SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File number: 0-25918
ACTIVE APPAREL GROUP, INC.
(Name of small business issuer in Its Charter)
Delaware 13-3672716
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1350 Broadway, Suite 2300, New York, New York 10018
- ---------------------------------------------- ------------
(Address of principal executive offices) Zip Code
Issuer's Telephone Number (212) 239-0990
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title Of Each Class On Which Registered
------------------- -------------------
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.002 par value
------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirement 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 is not contained in this form, and no disclosure will be
contained to the best of registrant's knowledge in definitive proxy or
information statement incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]
State issuer's revenue for its most recent fiscal year: $24,464,139
On March 15, 2000 the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $6,748,744 based upon the
average of the highest and lowest bid quotations for such Common Stock as
obtained from the Nasdaq Stock Market on March 15, 2000. Solely for the purpose
of this calculation, shares held by directors and officers of the Registrant
have been excluded. Such exclusion should not be deemed a determination or an
admission by Registrant that such individuals are, in fact, affiliates of the
Registrant.
The number of shares outstanding on March 15, 2000 was 2,492,581 shares of
Common Stock, $.002 par value, and 100,000 shares of Class A Common Stock, $.01
par value.
Documents Incorporated by Reference - None
Transitional Small Business Disclosure Format (Check one): YES / / NO / X /
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TABLE OF CONTENTS
Page
PART I
Item 1 Business...........................................................1
Item 2 Properties........................................................ 8
Item 3 Legal Proceedings..................................................9
Item 4 Submission of Matters to a Vote of Security Holders................9
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters..........................................10
Item 6 Management's Discussion and Analysis or Plan of Operation.........11
Item 7 Financial Statements..............................................13
Item 8 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.....................................14
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............14
Item 10 Executive Compensation............................................16
Item 11 Security Ownership of Certain Beneficial Owners
and Management ..............................................20
Item 12 Certain Relationships and Related Transactions....................23
Item 13 Exhibits and Reports on Form 8-K..................................24
Signatures....................................................................29
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PART I
ITEM 1. BUSINESS
General
Active Apparel Group, Inc. (the "Company"), a Delaware corporation
organized on July 6, 1992, is engaged in the design, manufacture, marketing and
sale of women's activewear, sportswear, swimwear and coverups (the "Everlast
Women's Products"), and, as of January 1, 1999, the design, manufacture,
marketing and sale of men's activewear, sportswear and outerwear (the "Everlast
Men's Products" together with the Everlast Women's Products, the "Everlast
Products"), featuring the widely-recognized Everlast(R) trademark. Generally,
the Company has the exclusive right to use and distribute these Everlast
Products in the United States, its territories and possessions (collectively,
the "United States") and Canada, its provinces, territories and possessions
(collectively, "Canada"). ?The Company is a member of the U. S. Sporting Goods
Manufacturers Association, the U. S. National Sporting Goods Association and the
Canadian Sporting Goods Association
The Company's strategy is to expand the Company's operations and to become
a leading brand name supplier of women's and men's activewear and sportswear.
Key elements of this strategy include:
o balancing and diversifying the Company's product collections in terms of
style and price range;
o maximizing visibility in the Company's products through focused
traditional advertising and marketing programs, as well as establishing a
strong internet presence ;
o expanding its product distribution system by establishing better
relationships with a broader network of retailers subject to distribution
restrictions of the Everlast Product licenses;
o capitalizing on the Company's strengths through design and manufacture for
private label activewear and sportswear customers.
All of the Company's products are manufactured by third party independent
manufacturing contractors in the United States and abroad. These products are
distributed through a variety of department stores, specialty stores, sporting
goods stores, catalog operations, and better mass merchandisers. The Company's
products are sold to over 20,000 retail locations throughout the United States
and Canada. See "Sales and Distribution."
Products
The Company's product line primarily consists of the Everlast Products,
which are designed and marketed to highlight brand name recognition and consumer
preference. The Company performs extensive market research in attempting to
provide its retail customers and consumers with functionality along with the
most desirable styles, color schemes and fabrics. The Company has actively
pursued a strategy of developing a balanced and diversified mix of products
which emphasizes the Everlast brand name and appeals to various demographic
groups and geographic areas.
The Company sells a diverse collection of Everlast Products consisting of
women's activewear, sportswear, swimwear and coverups, and as of January 1,
1999, men's activewear, sportswear and outerwear under the Everlast trademark
and logo. Since 1910, Everlast has gained wide recognition in
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professional and amateur boxing. The Company believes that the Everlast name has
become synonymous with quality athletic products. The Everlast Products seek to
continue this tradition, while recognizing that the active person has particular
demands regarding quality, comfort and style in activewear and sportswear. The
Everlast Products consist of approximately 80 separate products with varying
styles and functions. These include fitness apparel and sportswear made of
nylon, fleece, cotton, Lycra spandex and other technical polyester fabrics with
moisture management properties. The Everlast Products are designed to feature
the Everlast trademark and logo and to focus on the use of appropriate fabric
blends to maximize comfort and performance. The retail prices for the Everlast
Products generally range from $15 to $70.
Licenses
Everlast Women's License. The Company obtained the license to market and
sell Everlast Women's Products ("Everlast License") in July 1992. Generally, the
Everlast License grants to the Company the exclusive right and license to use
the Everlast trademark in connection with the manufacture, advertisement and
promotion, packaging, sale and distribution of women's activewear, sportswear,
swimwear and coverups in the United States and Canada during its term. Everlast
World's Boxing Headquarters ("Everlast"), however, reserved the right to use or
license the Everlast trademark on products other than women's activewear,
sportswear, swimwear and coverups within the United States and Canada, and up to
January 1, 1999, men's apparel, and the right to use or license such trademark
outside the United States or Canada. Everlast has also reserved the right to
sell, in the United States or Canada, women's activewear and sportswear through
Everlast's product catalogs or flyers, at prices not less than the lowest price
offered by the Company.
The term of the Everlast License ends on December 31, 2002, but is
renewable at the option of the Company for up to two successive five year
periods commencing January 1, 2003 and January 1, 2008, assuming the Company is
not then in default under the Everlast License and assuming further that the
Company achieves annual net sales in the United States of Everlast Women's
Products of at least $10,500,000, and in Canada, of at least CN$2,500,000 for
the exercise of the first option and achieves annual net sales in the United
States of at least $14,250,000 and in Canada of at least CN$3,500,000 for the
exercise of the second option. The Everlast License may be terminated in whole,
or only as to certain Everlast Women's Products, if the Company fails to fulfill
its material obligations of the Everlast License (including payments of
royalties or other amounts due), fails to use diligent efforts to promote,
advertise, manufacture, sell or ship any Everlast Product, or to fill accepted
orders for Everlast Women's Products to financially secure purchasers. See
"Manufacturing and Suppliers." The Everlast License may also be terminated if
net sales of Everlast Women's Products do not exceed certain minimum levels, or
if the Company voluntarily or involuntarily enters into a bankruptcy or similar
proceeding. To date, the Company has been in compliance with the Everlast
License.
Under the Everlast License, the Company is required to make royalty
payments to Everlast of 6% of net sales (as defined therein), subject to minimum
annual payments, which increase over the term, as amended, of the Everlast
License. The Company is also required to make advertising expenditures of at
least 2.5% of net sales of Everlast Women's Products, subject to annual minimum
expenditure levels. The minimum annual royalty payments under the Everlast
License for sales in the United States (including swimwear sales) are $630,000
and $679,500 for 1999 and 2000 (CN$168,000 and CN$186,000 with respect to sales
in Canada), respectively. The minimum annual advertising expenditures required
under the Everlast License for sales of Everlast Women's Products in the United
States (including swimwear sales) are $262,500 and $283,125 for 1999 and 2000
(CN$70,000 and CN$77,500 with respect to sales in Canada), respectively. To
date, all required levels have been met or exceeded. Royalty payments and
advertising expenditures are not required with respect to sales of Everlast
Women's Products to Everlast.
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The Company is also obligated to maintain product quality control, obtain prior
approval of designs and standards, and marketing, advertising and distribution
programs, and may be required to indemnify Everlast against any losses resulting
from alleged defects in the Everlast Women's Products arising out of the
Company's performance under the Everlast License or the manufacture, promotion
or sale of such products in violation of applicable laws or third-party rights.
According to the terms of the Everlast License, the Company must secure and
maintain product liability insurance, which the Company maintains. On the other
hand, subject to the terms of the Everlast License, Everlast is required to
indemnify the Company against any losses arising out of the use of the Everlast
trademark or the exercise by the Company of its rights under the Everlast
License. Everlast is also required, generally, to defend the Company's rights to
use the Everlast trademark pursuant to the Everlast License.
According to the terms of the Everlast License, the Company is required to
maintain, during the term thereof, letters of credit in favor of Everlast for an
amount equal to the minimum annual amounts due to Everlast under the Everlast
License from time to time, or a cash deposit in varying amounts. The Company is
in compliance with this requirement.
Everlast Men's License. The Company obtained the license to market and
sell Everlast Men's Products ("Men's License") effective January 1, 1999.
Generally, the Men's License grants to the Company the exclusive right and
license to use the Everlast trademark in connection with the manufacture,
advertisement and promotion, packaging, sale and distribution of men's
activewear, sportswear, swimwear and outerwear in the United States and Canada
during the term of the Men's License. Everlast, however, reserved the right to
use or license the Everlast trademark on products other than men's and women's
activewear, sportswear, swimwear and men's outerwear within the United States
and Canada, and the right to use or license such trademark outside the United
States or Canada. Everlast has also reserved the right to sell, in the United
States or Canada, men's activewear and sportswear through Everlast's product
catalogs or flyers at prices not less than the lowest price offered by the
Company.
The term of the Men's License ends on December 31, 2001, but is renewable
at the option of the Company for up to two successive five year periods
commencing January 1, 2002 and January 1, 2007, assuming the Company is not then
in default under the Everlast License and assuming further that the Company
achieves annual net sales in the United States of Everlast Men's Products of at
least $6,500,000, and in Canada, of at least CN$3,300,000 for the exercise of
the first option and achieves annual net sales in the United States of at least
$9,317,000 and in Canada of at least CN$4,790,000 for the exercise of the second
option. The Men's License may be terminated in whole, or only as to certain
Everlast Men's Products, if the Company fails to fulfill its material
obligations of the Men's License (including payments of royalties or other
amounts due), fails to use diligent efforts to promote, advertise, manufacture,
sell or ship any Everlast men's product, or to fill accepted orders for Everlast
Men's Products to financially secure purchasers. See "Manufacturing and
Suppliers." The Men's License may also be terminated if net sales of Everlast
Men's Products do not exceed certain minimum levels, or if the Company
voluntarily or involuntarily enters into a bankruptcy or similar proceeding.
Under the Men's License, the Company is required to make royalty payments
to Everlast of 6% of net sales (as defined therein), subject to minimum annual
payments, which increase over the term of the Men's License, as amended. The
Company is also required to make advertising expenditures of at least 2.5% of
net sales of Everlast Men's Products, subject to annual minimum expenditure
levels. The minimum annual royalty payments under the Men's License for sales of
the Everlast Men's Products in the United States are $180,000 and $300,000 for
1999 and 2000 (CN$72,000 and CN$144,000 with respect to sales in Canada),
respectively. The minimum annual advertising expenditures required under the
Men's License for sales in the United States are $75,000 and $125,000 for 1999
and 2000. (CN$30,000 and CN$60,000 with respect to sales in Canada),
respectively. Royalty payments and advertising expenditures are not required
with respect to sales of Everlast Men's Products to Everlast.
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The Company is also obligated to maintain product quality control, obtain prior
approval of designs and standards, and marketing, advertising and distribution
programs, and may be required to indemnify Everlast against any losses resulting
from alleged defects in the Everlast Products arising out of the Company's
performance under the Men's License or the manufacture, promotion or sale of
such products in violation of applicable laws or third-party rights. According
to the terms of the Men's License, the Company must secure and maintain product
liability insurance, which the Company maintains. On the other hand subject to
the terms of the Men's License, Everlast is required to indemnify the Company
against any losses arising out of the use of the Everlast trademark or the
exercise by the Company of its rights under the Men's License. Everlast is also
required, generally, to defend the Company's rights to use the Everlast
trademark pursuant to the Men's License.
According to the terms of the Men's License, the Company is required to
maintain, during the term thereof, letters of credit in favor of Everlast for an
amount equal to the minimum annual amounts due to Everlast under the Men's
License from time to time, or a cash deposit in varying amounts. The Company is
in compliance with this requirement.
Converse License The term of the Company's license with Converse, Inc.(the
"Converse License") ended on March 31, 1999. The Converse products included
women's and girls' activewear and sportswear. Because of slow sales of Converse
products, the Board of Directors of the Company approved a resolution not to
extend the Converse License. The Company believes that not renewing the Converse
License will not have a material adverse effect on the Company's business,
financial condition or results of operations. Under the Converse License, the
Company was required to make royalty payments to Converse Inc. of 7% of net
sales through March 31, 1999.
MTV License. The term of the Company's license with MTV Networks, Inc.
(the "MTV License") ended on June 30, 1999. The MTV products included unisex and
women's activewear and accessories. Because of slow sales of MTV products, the
Board of Directors of the Company approved a resolution not to extend the MTV
License. The Company believes that not renewing the MTV License will not have a
material adverse effect on the Company's business, financial condition or
results of operations. Under the MTV License, the Company was required to make
royalty payments to MTV Networks, Inc. of 8% of net sales of MTV products
through June 30, 1999.
Product Development. The Company's merchandising and design staff analyzes
demographic, market, style, fashion and fabric and technical developments and
attempts to make the necessary adjustments in product mix, construction, design,
styles, fabrics and colors in response to these developments. Members of the
merchandising and design staff also coordinate their activities with the
Company's production and sales staff, consult with buyers, visit retail outlets
and attend fashion and trade shows to gather additional information during the
design process. Sources of design and prints include, among others, industry
fashion analyses, the Company's products from previous years and freelance
artwork.
After a particular product concept has been designed, members of the
design staff prepare schematics containing the proposed styles, patterns and
fabrics, which are reviewed by senior members of the Company's management prior
to prototype construction. Prototypes of a potential new product are then
constructed and subjected to numerous tests for fit, comfort, quality,
functionality and consumer acceptance. New designs are previewed to buyers and
certain retail accounts to solicit their comments as to which styles are likely
to be the more popular. In addition, the Company's performance products are
given to fitness professionals for use and evaluation. The Company's goal is to
minimize the risk of changing fashion trends or consumer preferences.
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Marketing, Advertising and Promotions
The Company advertises and promotes its products to different consumer
segments through a variety of trade and consumer print advertising campaigns,
generally in selected magazines and other publications (including Women's Wear
Daily and Sporting Goods Business). The Company's advertising and promotion
program aims to achieve a high visibility for its products. The Company's
advertising and promotional efforts are directed towards the demographic
customer profile for the Company's products. The Company maintains its own
marketing and advertising staff who conceives and oversees implementation of
most aspects of the Company's advertising and sales promotions. The marketing
and advertising staff also develops catalogs for all of the Company's product
lines.
The Company uses several methods to advertise and promote its products.
The Everlast Products and the Company have received exposure through coverage in
both the print and television media. Additionally, the Company takes part in
various cooperative advertising programs such as national advertising, in-store
signage, point-of-purchase promotional giveaways and cooperative advertising
arrangements with several of its retail customers, which the Company believes
assists in raising consumer awareness and increasing retail floor space for its
products.
The Company also believes that grass roots promotion programs, such as the
limited distribution of samples of its products to local gyms, athletic clubs
and fitness professionals, help to advance the recognition and reputation of its
products. In addition, the Company has focused many of its promotional programs
on charitable and community events, such as "The New York Race for the Cure," a
running race aimed to develop awareness of breast cancer, the American Lung
Association's "Jammin With the Jets" and the "Share-A-Walk," a New York
fundraiser to raise awareness in the fight against cancer. The Company has also
sponsored high school and college women's basketball teams and NBA and college
dance teams.
The Company also attends and participates in the Atlanta Supershow,
WWDMAGIC, Women's Wear Daily's annual national trade show, and other appropriate
trade shows.
Manufacturing and Suppliers
The Company does not manufacture any of its products, but uses independent
contractors. Approximately 65% of the Company's products are supplied by
manufacturers in the United States while the remaining 35% are imported from
manufacturers abroad, principally in Asia. Currently, the Company uses over ten
separate manufacturers. While the Company has no long term agreements with any
of its contractors, the Company believes that its relationships with such
contractors are good. The Company does not believe that the loss of any
particular contractor would have a material adverse effect on its business,
financial condition or results of operations. The Company believes that
alternative sources of products would be readily available.
The supply of the Company's foreign-sourced products is subject to
constraints imposed by bilateral textile agreements between the United States
and foreign nations, which impose quotas on the amounts and types of goods which
can be imported into the United States. Some of the Company's manufactures may
be adversely affected by political instability in their respective countries
resulting in the disruption of trade, and the imposition of additional
regulations relating to imports or duties and taxes and other charges on
imports. In order to ensure quality control and timely delivery, the Company (or
its agents) conducts on-site inspections at manufacturers' facilities, as more
fully described herein. See "Quality Control." The Company's strategy is to find
manufacturers with specific product category expertise (such as fitness apparel,
tee shirts or outerwear) and extensive experience in the major athletic brand
name apparel
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industry. The Company has no long-term agreements with any of its manufacturers
and competes with other apparel companies for production capacity.
On December 31, 1998, the Company's inventory was $3,026,241 on net sales
during the year ended December 31, 1998 (Fiscal year 1998) of $15,011,926, with
a backlog of orders for future delivery of $4,019,603. At December 31, 1999, the
Company's inventory was $5,240,152 on net sales during the year ended December
31, 1999 (Fiscal year 1999) of $24,464,139, with a backlog of orders for future
delivery of $5,217,824. The Company has implemented an Electronic Data
Interchange (EDI) Quick Response Replenishment System by which customer orders
are facilitated in seven working days. Higher levels of inventory are required
to operate the EDI Quick Response Replenishment System program. Such levels of
inventory are needed as sales orders are generally received and shipped within a
seven day period. Other than the EDI Quick Response Replenishment System, the
Company practices a "just in time" manufacturing and purchasing program. The
Company makes arrangements with its manufacturers for delivery approximately 30
days before the scheduled shipment of products to the Company's customers. The
objectives of the "just-in-time" system are to decrease the Company's inventory
risk and to allow the Company flexibility to react to consumer responses to its
products and changing consumer preferences. The Company believes that these
objectives are currently being achieved, although no assurance can be given that
such objectives will continue to be partially or fully achieved in the future.
The Company schedules shipments from its manufacturers in a manner that accounts
for possible manufacturing lateness and transport time from manufacturers to the
Company's warehouse facilities. Although manufacturing lateness has not been a
material factor through the present date, the inability or unwillingness of a
manufacturer to ship orders of the Company's products in a timely manner could
adversely affect the Company's ability to deliver products to its customers on
time. Delay in delivery could result in missing certain retailing seasons with
respect to all or some of the Company's products, or could adversely affect the
Company's relationship with its customers, which could have a material adverse
effect on the Company's business.
As of December 31, 1999, the Company's backlog of unfilled orders was
$5,217,824 as compared to $4,019,603 as of December 31, 1998. The Company
expects that substantially all of its current orders will be shipped within 120
days of the receipt of such orders. The Company's backlog can be affected by a
variety of factors, including scheduling of manufacturing, shipment of products
and customer preferences. The Company has an on-line computerized order-entry
system that allows the Company to receive orders by computer and to follow daily
the status of orders received, shipped and unfilled.
Sales and Distribution
The Company's products are distributed through department stores,
specialty stores, sporting goods stores, catalog operations and better mass
merchandisers. The Company distributes its products to over 20,000 retail
locations throughout the United States and Canada. The Company's products are
sold by retailers such as, Bloomingdale's, Nordstrom, Modell's, Oshmans, Gart's,
Footlocker, The Sports Authority and the Army Air Force Exchange and through the
internet by web sites such as Global Sports International, Fashionmall.com,
Boo.com and Yahoo. In Canada, the Company's products are sold by such retailers
as The Bay, Sears-Canada, Superstar Group and Champs. For the year ended
December 31, 1998, four customers accounted for approximately 48% of sales, and
for the year ended December 31, 1999 three customers accounted for approximately
39% of sales. The Company's strategy is to expand its network of retailers
carrying the Company's products, and is focused on department stores, specialty
stores, sporting goods stores, catalog operations and better mass merchandisers.
The Company currently has seven in-house sales representatives and twelve
non-employee sales representatives. George Horowitz, President and Chief
Executive Officer, and a sales executive staff manage these representatives and
coordinate sales to customers. The Company works closely with its sales
representatives to ensure that a consistent and unified image of the Company is
projected to its customers.
The Company cooperates with major retailers to gauge promptly which styles
are the most popular and to track consumer preferences regarding its products.
Based upon its market data, as well as information gained from trade shows, the
Company attempts to shift its production orders towards styles that are most
popular, which shift may take up to a maximum of eight weeks. Many of the retail
stores offering the Company's products rely upon the Company's market
information and solicit the Company's advice regarding the products and
quantities to order. Most of the Company's products are manufactured in the
United States, reducing, in many instances, the amount of time between orders
placed by the Company with its manufacturers and shipments by such
manufacturers. The Company believes that its market information gathering and
shifting in production efforts towards more popular styles also reduces
inventory risk.
During fiscal year 1998 and 1999, the Company's foreign sales accounted
for 8.9% and 8.7% respectively of the Company's net sales, the majority of which
were in Canada.
Consistent with industry practice, the Company generally accepts returns
of any products with defects in materials or workmanship or which do not meet
the quality standards of the Company or its customers for up to 30 days. The
Company believes that its return levels are better than the industry norms. In
addition to returns, customers deduct chargebacks from the purchase price with
or without the Company's consent. Chargebacks have an adverse effect on the
Company's business and results of operations since they reduce overall gross
profit margins on sales of the Company's products. The Company experienced
chargeback levels of approximately 3.3% during 1999, which is consistent with
the industry norms of 3% to 5%. In 1998, the Company experienced chargeback
levels of approximately 3.5%.
Quality Control
Because the Company emphasizes fit, performance and quality of its
products, the Company places high priority on quality control. The Company has
established stringent quality control procedures under which domestic and
international production of the Company's products at independent manufacturing
locations is inspected by agents of the Company who visit each independent
manufacturing contractor at such frequency as is necessary to ensure compliance
with the Company's specifications and delivery requirements and in order to meet
the Company's shipping schedules. Prior to manufacture in large quantities, the
Company receives samples of its products for investigation and, if necessary,
alteration. The Company performs various tests, including fit tests on live
models, to ensure that the product meets specifications prior to the shipping of
product by the Company. In addition, senior employees of the Company
periodically personally inspect the manufacturing process and quality of
products.
The Company believes that its relationships with its warehouses, customs
brokers and international consolidators are an important part of its quality
control program. The Company views its service organizations as important
resources in maintaining high standards for its products and assisting in the
reliable and timely delivery of its products to its retail customers.
Competition
The apparel industry is highly competitive. The Company's competitors
include apparel manufacturers of all sizes, many of whom have greater financial
and manufacturing resources than the Company. The
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Company believes that it has been able to compete in the brand name men's and
women's activewear and sportswear market because of the high brand name
recognition, high quality and affordability of its products. The Company's
products may also compete with lower-priced men's and women's and girls'
activewear and sportswear products that may or may not be brand name products.
The Company believes that its principal competitors in the brand name men's and
women's activewear and sportswear industry are Nike, Reebok, Adidas and Fila. In
addition, its principal competitors in the brand name women's activewear and
sportswear industry are The Weekend Exercise Company and Danskin. Competition in
the activewear and sportswear segment of the apparel industry is based on price,
design, quality, name recognition and the ability to respond quickly to changing
consumer preferences.
Canadian Branch
The Company has a Canadian branch that markets Everlast Products in
Canada. During fiscal year 1998 and fiscal year 1999, net sales from operations
in Canada were U.S. $1,234,441 and U.S. $2,075,649, respectively. With the
exception of exchange rate fluctuations, the Company does not believe that the
Canadian operations are subject to risks that are significantly different from
domestic operations. The Company does not believe that exchange rate
fluctuations have had a material adverse effect on the Company's results of
operations, although there can be no assurance that such fluctuations, with
respect to its Canadian operations, will not have a material adverse effect on
the Company's results of operations in the future.
Employees
As of March 15, 2000, the Company had 31 employees, all of whom were
employed by the Company on a full-time basis. In addition, the Company may
employ additional full-time and part-time employees in connection with the
design, marketing and sale of its products as and if the need arises. The
Company currently hires temporary employees from time to time as needed. None of
the Company's employees is covered by a collective bargaining agreement,
although the Company considers its relations with its employees to be
satisfactory.
ITEM 2. PROPERTIES
The Company had three leases for approximately 7,160 square feet for a
total annual base rent of $166,629 at its principal executive offices in New
York, New York. The original lease had an annual base rent of $93,672 and
expired January 31, 2000. This space, which occupied approximately 3,981 square
feet, also included a showroom for the Everlast Products. In July 1994, the
Company increased its space in New York by 2,523 square feet to create
additional showroom space and to accommodate additional employees. Such lease
provided for an annual base rent of $57,902 and expired January 31, 2000. In
January 1996, the Company increased its space in New York by 656 square feet to
accommodate additional employees. Such lease provided for an annual base rent of
$15,055 and expired January 31, 2000.
On July 20, 1999 the Company renewed its real property leases which
includes 6,863 square feet, effective February 1, 2000, for a total annual base
rent of $171,575 through September 30, 2002 and $185,301 from October 1, 2000
through April 30, 2005. On July 19, 1999 the Company also leased an additional
2,150 square feet of adjacent space for an annual base rent of $53,750 from
November 1, 1999 through June 30, 2002 and $58,050 from July 1, 2002 through
April 30, 2005. The Company does not pay rent on the additional space until it
is ready for occupancy, which the Company expects to be on or about April 15,
2000.
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The Company leases approximately 1,200 square feet of office and showroom
space in Montreal, Canada at an annual base rent of CN$18,000. The lease expires
in April 2000 and the Company plans to renew this lease.
The Company believes that its existing facilities will be adequate to meet
its needs for the foreseeable future. In the event the Company requires
additional facilities in the future, the Company believes additional facilities
would be available at commercially reasonable rates.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation. No legal
proceedings were terminated during the fiscal year ended December 31, 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the last
quarter of fiscal year 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's common stock had been quoted on the Nasdaq National Market
from August 14, 1996 until December 8, 1998 under the symbol "AAGP." The
Company's common stock has been quoted on the Nasdaq SmallCap Market since
December 9, 1998, and from May 4, 1995 until August 14, 1996 under the same
symbol. The following table sets forth, for the period indicated, the highest
and lowest bid quotations for the common stock, $.002 par value (the "Common
Stock"), as reported by the Nasdaq system. Quotations reflect prices between
dealers, do not reflect retail markups, markdowns or commissions, and may not
necessarily represent actual transactions.
1998
High Low
---- ---
1st Quarter 3 1/2 2 1/8
2nd Quarter 2 7/8 1 3/4
3rd Quarter 2 3/8 11/16
4th Quarter 25 1/2
1999
High Low
---- ---
1st Quarter 10 11/16 2 1/2
2nd Quarter 5 23/32 2 1/4
3rd Quarter 3 13/16 2 1/4
4th Quarter 3 3/8 2 5/32
Holders
The closing bid price of the Common Stock as of March 15, 2000 was 3 11/16
There were 160 record holders of the Company's Common Stock and one record
holder of the Company's Class A Common Stock, $.01 par value (the "Class A
Common Stock"). Based upon information received from some of these record
holders, the Company believes there are more than 600 beneficial holders of the
Company's Common Stock.
Dividends
The Company has never paid dividends on its Common Stock or its Class A
Common Stock. The Company anticipates that, for the foreseeable future, earnings
will be retained for use in its business and does not anticipate the payment of
dividends.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Report on Form 10-KSB contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements. Factors
that may cause such differences include, but are not limited to, the Company's
expansion into new markets, competition, technological advances and availability
of managerial personnel.
General
The Company is a designer, marketer and supplier of women's and
men's activewear, sportswear, swimwear and accessories. The Company sells its
principal product collections under the Everlast brand name through exclusive
licensing arrangements. The Company's products are manufactured by independent
manufacturing contractors and are sold to over 20,000 retail locations mostly
throughout the United States and Canada, including a variety of department
stores, specialty stores, sporting goods stores, catalog operations and better
mass merchandisers.
The financial statements of the Company and the notes thereto
contain detailed information that should be referred to in conjunction with this
discussion.
Results of Operations
Year End 1999 Compared to Year End 1998
Net sales increased to $24,464,139 for the year ended December 31,
1999 from $15,011,926 for the year ended December 31, 1998, an increase of
$9,452,213 or 63.0%. The increase in net sales is primarily attributed to
increased sales volume of the Company's Women's Products through continued
market penetration and introduction of the Company's Men's Products.
Gross profit increased to $9,885,763 for the year ended December 31,
1999 from $5,528,335 for the year ended December 31, 1998, an increase of
$4,357,428 or 78.8%. Gross profit increased as a percentage of net sales to
40.4% from 36.8%. The increase as a percentage of net sales is primarily
attributed to higher prices received for the Company's products.
Selling and shipping expenses increased to $5,871,751 for the year
ended December 31, 1999 from $3,637,729 for the year ended December 31, 1998, an
increase of $2,234,022 or 61.4%. Selling and shipping expenses as a percentage
of net sales decreased to 24.0% from 24.2%. The decrease as a percentage of net
sales is primarily attributed to the increase in sales as it relates to the
fixed portion of the selling and shipping expenses.
General and administrative expenses increased to $2,024,539 for the
year ended December 31, 1999 from $1,911,621 for the year ended December 31,
1998, an increase of $112,918 or 5.9%. General and administrative expenses as a
percentage of net sales decreased to 8.3% from 12.7%. The decrease as a
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percentage of net sales is primarily attributed to the relative fixed nature of
general and administrative expenses.
Financial expenses increased to $557,627 for the year ended December
31, 1999 from $413,713 for the year ended December 31, 1998, an increase of
$143,914 or 34.8%. The increase is attributed to the increase in the Company's
net borrowings from the factor and factor commissions paid on increased sales,
for the year ended December 31, 1999 as compared to the year ended December 31,
1998, to finance growth.
Operating income increased to $1,431,846 for the year ended December
31, 1999 from a loss of $434,728 for the year ended December 31, 1998, an
increase of $1,866,574 for the reasons stated above. Operating income as a
percentage of net sales was 5.85% for the year ended December 31, 1999 as
compared to negative 2.9% for the year ended December 31, 1998.
The Company incurred a tax provision of $615,694 for the year ended
December 31, 1999 as compared to a tax benefit of $194,093 for the year ended
December 31, 1998. This income tax provision is in proportion to the increase in
the Company's income.
The Company had net income of $816,152 for the year ended December
31, 1999 as compared to a loss of $240,635 for the year ended December 31, 1998,
an increase of $1,056,787.
2000 Market Outlook
While the retail environment remains difficult, the Company's
management believes it will continue to increase its sales growth, although no
assurance can be given that such increase will continue.
The continued market penetration of the Everlast men's activewear
and sportswear line and the expansion of the Company's internet web site are
expected to add to the Company's distribution base. The Company continues to
focus on its core Everlast brand and to explore other opportunities for growth.
Liquidity and Capital Resources
Net cash provided by operating activities for the year ended
December 31, 1999 was $222,766 compared to $202,937 for the year ended December
31, 1998. This increase was primarily attributable to an increase in net income.
Net cash used for investing activities for the year ended December 31, 1999 was
$176,540 compared to $79,414 for the year ended December 31, 1998 due to an
increase in capital expenditures for computer related equipment. Net cash
provided by financing activities was $0 for the year ended December 31, 1999
compared to $9,906 for the year ended December 31, 1998 due to a decline in the
proceeds received from the exercise of stock options.
During the year ended December 31, 1999, the Company's primary need
for funds was to finance working capital due to growth in net sales of the
Company's products. The Company has relied primarily upon cash flow from
operations and advances drawn against factored receivables to finance its
operations and expansion. At December 31, 1999, working capital was $5,850,064
compared to $4,994,000 at December 31, 1998, an increase of $856,064. This
increase was primarily attributable to the Company's net income for the year
ended December 31, 1999, as compared to a net loss for the year ended December
31, 1998.
Due from factor represents the amount receivable by the Company for
factored receivables net of outstanding advances made by the factor to the
Company under the factoring agreement. At December 31, 1999 due from factor was
$1,549,047 as compared to $1,887,245 at December 31, 1998. The
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Company's inventory increased by 73.2% to $5,240,152 at December 31, 1999 from
$3,026,241 at December 31, 1998 to support the increased backlog of open orders
and the Company's expanded product lines.
2000 Liquidity Outlook
Management anticipates it will maintain a net surplus position with
the factor, although no assurance to that effect can be given. Positive cash
flow, if it occurs, will provide for further reduction in net borrowings, and
create additional working capital to fund the Company's continued growth over
the next 12 months. If a positive cash flow does not occur, borrowings with the
factor will increase.
Year 2000 Compliance
The Company experienced no disruptions to its normal operations
related to Year 2000 failures. The Company believes that it is Year 2000
compliant and if failures do occur they will not have a material impact on the
Company's results of operations, liquidity or financial condition.
ITEM 7. FINANCIAL STATEMENTS.
SEE PAGE 1f
13
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Company's executive officers and directors are as follows:
Name Age Position
George Horowitz 49 President; Chief Executive Officer; Chairman
of the Board; Treasurer; Director(1)
James Anderson 63 Vice Chairman of the Board; Director(1)(2)
Rita Cinque Kriss 34 Executive Vice President; Secretary of the
Company; Director(3)
Larry Kring 59 Director(2)(3)
Edward Epstein 60 Director(2)(3)
Angelo Giusti 49 Director(2)
(1) Member of the Executive Committee of the Board of Directors
(2) Member of the Compensation Committee of the Board of Directors
(3) Member of the Audit Committee of the Board of Directors
Mr. Horowitz is the Chairman, Chief Executive Officer and President
of Active Apparel Group, Inc. and has served in such capacities since his
founding of the company in 1992. Mr. Horowitz, formerly an educator, entered the
apparel industry in 1976. Mr. Horowitz was employed by Golden Touch Imports,
Inc., an apparel company in New York City, where he served as Vice President of
Operations and was a shareholder of that company. The media frequently calls
upon Mr. Horowitz for his views on issues pertaining to his company and the
industry in general. He has appeared on CNBC's "Squawk Box" and "Market Wrap,"
CNN's "Business Day" and "Moneyline News Hour with Lou Dobbs," and Fox News
Channel's "Cavuto Business Report," among other shows. He has been included in
the Sportstyle Magazine's Top 100 most influential people in the sporting goods
industry for 3 consecutive years. He is currently serving on the Executive
Committee for the Sports Apparel Product Council of the Sporting Goods
Manufacturers Association. Mr. Horowitz is also a member of the International
Radio and Television Society Foundation, Inc. He has been a speaker for several
industry events, including the Women's Wear Daily CEO Annual Summit and the
Fashion Round Table. Mr. Horowitz was chosen along with other selected top
leaders in the fashion industry to join President Clinton for a memorable
evening celebrating The William Jefferson Clinton Presidential Library
Foundation. He serves as a member of the Benefit Committee of Fashion and Media
Leaders for the NOW Legal Defense and Education Fund. Mr. Horowitz has been
involved with many civic and sports related community activities. He is a member
of the Three Miles of Men Honorary Committee for The Susan G. Komen Breast
Cancer Foundation New York City Race for the Cure. He has served in different
capacities as a leader and a mentor to the youth in his community.
14
<PAGE>
Mr. Anderson has been a director of the Company since August 1992
and was Chairman of the Board from January 1994 through December 1995. Since
January 1996, he has been Vice-Chairman of the Board. Since August 1996, he has
been Managing Partner of Millenium Venture Management LLC. Since July 1987 he
has been a management consultant in restructuring businesses. From 1981 to 1987,
he was President of Pacific First Financial Corp. and Pacific First Federal
Savings Bank and, in 1984, also became chairman of the board and CEO of each
company. He has served on the boards of directors of numerous businesses, civic,
arts and educational organizations and is a member of the Whitman College Board
of Overseers. He is currently a member of the Board of Directors of the
Washington Hospital Insurance Fund and the Washington Casualty Company and
Chairman of the Board of Directors of Reality Based Learning Corp.
Ms. Cinque Kriss has been Executive Vice President and a director of
the Company since May 1994. From April 1993 to May 1994, she was Vice
President-Operations of the Company, and from August 1992 to April 1993, she
served as a consultant to the Company in operations management. From November
1990 to August 1992, Ms. Cinque Kriss was the President of ITEW, Ltd., a
management consulting company in the apparel industry. In 1986, she was a
founding member of Women in International Trade, an organization created to
promote international trade, where she served as a director from January 1990 to
January 1993.
Mr. Kring has been a director of the Company since January 1993.
Since August 1993, Mr. Kring has been a Group Vice President of Esterline
Technologies, a diversified instrumentation, equipment and component
manufacturing company listed on the New York Stock Exchange and located in
Bellevue, Washington. From July 1978 to July 1993, Mr. Kring was the President
and Chief Executive Officer of Heath Tecna Aerospace Company, a manufacturer of
aircraft interior and aerospace components and a division of Ciba-Geigy
Corporation.
Mr. Epstein has been a director since January 1, 1996. Mr. Epstein
is an attorney admitted to practice law in both New York and Florida. He is an
experienced litigator, and has represented clients in all aspects of the garment
industry for 30 years. He is a member of the bars of the Supreme Court of the
State of Florida, the Supreme Court of the State of New York, various United
States District Courts and the United States Court of Appeals for the Second
Circuit. He is a member of the New York State Trial Lawyers Association,
Association of Trial Lawyers of America and the Florida Academy of Trial
Lawyers.
