 requires that
officers, directors and 10% or greater stockholders of the Company file
reports of their ownership with the Securities and Exchange Commission. No
officer, director or 10% or greater stockholder of the Company was late with
his filings other than Joseph A. Connell, Sr.
Item 10. Executive Compensation
The following table sets forth information concerning compensation
paid or accrued by the Company or its subsidiaries for services rendered
during the fiscal years ended December 31, 1995, 1996 and 1997 to the
Company's Chief Executive Officer and to each executive officer whose
compensation exceeded $100,000 during its fiscal year ended December 31, 1997:
22
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
------------------------------------------------------------------ -------------------------
Name and Other Annual Securities Underlying
Principal Position Year Salary Bonus Compensation (1) Options
- --------------------------- --------- -------------- -------------- -------------------- --------------------------
<S> <C> <C> <C> <C> <C>
Dean Sloane 1997 $225,000 0 $34,000 0
President and Chief 1996 $225,000 0 $37,000 0
Executive Officer 1995 $225,000 0 $46,000 0
Craig Sloane 1997 $ 94,000 0 $12,000 0
Vice- President- 1996 $ 90,000 $15,000 $12,000 10,000
Operations 1995 $ 85,000 $15,000 $12,000 0
- ------------
</TABLE>
(1) Consists primarily of automobile lease payments.
The following table sets forth information as to options exercised by
each of the named executives during the fiscal year ended December 31, 1997
and the value of in-the-money options held by such executives at December 31,
1997.
<TABLE>
<CAPTION>
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
Number of
Shares of
Common Stock Value Number of Shares of Common Stock
Acquired on Realized Underlying Unexercised Options at Value of In-the-Money Options at
Name Exercise Value 12/31/97 12/31/97 *
---------------- ---------------- -------------- ------------------------------------- ---------------------------------
Exercisable Unexercisable Exercisable Unexercisable
---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dean Sloane 0 --- 0 0 --- ---
Craig Sloane 0 --- 95,000 0 $29,700 ---
- ------------
</TABLE>
* Value is based on the excess of the closing bid price of the Company's
Common Stock as of December 31, 1997 ($1.22 per share) over the option
price of the in-the-money options.
Employment Agreements
In September 1994, the Company entered into an employment agreement
with Dean L. Sloane, President and Chief Executive Officer of the Company. The
agreement has a three-year term which renews for an additional year on each
anniversary of the agreement, and provides for an annual base compensation of
$225,000, with annual increases based on a published cost of living index. In
addition, Mr. Sloane is entitled to such bonuses as may be awarded by the
Board in its discretion. The agreement calls for payment of benefits,
including life insurance and automobile expenses, similar to that received
prior to execution of the agreement. In the event the Company terminates Mr.
Sloane's employment without cause or Mr. Sloane terminates the agreement for
"good reason" (as defined in the agreement), the Company has agreed to pay to
Mr. Sloane as severance, an amount equal to Mr. Sloane's monthly salary
multiplied by the greater of (i) the number of months remaining between the
date of termination and the then expiration date of the agreement, and (ii)
twelve. The Company is the beneficiary of a $1.0 million key man life
insurance policy with respect to Mr. Sloane. The agreement also contains a
non-competition provision covering the term of the agreement plus one year
following termination.
23
<PAGE>
In September 1994, the Company also entered into an employment
agreement with Craig V. Sloane, Vice President-Operations of the Company. The
agreement has a three-year term which renews for an additional year on each
anniversary of the agreement, and provides for an annual base compensation of
$85,000 subject to increase at least 5% per year. The agreement calls for
payment of automobile expenses. The agreement also contains a non-competition
provision covering the term of the agreement plus one year following
termination.
The Company has entered into an employment agreement as of July 1,
1997 with Joseph A. Connell, Sr., Chief Operating Officer of the Company. The
agreement has a two-year term which renews for an additional year on each
anniversary of the agreement, and provides for an annual base compensation of
$85,000. The agreement calls for payment of automobile expenses. The agreement
also contains a non-competition provision covering the term of the agreement
plus one year following termination.
Employee Stock Option Plan
The Company has adopted a 1992 Employee Stock Option Plan (the
"Employee Plan") for officers, employees, and consultants of the Company and
any of its subsidiaries. In February 1996 the Board of Directors authorized
the amendment of the Employee Plan subject to stockholder approval, increasing
the number of shares subject to the Employee Plan from 263,500 shares of the
Company's Common Stock to 750,000 shares. As of February 28, 1998, options to
purchase 203,000 shares of Common Stock were outstanding and options to
purchase 507,000 shares of Common Stock were available for grant..
The Employee Plan is administered by a Stock Option Committee (the
"Committee"), consisting of two disinterested members of the Board of
Directors. In general, the Committee will select the persons to whom options
will be granted and will determine, subject to the terms of the Employee Plan,
the number, the exercise period and other provisions of such options. The
options granted under the Employee Plan will be exercisable in such
installments as may be provided in the grant.
Options granted to employees may be either incentive stock options
under the Internal Revenue Code ("ISOs") or non-ISOs. The Committee may
determine the exercise price provided that, in the case of ISOs, such price
may not be less than 100% (110% in the case of ISOs granted to holders of 10%
of the voting power of the Company's stock) of the fair market value (as
defined in the Employee Plan) of the Company's Common Stock at the date of
grant. The aggregate fair market value (determined at time of option grant) of
stock with respect to which ISOs become exercisable for the first time in any
year cannot exceed $100,000.
The options are evidenced by a written agreement containing the above
terms and such other terms and conditions consistent with the Employee Plan as
the Committee may impose. Each option, unless sooner terminated, shall expire
no later than 10 years (five years in the case of ISOs granted to holders of
10% of the voting power of the Company's stock) from the date of the grant, as
the Committee may determine. The Committee has the right to amend, suspend or
terminate the Employee Plan at any time, provided, however, that unless
ratified by the Company's stockholders within 12 months thereafter, no
amendment or change in the Employee Plan will be effective: (a)
24
<PAGE>
increasing the total number of shares which may be issued under the Employee
Plan; (b) reducing below fair market value on the date of grant the price per
share at which any option which is an ISO may be granted; (c) extending the
term of the Employee Plan or the period during which any option which is an
ISO may be granted or exercised; (d) altering in any way the class of persons
eligible to participate in the Employee Plan; (e) materially increasing the
benefits accruing to participants under the Employee Plan; or (f) with respect
to options which are ISOs, amending the Employee Plan in any respect which
would cause such options to no longer qualify for incentive stock option
treatment pursuant to the Internal Revenue Code of 1986.
Compensation of Directors
Directors who are not employed by the Company will be paid a fee of
$1,000 for each board of directors meeting attended and $500 for each
committee meeting attended. All directors are reimbursed for expenses incurred
on behalf of the Company.
The Company has adopted a 1994 Directors' Stock Option Plan (the
"Directors' Plan") for non-employee directors of the Company and any of its
subsidiaries. The Directors' Plan authorizes the granting of stock options to
purchase an aggregate of 50,000 shares of the Company's Common Stock. Options
granted under the Directors' Plan do not qualify as incentive stock options
within the meaning of Section 422 of the Internal Revenue Code. The Directors'
Plan, as amended in 1996, provides for the automatic grant to each of the
Company's non-employee directors of options to purchase 5,000 shares of Common
Stock on the first day of the Company's fiscal year. The options will have an
exercise price of 100% of the fair market value of the Common Stock on the
date of grant, have a ten year term and become exercisable in two equal annual
installments commencing on the date of the grant. The options may be exercised
by payment in cash of the full option exercise price. At the discretion of the
Board, the exercise price may be paid by tendering of shares of Common Stock
having a fair market value equal to the option exercise price or by tendering
cash in an amount equal to the aggregate par value of the shares being
purchased, together with an interest bearing note for the remainder of the
purchase price in form, and having terms satisfactory to the Board, in its
sole discretion. Each director received 5,000 options in lieu of 1997 options
on November 11, 1996.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding
beneficial ownership of the Common Stock as of February 28, 1998 by (i) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock, (ii) each director of the Company, and (iii) all
directors and executive officers as a group. Except as otherwise indicated,
the Company believes that the beneficial owners of the Common Stock listed
below, based on information furnished by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable.
25
<PAGE>
<TABLE>
<CAPTION>
Name and address of Beneficial Number of Shares
Owner Beneficially Owned Percentage of Class
- -------------------------------------------- -------------------------------- ------------------------------------
<S> <C> <C>
Dean L. Sloane 1,440,596 (1) 24.6%
45 Morris Street
Yonkers, N.Y. 10705
Craig V. Sloane 95,000 (2) 1.6%
45 Morris Street
Yonkers, N.Y. 10705
Bernard M. Kruger 119,900 (3) 2.0%
170 East 78th Street
New York, N.Y. 10021
Lucius J. Riccio 9,500 (3) *
315 East 69th Street
New York, N.Y. 10021
Ronald V. Davis 376,667 (4) 6.4%
c/o Davis Capital LLC
2015 West Main Street
Stamford, Connecticut,
06902.
All directors and executive 1,707,496 (5) 28.4%
officers as a group (7
persons)
- ------------
* Less than 1%
</TABLE>
(1) Does not include 100,000 shares owned by Mary K. Sloane, Dean L.
Sloane's wife. Dean L. Sloane disclaims beneficial ownership of such
shares.
(2) Includes 95,000 shares of the Company's Common Stock subject to
presently exercisable options.
(3) Includes 9,500 shares of the Company's Common Stock subject to presently
exercisable options.
(4) As reported in a Schedule 13D, dated July 3, 1997.
(5) Includes 154,000 shares subject to presently exercisable options.
Item 12. Certain Relationships and Related Transactions
Not Applicable
26
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
3.01 Restated Certificate of Incorporation of the Company (1)
3.02 Amended and Restated By-Laws of the Company (1)
4.01 Specimen Certificate representing the Common Stock, par value
$.001 per share (1)
10.01* 1992 Employee Stock Option Plan (1)
10.02* 1994 Directors' Stock Option Plan (1)
10.03* Employment Agreement entered into between the Company and Dean
L. Sloane (1)
10.04* Employment Agreement entered into between the Registrant and
Craig V. Sloane (1)
10.05* Employment Agreement entered into between the Company and Joseph
A. Connell, Sr.
10.06 Lease dated January 1, 1997 by and between the Company and 2301
Jerome Avenue Realty Corp. and the Addendum thereto.
10.07 Lease dated September 1997 by and between the Company and
Principal Mutual Life Insurance Company
10.08 Indemnification Agreement entered into between the Company and
each of its directors (1)
10.09+ Agreement dated as of January, 1994 between the Company and Beth
Abraham Hospital (1)
10.10+ Agreement dated as of January 1, 1994 between the Company and
Beth Abraham Hospital (1).
10.11 Amendment to the Agreements between the Company and Beth Abraham
Hospital
10.12 Warrant, issued to the Equity Group, to purchase 30,000 shares
of Common Stock commencing November 1, 1994 (2)
10.13 Warrant, issued to the Equity Group, to purchase 30,000 shares
of Common Stock commencing November 1, 1995 (2)
10.14 Asset Purchase Agreement dated September 25,1995 between the
Company and Medical Transportation Corporation (3)
10.15 Credit Agreement, dated as of December 18, 1996, among the
Company, Atlantic Bank of New York, Fleet Bank, N.A. and Israel
Discount Bank of New York, including collateral documents (4)
21.01 Subsidiaries of the Company
23.01 Consent of Richard A. Eisner & Company, LLP
27.01 Financial Data Schedule
27
<PAGE>
- ------------
+ Confidential treatment was granted for the deleted portion of this
document.
* Management contract or compensatory plan or arrangement.
(1) Such Exhibits were filed with the Company's Registration Statement
(File No. 33-80338) declared effective September 30, 1994 and are
incorporated herein by reference.
(2) Such Exhibits were filed with the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994 and are
incorporated herein by reference.
(3) Such Exhibit was filed with the Company's Current Report on Form 8-K,
dated November 1, 1995, and is incorporated herein by reference.
(4) Such Exhibit was filed with the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996 and is incorporated herein
by reference.
(b) Reports on Form 8-K
None
28
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES
Contents
Page
Consolidated Financial Statements
Independent auditors' report F-2
Balance sheet as of December 31, 1997 F-3
Statements of operations for the years ended December 31, 1997
and 1996 F-4
Statements of changes in stockholders' equity for the years ended
December 31, 1997 and 1996 F-5
Statements of cash flows for the years ended December 31, 1997 and
1996 F-6
Notes to financial statements F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Community Medical Transport, Inc.
We have audited the accompanying consolidated balance sheet of Community
Medical Transport, Inc. and subsidiaries (the "Company") as of December 31,
1997 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-year
period ended December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these 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 financial statements enumerated above present fairly, in
all material respects, the consolidated financial position of Community
Medical Transport, Inc. and subsidiaries at December 31, 1997, and the
consolidated results of their operations, and their consolidated cash flows
for each of the years in the two-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
New York, New York
March 6, 1998
With respect to Note E,
April 14, 1998
F-2
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 925,000
Short-term investments 1,136,000
Accounts receivable - trade, less allowance for doubtful accounts of $1,434,000 4,828,000
Prepaid insurance 706,000
Prepaid and refundable income taxes 592,000
Other current assets 276,000
Deferred tax assets 524,000
---------------
Total current assets 8,987,000
Property, equipment and leasehold improvements - net 4,385,000
License - net 703,000
Customer lists - net 1,459,000
Other assets 398,000
Goodwill - net 2,661,000
Covenants not to compete, net 100,000
---------------
$ 18,693,000
===============
LIABILITIES
Current liabilities:
Current portion of long-term debt (including $408,000 past due) $ 2,388,000
Accounts payable 2,091,000
Accrued expenses 1,416,000
---------------
Total current liabilities 5,895,000
Long-term debt - net of current portion 5,566,000
Deferred tax liabilities 524,000
---------------
11,985,000
---------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, 4% cumulative, $.001 par value, 5,000,000 shares authorized,
Series BB, 7,500 shares designated, 778.4 shares issued and outstanding
(liquidation value of $778,400, excluding cumulative dividends)
Class A nonvoting common stock, $.001 par value, 10,000,000 shares authorized,
none issued
Common stock, $.001 par value, 20,000,000 shares authorized, 5,761,007 shares issued
and outstanding 6,000
Capital in excess of par value 14,043,000
Accumulated deficit (7,341,000)
---------------
Total stockholders' equity 6,708,000
---------------
$ 18,693,000
===============
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended
December 31,
1997 1996
Net revenue $ 22,814,000 $ 15,532,000
--------------- ---------------
<S> <C> <C>
Expenses:
Salaries and benefits 12,593,000 6,779,000
Fleet maintenance 1,766,000 1,207,000
Insurance 773,000 1,059,000
Rent 484,000 257,000
Depreciation and amortization 850,000 517,000
--------------- ---------------
Total operating expenses 16,466,000 9,819,000
--------------- ---------------
Gross profit 6,348,000 5,713,000
Selling, general and administrative expenses 6,996,000 4,740,000
Intangible write-down 5,400,000
Receivable write-down 1,371,000
Restructuring and other costs 1,239,000
--------------- ---------------
Income (loss) from operations (8,658,000) 973,000
Other income 44,000 42,000
Interest income 75,000 140,000
Interest expense (662,000) (463,000)
--------------- ---------------
Income (loss) before provision (benefit) for income taxes (9,201,000) 692,000
--------------- ---------------
Provision (benefit) for income taxes:
Current (120,000) 91,000
Deferred (857,000) 207,000
--------------- ---------------
(977,000) 298,000
--------------- ---------------
Net income (loss) $ (8,224,000) $ 394,000
=============== ===============
Net income (loss) available to common shareholders - basic $ (8,262,000) $ 357,000
Preferred stock dividends - assumed conversion 38,000 37,000
--------------- ---------------
Net income (loss) available to common shareholders including assumed
conversion - diluted $ (8,224,000) $ 394,000
================ ===============
Net income (loss) per share - basic and diluted $(1.57) $.10
====== ====
Weighted average number of common shares outstanding - basic 5,264,900 3,419,200
Effect of potential common shares related to stock options and assumed
preferred stock conversion 408,000
--------------- ---------------
Weighted average number of common shares outstanding - diluted 5,264,900 3,827,200
=============== ===============
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
4% Cumulative
Dividend
Convertible
Preferred Stock
-------------------------------------- Common Stock
Series A Series B Series BB -------------------
Shares Shares Shares Shares Amount
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1995 3,033,671 $ 3,000
Net income
Exercise of common stock warrants 79,280
Offering of common stock 277,348
Offering of convertible preferred stock 3,437.5 5,000.0
Conversion of preferred stock into common
stock (3,437.5) (2,577.0) 1,380,641 2,000
----------- ----------- ----------- ------------ --------
Balance - December 31, 1996 0.0 2,423.0 0.0 4,770,940 5,000
Net loss
Exercise of common stock options 40,000
Exchange of Series B preferred stock
for Series BB preferred stock (1,955.5) 1,955.5
Conversion of preferred stock into common (467.5) (1,177.1) 490,606 1,000
Additional costs in connection with stock
issuance
Shares issued in acquisition of Fox Ridge 130,969
Shares issued in acquisition of RDO 328,492
----------- ----------- ----------- ------------ -------
Balance - December 31, 1997 0.0 0.0 778.4 5,761,007 $ 6,000
=========== =========== =========== ============ =======
Retained
Capital in Earnings
Excess of (Accumulated
Par Value Deficit) Total
--------- --------- -----
<S> <C> <C> <C>
Balance - December 31, 1995 $ 4,593,000 $ 489,000 $ 5,085,000
Net income 394,000 394,000
Exercise of common stock warrants 476,000 476,000
Offering of common stock 1,337,000 1,337,000
Offering of convertible preferred stock 5,918,000 5,918,000
Conversion of preferred stock into common
stock (2,000) 0
--------------- ------------- ----------
Balance - December 31, 1996 12,322,000 883,000 13,210,000
Net loss (8,224,000) (8,224,000)
Exercise of common stock options 36,000 36,000
Exchange of Series B preferred stock
for Series BB preferred stock
Conversion of preferred stock into common (1,000) 0
Additional costs in connection with stock
issuance (35,000) (35,000)
Shares issued in acquisition of Fox Ridge 655,000 655,000
Shares issued in acquisition of RDO 1,066,000 1,066,000
------------- ------------- ------------
Balance - December 31, 1997 $ 14,043,000 $ (7,341,000) $ 6,708,000
============ ============= ===========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended
December 31,
--------------------------------
1997 1996
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (8,224,000) $ 394,000
Adjustments to reconcile net income (loss) to cash provided by (used in) operating
activities:
Depreciation and amortization expense 1,640,000 759,000
Imputed interest on note payable 5,000 44,000
Intangible write-down 5,400,000
Receivables write-down 1,371,000
Restructuring and other costs 1,239,000
(Decrease) increase in deferred taxes payable (971,000) 207,000
Changes in:
Accounts receivable (1,129,000) (2,205,000)
Prepaid insurance and other current assets 403,000 (1,055,000)
Other assets (162,000) (881,000)
Accounts payable and accrued expenses 903,000 1,643,000
Prepaid income taxes (379,000) (73,000)
------------- -------------
Net cash provided by (used in) operating activities 96,000 (1,167,000)
------------- -------------
Cash flows from investing activities:
Acquisition of equipment - net of disposals (1,256,000) (1,111,000)
Acquisition of businesses (46,000) (4,978,000)
Decrease in short-term investments 597,000 323,000
------------- -------------
Net cash used in investing activities (705,000) (5,766,000)
------------- -------------
Cash flows from financing activities:
Proceeds from bank borrowings 1,246,000 7,122,000
Principal repayments on debt (635,000) (6,878,000)
Principal payments on capital lease obligations (115,000) (30,000)
Net proceeds from issuance of common stock 1,337,000
Net proceeds from issuance of preferred stock 5,918,000
Additional costs in connection with common stock issuance (35,000)
Net proceeds from exercise of common stock options and warrants 36,000 476,000
------------- -------------
Net cash provided by financing activities 497,000 7,945,000
------------- -------------
Net increase (decrease) in cash (112,000) 1,012,000
Cash - beginning of year 1,037,000 25,000
------------- -------------
Cash - end of year $ 925,000 $ 1,037,000
============= =============
Supplementary disclosures of cash flow information:
Cash paid during the year for:
Interest $ 577,000 $ 386,000
============= =============
Taxes $ 253,000 $ 309,000
============= =============
Supplementary disclosures of noncash investing and financing activities:
Acquisition of property and equipment $ 739,000 $ 818,000
Acquisition of intangibles and licenses $ 1,513,000 $ 8,015,000
Common stock issued in connection with acquisition of businesses $ (1,721,000)
Debt assumed in connection with acquisition of business $ (485,000)
Notes payable in connection with acquisition of businesses $ (3,855,000)
------------- -------------
Cash paid to acquire assets $ 46,000 $ 4,978,000
============= =============
Equipment acquired under capital leases $ 342,000
=============
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
COMMUNITY MEDICAL TRANSPORT, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1997 and 1996
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Community
Medical Transport, Inc. (the "Company") and its five wholly owned
subsidiaries, Community Ambulette Service, Inc. ("Ambulette"), First Help
Ambulance and Ambulette Inc. ("First Help"), Empire Ambulance and Ambulette
Inc. ("Empire"), Century Ambulance and Ambulette, Inc. ("Century") and Elite
Ambulance and Medical Coach, Inc. ("Elite") (collectively the "Companies").
All intercompany balances and transactions have been eliminated in
consolidation.
The Company provides specialized transportation for the handicapped and
disabled, mentally retarded, elderly and chronically ill to and from day
treatment centers, day care programs, hospitals, nursing homes and other
health care facilities in the New York metropolitan area. This service is
provided in ambulettes, which are specialized vans that contain wheelchair
lifts or ramps.
The Company also provides emergency and nonemergency ambulance transportation
of patients who require basic medical care or supervision during transport to
and from hospitals, nursing homes and other health care facilities.
As presented in the consolidated financial statements, the Company has
experienced a net loss, was in Default of certain loan covenants and has
approximately $7.9 million of debt substantially consisting of bank loans, a
major portion of which is due in January 1999. The Company has negotiated a
retructuring of its bank debt as more fully described Note E.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies in the preparation of the financial statements
are as follows:
[1] Revenue recognition:
Revenue is recognized on the date of transportation. Revenue is reported
at the realizable amount from patients, third-party payors and others
under contractual arrangements.
[2] Property, equipment and leasehold improvements:
Property, equipment and leasehold improvements are stated at cost less
accumulated depreciation and amortization. The Company computed
depreciation and amortization using the straight-line method over the
estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Ambulette and ambulance fleet 5 - 7 years
Machinery, equipment and office furniture 3 - 10 years
Leasehold improvements Shorter of lease term or estimated
life of asset
</TABLE>
F-7
<PAGE>
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[3] Intangible assets:
Intangible assets consist of goodwill, licenses, customer lists and
covenants not to compete. The goodwill is being amortized on a
straight-line basis over twenty five years. The licenses are being
amortized on a straight-line basis over forty years. The customer lists
are being amortized using the straight-line method over the period of
expected benefit which is from five to ten years. The covenants not to
compete are being amortized using the straight-line method over the
period of the covenants which is three years. Intangible assets are
evaluated periodically, and adjusted if necessary, if events and
circumstances indicate that the carrying amount is impaired (Note L).
[4] Income taxes:
In 1996, the Company's income tax accounting method automatically
changed from the cash method of accounting to the accrual method in
compliance with Internal Revenue Code ("IRC") Section 448. In accordance
with IRC Section 448 the Company elected to recognize the impact of such
change over a four-year period commencing January 1, 1996.
The Company accounts for income taxes utilizing the asset and liability
approach requiring the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary
differences between the basis of assets and liabilities for financial
reporting purposes and tax purposes.
[5] Short-term investments:
Short-term investments consist primarily of United States government
obligations with original maturities less than one year when purchased.
These investments are readily convertible to cash and are accounted for
as available for sale securities. Such investments are stated at fair
value which approximates cost.
[6] Net income (loss) per share:
In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128 ("SFAS #128"), "Earnings Per Share", SFAS #128 requires the
reporting of earnings (loss) per basic share and earnings (loss) per
diluted share. Earnings (loss) per basic share is calculated by dividing
net income (loss) available to common shareholders by the weighted
average outstanding shares during the period. Earnings per diluted share
is calculated by dividing net income available to common shareholders
with preferred dividends added back (if converted method) by the basic
shares and all dilutive potential common shares, including options and
convertible preferred stock.
Adoption of SFAS #128 had no effect on 1996.
Net income (loss) available to common shareholders was computed by
deducting cumulative preferred stock dividends of $38,000 and $37,000 in
1997 and 1996, respectively from net income (loss).
[7] 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 revenue and expenses
during the reported period. Actual results could differ from those
estimates.
F-8
<PAGE>
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[8] Fair value of financial instruments:
The carrying value of the Company's cash, short-term investments and
accounts payable approximate fair value due to their short-term nature.
The fair value of long-term debt approximates the carrying amount as the
current rates on similar instruments is similar to the effective rates.
[9] Stock-based compensation:
The Company has adopted Statement of Financial Accounting Standards No.
123 " Accounting for Stock-Based Compensation ("SFAS No. 123"). The
provisions of SFAS No. 123 allow companies to either expense the
estimated fair value of employee stock options or to continue to follow
the intrinsic value method set forth in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees ("APB 25") but
disclose the pro forma effects on net income (loss) had the fair value
of the opinions been expensed. The Company has elected to continue to
apply APB 25 in accounting for its employee stock option incentive
plans.
NOTE C - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consist of the following:
Ambulette and ambulance fleet $ 5,056,000
Machinery, equipment and office furniture 1,521,000
Leasehold improvements 251,000
-------------
6,828,000
Less accumulated depreciation and amortization 2,443,000
-------------
$ 4,385,000
=============
The net book value of property and equipment under capital lease amounted to
approximately $767,000 at December 31, 1997. Depreciation expense includes
depreciation on property and equipment held under capital leases.
F-9
<PAGE>
NOTE D - LEASES
The Company is obligated under long-term noncancelable operating and capital
leases for premises and equipment expiring in various years through the year
2005.
Future minimum lease payments are as follows:
Operating Capital
Leases Leases
------ ------
1998 $ 575,000 $ 307,000
1999 510,000 307,000
2000 459,000 188,000
2001 440,000 38,000
2002 293,000 4,000
Thereafter 505,000 0
------------ ------------
Total minimum lease payments $ 2,782,000 844,000
============
Amount representing interest 131,000
------------
Present value of minimum lease payments $ 713,000
============
Rent expense for the years ended December 31, 1997 and 1996 was approximately
$502,000 and $282,000, respectively.
NOTE E - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
Bank debt
<S> <C> <C>
$6,500,000 Revolving Credit Note to bank, collateralized
principally by all accounts receivable, inventory and equipment, bearing
interest at prime rate plus 1/2% (9% at December 31, 1997), $500,000 is
due December 18, 1998 and $3,500,000 is due January 18, 1999 $ 4,000,000
Note payable to bank, collateralized principally by all accounts receivable,
inventory and equipment, bearing interest at the prime rate plus 1/2%,
(9% at December 31, 1997), payable in quarterly principal payments
of $166,666 due December 18, 1999 1,500,000
Note payable to bank, collateralized principally by all accounts receivable,
inventory, and equipment, bearing interest at the prime rate plus
1/2% (9% at December 31, 1997) due December 18, 2000 760,000 6,260,000 (1)
-------------
</TABLE>
F-10
<PAGE>
NOTE E - LONG-TERM DEBT (CONTINUED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Notes payable
Note payable to Jenco Ambulette Service Inc., (net of imputed interest at 9%)
payable in quarterly principal payments of $16,667
due June 15, 1999 121,000 (2)
Note payable to A-1 Ambulance Service Inc., bearing interest at
8.25%, payable in quarterly principal payments of $18,125
due June 12, 1998 109,000 (2)
Note payable for acquired businesses with an effective interest
rate of 8.25% payable in quarterly principal payments of $22,500 due
June 12, 1998 134,000 (2)
Note payable to Elite Ambulance and Medical Coach Inc., bearing interest
at 7%,due on December 15, 2001 365,000
Note payable to Medical Transportation Corporation, (net of imputed interest
at 9%) due October 31, 1997 212,000 (2)
Notes payable for vehicles collateralized by the underlying vehicles, bearing
interest at 9.9 - 12.8%, payable in monthly payments of $1,097 due
October 20, 2001 40,000 981,000
-------------
Capital lease obligations
Forvehicles in connection with the acquisition of Fox Ridge, bearing interest
at 10.9% payable in monthly installments of $15,324
due August 1, 2000 412,000
For various equipment, collateralized by the underlying
equipment, bearing interest at 10.8% - 17.4% payable in monthly
installments of $6,836 due at various times through November 16, 2002 181,000
For vehicles, collateralized by the underlying vehicles, bearing interest at
13.4% payable in monthly installments at $3,397 due October 1, 2001 120,000 713,000
------------- -------------
7,954,000
Less current maturities 2,388,000
-------------
$ 5,566,000
=============
</TABLE>
Future principal payments of long-term debt are as follows:
1998 $ 2,388,000
1999 4,806,000
2000 659,000
2001 97,000
2002 4,000
------------
$ 7,954,000
============
F-11
<PAGE>
NOTE E - LONG-TERM DEBT (CONTINUED)
(1) The Company's revolving credit agreement (the "Facility") dated
December 18, 1996 permitted borrowings by the Company of up to
$6,500,000 through December 18, 1998 for general working capital
purposes. In addition, the agreement permits borrowings under separate
facilities of a $1,500,000 line of credit for fixed asset acquisitions,
and a $2,000,000 term note financing existing equipment and refinancing
of existing bank debt. Borrowings under these agreements are
collateralized by substantially all property, plant and equipment,
inventory and accounts receivable, as well as a $1,000,000 personal
guarantee of the president of the Company. The agreement imposes
certain restrictions on borrowings, prohibits the payment of dividends
and requires the Company to meet certain net worth and working capital
requirements and other financial ratios.
At December 31, 1997 the Company was not in compliance with certain
covenants. On April 14, 1998, the bank has agreed to waive the
covenants which the Company was not in compliance with at December 31,
1997. Additionally, the bank has amended certain covenants at future
measurement dates to accommodate the Company's current financial
status. Further, the bank has extended the facility date to January 18,
1999 and in conjunction with their revisions reduced the amount
available under the revolving credit agreement from $6,500,000 to
$3,500,000.
(2) Payments of approximately $408,000 under these notes are in arrears
because of certain disputes with the noteholders. Management believes
that resolution of such disputes will not result in any material
obligation in excess of the amounts recorded in the Company's balance
sheet.
NOTE F - INCOME TAXES
The differences between the tax provision (benefit) and the amount that would
be computed by applying the statutory federal income tax rate to income before
taxes is attributable to the following:
<TABLE>
<CAPTION>
Year Ended
December 31,
-----------------------------
1997 1996
--------------- ------------
<S> <C> <C>
Income tax (benefit) provision at 34% $ (3,128,000) $ 235,000
Nondeductible items 1,923,000 51,000
State and local taxes, net of federal effect (257,000) 49,000
Increase in valuation reserve 480,000
Other 5,000 (37,000)
--------------- ------------
$ (977,000) $ 298,000
=============== ============
</TABLE>
F-12
<PAGE>
NOTE F - INCOME TAXES (CONTINUED)
The tax effects of temporary differences which give rise to deferred tax
assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
Total Current Long-term
----- ------- ---------
<S> <C> <C> <C>
Deferred tax liabilities:
Unrecognized prior year differences between the accrual
basis of accounting and the cash basis of accounting $ 676,000 $ 338,000 $ 338,000
Depreciation on property, equipment and leasehold
improvements 186,000 186,000
------------ ------------ -------------
862,000 338,000 524,000
------------ ------------ -------------
Deferred tax assets:
Allowance for doubtful accounts 631,000 631,000
Accrued expenses 509,000 509,000
Net operating loss carryforwards 202,000 202,000
------------ ------------ -------------
1,342,000 1,140,000 202,000
Valuation allowance 480,000 278,000 202,000
------------ ------------ -------------
862,000 862,000 0
------------ ------------ -------------
Net deferred tax asset (liability) $ 0 $ 524,000 $(524,000)
============ ============ =============
</TABLE>
As of December 31, 1997, the Company has approximately $459,000 of net
operating loss carryforwards available expiring in 2012.
The Company has established a valuation allowance of $480,000 as the
realization of the deferred tax asset is not certain.
NOTE G - STOCKHOLDERS' EQUITY
[1] Public offering:
In October 1994, the Company completed a public offering of 1,136,200
units at $4 per unit, each unit consisting of one share of common stock
and one redeemable ("Warrant") pursuant to a registration statement
which was declared effective by the Securities and Exchange Commission
on October 1, 1994, resulting in net proceeds of $3,343,000.
In connection therewith, the Company issued to the underwriters a
warrant ("Underwriters Warrant") to purchase 100,000 units at $5.80
per unit through September 30, 1999. Such units are identical to those
sold in the public offering.
The Warrants are exercisable into one share of common stock, at a price
of $6.00 per share, for a period of five years commencing with the
effective date of the public offering. The Warrants are redeemable at a
price of $.10 per Warrant, if the closing bid quotation of the Company's
common stock is in excess of $8.00 per share for twenty consecutive
trading days.
F-13
<PAGE>
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[1] Public offering: (continued)
In November 1994, the Company issued warrants to purchase 60,000 shares
of common stock at $5.00 per share to its public relations firm which expire
on October 31, 1999.
[2] Security offerings:
On May 31, 1996, the Company completed a private placement of 277,348
shares of common stock at a price of $6.40 per share, for net proceeds
of approximately $1,337,000. The placement agent of such offering
received a commission, a nonaccountable expense allowance, warrants to
purchase up to 138,674 shares of common stock at $10.00 per share and
unit purchase options to purchase up to 27,734 units at $7.68 per unit.
Each unit consists of one share of common stock and one-half of a
warrant, each full warrant entitling the holder to purchase one share of
common stock at $10.00 per share.
On July 31, 1996 and August 7, 1996, the Company completed an equity
financing from foreign investors, for 3,437.5 shares of Series A
convertible preferred stock (the "Series A") with a liquidation value of
$3,437,000 and 5,000 shares of Series B convertible preferred stock (the
"Series B") with a liquidation value of $5,000,000, respectively, for
net proceeds of approximately $5,918,000. The preferred stockholders of
each series are entitled to a 4% cumulative dividend on the stated
liquidation value, and each share is convertible based on their
liquidation by value into shares of common stock at the lower of the
market value for the five trading days prior to conversion or $7.00 per
share, and will automatically convert on July 31, 1998. All fees and
commissions associated with such offerings are recorded against paid in
capital. As of December 31, 1996 all of the Series A had been converted
into common stock and 2,577 shares of Series B were converted into
common stock. The liquidation value of the remaining Series B was
$2,423,000. In connection with such foreign financing, warrants to
purchase up to 135,000 shares of common stock at $5.00 per share have
been issued to a designee of a consultant which expire on September 31,
2001.
During the first quarter of 1997, 467.5 shares of preferred stock were
converted into 145,286 common shares with 1955.5 Series B shares
remaining to be converted. Subsequent to this conversion, the Board of
Directors authorized the adoption of 7,500 shares of the Company's
authorized preferred stock to be designated as Series BB preferred stock
("Series BB"). Series BB has the same rights and preferences as Series B
except as follows: eleven percent of each outstanding share shall be
convertible into common stock at any time after April 1, 1997 with an
additional eleven percent of each outstanding share to be convertible on
the first day of each of the next seven months, and the final twelve
percent to be convertible at any time after December 1, 1997. All
outstanding shares will automatically convert on July 31, 1998. The
conversion is based upon the liquidation value of the preferred stock
and is exchangeable at $3.50 per share.
The remaining 1955.5 shares of Series B preferred stock were exchanged
for 1955.5 shares of Series BB preferred stock and 150,000 common stock
purchase warrants. These warrants are exercisable at an initial exercise
price of $4.00 per share, provided, however, that the purchase price may
be adjusted under certain circumstances. The expiration date of the
common stock purchase warrant is November 18, 2000. As of December 31,
1997, 1177.1 shares of Series BB have been converted into common stock.
The liquidation value of the remaining 778.4 Series BB is 778,400,
excluding $75,000 of cumulative dividends. Subsequent to the balance
sheet date all of the remaining Series BB were converted into 222,394
common shares.
