<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission file number 0-27562
ATLANTIC REALTY TRUST
(Exact name of registrant as specified in its charter.)
Maryland 13-3849655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
747 Third Avenue, New York, N.Y. 10017
(Address of principal executive offices) (Zip Code)
212-702-8561
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Shares of Beneficial Interest, NASDAQ Small Cap Market
$0.01 Par Value Per Share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
(TITLE OF CLASS)
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate Market Value of the Shares of Beneficial Interest held by
non-affiliates of the Registrant as of March 10, 1997: approximately
$35,164,163 .
Approximately 3,561,553 Shares of Beneficial Interest of the Registrant were
outstanding as of March 10, 1997.
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ATLANTIC REALTY TRUST AND SUBSIDIARY
TABLE OF CONTENTS
NOTE: Atlantic Realty Trust and its consolidated subsidiary are sometimes
referred to in this Annual Report on Form 10-K as "Registrant" or the
"Trust."
Item Page
---- ----
Part I. 1. Business 2
2. Properties 8
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Securities
Holders 8
Part II. 5. Market for Registrant's Common Equity and Related
Shareholder Matters 9
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Financial
Condition and Liquidation Activities 10
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
Part III. 10. Directors and Executive Officers of the Registrant 13
11. Executive Compensation 16
12. Security Ownership of Certain Beneficial Owners and
Management 17
13. Certain Relationships and Related Transactions 18
Part IV. 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8K 19
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ATLANTIC REALTY TRUST AND SUBSIDIARY
CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES,"
"ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "RISK FACTORS" AS
SET FORTH IN THE COMPANY'S REGISTRATION STATEMENT ON FORM 10 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 1996 (FILE NO. 0-27562) AND IN
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS." READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR TO REFLECT
THE OCCURRENCE OF UNANTICIPATED EVENTS.
1
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ATLANTIC REALTY TRUST AND SUBSIDIARY
PART I
ITEM 1 - BUSINESS:
Atlantic Realty Trust (the "Trust") a Maryland real estate investment trust was
organized pursuant to a Declaration of Trust dated July 27, 1995. The principal
office of the Trust is located at 747 Third Avenue, New York, New York 10017.
The Trust commenced operations on May 10, 1996 as a result of a spinoff (the
"Spin-Off Transaction") from RPS Realty Trust ("RPS"). The Spin-Off Transaction
was consummated in order to permit RPS to complete an acquisition (the "Ramco
Acquisition") of assets from Ramco Gershenson, Inc. and its affiliates
("Ramco"), which permitted RPS to become an equity shopping center real estate
investment trust (a "REIT"). RPS undertook the Spin-Off Transaction because
Ramco was unwilling to consummate the Ramco acquisition if the assets that were
contributed by RPS to the Trust (the "Trust Assets") remained in RPS. Pursuant
to the Spin-Off Transaction, the Board of Trustees of RPS approved a
distribution of one common share of beneficial interest (the "Shares") of the
Trust for every eight shares of beneficial interest of RPS (the "Distribution").
Under the provisions of its Declaration of Trust, the Trust shall continue for a
period of 18 months from May 10, 1996 (November 10, 1997), during which time it
shall reduce to cash or cash equivalents the Trust Assets and either (i) make a
liquidating distribution to its shareholders or (ii) agree to merge or combine
operations with another real estate entity, in either case, as soon as
practicable following the Distribution and within such 18-month period. Such
18-month period is subject to extension if the Trust has not achieved its
objective and the holders of at least two-thirds of the outstanding Shares
approve the extension of such date or such date is automatically extended
without a shareholder vote because a contingent tax liability relating to RPS
that has been assumed by the Trust has not been satisfactorily resolved. It is
the intention of the Trust to seek shareholder approval of the extension of the
Trust's initial 18-month duration only in the event the Trust is unable to
achieve its objectives within such period. If the Trust enters into a definitive
merger or business combination agreement with another real estate entity prior
to the expiration of such 18-month period, the Trust shall continue
automatically until the earlier of (i) the closing of such merger or business
combination and (ii) the termination of any definitive agreement relating
thereto. Any liquidating distribution effected by the Trust would be subject to
the satisfaction of the Trust's liabilities to its creditors. In the event that
at the end of this period, the Trust is unable to achieve its business
objectives, the Trust's Trustees will appoint an independent third party to
liquidate the Trust's remaining assets.
As a result of the Spin-Off Transaction, the Trust acquired the Trust Assets.
The Trust Assets which have not been disposed of by the Trust are described
below under "--Description of Trust Assets." The Trust's principal investment
objective is to maximize shareholder value from the reduction of the Trust
Assets to cash or cash equivalents. As part of its plan to reduce to cash or
cash equivalents the Trust Assets, the Trust intends, among other things, to (i)
contact borrowers under the Trust's mortgage loans to explore possible
prepayments, (ii) contact strategic buyers of the Trust's assets regarding
possible portfolio sales transactions, and (iii) list the Trust's assets for
sale with qualified real estate brokers. The Trust expects that it will be able
to orderly reduce to cash or cash equivalents the Trust Assets by November 10,
1997. No assurance can be given however that such objective will be achieved.
The Trust expects to invest the net proceeds of such sales in short-term or
temporary investments, such as pass-through mortgage-backed certificates,
mortgage
2
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ATLANTIC REALTY TRUST AND SUBSIDIARY
participation certificates and mortgaged-backed securities (or similar
investment products), all or some of which investments may be guaranteed by
Ginnie Mae, Fannie Mae or Freddie Mac. Unless otherwise approved by the
shareholders, the Trust does not expect that it will make new permanent
investments or raise additional capital. In addition, the Trust does not expect
to acquire additional mortgage loans or properties (although the Trust may in
the course of its business acquire real property subject to an existing mortgage
loan pursuant to a workout, foreclosure, deed in lieu of foreclosure, or
bankruptcy proceeding).
In addition, the Trust expects that it will explore the possibility of merging
or entering into a business combination with another real estate entity. The
Trust expects that it will pursue such a transaction only if it represents an
attractive alternative to the distribution to shareholders of the net proceeds
from the orderly liquidation of the Trust Assets, as described above. The merger
candidates that may be available to the Trust may be limited as a result of the
amount of cash and the nature of the assets which the Trust will hold.
Accordingly, there can be no assurance that the Trust will successfully merge or
combine operations with another real estate entity. Because the Trust has
adopted a policy not to re-invest sales proceeds in additional mortgage loans on
real estate (except to the extent necessary to satisfy applicable REIT
requirements), a merger or other business combination involving the Trust and
another real estate entity may constitute a "roll-up transaction" under
applicable securities laws. In such case, the Trust would be required to comply
with the heightened disclosure rules as well as special rules relating to the
proxy solicitation process and the listing of the securities of the surviving
company on any exchange or on Nasdaq. Application of the roll-up rules to a
company merger or business combination could delay, defer or prevent such a
transaction from occurring.
The Trust was organized for the purpose of qualifying as a real estate
investment trust ("REIT") under sections 856-860 of the Internal Revenue Code of
1986, as amended (the "Code"). The Trust will elect to qualify as a REIT for the
year ended December 31, 1996 and intends to operate so as to continue to qualify
as a REIT.
Description of Trust Assets
As of December 31, 1996, the Trust (i) held three (3) mortgage loans (ii)
owned three (3) real properties, and (iii) held short-term investments in the
principal amount of $5,500,000, consisting primarily of a certificate of
deposit at a major New York bank as further described below.
Mortgage Loan Investments
During the period ended December 31, 1996, the Trust received aggregate net
proceeds of $8,715,787 from the prepayment of mortgage loans. The proceeds
consisted, in the aggregate, of the following amounts: repayment of $7,618,493
of principal, $376,774 of deferred interest, $724,533 of additional contingent
interest, $50,187 of contingent interest, $143,531 of current interest,
$19,216 of expense reimbursements less closing costs of $216,947.
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ATLANTIC REALTY TRUST AND SUBSIDIARY
The following table summarizes the Trust mortgage loan portfolio at its
estimated net realizable value as of December 31, 1996:
<TABLE>
<CAPTION>
CURRENT AVERAGE MATURITY ESTIMATED NET
DESCRIPTION (a) TYPE RATE ACCRUED DATE REALIZABLE VALUE(b)(c)(d)
<S> <C> <C> <C> <C> <C>
Mt. Morris Commons Shopping Ctr. 10.50% 2.00% Jun-99 $2,000,000
Copps Hill Plaza Shopping Ctr. 6.00% 0.50% Jul-96 2,506,398
Rector Office Bldg. 0.00% 6.00% Mar-04 2,626,036
----------
$7,132,434
==========
</TABLE>
(a) Copps Hill Plaza is a wraparound mortgage loan while Mt. Morris Commons
and Rector are first mortgage loans.
(b) The Copps Hill Plaza mortgage loan has matured and is currently in
default. All payments of interest are current.
(c) Includes estimated cash flows using disposition periods ranging from 3
months to 6 months. Realized values may differ depending on actual
disposition results and time periods.
(d) Because the determination of the collectibility of loans is based upon
future economic events, no assurance can be given that the amounts
ultimately realized at disposition will not be less than net estimated
net realizable values.
Real Property Investments
The following table and notes thereto describe the Trust's equity investments in
real properties at their estimated net realizable value as of December 31, 1996.
<TABLE>
<CAPTION>
Avg. Base
Approx. Rental
Approximate Base Revenue/
% of GLA Rental Leased
Leased Revenue Sq. Ft. Estimated
as of as of as of Net
Property Type of Year Total December December December Realizable
Name Property Acquired GLA 31, 1996 31, 1996 31, 1996 (1) Value(2)
- ----------- -------- -------- ------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Hylan Plaza Community 1996 349,000 98% $3,616,000 $10.67 $31,137,500
Shopping Center Center
Staten Island, NY
Norgate Shopping Community 1994 208,000 76 596,000 3.77 4,780,000
Center Center
Indianapolis, IN
9 North
Wabash Avenue
Chicago, Illinois Retail Bldg 1993 52,000 0 0 0 1,078,000
-----------
$36,995,500
===========
</TABLE>
4
<PAGE> 8
(1) The calculation of total average base rental revenue was determined by
taking the total base revenue as of December 31, 1996 and dividing such
amount by the occupied GLA.
(2) Includes estimated cash flows using disposition periods ranging from 5
months to 9 months. Realized values may differ depending on actual
disposition results and time periods.
Hylan Plaza Shopping Center. The Hylan Plaza Shopping Center is a one-story
shopping center located in Staten Island, New York. The shopping center contains
approximately 349,000 square feet of leasable space approximately 98% of which
was leased and occupied as of December 31, 1996. Major tenants (i.e., tenants
who accounted for 10% or more of the leasable space as of December 31, 1996)
include K-Mart Corp., a department store chain ("K-Mart"), Supermarkets General
Corp. d/b/a Pathmark, a supermarket chain ("Pathmark"), and Toys "R" Us --
Nytex, Inc., a retail toy store chain ("Toys "R" Us"). These three tenants lease
approximately 105,000, 55,000 and 42,000 square feet, respectively, which
constitutes 30%, 16%, and 12%, respectively, of the total leasable space. The
K-Mart lease expires in January 2002 and provides for annual rental payments of
approximately $235,000; the Pathmark lease expires in January 2002 and provides
for annual rental payments of approximately $339,000; and the Toys "R" Us lease,
which was due to expire in October 1995, was extended pursuant to the tenant's
exercise of a renewal option and is due to expire in October 2005 and provides
for annual rental payments of approximately $90,000. The K-Mart lease contains
three 5-year tenant renewal options; the Pathmark lease contains five 5-year
tenant renewal options; and the Toys "R" Us lease contains one 10-year tenant
renewal option. Leases for approximately 5,102 square feet expired on or prior
to December 31, 1996 and such space is currently leased on a month to month
basis, and leases for approximately 7,124 square feet are due to expire on or
prior to December 31, 1997. The average base rent per square foot paid by
tenants at such property as of December 31, 1996 excluding percentage rent and
similar provisions was $10.67. The Trust believes the property is adequately
covered by insurance. On May 31, 1996 the Trust's independent real estate
appraisers appraised the value of the property at $27,300,000.
Norgate Shopping Center. The Norgate Shopping Center is a one-story shopping
center located in Indianapolis, Indiana (Marion County). The shopping center
contains approximately 208,000 square feet of leasable space, approximately 76%
of which was leased and occupied as of December 31, 1996. Major tenants
(i.e.,tenants who accounted for 10% or more of the revenues at such property
during the 12-month period ended December 31, 1996) are Kohl's Oakland, Inc., a
department store retail chain and Consolidated Stores, Inc., a discount variety
store retail chain. These two tenants lease approximately 65,000 and 37,300
square feet, respectively, which constitutes 31% and 18%, respectively, of the
total leasable space. The Kohl's Oakland lease expires in January 1999 and
provides for annual rental payments of approximately $211,000 and the
Consolidated Stores lease is month to month and provides for rental payments of
approximately $140,000 on an annualized basis. The Kohl's lease contains three
5-year tenant renewal options. Leases for approximately 45,012 square feet
expired on or prior to December 31, 1996 and such space is currently leased on a
month-to-month basis, and leases for approximately
5
<PAGE> 9
ATLANTIC REALTY TRUST AND SUBSIDIARY
24,340 square feet are due to expire on or prior to December 31, 1997. The
average base rent per square foot paid by tenants at such property as of
December 31, 1996 excluding percentage rent and similar provisions was $3.77.
The Trust believes the property is adequately covered by insurance. The
Trust entered into a contract to sell the property for $4,800,000, but the
transaction ultimately was not consummated. The Trust will continue to engage in
discussions with third parties interested in purchasing the property.
9 North Wabash Avenue. The 9 North Wabash Avenue property is a six-story
building with approximately 52,000 square feet of leasable space located in
Chicago, Illinois. The entire Wabash property was leased to Lane Bryant, a
women's apparel retailer, pursuant to a lease which expired on June 30, 1995,
which lease was extended until December 31, 1995 at which time Lane Bryant
vacated the premises. The property is currently vacant. The Trust had entered
into an exclusive sales and lease arrangement with a local broker to sell or
lease this property. The Trust believes the property is adequately covered by
insurance. For over a year it has been offered unsuccessfully for lease or sale.
After negotiations with a well known national real estate auction firm an
auction was held on March 20, 1997. The highest bid at the auction was viewed
as inadequate and therefore was rejected by the Trust. On March 27, 1997, the
Trust entered into an agreement to sell the property for $1,250,000, less
selling expenses. There can be no assurance that such sale will be
consummated.
Indebtedness
In connection with the Spin-Off Transaction the Trust assumed $5,550,000 in
indebtedness, the proceeds of which, together with existing resources of RPS,
were used by RPS primarily for the payment of severance benefits in connection
with the termination of certain employment agreements of approximately
$3,000,000, distributions to shareholders of approximately $2,279,000,
directors' and officers' insurance premiums of approximately $1,150,000 and
approximately $750,000 in working capital for the Trust. Such indebtedness bore
interest at 8.25% per annum and matured on November 9, 1997. The indebtedness
was secured by a collateral assignment on the Trust's interest in the Hylan
Shopping Center. On July 10, 1996 the Trust, on behalf of the property, prepaid
$3,500,000 of the principal balance of such loan. On December 16, 1996 the Trust
prepaid the remaining balance of $2,050,000. As of December 31, 1996, the Trust
had no outstanding indebtedness.
Qualification as a REIT
The Trust intends to qualify as a REIT for federal income tax purposes. If the
Trust so qualifies, amounts paid by the Trust as distributions to its
shareholders will not be subject to corporate income taxes. For any year in
which the Trust does not meet the requirements for electing to be taxed as a
REIT, it will be taxed as a corporation.
The requirements for qualification as a REIT are contained in sections 856-860
of the Code and the regulations issued thereunder. The following discussion is a
brief summary of some of those requirements. Such requirements include certain
provisions relating to the nature of a REIT's assets, the sources of its income,
the
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ATLANTIC REALTY TRUST AND SUBSIDIARY
ownership of its stock, and the distribution of its income. Among other things,
at the end of each fiscal quarter, at least 75% of the value of the total assets
of the Company must consist of real estate assets (including interests in
mortgage loans secured by real property and interests in other REITs, as well as
cash, cash items and government securities) (the "75% Asset Test"). There are
also certain limitations on the amount of other types of securities which can be
held by a REIT. Additionally, at least 75% of the gross income of the Company
for the taxable year must be derived from certain sources, which include "rents
from real property," and interest secured by mortgages on real property. An
additional 20% of the gross income of the Company must be derived from these
same sources or from dividends, interest from any source, or gains from the sale
or other disposition of stock or securities or any combination of the foregoing.
Furthermore, less than 30% of the annual gross income of a REIT must be derived
from the sale or other distribution of real property or obligations secured by a
mortgage on real property which has been held for less than four years (the "30%
Income Test").
The Trust may invest the proceeds derived from the sale or other disposition of
the Trust Assets in pass-through mortgage-backed certificates, mortgage
participation certificates and mortgage-backed securities, all or some of which
instruments may be guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. Such
instruments produce qualifying income for REIT qualification purposes and also
satisfy the requirements of the 75% Asset Test. A REIT is also required to
distribute at least 95% of its REIT Taxable Income (as defined in the Code) to
its shareholders.