Mr. Giusti has been a director since January 3, 1997. He has been
Vice President of Operations at the Company since June 1997. From 1984 until
June 1997, Mr. Giusti was President of Universal Business Forms, a printing
company in New York City. From 1978 to 1984, Mr. Giusti was Sales Manager in New
York for Uarco, a national printing company. Mr. Giusti has served on many
community boards and activities. He was a New York City Public School teacher
and he has remained active in local education and in youth sports activities. He
is a former President of the Holmdel (Jersey Shore) Pop Warner Football League.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who
beneficially own more than ten percent of the Company's Common Stock, to file
with the Securities and Exchange Commission (the "SEC") reports of
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<PAGE>
ownership of Common Stock and other equity securities of the Company. Officers,
directors and more than ten percent stockholders are required by SEC regulation
to furnish the Company with copies of all Section 16(a) reports they file. To
the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company during the fiscal year ended December 31, 1999 all
required Section 16(a) filings by beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain
information concerning total annual compensation paid to George Horowitz, the
Company's President, Chief Executive Officer and Treasurer, Rita Cinque Kriss,
the Company's Executive Vice President and Secretary and Angelo Giusti, Vice
President of Operations (the "Named Executive Officers"), for services rendered
in all capacities by them to the Company during fiscal years 1999, 1998 and,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------
Securities
Name and Other Annual All Other Underlying
Principal Positions(1) Year Salary ($) Bonus ($) Compensation Compensation Options(11)
- ---------------------- ---- ---------- --------- ------------ ------------ -----------
$ $ (#)
- - ---
<S> <C> <C> <C> <C> <C> <C>
George Horowitz
(President; Chief; 1999 277,697 21,000 21,068(3) 983(6) 40,000
Executive Officer 1998 265,000 12,000 19,534(4) 853(6) 0
Treasurer) 1997 265,000 18,000 17,257(5) 595(6) 0
Rita Cinque Kriss
(Executive Vice 1999 128,462 18,265 12,048(7) 0 25,500
President; 1998 140,000 0 20,308(8) 0 0
Secretary) 1997 140,000 12,000(2) 9,565(9) 0 0
Angelo Giusti
(Vice President of 1999 121,846 3,000 0 0 3,000
Operations & 1998 110,000 0 0 0 0
Director) 1997 63,139(10) 0 0 0 0
</TABLE>
(1) Other than George Horowitz, Rita Cinque Kriss and Angelo Giusti no
Named Executive Officer of the Company was paid more than $100,000 in
total salary and bonus for fiscal year 1999, and accordingly, no other
Named Executive Officers are included in the table above.
(2) The Company has agreed to pay the amount of tax owed on the bonus
payment noted in the column above.
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(3) Consists of an aggregate of $21,068 paid to or on behalf of Mr.
Horowitz by the Company in fiscal year 1999 in connection with
automobile lease installment payments ($15,242), related insurance
premiums ($1,422) and parking expenses ($4,404).
(4) Consists of an aggregate of $19,534 paid to or on behalf of Mr.
Horowitz by the Company in fiscal year 1998 in connection with
automobile lease installment payments ($13,659), related insurance
premiums ($1,088) and parking expenses ($4,787).
(5) Consists of an aggregate of $17,257 paid to or on behalf of Mr.
Horowitz by the Company in fiscal year 1997 in connection with
automobile lease installment payments ($13,660), related insurance
premiums ($1,088) and parking expenses ($2,509).
(6) Represents premiums paid by the Company in fiscal year 1999, 1998 and
1997on term life (7) insurancepolicies for the benefit of Mr. Horowitz.
(7) Consists of an aggregate of $12,048 paid to or on behalf of Ms. Cinque
Kriss by the Company in fiscal year 1999 in connection with automobile
lease installment payments ($9,558), and related insurance premiums
($2,490).
(8) Consists of an aggregate of $12,732 paid to or on behalf of Ms. Cinque
Kriss by the Company in fiscal year 1998 in connection with automobile
lease installment payments ($8,019), related insurance premiums
($3,806) and parking expenses ($907), and $7,576 for income taxes on
1997 bonus.
(9) Consists of an aggregate of $9,565 paid to or on behalf of Ms. Cinque
Kriss by the Company in fiscal year 1997 in connection with automobile
lease installment payments ($5,601), related insurance premiums
($1,846) and parking expenses ($2,118).
(10) Mr. Giusti has been an employee of the Company since June 1997.
(11) See report on repricing of options section for details of repriced
options.
Long-Term Incentive and Pension Plans
The Company currently has no long-term incentive or defined pension
plans. The Company offers all employees a 401(k) savings plan that allows the
employee to voluntarily defer a certain portion of their income before taxes.
The Company pays all the administrative fees for the plan.
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<PAGE>
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted To Exercise Or
Options Employees in Base Price
Name Granted Fiscal Year ($/Sh) Expiration Date
---- ------- ----------- ------ ---------------
<S> <C> <C> <C> <C> <C>
George Horowitz 20,000 18.5% $3.97 3/22/09
20,000 18.5% $2.23 12/31/09
Rita Cinque Kriss 10,000 9.3% $3.97 3/22/09
10,000 9.3% $2.23 12/31/09
Angelo Giusti 2,500 2.3% $3.97 3/22/09
2,500 2.3% $2.23 12/31/09
</TABLE>
There were no other option grants to Named Executive Officers
during the year ended December 31, 1999.
Compensation of Directors
As compensation for their services as directors of the
Company, effective January 1, 1995, non-employee directors of the Company
receive options to purchase the Company's Common Stock pursuant to the Company's
1995 Non-Employee Director Stock Option Plan. The plan provides for annual
automatic grants of options to purchase 3,000 shares of Common Stock to each
director serving at the time of the grant who is not an officer or employee of
the Company. The Chairman and Secretary of the Board (provided they are not
officers or employees of the Company) also receive an automatic grant of options
to purchase an additional 200 shares, and the chairperson of a Board committee
(provided he or she is not an officer or employee of the Company) also receives
an automatic grant of options to purchase an additional 100 shares. The exercise
price per share for all such options is the fair market value of the shares of
Common Stock covered by the option on the date of grant of such option. The term
of each option is seven years from the date of grant, and the options vest in
three equal installments on the first, second and third anniversaries of the
date of grant. Effective January 1, 1998, each non-employee director was to
receive a fee of $6,000 payable quarterly at the end of each quarter. As of
December 31, 1999, Mr. James Anderson, Mr. Edward Epstein and Mr. Larry Kring
each received $6,000. Directors also receive reimbursement of expenses incurred
by them in performing their duties and in attending Board meetings, provided
such expenses are reasonable and evidenced by appropriate documentation.
Employment Contracts
George Horowitz. The Company and George Horowitz are parties to an employment
agreement, dated as of August 1, 1994 (the "Agreement") pursuant to which Mr.
Horowitz serves as the President and Chief Executive Officer of the Company, for
which Mr. Horowitz was paid an annual base salary of $265,000 through the
balance of the Term (as defined below) of the Agreement, unless increased by the
Board of Directors on an annual basis during the Term. Mr. Horowitz's annual
base salary from March 22, 1999 through December 31, 1999 was $280,000 as
approved by the Board of Directors. The initial
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<PAGE>
term of the Agreement expires on July 31, 2000 but continues thereafter for
additional one-year periods unless either Mr. Horowitz or the Company gives the
other ninety days' prior written notice of non-renewal (as and if so extended,
the "Term"). At the discretion of the Board of Directors, the Company may also
pay Mr. Horowitz a cash bonus on or before December 31 of any year during the
Term. In addition to such base salary and contingent cash bonuses, Mr. Horowitz
is entitled to receive an automobile allowance which on August 12, 1996 was
modified from $12,000 annually to reimbursement for an automobile commensurate
with his position and duties with the Company (to include appropriate
insurance), reimbursement for parking expenses which was modified from a limit
of $6,000 annually to such amount as is reasonably and customarily charged in
the area of the Company's principal offices, health and medical insurance and is
entitled to participate in any retirement, life and disability insurance, dental
insurance and any bonus, incentive or profit-sharing plans which the Company
makes available from time to time to its executives. Mr. Horowitz is also
entitled to receive reimbursement of all reasonable out-of-pocket expenses that
he actually incurs relating to his services under the Agreement.
The Agreement also restricts, generally, Mr. Horowitz from disclosing
certain confidential information obtained by Mr. Horowitz during the Term for a
period of three years following the termination or expiration of the Term, and
further restricts Mr. Horowitz from competing with the Company (including
soliciting the Company's employees or agents) for a period of one year following
the expiration or termination of the Term. The Agreement may be terminated by
the Company "for cause" (as defined in the Agreement), and in the event of such
termination, or in the event of the voluntary resignation by Mr. Horowitz, the
obligations of the Company under the Agreement will terminate (except with
respect to certain indemnification, confidentiality and "non-compete"
provisions). In the event of the termination of the Agreement by reason of Mr.
Horowitz's death, his estate is entitled to receive an amount equal to twice his
then-current base salary (which, in the case of Mr. Horowitz's death, may be
funded, wholly or partially, by a life insurance policy paid for by the Company,
at its option). If the Agreement is terminated for reasons other than Mr.
Horowitz's death, voluntary resignation or "for cause, " Mr. Horowitz will be
entitled to receive an amount equal to twice his then-current base salary, plus
all other amounts due to him under the Agreement through the date of such
termination. The Company is the beneficiary of "key-executive" life insurance
policies on George Horowitz in the amount of $5,000,000.
Rita Cinque Kriss. The Company and Rita Cinque Kriss are parties to an
employment agreement, dated as of August 1, 1994, pursuant to which Ms. Cinque
Kriss serves as Executive Vice President of the Company, for which Ms. Cinque
Kriss was paid an annual base salary of $70,000 from August 1, 1994 through
December 31, 1994, $90,000 from January 1, 1995 through June 30, 1995, $105,000
from July 1, 1995 through December 31, 1995, $125,000 from January 1, 1996
through December 31, 1996, and is paid an annual base salary of $140,000
commencing January 1, 1997 and continuing thereafter through the Term (as
defined below) of the agreement, unless increased by the Board of Directors on
an annual basis during the Term. The initial term of such agreement expired on
July 31, 1997 but was and will continue to be renewed for additional one-year
periods unless either Ms. Cinque Kriss or the Company gives the other ninety
days' prior written notice of non-renewal (as and if so extended, the "Term").
At the discretion of the Board of Directors, the Company may also pay Ms. Cinque
Kriss a cash bonus on or before December 31 of any year during the Term. In
addition to such base salary and contingent cash bonuses, Ms. Cinque Kriss is
entitled to receive an automobile allowance of $9,000 annually, reimbursement
for parking expenses up to $4,800 annually, health and medical insurance, and is
also entitled to participate in any retirement, life and disability insurance,
dental insurance and any bonus, incentive or profit-sharing plans which the
Company makes available from time to time to its executives. Ms. Cinque Kriss is
also entitled to receive reimbursement for all reasonable out-of-pocket expenses
that she incurs relating to her services under such agreement. The Company is
the beneficiary of a "key-executive" life insurance policy on Rita Cinque Kriss
in the amounts of $1,000,000.
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Report on Repricing of Options
On December 31, 1999, the Company's Board of Directors
approved the cancellation and replacement grant with a new exercise price of
previously granted options under the 1993 Employee Stock Option Plan and the
1995 Non-Employee Directors Option Plan (collectively referred to as the "Option
Plans") to its directors as follows:
No. of Option Original Option
Director Shares Exercise Price
George Horowitz 15,000 $11.75
25,000 $14.25
James Anderson 3,200 $11.75
3,200 $12.50
3,100 $14.25
Rita Cinque-Kriss 10,500 $11.75
15,000 $14.75
Larry Kring 3,100 $11.75
3,100 $12.50
3,100 $14.75
Edward Epstein 3,000 $12.50
3,000 $14.75
Angelo Giusti 3,000 $14.75
The Board of Directors determined that the original option exercise prices
shown above were significantly in excess of the then current market price of the
Common Stock, and was not fulfilling its designated purpose under their
respective Option Plans of providing the various directors incentive to remain
in the employ and service of the Company and to stimulate their efforts on
behalf of the Company. Accordingly, to restore the purpose for which the options
were granted, the exercise price of the options were reduced to $2.23, the
average of the high and low trading price of the Common Stock as quoted on the
Nasdaq SmallCap Market on December 30, 1999. All replacement options are
immediately exercisable and terminate based on their respective original
termination date. This action was taken to help restore the incentive value of
the options.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of the Company's Common Stock and Class A Common Stock
as of March 15, 2000 for (i) each of the Company's directors (ii) each of the
Company's executive officers (iii) each stockholder known to be the beneficial
owner of more than five percent of any class of the Company's voting securities
and (iv) all directors and executive officers as a group:
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Beneficial Ownership
Common, and
Class A Common (1)
Percentage of
Name and Address of Outstanding
Beneficial Owner Number (2) Stock
- ---------------- ---------- -----
George Q. Horowitz 624,795(3) 23.7%
c/o Active Apparel Group, Inc.
1350 Broadway, Suite 2300
New York, NY 10018
James K. Anderson 104,662(4) 4.0%
4903 163rd Ave., N.E.
Redmond, WA 98052
Rita Cinque Kriss 106,033(5) 4.0%
c/o Active Apparel Group, Inc.
1350 Broadway, Suite 2300
New York, NY 10018
Larry Kring 29,522(6) 1.1%
3265 126th Ave., N.E.
Bellevue, WA 98005
Edward R. Epstein 8,867(7) *
915 Middle River Drive
Suite 419
Fort Lauderdale, FL 33304
Angelo Giusti 5,366(8) *
19 Deer Path
Holmdel, NJ 07733
All directors and 879,245(3)(4) 32.3%
executive officers as a group (6 persons) (5)(6)(7)(8)
(1) Under rules adopted by the Securities and Exchange Commission, a person is
deemed to be a beneficial owner of securities with respect to which such
person has or shares: (i) voting power, which includes the power to vote
or direct the vote of the security, or (ii) investment power, which
includes the power to dispose of or to direct the disposition of the
security. Unless otherwise indicated below, the persons named in the table
above have sole voting and investment power with respect to all shares
beneficially owned.
(2) As of March 15, 2000, there were outstanding 2,492,581 shares of Common
Stock and 100,000 shares of Class A Common Stock. The Class A Common
stock, while held by George Horowitz, as they currently are, entitle
George Horowitz to five (5) votes for each share held. Thus, while there
are 2,592,581 total shares outstanding (not including any unexercised
options) this represents 2,992,581 votes.
21
<PAGE>
(3) Consists of (i) 478,128 shares of Common Stock (500 of which are owned by
minor children) (ii) 100,000 shares of super-voting Class A Common Stock
issued to Mr. George Q. Horowitz in July 1995 in exchange for 112,500
shares of Common Stock and (iii) 46,667 shares of Common Stock issuable
upon exercise of options exercisable currently or within 60 days,
including (A) options to purchase 15,000 shares granted by the Company at
the exercise price of $2.23 per share, which expire on November 3, 2005,
(B) options to purchase 25,000 shares at an exercise price $2.23 per
share, which expire on November 7, 2006, and (C) options to purchase 6,667
shares at an exercise price of $3.97 per share, which expire March 22,
2009.
(4) Consists of (i) 84,300 shares of Common Stock of which Mr. Anderson owns
44,300 shares of Common Stock with his wife, as joint tenants, and (ii)
20,362 shares of Common Stock issuable upon exercise of options
excercisable currently or within 60 days, including
(A) 839 shares @ $ 1.75 expires December 31, 2004
(B) 839 shares @ $ 3.00 expires December 31, 2004
(C) 839 shares @ $ 5.00 expires December 31, 2004
(D) 839 shares @ $ 6.25 expires December 31, 2004
(E) 4,706 shares @ $ 0.85 expires December 31, 2003
(F) 3,200 shares @ $ 2.23 expires November 3, 2002
(G) 3,200 shares @ $ 2.23 expires January 2, 2003
(H) 3,100 shares @ $ 2.23 expires January 3, 2004
(I) 1,733 shares @ $ 3.59 expires January 2, 2005
(J) 1,067 shares @ $ 9.38 expires January 3, 2006
(5) Consists of (i) 77,200 shares of Common Stock and (ii) 28,833 shares of
Common Stock issuable upon exercise of options exercisable currently or
within 60 days including (A) options to purchase 10,500 shares of Common
Stock at an exercise price of $2.23 per share, which expire on November 3,
2005 and (B) 15,000 shares of Common Stock at an exercise price of $2.23
per share, which expire on December 13, 2006 and (C) 3,333 shares of
Common Stock, at an exercise price of $3.97 per share which expire March
22, 2009.
<PAGE>
(6) Consists of (i) 10,338 shares of Common Stock and (ii) 19,184 shares of
Common Stock issuable upon the exercise of options currently exercisable
or within 60 days, including
(A) 839 shares @ $ 1.75 expires December 31, 2004
(B) 839 shares @ $ 3.00 expires December 31, 2004
(C) 839 shares @ $ 5.00 expires December 31, 2004
(D) 839 shares @ $ 6.25 expires December 31, 2004
(E) 3,762 shares @ $ 0.85 expires December 31, 2003
(F) 3,100 shares @ $ 2.23 expires November 3, 2002
(G) 3,100 shares @ $ 2.23 expires January 2, 2003
(H) 3,100 shares @ $ 2.23 expires January 3, 2004
(I) 1,733 shares @ $ 3.59 expires January 2, 2005
(J) 1,033 shares @ $ 9.38 expires January 3, 2006
(7) Consists of 8,867 shares of Common Stock issuable upon exercise of options
exercisable currently or within 60 days, including (A) options to purchase
3,000 shares of Common Stock at an exercise price of $2.23 per share,
which expire on January 2, 2003 and (B) options to purchase 3,000 shares
of Common Stock at an exercise price of $2.23 per share, which expire on
January 3, 2004, (C) 1,800 shares of Common Stock at an exercise price of
$3.59 which expire January 2, 2005, (D) 1,067 shares at an exercise price
of $9.38 which expire January 3, 2006.
22
<PAGE>
(8) Consists of (i) 700 shares of Common Stock and (ii) 4,666 shares of Common
Stock issuable upon exercise of options exercisable currently or within 60
days, including (A) options to purchase 3,000 shares of Common Stock at an
exercise price of $2.23 per share, which expire on January 3, 2004 and (B)
options to purchase 833 shares of Common Stock at an exercise price of
$2.094 per share, which expire on June 6, 2008, (C) 833 shares of Common
Stock at an exercise price of $3.97 which expire March 22, 2009.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Edward R. Epstein, a Director, was paid $93,889 for legal services for the
year ending December 31, 1999.
The Company had a promissory note dated December 23, 1996 with Mr. George
Q. Horowitz, President and Chief Executive Officer of the Company, in the amount
of $120,000 that was due July 31, 2000. The unpaid principal bears interest at
prime plus 1 1/2%. This note was refinanced on December 31, 1999 in the amount
of $91,200 and is due on July 31, 2009.
23
<PAGE>
Item 13. Exhibits AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exhibit Filed Incorporated By
Index Description of Document Herewith Reference to:
- ----- ----------------------- -------- -------------
3.1 Certificate of Incorporation of the Exhibit 3.(i) of Registration
Company ("Certificate of Statement File No.33-87954 (the
Incorporation"). "1995 Registration Statement"
3.2 Bylaws of the Company. Exhibit 3.(ii) of the 1995
Registration Statement
10.1 Trademark License Agreement, dated as Exhibit 10.1 of the 1995
of May 20, 1994, between Converse Inc. Registration Statement
and the Company.
10.2 License Agreement, dated as of June 1, Exhibit 10.2 of the 1995
1992 ("Everlast License"), between Registration Statement
Everlast World's Boxing
Headquarters Corp. ("Everlast") and
Total Impact, Inc. ("Total Impact").
10.3 First Amendment Agreement to Everlast Exhibit 10.3 of the 1995
License, dated as of June 1, 1992, Registration Statement
between Everlast and Total Impact.
10.4 Assignment of Everlast License, dated as Exhibit 10.4 of the 1995
of July 7, 1992, between Everlast and Registration Statement
the Company.
10.5 Consent to Assignment of Everlast Exhibit 10.5 of the 1995
License, dated as of August 18, 1992, by Registration Statement
Everlast to Total Impact.
10.6 Second Amendment Agreement to Exhibit 10.6 of the 1995
Everlast License, dated as of January 1, Registration Statement
1993 between Everlast and the
Company.
10.7 Third Amendment Agreement to Exhibit 10.7 of the 1995
Everlast License, dated as of November Registration Statement
15, 1993 between Everlast and the
Company.
10.8 License Agreement (Canada), dated as Exhibit 10.8 of the 1995
of January 1, 1993, ("Canada Everlast Registration Statement
License") between Everlast and the
Company.
10.9 First Amendment Agreement to Canada Exhibit 10.9 of the 1995
Everlast License, dated as of November Registration Statement
5, 1993, between Everlast and the
Company.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit Filed Incorporated By
Index Description of Document Herewith Reference to:
- ----- ----------------------- -------- -------------
<S> <C> <C>
10.10 Consulting Agreement, dated as of Exhibit 10.10 of the 1995
September 1, 1993, between the Registration Statement
Company and Michael Bick.
10.11 Buying Agency Agreement, dated as of Exhibit 10.11 of the 1995
December 1, 1992, between the Registration Statement
Company and D&P Fashion Collections
Ltd.
10.12 Services Agreement, dated as of July 7, Exhibit 10.12 of the 1995
1992, between the Company and Total Registration Statement
Impact.
10.13 Factoring Agreement, dated as of August Exhibit 10.13 of the 1995
21, 1992 and as subsequently amended, Registration Statement
between the Company and Century
Business Credit Corporation.
10.14 Lease Agreement, dated as of May 16, Exhibit 10.14 of the 1995
1991 ("Lease Agreement), between Registration Statement
Total Impact and 1350 Broadway
Associates.
10.15 Assignment of Lease Agreement, dated Exhibit 10.15 of the 1995
as of September 23, 1992, by Total Registration Statement
Impact to the Company.
10.16 Memorandum of Agreement of Lease, Exhibit 10.16 of the 1995
dated as of September 27, 1993, between Registration Statement
the Company and 433 Building Corporation.
10.17 Lease, dated as of July 20, 1994, Exhibit 10.17 of the 1995
between the Company and 1350 Registration Statement
Broadway Associates.
10.18 Lease, dated as of July 21, 1994, Exhibit 10.18 of the 1995
between the Company and 1350 Registration Statement
Broadway Associates.
10.19 Form of Registration Rights Agreement, Exhibit 10.19 of the 1995
dated as of August 20, 1992, between the Registration Statement
Company and the holders of
Preferred Stock.
10.20 Form of Registration Rights Agreement, Exhibit 10.20 of the 1995
dated as of August 20, 1992, between Registration Statement
the Company and the holders of
Common Stock.
10.21 Form of Senior Subordinated Notes of Exhibit 10.21 of the 1995
the Company due December 31, 1994. Registration Statement
10.22 Form of Non-Negotiable Convertible Exhibit 10.22 of the 1995
Promissory Notes of the Company due Registration Statement
May 31, 1995.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit Filed Incorporated By
Index Description of Document Herewith Reference to:
- ----- ----------------------- -------- -------------
<S> <C> <C>
10.23 Employment Agreement, dated as of Exhibit 10.23 of the 1995
August 1, 1994, between the Company Registration Statement
and George Horowitz.
10.24 Employment Agreement, dated as of Exhibit 10.24 of the 1995
September 1, 1994, between the Company Registration Statement
and Donald J Horowitz.
10.25 Employment Agreement, dated as of Exhibit 10.25 of the 1995
August 1, 1994, between the Company Registration Statement
and Rita Cinque Kriss.
10.26 Employment Agreement, dated as of Exhibit 10.26 of the 1995
September 1, 1994, between the Registration Statement
Company and Rita Cinque Kriss.
10.27 Option Agreement, dated as of Exhibit 10.27 of the 1995
November 23, 1994, between Century Registration Statement
Business Credit Corporation and the
Company.
10.28 1993 Stock Option Plan of the Company. Exhibit 10.28 of the 1995
Registration Statement
10.29 1995 Non-Employee Director Stock Exhibit 10.29 of the 1996
Option Plan of the Company, adopted Form 10-KSB for the year ended
on October 6, 1995. December 31, 1995
10.30 Amendment to 1993 Stock Option Plan Exhibit 10.30 of the 1996
of the Company, adopted on October 6, Form 10-KSB for the year
1995. ended December 31, 1995
10.31 Amendment dated October 3, 1995 of Exhibit 10.31 of the 1996 Form
Trademark License Agreement dated 10-KSB for the year ended
May 20, 1994 between the Company and December 31, 1995
Converse Inc.
10.32 Amendment dated April 28, 1995 to Exhibit 10.32 of the 1996 Form
amend Lease dated September, 1993 10-KSB for the year ended
between the Company and 433 Building December 31, 1995
Corporation.
10.33 Amendment of Lease, made as of Exhibit 10.33 of the 1996 Form
November 1, 1995 between the 10-KSB for the year ended
Company and 1350 Broadway December 31, 1995
Associates.
10.34 Consolidated Amendment Agreement to Exhibit 10.1 of the Form 8-K filed
Everlast License, dated as of January 1, on January 17, 1997
1997 between Everlast and the
Company.
10.35 Consolidated Amendment Agreement to Exhibit 10.2 of the Form 8-K filed
Canada Everlast License, dated as of on January 17, 1997
January 1, 1997 between Everlast and
the Company.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit Filed Incorporated By
Index Description of Document Herewith Reference to:
- ----- ----------------------- -------- -------------
<S> <C> <C>
10.36 Third Amendment to the Trademark Exhibit 10.36 of the 1997 Form 10-
License Agreement, dated as of January KSB for the year ended December
7, 1997 between the Company and 31, 1996
Converse Inc.
10.37 Fourth Amendment to the Trademark Exhibit 10.37 of the 1997 Form 10-
License Agreement, dated as of January KSB for the year ended December 31,
22, 1997 between the Company and 1996
Converse Inc.
10.38 Employment Agreement, dated as of Exhibit 10.38 of the 1997 Form 10-
September 1, 1996 between the KSB for the year ended December
Company and Donald Horowitz 31, 1996
10.39 Amendment to Employment Agreement, Exhibit 10.39 of the 1997 Form 10-
dated as of August 9, 1996 between the KSB for the year ended December
Company and George Horowitz 31, 1996
10.40 Fifth Amendment to the Trademark Exhibit 10.40 of the 1999 Form 10-
License Agreement, dated as of KSB for the year ended December
September 19, 1997 between the 31, 1998
Company and Converse Inc.
10.41 Sixth Amendment to the Trademark Exhibit 10.41 of the 1999 Form 10-
License Agreement, dated as of April KSB for the year ended December
15, 1998 between the Company and 31, 1998
Converse Inc.
10.42 Amendment to MTV License agreement Exhibit 10.1 of the Form 10-QSB
dated as of May 26, 1998 between the for the Quarter ended September
Company and MTV Networks 30, 1998
10.43 Amendment to MTV License agreement Exhibit 10.43 of the 1999 Form 10-
dated as of October 22, 1998 between KSB for the year ended December
the Company and MTV Networks 31, 1998
10.44 License Agreement, dated as of October Exhibit 10.44 of the 1999 Form 10-
23, 1998 ("Men's License"), between KSB for the year ended December
Everlast World's Boxing 31, 1998
Headquarters Corp. ("Everlast") and
the Company
10.45 License Agreement, dated as of October Exhibit 10.45 of the 1999 Form 10-
23, 1998 ("Men's License-Canada"), KSB for the year ended December
between Everlast World's Boxing 31, 1998
Headquarters Corp. ("Everlast") and the
Company
10.46 Lease, dated as of November 1, 1999, X
between the Company and
1350 Broadway Associates
10.47 Promissory Note dated December 31, X
1999 with George Q. Horowitz due July
31, 2009
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit Filed Incorporated By
Index Description of Document Herewith Reference to:
- ----- ----------------------- -------- -------------
<S> <C> <C>
10.48 Lease, dated as of February 1, 2000,
between the Company and 1350
Broadway Associates X
10.49 Consent from Berenson & Co. LLP
regarding incorporation by
reference of their report dated
January 21, 2000 in the Form S-8 X
27 Financial Data Schedule X
</TABLE>
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by the Company during the last
quarter of 1999.
28
<PAGE>
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACTIVE APPAREL GROUP, INC.
By: /s/ George Horowitz
-----------------------------------
George Horowitz
Chairman and Chief Executive Officer
Dated: March 17, 1999
In accordance with the Exchange Act this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
March 17, 2000 /s/ George Horowitz
--------------------------------
George Horowitz (Chairman; Chief
Executive Officer; Chief Financial Officer;
principal executive officer,
and principal accounting officer)
March 17, 2000
/s/ James Anderson
---------------------------------
James Anderson (Director)
March 17, 2000 /s/ Rita Cinque Kriss
---------------------------------
Rita Cinque Kriss (Executive Vice President
and Director)
March 17, 2000 /s/ Larry Kring
-----------------------------------
Larry Kring (Director)
March 17, 2000 /s/ Edward Epstein
-----------------------------------
Edward Epstein (Director)
March 17, 2000 /s/ Angelo Giusti
-----------------------------------
Angelo Giusti (Director)
<PAGE>
ACTIVE APPAREL GROUP, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
ITEM 7: FINANCIAL STATEMENTS
ACTIVE APPAREL GROUP, INC.
TABLE OF CONTENTS
Page
----
Independent Auditors' Report 1f
Balance Sheet 2f
Statements of Operations 3f
Statements of Changes in Stockholders' Equity 4f
Statements of Cash Flows 5f
Notes to Financial Statements 6f-14f
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Active Apparel Group, Inc.
New York, NY
We have audited the accompanying balance sheet of Active Apparel Group, Inc. as
of December 31, 1999, and the related statements of operations, changes in
stockholders' equity, and cash flows for the years ended December 31, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 referred to above present fairly, in
all material respects, the financial position of Active Apparel Group, Inc. as
of December 31, 1999 and the results of its operations and its cash flows for
the years ended December 31, 1999 and 1998 in conformity with generally accepted
accounting principles.
/S/ Berenson & Co. LLP
New York, NY
January 21, 2000
<PAGE>
Page 2f
ACTIVE APPAREL GROUP, INC.
BALANCE SHEET
DECEMBER 31, 1999
A S S E T S
<TABLE>
<CAPTION>
Current assets:
<S> <C>
Cash and cash equivalents $ 239,096
Due from factor 1,549,047
Inventory 5,240,152
Prepaid expenses and other current assets 379,840
Deferred tax asset 155,399
------------
Total current assets 7,563,534
Note receivable, officer 91,200
Property and equipment, net 419,954
Security deposits and other assets 199,510
------------
$8,274,198
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,479,081
Accrued expenses and other current liabilities 234,389
------------
Total liabilities, all current 1,713,470
------------
Commitments
Stockholders' equity:
Common stock, par value $.002; 10,000,000 shares authorized;
2,666,581 issued; 2,492,581 outstanding 5,333
Class A common stock, par value $.01; 100,000 shares
authorized; 100,000 shares issued and outstanding 1,000
Paid-in capital 6,136,341
Retained earnings 1,145,273
-----------
7,287,947
Less treasury stock, at cost (174,000 common shares) 727,219
------------
6,560,728
------------
$8,274,198
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Page 3f
ACTIVE APPAREL GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended
December 31,
1 9 9 9 1 9 9 8
---------------- ----------------
<S> <C> <C>
Net sales $24,464,139 $15,011,926
Cost of goods sold 14,578,376 9,483,591
------------ -------------
Gross profit 9,885,763 5,528,335
------------- -------------
Operating expenses:
Selling and shipping 5,871,751 3,637,729
General and administrative 2,024,539 1,911,621
Financial expenses 557,627 413,713
-------------- --------------
8,453,917 5,963,063
------------- -------------
Income (loss) before provision
for (recovery of) income taxes 1,431,846 (434,728)
Provision for (recovery of) income taxes 615,694 (194,093)
-------------- --------------
Net income (loss) $ 816,152 $ (240,635)
============= =============
Basic earnings per share $.31 $(.09)
==== =====
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
ACTIVE APPAREL GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Class A
Common stock common stock
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 2,469,375 $5,283 100,000 $1,000
Stock options exercised 24,706 50 - -
Purchase of treasury stock (1,500) - - -
Net loss, year ended December 31, 1998 - - - -
--------------- ---------- ----------- ----------
Balance, December 31, 1998 2,492,581 5,333 100,000 1,000
Net income, year ended December 31, 1999 - - - -
---------------- ---------- ------------ ----------
Balance, December 31, 1999 2,492,581 $5,333 100,000 $1,000
========= ====== ======= ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Page 4f
<TABLE>
<CAPTION>
Paid-in Retained Treasury stock
capital earnings Shares Amount Total
------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
$6,124,891 $ 569,756 172,500 $(725,625) $5,975,305
11,450 - - - 11,500
- - 1,500 (1,594) (1,594)
- (240,635) - - (240,635)
---------------- ----------- ----------- -------------- ------------
6,136,341 329,121 174,000 (727,219) 5,744,576
- 816,152 - - 816,152
---------------- ------------ ------------ --------------- ------------
$6,136,341 $1,145,273 174,000 $(727,219) $6,560,728
========== ========== ======= ========= ==========
</TABLE>
<PAGE>
Page 5f
ACTIVE APPAREL GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended
December 31,
-------------------------------
1 9 9 9 1 9 9 8
-------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 816,152 $ (240,635)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Bad debts 55,000 -
Depreciation 145,619 125,873
Deferred tax benefit (49,269) (18,077)
Changes in assets (increase) decrease:
Refundable income taxes 284,478 (130,978)
Due from factor 338,198 (230,962)
Inventory (2,213,911) 821,315
Prepaid expenses and other current assets (80,018) (3,849)
Security deposits and other assets 70,833 (9,002)
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses and
other current liabilities 855,684 (110,748)
------------ ------------
Net cash provided by operating activities 222,766 202,937
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (205,340) (79,414)
Note receivable, officer 28,800 -
------------- -----------------
Net cash used by investing activities (176,540) (79,414)
------------ -------------
Cash flows from financing activities:
Purchase of treasury stock - (1,594)
Proceeds from stock options exercised - 11,500
------------------ -------------
Net cash provided by financing activities - 9,906
------------------ --------------
Net increase in cash and cash equivalents 46,226 133,429
Cash and cash equivalents, beginning of year 192,870 59,441
------------ -------------
Cash and cash equivalents, end of year $ 239,096 $ 192,870
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 279,804 $ 120,950
Income taxes 433,959 88,584
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Page 6f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. Nature of business:
Active Apparel Group, Inc. (the "Company") is a distributor of licensed
women's and men's activewear, sportswear, and swimwear, throughout the
United States and Canada.
2. Significant accounting policies:
a. Inventory:
Inventory, consisting solely of finished goods, is stated at the lower
of cost (first-in, first-out basis) or market.
b. Property and equipment:
Property and equipment are stated at cost. Depreciation is computed by
the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the terms of the
respective leases or estimated life of the assets, whichever is
shorter. Expenditures for maintenance and repairs are charged to
operations as incurred.
c. Cash and cash equivalents:
The Company maintains its cash and cash equivalents accounts at
various commercial banks. The cash balances are insured by the Federal
Deposit Insurance Corporation (FDIC) up to $100,000, at each bank.
For purposes of the statements of cash flows, the Company considers
all short-term investments with an original maturity of three months
or less to be cash equivalents.
d. Fair value of financial instruments:
i. Cash and cash equivalents:
The carrying amount reflected in the balance sheet for cash and
cash equivalents, none of which are held for trading purposes,
approximates fair value due to the short maturity of these
instruments.
ii. Due from factor and accounts payable:
The carrying amounts of due from factor and accounts payable
approximate its fair values because of the short maturities of
these instruments.
<PAGE>
Page 7f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
2. Significant accounting policies: (Continued)
e. Advertising expense:
The Company expenses advertising costs as they are incurred.
As of December 31, 1999 and 1998, the Company had incurred advertising
and promotional expenses of $794,259 and $657,505, respectively.
f. Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting year. Actual results could differ
from those estimates.
g. Accounting for stock based compensation:
The Company applies APB Opinion 25 to account for employee stock
option plans (note 8). Accordingly, no compensation cost has been
recognized in 1999 and 1998. Had compensation cost been determined on
the basis of FASB Statement 123, net income (loss) and earnings per
share would have been reduced as follows:
1 9 9 9 1 9 9 8
----------- ------------
Net income (loss):
As reported $816,152 $(240,635)
======== =========
Pro forma $758,392 $(297,068)
======== =========
Basic earnings per share:
As reported $.31 $(.09)
==== =====
Pro forma $.29 $(.12)
==== =====
<PAGE>
Page 8f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
2. Significant accounting policies: (Continued)
g. Accounting for stock based compensation: (Continued)
The fair value of compensation was computed using an option-pricing
model which took into account the following factors as of the grant
date:
o the exercise price and expected life of the option
o the current price of the stock and its expected volatility o
expected dividends, if any
o the risk-free interest rate for the expected term of the option
using Treasury Note rates with a remaining term equal to the
expected life of the options
3. Due from factor:
Substantially all of the Company's accounts receivable are assigned
without recourse to a commercial factor. The amount due from the factor
represents net sales assigned in excess of advances received. The amount
due from the factor is net of a provision for future chargebacks of
$62,317 at December 31, 1999. Interest is charged at 1% above prime on
advances. This factoring arrangement is collateralized by the Company's
accounts receivable.
4. Property and equipment:
Furniture and fixtures $178,104
Machinery and equipment 666,122
Leasehold improvements 69,030
---------
913,256
Less accumulated depreciation and amortization 493,302
---------
$419,954
=========
5. Note receivable, officer:
The Company had a promissory note dated December 23, 1996 with the
President and Chief Executive Officer in the amount of $120,000 that was
due July 31, 2000. At December 31, 1999, this note was refinanced at its
outstanding balance of $91,200 with the term extended through July 31,
2009. The unpaid principal bears interest at prime plus 1-1/2%.
<PAGE>
Page 9f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
6. Commitments:
a. License agreements:
Revenues are generated principally from the sale of licensed
merchandise. The Company is the licensee on seven agreements which
provide for certain royalty payments and charges. Pursuant to five of
the agreements (with the same licensor), the Company is required to
pay a royalty of 6% of net sales, on licensed merchandise sold in the
U.S. and Canada, and to spend 2 1/2% of annual net sales on
advertising. The original two agreements with this licensor expired
December 31, 1996. Effective January 1, 1997, the agreements were
amended to reflect a new expiration date of December 31, 2002 with two
five year renewal options, subject to minimum sales requirements,
available to the Company. Effective January 1, 1999, the Company
entered into two new agreements with this licensor covering the period
January 1, 1999 to December 31, 2001 with two five-year renewal
options, subject to minimum sales requirements, available to the
Company. The agreements provide for minimum guaranteed payments
annually. Future minimum guaranteed payments are approximately as
follows:
<TABLE>
<CAPTION>
United States Canada
Royalty Advertising Royalty Advertising
Twelve months ending
<S> <C> <C> <C> <C> <C>
December 31, 2000 $ 980,000 $408,000 $228,000 $ 95,000
2001 1,149,000 479,000 291,000 121,000
2002 779,000 325,000 154,000 64,000
</TABLE>
The amounts for Canada are presented in U.S. dollars assuming an
exchange rate of $.69.
The Company is required to maintain a standby letter of credit equal
to the annual minimum royalties due per the licensing agreements or a
cash deposit in varying amounts. At December 31, 1999, the Company
maintained deposits of $135,000 for the US agreements and CN$40,000
for the Canadian agreements.
The sixth and seventh license agreements expired on March 31, 1999 and
June 30, 1999, respectively. The Company did not renew these
agreements.
Royalty expense for the years ended December 31, 1999 and 1998 was
approximately $1,309,000 and $809,000, respectively.