F-14
<PAGE>
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[3] Stock option plans:
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its employee stock options and accordingly, recognizes
compensation expense for the difference between the fair value of the
underlying common stock and the exercise price of the option at the date
of the grant. The effect of applying Statement of Financial Accounting
Standards No. 123 ("SFAS #123") on 1997 and 1996 pro forma net income
(loss) as stated below is not necessarily representative of the effects
on reported net income (loss) for future years due to, among other
things: (1) the vesting period of the stock options and the (2) fair
value of additional stock options in future years. Had compensation cost
for the Company's stock option plans been determined based upon the fair
value at the grant date for awards under the plans consistent with the
methodology prescribed under SFAS #123, the Company's net loss in 1997
would have been approximately $(8,298,000) or $(1.58) per basic and
diluted share and net income in 1996 would have been approximately
$204,000 or $.05 per basic and diluted share, respectively. The weighted
average fair value of the options granted during 1997 and 1996 are
estimated as $1.46 and $2.95 per share, respectively, on the date of
grant using the Black Scholes option pricing model with the following
assumptions: dividend yield 0%, volatility of 45%, risk free interest
rate of 6.2% and expected life of 10 years.
The 1992 Employees Stock Option Plan, as amended, (the "Plan") provides
for the granting of options to purchase up to 750,000 shares of the
Company's common stock . The Plan is administered by a Stock Option
Committee (the "Committee"), consisting of two members of the Board of
Directors, which has the authority to determine when options are
granted, the term, the exercise price and the exercise period.
Options granted to employees may be either incentive stock options
("ISOs") under the Internal Revenue Code or non-ISOs. The Committee may
determine the exercise price provided that in the case of ISOs, such
price may not be less than 100% (110% in the case of ISOs granted to
holders of 10% of the voting power of the Company's stock) of the fair
market value of the Company's common stock at the date of grant. The
aggregate fair market value (determined at time of option grant) of
stock with respect to which ISOs become exercisable for the first time
in any year cannot exceed $100,000. Each option, unless sooner
terminated, shall expire no later than 10 years (five years in the case
of ISOs granted to holders of 10% of the voting power of the Company's
stock) from the date of the grant.
Additional information with respect to options issued to employees under
the Plan is summarized below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1997 1996
----------------------- ----------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 234,000 $ 2.19 165,000 $1.40
Options granted 15,000 2.85 113,000 5.30
Options exercised (40,000) .89
Options canceled (6,000) 4.31 (44,000) 7.25
---------- ---------- --------- ---------
Outstanding at end of year 203,000 $ 2.43 234,000 $2.19
========== ======= ========= =====
Options exercisable at year-end 195,500 $ 2.41 192,000 $1.68
========== ======= ========= =====
</TABLE>
F-15
<PAGE>
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[3] Stock option plans: (continued)
The following table summarizes information about stock options to
employees at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------- ---------------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Price Outstanding (In Years) Price Exercisable Price
-------------- ----------- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$.89 110,000 6.7 $ .89 110,000 $ .89
$2.82 to $2.88 15,000 9.5 2.85 7,500 2.85
$3.19 to $4.75 68,000 8.5 4.22 68,000 4.22
$6.50 10,000 8.6 6.50 10,000 6.50
------------- --------- ------------- ----------
203,000 $ 2.43 195,500 $ 2.41
============= ====== ============= =======
</TABLE>
The directors' stock option plan (the "Directors' Plan"), as amended,
authorizes the granting of stock options to purchase an aggregate of not
more than 50,000 shares of the Company's common stock. Each director of
the Company who is not an employee of the Company shall be eligible for
options under this plan. Options to purchase 5,000 shares of stock shall
automatically be granted under the Directors' Plan each year. Each
option granted is exercisable as to 50% of the number of shares of stock
covered thereby on the date of grant and as to the balance on the first
anniversary of the grant. The exercise price of each option granted
shall be the fair market value of the stock on the date the option is
granted. Options granted prior to November 11, 1996 were exercisable as
to 50% of the number of shares covered thereby on the first anniversary
of such grant and as to the balance on the second anniversary.
F-16
<PAGE>
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[3] Stock option plans: (continued)
Additional information with respect to options issued to outside
directors under the Directors' Plan activity is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1997 1996
----------------------- ------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning of year 14,000 $ 4.32 2,000 $4.38
Options granted 10,000 1.22 14,000 4.72
Options canceled 0 (2,000) 7.44
---------- ---------- --------- -----------
Options at end of year 24,000 $ 3.03 14,000 $4.32
========== ====== ========= =====
Options exercisable at year-end 19,000 $ 3.50 8,000 $4.33
========== ====== ========= =====
</TABLE>
The following table summarizes information about stock options to
directors outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Price Outstanding (In Years) Price Exercisable Price
-------------- ----------- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$ 4.38 2,000 7 $4.38 2,000 $4.38
$ 4.31 12,000 8 $4.31 12,000 $4.31
$ 1.22 10,000 10 $1.22 5,000 $1.22
------------ -------------
24,000 19,000
============ =============
</TABLE>
F-17
<PAGE>
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[4] Warrants:
The Company has issued warrants to purchase its common stock principally
in connection with equity financings. Additional information with
respect to warrants is summarized below:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1997 1996
--------------------------- -----------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
------------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 1,601,000 $6.31 1,365,000 $5.99
Warrants granted 150,000 4.00 315,000 7.65
Warrants exercisable (79,000) 6.00
------------ ----------- ------------- -----
Warrants at end of year 1,751,000 6.12 1,601,000 6.31
============ =========== ============= =====
Warrants exercisable at year-end 1,751,000 $6.12 1,601,000 6.31
============ ====== ============= =====
</TABLE>
The following table summarizes information relating to warrants
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Warrants Outstanding Warrants Exercisable
--------------------------------------------- ----------------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Price Outstanding (In Years) Price Exercisable Price
-------------- ----------- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$ 4.00 150,000 3 $4.00 150,000 $4.00
$ 5.00 135,000 3 $5.00 135,000 $5.00
$ 5.80 - $6.00 1,286,000 1 $5.98 1,286,000 $5.98
$ 7.68 - 10.00 180,000 2 $9.64 180,000 $9.64
--------------- --------------
1,751,000 1,751,000
=============== ==============
</TABLE>
[5] Shares reserved or available for future issuance:
<TABLE>
<CAPTION>
<S> <C>
Shares of common stock reserved for future issuance are:
Options granted under the Plan 203,000
Options available for grant under the Plan 507,000
Options granted under the Directors Plan 24,000
Options available for grant under the Directors Plan 26,000
Shares underlying the Warrants and Underwriters Warrant 1,226,000
Warrants issued to a consultant 60,000
Warrants issued in connection with private equity financings 465,000
Issuable in connection with Fox Ridge acquisition 65,000
------------
2,576,000
============
</TABLE>
F-18
<PAGE>
NOTE H - CONCENTRATION OF RISK
Revenues from principal sources are as follows:
Year Ended
December 31,
-----------------
1997 1996
---- ----
Principal customer 9% 11%
Medicaid and Medicare 44 60
Private insurance and other
nongovernment agencies 47 29
------- ------
100% 100%
====== ======
[1] Reliance on principal customers:
The Company provides services to a principal customer, a hospital and
its affiliates, pursuant to two written contracts which expire on
December 31, 1998. These contracts give the Company the exclusive right
to provide medical transportation services for the patients of this
customer. The contracts may be terminated by the hospital if the Company
fails to perform its obligations thereunder. These contracts can also be
renegotiated by the hospital if there is a decrease in services.
[2] Dependence on governmental reimbursement:
The Company derives the majority of its revenue from reimbursement by
third party payers, particularly Medicaid and Medicare, typically
invoicing and collecting payments directly from the third party payer.
Reimbursement can be influenced by the financial instability of private
third party payers and the budget pressures and cost shifting by
governmental payers. A reduction in coverage or reimbursement rates by
third party payers could have a material adverse effect on the Company's
results of operations.
The Company is subject to audits of its Medicaid and Medicare
reimbursement claims by third-party fiscal intermediaries and
governmental agencies. In the opinion of management adjustments would
not be material to the financial position or results of operations of
the Company. As a provider of services under the Medicaid and Medicare
programs, the Company is also subject to the Medicaid and Medicare fraud
and abuse laws.
The Company was subject to an audit of its medicaid claims for which the
Company received reimbursement over a four and one-half year period
through June 30, 1994. The audit was settled in 1997 for $97,000.
At December 31, 1997, 31% of accounts receivable was due from Medicaid
and Medicare, 37% from the hospital facilities which includes its
principal customer and its affiliates and 32% from private insurers and
other nongovernmental sources.
F-19
<PAGE>
NOTE I - ACQUISITIONS
[1] 1996 Acquisitions:
(a) On May 21, 1996, the Company purchased from an ambulette provider
in Brooklyn, New York, (Jenco) equipment and ambulettes for a cash
payment of $30,000 and a balance of $200,000 to be paid in twelve
equal quarterly installments commencing September 1996. The note
is subject to reduction depending upon certain factors, including
revenues derived from former customers of the provider.
(b) On June 12, 1996, the Company completed the acquisition of
certain assets from A-1 Ambulance Service Inc. ("A-1") through
it's wholly owned subsidiary, Empire. The Company acquired
equipment, ambulances, customer lists, a covenant not to compete
and goodwill for a cash payment of $425,000 and a balance of
$325,000 to be paid in eight quarterly installments commencing
September 1996.
(c) On August 15, 1996, the Company acquired certain assets from
Hudvalco, Inc. and Harvey H. McGeorge, Inc. (collectively
"Hudvalco") and all the outstanding common stock of four entities
related to Hudvalco through common ownership (collectively, the
"Hudson Valley Companies"), through its wholly owned subsidiary,
Century. The Company acquired ambulance equipment, licenses to
operate an ambulance business previously conducted by Hudvalco,
customer lists and goodwill. The total consideration for the
acquisition was $5,950,000, subject to certain adjustments, of
which $3,000,000 was paid in cash, approximately $940,000
consisted of the assumption of debt and $2,010,000 consisted of a
ninety-day (90) promissory note.
The Company also agreed to acquire all the common stock of
Richard Decker Operating Corp. ("RDO"), an entity also related to
Hudvalco through common ownership, for $1,066,000, after certain
adjustments, which closed in May 1997. Consideration for the
acquired stock was an aggregate of 328,492 shares of the
Company's common stock issued to the sole stockholder of Hudvalco
and his designee. The purchase price was allocated as follows:
$141,000 to vehicles, $257,000 to customer list, $131,000 to
licenses, $22,000 to noncompete agreements and $515,000 to
goodwill.
(d) On August 22, 1996, a wholly owned subsidiary of the Company
completed the purchase from Elite Ambulance & Medical Coach, Inc.
("Elite") of ambulettes and certain other assets, including
accounts receivable and a license to operate an ambulette service
by the state of New Jersey. The assets were acquired pursuant to
an asset purchase agreement among the Company, Elite and its
shareholders. Elite operated an ambulette service from Orange,
New Jersey servicing Essex County, New Jersey and other nearby
counties under the name Elite. After the acquisition, the
subsidiary changed its name to Elite Ambulance & Medical Coach,
Inc. and is operating the acquired ambulette service under the
name Elite. The consideration for the acquisition was $760,000 of
which half was paid in cash at the closing and the balance
pursuant to a one year note. In connection with the acquisition,
the Company (i) assumed certain debts related to the assets,
including bank indebtedness of approximately $19,500, (ii)
entered into a contract with affiliates of Elite to acquire the
real estate facility containing Elite's operating facility for
approximately $1,200,000 in cash and short term mortgage notes,
and (iii) assumed a lease for such facility until the closing of
the real estate contracts of sale. The Company terminated the
agreement for the purchase of the property and has entered into a
long term lease for the facility. The parties are currently
negotiating an adjustment to the asset purchase price and the
payment terms on the balance of the purchase price.
(e) In August 1996, a wholly owned subsidiary of the Company
purchased from an ambulette provider in New Jersey (First Invalid
Coach Services, Inc.) ambulettes, its customer list and goodwill
for approximately $109,000. $59,000 was paid at the closing with
an estimated amount of $50,000 to be paid in twelve monthly
payments based on a percentage of cash receipts generated from
the client base.
F-20
<PAGE>
NOTE I - ACQUISITIONS (CONTINUED)
[1] 1996 Acquisitions: (continued)
(f) A summary of net assets acquired and consideration is as follows:
<TABLE>
<CAPTION>
First Invalid
Acquisitions A-1 Century Elite Coach Jenco Total
------------ --- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Vehicles and equipment $ 104,000 $ 537,000 $ 143,000 $ 34,000 $ 30,000 $ 848,000
Other current assets 187,000 187,000
Customer list 153,000 1,991,000 277,000 50,000 212,000 2,683,000
Goodwill 321,000 3,979,000 597,000 25,000 4,922,000
Noncompete covenants 200,000 200,000
Licenses 225,000 100,000 325,000
------------ ------------ ------------ ---------- ---------- ------------
Total assets 1,003,000 6,607,000 1,204,000 109,000 242,000 9,165,000
Assumption of liabilities 166,000 166,000
------------ ------------ ------------ ---------- ---------- ------------
Net assets acquired $ 1,003,000 $ 6,607,000 $ 1,038,000 $ 109,000 $ 242,000 $ 8,999,000
============ ============ ============ ========== ========== ============
Notes due former owners $ 325,000 $ 2,010,000 $ 380,000 $ 50,000 $ 200,000 $ 2,965,000
Payments 425,000 3,000,000 400,000 59,000 30,000 3,914,000
Bank note 940,000 940,000
Liabilities assumed which are
recorded
as additions to the purchase price 106,000 419,000 95,000 620,000
Acquisition costs 147,000 238,000 163,000 12,000 560,000
------------ ------------ ------------ ---------- ---------- ------------
$ 1,003,000 $ 6,607,000 $ 1,038,000 $ 109,000 $ 242,000 $ 8,999,000
============ ============ ============ ========== ========== ============
</TABLE>
[2] 1997 Acquisition:
In July 1997, the Company completed the acquisition of certain assets
of Fox Ridge Transportation, Inc. ("Fox Ridge"). The purchase price
plus related acquisition transaction costs of $46,000, totaled
$1,186,000 and is being allocated as follows: $598,000 to vehicles,
$196,000 to customer list and $392,000 to goodwill.
The purchase price of $1,140,000, is comprised of: assumption of debt
of approximately $485,000 and the issuance of 130,969 shares of its
common stock guaranteed at a value of $5.00 per share ($655,000) (the
"Guaranteed Value") for a period of one year following the effective
date of a registration statement covering the registration of such
shares.
The market value of the shares issued at the closing amounted to
$377,000 ($2.88 per share). The Company agreed to a Guaranteed Value of
approximately $655,000. Accordingly, the Company may be required to
issue additional shares (limited to 65,485 shares) and/or transfer cash
for any deficiency which might result.
The Company also agreed to place 97,031 shares of its common stock in
escrow to collateralize the assumed obligation of $485,000 which was
subsequently refinanced.
F-21
<PAGE>
NOTE I - ACQUISITIONS (CONTINUED)
[3] Unaudited pro forma information:
Unaudited pro forma summary of consolidated operations for 1996
assuming the acquisitions had taken place on January 1, 1996 is as follows:
Revenue $ 24,948,000
================
Net income $ 678,000
================
Net income per common share $.14
========
Had the Company acquired Fox Ridge on January 1, 1996, the effect on
the results of operations for 1997 would not be material.
NOTE J - EMPLOYEE BENEFITS
[1] 401(k) Retirement Savings Plan:
In November 1996, the Board of Directors authorized the adoption of a
401(k) Retirement Savings Plan (the "Plan") with an effective date of
adoption of January 1, 1997. The 401(k) Plan covers all employees who
meet the 401(k) Plan's eligibility requirements. Eligible employees may
elect to defer up to 15% of their yearly compensation, as defined.
Employer contributions are discretionary. A favorable determination
letter has been received from the Internal Revenue Service, and
participation in the Plan began April 1, 1997. The Company elected to
make a contribution to the Plan of 10,253 shares of the Company's common
stock. Such shares were funded in March 1998.
[2] Collective bargaining agreement:
Prior to the acquisition of A-1, the Company was not a party to any
collective bargaining agreements. The drivers, emergency medical
technicians and paramedics of A-1 were subject to a collective
bargaining agreement until 1997 when they voted to decertify the union
as their representative. During 1997, ambulance drivers in Yonkers, New
York and ambulette drivers located in Yonkers, New York and Union, New
Jersey voted to be unionized. The Company is currently negotiating a
formal agreement with the unions.
NOTE K - MANAGEMENT AGREEMENT
One of the Company's subsidiaries had entered into a management agreement with
an ambulance company to conduct, supervise and manage their daily operations
including personnel, finance and accounting, quality control and other day to
day functions. The subsidiary was paid on a "cost-plus" basis. The management
fee included in other income represents 10% of the subsidiary's direct and
allocated indirect costs in performing services under the agreement. The
direct and allocated indirect costs are reimbursable and have been excluded
from the results of operations. The Company terminated such agreement
effective December 31, 1997.
F-22
<PAGE>
NOTE L - INTANGIBLES WRITE-DOWN
Intangible assets are shown net of accumulated amortization, which includes a
material write-down in 1997. The decline in the financial results of the
operations of the Hudson Valley Companies acquired in 1996, has led the
Company to re-evaluate the carrying value of certain assets acquired. The
underlying factors contributing to the decline in financial results include
reductions in service revenue, changes in relations with certain customers and
increased competition. Based on a plan designed to improve operating margins,
the Company determined that a write-down of approximately $5,400,000 for
impairment of goodwill and customer lists should be charged to operations.
The Company determined the fair value of the assets based on discounted
expected future cash flows.
NOTE M - RECEIVABLES WRITE-DOWN, RESTRUCTURING AND OTHER COSTS
During 1997, the Company began implementing a restructuring program designed
to enhance overall competitiveness and increase productivity and efficiency
through the effective centralization of the Company's previously separate
operating entities. This consolidation is intended to reduce certain
redundancies and complexities in the operations, billing and dispatching as
well as obtaining a better overall utilization of its operating personnel.
This process will include moving the Company's headquarters and locating its
billing and dispatching into one facility in White Plains, NY. This move is
expected to take place in March 1998. In connection with this consolidation, a
partial consolidation of the billing process has already begun. In connection
with this process, a re-evaluation of outstanding accounts receivable resulted
in a write-down of $1,371,000, principally relating to the Hudson Valley
Companies, for revenues billed subsequent to its acquisition. The Company also
charged operations for $396,000 principally relating to severance costs.
In addition to the costs associated with the consolidation of the Company's
separate operating companies identified above, the company is also taking a
charge to earnings for other costs. The Company defers certain costs incurred
in connection with pending acquisitions. In conjunction with the Company's
restructuring program, management believes that the likelihood of the
completion of these potential acquisitions has been reduced. Accordingly,
costs approximating $843,000 have been charged to operations in 1997.
NOTE N - CONTINGENCIES
On February 12, 1998, the Chapter 7 Trustee of BR Ambulance Service, Inc.
("BR") filed a complaint ("Complaint") against the Company alleging that the
Company was the recipient of fraudulent conveyances from BR arising out of an
asset purchase agreement between the Company and BR dated March 12, 1995
wherein the Company allegedly agreed to purchase the assets of BR for a base
price of $2.0 million plus additional consideration to be calculated pursuant
to a formula. The Complaint further alleges that BR subsequently transferred
various assets to the Company but the Company did not pay the specified
consideration and accordingly, owes BR not less than $2.0 million. The
Company's time to respond to the Complaint has been extended to April 21,
1998. The Company vigorously disputes the material allegations of the
Complaint.
In an action filed by Medical Transportation Corp. ("Med-Trans"), Med-Trans
alleges that during the twelve-month period commencing December 1, 1996 and
ending November 30, 1997, the Company deliberately terminated relationships
with numerous customers and unilaterally ceased to provide services to such
customers. Med-Trans is the holder of a promissory note (Note E) which is
subject to adjustment based on total annual revenues from an ambulette
business acquired from Med-Trans. Med-Trans is seeking payment in the amount
of $228,000. The Company filed an answer to the complaint on March 30, 1998,
together with affirmative defenses, stating, among other things, that at no
time did the Company voluntarily decide not to service a customer. The Company
intends to vigorously oppose this action.
F-23
<PAGE>
NOTE N - CONTINGENCIES (CONTINUED)
Various other actions have been filed against the Company principally relating
to alleged breach of employment agreements in connection with certain
acquisitions. The claimants in the actions seek an aggregate of $650,000, plus
punitive damages. The actions are at various stages and the Company believes
it has valid and meritorious defenses.
The ultimate outcome of the above-mentioned Complaint and actions cannot
presently be determined. Accordingly, no provision for any liability that may
result, if any, has been made in the financial statements.
NOTE O - RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statements of
Accounting Standards, No. 130, "Reporting Comprehensive Income" and No. 131,
"Disclosure About Segments of an Enterprise and Related Information" effective
for fiscal years beginning after December 15, 1997. The Company believes that
these pronouncements will not cause its financial position or results of
operations disclosures to change.
F-24
<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, in the City of
White Plains, State of New York, on the 14th day of April, 1998.
COMMUNITY MEDICAL TRANSPORT, INC.
By: /s/ Dean L. Sloane
-----------------------------------
Dean L. Sloane,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Capacity Date
- ------------------------------ ---------------------------------------------------------- -----------------------
<S> <C> <C>
/s/ Dean L. Sloane
- ------------------------------ Director, President and Chief Executive April 14, 1998
Dean L. Sloane Officer (Principal Executive Officer, Principal
Financial and Accounting Officer)
/s/ Donald J. Panos
- ------------------------------ Chief Financial Officer, Principal Financial April 14, 1998
Donald J. Panos Officer and Principal Accounting Officer
/s/ Craig V. Sloane Director April 14, 1998
- ------------------------------
Craig V. Sloane
/s/ Bernard M. Kruger Director April 14, 1998
- ------------------------------
Bernard M. Kruger
/s/ Lucius J. Riccio
- ------------------------------ Director April 14, 1998
Lucius J. Riccio
</TABLE>
<PAGE>
Exhibits Index
3.01 Restated Certificate of Incorporation of the Company (1)
3.02 Amended and Restated By-Laws of the Company (1)
4.01 Specimen Certificate representing the Common Stock, par value
$.001 per share (1)
10.01* 1992 Employee Stock Option Plan (1)
10.02* 1994 Directors' Stock Option Plan (1)
10.03* Employment Agreement entered into between the Company and Dean
L. Sloane (1)
10.04* Employment Agreement entered into between the Registrant and
Craig V. Sloane (1)
10.05* Employment Agreement entered into between the Company and Joseph
A. Connell, Sr.
10.06 Lease dated January 1, 1997 by and between the Company and 2301
Jerome Avenue Realty Corp. and the Addendum thereto
10.07 Lease dated September 1997 by and between the Company and
Principal Mutual Life Insurance Company
10.08 Indemnification Agreement entered into between the Company and
each of its directors (1)
10.09+ Agreement dated as of January, 1994 between the Company and Beth
Abraham Hospital (1)
10.10+ Agreement dated as of January 1, 1994 between the Company and
Beth Abraham Hospital (1).
10.11 Amendment to the Agreements between the Company and Beth Abraham
Hospital
10.12 Warrant, issued to the Equity Group, to purchase 30,000 shares
of Common Stock commencing November 1, 1994 (2)
10.13 Warrant, issued to the Equity Group, to purchase 30,000 shares
of Common Stock commencing November 1, 1995 (2)
10.14 Asset Purchase Agreement dated September 25,1995 between the
Company and Medical Transportation Corporation (3)
10.15 Credit Agreement, dated as of December 18, 1996, among the
Company, Atlantic Bank of New York, Fleet Bank, N.A. and Israel
Discount Bank of New York, including collateral documents (4)
21.01 Subsidiaries of the Company
23.01 Consent of Richard A. Eisner & Company, LLP
27.01 Financial Data Schedule
- ------------
+ Confidential treatment was granted for the deleted portion of this
document.
* Management contract or compensatory plan or arrangement.
(1) Such Exhibits were filed with the Company's Registration Statement
(File No. 33-80338) declared effective September 30, 1994 and are
incorporated herein by reference.
(2) Such Exhibits were filed with the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994 and are
incorporated herein by reference.
(3) Such Exhibit was filed with the Company's Current Report on Form 8-K,
dated November 1, 1995, and is incorporated herein by reference.
(4) Such Exhibit was filed with the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996 and is incorporated herein
by reference.
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made and entered as of July 1,
1997 by and among COMMUNITY MEDICAL TRANSPORT, INC. a Delaware corporation,
(collectively, "the Company"), and JOSEPH A. CONNELL, SR. (the "Employee").
The Employee is being employed by the Company to be in a managerial
or supervisory capacity. The parties desire to enter into an employment
agreement and to set forth herein the terms and conditions of the Employee's
continued employment by the Company and its subsidiaries.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and the mutual benefits to be derived herefrom,
the Company and the Employee agree as follows:
1. Employment.
a. Duties. The Company shall employ the Employee, on the
terms set forth in this Agreement, as its Senior Vice President-Quality
Assurance & Clinical Services (direct consultant to the President). The
Employee accepts such employment with the Company and shall perform and
fulfill such duties as are assigned to him hereunder, devoting his best
efforts and entire professional time and attention to the performance and
fulfillment of his duties and to the advancement of the interests of the
Company, subject to the direction, approval, control and directives of the
Company's Board of Directors (the "Board") and the Company's President.
Nothing contained herein shall be construed, however, to prevent the Employee
from trading in or managing, for his own account and benefit, in stocks,
bonds, securities, real estate, commodities or other forms of investments
(subject to law and Company policy with respect to trading in Company
securities). Without any additional consideration, Employee may also serve as
an employee of any or all subsidiaries of the Company. Unless otherwise
indicated by the context, the term "Company" shall include the Company and all
its subsidiaries.
b. Job Description. Upon consultation with the President of
the Company, and subject to his direction, to direct, coordinate and investigate
Company-wide quality assurance, clinical and field operations to ensure
compliance with applicable jurisdictional laws, statutes and regulations, as
well as Company quality assurance plans and internal policies and procedures.
Nothing herein, however, shall be deemed to establish the Employee as Company
counsel or to empower or require him to act as attorney for the Company in any
legal proceeding. The Employee, from time to time, during the Term may be
required to assist in emergency response situations as needed or at the
discretion of the President.
Subject to the limitations set forth in paragraph 7 hereof,
the Employee shall be allowed access to all records and documents of the
Company as needed to facilitate the foregoing job description. In addition, as
needed to respond to emergencies and to further the Company's
<PAGE>
interest as determined in the Company's President's discretion, the Employee
shall have access to an emergency response vehicle.
c. Place of Performance. In connection with his employment
by the Company, the Employee shall be based in the New York metropolitan area,
except for required travel on Company business.
2. Term. The Employee's employment under this Agreement shall
commence as of July 11, 1997 (the "Commencement Date") and shall, unless
sooner terminated in accordance with the provisions hereof, continue
uninterrupted until June 30, 1999 and thereafter such employment shall
continue from year to year unless terminated upon thirty days notice prior to
June 30, 1999 or June 30th of any renewal year. The terms of employment shall
be referred to as the "Term." As used herein "Year" shall refer to a twelve
month period ending on the first anniversary of the date hereof. In the event
of termination upon thirty days' notice within the first Year of the Term, the
Company shall pay the Employee three (3) months salary as severance pay. The
number of months salary to be paid to the Employee as severance as a result of
termination on thirty (30) days' notice shall be increased by a month for
every additional Year during which the Employee was employed by the Company
hereunder up to a maximum severance equal to six (6) months' worth of salary.
Such sum shall be paid upon the Employee leaving his employment hereunder. In
the event the Company is sold or management control in the Company is acquired
by someone other than current management during the Term hereof, or if the
Company shall merge and not be a survivor of such merger, the Term of this
Agreement shall automatically be extended for an additional year, commencing
on the date of such sale, acquisition or merger.
3. Compensation. During the Term the Employee shall be entitled to
receive an annual salary Eighty Five Thousand ($85,000) Dollars payable in
installments at such times as the Company customarily pays its other employees
(but in any event no less often than Monthly). Any additional provisions shall
be as set forth in Section 10 hereof. The Company hereby agrees to review the
services of the Employee annually.
4. Health Insurance and Other Benefits. During the Term the Employee
shall be entitled to all employee benefits offered by the Company to its key
management employees generally, including, without limitation, all pension,
profit sharing, retirement, stock option, bonus, deferred compensation,
disability insurance, hospitalization insurance, major medical insurance,
medical reimbursement, survivor income, life insurance or any other benefit
plan or arrangement established and maintained by the Company, subject to the
rules and regulations then in effect regarding participation therein. The
Company shall provide the Employee with an alphanumeric pager and cellular
telephone during the term of his employment. The Company shall provide the
Employee with a monthly allowance of Five Hundred Dollars ($500) for all
maintenance, fuel, insurance and normal automotive expenses incurred in the
performance of his duties hereunder. The Employee shall be entitled to three
(3) weeks of paid vacation each Year. During the first Year hereof, however,
Employee shall be eligible for two (2) week's vacation
-2-
<PAGE>
only after the first quarter of the Year and an additional week's vacation
only after the third quarter. Vacation may be taken in days, groups of days or
paid out in dollars.
5. Reimbursement of Expenses. The Employee shall be reimbursed for
all items of travel, entertainment and miscellaneous expenses (including
directly attributable expenses of his home office) which the Employee
reasonably incurs in connection with the performance of his duties hereunder,
provided that the Employee submits to the Company such statements and other
evidence supporting said expenses as the Company may reasonably require. In
addition, the Employee shall be reimbursed for all training and
re-certification program costs required to maintain licensure and
certification, and to further the Company's interests as determined by the
Company's President.
6. Termination of Employment.
a. Death or Total Disability. In the event of the death of
the Employee during the Term, this Agreement shall terminate as of the date of
the Employee's death. In the event of the Total Disability (as that term is
defined below) of the Employee for sixty (60) days in the aggregate during any
consecutive six (6) month period during the Term, the Company shall have the
right to terminate this Agreement by giving the Employee thirty (30) days'
prior written notice thereof, and upon the expiration of such thirty (30) day
period, the Employee's employment under this Agreement shall terminate. If the
Employee shall resume his duties within thirty (30) days after receipt of such
a notice of termination and continue to perform such duties for four (4)
consecutive weeks thereafter, this Agreement shall continue in full force and
effect, without any reduction in salary, and other benefits, and the notice of
termination shall be considered null and void and of not effect. Upon
termination of this Agreement under this Agreement under this paragraph 6(a),
the Company shall have no further obligations or liabilities under this
Agreement, except to pay to the Employee's estate or the Employee, as the case
may be, (i) the portion, if any, that remains compensation accrued but unpaid;
(ii) the amount of any expenses reimbursable in accordance with paragraph 5
above; and (iii) any amounts due under any Company benefit, welfare or pension
plan.
The term "Total Disability," as used herein, shall mean a
mental or physical condition which in the reasonable opinion of an independent
medical doctor selected by the Company renders the Employee unable or
incompetent to carry out the material duties and responsibilities of the
Employee under this Agreement at the time the disabling condition was
incurred. Notwithstanding the foregoing, if the Employee is covered under any
policy of disability insurance under paragraph 4 above, under no circumstances
shall the definition of Total Disability be different from the definition of
that term in such policy.
b. Discharge for Cause. The Company may discharge the
Employee for "Cause" upon notice and thereby immediately terminate his
employment under this Agreement. For purposes of this Agreement the Company
shall have "Cause" to terminate the Employee's employment if Employee, in the
reasonable judgment of the Company, (i) materially breaches
-3-
<PAGE>
any of his agreements, duties, representations or obligations under this
Agreement and has not cured such breach or commenced in good faith to correct
such breach within thirty (30) days after notice; (ii) fails to carry out a
lawful directive of the Board of Directors or the President of the Company;
(iii) embezzles or converts to his own use any funds of the Company or any
client or customer of the Company; (iv) converts to his own use or
unreasonably destroys, intentionally, any property of the Company, without the
Company's consent (v) is convicted of a crime; (vi) is adjudicated an
incompetent; (vii) is habitually intoxicated or is diagnosed by an independent
medical doctor to be addicted to a controlled substance (any disagreement of
Employee shall be resolved using the procedure provided in paragraph 6(a)
above); or (viii) behaves in a manner which, with intent to do so, materially
impairs the Company's relations with others in its industry.
c. Termination by Employee. The Employee may terminate this
agreement for the material non-compliance by the Company with its obligations
under Sections 3, 4, and 5 hereof, for which proper (written) notice is
tendered by the Employee, if the Company has not cured such material
non-compliance within thirty (30) days of such notice.
7. Restrictions.
a. Non-Disclosure of Information/Non-Salutation.
(1) The Employee shall (i) never, directly or
indirectly, disclose to any person or entity for any reason, or use for his
own personal benefit, any "Confidential Information" (as hereinafter defined)
either during his employment with the Company or following termination of that
employment for any reason (ii) at all times take all precautions necessary to
protect from loss or disclosure by him of any and all documents or other
information containing, referring or relating to such Confidential
Information, and (iii) upon termination of his employment with the Company for
any reason, the Employee shall promptly return to this Company any and all
documents or other tangible property containing, referring or relating to such
Confidential Information, whether prepared by him or others.
(2) Notwithstanding any provision to the contrary
in paragraph 7(a)(1), this paragraph shall not apply to information which the
Employee is called upon by legal process regular on its face (including,
without limitation, by subpoena or discovery requirement) to disclose or to
information which has become part of the public domain or is otherwise
publicly disclosed through no fault or action of the Employee.
(3) For purposes of this Agreement, "Confidential
Information" means any information relating in any way to the business of the
Company disclosed to or known to the Employee as a consequence of, result of,
or through the Employee's employment by the Company which consists of
technical and non-technical information about the Company's products,
processes, programs, concepts, forms, business methods, data, any and all
financial and accounting data, marketing, customers, customer lists, and
services and information corresponding thereto acquired by the Employee during
the term of the Employee's employment by the
-4-
<PAGE>
Company. Confidential Information shall not include any of such items which
are published or are otherwise part of the public domain, or freely available
from trade sources or otherwise.
(4) Upon termination of this Agreement for any
reason, the Employee shall turn over to the Company all tangible property then
in the Employee's possession or custody which belongs or relates to the
Company. The Employee shall not retain any copies or reproductions of
correspondence, memoranda, reports, notebooks, drawings, photographs, or other
documents which constitute Confidential Information.
(5) Executive further undertakes and agrees that
during the term of this Agreement and for a period of one (1) year after the
Date of Termination he will note, directly or indirectly employ, cause to be
employed, or solicit for employment any of the Company's employees, nor during
such period shall Employee solicit or enter into any arrangements with any of
the Company's accounts.
b. Injunctive Relief. The parties hereto agree that the
remedy at law for any breach of the provision of this paragraph 7 will be
inadequate and that the Company or any of its subsidiaries or other successors
or assigns shall be entitled to injunctive relief without bond. Such injunctive
relief shall not be exclusive, but shall be in addition to any other rights and
remedies Company or any of its subsidiaries or their successors or assigns might
have for such breach.
8. Representation of Employee. Employee represents that there is
no impediment to his executing this Agreement and that there is no other
contract, agreement, obligation or other covenant to which he is bound that
would be breached or violated by his making this agreement and undertaking the
obligations herein set forth.
9. Miscellaneous.
a. Notices. Any notice, demand or communication required or
permitted under this Agreement shall be in writing and shall either be
hand-delivered to the other party or mailed to the addresses set forth below
by registered or certified mail, return receipt requested or sent by overnight
express mail or courier or facsimile to such address, if a party has a
facsimile machine. Notice shall be deemed to have been given and received when
so hand-delivered or after three (3) business days when so deposited in the
U.S. Mail, or when transmitted and received by facsimile or sent by express
mail properly addressed to the other party. The addresses are:
To the Company:
Community Medical Transport, Inc.
45 Morris Street
-5-
<PAGE>
Yonkers, New York 10705
Facsimile No.: (914) 963-7896
To the Employee:
Mr. Joseph A. Connell, Sr.
976 McLean Ave.
Suite 101
Yonkers, N.Y. 10704
The foregoing addresses may be changed at any time by notice given in the
manner herein provided.
b. Integration; Modification. This Agreement constitutes the
entire understanding and agreement between the Company and the Employee
regarding its subject matter and supersedes all prior negotiations and
agreements, whether oral or written, between them with respect to its subject
matter. This Agreement may not be modified except by a written agreement
signed by the Employee and the President of the Company.
c. Enforceability. If any provision of this Agreement shall
be invalid or unenforceable, in whole or in part, such provision shall be
deemed to be modified, or restricted to the extent and in the manner necessary
to render the same valid and enforceable, or shall be deemed excised from this
Agreement, as the case may require, and this Agreement shall be construed and
enforced to the maximum extent permitted by law as if such provision had been
originally incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case may be.
d. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties, including and their respective heirs,
executors, successors and assigns, except that this Agreement may not be
assigned by the Employee.
e. Waiver of Breach. No waiver by either party of any
condition or of the breach by the other of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one (1) or more
instances shall be deemed or construed as a further or continuing waiver of
any such condition or breach or a waiver of any other condition, or the breach
of any other term or covenant set forth in this Agreement. Moreover, the
failure of either party to exercise any right hereunder shall not bar the
later exercise thereof with respect to other future breaches.
f. Governing Law. This Agreement shall be governed by the
internal laws of the State of New York.