Tax Contingency
During the third quarter of 1994, RPS held more than 25% of the value of its
gross assets in overnight Treasury Bill reverse repurchase transactions which
the Internal Revenue Service ("IRS") may view as non-qualifying assets for the
purposes of satisfying an asset qualification test applicable to REITs, based on
a Revenue Ruling published in 1977 (the "Asset Issue"). RPS has requested that
the IRS enter into a closing agreement with RPS that the Asset Issue will not
impact RPS' status as a REIT. The IRS has deferred any action relating to the
Asset Issue pending the further examination of RPS' 1991-1994 tax returns (the
"RPS Audit," and together with the Asset Issue, the "RPS Tax Issues"). Based on
developments in the law which occurred since 1977, RPS' tax counsel, rendered an
opinion that RPS' investment in Treasury Bill repurchase obligations would not
adversely affect its REIT status. However, such opinion is not binding upon the
IRS. In connection with the Transaction, the Trust assumed all tax liability
arising out of the RPS Tax Issues (other than liability that relates to events
occurring or actions taken by RPS following the date of the Transaction). In
connection with the assumption of such potential liabilities, the Trust and RPS
entered into a tax agreement which provides that RPS (currently known as Ramco
Gershenson Properties Trust) (under the direction of its Continuing Trustees),
and not the Trust, will control, conduct and effect the settlement of any tax
claims against RPS relating to the RPS Tax Issues. Accordingly, the Trust does
not have any control as to the timing of the resolution or disposition of any
such claims and no assurance can be given that the resolution or disposition of
any such claims will be on terms or conditions as favorable to the Trust as if
they were resolved or disposed of by the Trust. RPS and the Trust also have
received an opinion from legal counsel that, to the extent there is a deficiency
in RPS' taxable income arising out of the IRS examination and provided RPS
timely makes a deficiency dividend (i.e. declares and pays a distribution which
is permitted to relate back to the year for which each deficiency was determined
to satisfy the requirement that a REIT distribute 95 percent of its taxable
income), the classification of RPS as a REIT for the taxable years under
examination would not be affected. If,
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ATLANTIC REALTY TRUST AND SUBSIDIARY
notwithstanding the above-described opinions of legal counsel, the IRS
successfully challenged the status of RPS as a REIT, the REIT status of the
Trust could be adversely affected. Management estimates that this would have an
effect of approximately $0 for 1996, $600,000 for 1995 and $400,000 for prior
years, which have not been provided for in the financial statements of RPS or
the Trust. Such amounts do not include potential penalties and interest. The
possible effect on the Trust for subsequent periods could be significant
depending on the taxable income of either RPS or the Trust in such periods. As
of December 31, 1996, the Trust has not been required to perform its indemnity
with respect to the RPS Tax Issues and management is not aware of any
determination of tax liability by the IRS against RPS.
Item 2. - Properties
The Trust leases approximately 4,800 square feet of office space at 747 Third
Avenue, New York, New York at an annual base rent of approximately $172,000.
This lease will expire on April 30, 1998. The Trust and the landlord each have
options to terminate the lease as of November 20, 1997 or as of February 28,
1998 upon 90 days prior written notice to the other. In addition, the Trust
owns the properties described under the caption "Business."
Item 3. - Legal Proceedings
There are no material pending legal proceedings other than ordinary routine
litigation incidental to the business (including without limitation, foreclosure
proceedings), against or involving the Trust or its properties.
Item 4. - Submission of Matters to a Vote of Security Holders
The Trust did not submit any matter to a vote of its shareholders during the
fourth quarter of 1996.
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ATLANTIC REALTY TRUST AND SUBSIDIARY
PART II
Item 5. - Market for Registrant's Common Equity and Related Stockholder Matters
(a) Market Information
The shares have been traded on the NASDAQ Small Cap Market since May 10, 1996.
Set forth below is the range of high and low bid prices for the shares for each
of the quarters during the period from May 10, 1996 through December 31, 1996.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Inception (May 13, 1996) through June 30, 1996 9.000 7.500
Third Quarter 1996 9.500 8.375
Fourth Quarter 1996 10.875 9.250
</TABLE>
(b) Approximate Number of Equity Security Holders
<TABLE>
<CAPTION>
Approximate Number
Of Record Holders
Title of Class (As Of March 10, 1997)
-------------- ----------------------
<S> <C>
Shares of Beneficial Interest
$.01 Par Value 3,916
</TABLE>
(c) Dividend Information
Under the Code, a REIT must meet certain qualifications including a requirement
that it distribute annually to its shareholders at least 95% of its REIT Taxable
Income. The Trust has continued the cash distribution policy of the predecessor
programs by making quarterly distributions to its shareholders in amounts such
that annual distributions equal 100% of REIT Taxable Income, thereby complying
with the distribution requirements of the federal income tax laws applicable to
REITs. See "Qualification as a REIT" in Item 1 above.
The Trust declared the following cash distributions to shareholders for the year
ended December 31, 1996:
<TABLE>
<CAPTION>
Record Date Distribution Payment Date
- ----------- ------------ ------------
<S> <C> <C>
December 26, 1996 $.39 per share January 21, 1997
</TABLE>
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ATLANTIC REALTY TRUST AND SUBSIDIARY
Item 6. - Selected Financial Data
The following tables set forth certain selected historical information for the
Trust and for the Net Assets to be transferred to Atlantic Realty Trust. The
financial information should be read in conjunction with the financial
statements and notes thereto included herein.
<TABLE>
<CAPTION>
ATLANTIC REALTY TRUST 12/31/96 5/10/96
<S> <C> <C>
Statement of Net Assets
in Liquidation Data:
Total Assets $ 51,175,032 $ 54,445,060
Total Liabilities 3,559,268 9,580,845
Net Assets in Liquidation 47,615,764 44,864,215
Statement of Changes in
Net Assets in Liquidation Data:
Increase (Decrease)
Assets Transferred to the Trust -
Adjustments for RPS Transaction -
Distributions Payable (1,389,006)
Adjustments to Reflect Liquidation
Basis of Accounting 4,140,555
Net Change in net assets in Liquidation 2,751,549
</TABLE>
NET ASSETS TO BE TRANSFERRED TO ATLANTIC REALTY TRUST
<TABLE>
<CAPTION>
For the
period
1/1/96-
5/10/96 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total Revenues $ 1,255,607 $ 4,573,011 $ 4,423,519 $ 5,488,801 $ 6,810,157
Total Assets 51,297,578 54,230,032 56,087,512 55,616,772 63,106,268
Income (Loss) 595,587 (1,682,764) 722,058 435,891 (139,551)
</TABLE>
Item 7.- Management's Discussion and Analysis of Financial Condition and
Liquidation Activities
CAPITAL RESOURCES AND LIQUIDITY -- ATLANTIC REALTY TRUST
Upon consummation of the Spin-Off Transaction, the Trust owned seven mortgage
loans and three retail properties (Hylan Plaza Shopping Center, located in
Staten Island, New York, Norgate Shopping Center located in Indianapolis,
Indiana and 9 North Wabash Avenue Building, located in Chicago, Illinois), as
well as cash and certain other assets, which include furniture, fixtures and
equipment, formerly held by RPS. In addition, upon consummation of the Spin-Off
Transaction, the Trust assumed the repayment obligation in respect of $5,550,000
in indebtedness from RPS. This indebtedness was evidenced by a promissory note
which bore interest at a rate of 8.25% and matured on November 9, 1997 (the
"Promissory
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ATLANTIC REALTY TRUST AND SUBSIDIARY
Note"). The Promissory Note was secured by a collateral assignment of the
Trust's interest in the Hylan Shopping Center. On July 10, 1996, the Trust
repaid $3,500,000 of the principal balance of the Promissory Note. On December
16, 1996 the Trust prepaid the remaining balance of $2,050,000. The Trust does
not intend to make new loans or actively engage in either the mortgage lending
or the property acquisition business, other than in connection with potential
workouts of certain of its mortgage loans.
The Trust's primary objective is to liquidate its assets in an eighteen month
period from the date of the Spin-Off Transaction while realizing the maximum
values for such assets. Although the Trust considers its assumptions and
estimates as to the values and timing of such liquidations to be reasonable, the
period of time to liquidate the assets and distribute the proceeds of such
assets is subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Trust's control.
There can be no assurance that the net values ultimately realized and costs
actually incurred for such assets will not materially differ from the Trust's
estimate.
The Trust believes that cash and cash equivalents on hand, proceeds generated
from the mortgage loans and real estate properties that continue to operate and
from the eventual sale of such assets will be sufficient to support the Trust
and meet its obligations. At December 31, 1996 the Trust had approximately
$7,047,000 in cash and short term investments.
During the period ended December 31, 1996 the Trust received proceeds of
approximately $8,715,000 from the prepayment of four mortgage loans. At December
31, 1996 the Trust owned three mortgage loans and the three retail properties
discussed above. The Trust intends to reduce to cash or cash equivalents the
mortgage loan and real property portfolio in an orderly manner as soon as
practicable and make a liquidating distribution or distributions to its
shareholders, or merge or combine operations with another real estate entity.
NET ASSETS TO BE TRANSFERRED TO ATLANTIC REALTY TRUST
The following information is based upon the consolidated financial statements of
the Net Assets to be transferred to the Trust, which were derived from RPS'
historical financial statements to reflect the transfer of the assets to the
Trust as a result of the Distribution. The financial information, and the
discussion that follows, assumes that the assets were transferred to the Trust
at the beginning of the periods indicated, and that the Trust and RPS were
separate companies with separate operations as of such dates. The allocation of
certain expenses between the Trust and RPS was determined by using the weighted
average of the Trust's total assets to RPS' total assets and the Trust's total
revenues to RPS' total revenues and reflects management's best estimate of the
appropriate allocation of such expenses between the two companies. As described
below, the Trust has utilized a weighted average of approximately 30%, 29%,
and 24% for the purpose of allocating such expenses for the period January 1,
1996 through May 10, 1996 (Date of Transfer) and for the years ended December
31, 1995, and 1994, respectively.
11
<PAGE> 15
RESULTS OF OPERATIONS
PERIOD FROM JANUARY 1, 1996 TO MAY 10, 1996 COMPARED TO PERIOD FROM
JANUARY 1,1995 TO MAY 10, 1995
Interest income on mortgage loans for the period ended May 10,1996
decreased by approximately $192,799 or 16% as compared to the period ended May
10, 1995. During the 1995 period, the Trust received contingent interest of
$43,862 as compared to none during the comparable 1996 period. The Trust also
received $19,166 in extension fee income during the 1995 period. For the period
of 1996 the Trust received rental income of $241,502 as compared to $369,755
for the 1995 period or a reduction of $128,253 or 35%. This is the result of
the tenant at the 9 No. Wabash property vacating at the end of 1995.
During the period ended May 10, 1995 the Trust provided additional
allowance for possible loan losses of $3,000,000 based on an offer for the sale
of the Hylan Mortgage received in the first quarter of 1995 which was
$3,000,000 less than the Trust's net carrying amount of the loan at such date.
During the period ending May 10, 1996 the Trust recognized a loss of $128,886
as a result of the disposition of the Simmons Mortgage loan. General and
Administrative expenses amounted to $321,197 for the period ended May 10, 1996.
This reflects the use of a weighted average of approximately 30% during the
period ended May 10, 1996 for the purpose of allocating expenses between the
Trust and RPS.
CALENDAR YEAR 1995 COMPARED TO CALENDAR YEAR 1994
Total revenues before rental income during 1995 increased $22,411 or
.6% from the 1994 year. During 1995 the Trust received contingent interest of
$43,862 as compared to $41,836 during the comparable 1994 period. The Trust
also received $19,166 in extension fee income during 1995.
During the year ended December 31, 1995, expenses (excluding property
operating expenses, real estate taxes and depreciation) increased $2,624,401 or
87.2% compared to the same period during 1994. This increase was primarily due
to increasing the provision for possible loan losses. During the year ended
December 31, 1995, the Trust provided allowance for possible loan losses of
$3,650,000 as compared to $2,100,000 during 1994, representing an increase of
$1,550,000 or 73.8%. $3,000,000 of the $3,650,000 allowance for possible loan
losses related to the Hylan mortgage loan was based on an offer for the sale of
the Hylan mortgage received in the first quarter of 1995 which was $3,000,000
less than the Trust's net carrying amount of that loan at such date.
Additionally, the Trust provided an impairment of $800,000 with regard to the
9 No. Wabash building. General and administrative expenses amounted to
$1,185,161 for 1995. This reflects the use of a weighted average of
approximately 29% during 1995 for the purpose of allocating expenses between
RPS and the Trust.
During 1995, the Trust received rental income of $994,369 as compared to
$867,288 for the 1994 year. This increase of $127,081 or 14.7% resulted
primarily from the Trust's ownership of the Norgate Shopping Center property for
a full 12 months during 1995 as compared with only 6 months of ownership of such
property during 1994. Property operating expenses and depreciation expense
increased during the 1995 year by $74,459 and $45,858 due to the aforementioned
acquisition of the Norgate Center. Real estate tax expense decreased by $190,404
during 1995 as a result of the Trust having to pay past due real estate taxes on
the Norgate property during 1994. For the year ended December 31, 1995, the
Trust recognized net income from the investment in real estate of $373,755 as
compared to net income of $176,587 for 1994.
12
<PAGE> 16
Item 8. - Financial Statements and Supplementary Data
See pages F-1 -- F-26 which are included herein
Item 9. - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. - Directors and Executive Officers of the Registrant
The Trust's Board of Trustees are composed of nine Trustees, each of whom will
serve until the respective successors are elected and qualified.
13
<PAGE> 17
ATLANTIC REALTY TRUST AND SUBSIDIARY
The Trustees of the Trust are as follows:
<TABLE>
<CAPTION>
Name Age Offices and Positions
- ---- --- ---------------------
<S> <C> <C>
Joel M. Pashcow...... 54 Chairman and President of the Trust effective as of February 29,
1996. He has been a member of the Bar of the State of New York
since 1968. Chairman of RPS from inception (December 1988) through
May 1996. He is a graduate of Cornell University and the
Harvard Law School. Mr. Pashcow is also a trustee of Ramco-Gershenson
Properties Trust and Chairman of its Executive Committee (formerly
RPS Realty Trust).
Herbert Liechtung.... 66 Private investor. President of RPS until February, 1996. After the
Distribution, Mr. Liechtung became a trustee of Ramco-Gershenson
Properties Trust (formerly named RPS Realty Trust).
Edwin J. Glickman.... 64 Private investor. Executive Vice President of Capital Lease Funding
Corp. from January 1995 to December 1996, which is a company engaged in
commercial real estate lending. Prior to that, Mr. Glickman was President
of the Glickman Organization, Inc. ("Glickman") from January 1992 to
December 1994. Glickman conducted real estate investment
consulting services and real estate financial services, including
mortgage brokerage, arranging joint ventures and equity financing.
Prior to that, Mr. Glickman was Chairman of the Executive
Committee of Schoenfeld Glickman Maloy Inc. from May 1989,
which is a company that conducted real estate financial services,
including mortgage brokerage, arranging joint ventures and equity
financing. Also Vice Chairman of Sybedon Corporation from
1977 to 1993, which is a company that conducted real estate
financial services, including mortgage brokerage, arranging joint
ventures and equity financing. In all positions, Mr. Glickman has
been engaged in real estate financial services, including mortgage
brokerage, arranging joint ventures and equity financing.
Stephen R. Blank..... 51 Managing Director of Oppenheimer & Co., Inc. since November 1,
1993. Prior to joining Oppenheimer Mr. Blank was a Managing
Director, Real Estate Corporate Finance, of Cushman &
Wakefield, Inc. for four years. Prior to that, Mr. Blank was
associated for ten years with Kidder, Peabody & Co. Incorporated
as a Managing Director of the firm's Real Estate Group. Mr.
Blank graduated from Syracuse University in 1967 and was
awarded a Masters Degree in Business Administration (Finance
Concentration) by Adelphi University in 1971. He is a member of
</TABLE>
14
<PAGE> 18
ATLANTIC REALTY TRUST AND SUBSIDIARY
<TABLE>
<S> <C> <C>
the Urban Land Institute and the American Society of Real Estate
Counselors. He has lectured before the Practising Law Institute,
the New York University Real Estate Institute, the Urban Land
Institute and the International Council of Shopping Centers. He is
a Trustee of the Crohn's & Colitis Foundation of America, Inc.
Trustee of RPS since 1990. Mr. Blank is also a trustee of
Ramco-Gershenson Properties Trust (formerly named RPS Realty Trust).
Edward Blumenfeld.... 56 A principal of Blumenfeld Development Group, Ltd, a real estate
development firm principally engaged in the development of
commercial properties, since 1991-1996 since 1978.
Samuel M. Eisenstat.. 59 Engaged in the private practice of law for more than five years.
Mr. Eisenstat serves as a director of various mutual funds managed
by Sun America Asset Management and of UMB Bank & Trust
Co. Mr. Eisenstat received a B.S. degree from New York
University School of Commerce in 1961 and graduated from New
York University School of Law.
Arthur H. Goldberg... 54 President of Manhattan Associates, LLC, a merchant and
investment banking firm since February 1994. Prior to that, Mr.
Goldberg was Chairman of Reich & Company, Inc. (Formerly,
Vantage Services, Inc.), a securities brokerage and investment
brokerage firm from January 1990 to December 1993. Mr.
Goldberg was employed by Integrated Resources, Inc. from its
inception in December 1968, as President and Chief Operating
Officer from May 1973 and as Chief Executive Officer from
February 1989 until January 1990. On February 13, 1990,
Integrated Resources, Inc. filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy
Code. Mr. Goldberg has been a member of the Bar of the State of
New York since 1967. He is a graduate of New York University
School of Commerce and its School of Law. Trustee of RPS since
1988. Mr. Goldberg is also a trustee of Ramco-Gershenson Properties
Trust (formerly named RPS Realty Trust).