<PAGE>
Page 10f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
6. Commitments: (Continued)
b. Lease commitments:
The Company has three leases for office and showroom space, one of
which will expire April 30, 2000 and the other two will expire on
April 30, 2005.
At December 31, 1999, future minimum rental payments required under
the noncancelable leases are approximately as follows:
Twelve months ending December 31, 2000 $215,000
2001 225,000
2002 229,000
2003 243,000
2004 243,000
Thereafter 81,000
Rent expense for the years ended December 31, 1999 and 1998 was
approximately $206,000 and $197,000, respectively.
c. Employment agreements:
i. The Company has an employment agreement with its President and
Chief Executive Officer at an annual base salary of $265,000
through the term (as defined) of the agreement. The initial term
of the agreement expires on July 31, 2000 but continues
thereafter for additional one-year periods unless either the
President and Chief Executive Officer of the Company or the Board
of Directors gives the other ninety days prior written notice of
nonrenewal. At the discretion of the Board of Directors, the
Company may pay the President and Chief Executive Officer a bonus
on or before December 31, of any year during the term.
Effective January 1, 2000, the Board of Directors increased the
annual base salary of the President and Chief Executive Officer
to $320,000.
The agreement also includes a noncompete clause for a period of
one year following its expiration or termination.
<PAGE>
Page 11f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
6. Commitments: (Continued)
c. Employment agreements: (Continued)
ii. The Company has an employment agreement with a Director of the
Company, whereby the Company has agreed to employ her as the
Executive Vice-President at an annual compensation of $140,000.
The agreement with the Executive Vice-President has restrictive
covenants similar to those of the President and Chief Executive
Officer.
7. Class A common stock:
The holder of the Class A common stock is entitled to five votes on all
matters upon which each holder of common stock is entitled to vote. After
the effective date of the initial public offering, the Board of Directors
issued 100,000 shares of the Class A common stock exclusively to the
President and Chief Executive Officer in order to permit him to maintain
approximately the same voting power after the initial public offering as
held prior to the offering. In exchange for the shares of Class A common
stock issued to him, he surrendered 112,500 shares of common stock.
8. Stock options:
The Company has three stock option plans; the stock option plan, the 1993
stock option plan and the 1995 non-employee director stock option plan.
Pursuant to the stock option plan, grants were awarded in 1993 to four
individuals for services performed regarding the private offering of
preferred stock. These options are exercisable at $.375 for a term of five
years through September 30, 1998. All unexercised options were cancelled
in 1998. Under the 1993 stock option plan, a maximum of 443,900 shares may
be granted by the Company.
The option price of shares designated as nonqualified shall be determined
by the Board of Directors each year for the following year at 85% of fair
market value and in the case of incentive stock options will be no less
than the fair market value of the shares on the date of the grant.
<PAGE>
Page 12f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
8. Stock options (Continued):
The 1995 non-employee director stock option plan provides for automatic
grants of options to purchase 3,000 shares and thereafter yearly grants to
purchase 3,000 shares of common stock to each active director serving on
the Board at the time of the grant who is not an officer or employee of
the Company. The Director Plan provides additional grants of options to
non-employee directors of 100 shares to the Chairman of a committee and
200 shares to the Chairman and Secretary of the Board of Directors.
Effective December 31, 1999, the Company granted 93,300 options pursuant
to the 1993 stock option plan and the 1995 non-employee director stock
plan to certain key employees and directors. The options were granted in
exchange for the employees and directors cancellation of the same number
of previously granted options which had a higher exercise price. The
options granted have an effective exercise price of $2.23.
The exercise price for options granted is the fair market value of the
shares of common stock on the date of the grant. The term of each option
is seven years from the date of the grant.
<TABLE>
<CAPTION>
S H A R E S
1993 1995
Stock stock non-employee
option option director stock Option exercise
1 9 9 9 plan plan option plan Total prices
------------------- -------- ---------- ---------------- --------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1, - 195,979 35,700 231,679 $ .85 - $14.75
Granted - 176,000 46,800 222,800 $2.23 - $ 9.38
Cancelled - 86,300 27,800 114,100 $2.09 - $14.75
Exercised - - - - -
------------------ -----------
Outstanding at December 31, - 285,679 54,700 340,379 $ .85 - $ 9.38
====== ======= ====== =======
Exercisable at December 31, - 166,976 24,566 191,542 $ .85 - $ 6.25
====== ======= ====== =======
</TABLE>
<PAGE>
Page 13f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
8. Stock options: (Continued)
<TABLE>
<CAPTION>
S H A R E S
------------------------------------------------------------------------------
1993 1995
Stock stock non-employee
option option director stock Option exercise
1 9 9 8 plan plan option plan Total prices
------------------- -------- ---------- --------------- --------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
January 1 48,700 243,187 27,800 319,687 $ .38 - $14.75
Granted - 16,000 7,900 23,900 $ 2.09 - $ 3.59
Cancelled 28,700 58,502 - 87,202 $ .38 - $ 5.38
Exercised 20,000 4,706 - 24,706 $ .38 - $ .85
------ -------- ---------- --------
Outstanding at
December 31 - 195,979 35,700 231,679 $ .85 - $14.75
====== ======= ====== =======
Exercisable at
December 31 - 165,647 16,567 182,214 $ .85 - $14.75
====== ======= ====== =======
</TABLE>
9. Income taxes:
a. For the year ended December 31, 1999 and 1998, the Company had a
provision for (recovery of) income taxes consisting of the following:
<TABLE>
<CAPTION>
1 9 9 9 1 9 9 8
------------ -----------
Current tax provision (recovery):
<S> <C> <C>
Federal $525,785 $(123,815)
State and local 139,178 (53,891)
Foreign - 1,690
--------------- ------------
664,963 (176,016)
Deferred tax benefit:
Federal (38,957) (13,015)
State and local (10,312) (5,062)
---------- ------------
Income tax provision (recovery) $615,694 $(194,093)
======== =========
</TABLE>
The deferred tax benefit primarily consists of the utilization of net
operating loss carryforwards.
b. The deferred tax asset primarily consists of the temporary difference
between the book and tax basis of inventory.
<PAGE>
Page 14f
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
10. Economic dependency:
For the year ended December 31, 1999, three customers accounted for
approximately 39% of sales. For the year ended December 31, 1998, four
customers accounted for approximately 48% of sales.
11. Geographic data:
Geographic information for net sales is as follows:
<TABLE>
<CAPTION>
1 9 9 9 1 9 9 8
---------------- ----------------
<S> <C> <C>
U.S. $22,331,244 $13,680,460
Canada 2,075,649 1,234,441
Other foreign countries 57,246 97,025
-------------- --------------
$24,464,139 $15,011,926
=========== ===========
</TABLE>
12. Earnings per share:
Basic earnings per share amounts are computed based on the weighted
average number of shares actually outstanding during the year.
Diluted earnings per share is not presented for December 31, 1999 because
it is not materially dilutive. Diluted earnings per share is not presented
for December 31, 1998 because it is anti-dilutive.
<TABLE>
<CAPTION>
1 9 9 9 1 9 9 8
---------- -------------
<S> <C> <C>
Basic earnings per share:
Net income (loss) available for common stock $816,152 $ (240,635)
======== ==========
Weighted average common stock outstanding 2,592,581 2,592,155
========= ==========
Basic earnings per share $.31 $(.09)
==== =====
</TABLE>
13. Financial expenses:
Included in financial expenses is interest expense of $279,804 and
$120,950 for the years ended December 31, 1999 and 1998, respectively.
Exhibit 10.46
1350 BROADWAY ASSOCIATES
--------------------------------------------------------
Landlord,
to
ACTIVE APPAREL GROUP, INC.
--------------------------------------------------------
Tenant.
-------------------------------------
LEASE
-------------------------------------
From November 1, 1999
To April 30, 2005
Annual Rent $53,750.00 p.a. $4,479.17 p.m. 11/1/99-6/30/02
$58,050.00 p.a. $4,837.50 p.m. 7/1/02-4/30/05
Elec.: $ 6,837.00 p.a. $ 569.75 p.m.
C.W.: $ 1,612.50 p.a. $ 134.38 p.m.
Premises: Rooms 2310/11
1350 Broadway
<PAGE>
Agreement of Lease, made as of this 19th day of July,
1999, between 1350 BROADWAY ASSOCIATES, a partnership having offices in care of
Helmsley-Spear, Inc., 60 East 42nd Street party of the first part, hereinafter
referred to as "Landlord" or "Lessor", and ACTIVE APPAREL GROUP, INC. a domestic
corporation having offices at New York City, party of the second part,
hereinafter referred to as "Tenant" or "Lessee".
Witnesseth: Landlord hereby leases to Tenant and Tenant
hereby hires from Landlord the space on the 23rd floor, as more particularly
shown on the plan annexed hereto and made a part hereof. Room 2310/11 in the
building known as 1350 Broadway in the Borough of Manhattan, City of New York,
for the term of 5 Yrs. 6 Mos. (or until such term shall sooner cease and expire
as hereinafter provided) to commence on the 1st day of Nov. 1999 and to end on
the 30th day of April, 2005, both dates inclusive, at an annual rent of
* See Article SIXTY-FOURTH
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 of $ * in advance on the first day of
each month during said term, at the office of Landlord or such other place as
Landlord may designate, without any set off or deduction whatsoever.
The parties hereto, for themselves, their heirs,
distributees, executors, administrators, legal representatives, successors and
assigns, hereby covenant and agree as follows:
FIRST:-Tenant shall pay the rent and additional rent as
above and as hereinafter provided.
SECOND:-(a) Tenant shall pay to Landlord, as additional
rent hereunder, in advance, on the first day of each and every month during the
term hereof, all sums expended by Landlord and/or which become due to Landlord
under this lease and under any collateral agreements relating to the premises.
Tenant's use and occupancy thereof, the supplying by Landlord to Tenant of any
services in connection therewith, together with any fines or penalties imposed
or assessed by any governmental authority by reason of failure to comply with
its requirements.
(b) 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 paragraph of this
lease, Landlord may immediately or at any time thereafter and without notice
perform the same for the account of Tenant, and if Landlord makes any
expenditures or incurs any obligations for the payment of money in connection
therewith including, but not limited to, attorneys' fees in instituting,
prosecuting or defending any action or
-2-
<PAGE>
proceeding, such sums paid or obligations incurred with interest and costs shall
be deemed to be additional rent hereunder.
(c) The receipt by Landlord at any time of any
installment of the regular stipulated rent hereunder or of any additional rent
shall not be deemed to be a waiver of any other additional rent then due. For
the non-payment of any additional rent, Landlord shall have all the rights and
remedies which it would have in the case of a default in the payment of the
regular stipulated rent hereunder or any installment thereof.
THIRD:-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 Landlord pursuant to the terms of another lease with Landlord or with
Landlord's predecessor in interest, Landlord may, at Landlord's option and
without notice to Tenant, add the amount of such arrearages to any monthly
installment of rent payable hereunder, and the same shall be payable to Landlord
as additional rent.
FOURTH:-Tenant shall use and occupy the demised premises
for office and showroom for display and sale, at wholesale and not retail, of
wearing apparel and for no other purpose. Tenant shall not suffer or permit the
demised premises or any part thereof to be used by others for any purpose
whatsoever, without the prior written consent of Landlord in each instance.
FIFTH:-Tenant at its sole expense shall comply with all
laws, orders and regulations of Federal, State, County and Municipal
Authorities, and with any direction of any public officer or officers, pursuant
to law, which shall impose any violation, order or duty upon Landlord or Tenant
with respect to demised premises, or the use or occupation thereof. Tenant shall
not do, or permit to be done, any act or thing upon said premises which shall or
might subject Landlord to any liability or responsibility for injury to any
person or persons or to property by reason of any business or operation being
carried on upon said premises or for any other reason.
SIXTH:-Tenant will not at any time use or occupy the
demised premises in violation of the certificate of occupancy or certificate of
compliance issued for the building of which the demised premises form a part,
and in the event that any department of the City or State of New York shall
hereafter at any time contend and/or declare by notice, violation, order or in
any other manner whatsoever that the premises hereby demised are used for a
purpose which is a violation of such certificate of occupancy, Tenant shall,
upon five (5) days' written notice from Landlord, immediately discontinue said
use of such premises. Failure by Tenant to discontinue such use after such
notice shall be considered a default in the fulfillment of a covenant of this
lease, and Landlord shall have the right to terminate this lease immediately,
and in addition thereto shall have the right to exercise any and all rights and
privileges and remedies given to Landlord by and pursuant to the provisions of
Paragraph 40 hereof. The statement in this lease of
-3-
<PAGE>
the nature of the business to be conducted by Tenant in demised premises shall
not be deemed or construed to constitute a representation or guaranty by
Landlord that such business may continue to be conducted in the premises for the
entire period of the lease or is lawful or permissible under the certificate of
occupancy in effect for the building of which the demised premises form a part,
or otherwise permitted by law. If alterations or additions, including but not
limited to a sprinkler system, are needed to permit lawful conduct of Tenant's
business or to comply with the certificate of occupancy, the same shall be made
by and at the sale expense of Tenant.
SEVENTH:-Tenant shall not suffer any act to be done or
any condition to exist on the demised premises or any part thereof or any
article to brought thereon, which may be dangerous, unless safeguarded as
required by law, or by any insurance carrier having any interest in such conduct
or condition or which may, in law, constitute a nuisance, public or private, and
as not to make void or voidable any insurance applicable to the building, under
penalty of damages and forfeiture.
EIGHT:-Tenant shall not at any time allow smoking on any
part of the premises where stock is stored. Tenant shall store all silk and
other textiles in steel bins or shelving, the bottoms of which shall be at least
six inches above the floor, and the tops of which shall extend at least three
inches and shall have drip points so as to shed water from the goods. No
shelving bins shall be installed without Landlord's prior written consent.
Tenant shall make all floors water-tight by painting or covering them with
linoleum or other water-tight floor covering. Where cleaning fluid is used, it
shall be non-inflammable. Tenant shall use no cleaning fluid not approved in
writing by Landlord. Tenant will not permit the accumulation of waste or refuse
matter on the premises.
NINTH:-Tenant will conduct its business in such a manner
as to enable Landlord or other tenants in the building to obtain the lowest
possible insurance rate upon the entire building in which the demised premises
are located, and will, at its sole expense, comply with all rules, orders,
regulations or requirements of all public liability, fire and insurance policies
in force at any time with respect to the demised premises, as well as all rules,
orders, regulations or requirements of the New York Board of Fire Underwriters
or any other similar body, and shall not do or permit anything to be done in or
upon said premises or bring or keep anything therein, except as now or hereafter
permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance
Rating Organization, or other authority having jurisdiction and then only in
such quantity and manner of storage as not to increase the rate for fire
insurance applicable to the building, or use the premises in a manner which
shall increase the rate of fire insurance on the building of which demised
premises form a part, or on property located therein, over that in effect prior
to this lease. If by reason of failure of Tenant to comply with the provisions
of this paragraph including, but not limited to, the mere use to which Tenant
puts the premises, the fire insurance rate shall at the beginning of this lease
or at any time thereafter be higher than it otherwise would be, then Tenant
shall reimburse Landlord, as additional rent hereunder, for that part of all
fire insurance premiums thereafter paid by Landlord, which shall have been
charged because of such failure or use by Tenant, and shall make such
reimbursement upon the first day
-4-
<PAGE>
of the month following such outlay by Landlord. In any action or proceeding
wherein Landlord and Tenant are parties, a schedule or "make up" of rate for the
building or demised premises issued by the New York Fire Insurance Exchange, or
other body making fire insurance rates for said premises, shall be conclusive
evidence of the facts therein stated and of the several items and changes in the
fire insurance rate then applicable to said premises. Tenant shall not bring or
permit to be brought or kept in or on the demised premises, any inflammable,
combustible or explosive fluid, chemical, substance or material other than silk
or other textiles, or cause or permit any odors of cooking or other processes,
or any unusual or other objectionable odors to permeate from the demised
premises. That the premises are being used for the purpose set forth herein
shall not relieve Tenant from the foregoing duties, obligation and expenses.
TENTH:-(a) Tenant shall not assign, mortgage or encumber
this agreement nor underlet the demised premises or any part thereof or permit
the demised premises or any part thereof to be occupied by anybody other than
Tenant, without the prior written consent of Landlord in each instance. If this
lease be assigned, or if the demised premises or any part thereof be underlet or
occupied by anybody other than Tenant, Landlord may, after default by Tenant,
collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, but no 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 Landlord to an assignment or
underletting shall not in any wise be construed to relieve Tenant from obtaining
the express consent in writing of Landlord to any further assignment or
underletting.
(b) If the demised premises shall be underlet in whole
or in part by Tenant or its heirs, executors, administrators, legal
representatives, successors or assigns, such party shall, within three (3) days
of such underletting, furnish Landlord with a duplicate original of such
underlease and shall, on demand of Landlord, supply Landlord within three (3)
days of such demand, a written list of all such under-tenants, the terms,
including expiration dates of their under-tenancies, the rents payable
thereunder, and any additional information requested by Landlord. This provision
or compliance therewith, however, shall in no event be construed to be a consent
to any underletting or a waiver of the covenant against underletting contained
herein. Non-compliance by Tenant with the provisions of this paragraph shall be
deemed to be a breach of this lease.
(c) Tenant assumes and shall be responsible for and
liable to Landlord, for all acts and omissions on the part of any present or
future under-tenant, their agents, employees, servants or licensees, and any
breach or violation of any terms, covenants, agreements, provisions, conditions
and limitations of this lease, whether by act or omission, by any under-tenant
shall constitute a breach or violation of this lease by Tenant.
-5-
<PAGE>
ELEVENTH:-Throughout the term of this lease, Tenant will take good
care of the demised premises and appurtenances and suffer no waste, damage,
disfigurement or injury thereto or any part thereof.
TWELFTH:-(a) Tenant shall make no alterations, decorations,
installations, additions or improvements in or to the demised premises,
including, but not limited to, an air-conditioning or cooling system, unit or
part thereof or other apparatus of like or other nature, nor bring materials in
connection therewith on the demised premises, without Landlord's prior written
consent, and then only by contractors or mechanics approved by Landlord, and
subject to plans and specifications approved by Landlord. All such work,
alterations, decorations, installations, additions or improvements shall be done
at Tenant's sole expense and at such times and in such manner as Landlord may
from time to time designate. All alterations, decorations, installations,
additions or improvements upon demised premises, made by either party, including
all paneling, decorations, partitions, railings, mezzanine floors, galleries,
steam, water, and air conditioning systems and units, shelving, electric
fixtures and the like, shall, unless Landlord elects otherwise (which election
shall be made by giving a notice pursuant to the provisions hereof not less than
thirty (30) days prior to the expiration or other termination of this lease or
any renewal or extension thereof) become the property of Landlord, and shall
remain upon, and be surrendered with, said premises, as a part thereof, at the
end of the term or renewal term, as the case may be. In the event Landlord shall
elect otherwise, then such alterations, installations, additions or improvements
made by Tenant upon the demised premises as the Landlord shall select, shall be
removed by Tenant at Tenant's sole cost and expense. All alterations,
decorations, installations, additions or improvements installed by Tenant may be
used by Tenant without additional charge for such use, and without any right in
the Landlord to remove the same in the absence of any default under this lease
during the term hereof.
(b) Tenant, at its own expense, will promptly repair all damage and
injury resulting from such removal and restore the space theretofore occupied by
such fixtures and installations to good order and condition and to character and
appearance equal to that of the area adjacent thereto, in default of any of
which Landlord may at its option cause the same to be done at Tenant's expense.
THIRTEENTH:-Tenant shall take good care of the demised premises and
the fixtures and appurtenances therein, and at its sole cost and expense make
all repairs thereto as and when needed to preserve them in good working order
and condition. All damage or injury to the demised premises and to its fixtures,
appurtenances and equipment or to the building of which the same form a part or
to its fixtures, appurtenances and equipment caused by Tenant's moving property
in or out of the building or by installation or removal of furniture, fixtures
or other property, or resulting from fire, explosion, air-conditioning unit or
system, short circuits, flow or leakage of water, steam, illuminating gas, sewer
gas, sewerage or odors or by frost or by bursting or leaking of pipes or
plumbing works or gas, or from any other cause of any other kind or nature
whatsoever due to carelessness, omission, neglect, improper conduct or other
cause of Tenant, its servants, employees, agents, visitors or licensees shall be
repaired, restored or replaced promptly
-6-
<PAGE>
by Tenant at its sole cost and expense to the satisfaction of Landlord. All
aforesaid repairs, restorations and replacements shall be in quality and class
equal to the original work or installations. If Tenant fails to make such
repairs, restorations or replacements within a reasonable time same may be made
by Landlord at expense of Tenant and collectible as additional rent.
FOURTEENTH:-(a) Except where otherwise provided in this lease, there
shall be no allowance to Tenant for diminution of rental value and no liability
on the part of Landlord by reason of inconvenience, annoyance or injury to
business arising from Landlord, Tenant or others making any repairs,
alterations, additions or improvements in or to any portion of the building or
demised premises, or in or to fixtures, appurtenances, or equipment thereof, and
no liability upon Landlord for failure of Landlord or others to make any
repairs, alterations or improvements in or to any portion of the building or of
demised premises, or in or to the fixtures, appurtenances or equipment thereof.
(b) Landlord reserves the right to stop service of the electric,
water, sprinkler, steam, air conditioning, elevator, heating and plumbing
systems, when necessary, by reason of accident, or emergency, or for repairs,
alterations, replacements or improvements, in the judgment of Landlord desirable
or necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed.
FIFTEENTH:-Tenant agrees that whenever any alterations, additions,
improvements, changes or repairs to the said premises are consented to by
Landlord, or in the moving of merchandise, fixtures or equipment into the said
building, or moving the same therefrom, only such labor under agreement with the
Building Trades Employers' Association of New York City, or which shall not
cause strikes or concerted labor action by other employees of the building, and
which have the same or similar labor union affiliations as those employed by
Landlord or Landlord's contractors, shall be employed.
SIXTEENTH:-(a) Any mechanic's lien filed against the demised
premises, or the building of which the same form a part, for work claimed to
have been done for, or materials claimed to have been furnished to Tenant, shall
be discharged by Tenant within ten (10) days thereafter, by payment in full or
at Tenant's expense, by filing the bond required by law. If Tenant fails to so
pay or file any bond, Landlord may pay the amount of said lien or discharge the
same by deposit, or otherwise, billing Tenant for all expenses in connection
therewith as additional rent.
(b) Nothing in this lease contained shall be deemed or construed in
any way as constituting the consent or request of Landlord, express or implied
by inference or otherwise, to any contractor, sub-contractor, laborer or
materialman for the performance of any labor or the furnishing of any materials
for any specific improvement, alteration to, or repair of the demised premises,
or any part thereof, or for the demolition or replacement of the demised
premises or any part thereof.
-7-
<PAGE>
(c) Tenant agrees to obtain and deliver to Landlord, written and
unconditional waivers of liens (and agreement that its filed plans may be
replaced), for all plans, specifications and drawings for work or materials to
be furnished to Tenant at the premises, signed by all architects, engineers and
designers to become involved in such work for Tenant; with respect to
contractors, subcontractors, materialmen and laborers, and all work or materials
to be furnished to Tenant at the premises. Tenant agrees to obtain and deliver
to Landlord written and unconditional waiver of mechanics liens upon the
premises or the building after payments to the contractors, and subject to any
applicable provisions of the Lien Law.
SEVENTEENTH:-Tenant will not, without Landlord's written consent,
place, affix or paint any signs, awnings, projections or advertising material of
any kind upon the exterior of the premises or of the building, not upon the
windows, nor in any location that may be visible from any of the lobbies or
passageways. If Tenant shall cause or permit any sign or other object, similar
or dissimilar, to be placed on or affixed to any part of the building not inside
the space specifically demised hereunder, Landlord shall have the right, without
notice or liability to Tenant, to remove and dispose of the same and to make any
repairs necessitated by such removal, all at Tenant's sole expense and risk.
Landlord's expenses in so doing shall be deemed additional rent hereunder and
collectible as such.
EIGHTEENTH:-(a) Tenant will not cause or permit any connection to be
made to the wiring on the electrical panel boards of the building without the
prior written consent and supervision of Landlord.
(b) Tenant agrees that it will not drive nails in, drill in,
disfigure or deface any part of the building nor suffer the same to be done, nor
cause or permit the floors, walls, doors or ceilings of the demised premises to
be drilled, hammered, pounded or otherwise dealt with in a noisy or disturbing
manner at any time during customary business hours (i.e., between 9:00 A.M. and
5:00 P.M.) whether or not such activities are incidental to or part of work to
which Landlord has consented.
(c) Tenant shall not install any pressing equipment, whether
connected to Tenant's gas- fired boiler or to the building steam system, without
first having plans and specifications approved by Landlord.
The vacuum used by pressing machines for the drying of garments
shall be created by an electrically driven vacuum pump. Tenant shall not use any
vacuum created by the use of steam from a gas-fired boiler or from the building
steam system.
(d) Tenant shall not permit any connection to be made at the demised
premises with any high pressure steam lines, electric current lines or water
lines without Landlord's prior written consent.
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(e) Tenant shall not make any electrical or plumbing installation
without Landlord's prior written consent. All water lines must be installed in
red brass.
(f) Window air-conditioning units shall in no event be installed
without Landlords' prior written approval or be mounted so as to extend outward
beyond the line of the windowframe.
(g) Tenant shall install no linoleum, rubber, mastic or vinyl tile
floor covering, unless it is laid over a layer of felt, double cemented in the
manner approved by Landlord.
(h) Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which such floor was
designed to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes which must be placed so as to
distribute the weight. Business machines and mechanical equipment shall be
placed and maintained by Tenant at Tenant's expense in settings sufficient in
Landlord's judgment to absorb and prevent vibration, noise and annoyance. Tenant
agrees that upon the written request of Landlord, Tenant will, within fifteen
(15) days of the mailing of such request, provide rubber or other approved
settings for absorbing, preventing and decreasing noise and/or vibration from
any or all machines or machinery, such insulation or other devices for the
prevention, decrease or elimination of noise satisfactory to Landlord shall be
made in such manner and of such material as Landlord may direct. In the event
that Tenant fails to comply with the aforesaid request within the fifteen (15)
days aforementioned, Landlord may, at its option, by notice in writing to
Tenant, cause the term of this lease to expire. Landlord in such event shall
have the right to re-enter the premises by summary proceedings or otherwise
without liability. Landlord shall not give less than thirty (30) days' notice of
its election to terminate the lease as above provided. Landlord shall have the
right to enter the demised premises with workmen and materials and to insulate
the machinery as above provided, collecting from Tenant the cost of such work as
additional rent in the event that Tenant fails to comply with the written
request aforementioned after the expiration of fifteen (15) days from the
receipt thereof.
(i) Tenant shall not move any safe, heavy machinery, heavy
equipment, freight, bulky matter, or fixtures into or out of the building
without Landlord's prior written consent and the filing with Landlord of a
Rigger's Liability Insurance Certificate satisfactory to Landlord. If such safe,
machinery, equipment, freight, bulky matter or fixtures require special
handling, Tenant agrees to employ only persons holding a Master Rigger's License
to do said work, and that all work in connection therewith shall comply with the
Administrative Code of the City of New York.
(j) If the demised premises be or become infested with vermin,
Tenant shall, at Tenant's expense, cause the same to be exterminated from time
to time to the satisfaction of Landlord, and shall employ such exterminators and
such exterminating company or companies as shall be approved by Landlord.
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(k) The water and wash closets and other plumbing fixtures shall not
be used for any purposes other than those for which they were designed or
constructed, and no sweepings, rubbish, rags, acids or other substances shall be
deposited therein.
(l) Tenant agrees to provide proper receptacles as called for by the
Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization
or of the authority having jurisdiction. Tenant hereby agrees to cause its
rubbish or waste to be disposed of at its own cost and expense, subject to all
the rules and regulations that from time to time may be made in connection
therewith by Landlord, including a regulation that Tenant shall use a single
rubbish or waste remover designated by Landlord for the removal of the rubbish
or waste of the tenants in the building. Tenant further agrees that it shall not
at any time store any of its rubbish or waste in the lobbies, foyers,
passage-ways or other spaces adjacent to the premises herein demised, nor shall
Tenant place the rubbish (which is to be taken by the waste remover) in the said
areas prior to 5:00 P.M.
(m) If Tenant is a lessee of any store in said building, the said
Tenant hereby agrees to keep the sidewalk, entrance and passage-ways
unencumbered and unobstructed, and agrees, further, to remove all ice and show
from the sidewalks immediately in front of the demised premises.
(n) Tenant will not suffer, permit or allow unusual or objectionable
odors to be produced upon or permeate from the demised premises.
NINETEENTH:-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 Labor Law or of the rules of the Board of
Standards and Appeals, or of any other board or body having or asserting
jurisdiction.
TWENTIETH:-Tenant shall give prompt notice to Landlord of any
accidents to or defects in the pipes and apparatus in the building or of any
fire that may occur.
TWENTY-FIRST:-Tenant shall permit Landlord to erect, use and
maintain, pipes and conduits in and through the demised premises. Landlord or
Landlord's agents shall have the right to enter the demised premises at all
times to examine the same, and to show them to prospective purchasers or lessees
of the building, and to make such decorations, repairs, alterations,
improvements or additions as Landlord may deem necessary or desirable, and
Landlord and its representatives shall be allowed to take and store all material
into and upon said premises that may be required therefor without the same
constituting an eviction of Tenant in whole or in part and the rent reserved
shall in no wise abate while said decorations, repairs, alterations,
improvements, or additions are being made, by reason of loss or interruption of
business of Tenant, or otherwise. During the six months prior to the expiration
of the term of this lease, or any renewal term, Landlord may exhibit the
premises to prospective tenants or purchasers, and place upon said premises, or
the exterior thereof, the usual notice "To Let" or "For Sale", which
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notices Tenant shall permit to remain thereon without molestation. If, during
the last month of the term, Tenant shall have removed all or substantially all
of Tenant's property therefrom, Landlord may immediately enter and alter,
renovate and redecorate the demised premises, without elimination or abatement
of rent, or incurring liability to Tenant for any compensation, and such acts
shall have no effect upon this lease. If Tenant shall not be personally present
to open and permit an entry into said premises, at any time, when for any reason
an entry therein shall be necessary or permissible, Landlord or Landlord's
agents may enter the same by a master key, or may forcibly enter the same,
without rendering Landlord or such agents liable therefor (if during such entry
Landlord or Landlord's agents shall accord reasonable care to Tenant's
property), and without in any manner affecting the obligations and covenants of
this lease. Nothing herein contained, however, shall be deemed or construed to
impose upon Landlord any obligation, responsibility or liability whatsoever, for
the care, supervision or repair, of the building or any part thereof, other than
as herein provided. Landlord shall also have the right at any time without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement and/or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets, or other public parts of the building and to change the name, number or
designation by which the building is commonly known.
TWENTY-SECOND:-Tenant agrees that Landlord may furnish electricity
to Tenant on a "submetering" basis or on a "rent inclusion" basis". Electricity
and electric service, as used herein, shall mean any element affecting the
generation, transmission, and/or distribution of electricity, including but not
limited to services which facilitate the distribution of service.
(a) Submetering: If and so long as Landlord provides electricity to
the demised premises on a submetering basis, Tenant covenants and agrees to
purchase the same from Landlord or Landlord's designated agent at charges, terms
and rates set, from time to time, during the term of this lease by Landlord but
not more than those specified in the service classification in effect on January
1, 1970 pursuant to which Landlord then purchased electric current from the
public utility corporation serving the part of the city where the building is
located; provided however, said charges shall e increased in the same percentage
as any percentage increase in the billing to Landlord for electricity for the
entire building, by reason of increase in Landlord's electric rates or service
classifications, subsequent to January 1, 1970, and so as to reflect any
increase in Landlord's electric charges, including changes in market prices for
electricity from utilities and/or other providers, in fuel adjustments, or by
taxes or charges of any kind imposed on Landlord's electricity purchases or
redistribution, or for any other such reason, subsequent to said date. Any such
percentage increase in Landlord's billing for electricity due to changes in
rates, service classifications, or market prices, shall be computed by the
application of the average consumption (energy and demand) of electricity for
the entire building for the twelve (12) full months immediately prior to the
rate and/or service change, or any changed methods of or rules on billing for
same, applied on a consistent basis to the new rate and/or service
classification or market price, and to the service classification and rate in
effect on January 1, 1970. If the average consumption of electricity for the
entire building for said prior twelve (12) months
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cannot reasonably be applied and used with respect to changed methods of or
rules on billing, then the percentage shall be computed by the use of the
average consumption (energy and demand) for the entire building for the first
three (3) months after such change, projected to a full twelve (12) months, so
as to reflect the different seasons; and that same consumption, so projected
shall be applied to the service classification and rate in effect on January 1,
1970. Where more than one meter measures the service of Tenant in the building,
the service rendered through each meter may be computed and billed separately in
accordance with the rates herein specified. Bills therefore shall be rendered at
such times as Landlord may elect and the amount, as computed from a meter, shall
be deemed to be, and be paid as, additional rent. In the event that such bills
are not paid within five (5) days after the same are rendered, Landlord may,
without further notice, discontinue the service of electric current to the
demised premises without releasing Tenant from any liability under this lease
and without Landlord or Landlord's agent incurring any liability for any damage
or loss sustained by lessee by such discontinuance of service. If any tax is
imposed upon Landlord's receipt from the sale, resale or redistribution of
electricity or gas or telephone service to Tenant by any Federal, State, or
Municipal authority, Tenant covenants and agrees that where permitted by law,
Tenant's pro-rata share of such taxes shall be passed on to and included in the
bill of, and paid by, Tenant to Landlord.
(b) Rent Inclusion: If and so long as Landlord provides electricity
to the demised premises on a rent inclusion basis, Tenant agrees that the fixed
annual rent shall be increased by the amount of the Electricity Rent Inclusion
Factor ("ERIF"), as hereinafter defined. Tenant acknowledges and agrees (i) that
the fixed annual rent hereinabove set forth in this lease does not yet, but is
to include an ERIF of $3.18 per rentable square foot to compensate Landlord for
electrical wiring and other installations necessary for, and for its obtaining
and making available to Tenant the redistribution of electric current as an
additional service; and (ii) that said ERIF, which shall be subject to periodic
adjustments as hereinafter provided, has been partially based upon an estimate
of the Tenant's connected electrical load, in whatever manner delivered to
Tenant, which shall be deemed to be the demand (KW), and hours of use thereof,
which shall be deemed to be the energy (KWH), for ordinary lighting and light
office equipment and the operation of the usual small business machines,
including Xerox or other copying machines (such lighting and equipment are
hereinafter called "Ordinary Equipment") during ordinary business hours
("ordinary business hours" shall be deemed to mean 50 hours per week), with
Landlord providing an average connected load of 4 1/2 watts of electricity for
all purposes per rentable square foot. Any installation and use of equipment
other than Ordinary Equipment and/or any connected load and/or energy usage by
Tenant in excess of the foregoing shall result in adjustment of the ERIF as
hereinafter provided. For purposes of this lease the rentable square foot area
of the presently demised premises shall be deemed to be 2,150 square feet
If the cost to Landlord of electricity shall have been, or shall be,
increased or decreased subsequent to May 1, 1996 (whether such change occurs
prior to or during the term of this Lease), by change in Landlord's electric
rates or service classifications, or electricity charges, including changes in
market prices, or by any increase, subsequent to the last such electric rate or
service classification change or market price change, in fuel adjustments or
charges of any kind,
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or by taxes, imposed on Landlord's electricity purchases or on Landlord's
electricity redistribution, or for any other such reason, then the aforesaid
ERIF portion of the fixed annual rent shall be changed in the same percentage as
any such change in cost due to changes in electric rates, service
classifications or market prices, and, also Tenant's payment obligation, for
electricity redistribution, shall change from time to time so as to reflect any
such increase in fuel adjustments or charges, and such taxes. Any such
percentage change in Landlord's cost due to change in Landlord's electric rates
or service classifications or market prices, shall be computed on the basis of
the average consumption of electricity for the building for the twelve full
months immediately prior to the rate change or other such changes in cost,
energy and demand, and any changed methods of or rules on billing for same,
applied on a consistent basis to the new electric rate or service classification
or market price and to the immediately prior existing electric rate or service
classification or market price. If the average consumption (energy and demand)
for the entire building for said prior (12) months cannot reasonably be applied
and used with respect to changed methods of or rules on billing, then the
percentage increase shall be computed by the use of the average consumption
(energy and demand) for the entire building for the first three (3) months after
such change, projected to a full twelve (12) months, so as to reflect the
different seasons; and the same consumption, so projected, shall be applied to
the rate and/or service classification or market price which existed immediately
prior to the change. The parties agree that a reputable, independent electrical
consultant firm, selected by Landlord, ("Landlord's electrical consultant"),
shall determine the percentage change for the changes in ERIF due to Landlord's
changed costs, and that the Landlord's electrical consultant may from time to
time make surveys in the demised premises of the electrical equipment and
fixtures and uses of current. (i) If such survey shall reflect a connected
electrical load in the demised premises in excess of 4 1/2 watts of electricity
for all purposes per rentable square foot and/or energy usage in excess of
ordinary business hours (each such excess hereinafter called "excess
electricity") then the connected electrical load and/or the hours of use
portion(s) of the then existing ERIF shall be increased by an amount which is
equal to a fraction of the then existing ERIF, the numerator of which is the
excess electricity (i.e. excess connected load and/or excess usage) and the
denominator of which is the connected loan and/or the energy usage which was the
basis of the then existing ERIF. Such fractions shall be determined by
Landlord's electrical consultant. The fixed annual rent shall then be
appropriately adjusted, effective as of the date of any such change in connected
load and/or usage, as disclosed by said survey. (ii) If such survey shall
disclose installation and use of other than Ordinary Equipment, then effective
as of the date of said survey, there shall be added to the ERIF portion of fixed
annual rent (computed and fixed as hereinbefore described) an additional amount
equal to what would be paid under the SC-4 Rate I Service Classification in
effect on May 1, 1996 (and not the time-of-day rate schedule) for such load and
usage of electricity, with the connected electrical load deemed to be the demand
(KW) and the hours of use thereof deemed to be the energy (KWH), as hereinbefore
provided, (which addition to the ERIF shall be increased or decreased by all
electricity cost changes of Landlord, as hereinabove provided, from May 1, 1996
through the date of billing).
In no event, whether because of surveys, rates or cost changes, or
for any other reason, is the originally specified $3.18 per per rentable square
foot ERIF portion of the fixed annual rent
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(plus any net increase thereof, but not decrease, by virtue of all electricity
rate, service classification or market price changes of Landlord subsequent to
May 1, 1996) to be reduced.