-6-
<PAGE>
g. Headings. The headings of the various sections and
paragraphs have been included herein for convenience only and shall not be
considered in interpreting this Agreement.
h. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
i. Due Authorization. The Company represents that all
corporate action required to authorize the execution, delivery and performance
of this Agreement has been duly taken.
10. Additional Provisions.
In addition to the compensation set forth in paragraph 3,
employee shall (i) be eligible to receive a bonus of 33.3% of this annual
salary, payable as agreed upon by the Company and the Employee, if the Company
achieves goals established by the President of the Company in his sole
discretion; (ii) the Company as of the date hereof, has also granted Employee
an option to purchase 10,000 shares of the Company's Common Stock, at the per
share price on the date hereof, pursuant to its employees stock option plan
and (iii) the Company agrees to pay the Employee a lump sum payment of $6,000
in compensation for the value of vacation time foregone in executing this
Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the
Employee and, on behalf of the Company, by its duly authorized officer on the
day and year first above written.
COMMUNITY MEDICAL TRANSPORT, INC.
By:
---------------------------------
Dean L. Sloane, President
Accepted:
- ------------------------------
JOSEPH A. CONNELL, SR.
-7-
<PAGE>
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
(C) Copyright 1982. All Rights Reserved.
Reproduction in whole or in part prohibited.
Agreement of Lease, made as of this 1st day of January 1997, between 2301
JEROME AVENUE REALTY CORP., a New York Corporation having its office at 29 Agar
Street, Yonkers, NY 10701, party of the first part, hereinafter referred to as
OWNER, and COMMUNITY MEDICAL TRANSPORT, INC., a New York Corporation having its
office at 45 Morris Street, Yonkers, NY 10705
party of the second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from
Owner the entire building identified as "Building A" on the copy of survey which
is annexed hereto and made a part hereof together with a portion of the real
property shown on said survey identified thereon as Porpoerty "A" in the
building known as 56 Worth Street, Yonkers, NY 10701, for the term of (5) years
(or until such term shall sooner cease and expire as hereinafter provided) to
commence on the 1st day of January nineteen hundred and ninety-seven, and to end
on the 31st day of December two thousand and one both dates inclusive, at an
annual rental rate of more particularly described in Article 41 of this lease,
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues, public and private, at the time
of payment, in equal monthly installments in advance on the first day of each
month during said term, at the office of Owner or such other place as Owner may
designate, without any set off or deduction whatsoever, except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this lease
be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installments of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby convenant
as follows:
Occupancy:
1. Tenant shall pay the rent as above and as hereinafter provided.
Use:
2. Tenant shall use and occupy demised premises for the operation of a
transportation service business, provided such use is in accordance with the
Certificate of Occupancy for the building, if any, and for no other purpose.
Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
Owner, and to the provisions of this article, Tenant at Tenant's expense, may
make alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises using
contractors or mechanics first approved by Owner. Tenant shall, at its expense,
before making any alterations, additions, installments or improvements, obtain
all permits, approvals and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner. Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compsenation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within thirty days thereafter, at Tenant's
expense, by filing the bond required by law or otherwise. All fixtures and all
paneling, partitions, railings and like installations, installed in the premises
at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon
installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises unless Owner, by notice to Tenant no later
than twenty days prior to the date fixed as the termination of this lease,
elects to relinquish Owner's right thereto and to have them removed by Tenant,
in which event the same shall be removed from the demised premises by Tenant
prior to the expiration of the lease, at Tenant's expense. Nothing in this
Article shall be construed to give Owner title to or to prevent Tenant's removal
of trade fixtures, moveable office furniture and equipment, but upon removal of
any such from the premises or upon removal of other installations as may be
required by Owner, Tenant shall immediately and at its expense, repair and
restore the premises to the condition existing prior to installation and repair
any damage to the demised premises or the building due to such removal. All
property permitted or required to be removed, by Tenant at the end of the term
remaining in the premises after Tenant's removal shall be deemed abandoned and
may, at the election of Owner, either be retained as Owner's property or may be
removed from the premises by Owner, at Tenant's expense.
Repairs:
4. Owner shall maintain and repair the exterior of and the public portions
of the building. Tenant shall, throughout the term of this lease, take good care
of the demised premises including the bathrooms and lavatory facilities (if the
demised premises encompass the entire floor of the building) and the windows and
window frames and, the fixtures and appurtenances therein and at Tenant's sole
cost and expense promptly make all repairs thereto and to the building, whether
structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
servants, employees, invitees or licensees, and whether or not arising from such
Tenant conduct or omission, when required by other provisions of this lease,
including Article 6. Tenant shall also repair all damage to the building and the
demised premises caused by the moving of Tenant's fixtures, furniture or
equipment. All the aforesaid repairs shall be of quality or class equal to the
original work or construction. If Tenant fails, after ten days notice, to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by the Owner at the expense of Tenant, and the expenses thereof
incurred by Owner shall be collectible, as additional rent, after rendition of a
bill or statement therefor. If the demised premises be or become infested with
vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant
shall give Owner prompt notice of any defective condition in any plumbing,
heating system or electrical lines located in the demised premises and following
such notice, Owner shall remedy the condition with due diligence, but at the
expense of the Tenant, if repairs are necessitated by damage or injury
attributable to Tenant, Tenant's servants, agents, employees, invitees or
licensees as aforesaid. Except as specifically provided in Article 9 or
elsewhere in this lease, there shall be no allowance to the Tenant for the
diminution of rental value and no liability on the part of the Owner by reason
of inconvenience, annoyance or injury to business arising from Owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. The provisions of this
Article 4 with respect too the making of repairs shall not apply in the case of
fire or other casualty with regard to which Article 9 hereof shall apply.
Window Cleaning:
5. Tenant will not clean, nor require, permit, suffer or allow any window
in the demised premises to be cleaned from the outside in violation of Section
202 of the New York State Labor Law or of any other applicable law or of the
Rules of the Board of Standards and Appeals, or of any other Board or body
having or asserting jurisdiction.
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter Tenant shall, at Tenant's sole cost and
expense, promptly comply will all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, or the Insurance Services Office, or any similar body which shall
impose any violation, order or duty upon Owner or Tenant with respect to the
demised premises, whether or not arising out of Tenant's use or manner of use
thereof, or, with respect to the building, if arising out of Tenant's use or
manner of use of the demised premises or the building (including the use
permitted under the
<PAGE>
lease). Except as provided in Article 30 hereof, nothing herein shall require
Tenant to make structural repairs or alterations unless Tenant has, by its
manner of use of the demised premises or method of operation therein, violated
any such laws, ordinances, order, rules, regulations or requirements with
respect thereto. Tenant shall not do or permit any act or thing to be done in or
to the demised premises which is contrary to law, or which will invalidate or be
in conflict with public liability, fire or other policies of insurance at any
time carried by or for the benefit of Owner. Tenant shall not keep anything in
the demised premises except as now or hereafter permitted by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization and
other authority having jurisdiction, and then only in such manner and such
quantity so as not to increase the rate for fire insurance applicable to the
building, nor use the premises in a manner which will increase the insurance
rate for the building or any property located therein over that in effect prior
to the commencement of Tenant's occupancy. If by reason of failure to comply
with the foregoing the fire insurance rate shall, at the beginning of this lease
or at any time thereafter, be higher than otherwise would be, then Tenant shall
reimburse Owner, as additional rent hereunder, for that portion of all fire
insurance premiums thereafter paid by Owner which shall have been charged
because of such failure by Tenant. In any action or proceeding wherein Owner and
Tenant are parties, a schedule or "make-up" or rate for the building or demised
premises issued by a body making fire insurance rates applicable to said
premises shall be conclusive evidence of the facts therein stated and of the
several items and charges in the fire insurance rates then applicable to said
premises. Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which it was designed to carry and
which is allowed by law. Owner reserves the right to prescribe the weight and
position of all safes, business machines and mechanical equipment. Such
installations shall be placed and maintained by Tenant, at Tenant's expense, in
settings sufficient, in Owner's judgement, to absorb and prevent vibration,
noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases
and to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property--Loss, Damage, Reimbursemnet, Indemnity:
8. Owner or its agents shall not be liable for any damage to property of
Tenant or of others entrusted to employees of the building, nor for loss of or
damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees; Owner or its agents shall not be liable for any damage caused by
other tenants or persons in, upon or about said building or caused by operations
in connection of any private, public or quasi public work. If at any time any
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable
attorney's fees, paid, suffered or incurred as a result of any breach by Tenant,
Tenant's agents, contractors, employees, invitees, or licensees, of any covenant
or condition of this lease, or the carelessness, negligence or improper conduct
of the Tenant, Tenant's agents, contractors, employees, invitees or licensees.
Tenant's liability under this lease extends to the acts and omissions of any
sub-tenant, and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reason
of any such claim, Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) if the demised premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate notice thereof to Owner and this
lease shall continue in full force and effect except as hereinafter set forth.
(b) If the demised premises are partially damaged or rendered partially unusable
by fire or other casualty, the damages thereto shall be repaired by and at the
expense of Owner and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Owner subject to Owner's right to elect not to restore
the same as hereinafter provided. (d) If the demised premises are rendered
wholly unusable or (whether or not the demised premises are damaged in whole or
in part) if the building shall be so damaged that Owner shall decide to demolish
it or to rebuild it, then, in any of such events, Owner may elect to terminate
this lease by written notice to Tenant, given within 90 days after such fire or
casualty, specifying a date for the expiration of the lease, which date shall
not be more than 60 days after the giving of such notice, and upon the date
specified in such notice the term of this lease shall expire as fully and
completely as if such date were the date set forth above for the termination of
this lease and Tenant shall forthwith quit, surrender and vacate the premises
without prejudice however, to Owner's rights and remedies against Tenant under
the lease provisions in effect prior to such termination, and any rent owing
shall be paid up to such date and any payments of rent made by Tenant which were
on account of any period subsequent to such date shall be returned to Tenant.
Unless Owner shall serve a termination notice as provided for herein, Owner
shall make the repairs and restorations under the conditions of (b) and (c)
hereof, with all reasonable expedition, subject to delays due to adjustment of
insurance claims, labor troubles and causes beyond Owner's control. After any
such casualty, Tenant shall cooperate with Owner's restoration by removing from
the premises as promptly as reasonably possible, all of Tenant's salvageable
inventory and movable equipment, furniture, and other property. Tenant's
liability for rent shall resume five (5) days after written notice from Owner
that the premises are substantially ready for Tenant's occupancy. (e) Nothing
contained hereinabove shall relieve Tenant from liability that may exist as a
result of damage from fire or other casualty. Notwithstanding the foregoing each
party shall look first to any insurance in its favor before making any claim
against the other party for recovery for loss or damage resulting from fire or
other casualty, and to the extent that such insurance is in force and
collectible and to the extent permitted by law, Owner and Tenant each hereby
releases and waives all right of recovery against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors' insurance policies
contain a clause providing that such a release or waiver shall not invalidate
the insurance. If, and to the extent, that such waiver can be obtained only by
the payment of additional premiums, then the party benefitting from the waiver
shall pay such premium within ten days after written demand or shall be deemed
to have agreed that the party obtaining insurance coverage shall be free of any
further obligation under the provisions hereof with respect to waiver of
subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's
furniture and or furnishings or any fixtures or equipment, improvements, or
appurtenances removable by Tenant and agrees that Owner will not be obligated to
repair any damage thereto or replace the same. (f) Tenant hereby waives the
provisions of Section 227 of the Real Property Law and agrees that the
provisions of this article shall govern and control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease.
Assignment, Mortgage, Etc.:
11. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants that it shall
not assign, mortgage or encumber this agreement, nor underlet, or suffer or
permit the demised premises or any part thereof to be used by others, without
the prior written consent of Owner in each instance. Transfer of the majority of
the stock of a corporate Tenant shall be deemed an assignment. If this leases be
assigned, or if the demised premises or any part thereof be underlet or occupied
by anybody other than Tenant, Owner may, after default by Tenant, collect rent
from the assignee, under-tenant, or occupant, and apply the net amount collected
to the rent herein reserved, but no such assignment, underletting, occupancy or
collection shall be deemed a waiver of this covenant, or the acceptance of the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an assignment or underletting shall not in
any wise be construed to relieve Tenant from obtaining the express consent in
writing of Owner to any further assignment or underletting.
Electric Current:
[Hand graphic]
12. Rates and conditions in respect to submetering or rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing leeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to any portion of the building or which Owner may elect to perform in
the premises after Tenant's failure to make repairs or perform any work which
Tenant is obligated to perform under this lease, or for the purpose of complying
with laws, regulations and other directions of governmental authorities. Tenant
shall permit Owner to use and maintain and replace pipes and conduits in and
through the demised premises and to erect new pipes and conduits therein
provided, wherever possible, they are within walls or otherwise concealed. Owner
may, during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
tenants and may, during said six months period, place upon the demised premises
the usual notices "To Let" and "For Sale" which notices Tenant shall permit to
remain thereon without molestation. If Tenant is not present to open and permit
an entry into the premises, Owner or Owner's agents may enter the same whenever
such entry may be necessary or permissible by master key or forcibly and
provided reasonable care is exercised to safeguard Tenant's property, such entry
shall not render Owner or its agents liable therefor, nor in any event shall the
obligations of Tenant hereunder be affected. If during the last month of the
term Tenant shall have removed all or substantially all of Tenant's property
therefrom, Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring liability
to Tenant for any compensation and such act shall have no effect on this lease
or Tenant's obligations hereunder.
<PAGE>
Vault, Vault Space, Area:
14. No Vaults, vault space or area, whether or not enclosed or covered, not
within the property line of the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding. Owner makes no
representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant, if used by Tenant,
whether or not specifically leased hereunder.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business, Tenant shall be responsible for
and shall procure and maintain such license or permit.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding,
this lease may be cancelled by Owner by sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or any other arrangement for the benefit of creditors under any state statute.
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such re-letting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
17. (1) If Tenant defaults in fulfilling any of the covenants of this lease
other than the covenants for the payment of rent or additional rent; or if the
demised premises becomes vacant or deserted "or if this lease be rejected under
ss.235 of Title 11 of the U.S. Code (bankruptcy code);" or if any execution or
attachment shall be issued against Tenant or any of Tenant's property whereupon
the demised premises shall be taken or occupied by someone other than Tenant; or
if Tenant shall make default with respect to any other lease between Owner and
Tenant; or if Tenant shall have failed, after five (5) days written notice, to
redeposit with Owner any portion of the security deposited hereunder which Owner
has applied to the payment of any rent and additional rent due and payable
hereunder or failed to move into or take possession of the premises within
fifteen (15) days after the commencement of the term of this lease, of which
fact Owner shall be the sole judge; then in any one or more of such events, upon
Owner serving a written five (5) days notice upon Tenant specifying the nature
of said default and upon the expiration of said five (5) days, if Tenant shall
have failed to comply with or remedy such default, or if the said default or
omission complained of shall be of a nature that the same cannot be completely
cured or remedied within said five (5) day period, and if Tenant shall not have
diligently commenced during such default within such five (5) day period, and
shall not thereafter with reasonable diligence and in good faith, proceed to
remedy or cure such default, then Owner may serve a written (5) days' notice of
cancellation of this lease upon Tenant, and upon the expiration of said three
(3) days this lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such three (3) day period were the day herein
definitely fixed for the end and expiration of this lease and the term thereof
and Tenant shall then quit and surrender the demised premises to Owner but
Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and the
term shall expire as aforesaid; or if Tenant shall make default in the payment
of the rent reserved herein or any item additional rent herein mentioned or any
part of either or in making any other payment herein required; then and in any
such events Owner may without notice, re-enter the demised premises either by
force or otherwise, and dispossess Tenant by summary proceedings or otherwise
and the legal representative of Tenant or other occupant of demised premises and
remove their effects and hold the premises as if this lease had not been made,
and Tenant hereby waives the service of notice of intention to re-enter or to
institute legal proceedings to that end. If Tenant shall default hereunder prior
to the date fixed as the commencement of any renewal or extension of this lease,
Owner may cancel and terminate such renewal or extension agreement by written
notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent, and additional rent, shall
become due thereupon and paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or part or parts thereof, either
in the name of Owner or otherwise, for a term or terms, which may at Owner's
option be less than or exceed the period which would otherwise have constituted
the balance of the term of this lease and may grant concessions or free rent or
charge a higher rental than that in this lease, (c) Tenant or the legal
representatives of Tenant shall also pay Owner as liquidated damages for the
failure of Tenant to observe and perform said Tenant's covenants herein
contained, any deficiency between the rent hereby reserved and/or covenanted to
be paid and the net amount, if any, of the rents collected on account of the
subsequent lease or leases of the demised premises for each month of the period
which would otherwise have constituted the balance of the term of this lease.
The failure of Owner to re-let the premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with re-letting, such as legal expenses,
reasonable attorneys' fees, brokerage, advertising and for keeping the demised
premises in good order or preparing the same for re-letting. Any such liquidated
damages shall be paid in monthly installments by Tenant on the rent day
specified in this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of Owner to
collect the deficiency for any subsequent month by a similar proceeding. Owner,
in putting the demised premises in good order or preparing the same for
re-rental may, at Owner's option, make such alterations, repairs, replacements
and/or decorations in the demised premises as Owner, in Owner's sole judgment,
considers advisable and necessary for the purpose of re-letting the demised
premises, and the making of such alterations, repairs, replacements and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever
for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws.
Fees and Expenses:
19. If Tenant shall default in the observance or performance of any term or
covenant on Tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, then, unless otherwise
provided elsewhere in this lease, Owner may immediately or at any time
thereafter and without notice perform the obligation of Tenant thereunder. If
Owner, in connection with the foregoing or in connection with any default by
Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs
any obligations for the payment of money, including but not limited to
attorney's fees, in instituting, prosecuting, or defending any such action or
proceedings, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within five (5) days of rendition of any bill
or statement to Tenant therefor. If Tenant's lease term shall have expired at
the time of making of such expenditures or incurring of such obligations, such
sums shall be recoverable by Owner as damages.
Building Alterations and Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to Tenant therefor to change the
arrangement and or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets, or other public parts of the building and
to change the name, number or designation by which the building may be known.
There shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
No Representation by Owner:
21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which it is erected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, easements or licenses are
acquired by Tenant by implications or otherwise except as expressly set forth in
the provisions of this lease. Tenant has inspected the building and the demised
premises and is thoroughly acquainted with their condition and agrees to take
the same "as is" on the date possession is tendered and acknowledges that the
taking of possession of the demised premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a part
were in good and satisfactory condition at the time such possession was so
taken, except as to latent defects. All understandings and agreements heretofore
made between the parties hereto are merged in this contract, which alone fully
and completely expresses the agreement between Owner and Tenant and any
executory agreement hereafter made shall be ineffective to
<PAGE>
change, modify, discharge or effect an abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
End Of Term:
22. Upon the expiration or other termination of the term of this lease,
Tenant shall quit and surrender to Owner the demised premises, broom clean, in
good order and condition, ordinary wear and damages which Tenant is not required
to repair as provided elsewhere in this lease excepted, and Tenant shall remove
all its property from the demised premises. Tenant's obligation to observe or
perform this covenant shall survive the expiration or other termination of this
lease. If the last day of the term of this Lease or any renewal thereof, falls
on Sunday, this lease shall expire at noon on the preceding Saturday unless it
be a legal holiday in which case it shall expire at noon on the preceding
business day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms, covenants
and conditions, on Tenant's part to be observed and performed, Tenant may
peaceably and quietly enjoy the premises hereby demised, subject, never-
theless, to the terms and conditions of the lease including, but not limited to,
Article 34 hereof and to the ground leases, underlying leases and mortgages
hereinbefore mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on the
date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or if Owner had not completed any work required to be performed by
Owner, or for any other reason, Owner shall not be subject to any liability for
failure to give possession on said date and the validity of the lease shall not
be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession or complete any work required) until after Owner shall have given
Tenant notice that the premises are substantially ready for Tenant's occupany.
If permission is given to Tenant to enter into the possession of the demised
premises or to occupy premises other than the demised premises prior to the date
specified as the commencement of the term of this lease, Tenant covenants and
agrees that such occupancy shall be deemed to be under all the terms, covenants,
conditions and provisions of this lease, except as to the covenant to pay the
rent. The provisions of this article are intended to constitute "an express
provision to the contrary" within the meaning of Section 223-a of the New York
Real Property Law.
No Waiver:
25. The failure of Owner to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this lease or any of
the Rules or Regulations, set forth or hereafter adopted by Owner, shall not
prevent a subsequent act which would have originally constituted a violation
from having all the force and effect of an original violation. The receipt by
Owner of rent with knowledge of the breach of any covenant of this lease shall
not be deemed a waiver of such breach and no provision of this lease shall be
deemed to have been waived by Owner unless such waiver be in writing signed by
Owner. No payment by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement of any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. All checks tendered to Owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an attornment to Owner by the payor of such rent or as a consent by
Owner to an assignment or subletting by Tenant of the demised premises to such
payor, or as a modification of the provisions of this lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or Owner's agent shall have power to accept the keys of said premises prior to
the termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or surrender of the
premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counter claim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any summary proceeding or
action for possession including a summary proceeding for possession of the
premises, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceeding.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures or other materials if Owner is prevented or delayed from so doing by
reason of strike or labor troubles or any cause whatsoever beyond Owner's sole
control including, but not limited to, government preemption in connection with
a National Emergency or by reason of any rule, order or regulation of any
department or subdivision thereof of any government agency or by reason of the
conditions of suply and demand which have been or are affected, either directly
or indirectly, by war or other emergency.
Bill and Notices:
28. Except as otherwise in this lease provided, a bill statement, notice or
communication which Owner may desire or be required to give to Tenant, shall be
deemed sufficiently given or rendered if, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
Water Charges:
29. If Tenant requires, uses or consumes water for any purpose in addition
to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the
sole judge) Owner may install a water meter and thereby measure Tenant's water
consumption for all purposes. Tenant shall pay Owner for the cost of the meter
and the cost of installation, thereof and throughout the duration of Tenant's
occupancy Tenant shall keep said meter and installation equipment in good
working order and repair at Tenant's own cost and expense in default of which
Owner may cause such meter and equipment to be replaced or repaired and collect
the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water
consumed, as shown on said meter as and when bills are rendered, and on default
in making such payment Owner may pay such charges and collect the same from
Tenant, as additional rent. Tenant covenants and agrees to pay, as additional
rent, the sewer rent, charge or any other tax, rent, levy or charge which now or
hereafter is assessed, imposed or a lien upon the demised premises or the realty
of which they are part pursuant to law, order or regulation made or issued in
connection with the use, consumption, maintenance or supply of water, water
system or sewage or sewage connection or system.
Sprinklers: [Hand arrow graphic]
30. Anything elsewhere in this lease to the contrary notwithstanding, if
the New York Board of Fire Underwriters or the New York Fire Insurance Exchange
or any bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment, become necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the fire insurance
rate set by any said Exchange or by any fire insurance company, Tenant shall, at
Tenant's expense, promptly make such sprinkler system installations, changes,
modifications, alterations, and supply additional sprinkler heads or other
equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of $_________, on the first day of each month during the term of this lease, as
Tenant's portion of the contract price for sprinkler supervisory service.
Elevators, Heat, Cleaning:
31. Tenant shall, at Tenant's expense, keep the demised premises, including
the windows, clean and in order, to the satisfaction of Owner, and for that
purpose shall employ the person or persons, or corporation approved by Owner.
Tenant shall pay to Owner the cost of removal of any of Tenant's refuse and
rubbish from the building. Bills for the same shall be rendered by Owner to
Tenant at such time as Owner may elect and shall be due and payable hereunder,
and the amount of such bills shall be deemed to be, and be paid as, additional
rent. Tenant shall, however, have the option of independently contracting for
the removal of such rubbish and refuse in the event that Tenant does not wish to
to have same done by employees of Owner. Under such circumstances, however, the
removal of such refuse and rubbish by others shall be subject to such rules and
regulations as, in the judgment of Owner, are necessary for the proper operation
of the building. Owner reserves the right to stop service of the heating,
elevator, plumbing and electric systems, when necessary, by reason of accident,
or emergency, or for repairs, alterations, replacements or improvements, in the
judgment of Owner desirable or necessary to be made, until said repairs,
alterations, replacements or improvements shall have been completed. If building
of which the demised premises are a part supplies manually operated elevator
service, Owner may proceed with alterations necessary to substitute automatic
control elevator service upon (10) day written notice to Tenant without in any
way affecting the obligations of Tenant hereunder, provided that the same shall
be done with the minimum amount of inconvenience to Tenant, and Owner pursues
with due diligence the completion of the alterations.
<PAGE>
Security: [Hand arrow graphic]
32. Tenant has deposited with Owner the sum of $22,510, as security for the
faithful performance and observance by Tenant of the terms, provisions and
conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises form a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look to
the new Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further convenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
Captions:
33. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provision thereof.
Definitions:
34. The term "Owner" as used in this lease means only the owner of the fee
or of the leasehold of the building, or the mortgagee in possession, for the
time being of the land and building (or the owner of a lease of the building or
of the land and building) of which the demised premises form a part, so that in
the event of any sale or sales of said land and building or of said lease, or in
the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and released of all covenants and
obligations of Owners hereunder, and it shall be deemed and construed without
further agreement between the parties, their successors in interest, or between
the parties and the purchaser, at any such sale, or the said lessee of the
building, or of the land and building, that the purchaser or the lessee of the
building has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so expressed or expressed in monthly
installments, and "additional rent". "Additional rent" means all sums which
shall be due to Owner from tenant under this lease, in addition to the annual
rental rate. The term "business days" as used in this lease, shall exclude
Saturdays (except such portion thereof as is covered by specific hours in
Article 31 hereof), Sundays and all days observed by the State or Federal
Government as legal holidays and designated as holidays by the applicable
building service union employee service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
Adjacent Excavation -- Shoring:
35. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.
Rules and Regulations:
36. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations annexed hereto and such other and further reasonable Rules and
Regulations as Owner or Owner's agents may from time to time adopt. Notice of
any additional rules or regulations shall be given in such manner as Owner may
elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon the Owner within ten (10) days
after the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
Glass:
37. Owner shall replace, at the expense of the Tenant, any and all plate
and other glass damaged or broken from any cause whatsoever in and about the
demised premises. Owner may insure, and keep insured, at Tenant's expense, all
plate and other glass in the demised premises for and in the name of Owner.
Bills for the premiums therefor shall be rendered by Owner to Tenant at such
times as Owner may elect, and shall be due from, and payable by, Tenant when
rendered, and the amount thereof shall be deemed to be, and be paid, as
additional rent.
Estoppel Certificate:
38. Tenant, at any time, and from time to time, upon at least 10 days'
prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or
to any other person, firm or corporation specified by Owner, a statement
certifying that this Lease is unmodified and in full force and effect (or, if
there has been modifications, that the same is in full force and effect as
modified, and stating the modifications), stating the dates to which the rent
and additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and, if so, specifying each such default.
Directory Board Listing
39. If, at the request of and as accomodation to Tenant, Owner shall place
upon the directory board in the lobby of the building, one or more names of
persons other than Tenant, such directory board listing shall not be construed
as the consent by Owner to an assignment or subletting by Tenant to such person
or persons.
Successors and Assigns:
40. The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns.
- -----------------------------------------------------
[Hand arrow graphic] Space to be filled in or deleted.
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner:
2301 JEROME AVENUE RELATY CORP. [CORP. SEAL]
.................................
By /s/ [ILLEGIBLE]
.............................. .................................[L.S]
Witness for Tenant:
COMMUNITY MEDICAL TRANSPORT, INC.[CORP. SEAL]
.................................
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
.............................. .................................[L.S]
<PAGE>
RIDER TO LEASE AGREEMENT BETWEEN
2301 JEROME AVENUE REALTY CORP., AS OWNER AND
COMMUNITY MEDICAL TRANSPORT, INC., AS TENANT,
DATED AS OF THE 1ST DAY OF JANUARY, 1997
41. The annual rent for the first year of the term of this lease is $120,000.
and shall be paid in monthly installments of $10,000.
The annual rent for the second year of the term of this lease is $123,600.
and shall be paid in monthly installments of $10,300.
The annual rent for the third year of the term of this lease is $127,308.
and shall be paid in monthly installments of $10,609.
The annual rent for the fourth year of the term of this lease is
$131,227.24 and shall be paid in monthly installments of $10,927.27.
The annual rent for the fifth year of the term of this lease is $135,061.08
and shall be paid in monthly installments of $11,255.09.
42. In addition to the rent required to be paid by Tenant pursuant to the terms
of this lease, Tenant shall pay as additional rent the real property taxes
attributable to the demised premises over and above the 1996 county real
property tax and the 1996/1997 city real property tax. For purposes of this
Article, real property taxes shall be determined by applying the tax rate
adopted by the City of Yonkers for the annual City tax and by the County of
Westchester for the annual County tax to the assessed valuation of the
building on the demised premises as established by the city assessor, and
to the assessed valuation for the land as established by the city assessor,
on a pro rata basis. Upon the issuance of any tax bill for the real
property of which the demised premises are a part, Owner shall cause to be
prepared a written statement setting forth the real property taxes
allocable to the demised premises and the manner in which the amount due
from Tenant was calculated. The amount set forth on said statement shall
constitute the additional rent required to be paid to Owner by Tenant
pursuant to the terms of this Article. Such payment shall be made on or
before the expiration of seven (7) days from the delivery to Tenant of the
statement setting forth the calculation of the amount due hereunder.
43. In the event Owner has not received payment of the rent due on the first of
each month on or before the expiration of the seventh (7th) day of such
month, Tenant shall be liable for the payment to Owner, as additional rent,
a sum equal to five (5%) percent of the payment due for such month.
44. Tenant agrees that he will not withhold the payment of any rent in the
event of any dispute between the parties.
45. The parties agree that Friedland Realty, Inc. is the broker entitled to be
paid a commission in connection with this lease. Owner agrees to pay the
commission earned by said broker pursuant to a separate agreement. Owner
and Tenant each represents that it has not dealt with any other broker in
connection with this transaction and shall indemnify and defend each other
against any costs, claims and expenses, including reasonable attorneys'
fees, arising out of the breach by either of such representation and
agreement.
46. Supplementing any similar provisions set forth in Articles 1 through 40 of
this lease, Tenant agrees as follows:
a) to pay for the cost of all electricity, gas, fuel oil and water
required to be used by Tenant during the term of this lease and to
file with the entity providing such utilities and services any
documents required to be filed in order to have Tenant billed directly
for same.
b) to pay for the cost of heating and cooling the demised premises;
c) to make all repairs to the demised premises including the roof and
including the underground pipes and conduits which are part of the
plumbing, heating, electrical and water systems servicing the demised
premises; notwithstanding the foregoing, Tenant shall not be
responsible for structural repairs unless the same are caused by
Tenant's gross negligence;
<PAGE>
d) to maintain and repair any sidewalk abutting the demised premises, to
keep same clean and free of debris and to remove any snow and ice
therefrom;
e) to maintain, repair or replace the boiler in the demised premises as
may be required to keep the same in good operating condition;
f) to cause the boiler to be cleaned and serviced at least once each year
during the term of this lease and provide Owner with a receipted bill
evidencing that same was done and paid for;
g) to refrain from bringing on to the demised premises any hazardous,
toxic or dangerous materials or substances unless the same are
necessarily required for the operation of Tenants business and Tenant
has obtained from governmental authorities having jurisdiction of same
any permit, license or other document of like nature; (See Article 49)
h) to take possession of the demised premises subject to the codes,
ordinances, rules and regulations of any governmental authority having
jurisdiction of the premises now or hereafter in force and effect;
i) to take possession of the demised premises subject to any state of
facts an accurate survey will show and subject to covenants,
restrictions, easements and agreements of record, if any;
j) to cause all refuse and garbage to be removed from the premises at
such times and in such manner as are required to keep the premises
clean and in good order and to pay for the cost and expense of such
removal;
k) to exercise such control over the demised premises as may be necessary
to protect Owner against any liability for injury and/or damages to
persons and/or property or liability for the violation of any law or
other legal requirement of any governmental authority;
l) to obtain any policy of insurance required to be obtained and
maintained pursuant to the terms of this lease from an insurance
company licensed to do business in the State of New York having a
rating by A.M. Best Co. acceptable to Owner. Tenant agrees that any
such policy shall contain provisions that it may not be canceled,
altered, amended or modified unless sixty (60) days' prior written
notice of same has been given to Owner. (See Article 52).
47. Provided Tenant has fully complied with all of the terms and conditions of
this lease and this lease shall be then in force and effect on the
expiration date of the original term, Tenant may elect to renew this lease
for a period of five years upon the same terms and conditions set forth
herein with the exception of the provisions relating to the annual rental
rate, the payment of same and the option to renew set forth herein. The
election to renew this lease must be made by Tenant by giving written
notice of the exercise thereof to Owner personally or by certified mail,
return receipt requested. In either event said notice must in fact be
received by Owner on or before September 30,2001. In the event such notice
is not received by Owner on or before said date, Tenant shall be deemed to
have waived the right to renew this lease.
The annual rent for the first year of the renewal term of this lease is
$139,112.88 and shall be paid in monthly installments of $11,592.74.
The annual rent for the second year of the renewal term of this lease is
$143,286.24 and shall be paid in monthly installments of $11,940.52.
The annual rent for the third year of the renewal term of this lease is
$147,584.88 and shall be paid in monthly installments of $12,298.74.
The annual rent for the fourth year of the renewal term of this lease is
$152,012.40 and shall be paid in monthly installments of $12,667.70.
The annual rent for the fifth year of the renewal term of this lease is
$156,572.76 and shall be paid in monthly installments of $13,047.73.
48. Provided Tenant is not in default of any of the terms and conditions of
this lease, Tenant shall have the option to purchase the demised premises
at the price and on the terms
2
<PAGE>
and conditions herein set forth. In order for the exercise of the option by
Tenant to be valid, Tenant must give written notice of the exercise thereof
to Owner personally or by certified mail, return receipt requested. In
either event, such notice must in fact be received by Owner on or before
the 31st day of December of the year in which the option is exercised.
In the event the option is exercised during the first three years of the
term of this lease (1/1/97 to 12/31/99), the purchase price shall be
$1,385,000.). In the event Tenant exercises said option in the fourth year
of the term of this lease (1/1/2000 to 12/31/2000), the purchase price
shall be $1,440,400., a four percent increase over $1,385,000. In the event
Tenant exercises said option in the fifth year of the term of this lease
(1/1/2001 to 12/31/2001), the purchase price shall be $1,498,016., a four
percent increase over $1,440,400.
In the event Tenant exercises its option to renew this lease as provided
for herein, Tenant shall continue to have the option to purchase the
premises at a price which is four percent higher than the price in effect
for the previous year.
The contract of sale to be entered into by and between the parties shall be
on the form of contract approved by the New York Board of Title
Underwriters and shall contain, among other things, the following
provisions:
a) The amount to be paid upon the execution of the contract shall be ten
percent of the price and shall be held in escrow by the attorneys for
Owner;
b) The balance of the purchase price shall be in the form of certified or
bank checks payable to the order of Owner (as Seller) and shall be
drawn on a bank or banks having locations in the State of New York.
c) The date of the delivery of the deed shall be the first day of the
second month next succeeding the month in which Tenant has exercised
its option to purchase;
d) The deed to be delivered shall be a bargain and sale with covenant
deed;
e) Owner (as Seller) shall pay the transfer taxes required to be paid to
the City of Yonkers and State of New York in connection with the sale.
f) The parties agree to execute any and all documents required to be
executed in order to effectuate transfer of title;
g) Title to be given by Owner (as Seller) shall be such title as any
title company licensed to do business in the State of New York will
approve and insure, and shall be subject to any state of facts an
accurate survey will show, provided such state of facts does not
render title unmarketable, and to covenants, restrictions, easements
and agreements of record, provided same do not prohibit or prevent the
use of the premises as described in Article 1 of this lease.
h) Title shall be taken by Tenant (as Purchaser) in an "as is" condition
and Owner (as Seller) shall not be required to make any repairs to the
improvements on the premises.
i) The amount of the contract deposit shall be retained by Owner as
liquidated damages in the event Tenant (as Purchaser) defaults in its
performance of the terms and conditions of the contract.