William A. Rosoff.... 53 Vice-Chairman of Advanta Corporation, a financial services
company, since January, 1996. Prior thereto, Mr. Rosoff was
associated with the law firm of Wolf, Block, Schorr and Solis-
Cohen since 1969, a partner since 1975. Mr. Rosoff is a past
chairman of that firm's Executive Committee and is a past
chairman of its tax department. Mr. Rosoff serves on the Legal
</TABLE>
15
<PAGE> 19
ATLANTIC REALTY TRUST AND SUBSIDIARY
<TABLE>
<S> <C> <C>
Activities Policy Board of Tax Analysts, the Advisory Board for
Warren, Gorham and Lamont's Journal of Partnership Taxation,
and has served on the Tax Advisory Boards of Commerce Clearing
House, and Little, Brown and Company. Mr. Rosoff also serves on
the Advisory Group for the American Law Institute's ongoing
Federal Income Tax Project; as a consultant for the ALI's current
study of the Taxation of Pass Through Entities. He is a fellow of
the American College of Tax Counsel. Mr. Rosoff is Chairman of
the Board of RMH Teleservices, Inc. Mr. Rosoff serves as a
member of the Board of Directors of the Philadelphia Chapter of
the American Jewish Congress and is a member of the Board of
Regents of the Philadelphia chapter of the American Society for
Technion. Mr. Rosoff earned a B.S. degree with honors from
Temple University in 1964, and earned an L.L.B magna cum laude
from the University of Pennsylvania Law School in 1967.
Alfred D. Stalford...(1) 74 Previously engaged in the business of mortgage brokerage and real
estate sales, principally involving commercial properties. He has
since retired from the mortgage brokerage business. Mr. Stalford
has extensive mortgage loan and real estate experience and has
served on a number of government commissions, including the
California Commission of Housing and Community Development,
the Board of Directors of the National Housing Conference, vice
chairman of the Special Advisory Committee on Disposition of
certain California surplus land and the Board of Directors of the
California Exposition and Fair Corporation, a nonprofit
corporation established by the State of California (of which he
served as Chairman of the Board for a period of time).
A significant employee of
the Trust is:
Edwin R. Frankel........ 51 Since the inception of the Trust, Mr. Frankel has served as its
Executive Vice President, Chief Financial Officer, Secretary and
Principal Financial and Accounting Officer. Prior to such time,
Mr. Frankel was employed by RPS since its inception; and since
1992 as its Senior Vice President and Treasurer.
</TABLE>
(1) Mr. Stalford resigned as a Trustee of Atlantic Realty Trust on March 5,
1997.
The Audit Committee, established in January, 1996, consists of three trustees,
Messrs. Blumenfeld, Eisenstat and Goldberg. The Audit Committee meets with
management and the Trust's independent accountants to determine the adequacy of
internal controls and other financial reporting matters.
Item 11. - Executive Compensation
Executive Officers
Mr. Pashcow receives no cash compensation for serving as an executive
officer of the Trust. Mr. Frankel will receive compensation of $60,000 per annum
based on working two days per week, plus an additional amount on a per diem
basis at the same daily rate, for serving as Executive Vice President, Chief
Financial Officer and Secretary of the Trust.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
-----------------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------
Other Securities
Name Annual Restricted Under- All Other
and Compen- Stock lying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position* Year Salary($) Bonus($) ($) ($) SARs($) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edwin R. Frankel............. 1996 54,067** -- -- -- -- -- --
Executive Vice President,
Chief Financial Officer
and Secretary
</TABLE>
- ---------------
* No other individual received compensation in excess of $100,000.
** Compensation is $60,000 per annum based on working two days per week, plus
an additional amount on a per diem basis at the same daily rate, for
serving as Executive Vice President, Chief Financial Officer and
Secretary of the Trust.
16
<PAGE> 20
ATLANTIC REALTY TRUST AND SUBSIDIARY
The Trust had no compensation committee, however all of the trustees
participated in deliberations of the registrant's board of trustees concerning
executive officer compensation.
Trustees
The Trustees will not receive any compensation for serving as trustees and
likewise will not receive any compensation for attending meetings or for serving
on any committees of the Board of Trustees; however, Trustees will receive
reimbursement of travel and other expenses and other out-of-pocket disbursements
incurred in connection with attending any meetings.
Messrs. Edwin Glickman and Edward Blumenfeld serve on a special real estate
committee in conjunction with the disposition of the Trust's assets. During
1996, Messrs. Glickman and Blumenfeld received fees of $80,000 and $45,000
respectively in connection with services they provided to the Trust as Members
of the Committee.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
EQUITY MORTGAGE
REIT REIT
DATE ATLRS INDEX INDEX S&P 500
---- ----- ----- ----- -------
<S> <C> <C> <C> <C>
May-96 $8.125 $236.700 $19.270 $669.120
Jun-96 8.375 239.070 19.740 672.400
Jul-96 8.500 238.740 19.950 639.950
Aug-96 9.250 246.350 21.010 651.990
Sep-96 9.375 250.070 21.400 687.310
Oct-96 9.500 255.670 22.600 705.270
Nov-96 9.875 265.140 23.560 757.020
Dec-96 10.125 291.570 24.620 740.740
</TABLE>
SOURCE: FACTSET SECURITY PRICE HISTORY REPORT, IDD INFORMATION SERVICES, AND
NAREIT
Item 12. - Security Ownership of Certain Beneficial Owners and Management
As of March 15, 1997, each of the following persons were known by the Trust to
be the beneficial owners of more than five percent of the Shares of the Trust.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND NATURE OF PERCENT
ADDRESS OF BENEFICIAL OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
- -------------- ---------------- --------- -----
<S> <C> <C> <C>
Shares of beneficial Ryback Management Corp. 387,799* 10.9%
interest and/or Lindner Shares
$.01 par value Investment Series Trust, owned as
in a fiduciary capacity fiduciary
for Lindner Growth Fund with sole
c/o Ryback Management voting and
Corporation disposition
7711 Carondelet Avenue, power
Box 16900,
St. Louis, Missouri
</TABLE>
17
<PAGE> 21
ATLANTIC REALTY TRUST AND SUBSIDIARY
<TABLE>
<S> <C> <C> <C>
63105
Shares of beneficial Private Management Group, Inc. 404,295* 11.4%
interest an investment advisor
$.01 par value in a fiduciary capacity
20 Corporate Park, Suite 400
Irvine, California 92606
Shares of beneficial Kimco Realty Corporation 347,035** 9.7%
interest Milton Cooper +
$.01 par value 3333 New Hyde Park Rd.
New Hyde Park, NY 11042
</TABLE>
* Based upon Schedule 13D and Schedule 13G fillings with the Securities and
Exchange Commission.
** Based upon a Schedule 13D/A filing with the Securities and Exchange
Commission and information provided to the Trust by Kimco Realty
Corporation.
+ Includes 314,084 shares owned by Kimco Realty Corporation, which are
beneficially owned with sole voting and disposition power, and 32,951
shares owned by Milton Cooper, which are beneficially owned and of which
29,824 Mr. Cooper has sole voting and disposition power and 3,127 for
which Mr. Cooper has sole voting and disposition power.
Item 13. - Certain Relationships and Related Transactions.
Set forth below is information as to the Shares beneficially owned as of March
10, 1997 by each of the Trustees, each of the executive officers included in the
Summary Compensation Table set forth in Item 11 and all Trustees and executive
officers as a group, based on information furnished by each Trustee and
executive officer.
<TABLE>
<CAPTION>
Name of Trustee/ Shares Owned Percent of
Executive Officer Beneficially (1) Class
- ----------------- ---------------- -----
<S> <C> <C>
Joel M. Pashcow ............................. 93,154(2) 2.62%
Herbert Liechtung ........................... 11,906(3) *
Arthur H. Goldberg .......................... 24,487(4) *
William A. Rosoff ........................... 125(5) *
Stephen R. Blank ............................ 981(6) *
Edward Blumenfeld ........................... 125 *
Samuel M. Eisenstat ......................... 125(7) *
Edwin J. Glickman ........................... 0 *
Edwin R. Frankel ............................ 0 *
All Trustees and
Executive Officers as a group (9 persons) 130,903 3.68%
</TABLE>
- ----------
* Less than 1% of class.
(1) All amounts are directly owned unless stated otherwise.
(2) Includes 25,890 shares held in an IRA account for the benefit of Mr.
Pashcow, a retirement savings plan, a pension and profit sharing
account and a money purchase plan, 47,662 shares owned by an
irrevocable trust of which Mr. Pashcow is a trustee, an irrevocable
trust for his daughter and a foundation of which Mr. Pashcow is trustee
(for all of which trusts Mr. Pashcow has shared voting and investment
powers). Mr. Pashcow disclaims beneficial ownership of the Shares
owned by the foundation and each of the trusts.
18
<PAGE> 22
ATLANTIC REALTY TRUST AND SUBSIDIARY
(3) Includes 11,906 shares held in an IRA account for the benefit of Mr.
Liechtung and a retirement savings plan.
(4) Includes 19,563 shares owned by Mr. Goldberg's wife, 1,875 shares owned
by trusts for his daughters and 3,050 shares owned by a pension trust.
Mr. Goldberg disclaims beneficial ownership of the Shares owned by his
wife and the trusts for his daughters.
(5) Includes 125 shares held by Mr. Rosoff as a trustee for his sister,
Barbara Rosoff, pursuant to a trust indenture dated December 30, 1991.
(6) Includes 706 shares owned by trusts for Mr. Blank's daughters and 275
shares held in an IRA account for the benefit of Mr. Blank. Mr. Blank
disclaims beneficial ownership of the Shares owned by the trusts for
his daughters.
(7) Includes 125 shares held in an IRA account for which Mr. Eisenstat has
sole voting and investment power.
PART IV
Item 14. - Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial Statements, Schedules and Exhibits
(a)(1) Financial Statements
See pages F-1 through F-26, which are included herein.
(a)(2) Financial Statement Schedules
All schedules have been omitted because they are inapplicable,
not required, or the information is included in the financial
statements or notes thereto.
(a)(3) Exhibits
The exhibits listed in the Exhibit Index immediately
preceding the exhibits are filed as a part of this Annual
Report on Form 10-K.
The exhibits listed in the Exhibit Index immediately preceding
the Exhibits are filed as a part of this Annual Report on Form
10-K.
(b) No Current Reports on Form 8-K were filed by the Company during
the last quarter of the period covered by this report.
19
<PAGE> 23
Financial Statements - Atlantic Realty Trust and Subsidiary (Liquidation Basis)
Independent Auditors' Report
Consolidated Statements of Net Assets in Liquidation at December 31, 1996
and May 10, 1996 (Date of Transfer)
Consolidated Statement of Changes in Net Assets in Liquidation for the
Period May 11, 1996 through December 31, 1996
Notes to Consolidated Financial Statements
Financial Statements - Atlantic Realty Trust
(Going Concern Basis)
Independent Auditors' Report
Balance Sheet as of December 31, 1995
Financial Statements - Net Assets to be Transferred to Atlantic Realty Trust
(Going Concern Basis)
Independent Auditors' Report
Combined Balance Sheet as of December 31, 1995
Combined Statements of Operations for the period January 1, 1996 through
May 10, 1996 (Date of Transfer) and for the years ended December 31, 1995
and 1994
Combined Statement of Shareholders' Equity for the year ended December
31, 1995
Combined Statements of Cash Flows for the period January 1, 1996 through
May 10, 1996 (Date of Transfer) and for the years ended December 31, 1995
and 1994
Notes to Combined Financial Statements for the period January 1, 1996
through May 10, 1996 (Date of Transfer) and for the years ended December
31, 1995 and 1994
F-1
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of
Atlantic Realty Trust:
We have audited the accompanying consolidated statements of net assets in
liquidation of Atlantic Realty Trust and subsidiaries (the "Trust") at
December 31, 1996 and May 10, 1996 (Date of Transfer) and the related
consolidated statement of changes in net assets in liquidation for the period
May 11, 1996 through December 31, 1996. These consolidated financial
statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and the 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.
As discussed in Note 1 to the consolidated financial statements, the Trust was
formed for the purpose of liquidating the mortgage loan portfolio and certain
other assets and liabilities which were transferred to the Trust from RPS
Realty Trust on May 10, 1996 (Date of Transfer) and liquidating and
distributing capital to the Trust's shareholders. As a result, the Trust
adopted the liquidation basis of accounting effective May 10, 1996 (Date of
Transfer).
In our opinion, such consolidated financial statements present fairly, in all
material respects, the net assets in liquidation of the Trust at December 31,
1996 and May 10, 1996 (Date of Transfer) and the changes in its net assets in
liquidation for the period May 11, 1996 through December 31, 1996 in
conformity with generally accepted accounting principles on the basis
described in the preceding paragraph.
As discussed in Note 1 to the consolidated financial statements, because of the
inherent uncertainty of valuation when an entity is in liquidation, the amounts
ultimately realized from assets disposed and costs incurred to settle
liabilities may differ materially from amounts presented.
/s/ Deloitte & Touche LLP
New York, New York
March 27, 1997
F-2
<PAGE> 25
ATLANTIC REALTY TRUST AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS OF ACCOUNTING)
<TABLE>
<CAPTION>
MAY 10, 1996
DECEMBER 31, 1996 (DATE OF TRANSFER)
----------------- ------------------
<S> <C> <C>
ASSETS:
Investments in Real Estate $36,995,500 $36,606,600
Mortgage Loans and Related Interest 7,132,434 15,180,106
Cash and Short Term Investments 7,047,098 2,658,354
----------- -----------
Total Assets 51,175,032 54,445,060
----------- -----------
LIABILITIES:
Estimated Costs of Liquidation 2,170,262 3,731,520
Distribution Payable 1,389,006 --
Loan Payable -- 5,849,325
----------- -----------
Total Liabilities 3,559,268 9,580,845
----------- -----------
Net Assets in Liquidation $47,615,764 $44,864,215
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 26
ATLANTIC REALTY TRUST AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS OF ACCOUNTING)
<TABLE>
<CAPTION>
FOR THE PERIOD
5/11/96 TO 12/31/96
<S> <C>
Net Assets in Liquidation
Beginning of Period $ 44,864,215
Net Assets Transferred to
Atlantic Realty Trust
(At Historical Cost) --
Adjustments for Spin-Off Transaction
(Note 6) --
Distributions Payable (1,389,006)
Adjustments to Reflect Liquidation
Basis of Accounting 4,140,555
------------
Net Assets in Liquidation $ 47,615,764
============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 27
ATLANTIC REALTY TRUST AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Atlantic Realty Trust (the "Trust"), a Maryland real estate investment
trust, was formed on July 27, 1995 for the purpose of liquidating the
mortgage loan portfolio and certain other assets and liabilities which
were transferred to the Trust from RPS Realty Trust ("RPS") on May 10,
1996 (the "Spin-Off Transaction"). The Trust had no operations from the
date of formation to the date of the Spin-Off Transaction. The Trust
adopted the liquidation basis of accounting as of the date of the
Spin-Off Transaction based on its intention to liquidate its assets
within eighteen months from the date of the Spin-Off Transaction or
merge or combine operations with another real estate entity.
LIQUIDATION BASIS OF ACCOUNTING
As a result of the Spin-Off Transaction, the Trust has adopted the
liquidation basis of accounting. The liquidation basis of accounting is
appropriate when liquidation appears imminent and the Trust is no longer
viewed as a going concern. Under this method of accounting, assets are
stated at their estimated net realizable values and liabilities are stated
at the anticipated settlement amounts.
The valuations presented in the accompanying Statements of Net Assets in
Liquidation represent the estimates at the date shown, based on current
facts and circumstances, of the estimated net realizable value of assets
and estimated costs of liquidating the Trust. In determining the net
realizable values of the assets, the Trust considered each asset's
ability to generate future cash flows, offers to purchase received from
third parties, if any, and other general market information. Such
information was considered in conjunction with the Trust's plan for
disposition of assets. The estimated costs of liquidation represent the
estimated costs of operating the Trust through its anticipated
termination. These costs primarily include payroll, consulting and
related costs, rent, shareholder relations, legal and auditing. The
estimated costs of liquidation assume liquidation within 18 months from
the Transaction date. Computations of net realizable value necessitate
the use of certain assumptions and estimates. Future events, including
economic conditions that relate to real estate markets in general, may
differ from those assumed or estimated at the time such computations
are made. Because of inherent uncertainty of valuation when an entity
is in liquidation, the amounts ultimately realized from assets
disposed and costs incurred to settle liabilities may materially
differ from amounts presented.
F-5
<PAGE> 28
ATLANTIC REALTY TRUST AND SUBSIDIARY
CONSOLIDATION
The consolidated financial statements include the accounts of the Trust
and its subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.
2. MORTGAGE LOANS AND RELATED INTEREST
<TABLE>
<CAPTION>
ESTIMATED NET
CURRENT AVERAGE MATURITY REALIZABLE VALUE
DESCRIPTION TYPE RATE ACCRUED DATE 12/31/96(a) 5/10/96
<S> <C> <C> <C> <C> <C> <C>
Branhaven Plaza (e) Shopping Ctr. 14.25% 0.00% Feb-97 -- $ 3,365,750
Mt. Morris Commons Shopping Ctr. 10.50% 2.00% Jun-99 $ 2,000,000 1,752,923
Copps Hill Plaza (f) Shopping Ctr. 6.00% 0.50% Jul-96 2,506,398 2,945,251
1733 Massachusetts
Avenue (c) Shopping Ctr. 8.58% 1.42% Jun-01 -- 3,382,805
NCR Building (d) Office Bldg. 10.00% 0.00% Dec-95 -- 520,586
Rector Office Bldg. 0.00% 6.00% Mar-04 2,626,036 1,255,596
1-5 Wabash Avenue (b) Office Bldg. 5.00% 0.00% Mar-01 -- 1,957,195
---------- -----------
$7,132,434 $15,180,106
========== ===========
</TABLE>
(a) Includes estimated cash flows using disposition periods ranging from 3
months to 6 months. Realized values may differ depending on actual
disposition results and time periods.
(b) On June 17, 1996, the Trust received proceeds of $1,957,515 from the
repayment of the 1-5 Wabash loan. The proceeds consisted of repayment of
principal of $2,150,000, current interest $24,462 less closing adjustments
of $216,947.