(c) General Conditions: The determinations of Landlord's electrical
consultant shall be binding and conclusive on Landlord and Tenant from and after
the delivery of copies of such determinations to Landlord and Tenant, unless,
within thirty (30) days after delivery thereof, Tenant disputes such
determination. If Tenant so disputes the determination, it shall, at its own
expense, obtain from a reputable, independent electrical consultant its own
determinations in accordance with the provisions of this Article. Tenant's
consultant and Landlord's consultant shall then seek to agree. If they cannot
agree within sixty (60) days they shall choose a third reputable electrical
consultant, whose cost shall be shared equally by the parties, to make similar
determinations which shall be controlling. (If they cannot agree on such third
consultant with ten (10) days, then either party may apply to the Supreme Court
in the County of New York for such appointment.) However, pending such
controlling determinations, Tenant shall pay to Landlord the amount of
additional rent or ERIF in accordance with the determinations of Landlord's
electrical consultant. If the controlling determinations differ from Landlord's
electrical consultant, then the parties shall promptly make adjustment for any
deficiency owed by Tenant or overage paid by Tenant.
At the option of Landlord, Tenant agrees to purchase from Landlord
or its agents all lamps and bulbs used in the demised premises and to pay for
the cost of installation thereof. Supplementing Article 53 hereof, if all or
part of the submetering additional rent or the ERIF payable in accordance with
subdivision (a) or (b) of this Article becomes uncollectible or reduced or
refunded by virtue of any law, order or regulation, the parties agree that, at
Landlord's option, in lieu of submetering additional rent or ERIF, and in
consideration of Tenant's use of the building's electrical distribution system
and receipt of redistributed electricity and payment by Landlord of consultant's
fees and other redistribution costs, the fixed annual rental rate(s) to be paid
under this lease shall be increased by an "alternative charge"which shall be a
sum equal to $3.18 per year per rentable square foot of the demised premises,
changed in the same percentage as any increases in the cost to Landlord for
electricity for the entire building subsequent to May 1, 1996, because of
electric rate, service classification or market price changes, such percentage
change to be computed as in subdivision (b) provided.
Landlord shall not be liable to Tenant for any loss or damage or
expense which Tenant may sustain or incur if either the quantity or character of
electric service is changed or is no longer available or suitable for Tenant's
requirements. Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity of existing feeders to the building or
wiring installation. Tenant agrees not to connect any additional electrical
equipment to the building electric distribution system, other than lamps,
typewriters and other small office machines which consume comparable amounts of
electricity, without Landlord's prior written consent, which consent shall not
be unreasonably withheld. Any riser or risers to supply Tenant's electrical
requirements, upon written request of Tenant, will be installed by Landlord, at
the sole cost and expense of Tenant, if, in Landlord's sole judgment, the same
are necessary and will not
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cause permanent damage or injury to the building or demised premises or cause or
create a dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other tenants and
occupants. In addition to the installation of such riser or risers, Landlord
will also at the sole cost and expense of Tenant, install all other equipment
proper and necessary in connection therewith subject to the aforesaid terms and
conditions. The parties acknowledge that they understand that it is anticipated
that electric rates, charges, etc., may be changed by virtues of time-of-day
rates or changes in other methods of billing, and/or electricity purchases and
the redistribution thereof, and fluctuation in the market price of electricity,
and that the references in the foregoing paragraphs to changes in methods of or
rules on billing are intended to include any such changes. Anything hereinabove
to the contrary notwithstanding, in no event is the submetering additional rent
or ERIF, or any "alternative charge", to be less than an amount equal to the
total of Landlord's payments to public utilities and/or other providers for the
electricity consumed by Tenant (and any taxes thereon or on redistribution of
same) plus 5% thereof for transmission line loss, plus 15% thereof for other
redistribution costs. The Landlord reserves the right, at any time upon thirty
(30) days' written notice, to change its furnishing of electricity to Tenant
from a rent inclusion basis to a submetering basis, or vice versa, or to change
to the distribution of less than all the components of the existing service to
Tenant. The Landlord reserves the right to terminate the furnishing of
electricity on a rent inclusion, submetering, or any other basis at any time,
upon thirty (30) days' written notice to the Tenant, in which event the Tenant
may make application directly to the public utility and/or other providers for
the Tenant's entire separate supply of electric current and Landlord shall
permit its wires and conduits, to the extent available and safely capable, to be
used for such purpose, but only to the extent of Tenant's then authorized load.
Any meters, risers, or other equipment or connections necessary to furnish
electricity on a submetering basis or to enable Tenant to obtain electric
current directly from such utility and/or other providers shall be installed at
Tenant's sole cost and expense. Only rigid conduit or electricity metal tubing
(EMT) will be allowed. The Landlord, upon the expiration of the aforesaid thirty
(30) days' written notice to the Tenant may discontinue furnishing the electric
current but this lease shall otherwise remain in full force and effect. If
Tenant was provided electricity on a rent inclusion basis when it was so
discontinued, then commencing when Tenant receives such direct service and as
long as Tenant shall continue to receive such service, the fixed annual rent
payable under this lease shall be reduced by the amount of the ERIF which was
payable immediately prior to such discontinuance of electricity on a rent
inclusion basis.
TWENTY-THIRD:- (a) If Landlord installs a water meter to measure
Tenant's water consumption for all purposes, Tenant shall pay Landlord for the
cost of the meter and the cost of the 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 Landlord may cause such meter and equipment to be replaced or
repaired and collect the cost thereof from Tenant. 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 Landlord may pay such charges and collect the
same from Tenant. Landlord may inspect such
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water meter at any time and shall have access thereto at all times for the
purpose of such inspection.
(b) In addition to the foregoing, Tenant agrees to pay its
proportionate share of the water consumed in the toilets and other portions of
the premises over which Landlord may reserve control, irrespective of the fact
that the same shall be located outside of the demised premises.
(c) Tenant covenants and agrees to pay its pro-rata share of the
sewer rent, charge or any other tax, rent levy or charge which are 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.
(d) The bill rendered by Landlord for metered water, sewer or any
other charges provided for in this paragraph "23," shall be based upon Tenant's
consumption and shall be payable by Tenant as additional rent. Any such costs or
expenses incurred or payments made by Landlord for any of the reasons or
purposes hereinabove stated, shall be deemed to be additional rent payable by
Tenant and collectible by Landlord as such. If the building or the demised
premises or any part thereof be supplied with water through a meter through
which water is also supplied to other premises, Tenant shall pay to Landlord as
additional rent, on the first day of each month, $NONE as Tenant's portion.
Independently of and in addition to any of the remedies reserved to Landlord
hereinabove or elsewhere in this lease, Landlord may sue for and collect any
monies to be paid by Tenant or paid by Landlord for any of the reasons or
purposes hereinabove set forth.
TWENTY-FOURTH:- If the sprinkler system or any of its appliances
shall be damaged or injured or not in proper working order by reason of any act
or omission of Tenant, Tenant's agents, servants, employees, licensees or
visitors, Tenant shall forthwith restore the same in good working condition at
its own expense; and if the New York Board of Fire Underwriters or the New York
Fire Insurance Rating Organizations or any bureau, department or official of the
State or City Government, require or recommend that any changes, modifications,
alterations or additional sprinkler heads or other equipment be made or supplied
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 changes, modifications, alterations, additional sprinkler heads or other
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 as
fixed by said Rating Organization, or by any Fire Insurance Company, Tenant
shall, at Tenant's expense, promptly make and supply such changes,
modifications, alterations, additional sprinkler heads or other equipment.
Tenant shall pay to Landlord as additional rent the sum of $NONE 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.
TWENTY-FIFTH:- Tenant shall have the privilege of using
the air conditioning system which affects the whole or a portion of the demised
premises, and shall, at its own cost and
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expense;1 maintain and operate said system in compliance with all present and
future laws and governmental requirements, and shall obtain all governmental
licenses and permits now or hereafter required. Tenant shall pay for all
electric current, water and refrigerants used in connection with said system.
Tenant, at its own cost and expense, shall make or cause to be made, all
repairs, alterations, changes, additions or improvements in and to said system
which may be necessary or which may be required or recommended by Landlord or by
any governmental authority, and shall furnish all parts and supplies necessary
or desirable in connection therewith, but no alterations, changes, additions or
improvements shall be made by Tenant without the advance written consent of
Landlord. Landlord's charges for electric current, water and refrigerants and
for such parts, supplies, repairs, alterations, changes, additions or
improvements as are caused to be furnished or made by Landlord shall be payable
by Tenant as additional rent upon presentation of Landlord's bill for same. If
Tenant shall default in paying any such bill for five (5) days, Landlord shall
have the right, in addition to any other rights under this lease to terminate
the operation of said air conditioning system without notice to Tenant, and if
such default shall continue for sixty (60) days, Landlord shall have right to
remove the whole or any part of said system from the demised premises without
notice to Tenant. The non- functioning or defective functioning of said air
conditioning system, or Tenant's inability to operate or maintain the same in
compliance with lawful requirements, or Landlord's removal thereof or
termination of the operation thereof as provided in this paragraph, or any
delay, discomfort or inconvenience suffered by Tenant in connection therewith,
or, without limitation or of by the foregoing, any other matter or thing related
to such system, shall not give rise to any obligation or liability on the part
of Landlord and shall not affect this lease or be deemed to release or discharge
Tenant of any of Tenant's obligations or liabilities under this lease or
otherwise. Title to said system and all present and future parts thereof is and
shall be vested in Landlord.
TWENTY-SIXTH: - (a) As long as Tenant is not in default
under any of the covenants of this lease, Landlord shall provide necessary
freight elevator facilities on business days from 8:00 A.M. to 5:30 P.M. On
Sundays, Saturdays, holidays and nights, Landlord will furnish at least one (1)
passenger elevator.
(b) If the building of which the demised premises are a part
supplies manually operated elevator service, Landlord may proceed with
alterations necessary to substitute automatic control elevator service upon ten
(10) days' 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 Landlord pursues with due diligence the
completion of the alterations. Where automatic control elevator service is now,
or hereafter furnished, and the demised premises contain an entire floor or
floors, Tenant will provide, at its own cost and expense, locks for all
entrances to such floor or floors from the elevators.
- --------
1 Landlord shall be responsible for maintenance and repair of air
conditioning units.
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(c) Tenant agrees it will not permit its employees other than office
help to use the passenger elevator in said building, nor will it permit them to
use the stairs leading to and from the passenger entrance to said building.
Landlord may prescribe and regulate which elevator and entrance shall be used by
Tenant's employees and for Tenant's shipping.
TWENTY-SEVENTH: - Landlord will:
(a) Furnish heat to the demised premises, when and as required by
law, on business days during regular business hours.
(b) Cause to be kept clean the public halls and public portions of
the building, which are used in common by all tenants.
TWENTY-EIGHTH: - It is expressly agreed that if in consequence of
the use of the demised premises for manufacturing purposes any Municipal or
State Authority requires alterations and additions to such premises or the
building of which they are a part, Landlord, in addition to other remedies
provided for in this lease, shall have the option of terminating this lease on
sixty (60) days' written notice to Tenant. Upon expiration of said sixty (60)
days, the term of this lease shall terminate, and Tenant shall immediately
vacate the premises. In such event, Landlord shall refund to Tenant the unearned
pro rata portion of any rent paid in advance. Landlord reserves the privilege of
complying with any order, rule or regulation as aforementioned in order to
remove such violation, if any. In such event, Tenant waives any and all claims
for damages growing out of the work in the building or on the premises in
connection therewith. In the event that the violation can be removed by Tenant's
limiting the number of employees in the demised premises, Tenant shall so limit
the number of employees immediately and no claim for damages or any loss may be
made against Landlord therefor.
TWENTY-NINTH: - Tenant shall have the use of the partitions existing
in the premises demised herein and of all other equipment, fixtures and
appurtenances installed by Landlord prior to or during the term hereof. The
ownership of such property shall at all times be vested in Landlord and
possession thereof shall revert to Landlord upon the expiration of the lease.
THIRTIETH: - If any vault space is adjacent to the demised premises,
the same shall not be or be deemed to be part of the demised premises or its
appurtenances. Landlord may permit Tenant to use such vault space gratuitously,
but such permission may be revoked by Landlord at any time on two (2) days'
notice. Landlord shall have the right at any time to cause a wall to be erected
for the purpose of sealing off such vault space from the demised premises. Said
wall may be erected wholly or partly on that portion of the demised premises
which abuts such vault space. Landlord and its designees shall have the right
from time to time to enter and remain upon the demised premises, with men and
materials, for the purpose of erecting such wall. Tenant shall not be entitled
to an compensation, abatement of rent, or other claim by reason of any action
taken under this paragraph by or on behalf of Landlord. Any fee or license
charge or tax of municipal authorities for such vault shall be paid by Tenant.
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THIRTY-FIRST: - Landlord 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 the loss of or damage to any property of Tenant by theft or
otherwise. Landlord or its agents shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling ceilings, falling
plaster, steam, gas, electricity, water, rain or snow or leaks from any part of
said building or from the pipes, appliances or plumbing works or from the roof,
street or subsurface or from any other place or by dampness or by any other
cause of whatsoever nature, including but not limited to the making of repairs
and improvements, unless caused by or due to the negligence of Landlord, its
agents, servants or employees; nor shall Landlord or its agents be liable for
any such damage caused by other tenants or persons in said building or caused by
operations in construction of any private, public or quasi public work; nor
shall Landlord be liable for any latent defect in the demised premises or in the
building of which they form a part. Tenant shall give immediate notice to
Landlord in case of fire or accidents in the demised premises or in the building
or of defects therein or in any fixtures or equipment.*
THIRTY-SECOND: - Tenant shall, throughout the term and thereafter,
indemnify Landlord and save it harmless and free from damages, liabilities,
penalties, losses, expenses, causes of action, claims, suits and judgments, as
well as all expenses and attorneys' fees, arising from injury during said term
to person or property of any nature, and also for any matter or thing growing
out of the occupation of the demised premises or the streets, sidewalks, or
vaults adjacent thereto occasioned in whole or part by any act or acts, omission
or omissions of Tenant, its employees, guests, agents, assigns or undertenants.
THIRTY-THIRD: - Neither this lease nor any obligation hereunder on
Tenant's part to be performed (including, but not limited to, Tenant's
obligation to pay the rents provided for hereunder) shall in any wise be
released, discharged, impaired, excused or otherwise affected because of
Landlord's inability to supply, furnish or make such services, fixtures,
equipment, repairs, additions, improvements, alterations and/or decorations, if
any, as Landlord may be required to supply, furnish or make hereunder or in
connection herewith, or because of any delay in supplying, furnishing or making
any of the foregoing, if such inability or delay directly or indirectly results
from or is caused by or attributable to any cause or thing whatsoever beyond
Landlord's, control, including, but not limited to, any law or ordinance or any
governmental order, rule, regulation or requirement, or any shortages in
supplies, materials or labor, or any acts of God, or any labor difficulties,
disasters or acts of public enemies, and in any such event Landlord shall be
relieved of any liability to Tenant which it might otherwise have had by reason
of any such requirement. Lessee agrees to look solely to Lessor's estate and
interest in the land and building, or the lease of the building or of the land
and building, and the demised premises, for the satisfaction of any right or
remedy of Lessee for the collection of a judgment (or other judicial process)
requiring the payment of money by Lessor, in the event of any liability by
- --------
*limitations shall not apply if they interfere or conflict with
provisions of Tenant's insurance policy.
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Lessor, and no other property or assets of Lessor shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Lessee's
remedies under or with respect to this lease, the relationship of landlord and
tenant hereunder, or Lessee's use and occupancy of the demised premises or any
other liability of Lessor to Lessee (except for negligence).
THIRTY-FOURTH:- This lease is and shall be subject and subordinate
at all times to all present or future leases and subleases of the entire
building or of the land and entire building of which the demised premises form a
part, and to all mortgages which now affect or may hereafter affect or be made
in respect of such leases and subleases or the real property of which the
demised premises form a part (whether or not such leases or mortgages also
affect any other or additional real property), and to all renewals,
modifications, consolidations, replacements and extensions thereof, and to all
advances made or hereafter to be made upon the security thereof. This clause
shall be self-operative and no further instrument in writing to effectuate such
subordination shall be necessary. In confirmation of such subordination,
however, Tenant shall, on demand, promptly execute, acknowledge and deliver such
further instruments or certificates that Landlord may request. Tenant hereby
irrevocably appoints Landlord the attorney-in-fact of Tenant to execute,
acknowledge and deliver any such instrument or certificate for on behalf of
Tenant. In the event that any Master Lease or any other ground or underlying
lease is terminated or any mortgage foreclosed, this lease shall not terminate
or be terminable by Lessee unless Lessee was specifically named in any
termination or foreclosure judgment or final order. In the event that the Master
Lease or any other ground or underlying lease is terminated as aforesaid, Lessee
agrees to enter into a new lease covering the within premises, for the remaining
term of this lease and otherwise on the same terms, conditions and rentals as
herein provided, with and at the election of the holder of the fee title to the
premises. If the current term of the Master Lease shall explore prior to the
date set forth herein for the expiration of this lease, then, unless Lessor, at
its sole option, shall have elected to extend or renew the term of the Master
Lease, the term of this lease shall expire on the date of expiration of the
Master Lease, notwithstanding the later expiration date hereinabove set forth.
If the Master Lease is renewed, then the term of this lease shall expire as
hereinabove set forth. From time to time, Lessee, on at least (10) days' prior
written request by Lessor, will deliver to Lessor a statement in writing
certifying that this lease is unmodified and in full force and effect (or if
there shall have been modifications, that the same is in full force and effect
as modified and stating the modifications) and the dates to which the rent and
other charges have been paid and stating whether or not the Lessor is in default
in performance of any covenant, agreement or condition contained in this lease
and, if so, specifying each such default of which Lessee may have knowledge.
This paragraph shall not be deemed modified in whole or in part by any provision
of this lease or any rider thereto during the term hereof, unless such
provisions or rider shall by its terms expressly so modify it.
THIRTY-FIFTH: - Provided the damage be not caused by the fault or
neglect of Tenant or of its employees, agents, visitors or licensees, in the
event of damage by fire, or other action of the elements, to the demised
premises not rendering all of them unfit for occupancy, Landlord shall repair
the same with reasonable dispatch after notice of such damage, and the rent
accrued or accruing shall not cease; but if the damage be so extensive as to
render all of the demised
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premises untenantable, the rent shall cease until they be repaired, provided the
damage be not caused by the carelessness or negligence of Tenant or of the
agents or servants of Tenant. No penalty shall accrue for reasonable delay which
may arise by reason of adjustment of insurance on the part of Landlord and/or
Tenant, and for reasonable delay on account of "labor troubles" or any other
cause beyond Landlord's control. If the demised premises are seventy-five (75%)
damaged or are rendered wholly untenantable by fire or other cause, and if
Landlord shall decide not to restore or not to rebuild the same, or if the
building shall be so damaged that Landlord shall decide to demolish it or to
rebuild it, or if the cost of restoration of the building of which the demised
premises are a part, resulting from the aforesaid fire or other casualty shall
exceed the sum of $3,000,000, then or in any of such events Landlord may, within
ninety (90) days after such fire other cause, give Tenant a notice in writing of
termination, which notice shall be given as provided in this lease, and
thereupon the term of this lease shall expire by lapse of time upon the third
day after such notice is given, and Tenant shall vacate the demised premises and
surrender the same to Landlord. If Tenant shall not be in default under this
lease then, upon the termination of this lease under the conditions provided for
in the sentence immediately preceding, Tenant's liability for rent shall cease
as of the day following the casualty. Tenant hereby expressly waives the
provisions of Section 227 of the Real Property Law and agrees that the foregoing
provisions of this paragraph shall govern and control in lieu thereof. If the
damage or destruction be due to the fault or neglect of Tenant, the debris shall
be removed by and at the expense of Tenant.
THIRTY-SIXTH: - 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. If any part of the
land or the building of which the demised premises are a part shall be so
acquired or condemned, then and in that event the term of this lease, at the
option of Landlord, shall cease and terminate on ten (10) days' notice by
Landlord to Tenant. In neither event shall Tenant have any claim for the value
of any unexpired term of said lease.
THIRTY-SEVENTH: - If, when and to the extent permitted by law, the
parties agree that the following provisions shall apply to this lease and
tenancy (and that the provisions of 11 U.S.C. ss. 365(b) shall be applied): (a)
If at any time prior to the date herein fixed as the commencement of the term of
this lease there shall be filed against Tenant thereof or if such filing is made
by Tenant in any court pursuant to any statute either of the United States or of
any State a petition of bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within sixty (60) days thereof Tenant fails to secure a discharge
thereof, or if Tenant makes an assignment for the benefit of creditors, or
petition for or enter into an arrangement, this lease shall ipso facto be
cancelled and terminated, and in which event, neither Tenant nor any person
claiming through or under Tenant or by virtue of any statute or of an order of
any court shall be entitled to possession of the demised premises and Landlord,
in addition to the other rights and remedies given by (c) hereof and by virtue
of any other provision herein or elsewhere in this lease contained or by virtue
of
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any statute or rule of law, may retain as liquidated damages any rent, security,
deposit or monies, received by him from Tenant or others in behalf of Tenant
upon the execution hereof.
(b) If the date fixed as the commencement of the term of this lease
or if at any time during the term hereby demised, there shall be filed against
Tenant thereof or if such filing is made by Tenant in any court pursuant to any
statute of the United States or any State a petition of bankruptcy or insolvency
or for reorganization or for the appointment of a receiver or trustee of all or
a portion of Tenant's property, and within sixty (60) days thereof Tenant fails
to secure a discharge thereof, or if Tenant makes an assignment for the benefit
of creditors or petition for or enter into an arrangement, this lease, at the
option of Landlord. exercised within a reasonable time after notice of the
happening of any one or more of such events, may be cancelled and terminated,
and in which event neither Tenant nor any person claiming through or under
Tenant by virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the premises demised, but shall
forthwith quit and surrender the premises, and Landlord, in addition to the
other rights and remedies Landlord has by virtue of any other provision herein
or elsewhere in this lease contained or by virtue of any statute or rule of law,
may retain as liquidated damages any rent, security, deposit or monies received
by him from Tenant or others in behalf of Tenant.
(c) It is stipulated and agreed that in the event of the termination
of this lease pursuant to (a) or (b) hereof, Landlord shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the then fair and reasonable rental value of the demised
premises for the same period. 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 payment 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 re-let by Landlord for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
re-letting shall be prima facie 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
Landlord to prove for and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
THIRTY-EIGHTH: - Tenant has deposited with Landlord the
sum of $ NONE** as security for the faithful performance and observance by
Tenant of the terms, provisions and
- --------
**Such security deposit shall be deposited in an interest-bearing
account with interest to be paid to Tenant annually less 1% to be retained by
Landlord as administrative fee.
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<PAGE>
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, Landlord 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 Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including, but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord. Tenant shall, upon demand, deposit with Landlord the full amount so
used, in order that Landlord shall have the full security deposit on hand at all
times. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the lease and
after delivery of entire possession of the demised premises to Landlord. In the
event of any transfer or conveyance by landlord of its lease to the building of
which the demised premises form a part, hereinafter referred to, Landlord shall
have the right to transfer the security to the transferee or grantee, and
Landlord shall thereupon be released by Tenant from all liability for the return
of such security; and Tenant agrees to look to the new Landlord solely for the
return of said security; and it is agreed that the provisions hereof shall apply
to every transfer or assignment made of the security to a new Landlord. Tenant
further covenants that it will not assign or encumber or attempt to assign or
encumber the monies deposited herein as security and that neither Landlord nor
its successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
THIRTY-NINTH: - (a) 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 of any ancillary agreement, or if the demised premises
become vacant or deserted, then, in any one or more of such events, upon
Landlord serving a written twenty (20) days' notice upon Tenant specifying the
nature of said default and upon the expiration of said twenty (20) days, if
Tenant shall have failed to comply with or remedy such default, or if the said
default or omission complained of shall be of such a nature that the same cannot
be completely cured or remedied within said twenty (20) day period, and if
Tenant shall not have diligently commenced curing such default within such
twenty (20) day period, and shall not thereafter with reasonable diligence and
in good faith proceed to remedy ore cure such default, then Landlord may serve a
written three (3) 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 date of 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 quite and
surrender the demised premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
(b) If the notice provided for in (a) hereof shall have been given,
and the term shall expire as aforesaid: or (1) if Tenant shall make default in
the payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein provided;
or (2) if any execution or attachment shall be issued against Tenant or any of
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Tenant's property whereupon the demised premises shall be taken or occupied or
attempted to be taken or occupied by someone other than Tenant; or (3) if Tenant
shall make default with respect to any other lease between Landlord and Tenant;
or (4) if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after commencement of the term of this lease, of which
fact Landlord shall be the sole judge: then and in any of such events Landlord
may without notice, 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 make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Landlord may cancel and terminate such renewal or
extension agreement by written notice.
(c) If Tenant is presently in possession of the demised premises
pursuant to a lease in writing heretofore made and if, before the commencement
of the term herein provided the aforesaid lease shall be terminated or Tenant
shall be dispossessed or shall voluntarily or involuntarily vacate, surrender or
remove from the demised premises, then this lease shall, at the option of
Landlord, be terminated, but Tenant shall nevertheless remain liable as
hereinbefore provided.
FORTIETH: - In case of any such default, re-entry or dispossess by
summary proceedings or otherwise, (a) the rent and additional rent shall become
due thereupon and be paid up to the time of such re-entry, dispossess and/or,
together with such expenses as Landlord may incur for legal expenses, attorneys'
fees, brokerage, and/or putting the demised premises in good order, or for
preparing the same for re-rental; (b) Landlord may re-let the premises or any
part or parts thereof, either in the name of Landlord or otherwise, for a term
or terms, which may at landlord's option be less than or exceed the period which
would otherwise have constituted the balance of the term of this lease and may
grant concessions or free rent; and/or (c) Tenant or the legal representatives
of Tenant shall also pay Landlord as liquidated damages for the failure of
Tenant to observe and perform said Tenant's covenants herein contained, any
deficiency between rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this lease. The rent received from any
re-letting or re-lettings, but only for the unexpired potion of this lease,
shall be applied first to the payment of Landlord's expenses in resuming
possession and re-letting the premises, which expenses shall include but not be
limited to attorneys' fees, brokerage commissions, cleaning, repairs, painting
and decoration. The balance, if any, shall be applied in payment of all unpaid
rent, additional rent and other charges due from Tenant hereunder, irrespective
of whether the liability therefor arose prior or subsequent to the date of the
expiration of the term hereof. Tenant hereby covenants and agrees to pay
Landlord, within a reasonable time after demand therefor shall be made, the
balance, if any, remaining unpaid. In the event that any re-letting hereunder
results in Landlord's receiving from Tenant in any month an amount in excess of
the amount due for such month, then and in that event Tenant shall not be
obligated to make any
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payment to Landlord for rent due in such month, then and in that event Tenant
shall not be obligated to make any payment to Landlord for rent due in such
month, nor shall Landlord at any time be obligated to make any refund or apply
any credit to Tenant with respect to such rent, and Tenant shall have no claim
by way of defense to a suit or otherwise that Landlord has received for any
prior month or that any new tenant has agreed to pay for any subsequent month a
greater amount than that hereinabove reserved to be paid as rent for that month.
The failure or refusal of Landlord to re-let the premises or any part or parts
thereof shall not release or affect Tenant's liability for damages. Any security
in Landlord's possession not retained by it as liquidated damages may be applied
by it for any or all of the aforesaid purposes. Any such liquidated damages
shall be paid as additional rent hereunder 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
Landlord to collect the deficiency for any subsequent month by a similar
proceeding. Landlord, at Landlord's option, may make such alterations, repairs,
replacements and/or decorations in the demised premises as Landlord in
Landlord's sole judgment considers advisable and necessary for the purpose of
re-letting the demised premises; and the making of such alterations and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Landlord shall in no event be liable in any way
whatsoever for failure 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. In the event of a breach or threatened breach by Tenant of any of
the covenants or provisions hereof, Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or inequity as if re-entry,
summary proceedings and other remedies were not herein provided for. Mention in
this lease of any particular remedy, shall not preclude Landlord from any other
remedy, in law or in equity.
FORTY-FIRST: - Notwithstanding anything elsewhere contained in this
lease, if by reason of any present or future cause or thing whatsoever
(including, without limitation, by reason of any statute, ordinance, judgment,
decree, court order or governmental rule or regulation). Tenant will not or
shall not be required to pay to Landlord the full amount of rent and additional
rent reserved hereunder, then Landlord, at its unrestricted option, may give
Tenant not less than thirty (30) days, notice of intention to end this lease and
the term hereof, and thereupon, on the date specified in said notice, this lease
and the term hereof shall expire as fully and completely as if that date were
the date, herein originally fixed for the expiration of this lease and the term
hereof.
FORTY-SECOND: - It is mutually agreed by and between Landlord and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way connected with this lease, the relationship of landlord and tenant,
Tenant's use or occupancy of said premises, except for personal injury or
property damage, or involving the right to any statutory relief or remedy.
Tenant will not interpose any counterclaim of any nature in any summary
proceeding. The provisions of this paragraph shall be binding
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upon the respective heirs, distributees, executors, administrators, successors
and assigns of the parties hereto and all subtenants hereunder.
FORTY-THIRD: - Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any [illegible], or in the event of Landlord
obtaining possession of demised premises, by reason of violation by Tenant of
any of the covenants and conditions of this lease, or otherwise.
FORTY-FOURTH: - (a) If there be any agreement between Landlord and
Tenant providing for the cancellation of this lease upon certain provisions or
contingencies, and/or an agreement for the renewal hereof at the expiration of
the term first above mentioned, the right to such renewal or the execution of a
renewal agreement between Landlord and Tenant prior to the expiration of such
first mentioned term shall not be considered an extension thereof or a vested
right in Tenant to such further term, so as to prevent Landlord from cancelling
this lease and any such extension thereof during the remainder of the original
term hereby granted: such privilege, if and when so exercised by Landlord, shall
cancel and terminate this lease and any such renewal or extension previously
entered into between said Landlord and Tenant or the right of Tenant to any such
renewal or extension; any right herein contained on the part of Landlord to
cancel this lease shall continue during any extension or renewal hereof; any
option on the part of Tenant herein contained for an extension or renewal hereof
shall not be deemed to give Tenant any option for a further extension beyond the
first renewal or extended term.
(b) No act or thing done by Landlord or Landlord's agents during the
term hereby demised shall constitute an actual or constructive eviction by
Landlord, nor shall be deemed an acceptance of a surrender of said demised
premises, and no agreement to accept such surrender shall be valid unless in
writing signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys of said premises prior to the
termination of the lease. The delivery of keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the lease or a surrender
of the premises. In the event of Tenant at any time desiring to have Landlord
sublet the premises for Tenant's account, Landlord or Landlord's agents are
authorized to receive said keys for such purposes without releasing Tenant from
any of the obligations under this lease, and Tenant hereby relieves Landlord of
any liability for loss of or damage to any of Tenant's effects in connection
with such subletting.
(c) The failure of Landlord ro seek redress for violation or, or to
insist upon strict performance of, any covenant or condition of this lease, or
any of the Rules or Regulations set forth or hereafter adopted by Landlord,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach.
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(d) The failure of Landlord to enforce any of the Rules and
Regulations set forth, or hereafter adopted, against Tenant and/or any other
tenant in the building shall not be deemed a waiver of any such Rules and
Regulations. No provision of this lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord.
(e) No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy in this lease provided.
FORTY-FIFTH: - Tenant covenants that Tenant will not, without the
consent of Landlord first obtained in each case, make or grant any license in
respect of the demised premises or any part thereof, or in respect of the use
thereof, and will not permit any such license to be made or granted.
FORTY-SIXTH: - Landlord shall replace, at the expense of Tenant, any
and all glass damaged or broken from any cause whatsoever in and about the
demised premises. Landlord may insure, and keep insured, at Tenant's expense,
all plate and other glass in the demised premises for and in the name of
Landlord. Bills for premiums therefor shall be rendered by Landlord to Tenant at
such times as Landlord 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. Tenant may be a selfinsurer.
FORTY-SEVENTH: - 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 landlord, or
diminution or abatement of rent.
FORTY-EIGHTH: - Except as otherwise in this lease provided, a bill,
statement, notice or communication which Landlord may desire or be required to
give to Tenant, shall be deemed sufficiently given or rendered if in writing
delivered to Tenant. All notices shall be delivered by certified mail return
receipt 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 Landlord must be served by registered or certified mail
addressed to
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Landlord at the address first hereinabove given or at such other address as
landlord shall designate by written notice.
FORTY-NINTH - If and so long as Tenant pays the rent and additional
rent reserved hereby and performs and observes the covenants and provisions
hereof, Tenant shall quietly enjoy the demised premises, subject, however, to
the terms, conditions, exceptions and reservations of this lease, and to the
ground, underlying and overriding leases and mortgages hereinbefore mentioned.
FIFTIETH: - Upon the expiration or other termination of the term of
this lease, Tenant shall quit and surrender to Landlord the demised premises,
broom clean, in good order and condition, ordinary wear excepted. Lessee
acknowledges that possession of the demised premises must be surrendered to the
Lessor at the expiration or sooner termination of the term of this Lease. Lessee
agrees it shall indemnify and save Lessor harmless against costs, claims, loss
or liability resulting from delay by Lessee in so surrendering the demised
premises, including, without limitation, any claims made by any succeeding
tenant, founded on such delay. The parties recognize and agree that the damage
to Lessor resulting from any failure by Lessee timely to surrender possession of
the demised premises as aforesaid will be extremely substantial, will exceed the
amount of monthly rent theretofore payable hereunder, and will be impossible of
accurate measurement. Lessee therefore agrees that if possession of the demised
premises is not surrendered to within seven (7) days after the date of the
expiration or termination of the term of this lease, then lessee agrees to pay
lessor as liquidated damages for each month and for each portion of any month
during which lessee holds over in the premises after expiration or termination
of the term of this lease, a sum equal to one and one-half (1 1/2) times the
average rent and additional rent which was payable per month under this lease
during the last six months of the term thereof. The aforesaid provisions of this
article shall survive the expiration or sooner termination of the term of this
Lease. If the last day of the term of this lease or any renewal thereof falls on
Sunday, this lease shall expire on the business day immediately preceding.
FIFTY-FIRST: - If Landlord shall be unable to give possession of the
demised premises on the date of the commencement of the term hereof for any
reason, Landlord shall not be subject to any liability. Under such
circumstances, the rent reserved and covenanted to be paid herein shall not
commence until the possession of the demised premises is given or the premises
are available for occupancy by Tenant, and no such failure to give possession on
the date of the commencement of the term shall in any wise affect the validity
of this lease or the obligations of Tenant hereunder, nor shall same be
construed in any wise to extend the term of this lease. If Landlord is unable to
give possession of the demised premises on the date of the commencement of the
term hereof by reason of the holding over or retention of possession of any
tenant, tenants or occupants or for any other reason, or if repairs,
improvements or decorations of the demised premises or of the building of which
said premises form a part, are not completed, no abatement or diminution of the
rent to be paid hereunder shall be allowed to Tenant nor shall the validity of
the lease be impaired under such circumstances. 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
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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 rent. In either case rent shall commence on the date specified
in this lease.
FIFTY-SECOND: - Landlord or Landlord's agents have made no
representations or promises with respect to the said building or demised
premises except as herein expressly set forth. The taking possession of the
demised premises by Tenant shall be conclusive evidence, as against Tenant, that
Tenant accepts same "as is" and that 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.
FIFTY-THIRD: - In the event the fixed annual rent or additional rent
or any part thereof provided to be paid by Lessee under the provisions of this
lease during the demised term shall become uncollectible or shall be reduced or
required to be reduced or refunded by virtue of any Federal, State, County or
City law, order or regulation, or by any direction of a public officer or body
pursuant to law, or the orders, rules, code, or regulations of any organization
or entity formed pursuant to law, whether such organization or entity be public
or private, then Lessor, at its option, may at any time thereafter terminate
this lease, by not less than thirty (30) days' written notice to Lessee, on a
date set forth in said notice, in which event this lease and the term hereof
shall terminate and come to an end on the date fixed in said notice as if the
said date were the date originally fixed herein for the termination of the
demised term. Lessor shall not have the right so to terminate this lease if
Lessee within such period of thirty (30) days shall in writing lawfully agree
that the rentals herein reserved are reasonable rentals and agree to continue to
pay said rentals and if such agreement by Lessee shall be legally enforceable by
Lessor.
FIFTY-FOURTH: - The covenants, conditions and agreements contained
in this lease shall bind and inure to the benefit of Landlord and Tenant and
their respective heirs, distributees, executors, administrators, successors,
and, except as otherwise provided in this lease, their assigns.
FIFTY-FIFTH: - Except as may be otherwise contained in a written
instrument or instruments duly executed and delivered by and between the parties
hereto, this lease contains the entire agreement and understanding of the
parties with respect to the demised premises and the respective rights and
duties of the parties in relation thereto and in relation to each other. There
are no oral understandings or agreements between the parties of any kind.
Landlord has made no representations or warranties to Tenant of any kind. All
oral representations, warranties and promises prior to or contemporaneous with
this written lease (if any be claimed) are and shall be deemed merged into this
lease. This lease cannot be changed or supplemented orally. All promises and
agreements made by or between the parties subsequent to the execution and
delivery of this lease shall be and be deemed to be null, void and unenforceable
unless contained in a writing duly executed and delivered by and between the
parties hereto, whether or not the same relate in any way to this lease or any
matter covered hereby.
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FIFTY-SIXTH: - (a) The term "Landlord" as used in this lease means
only the owner or the mortgagee in possession for the time being, of the land
and building (or the owner of a lease of the entire building or of the land and
entire building) of which the demised premises form a part so that in the event
of any sale or sales of said land and entire building or of any transfer or
conveyance of said lease or in the event of a lease of said entire building or
of the land and entire building, the Landlord shall be and hereby is entirely
freed and relieved of all liability for the performance of all covenants and
obligations on the part of Landlord to be performed hereunder, and it shall be
deemed and considered without further agreement between the parties or other
successors in interest or between the parties and the purchaser at any such sale
or any transferee or mortgagee or any lessee of the entire building or of the
land and entire building that the purchaser, lessee, transferee or grantee has
assumed and agreed to carry out any and all covenants and obligations of
Landlord hereunder. Tenant acknowledges that it has been informed and
understands that Landlord is a lessee of the land and entire building of which
the demised premises form a part. The term "lease of the entire building or of
the land and entire building" shall be deemed to include a sublease thereof, and
the term "lessee of the entire building or of the land and entire building"
shall be deemed to include a sublessee thereof.
(b) The words "re-entry" as used in this lease are not restricted to
their technical meaning.
(c) The term "business days" as used in this lease shall exclude
Saturdays (except such portion thereof as is covered by the insertion of
specific hours herein), Sundays and all days observed by the State or Federal
Government as legal holidays.
(d) From time to time, Tenant, on at least ten (10) days' prior
written request by Landlord, will deliver to Landlord a statement in writing
certifying that this lease is unmodified and in full force and effect (or if
there shall have been modifications, that the same is in full force and effect
as modified and stating the modifications) and the dates to which the rent and
other charges have been paid and stating whether or not Landlord is in default
in performance of any covenant, agreement or condition contained in this lease
and if so, specifying each such default of which Tenant may have knowledge.