Owner agrees to deliver to Tenant, in triplicate, the proposed contract
within five (5) business days after the receipt of the aforesaid written
notice from Tenant exercising the option to purchase. In the event Tenant
fails to execute said contracts and to deliver same as executed together
with a check in the amount of the required down payment payable to the
order of DelBello, Donnellan Weingarten & Tartaglia, LLP, as attorneys,
within five (5) days thereafter, the exercise of the option shall be deemed
to be null and void.
3
<PAGE>
49. COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) For the purposes of this Lease, "Hazardous Material" means and includes
any hazardous, toxic or dangerous waste, substance or material defined as
such in (or for purposes of) the Comprehensive Environmental Response,
Compensation, and Liability Act, any so-called "Superfund" or "Superlien"
law, or any other federal, state or local statute, law, ordinance, code,
rule, regulation, order, decree or other requirement of any governmental
authority regulating, relating to, or imposing liability or standards of
conduct concerning any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect (collectively,
"Environmental Laws"). "Tenant's Hazardous Material" shall mean Hazardous
Material brought onto the Real Property by Tenant or its employees, agents,
contractors or invitees (including "Asbestos", as defined below), while
"Owner's Hazardous Material" shall mean Hazardous Material brought onto the
Real Property by Owner or its employees, agents, contractors or invitees.
(b) (i) Tenant shall comply with any and all Environmental Laws with
respect to the use, discharge or removal of Tenant's Hazardous
Material, shall pay immediately when due the costs of removal of
Tenant's Hazardous Material, and shall keep the Real Property free of
any lien imposed pursuant to Environmental Laws in connection with
Tenant's Hazardous Material. If Tenant fails to do so, then, after
notice to Tenant and the expiration of the earlier of (a) applicable
cure periods hereunder, or (b) the cure period permitted under the
applicable Environmental Law, Owner may declare this Lease to be in
default and/or cause the demised premises, the Building and the Real
Property to be freed from the Tenant's Hazardous Material with the
competitive, actual cost of the removal to be paid by Tenant as Rent
(in which event Tenant shall give Owner and its agents and employees
access to the demised premises at reasonable times on reasonable
notice if required in connection with such removal). Owner shall have
the right at any time (with reasonable notice and reasonable efforts
to minimize interference with Tenant's business) to conduct an
environmental audit of the demised premises, the Building and the Real
Property, and Tenant shall cooperate in the conduct of such audit.
Tenant shall defend, indemnify and save Owner harmless from and
against all loss, cost, damage and expense (including all
consequential damages and reasonable attorneys' fees and costs)
asserted or proven against Owner as a result of any claim in
connection with Tenant's Hazardous Material. The foregoing
indemnification shall survive any termination or expiration of this
Lease.
(ii) Owner shall comply with any and all Environmental Laws with
respect to the use, discharge or removal of Owner's Hazardous
Material, shall pay immediately when due the cost of removal of
Owner's Hazardous Material, and shall keep the Real Property free of
any lien imposed pursuant to Environmental Laws in connection with the
Owner's Hazardous Material. Owner shall defend, indemnify and save
Tenant harmless from and against all loss, cost, damage and expense
(including all consequential damages and reasonable attorneys' fees
and costs) asserted or proven against Tenant as a result of any claim
in connection with Owner's Hazardous Material. The foregoing
indemnification shall survive any termination or expiration of this
Lease. Owner represents and warrants that as of the date hereof there
is no Asbestos in the Real Property.
(c) Tenant shall not install or permit to be installed in the demised
premises, the Building or the Real Property, friable asbestos or any
substance containing asbestos (collectively, "Asbestos"), and shall
promptly, at Tenant's expense, either (a) remove any such Asbestos which
Environmental Laws deem hazardous and require to be removed or (b)
otherwise comply with Environmental Laws in connection with such Asbestos.
If Tenant shall fail to so remove or otherwise comply after the applicable
cure period, Owner may declare this Lease to be in default and/or do
whatever is reasonably necessary to eliminate such Asbestos from the
demised premises, the Building or the Real Property, or otherwise comply
with the applicable Environmental Laws, and the reasonable cost thereof
shall be paid by Tenant as Rent. Following such failure by Tenant and upon
Owners request, Tenant shall give Owner and its agents and employees access
to the demised premises in order to remove such Asbestos if Owner so
desires. Tenant shall defend, indemnify and save Owner harmless from all
costs and expenses (including all consequential damages and reasonable
attorneys' fees and costs) asserted or proven against Owner by any party as
a result of any claim in connection with such Asbestos. The foregoing
indemnification shall survive any termination or expiration of this Lease.
Owner represents and warrants that as of the date hereof there is no
Asbestos in the Real Property.
4
<PAGE>
(d) Tenant hereby agrees to indemnify Owner (and its successors and
assigns) and hold Owner (and its successors and assigns) harmless from and
against all claims, demands, losses, costs, damages, liabilities, fines,
penalties, charges, administrative and judicial proceedings and orders,
judgments, remedial action requirements, enforcement actions of any kind,
and all costs and expenses of every kind and nature whatsoever (including,
but not limited to, reasonable attorneys' fees and expenses, whether at
trial level or on appeal) which Owner (or its successors or assigns) shall
or may, at any time, sustain or incur by reason of, in connection with,
arising from or otherwise relating to any one of the following conditions:
(i) any breach of the representations, warranties or covenants set
forth, respectively, in subparagraphs (b) and (c) above, or
(ii) the presence in, on or under the demised premises of any Tenant's
Hazardous Materials, or any release, discharge or removal of any
Tenant's Hazardous Materials on, under or from the demised premises,
or
(iii) any activity carried on or undertaken on or off the demised
premises, prior to, during or after the term of this Lease, by Tenant
or any employees, agents, contractors or subcontractors of Tenant or
any third persons occupying or present on the demised premises with
Tenant's authorization, in connection with the handling, treatment,
removal, storage, decontamination, cleanup, transport or disposal of
any Hazardous Materials, or
(iv) the presence of Asbestos in the demised premises (if installed or
permitted by Tenant to be installed in the demised premises) or any
activity carried on or undertaken on the demised premises (unless such
activity is not related to Asbestos installed or permitted to be
installed by Tenant in the demised premises or is not carried on or
undertaken by Tenant or its contractors, agents, employees, subtenants
or licensees) in connection with the elimination and removal of
Asbestos from the demised premises or to otherwise comply with
applicable Environmental Laws concerning Asbestos on the demised
premises, or
(v) the filing of any lien by or on behalf of any regulatory authority
relating to the existence or removal of any Tenant's Hazardous
Material related to the demised premises, or
(vi) the failure of Tenant to comply in all respects with any
Environmental Law.
The foregoing indemnity shall further apply to any residual contamination
on or under the Real Property or contamination affecting any natural
resources or any other property arising in connection with the generation,
use, handling, storage, transport or disposal of Tenant's Hazardous
Materials, and irrespective of whether any of such activities were or will
be undertaken in accordance with Environmental Laws.
(e) Tenant agrees to pay, reimburse or make whole any loss that Owner may
suffer as a result of the occurrence of any of the conditions described in
(i) through (vi) hereinabove as and when such loss is incurred by Owner.
(f) Owner represents and warrants that as of the date hereof the Real
Property does not violate any Environmental Laws. Owner hereby agrees to
indemnify Tenant (and its successors and assigns) and hold Tenant (and its
successors and assigns) harmless from and against all claims, demands,
losses, costs, damages, liabilities, fines, penalties, charges,
administrative and judicial proceedings, orders, judgments, remedial action
requirements, enforcement actions of any kind, and all costs and expenses
of every kind and nature (including, but not limited to, reasonable
attorneys' fees and expenses, whether at trial level or on appeal) which
Tenant (or its successors or assigns) shall or may, at any time, sustain or
incur as a result of a breach by Owner of such representation and warranty.
(g) The liability of either party under this Article shall in no way be
limited, impaired or otherwise affected by any amendment or modification of
the provisions of this Lease.
(h) Each party covenants and agrees to pay all fees and expenses, including
reasonable attorneys' fees and expenses and court costs, which may be
incurred
5
<PAGE>
by the other party, its successors or assigns, in enforcing any of the
terms or provisions of this Article, in addition to all other amounts due
hereunder.
(i) The indemnifications and other covenants and terms contained in
this Article shall survive in perpetuity, notwithstanding any
termination or expiration of this Lease.
50. Tenant acknowledges having received from Owner a copy of the certificate of
occupancy issued on March 28, 1995. Tenant further acknowledges that a new
certificate of occupancy would be required for its use of the premises.
Tenant agrees, at its own cost and expense, to immediately proceed in a
diligent and expeditious manner with the filing of any and all documents
and the payment of any and all fees required to be filed and paid and to
take whatever additional steps as may be required by the Codes and
Ordinances of the City of Yonkers and the rules and regulations of the
Department of Housing and Buildings in order to obtain such certificate of
occupancy. This lease is contingent upon the issuance of such certificate
to Tenant and shall not be deemed effective until the date such certificate
is in fact issued. Tenant, however, shall be obligated to pay rent for the
period commencing January 1, 1997, which date shall be deemed to be the
commencement date of the term of this Lease. In the event, however, such
certificate is not issued to Tenant on or before the 20th day of May, 1997,
this lease shall terminate and be of no further force and effect as between
the parties
51. In the event Owner receives a bonafide offer from a third party to purchase
all of the premises shown on the attached sketch, including that portion
marked "NOT INCLUDED AS PART OF THE DEMISED PREMISES", Owner shall give
written notice to Tenant of the receipt of such bonafide offer and the
terms and conditions set forth therein personally or by certified mail,
return receipt requested. Tenant shall thereupon have ten (10) days within
which to give written notice that Tenant will purchase the premises on the
same terms and conditions as set forth in said offer in such manner that
Owner will have received such notice within said ten (10) day period.
52. In the event Tenant's use of the demised premises results in an increase in
the premium on Owner's policy of fire insurance, the difference between the
amount of the premium ordinarily charged and the amount of the premium
charged as a result of Tenant's use shall be deemed additional rent and
shall be due and payable by Tenant on or before the expiration of ten (10)
days after receipt by Tenant of a written notice from Owner setting forth
the amount of such additional rent and the manner in which such amount was
calculated.
53. Supplementing Article 32 of this lease, it is agreed by and between the
parties that Owner shall not be required to keep the security deposit in an
interest bearing account and that Owner may, upon the delivery to Tenant, a
written notice of Owner's intention to do so together with the personal
guarantee of Thomas Abruzese and Michael Abruzese hereinafter described,
invade the security deposit, provided the funds taken from said deposit
shall be used for the maintenance of the demised premises. The guarantee
herein described shall provide for the repayment of said funds to the
security deposit upon the failure of Owner to do so.
54. Supplementing articles 17, 36, 42 and 47 of this Lease, the time period set
forth in each of said articles shall be increased to a period of time
consisting of ten (10) business days in lieu of the time set forth in said
articles.
55. Wherever the term "City of New York" appears in this Lease, it shall be
deemed to mean the City of Yonkers.
2301 JEROME AVENUE REALTY CORP.
By: /s/ Michael J. Abruzese
-----------------------------
COMMUNITY MEDICAL TRANSPORT, INC.
By: /s/ [ILLEGIBLE]
-----------------------------
6
<PAGE>
ADDENDUM
--------
Re: Lease amendment 56 Worth Street Yonkers, NY
This is an addendum to the original lease for 56 Worth Street in Yonkers,
NY. Whereas the certificate of occupancy has not been obtained prior to January
1, 1997, the facility could not be used for the purposes needed by Community. In
consideration for the work to be completed, it is hereby agreed that the terms
of the lease be amended as follows.
It is hereby agreed that the lease is amended to begin July 1, 1997, and
the term is amended from 5 years (January 1, 1997 - December 31, 2001) to 4
years and 9 months (July 1, 1997 - March 31, 2002). However, should the
certificate of occupancy be obtained prior to July 1, 1997, then CMTI will pay
rent for the number of days the certificate of occupancy is obtained prior to
July 1, 1997 on a monthly pro-rata basis using $10,000 per month.
It is hereby agreed that CMTI will pay landlord an additional $30,000
payable at a rate of $2,500 per month for the first twelve months (July 1997 to
June 1998).
It is hereby agreed that the annual rent increases are to begin on April 1
of each year. The monthly rent payments (excluding the additional $30,000) shall
be paid as follows:
July 1, 1997 - March 31, 1998 $10,000.00
April 1, 1998 - March 31, 1999 $10,300.00
April 1, 1999 - March 31, 2000 $10,609.00
April 1, 2000 - March 31, 2001 $10,927.27
April 1, 2001 - March 31, 2002 $11,255.09
It is hereby agreed that 1/2 the costs incurred by CMTI in connection with
Architects fees will be reimbursed to CMTI by the landlord.
All other terms of the original agreement remain unchanged.
/s/ Michael Abruzese /s/ Dean L. Sloane
- -------------------- ------------------
Michael Abruzese Dean L. Sloane
2301 Jerome Avenue Realty Corp. Community Medical Transport, Inc.
<PAGE>
LEASE AGREEMENT BETWEEN
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY,
AS LESSOR,
AND
COMMUNITY MEDICAL TRANSPORT, INC.,
AS LESSEE.
Premises:
4 Gannett Drive
White Plains, New York 10604
Prepared By:
The Law Offices of
HIRSCH & KATZ, LLP
595 Stewart Avenue
Suite 400
Garden City, New York 11530
(516) 227-1117
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEMISE AND TERM OF DEMISE 1
ARTICLE 2 - RENT 2
ARTICLE 3 - TAXES AND COMMON AREA MAINTENANCE CHARGES 4
ARTICLE 4 - USE OF DEMISED PREMISES 10
ARTICLE 5- POSSESSION AND CONDITION OF DEMISED PREMISES 12
ARTICLE 6- UTILITIES, CLEANING, ETC. 137-
LIST OF EXHIBITS TO LEASE
EXHIBIT "A" THE METES AND BOUNDS DESCRIPTION OF THE PROPERTY
EXHIBIT "B" THE FLOOR PLANS OF THE DEMISED PREMISES
EXHIBIT "C" BUILDING RULES AND REGULATIONS
EXHIBIT "D" CLEANING SPECIFICATIONS
EXHIBIT "E" LESSOR'S WORK
EXHIBIT "F" This Exhibit Has Been Intentionally Omitted
EXHIBIT "G" STANDARD REQUIREMENTS FOR ALTERATIONS
TO BE PERFORMED BY LESSEES
<PAGE>
AGREEMENT OF LEASE, dated as of September , 1997, between PRINCIPAL
MUTUAL LIFE INSURANCE COMPANY, having an office in care of Rostenberg-Doern
Management Corp., 2975 Westchester Avenue, Purchase, New York 10577
(hereinafter referred to as "Lessor") and COMMUNITY MEDICAL TRANSPORT, INC., a
New York corporation, with offices at 4 Gannett Drive, White Plains, New York
10604 (hereinafter referred to as "Lessee");
W I T N E S S E T H
WHEREAS, Lessor, is the owner in fee simple absolute of the land and
all the improvements erected thereon commonly known as 4 Gannett Drive,
located in the City of White Plains, County of Westchester, State of New York
and more particularly described in EXHIBIT "A" annexed hereto (the
"Property");
WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to
hire from Lessor, a portion of the First (1st) Floor in the building known as
and located at 4 Gannett Drive, White Plains, New York 10604 (the "Building")
on the Property and which shall be deemed to consist of approximately Seven
Thousand, Five Hundred and Ninety-Eight (7,598) rentable square feet
(hereinafter collectively referred to as the "Demised Premises") and as more
particularly described on the floor plans annexed hereto as EXHIBIT "B" and
made a part hereof; and
NOW, THEREFORE, in consideration of the foregoing and of the
covenants, conditions and agreements hereinafter set forth, Lessor and Lessee
agree as follows:
ARTICLE 1 - DEMISE AND TERM OF DEMISE
SECTION 1.01.A. Lessor, in consideration of the rents hereinafter
reserved and of the terms, covenants, conditions and agreements herein
contained on the part of Lessee to be paid, observed and fulfilled, does
hereby demise and lease the Demised Premises to Lessee and Lessee hereby hires
the same from Lessor, subject to the following:
(i) all present and future zoning ordinances, laws,
regulations, requirements and orders, including building restrictions
and regulations, and all other present and future ordinances, laws,
regulations, requirements and orders of all departments, boards,
bureaus, commission and bodies, of any municipal, county, state or
federal governments now or hereafter having or acquiring jurisdiction
of the Demised Premises, except that Lessor represents that on the
Commencement Date the Demised Premises shall be suitable for general
office use in accordance with the provisions of this Lease;
(ii) Taxes (as hereinafter defined) not yet due and payable;
and
(iii) all other present and future covenants, easements and
restrictions affecting the Property and the Demised Premises and the
revocable nature of any restriction, easement, agreement, ordinance
or right affecting the Property and the Demised Premises, provided,
however, that same do not prohibit the use of the Demised Premises
for general office use.
B. The Demised Premises are demised and leased unto Lessee, its
permitted successors and assigns, for a term ("Term") commencing on the
Commencement Date (as hereinafter defined) and expiring at noon on the last
day ("Expiration Date") of the first full month in which the Seventh (7th)
anniversary of the Rent Commencement Date (as hereinafter defined) falls,
unless the same shall sooner terminate pursuant to any of the terms,
covenants, conditions or agreements of this Lease or pursuant to law or be
extended pursuant to the provisions of Article 30 hereof.
<PAGE>
SECTION 1.02. As used herein, the term "Commencement Date" shall mean
the date which is the sooner of: (i) the date that Lessor's Work (as
hereinafter defined) is substantially completed (in accordance with the
provisions of Section 34.02(e) hereof), and (ii) the date which is such number
of days prior to the Commencement Date as shall equal the number of days, if
any, by which commencement or performance of Lessor's Work shall have been
delayed by reason of Lessee's Delays (as hereinafter defined), or (iii) the
date upon which Lessee takes possession of all or any part of the Demised
Premises.
SECTION 1.03. As used herein, the term "Rent Commencement Date" shall
mean the date which is the Ninetieth (90th) day after the Commencement Date.
SECTION 1.04. Upon determination of the date which is the
Commencement Date and/or the Rent Commencement Date, as provided in this
Section, either party, upon the request of the other, shall execute and
deliver a statement setting forth the Commencement Date and/or the Rent
Commencement Date, but the failure of such party to execute and deliver such
statement shall not detract from the effectiveness of any of the provisions of
this Lease.
ARTICLE 2 - RENT
SECTION 2.01. Lessee shall pay to Lessor, or to such other person as
Lessor may from time to time designate, at the address specified in or
pursuant to Section 2.04, during the Term, fixed rent ("Fixed Rent"), over and
above the other and additional payments to be made by Lessee as hereinafter
provided, as follows:
A. During and in respect of the period from the Commencement
Date to the Rent Commencement Date (both dates inclusive), an amount
equal to Five Thousand, Six Hundred and Ninety-Eight and 50/100
($5,698.50) Dollars payable in equal monthly installments of One
Thousand, Eight Hundred and Ninety-Nine and 50/100 ($1,899.50)
Dollars; and
B. During and in respect of the period from the Rent
Commencement Date to the date preceding the Second (2nd) Anniversary
of the Rent Commencement Date (both dates inclusive), an amount each
year equal to One Hundred and Fifty-Nine Thousand, Five Hundred and
Fifty-Eight and 00/100 ($159,558.00) Dollars payable in equal monthly
installments of Thirteen Thousand, Two Hundred and Ninety-Six and
50/100 ($13,296.50) Dollars; and
C. During and in respect of the period from the Second (2nd)
Anniversary of the Rent Commencement Date to the date preceding the
Fourth (4th) Anniversary of the Rent Commencement Date (both dates
inclusive), an amount each year equal to One Hundred and Sixty-One
Thousand, Four Hundred and Fifty-Seven and 48/100 ($161,457.48)
Dollars payable in equal monthly installments of Thirteen Thousand,
Four Hundred and Fifty-Seven and 79/100 ($13,454.79) Dollars; and
D. During and in respect of the period from the Fourth (4th)
Anniversary of the Rent Commencement Date to the date preceding the
Sixth (6th) Anniversary of the Rent Commencement Date (both dates
inclusive), an amount each year equal to One Hundred and Sixty-Three
Thousand, Three Hundred and Fifty-Six and 96/100 ($163,356.96)
Dollars payable in equal monthly installments of Thirteen Thousand,
Six Hundred and Thirteen and 08/100 ($13,613.08) Dollars; and
E. During and in respect of the period from the Sixth (6th)
Anniversary of the Rent Commencement Date to the Expiration Date
(both dates inclusive), an amount equal to One Hundred and Sixty-Five
Thousand, Two Hundred and Fifty-Six and 56/100 ($165,256.56) Dollars
payable in equal monthly installments of Thirteen Thousand, Seven
Hundred and Seventy-One and 38/100 ($13,771.38) Dollars.
<PAGE>
SECTION 2.02.A. Fixed Rent shall be paid in equal monthly
installments on the first day of each and every month during the Term without
any set off or deduction whatsoever; provided however, that if Fixed Rent
shall be payable for any period prior to the first day of the first full month
during the Term, then such Fixed Rent shall be paid in a proportionate amount
for the number of days in such period and paid as and when the first equal
monthly installment is payable as aforesaid. Notwithstanding the foregoing,
Lessee shall pay the first monthly installment of Fixed Rent upon execution of
this Lease.
SECTION 2.03. If Lessee shall fail to pay as and when due under this
Lease any Additional Rent (as hereinafter defined), and such failure shall not
be remedied within the grace period (if any) applicable thereto under this
Lease, Lessor shall have all of the rights and remedies provided in this Lease
as in the case of default in the payment of the Fixed Rent, including any
rights available to Lessor at law or in equity. Except as otherwise
specifically provided in this Lease, the Fixed Rent and Additional Rent shall
be paid without notice, demand, credit, abatement, deduction or setoff of any
kind whatsoever. The Fixed Rent and Additional Rent are sometimes referred to
collectively herein as "Rent."
SECTION 2.04. Lessee shall pay the Rent to Lessor in lawful money of
the United States of America which shall be legal tender for all debts, public
and private, at the time of payment, at the office of Lessor set forth above,
or to such other person or persons and/or at such other place or places as
Lessor may designate from time to time by notice to Lessee. Such payments may
be by check of Lessee, subject to collection, payable to the order of Lessor
or to such other person or persons as Lessor may designate from time to time
by notice to Lessee; any such payment shall be deemed made upon receipt
thereof, subject to collection.
SECTION 2.05. Any obligation of Lessee for payment of Rent which
shall have accrued with respect to any period during or prior to the Term
shall survive the expiration or termination of this Lease.
ARTICLE 3 - TAXES AND COMMON AREA MAINTENANCE CHARGES
SECTION 3.01. As used herein:
A. "Lessor's Statement" shall mean an instrument containing a
computation of any Additional Rent payable by Lessee to Lessor pursuant to
this Article.
<PAGE>
B. "Common Area Maintenance Charges" shall mean all costs and
expenses of whatever kind or nature, whether or not herein specifically
mentioned or now contemplated, which are incurred by Lessor or Lessor's agents
in connection with the use, operation, repair or maintenance of the Building
and/or Property, including, but not limited to the following: (1) premiums and
other charges for insurance which Lessor is required or permitted to maintain
hereunder including, but not limited to, general comprehensive liability
insurance covering bodily injury, personal injury (including death), property
damage, public liability, non-hired automobile insurance, sign insurance,
plate glass insurance and any other insurance incurred by Lessor for the
Building and/or Property; (2) costs and expenses of performing repairs in or
to the Building and/or Property and the sidewalks and curbs adjacent thereto;
(3) costs and expenses of performing repairs, resurfacing of the parking lots
and any adjacent facilities; (4) costs and expenses of landscaping and
maintaining the grounds of the Building and/or Property; (5) costs and
expenses of snow and ice removal and/or treatment; (6) costs and expense of
rubbish, garbage and other refuse removal; (7) fees and disbursements payable
to Rostenberg-Doern Management Corp. ("RDM") to furnish management, repair, or
other services regarding the Building and/or Property, except that, in the
case of any such person who is affiliated with Lessor, such fees shall not
exceed that which is customary or reasonable in the industry for similar
buildings in Westchester County; (8) fees and disbursements payable to any
person (other than "RDM") to furnish management, repair or other services
regarding the Building and/or Property, except that, in the case of any such
person who is affiliated with Lessor, such fees shall not exceed that which is
customary or reasonable in the industry for similar buildings in Westchester
County; (9) cost and expenses of performing repairs to all structural walls,
roofs, and plate glass doors and windows, if any, which are not expressly made
part of the Building, Property or the Demised Premises; (10) cost of
refurbishing the common areas and modernizing and replacing equipment
servicing the common areas, including but not limited to regular painting of
non-tenanted areas at the Building and/or Property; (11) cost and expense of
maintenance and repairs of the structural elements of the Building and/or
Property; (12) costs and expenses of performing repair, maintenance and
replacement of lighting and lighting fixtures; (13) repair, maintenance, and
replacement of all or any part of the sprinkler system installed in any part
of the Building and/or Property; (14) cost of utilities, such as electricity,
water and sewer; (15) costs and expenses of performing repairs and maintenance
to all heating, ventilating and air conditioning equipment installed in any
part of the Building, including but not limited to that portion contained
within the Demised Premises; (16) cost and expense of performing repairs and
maintenance to utility lines, sanitary and storm sewer lines and culverts and
drainage facilities; (17) costs and expenses of providing and maintaining
security, if any; (18) costs and expenses of providing and maintaining traffic
control, if any; (19) labor costs and expenses of full or part time personnel
employed at the Property in connection with the operation of the Building at
or below the grade of building manager; (20) costs and expenses of providing
holiday and other decorations to the Building and/or Property; (21) costs and
expenses of performing repairs and maintenance to all elevators in any part of
the Building and/or Property; (22) cost and expense of providing and
maintaining porter and matron service at the Building and/or Property, if any;
(23) cost and expense of providing and performing cleaning and related
services; (24) cost and expense of providing window washing; (25) cost and
expense of all supplies; (26) wages, salaries, disability benefits, pensions,
hospitalization, retirement plans and group insurance respecting service and
maintenance employees of Lessor; (27) cost and expense of all uniforms and
working clothes for such employees and the cleaning thereof; (28) cost and
expense imposed on Lessor pursuant to law or to any collective bargaining
agreement with respect to such employees; (29) cost and expense of providing
and maintaining worker's compensation insurance, payroll, social security,
unemployment and other taxes now in effect or hereinafter imposed with respect
to such employees; (30) cost of all sales, utility and use taxes and other
taxes of like import now in effect or hereinafter imposed; (31) cost and
expense of all maintenance and service contracts for the Building and/or
Property; (32) cost of all other normal operating expenses of repair,
operation, and maintenance of the Building and/or Property; (33) cost and
expense of providing and maintaining loading dock and mail personnel, if any;
(34) cost and expense of all professional and consulting fees, including legal
and audit fees and all costs and disbursements incurred in connection
therewith; and (35) the cost of any capital equipment or capital expenditures,
to the extent provided for in Section 3.01.C. hereof;
<PAGE>
provided, however, that the following items shall be excluded from Common Area
Maintenance Charges: (1) leasing commissions; (2) cost of repairs or
replacements incurred by reason of fire or other casualty (to the extent the
same is or would have been covered by insurance required to be maintained by
Lessor herein), or caused by the exercise of the right of eminent domain (to
the extent same is covered by any condemnation award) less any cost incurred
by Lessor in obtaining such insurance proceeds or condemnation award; (3)
costs incurred in performing work or furnishing services to or for individual
tenants (including Lessee) at such tenant's expense; (4) debt service on any
mortgages now or hereafter encumbering the Building and/or Property; (5) the
cost of performing or furnishing services for tenants other than Lessee at
Lessor's expense, to the extent that such work or service Lessor is obligated
to furnish to or for Lessee at Lessor's expense and (6) the cost of attorneys'
fees incurred in connection with negotiating and drafting leases with other
tenants, or in connection with disputes with other tenants; (7) costs incurred
in the sale or refinancing of the Building and/or Property; (8) interest or
penalties due to Lessor's violations of law; (9) advertising and promotional
expenses; (10) depreciation; and (11) leasehold improvements made for other
tenants.
C.1. If Lessor shall purchase or lease any item of capital equipment
or make any capital expenditure intended to result in savings or reductions in
the Common Area Maintenance Charges and which Lessor reasonably believes shall
provide Lessee with the benefit of a savings or reduction in such Common Area
Maintenance Charges based upon the advice of Lessor's consultants, then the
costs for same shall be included in the Common Area Maintenance Charges, to
the extent hereinafter set forth. Lessor shall deliver to Lessee, promptly
following Lessee's request, a copy of any concluded studies conducted by
Lessor which show anticipated savings or reductions in such Common Area
Maintenance Charges as a result of any planned capital expenditure or purchase
of capital equipment. The costs of capital equipment or capital expenditures
shall be included in the Common Area Maintenance Charges in the year in which
the costs are incurred and in any subsequent years, on a straight-line basis
(using applicable federal tax lives), to the extent that such items are
amortized over the useful life of such equipment and/or asset to which it
relates and only to the extent of such savings or reductions in Common Area
Maintenance Charges with an interest factor equal to two percent (2%) above
the interest rate payable on United States Treasury securities having a
maturity comparable to the useful life of such equipment and/or asset.
2. If Lessor shall purchase or lease any item of capital equipment or
make any other capital expenditure in order to comply with Legal Requirements,
Insurance Requirements or Environmental Laws (as those terms are hereinafter
defined) which become effective after the execution date of this Lease or in
order to benefit or increase the safety and security of the Building,
Property, or its tenants and/or invitees, then the costs for same shall be
included in Common Area Maintenance Charges for the year in which the costs
are incurred and subsequent years, on a straight-line basis, (using applicable
federal tax lives), with an interest factor equal to two percent (2%) above
the interest rate payable on United States Treasury securities having a
maturity comparable to the useful life of such items at the time Lessor
incurred said costs.
<PAGE>
3. If during all or part of any year, including calendar year 1997,
(i) less than ninety-five percent (95%) of the leasable space in the Building
is occupied by tenants or occupants or (ii) Lessor shall furnish any
particular item(s) of work or service (which would constitute a common area
maintenance charge hereunder) to less than ninety-five percent (95%) of the
leasable portions of the Building or to only a portion of the Property, due to
the fact that less than ninety-five percent (95%) of the leasable portions of
the Building are occupied, or because such item of work or service is not
required or desired by the tenant of such portion, or such tenant is itself
obtaining and providing such item of work or service, or for other reasons,
then, for the purposes of computing the Additional Rent payable hereunder, the
amount of Common Area Maintenance Charges or the amount of the expenses
attributable to such item, as the case may be, for such period shall be deemed
to be increased by an amount equal to the additional costs and expenses which
would reasonably have been incurred during such period had the Building been
at least ninety-five percent (95%) occupied or had Lessor furnished such item
of work or services to such other portions of the Building or the Property.
D. Lessor shall have the absolute right, at all times during the Term
and any Renewal Term, (as hereinafter defined) to increase, reduce, alter or
otherwise modify the way in which it uses, operates, repairs, or maintains the
Building and/or the Property and the cost thereof. Nothing contained herein
shall require Lessor to incur or provide any particular service or charge in
connection with its use, operation, repair or maintenance of the Building
and/or Property, it being agreed and understood that the items described in
Section 3.01.B. are by way of illustration only and shall not obligate Lessor
thereto, except that Lessor shall maintain the Building and Property as a
first class office building in Westchester County, New York.
E. The term "Taxes" shall mean all such taxes, assessments, use and
occupancy taxes in respect of this Lease and any subleases made hereunder,
water and sewer charges, rates and rents, water and other meter charges and
all such other charges, taxes, levies and sums of every kind or nature
whatsoever, general and special, extraordinary as well as ordinary, whether or
not now within the contemplation of the parties, as shall or may during or in
respect of the Term (or any period prior to the Term for which Fixed Rent is
payable) be assessed, levied, charged or imposed upon or become a lien on the
Property, Building, or Demised Premises, or any part thereof, or anything
appurtenant thereto, or the sidewalks, streets or roadways in front of,
adjacent to or appurtenant to the Property, Building or Demised Premises (and
which have a basis related in any way to the Property, Building, or Demised
Premises and/or the use or manner of use thereof), or which, if imposed on
Lessee or in respect of the Property, Building or Demised Premises and if not
paid by Lessee, would be collectible from Lessor, or which have been so
assessed, levied, charged or imposed prior to the Term (but, in the
last-mentioned case, only with respect to a period falling within the Term);
provided, however, that, except if and to the extent otherwise provided in the
succeeding sentence, "Taxes" shall not mean federal, state or local income
taxes, franchise, excise, gift, transfer, capital stock, estate, succession or
inheritance taxes or penalties or interest for late payment of any tax in
respect of which Lessee shall have duly made payment of Additional Rent as
herein provided. If, at any time during the Term, the methods of taxation
prevailing at the commencement of the Term shall be altered so that, in lieu
of or as a substitution in whole or in part for the taxes, assessments,
levies, impositions or charges now or hereafter levied, assessed or imposed on
real estate and the improvements thereon, shall be levied, assessed or imposed
any tax or other charge on or in respect of the Property, Building and/or
Demised Premises or the rents, income or gross receipts of Lessor therefrom
(including any county, town, municipal, state or federal levy), then such tax
or charge shall be deemed a Tax, but only to the extent that such Tax would be
payable if the Property, Building or Demised Premises, or the rent, income or
gross receipts received therefrom, were the only property of Lessor subject to
such Tax, and Lessee shall pay and discharge the same as herein provided in
respect of the payment of Taxes.
<PAGE>
F. The term "School Tax Base" shall mean the amount of Taxes as
hereinabove defined, imposed, levied, assessed and/or collected on the
Property, for the 1997/1998 School Tax and "Town Tax Base" shall mean the
amount of Taxes as hereinabove defined, imposed, levied, assessed and/or
collected on the Property for the 1997 Town, County and State Tax.
G. The term "School Tax Year" shall mean each period of twelve (12)
consecutive months commencing as of the first day of July of each such period;
and "Town Tax Year" shall mean each period of twelve (12) consecutive months
commencing as of the first day of January of each such period, in which any
part of the term of this Lease shall occur, or such other periods of twelve
(12) months as may be adopted as the fiscal year for real estate tax purposes.
SECTION 3.02.A. Lessee shall pay to Lessor, as Additional Rent,
during or in respect of the period from the Rent Commencement Date to the
Expiration Date (both dates inclusive) for each School Tax Year and Town Tax
Year or portion thereof, its proportionate share ("Lessee's Proportionate
Share", as hereinafter defined) of increases in Taxes which will be imposed,
levied, assessed or collected on the Property, and/or Building of which the
Demised Premises are a part, for such School Tax Year and/or Town Tax Year, as
the case may be, over the respective tax bases regardless of whether such
increase results from a higher tax rate and/or an increase in the assessed
valuation of either the Property or Building or any other tax. Reasonable fees
and expenses, if any, incurred in obtaining any reduction in assessed
valuation from the tentative assessment to the final assessment shall also be
considered an increase in Taxes for the purpose of this provision. Such
payments shall be made by Lessee as Additional Rent in equal monthly
installments during the applicable tax year together with the payment of Fixed
Rent. Copies of tax bills applicable to the School Tax Base and the Town Tax
Base, as the case may be, and to any such applicable tax year shall be made
available by Lessor for inspection by Lessee during normal business hours. In
the event of any reduction in Taxes after final assessment and with respect to
which Lessee has paid its proportionate share, any such reduction, less fees
and expenses incurred to obtain such reduction shall be refunded in
proportionate amounts to Lessee.
<PAGE>
B. If Lessor obtains a reduction of either the School Tax Base or
Town Tax Base by final determination of legal proceedings or otherwise, then:
(i) the School Tax Base or Town Tax Base shall be correspondingly revised,
(ii) all Tax payments theretofore paid or payable hereunder shall be
recomputed on the basis of such reduction, (iii) Lessee shall pay to Lessor as
Additional Rent, within thirty (30) days after receipt of a bill therefor, any
deficiency between the amount of such Tax payments theretofore computed and
the amount thereof due as a result of such recomputations and (iv) all future
Tax payments shall be computed using the revised School Tax Base and Town Tax
Base.
SECTION 3.03.A. Lessee shall pay to Lessor, as Additional Rent,
during or in respect of the period from the Rent Commencement Date to the
Expiration Date (both dates inclusive) for each calendar year or portion
thereof, Lessee's Proportionate Share of the increases in the Common Area
Maintenance Charges over the over the Base Common Area Maintenance Charges (as
hereinafter defined). Such payments shall be made by Lessee as Additional Rent
in equal monthly installments during the applicable calendar year together
with the payment of Fixed Rent.
B. The term "Base Common Area Maintenance Charges" shall mean the
Common Area Maintenance Charges in effect for the calendar year ending
December 31, 1997.