(c) On June 26, 1996, the Trust received proceeds of $3,382,805 from the
prepayment of the 1733 Massachusetts Avenue loan. The proceeds consisted
of the prepayment of the principal loan balance of $2,200,000, deferred
interest of $375,467, current interest of $32,618, contingent interest of
$50,187 and additional contingent interest of $724,533.
(d) On July 12, 1996, the Trust received proceeds of $539,802 from the
repayment of the NCR Building loan. The proceeds consisted of the
repayment of the principal loan balance of $468,493, current interest of
$52,093 and expenses due to the foreclosure action of $19,216.
(e) On November 1, 1996, the Trust received proceeds of $2,835,665 from the
prepayment of the Branhaven Plaza mortgage loan. The proceeds consisted of
the prepayment of the principal loan balance of $2,800,000, current
interest of $34,358 and deferred interest of $1,307.
(f) The Copps Hill Plaza mortgage loan has matured and is currently in
default. All payments of interest are current.
F-6
<PAGE> 29
ATLANTIC REALTY TRUST AND SUBSIDIARY
3. INVESTMENTS IN REAL ESTATE
<TABLE>
<CAPTION>
ESTIMATED NET
REALIZABLE VALUE
PROPERTY LOCATION 12/31/96(a) 5/10/96
<S> <C> <C> <C>
Hylan Shopping Center Staten Island, NY $31,137,500 $30,000,000
Norgate Shopping Center Indianapolis, IN 4,780,000 4,726,600
9 North Wabash Building Chicago, IL 1,078,000 1,880,000
----------- -----------
$36,995,500 $36,606,600
=========== ===========
</TABLE>
(a) Includes estimated cash flows using disposition periods ranging from 5
months to 9 months. Realized values may differ depending on actual
disposition results and time periods.
4. SHARES OUTSTANDING
The weighted average number of common shares outstanding for the period
ending December 31, 1996 was 3,561,553.
5. SHORT-TERM INVESTMENTS
Short-term investments at December 31, 1996 consist primarily of a
$5,500,000 Certificate of Deposit at a major New York bank, bearing
interest at a fixed rate of 4.65%.
6. LOAN PAYABLE
In connection with the Spin-Off Transaction the Trust assumed $5,550,000
in indebtedness, the proceeds of which, together with existing resources
of RPS, were used by RPS primarily for the payment of severance benefits
in connection with the termination of certain employment agreements of
approximately $3,000,000, distributions to shareholders of approximately
$2,279,000, directors' and officers' insurance premiums of approximately
$1,150,000 and approximately $750,000 in working capital for the Trust.
Such indebtedness bore interest at 8.25% per annum and matured on November
9, 1997. The indebtedness was secured by a collateral assignment on the
Trust's interest in the Hylan Shopping Center. On July 10, 1996 the Trust
prepaid $3,500,000 of the principal balance of such loan. On December 16,
1996 the Trust prepaid the remaining balance of $2,050,000.
7. TAX CONTINGENCY
During the third quarter of 1994, RPS held more than 25% of the value of
its gross assets in overnight Treasury Bill reverse repurchase
transactions which the Internal Revenue Service ("IRS") may view as
non-qualifying assets for the purposes of satisfying an asset
qualification test applicable to REITs, based on a Revenue Ruling
published in 1977 (the "Asset Issue"). RPS has requested that the IRS
enter into a closing agreement with RPS that the Asset Issue will not
impact RPS' status as a REIT. The IRS has
F-7
<PAGE> 30
ATLANTIC REALTY TRUST AND SUBSIDIARY
deferred any action relating to the Asset Issue pending the further
examination of RPS' 1991-1994 tax returns (the "RPS Audit," and together
with the Asset Issue, the "RPS Tax Issues"). Based on developments in the
law which occurred since 1977, RPS' tax counsel, rendered an opinion that
RPS' investment in Treasury Bill repurchase obligations would not
adversely affect its REIT status. However, such opinion is not binding
upon the IRS. In connection with the Transaction, the Trust assumed all
tax liability arising out of the RPS Tax Issues (other than liability that
relates to events occurring or actions taken by RPS following the date of
the Transaction). In connection with the assumption of such potential
liabilities, the Trust and RPS entered into a tax agreement which provides
that RPS (currently known as Ramco Gershenson Properties Trust) (under the
direction of its Continuing Trustees), and not the Trust, will control,
conduct and effect the settlement of any tax claims against RPS relating
to the RPS Tax Issues. Accordingly, the Trust does not have any control as
to the timing of the resolution or disposition of any such claims and no
assurance can be given that the resolution or disposition of any such
claims will be on terms or conditions as favorable to the Trust as if they
were resolved or disposed of by the Trust. RPS and the Trust also have
received an opinion from legal counsel that, to the extent there is a
deficiency in RPS' taxable income arising out of the IRS examination and
provided RPS timely makes a deficiency dividend (i.e. declares and pays a
distribution which is permitted to relate back to the year for which each
deficiency was determined to satisfy the requirement that a REIT
distribute 95 percent of its taxable income), the classification of RPS as
a REIT for the taxable years under examination would not be affected. If,
notwithstanding the above-described opinions of legal counsel, the IRS
successfully challenged the status of RPS as a REIT, the REIT status of
the Trust could be adversely affected. Management estimates that this
would have an effect of approximately $0 for 1996, $600,000 for
1995 and $400,000 for prior years which have not been provided in the
financial statements of RPS or the Trust. Such amounts do not include
potential penalties and interest. The possible effect on the Trust for
subsequent periods could be significant depending on the taxable income
of either RPS or the Trust in such periods. As of December 31, 1996, the
Trust has not been required to perform its indemnity with respect to the
RPS Tax Issues and Management is not aware of any determination of tax
liability by the IRS against RPS.
8. DIVIDENDS/DISTRIBUTIONS TO SHAREHOLDERS
Under the Internal Revenue Code, a REIT must meet certain qualifications,
including a requirement that it distribute annually to its shareholders at
least 95 percent of its taxable income. The Trust's policy is to
distribute to shareholders all taxable income. Dividend distributions for
the year ended December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Record Date Distribution Payment Date
----------- ------------ ------------
<S> <C> <C>
December 26, 1996 $.39 per share January 21, 1997
</TABLE>
9. SUBSEQUENT EVENT
On March 27, 1997, the Trust entered into an agreement to sell the 9
North Wabash Building for $1,250,000, less selling expenses. There can
be no assurance that such sale will be consummated.
F-8
<PAGE> 31
NET ASSETS TO BE TRANSFERRED TO ATLANTIC REALTY TRUST
Atlantic Realty Trust
Balance Sheet as of
December 31, 1995 and
Independent Auditors' Report
F-9
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of
Atlantic Realty Trust:
We have audited the accompanying balance sheet of Atlantic Realty Trust
(the "Trust") as of December 31, 1995. This financial statement is the
responsibility of the Trust's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for
our opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of the Trust at December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
New York, New York
March 25, 1997
F-10
<PAGE> 33
ATLANTIC REALTY TRUST
BALANCE SHEET
DECEMBER 31, 1995
ASSET -- Cash..................................................... $100
===
SHAREHOLDERS' EQUITY -- Common stock (10,000 shares outstanding
at $.01 par value)........................ $100
===
- -------------------
Note: Atlantic Realty Trust (the "Trust"), a wholly-owned subsidiary of RPS
Realty Trust, was formed on July 27, 1995 and funded on October 11, 1995
for the purpose of liquidating the mortgage loan portfolio and certain
other assets and liabilities to be transferred to the Trust (the "Net
Assets") from RPS Realty Trust (subsequently renamed Ramco-Gershenson
Properties Trust).
On May 10, 1996, the Net Assets were transferred to the Trust (the
"Spin-Off Transaction"). The Trust adopted the liquidation basis of
accounting as of that date based on its intention to liquidate its assets
within eighteen months from the date of the Transaction or merge or
combine operations with another real estate entity.
F-11
<PAGE> 34
NET ASSETS TO BE
TRANSFERRED TO ATLANTIC
REALTY TRUST
Balance Sheet as of December 31, 1995 and
Statements of Operations and Cash Flows for the
Period January 1, 1996 Through May 10, 1996
(Date of Transfer), and for the Years Ended
December 31, 1995 and 1994, and
Independent Auditors' Report
F-12
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of
RPS Realty Trust and
Atlantic Realty Trust:
We have audited the accompanying combined balance sheet and statement of
shareholders' equity of the Net Assets to be Transferred to Atlantic Realty
Trust as of December 31, 1995 and the related combined statements of operations
and cash flows for the period January 1, 1996 through May 10, 1996 (Date of
Transfer) and each of the two years in the period ended December 31, 1995.
These combined financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined 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, such combined financial statements present fairly, in all
material respects, the financial position of the Net Assets to be Transferred to
Atlantic Realty Trust as of December 31, 1995, and the results of their
operations and cash flows for the period January 1, 1996 through May 10, 1996
(Date of Transfer) and for each of the two years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
As more fully described in Note 1, Atlantic Realty Trust was obligated to
adopt the liquidation basis of accounting upon completion of the Transaction.
The accompanying combined financial statements do not give effect to the
adjustments, if any, to be recorded at such time.
/s/ Deloitte & Touche LLP
New York, New York
March 25, 1997
F-13
<PAGE> 36
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED BALANCE SHEET
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
MORTGAGE LOANS RECEIVABLE - Net of allowance
for possible loan losses of $10,231,336 $36,023,265
INVESTMENT IN REAL ESTATE - Net 6,866,189
SHORT-TERM INVESTMENTS 3,356,995
INTEREST AND ACCOUNTS RECEIVABLE 7,523,583
OTHER ASSETS 460,000
-----------
TOTAL $54,230,032
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 717,036
Deferred commitment fees 346,320
-----------
Total liabilities 1,063,356
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 53,166,676
-----------
TOTAL $54,230,032
===========
</TABLE>
See notes to combined financial statements.
F-14
<PAGE> 37
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 1996 THROUGH MAY 10, 1996 (DATE OF TRANSFER) AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> FOR THE PERIOD
JANUARY 1, 1996
THROUGH YEAR ENDED DECEMBER 31,
MAY 10, 1996 ------------------------------
(Date of Transfer) 1995 1994
------------ ----------- ----------
<S> <C> <C> <C>
REVENUES:
Interest income $1,014,205 $ 3,515,614 $3,514,395
Contingent interest and fee income -- 63,028 41,836
Rental income 241,402 994,369 867,288
---------- ----------- ----------
Total revenues 1,255,607 4,573,011 4,423,519
---------- ----------- ----------
EXPENSES:
Provision for possible loan losses -- 3,650,000 2,100,000
Provision for impairment of real estate -- 800,000 --
Loss on disposition of mortgage loan 128,886 -- --
General and administrative expenses 321,197 1,185,161 910,760
Property operating 63,285 200,209 125,750
Real estate tax 110,161 311,642 502,046
Depreciation 36,491 108,763 62,905
---------- ----------- ----------
Total expenses 660,020 6,255,775 3,701,461
---------- ----------- ----------
NET INCOME (LOSS) $595,587 $(1,682,764) $ 722,058
========== =========== ==========
</TABLE>
See notes to combined financial statements.
F-15
<PAGE> 38
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
NUMBER OF PAID-IN CUMULATIVE CUMULATIVE SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS DISTRIBUTIONS EQUITY
----------- ----------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 1995 28,492,421 $2,849,242 $195,591,125 $51,324,071 $(194,569,545) $55,194,893
Net Loss (1,682,764) (1,682,764)
Distributions (345,453) (345,453)
----------- ----------- ------------ ----------- ------------- ------------
BALANCE,
DECEMBER 31, 1995 28,492,421 $2,849,242 $195,591,125 $49,641,307 $(194,914,998) $53,166,676
=========== ========== ============ =========== ============== ===========
</TABLE>
See notes to combined financial statements.
F-16
<PAGE> 39
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1996 THROUGH MAY 10, 1996 (DATE OF TRANSFER) AND
FOR THE YEARS ENDED DECEMBER 31, 1995, AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION> FOR THE PERIOD
JANUARY 1, 1996
THROUGH DECEMBER 31,
MAY 10, 1996 ----------------------------
(Date of Transfer) 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) income $595,587 $(1,682,764) $ 722,058
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Provision for possible loan losses -- 3,650,000 2,100,000
Provision for impairment of real estate -- 800,000 --
Loss on disposition of mortgage loan 128,886 -- --
Depreciation 36,491 108,763 62,905
Changes in operating assets and liabilities:
Interest and accounts receivable 352,813 (159,824) 216,456
Accounts payable and deferred 1,149,735
commitment fees 170,737 52,737
---------- ----------- -----------
Net cash provided by operating activities 2,263,512 2,886,912 3,154,156
---------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Satisfaction of mortgage loans receivable 3,416,564 -- 77,662
Investment in mortgage loans receivable -- (255,596) --
Investment in real estate (1,933,762) (271,847) (1,592,068)
---------- ----------- -----------
Net cash provided by (used in) investing activities 1,482,802 (527,443) (1,514,406)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of financing 5,550,000 -- --
Distributions to RPS Realty Trust (9,994,955) (345,453) (296,771)
---------- ----------- -----------
Net cash used in financing activities (4,444,955) (345,453) (296,771)
---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (698,641) 2,014,016 1,342,979
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,356,995 1,342,979 --
---------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $2,658,354 $ 3,356,995 $ 1,342,979
========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Investment in real estate 25,455,310 -- 2,685,460
Interest and accounts receivable (6,275,000) -- 3,195,876
Use (recovery) of provision for possible loan losses 5,819,690 -- (381,336)
Gross mortgage receivable exchanged for real estate (25,000,000) -- (2,500,000)
Mortgage receivable exchanged -- -- (3,000,000)
</TABLE>
See notes to combined financial statements.
F-17
<PAGE> 40
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994
AND FOR THE PERIOD JANUARY 1, 1996 THROUGH MAY 10, 1996 (DATE OF TRANSFER)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Atlantic Realty Trust (the "Trust") is a newly formed Maryland real estate
investment trust formed as a condition of the Spin-Off Transaction
described in Note 7 for the transfer from RPS Realty Trust ("RPS") of the
remaining mortgage loan portfolio, as well as certain other assets and
liabilities ("Net Assets").
The combined financial statements reflect the Net Assets and the related
results of their operations for the periods presented. Historical
performance of the Net Assets is presented as if those assets were
separately managed. Under the provisions of its Declaration of Trust, the
Trust is obligated to make a final liquidating distribution of the net cash
proceeds attributable to the sale or other disposition of the Trust's
assets within 18 months, or to merge or combine operations with another
real estate entity during such 18 month period, unless on or before such
date the holders of at least two-thirds of the Trust's outstanding shares
approve the extension of such date. In the event that at the end of such
18-month period, the Trust is unable to dispose of all of its assets, and
the shareholders of the Company have not approved an extension of such
date, the Trust will appoint an independent third party to liquidate the
Trust's remaining assets.
On May 10, 1996, the Transaction was consummated. As a result, the Trust
was obligated to adopt the liquidation basis of accounting. Under this
method of accounting, assets are stated at the amounts to be realized in
liquidation and liabilities are stated at anticipated settlement amounts.
The accompanying financial statements do not give effect to the
adjustments, if any, to be recorded upon adoption of the liquidation basis
of accounting.
Certain common payroll and other general and administrative expenses have
been allocated to the Net Assets based on the average of the weighted
average of the Trust's total assets under management to the total assets of
RPS and the Trust's total revenue to the total revenue of RPS. Such
averages were 30 percent, 29 percent and 24 percent for the period
January 1, 1996 through May 10, 1996 (Date of Transfer) and the years
ended December 31, 1995 and 1994, respectively.
The following is a summary of significant accounting policies followed in
the preparation of the historical financial statements of the Net Assets:
a. Income Tax Status - The Trust intends to conduct its operations with
the intent of meeting the requirements applicable to a real estate
investment trust ("REIT") under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code"). RPS conducts
its operations with the intent of meeting the requirements applicable
to a REIT under Sections 856 through 860 of the Code. For the year
ended December 31, 1995, the Trust has distributed all of its taxable
income prior to filing its tax return. As a result, the Trust will
have no current and deferred tax liabilities. See Note 6 for current
developments.
b. Principles of Combination - The combined financial statements include
the accounts of the Net Assets.
F-18
<PAGE> 41
c. Cash Equivalents - Short-term investments are considered cash
equivalents for purposes of the statement of cash flows and consist
primarily of highly liquid investments having original maturities of
less than three months.
d. Investment in Real Estate - Investment in real estate is stated at
cost less accumulated depreciation and is depreciated using the
straight-line method over the estimated useful life of the property.
Additions and improvements which extend the estimated useful life of
the property are capitalized. Repairs and maintenance are expensed. In
the event that it appears that the cost less accumulated depreciation
cannot be recovered through operations and/or a sale over a reasonable
future period, then it will be considered probable that an impairment
that is other than temporary has occurred and the net cost less
accumulated depreciation will be written down to market value and a
new cost basis will be established.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and Assets to be Disposed of" which requires that long lived assets
and certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
The adoption of the Statement is required for years beginning after
December 15, 1995. The provisions of this Statement were adopted as
of January 1, 1996 and the adoption of this Statement did not have a
significant impact on the carrying value of the real estate.
The Company records properties received in foreclosures or by deed in
lieu of foreclosure at the lower of the carrying value of the related
mortgage loan, plus accrued interest and costs incurred in connection
with the foreclosure, or the market value of the property.
e. Income Recognition - Current interest income on mortgage loans is
recognized on the accrual method during the periods in which the
mortgage loans are outstanding. Deferred interest, due at the maturity
of the mortgage loan, is recognized as income based on the interest
method using the implicit rate of interest on the mortgage loan.