FIFTY-SEVENTH: - The fixed annual rent reserved in this lease and
payable hereunder shall be adjusted, as of the times and in the manner set forth
in this Article:
(a) Definitions: For the purposes of this Article, the following
definitions shall apply:
(i) The term "Base Year" shall mean the full calendar year during
which the term of this lease commences.
(ii) The term "Price Index" shall mean the "Consumer Price Index"
published by the Bureau of Labor Statistics of the U.S. Department of Labor, All
Items, New York, N.Y.-- Northeastern, N.J., all urban consumers (presently
denominated "CPI-U"), or a successor or substitute index appropriately adjusted.
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(iii) The term "Price Index for the Base Year" shall mean the
average of the monthly All Items Price Indexes for each of the 12 months of the
Base Year.
(b) Effective as of each January and July subsequent to the Base
Year, there shall be made a cost of living adjustment of the fixed annual rental
rate payable hereunder. The July adjustment shall be based on the percentage
difference between the Price Index for the preceding month of June and the Price
Index for the Base Year. The January adjustment shall be based on such
percentage difference between the Price Index for the preceding month of
December and the Price Index for the Base Year.
(i) In the event the Price Index for June in any calendar year
during the term of this lease reflects an increase over the Price Index for the
Base Year, then the fixed annual rent herein provided to be paid as of the July
1st following such month of June (unchanged by any adjustments under this
Article) shall be multiplied by the percentage difference between the Price
Index for June and the Price Index for the Base Year, and the resulting sum
shall be added to such fixed annual rent, effective as of such July 1st. Said
adjusted fixed annual rent shall thereafter be payable hereunder, in equal
monthly installments, until it is readjusted pursuant to the terms of this
lease.
(ii) In the event the Price Index for December in any calendar year
during the term of this lease reflects an increase over the price Index for the
Base Year, then the fixed annual rent herein provided to be paid as of the
January 1st following such month of December (unchanged by any adjustments under
this Article) shall be multiplied by the percentage difference between the Price
Index for December and the Price Index for the Base Year, and the resulting sum
shall be added to such fixed annual rent effective as of such January 1st. Said
adjusted fixed annual rent shall thereafter be payable hereunder, in equal
monthly installments, until it is readjusted pursuant to the terms of this
lease.
The following illustrates the intentions of the parties hereto as to
the computation of the aforementioned cost of living adjustment in the annual
rent payable hereunder.
Assuming that said fixed annual rent is $10,000, that the Price
Index for the Base Year was 102.0 and that the Price Index for the month of June
in a calendar year following the Base Year was 105.0, then the percentage
increase thus reflected, i.e., 2.941% (3.0/102.0) would be multiplied by
$10,000, and said fixed annual rent would be increased by $294.10 effective as
of July 1st of said calendar year.
In the event that the Price Index ceases to use 1982-84=100 as the
basis of calculation, or if a substantial change is made in the terms or number
of items contained in the Price Index, then the Price Index shall be adjusted to
the figure that would have been arrived at had the manner of computing the Price
Index in effect at the date of this lease not been altered. In the event such
Price Index (or a successor or substitute index) is not available, a reliable
governmental or other
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non-partisan publication evaluating the information theretofore used in
determining the Price Index shall be used.
(c) Landlord will cause statements of the cost of living adjustments
provided for in subdivision (b) to be prepared in reasonable detail and
delivered to Tenant.
(d) In no event shall the fixed annual rent originally provided to
be paid under this lease (exclusive of the adjustments under this Article) be
reduced by virtue of this Article.
(e) Any delay or failure of Landlord, beyond July or January of any
year, computing or billing for the rent adjustments hereinabove provided, shall
not constitute a waiver of or in any way impair the continuing obligation of
Tenant to pay such rent adjustments hereunder.
(f) Notwithstanding any expiration or termination of this lease
prior to the lease expiration date (except in the case of a cancellation by
mutual agreement) Tenant's obligation to pay rent as adjusted under this Article
shall continue and shall cover all periods up to the lease expiration date, and
shall survive any expiration or termination of this lease.
FIFTY-EIGHTH: - Tenant shall pay to Landlord, as additional rent,
tax escalation in accordance with this Article:
(a) For purposes of this lease the rentable square foot area of the
presently demised premises shall be deemed to be 2,150 square feet.
(b) Definitions: For the purpose of this Article, the following
definitions shall apply:
(i) The term "base tax year" as hereinafter set forth for the
determination of real estate tax escalation, shall mean the New York City real
estate tax year commencing July 1, 1999 and ending June 30, 2000.
(ii) The term "The Percentage", for purposes of computing tax
escalation, shall mean 65/100's/1 percent (.65%). The Percentage has been
computed on the basis of a fraction, the numerator of which is the rentable
square foot area of the demised premises and the denominator of which is the
total rentable square foot area of the office and commercial space in the
building project. The parties acknowledge and agree that the total rentable
square foot area of the office and commercial space in the building project
shall be deemed to be 330,331 square feet.
(iii) The term "the building project" shall mean the aggregate
combined parcel of land on a portion of which are the improvements of which the
demised premises form a part, with all the improvements thereon, said
improvements being a part of the block and lot for tax purposes which are
applicable to the aforesaid land.
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(iv) The term "comparative year" shall mean the twelve (12) months
following the base tax year, and each subsequent Period of twelve (12) months
(or other such Period of twelve (12) months occurring during the term of this
lease as hereafter may be duly adopted as the tax year for real estate tax
purposes by the City of New York).
(v) The term "real estate taxes" shall mean the total of all taxes
and special or other assessments levied, assessed or imposed at any time by any
governmental authority upon or against the building project, and also any tax or
assessment levied, assessed or imposed at any time by any governmental authority
in connection with the receipt of income or rents from said building project to
the extent that same shall be in lieu of all or a portion of any of the
aforesaid taxes or assessments, or additions or increases thereof, upon or
against said building project. If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason, a franchise,
income, transit, profit or other tax or governmental imposition, however
designated, shall be levied against Landlord in substitution in whole or in part
for the real estate taxes, or in lieu of additions to or increases of said real
estate taxes, then such franchise, income, transit, profit or other tax or
governmental imposition shall be deemed to be included within the definition of
"real estate taxes" for the purposes hereof. As to special assessments which are
payable over a period of time extending beyond the term of this lease, only a
pro rata portion thereof covering the portion of the term of this lease
unexpired at the time of the imposition of such assessment, shall be included in
"real estate taxes". If by law, any assessment may be paid in installments,
then, for the purposes hereof (a) such assessment shall be deemed to have been
payable in the maximum number of installments permitted by law and (b) there
shall be included in real estate taxes, for each comparative year in which such
installments may be paid, the installments of such assessment so becoming
payable during such comparative year, together with interest payable during such
comparative year.
(vi) Where more than one assessment is imposed by the City of New
York for any tax year, whether denominated an "actual assessment" or a
"transitional assessment" or otherwise, then the phrases herein "assessed value"
and "assessments" shall mean whichever of the actual, transitional or other
assessment is designated by the City of New York as the taxable assessment for
that tax year.
(vii) The phrase "real estate taxes payable during the base tax
year" shall mean that amount obtained by multiplying the assessed value of the
land and buildings of the building project for the base tax year by the tax rate
for the base tax year for each $100 of such assessed value.
(c) 1. In the event that the real estate taxes payable for any
comparative year shall exceed the amount of the real estate taxes payable during
the base tax year, Tenant shall pay to Landlord, as additional rent for such
comparative year, an amount equal to The Percentage of the excess. Before or
after the start of each comparative year, Landlord shall furnish to Tenant a
statement of the real estate taxes payable for such comparative year, and a
statement of the real estate taxes payable during the base tax year. If the real
estate taxes payable for such comparative year
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exceed the real estate taxes payable during the base tax year, additional rent
for such comparative year, in an amount equal to The Percentage of the excess,
shall be due from Tenant to Landlord, and such additional rent shall be payable
by Tenant to Landlord within ten (10) days after receipt of the aforesaid
statement. The benefit of any discount for any earlier payment or prepayment of
real estate taxes shall accrue solely to the benefit of Landlord, and such
discount shall not be subtracted from the real estate taxes payable for any
comparative year.
Additionally, Tenant shall pay to Landlord, on demand, a sum equal
to The Percentage of any business improvement district assessment payable by the
building project.
2. Should the real estate taxes payable during the base tax year be
reduced by final determination of legal proceedings, settlement or otherwise,
then, the real estate taxes payable during the base tax year shall be
correspondingly revised, the additional rent theretofore paid or payable
hereunder for all comparative years shall be recomputed on the basis of such
reduction, and Tenant shall pay to Landlord as additional rent, within ten (10)
days after being billed therefor, any deficiency between the amount of such
additional rent as theretofore computed and the amount thereof due as the result
of such recomputations. Should the real estate taxes payable during the base tax
year be increased by such final determination of legal proceedings, settlement
or otherwise, then appropriate recomputation and adjustment also shall be made.
3. If after Tenant shall have made a payment of additional rent
under this subdivision (c), Landlord shall receive a refund of any portion of
the real estate taxes payable for any comparative year after the base tax year
on which such payment of additional rent shall have been based, as a result of a
reduction of such real estate taxes by final determination of legal proceedings,
settlement or otherwise, Landlord shall within ten (10) days after receiving the
refund pay to Tenant The Percentage of the refund less The Percentage of
expenses (including attorneys' and appraisers' fees) incurred by Landlord in
connection with any such application or proceeding. If prior to the payment of
taxes for any comparative year, Landlord shall have obtained a reduction of that
comparative year's assessed valuation of the building project, and therefore of
said taxes, then the term "real estate taxes" for that comparative year shall be
deemed to include the amount of Landlord's expenses in obtaining such reduction
in assessed valuation, including attorneys' and appraisers' fees.
4. The statements of the real estate taxes to be furnished by
Landlord as provided above shall be certified by Landlord and shall constitute a
final determination as between Landlord and Tenant of the real estate taxes for
the Periods represented thereby, unless Tenant within thirty (30) days after
they are furnished shall give a written notice to Landlord that it disputes
their accuracy or their appropriateness, which notice shall specify the
particular respects in which the statement is inaccurate or inappropriate. If
Tenant shall so dispute said statement then, pending the resolution of such
dispute, Tenant shall pay the additional rent to Landlord in accordance with the
statement furnished by Landlord.
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5. In no event shall the fixed annual rent under this lease
(exclusive of the additional rents under this Article) be reduced by virtue of
this Article.
6. If the commencement date of the term of this lease is not the
first day of the first comparative year, then the additional rent due hereunder
for such first comparative year shall be a proportionate share of said
additional rent for the entire comparative year, said proportionate share to be
based upon the length of time that the lease term will be in existence during
such first comparative year. Upon the date of any expiration or termination of
this lease except termination because of Tenant's default) whether the same be
the date hereinabove set forth for the expiration of the term or any prior or
subsequent date, a proportionate share of said additional rent for the
comparative year during which such expiration or termination occurs shall
immediately become due and payable by Tenant to Landlord, if it was not
theretofore already billed and paid. The said proportionate share shall be based
upon the length of time that this lease shall have been in existence during such
comparative year. Landlord shall promptly cause statements of said additional
rent for that comparative year to be prepared and furnished to Tenant. Landlord
and Tenant shall thereupon make appropriate adjustments of amounts then owing.
7. Landlord's and Tenant's obligations to make the adjustments
referred to in subdivision (6) above shall survive any expiration or termination
of this lease.
8. Any delay or failure of Landlord in billing any tax escalation
hereinabove provided shall not constitute a waiver of or in any way impair the
continuing obligation of Tenant to pay such tax escalation hereunder.
FIFTY-NINTH: - (A) Tenant acknowledges that its continued occupancy
of the demised premises and the regular conduct of its business therein, are of
utmost importance to the Landlord in the renewal of other leases in the
building, in the renting of vacant space in the building, in the providing of
electricity, air conditioning, steam and other services to the tenants in the
building, and in the maintenance of the character and quality of the tenants in
the building. Tenant therefore covenants and agrees that it will occupy the
entire demised premises and will conduct its business therein in the regular and
usual manner, throughout the term of this lease. Tenant acknowledges that
Landlord is executing this lease in reliance upon these covenants and that these
covenants are a material element of consideration inducing Landlord to execute
this lease. Tenant further agrees that if it vacates the demised premises or
fails to so conduct its business therein at any time during the term of this
lease, without the prior written consent of the Landlord, then all rent and
additional rent reserved in this lease from the date of such breach to the
expiration date of this lease shall become immediately due and payable to
Landlord.
(B) The parties recognize and agree that the damage to Landlord
resulting from any breach of the covenants in subdivision (A) hereof will be
extremely substantial, will be far greater than the rent payable for the balance
of the term of this lease, and will be impossible of accurate measurement. The
parties therefore agree that in the event of a breach or threatened breach of
the said covenants, in addition to all of Landlord's other rights and remedies,
at law or
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in equity or otherwise, Landlord shall have the right of injunction to preserve
Tenant's occupancy and use. The words "become vacant or deserted" as used
elsewhere in this lease shall include Tenant's failure to occupy or use as by
this Article required.
(C) If Tenant breaches either of the covenants in subdivision (A)
above, and this lease be terminated because of such default, then, in addition
to Landlord's rights of re-entry, restoration, preparation for and re-rental,
and anything elsewhere in this lease to the contrary notwithstanding, Landlord
shall retain its right to judgment on and collection of Tenant's aforesaid
obligation to make a single payment to Landlord of a sum equal to the total of
all rent and additional rent reserved for the remainder of the original term of
this lease, subject to future credit or repayment to Tenant in the event of any
rerenting of the premises by Landlord, after first deducting from re-rental
income all expenses incurred by Landlord in reducing to judgment or otherwise
collecting Tenant's aforesaid obligation, and in obtaining possession of,
restoring, preparing for and re-letting the premises. In no event shall Tenant
be entitled to a credit or repayment for rerental income which exceeds the sums
payable by Tenant hereunder or which covers a period after the original term of
this lease.
(D) If any provision of this Article of this lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Article, or the application of
such provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each provision
of this Article and of this lease shall be valid and be enforced to the fullest
extent permitted by law.
SIXTIETH: - The Landlord shall be under no obligation to provide
access between the "A" Wing and the "B" Wing on the floor of the premises
demised herein, and any passageways which may now or hereafter exist between
said wings may be discontinued at any time at the discretion of the Landlord.
SIXTY-FIRST: - 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.
SIXTY-SECOND: - Tenant and Tenant's servants, employees, agents,
visitors, and licensees shall observe faithfully, and comply strictly with, the
Rules and Regulations and such other and further reasonable Rules and
Regulations as Landlord or Landlord's agents may from time to time adopt. Notice
of any additional rules or regulations shall be given in such manner as Landlord
may elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Landlord or Landlord's agents, the
parties hereto agree to submit the question of the reasonableness of such Rule
or Regulation for decision to the Chairman of the Board of Directors of the
Management Division of The Real Estate Board of New York, Inc., or to such
impartial person or persons as he may designate, 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
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shall be asserted by service of a notice in writing upon Landlord within thirty
(30) days after the adoption of any such additional Rule or Regulation. Nothing
in this lease contained shall be construed to impose upon Landlord any duty or
obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Landlord shall
not be liable to Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors or licensees.
The use in the demised premises of auxiliary heating devices, such
as portable electric heaters, heat lamps or other devices whose principal
function at the time of operation is to produce space heating, is prohibited.
SIXTY-THIRD: - It is understood and agreed that this lease is
submitted to Tenant on the understanding that it shall not be considered an
offer and shall not bind Landlord in any way until (i) Tenant has duly executed
and delivered duplicate originals to Landlord and (ii) Landlord has executed and
delivered one of said originals to Tenant.
SIXTY-FOURTH: - It is understood and agreed that the annual rent for
the period November 1, 1999 to June 30, 2002 shall be SIXTY THOUSAND FIVE
HUNDRED EIGHTY- SEVEN AND 00/100 ($60,587.00) DOLLARS ($5,048.92 per month); and
for the period July 1, 2002 to April 30, 2005 the annual rent shall be
SIXTY-FOUR THOUSAND EIGHT HUNDRED EIGHTY-SEVEN AND 00/100 ($64,887.00) DOLLARS
($5,407.25 per month). Of the above figures, SIX THOUSAND EIGHT HUNDRED
THIRTY-SEVEN AND 00/100 ($6,837.00) DOLLARS represents the electric rent
inclusion factor of the annual rent which shall be subject to adjustment as
provided in Article #22 hereof.
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
1350 BROADWAY ASSOCIATES
BY: HELMSLEY-SPEAR, INC., Agent
............................... /s/[illegible].........................
Witness for Landlord: Chief Operating Officer
ACTIVE APPAREL GROUP, INC.
.......................................
............................... By: /s/ George Horowitz
Witness for Tenant: President & CEO..................
George Horowitz.................
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ACKNOWLEDGMENTS
LANDLORD
State of New York )
County of New York ) ss.:
On this ____ day of _____, 19__, before me personally came
__________, to me known and known to me to be a partner of ____________, a
co-partnership, mentioned and described in, and which executed the foregoing
instrument, and the said duly acknowledged to me that he executed the said
instrument for and on behalf of and with the authority of said for the uses and
purposes therein mentioned.
....................................
PARTNERSHIP TENANT
State of New York )
County of New York ) ss.:
On this ____ day of _________, 19__, before me personally came
___________, to me known and known to me to be a partner of _____________, a
co-partnership, mentioned and described in, and which executed the foregoing
instrument, and the said duly acknowledged to me that he executed the said
instrument for and on behalf of and with the authority of said for the uses and
purposes therein mentioned.
....................................
INDIVIDUAL TENANT
State of New York )
County of New York ) ss.:
On this ____ day of ___, 19 , before me personally came _________,
to me known and known to me to be the individual described in, and who executed
the foregoing instrument, and acknowledged to me that he executed the same.
....................................
CORPORATE TENANT
State of New York )
County of New York ) ss.:
On this ___ day of ______, 19__, before me personally came
_________, to me known, who being by me duly sworn, did depose and say that he
resides at ______________; that he is the of the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
....................................
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GUARANTY
For Value Received, and in consideration for, and as an inducement
to Landlord making the foregoing lease with Tenant, the undersigned guarantees
to Landlord, its successors and assigns, the full performance and observance of
all the covenants, conditions and agreements, including the "Rules and
Regulations", therein provided to be performed and observed by Tenant, without
requiring any notice or proof of non-payment, non-performance, or non-
observance, and without demand, to charge the undersigned therefor, all of which
the undersigned hereby expressly waives.
The undersigned further covenants and agrees: (a) that the validity
of this agreement and its obligations hereunder shall in no wise be terminated,
affected or impaired by reason of the assertion by Landlord against Tenant of
any of the rights or remedies reserved to Landlord pursuant to the provisions of
the within lease; (b) that this guaranty shall remain and continue in full force
and effect as to any renewal, modification or extension of the within lease.
As a further inducement to Landlord to make the within lease and in
consideration thereof, Landlord and the undersigned covenant and agree that in
any action or proceeding or counterclaim brought by either against the other on
any matters whatsoever arising out of, under, or in any way connected with said
lease or this guaranty, or by virtue of the terms thereof, Landlord and the
undersigned shall and do hereby waive trial by jury.
Dated, New York City , 19
............................... ..............................................
Witness ..............................................
Address
State of New York )
County of New York ) ss.:
On this day of , 19 , before me personally came
, to me known and known to me to be the individual
described in, and who executed the foregoing Guaranty and acknowledged to me
that he executed the same.
....................................
Notary Public
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<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than ingress and egress to and from
the demised premises, and if said premises are situate on the ground floor of
the building the Tenant thereof shall further, at said Tenant's own expense,
keep the sidewalks and curb directly in front of said premises clean and free
from ice, snow, etc.
2. The freight and not the passenger elevators shall be used by the
working hands of Tenant and persons calling for and delivering goods to and from
the demised premises.
3. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Landlord. No
curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the demised premises, without the prior
written consent of the Landlord. Such awnings, projections, curtains, blinds,
shades, screens or other fixtures must be of a quality, type, design and color,
and attached in the manner approved by the Landlord.
4. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside or inside of the demised premises or building without the prior written
consent of Landlord. Interior signs on doors shall be inscribed, painted or
affixed for each Tenant by Landlord at the expense of such Tenant, and shall be
of a size, color and style acceptable to Landlord. Only the Tenant named in the
lease shall be entitled to appear on the Directory Board or Tablet. Additional
names may be added in Landlord's sole discretion under such terms and conditions
as he may approve.
5. The sashes, sash doors, skylights, windows and doors that reflect
or admit light and air into the halls, passageways or other public places in the
building shall not be covered by any Tenant, nor shall any bottles, parcels, or
other articles be placed on the windowsills.
6. The water and wash closets and other plumbing fixtures shall not
be used for any purposes other than those for which they were constructed, and
no sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by Tenant who,
or whose servants, employees, agents, visitors or licensees, shall have caused
the same.
7. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. No linoleum or other
floor covering shall be laid in direct contact with the floor of the demised
premises, but if any such covering is required by Tenant, an interlining of
builder's deadening felt shall first be affixed to the floor with paste or other
water soluble material, the use of cement or other adhesive non-soluble in water
is expressly prohibited.
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<PAGE>
8. No Tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them whether by the use of
any instrument, radio, talking machine, musical noise, whistling, singing or in
any other way.
9. No Tenant, nor any of Tenant's servants, employees, agents,
visitors, or licensees, shall at any time bring or keep upon the demised
premises any inflammable, combustible or explosive fluid, chemical and
substance, or cause or permit any unusual or objectionable odors to be produced
upon or permeate from the demised premises. No animals or birds shall be kept by
Tenant in or about the building.
10. Landlord reserves the right to inspect all freight to be brought
into the building and to exclude from the building all freight which violates
any of these Rules and Regulations or the lease of which these Rules and
Regulations are a part.
11. Landlord shall have the right to prohibit any advertising by any
Tenant which, in its opinion, tends to impair the reputation of the building or
its desirability and, upon written notice from Landlord, Tenant shall refrain
from or discontinue such advertising.
12. Canvassing, soliciting and peddling in the building is
prohibited and each Tenant shall co-operate to prevent the same.
13. There shall not be used in any space, or in the public halls of
any building, either by Tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
14. No Tenant shall purchase spring water, ice, towels, or other
like service, from any company or persons not approved by Landlord.
15. The use in the demised premises of auxiliary heating devices,
such as portable electric heaters, heat lamps or other devices whose principal
function at the time of operation is to produce space heating, is prohibited.
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<PAGE>
ADDITIONAL CLAUSES ATTACHED TO AND FORMING A PART OF LEASE DATED JULY 19, 1999
BETWEEN 1350 BROADWAY ASSOCIATES AND ACTIVE APPAREL GROUP, INC.
SIXTY-FIFTH:
A. 1. The Landlord will supply through its system chilled water at a
temperature in the approximate range of 45 degrees F. to 50 degrees F.
throughout the cooling season, to wit, April 15 to October 15 in each year, on
regular business days, Monday through Friday from 8:00 A.M. to 6:00 P.M.
2. Landlord may elect from time to time; to commence the cooling
season on a date earlier than that specified above and/or extend the cooling
season beyond the date specified in said clause. In either or both such events,
Tenant agrees it will avail itself to the cooling season aforementioned. In such
event, Tenant covenants and agrees to pay to Landlord as additional rent for the
chilled water to be supplied by Landlord prior to and/or subsequent to the
cooling season aforementioned, a sum equal to the proportion of the annual
additional rent payable as herein provided for chilled water service furnished
during the cooling season specified in this clause, that the number of days
during which the Landlord furnishes the chilled water service prior to and/or
subsequent to such cooling season aforementioned. Such sum shall be in addition
to all the other sums payable under this lease, including but not limited to the
annual additional rent payable for chilled water service during the cooling
season aforementioned, the same shall be due and payable on demand.
B. For the chilled water service to be supplied by the Landlord, the
Tenant agrees, throughout the term of this lease, to pay the Landlord as
additional rent, (aggregating the sum of $1,612.50 per annum) for the space in
the demised premises to be air-cooled by the system, and Tenant agrees to pay
such additional rent in twelve (12) monthly installments of $134.00 in advance,
on the first day of each month, for the duration of this lease. However, during
any continued occupancy of said premises by the Tenant after the expiration of
said lease, Tenant agrees to pay the building's prevailing rate for the chilled
water service during the full term of the continued occupancy. Payment to be
made in the same manner as heretofore. If either of said dates shall be other
than the first day of the month, the monthly installment of additional rent for
that month shall be prorated. Electric current to operate the installation shall
be paid by the Tenant as herein in this lease provided.
C. 1. Landlord shall have no responsibility or liability for failure
to supply chilled water for the operation of the installation or for failure to
perform any agreement contained herein, when prevented from doing so by strikes,
accidents or by any cause beyond Landlord's control, or by laws, orders, or
Regulations of any Federal, State, County or Municipal Authority or other
governmental authority or by failure of water, steam, electric supply or
inability by exercise of reasonable diligence, to obtain water, steam or
electricity.
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<PAGE>
2. Landlord reserves the right to stop service of furnishing chilled
water for air cooling system when necessary by reason of accident or emergency,
or for repairs, alterations, replacements, or improvements which in the judgment
of the Landlord are desirable or necessary to be made to the chilled water
circulating system or to the demised premises or to the building of which the
demised premises are a part, until such repairs, alterations, replacements, or
improvements shall have been completed.
D. Landlord will, without charge and as an accommodation to Tenant,
attend to the regular lubrication of the installation, during regular business
hours, after same is connected to the Landlord's system, and in addition,
Landlord will install filters in such installation, which filters are to be
furnished by and at the expense of the Tenant. Landlord shall not be liable to
Tenant for damage resulting from any delays or omissions in connection with such
lubrication or the service to be rendered pursuant to this sub-division.
E. Tenant agrees to indemnify and hold the Landlord safe and
harmless from and against any injury or damage to the demised premises or to the
building of which the demised premises are a part, and from and against any and
all claims for injury or damage to property which may be asserted against
Landlord, if any such injury or damage is caused by the installation,
connection, operation and maintenance of Tenant's air cooling system.
F. If, on the date hereof, the unit has already been installed and
connected with Landlord's system, then all of the provisions of this article
shall nevertheless be applicable with the same force and effect as though the
installation was a new installation, and the additional rent payable hereunder
for the chilled water shall commence on the commencement of the term of this
lease.
G. Landlord agrees to allocate FORTY-THREE (43) gallons per minute
to the installation.
H. It is further understood and agreed that the complete chilled
water air cooling machinery, equipment, and all parts hereto, is and remain at
all times the property of the Landlord.
I. Landlord is in no way obligated to replace any or all of the air
conditioning system in the premises if any governmental regulations require the
installation of any additional equipment or fixtures.
J. 1. It is understood and agreed that the Landlord's obligation
under this article is to supply chilled water to the demised premises through
the Landlord's chilled water system.
2. Tenant may use any air conditioning equipment presently in the
demised premises.
3. Any necessary repairs or replacements of any air conditioning
equipment (other than Landlord's chilled water system equipment) is the
obligation of the Tenant. Any replacements or additions to the air conditioning
equipment shall be limited to the chilled water system and shall be subject to
Landlord's written approval which shall not be unreasonably withheld.
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<PAGE>
1350 BROADWAY ASSOCIATES
BY: HELMSLEY-SPEAR, INC., Agent
/s/ [illegible]
- -----------------------------------------
Chief Operating Officer
ACTIVE APPAREL GROUP, INC.
By: /s/ George Horowitz
- -----------------------------------------
President & CEO
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<PAGE>
ADDITIONAL CLAUSES ATTACHED TO AND FORMING A PART OF LEASE DATED JULY 19, 1999
BETWEEN 1350 BROADWAY ASSOCIATES AND ACTIVE APPAREL GROUP, INC.
SIXTY-SIXTH:
Supplementing Article 10 and 59 hereof:
1. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this Lease, nor
underlet, or suffer, or permit the demised premises or any part thereof to be
used or occupied by others, without the prior written consent of Landlord in
each instance. If this Lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anyone other than Tenant, Landlord may, after
default by Tenant, collect rent from the assignee, undertenant, or occupant, and
apply the net amount collected to the rent herein reserved, but no assignment,
underletting, occupancy or collection shall be deemed a waiver of the provision
hereof, the acceptance of the assignee, undertenant or occupant of Tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Landlord to an assignment or
underletting shall not in any way by construed to relieve Tenant from obtaining
the express consent in writing of Landlord to any further assignment or
underletting. In no event shall any permitted sublessee assign or encumber its
sublease or further sublet all or any portion of its sublet space or otherwise
suffer or permit the sublet space or any part thereof to be used or occupied by
others, without Landlord's prior written consent in each instance. A
modification, amendment or extension of a sublease shall be deemed a sublease.
If any lien is filed against the demised premises or the building of which the
same form a part for brokerage services claimed to have been performed by
Tenant, whether or not actually performed, the same shall be discharged by
Tenant within thirty (30) days thereafter, at Tenant's expense, by filing a bond
required by law or otherwise, and paying any other necessary sums, and Tenant
agrees to indemnify Landlord and its agents and hold them, harmless from and
against any and all claims, losses or liability resulting from such lien for
brokerage services rendered.
2. If Tenant desires to assign this Lease or to sublet all or any
portion of the demised premises, it shall first submit in writing to Landlord
the documents described in Section "C" hereof and shall offer in writing, (i)
with respect to a prospective assignment, to assign this Lease to Landlord
without any payment of moneys or other consideration, therefor, or, (ii) with
respect to a prospective subletting, to sublet to Landlord the portion of the
demised premises involved ("Leaseback Area") for the term specified by Tenant in
its proposed sublease and at the lower of (a) Tenant's proposed subrental or (b)
at the same rate of fixed rent and additional rent, and otherwise on the same
term, covenants and conditions (including provisions relating to escalation
rents), as are contained herein and as are allocable and applicable to the
portion of the demised premises to be covered by such subletting. The offer
shall specify the date when the Leaseback Area will be made available to
Landlord, which date shall be in no event earlier than ninety (90) days nor
later than one hundred eighty (180) days following the acceptance of the offer.
If an offer of
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sublease is made, and if the proposed sublease will result in all or
substantially all of the demised premises being sublet, then Landlord shall have
the option to extend the term of its proposed sublease for the balance of the
term of this Lease less one (1) day.
Landlord shall have a period of ninety (90) days from the receipt of
such offer to either accept or reject the same. If Landlord shall accept such
offer (i) Tenant shall then execute and deliver to Landlord, or to anyone
designated or named by Landlord, an assignment or sublease, as the case may be,
in either case in a form reasonably satisfactory to Landlord's counsel; and (ii)
if the proposed transaction is a sublease and Landlord accepts such offer,
Tenant, on demand, shall pay to Landlord or its managing agent (as Landlord
shall elect) an amount equal to the brokerage commissions which would have been
incurred by Tenant but for Landlord's accepting such offer.
If a sublease is so made it shall expressly:
(a) permit Landlord to make further subleases of all or any part
of the Leaseback Area and (At no cost or expense to Tenant) to
make and authorize any and all changes, alterations,
installations and improvements in such space as necessary;
(b) provide that Tenant will, at all times, permit reasonably
appropriate means of ingress to and egress from the Leaseback
Area;
(c) negate any intention that the estate created under such
sublease be merged with any other estate held by either of the
parties;
(d) provide that Landlord shall accept the Leaseback Area "as is"
except that Landlord, at Tenant's expense, shall perform all
such work and make all such alterations as may be required
physically to separate the Leaseback Area from the remainder
of the demised premises and to permit lawful occupancy, it
being intended that Tenant shall have no other cost or expense
in connection with the subletting of the Leaseback Area;
(e) provide that at the expiration of the term of such sublease,
Tenant will accept the Leaseback Area in its then existing
condition, subject to the obligations of Landlord to make such
repairs thereto as may be necessary to preserve the Leaseback
Area in good order and condition, ordinary wear and tear
excepted.
Landlord shall indemnify and save Tenant harmless from all
obligations under this Lease as to the Leaseback Area during the period of time
it is so sublet, except for fixed annual rent and additional rent, if any, due
under the within Lease, which are in excess of the rents and additional sums due
under such sublease.
Subject to the foregoing, performance by Landlord, or its designee,
under a sublease of the Leaseback Area shall be deemed performance by Tenant of
any similar obligation under this Lease
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<PAGE>
and any default under any such sublease shall not give rise to a default under a
similar obligation contained in this Lease, nor shall Tenant be liable for any
default under this Lease or deemed to be in default hereunder if such default is
occasioned by or arises from any act or omission of the tenant under such
sublease or is occasioned by or arises from any act or omission of any occupant
holding under or pursuant to any such sublease.
C. If Tenant requests Landlord's consent to a specific assignment or
subletting, it shall submit in writing to Landlord (i) the name and address of
the proposed assignee or sublessee, (ii) a duly executed counterpart of the
proposed agreement of assignment or sublease, (iii) reasonably satisfactory
information as to the nature and character of the business of the proposed
assignee or sublessee, and as to the nature of its proposed use of the pace, and
(iv) banking, financial or other credit information relating to the proposed
assignee or sublessee reasonably sufficient to enable Landlord to determine the
financial responsibility and character of the proposed assignee or sublessee.
D. If Landlord shall not have accepted Tenant's offer as provided in
Section "B", then Landlord will not unreasonably withhold or delay its consent
to Tenant's request for consent to such specific assignment or subletting, where
Tenant will not move the conduct of its business to another building in New York
City. Any such consent of Landlord shall be subject to the terms of this Article
and conditioned upon there being no default by Tenant, beyond any grace period,
under any of the terms, covenants and conditions of this Lease at the time that
Landlord's consent to any such subletting or assignment is requested and on the
date of the commencement of the term of any such proposed sublease or the
effective date of any such proposed assignment.
E. Upon receiving Landlord's written consent (and unless theretofore
delivered to Landlord) a duly executed copy of sublease or assignment shall be
delivered to Landlord within ten (10) days after execution thereof. Any such
sublease shall provide that the sublease shall comply with all applicable terms
and conditions of this Lease to be performed by the Tenant hereunder. Any such
assignment of lease shall contain an assumption by the assignee of all of the
terms, covenants and conditions of this Lease to be performed by the Tenant.
F. Anything herein contained to the contrary notwithstanding:
1. Tenant shall not advertise (but may list with brokers) its space
for assignment or subletting at a rental rate lower than the greater of the then
building rental rate for such space or the rental rate then being paid by Tenant
to Landlord.
2. Deleted.
3. No assignment or subletting shall be made:
a. To any person or entity which shall at that time be a
tenant, subtenant or other occupant of any part of the building of
which the demised premises form a part, or who dealt with Landlord
or Landlord's agent (directly or through a broker) with respect to
space in the
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<PAGE>
building during the six (6) months immediately preceding Tenant's
request for Landlord's consent;
b. By the legal representatives of the Tenant or by any
person to whom Tenant's interest under this Lease passes by
operation of law, except in compliance with the provisions of this
Article;
c. To any person or entity for the conduct of a business
which is not in keeping with the standards and the general character
of the building of which the demised premises form a part.
G. Anything hereinabove contained to the contrary notwithstanding,
the offer back to Landlord provisions of Section "B" hereof shall not apply to,
and Landlord will not unreasonably withhold or delay its consent to an
assignment of this Lease, or sublease of all of part of the demised premises, to
the parent of Tenant or to a wholly-owned subsidiary of Tenant or of said
parent, or to any corporation into or with which Tenant may be merged or
consolidated, provided that the greater of (a) the net worth of Tenant on the
date hereof or (b) the net worth of Tenant immediately prior to such merger or
consolidation; provided, further, that any such assignment of lease shall
contain an assumption by the Assignee of all of the terms, covenants and
conditions of this Lease to be performed by the Tenant. Tenant agrees that no
such assignment or subletting shall be effective unless and until Tenant gives
Landlord written notice thereof, together with a true copy of the assignment or
of the sublease.
H. If Landlord shall not have accepted Tenant's offer and Tenant
effects such assignment or subletting, then Tenant thereafter shall pay to
Landlord a sum equal to (a) any rent or other consideration paid to Tenant by
any subtenant which (after deducting the costs of Tenant, if any, in effecting
the subletting, including reasonable alteration costs, commissions and legal
fees) is in excess of the rent allocable to the subleased space which is then
being paid by Tenant to Landlord pursuant to the terms hereof, and (b) any other
profit or gain (after deducting any necessary expenses incurred) realized by
Tenant from any such subletting or assignment. All sums equal hereunder by
Tenant shall be payable to Landlord as additional rent upon receipt thereof by
Tenant.
I. In no event shall Tenant be entitled to make, nor shall Tenant
make, any claim and Tenant hereby waives any claim for money damages (nor shall
Tenant claim any money damages by way of set-off, counterclaim, or defense)
based upon any claim or assertion by Tenant that Landlord has unreasonably
withheld or unreasonably delayed its consent or approval to a proposed
assignment or subletting as provided for in this Article. Tenant's sole remedy
shall be an action or proceeding to enforce any such provision, or for specific
performance, injunction or declaratory judgment.
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<PAGE>
1350 BROADWAY ASSOCIATES
BY: HELMSLEY-SPEAR, INC. Agent
/s/ [illegible]
- -------------------------------------------
Chief Operating Officer
ACTIVE APPAREL GROUP, INC.
By: /s/ George Horowitz
- -------------------------------------------
President & CEO
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<PAGE>
ADDITIONAL CLAUSES ATTACHED TO AND FORMING A PART OF LEASE DATED JULY 19, 1999
BETWEEN 1350 BROADWAY ASSOCIATES AND ACTIVE APPAREL GROUP, INC.
SIXTY-SEVENTH:
A. Tenant covenants and agrees that Landlord shall have the absolute
and unqualified right, upon notice to Tenant, to designate as the Demised
Premises that part of any other floor in the building or in the building located
at 1333 Broadway, New York, New York that approximately corresponds to the
premises demised hereunder, provided, however, (i) Landlord may exercise this
tight only once during the Initial Term of this Lease, (ii) such substituted
space shall be the equivalent or better in the appearance of the Demised
Premises upon completion of Landlord's Initial Construction (wear and tear, as
well as damage to the Demised Premises caused by Tenant, and (iii) Landlord
shall move Tenant to the substituted space during a single weekend. Such notice
shall specify and designate the space so substituted for the Demised Premises.
Notwithstanding such substitution of space, this Lease and all the terms,
provisions, covenants and conditions contained in this Lease shall remain and
continue in full force and effect, except that the Demised Premises shall be and
be deemed to be such substituted space (hereinafter called "Substituted Space"),
with the same force and effect as if the Substituted Space were originally
specified in this Lease as the premises demised hereunder. The new space shall
be the same size or no more than 20% larger than the present space and if Tenant
occupies a complete floor, Tenant can only be moved to another complete floor
which also will be the same size or no more than 20% larger than the present
full floor and Tenant shall remain as sole Tenant on such floor.