SECTION 3.04.A. At any time hereafter and from time to time, Lessor
may furnish to Lessee a Lessor's Statement setting forth (i) Lessor's actual
Common Area Maintenance Charges (or any one or more items thereof) and/or
actual Taxes for a period which shall have expired only if a final statement
has not been previously rendered, and/or (ii) Lessor's reasonable estimate of
Common Area Maintenance Charges and/or Taxes for a succeeding period. Within
Thirty (30) days next following rendition of each such Lessor's Statement,
Lessee shall pay to Lessor the entire amount, if any, shown on such Lessor's
Statement as being due with respect to any period which shall have expired. In
addition, Lessee shall pay to Lessor, on the first day of each month following
rendition of each such Lessor's Statement, on account of the estimated
Additional Rent thereafter payable, a proportionate sum of the total
Additional Rent shown upon such Lessor's Statement as being Lessor's
reasonable estimate for a succeeding period on an annual basis (it being
agreed that Lessor's estimate shall in any event be deemed reasonable if it is
based on actual Common Area Maintenance Charges (or any one or more items
thereof) and/or actual Taxes for a period which shall have expired immediately
prior thereto, so that one month prior to the end of such period, Lessee's
Proportionate Share of the increase shall be paid in full, and Lessee shall
continue to pay Additional Rent on such basis until receipt of a subsequent
Lessor's Statement. Such Additional Rent shall be due and payable at the same
time as each monthly installment of Fixed Rent.
B. A reconciliation shall be made upon each Lessor's Statement as
follows: Lessee shall be debited with any Common Area Maintenance Charges
and/or Taxes payable as shown on such Lessor's Statement, and credited with
the aggregate of the total amount, if any, paid by Lessee in accordance with
the provisions of the preceding paragraph on account of the estimated
Additional Rent, for the period or item in question, and, within thirty (30)
days next following rendition of such Lessor's Statement, Lessee shall pay
Lessor the amount of any net debit balance shown thereon or Lessor shall apply
against the next ensuing installments of Fixed Rent the net credit balance
shown thereon.
C. Without limiting the preceding provisions of Section 3.04, it is
understood that Lessor shall furnish a Lessor's Statement, for each calendar
year falling wholly or partially within the Term.
<PAGE>
SECTION 3.05. A. Lessor's failure to render Lessor's Statements with
respect to any period shall not prejudice Lessor's right to render a Lessor's
Statement with respect to that or any subsequent period. The obligations of
Lessor and Lessee under the provisions of this Article with respect to
Additional Rent shall survive the expiration or any sooner termination of the
Term.
B. Each Lessor's Statement shall be conclusive and binding
upon Lessee unless within thirty (30) days after receipt of such Lessor's
Statement, Lessee shall notify Lessor that it disputes the reasonableness or
correctness of Lessor's Statement, specifying the respects in which Lessor's
Statement is claimed to be unreasonable or incorrect. Pending the
determination of such dispute by agreement or arbitration (as hereinafter
provided), Lessee shall pay Additional Rent in accordance with the applicable
Lessor's Statement, and such payment will be without prejudice to Lessee's
position. If the dispute shall be finally determined in Lessee's favor by
arbitration, Lessor shall forthwith pay Lessee the amount of Lessee's
overpayment of Additional Rent resulting from compliance with Lessor's
Statement together with interest thereon at the legal rate from the date of
such payment by Lessee. Lessor, upon request of Lessee, shall either make
available to Lessee such documentation as may be in Lessor's possession to
support a particular Common Area Maintenance Charge or permit Lessee to
examine relevant portions of Lessor's books and records.
C. The parties hereto agree that any dispute solely with respect to
Common Area Maintenance Costs shall be finally determined by binding
arbitration in accordance with rules and regulations promulgated by the
American Arbitration Association at its offices closest to the City of White
Plains, New York. Notwithstanding the foregoing, Lessor shall have the right
to commence summary or other judicial proceedings to recover Rent, possession
of the Demised Premises or in connection with the termination of this Lease.
In the event that any matter is submitted to arbitration, the party seeking
arbitration shall designate an arbitrator by giving notice to the other party
as to the name of such arbitrator and if such arbitrator is not satisfactory
to the other party, then the other party shall designate its own arbitrator
within twenty (20) days after receiving the notice of the party first
designating an arbitrator. Failure by the party not initiating the arbitration
process to designate an arbitrator within said twenty (20) day period shall be
deemed acceptance of the arbitrator designated by the party initiating the
arbitration process. If two arbitrators are so designated by the parties, then
those two arbitrators shall designate a third arbitrator within twenty (20)
days after the designation of the second arbitrator. In the event that the two
arbitrators are unable to agree upon the third arbitrator within said twenty
(20) day period, then in such event, either party or the arbitrator for such
party, may apply to the office of the American Arbitration Association nearest
to the City of White Plains, New York for the appointment of the third
arbitrator. The sole or three arbitrators so designated, as the case may be,
shall resolve the matter in dispute by majority within twenty (20) days after
such designations. Any such resolution shall be final and binding upon the
parties hereto. In making their determination, the arbitrators shall not
enlarge upon, or alter or amend, this Lease or Lessor's or Lessee's rights as
provided in this Lease, it being understood that the sole issue for
determination by the arbitrators shall be matter submitted to them for
arbitration. Lessor and Lessee may, at their own cost and expense, be
represented by counsel and employ expert and other witnesses in any such
arbitration. If only one arbitrator is used, each party shall share equally in
the arbitrators fees. If three arbitrators are used, the parties shall each
pay their own arbitrators and shall share equally in the charges for the third
arbitrator. If in their decision, the arbitrators shall specify that either of
the parties is the prevailing party, which right the arbitrators shall have,
the party prevailing shall be entitled to reasonable counsel fees and the
party not prevailing shall also pay the charges and expenses of all three
arbitrators.
SECTION 3.06. Lessee shall pay and discharge, or cause to be paid and
discharged, the following items, regardless of to whom or how incurred, all
taxes and assessments, if any, which shall or may during the Term be charged,
levied, assessed or imposed upon, or become a lien upon, the personal property
of Lessee used in the operation of the Demised Premises and which, if not paid
by Lessee, would be collectible from Lessor.
ARTICLE 4 - USE OF DEMISED PREMISES
SECTION 4.01.A. Subject to the provisions of this Article, Lessee
shall have the right to use the Demised Premises for general office purposes
and for no other purposes.
<PAGE>
B. Lessor does hereby grant unto Lessee the privilege and a license
to Twenty-Nine (29) non-reserved parking spaces in the parking area located on
the Property, for a period to be coterminous with the Term of this Lease.
Lessee agrees that Lessor shall have the right, in its sole and absolute
discretion, upon thirty (30) days written notice to Lessee, to change the
location of all reserved parking spaces in the event that Lessor determines to
change the area, level, location and arrangement of parking areas and other
facilities; to build multistory parking facilities; to temporarily restrict
parking by lessees, their officers, agents and employees; and to close all or
any portion of said areas or facilities to such extent as may be legally
sufficient to prevent a dedication thereof or the accrual of any right to any
person or the public therein; to close temporarily all or any portion of the
parking areas or facilities to discourage non-customer parking, provided,
however, that in no event shall number of parking spaces available at the
Property be less than the number required by law. The license and privilege
hereby granted shall apply only to those duly registered and operating private
passenger motor vehicle(s) owned and operated by Licensee or Licensee's
employees, invitees and contractors and shall not be transferable to any other
person or used for any other purpose other than as herein provided.
SECTION 4.02. Lessee shall not use or occupy the Demised Premises in
any manner or suffer or permit the Demised Premises or any part thereof to be
used in any manner, or do or suffer or permit anything to be done in the
Demised Premises, or bring anything into the Demised Premises or suffer or
permit anything to be brought into the Demised Premises, which would in any
way do any of the following: (a) violate any of the provisions of the Mortgage
(as hereinafter defined) or Superior Lease (as hereinafter defined); (b)
violate any Legal Requirements, Insurance Requirements or Environmental Laws
(as such terms are hereinafter defined); (c) make void or voidable any
insurance policy then in force with respect to the Demised Premises, Building
or Property; (d) make unobtainable from insurance companies authorized to do
business in the State of New York and rated by Best's Insurance Rating Service
with a rating at least equal to A:XII, at standard rates without any special
premium or charge, any fire or other casualty insurance with extended
coverage, or rental, liability or boiler insurance, or other insurance
provided for in Section 11.01 or otherwise may be required to be furnished by
Lessor under the terms of the Mortgage or Superior Lease with respect to the
Demised Premises; (e) cause physical damage to the Demised Premises, Building
or Property, or any part thereof; (f) constitute a public or private nuisance;
(g) substantially impair the appearance or character of the Demised Premises,
Building or Property; (h) discharge or cause the discharge of objectionable
substances, fumes, vapors or odors from the Demised Premises not otherwise in
compliance with Legal Requirements, Insurance Requirements and Environmental
Laws; (i) cause Lessee to default in the observance and performance of any of
its other obligations to be observed and performed under this Lease; (j)
unreasonably interfere with the effectiveness or accessibility of the utility,
mechanical, electrical and other systems installed or located anywhere at the
Demised Premises, or (k) violate any of the Building's Rules and Regulations
annexed hereto as EXHIBIT "C," as same may be amended from time to time,
provided, however, that nothing contained in sections (a) through (k) shall
prohibit the use of the Demised Premises for the purposes set forth in Section
4.01 of this Lease.
SECTION 4.03. If any governmental license or permit shall be required
for the proper and lawful conduct of Lessee's business in the Demised Premises
or any part thereof, then Lessee, at its sole cost and expense, shall duly
procure and thereafter maintain such license or permit and submit the same to
inspection by Lessor. Lessee shall, at all times, comply with the terms and
conditions of each such license or permit, but in no event shall failure to
procure and maintain same by Lessee affect Lessee's obligations hereunder.
Lessee shall not use or occupy the Demised Premises, or suffer or permit
anyone to use or occupy the Demised Premises, in violation of any certificate
of occupancy issued for the Building or Property.
SECTION 4.04. Lessor shall obtain a certificate(s) of occupancy
required for Lessee's occupancy of the Demised Premises upon substantial
completion of Lessor's Work (as that term is hereinafter defined).
SECTION 4.05. Lessee shall not place, or suffer, or permit anyone to
place a load upon any floor of the Building that exceeds the floor load per
square foot that such floor was designed to carry and which is allowed by
certificate, rule, regulation, permit or law, nor shall Lessee overload, or
suffer, or permit anyone to overload any wall, roof, land surface, pavement,
landing or equipment on the Demised Premises.
SECTION 4.06. Lessee shall not use, or suffer, or permit anyone to
use, on or across the Demised Premises, Building or Property, any equipment
having caterpillar-type tracks or tires, or any other equipment which would be
damaging to the Demised Premises, Building or Property or any road surface or
blacktopping thereon.
SECTION 4.07. A. Lessee shall not release, discharge or dispose of,
or permit, or suffer any release, discharge or disposal of any Hazardous
Material at the Demised Premises in violation of any Environmental Law (as
hereinafter defined). Lessee shall not permit or suffer the manufacture,
generation, storage, transmission or presence of any Hazardous Material over
or upon the Demised Premises in violation of any Environmental Law.
<PAGE>
B. Lessee shall: (i) promptly, upon learning thereof, notify
Lessor of any violation of, or non-compliance with, potential violation of or
non-compliance with, or liability or potential liability under, any
Environmental Law concerning the Demised Premises, (ii) promptly make (and
deliver to Lessor copies of) all reports or notices that Lessee is required to
make under any Environmental Law concerning the Demised Premises and maintain
in current status all permits and licenses required under any Environmental
Law concerning the Demised Premises, (iii) immediately comply with any orders,
actions or demands of any Governmental Authority (as herein defined) with
respect to the discharge, clean-up or removal of Hazardous Materials at or
from the Demised Premises due to a breach of a covenant set forth in Section
4.07.A, (iv) pay when due the cost of removal of, treatment of, or the taking
of remedial action with respect to, any Hazardous Material on the Demised
Premises which is required by an Environmental Law due to a breach of a
covenant set forth in Section 4.07.A, (v) keep the Demised Premises free of
any lien imposed pursuant to any Environmental Law in respect of a breach of a
covenant set forth in Section 4.07.A, (vi) from time to time, upon the request
of Lessor, execute such affidavits, certificates and statements concerning
Lessee's knowledge and belief concerning the presence of Hazardous Materials
on the Demised Premises and (vii) otherwise comply with all Environmental Laws
concerning the Demised Premises.
SECTION 4.08 Lessor shall include Lessee's name on any internal
Building directory and on the floor directional signs. Other than the
foregoing, Lessee shall not place or suffer to be placed or maintain any sign,
awning or canopy upon or outside the Demised Premises or in the Building; nor
shall Lessee place at the store front any sign, decoration, lettering or
advertising matter of any kind without first obtaining Lessor's written
approval and consent in each instance. In the event that Lessor gives its
consent hereunder, all signs shall be of a size, color and design as is
approved in writing by Lessor and shall be installed where designated by
Lessor and maintained in good condition, repair and appearance at all times,
according to Lessor's standards and the laws of the municipality having
jurisdiction over such signs. If Lessor shall deem it necessary to remove any
sign in order to paint or to make any repairs, alterations or improvements in
or upon the Demised Premises or any part thereof, Lessor shall have the right
to do so, provided the same be removed and replaced at Lessor's cost and
expense unless having been occasioned by fault of Lessee. Lessor shall have
the right, with or without notice to Lessee, to remove any signs (paper or
otherwise) installed by Lessee in violation of this paragraph and to charge
Lessee the cost of such removal without liability to Lessee for such removal.
SECTION 4.09 No property, other than such as might normally be
brought upon or kept in the Demised Premises as incidental to the reasonable
use of the Demised Premises for the purposes herein permitted, will be brought
upon or kept in the Demised Premises.
ARTICLE 5- POSSESSION AND CONDITION OF DEMISED PREMISES
SECTION 5.01. Lessee has inspected the Demised Premises and subject
to latent defects and Lessor's obligations under Section 8.01, Lessee accepts
the Demised Premises in their "AS IS" state and condition on the Commencement
Date and without any representation or warranty (except as expressly set forth
herein), express or implied, in fact or by law, by Lessor, and without
recourse to Lessor, as to the nature, condition or usability thereof or as to
the use or occupancy which may be made thereof.
SECTION 5.02. If delivery of possession to the Demised Premises to
Lessee is delayed by reason of Unavoidable Delays (as hereinafter defined),
then this Lease and the validity thereof shall not be affected thereby and
Lessee shall not be entitled to terminate this Lease, to claim actual or
constructive eviction, partial or total, or to be compensated for loss or
injury suffered as a result thereof, nor shall the same be construed in any
way to extend the Term, provided, however, that, notwithstanding the
provisions of Article 1, the Commencement Date shall be deemed to occur only
if and when possession of the Demised Premises is made available to Lessee.
SECTION 5.03. The provisions of this Article shall be considered an
express provision to the contrary governing delivery of possession of the
Demised Premises and any law providing for such a contingency in the absence
of such express agreement now or hereafter enacted shall have no application
in such case to the extent inconsistent with this Lease.
<PAGE>
ARTICLE 6- UTILITIES, CLEANING, ETC.
SECTION 6.01.A. During the Term hereof and any Renewal Term, Lessor
shall furnish to Lessee, during Normal Working Hours (as hereinafter defined):
(a) necessary elevator facilities; (b) heat to the Demised Premises; (c) water
for ordinary lavatory purposes, but if Lessee uses or consumes water for any
other purposes or in unusual quantities (of which fact Lessor shall be the
sole judge), Lessor may install a water meter at Lessee's expense in good
working order and repair to register such water consumption and Lessee shall
pay for water consumed as shown on said meter as Additional Rent as and when
bills are rendered; (d) air conditioning and/or cooling; (e) ventilation; and
(f) electricity for Building lighting and normal Building equipment and other
incidental equipment ("Utility Service").
B. Except as otherwise specifically provided for in this Lease,
Lessor represents and warrants that Lessee shall have access (by elevator) to
the Demised Premises Twenty-Four (24) hours a day, Seven (7) days a week.
C.1. The air conditioning and/or cooling system shall be capable of
substantially meeting the following maximum performance specifications:
Inside Condition Outside Condition
(Degrees) (Degrees)
Cooling Season 78(degree)F dry bulb 95(degree)F dry bulb
50% RH 75(degree)F wet bulb
Heating Season 72(degree)F dry bulb 0(degree)F
2. The foregoing performance standards shall be inapplicable where
the Demises Premises are occupied by more than an average of one person for
each 150 square feet of Lessee's floor space or if Lessee installs and
operates machines and appliances, the connected electrical load of which when
combined with the load of all lighting fixtures and all occupancy factors
exceeds four watts per usable square foot of Lessee's floor space in any one
room or other area or in any area used other than for offices. If due to use
of the Demised Premises in a manner exceeding the aforementioned occupancy and
electrical load criteria, or due to rearrangement of partitioning after the
initial preparation of the Demised Premises, interference with normal
operation of the air conditioning in the Demised Premises results,
necessitating changes in the air conditioning system servicing the Demised
Premises, such changes shall be made by Lessor upon written notice to Tenant
and Tenant's sole cost and expense. Tenant agrees to keep all windows closed,
and to lower and close window coverings when necessary because of the sun's
position whenever the said air conditioning system is in operation, and Lessee
agrees at all times to cooperate fully with Lessor and to abide by all the
regulations and requirements which Lessor may prescribe for the proper
functioning and protection of the said air conditioning system. Lessor,
throughout the Term, shall have free and unrestricted access to any and all
air conditioning facilities in the Demised Premises.
SECTION 6.02. During the Term hereof and any Renewal Term, Lessor
shall furnish to Lessee cleaning services for the Demised Premises in
accordance with the Cleaning Specifications annexed hereto as EXHIBIT "D".
<PAGE>
SECTION 6.03.A. If Lessee uses the Demised Premises outside Normal
Working Hours, Lessee agrees to pay to Lessor an overtime charge to cover
Lessor's expenses for electricity for lighting and normal Building Equipment
(as hereinafter defined) and other incidental equipment, extra building
maintenance, building employee overtime, furnishing water for lavatories, air
cooling, heat, ventilation, wear and tear, etc.
B.1 Lessor shall furnish such overtime service to Lessee provided
that (i) Lessee pays to Lessor as Additional Rent special overtime charges
(the "Overtime Charge") therefore, which is presently at the rate of $150.00
per hour for Overtime Services, which Overtime Charge will be billed to Lessee
along with Lessee's next monthly installment of Fixed Rent if such service
shall have been furnished to Lessee prior to the fifteenth (15th) day of the
month or along with the subsequent monthly installment of Fixed Rent if such
service shall have been furnished to Lessee after the fifteenth (15th) day of
the month, (ii) that Lessee's request shall be received by Lessor by not later
than 2:00 P.M. on the day for which after hours service is requested (and by
not later than 2:00 P.M. on the day preceding any requested before-hours
service), (iii) that Lessor shall not be required to furnish such Overtime
Services to Lessee for more than twenty (20) hours in any one (1) week, and
(iv) the Building HVAC system is not then producing chilled water for future
HVAC use. Notwithstanding anything contained to the contrary in this Article
6, Lessee shall not be required to pay Overtime Charges for intermittent use
of the Demised Premises outside Normal Working Hours, provided that such use
shall not be on a scale and of a frequency so as to constitute the regular
operation of Lessee's business outside Normal Working Hours. In no event,
however, shall Lessor be obligated to supply heating or air conditioning
outside of Normal Working Hours unless Lessee shall request and pay for the
same as provided in this Article 6. In the event that Lessee and any other
tenant in the Building shall request Overtime Services, then, to the extent
that the Building Equipment permits same, Lessee and such other tenants shall
pay their proportionate share of the Overtime Charges.
2. Lessee agrees that the Overtime Charges, may from time to time, be
increased by Lessor, with not less than thirty (30) days prior written notice
to Lessee, if the rates at which Lessor purchases electrical energy from the
public utility corporation supplying electrical current to the Building of
which the Demised Premises are a part shall be increased, or any tax is
imposed upon Lessor's receipt from the sale or resale of electrical energy by
any Federal, State or Municipal Authority, or any charges incurred or taxes
payable by Lessor in connection therewith shall be increased. The Overtime
Charges shall be increased by an amount equal to the product of the respective
hourly rate times the percentage increase in the rates at which Lessor
purchases electrical energy from the public utility corporation as aforesaid.
<PAGE>
SECTION 6.04.A. Lessee acknowledges and agrees that Lessor shall
furnish electrical current to Lessee ("Electric Service") for use in the
Demised Premises, excluding however, electrical current for supplemental
heating, ventilating and air conditioning units which shall be separately
metered as provided for in Section 6.05 hereof, based on the method of
including the use thereof within the Fixed Rent and, accordingly, Lessee
agrees that the Fixed Rent provided for in Article 2 of this Lease has been
increased to compensate Lessor for supplying Electric Service on the basis of
Two and 25/100 Dollars ($2.25) per square foot per annum for each square foot
contained in the Demised Premises (hereinafter referred to as the "Base
Charge") payable in equal monthly installments commencing on the Commencement
Date. By the execution of this Lease, Lessee acknowledges and agrees that the
Base Charge shall not be contestable by Lessee at a future date and shall only
be increased by Lessor at a future date in accordance with this Section.
Lessor will furnish electricity to Lessee through presently installed
electrical facilities for Lessee's reasonable use.
B.1. Lessee shall make no substantial alterations or additions to the
initial lighting, electrical appliances or office equipment without first
obtaining written consent from Lessor in each instance. Lessor warrants that
the electrical facilities servicing the Demised Premises is in good working
order and can accommodate a normal office installation with associated office
machinery and equipment. Lessee agrees that at all times its use of Electric
Service shall not exceed the capacity or overload any of the central and
appurtenant installations for Electric Service including, but not limited to
all wires, feeders, risers, electrical boxes, switches, outlets, connections,
and cables located in the Property, Building, or Demised Premises or any other
mechanical equipment spaces located therein. Lessee's use of Electric Service
shall not interfere with the use thereof by other occupants of the Property,
or Building and shall be of such a nature, as determined by Lessor in its sole
judgment and discretion, so as not cause permanent damage or injury to the
Demised Premises or the Building of which the Demised Premises are a part, or
cause or create a dangerous or hazardous condition or entail excessive or
unreasonable alterations, repairs or expense, or interfere with or disturb
other tenants or occupants.
2. If at any time prior to or during the Term or any Renewal Term of
this Lease, subject to the restrictions contained elsewhere in this Lease: (i)
Lessee installs substantial additional or substituted lighting, electrical
appliances, office equipment or otherwise increases its use of Electric
Service, and/or; (ii) subject to the provisions of Article 8 of this Lease,
electrical feeders, risers, wiring or other electrical facilities serving the
Demised Premises shall be installed by Lessor, Lessee or others, on behalf of
Lessee or any person claiming through or under Lessee in addition to the
feeders, risers, wiring or other electrical facilities necessary to serve the
lighting fixtures, electrical appliances, office equipment and electrical
receptacles initially located in the Demised Premises; then the Fixed Rent
shall be increased by an amount determined by the electrical engineer selected
by Lessor who shall certify the amount of the Additional Rent to be increased
in writing to Lessor and Lessee. Following any such determination and
certification by the electrical engineer, this Lease shall automatically be
modified by increasing the Additional Rent by an amount equal to (i) the
product of the Base Charge times the percentage increase in Lessee's use of
electrical current over that for Lessee's initially installed lighting,
electrical appliances and office equipment and/or (ii) the product of the Base
Charge times the percentage increase in the potential additional electrical
energy made available to Lessee annually based upon the estimated capacity of
such additional electrical feeders, risers, wiring or other electrical
facilities, as the case may be. As evidence of such modification such
electrical engineer's certification shall be delivered by Lessor to Lessee and
also appended hereto. Any such increase shall be effective as of the date of
the first use by Lessee of such additional service and retroactive to such
date if necessary. In addition, Lessee shall pay to Lessor, as Additional
Rent, within ten (10) days of the date of a notice therefore from Lessor, the
total Cost (as hereinafter defined) to Lessor of the additional electrical
feeders, risers, wiring, or other electrical facilities serving the Demised
Premises.
<PAGE>
C. If, at any time or times after the date of this Lease, the rates
at which Lessor purchases electrical energy from the public utility
corporation supplying electrical current to the Building of which the Demised
Premises are a part shall be increased, or any tax is imposed upon Lessor's
receipt from the sale or resale of electrical energy or gas or telephone
service to Lessee by any Federal, State or Municipal Authority, or any charges
incurred or taxes payable by Lessor in connection therewith shall be
increased, the Additional Rent shall be increased by an amount equal to the
product of the Base Charge times the percentage increase in the rates at which
Lessor purchases electrical energy from the public utility corporation as
aforesaid, over those rates in effect on the date of the calculation of the
Base Charge. Following any such rate increase or other charge, this Lease
shall automatically be modified by increasing the Additional Rent for the
remainder of the term hereof in accordance with this Subsection and, as
evidence of such modification, documentation of such rate increase or other
charge shall be delivered by Lessor to Lessee and also appended hereto. Any
such increase in the Additional Rent shall be effective as of the date of any
such increase in cost or other charge to Lessor and shall be retroactive to
such date if necessary.
D.1 Notwithstanding anything contained to the contrary in this
Article 6, Lessor shall have the right, at its option, to conduct a survey of
the Demised Premises by an independent electrical engineer of Lessor's
choosing at any time during the Term or any Renewal Term in order to determine
Lessee's actual use of electrical current therein (the "Electric Survey"). In
the event that the Electric Survey provided for in the preceding sentence
shall indicate that Lessee's use of electrical current then exceeds that at
the time of Lessee's initial installation of its lighting fixtures, electrical
appliances and office equipment, Lessee upon receipt of notice from Lessor
together with a copy of such Electrical Survey ("Lessor's Electric
Statement"), shall pay to Lessor an increase in Fixed Rent equal to an amount
determined by multiplying the Base Charge times the percentage increase in
Lessee's use of electrical current over that for Lessee's initially installed
lighting, electrical appliances and office equipment. Any such increase shall
be payable in accordance with the terms of this Article 6 and shall be
effective as of the date of Lessee's first increased use of electrical current
and shall be retroactive to such date, if necessary.
2. Lessor's Electric Statement shall be conclusive and binding upon
Lessee unless within One Hundred and Eighty (180) days after receipt of such
Lessor's Electric Statement, Lessee shall notify Lessor that it disputes the
reasonableness or correctness of Lessor's Electric Statement, specifying the
respects in which Lessor's Electric Statement is claimed to be unreasonable or
incorrect. Pending the determination of any such dispute respecting a Lessor's
Electric Statement by agreement or arbitration, Lessee shall pay such increase
in accordance with the applicable Lessor's Electric Statement, and such
payment will be without prejudice to Lessee's position. If the dispute shall
be finally determined in Lessee's favor by arbitration, Lessor shall forthwith
pay Lessee the amount of Lessee's overpayment resulting from compliance with
Lessor's Electric Statement together with interest thereon at the legal rate.
Lessor, upon request of Lessee, shall either make available to Lessee such
documentation as may be in Lessor's possession to support the Electric Survey
or permit Lessee, its agents and/or auditors to examine relevant portions of
the Building and the electrical facilities relating to and/or supplying
electric current to the Demised Premises.
SECTION 6.05.A. During the Term or any Renewal Term, Lessor shall
also furnish to Lessee electricity for supplemental heating, ventilating and
air conditioning systems servicing the Demised Premises ("Supplemental
Electric Service").
B. Lessee agrees that it shall purchase or receive such Supplemental
Electric Service directly from Lessor and to pay directly to Lessor all
charges for Supplemental Electric Service rendered or supplied to the Demised
Premises throughout the Term hereof, or any Renewal Term.
<PAGE>
C. Lessee's consumption of Supplemental Electric Service shall be
measured by means of separate flow meters (hereinafter referred to as the
"Meters") installed by Lessor as part of Lessor's Work, and Lessee shall pay,
during the entire Term of this Lease, or any Renewal Term, all actual costs
and reasonable expenses including the payments of any taxes and/or penalties
in connection therewith for all Supplemental Electric Service used, consumed
or provided to the Demised Premises.
D. Lessee shall pay for all Supplemental Electric Service consumed,
used or provided to the Demised Premises as hereinabove provided within ten
(10) days after rendition of a bill for same by Lessor (the "Utility Bill").
Lessor shall bill Lessee at Lessor's actual expense to purchase all
Supplemental Electric Service and Lessor shall be entitled to an
administrative fee of Five (5%) percent of all Supplemental Electric Service
charged or otherwise billed pursuant to the Utility Bill. All Supplemental
Electric Service billed by Lessor to Lessee shall be deemed Additional Rent.
Each Utility Bill shall be conclusive and binding upon Lessee unless within
One Hundred and Eighty (180) days after receipt of such Utility Bill Lessee
shall notify Lessor that it disputes the reasonableness or correctness of the
Utility Bill, specifying the respects in which the Utility Bill is claimed to
be unreasonable or incorrect. Pending the determination of such dispute by
agreement or otherwise, Lessee shall pay for Supplemental Electric Service in
accordance with the applicable Utility Bill, and such payment will be without
prejudice to Lessee's position. If the dispute shall be finally determined in
Lessee's favor by arbitration, Lessor shall forthwith pay Lessee the amount of
Lessee's overpayment of Supplemental Electric Service resulting from
compliance with the applicable Utility Bill together with interest thereon at
the legal rate. Lessor, upon request of Lessee, shall either make available to
Lessee such documentation as may be in Lessor's possession to support a
particular Utility Bill or permit Lessee to examine relevant portions of
Lessor's books and records.
E. Lessee agrees that at all times its use of Supplemental Electric
Service shall not exceed the capacity or overload any of the central and
appurtenant installations for Supplemental Electric Service including, but not
limited to all wires, feeders, risers, electrical boxes, switches, outlets,
connections, supply and return lines, fittings, ducts, pipes, chutes, cables,
conduits, water and refrigerant lines, registers, convertors, radiation
elements and dampers located in the Building, Demised Premises or any other
mechanical equipment spaces located therein. Lessee's use of Supplemental
Electric Service shall be of such a nature, as determined by Lessor in its
reasonable judgment and discretion, so as not cause permanent damage or injury
to the Demised Premises or the Building of which the Demised Premises are a
part, or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense, or materially
interfere with or disturb other tenants or occupants.
<PAGE>
SECTION 6.06. Lessor reserves the right, upon reasonable written
notice and at reasonable times, except that no notice shall be required in the
event of an emergency, to stop, interrupt and/or suspend Utility Service,
Electric Service and/or Supplemental Electric Service when necessary by reason
of accident or for repairs, alterations, replacements or improvements
necessary or desirable in the judgement of Lessor for as long as may be
reasonably required by reason thereof. The repairs, alterations, replacements
or improvements shall be done with a minimum of inconvenience to Lessee and
upon reasonable notice to Lessee (except that no notice shall be required in
the event of an emergency) and Lessor shall pursue same with due diligence.
SECTION 6.07. Except to the extent caused by the wilful conduct or
negligent acts or omissions of Lessor, Lessor shall in no way be liable for
any loss, damage, or expense which Lessee may incur as a result of the change,
at any time, of the character or quality of Electric Service, Supplemental
Electric Service, or Utility Service or any failure of or defect in Electric
Service, Supplemental Electric Service or Utility Service by reason of any
public or private utility company then supplying such service to the Property,
Building or the Demised Premises and Lessee agrees to hold the Lessor harmless
and to indemnify it from and against any loss, liability or damage in
connection therewith resulting from Lessee's negligent or wilful acts or
omissions. This indemnity shall survive the expiration or other termination of
this Lease.
ARTICLE 7- REPAIR AND MAINTENANCE
SECTION 7.01.A. Subject to the provisions of Section 7.02 hereof,
Lessee shall, during the Term of this Lease and any Renewal Term, at Lessee's
sole cost and expense, take good care of, maintain and make all repairs,
(other than structural) in the Demised Premises, and the fixtures and
equipment therein and appurtenances thereto, including but not limited to,
internal doors and entrances, door checks, internal signs, floor covering,
interior walls, columns and partitions; and lighting, heating, hot water,
plumbing and sewerage facilities, sprinkler system and sprinkler heads which
are located within the Demised Premises and serve exclusively the Demised
Premises.
B. If Lessee refuses or neglects to clean, maintain or make repairs
or otherwise fails to perform any of Lessee's repairs or maintenance
obligations hereunder, Lessor shall have the right, but shall not be
obligated, to make such repairs or perform on behalf of and for the account of
Lessee after thirty (30) days written notice to Lessee as provided for in
Article 21 of this Lease, except that lesser notice appropriate to the
circumstances shall be required in the event of an emergency. All sums so paid
by Lessor in connection with the payment or performance by it or any of the
obligations of Lessee hereunder and all actual and reasonable costs, expenses
and disbursements paid in connection therewith or enforcing or endeavoring to
enforce any right under or in connection with this Lease, or pursuant to law,
together with interest thereon at the maximum legal rate from the respective
dates of the making of such payment, shall constitute Additional Rent payable
by Lessee under this Lease and shall be paid by Lessee to Lessor upon demand
by Lessor. The provisions of this Section shall survive the expiration or
other termination of this Lease.
<PAGE>
SECTION 7.02. Lessor shall not be required to make any repairs or
improvements of any kind upon the Demised Premises except for necessary
structural repairs to the Building or for damage caused by a casualty or
Lessor's negligent acts, excluding Lessee's property. Lessor shall during the
Term of this Lease and any Renewal Term, maintain and repair all common areas
and other facilities in or about the Property and/or the Building, exclusive
of doors, door frames, door checks, windows and window frames. Lessor shall
have the right to construct, maintain and operate lighting and other
facilities on all said areas and improvements; to police the same; to change
the area, level, location and arrangement of parking areas and other
facilities; to build multistory parking facilities; to restrict parking by
Lessee's, their officers, directors, agents and employees, to enforce parking
charges (by operation of meters and otherwise); and to close all or any
portion of said areas or facilities to such extent as may be legally
sufficient to prevent a dedication thereof or the accrual of any right to any
person or the public therein; to close temporarily all or any portion of the
parking areas or facilities to discourage non-visitor parking. Lessor shall
operate and maintain the common areas in such manner as Lessor in its
discretion shall determine, and Lessor shall have full right and authority to
employ and discharge all personnel with respect thereto, provided, however,
that Lessor shall maintain the common areas as a first class office building
in Westchester County, New York. If Lessor shall designate an employee or
lessee parking area or areas, Lessee and its employees shall use only such
areas for parking and Lessee shall cooperate fully with Lessor in enforcing
this covenant.
SECTION 7.03. "Repairs" as used herein shall mean all repairs,
replacements, renewals, alterations, additions and betterments. All contracts
between Lessee and others for installations, maintenance, and repairs and
alterations involving the Demised Premises, including maintenance agreements,
shall be subject to the prior written approval of Lessor, not to be
unreasonably withheld or delayed.
<PAGE>
SECTION 7.04. Lessor shall not be required to make any repairs or
replacements to the common areas occasioned by the act or negligence of
Lessee, its agents, employees, invitees, customers, licensees, or contractors,
except to the extent that Lessor is reimbursed therefor under any policy of
insurance permitting waiver of liability and containing a waiver of
subrogation, except as otherwise provided in this Article and Article 12 of
this Lease.
ARTICLE 8- LESSOR'S WORK; LESSOR'S ALLOWANCE; LESSEE'S WORK
SECTION 8.01.A.1. Lessor (which term as used herein may be deemed to
mean Lessor and/or Lessor's affiliated or non-affiliated general contractor)
shall act as general contractor with respect to the build-out of the Demised
Premises (the "Work") and, in such capacity, shall perform the Work on behalf
of Lessee and in accordance with the plans annexed hereto as EXHIBIT "E" (the
"Plans"), which Plans, Lessor and Lessee have approved. Lessor and Lessee
agree that Lessor shall not be obligated to contribute more than One Hundred
and Eighty Thousand, Nine Hundred and Twenty-Five and 00/100 ($180,925.00)
Dollars, including architectural, space planning, engineering fees and
construction documents for the completion of the Work (Lessor's Allowance")
and Lessee agrees that any costs to complete the Work in excess of Lessor's
Allowance shall be the sole responsibility and obligation of Lessee. Lessor
agrees that it will spend Lessor's Allowance for the performance of the Work.
Upon disbursement of Lessor's Allowance, Lessor shall have no further
obligation or liability whatsoever to Lessee for funding the Work and it is
expressly understood and agreed that Lessee shall be obligated to complete, at
its sole cost and expense, the Work, whether or not Lessor's Allowance is
sufficient to fund such completion.