Income from operating leases held in connection with the investments
in real estate is recognized when earned. Contingent and additional
contingent income and prepayment premium income are recognized as cash
is received. Certain leases at one of the Trust's real estate
properties may have percentage rent features and such amounts are
recognized upon receipt.
f. Impairment of Loans - In May 1993, the Financial Accounting Standards
Board issued Statement No. 114, "Accounting by Creditors for
Impairment of a Loan," which requires creditors to account for
impaired loans at the present value of their future cash flows or at
the fair value of the collateral, if the loan is collateral dependent.
The provisions of this statement were adopted as of January 1, 1995
and the adoption of this statement did not have a significant impact
on the carrying value of the loans.
g. Allocation of Distributions - Net cash flows from operating, financing
and investing activities are those amounts which would have been
distributed to RPS or received from RPS to the extent required to
fulfill the cash contributions of RPS to the Operating Partnership,
as described in Note 7.
h. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-19
<PAGE> 42
2. MORTGAGE LOANS RECEIVABLE
The principal amounts of the mortgage loans receivable at December 31, 1995
are summarized below:
<TABLE>
<CAPTION>
INTEREST RATE (b) DECEMBER 31, 1995
------------------------------------------------ -------------------------------------------
CURRENT PAY NET
AVERAGE RATE AT AMOUNT ALLOWANCE CARRYING
RATE OF DECEMBER 31, AVERAGE MATURITY ADVANCED FOR LOSS AMOUNT
DESCRIPTION LOAN 1995 ACCRUED DATE (a)(d)(i) (g)(h) (j)
----------- ---- ---- ------- ---- --------- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping centers/retail:
Holiday Park 10.00% 9.75% -- 12/95 $ 1,916,564 $ -- $ 1,916,564
Branhaven Plaza 11.19 14.25 -- 8/99 2,800,000 -- 2,800,000
1733 Massachusetts Avenue 8.58 8.58 1.42 6/99 2,200,000 -- 2,200,000
Mt. Morris Commons 11.20 10.50 2.00 6/99 2,700,000 (1,000,000) 1,700,000
Copps Hill Plaza 6.00 6.00 0.50 7/96 3,563,948 (350,000) 3,213,948
Hylan Center (f) and
(Note 3a.) 7.50 7.50 4.50 1/01 25,000,000 (6,000,336) 18,999,664
Office buildings:
NCR Building (e) 10.00 10.00 -- 12/95 468,493 (231,000) 237,493
1-5 Wabash Avenue 5.00 5.00 -- 3/96 2,850,000 (650,000) 2,200,000
Rector (c) and (Note 3a.) 6.00 -- 6.00 3/04 3,255,596 (2,000,000) 1,255,596
Industrial/commercial:
Simmons Mfg. Warehouse 10.00 10.00 2.00 8/01 1,500,000 -- 1,500,000
----------- ------------- -----------
$46,254,601 $(10,231,336) $36,023,265
=========== ============ ===========
</TABLE>
Deferred interest due at maturity of the mortgage loans is recognized as
income based on the interest method. The amounts currently recognized
through December 31, 1995 are as follows:
<TABLE>
<CAPTION>
FOR
DECEMBER 31,
1995
-----------------
DEFERRED INTEREST
ACCRUED
-----------------
<S> <C>
Holiday Park $ 67,080
Branhaven Plaza 345,998
1733 Massachusetts Avenue 335,127
Mt. Morris Commons 52,923
Hylan Center 6,275,000
Simmons Mfg. Warehouse 128,886
----------
Balance, end of period $7,205,014
==========
</TABLE>
F-20
<PAGE> 43
(a) Of the 10 loans outstanding at December 31, 1995, 4 are wrap around
and 6 are first mortgage loans. The wrap around mortgage loans are
subordinate to prior liens held by others with no recourse to the
Trust. Such prior liens are not to be liabilities of the Trust and,
therefore, are not reflected in the accompanying financial statements.
(b) In addition to fixed interest, on certain loans the Trust would be
entitled to contingent interest in an amount equal to a percentage of
the gross rent received by the borrower from the property securing the
mortgage above a base amount, payable annually, and additional
contingent interest based on a predetermined multiple of the
contingent interest or a percentage of the net value of the property
at such date, payable at maturity (equity participation). Contingent
interest in the amounts of $43,862 and $41,836 was received for the
years ended December 31, 1995 and 1994.
(c) Pursuant to the terms of the restructuring of the collateral
assignment loan which was partially secured by a security interest in
a mortgage on 19 Rector Street, the interest held was converted to a
direct first mortgage lien by delivery on September 21, 1995 of an
Assignment of Senior Participation in the mortgage loan which formerly
had been only collaterally assigned by its mortgagee in consideration
of an additional $255,596.
(d) The aggregate cost for Federal income tax purposes approximates that
used for financial reporting.
(e) The NCR Building loan matured on December 31, 1995 and is in default.
The Trust has initiated foreclosure proceedings with respect to the
loan.
(f) The interest income from the Hylan loan represented more than 35% of
total revenues for the years ended December 31, 1995 and 1994. The
mortgage receivable balance and deferred interest receivable also
represented more than 45% of total assets at December 31, 1995.
(g) As of December 31, 1995, there were six loans that were in arrears
(three monthly payments or more) or otherwise considered to be
"problem loans". The aggregate gross principal amounts of these loans,
together with receivables relating to such loans comprised of accrued
interest and payments made on behalf of the borrowers for mortgage
payments relating to such properties, totaled $44,165,960,
representing 81 percent of total assets. At December 31, 1995, the
Trust was not accruing current and deferred interest on one of the
above-mentioned loans, in the aggregate approximate principal amount
of $2,700,000. In addition, as of such dates, deferred interest on
three additional loans in the aggregate approximate principal amount
of $31,819,544, was not being accrued. There is an allowance for
possible loan losses of $10,231,336 at December 31, 1995, which
includes principal and deferred interest that the Company does not
anticipate recovering.
(h) An allowance for possible loan losses is established based upon a
review of each of the loans in the portfolio. In performing the
review, management considers the estimated net realizable value of the
property or collateral as well as other factors, such as the current
occupancy, the amount and status of senior debt, if any, the prospects
for the property, the credit worthiness and current financial position
of the borrower and the economic situation in the region where the
F-21
<PAGE> 44
property is located. Because this determination of the collectibility
of loans is based upon future economic events, the amounts ultimately
realized at disposition may differ materially from the carrying value
as of December 31, 1995.
(i) The allowance is indicative of the continued weakness and the
protracted declines in values of commercial real estate throughout the
country which resulted in part from the general economic decline in
earlier years and the continuing lack of readily available credit
sources for commercial real estate. The allowance is inherently
subjective and is based on management's best estimates of current
conditions and assumptions about expected future conditions. It is
reasonably possible that future conditions may not meet management's
expectation and that additional allowances for possible loan losses
may be required.
(j) A summary of mortgage receivable loan activity for the year ended
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1995
<S> <C>
Balance, beginning of period $ 39,417,669
Mortgage loans issued 255,596
Mortgage loan satisfaction --
Provision for possible loan losses (3,650,000)
------------
Balance, end of period $ 36,023,265
============
</TABLE>
3. PREPAYMENTS AND OTHER ACTIVITY
(a) On April 30, 1996, Hylan Plaza Shops, Inc., a Delaware Corporation and
wholly owned subsidiary of the Trust, acquired the Hylan Plaza
Shopping Center in connection with a workout of the mortgage held by
the Trust for approximately $1.1 million over the mortgage held by the
Trust, plus closing costs.
(b) On January 19, 1996, the Trust received proceeds of $2,008,560 from
the repayment of the Holiday Park loan. The proceeds consisted of the
repayment of the principal loan balance of $1,916,564, current
interest of $24,916 and deferred interest of $67,080.
(c) On February 1, 1996, the Trust received proceeds of $1,512,500 from
the prepayment of the Simmons Manufacturing Warehouse loan. The
proceeds consisted of the repayment of the principal loan balance of
$1,500,000 and current interest of $12,500.
(d) On March 7, 1996, the Trust reached an agreement in principal with the
borrower under the 1-5 Wabash loan for such borrower to acquire the
loan for $2,200,000 in cash.
(e) On January 25, 1994, a mortgage loan in the original principal amount
of $31,000,000 which was secured by a collateral assignment of
mortgages on two properties, an office building located on Rector
Street in New York City (the "Rector Property") and a shopping center
located on Hylan Boulevard in Staten Island, New York (the "Hylan
Center") was restructured. Pursuant to the restructuring, a direct
assignment of the first mortgage with a principal amount of
$25,000,000 and accrued interest of $7,881,250 secured by the Hylan
Center was received and the collateral assignment of the Rector
Property mortgage, the principal amount of which was reduced to
$3,000,000 was retained. The holder of the first mortgage secured by
the Rector Property has granted a pledge of a senior participation
interest in such mortgage. In addition, upon a foreclosure, a direct
first mortgage secured by the Rector Property will be obtained. The
restructuring was completed in October 1994.
F-22
<PAGE> 45
4. INVESTMENT IN REAL ESTATE
<TABLE>
<CAPTION>
PROVISION
INITIAL COST TO CAPITAL GROSS FOR
COMPANY IMPROVEMENTS AMOUNT(1) IMPAIRMENT
----------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
LAND BUILDING 1995 1995 1995
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
9 North Wabash
Chicago, Illinois $2,319,900 $ 980,100 $ -- $3,300,000 $(800,000)
Norgate Shopping Center
Indianapolis, Indiana 1,260,000 2,940,000 349,375 4,549,375 --
---------- ---------- -------- ---------- ---------
Totals $3,579,900 $3,920,100 $349,375 $7,849,375 $(800,000)
========== ========== ======== ========== =========
<CAPTION>
NET
ACCUMULATED CARRYING
DEPRECIATION AMOUNT
DECEMBER 31, DECEMBER 31, DATE PREDICTABLE
1995 1995 ACQUIRED LIFE
------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
9 North Wabash
Chicago, Illinois $ 61,778 $2,438,222 7/01/93 39
Norgate Shopping Center
Indianapolis, Indiana 121,408 4,427,967 6/01/94 39
-------- ----------
Totals $183,186 $6,866,189
======== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1995
-----------
<S> <C>
REAL ESTATE OWNED:
Balance at beginning of year $ 7,577,528
Capital Improvements 271,847
Provision for Impairment (800,000)
-----------
Balance at end of year $ 7,049,375
===========
ACCUMULATED DEPRECIATION:
Balance at beginning of year: $ 74,423
Depreciation Expense (2) 108,763
-----------
Balance at end of year $ 183,186
===========
</TABLE>
(1) Aggregate cost for Federal income tax purposes at December 31, 1995
approximates $7,849,375.
(2) Properties are depreciated over an estimated life of 39 years using the
straight-line method.
(3) As the sole tenant at 9 North Wabash terminated its lease on December 31,
1995, the property value was impaired and a provision for impairment of
$800,000 was recognized.
F-23
<PAGE> 46
RENTALS UNDER OPERATING LEASES
The following is a schedule by years of minimum future rentals to be
received on noncancelable operating leases at December 31, 1995:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
<S> <C>
1996 $ 353,148
1997 337,746
1998 337,746
1999 144,100
2000 126,496
Later Years 973,509
-----------
$ 2,272,745
===========
</TABLE>
5. FINANCIAL INSTRUMENTS
The market value of mortgage loans and receivables relating to such loans
as of December 31, 1995 is estimated to be approximately $45,000,000. At
December 31, 1995, the aggregate estimated fair market value of five of the
ten mortgage loans exceeded the aggregate carrying value of $32,516,828 by
$3,593,795. The remaining five mortgage loans were stated at their fair
market value. The estimated market value has been determined, using
available market information, methodologies deemed reasonable and the
present value of estimated future cash flows using a discount rate
commensurate with the risks involved. Estimated market values represent
management's estimate as of the date of the valuation and are based on
facts and conditions existing on the date of the valuation and on a number
of assumptions concerning future circumstances, which assumptions may or
may not prove to be accurate. Management believes that the estimated market
value as stated is not necessarily indicative of the price which could be
realized if it were actively attempting to sell the mortgages in its
portfolio.
6. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption of the
statement is required for years beginning after December 15, 1992. Even
though the Trust will not be subject to income taxes as discussed in Note
1, since the Trust is a public enterprise, in accordance with SFAS 109, it
is required to disclose the net differences between the assets and
liabilities for tax purposes and financial reporting purposes as follows:
<TABLE>
<CAPTION>
1995
<S> <C>
Net assets, financial statements $ 53,166,676
Interest 7,600,000
Allowance for loan losses 10,250,000
Provision for impairment of real estate 800,000
Deferred interest (7,200,000)
------------
Net assets, tax reporting $ 64,616,676
============
</TABLE>
F-24
<PAGE> 47
During the third quarter of 1994, RPS held more than 25% of the value of
its gross assets in overnight Treasury Bill reverse repurchase transactions
which the IRS may view as non-qualifying assets for the purposes of
satisfying an asset qualification test applicable to REITs, based on a
Revenue Ruling published in 1997 (the "Asset Issue"). RPS has requested
that the United States Internal Revenue Service (the "IRS") enter into a
closing agreement with RPS that the Assets Issue will not impact RPS'
status as a REIT. The IRS has deferred any action relating to the Asset
Issue pending the further examination of RPS' 1991-1994 tax returns (the
"RPS Audit" and together with the Asset Issue (the "RPS Tax Issues"). Based
on developments in the law which occurred since 1977, RPS' counsel, Battle
Fowler LLP, has rendered an opinion that RPS' investment in Treasury Bill
repurchase obligations would not adversely affect its REIT status. However,
such opinion is not binding upon the IRS. In connection with the
Transaction, the Trust will assume all tax liability arising out of the RPS
Tax Issues. In connection with the assumption of such potential
liabilities, the Trust and RPS will enter into a tax agreement which
provides that RPS (under the direction of its Continuing Trustees), and not
the Trust, will control, conduct and effect the settlement of any tax
claims against RPS relating to the RPS Tax Issues. Accordingly, the Trust
will not have any control as to the timing of the resolution or disposition
of any such claims and no assurance can be given that the resolution or
disposition of any such claims will be on terms or conditions as favorable
to the Company as if they were resolved or disposed of by the Company. RPS
and the Trust also have received an opinion from legal counsel that, to the
extent there is a deficiency in RPS' taxable income arising out of the IRS
examination and provided RPS timely makes a deficiency dividend (i.e.,
declares and pays a distribution which is permitted to relate back to the
year for which each deficiency was determined to satisfy the requirement
that a REIT distribute 95 percent of its taxable income), the
classification of RPS as a REIT for the taxable years under examination
would not be affected. If, notwithstanding the above-described opinions of
legal counsel, the IRS successfully challenged the status of RPS as a REIT,
the REIT status of the Trust could be adversely affected. Management
estimates that this would have an effect of approximately $0 for 1996,
$600,000 for 1995 and $400,000 for prior years which have not been
provided in the financial statements of RPS or the Trust. Such amounts do
not include potential penalties and interest. The possible effect on the
Trust for subsequent periods could be significant depending on the taxable
income of either RPS or the Trust in such periods.
7. RAMCO TRANSACTION
On December 27, 1995, RPS and Ramco-Gershenson, Inc. ("Ramco") and its
affiliates (the "Ramco Group") entered into an agreement relating to the
acquisition through an operating partnership (the "Operating Partnership")
controlled by RPS of substantially all of the real estate assets as well as
the business operations of Ramco (the "Transaction"). As part of the
Transaction, the Operating Partnership will succeed to the ownership of
interests in 22 shopping center and retail properties (the "Ramco
Properties"), as well as 100% of the nonvoting stock and 5% of the voting
stock of Ramco (representing in excess of 95% of the economic interests of
Ramco). Under the proposed revised structure to the Transaction, RPS will
contribute to the Operating Partnership six retail properties ("RPS
Properties") and $68,000,000 in cash and will be liable for approximately
$7,000,000 of Transaction expenses. Following the closing of the
Transaction, Ramco will manage the Ramco Properties, the RPS Properties and
properties of certain third parties and other Ramco affiliates.
Upon consummation of the Transaction, RPS will be the sole general partner
of and a limited partner in the Operating Partnership and under the
proposed revised structure to the Transaction will initially hold
approximately 75% of the interests therein. The members of the Ramco Group
will be limited partners in the Operating Partnership and will initially
hold, in the aggregate, approximately 25% of the interests therein. The
Ramco Group could also increase its interest in the Operating Partnership
based on the future performance of certain of the Ramco Properties; such
performance incentives
F-25
<PAGE> 48
could increase the Ramco Group's interest in the Operating Partnership to
approximately 29% in the aggregate. The Ramco Group's units in the
Operating Partnership will be exchangeable for shares of RPS Realty Trust
commencing one year after consummation of the Transaction, subject to
purchase of such OP Units for cash by RPS Realty Trust, at RPS's option.
As part of the Transaction, it is anticipated that RPS will change its name
to Ramco-Gershenson Properties Trust and will implement a one-for-four
reverse share split.
Upon consummation of the Transaction, it is contemplated that four of the
nine current members of the Board of Trustees of RPS will resign and will
be replaced by four individuals designated by the Ramco Group, two of whom
will be independent of RPS, Ramco and their respective affiliates. In
addition, the five current principal executive officers of Ramco will
become executive officers of RPS and will be responsible for the management
of the RPS's real estate operations.
In connection with the Transaction, and as a condition thereto, RPS will
transfer its remaining mortgage loan portfolio, as well as certain other
assets, to the Trust and thereafter will distribute the shares after taking
into account the reverse stock split referred to above, to the RPS
shareholders. Additionally, pursuant to the terms of the Transaction, the
Trust will incur approximately $6,500,000 in indebtedness, the proceeds of
which, together with existing resources of RPS to be used primarily for the
payment of severance benefits of approximately $4,500,000, distributions to
shareholders of $2,279,000 and director's and officers insurance premiums
of approximately $1,150,000 and approximately $750,000 in working capital.