B. In the event of the substitution of space, Tenant, upon six (6)
months prior written notice, shall move to the Substituted Space, at Landlord's
expense, and upon failure of Tenant to so move to the Substituted Space,
Landlord may, as Tenant's Agent, remove Tenant from the Demised Premises to the
Substituted Space. Failure of Tenant to move to the Substituted Space, pursuant
to this Article shall be deemed a substantial breach of this Lease. Landlord
shall reimburse Tenant for Tenant's reasonable and necessary out-of-pocket
expenses actually incurred with regard to the move to the Substituted Space.
Upon request from Landlord, Tenant shall supply Landlord with satisfactory proof
of out-of-pocket expenses incurred by Tenant in moving from the Demised Premises
to the Substituted Space. Tenant shall be reimbursed for moving costs as they
are incurred.
C. Following such substitution of space, pursuant to this Article,
if any, Landlord and Tenant shall, promptly at the request of either party,
execute and deliver an agreement in recordable form setting forth such
substitution of space.
D. No such substitution shall be permitted without Landlord also
making same substitution for the premises known as Rooms 2300-2307/2315 1350
Broadway.
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To Be Signed By Landlord and Tenant
/s/ [illegible]....................
(Landlord)
/s/ George Horowitz
President & CEO
(Tenant)
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<PAGE>
ADDITIONAL CLAUSES ATTACHED TO AND FORMING A PART OF LEASE DATED JULY 19, 1999
BETWEEN 1350 BROADWAY ASSOCIATES AND ACTIVE APPAREL GROUP, INC.
SIXTY-EIGHTH:
Landlord shall provide and install the following facilities and materials and
complete the following work as part of "Landlord's Work" (as hereinafter
defined) in accordance with Tenant's Plans. For purposes of this Lease,
"Landlord's Work" shall be:
1. PARTITIONS: Supply and install building standard
drywalls.
2. CEILING: Supply and install building standard 2 x 4
lay-in acoustical ceiling with window pockets.
3. LIGHTING: Supply and install one (1) 2 x 4 light
fixture every 100 sq. ft. of rental area.
4. AIRCONDITIONING: Provide building standard air-conditioning
system with all necessary ductwork to form a complete system, the
repair and maintenance of which shall be the obligation of Tenant,
subsequent to the first year after installation.
5. FLOORING: Supply and install building standard carpet
over padding or building standard vinyl tile floor. Tenant to select
color of carpet/tile to match decor.
6. DOORS: Tan Supply and install building standard
hollow metal doors, and, if required, building standard Herculite
entrance door with sidelight and back-up fire door.
7. ELECTRICAL CONSTRUCTION:
a. Supply and install two (2) separate dedicated circuits.
b. Supply and install two (2) base outlets per room.
8. PAINTING: Paint with one (1) coat of paint on existing
walls; two (2) coats on new sheetrock walls. Tenant to select color
from our building standard color chart.
9. RADIATOR COVERS: Supply and install paint grade building
standard radiator covers where needed.
10. CLOSETS: Supply and install one (1) building standard
clothes closet every 2,000 feet.
11. SPRINKLERS: Supply and install building standard
sprinkler heads as required by all applicable ordinances and codes.
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<PAGE>
As used in this Workletter, the term "building standard" shall mean such
materials as Landlord may elect to use as part of its standard construction
substantially throughout the building.
Tenant's rent, as outlined in Article SIXTY-FOURTH hereof, shall not commence
until Landlord has substantially completed the above work.
Landlord will complete above work as stated above and do any additional work
requested by Tenant as long as Landlord's expenses do not exceed Fifty Three
Thousand Five Hundred ($53,000.00) Dollars.
To Be Initialled By The Landlord and Tenant
/s/ [illegible].............
(Landlord)
George Horowitz
President & CEO......................
(Tenant)
[Floor Plan Omitted]
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Exhibit 10.47
PROMISSORY NOTE
DEBTOR: GEORGE Q. HOROWITZ
CREDITOR: ACTIVE APPAREL GROUP, INC.
$91,200 December 31, 1999
- ------------------------- ------------------------
On or before July 31, 2009, for value received, George Horowitz
promises to pay to Active Apparel Group, Inc. (hereinafter known as the
"Company"), or its order, at its principal address in New York, New York, or
such other place as the Company may designate the sum of Ninety-One Thousand and
Two Hundred Dollars ($91,200), with interest thereon (computed on the basis of a
360 day year consisting of twelve 30 day months) from the date hereof on the
unpaid principal amount at the rate of Prime plus one and one-half percent per
annum, payable in arrears at such time at the principal amount hereof shall have
become due and payable. For purposes of this Note, the term "Prime" shall mean
that rate of interest actually charged by Chase Manhattan Bank, Main Branch, New
York, New York to its most favored commercial customers, as such rate may vary
over the term of this Note. All payments of principal and interest on this Note
shall be in such coin or currency of the United States of America as at the time
of payment shall be legal tender for payment of public and private debts.
This Promissory Note is made and delivered in full and final
satisfaction of a certain Promissory Note made the 23rd day of December, 1996 in
the principal sum of $120,000 by and between George Horowitz, debtor and Active
Apparel Group, Inc., Creditor. The aforesaid Promissory Note is accordingly
cancelled and deemed null and void.
/S/ GEORGE HOROWITZ
---------------------------------
GEORGE HOROWITZ
Exhibit 10.48
1350 BROADWAY ASSOCIATES
--------------------------------------------------------
Landlord,
to
ACTIVE APPAREL GROUP, INC.
--------------------------------------------------------
Tenant.
-------------------------------------
LEASE
-------------------------------------
From February 1, 2000
To April 30, 2005
Annual Rent $171,575.00 p.a. $14,297.92 p.m. 2/1/00-9/30/02
$185,301.00 p.a. $15,441.75 p.m. 10/1/02-4/30/05
Elec.: $ 21,824.00 p.a. $ 1,818.70 p.m.
C.W.: $ 5,147.25 p.a. $ 428.94 p.m.
Premises: Rooms 2300-2307/2315
1350 Broadway
<PAGE>
Agreement of Lease, made as of this 20th day of July, 1999,
between 1350 BROADWAY ASSOCIATES, a partnership having offices in care of
Helmsley-Spear, Inc., 60 East 42nd Street party of the first part, hereinafter
referred to as "Landlord" or "Lessor", and ACTIVE APPAREL GROUP, INC. a domestic
corporation having offices at New York City, party of the second part,
hereinafter referred to as "Tenant" or "Lessee".
Witnesseth: Landlord hereby leases to Tenant and Tenant hereby
hires from Landlord the space on the 23rd floor, as more particularly shown on
the plan annexed hereto and made a part hereof. Room 2300-2307/2315 in the
building known as 1350 Broadway in the Borough of Manhattan, City of New York,
for the term of 5 Yrs. 3 Mos. (or until such term shall sooner cease and expire
as hereinafter provided) to commence on the 1st day of February 2000 and to end
on the 30th day of April, 2005, both dates inclusive, at an annual rent of
* See Article SIXTY-FOURTH
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 of $ * in advance on the first day of
each month during said term, at the office of Landlord or such other place as
Landlord may designate, without any set off or deduction whatsoever.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant and agree as follows:
FIRST:-Tenant shall pay the rent and additional rent as above
and as hereinafter provided.
SECOND:-(a) Tenant shall pay to Landlord, as additional rent
hereunder, in advance, on the first day of each and every month during the term
hereof, all sums expended by Landlord and/or which become due to Landlord under
this lease and under any collateral agreements relating to the premises.
Tenant's use and occupancy thereof, the supplying by Landlord to Tenant of any
services in connection therewith, together with any fines or penalties imposed
or assessed by any governmental authority by reason of failure to comply with
its requirements.
(b) 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 paragraph of this lease,
Landlord may immediately or at any time thereafter and without notice perform
the same for the account of Tenant, and if Landlord makes any expenditures or
incurs any obligations for the payment of money in connection therewith
including, but not limited to, attorneys' fees in instituting, prosecuting or
defending any action or
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<PAGE>
proceeding, such sums paid or obligations incurred with interest and costs shall
be deemed to be additional rent hereunder.
(c) The receipt by Landlord at any time of any installment of
the regular stipulated rent hereunder or of any additional rent shall not be
deemed to be a waiver of any other additional rent then due. For the non-payment
of any additional rent, Landlord shall have all the rights and remedies which it
would have in the case of a default in the payment of the regular stipulated
rent hereunder or any installment thereof.
THIRD:-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
Landlord pursuant to the terms of another lease with Landlord or with Landlord's
predecessor in interest, Landlord may, at Landlord's option and without notice
to Tenant, add the amount of such arrearages to any monthly installment of rent
payable hereunder, and the same shall be payable to Landlord as additional rent.
FOURTH:-Tenant shall use and occupy the demised premises for
office and showroom for display and sale, at wholesale and not retail, of
wearing apparel and accessories and for no other purpose. Tenant shall not
suffer or permit the demised premises or any part thereof to be used by others
for any purpose whatsoever, without the prior written consent of Landlord in
each instance.
FIFTH:-Tenant at its sole expense shall comply with all laws,
orders and regulations of Federal, State, County and Municipal Authorities, and
with any direction of any public officer or officers, pursuant to law, which
shall impose any violation, order or duty upon Landlord or Tenant with respect
to demised premises, or the use or occupation thereof. Tenant shall not do, or
permit to be done, any act or thing upon said premises which shall or might
subject Landlord to any liability or responsibility for injury to any person or
persons or to property by reason of any business or operation being carried on
upon said premises or for any other reason.
SIXTH:-Tenant will not at any time use or occupy the demised
premises in violation of the certificate of occupancy or certificate of
compliance issued for the building of which the demised premises form a part,
and in the event that any department of the City or State of New York shall
hereafter at any time contend and/or declare by notice, violation, order or in
any other manner whatsoever that the premises hereby demised are used for a
purpose which is a violation of such certificate of occupancy, Tenant shall,
upon five (5) days' written notice from Landlord, immediately discontinue said
use of such premises. Failure by Tenant to discontinue such use after such
notice shall be considered a default in the fulfillment of a covenant of this
lease, and Landlord shall have the right to terminate this lease immediately,
and in addition thereto shall have the right to exercise any and all rights and
privileges and remedies given to Landlord by and pursuant to the provisions of
Paragraph 40 hereof. The statement in this lease of
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<PAGE>
the nature of the business to be conducted by Tenant in demised premises shall
not be deemed or construed to constitute a representation or guaranty by
Landlord that such business may continue to be conducted in the premises for the
entire period of the lease or is lawful or permissible under the certificate of
occupancy in effect for the building of which the demised premises form a part,
or otherwise permitted by law. If alterations or additions, including but not
limited to a sprinkler system, are needed to permit lawful conduct of Tenant's
business or to comply with the certificate of occupancy, the same shall be made
by and at the sale expense of Tenant.
SEVENTH:-Tenant shall not suffer any act to be done or any
condition to exist on the demised premises or any part thereof or any article to
brought thereon, which may be dangerous, unless safeguarded as required by law,
or by any insurance carrier having any interest in such conduct or condition or
which may, in law, constitute a nuisance, public or private, and as not to make
void or voidable any insurance applicable to the building, under penalty of
damages and forfeiture.
EIGHT:-Tenant shall not at any time allow smoking on any part
of the premises where stock is stored. Tenant shall store all silk and other
textiles in steel bins or shelving, the bottoms of which shall be at least six
inches above the floor, and the tops of which shall extend at least three inches
and shall have drip points so as to shed water from the goods. No shelving bins
shall be installed without Landlord's prior written consent. Tenant shall make
all floors water-tight by painting or covering them with linoleum or other
water-tight floor covering. Where cleaning fluid is used, it shall be
non-inflammable. Tenant shall use no cleaning fluid not approved in writing by
Landlord. Tenant will not permit the accumulation of waste or refuse matter on
the premises.
NINTH:-Tenant will conduct its business in such a manner as to
enable Landlord or other tenants in the building to obtain the lowest possible
insurance rate upon the entire building in which the demised premises are
located, and will, at its sole expense, comply with all rules, orders,
regulations or requirements of all public liability, fire and insurance policies
in force at any time with respect to the demised premises, as well as all rules,
orders, regulations or requirements of the New York Board of Fire Underwriters
or any other similar body, and shall not do or permit anything to be done in or
upon said premises or bring or keep anything therein, except as now or hereafter
permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance
Rating Organization, or other authority having jurisdiction and then only in
such quantity and manner of storage as not to increase the rate for fire
insurance applicable to the building, or use the premises in a manner which
shall increase the rate of fire insurance on the building of which demised
premises form a part, or on property located therein, over that in effect prior
to this lease. If by reason of failure of Tenant to comply with the provisions
of this paragraph including, but not limited to, the mere use to which Tenant
puts the premises, the fire insurance rate shall at the beginning of this lease
or at any time thereafter be higher than it otherwise would be, then Tenant
shall reimburse Landlord, as additional rent hereunder, for that part of all
fire insurance premiums thereafter paid by Landlord, which shall have been
charged because of such failure or use by Tenant, and shall make such
reimbursement upon the first day
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<PAGE>
of the month following such outlay by Landlord. In any action or proceeding
wherein Landlord and Tenant are parties, a schedule or "make up" of rate for the
building or demised premises issued by the New York Fire Insurance Exchange, or
other body making fire insurance rates for said premises, shall be conclusive
evidence of the facts therein stated and of the several items and changes in the
fire insurance rate then applicable to said premises. Tenant shall not bring or
permit to be brought or kept in or on the demised premises, any inflammable,
combustible or explosive fluid, chemical, substance or material other than silk
or other textiles, or cause or permit any odors of cooking or other processes,
or any unusual or other objectionable odors to permeate from the demised
premises. That the premises are being used for the purpose set forth herein
shall not relieve Tenant from the foregoing duties, obligation and expenses.
TENTH:-(a) Tenant shall not assign, mortgage or encumber this
agreement nor underlet the demised premises or any part thereof or permit the
demised premises or any part thereof to be occupied by anybody other than
Tenant, without the prior written consent of Landlord in each instance. If this
lease be assigned, or if the demised premises or any part thereof be underlet or
occupied by anybody other than Tenant, Landlord may, after default by Tenant,
collect rent from the assignee, under-tenant or occupant, and apply the net
amount collected to the rent herein reserved, but no 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 Landlord to an assignment or
underletting shall not in any wise be construed to relieve Tenant from obtaining
the express consent in writing of Landlord to any further assignment or
underletting.
(b) If the demised premises shall be underlet in whole or in
part by Tenant or its heirs, executors, administrators, legal representatives,
successors or assigns, such party shall, within three (3) days of such
underletting, furnish Landlord with a duplicate original of such underlease and
shall, on demand of Landlord, supply Landlord within three (3) days of such
demand, a written list of all such under-tenants, the terms, including
expiration dates of their under-tenancies, the rents payable thereunder, and any
additional information requested by Landlord. This provision or compliance
therewith, however, shall in no event be construed to be a consent to any
underletting or a waiver of the covenant against underletting contained herein.
Non-compliance by Tenant with the provisions of this paragraph shall be deemed
to be a breach of this lease.
(c) Tenant assumes and shall be responsible for and liable to
Landlord, for all acts and omissions on the part of any present or future
under-tenant, their agents, employees, servants or licensees, and any breach or
violation of any terms, covenants, agreements, provisions, conditions and
limitations of this lease, whether by act or omission, by any under-tenant shall
constitute a breach or violation of this lease by Tenant.
-5-
<PAGE>
ELEVENTH:-Throughout the term of this lease, Tenant will take good care
of the demised premises and appurtenances and suffer no waste, damage,
disfigurement or injury thereto or any part thereof.
TWELFTH:-(a) Tenant shall make no alterations, decorations,
installations, additions or improvements in or to the demised premises,
including, but not limited to, an air-conditioning or cooling system, unit or
part thereof or other apparatus of like or other nature, nor bring materials in
connection therewith on the demised premises, without Landlord's prior written
consent, and then only by contractors or mechanics approved by Landlord, and
subject to plans and specifications approved by Landlord. All such work,
alterations, decorations, installations, additions or improvements shall be done
at Tenant's sole expense and at such times and in such manner as Landlord may
from time to time designate. All alterations, decorations, installations,
additions or improvements upon demised premises, made by either party, including
all paneling, decorations, partitions, railings, mezzanine floors, galleries,
steam, water, and air conditioning systems and units, shelving, electric
fixtures and the like, shall, unless Landlord elects otherwise (which election
shall be made by giving a notice pursuant to the provisions hereof not less than
thirty (30) days prior to the expiration or other termination of this lease or
any renewal or extension thereof) become the property of Landlord, and shall
remain upon, and be surrendered with, said premises, as a part thereof, at the
end of the term or renewal term, as the case may be. In the event Landlord shall
elect otherwise, then such alterations, installations, additions or improvements
made by Tenant upon the demised premises as the Landlord shall select, shall be
removed by Tenant at Tenant's sole cost and expense. All alterations,
decorations, installations, additions or improvements installed by Tenant may be
used by Tenant without additional charge for such use, and without any right in
the Landlord to remove the same in the absence of any default under this lease
during the term hereof.
(b) Tenant, at its own expense, will promptly repair all damage and
injury resulting from such removal and restore the space theretofore occupied by
such fixtures and installations to good order and condition and to character and
appearance equal to that of the area adjacent thereto, in default of any of
which Landlord may at its option cause the same to be done at Tenant's expense.
THIRTEENTH:-Tenant shall take good care of the demised premises and the
fixtures and appurtenances therein, and at its sole cost and expense make all
repairs thereto as and when needed to preserve them in good working order and
condition. All damage or injury to the demised premises and to its fixtures,
appurtenances and equipment or to the building of which the same form a part or
to its fixtures, appurtenances and equipment caused by Tenant's moving property
in or out of the building or by installation or removal of furniture, fixtures
or other property, or resulting from fire, explosion, air-conditioning unit or
system, short circuits, flow or leakage of water, steam, illuminating gas, sewer
gas, sewerage or odors or by frost or by bursting or leaking of pipes or
plumbing works or gas, or from any other cause of any other kind or nature
whatsoever due to carelessness, omission, neglect, improper conduct or other
cause of Tenant, its servants, employees, agents, visitors or licensees shall be
repaired, restored or replaced promptly
-6-
<PAGE>
by Tenant at its sole cost and expense to the satisfaction of Landlord. All
aforesaid repairs, restorations and replacements shall be in quality and class
equal to the original work or installations. If Tenant fails to make such
repairs, restorations or replacements within a reasonable time same may be made
by Landlord at expense of Tenant and collectible as additional rent.
FOURTEENTH:-(a) Except where otherwise provided in this lease, there
shall be no allowance to Tenant for diminution of rental value and no liability
on the part of Landlord by reason of inconvenience, annoyance or injury to
business arising from Landlord, Tenant or others making any repairs,
alterations, additions or improvements in or to any portion of the building or
demised premises, or in or to fixtures, appurtenances, or equipment thereof, and
no liability upon Landlord for failure of Landlord or others to make any
repairs, alterations or improvements in or to any portion of the building or of
demised premises, or in or to the fixtures, appurtenances or equipment thereof.
(b) Landlord reserves the right to stop service of the electric, water,
sprinkler, steam, air conditioning, elevator, heating and plumbing systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Landlord desirable or necessary
to be made, until said repairs, alterations, replacements or improvements shall
have been completed.
FIFTEENTH:-Tenant agrees that whenever any alterations, additions,
improvements, changes or repairs to the said premises are consented to by
Landlord, or in the moving of merchandise, fixtures or equipment into the said
building, or moving the same therefrom, only such labor under agreement with the
Building Trades Employers' Association of New York City, or which shall not
cause strikes or concerted labor action by other employees of the building, and
which have the same or similar labor union affiliations as those employed by
Landlord or Landlord's contractors, shall be employed.
SIXTEENTH:-(a) Any mechanic's lien filed against the demised premises,
or the building of which the same form a part, for work claimed to have been
done for, or materials claimed to have been furnished to Tenant, shall be
discharged by Tenant within ten (10) days thereafter, by payment in full or at
Tenant's expense, by filing the bond required by law. If Tenant fails to so pay
or file any bond, Landlord may pay the amount of said lien or discharge the same
by deposit, or otherwise, billing Tenant for all expenses in connection
therewith as additional rent.
(b) Nothing in this lease contained shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied by
inference or otherwise, to any contractor, sub-contractor, laborer or
materialman for the performance of any labor or the furnishing of any materials
for any specific improvement, alteration to, or repair of the demised premises,
or any part thereof, or for the demolition or replacement of the demised
premises or any part thereof.
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<PAGE>
(c) Tenant agrees to obtain and deliver to Landlord, written and
unconditional waivers of liens (and agreement that its filed plans may be
replaced), for all plans, specifications and drawings for work or materials to
be furnished to Tenant at the premises, signed by all architects, engineers and
designers to become involved in such work for Tenant; with respect to
contractors, subcontractors, materialmen and laborers, and all work or materials
to be furnished to Tenant at the premises. Tenant agrees to obtain and deliver
to Landlord written and unconditional waiver of mechanics liens upon the
premises or the building after payments to the contractors, and subject to any
applicable provisions of the Lien Law.
SEVENTEENTH:-Tenant will not, without Landlord's written consent,
place, affix or paint any signs, awnings, projections or advertising material of
any kind upon the exterior of the premises or of the building, not upon the
windows, nor in any location that may be visible from any of the lobbies or
passageways. If Tenant shall cause or permit any sign or other object, similar
or dissimilar, to be placed on or affixed to any part of the building not inside
the space specifically demised hereunder, Landlord shall have the right, without
notice or liability to Tenant, to remove and dispose of the same and to make any
repairs necessitated by such removal, all at Tenant's sole expense and risk.
Landlord's expenses in so doing shall be deemed additional rent hereunder and
collectible as such.
EIGHTEENTH:-(a) Tenant will not cause or permit any connection to be
made to the wiring on the electrical panel boards of the building without the
prior written consent and supervision of Landlord.
(b) Tenant agrees that it will not drive nails in, drill in, disfigure
or deface any part of the building nor suffer the same to be done, nor cause or
permit the floors, walls, doors or ceilings of the demised premises to be
drilled, hammered, pounded or otherwise dealt with in a noisy or disturbing
manner at any time during customary business hours (i.e., between 9:00 A.M. and
5:00 P.M.) whether or not such activities are incidental to or part of work to
which Landlord has consented.
(c) Tenant shall not install any pressing equipment, whether connected
to Tenant's gas- fired boiler or to the building steam system, without first
having plans and specifications approved by Landlord.
The vacuum used by pressing machines for the drying of garments shall
be created by an electrically driven vacuum pump. Tenant shall not use any
vacuum created by the use of steam from a gas-fired boiler or from the building
steam system.
(d) Tenant shall not permit any connection to be made at the demised
premises with any high pressure steam lines, electric current lines or water
lines without Landlord's prior written consent.
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<PAGE>
(e) Tenant shall not make any electrical or plumbing installation
without Landlord's prior written consent. All water lines must be installed in
red brass.
(f) Window air-conditioning units shall in no event be installed
without Landlords' prior written approval or be mounted so as to extend outward
beyond the line of the windowframe.
(g) Tenant shall install no linoleum, rubber, mastic or vinyl tile
floor covering, unless it is laid over a layer of felt, double cemented in the
manner approved by Landlord.
(h) Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which such floor was
designed to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes which must be placed so as to
distribute the weight. Business machines and mechanical equipment shall be
placed and maintained by Tenant at Tenant's expense in settings sufficient in
Landlord's judgment to absorb and prevent vibration, noise and annoyance. Tenant
agrees that upon the written request of Landlord, Tenant will, within fifteen
(15) days of the mailing of such request, provide rubber or other approved
settings for absorbing, preventing and decreasing noise and/or vibration from
any or all machines or machinery, such insulation or other devices for the
prevention, decrease or elimination of noise satisfactory to Landlord shall be
made in such manner and of such material as Landlord may direct. In the event
that Tenant fails to comply with the aforesaid request within the fifteen (15)
days aforementioned, Landlord may, at its option, by notice in writing to
Tenant, cause the term of this lease to expire. Landlord in such event shall
have the right to re-enter the premises by summary proceedings or otherwise
without liability. Landlord shall not give less than thirty (30) days' notice of
its election to terminate the lease as above provided. Landlord shall have the
right to enter the demised premises with workmen and materials and to insulate
the machinery as above provided, collecting from Tenant the cost of such work as
additional rent in the event that Tenant fails to comply with the written
request aforementioned after the expiration of fifteen (15) days from the
receipt thereof.
(i) Tenant shall not move any safe, heavy machinery, heavy equipment,
freight, bulky matter, or fixtures into or out of the building without
Landlord's prior written consent and the filing with Landlord of a Rigger's
Liability Insurance Certificate satisfactory to Landlord. If such safe,
machinery, equipment, freight, bulky matter or fixtures require special
handling, Tenant agrees to employ only persons holding a Master Rigger's License
to do said work, and that all work in connection therewith shall comply with the
Administrative Code of the City of New York.
(j) If the demised premises be or become infested with vermin, Tenant
shall, at Tenant's expense, cause the same to be exterminated from time to time
to the satisfaction of Landlord, and shall employ such exterminators and such
exterminating company or companies as shall be approved by Landlord.
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<PAGE>
(k) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed or
constructed, and no sweepings, rubbish, rags, acids or other substances shall be
deposited therein.
(l) Tenant agrees to provide proper receptacles as called for by the
Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization
or of the authority having jurisdiction. Tenant hereby agrees to cause its
rubbish or waste to be disposed of at its own cost and expense, subject to all
the rules and regulations that from time to time may be made in connection
therewith by Landlord, including a regulation that Tenant shall use a single
rubbish or waste remover designated by Landlord for the removal of the rubbish
or waste of the tenants in the building. Tenant further agrees that it shall not
at any time store any of its rubbish or waste in the lobbies, foyers,
passage-ways or other spaces adjacent to the premises herein demised, nor shall
Tenant place the rubbish (which is to be taken by the waste remover) in the said
areas prior to 5:00 P.M.
(m) If Tenant is a lessee of any store in said building, the said
Tenant hereby agrees to keep the sidewalk, entrance and passage-ways
unencumbered and unobstructed, and agrees, further, to remove all ice and show
from the sidewalks immediately in front of the demised premises.
(n) Tenant will not suffer, permit or allow unusual or objectionable
odors to be produced upon or permeate from the demised premises.
NINETEENTH:-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 Labor Law or of the rules of the Board of Standards and
Appeals, or of any other board or body having or asserting jurisdiction.
TWENTIETH:-Tenant shall give prompt notice to Landlord of any accidents
to or defects in the pipes and apparatus in the building or of any fire that may
occur.
TWENTY-FIRST:-Tenant shall permit Landlord to erect, use and maintain,
pipes and conduits in and through the demised premises. Landlord or Landlord's
agents shall have the right to enter the demised premises at all times to
examine the same, and to show them to prospective purchasers or lessees of the
building, and to make such decorations, repairs, alterations, improvements or
additions as Landlord may deem necessary or desirable, and Landlord and its
representatives shall be allowed to take and store all material into and upon
said premises that may be required therefor without the same constituting an
eviction of Tenant in whole or in part and the rent reserved shall in no wise
abate while said decorations, repairs, alterations, improvements, or additions
are being made, by reason of loss or interruption of business of Tenant, or
otherwise. During the six months prior to the expiration of the term of this
lease, or any renewal term, Landlord may exhibit the premises to prospective
tenants or purchasers, and place upon said premises, or the exterior thereof,
the usual notice "To Let" or "For Sale", which
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<PAGE>
notices Tenant shall permit to remain thereon without molestation. If, during
the last month of the term, Tenant shall have removed all or substantially all
of Tenant's property therefrom, Landlord may immediately enter and alter,
renovate and redecorate the demised premises, without elimination or abatement
of rent, or incurring liability to Tenant for any compensation, and such acts
shall have no effect upon this lease. If Tenant shall not be personally present
to open and permit an entry into said premises, at any time, when for any reason
an entry therein shall be necessary or permissible, Landlord or Landlord's
agents may enter the same by a master key, or may forcibly enter the same,
without rendering Landlord or such agents liable therefor (if during such entry
Landlord or Landlord's agents shall accord reasonable care to Tenant's
property), and without in any manner affecting the obligations and covenants of
this lease. Nothing herein contained, however, shall be deemed or construed to
impose upon Landlord any obligation, responsibility or liability whatsoever, for
the care, supervision or repair, of the building or any part thereof, other than
as herein provided. Landlord shall also have the right at any time without the
same constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor, to change the arrangement and/or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets, or other public parts of the building and to change the name, number or
designation by which the building is commonly known.
TWENTY-SECOND:-Tenant agrees that Landlord may furnish electricity to
Tenant on a "submetering" basis or on a "rent inclusion" basis". Electricity and
electric service, as used herein, shall mean any element affecting the
generation, transmission, and/or distribution of electricity, including but not
limited to services which facilitate the distribution of service.
(a) Submetering: If and so long as Landlord provides electricity to the
demised premises on a submetering basis, Tenant covenants and agrees to purchase
the same from Landlord or Landlord's designated agent at charges, terms and
rates set, from time to time, during the term of this lease by Landlord but not
more than those specified in the service classification in effect on January 1,
1970 pursuant to which Landlord then purchased electric current from the public
utility corporation serving the part of the city where the building is located;
provided however, said charges shall e increased in the same percentage as any
percentage increase in the billing to Landlord for electricity for the entire
building, by reason of increase in Landlord's electric rates or service
classifications, subsequent to January 1, 1970, and so as to reflect any
increase in Landlord's electric charges, including changes in market prices for
electricity from utilities and/or other providers, in fuel adjustments, or by
taxes or charges of any kind imposed on Landlord's electricity purchases or
redistribution, or for any other such reason, subsequent to said date. Any such
percentage increase in Landlord's billing for electricity due to changes in
rates, service classifications, or market prices, shall be computed by the
application of the average consumption (energy and demand) of electricity for
the entire building for the twelve (12) full months immediately prior to the
rate and/or service change, or any changed methods of or rules on billing for
same, applied on a consistent basis to the new rate and/or service
classification or market price, and to the service classification and rate in
effect on January 1, 1970. If the average consumption of electricity for the
entire building for said prior twelve (12)
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months cannot reasonably be applied and used with respect to changed methods of
or rules on billing, then the percentage shall be computed by the use of the
average consumption (energy and demand) for the entire building for the first
three (3) months after such change, projected to a full twelve (12) months, so
as to reflect the different seasons; and that same consumption, so projected
shall be applied to the service classification and rate in effect on January 1,
1970. Where more than one meter measures the service of Tenant in the building,
the service rendered through each meter may be computed and billed separately in
accordance with the rates herein specified. Bills therefore shall be rendered at
such times as Landlord may elect and the amount, as computed from a meter, shall
be deemed to be, and be paid as, additional rent. In the event that such bills
are not paid within five (5) days after the same are rendered, Landlord may,
without further notice, discontinue the service of electric current to the
demised premises without releasing Tenant from any liability under this lease
and without Landlord or Landlord's agent incurring any liability for any damage
or loss sustained by lessee by such discontinuance of service. If any tax is
imposed upon Landlord's receipt from the sale, resale or redistribution of
electricity or gas or telephone service to Tenant by any Federal, State, or
Municipal authority, Tenant covenants and agrees that where permitted by law,
Tenant's pro-rata share of such taxes shall be passed on to and included in the
bill of, and paid by, Tenant to Landlord.
(b) Rent Inclusion: If and so long as Landlord provides electricity to
the demised premises on a rent inclusion basis, Tenant agrees that the fixed
annual rent shall be increased by the amount of the Electricity Rent Inclusion
Factor ("ERIF"), as hereinafter defined. Tenant acknowledges and agrees (i) that
the fixed annual rent hereinabove set forth in this lease does not yet, but is
to include an ERIF of $3.18 per rentable square foot to compensate Landlord for
electrical wiring and other installations necessary for, and for its obtaining
and making available to Tenant the redistribution of electric current as an
additional service; and (ii) that said ERIF, which shall be subject to periodic
adjustments as hereinafter provided, has been partially based upon an estimate
of the Tenant's connected electrical load, in whatever manner delivered to
Tenant, which shall be deemed to be the demand (KW), and hours of use thereof,
which shall be deemed to be the energy (KWH), for ordinary lighting and light
office equipment and the operation of the usual small business machines,
including Xerox or other copying machines (such lighting and equipment are
hereinafter called "Ordinary Equipment") during ordinary business hours
("ordinary business hours" shall be deemed to mean 50 hours per week), with
Landlord providing an average connected load of 4 1/2 watts of electricity for
all purposes per rentable square foot. Any installation and use of equipment
other than Ordinary Equipment and/or any connected load and/or energy usage by
Tenant in excess of the foregoing shall result in adjustment of the ERIF as
hereinafter provided. For purposes of this lease the rentable square foot area
of the presently demised premises shall be deemed to be 6,863 square feet
If the cost to Landlord of electricity shall have been, or shall be,
increased or decreased subsequent to May 1, 1996 (whether such change occurs
prior to or during the term of this Lease), by change in Landlord's electric
rates or service classifications, or electricity charges, including changes in
market prices, or by any increase, subsequent to the last such electric rate or
service classification change or market price change, in fuel adjustments or
charges of any kind,
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or by taxes, imposed on Landlord's electricity purchases or on Landlord's
electricity redistribution, or for any other such reason, then the aforesaid
ERIF portion of the fixed annual rent shall be changed in the same percentage as
any such change in cost due to changes in electric rates, service
classifications or market prices, and, also Tenant's payment obligation, for
electricity redistribution, shall change from time to time so as to reflect any
such increase in fuel adjustments or charges, and such taxes. Any such
percentage change in Landlord's cost due to change in Landlord's electric rates
or service classifications or market prices, shall be computed on the basis of
the average consumption of electricity for the building for the twelve full
months immediately prior to the rate change or other such changes in cost,
energy and demand, and any changed methods of or rules on billing for same,
applied on a consistent basis to the new electric rate or service classification
or market price and to the immediately prior existing electric rate or service
classification or market price. If the average consumption (energy and demand)
for the entire building for said prior (12) months cannot reasonably be applied
and used with respect to changed methods of or rules on billing, then the
percentage increase shall be computed by the use of the average consumption
(energy and demand) for the entire building for the first three (3) months after
such change, projected to a full twelve (12) months, so as to reflect the
different seasons; and the same consumption, so projected, shall be applied to
the rate and/or service classification or market price which existed immediately
prior to the change. The parties agree that a reputable, independent electrical
consultant firm, selected by Landlord, ("Landlord's electrical consultant"),
shall determine the percentage change for the changes in ERIF due to Landlord's
changed costs, and that the Landlord's electrical consultant may from time to
time make surveys in the demised premises of the electrical equipment and
fixtures and uses of current. (i) If such survey shall reflect a connected
electrical load in the demised premises in excess of 4 1/2 watts of electricity
for all purposes per rentable square foot and/or energy usage in excess of
ordinary business hours (each such excess hereinafter called "excess
electricity") then the connected electrical load and/or the hours of use
portion(s) of the then existing ERIF shall be increased by an amount which is
equal to a fraction of the then existing ERIF, the numerator of which is the
excess electricity (i.e. excess connected load and/or excess usage) and the
denominator of which is the connected loan and/or the energy usage which was the
basis of the then existing ERIF. Such fractions shall be determined by
Landlord's electrical consultant. The fixed annual rent shall then be
appropriately adjusted, effective as of the date of any such change in connected
load and/or usage, as disclosed by said survey. (ii) If such survey shall
disclose installation and use of other than Ordinary Equipment, then effective
as of the date of said survey, there shall be added to the ERIF portion of fixed
annual rent (computed and fixed as hereinbefore described) an additional amount
equal to what would be paid under the SC-4 Rate I Service Classification in
effect on May 1, 1996 (and not the time-of-day rate schedule) for such load and
usage of electricity, with the connected electrical load deemed to be the demand
(KW) and the hours of use thereof deemed to be the energy (KWH), as hereinbefore
provided, (which addition to the ERIF shall be increased or decreased by all
electricity cost changes of Landlord, as hereinabove provided, from May 1, 1996
through the date of billing).
In no event, whether because of surveys, rates or cost changes, or for
any other reason, is the originally specified $3.18 per per rentable square foot
ERIF portion of the fixed annual rent
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(plus any net increase thereof, but not decrease, by virtue of all electricity
rate, service classification or market price changes of Landlord subsequent to
May 1, 1996) to be reduced.
(c) General Conditions: The determinations of Landlord's electrical
consultant shall be binding and conclusive on Landlord and Tenant from and after
the delivery of copies of such determinations to Landlord and Tenant, unless,
within thirty (30) days after delivery thereof, Tenant disputes such
determination. If Tenant so disputes the determination, it shall, at its own
expense, obtain from a reputable, independent electrical consultant its own
determinations in accordance with the provisions of this Article. Tenant's
consultant and Landlord's consultant shall then seek to agree. If they cannot
agree within sixty (60) days they shall choose a third reputable electrical
consultant, whose cost shall be shared equally by the parties, to make similar
determinations which shall be controlling. (If they cannot agree on such third
consultant with ten (10) days, then either party may apply to the Supreme Court
in the County of New York for such appointment.) However, pending such
controlling determinations, Tenant shall pay to Landlord the amount of
additional rent or ERIF in accordance with the determinations of Landlord's
electrical consultant. If the controlling determinations differ from Landlord's
electrical consultant, then the parties shall promptly make adjustment for any
deficiency owed by Tenant or overage paid by Tenant.
At the option of Landlord, Tenant agrees to purchase from Landlord or
its agents all lamps and bulbs used in the demised premises and to pay for the
cost of installation thereof. Supplementing Article 53 hereof, if all or part of
the submetering additional rent or the ERIF payable in accordance with
subdivision (a) or (b) of this Article becomes uncollectible or reduced or
refunded by virtue of any law, order or regulation, the parties agree that, at
Landlord's option, in lieu of submetering additional rent or ERIF, and in
consideration of Tenant's use of the building's electrical distribution system
and receipt of redistributed electricity and payment by Landlord of consultant's
fees and other redistribution costs, the fixed annual rental rate(s) to be paid
under this lease shall be increased by an "alternative charge"which shall be a
sum equal to $3.18 per year per rentable square foot of the demised premises,
changed in the same percentage as any increases in the cost to Landlord for
electricity for the entire building subsequent to May 1, 1996, because of
electric rate, service classification or market price changes, such percentage
change to be computed as in subdivision (b) provided.