2. Any increase in the scope of Work to be performed by Lessor beyond
that contained in the Plans ("Extra Work") shall be approved as follows: (i) a
written request for any such Extra Work (including any and all change orders)
defining the scope of such Extra Work plus any possible time delay and
containing an "Extra Work Cost Estimate" shall be prepared by Lessor for
review and acceptance by Lessee; and (ii) upon execution by Lessee of such
written request of Lessor, Lessor shall pursue completion of the Extra Work
stipulated therein at Lessee's sole cost and expense. Lessee shall pay to
Lessor the cost of the Extra Work upon the commencement of such Extra Work.
3. To the extent (i) Lessor (which term as used herein may be deemed
to mean Lessor and/or Lessor's affiliated or non-affiliated general
contractor) may be or is required to or actually does perform Work pursuant to
this Article 8, and/or (ii) Lessor performs other build-out or similar work or
alterations to the Demised Premises of any kind or any other demolition,
renovation or construction on Lessee's behalf during the term of this Lease,
pursuant to Article 25 of this Lease and otherwise, same shall be on a Cost
(as hereinafter defined) basis.
SECTION 8.02.A. Lessor shall use reasonable efforts to substantially
complete the Work within a reasonable period of time, subject to Unavoidable
Delays, but failure to complete the Work within a reasonable period of time
shall not effect the validity of this Lease. Lessor has not made, and makes,
no representations as to the date when the Work will be substantially
complete, and notwithstanding any date specified in this Lease, the same is
merely an estimate.
<PAGE>
B. Lessee shall submit to Lessor, on or before the tenth (10th) day
following notice of substantial completion of the Work, a punch list setting
forth such details provided for in the Plans as remain to be completed and,
except as noted therein, Lessee shall be deemed to have accepted the Work as
of the date of substantial completion.
C. Except as provided herein, Lessee hereby waives any right to
terminate, cancel or rescind this Lease by reason of Lessor's failure to
complete the Work, to deliver possession of the Demised Premises or otherwise
perform its obligations under this Article, which Lessee might otherwise have
pursuant to any law now or hereafter in force or otherwise. Lessee further
waives the right to recover any damages which may result from Lessor's failure
to complete the Work, to deliver possession of the Demised Premises or
otherwise to perform its obligations under this Article.
SECTION 8.03. Following substantial completion of the Work, or
earlier by mutual consent, Lessee shall equip the Demised Premises with all
trade and operating fixtures, equipment, furniture, furnishings, and any and
all other items necessary as reasonably determined by Lessee for the proper
operation of Lessee's business (Lessee's Alterations"). All trade and
operating equipment permanently affixed to the Demised Premises by Lessee
shall not be subject to liens, conditional sales contracts, security
agreements or chattel mortgages. Within thirty (30) days after the
Commencement Date, or substantial completion of the Work, as the case may be,
Lessee shall complete all of Lessee's Alterations required on Lessee's part to
be performed in and at the Demised Premises under this Lease. Lessee shall
work compatibly, and not interfere, in Lessor's reasonable judgment, with
Lessor in the completion of the Work. Lessee shall at all times comply with
all of the terms of this Lease.
<PAGE>
SECTION 8.04. Other than as specifically provided for in Section 8.03
hereof, Lessee shall not do any construction, work or alterations to the
Demised Premises, nor shall Lessee install any items other than Lessee's trade
fixtures without first: (1) obtaining Lessor's written consent and (2)
complying with all of the terms, covenants and conditions contained in
Lessor's Standard Requirements For Alterations To Be Performed by Lessees',
annexed hereto as EXHIBIT "G," as may be amended from time to time.
ARTICLE 9- COMPLIANCE WITH LAWS
SECTION 9.01. Lessor represents that the Demised Premises, the
Building and Property will comply with all Legal Requirements, Environmental
Laws and Insurance Requirements as of the Commencement Date.
SECTION 9.02. Throughout the Term of this Lease and all Renewal
Terms, Lessee shall promptly comply with all Legal Requirements, Environmental
Laws and Insurance Requirements whether or not such compliance involves
structural repairs or changes or be required on account of any particular use
to which the Demised Premises, or any part, may be put by Lessee, other than
general office use and whether or not any such Legal Requirements,
Environmental Laws, or Insurance Requirements be of a kind not now within the
contemplation of the parties hereto. Compliance by Lessee with Legal
Requirements, Environmental Laws, and Insurance Requirements shall be at
Lessee's sole cost and expense. Lessee shall not contest the application or
validity of any such Legal Requirements, Environmental Laws, or Insurance
Requirements without the prior written consent of Lessor in each such
instance, which consent shall not be unreasonably withheld or delayed,
provided, however, that (i) such contest shall not result in Lessor being in
default under any Superior Mortgages or Leases; (ii) does not impose any civil
or criminal liability on Lessor's officers, directors, shareholders or
partners; (iii) Lessee agrees to pay any and all fines and/or penalties
incurred, assessed or levied in connection with such contest; and (iv) Lessee
shall and does hereby indemnify and hold harmless Lessor, and Lessor's agents,
officers, directors, and employees, from and against any and all loss,
liability, fines, suits, claims, obligations, damages, penalties, demands and
actions, and costs and reasonable expenses of any kind or nature (including
architects' and attorneys' fees) due to or arising out of such contest. Any
repair or change required under this Section shall be deemed a repair for the
purposes of Article 7. With respect to actions necessary to comply with Legal
Requirements, Insurance Requirements and Environmental Laws which due to their
nature, can only be taken by Lessor, Lessor, at Lessee's expense, will
cooperate with Lessee in facilitating such compliance.
ARTICLE 10- RIGHTS RESERVED TO LESSOR
SECTION 10.01. Lessee shall permit Lessor, Lessor's agents, and its
invitees to enter the Demised Premises, or any part thereof, at all reasonable
times and on reasonable notice provided same does not unreasonably interfere
with Lessee's business and a representative of Lessee is present for the
purposes of (a) inspecting the same, (b) curing Events of Default of Lessee
(after Ten (10) days notice to Lessee, except that no notice shall be required
in case of an emergency), (c) showing the same to mortgagees, appraisers, or
prospective lenders, purchasers or lessees, (d) observing the performance by
Lessee of its obligations under this Lease, and (e) performing any act or
thing which Lessor may be obligated or have the right to do under this Lease
or otherwise. Lessor and any providers of Utility Services or other services
shall have the right to maintain existing utility, mechanical, electrical and
other systems and to enter upon the Demised Premises to make such repairs and
alterations therein or in or to the Demised Premises as may, in the opinion of
Lessor, be deemed necessary or advisable. Lessor shall not be liable for
inconvenience, annoyance, disturbance or loss of business to Lessee or any
sublessee by reason of making any repairs or the performance of any work, or
on account of bringing materials, tools, supplies and equipment into or
through the Demised Premises during the course thereof and the obligations of
Lessee under this Lease shall not be affected thereby. The rights provided in
this Article shall be exercised so as to minimize interference with access to
and/or use of the Demised Premises and/or Building by Lessee. Nothing
contained in this Article shall impose, or shall be construed to impose on
Lessor any obligation to maintain the systems referred to in this Article or
the Demised Premises or anything appurtenant thereto, or to make repairs or
alterations thereof or thereto, or to create any liability for any failure to
do so.
<PAGE>
SECTION 10.02.A. Without abatement or diminution in rent, Lessor
reserves and shall have the following additional rights: (a) to change the
street address and/or the name of the Building of which the Demised Premises
are a part and/or the Property and/or the locations of entrances, passageways,
doors, doorways, corridors, elevators, stairs, toilets, or other public parts
of the Building and/or Property without liability to Lessee, (b) to approve in
writing all sources furnishing construction work, painting, decorating,
repairing, maintenance and any other work in or about the Demised Premises,
(c) to erect, use and maintain pipes and conduits in and through the Demised
Premises, (d) to charge to Lessee any expense including overtime cost incurred
by Lessor in the event that repairs, alterations, decorating or other work in
the Demised Premises are made or done after ordinary business hours at
Lessee's request, (e) to immediately enter and alter, renovate, and redecorate
the Demised Premises (without reduction or abatement of rent or incurring any
liability to Lessee for compensation), if during the last six (6) months of
the term or of a renewal term Lessee shall have removed all or substantially
all of Lessee's property therefrom, and (f) to grant to anyone the exclusive
right to conduct any particular business or undertaking in the Building of
which the Demised Premises are a part provided, however, that Lessor shall
take no action which adversely affects Lessee's access to and/or use of the
Demised Premises and/or Building..
B. Lessor may exercise any or all of the foregoing rights hereby
reserved to Lessor without being deemed guilty of an eviction, actual or
constructive, or disturbance or interruption of Lessee's use or possession and
without being liable in any manner toward Lessee and without limitation or
abatement of rent or other compensation, and such acts shall have no effect on
this Lease.
ARTICLE 11- INSURANCE
SECTION 11.01. A. Lessee shall obtain and keep in full force and
effect during the Term, and during any earlier period of time when Lessee or
Lessee's agents, employees, or contractors may enter the Demised Premises at
its own cost and expense:
(1) commercial general liability insurance (with a
contractual liability endorsement covering the matters set forth in
Article 16) having a combined single limit of not less than Two
Million ($2,000,000.00) Dollars protecting Lessor, any Lessor's agent
which is acting as a property manager for the Property, the holder of
any Mortgage, or lessor under any Superior Lease and Lessee as
insureds (and naming each such person as an insured party or as an
additional insured) against any and all claims for bodily injury,
death or property damage occurring, during the Term and during any
earlier period of time when Lessee or Lessee's agents, employees, or
contractors may enter the Demised Premises;
<PAGE>
(2) insurance (herein sometimes referred to as "Lessee's
fire (casualty) insurance") against loss or damage by any and all
risks and hazards to Lessee's Property (as hereinafter defined) for
the full replacement value thereof (including coverages which are
currently sometimes referred to as "all risk" with coverage written
on a replacement cost basis);
(3) workers' compensation and employees liability insurance
in accordance with the laws of the State of New York and all
Governmental Authorities having jurisdiction over the Demised
Premises and/or the Property; and
(4) Lessee shall insure and keep insured in the name of
Lessee, with the name of Lessor included as an additional insured, at
Lessee's expense (i) all internal plate glass in the Demised
Premises; (ii) if there is a steam boiler, steam generator, or any
other combustible device, mechanism or appliance in, on, adjoining or
beneath the Demised Premises, for the exclusive use of the Lessee,
Lessee shall insure and keep the same insured with a broad form
boiler insurance in the amount of at least Five Hundred Thousand
($500,000.00) Dollars. Lessee shall further insure, at Lessor's
request, against any other peril generally insured against by a
business of Lessee's type. B. Said insurance is to be written in form
and substance reasonably satisfactory to Lessor by an
insurance company, licensed to do business in the State of New York, which
shall be rated by Best's Insurance Rating Service with at least a rating equal
to A:XII. Lessee shall procure, maintain and place such insurance and pay all
premiums and charges therefor and upon failure to do so Lessor may, but shall
not be obligated to, procure, maintain and place such insurance or make such
payments, and in such event Lessee agrees to pay the amount thereof plus
interest at the maximum legal rate then prevailing, to Lessor on demand as
Additional Rent. If Lessee has other locations that it owns or leases, said
policy shall include an aggregate per location endorsement. Lessee shall cause
to be included in all such insurance policies (i) a provision to the effect
that the same will not be canceled or modified except upon not less than
thirty (30) days prior written notice to the Lessor, and (ii) a provision to
the effect that the naming of any person other than Lessee as an insured shall
not obligate such person to pay any premium. Each such Lessee's fire
(casualty) insurance policy shall contain an agreement by the insurer that the
act or omission of one insured will not invalidate the policy as to any other
insured. Not less than ten (10) days prior to the Commencement Date the
appropriate certificates and paid receipts therefor, (together with a
photocopy of the policy, if Lessor shall so request) shall be deposited with
Lessor. Any renewals or endorsements thereto shall also be deposited with
Lessor, not less than ten (10) days prior to the expiration date of the policy
being renewed, replaced or endorsed, to the end that said insurance shall be
in full force and effect at all times during the Term.
<PAGE>
SECTION 11.02. Lessee agrees to use reasonable efforts to include in
each of its insurance policies (insuring the Demised Premises and Lessor's
property therein, against loss occasioned by fire or other casualty) a waiver
of the insurer's right of subrogation against the Lessor, or if such waiver
should be unobtainable or unenforceable, (a) an express agreement that such
policy shall not be invalidated if the insured waives or has waived before the
casualty the right of recovery against any party responsible for a casualty
covered by the policy, or (b) any other form of permission for the release of
the other party, or (c) the inclusion of the Lessor as an additional insured.
Lessee, upon request from Lessor from time to time, will furnish evidence of
the nature of the insurance arrangements made concerning the subject matter of
this Section.
SECTION 11.03. As long as both parties' fire (casualty) insurance
policies then in force include the waiver of subrogation or agreement or
permission to release liability referred to in Section 11.02 or name the other
party as an additional insured, each party hereby waives (and agrees to cause
any other permitted occupants of the Demised Premises to execute and deliver
to the other party written instruments waiving) any right of recovery against
the other party, the holder of the Mortgage, or Superior Lease, and any
servants, employees, agents or contractors of the other party, or of any such
lessor or holder, or of any such other tenants or occupants, for any loss
occasioned by fire or other casualty, that is an insured risk under Lessee's
fire (casualty) insurance policies. In the event that at any time either
party's fire (casualty) insurance carriers shall not include such or similar
provisions in the other party's fire (casualty) insurance policies, the
waivers set forth in the foregoing sentence shall be deemed of no further
force and effect. During any period when either party fails to maintain such
fire (casualty) insurance, for the purposes of the first sentence of this
Section there shall be deemed to be in effect such fire (casualty) insurance
meeting the requirements of such sentence.
<PAGE>
SECTION 11.04. Nothing contained in this Lease shall (i) relieve
Lessee of any liability to Lessor or to its insurance carriers which Lessee
may have under law or the provisions of this Lease in connection with any
damage to the Demised Premises by fire or other casualty; (ii) impose upon
Lessor any duty to procure or maintain any kinds of insurance or any
particular amounts or limits of any such kinds of insurance.
SECTION 11.05. Lessor shall insure the Building with all risk
insurance coverage in such amounts so as to avoid co-insurance and Lessor
agrees that such policies shall contain a waiver of subrogation in favor of
Lessee.
ARTICLE 12 - DAMAGE OR DESTRUCTION
SECTION 12.01. If the Demised Premises or any part thereof shall be
damaged by fire or other casualty, Lessee shall give prompt notice thereof to
Lessor and Lessor shall proceed (subject to the provisions of this Article)
with reasonable diligence to repair or cause to be repaired such damage.
Except as provided in Section 12.05, the Fixed Rent shall be abated
proportionately to the extent that the Demised Premises shall have been
rendered Untenantable (as hereinafter defined), such abatement to be from the
date of such damage or destruction to the date the Demised Premises shall no
longer be Untenantable.
SECTION 12.02. If the Demised Premises shall be totally damaged or
the whole of the Demised Premises shall be rendered Untenantable by fire or
other casualty, and Lessor has not terminated this Lease pursuant to Section
12.03 and Lessor has not completed the making of the required repairs and
restored and rebuilt the Demised Premises and/or access thereto within one (1)
year from the date of such damage or destruction to the condition the Demised
Premises were in on the Commencement Date (except for Lessee's Property) and
such additional time after such date, as shall equal the aggregate period
Lessor may have been delayed in doing so by Unavoidable Delays or adjustment
of insurance, Lessee may serve notice on Lessor of its intention to terminate
this Lease and if within thirty (30) days thereafter, Lessor shall not have
substantially completed the making of the required repairs and restored and
rebuilt the Demised Premises to the condition the Demised Premises were in on
the Commencement Date (except for Lessee's Property), then in such events,
this Lease shall terminate on the expiration of such thirty (30) day period as
if such termination date were the Expiration Date, and the Fixed Rent and
Additional Rent shall be apportioned as of the of such fire or other casualty
and any prepaid portion of Fixed Rent and Additional Rent for any period after
such date shall be refunded by Lessor to Lessee.
<PAGE>
SECTION 12.03.A. If the Demised Premises shall be totally damaged or
the whole or substantially all of the Demised Premises shall be rendered
Untenantable by fire or other casualty or if the Demised Premises shall be so
damaged by fire or other casualty that substantial alteration or
reconstruction shall, in Lessor's reasonable opinion, be required, then and in
such events Lessor may, at its option, terminate this Lease and the Term and
estate hereby granted by giving Lessee not less than thirty (30) days, nor
more than sixty (60) days, notice of such termination, within ninety (90) days
after the date of such damage. In the event that such notice of termination
shall be given, this Lease and the Term and estate hereby granted shall
terminate as of the date provided in such notice of termination (whether or
not the Term shall have commenced) with the same effect as if that were the
Expiration Date, and the Fixed Rent and Additional Rent shall be apportioned
as of the date of such fire or other casualty, and any prepaid portion of
Fixed Rent and Additional Rent for any period after such date shall be
refunded by Lessor to Lessee.
B. If the Demised Premises shall be totally damaged or the whole or
substantially all of the Demised Premises shall be rendered untenantable by
fire or other casualty, and Lessor has not terminated this Lease as provided
in Section 12.03.A., Lessor shall notify Lessee, within ninety (90) days after
such fire or other casualty, as to the estimated period of time necessary to
complete the required repairs and restore and rebuild the Demised Premises to
the condition the Demised Premises were in on the Commencement Date (except
for Lessee's Property). If such Lessor's estimate exceeds one (1) year, from
the date of such notice, or if Lessor falls to deliver such notice, then in
such events, Lessee may serve on Lessor, within thirty (30) days of its
receipt of Lessor's notice, or the expiration of the ninety (90) days after
such fire or other casualty, as the case may be, (time being of the essence
with respect thereto), notice of its intention to terminate this Lease on a
date which shall be not more than thirty (30) days from the date of Lessee's
notice. If Lessee gives notice of its intention to cancel this Lease as
provided herein, then in such event, this Lease shall terminate on the
expiration of such thirty (30) day period as if such termination date were the
Expiration Date, and the Fixed Rent and Additional Rent shall be apportioned
as of the date of such fire or other casualty and any prepaid portion of Fixed
Rent and Additional Rent for any period after such date shall be refunded by
Lessor to Lessee. Lessee's failure to notify Lessor within the thirty (30) day
period shall be deemed a waiver of the right to terminate this Lease.
SECTION 12.04. Lessor shall not be liable for any inconvenience or
annoyance to Lessee or injury to the business of Lessee resulting in any way
from such damage by fire or other casualty or the repair thereof.
SECTION 12.05. Lessee shall restore all improvements made by Lessee
to the Demised Premises, at Lessee's sole cost and expense. Nothing herein
contained shall relieve Lessee from any liability to the Lessor or to its
insurers in connection with any damage to the Property, Building or Demised
Premises by fire or other casualty if Lessee shall be legally liable in such
respect. Notwithstanding any of the foregoing provisions of this Article, if
by reason of some action or inaction on the part of Lessee or any of its
employees, agents, officers, directors or contractors, Lessor or the holder of
the Mortgage or Superior Lease shall be unable to collect all of the insurance
proceeds (including rent insurance proceeds) applicable to damage or
destruction of the Demised Premises by fire or other cause, then, without
prejudice to any other remedy which may be available against Lessee, the
abatement of Fixed Rent provided for in this Article shall not be effective to
the extent of the uncollected insurance proceeds.
SECTION 12.06. This Lease shall be considered an express agreement to
the contrary governing any case of damage to or destruction of the Demised
Premises or any part thereof by fire or other casualty, and any law providing
for such a contingency in the absence of such express agreement, now or
hereafter enacted, shall have no application in such case to the extent
inconsistent with this Lease.
SECTION 12.07. Lessee shall, at its own cost and expense, remove all
of Lessee's property from the Demised Premises as Lessor shall require in
order to repair and restore the Demised Premises and Lessor shall not be
obligated to commence repairs or restoration of the Demised Premises until
such property has been removed by Lessee from the damaged portion of the
Demised Premises. Should Lessee neglect, fail, or refuse to remove its
aforesaid property within thirty (30) days after such damage or destruction,
the provisions for abatement of Fixed Rent contained herein shall be suspended
and of no force and effect whatsoever until Lessee has completed such removal.
In no event shall the Lessor be required to repair or replace Lessee's
merchandise, trade fixtures, furniture, furnishings, inventory and equipment.
<PAGE>
ARTICLE 13 - CURING DEFAULTS; FEES AND EXPENSES
SECTION 13.01. If Lessee shall default in the full and prompt
performance of any covenant contained herein and to be performed on Lessee's
part, Lessor, after thirty (30) days notice to Lessee (except that a lesser
notice appropriate to the circumstances shall be required in case of an
emergency), without being under any obligation to do so and without thereby
waiving such default may perform such covenant for the account and at the
expense of Lessee and may enter upon the Demised Premises for any such purpose
and take all action thereon as may be necessary therefor. All sums so paid by
Lessor in connection with the payment or performance by it of any of the
obligations of Lessee hereunder and all actual and reasonable costs, expenses
and disbursements paid in connection therewith or enforcing or endeavoring to
enforce any right under or in connection with this Lease, or pursuant to law,
together with interest thereon at the maximum legal rate from the respective
dates of the making of each such payment, shall constitute Additional Rent
payable by Lessee under this Lease and shall be paid by Lessee to Lessor upon
demand by Lessor. The provisions of this Section shall survive the expiration
or other termination of this Lease.
ARTICLE 14 - DEFAULT PROVISIONS
SECTION 14.01. A. If any one or more of the following events
shall happen and shall not have been cured within any applicable grace
period herein provided:
(1) if default shall be made in the due and punctual payment
of Fixed Rent or Additional Rent payable by Lessee under this Lease
when and as the same shall become due and payable, and such default
shall continue for a period of five (5) days after written notice
thereof from Lessor to Lessee (provided that no such notice shall be
required if, during the period of one (1) year immediately preceding
the date of default, there shall have been two (2) or more defaults
in the due and punctual payment of Fixed Rent or Additional Rent
payable by Lessee under this Lease when and as the same shall have
been due and payable); or
(2) if default shall be made by Lessee in performance of, or
compliance with, any of the covenants, agreements or conditions
contained in this Lease and either (i) in the case of a default or a
contingency which can with due diligence be cured within thirty (30)
days, such default shall continue for a period of thirty (30) days
after written notice thereof from Lessor to Lessee, or (ii) in the
case of a default or a contingency which cannot with due diligence be
cured within thirty (30) days, Lessee shall fail, after written
notice thereof from Lessor, to proceed promptly and with all due
diligence to commence to cure the same and thereafter to prosecute
the curing of such default with all due diligence (it being intended
that, in connection with a default which is not susceptible of being
cured with due diligence within thirty (30) days the time of Lessee
within which to cure the same shall be extended for such period as
may be necessary for the curing thereof with all due diligence); or
<PAGE>
(3) if Lessee shall file a voluntary petition seeking an
order or relief under Title 11 of the United States Code or similar
law of any jurisdiction applicable to Lessee, or Lessee shall be
adjudicated a debtor, bankrupt or insolvent, or shall file any
petition or answer seeking, consenting to or acquiescing in any order
for relief, reorganization, arrangement, composition, adjustment,
winding-up, liquidation, dissolution or similar relief with respect
to Lessee or its debts under the present or any future bankruptcy act
or any other present or future applicable federal, state or other
statute or law, or shall file an answer admitting or failing to deny
the material allegations of a petition against it for any such relief
or shall generally not, or shall be unable to, pay its debts as they
become due or shall admit in writing in any filing with any court or
Governmental Authority its insolvency or its inability to pay its
debts as they become due, or shall make a general assignment for the
benefit of creditors or shall seek or consent or acquiesce in the
appointment of any trustee, receiver, examiner, assignee,
sequestrator, custodian or liquidator or similar official of Lessee
or of all or any part of Lessee's property or if Lessee shall take
any action in furtherance of or authorizing any of the foregoing; or
if Lessee shall call a meeting of, or propose any form of
arrangement, composition, extension or adjustment with, its creditors
holding a majority in amount of Lessee's outstanding indebtedness; or
(4) if any case, proceeding or other action shall be
commenced or instituted against Lessee, seeking to adjudicate lessee
a bankrupt or insolvent, or seeking an order for relief against
Lessee as debtor, or reorganization, arrangement, composition,
adjustment, winding-up, liquidation, dissolution or similar relief
with respect to Lessee or its debts under the present or any future
bankruptcy act or any other present or future applicable federal,
state or other statute or law, or seeking appointment of any trustee,
receiver, examiner, assignee, sequestrator, custodian or liquidator
or similar official of Lessee or of all or part of Lessee's property,
which either (i) results in the entry of an order for relief,
adjudication of bankruptcy or insolvency or such an appointment or
the issuance or entry of any other order having similar effect or
(ii) remains undismissed for a period of ninety (90) days; or if any
case, proceeding or other action shall be commenced or instituted
against Lessee seeking issuance of a warrant of execution, attachment
restraint or similar process against Lessee or any of Lessee's
property which results in the taking or occupancy of the Demised
Premises or an attempt to take or occupy the Demised Premises which
shall not have been vacated, discharged, or stayed or bonded pending
appeal within ninety (90) days after the entry thereof; or
<PAGE>
(5) if any event shall occur or any contingency shall arise
whereby this Lease or the estate hereby granted to the unexpired
balance of the Term would, by operation of law or otherwise, devolve
upon or pass to any person other than Lessee, except as is expressly
permitted under Article 27, or if default shall be made by Lessee in
the performance of, or compliance with, the covenants, agreements and
conditions set forth in Article 27; or
(6) if Lessee's (other than Lessee herein named) obligations
under this Lease shall have been guaranteed by any person other than
Lessee and such person shall default in observance or performance of
any term, covenant or condition to be observed or performed by such
person under the instrument or agreement containing such guarantee;
or
(7) if any financial statement or other information
furnished to Lessor by Lessee in connection with this Lease is
materially false or misleading; or
(8) if Lessee shall default in the observance or performance
of any term, covenant or condition on Lessee's part to be observed or
performed under the provisions of Section 35.09; or
(9) if Lessee is the subject of a Chapter 11 reorganization
under the Bankruptcy Reform Act of 1978 and such reorganization is
not confirmed within eighteen (18) months from the time of filing of
a voluntary or involuntary petition thereunder (it being understood
that in such event Lessee consents to the termination of the
automatic stay provisions of Section 362 of such Act);
then and in any such event (hereinafter sometimes called an "Event of
Default") Lessor may give written notice ("Termination Notice") to Lessee
specifying such Event of Default or Events of Default and stating that this
Lease and the Term shall expire and terminate on the date specified in the
Termination Notice, which shall be at least seven (7) days after the giving of
the Termination Notice, and on the date specified therein this Lease and the
Term and all rights of Lessee under this Lease shall expire and terminate, it
being the intention of the Lessor and Lessee hereby to create conditional
limitations, and Lessee shall remain liable as provided in Article 15 and in
accordance with those provisions of this Lease which are specifically stated
herein to survive the expiration or other termination of this Lease.
B. Notwithstanding the provisions of Section 14.01.A, if there shall
be an Event of Default at any time or from time to time under the provisions
of subdivision (1) of Section 14.01.A, Lessor may, in lieu of giving a
Termination Notice, at any time after the occurrence of any such Event of
Default and during the continuance thereof, institute an action for the
recovery of the Fixed Rent and/or Additional Rent in respect of which an Event
of Default shall have occurred and be continuing. Neither the commencement of
any such action for the recovery of Fixed Rent and/or Additional rent nor the
prosecution thereof shall be deemed a waiver of Lessor's right to give a
Termination Notice in respect of any such Event of Default during the
continuance thereof and Lessor may, notwithstanding the commencement and
prosecution of any such action, give a Termination Notice and terminate this
Lease pursuant to Section 14.01.A at any time during the continuance of such
Event of Default.
C. If, at any time, (i) Lessee shall be comprised of two or more
persons, or (ii) Lessee's obligations under this Lease shall have been
guaranteed by any person other than Lessee, or (iii) Lessee's interest in this
Lease shall have been assigned, the word "Lessee", as used in subdivisions
(4), (5) and (9) of Section 14.01.A, shall be deemed to mean any one or more
of the persons primarily or secondarily liable for Lessee's obligations under
this Lease. Any monies received by Lessor from or on behalf of Lessee during
the pendency of any proceeding of the types referred to in said subdivisions
(4), (5) and (9) of Section 14.01.A shall be deemed paid as compensation for
the use and occupation of the Demised Premises and the acceptance of any such
compensation by Lessor shall not be deemed an acceptance of rent or a waiver
on the part of Lessor of any rights under Section 14.01.
SECTION 14.02. In the event that this Lease shall be terminated as
provided in this Article, Lessor or Lessor's agents may, immediately, or at
any time thereafter, without further notice, enter upon and re-enter the
Demised Premises and possess and repossess itself thereof, by summary
proceedings, ejectment or otherwise, and have, hold and enjoy the Demised
Premises and the right to receive all income of and from the same. No re-entry
by Lessor pursuant to this Article shall be deemed an acceptance of a
surrender of this Lease nor shall it absolve or discharge Lessee from any
liability under this Lease.
<PAGE>
SECTION 14.03. In the event that this Lease shall be terminated as
provided in this Article, Lessor may, at any time or from time to time
thereafter, relet the Demised Premises or any part thereof, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent, which shall, however, be amortized over the entire
term for the purpose of determining damages under Article 15) as Lessor may
determine, to any tenant which it may deem suitable and satisfactory and for
any use and purpose it may deem appropriate and may collect and receive the
rents therefor. Lessor shall use commercially reasonable methods in making
such reletting. Lessor, at its option, may make such repairs, alterations,
additions, improvements, decorations and other physical changes in and to the
Demised Premises as Lessor considers advisable or necessary in connection with
any such reletting or proposed reletting, without relieving Lessee of any
liability under this Lease or otherwise affecting any such liability. Lessor
shall in no way be responsible or liable for any failure to relet the Demised
Premises, or any part thereof, or for any failure to collect any rent due upon
such reletting. Lessor shall not in any event be required to pay Lessee (but
shall credit Lessee, to the extent set forth in Article 15, with) any sums
received by Lessor on a reletting of the Demised Premises, or any part
thereof, whether or not in excess of the rent reserved in this Lease.
SECTION 14.04. Lessee, on its own behalf and on behalf of all persons
claiming through or under Lessee including all creditors, does hereby waive
any and all rights and privileges, so far as is permitted by law, which Lessee
and all such persons might otherwise have under any present or future law, to
(i) the service of any notice of intention to re-enter or institute legal
proceedings to that end, excluding service of process, (ii) redeem the Demised
Premises, (iii) re-enter or repossess the Demised Premises, or (iv) restore
the operation of this Lease, after Lessee shall have been dispossessed by a
judgment or by warrant of any court or judge, or after any re-entry by Lessor
or after any expiration or termination of this Lease and the Term, whether
such dispossess, re-entry, expiration or termination shall be by operation of
law or pursuant to the provisions of this Lease. The words "re-enter,"
"re-entry" and "re-entered" as used in this Lease shall not be deemed to be
restricted to their technical legal meanings.
SECTION 14.05. In the event the Lessee shall dispute the validity or
amount, or the time or manner of payment of, any rent claimed by Lessor to be
due from Lessee under this Lease, Lessee shall nevertheless pay the same and
such payment may be without prejudice to Lessee's position if Lessee so
requests at the time of payment. If the dispute shall be finally determined in
Lessee's favor by a court of competent jurisdiction, Lessor shall within a
reasonable period of time not to exceed sixty (60) days pay Lessee the amount
of Lessee's overpayment of such rent. Lessee's failure to observe and perform
the provisions of this Section shall be deemed a default under subdivision (1)
of Section 14.01.A.
ARTICLE 15 - MEASURE OF DAMAGES IN EVENT OF DEFAULT
SECTION 15.01. A. In the event that this Lease be terminated pursuant
to Article 14 as a result of an Event of Default on the part of the Lessee and
whether or not the Demised Premises be relet, Lessor shall be entitled to
retain all monies, if any, paid by Lessee to Lessor, whether as advance rent
or otherwise, but such monies shall be credited by Lessor against any rent due
at the time of such termination, or at Lessor's option, against any damages
payable by Lessee, and Lessor shall be entitled to recover from Lessee, and
Lessee shall pay to Lessor the following:
(a) All rent to the date upon which this Lease and the Term shall
have terminated, and
(b) All expenses reasonably incurred by Lessor in recovering
possession of the Demised Premises (including summary proceedings),
restoring the Demised Premises to good order and condition,
maintaining the Demised Premises in good order and condition while
vacant, altering or otherwise preparing the same for reletting, and
in reletting the Demised Premises (including brokerage commissions
and legal expenses), the same to be paid by Lessee to Lessor on
demand, and
(c) The amount by which the rent which, but for the termination of
this Lease, would have been payable under this Lease from the date of
termination to the Expiration Date exceeds the rental and other
income, if any, collected by Lessor in respect of the Demised
Premises, or any part thereof, subject nevertheless to the provisions
of Section 14.03, said amount to be due and payable by Lessee to
Lessor on the several days on which the rent reserved in this Lease
would have become due and payable for the period which otherwise
would have constituted the unexpired portion of the Term (that is to
say, upon each of such days Lessee shall pay to Lessor the amount of
deficiency then existing).
<PAGE>
B. Whether or not Lessor shall have collected any monthly
deficiencies aforesaid, Lessor shall be entitled to recover from Lessee on
demand, as and for liquidated damages, a lump sum payment equal to the amount
by which the Fixed Rent and Additional Rent payable hereunder for the period
which otherwise would have constituted the unexpired portion of the Term (due
account being taken of amounts, if any, collected under clause [c] of Section
15.01.A, and conclusively presuming the Additional Rent to be the same as was
payable for the year immediately preceding such termination or re-entry and
thereafter increasing by two (2%) percent per annum) exceeds the then rental
value of the Demised Premises for the same period both discounted at a rate
equal to then applicable Treasury Rate to present value. If the Demised
Premises or any part thereof be relet by Lessor for the unexpired portion of
the Term, or any part thereof, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the amount of rent reserved upon
such reletting shall be deemed prima facie to be the fair and reasonable
rental value for the part or the whole of the Demised Premises so relet during
the term of the reletting. Nothing herein contained shall limit or prejudice
the right of the Lessor to prove for and obtain as damages by reason of such
termination an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater or less than
the amount of liquidated damages referred to above (due account to be taken,
however, of the amounts, if any, collected under this Article 15).
SECTION 15.02. In no event shall Lessee be entitled to receive any
excess of the rental and other income collected by Lessor in respect of the
Demised Premises over the sums payable by Lessee to Lessor hereunder. In no
event shall Lessee be entitled in any suit for the collection of damages
pursuant to this Article to a credit in respect of any such rental and other
income, except to the extent that such rental and other income is allocable to
the portion of the Term in respect of which such suit is brought and is
actually received by Lessor prior to the entry of judgment in such suit.
SECTION 15.03. Separate actions may be maintained by Lessor against
Lessee from time to time to recover any damages which, at the commencement of
any such action, have then or theretofore become due and payable to Lessor
under Article 14, without waiting until the end of the Term and without
prejudice to Lessor's right to collect damages thereafter.
ARTICLE 16 - INDEMNIFICATION
SECTION 16.01. Notwithstanding that joint or concurrent liability may
be imposed upon either party by statute, ordinance, rule, regulation, order or
court decision, and notwithstanding any insurance furnished by either party
pursuant hereto or otherwise, Lessee shall and does hereby indemnify and hold
Lessor and its agents, officers, directors, and employees, harmless from and
against any and all loss, liability, fines, suits, claims, obligations,
damages, penalties, demands and actions, and costs and reasonable expenses of
any kind or nature (including architects', engineers' and attorneys' fees) due
to or arising out of any of the following:
(a) any work or thing done in, on or about the Demised
Premises, Building or the Property or any part thereof or any use,
possession, occupation, condition, operation, maintenance, repair or
management of the Demised Premises, Building or the Property or any
part thereof, by Lessee or anyone claiming through or under Lessee or
the respective employees, agents, licensees, contractors, servants or
sublessees of Lessee or any such person;
<PAGE>
(b) any act or omission on the part of Lessee or any person
claiming through or under Lessee, or the respective employees,
agents, licensees, invitees, contractors, servants or sublessees of
Lessee or any such person; or
(c) any accident or injury to any person (including death)
or damage to property (including loss of property) occurring in, on,
or about the Demised Premises, Building or the Property or any part
thereof, due to the act or omission by Lessee, its employees, agents,
licensees, invitees, contractors or servants.
The provisions of this Section 16.01 shall survive the expiration or
termination of this Lease. Any sums payable by Lessee to Lessor under this
Section 16.01 shall be due and payable on demand.