It is anticipated that such indebtedness will accrue interest at 10% per
annum (approximately $650,000 per year) and mature on the date which is 18
months after the Transaction. Such interest will be included as a decrease
in the Statement of Changes in Net Assets following the consummation of the
Transaction. Upon consummation of the Transaction, the Trust will assume
this indebtedness. The actual amount of such indebtedness may be less than
$6,500,000 to the extent that RPS effects the sale of the assets to be
distributed to the Trust or is prepaid by any of the borrowers under its
mortgage loans.
8. COMMITMENTS
In March 1995 a lease was entered into for approximately 4,863 square feet
of office space at 747 Third Avenue, New York, New York. The term of the
lease commenced on April 1, 1995. The lease was extended in January 1997 at
an annual base rental of approximately $172,000. The lease will expire on
April 30, 1998. The Trust and the landlord each have options to terminate
the lease as of November 20, 1997 or as of February 28, 1998 upon 90 days
prior written notice to the other.
F-26
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 27th day
of March, 1997.
ATLANTIC REALTY TRUST
By: /s/ Joel M. Pashcow
----------------------------
Name: Joel M. Pashcow
Title: Chairman and President
S-1
<PAGE> 50
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JOEL M. PASHCOW Chairman, President and March 27, 1997
- ----------------------- Trustee (Principal
Joel M. Pashcow Executive Officer)
/s/ EDWIN R. FRANKEL Executive Vice President March 27, 1997
- ----------------------- Chief Financial Officer
Edwin R. Frankel and Secretary (Principal
Financial and Accounting
Officer)
/s/ HERBERT LIECHTUNG Trustee March 27, 1997
- -----------------------
Herbert Liechtung
/s/ STEPHEN R. BLANK Trustee March 27, 1997
- -----------------------
Stephen R. Blank
/s/ ARTHUR H. GOLDBERG Trustee March 27, 1997
- -----------------------
Arthur H. Goldberg
/s/ WILLIAM A. ROSOFF Trustee March 27, 1997
- -----------------------
William A. Rosoff
/s/ EDWIN J. GLICKMAN Trustee March 27, 1997
- -----------------------
Edwin J. Glickman
/s/ EDWARD BLUMENFELD Trustee March 27, 1997
- -----------------------
Edward Blumenfeld
/s/ SAMUEL M. EISENSTAT Trustee March 27, 1997
- ------------------------
Samuel M. Eisenstat
S-2
<PAGE> 51
ATLANTIC REALTY TRUST AND SUBSIDIARY
EXHIBIT INDEX
The following exhibits are filed as part of this Annual Report on form 10-K.
Description
Sequential
Page No.
3.1 Amended and Restated Declaration of Trust of the Company
(Incorporated by reference to the Company's definitive
registration statement on Form 10, dated March 28, 1996,
File No. 0-27562, Exhibit 3.1).
3.2 Amended and Restated By-Laws of the Company (Incorporated
by reference to the Company's definitive registration
statement on Form 10, dated March 28, 1996, File No.
0-27562, Exhibit 3.2).
3.3 First Amendment to Amended and Restated Declaration of
Trust of the Company (Incorporated by reference to the
Company's definitive registration statement on Form 10,
dated March 28, 1996, File No. 0-27562, Exhibit 3.3).
4.1 Form of Share Certificate (Incorporated by reference to
the Company's definitive registration statement on Form 10,
dated March 28, 1996, File No. 0-27562, Exhibit 4.1).
10.1 Lease Agreement, dated as of January 16, 1997, by any
between Sage Realty Corporation, as the lessor and the
Trust, as the lessee.
10.2 Form of Assignment, Assumption and Indemnification
Agreement between RPS Realty Trust and the Company
(Incorporated by reference to the Company's definitive
registration statement on Form 10, dated March 28,
1996, File No. 0-27562, Exhibit 10.1).
10.3 Form of Tax Agreement between RPS Realty Trust and the
Company (Incorporated by reference to the Company's
definitive registration statement on Form 10, dated
March 28, 1996, File No. 0-27562, Exhibit 10.2).
10.4 Form of Information Statement (Incorporated by reference
to the Company's definitive registration statement on
Form 10, dated March 28, 1996, File No. 0-27562,
Exhibit 20.1).
27.1 Financial Data Schedule
<PAGE> 1
Exhibit 10.1
NUMBER 5 OF
5 EXECUTED
COUNTERPARTS
SAGE REALTY CORPORATION, AGENT
LANDLORD
and
ATLANTIC REALTY TRUST
TENANT
INDENTURE OF LEASE
PREMISES: Part of the 10th Floor
747 Third Avenue
New York, New York 10017
<PAGE> 2
TABLE OF CONTENTS
Article Page
- ------- ----
1 DEFINITIONS, TERM . . . . . . . . . . . . . . . . . . . .. .......... 1
2 COMMENCEMENT OF TERM ................................................ 2
3 FIXED RENT, ADDITIONAL RENTS AND RENT ADJUSTMENTS . . . ............. 3
A. Operating Expense Adjustment . . . . . . . . . . . .............. 5
B. Real Estate Tax Adjustment . . . . . . . . . . . . .............. 5
4 ELECTRICITY ......................................................... 7
5 USE ................................................................. 10
6 REPAIRS, ALTERATIONS AND LIENS . . . . . . . . . . . . . ............ 11
7 FLOOR LOAD, NOISE, WINDOW CLEANING . . . . . . . . . . . ............ 16
8 LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES . . ............ 16
9 INSURANCE, PROPERTY LOSS, REIMBURSEMENT . . . . . . . . ............. 17
10 DAMAGE OR DESTRUCTION BY FIRE OR OTHER CAUSE . . . . . . ............ 20
11 ASSIGNMENT, SUBLETTING, MORTGAGING . . . . . . . . . . . ............ 22
12 NO LIABILITY ON LANDLORD ............................................ 26
13 MOVING OF HEAVY EQUIPMENT . . . . . . . . . . . . . . . ............. 26
14 CONDEMNATION ......................................................... 27
15 ENTRY, RIGHT TO CHANGE PUBLIC PORTIONS OF THE
BUILDING ............................................................ 28
16 BANKRUPTCY .......................................................... 29
17 DEFAULTS AND REMEDIES AND WAIVER OF REDEMPTION . . . . . ............ 30
18 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS . . . . ............ 33
19 COVENANT OF QUIET ENJOYMENT . . . . . . . . . . . . . . ............. 33
20 EXCAVATION .......................................................... 34
21 SERVICES AND EQUIPMENT .............................................. 34
22 DEFINITION OF LANDLORD .............................................. 38
i
<PAGE> 3
23 INVALIDITY OF ANY PROVISION . . . . . . . . . . . . . . ............. 38
24 BROKER .............................................................. 39
25 SUBORDINATION ....................................................... 39
26 ESTOPPEL CERTIFICATE ................................................ 40
27 LEGAL PROCEEDINGS, WAIVER OF JURY TRIAL . . . . . . . . ............. 41
28 SURRENDER OF PREMISES/HOLDOVER . . . . . . . . . . . . . ............ 42
29 RULES AND REGULATIONS ............................................... 42
30 NOTICES ............................................................. 43
31 NO WAIVER: ENTIRE AGREEMENT . . . . . . . . . . . . . . ............. 43
32 CAPTIONS ............................................................ 44
33 INABILITY TO PERFORM . . . . . . . . . . . . . . . . . . ............ 44
34 NO REPRESENTATION BY LANDLORD . . . . . . . . . . . . . ............. 45
35 NAME OF BUILDING .................................................... 45
36 SUCCESSORS AND ASSIGNS .............................................. 45
37 DEFERRED COLLECTIONS ................................................ 45
38 FEES/INTEREST/LATE CHARGES . . . . . . . . . . . . . . . ............ 46
39 INTENTIONALLY OMITTED ............................................... 46
40 MUTUAL TERMINATION OPTION . . . . . . . . . . . . . . . ............. 46
Schedule A Floor Plan
Schedule B Intentionally Omitted
Schedule C Rules and Regulations
ii
<PAGE> 4
INDENTURE OF LEASE made as of this 16th day of January 1996, between
SAGE REALTY CORPORATION, a New York Corporation having its principal office at
777 Third Avenue, N`} York, Newt York 10017, Agent for the owner of the Building
hereinafter mentioned (herein "Landlord"), and ATLANTIC REALTY TRUST, a
______________________ having its office at 747 Third Avenue, New York,
New York 10017 (herein "Tenant").
W I T N E S S E T H:
ARTICLE 1
DEFINITIONS. TERM
-----------------
Section 1.01. The terms defined in this Article shall, for all purposes
of this Lease and all agreements supplemental thereto, have the meanings herein
specified unless the context otherwise requires.
(a) "Building" shall mean the office building known as 747 Third
Avenue, in the Borough of Manhattan, City and State of New York. The plot of
land on which the Building is erected is hereinafter called the "Land".
(b) "Business Days" shall mean all days excluding Saturdays,
Sundays and days observed by the State of New York or Federal Government as
legal holidays, and further excluding holidays established by any union contract
applicable to employees at the Building.
(c) "Commencement Date" shall have the meaning set forth in Section
2.02.
(d) "Demised Premises" shall mean a portion of the tenth (lath)
floor of the Building, as shown on the Floor Plan annexed hereto as Schedule A
and made a part of this Lease, including all fixtures and equipment which at the
Commencement Date or during the Term of this Lease are attached thereto and
which become a part thereof.
(e) "Expiration Date" shall mean April 30, 1998 or any sooner date
of termination pursuant to the provisions hereof.
(f) "Fixed Rent" shall mean the annual rental payable by Tenant for
the Demised Premises in equal monthly installments as provided for in Article 3
of this Lease.
(g) "Interest Rate" shall mean the lesser of (i) 2% above the prime
commercial lending rate of Marine Midland Bank, N.A. in effect from time to time
or (ii) the maximum applicable legal rate, if any.
(h) "Lease" shall mean this Indenture of Lease and any and all
Schedules annexed hereto.
<PAGE> 5
- 2 -
(i) "Lease" shall mean this Indenture of Lease and any and all
Schedules annexed hereto.
(I) "Term of this Lease" and "Term" shall mean the term of years
commencing on the Commencement Date and expiring on the Expiration Date, subject
to the terms and conditions hereinafter set forth.
Section 1.02. Landlord hereby leases to Tenant, and Tenant hereby rents
from Landlord, the Demised Premises, subject to the provisions hereinafter set
forth, together with appurtenances, including the right to use in common with
others the lobbies, elevators and other public portions of the Building.
TO HAVE AND TO HOLD unto Tenant, its successors and permitted assigns,
for the Term of this Lease or until the Term of this Lease sooner terminates as
hereinafter provided.
ARTICLE 2
COMMENCEMENT OF TERM
--------------------
Section 2.01. Tenant acknowledges that it has examined the Demised
Premises and is taking same "as is" as of the Commencement Date. Tenant
acknowledges that Landlord is not required to do any work with respect thereto.
Section 2.02. The Term of this Lease and the payment of rent shall
commence on May 1, 1997 (herein the "Commencement Date" ) .
The taking of possession by Tenant of the Demised Premises shall be
deemed an acceptance of same by Tenant. Such taking of possession shall also be
conclusive evidence, as against Tenant, that the Demised Premises and the
Building of which the same form a part were in good and satisfactory condition
at the time of such occupancy and that the Demised Premises were substantially
as shown on Schedule A.
Section 2.03. If Landlord shall be unable to give possession of the
Demised Premises on the date anticipated for the commencement of the Term hereof
for any reason whatsoever, Landlord shall not be subject to any liability, nor
shall the validity of this Lease nor the obligations of Tenant hereunder be
thereby affected. Without limiting the foregoing, the parties hereto expressly
negate the provisions of Section 223-a of the Real Property Law and agree that
such Section shall be inapplicable hereto. Tenant agrees that the provisions of
this Article are intended to constitute "an express provision to the contrary"
within the meaning of Section 223-a. If by reason of such delay, the Term of
this Lease shall commence subsequent to such anticipated date, the Term of this
Lease shall be deemed extended for the same period.
<PAGE> 6
- 3 -
ARTICLE 3
FIXED RENT. ADDITIONAL RENTS AND RENT ADJUSTMENTS
-------------------------------------------------
Section 3.01. During the Term of this Lease, Tenant shall pay, at
Landlord's address as herein set forth, or at such other address that Landlord
may from time to time designate, a Fixed Rent payable in lawful money of the
United States of America (by check of Tenant drawn on a bank that is a member of
the New York Clearinghouse Association) in equal monthly installments in advance
on the first day of each calendar month, without notice or demand, and without
setoff or deduction whatsoever at the annual rate (subject to adjustment
pursuant to Article 4 hereof) of $172,150.70 during the period beginning on the
Commencement Date and continuing through the balance of the Term.
If Tenant's obligation to pay Fixed Rent shall commence on a date other
than the first day of a calendar month, the first installment of Fixed Rent
shall be in an amount equal to that required to cover the period up to and
including the last day of the month wherein the obligation to pay Fixed Rent
occurs, computed on a per diem basis.
Section 3.02. The Fixed Rent does not take into account increases of real
estate taxes and/or expenses during the Term of this Lease or other adjustments
in rent, or other payments to be made by Tenant, during the Term of this Lease.
Provision therefor is hereinafter made.
Section 3.03. All costs, expenses, adjustments and payments which Tenant
is obligated to pay to Landlord pursuant to this Lease and/or its Schedules
shall be deemed additional rent whether or not denominated as such and, in the
event of nonpayment thereof, Landlord shall have all rights and remedies with
respect thereto as herein provided for in case of nonpayment of Fixed Rent.
Tenant covenants and agrees to pay the Fixed Rent and additional rent as
in this Lease provided, when due.
Section 3.04. For the purposes of this Section 3.04, the following
definitions shall apply:
(a) The term "Base Tax Year" as hereinafter set forth for the
determination of real estate tax escalation shall mean the period commencing on
July 1, 1996 and ending on June 30, 1997.
(b) The term "the Percentage" shall mean 1.35%.
(c) The term "Real Estate Taxes" shall mean all real estate taxes,
assessments, water and sewer rents, governmental levies, county taxes or any
other governmental charges, general
<PAGE> 7
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or special, ordinary or extraordinary, unforeseen as well as foreseen, of any
kind or nature whatsoever, which are or may be assessed or imposed upon the
Land, the Building and the sidewalks, plazas or streets in front of or adjacent
thereto, including any tax, excise or fee measured by or payable with respect to
any rent, and levied against Landlord and/or the Land and/or Building, under the
laws of the United States, the State of New York, or any political subdivision
thereof, or by the City of New York, or any political subdivision thereof. If,
due to a future change in the method of taxation or in the taxing authority, a
franchise, income, transit, profit or other tax or governmental imposition,
however designated, shall be levied against Landlord, and/or the Land and/or the
Building, in substitution in whole or in part for said Real Estate Taxes, or in
lieu of additional 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.
(d) The term "Tax Year" shall mean every twelve-month consecutive
period commencing each July 1st during the Term of this Lease.
(e) The term "Wage Rate" shall mean the minimum regular hourly wage
rate plus all other sums, including, but not limited to, sums paid for pensions,
welfare funds, vacations, bonuses, social security unemployment, disability
benefits, health, life, accident and other type of insurance required to be paid
to or for the benefit of employees engaged in the general maintenance and
operation of office buildings of the type in the vicinity of the Building
pursuant to a c0110ctiv0 bargaining agreement (designated as "Others" in said
agreement) between Realty Advisory Board on Labor Relations, Inc. (or any
successor thereto) and Local 32B/32J of the Building Service Employees
International Union AFL-CIO (or any successor thereto). The Wage Rate is
intended to be an index in the nature of a cost of living index, and is not
intended to reflect the actual costs of wages or expenses for the Building. If
any such agreement is not entered into, or such parties or their successors
shall cease to bargain collectively, then the Wage Rate shall be the minimum
regular hourly wage rate and other suns as aforesaid payable to or for the
benefit of employees engaged in the maintenance and operation of first class
office buildings of the same general type as the Building in the Manhattan area.
(f) The term "Base Wage Rate" shall mean the Wage Rate in effect on
January 1, 1997.
(g) The term "Wage Rate Factor" shall mean 4,863.
<PAGE> 8
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A. Operating Expense Adjustment
It is agreed that if at any time the Wage Rate shall be greater than the
Base Wage Rate, Tenant shall be required to pay to Landlord as additional rent
an "Operating Expense Adjustment" in an annual sum equal to the product obtained
by multiplying (i) the number of cents (including any fraction of a cent) by
which the Wage Rate exceeds the Base Wage Rate by (ii) the Wage Rate Factor by
(iii) 80%. Such Operating Expense Adjustment shall be payable to Landlord
together with Fixed Rent in equal monthly installments on the first day of each
calendar month commencing with the first month during the Term of this Lease in
which the Wage Rate shall be greater than the Base Wage Rate and, as billed by
Landlord, continuing thereafter until a new adjustment in the additional rent
shall be established and become effective in accordance with the provisions of
this paragraph. Notwithstanding any change in Wage Rate downwards, the Fixed
Rent shall not be reduced. In the event any change in the Wage Rate shall be
made retroactive, Tenant shall pay Landlord the amount of any resulting
retroactive adjustment in such additional rent within fifteen (15) days after
being billed therefor.
B. Real Estate Tax Adjustment
In the event that the Real Estate Taxes payable for any Tax Year shall
exceed the amount of such Real Estate Taxes, as finally determined, payable with
respect to the Base Tax Year, Tenant shall pay to Landlord, as additional rent
("Tenant's Tax Payment") for such Tax Year, an amount equal to the Percentage of
the excess. By or after the start of the Tax Year following the Base Tax Year,
and by or after the start of each Tax Year thereafter, Landlord shall furnish to
Tenant a statement of the Real Estate Taxes payable with respect to such Tax
Year, and a statement of the Real Estate Taxes payable during the Base Tax Year.