Landlord shall not be liable to Tenant for any loss or damage or
expense which Tenant may sustain or incur if either the quantity or character of
electric service is changed or is no longer available or suitable for Tenant's
requirements. Tenant covenants and agrees that at all times its use of electric
current shall never exceed the capacity of existing feeders to the building or
wiring installation. Tenant agrees not to connect any additional electrical
equipment to the building electric distribution system, other than lamps,
typewriters and other small office machines which consume comparable amounts of
electricity, without Landlord's prior written consent, which consent shall not
be unreasonably withheld. Any riser or risers to supply Tenant's electrical
requirements, upon written request of Tenant, will be installed by Landlord, at
the sole cost and expense of Tenant, if, in Landlord's sole judgment, the same
are necessary and will not
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<PAGE>
cause permanent damage or injury to the building or demised premises or cause or
create a dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other tenants and
occupants. In addition to the installation of such riser or risers, Landlord
will also at the sole cost and expense of Tenant, install all other equipment
proper and necessary in connection therewith subject to the aforesaid terms and
conditions. The parties acknowledge that they understand that it is anticipated
that electric rates, charges, etc., may be changed by virtues of time-of-day
rates or changes in other methods of billing, and/or electricity purchases and
the redistribution thereof, and fluctuation in the market price of electricity,
and that the references in the foregoing paragraphs to changes in methods of or
rules on billing are intended to include any such changes. Anything hereinabove
to the contrary notwithstanding, in no event is the submetering additional rent
or ERIF, or any "alternative charge", to be less than an amount equal to the
total of Landlord's payments to public utilities and/or other providers for the
electricity consumed by Tenant (and any taxes thereon or on redistribution of
same) plus 5% thereof for transmission line loss, plus 15% thereof for other
redistribution costs. The Landlord reserves the right, at any time upon thirty
(30) days' written notice, to change its furnishing of electricity to Tenant
from a rent inclusion basis to a submetering basis, or vice versa, or to change
to the distribution of less than all the components of the existing service to
Tenant. The Landlord reserves the right to terminate the furnishing of
electricity on a rent inclusion, submetering, or any other basis at any time,
upon thirty (30) days' written notice to the Tenant, in which event the Tenant
may make application directly to the public utility and/or other providers for
the Tenant's entire separate supply of electric current and Landlord shall
permit its wires and conduits, to the extent available and safely capable, to be
used for such purpose, but only to the extent of Tenant's then authorized load.
Any meters, risers, or other equipment or connections necessary to furnish
electricity on a submetering basis or to enable Tenant to obtain electric
current directly from such utility and/or other providers shall be installed at
Tenant's sole cost and expense. Only rigid conduit or electricity metal tubing
(EMT) will be allowed. The Landlord, upon the expiration of the aforesaid thirty
(30) days' written notice to the Tenant may discontinue furnishing the electric
current but this lease shall otherwise remain in full force and effect. If
Tenant was provided electricity on a rent inclusion basis when it was so
discontinued, then commencing when Tenant receives such direct service and as
long as Tenant shall continue to receive such service, the fixed annual rent
payable under this lease shall be reduced by the amount of the ERIF which was
payable immediately prior to such discontinuance of electricity on a rent
inclusion basis.
TWENTY-THIRD:- (a) If Landlord installs a water meter to measure
Tenant's water consumption for all purposes, Tenant shall pay Landlord for the
cost of the meter and the cost of the 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 Landlord may cause such meter and equipment to be replaced or
repaired and collect the cost thereof from Tenant. 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 Landlord may pay such charges and collect the
same from Tenant. Landlord may inspect such
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<PAGE>
water meter at any time and shall have access thereto at all times for the
purpose of such inspection.
(b) In addition to the foregoing, Tenant agrees to pay its
proportionate share of the water consumed in the toilets and other portions of
the premises over which Landlord may reserve control, irrespective of the fact
that the same shall be located outside of the demised premises.
(c) Tenant covenants and agrees to pay its pro-rata share of the sewer
rent, charge or any other tax, rent levy or charge which are 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.
(d) The bill rendered by Landlord for metered water, sewer or any other
charges provided for in this paragraph "23," shall be based upon Tenant's
consumption and shall be payable by Tenant as additional rent. Any such costs or
expenses incurred or payments made by Landlord for any of the reasons or
purposes hereinabove stated, shall be deemed to be additional rent payable by
Tenant and collectible by Landlord as such. If the building or the demised
premises or any part thereof be supplied with water through a meter through
which water is also supplied to other premises, Tenant shall pay to Landlord as
additional rent, on the first day of each month, $NONE as Tenant's portion.
Independently of and in addition to any of the remedies reserved to Landlord
hereinabove or elsewhere in this lease, Landlord may sue for and collect any
monies to be paid by Tenant or paid by Landlord for any of the reasons or
purposes hereinabove set forth.
TWENTY-FOURTH:- If the sprinkler system or any of its appliances shall
be damaged or injured or not in proper working order by reason of any act or
omission of Tenant, Tenant's agents, servants, employees, licensees or visitors,
Tenant shall forthwith restore the same in good working condition at its own
expense; and if the New York Board of Fire Underwriters or the New York Fire
Insurance Rating Organizations or any bureau, department or official of the
State or City Government, require or recommend that any changes, modifications,
alterations or additional sprinkler heads or other equipment be made or supplied
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 changes, modifications, alterations, additional sprinkler heads or other
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 as
fixed by said Rating Organization, or by any Fire Insurance Company, Tenant
shall, at Tenant's expense, promptly make and supply such changes,
modifications, alterations, additional sprinkler heads or other equipment.
Tenant shall pay to Landlord as additional rent the sum of $NONE 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.
TWENTY-FIFTH:- Tenant shall have the privilege of using the air
conditioning system which affects the whole or a portion of the demised
premises, and shall, at its own cost and
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expense;1 maintain and operate said system in compliance with all present and
future laws and governmental requirements, and shall obtain all governmental
licenses and permits now or hereafter required. Tenant shall pay for all
electric current, water and refrigerants used in connection with said system.
Tenant, at its own cost and expense, shall make or cause to be made, all
repairs, alterations, changes, additions or improvements in and to said system
which may be necessary or which may be required or recommended by Landlord or by
any governmental authority, and shall furnish all parts and supplies necessary
or desirable in connection therewith, but no alterations, changes, additions or
improvements shall be made by Tenant without the advance written consent of
Landlord. Landlord's charges for electric current, water and refrigerants and
for such parts, supplies, repairs, alterations, changes, additions or
improvements as are caused to be furnished or made by Landlord shall be payable
by Tenant as additional rent upon presentation of Landlord's bill for same. If
Tenant shall default in paying any such bill for five (5) days, Landlord shall
have the right, in addition to any other rights under this lease to terminate
the operation of said air conditioning system without notice to Tenant, and if
such default shall continue for sixty (60) days, Landlord shall have right to
remove the whole or any part of said system from the demised premises without
notice to Tenant. The non- functioning or defective functioning of said air
conditioning system, or Tenant's inability to operate or maintain the same in
compliance with lawful requirements, or Landlord's removal thereof or
termination of the operation thereof as provided in this paragraph, or any
delay, discomfort or inconvenience suffered by Tenant in connection therewith,
or, without limitation or of by the foregoing, any other matter or thing related
to such system, shall not give rise to any obligation or liability on the part
of Landlord and shall not affect this lease or be deemed to release or discharge
Tenant of any of Tenant's obligations or liabilities under this lease or
otherwise. Title to said system and all present and future parts thereof is and
shall be vested in Landlord.
TWENTY-SIXTH: - (a) As long as Tenant is not in default under any of
the covenants of this lease, Landlord shall provide necessary freight elevator
facilities on business days from 8:00 A.M. to 5:30 P.M. On Sundays, Saturdays,
holidays and nights, Landlord will furnish at least one (1) passenger elevator.
(b) If the building of which the demised premises are a part supplies
manually operated elevator service, Landlord may proceed with alterations
necessary to substitute automatic control elevator service upon ten (10) days'
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 Landlord pursues with due diligence the completion
of the alterations. Where automatic control elevator service is now, or
hereafter furnished, and the demised premises contain an entire floor or floors,
Tenant will provide, at its own cost and expense, locks for all entrances to
such floor or floors from the elevators.
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1Landlord shall be responsible for maintenance and repair of air
conditioning units.
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<PAGE>
(c) Tenant agrees it will not permit its employees other than office
help to use the passenger elevator in said building, nor will it permit them to
use the stairs leading to and from the passenger entrance to said building.
Landlord may prescribe and regulate which elevator and entrance shall be used by
Tenant's employees and for Tenant's shipping.
TWENTY-SEVENTH: - Landlord will:
(a) Furnish heat to the demised premises, when and as required by law,
on business days during regular business hours.
(b) Cause to be kept clean the public halls and public portions of the
building, which are used in common by all tenants.
TWENTY-EIGHTH: - It is expressly agreed that if in consequence of the
use of the demised premises for manufacturing purposes any Municipal or State
Authority requires alterations and additions to such premises or the building of
which they are a part, Landlord, in addition to other remedies provided for in
this lease, shall have the option of terminating this lease on sixty (60) days'
written notice to Tenant. Upon expiration of said sixty (60) days, the term of
this lease shall terminate, and Tenant shall immediately vacate the premises. In
such event, Landlord shall refund to Tenant the unearned pro rata portion of any
rent paid in advance. Landlord reserves the privilege of complying with any
order, rule or regulation as aforementioned in order to remove such violation,
if any. In such event, Tenant waives any and all claims for damages growing out
of the work in the building or on the premises in connection therewith. In the
event that the violation can be removed by Tenant's limiting the number of
employees in the demised premises, Tenant shall so limit the number of employees
immediately and no claim for damages or any loss may be made against Landlord
therefor.
TWENTY-NINTH: - Tenant shall have the use of the partitions existing in
the premises demised herein and of all other equipment, fixtures and
appurtenances installed by Landlord prior to or during the term hereof. The
ownership of such property shall at all times be vested in Landlord and
possession thereof shall revert to Landlord upon the expiration of the lease.
THIRTIETH: - If any vault space is adjacent to the demised premises,
the same shall not be or be deemed to be part of the demised premises or its
appurtenances. Landlord may permit Tenant to use such vault space gratuitously,
but such permission may be revoked by Landlord at any time on two (2) days'
notice. Landlord shall have the right at any time to cause a wall to be erected
for the purpose of sealing off such vault space from the demised premises. Said
wall may be erected wholly or partly on that portion of the demised premises
which abuts such vault space. Landlord and its designees shall have the right
from time to time to enter and remain upon the demised premises, with men and
materials, for the purpose of erecting such wall. Tenant shall not be entitled
to an compensation, abatement of rent, or other claim by reason of any action
taken under this paragraph by or on behalf of Landlord. Any fee or license
charge or tax of municipal authorities for such vault shall be paid by Tenant.
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THIRTY-FIRST: - Landlord 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 the loss of or damage to any property of Tenant by theft or
otherwise. Landlord or its agents shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling ceilings, falling
plaster, steam, gas, electricity, water, rain or snow or leaks from any part of
said building or from the pipes, appliances or plumbing works or from the roof,
street or subsurface or from any other place or by dampness or by any other
cause of whatsoever nature, including but not limited to the making of repairs
and improvements, unless caused by or due to the negligence of Landlord, its
agents, servants or employees; nor shall Landlord or its agents be liable for
any such damage caused by other tenants or persons in said building or caused by
operations in construction of any private, public or quasi public work; nor
shall Landlord be liable for any latent defect in the demised premises or in the
building of which they form a part. Tenant shall give immediate notice to
Landlord in case of fire or accidents in the demised premises or in the building
or of defects therein or in any fixtures or equipment.*
THIRTY-SECOND: - Tenant shall, throughout the term and thereafter,
indemnify Landlord and save it harmless and free from damages, liabilities,
penalties, losses, expenses, causes of action, claims, suits and judgments, as
well as all expenses and attorneys' fees, arising from injury during said term
to person or property of any nature, and also for any matter or thing growing
out of the occupation of the demised premises or the streets, sidewalks, or
vaults adjacent thereto occasioned in whole or part by any act or acts, omission
or omissions of Tenant, its employees, guests, agents, assigns or undertenants.
THIRTY-THIRD: - Neither this lease nor any obligation hereunder on
Tenant's part to be performed (including, but not limited to, Tenant's
obligation to pay the rents provided for hereunder) shall in any wise be
released, discharged, impaired, excused or otherwise affected because of
Landlord's inability to supply, furnish or make such services, fixtures,
equipment, repairs, additions, improvements, alterations and/or decorations, if
any, as Landlord may be required to supply, furnish or make hereunder or in
connection herewith, or because of any delay in supplying, furnishing or making
any of the foregoing, if such inability or delay directly or indirectly results
from or is caused by or attributable to any cause or thing whatsoever beyond
Landlord's, control, including, but not limited to, any law or ordinance or any
governmental order, rule, regulation or requirement, or any shortages in
supplies, materials or labor, or any acts of God, or any labor difficulties,
disasters or acts of public enemies, and in any such event Landlord shall be
relieved of any liability to Tenant which it might otherwise have had by reason
of any such requirement. Lessee agrees to look solely to Lessor's estate and
interest in the land and building, or the lease of the building or of the land
and building, and the demised premises, for the satisfaction of any right or
remedy of Lessee for the collection of a judgment (or other
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*limitations shall not apply if they interfere or conflict with
provisions of Tenant's insurance policy.
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<PAGE>
judicial process) requiring the payment of money by Lessor, in the event of any
liability by Lessor, and no other property or assets of Lessor shall be subject
to levy, execution or other enforcement procedure for the satisfaction of
Lessee's remedies under or with respect to this lease, the relationship of
landlord and tenant hereunder, or Lessee's use and occupancy of the demised
premises or any other liability of Lessor to Lessee (except for negligence).
THIRTY-FOURTH:- This lease is and shall be subject and subordinate at
all times to all present or future leases and subleases of the entire building
or of the land and entire building of which the demised premises form a part,
and to all mortgages which now affect or may hereafter affect or be made in
respect of such leases and subleases or the real property of which the demised
premises form a part (whether or not such leases or mortgages also affect any
other or additional real property), and to all renewals, modifications,
consolidations, replacements and extensions thereof, and to all advances made or
hereafter to be made upon the security thereof. This clause shall be
self-operative and no further instrument in writing to effectuate such
subordination shall be necessary. In confirmation of such subordination,
however, Tenant shall, on demand, promptly execute, acknowledge and deliver such
further instruments or certificates that Landlord may request. Tenant hereby
irrevocably appoints Landlord the attorney-in-fact of Tenant to execute,
acknowledge and deliver any such instrument or certificate for on behalf of
Tenant. In the event that any Master Lease or any other ground or underlying
lease is terminated or any mortgage foreclosed, this lease shall not terminate
or be terminable by Lessee unless Lessee was specifically named in any
termination or foreclosure judgment or final order. In the event that the Master
Lease or any other ground or underlying lease is terminated as aforesaid, Lessee
agrees to enter into a new lease covering the within premises, for the remaining
term of this lease and otherwise on the same terms, conditions and rentals as
herein provided, with and at the election of the holder of the fee title to the
premises. If the current term of the Master Lease shall explore prior to the
date set forth herein for the expiration of this lease, then, unless Lessor, at
its sole option, shall have elected to extend or renew the term of the Master
Lease, the term of this lease shall expire on the date of expiration of the
Master Lease, notwithstanding the later expiration date hereinabove set forth.
If the Master Lease is renewed, then the term of this lease shall expire as
hereinabove set forth. From time to time, Lessee, on at least (10) days' prior
written request by Lessor, will deliver to Lessor a statement in writing
certifying that this lease is unmodified and in full force and effect (or if
there shall have been modifications, that the same is in full force and effect
as modified and stating the modifications) and the dates to which the rent and
other charges have been paid and stating whether or not the Lessor is in default
in performance of any covenant, agreement or condition contained in this lease
and, if so, specifying each such default of which Lessee may have knowledge.
This paragraph shall not be deemed modified in whole or in part by any provision
of this lease or any rider thereto during the term hereof, unless such
provisions or rider shall by its terms expressly so modify it.
THIRTY-FIFTH: - Provided the damage be not caused by the fault or
neglect of Tenant or of its employees, agents, visitors or licensees, in the
event of damage by fire, or other action of the elements, to the demised
premises not rendering all of them unfit for occupancy, Landlord shall repair
the same with reasonable dispatch after notice of such damage, and the rent
accrued
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or accruing shall not cease; but if the damage be so extensive as to render all
of the demised premises untenantable, the rent shall cease until they be
repaired, provided the damage be not caused by the carelessness or negligence of
Tenant or of the agents or servants of Tenant. No penalty shall accrue for
reasonable delay which may arise by reason of adjustment of insurance on the
part of Landlord and/or Tenant, and for reasonable delay on account of "labor
troubles" or any other cause beyond Landlord's control. If the demised premises
are seventy-five (75%) damaged or are rendered wholly untenantable by fire or
other cause, and if Landlord shall decide not to restore or not to rebuild the
same, or if the building shall be so damaged that Landlord shall decide to
demolish it or to rebuild it, or if the cost of restoration of the building of
which the demised premises are a part, resulting from the aforesaid fire or
other casualty shall exceed the sum of $3,000,000, then or in any of such events
Landlord may, within ninety (90) days after such fire other cause, give Tenant a
notice in writing of termination, which notice shall be given as provided in
this lease, and thereupon the term of this lease shall expire by lapse of time
upon the third day after such notice is given, and Tenant shall vacate the
demised premises and surrender the same to Landlord. If Tenant shall not be in
default under this lease then, upon the termination of this lease under the
conditions provided for in the sentence immediately preceding, Tenant's
liability for rent shall cease as of the day following the casualty. Tenant
hereby expressly waives the provisions of Section 227 of the Real Property Law
and agrees that the foregoing provisions of this paragraph shall govern and
control in lieu thereof. If the damage or destruction be due to the fault or
neglect of Tenant, the debris shall be removed by and at the expense of Tenant.
THIRTY-SIXTH: - 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. If any part of the
land or the building of which the demised premises are a part shall be so
acquired or condemned, then and in that event the term of this lease, at the
option of Landlord, shall cease and terminate on ten (10) days' notice by
Landlord to Tenant. In neither event shall Tenant have any claim for the value
of any unexpired term of said lease.
THIRTY-SEVENTH: - If, when and to the extent permitted by law, the
parties agree that the following provisions shall apply to this lease and
tenancy (and that the provisions of 11 U.S.C. ss. 365(b) shall be applied): (a)
If at any time prior to the date herein fixed as the commencement of the term of
this lease there shall be filed against Tenant thereof or if such filing is made
by Tenant in any court pursuant to any statute either of the United States or of
any State a petition of bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within sixty (60) days thereof Tenant fails to secure a discharge
thereof, or if Tenant makes an assignment for the benefit of creditors, or
petition for or enter into an arrangement, this lease shall ipso facto be
cancelled and terminated, and in which event, neither Tenant nor any person
claiming through or under Tenant or by virtue of any statute or of an order of
any court shall be entitled to possession of the demised premises and Landlord,
in addition to the other rights and remedies given by (c) hereof and by virtue
of any other provision herein or elsewhere in this lease contained or by virtue
of
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any statute or rule of law, may retain as liquidated damages any rent, security,
deposit or monies, received by him from Tenant or others in behalf of Tenant
upon the execution hereof.
(b) If the date fixed as the commencement of the term of this lease or
if at any time during the term hereby demised, there shall be filed against
Tenant thereof or if such filing is made by Tenant in any court pursuant to any
statute of the United States or any State a petition of bankruptcy or insolvency
or for reorganization or for the appointment of a receiver or trustee of all or
a portion of Tenant's property, and within sixty (60) days thereof Tenant fails
to secure a discharge thereof, or if Tenant makes an assignment for the benefit
of creditors or petition for or enter into an arrangement, this lease, at the
option of Landlord. exercised within a reasonable time after notice of the
happening of any one or more of such events, may be cancelled and terminated,
and in which event neither Tenant nor any person claiming through or under
Tenant by virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the premises demised, but shall
forthwith quit and surrender the premises, and Landlord, in addition to the
other rights and remedies Landlord has by virtue of any other provision herein
or elsewhere in this lease contained or by virtue of any statute or rule of law,
may retain as liquidated damages any rent, security, deposit or monies received
by him from Tenant or others in behalf of Tenant.
(c) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) or (b) hereof, Landlord shall forthwith,
notwithstanding any other provisions of this lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the then fair and reasonable rental value of the demised
premises for the same period. 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 payment 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 re-let by Landlord for the unexpired term of said lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
re-letting shall be prima facie 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
Landlord to prove for and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
THIRTY-EIGHTH: - Tenant has deposited with Landlord the sum of $
16,919.38 (transferred from Lease dated ___________ for Rooms 2300. Such
security deposit shall be deposited in an interest-bearing account with interest
to be paid to Tenant annually less 1% to be retained by Landlord as
administrative fee) 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
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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, Landlord 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 Landlord
may expend or may be required to expend by reason of Tenant's default in respect
of any of the terms, covenants and conditions of this lease, including, but not
limited to, any damages or deficiency in the re-letting of the premises, whether
such damages or deficiency accrued before or after summary proceedings or other
re-entry by Landlord. Tenant shall, upon demand, deposit with Landlord the full
amount so used, in order that Landlord shall have the full security deposit on
hand at all times. In the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this lease, the
security shall be returned to Tenant after the date fixed as the end of the
lease and after delivery of entire possession of the demised premises to
Landlord. In the event of any transfer or conveyance by landlord of its lease to
the building of which the demised premises form a part, hereinafter referred to,
Landlord shall have the right to transfer the security to the transferee or
grantee, and Landlord shall thereupon be released by Tenant from all liability
for the return of such security; and Tenant agrees to look to the new Landlord
solely for the return of said security; and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the security to a new
Landlord. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and that
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
THIRTY-NINTH: - (a) 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 of any ancillary agreement, or if the demised premises
become vacant or deserted, then, in any one or more of such events, upon
Landlord serving a written twenty (20) days' notice upon Tenant specifying the
nature of said default and upon the expiration of said twenty (20) days, if
Tenant shall have failed to comply with or remedy such default, or if the said
default or omission complained of shall be of such a nature that the same cannot
be completely cured or remedied within said twenty (20) day period, and if
Tenant shall not have diligently commenced curing such default within such
twenty (20) day period, and shall not thereafter with reasonable diligence and
in good faith proceed to remedy ore cure such default, then Landlord may serve a
written three (3) 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 date of 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 quite and
surrender the demised premises to Landlord, but Tenant shall remain liable as
hereinafter provided.
(b) If the notice provided for in (a) hereof shall have been given, and
the term shall expire as aforesaid: or (1) if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein provided;
or (2) if any execution or attachment shall be issued against Tenant or any of
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Tenant's property whereupon the demised premises shall be taken or occupied or
attempted to be taken or occupied by someone other than Tenant; or (3) if Tenant
shall make default with respect to any other lease between Landlord and Tenant;
or (4) if Tenant shall fail to move into or take possession of the premises
within fifteen (15) days after commencement of the term of this lease, of which
fact Landlord shall be the sole judge: then and in any of such events Landlord
may without notice, 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 make
default hereunder prior to the date fixed as the commencement of any renewal or
extension of this lease, Landlord may cancel and terminate such renewal or
extension agreement by written notice.
(c) If Tenant is presently in possession of the demised premises
pursuant to a lease in writing heretofore made and if, before the commencement
of the term herein provided the aforesaid lease shall be terminated or Tenant
shall be dispossessed or shall voluntarily or involuntarily vacate, surrender or
remove from the demised premises, then this lease shall, at the option of
Landlord, be terminated, but Tenant shall nevertheless remain liable as
hereinbefore provided.
FORTIETH: - In case of any such default, re-entry or dispossess by
summary proceedings or otherwise, (a) the rent and additional rent shall become
due thereupon and be paid up to the time of such re-entry, dispossess and/or,
together with such expenses as Landlord may incur for legal expenses, attorneys'
fees, brokerage, and/or putting the demised premises in good order, or for
preparing the same for re-rental; (b) Landlord may re-let the premises or any
part or parts thereof, either in the name of Landlord or otherwise, for a term
or terms, which may at landlord's option be less than or exceed the period which
would otherwise have constituted the balance of the term of this lease and may
grant concessions or free rent; and/or (c) Tenant or the legal representatives
of Tenant shall also pay Landlord as liquidated damages for the failure of
Tenant to observe and perform said Tenant's covenants herein contained, any
deficiency between rent hereby reserved and/or covenanted to be paid and the net
amount, if any, of the rents collected on account of the lease or leases of the
demised premises for each month of the period which would otherwise have
constituted the balance of the term of this lease. The rent received from any
re-letting or re-lettings, but only for the unexpired potion of this lease,
shall be applied first to the payment of Landlord's expenses in resuming
possession and re-letting the premises, which expenses shall include but not be
limited to attorneys' fees, brokerage commissions, cleaning, repairs, painting
and decoration. The balance, if any, shall be applied in payment of all unpaid
rent, additional rent and other charges due from Tenant hereunder, irrespective
of whether the liability therefor arose prior or subsequent to the date of the
expiration of the term hereof. Tenant hereby covenants and agrees to pay
Landlord, within a reasonable time after demand therefor shall be made, the
balance, if any, remaining unpaid. In the event that any re-letting hereunder
results in Landlord's receiving from Tenant in any month an amount in excess of
the amount due for such month, then and in that event Tenant shall not be
obligated to make any
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payment to Landlord for rent due in such month, then and in that event Tenant
shall not be obligated to make any payment to Landlord for rent due in such
month, nor shall Landlord at any time be obligated to make any refund or apply
any credit to Tenant with respect to such rent, and Tenant shall have no claim
by way of defense to a suit or otherwise that Landlord has received for any
prior month or that any new tenant has agreed to pay for any subsequent month a
greater amount than that hereinabove reserved to be paid as rent for that month.
The failure or refusal of Landlord to re-let the premises or any part or parts
thereof shall not release or affect Tenant's liability for damages. Any security
in Landlord's possession not retained by it as liquidated damages may be applied
by it for any or all of the aforesaid purposes. Any such liquidated damages
shall be paid as additional rent hereunder 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
Landlord to collect the deficiency for any subsequent month by a similar
proceeding. Landlord, at Landlord's option, may make such alterations, repairs,
replacements and/or decorations in the demised premises as Landlord in
Landlord's sole judgment considers advisable and necessary for the purpose of
re-letting the demised premises; and the making of such alterations and/or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Landlord shall in no event be liable in any way
whatsoever for failure 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. In the event of a breach or threatened breach by Tenant of any of
the covenants or provisions hereof, Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or inequity as if re-entry,
summary proceedings and other remedies were not herein provided for. Mention in
this lease of any particular remedy, shall not preclude Landlord from any other
remedy, in law or in equity.
FORTY-FIRST: - Notwithstanding anything elsewhere contained in this
lease, if by reason of any present or future cause or thing whatsoever
(including, without limitation, by reason of any statute, ordinance, judgment,
decree, court order or governmental rule or regulation). Tenant will not or
shall not be required to pay to Landlord the full amount of rent and additional
rent reserved hereunder, then Landlord, at its unrestricted option, may give
Tenant not less than thirty (30) days, notice of intention to end this lease and
the term hereof, and thereupon, on the date specified in said notice, this lease
and the term hereof shall expire as fully and completely as if that date were
the date, herein originally fixed for the expiration of this lease and the term
hereof.
FORTY-SECOND: - It is mutually agreed by and between Landlord and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way connected with this lease, the relationship of landlord and tenant,
Tenant's use or occupancy of said premises, except for personal injury or
property damage, or involving the right to any statutory relief or remedy.
Tenant will not interpose any counterclaim of any nature in any summary
proceeding. The provisions of this paragraph shall be binding
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upon the respective heirs, distributees, executors, administrators, successors
and assigns of the parties hereto and all subtenants hereunder.
FORTY-THIRD: - Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any [illegible], or in the event of Landlord
obtaining possession of demised premises, by reason of violation by Tenant of
any of the covenants and conditions of this lease, or otherwise.
FORTY-FOURTH: - (a) If there be any agreement between Landlord and
Tenant providing for the cancellation of this lease upon certain provisions or
contingencies, and/or an agreement for the renewal hereof at the expiration of
the term first above mentioned, the right to such renewal or the execution of a
renewal agreement between Landlord and Tenant prior to the expiration of such
first mentioned term shall not be considered an extension thereof or a vested
right in Tenant to such further term, so as to prevent Landlord from cancelling
this lease and any such extension thereof during the remainder of the original
term hereby granted: such privilege, if and when so exercised by Landlord, shall
cancel and terminate this lease and any such renewal or extension previously
entered into between said Landlord and Tenant or the right of Tenant to any such
renewal or extension; any right herein contained on the part of Landlord to
cancel this lease shall continue during any extension or renewal hereof; any
option on the part of Tenant herein contained for an extension or renewal hereof
shall not be deemed to give Tenant any option for a further extension beyond the
first renewal or extended term.
(b) No act or thing done by Landlord or Landlord's agents during the
term hereby demised shall constitute an actual or constructive eviction by
Landlord, nor shall be deemed an acceptance of a surrender of said demised
premises, and no agreement to accept such surrender shall be valid unless in
writing signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys of said premises prior to the
termination of the lease. The delivery of keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the lease or a surrender
of the premises. In the event of Tenant at any time desiring to have Landlord
sublet the premises for Tenant's account, Landlord or Landlord's agents are
authorized to receive said keys for such purposes without releasing Tenant from
any of the obligations under this lease, and Tenant hereby relieves Landlord of
any liability for loss of or damage to any of Tenant's effects in connection
with such subletting.
(c) The failure of Landlord ro seek redress for violation or, or to
insist upon strict performance of, any covenant or condition of this lease, or
any of the Rules or Regulations set forth or hereafter adopted by Landlord,
shall not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of this
lease shall not be deemed a waiver of such breach.
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(d) The failure of Landlord to enforce any of the Rules and Regulations
set forth, or hereafter adopted, against Tenant and/or any other tenant in the
building shall not be deemed a waiver of any such Rules and Regulations. No
provision of this lease shall be deemed to have been waived by Landlord, unless
such waiver be in writing signed by Landlord.
(e) No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly rent herein stipulated shall be deemed to be other than on account
of the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this lease provided.
FORTY-FIFTH: - Tenant covenants that Tenant will not, without the
consent of Landlord first obtained in each case, make or grant any license in
respect of the demised premises or any part thereof, or in respect of the use
thereof, and will not permit any such license to be made or granted.
FORTY-SIXTH: - Landlord shall replace, at the expense of Tenant, any
and all glass damaged or broken from any cause whatsoever in and about the
demised premises. Landlord may insure, and keep insured, at Tenant's expense,
all plate and other glass in the demised premises for and in the name of
Landlord. Bills for premiums therefor shall be rendered by Landlord to Tenant at
such times as Landlord 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. Tenant may be a self-insurer.
FORTY-SEVENTH: - 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 landlord, or diminution or
abatement of rent.
FORTY-EIGHTH: - Except as otherwise in this lease provided, a bill,
statement, notice or communication which Landlord may desire or be required to
give to Tenant, shall be deemed sufficiently given or rendered if in writing
delivered to Tenant. All notices shall be delivered by certified mail return
receipt 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 Landlord must be served by registered or certified mail
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addressed to Landlord at the address first hereinabove given or at such other
address as landlord shall designate by written notice.
FORTY-NINTH - If and so long as Tenant pays the rent and additional
rent reserved hereby and performs and observes the covenants and provisions
hereof, Tenant shall quietly enjoy the demised premises, subject, however, to
the terms, conditions, exceptions and reservations of this lease, and to the
ground, underlying and overriding leases and mortgages hereinbefore mentioned.
FIFTIETH: - Upon the expiration or other termination of the term of
this lease, Tenant shall quit and surrender to Landlord the demised premises,
broom clean, in good order and condition, ordinary wear excepted. Lessee
acknowledges that possession of the demised premises must be surrendered to the
Lessor at the expiration or sooner termination of the term of this Lease. Lessee
agrees it shall indemnify and save Lessor harmless against costs, claims, loss
or liability resulting from delay by Lessee in so surrendering the demised
premises, including, without limitation, any claims made by any succeeding
tenant, founded on such delay. The parties recognize and agree that the damage
to Lessor resulting from any failure by Lessee timely to surrender possession of
the demised premises as aforesaid will be extremely substantial, will exceed the
amount of monthly rent theretofore payable hereunder, and will be impossible of
accurate measurement. Lessee therefore agrees that if possession of the demised
premises is not surrendered to within seven (7) days after the date of the
expiration or termination of the term of this lease, then lessee agrees to pay
lessor as liquidated damages for each month and for each portion of any month
during which lessee holds over in the premises after expiration or termination
of the term of this lease, a sum equal to one and one-half (1 1/2) times the
average rent and additional rent which was payable per month under this lease
during the last six months of the term thereof. The aforesaid provisions of this
article shall survive the expiration or sooner termination of the term of this
Lease. If the last day of the term of this lease or any renewal thereof falls on
Sunday, this lease shall expire on the business day immediately preceding.
FIFTY-FIRST: - If Landlord shall be unable to give possession of the
demised premises on the date of the commencement of the term hereof for any
reason, Landlord shall not be subject to any liability. Under such
circumstances, the rent reserved and covenanted to be paid herein shall not
commence until the possession of the demised premises is given or the premises
are available for occupancy by Tenant, and no such failure to give possession on
the date of the commencement of the term shall in any wise affect the validity
of this lease or the obligations of Tenant hereunder, nor shall same be
construed in any wise to extend the term of this lease. If Landlord is unable to
give possession of the demised premises on the date of the commencement of the
term hereof by reason of the holding over or retention of possession of any
tenant, tenants or occupants or for any other reason, or if repairs,
improvements or decorations of the demised premises or of the building of which
said premises form a part, are not completed, no abatement or diminution of the
rent to be paid hereunder shall be allowed to Tenant nor shall the validity of
the lease be impaired under such circumstances. 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
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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 rent. In either case rent shall commence on the date specified
in this lease.
FIFTY-SECOND: - Landlord or Landlord's agents have made no
representations or promises with respect to the said building or demised
premises except as herein expressly set forth. The taking possession of the
demised premises by Tenant shall be conclusive evidence, as against Tenant, that
Tenant accepts same "as is" and that 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.
FIFTY-THIRD: - In the event the fixed annual rent or additional rent or
any part thereof provided to be paid by Lessee under the provisions of this
lease during the demised term shall become uncollectible or shall be reduced or
required to be reduced or refunded by virtue of any Federal, State, County or
City law, order or regulation, or by any direction of a public officer or body
pursuant to law, or the orders, rules, code, or regulations of any organization
or entity formed pursuant to law, whether such organization or entity be public
or private, then Lessor, at its option, may at any time thereafter terminate
this lease, by not less than thirty (30) days' written notice to Lessee, on a
date set forth in said notice, in which event this lease and the term hereof
shall terminate and come to an end on the date fixed in said notice as if the
said date were the date originally fixed herein for the termination of the
demised term. Lessor shall not have the right so to terminate this lease if
Lessee within such period of thirty (30) days shall in writing lawfully agree
that the rentals herein reserved are reasonable rentals and agree to continue to
pay said rentals and if such agreement by Lessee shall be legally enforceable by
Lessor.
FIFTY-FOURTH: - The covenants, conditions and agreements contained in
this lease shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, distributees, executors, administrators, successors, and,
except as otherwise provided in this lease, their assigns.
FIFTY-FIFTH: - Except as may be otherwise contained in a written
instrument or instruments duly executed and delivered by and between the parties
hereto, this lease contains the entire agreement and understanding of the
parties with respect to the demised premises and the respective rights and
duties of the parties in relation thereto and in relation to each other. There
are no oral understandings or agreements between the parties of any kind.
Landlord has made no representations or warranties to Tenant of any kind. All
oral representations, warranties and promises prior to or contemporaneous with
this written lease (if any be claimed) are and shall be deemed merged into this
lease. This lease cannot be changed or supplemented orally. All promises and
agreements made by or between the parties subsequent to the execution and
delivery of this lease shall be and be deemed to be null, void and unenforceable
unless contained in a writing duly executed and delivered by and between the
parties hereto, whether or not the same relate in any way to this lease or any
matter covered hereby.
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FIFTY-SIXTH: - (a) The term "Landlord" as used in this lease means only
the owner or the mortgagee in possession for the time being, of the land and
building (or the owner of a lease of the entire building or of the land and
entire building) of which the demised premises form a part so that in the event
of any sale or sales of said land and entire building or of any transfer or
conveyance of said lease or in the event of a lease of said entire building or
of the land and entire building, the Landlord shall be and hereby is entirely
freed and relieved of all liability for the performance of all covenants and
obligations on the part of Landlord to be performed hereunder, and it shall be
deemed and considered without further agreement between the parties or other
successors in interest or between the parties and the purchaser at any such sale
or any transferee or mortgagee or any lessee of the entire building or of the
land and entire building that the purchaser, lessee, transferee or grantee has
assumed and agreed to carry out any and all covenants and obligations of
Landlord hereunder. Tenant acknowledges that it has been informed and
understands that Landlord is a lessee of the land and entire building of which
the demised premises form a part. The term "lease of the entire building or of
the land and entire building" shall be deemed to include a sublease thereof, and
the term "lessee of the entire building or of the land and entire building"
shall be deemed to include a sublessee thereof.
(b) The words "re-entry" as used in this lease are not restricted to
their technical meaning.
(c) The term "business days" as used in this lease shall exclude
Saturdays (except such portion thereof as is covered by the insertion of
specific hours herein), Sundays and all days observed by the State or Federal
Government as legal holidays.
(d) From time to time, Tenant, on at least ten (10) days' prior written
request by Landlord, will deliver to Landlord a statement in writing certifying
that this lease is unmodified and in full force and effect (or if there shall
have been modifications, that the same is in full force and effect as modified
and stating the modifications) and the dates to which the rent and other charges
have been paid and stating whether or not Landlord is in default in performance
of any covenant, agreement or condition contained in this lease and if so,
specifying each such default of which Tenant may have knowledge.
FIFTY-SEVENTH: - The fixed annual rent reserved in this lease and
payable hereunder shall be adjusted, as of the times and in the manner set forth
in this Article:
(a) Definitions: For the purposes of this Article, the following
definitions shall apply:
(i) The term "Base Year" shall mean the full calendar year during which
the term of this lease commences.
(ii) The term "Price Index" shall mean the "Consumer Price Index"
published by the Bureau of Labor Statistics of the U.S. Department of Labor, All
Items, New York, N.Y.-- Northeastern, N.J., all urban consumers (presently
denominated "CPI-U"), or a successor or substitute index appropriately adjusted.
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(iii) The term "Price Index for the Base Year" shall mean the average
of the monthly All Items Price Indexes for each of the 12 months of the Base
Year.
(b) Effective as of each January and July subsequent to the Base Year,
there shall be made a cost of living adjustment of the fixed annual rental rate
payable hereunder. The July adjustment shall be based on the percentage
difference between the Price Index for the preceding month of June and the Price
Index for the Base Year. The January adjustment shall be based on such
percentage difference between the Price Index for the preceding month of
December and the Price Index for the Base Year.
(i) In the event the Price Index for June in any calendar year during
the term of this lease reflects an increase over the Price Index for the Base
Year, then the fixed annual rent herein provided to be paid as of the July 1st
following such month of June (unchanged by any adjustments under this Article)
shall be multiplied by the percentage difference between the Price Index for
June and the Price Index for the Base Year, and the resulting sum shall be added
to such fixed annual rent, effective as of such July 1st. Said adjusted fixed
annual rent shall thereafter be payable hereunder, in equal monthly
installments, until it is readjusted pursuant to the terms of this lease.