SECTION 16.02. Lessor and Lessor's agents, officers, directors, and
employees shall not be liable for any of the following, however caused, other
than by negligent (only to extent covered by Lessor's insurance) or wilful
acts: (a) failure of any Utility Service, (b) damage to Lessee's property on
the Demised Premises caused by or resulting from any cause whatsoever,
including explosion, falling plaster, vermin, smoke, gasoline, oil, Hazardous
Materials, steam, gas electricity, earthquake, subsidence of land, hurricane,
tornado, flood, wind or similar storms or disturbances or water, rain, ice or
snow which may be upon, or leak or flow from, any street, road, parking lot,
sewer, gas main or subsurface area, or from any part of the Property, or
leakage of gasoline, oil or other substances from pipes, pipelines,
appliances, storage tanks, sewers or plumbing works in or at the Property, or
from any other place, or from the breaking of any electrical wire or the
breaking, bursting or leaking of water or Hazardous Materials from any
plumbing or sprinkler system, or any other pipe or storage tanks in, on, under
or about the Property, (c) interference with light or other incorporeal
hereditaments, and (d) loss by theft or otherwise of Lessee's Property or the
property of any person claiming through or under Lessee. Any employees of
Lessor to whom any property shall be entrusted by or on behalf of Lessee shall
be deemed to be acting as Lessee's agents with respect to such property and
neither Lessor nor Lessor's agents shall be liable for any loss or for damage
to any such property by theft or otherwise. This Section 16.02 shall not be
construed as a provision for indemnification.
<PAGE>
SECTION 16.03. Except as otherwise provided for in this Lease, Lessor
shall and does hereby indemnify and hold harmless Lessee and Lessee's agents
from and against any and all loss, liability, fines, suits, claims,
obligations, damages, penalties, demands and actions, and costs and reasonable
expenses of any kind or nature (including architects' and attorneys' fees) due
to or arising out of the negligence or willful misconduct of Lessor, its
agents, officers, directors and employees and contractors. In case of any
obligation of Lessor to indemnify Lessee pursuant to this Section, such
obligation shall be subject to and conditioned upon (x) the receipt by Lessor
of prompt written notice of the claim with respect to which indemnification is
sought and (y) Lessor's having had reasonable opportunity to conduct the
defense of such claim in such manner as it deems appropriate, with the full
cooperation of Lessee, and using counsel reasonably acceptable to Lessor.
ARTICLE 17 - MECHANIC'S AND OTHER LIENS
SECTION 17.01. If any mechanic's, laborer's or materialman's lien
shall be at any time be filed against the Demised Premises, Building or
Property, or any part thereof with respect to any work done, or caused to be
done, or labor or materials furnished, or caused to be furnished, by Lessee or
anyone claiming through or under Lessee (except for Lessor's Work), Lessee,
within thirty (30) days after notice of the filing thereof, shall cause the
same to be discharged of record by payment, deposit, bond, order of a court of
competent jurisdiction or otherwise. If Lessee shall fail to cause such lien
to be discharged within the period aforesaid, then, in addition to any other
right or remedy, Lessor may, but shall not be obligated to, discharge the same
by bonding proceedings, if permitted by law (and if not so permitted, by
deposit in court). Any amount so paid by Lessor, including all costs and
expenses paid by Lessor in connection therewith, together with interest
thereon at the maximum legal rate from the respective dates of Lessor's so
paying any such amount, cost or expense, shall constitute Additional Rent
payable by Lessee under this Lease and shall be paid by Lessee to Lessor on
demand.
ARTICLE 18 - CONDEMNATION
SECTION 18.01. If the whole of the Demised Premises, or such part
thereof as will render the remainder Untenantable, shall be acquired or
condemned for any public or quasi-public use or purpose, this Lease and the
Term shall end as of the date of vesting of title in the condemning authority
with the same effect as if said date were the Expiration Date. If only a part
of the Demised Premises shall be so acquired or condemned then, except as
otherwise provided in this Article, this Lease and the Term shall continue in
force and effect but, from and after the date of the vesting of title, the
Fixed Rent shall be an amount which bears the same ratio to the Fixed Rent
payable immediately prior to such condemnation pursuant to this Lease as the
value of the untaken portion of the Demised Premises (appraised after taking
and repair of any damage to the Demised Premises pursuant to this Section)
bears to the value of the entire Demised Premises immediately before the
taking. The value of the Demised Premises before and after the taking shall be
determined for the purposes of this Section by an independent licensed
appraiser chosen by Lessor. If more than sixty (60%) percent of the total area
of the Building included in the Demised Premises immediately prior to
acquisition or condemnation is so acquired or condemned, or if by reason of
such acquisition or condemnation, Lessee no longer has reasonable means of
access to the Demised Premises, then in such event, either party, may give
notice to the other party within sixty (60) days next following the date upon
which Lessee have received notice of vesting of title, thirty (30) days notice
of termination of this Lease. In the event any such thirty (30) day notice of
termination is given by Lessor or Lessee, this Lease and the Term shall
terminate upon the expiration of said thirty (30) days with the same effect as
if that date were the Expiration Date. If a part of the Demised Premises shall
be so acquired or condemned, and the Term shall not be terminated pursuant to
the provisions of this Section, Lessor, at Lessor's expense, shall restore
that part of the Demised Premises not so acquired or condemned to a
self-contained unit. In the event of any termination of this Lease and the
Term pursuant to the provisions of this Section, the Fixed Rent and Additional
Rent shall be apportioned as of the date of sooner termination and any prepaid
portion of the Fixed Rent and Additional Rent for any period after such date
shall be refunded by Lessor to Lessee, subject to the claims, if any, of
Lessor against Lessee hereunder or otherwise.
<PAGE>
SECTION 18.02. In the event of any acquisition or condemnation of all
or part of the Demised Premises for any public or quasi-public use or purpose,
Lessor shall be entitled to receive the entire award for such acquisition or
condemnation, Lessee shall have no claim against Lessor or the condemning
authority for the value of any unexpired portion of the Term and Lessee hereby
expressly assigns to Lessor all of its right, title and interest in and to any
such award, and also agrees to execute any and all further documents that may
be required in order to facilitate the collection thereof by Lessor. Nothing
contained in this Section shall be deemed to prevent Lessee from making a
separate claim in any condemnation proceeding for moving expenses and for the
value of any Lessee's Property which would be removable at the end of the Term
pursuant to the provisions hereof, directly against any governmental authority
authorized to exercise the power of eminent domain, provided that applicable
statutes permit such awards and any award to Lessor is not diminished or
adversely affected thereby.
SECTION 18.03. The terms "condemnation" and "acquisition" as used in
this Article shall include any agreement in lieu of or in anticipation of the
exercise of the power of eminent domain between Lessor and/or any Superior
Mortgage and any governmental authority authorized to exercise the power of
eminent domain.
ARTICLE 19 - COVENANT OF QUIET ENJOYMENT
SECTION 19.01. If and so long as no Event of Default shall have
occurred and be continuing, Lessor covenants and agrees that Lessee shall be
entitled to peaceably and quietly enjoy the Demised Premises and Lessee's
possession of the Demised Premises will not be disturbed by Lessor, its
successors and assigns, subject, however, to the terms of this Lease
(including those set forth in Sections 24.01 and 24.02), the Mortgage,
Superior Lease and any and/or all other agreements and any amendments thereto,
to which this Lease is subordinated.
ARTICLE 20 - WAIVER OF COUNTERCLAIM AND JURY TRIAL
SECTION 20.01. In the event that Lessor shall commence any summary or
other proceedings or action for non-payment of rent hereunder, Lessee shall
not interpose any counterclaim of any nature or description in such proceeding
or action, unless such non-interposition would effect a waiver of Lessee's
right to assert such claim against Lessor in a separate action or proceeding.
The provisions of this Article shall survive the expiration or other
termination of this Lease.
ARTICLE 21 - NOTICES
SECTION 21.01. A. Except as otherwise expressly provided in this
Lease, any bills, statements, notices, demands, requests, consents or other
communications given or required to be given under this Lease shall be
effective only if rendered or given in writing and
(a) If to Lessee, then, at the option of Lessor, (i)
addressed to Lessee's address as set forth in this Lease, with copies
thereof to Parker, Duryee, Rosoff & Haft, P.C., 529 Fifth Avenue, New
York, New York 10017-4608, Attention: Daniel B. Zanini, Esq., or to
such other address as Lessee may designate as its new address for
such purpose by notice given to Lessor in accordance with the
provisions of this Section, or (ii) delivered personally to Lessee,
or (iii) by overnight courier,
(b) If to Lessor, then, at the option of Lessee, (i)
addressed to Lessor's address as set forth in this Lease, with copies
thereof to Hirsch & Katz, LLP, 595 Stewart Avenue, Suite 400, Garden
City, New York 11530, Attention: Steven C. Hirsch, Esq., or to such
other address as Lessor may designate as its new address for such
purpose by notice given to Lessee in accordance with the provisions
of this Section, or (ii) delivered personally to Lessor, or (iii) by
overnight courier.
<PAGE>
B. Any such bill, statement, notice, demand, request, consent or
other communication shall be deemed to have been rendered or given: (i) on the
date delivered, if delivered to Lessee personally, or by overnight courier and
(ii) on the expiration of five (5) days after mailing, if mailed to Lessor or
Lessee as provided in this Section. Any notice by a party signed by counsel
for such party shall be deemed a notice signed by such party.
ARTICLE 22 - WAIVERS AND SURRENDERS TO BE IN WRITING
SECTION 22.01. The receipt of full or partial rent by Lessor with
knowledge of any breach of this Lease by Lessee or of any default on the part
of the Lessee in the observance or performance of any of the provisions or
covenants of this Lease shall not be deemed to be a waiver of any such
provision, covenant or breach of this Lease provided, however, that acceptance
of a payment of rent shall be valid pro tanto. No waiver or modification by
Lessor, unless in writing, and signed by Lessor, shall discharge or invalidate
any provision or covenant or affect the right of Lessor to enforce the same in
the event of any subsequent breach or default. The failure on the part of
Lessor to insist in any one or more instances upon the strict performance of
any of the provisions or covenants of this Lease, or to enforce any covenant
or provision herein contained or to exercise any right, remedy or election
herein contained consequent upon a breach of any provision of this Lease,
shall not affect or alter this Lease or be construed as a waiver or
relinquishment for the future of such one or more provisions or covenants or
of the right to insist upon strict performance or to exercise such right,
remedy or election, but the same shall continue and remain in full force and
effect with respect to any existing or subsequent breach, act or omission,
whether of a similar nature or otherwise. The receipt by Lessor of any rent or
any other sum of money or any other consideration hereunder paid by Lessee
after the termination, in any manner, of the Term, or after the giving by
Lessor of the Termination Notice, shall not reinstate, continue or extend the
Term, or destroy, or in any manner impair the efficacy of any such Termination
Notice, as may have been given hereunder by Lessor to Lessee prior to the
receipt of any such rent, or other sum of money or other consideration, unless
so agreed to in writing and signed by Lessor. Neither acceptance of the keys
or any other act or thing done by Lessor or any agent or employee shall be
deemed to be an acceptance of a surrender of the Demised Premises, or any part
thereof, excepting only an agreement in writing signed by Lessor. No payment
by Lessee or receipt by Lessor of a lesser amount than the correct rent shall
be deemed to be other than a payment on account, nor shall any endorsement or
statement on any check, as distinguished from any letter accompanying such
check or payment, be deemed to effect or evidence an accord and satisfaction,
and Lessor may accept such check or payment without prejudice to Lessor's
right to recover the balance or pursue any other remedy in this Lease
provided.
<PAGE>
SECTION 22.02. No waiver or modification by Lessee, unless in
writing, and signed by Lessee, shall discharge or invalidate any provision or
covenant or affect the right of Lessee to enforce the same in the event of any
subsequent breach or default. The failure on the part of Lessee to insist in
any one or more instances upon the strict performance of any of the provisions
or covenants of this Lease, or to enforce any covenant or provision herein
contained or to exercise any right, remedy or election herein contained
consequent upon a breach of any provision of this Lease, shall not affect or
alter this Lease or be construed as a waiver or relinquishment for the future
of such one or more provisions or covenants or of the right to insist upon
strict performance or to exercise such right, remedy or election, but the same
shall continue and remain in full force and effect with respect to any
existing or subsequent breach, act or omission, whether of a similar nature or
otherwise.
ARTICLE 23- RIGHTS CUMULATIVE
SECTION 23.01. Each right and remedy of the parties shall be
cumulative and to the extent permitted by law, the exercise or beginning of
the exercise by such party of any one or more of the rights or remedies of
such party shall not preclude the simultaneous or later exercise by such party
of any or all other rights or remedies; provided, however, that this sentence
shall not be construed to entitle any party to satisfaction of more than one
remedy in respect of a particular breach. In the event of any breach or
threatened breach by Lessee or Lessor or any persons claiming through or under
Lessee or Lessor of any of the agreements, terms, covenants or conditions
contained in this Lease, the other party shall be entitled to enjoin such
breach or threatened breach (if entitled to do so at law or in equity or by
statue or otherwise) and shall have the right to invoke any right or remedy
allowed by law or in equity or by statute or otherwise as if re-entry, summary
proceedings or other specific remedies were not provided for in this Lease.
ARTICLE 24- CONVEYANCE; LIABILITY OF PARTIES
SECTION 24.01. The term "Lessor" as used herein shall mean and
include only the owner or owners at the time in question of the Lessor's
interest in this Lease so that in the event of any transfer or transfers (by
operation of law or otherwise) of Lessor's entire interest in this Lease,
Lessor herein named (and in the case of any subsequent transfers or
conveyances, the then transferor) shall be and hereby is automatically freed
and relieved, from and after the date of such transfer or conveyance, of all
liability in respect of the performance of any covenants or obligations on the
part of the Lessor contained in this Lease thereafter to be performed,
provided that the transferee shall be deemed to have assumed and agreed to
perform subject to the limitation of this Article (and without further
agreement between or among the parties or their successors in interest, and/or
the transferee) and only during and in respect of the transferee's period of
ownership, all of the terms, covenants and conditions in this Lease contained
on the part of Lessor to be performed, which terms, covenants, and conditions
shall be deemed to "run with the land", it being intended hereby that the
terms, covenants and conditions contained in this Lease on the part of the
Lessor to be performed shall, subject as aforesaid, be binding on Lessor, its
successors and assigns, only during and in respect of their respective
successive periods of ownership.
<PAGE>
SECTION 24.02. In the event of a breach by Lessor of any provisions,
covenants or obligations of this Lease to be performed by Lessor, the monetary
liability of Lessor in relation to any such breach shall be limited to the
equity of Lessor in the Demised Premises (including insurance proceeds, sale
proceeds and/or condemnation awards), and Lessee shall look only to Lessor's
equity in the Demised Premises (including insurance proceeds, sale proceeds
and/or condemnation awards) for the performance and observance of the terms,
covenants, conditions and obligations of this Lease to be performed or
observed by Lessor and for the satisfaction of Lessee's remedies for the
collection of any award, judgment or other judicial process requiring the
payment of money by Lessor in the event of a default in the full and prompt
payment and performance of any Lessor's obligations hereunder and in no event
shall any of the partners constituting Lessor (the "Partners"), nor the
partners, shareholders, officers or directors of Lessor or the Partners shall
be liable for the performance of Lessor's obligations under this Lease, nor
shall any of the Partners assets be liable to any levy, execution, restraint,
award, claim of any kind whatsoever arising out of, or in any way related to
this Lease.
SECTION 24.03. The term "Lessee" as used in this Lease shall mean and
include Lessee named herein and, during and in respect of their respective
successive periods of ownership, each subsequent owner or owners of the
leasehold estate created by this Lease. For all purposes of this Lease and
without affecting the rights of, and obligations between, Lessee herein named
and any transferee, notwithstanding any transfer (by operation or law or
otherwise) of title to the leasehold estate created by this Lease by Lessee
herein named or by any subsequent owner of such estate and notwithstanding the
assumption by any transferee of the obligations of the Lessee hereunder,
Lessee herein named, as between Lessor and Lessee herein named, shall remain
primarily liable as primary obligor and not as a surety, for the full and
prompt payment and performance of Lessee's obligations hereunder and, without
limiting the generality of the foregoing or of Article 28, shall remain fully
and directly responsible and liable to Lessor for all acts and omissions on
the part of any transferee subsequent to it in violation of any obligation of
this Lease.
<PAGE>
ARTICLE 25- CHANGES AND ALTERATIONS BY LESSEE
SECTION 25.01.A. Lessee shall have no right to make any alteration,
change, additions or improvement, structural or otherwise (an "Alteration"),
to the Demised Premises or any appurtenances thereto without the prior written
consent of Lessor in each instance, which consent shall not be unreasonably
withheld, or delayed. Notwithstanding the foregoing, Lessee shall have the
right, without Lessor's consent, to decorate the Demised Premises, excluding,
however, paint, carpeting and wall coverings.
B. If Lessor shall grant its consent to the making of an Alteration,
then the same shall (i) be performed at the sole cost and expense of Lessee,
(ii) be performed in a good and workmanlike manner, and in compliance with all
applicable Legal Requirements (including existing zoning requirements),
Insurance Requirements and Environmental Laws, (iii) be consistent with the
use of the Demised Premises provided for herein, (iv) not in any way render
the Demised Premises other than a complete, self containing operating unit,
(v) in the case of a structural alteration, be performed in accordance with
plans and specifications approved prior to the commencement of any work by the
appropriate Governmental Authorities and by Lessor, (vi) be of such nature so
as not to lessen the fair market value of the Demised Premises when completed,
and (vii) be performed under the supervision of a licensed architect approved
by Lessor and in accordance with Lessor's Standard Requirements For
Alterations To Be Performed By Lessees', as may be amended from time to time.
SECTION 25.02.A. Any and all Alterations made in accordance with
Section 25.01 shall immediately become the property of Lessor, provided,
however, that if, in accordance with the provisions of Sections 25.02.B and
29.02, Lessee shall have the option to and shall remove its trade fixtures,
provided that same are not affixed to or such removal would otherwise damage
the Demised Premises, then the same shall cease to be property of the Lessor
upon removal.
B. Except for Lessee's Work as provided for in Article 8 of this
Lease, unless Lessor shall otherwise expressly indicate in writing at the time
of granting its consent to the making of a proposed Alteration, Lessee shall,
as and when provided in Section 29.02, restore the affected portion of the
Demised Premises to the state or condition thereof existing prior to the
making of such Alteration.
C. Any and all contractors to be involved in performing work shall be
subject to Lessor's prior approval, which shall not be unreasonably withheld.
<PAGE>
D. Prior to commencing any work at the Demised Premises, Lessee shall
furnish Lessor with evidence reasonably satisfactory to Lessor of such
insurance as Lessor may require and such insurance shall be in full force and
effect during such work and will cover, by endorsement or otherwise, the risk
during the course of such work.
E. In the event of any Alteration as provided for in this Article,
the Rent payable hereunder shall not be reduced or abated in any manner
whatsoever.
F. No Alterations shall involve the permanent removal of any
fixtures, equipment or other property in the Demised Premises which are not
Lessee's property, unless Lessor's prior written consent is first obtained and
unless such fixtures, equipment or other property shall be promptly replaced,
at Lessee's expense and free of superior title, liens and claims, with
fixtures, equipment or other property (as the case may be) of like utility and
at least equal value (which replaced fixtures, equipment or other property
shall thereupon become the property of Lessor), unless Lessor shall otherwise
expressly consent in writing.
SECTION 25.03. Notwithstanding anything herein to the contrary,
Lessor shall have the option of performing any and all Alterations which cost
in excess of Twenty Thousand and 00/100 ($20,000.00) Dollars pursuant to
Article 25 of this Lease on Lessee's behalf and at Lessee's Cost.
ARTICLE 26 - CERTIFICATES
SECTION 26.01. The parties hereto agree at any time and from time to
time, within twenty (20) days after request by the other, to execute,
acknowledge and deliver a statement certifying (i) the Commencement Date
and/or Rent Commencement Date hereunder, (ii) that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the
Lease is in full force and effect as modified and stating the modifications),
(iii) the dates to which the Fixed Rent and Additional Rent have been paid,
and (iv) whether or not to the knowledge of the signer of such statement (a)
the other party is in default in keeping, observing or performing any term,
covenant, agreement, provision, condition or limitation contained in this
Lease and, if in default, specifying each such default, (b) either party is
holding any funds under this Lease in which the other has an interest (and, if
so, specifying the party holding such funds and the nature and amount
thereof), and (c) there is any amount then due and payable to either party by
the other, it being intended that any such statement delivered pursuant to
this Section may be relied upon by Lessor, Lessee, any mortgagee, superior
lessor or any person who may and does become a mortgagee, superior lessee, any
person who may and does become a purchaser or assignee of Lessor's interest in
this Lease or the mortgagee's interest in any mortgage or the lessor's
interest in the Superior Lease.
<PAGE>
ARTICLE- 27 ASSIGNMENTS, SUBLEASES AND MORTGAGES
SECTION 27.01.A. Except as otherwise specifically provided in this
Article, neither this Lease, nor the Term and estate hereby granted, nor any
part thereof, nor the interest of Lessee in any sublease or the rental
thereunder, shall be assigned, mortgaged, pledged, encumbered or otherwise
transferred by Lessee or Lessee's legal representatives or successors in
interest, by operation of law or otherwise, and neither the Demised Premises,
nor any part thereof, nor any Lessee's Property, shall be encumbered in any
manner by reason of any act or omission on the part of Lessee or anyone
claiming under or through Lessee, or shall be sublet or be used or occupied or
permitted to be used or occupied or utilized for desk or storage space by
anyone other than Lessee or for any purpose other than as specifically
permitted by this Lease, without the prior written consent of Lessor in each
case, which consent may not be unreasonably withheld, conditioned or delayed.
If Lessee is other than a public company, a transfer (including any issuance
of stock) of an aggregate of fifty (50%) percent or more stock, partnership
interest or other equity interest in Lessee by any party or parties in
interest shall be deemed an assignment of this Lease. Notwithstanding the
foregoing, Lessee shall have the right, upon at least Thirty (30) days prior
written notice to Lessor, to assign or sublease this Lease, in its entirety,
to any of its affiliated or subsidiary companies.
B. If Lessee is a corporation, upon at least Thirty (30) days prior
notice to Lessor, this Lease in its entirety may be assigned without Lessor's
consent to a corporation into which Lessee merges or consolidates, or which
controls, is controlled by or under common control with Lessee, so long as the
Demised Premises continue to be used for the use described in Article 4 of
this Lease; the transfer is not principally for the purpose of transferring
the leasehold estate created hereby; the net worth of the assignee is at least
equal to or in excess of the net worth of Lessee at the time of execution of
this Lease and immediately prior to such assignment or the assignee can
otherwise secure and guaranty the payment to Lessor or all rent and any other
amounts due from Lessee pursuant to this Lease in a manner reasonably
satisfactory to Lessor; the assignee assumes by documents satisfactory to
Lessor all of Lessee's obligations to be performed under this Lease, and;
provided such assignment shall be subject to all of the other terms and
conditions of this Lease.
<PAGE>
SECTION 27.02. If this Lease be assigned, whether or not in violation
of the provisions of this Lease, Lessor may collect rent from the assignee,
and Lessor shall be entitled to receive, as Additional, Rent, any and all
consideration paid to Lessee in connection with such assignment promptly after
receipt thereof by Lessee and any and all considerations payable to Lessee in
connection with such assignment as and when Lessee would be entitled to
receive the same. The provisions of the preceding sentence shall be in full
force and effect notwithstanding that Lessee has sought the protection of any
provisions of the bankruptcy law (as hereinafter defined) or if a petition has
been filed against Lessee under such bankruptcy law. If the Demised Premises
or any part thereof be sublet or be used or occupied by anybody other than
Lessee, whether or not in violation of this Lease, Lessor may, after default
by Lessee and expiration of Lessee's time to cure such default, if any,
collect rent from the sublessee or occupant. In either event, Lessor shall
apply the net amount collected to the rents herein reserved, but no such
assignment, subletting, occupancy or collection shall be deemed a waiver of
any of the provisions of Section 27.01, or the acceptance of the assignee,
sublessee or occupant as tenant, or a release of Lessee from the further
performance by Lessee of Lessee's obligations under this Lease. The consent by
Lessor to an assignment, mortgaging or subletting pursuant to any provision of
this Lease shall not in any way be considered to relieve Lessee from obtaining
the express consent of Lessor for any other or further assignment, mortgaging
or subletting. References in this Lease to use or occupancy by anyone other
than Lessee shall not be construed as limited to sublessees and those claiming
under or through sublessees but as including also licensees and other claiming
under or through Lessee, immediately or remotely. The listing of any name
other than that of Lessee on any door of the Demised Premises or on any sign
on the Demised Premises, or otherwise, shall not operate to vest in the person
so named any right or interest in this Lease or in the Demised Premises, or be
deemed to constitute, or serve as a substitute for, any prior consent of
Lessor required under this Article, and it is understood that any such listing
shall constitute a privilege extended by Lessor which shall be revocable at
Lessor's will by notice to Lessee. Lessee agrees to pay to Lessor any
reasonable counsel fees incurred by Lessor in connection with any proposed
assignment of Lessee's interest in this Lease or any proposed subletting of
the Demised Premises or any part thereof. Neither any assignment of Lessee's
interest in this Lease nor any subletting, occupancy or use of the Demised
Premises or any part thereof by any person other than Lessee as provided in
this Article, nor any application of any such rent as provided in this Article
shall, under any circumstances, relieve Lessee herein named of its obligations
fully to observe and perform the terms, covenants and conditions of this Lease
on Lessee's part to be observed and performed.
SECTION 27.03. A. Notwithstanding anything contained in Sections
27.01 and 27.02, in the event that, at any time or from time to time during
the Term, Lessee desires to sublet all or any part of the Demised Premises,
Lessee shall notify Lessor of such desire and shall: (i) submit to Lessor in
writing the name and address of the proposed subtenant, a reasonably detailed
statement of the proposed subtenant's business, reasonably detailed financial
references for the proposed subtenant and any other information reasonably
requested by Lessor, and (ii) submit to Lessor a copy of the proposed
sublease.
<PAGE>
B. If a proposed assignment or sublease requires Lessor's consent,
then upon receipt of such notice Lessor shall thereupon have the option and
right, exercisable within Ten (10) days of receipt of such notice from Lessee,
to terminate this Lease effective as of a date specified by Lessor in such
notice which date shall not be later than Thirty (30) days after the date of
Lessor's notice. Notwithstanding the foregoing, Lessor shall not have the
right to terminate this Lease as provided for in the preceding sentence in
connection with a sublease(s) which in the aggregate, do not constitute more
than Twenty (20%) percent of the rentable square footage of the Demised
Premises.
C. If within ten (10) business days after Lessee shall have requested
the consent of Lessor to any assignment or subletting under this Article, and
shall have submitted all items required hereby, Lessor does not exercise its
option to terminate this Lease, the term of the proposed assignment or
sublease may commence upon Lessor's consent, which consent may not be
unreasonably withheld, it being agreed that if within such ten (10) business
day period Lessor does not advise Lessee that such consent is granted, such
consent shall be deemed granted by Lessor. Lessor, however, shall not in any
event be obligated to consent to the proposed sublease or the commencement of
the term unless: (i) in the reasonable judgment of Lessor the proposed
subtenant is of a character and financial worth such as is in keeping with the
standards of Lessor in those respects for the Demised Premises, and the nature
of the proposed subtenant's business and its reputation are in keeping with
the character of the Demised Premises and the use thereof, (ii) the purpose
for which the proposed subtenant intends to use the portion of the Demised
Premises sublet to it are uses expressly permitted by and not expressly
prohibited by this Lease; (iii) the proposed sublease shall prohibit any
assignment or subletting; (iv) no Event of Default shall have occurred and be
continuing and (v) Lessee shall reimburse Lessor for all reasonable costs that
may be incurred by Lessor in connection with the said sublease, including the
costs of making investigations as to the acceptability of a proposed subtenant
and legal costs incurred in connection with the granting of any requested
consent.
D. With respect to each and every subletting authorized by the
provisions of this Article it is further agreed and understood between Lessor
and Lessee that: (i) the subletting shall be, and each such sublease shall
expressly provide that is, subject and subordinate at all times and in all
respects, to this Lease, (ii) no subletting shall be for a term ending later
than one day prior to the Expiration Date originally provided for herein and
that part, if any, of the proposed term of any sublease which shall extend
beyond a date one day prior to the Expiration Date originally provided for
herein (or any sooner date of the expiration of the term or termination of
this Lease) is hereby deemed to be a nullity, (iii) there shall be delivered
to Lessor, within ten (10) days after the commencement of the term of the
proposed sublease, notice of such commencement and a fully executed copy of
the proposed sublease (unless previously submitted) and (iv) Lessee shall pay
to Lessor, as Additional Rent, all of the rents, additional charges and other
consideration arising from such subletting as shall for any period exceed the
aggregate of the rents payable under this Lease for the subleased space of the
same period less the brokerage commissions and attorneys' fees and
disbursements reasonably incurred by Lessee for such subletting, allocated to
such period on a straight line basis over the term of such subletting.
E. Anything herein contained to the contrary notwithstanding: (i)
Lessee shall not advertise but may list its space for subletting or
assignment, and may list its space at a rental rate lower than the rental rate
then being paid by Lessee to Lessor only with respect to subletting (but not
assignment) and (ii) No assignment or subletting shall be made to any person
or entity which shall at that time otherwise be a tenant, sub-tenant or other
occupant of any part of the Property or which shall within the prior Six (6)
months have been negotiating with Lessor to become such a tenant, sub-tenant
or occupant of the Property.
<PAGE>
ARTICLE 28 - SUBORDINATION
SECTION 28.01. Subject to the provisions of Section 28.02, this
Lease, and all rights of Lessee hereunder, are and shall be subject and
subordinate in all respects to (a) all present and future ground leases,
overriding leases and underlying leases and/or grants of term of the Property,
the Building, the Building Equipment and/or any appurtenance thereto of which
Lessor has notified Lessee (collectively, the "Superior Lease"), (b) all
mortgages and building loan agreements, including leasehold mortgages, deeds
of trust, and building loan agreements, which may now or hereafter affect the
Property, the Building, the Building Equipment and/or any appurtenance
thereto, of which Lessor has notified Lessee (collectively, the "Mortgage"),
whether or not the Mortgage shall also cover other land and/or buildings, and
(c) each and every advance made or hereafter to be made under the Mortgage and
to all renewals, modifications, replacements, substitutions and extensions of
any Superior Lease and the Mortgage and spreaders and consolidations of the
Mortgage. The provisions of this Section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Lessee shall promptly execute and deliver, at its own cost and
expense, an instrument in recordable form to evidence such subordination,
provided, however, that such instrument has been prepared by Lessor and
submitted to Lessee for execution and delivery. If, in connection with the
obtaining, continuing or renewing of financing for which the Demised Premises
or the interest of the lessee under the Superior Lease represents collateral
in whole or in part, a bank, insurance company or other lender shall request
reasonable modifications of this Lease as a condition of such financing,
Lessee will not unreasonably withhold or delay its consent thereto, provided
that such modifications do not increase the monetary obligations of Lessee
under this Lease or materially increase the other obligations of Lessee
hereunder or materially and adversely affect the rights of Lessee under this
Lease. Lessor represents that as of the Commencement Date the Property shall
not be encumbered by a Mortgage or Superior Lease.
SECTION 28.02. The subordination provided in Section 28.01 shall be
effective as between Lessee herein named and any lessor under a future
Superior Lease, or any holder of a future Mortgage, as the case may be, only
if such lessor or holder delivers to Lessee an agreement providing in
substance, that if and so long as no Event of Default shall have occurred and
be continuing, this Lease shall continue upon its then executory terms and
conditions and possession of the Demised Premises held by Lessee herein named
will not be disturbed by such person in the event of a default under the
underlying lease or the Mortgage, as the case may be. The foregoing provisions
of this Section shall endure to the benefit of Lessee herein named and shall
apply notwithstanding that, as a matter of law, this Lease may terminate upon
the termination of the Superior Lease, or the foreclosure (including judgment
of foreclosure and sale) of the Mortgage.
<PAGE>
SECTION 28.03. If at any time prior to the expiration of the Term,
the holder of the Mortgage shall become the owner of the Demised Premises as a
result of foreclosure of its mortgage or by reason of an assignment of the
lessee's interest under any such lease or conveyance of the Demised Premises,
Lessee agrees, at the election and upon demand of any owner of the Demised
Premises, or of the holder of any Mortgage or Superior Lease (including a
leasehold mortgage) in possession of the Demised Premises, to attorn, from
time to time, to any such owner, or lessee, upon the then executory terms and
conditions of this Lease, provided that such owner, holder or lessee, as the
case may be, shall then be entitled to possession of the Demised Premises. No
such owner, holder or lessee shall be liable for any previous acts or omission
of Lessor under this Lease (except that this provision shall not be construed
to relieve such person from any obligation thereafter to be performed), nor
shall such owner holder or Lessee be subject to any offset which shall have
theretofore accrued to Lessee against Lessor, or be bound by any previous
modification of this Lease, not expressly provided for in this Lease, entered
into after the date of the Mortgage, or Superior Lease, or by any previous
prepayment of more than one month's Fixed Rent. The foregoing provisions of
this Section shall enure to the benefit of any such owner, holder or lessee,
shall apply notwithstanding that, as a matter of law, this Lease may terminate
upon the termination of the Superior Lease, or the foreclosure (including
judgment of foreclosure and sale) of the Mortgage, shall be self-operative
upon any such demand, and no further instrument shall be required to give
effect to said provisions. Lessee, however, upon demand of any such owner,
holder or lessee, agrees to execute, from time to time, instruments in
confirmation of the foregoing provisions of this Section, acknowledging such
attornment and setting forth the terms and conditions of its tenancy. Nothing
contained in this Section shall be construed to impair any right otherwise
exercisable by any such owner, holder or lessee.
ARTICLE 29 - SURRENDER; REMOVAL OF LESSEE'S PROPERTY
SECTION 29.01. On the last day of the Term or on the earlier
termination of the Term, Lessee shall peaceably and quietly leave, surrender
and deliver the Demised Premises to Lessor, together with (a) all alterations,
changes, additions and improvements, which may have been made upon the Demised
Premises, and (b) except for Lessee's Property, Lessee's Work as defined in
Article 8 of this Lease, all fixtures and articles of personal property of any
kind or nature which Lessee may have installed or affixed on, in, or to the
Demised Premises for use in connection with the operation and maintenance of
the Demised Premises (whether or not said property be deemed to be fixtures),
all of the foregoing to be surrendered in good, substantial and sufficient
repair, order and condition, reasonable use, wear and tear, and damage by fire
or other casualty, excepted, and free of occupants and sublessees.
<PAGE>
SECTION 29.02. On or prior to the Expiration Date or any earlier
termination of this Lease, Lessee shall remove Lessee's Property, and any
items referred to in clauses (a) or (b) of Section 29.01, which Lessor shall
request Lessee to remove (unless Lessor shall have waived such right as to any
item referred to in clause (a) of Section 29.01 at the time of the granting of
consent with respect thereto under Article 25), and Lessee shall pay or cause
to be paid the cost of repairing or remedying any damage caused thereby,
provided that no item of Lessee's Property may be removed if its removal would
impair the integrity (structural or otherwise) of the Building or Building
Equipment. All property not so removed shall be deemed abandoned and may
either be retained by Lessor as its property or disposed of, without
accountability, at Lessee's sole cost, expense and risk, in such manner as
Lessor may see fit.
SECTION 29.03. If the Demised Premises are not surrendered in
accordance with the provisions of this Article upon the expiration or
termination of this Lease, Lessor shall have all rights given at law or in
equity, in the case of holdovers, to remove Lessee and anyone claiming through
or under Lessee. In any event, Lessee shall and does hereby indemnify Lessor
against all loss or liability arising from delay by Lessee in so surrendering
the Demised Premises, including any claims made by any succeeding lessees
founded on such delay. Lessee expressly waives, for itself and for any person
claiming through or under Lessee (including creditors), any rights which
lessee or any such person may have under the provisions of any law in
connection with any holdover summary proceedings which Lessor may institute to
enforce the provisions of this Article. Lessee's obligations under this
Article shall survive the expiration or termination of this Lease.
SECTION 29.04. Lessee acknowledges the extreme importance to Lessor
that possession of the Demised Premises be surrendered at the expiration or
sooner termination of this Lease. In the event that Lessee fails to vacate the
Demised Premises at the expiration or sooner termination of this Lease, Lessee
shall be obligated to pay Lessor damages in an amount equal to One Hundred and
Fifty (150%) Percent of the annual Fixed Rent and Additional Rent provided for
on the day preceding the Expiration Date for such period of time that Lessee
holds over on a per diem basis.