Within thirty (30) days after the issuance by the governmental authority
having jurisdiction thereafter of tax bills for Real Estate Taxes assessed,
levied and/or imposed upon the Land and Building for any Tax Year, Landlord
shall submit to Tenant a photostated copy of such bill and/or bills and
thereafter on or about each respective anniversary date shall submit a copy of
the tax bill and/or bills for the Real Estate Taxes assessed, levied or imposed
upon the Land and Building for such Tax Year, together with a statement which
shall indicate the amount, if any, of Tenant's Tax Payment. Landlord's failure
to submit copies of bills as aforesaid shall not be considered a default by
Landlord or a defense by Tenant to such tax payment.
Within thirty (30) days after the issuance of the statement, Tenant shall
pay Tenant's Tax Payment in the amount set forth on such statement. Such
statement shall be conclusively deemed binding upon Tenant unless Tenant shall
have objected thereto in
<PAGE> 9
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writing within thirty (30) days of receipt thereof. Notwithstanding the
foregoing provisions of this paragraph, Tenant's Tax Payment shall be payable in
the same number of installments as Real Estate Taxes are payable to the taxing
authority and shall be payable not less than thirty (30) days in advance of the
date on which the corresponding installment is due such taxing authority without
incurring any penalty, interest or late charge.
In the event Landlord shall receive a final reduction or refund of Real
Estate Taxes for any Tax Year for which Tenant is obligated to pay any
additional rent under the provisions of this subsection B of Section 3.04, the
amount or the proceeds of such reduction or refund, less legal fees and other
expenses incurred in collecting the same or achieving such reduction, shall be
applied and allocated to the periods for which such final reduction or refund
was obtained, and proper adjustment shall be made between Landlord and Tenant.
Tenant has been advised that proceedings to protest the Real Estate Tax
Assessment for the Base Tax Year may have been filed and may result in a
reduction of Real Estate Taxes for the Base Tax Year.
Any payments or refunds due hereunder for any period of less than a full
Tax Year at the commencement or end of the Term of this Lease shall be equitably
prorated to reflect such event.
In addition to Tenant's obligation to pay Tenant's Tax Payment as
aforesaid, Tenant shall pay to Landlord as additional rent payable upon demand,
any occupancy tax or rent tax now in effect or hereafter enacted, iii payable by
Landlord in the first instance or hereafter required to be paid by Landlord.
Section 3.05. Upon the date of the expiration or any sooner termination
of this Lease, whether the same be the date hereinabove set forth as the
expiration of the Term of this Lease or any prior or subsequent date, a
proportionate share of the Fixed Rent, adjustments and additional rents for the
year (calendar or fiscal) in which such expiration or termination occurs, shall
immediately become due and payable by Tenant to Landlord as hereinafter
provided, if not theretofore already billed and paid. Such proportionate share
shall be based upon the length of time that this Lease shall have been in
existence during such year. Promptly after any such expiration or termination,
Landlord shall compute the amounts due from Tenant, as aforesaid, which
computations shall either be based on that year's actual figures or be an
estimate based on the most recent statements theretofore prepared by Landlord
and furnished to Tenant pursuant to this Lease. If an estimate is used, then
Landlord shall promptly cause statements to be prepared on the basis of the
comparative year's actual figures as soon as they are available, and within ten
(10) days after such statement or statements are prepared by Landlord and
furnished to Tenant,
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Landlord and Tenant shall make appropriate adjustments of any estimated payments
theretofore made.
Tenant's obligation to pay any and all rents, adjustments and additional
rents under this Lease shall continue and shall cover all periods up to the
Expiration Date. Landlord's and Tenant's obligations to make the adjustments
hereinabove referred to shall survive any expiration or termination of this
Lease. Any delay or failure of Landlord in billing any Fixed Rent or additional
rent herein provided for shall not constitute a waiver of or in any way impair
the continuing obligation of Tenant to pay such rent adjustments hereunder.
ARTICLE 4
ELECTRICITY
-----------
Section 4.01. The Fixed Rent reserved in this Lease includes the agreed
sum of 514,102.70 per annum in consideration of which Landlord, as an additional
service, will supply Tenant with electricity for normal use in the Demised
Premises between the hours 9:00 A.H. and 5:30 P.h. on Business Days. If
Landlord's electric rates (i.e., the public utility rate schedule at the time in
question, including all surcharges, taxes, fuel adjustments, taxes regularly
passed on to consumers by the public utility, and other sums payable in respect
thereof for the supply of electric energy to Landlord for the Building) are
increased, the Fixed Rent reserved in this Lease shall be adjusted by applying
to the sum specified above, the same percentage as such rate increase, and such
adjusted Fixed Rent shall be billed by Landlord to Tenant, with effect as of the
date of the increase of Landlord's electric rats. Landlord shall not be liable
in any way to Tenant for any failure or defect in the supply or character of
electric energy furnished to the Demised Premises by reason of any requirement,
act or omission of the public utility serving the Building with electricity or
for any other reason not attributable to the Landlord. At Landlord's option,
Tenant shall purchase fro" the Landlord or Landlord's agent all lighting tubas,
lamps, bulbs and ballasts used in the Demised Premises and Tenant shall pay
Landlord's reasonable charges for providing and installing same on demand, as
additional rent.
Section 4.02. Tenant's use of electric energy in the Demised Premises
shall not at any time exceed the capacity of any of the electrical conductors,
machinery and equipment in or otherwise serving the Demised Premises. In order
to insure that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service, Tenant shall not, without Landlord's
prior written consent in each instance, connect any additional fixtures,
machinery, appliances or equipment to the Building electric distribution system
or make any alteration or addition to Tenant's machinery, appliances or
equipment, or the electric system of the Demised Premises
<PAGE> 11
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existing on the CommenC0ment Date other than lamps, typewriters, copiers,
computer terminals, copying machines, communications equipment such as
telephones, fax machines, appliances, and other small office machines that
consume comparable or less amounts of electricity. Should Landlord grant such
consent, all additional risers or other equipment required therefor shall be
provided by Landlord, and the cost thereof shall be paid by Tenant upon
Landlord's demand. As a condition to granting such consent, Landlord may require
Tenant to agree to an increase in the Fixed Rent by an amount which will reflect
the value to Tenant of the additional service to be furnished by Landlord, that
is, the potential additional electrical energy to be mad. available to Tenant
based upon the estimated additional capacity of such additional risers or other
equipment. If Landlord and Tenant cannot agree on the amount of such increase,
Tenant shall nevertheless pay the same as billed until such amount shall be
determined by an independent utility consultant to be selected by Landlord and
paid by Tenant. The determination of the consultant shall be binding upon the
parties. When the amount of such increase is so determined, the parties shall
execute an agreement supplementary hereto to reflect such increase in the amount
of the Fixed Rent stated in this Lease and in the amount set forth in Section
4.01, effective from the date such additional service is made available to
Tenant, but such increase shall be effective from such date even if such
supplementary agreement is not executed.
Section 4.03. If there shall be an increase in the space constituting the
Demised Premises, or if Tenant's failure to maintain its machinery and equipment
in good order and repair causes greater consumption of electrical current, or if
Tenant uses electricity on days or hours other than those specified in Section
4.01, or if Tenant adds any machinery, appliances or equipment requiring
additional 010ctrical current, the Fixed Rent herein reserved shall be increased
accordingly. The amount of such increase shall be billed by Landlord to Tenant,
effective as of the date of the increased usage. Such sum shall be due, and
shall be paid by Tenant, as additional rent hereunder at the time billed. If
Tenant disputes the amount of such increase, Tenant shall nevertheless pay the
same as billed, and the amount shall be determined by an independent utility
consultant to be selected by Landlord and paid by Tenant. The determination of
the consultant shall be binding upon the parties.
Section 4.04. Landlord reserves the right to discontinue furnishing
electric energy to Tenant in the Demised Premises at any time upon not less than
one hundred twenty (120) days prior written notice to Tenant provided that
Landlord shall have made such election as to the majority of all tenants
occupying the Building and further provided that electric service is available
directly from the public utility servicing the Building (Landlord hereby
agreeing, unless otherwise required by law, not to discontinue furnishing
electricity to Tenant until such time as
<PAGE> 12
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Tenant is able to obtain same directly from the public utility). If Landlord
exercises such right of termination, this Lease shall continue in full force and
effect and shall be unaffected thereby, except only that, from and after the
effective date of such termination, Landlord shall not be obligated to furnish
electric energy to Tenant and the Fixed Rent under this Lease shall be reduced
by the amount set forth in Section 4.01, plus or minus the amount of any change
pursuant to Sections 4.01, 4.02, 4.03 and 4.05. If Landlord so discontinues
furnishing electric energy to Tenant, Tenant shall arrange to obtain electric
energy directly from the public utility company furnishing electric service to
the Building. Such electric energy may be furnished to Tenant by means of the
then existing building system feeders, risers and wiring to the extent that the
same are available, suitable and safe for such purposes. All meters and
additional panel boards, feeders, risers, wiring and other conductors and
equipment which may be required to obtain electric energy directly from such
public utility company shall be installed and maintained by Tenant at its
expense.
Section 4.05. Tenant covenants and agrees that at no time will the
connected electrical load serving the Demised Premises exceed 5 watts per square
foot. Should Landlord consent to an increase in the connected electrical load,
as a condition to granting such consent, Landlord may require Tenant to agree to
an increase in the Pied Rent by an amount which will reflect the value to
Tenant of the additional connected electrical load. If Tenant disputes the
amount, Tenant shall nevertheless pay the same as billed, and the amount shall
be determined by an independent utility consultant to be selected by Landlord
and paid by Tenant. The determination of the consultant shall be binding upon
the parties.
Section 4.06. If any tax is imposed upon Landlord with respect to
electrical energy furnished as a service to Tenant by any Federal, State or
Municipal Authority, Tenant covenants and agrees that where permitted by law or
applicable regulations, Tenant's pro rata share of such taxes shall be
reimbursed by Tenant to Landlord.
Section 4.07. Landlord shall have the right to procure periodic surveys
made by an independent utility consultant selected by Landlord and if such
utility consultant determines that there has been (i) an increase in Tenant's
use of electrical current or (ii) the amount set forth in section 4.01 is
insufficient, then, the amount set forth in Section 4.01 shall be adjusted and
in addition to the other requirements and obligations imposed on Tenant in this
Article, Tenant shall pay the fees of the utility consultant making such survey.
The findings of such utility consultant shall be binding and conclusive upon the
parties.
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Section 4.08. Notwithstanding the aforesaid provisions of this Article,
if, pursuant to an action of the Public Service Commission of the State of New
York, or otherwise, submerging of electricity is permitted at the Building,
then Landlord shall have the option, at Landlord's sole cost and expense, of
installing submitters to measure Tenant's electricity consumption Upon
installation of the submitters, Tenant's electricity consumption and demand
shall be measured by said submitters, and Tenant agrees to purchase such
electricity from Landlord or Landlord's designated agent at Landlord's electric
rates, plus twelve (12%) percent thereof to reimburse Landlord for
administrative services in connection with supplying and billing such
electricity and two and one-half (2-1/2%) percent for line loss All such sums
shall be paid by Tenant to Landlord as additional rent hereunder If more than
one meter measures the electricity consumption and demand of Tenant in the
Building, the service rendered through each meter shall be aggregated and billed
in accordance with the above rate classification, unless Landlord shall elect
separate billing on a per-meter basis Landlord may at any time render bills for
Tenant's consumption and demand and Tenant shall pay the same within thirty (30)
days following the date the same are rendered If Landlord exercises such right
of suturing, this Lease shall continue in full force and effect and shall be
unaffected thereby, except only that, from and after the effective date of such
submerging, Landlord shall not be obligated to furnish electric energy to Tenant
and the Fixed Rent under this Lease shall be reduced by the amount set forth in
Section 4.01, plus or minus the amount of any change pursuant to Sections 4.01,
4.02, 4.03 and 4.05.
ARTICLE 5
USE
---
Section 5.01. Tenant shall use and occupy the Demised Premises for
administrative, executive and general business office purposes only and for no
other purposes.
Section 5 02 Tenant shall not suffer or permit the Demised Premises or
any part thereof to be used in any manner, or suffer or permit anything to be
done therein, or suffer or permit anything to be brought into or kept in the
Demised Premises which would in any way (i) violate any law or requirement of
public authorities, (ii) cause structural injury to the Building or any part
thereof, (iii) interfere with the normal operation of the heating,
air-conditioning, ventilating, plumbing or other mechanical or electrical
systems of the Building or the elevators installed therein, (iv) constitute a
public or private nuisance, or (v) alter the appearance of the exterior of the
Building or of any portion of the interior thereof other than the Demised
Premises.
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Section 5.03. Tenant shall not, without the prior written consent of
Landlord (which shall not be unreasonably withheld or delayed), allow a
"Servicing Company" (defined below) to install any telephone, data, information
or other communications equipment in the Demised Premises to service premises
occupied by persons other than Tenant and/or its affiliates. For example, the
Demised Premises may not be used as a so-called "switching" or "relay" station
serving third parties (that is, parties other than Tenant and its affiliates)
without such consent by Landlord. In granting such consent, Landlord may require
that the Servicing Company enter into a license agreement with Landlord
confirming that the Servicing Company shall have no independent rights in the
Demised Premises and that upon termination of this Lease, for whatever reason,
the Servicing Company will have no right to leave its equipment in the Demised
Premises. Landlord may make a reasonable charge to the Servicing Company for
allowing it to install its equipment in the Demised Premises. A "Servicing
Company" shall mean a person, firm, corporation or other entity other than
Tenant whose equipment services not only the Demised Premises, but other
premises or parties as well.
ARTICLE 6
REPAIRS. ALTERATIONS AND LIENS
------------------------------
Section 6.01. Tenant shall take good care of the Demised Premises
and the fixtures and appurtenances and equipment therein and, at its sole cost
and expense, make all repairs thereto as and when needed to preserve the
aforesaid 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 moving property, or resulting from any
air-conditioning unit or system, any short circuit, 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 by
Tenant, at its sole cost and expense, to the satisfaction of Landlord. If Tenant
fails to make such repairs, restorations or replacements, same may be made by
Landlord at the expense of Tenant and any costs therefor shall be collectible as
additional rent or otherwise, and shall be paid by Tenant within five (5) days
after rendition of a bill or statement therefor.
Section 6.02. Landlord shall, at its expense, make all repairs and
replacements, structural and otherwise, necessary in order to keep in good order
and repair the exterior of the Building and the public portions of the Building,
the need for which Landlord shall have knowledge (including the public halls
<PAGE> 15
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and stairways, plumbing, wiring and other Building equipment for the general
supply of water, heat, air-conditioning, gas and electricity) except repairs
hereinabove provided to be made by Tenant and repairs, the need for which Tenant
has not reported to Landlord.
Section 6.03. All repairs, restorations or replacements by either party
shall be of first-class quality and done in good and workmanlike manner. Tenant
shall, and shall include in all contracts, subcontracts and purchase orders, a
requirement that such contractors, subcontractors or materialism, as the case
may be, shall, cause all workers at the Demised Premises to work harmoniously
with each other and with Building personnel and in a manner which will not
disrupt access to or use of the common areas of the Building, cause
inconvenience to the other tenants in the Building or interfere with the conduct
of other tenants' business. Tenant agrees that should Tenant, its agents and/or
contractors, enter upon the Demised Premises for the purpose of performing any
work, the labor employed by Tenant or anyone performing such work, for or on
behalf of Tenant, shall always be harmonious and compatible with the labor
employed by Landlord or any contractors or subcontractors of Landlord. Should
such labor be unharmonious or incompatible, Landlord may require Tenant to
withdraw such labor fro" the Demised Premises. In the event Tenant or Tenant's
contractor shall enter upon the Demised Premises or any other part of the
Building, Tenant agrees to indemnify and save Landlord free and harmless, fro"
and against any and all claims whatsoever arising out of said entry or such
work. Tenant's agents and contractors and their employees shall comply with the
special rules, regulations and requirements of Building management with respect
to the performance and coordination of said agents, contractors and their
employees so as to avoid intrusion into the operation of the Building and to
avoid disturbing the quiet enjoyment of other tenants.
Section 6.04. Tenant shall not store or place any materials or other
obstructions in the lobby or other public portions of the Building, or on the
sidewalk adjacent to the Building.
Section 6.05. Tenant shall do no work and shall make no alterations,
decorations, installations, additions or improvements in or to the Demised
Premises, including, but not limited to, installation of a water cooler, an
air-conditioning or cooling system unit or part thereof, or other apparatus of
like or other nature without Landlord's prior written consent which consent
shall not be unreasonably withheld or delayed in the case of alterations,
decorations, installations, additions or improvements in the Demised Premises
which are non-structural in nature and do not materially, adversely affect the
structure, exterior or common areas of the Building or materially, adversely
affect the functioning of the heating, ventilating or airworthiness,
electrical, mechanical, plumbing or elevator systems of the Building or other
tenants' use thereof, and then
<PAGE> 16
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only by contractors or mechanics approved by Landlord. Such approval must be
obtained prior to any bidding for said work. 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 and in full compliance with all governmental bodies having
jurisdiction thereafter.Tenant's work, alterations, decorations, installations,
additions or improvements shall be completed free of all liens and encumbrances
and, as a condition precedent to Landlord's consent to the making by Tenant of
alterations, decorations, installations, additions or improvements to the
Demised Premises, Tenant shall obtain, and deliver to Landlord, at the earliest
opportunity permitted by applicable law, written and unconditional waivers of
mechanics' liens upon the real property in which the Demised Premises are
located, for all work, labor and services to be performed and materials to be
furnished by them in connection with such work, signed by all contractors,
subcontractors, materialism and laborers to become involved in such work. As a
condition to Landlord's permission to Tenant to make any of Tenant's
installations in the Demised Premises, Landlord may require that Tenant agree
with Landlord to fixing the Commencement Date of this Lease.