(ii) In the event the Price Index for December in any calendar year
during the term of this lease reflects an increase over the price Index for the
Base Year, then the fixed annual rent herein provided to be paid as of the
January 1st following such month of December (unchanged by any adjustments under
this Article) shall be multiplied by the percentage difference between the Price
Index for December and the Price Index for the Base Year, and the resulting sum
shall be added to such fixed annual rent effective as of such January 1st. Said
adjusted fixed annual rent shall thereafter be payable hereunder, in equal
monthly installments, until it is readjusted pursuant to the terms of this
lease.
The following illustrates the intentions of the parties hereto as to
the computation of the aforementioned cost of living adjustment in the annual
rent payable hereunder.
Assuming that said fixed annual rent is $10,000, that the Price Index
for the Base Year was 102.0 and that the Price Index for the month of June in a
calendar year following the Base Year was 105.0, then the percentage increase
thus reflected, i.e., 2.941% (3.0/102.0) would be multiplied by $10,000, and
said fixed annual rent would be increased by $294.10 effective as of July 1st of
said calendar year.
In the event that the Price Index ceases to use 1982-84=100 as the
basis of calculation, or if a substantial change is made in the terms or number
of items contained in the Price Index, then the Price Index shall be adjusted to
the figure that would have been arrived at had the manner of computing the Price
Index in effect at the date of this lease not been altered. In the event such
Price Index (or a successor or substitute index) is not available, a reliable
governmental or other
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non-partisan publication evaluating the information theretofore used in
determining the Price Index shall be used.
(c) Landlord will cause statements of the cost of living adjustments
provided for in subdivision (b) to be prepared in reasonable detail and
delivered to Tenant.
(d) In no event shall the fixed annual rent originally provided to be
paid under this lease (exclusive of the adjustments under this Article) be
reduced by virtue of this Article.
(e) Any delay or failure of Landlord, beyond July or January of any
year, computing or billing for the rent adjustments hereinabove provided, shall
not constitute a waiver of or in any way impair the continuing obligation of
Tenant to pay such rent adjustments hereunder.
(f) Notwithstanding any expiration or termination of this lease prior
to the lease expiration date (except in the case of a cancellation by mutual
agreement) Tenant's obligation to pay rent as adjusted under this Article shall
continue and shall cover all periods up to the lease expiration date, and shall
survive any expiration or termination of this lease.
FIFTY-EIGHTH: - Tenant shall pay to Landlord, as additional rent, tax
escalation in accordance with this Article:
(a) For purposes of this lease the rentable square foot area of the
presently demised premises shall be deemed to be 6,863 square feet.
(b) Definitions: For the purpose of this Article, the following
definitions shall apply:
(i) The term "base tax year" as hereinafter set forth for the
determination of real estate tax escalation, shall mean the New York City real
estate tax year commencing July 1, 1999 and ending June 30, 2000.
(ii) The term "The Percentage", for purposes of computing tax
escalation, shall mean two and 8/100's/1 percent (2.08%). The Percentage has
been computed on the basis of a fraction, the numerator of which is the rentable
square foot area of the demised premises and the denominator of which is the
total rentable square foot area of the office and commercial space in the
building project. The parties acknowledge and agree that the total rentable
square foot area of the office and commercial space in the building project
shall be deemed to be 330,331 square feet.
(iii) The term "the building project" shall mean the aggregate combined
parcel of land on a portion of which are the improvements of which the demised
premises form a part, with all the improvements thereon, said improvements being
a part of the block and lot for tax purposes which are applicable to the
aforesaid land.
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(iv) The term "comparative year" shall mean the twelve (12) months
following the base tax year, and each subsequent Period of twelve (12) months
(or other such Period of twelve (12) months occurring during the term of this
lease as hereafter may be duly adopted as the tax year for real estate tax
purposes by the City of New York).
(v) The term "real estate taxes" shall mean the total of all taxes and
special or other assessments levied, assessed or imposed at any time by any
governmental authority upon or against the building project, and also any tax or
assessment levied, assessed or imposed at any time by any governmental authority
in connection with the receipt of income or rents from said building project to
the extent that same shall be in lieu of all or a portion of any of the
aforesaid taxes or assessments, or additions or increases thereof, upon or
against said building project. If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason, a franchise,
income, transit, profit or other tax or governmental imposition, however
designated, shall be levied against Landlord in substitution in whole or in part
for the real estate taxes, or in lieu of additions to or increases of said real
estate taxes, then such franchise, income, transit, profit or other tax or
governmental imposition shall be deemed to be included within the definition of
"real estate taxes" for the purposes hereof. As to special assessments which are
payable over a period of time extending beyond the term of this lease, only a
pro rata portion thereof covering the portion of the term of this lease
unexpired at the time of the imposition of such assessment, shall be included in
"real estate taxes". If by law, any assessment may be paid in installments,
then, for the purposes hereof (a) such assessment shall be deemed to have been
payable in the maximum number of installments permitted by law and (b) there
shall be included in real estate taxes, for each comparative year in which such
installments may be paid, the installments of such assessment so becoming
payable during such comparative year, together with interest payable during such
comparative year.
(vi) Where more than one assessment is imposed by the City of New York
for any tax year, whether denominated an "actual assessment" or a "transitional
assessment" or otherwise, then the phrases herein "assessed value" and
"assessments" shall mean whichever of the actual, transitional or other
assessment is designated by the City of New York as the taxable assessment for
that tax year.
(vii) The phrase "real estate taxes payable during the base tax year"
shall mean that amount obtained by multiplying the assessed value of the land
and buildings of the building project for the base tax year by the tax rate for
the base tax year for each $100 of such assessed value.
(c) 1. In the event that the real estate taxes payable for any
comparative year shall exceed the amount of the real estate taxes payable during
the base tax year, Tenant shall pay to Landlord, as additional rent for such
comparative year, an amount equal to The Percentage of the excess. Before or
after the start of each comparative year, Landlord shall furnish to Tenant a
statement of the real estate taxes payable for such comparative year, and a
statement of the real estate taxes payable during the base tax year. If the real
estate taxes payable for such comparative year
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exceed the real estate taxes payable during the base tax year, additional rent
for such comparative year, in an amount equal to The Percentage of the excess,
shall be due from Tenant to Landlord, and such additional rent shall be payable
by Tenant to Landlord within ten (10) days after receipt of the aforesaid
statement. The benefit of any discount for any earlier payment or prepayment of
real estate taxes shall accrue solely to the benefit of Landlord, and such
discount shall not be subtracted from the real estate taxes payable for any
comparative year.
Additionally, Tenant shall pay to Landlord, on demand, a sum equal to
The Percentage of any business improvement district assessment payable by the
building project.
2. Should the real estate taxes payable during the base tax year be
reduced by final determination of legal proceedings, settlement or otherwise,
then, the real estate taxes payable during the base tax year shall be
correspondingly revised, the additional rent theretofore paid or payable
hereunder for all comparative years shall be recomputed on the basis of such
reduction, and Tenant shall pay to Landlord as additional rent, within ten (10)
days after being billed therefor, any deficiency between the amount of such
additional rent as theretofore computed and the amount thereof due as the result
of such recomputations. Should the real estate taxes payable during the base tax
year be increased by such final determination of legal proceedings, settlement
or otherwise, then appropriate recomputation and adjustment also shall be made.
3. If after Tenant shall have made a payment of additional rent under
this subdivision (c), Landlord shall receive a refund of any portion of the real
estate taxes payable for any comparative year after the base tax year on which
such payment of additional rent shall have been based, as a result of a
reduction of such real estate taxes by final determination of legal proceedings,
settlement or otherwise, Landlord shall within ten (10) days after receiving the
refund pay to Tenant The Percentage of the refund less The Percentage of
expenses (including attorneys' and appraisers' fees) incurred by Landlord in
connection with any such application or proceeding. If prior to the payment of
taxes for any comparative year, Landlord shall have obtained a reduction of that
comparative year's assessed valuation of the building project, and therefore of
said taxes, then the term "real estate taxes" for that comparative year shall be
deemed to include the amount of Landlord's expenses in obtaining such reduction
in assessed valuation, including attorneys' and appraisers' fees.
4. The statements of the real estate taxes to be furnished by Landlord
as provided above shall be certified by Landlord and shall constitute a final
determination as between Landlord and Tenant of the real estate taxes for the
Periods represented thereby, unless Tenant within thirty (30) days after they
are furnished shall give a written notice to Landlord that it disputes their
accuracy or their appropriateness, which notice shall specify the particular
respects in which the statement is inaccurate or inappropriate. If Tenant shall
so dispute said statement then, pending the resolution of such dispute, Tenant
shall pay the additional rent to Landlord in accordance with the statement
furnished by Landlord.
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5. In no event shall the fixed annual rent under this lease (exclusive
of the additional rents under this Article) be reduced by virtue of this
Article.
6. If the commencement date of the term of this lease is not the first
day of the first comparative year, then the additional rent due hereunder for
such first comparative year shall be a proportionate share of said additional
rent for the entire comparative year, said proportionate share to be based upon
the length of time that the lease term will be in existence during such first
comparative year. Upon the date of any expiration or termination of this lease
except termination because of Tenant's default) whether the same be the date
hereinabove set forth for the expiration of the term or any prior or subsequent
date, a proportionate share of said additional rent for the comparative year
during which such expiration or termination occurs shall immediately become due
and payable by Tenant to Landlord, if it was not theretofore already billed and
paid. The said proportionate share shall be based upon the length of time that
this lease shall have been in existence during such comparative year. Landlord
shall promptly cause statements of said additional rent for that comparative
year to be prepared and furnished to Tenant. Landlord and Tenant shall thereupon
make appropriate adjustments of amounts then owing.
7. Landlord's and Tenant's obligations to make the adjustments referred
to in subdivision (6) above shall survive any expiration or termination of this
lease.
8. Any delay or failure of Landlord in billing any tax escalation
hereinabove provided shall not constitute a waiver of or in any way impair the
continuing obligation of Tenant to pay such tax escalation hereunder.
FIFTY-NINTH: - (A) Tenant acknowledges that its continued occupancy of
the demised premises and the regular conduct of its business therein, are of
utmost importance to the Landlord in the renewal of other leases in the
building, in the renting of vacant space in the building, in the providing of
electricity, air conditioning, steam and other services to the tenants in the
building, and in the maintenance of the character and quality of the tenants in
the building. Tenant therefore covenants and agrees that it will occupy the
entire demised premises and will conduct its business therein in the regular and
usual manner, throughout the term of this lease. Tenant acknowledges that
Landlord is executing this lease in reliance upon these covenants and that these
covenants are a material element of consideration inducing Landlord to execute
this lease. Tenant further agrees that if it vacates the demised premises or
fails to so conduct its business therein at any time during the term of this
lease, without the prior written consent of the Landlord, then all rent and
additional rent reserved in this lease from the date of such breach to the
expiration date of this lease shall become immediately due and payable to
Landlord.
(B) The parties recognize and agree that the damage to Landlord
resulting from any breach of the covenants in subdivision (A) hereof will be
extremely substantial, will be far greater than the rent payable for the balance
of the term of this lease, and will be impossible of accurate measurement. The
parties therefore agree that in the event of a breach or threatened breach of
the said covenants, in addition to all of Landlord's other rights and remedies,
at law or
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in equity or otherwise, Landlord shall have the right of injunction to preserve
Tenant's occupancy and use. The words "become vacant or deserted" as used
elsewhere in this lease shall include Tenant's failure to occupy or use as by
this Article required.
(C) If Tenant breaches either of the covenants in subdivision (A)
above, and this lease be terminated because of such default, then, in addition
to Landlord's rights of re-entry, restoration, preparation for and re-rental,
and anything elsewhere in this lease to the contrary notwithstanding, Landlord
shall retain its right to judgment on and collection of Tenant's aforesaid
obligation to make a single payment to Landlord of a sum equal to the total of
all rent and additional rent reserved for the remainder of the original term of
this lease, subject to future credit or repayment to Tenant in the event of any
rerenting of the premises by Landlord, after first deducting from re-rental
income all expenses incurred by Landlord in reducing to judgment or otherwise
collecting Tenant's aforesaid obligation, and in obtaining possession of,
restoring, preparing for and re-letting the premises. In no event shall Tenant
be entitled to a credit or repayment for rerental income which exceeds the sums
payable by Tenant hereunder or which covers a period after the original term of
this lease.
(D) If any provision of this Article of this lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Article, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each provision of
this Article and of this lease shall be valid and be enforced to the fullest
extent permitted by law.
SIXTIETH: - The Landlord shall be under no obligation to provide access
between the "A" Wing and the "B" Wing on the floor of the premises demised
herein, and any passageways which may now or hereafter exist between said wings
may be discontinued at any time at the discretion of the Landlord.
SIXTY-FIRST: - 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.
SIXTY-SECOND: - Tenant and Tenant's servants, employees, agents,
visitors, and licensees shall observe faithfully, and comply strictly with, the
Rules and Regulations and such other and further reasonable Rules and
Regulations as Landlord or Landlord's agents may from time to time adopt. Notice
of any additional rules or regulations shall be given in such manner as Landlord
may elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulation hereafter made or adopted by Landlord or Landlord's agents, the
parties hereto agree to submit the question of the reasonableness of such Rule
or Regulation for decision to the Chairman of the Board of Directors of the
Management Division of The Real Estate Board of New York, Inc., or to such
impartial person or persons as he may designate, 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
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shall be asserted by service of a notice in writing upon Landlord within thirty
(30) days after the adoption of any such additional Rule or Regulation. Nothing
in this lease contained shall be construed to impose upon Landlord any duty or
obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Landlord shall
not be liable to Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors or licensees.
The use in the demised premises of auxiliary heating devices, such as
portable electric heaters, heat lamps or other devices whose principal function
at the time of operation is to produce space heating, is prohibited.
SIXTY-THIRD: - It is understood and agreed that this lease is submitted
to Tenant on the understanding that it shall not be considered an offer and
shall not bind Landlord in any way until (i) Tenant has duly executed and
delivered duplicate originals to Landlord and (ii) Landlord has executed and
delivered one of said originals to Tenant.
SIXTY-FOURTH: - It is understood and agreed that the annual rent for
the period February 1, 2000 to September 20, 2002 shall be ONE HUNDRED
NINETY-THREE THOUSAND THREE HUNDRED NINETY-NINE AND 34/100 ($193,399.34) DOLLARS
($16,116.61 per month); and for the period October 1, 2002 to April 30, 2005 the
annual rent shall be TWO HUNDRED SEVEN THOUSAND ONE HUNDRED TWENTY-FIVE AND
34/100 ($207,125.34) DOLLARS ($17,260.45 per month). Of the above figures,
TWENTY- ONE THOUSAND EIGHT HUNDRED TWENTY-FOUR AND 34/10 ($21,824.34) DOLLARS
represents the electric rent inclusion factor of the annual rent which shall be
subject to adjustment as provided in Article #22 hereof.
SIXTY-FIFTH: - Landlord will do the following work, once prior to the
Commencement Date of this Lease Renewal, in building's standard manner and with
building's standard materials:
1. Paint entire premises with two (2) coats of paint. Tenant to select
color from our standard color chart.
2. Install new carpet over padding including base, if necessary. Tenant
to select color to match decor from our sample book.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
1350 BROADWAY ASSOCIATES
BY: HELMSLEY-SPEAR, INC., Agent
.......................................... /s/[illegible]......................
Witness for Landlord: Chief Operating Officer
ACTIVE APPAREL GROUP, INC.
.....................................
.......................................... By: /s/ George Horowitz
Witness for Tenant: President & CEO..................
George Horowitz..................
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ACKNOWLEDGMENTS
LANDLORD
State of New York )
County of New York ) ss.:
On this _____ day of _______, 19__, before me personally came
_________, to me known and known to me to be a partner of ____________, a
co-partnership, mentioned and described in, and which executed the foregoing
instrument, and the said duly acknowledged to me that he executed the said
instrument for and on behalf of and with the authority of said for the uses and
purposes therein mentioned.
....................................
PARTNERSHIP TENANT
State of New York )
County of New York ) ss.:
On this ________ day of ________, 19__, before me personally came
___________, to me known and known to me to be a partner of ___________, a
co-partnership, mentioned and described in, and which executed the foregoing
instrument, and the said duly acknowledged to me that he executed the said
instrument for and on behalf of and with the authority of said for the uses and
purposes therein mentioned.
....................................
INDIVIDUAL TENANT
State of New York )
County of New York ) ss.:
On this _________ day of ________, 19__, before me personally came
____________, to me known and known to me to be the individual described in, and
who executed the foregoing instrument, and acknowledged to me that he executed
the same.
....................................
CORPORATE TENANT
State of New York )
County of New York ) ss.:
On this _________ day of ________, 19__, before me personally came
_________, to me known, who being by me duly sworn, did depose and say that he
resides at ______________ ; that he is the _________________ of the corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the Board of Directors of said corporation.
....................................
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RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
Tenant or used for any purpose other than ingress and egress to and from the
demised premises, and if said premises are situate on the ground floor of the
building the Tenant thereof shall further, at said Tenant's own expense, keep
the sidewalks and curb directly in front of said premises clean and free from
ice, snow, etc.
2. The freight and not the passenger elevators shall be used by the
working hands of Tenant and persons calling for and delivering goods to and from
the demised premises.
3. No awnings or other projections shall be attached to the outside
walls of the building without the prior written consent of Landlord. No
curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the demised premises, without the prior
written consent of the Landlord. Such awnings, projections, curtains, blinds,
shades, screens or other fixtures must be of a quality, type, design and color,
and attached in the manner approved by the Landlord.
4. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of the
outside or inside of the demised premises or building without the prior written
consent of Landlord. Interior signs on doors shall be inscribed, painted or
affixed for each Tenant by Landlord at the expense of such Tenant, and shall be
of a size, color and style acceptable to Landlord. Only the Tenant named in the
lease shall be entitled to appear on the Directory Board or Tablet. Additional
names may be added in Landlord's sole discretion under such terms and conditions
as he may approve.
5. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
building shall not be covered by any Tenant, nor shall any bottles, parcels, or
other articles be placed on the windowsills.
6. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by Tenant who,
or whose servants, employees, agents, visitors or licensees, shall have caused
the same.
7. No Tenant shall mark, paint, drill into, or in any way deface any
part of the demised premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. No linoleum or other
floor covering shall be laid in direct contact with the floor of the demised
premises, but if any such covering is required by Tenant, an interlining of
builder's deadening felt shall first be affixed to the floor with paste or other
water soluble material, the use of cement or other adhesive non-soluble in water
is expressly prohibited.
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8. No Tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them whether by the use of
any instrument, radio, talking machine, musical noise, whistling, singing or in
any other way.
9. No Tenant, nor any of Tenant's servants, employees, agents,
visitors, or licensees, shall at any time bring or keep upon the demised
premises any inflammable, combustible or explosive fluid, chemical and
substance, or cause or permit any unusual or objectionable odors to be produced
upon or permeate from the demised premises. No animals or birds shall be kept by
Tenant in or about the building.
10. Landlord reserves the right to inspect all freight to be brought
into the building and to exclude from the building all freight which violates
any of these Rules and Regulations or the lease of which these Rules and
Regulations are a part.
11. Landlord shall have the right to prohibit any advertising by any
Tenant which, in its opinion, tends to impair the reputation of the building or
its desirability and, upon written notice from Landlord, Tenant shall refrain
from or discontinue such advertising.
12. Canvassing, soliciting and peddling in the building is prohibited
and each Tenant shall co-operate to prevent the same.
13. There shall not be used in any space, or in the public halls of any
building, either by Tenant or by jobbers or others, in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
side guards.
14. No Tenant shall purchase spring water, ice, towels, or other like
service, from any company or persons not approved by Landlord.
15. The use in the demised premises of auxiliary heating devices, such
as portable electric heaters, heat lamps or other devices whose principal
function at the time of operation is to produce space heating, is prohibited.
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ADDITIONAL CLAUSES ATTACHED TO AND FORMING A PART OF LEASE DATED
JULY 20, 1999 BETWEEN 1350 BROADWAY ASSOCIATES AND ACTIVE APPAREL
GROUP, INC.
SIXTY-SIXTH:
A. 1. The Landlord will supply through its system chilled water at a
temperature in the approximate range of 45 degrees F. to 50 degrees F.
throughout the cooling season, to wit, April 15 to October 15 in each year, on
regular business days, Monday through Friday from 8:00 A.M. to 6:00 P.M.
2. Landlord may elect from time to time; to commence the cooling season
on a date earlier than that specified above and/or extend the cooling season
beyond the date specified in said clause. In either or both such events, Tenant
agrees it will avail itself to the cooling season aforementioned. In such event,
Tenant covenants and agrees to pay to Landlord as additional rent for the
chilled water to be supplied by Landlord prior to and/or subsequent to the
cooling season aforementioned, a sum equal to the proportion of the annual
additional rent payable as herein provided for chilled water service furnished
during the cooling season specified in this clause, that the number of days
during which the Landlord furnishes the chilled water service prior to and/or
subsequent to such cooling season aforementioned. Such sum shall be in addition
to all the other sums payable under this lease, including but not limited to the
annual additional rent payable for chilled water service during the cooling
season aforementioned, the same shall be due and payable on demand.
B. For the chilled water service to be supplied by the Landlord, the
Tenant agrees, throughout the term of this lease, to pay the Landlord as
additional rent, (aggregating the sum of $5,147.25 per annum) for the space in
the demised premises to be air-cooled by the system, and Tenant agrees to pay
such additional rent in twelve (12) monthly installments of $428.94 in advance,
on the first day of each month, for the duration of this lease. However, during
any continued occupancy of said premises by the Tenant after the expiration of
said lease, Tenant agrees to pay the building's prevailing rate for the chilled
water service during the full term of the continued occupancy. Payment to be
made in the same manner as heretofore. If either of said dates shall be other
than the first day of the month, the monthly installment of additional rent for
that month shall be prorated. Electric current to operate the installation shall
be paid by the Tenant as herein in this lease provided.
C. 1. Landlord shall have no responsibility or liability for failure to
supply chilled water for the operation of the installation or for failure to
perform any agreement contained herein, when prevented from doing so by strikes,
accidents or by any cause beyond Landlord's control, or by laws, orders, or
Regulations of any Federal, State, County or Municipal Authority or other
governmental authority or by failure of water, steam, electric supply or
inability by exercise of reasonable diligence, to obtain water, steam or
electricity.
-42-
<PAGE>
2. Landlord reserves the right to stop service of furnishing chilled
water for air cooling system when necessary by reason of accident or emergency,
or for repairs, alterations, replacements, or improvements which in the judgment
of the Landlord are desirable or necessary to be made to the chilled water
circulating system or to the demised premises or to the building of which the
demised premises are a part, until such repairs, alterations, replacements, or
improvements shall have been completed.
D. Landlord will, without charge and as an accommodation to Tenant,
attend to the regular lubrication of the installation, during regular business
hours, after same is connected to the Landlord's system, and in addition,
Landlord will install filters in such installation, which filters are to be
furnished by and at the expense of the Tenant. Landlord shall not be liable to
Tenant for damage resulting from any delays or omissions in connection with such
lubrication or the service to be rendered pursuant to this sub-division.
E. Tenant agrees to indemnify and hold the Landlord safe and harmless
from and against any injury or damage to the demised premises or to the building
of which the demised premises are a part, and from and against any and all
claims for injury or damage to property which may be asserted against Landlord,
if any such injury or damage is caused by the installation, connection,
operation and maintenance of Tenant's air cooling system.
F. If, on the date hereof, the unit has already been installed and
connected with Landlord's system, then all of the provisions of this article
shall nevertheless be applicable with the same force and effect as though the
installation was a new installation, and the additional rent payable hereunder
for the chilled water shall commence on the commencement of the term of this
lease.
G. Landlord agrees to allocate FORTY-THREE (43) gallons per minute to
the installation.
H. It is further understood and agreed that the complete chilled water
air cooling machinery, equipment, and all parts hereto, is and remain at all
times the property of the Landlord.
I. Landlord is in no way obligated to replace any or all of the air
conditioning system in the premises if any governmental regulations require the
installation of any additional equipment or fixtures.
J. 1. It is understood and agreed that the Landlord's obligation under
this article is to supply chilled water to the demised premises through the
Landlord's chilled water system.
2. Tenant may use any air conditioning equipment presently in the
demised premises.
3. Any necessary repairs or replacements of any air conditioning
equipment (other than Landlord's chilled water system equipment) is the
obligation of the Tenant. Any replacements or additions to the air conditioning
equipment shall be limited to the chilled water system and shall be subject to
Landlord's written approval which shall not be unreasonably withheld.
-43-
<PAGE>
1350 BROADWAY ASSOCIATES
BY: HELMSLEY-SPEAR, INC., Agent
/s/ [illegible]
--------------------------------------
Chief Operating Officer
ACTIVE APPAREL GROUP, INC.
By: /s/ George Horowitz
----------------------------------
President & CEO
-44-
<PAGE>
ADDITIONAL CLAUSES ATTACHED TO AND FORMING A PART OF LEASE DATED
JULY 20, 1999 BETWEEN 1350 BROADWAY ASSOCIATES AND ACTIVE APPAREL
GROUP, INC.
SIXTY-SEVENTH:
Supplementing Article 10 and 59 hereof:
1. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this Lease, nor
underlet, or suffer, or permit the demised premises or any part thereof to be
used or occupied by others, without the prior written consent of Landlord in
each instance. If this Lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anyone other than Tenant, Landlord may, after
default by Tenant, collect rent from the assignee, undertenant, or occupant, and
apply the net amount collected to the rent herein reserved, but no assignment,
underletting, occupancy or collection shall be deemed a waiver of the provision
hereof, the acceptance of the assignee, undertenant or occupant of Tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Landlord to an assignment or
underletting shall not in any way by construed to relieve Tenant from obtaining
the express consent in writing of Landlord to any further assignment or
underletting. In no event shall any permitted sublessee assign or encumber its
sublease or further sublet all or any portion of its sublet space or otherwise
suffer or permit the sublet space or any part thereof to be used or occupied by
others, without Landlord's prior written consent in each instance. A
modification, amendment or extension of a sublease shall be deemed a sublease.
If any lien is filed against the demised premises or the building of which the
same form a part for brokerage services claimed to have been performed by
Tenant, whether or not actually performed, the same shall be discharged by
Tenant within thirty (30) days thereafter, at Tenant's expense, by filing a bond
required by law or otherwise, and paying any other necessary sums, and Tenant
agrees to indemnify Landlord and its agents and hold them, harmless from and
against any and all claims, losses or liability resulting from such lien for
brokerage services rendered.
2. If Tenant desires to assign this Lease or to sublet all or any
portion of the demised premises, it shall first submit in writing to Landlord
the documents described in Section "C" hereof and shall offer in writing, (i)
with respect to a prospective assignment, to assign this Lease to Landlord
without any payment of moneys or other consideration, therefor, or, (ii) with
respect to a prospective subletting, to sublet to Landlord the portion of the
demised premises involved ("Leaseback Area") for the term specified by Tenant in
its proposed sublease and at the lower of (a) Tenant's proposed subrental or (b)
at the same rate of fixed rent and additional rent, and otherwise on the same
term, covenants and conditions (including provisions relating to escalation
rents), as are contained herein and as are allocable and applicable to the
portion of the demised premises to be covered by such subletting. The offer
shall specify the date when the Leaseback Area will be made available to
Landlord, which date shall be in no event earlier than ninety (90) days nor
later than one hundred eighty (180) days following the acceptance of the offer.
If an offer of
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<PAGE>
sublease is made, and if the proposed sublease will result in all or
substantially all of the demised premises being sublet, then Landlord shall have
the option to extend the term of its proposed sublease for the balance of the
term of this Lease less one (1) day.
Landlord shall have a period of ninety (90) days from the receipt of
such offer to either accept or reject the same. If Landlord shall accept such
offer (i) Tenant shall then execute and deliver to Landlord, or to anyone
designated or named by Landlord, an assignment or sublease, as the case may be,
in either case in a form reasonably satisfactory to Landlord's counsel; and (ii)
if the proposed transaction is a sublease and Landlord accepts such offer,
Tenant, on demand, shall pay to Landlord or its managing agent (as Landlord
shall elect) an amount equal to the brokerage commissions which would have been
incurred by Tenant but for Landlord's accepting such offer.
If a sublease is so made it shall expressly:
(a) permit Landlord to make further subleases of all or any part
of the Leaseback Area and (At no cost or expense to Tenant) to
make and authorize any and all changes, alterations,
installations and improvements in such space as necessary;
(b) provide that Tenant will, at all times, permit reasonably
appropriate means of ingress to and egress from the Leaseback
Area;
(c) negate any intention that the estate created under such
sublease be merged with any other estate held by either of the
parties;
(d) provide that Landlord shall accept the Leaseback Area "as is"
except that Landlord, at Tenant's expense, shall perform all
such work and make all such alterations as may be required
physically to separate the Leaseback Area from the remainder
of the demised premises and to permit lawful occupancy, it
being intended that Tenant shall have no other cost or expense
in connection with the subletting of the Leaseback Area;
(e) provide that at the expiration of the term of such sublease,
Tenant will accept the Leaseback Area in its then existing
condition, subject to the obligations of Landlord to make such
repairs thereto as may be necessary to preserve the Leaseback
Area in good order and condition, ordinary wear and tear
excepted.
Landlord shall indemnify and save Tenant harmless from all obligations
under this Lease as to the Leaseback Area during the period of time it is so
sublet, except for fixed annual rent and additional rent, if any, due under the
within Lease, which are in excess of the rents and additional sums due under
such sublease.
Subject to the foregoing, performance by Landlord, or its designee,
under a sublease of the Leaseback Area shall be deemed performance by Tenant of
any similar obligation under this Lease
-46-
<PAGE>
and any default under any such sublease shall not give rise to a default under a
similar obligation contained in this Lease, nor shall Tenant be liable for any
default under this Lease or deemed to be in default hereunder if such default is
occasioned by or arises from any act or omission of the tenant under such
sublease or is occasioned by or arises from any act or omission of any occupant
holding under or pursuant to any such sublease.
C. If Tenant requests Landlord's consent to a specific assignment or
subletting, it shall submit in writing to Landlord (i) the name and address of
the proposed assignee or sublessee, (ii) a duly executed counterpart of the
proposed agreement of assignment or sublease, (iii) reasonably satisfactory
information as to the nature and character of the business of the proposed
assignee or sublessee, and as to the nature of its proposed use of the pace, and
(iv) banking, financial or other credit information relating to the proposed
assignee or sublessee reasonably sufficient to enable Landlord to determine the
financial responsibility and character of the proposed assignee or sublessee.
D. If Landlord shall not have accepted Tenant's offer as provided in
Section "B", then Landlord will not unreasonably withhold or delay its consent
to Tenant's request for consent to such specific assignment or subletting, where
Tenant will not move the conduct of its business to another building in New York
City. Any such consent of Landlord shall be subject to the terms of this Article
and conditioned upon there being no default by Tenant, beyond any grace period,
under any of the terms, covenants and conditions of this Lease at the time that
Landlord's consent to any such subletting or assignment is requested and on the
date of the commencement of the term of any such proposed sublease or the
effective date of any such proposed assignment.
E. Upon receiving Landlord's written consent (and unless theretofore
delivered to Landlord) a duly executed copy of sublease or assignment shall be
delivered to Landlord within ten (10) days after execution thereof. Any such
sublease shall provide that the sublease shall comply with all applicable terms
and conditions of this Lease to be performed by the Tenant hereunder. Any such
assignment of lease shall contain an assumption by the assignee of all of the
terms, covenants and conditions of this Lease to be performed by the Tenant.
F. Anything herein contained to the contrary notwithstanding:
1. Tenant shall not advertise (but may list with brokers) its space for
assignment or subletting at a rental rate lower than the greater of the then
building rental rate for such space or the rental rate then being paid by Tenant
to Landlord.
2. Deleted.
3. No assignment or subletting shall be made:
a. To any person or entity which shall at that time be a
tenant, subtenant or other occupant of any part of the building of
which the demised premises form a part, or who dealt with Landlord or
Landlord's agent (directly or through a broker) with respect to space
in the
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<PAGE>
building during the six (6) months immediately preceding Tenant's
request for Landlord's consent;
b. By the legal representatives of the Tenant or by any person
to whom Tenant's interest under this Lease passes by operation of law,
except in compliance with the provisions of this Article;
c. To any person or entity for the conduct of a business which
is not in keeping with the standards and the general character of the
building of which the demised premises form a part.
G. Anything hereinabove contained to the contrary notwithstanding, the
offer back to Landlord provisions of Section "B" hereof shall not apply to, and
Landlord will not unreasonably withhold or delay its consent to an assignment of
this Lease, or sublease of all of part of the demised premises, to the parent of
Tenant or to a wholly-owned subsidiary of Tenant or of said parent, or to any
corporation into or with which Tenant may be merged or consolidated, provided
that the greater of (a) the net worth of Tenant on the date hereof or (b) the
net worth of Tenant immediately prior to such merger or consolidation; provided,
further, that any such assignment of lease shall contain an assumption by the
Assignee of all of the terms, covenants and conditions of this Lease to be
performed by the Tenant. Tenant agrees that no such assignment or subletting
shall be effective unless and until Tenant gives Landlord written notice
thereof, together with a true copy of the assignment or of the sublease.
H. If Landlord shall not have accepted Tenant's offer and Tenant
effects such assignment or subletting, then Tenant thereafter shall pay to
Landlord a sum equal to (a) any rent or other consideration paid to Tenant by
any subtenant which (after deducting the costs of Tenant, if any, in effecting
the subletting, including reasonable alteration costs, commissions and legal
fees) is in excess of the rent allocable to the subleased space which is then
being paid by Tenant to Landlord pursuant to the terms hereof, and (b) any other
profit or gain (after deducting any necessary expenses incurred) realized by
Tenant from any such subletting or assignment. All sums equal hereunder by
Tenant shall be payable to Landlord as additional rent upon receipt thereof by
Tenant.
I. In no event shall Tenant be entitled to make, nor shall Tenant make,
any claim and Tenant hereby waives any claim for money damages (nor shall Tenant
claim any money damages by way of set-off, counterclaim, or defense) based upon
any claim or assertion by Tenant that Landlord has unreasonably withheld or
unreasonably delayed its consent or approval to a proposed assignment or
subletting as provided for in this Article. Tenant's sole remedy shall be an
action or proceeding to enforce any such provision, or for specific performance,
injunction or declaratory judgment.
-48-
<PAGE>
1350 BROADWAY ASSOCIATES
BY: HELMSLEY-SPEAR, INC. Agent
/s/ [illegible]
----------------------------------------
Chief Operating Officer
ACTIVE APPAREL GROUP, INC.
By: /s/ George Horowitz
-------------------------------------
President & CEO
-49-
<PAGE>
ADDITIONAL CLAUSES ATTACHED TO AND FORMING A PART OF LEASE DATED
JULY 20, 1999 BETWEEN 1350 BROADWAY ASSOCIATES AND ACTIVE APPAREL
GROUP, INC.
SIXTY-EIGHTH:
A. Tenant covenants and agrees that Landlord shall have the absolute
and unqualified right, upon notice to Tenant, to designate as the Demised
Premises that part of any other floor in the building that approximately
corresponds to the premises demised hereunder, provided, however, (i) Landlord
may exercise this tight only once during the Initial Term of this Lease, (ii)
such substituted space shall be the equivalent or better in the appearance of
the Demised Premises upon completion of Landlord's Initial Construction (wear
and tear, as well as damage to the Demised Premises caused by Tenant, and (iii)
Landlord shall move Tenant to the substituted space during a single weekend.
Such notice shall specify and designate the space so substituted for the Demised
Premises. Notwithstanding such substitution of space, this Lease and all the
terms, provisions, covenants and conditions contained in this Lease shall remain
and continue in full force and effect, except that the Demised Premises shall be
and be deemed to be such substituted space (hereinafter called "Substituted
Space"), with the same force and effect as if the Substituted Space were
originally specified in this Lease as the premises demised hereunder. The new
space shall be the same size or no more than 20% larger than the present space
and if Tenant occupies a complete floor, Tenant can only be moved to another
complete floor which also will be the same size or no more than 20% larger than
the present full floor and Tenant shall remain as sole Tenant on such full
floor.
B. In the event of the substitution of space, Tenant, upon six (6)
months prior written notice, shall move to the Substituted Space, at Landlord's
expense, and upon failure of Tenant to so move to the Substituted Space,
Landlord may, as Tenant's Agent, remove Tenant from the Demised Premises to the
Substituted Space. Failure of Tenant to move to the Substituted Space, pursuant
to this Article shall be deemed a substantial breach of this Lease. Landlord
shall reimburse Tenant for Tenant's reasonable and necessary out-of-pocket
expenses actually incurred with regard to the move to the Substituted Space.
Upon request from Landlord, Tenant shall supply Landlord with satisfactory proof
of out-of-pocket expenses incurred by Tenant in moving from the Demised Premises
to the Substituted Space. Tenant shall be reimbursed for moving costs as they
are incurred.
C. Following such substitution of space, pursuant to this Article, if
any, Landlord and Tenant shall, promptly at the request of either party, execute
and deliver an agreement in recordable form setting forth such substitution of
space. Tenant shall be reimbursed for moving costs as they are incurred.
D. No such substitution shall be permitted without Landlord making same
substitution for the premises known as Rooms 2310/11 1350 Broadway.
-50-
<PAGE>
To Be Signed By Landlord and Tenant
/s/ [illegible].....................
(Landlord)
/s/ George Horowitz President & CEO...
(Tenant)
[Floor Plan Omitted]
-51-
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference to this Registration
Statement of Active Apparel Group, Inc., on Form S-8 of our report dated January
21, 2000, on our audits of the financial statements of Active Apparel Group,
Inc., as of December 31, 1999 and for the years ended December 31, 1999 and
1998, which report appears in the Annual Report on Form 10-KSB.
/s/ Berenson & Company LLP
New York, NY
March 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FOR 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 239,096
<SECURITIES> 0
<RECEIVABLES> 1,549,047
<ALLOWANCES> 0
<INVENTORY> 5,240,152
<CURRENT-ASSETS> 7,563,534
<PP&E> 913,255
<DEPRECIATION> 493,301
<TOTAL-ASSETS> 8,274,198
<CURRENT-LIABILITIES> 1,713,470
<BONDS> 0
0
0
<COMMON> 5,333
<OTHER-SE> 1,000
<TOTAL-LIABILITY-AND-EQUITY> 8,274,198
<SALES> 24,464,139
<TOTAL-REVENUES> 24,464,139
<CGS> 14,578,376
<TOTAL-COSTS> 14,578,376
<OTHER-EXPENSES> 8,453,917
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 279,804
<INCOME-PRETAX> 1,431,847
<INCOME-TAX> 615,694
<INCOME-CONTINUING> 1,431,846
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 816,152
<EPS-BASIC> .31
<EPS-DILUTED> .31
</TABLE>