<PAGE>
ARTICLE 30 - RENEWAL TERM
SECTION 30.01. Lessee named herein, shall have the right, at its
option, to extend this Lease for the Demised Premises (including any
Additional Space as hereinafter defined) for a term ("Renewal Term") of Five
(5) years (to commence on the Expiration Date originally provided for herein
and to end at noon on the Fifth (5th) anniversary of such Expiration Date
originally provided for herein) by giving Lessor notice of such election at
any time but not less than Nine (9) months prior to the Expiration Date
originally provided for herein (time being of the essence with respect
thereto), and upon the giving of such notice this Lease thereupon shall,
subject to the provisions of Section 30.02, be automatically extended for the
Renewal Term with the same force and effect as if the Renewal Term had been
originally included in the Term, without the execution of any further
instrument.
SECTION 30.02. Any notice of election to exercise the option to
extend as hereinbefore provided must be in writing and sent to Lessor as
provided in Article 21. Neither the option granted to Lessee in this Article
to extend the Term, nor the exercise of such option by Lessee, named herein
shall prevent Lessor from exercising any option or right granted or reserved
to Lessor in this Lease to terminate this Lease, and the effective exercise of
any such right of termination by Lessor shall terminate any such renewal or
extension and any right of Lessee to any such renewal or extension, whether or
not Lessee shall have exercised any such option to extend the Term. Any such
option or right on the part of Lessor to terminate this Lease pursuant to the
provisions hereof shall continue during any Renewal Term.
SECTION 30.03. All of the terms, covenants and conditions of this
Lease shall continue in full force and effect during the Renewal Term except
that (i) the Fixed Rent for the Renewal Term shall be as provided in Section
30.04 (all other rent and charges payable by Lessee remaining unaffected), and
(b) there shall be no further privilege of extension of this Lease beyond the
Renewal Term.
SECTION 30.04. A. During the Renewal Term, Lessee shall pay to Lessor
annual Fixed Rent, at the same times and in the same manner as in the Term
originally provided for, at the annual rate equal to Ninety-Five (95%) percent
of the annual fair rental value of the Demised Premises (without deduction for
the cash value of free rent and leasehold improvements), which renewing,
non-equity tenants are then receiving in connection with a lease for
comparable space in a building of the same age, quality, size, location,
services, amenities, quality of construction and appearance to that of the
Building on the date of the commencement of the Renewal Term with a term equal
to the Renewal Term and otherwise containing the same provisions as this Lease
contains, as determined by agreement between Lessor and Lessee. If, prior to
the commencement of the Renewal Term, Lessor and Lessee are unable to agree on
the amount of the annual Fixed Rent during the Renewal Term, then in such
event, the determination of such annual fair rental value shall be made by
arbitration pursuant to the provisions of Section 30.04. B. hereof. If the
Renewal Term, shall commence prior to determination of the amount of annual
Fixed Rent payable during the Renewal Term, either by agreement or by decision
of the arbitrators, Lessee, in the meantime, shall pay the monthly
installments of Fixed Rent at the annual rate payable under this Lease for the
year ending on the Expiration Date originally provided for herein. If monthly
installments of the amount agreed upon by Lessor and Lessee, or found by the
arbitrators, shall be greater than such amount, then Lessee, forthwith after
such agreement or arbitrators' decision, shall pay to Lessor, for the period
from the commencement of the Renewal Term to the last day of the calendar
month in which the agreement or the arbitrators' decision takes effect, the
difference between the monthly installments actually paid and the monthly
installments which should have been paid in accordance with such agreement or
arbitrator's decision, together with interest at the prime rate plus two (2%)
percent from the respective due dates of each monthly installment to the date
of payment pursuant to this paragraph; and, thereafter, Lessee shall pay the
monthly installments at the new rate. In no event shall the annual Fixed Rent
during the Renewal Term be less than the annual Fixed Rent payable immediately
prior to the Renewal Term.
<PAGE>
B. (1) In the event that Lessor and Lessee are unable to agree on the
amount of the annual Fixed Rent during the Renewal Term, then either Lessor or
Lessee (hereinafter referred to as the "Initiating Party") may give the other
party (hereinafter called the "Responding Party") a notice designating the
name and address of the arbitrator designated by the Initiating Party to act
on its behalf in the arbitration process hereinafter described (the "Review
Notice").
(2) If the Initiating Party gives a Review Notice, then within twenty
(20) days after giving of such Review Notice, the Responding Party shall give
notice to Initiating Party specifying in such notice the name and address of
the arbitrator designated by the Responding Party to act on its behalf. In the
event the Responding Party shall fail to give such notice within such twenty
(20) day period, then the appointment of such arbitrator shall be made in the
same manner as hereinafter provided for the appointment of a third arbitrator
in a case where two arbitrators are appointed hereunder and the parties are
unable to agree to such appointment. The two arbitrators so chosen shall meet
within thirty (30) days after the second arbitrator is appointed and shall
exchange sealed envelopes each containing such arbitrators written
determination of the fair market rent of the Demised Premises based on the
criteria set forth in Section 30.04.A. The fair market rent specified by
Lessor's arbitrator shall be called the "Lessor's Submitted Value" and the
fair market rent specified by Lessee's arbitrator shall be called the
"Lessee's Submitted Value". Copies of such written determinations shall
promptly be sent to both Lessor and Lessee. Any failure of either such
arbitrator to meet and exchange such determinations shall be acceptance of the
other party's arbitrator's determination as to fair market rent, if, and only
if, such failure persists for five (5) days after notice to whom such
arbitrator is acting, and, provided that such five (5) day period shall be
extended by reason of any Unavoidable Delay. If the higher determination of
the fair market rent for the Demised Premises is not more than one hundred and
five (105%) percent of the lower determination of the fair market rent, then
the fair market rent for such space shall be deemed to be the average of the
two determinations. If, however, the higher determination is more than one
hundred and five (105%) percent of the lower determination, then within ten
(10) days of the date the arbitrators submitted their respective fair market
rent determinations, the two arbitrators shall appoint a third arbitrator. In
the event of their being unable to agree upon such appointment within ten (10)
days after the exchange of the sealed envelopes, the third arbitrator shall be
selected by the parties themselves if they can agree thereon within a further
period of 10 days. If the parties do not so agree, then either party, on
behalf of both and on notice to the other, may request such an appointment by
the American Arbitration Association (or any successor organization) in
accordance with its rules then prevailing or if the American Arbitration
Association (or any successor organization) shall fail to appoint said third
arbitrator within fifteen (15) days after such request is made, then either
party may apply for such appointment, on notice to the other, to the President
of the Westchester County Bar Association (who may consult with the Chairman
of the Real Property Law Committee of the Westchester County Bar Association).
Within ten (10) days after the appointment of such third arbitrator, the
Lessor's arbitrator shall submit Lessor's Submitted Value to such third
arbitrator and the Lessee's arbitrator shall submit Lessee's Submitted Value
to such third arbitrator. Such third arbitrator shall, within thirty (30) days
after the end of such fifteen (15) day period, make his own determination of
the fair market rent of the Demised Premises using the criteria set forth in
Section 30.04.A. hereof, and send copies of his determination promptly to both
Lessor and Lessee specifying whether Lessor's Submitted Value or Lessee's
Submitted Value was closer to the determination by such third arbitrator of
the fair market rent of the Demised Premises. Whichever of Lessor's Submitted
Value or Lessee's Submitted Value shall be closer to the determination by such
third arbitrator shall conclusively be deemed to be the fair market rent of
the Demised Premises.
<PAGE>
(3) In no event shall the arbitrators enlarge upon, or alter or
amend, this Lease or Lessor's or Lessee's rights as provided in this Lease, it
being understood that the sole issue for determination by the arbitrators
shall be the single issue of fact of the annual fair rental value of the
Demised Premises as provided in paragraph A of this Section 30.01.
(4) Except as otherwise provided in the following sentence, the fees
and expenses of an arbitration proceeding shall be borne by the parties
equally. The fees of respective counsel engaged by the parties the fees and
expenses of expert witnesses and other witnesses called and the cost of
transcripts shall be borne by the parties engaging such counsel or calling
such witness or ordering such transcripts.
SECTION 30.05. The rights provided to Lessee to extend this Lease as
provided in Section 30.01 is conditioned in all respects upon (i) there being
no Event of Default in the observance or performance of any term, covenant,
condition or agreement of Lessee's part to be observed or performed under this
Lease both at the time the notice of exercise is given and immediately prior
to commencement of the Renewal Term, and (ii) there being no sublease in
effect (other than subleases with related corporations) with respect to the
Demised Premises or any part thereof immediately preceding the Expiration Date
originally provided for herein. Any termination, cancellation or surrender of
this Lease shall terminate any right of extension hereunder for the Renewal
Term.
<PAGE>
ARTICLE 31- SECURITY DEPOSIT
SECTION 31.01. Lessee shall deposit with Lessor, upon execution of
this Lease, the sum of Twenty-Six Thousand, Five Hundred and Ninety-Three and
00/100 ($26,593.00) Dollars either in cash or by Letter of Credit as provided
in Section 31.02 as security for the faithful performance and observance by
Lessee of the terms, provisions, conditions and covenants of this Lease (the
"Security Deposit"). Lessee agrees that, in the event that Lessee defaults,
beyond all applicable grace and cure periods after notice, in respect of any
terms, provisions, conditions and covenants of this Lease (including the
payment of Rent), Lessor may notify the Issuing Bank (as such term is defined
in Section 31.02) and thereupon receive all of the monies represented by the
said Letter of Credit and use, apply, or retain the whole or any part of such
proceeds, as the case may be, to the extent required for the payment of Rent,
or any other sums as to which Lessee is in default, or for any sum that Lessor
may expend or may be required to expend by reason of Lessee's default, in
respect of the terms, provisions, conditions and covenants of this Lease
(including any damages or deficiency accrued before or after summary
proceedings or other re-entry by Lessor). In the event that Lessor applies or
retains any portion of the proceeds of such Letter of Credit, Lessee shall
forthwith restore the amount so retained or applied.
<PAGE>
SECTION 31.02. Lessee shall deliver to Lessor a clean, irrevocable
and unconditional Letter of Credit issued by and drawn upon any commercial
bank reasonably acceptable to Lessor (the "Issuing Bank") with offices for
banking purposes in the City of New York, which Letter of Credit shall have a
term of not less than one year, be in a form and content reasonably
satisfactory to Lessor, be for the account of Lessor and be in the amount of
Twenty-Six Thousand, Five Hundred and Ninety-Three and 00/100 ($26,593.00)
Dollars. The Letter of Credit shall provide that:
A. the Issuing Bank shall pay to Lessor an amount up to the
face amount of the Letter of Credit upon presentation of only the
Letter of Credit, a sight draft in the amount to be drawn and an
affidavit of default;
B. the Letter of Credit shall be deemed to be automatically
renewed, without amendment, for consecutive periods of one year
during the Term of this Lease, unless the Issuing Bank sends written
notice ("Non-Renewal Notice") to Lessor by certified or registered
mail, return receipt requested, not less than thirty (30) days next
preceding the then expiration date of the Letter of Credit that it
elects not to renew such Letter of Credit;
C. Lessor, after receipt of the Non-Renewal Notice, shall
have the right, exercisable by a sight draft only, to receive the
moneys represented by the Letter of Credit (which moneys shall be
held by Lessor as a cash deposit pursuant to the terms of this
Article 31 pending replacement of such Letter of Credit); and
D. Upon Lessor's sale of the Property, or Lessor's interest
therein, or a leasing of the Property, the Letter of Credit shall be
transferable by Lessor as provided in Section 31.03.
SECTION 31.03 In the event of a sale of the Property, or Lessor's
interest therein, or of a leasing of the Property, Lessor shall transfer the
Letter of Credit deposited hereunder to the vendee or lessee, and Lessor shall
thereupon be released by Lessee from all liability for the return of the
Letter of Credit to a new lessor. Lessee shall execute such documents as may
be necessary to accomplish such transfer or assignment of the Letter of
Credit.
SECTION 31.04. Lessee covenants that it will not assign or encumber,
or attempt to assign or encumber the monies or Letter of Credit deposited
hereunder as security, and that neither Lessor nor its successors and/or
assigns shall be bound by any such assignment, or attempted encumbrance.
SECTION 31.05. In the event that Lessee shall fully and faithfully
comply with all of the terms, provisions, conditions and covenants of this
Lease, and provided further, that no Event of Default shall have occurred and
be continuing, the Security Deposit shall be returned to Lessee within thirty
(30) days after Lessee delivers possession of the Demised Premises to Lessor
as provided for in this Lease.
ARTICLE 32- BROKERS
SECTION 32.01. The parties hereto represent that in connection with
this Lease they have dealt with no broker other than Rostenberg Doern Company,
Inc. and Friedland Realty, Inc. (the "Brokers") nor has either party had any
correspondence or other communication in connection with this Lease with any
other person who is a broker, and that so far as the parties are aware the
Brokers are the only brokers who negotiated this Lease. Each party hereby
indemnifies the other party and holds it harmless from any and all loss, cost,
liability, claim, damage, or expense (including court costs and attorneys'
fees) arising out of any inaccuracy of the above representation. Lessor agrees
to pay the Brokers all commissions due for its services pursuant to a separate
written agreement.
<PAGE>
ARTICLE 33- RIGHT OF FIRST OFFER; ADDITIONAL SPACE
SECTION 33.01.A. From and after the Second (2nd) Anniversary of the
Rent Commencement Date, Lessor agrees that prior to offering for lease any
contiguous space on the First (1st) floor of the Building (subject to the
rights of other lessees), it shall give Lessee notice of and the right to, at
its option, expand the Demised Premises herein to include all such additional
space (the "Additional Space") with occupancy to commence on the Additional
Space Commencement Date (as hereinafter defined) and to end on the Expiration
Date originally provided for herein.
B. Lessee shall, within Ten (10) days after receipt of the notice
from Lessor that the Additional Space will become available for hire, notify
Lessor of its intention to lease the Additional Space (time being of the
essence with respect thereto). Lessee's failure to notify Lessor within the
Ten (10) day period shall be deemed a waiver of the right to hire the
Additional Space. In the event that Lessee shall elect to hire the Additional
Space, same shall be deemed added to and a part of the Demised Premises, with
the same force and effect as if originally so demised under this Lease as of
the Additional Space Commencement Date.
C. Lessee shall have the right to inspect the Additional Space prior
to exercising its rights herein. Lessee agrees to accept the Additional Space
in its "AS IS" state and condition on the Additional Space Commencement Date
without any representation or warranty, express or implied, in fact or by law,
by Lessor, and without recourse to Lessor, as to the nature, condition or
usability thereof or as to the use or occupancy which may be made thereof
D. As used herein the Additional Space Commencement Date shall be the
date which is the sooner of: (i) the date specified in Lessor's notice or (ii)
the date upon which Lessee occupies the Additional Space.
SECTION 32.02. Any notice of election to exercise the right to expand
the Demised Premises as hereinbefore provided must be in writing and sent to
Lessor as provided in Article 21. In addition, if prior to the exercise of the
right to expand the Demised Premises, Lessee herein named shall have assigned
this Lease, no notice by the then Lessee of election to exercise an option to
expand shall be valid unless joined in or consented to in writing by Lessee
herein named (which consent, in order for the exercise of such right to be
effective, shall be delivered to Lessor at or prior to the time of the
exercise of the right as to which consent of Lessee herein named had been
given). Neither the right granted to Lessee in this Article to expand the
Demised Premises, nor the exercise of such right by Lessee, shall prevent
Lessor from exercising any option or right granted or reserved to Lessor in
this Lease to terminate this Lease, and the effective exercise of any such
right of termination by Lessor shall terminate any such renewal or extension
and any right of Lessee to any such renewal or extension, whether or not
Lessee shall have exercised any such right to expand the Demised Premises. Any
such option or right on the part of Lessor to terminate this Lease pursuant to
the provisions hereof shall apply to the Additional Space.
SECTION 33.03.A. All of the terms, covenants and conditions of this
Lease applicable to the Demised Premises as originally constituted shall be
applicable to the Demised Premises including the Additional Space, except that
the annual Fixed Rent provided for in Article 2 shall be increased by the fair
market value of the Additional Space on the Additional Space Commencement Date
on a square footage basis as determined in accordance with the provisions of
Section 30.04 of this Lease and the gross square footage of the Additional
Space.
<PAGE>
B. During and in respect of the Term hereof, Lessee's Proportionate
Share shall be increased by the gross square footage of all Additional Space
that Lessee occupies in the Building.
SECTION 33.04. If Lessee shall effectively exercise its right to hire
the Additional Space, Lessor and Lessee, upon demand of either, shall execute
and deliver to each other duplicate originals of an instrument, duly
acknowledged, setting forth (i) that the Demised Premises have been expanded
to include the Additional Space, (ii) the amount of such Additional Space,
(iii) the annual Fixed Rent payable during the Term, (iv) that such Additional
Space is upon and subject to all of the terms, covenants, conditions and
limitations contained herein, and (v) Lessee's Proportionate Share as
increased by the Additional Space.
SECTION 33.05. The right of Lessee to hire the Additional Space as
provided in Section 33.01 is conditioned in all respects upon there being no
Event of Default in the observance or performance of any term, covenant,
condition or agreement on Lessee's part to be observed or performed under this
Lease both at the time the notice of exercise is given and immediately prior
to Additional Space Commencement Date. Any termination, cancellation or
surrender of this Lease shall terminate Lessee's right to hire the Additional
Space.
ARTICLE 34- DEFINITIONS
SECTION 34.01 For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(a) "Additional Rent" shall mean all sums of money, other
than Fixed Rent, as shall become due from and payable by Lessee
hereunder.
(b) "Building" shall mean the building, structures and
improvements, and related facilities, including paved areas and all
parking lots adjacent and/or appurtenant thereto (other than
"Building Equipment", as such term is herein defined) known as and
located at 4 Gannett Drive, White Plains, New York 10604, now or
hereafter erected, constructed or situated on the land underlying or
appurtenant to the Building or any part thereof, together with all
alterations, additions and improvements thereto and all restorations
and replacements thereof.
<PAGE>
(c) "Building Equipment" shall mean all machinery, systems,
apparatus, facilities, equipment and fixtures of every kind
whatsoever now or hereafter belonging, attached to and used
exclusively (whether or not same constitute fixtures), or procured
for exclusive use, in connection with the operation or maintenance of
the Building and/or Property, including water, sewer and gas
connections, all heating, electrical, lighting, and power equipment,
engines, furnaces, boilers, pumps, tanks, dynamos, motors,
generators, conduits, plumbing, cleaning, fire prevention,
refrigeration, ventilating, air cooling, air conditioning equipment
and apparatus, cranes, elevators, escalators, ducts and compressors
and any and all replacements thereof and additions thereto; but
excluding, however, (i) Lessee's Property, (ii) property of any
sublessee which sublessee may be authorized to remove from the
Building upon and subject to the terms and conditions of its sublease
and this Lease, (iii) property of contractors servicing the Building,
and (v) improvements for water, gas, and electricity and other
similar equipment or improvements owned by any public utility company
or any governmental agency or body.
(d) "Cost" shall mean that Lessor will perform all such
services on a "cost plus" basis, whereby Cost shall include, but not
be limited to, the cost of sub-contractors, material, equipment
rental, transportation and delivery items, permits, fees, taxes,
insurance's, debris removal, demolition, safety protection, labor,
supervision, project management, purchasing, expediting and material
handling, and shall also include a contingency, based on the
complexity of the work to be performed, of up to five percent (5%) of
the total of all such items otherwise included within such definition
(the "Trades"). In addition, with respect to Alterations as provided
for in Article 25 of this Lease, Cost shall also include Lessor's fee
for acting as general contractor which shall be equal to: (i)
Eighteen and Eighty Hundredths (18.80%) of the total cost of the
Trades, if such cost does not exceed One Hundred Thousand and 00/100
($100,000.00) Dollars; (ii) Sixteen and Sixty-Three Hundredths
(16.63%) Percent of the total cost of the Trades, if such costs are
between One Hundred, Thousand and One and 00/100 ($100,001.00)
Dollars and Three Hundred and Ninety Nine Thousand, Nine Hundred and
Ninety-Nine and 99/100 ($399,999.99) Dollars; or (iii) Fifteen and
Fifty-Six Hundredths (15.56%) Percent of the total cost of the
Trades, if such costs are in excess of Four Hundred Thousand and
00/100 ($400,000.00) Dollars.
(e) "Environmental Laws" shall mean any and all Federal,
state, local, or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees or requirements of any
Governmental Authority regulating, relating to or imposing liability
or standards of conduct concerning environmental conditions at the
Demised Premises, Building or Property as now or may at any time
hereafter be in effect, including but not limited to and without
limiting the generality of the foregoing, The Clean Water Act also
known as the Federal Water Pollution Control Act, 88 U.S.C.
ss.ss.1251 et seq., the Toxic Substance Control Act, 15 U.S.C.
ss.ss.2601 et seq., the Clean Air Act, 42 U.S.C. ss.ss.7401 et seq.,
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
ss.ss.186 et seq., the Safe Drinking Water Act, 42 U.S.C. ss.ss.300f
et seq., the Surface Mining Control and Reclamation Act, ss.1201 et
seq., 80 U.S.C. ss.1201 et seq., the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
ss.ss.9601 et seq., the Superfund Amendment and Reauthorization Act
of 1986 ("SARA"), Public Law 99-499, 100 Stat. ss.1818, the Emergency
Planning and Community Right to Know Act, 42 U.S.C. ss.ss.1101 et
seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss.ss.6901 et seq., and the Occupational Safety and Health Act as
amended ("OSHA"), 29 U.S.C. ss.655 and ss.657, together with any
amendments thereto, regulations promulgated thereunder and all
substitutions thereof.
<PAGE>
(f) "Hazardous Material" shall mean (i) Any hazardous, toxic
or dangerous waste, substance or material defined as such in (or for
the purpose of) CERCLA, SARA, RCRA, or any other Environmental Law as
now or at any time hereafter in effect; (ii) any other waste,
substance or material that exhibits any of the characteristics
enumerated in 40 C.F.R. ss.ss.261.20 through 261.24, inclusive, and
those extremely hazardous substances listed under Section 902 of SARA
that are present in threshold planning or reportable quantities as
defined under SARA and toxic or hazardous chemical substances that
are present in quantities that exceed exposure standards as those
terms are defined under Section 6 and 8 of OSHA and 29 C.F.R. Part
1910; (iii) any asbestos or asbestos containing substances whether or
not the same are defined as hazardous, toxic, dangerous waste, a
dangerous substance or dangerous material in any Environmental Law;
(iv) "Red Label" flammable materials; (v) all Laboratory Waste and
by-products; and (vi) all biohazardous materials.
(g) "Insurance Requirements" shall mean the rules,
regulations, orders and other requirements of any insurance rating or
regulatory organization having jurisdiction of, and which are
applicable to, the Demised Premises and of any liability, casualty,
or other insurance policy which either Lessor or Lessee is required
hereunder to maintain or may maintain hereunder.
(h) "Legal Requirements" shall mean the requirements of
every statute, law, ordinance, regulation, rule requirement, order or
directive, now or hereafter made by any Federal, state or local
government or any department, political subdivision, bureau, agency,
office or officer thereof, or any other governmental authority having
jurisdiction (a "Governmental Authority") with respect to and
applicable to (i) the Demised Premises and appurtenances thereto,
and/or (ii) the condition, equipment, maintenance, use or occupation
of the Demised Premises, including the making of an alteration or
addition in or to any structure upon, connected with or appurtenant
to the Demised Premises.
(i) "Lessee's Delays" shall mean any and all delays caused
by or attributable to any action or failure or refusal of Lessee to
perform a duty of, Lessee or any person claiming through or under
Lessee, or any agent, servant, employee, director, shareholder,
contractor or invitee of Lessee or any such person.
(j) "Lessee's Property" shall mean all articles of personal
property and fixtures and other property, which have been installed
or affixed on, in or to, or brought into, the Demised Premises, at
the expense of Lessee or any permitted sublessee of Lessee or other
permitted occupant of the Demised Premises and without any credit or
allowance by Lessor, which are not replacements or any property of
Lessor (whether any such replacement is made at Lessee's expense or
otherwise), and which do not constitute alterations, changes,
additions, or improvements to the Demised Premises or any
appurtenances thereto.
<PAGE>
(k) "Lessee's Proportionate Share" shall mean a fraction the
numerator of which is equal to the gross square footage that Lessee
occupies in the Demised Premises, and the denominator of which is
equal to the total gross square footage of the Building as it
presently exists or may hereinafter be increased or enlarged. As of
the Commencement Date, the total square footage of the Building shall
be deemed to be One Hundred and Five Thousand, and Ninety-Three
(105,093) and Lessee's Proportionate Share shall be deemed to be
Seven and Twenty-Three Hundredths (7.23%) percent. Lessee and Lessor
agree that Lessee's Proportionate Share is not based upon any
particular method of measuring the Demised Premises and/or the
Building and represents an agreed upon percentage and shall not be
contestable by Lessee at a future date.
(l) "Lessor's Agents" shall be deemed to include agents,
servants, employees, directors, officers, shareholders and
contractors of Lessor.
(m) "Normal Working Hours" shall mean only those between the
hours of 8:00 A.M. and 6:00 P.M., Monday through Friday, and 8:00
A.M. and 1:00 P.M. on Saturday, exclusive of New Years Day, the day
designated as the legal holiday for the celebration of Washington's
Birthday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day
and Christmas Day.
(n) "Unavoidable Delays" shall mean any and all delays
beyond Lessor's reasonable control, including Lessee's Delays,
governmental restrictions, governmental preemption, strikes, labor
disputes, lockouts, shortages of labor and materials, enemy action,
civil commotions, riot, insurrection and fire, other casualty and
other acts of God.
(o) "Untenantable" shall mean actual inability to use space
in the Demised Premises for the purposes permitted by Section 4.01.
<PAGE>
SECTION 34.02. For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(a) The terms "include", "including", and "such as" shall be
construed as if followed by the phrase "without being limited to".
(b) Whenever this Lease provides that Lessee shall pay
Lessor interest at the "maximum legal rate" then interest shall be
payable at the highest rate of interest permitted at the relevant
time by applicable law to be paid by Lessee without impairing the
validity or enforceability of this Lease and without incurring any
civil or criminal penalty.
(c) The term "obligations of this Lease" and words of
similar import, shall mean the covenants to pay Fixed Rent and
Additional Rent and all of the other covenants and conditions
contained in this Lease. Any provision in this Lease that one party
or the other or both shall do or not do or shall cause or permit or
not cause or permit a particular act, condition or circumstance shall
be deemed to mean that such party so covenants or both parties so
covenant, as the case may be.
(d) The term "repair" shall be deemed to include restoration
and replacement as may be necessary to achieve and/or maintain good
working order and condition.
(e) Reference to "substantially complete" and words of
similar import shall be deemed to mean, with regard to construction
work, completion but for such minor details of work, the
non-completion of which would not materially interfere with the
utility of the affected space and if a certificate is issued by an
independent architect or engineer stating that the work is
substantially complete, then such determination shall be conclusive
and binding upon the parties to this Lease.
(f) Reference to "termination of this Lease" includes
expiration or earlier termination of the Term or cancellation of this
Lease pursuant to any of the provisions of this Lease or to law. Upon
the termination of this Lease, the Term and estate hereby granted by
this Lease shall end at noon on the date of termination as if such
date were the date of expiration of the Term and neither party shall
have any further liability or obligation to the other after such
termination (i) except as shall be expressly provided for in this
Lease, and (ii) except for such obligations as by their nature or
under the circumstances can only be, or by the provisions of this
Lease, may be, performed after such termination, and, in any event,
unless expressly otherwise provided in this Lease, any liability for
a payment which shall have accrued to or with respect to any period
ending at the time of termination shall survive the termination of
this Lease.
<PAGE>
ARTICLE 35- MISCELLANEOUS
SECTION 35.01. This Lease shall be governed in all respects by the
laws of the State of New York applicable to leases made and to be performed
wholly therein.
SECTION 35.02. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, single or plural, as the
identity of the person or persons or entity or entities in question may
require. The term "person" shall be deemed to include individuals,
corporations, partnerships, joint ventures, firms, associations and other
entities.
SECTION 35.03. All provisions of this Lease shall be deemed and
construed to be "conditions" as well as "covenants", as though the words
specifically expressing or importing covenants and conditions were used in
each separate provision hereof.
SECTION 35.04. If any provision of this Lease or 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 or provisions to persons or circumstances other than those as to
whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Lease shall be valid and enforceable to
the fullest extent permitted by law.
SECTION 35.05. The article headings in this Lease are inserted only
as a matter of convenience and reference and are not to be given any effect
whatsoever in construing this Lease.
SECTION 35.06. This Lease contains the entire agreement between the
parties regarding the Demised Premises and shall not be modified in any manner
except by an instrument in writing executed by the parties or their respective
successors in interest. No waiver or modification by either party or any
provision or covenant of this Lease shall be deemed to have been made unless
such waiver is expressed in writing and signed by the party against whom such
waiver or modification is sought.
SECTION 35.07. Lessee agrees with Lessor that Lessee will not record
this Lease or any memorandum of this Lease without the prior written consent
of Lessor.
SECTION 35.08. The covenants, agreements, terms, provisions and
conditions contained in this Lease shall apply to and inure to the benefit of
and be binding upon Lessor and Lessee and their respective successors and
assigns, except as otherwise provided for herein.
SECTION 35.09. Upon request of Lessor, but not more often than once
each fiscal or calendar year, as the case may be, Lessee and any such person
shall submit to Lessor true, correct, current and complete financial
statements of Lessee and its affiliates, if any.
SECTION 35.10. Solely for the purposes of a proceeding under the
present or future federal bankruptcy act or any other present or future
applicable federal, state or other statute or law (a "bankruptcy law"), the
following terms and conditions have been agreed upon by Lessor and Lessee:
<PAGE>
(a) In the event of a default by Lessee under this Lease
continuing after the filing of a voluntary or involuntary petition (a
"pre-petition default") under any bankruptcy law, a period exceeding
thirty (30) days for curing such default shall in no event be deemed
reasonable.
(b) In order to be deemed adequate assurance by Lessee for
the cure of any pre-petition default, Lessee, or the trustee, as the
case may be, must (i) deposit with a banking institution selected by
Lessor securities, in negotiable form, issued by the United States of
America, with a fair market value, at all relevant times, equal to
twice the amount of rent due or the cost, as estimated by Lessor of
curing the pre-petition default, as the case may be, or (ii) grant to
Lessor a security interest or lien, which shall be superior to any
and all claims and liens, on any of Lessee's property that is valued
at liquidation at twice the amount of such rent or cost.
(c) In order to be deemed adequate assurance by Lessee, with
respect to the payment of rent due after the filing of a voluntary or
involuntary petition under any bankruptcy law, Lessee must (i)
deposit with a banking institution selected by Lessor securities in
negotiable form, issued by the United States of America, with a fair
market value, at all relevant times, of not less than six (6) months'
rent, or (ii) grant a security interest or lien, which shall be
superior to any and all claims and liens, in any of Lessee's property
that is valued at liquidation at not less than six (6) months' rent.
SECTION 35.11. Lessee represents and warrants: (i) that it is a
corporation duly organized and in good standing under the laws of the State of
New York, (ii) that it has all requisite authority to execute and to enter
into this Lease and that the execution of this Lease will not constitute a
violation of any internal by-law, agreement or other rule of governance, and
(iii) that the individual executing this Lease on behalf of Lessee is so
authorized and Lessee shall supply Lessor with a verified resolution or
similar written documentation evidencing such authority upon or prior to
Lessee's execution of this Lease.
<PAGE>
IN WITNESS WHEREOF, the parties to this Lease have executed the same
on the day and in the year first above written.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, (Lessor)
By: _________________________________L.S.
Name:
Title:
By: _________________________________L.S.
Name:
Title:
COMMUNITY MEDICAL TRANSPORT, INC., (Lessee)
By: _________________________________L.S.
Name:
Title:
<PAGE>
STATE OF IOWA )
)ss.:
COUNTY OF POLK )
On the day of September, 1997, before me personally came , to me
known, who being by me duly sworn, did depose and say that he resides in Des
Moines, Iowa; that he is the of PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an
Iowa Corporation described in and which executed the foregoing instrument;
That he signed his name thereto on behalf the Corporation described therein by
order of its board of directors.
Notary Public
STATE OF IOWA )
)ss.:
COUNTY OF POLK )
On the day of September, 1997, before me personally came , to me
known, who being by me duly sworn, did depose and say that he resides in Des
Moines, Iowa; that he is the of PRINCIPAL MUTUAL LIFE INSURANCE COMPANY, an
Iowa Corporation described in and which executed the foregoing instrument;
That he signed his name thereto on behalf the Corporation described therein by
order of its board of directors.
Notary Public
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the day of September, 1997, before me personally came , to me
known, who being by me duly sworn, did depose and say that he resides in ;
that he is the of COMMUNITY MEDICAL TRANSPORT, INC., a New York Corporation
described in and which executed the foregoing instrument; That he signed his
name thereto on behalf the Corporation described therein by order of its board
of directors.
Notary Public
<PAGE>
REVIEW AND RENEWAL OF CONTRACT
BETWEEN
BETH ABRAHAM HEALTH SERVICES
LONG TERM HOME HEALTH CARE PROGRAM
AND
COMMUNITY MEDICAL TRANSPORT, INC.
CONTRACT REVIEWED AND CONTINUED FROM:
JANUARY 1998 THROUGH DECEMBER 1998
/s/ Dean L. Sloane /s/ Susan Aldrich
- ----------------- -----------------
Dean L. Sloane Susan Aldrich
CEO Senior Vice President, Managed Care
Community Ambulette Service Beth Abraham Health Services
<PAGE>
REVIEW AND RENEWAL OF CONTRACT
BETWEEN
BETH ABRAHAM CERTIFIED HOME HEALTH AGENCY
AND
COMMUNITY AMBULETTE SERVICE
CONTRACT REVIEWED AND CONTINUED FROM:
JANUARY 1998 THROUGH DECEMBER 1998
/S/ DEAN SLOAN /S/ GERRY POLONY
- ----------------- -----------------
DEAN SLOAN GERRY POLONY
CEO VICE PRESIDENT
COMMUNITY AMBULETTE BETH ABRAHAM
SERVICE HOME CARE SERVICES
<PAGE>
REVIEW AND RENEWAL OF CONTRACT
BETWEEN
BETH ABRAHAM HEALTH SERVICES
ADULT DAY HEALTH CENTER (BRONX)
AND
COMMUNITY AMBULETTE SERVICE
CONTRACT REVIEWED AND CONTINUED FROM:
JANUARY 1998 THROUGH DECEMBER 1998
/s/ Dean Sloane /S/ Gerry Polony Terry
- ----------------- ----------------------
Dean Sloane Gerry Polony Terry
CEO Vice President
Community Ambulette Service Beth Abraham Health Services
<PAGE>
SUBSIDIARIES
OF
COMMUNITY MEDICAL TRANSPORT, INC.
State of
Legal Name DBA Names Incorporation
---------- --------- -------------
Community Ambulette Service, Inc. Delaware
First Help Ambulance and Ambulette, Inc. Freedom/A-1 Ambulance New York
Empire Ambulance and Ambulette, Inc. Freedom/A-1 Ambulance New York
Century Ambulance and Ambulette, Inc. Hudson Valley Ambulance New York
Elite Ambulance & Medical Coach, Inc. New Jersey
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the post-effective
amendment of the Registration Statement on Form S-3 to Form SB-2 (33-80338),
and the Registration Statements on Form S-3 (333-11069), Form S-3 (333-26213),
Form S-3 (333-30301), Form S-3 (333-38401), Form S-8 (333-20639) and Form S-8
(333-23793) of our report dated March 6, 1998 (with respect to Note E, April
14, 1998), on the consolidated financial statements of Community Medical
Transport, Inc. and subsidiaries included in the 1997 Annual Report on Form
10-KSB. We also consent to the reference to our Firm under the caption
"Experts" in the prospectuses.
/s/ Richard A. Eisner & Company, LLP
New York, New York
April 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 925,000
<SECURITIES> 1,136,000
<RECEIVABLES> 6,262,000
<ALLOWANCES> 1,434,000
<INVENTORY> 0
<CURRENT-ASSETS> 8,987,000
<PP&E> 6,828,000
<DEPRECIATION> 2,443,000
<TOTAL-ASSETS> 18,693,000
<CURRENT-LIABILITIES> 5,895,000
<BONDS> 0
0
0
<COMMON> 6,000
<OTHER-SE> 6,702,000
<TOTAL-LIABILITY-AND-EQUITY> 18,693,000
<SALES> 0
<TOTAL-REVENUES> 22,814,000
<CGS> 0
<TOTAL-COSTS> 16,466,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 662,000
<INCOME-PRETAX> (9,201,000)
<INCOME-TAX> (977,000)
<INCOME-CONTINUING> (8,224,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,224,000)
<EPS-PRIMARY> (1.57)
<EPS-DILUTED> (1.57)
</TABLE>