Landlord shall not be liable for any failure of the airconditioning and
ventilating equipment in the Demised Premises installed by Landlord caused by
any work, alterations, decorations, installations, additions or improvements by
Tenant, and Tenant shall correct any such condition causing such failure
promptly upon notice from Landlord of the need therefor. If Tenant shall fail to
correct same, Landlord may make such correction and charge Tenant for the cost
thereof. Such sum due Landlord shall be deemed additional rent and shall be paid
by Tenant promptly upon being billed therefor.
Section 6.06. Prior to co fencing any work pursuant to the provisions of
Section 6.05, Tenant shall furnish to Landlord:
(i) Copies of all governmental permits and authorizations which
may be required in connection with such work.
(ii) A certificate evidencing that Tenant (or Tenant's
contractors) has (have) procured workers' compensation insurance covering all
persons employed in connection with the work who might assert claims for death
or bodily injury against Landlord, "Overlapped" (as hereinafter defined),
Tenant or the Building.
(iii) Such additional personal injury and property damage insurance
(over and above the insurance required to be carried by Tenant pursuant to the
provisions of Article 9) as Landlord may reasonably require because of the
nature of the work to be performed by Tenant.
<PAGE> 17
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Section 6.07. All work, alterations, decorations, installations,
additions or improvements upon the Demised Premises made by either party,
including all paneling, decorations, partitions, railings, mezzanine floors,
galleries and the like, affixed to the realty or for which Tenant shall have
received a credit or contribution shall, unless Landlord elects otherwise (which
election shall be made by giving a notice pursuant to the provisions of Article
30 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 the Demised Premises as
a part thereof at the end of the Term or renewal or extension term, as the case
may be In the event that Landlord shall elect otherwise, then such alterations,
decorations, installations, additions or improvements made by Tenant upon the
Demised Premises as Landlord shall select shall be removed by Tenant, and Tenant
shall restore the Demised Premises to its original condition, at its own cost
and expense, at or prior to the expiration of the Term.
Where furnished by or at the expense of Tenant (except where same
is a replacement of an item theretofore furnished and paid for by Landlord or
against which Tenant has received a credit or contribution from Landlord), all
movable property, furniture, furnishings and trade fixtures other than those
affixed to the realty so that they cannot be removed without material damage
shall remain the property of Tenant and shall be removed from the Demised
Premises on or before the Expiration Date In the event of damage to the Demised
Premises or the Building by reason of such removal, Tenant shall restore the
same to good order and condition (normal wear and tsar excepted) If Tenant
should desire to leave any part of such property in the Demised Premises upon
the expiration of the Term, it shall so notify Landlord in writing not less than
sixty (60) days prior to the expiration of the Term, specifying the items of
property which it desires to so leave If within thirty (30) days after the
service of such notice Landlord shall request Tenant to remove any of the said
property, Tenant shall, at its expense, at or before the expiration of the Term,
remove said property and, in case of damage to the Demised Premises or the
Building by reason of such removal, restore the Demised Premises to good order
and condition (normal wear and tear excepted).
Section 6.08. Landlord shall not be responsible for supervision and/or
coordination in respect to Tenant's activities pursuant to this Lease Landlord's
managing agent shall perform such supervision and coordination and, with respect
to any work, alteration, decoration, addition or improvement costing more than
$15,000, Tenant agrees to pay such managing agent, promptly upon being billed
therefor, a sun equal to ten (10%) percent of the cost of such work for indirect
costs, field supervision and coordination in connection therewith Tenant agrees
to keep records of Tenant's work, alterations, decorations, additions and
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improvements costing in excess of 515,000 and of the cost thereof. Tenant agrees
to furnish to Landlord's managing agent copies of such records certified as
correct by Tenant within forty-five (45) days after Landlord's managing agent's
request therefor.
Section 6.09. Tenant will not do any act or suffer any act to be done
which will in any way encumber the title of Landlord or Tenant in and to the
Demised Premises or the Building or the Land, nor will the interest or estate of
Landlord or Tenant in the Demised Premises or the Building or the Land be in any
way subject to any claim by way of lien or encumbrance, whether by operation of
law or by virtue of any express or implied contract by Tenant.
Section 6.10. Tenant will not suffer or permit any liens to stand against
the Demised Premises, the Building or the Land or any part thereof, by reason of
any work, labor, services or materials done for, or supplied to, or claimed to
have been done for, or supplied to, Tenant, or anyone holding the Demised
Premises or any part thereof through or under Tenant. If any such lien is at any
time filed against the Demised Premises or the Building or the Land, Tenant will
cause the saw to be discharged of record within thirty (30) days after the date
of filing of the Sara, by either payment, deposit or bonding (and the failure of
Tenant to do so shall be a material default hereunder entitling Landlord to give
a notice to Tenant pursuant to the provisions of Section 17.01(1) hereof). In
addition to any other right or remedy of Landlord, Landlord may, but will not be
obligated to, procure the discharge of such lien either by paying the amount
claimed to be due by deposit in court or bonding, and/or Landlord will be
entitled, if Landlord so elects, to compel the prosecution of an action for the
foreclosure of such lien by the listener and to pay the amount of the judgment,
if any, in favor of the listener with interest computed at the Interest Rate,
costs and allowances. Any amount paid or deposited by Landlord for any of the
aforesaid purposes, and all legal and other expenses of Landlord, including,
without limitation, attorneys' fees incurred in defending such action or in
procuring the discharge of such lien, with all necessary disbursements in
connection therewith, will become due and payable on the date of payment or
deposit, as additional rent.
Section 6.11. Nothing in this Lease will be deemed to be, or construed in
any way as constituting, the consent or request of Landlord, express or implied
by inference or otherwise, to any person, firm or corporation for the
performance of any labor or the furnishing of any materials for any
construction, rebuilding, alteration or repair of or to the Demised Premises,
the Building or the Land or any part thereof, nor as giving Tenant any right,
power or authority to contract for or permit the rendering of any services or
the furnishing of any materials which might in any
<PAGE> 19
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way give rise to the right to file any lien against Landlord's interest in the
Demised Premises, the Building or the Land.
ARTICLE 7
FLOOR LOAD. NOISE. WINDOW CLEANING
----------------------------------
Section 7.01. Tenant shall not place a load upon any floor of the Demised
Premises which exceeds the load per square foot which such floor was designed to
carry and which is allowed by law.
Section 7.02. Business machines and mechanical equipment belonging to
Tenant which cause noise or vibration that may be transmitted to the structure
of the Building or the Demised Premises to such a degree as to be objectionable
to Landlord shall be placed and maintained by the party owning the machines or
equipment, at such party's expense, in settings of cork, rubber or spring type
vibration eliminators sufficient to eliminate noise or vibration.
Section 7.03. 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 assenting jurisdiction.
ARTICLE 8
LAWS. ORDINANCES. REQUIREMENTS OF PUBLIC AUTHORITIES
----------------------------------------------------
Section 8.01. Tenant shall, at its expense, comply with all laws, orders,
ordinances and regulations or any direction made pursuant to any law, ordinance,
rule, regulation or order of any public of rice or officer which or who shall,
with respect to the particular use or manner of use of the Demised Premises (as
opposed to office us- in general) or to any abatement of nuisance, impose any
violation, order or duty upon Landlord or Tenant arising from Tenant's
particular use or manner of use of the Demised Premises (as opposed to office
use in general), or as a result of any installations made therein (whether or
not in compliance with the work article hereof) by Tenant or at Tenant's
request, or required by reason of a breach of any of Tenant's covenants or
agreements hereunder.
Section 8.02. If Tenant should desire to contest the validity of any such
law, ordinance, rule, regulation or order with which Tenant is obligated to
comply, it may, at its expense, carry on such contest and non-compliance by it
during such contest (so long as Tenant proceeds with due diligence) shall not
constitute a breach of this Lease provided that it shall, to the satisfaction of
Landlord, indemnify and hold Landlord harmless from and against all liability
for any loss, damages and expenses
<PAGE> 20
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(including, without limitation, attorneys' fees) which might result from or be
incurred in connection with such contest or non-compliance. Notwithstanding the
foregoing, non-compliance as aforesaid shall not commence or continue if it
might subject Landlord to any fine or penalty or to prosecution for a crime, or
if it would constitute a default by Landlord under any mortgage or lease
affecting the Building and/or the Land.
Section 8.03. If Tenant receives written notice of any violation of
law, ordinance, rule, regulation or order applicable to the Demised Premises,
it shall give prompt notice thereof to Landlord.
Section 8.04. Except as aforesaid, Landlord shall, at its expense,
comply with or cause to be complied with, all laws, ordinances, rules,
regulations and orders of federal, state, county and municipal authorities and
any direction made pursuant to law of any public officer or officers which
shall, with respect to the public portions of the Building, impose any
violation, order or duty upon Landlord or Tenant and with respect to which
Tenant is not obligated by Section 8.01 to comply. Except as aforesaid,
Landlord shall further, at its expense, comply with or cause to be complied
with, all laws, ordinances, rules, regulations and orders of federal, state,
county and municipal authorities and any direction made pursuant to law of any
public officer or officers which affect Tenant's use or enjoyment of, or access
to, the Demised Premises and with respect to which Tenant is not obligated by
Section 8.01 to comply. Landlord may, at its expense, contest the validity of
any such law, ordinance, rule, order or regulation.
ARTICLE 9
INSURANCE, PROPERTY LOSS, REIMBURSEMENT
Section 9.01. Tenant shall not do or permit to be done any act or
thing upon the Demised Premises which will invalidate or be in conflict with
the Certificate of Occupancy or the terms of the New York State standard form
of fire, boiler, sprinkler, water damage or other insurance policies covering
the Building and the fixtures and property therein and Tenant shall, at its own
expense, comply with all rules, orders, regulations or requirements of the New
York Board of Fire Underwriters or any other similar body having jurisdiction
and shall not knowingly do or permit anything to be done in or upon the Demised
Premises in a manner which increases the rate of fire insurance upon the
Building or on any property or equipment located therein over the rate in
effect at the commencement of the Term of this Lease.
Section 9.02. If, by reason of any failure of Tenant to comply with
the provisions of this Lease, the rate of fire, boiler, sprinkler, water damage
or other insurance (with extended coverage) on the Building or on the property
and equipment of
<PAGE> 21
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Landlord or any other tenant or subtenant in the Building shall be higher than
it otherwise would be, Tenant shall reimburse Landlord and the other tenants in
the Building for that part of the fire, boiler, sprinkler, water damage or other
insurance premiums thereafter paid by Landlord or by the other tenants in the
Building which shall have been charged because of such failure by Tenant, and
Tenant shall make the reimbursement on the first day of the month following such
payment by Landlord or such other tenants. In any action or proceeding wherein
Landlord and remnant are parties, a schedule or Make up" of any insurance rate
for the Building or Demised Premises issued by the New York Fire Insurance
Exchange, or other body establishing fire insurance rates for the Building,
shall be conclusive evidence of the facts therein stated and of the several
items and charges in the insurance rates then applicable to the Building or
Demised Premises.
Section 9.03. Tenant, at Tenant's own cost and expense, shall maintain
insurance protecting and indemnifying Landlord and Tenant (and at Landlord's
request, the landlord under any ground or underlying lease [herein
"Overlandlord"], as well as the holder of any mortgage affecting the Land, the
Building or both) against any and all claims for injury or damage to persons or
property for the loss of life or of property occurring upon, in or about the
Demised Premises and the public portions of The Building used by Tenant, its
employees, agents, contractors, customers and invitees arising out of the
negligent act or omission of any of the foregoing, such insurance to afford
minimum protection during the Term of this Lease of not less than a single
combined limit of S3,000,000 in respect of property damage and bodily injury or
death to any one person or in respect of any one occurrence or accident.
Landlord may from time to time require that the amount of liability insurance to
be maintained by Tenant under this Article be increased so that Landlord shall
be adequately protected giving due consideration to all relevant circumstances
and conditions.
All such insurance shall be effected under valid and enforceable policies
(which may cover the Demised Premises and other locations), shall be issued by
insurers of recognized responsibility and shall contain a provision whereby the
insurer agrees not to cancel the insurance without ten (10) days' prior written
notice to Landlord.
On or before the Commencement Date of this Lease, Tenant shall furnish
Landlord with a certificate evidencing the aforesaid insurance coverage and
renewal certificates shall be furnished to Landlord at least thirty (30) days
prior to the expiration date of each policy for which a certificate was
theretofore required to be furnished.
Section 9.04. Tenant shall give Landlord immediate notice in case of a
fire or accident in the Demised Premises or the
<PAGE> 22
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Building, or of defects therein or in any fixtures or equipment promptly after
Tenant becomes aware of the same.
Section 9.05. Tenant shall indemnify and hold Landlord harmless from and
against all liabilities, suits, claims, demands and actions, and costs and
expenses of any kind or nature, due to or arising out Of any injury to person or
property, including death resulting at any time therefrom, occurring in or about
the Demised Premises. To the extent of any valid and collectible insurance
furnished by Tenant for the protection of Landlord, Tenant's obligation to
indemnify and hold Landlord harmless against liability which is covered by such
insurance shall be deemed, to the extent thereof, to be satisfied.
Section 9.06. Landlord and Tenant shall each endeavor to secure an
appropriate clause in, or an endorsement upon, each fire or extended coverage or
rent insurance policy obtained by it and covering the Building, the Demised
Premises or the personal property, fixtures and equipment located therein or
thereon, pursuant to which the respective insurance companies waive -subrogation
or permit the insured, prior to any loss, to agree with a third party to waive
any claim it might have against said third party. The parties hereto shall give
prompt notice to the other in the event such clause is or becomes unavailable.
The waiver of subrogation or permission for waiver of any claim shall extend to
the agents of each party and the employees of each party and its respective
agents and, in the case of Tenant, shall also extend to all other persons and
entities occupying or using the Demised Premises. If and to the extent that such
waiver or permission can be obtained only upon payment of an additional charge,
then the party benefiting from the waiver or permission shall pay such charge
upon written demand, or shall be deemed to have agreed that the party obtaining
the insurance coverage in question shall be free of any further obligations
under the provisions hereof relating to such waiver or permission.
Subject to the foregoing provisions of this Section 9.06, each party
hereby releases the other with respect to any claim (including a claim for
negligence) which it might otherwise have against the other party for loss,
damages or destruction with respect to its property by fire or other casualty
(including rental value or business interest, as the case may be) occurring
during the Term of this Lease.
Section 9.07. Tenant agrees to look solely to Landlord's estate and
interest in the Land and Building, or the lease of the Building, or of the Land
and Building, and the Demised Premises (or the unencumbered proceeds from a sale
thereof), for the satisfaction of any right or remedy of Tenant for the
collection of a judgment (or other judicial process) requiring the payment of
money by Landlord, in the event of any liability by Landlord, and no other
property or assets of Landlord shall be subject to levy, execution, attachment,
or other enforcement procedure for
<PAGE> 23
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the satisfaction of Tenant's remedies under or with respect to this Lease, the
relationship Of Landlord and Tenant hereunder, or Tenant's use and occupancy of
the Demised Premises, or any other liability of Landlord to Tenant.
ARTICLE 10
DAMAGE OR DESTRUCTION BY FIRE OR OTHER CAUSE
--------------------------------------------
Section 10.01. If the Building or the Do teed Premises shall be partially
or totally damaged or destroyed by fire or other cause, then whether or not the
damage or destruction shall have resulted from the fault or neglect of Tenant,
or its employees, agents or visitors (and if this Lease shall not have been
terminated as in this Article 10 hereinafter provided), Landlord shall to the
extent permitted by available insurance proceeds, repair the damage and restore
and rebuild the Building and/or the Demised Premises (without limiting the
rights of any insurance company, subrogated to Landlord's rights hereunder
pursuant to the terms of any insurance policy as to which Landlord shall have
been unable to obtain a waiver of subrogation in accordance with Section 9.06
hereof to seek recovery from Tenant, and any rights of Landlord under any other
provisions of this Lease or at law or in equity), with reasonable dispatch after
notice to it of the damage or destruction; provided, however, that Landlord
shall not be required to repair or replace any of Tenant's property.
Notwithstanding anything contained herein to the contrary, in no event shall
Tenant be relieved of liability or responsibility for damage or destruction
resulting from the fault or neglect of Tenant if the insurance policies carried
by Landlord on the Building do not contain a waiver of the right of subrogation.
Section 10.02. If the Building or the Demised Premises shall be partially
destroyed by fire or other cause, the rents payable hereunder shall be abated to
the extent that the Demised Premises shall have been rendered untenantabl0 and
for the period from the date of such damage or destruction to the date the
damage shall be repaired or restored. If the Demised Premises or a major part
thereof shall be totally (which shall be deemed to include substantially
completely) untenable on account of fire or other cause, the rent shall abate
as of the date of the damage or destruction and until Landlord shall repair,
restore and rebuild the Building and the Demised Premises, provided, however,
that should Tenant occupy or reoccurs a portion of the Demised Premises during
the period the Demised Premises are made completely untenantable, rents
allocable to such portion shall be payable by Tenant from the date of such
occupancy.
Section 10.03. If the Building or Demised Premises shall be totally
damaged or destroyed by fire or other cause, or if the Building shall be so
damaged or destroyed by fire or other cause that Landlord shall decide not to
restore or rebuild it, then in either such case Landlord may terminate this
Lease by giving
<PAGE> 24
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Tenant notice to such effect within sixty (60) days after the date of the
casualty. In case of any substantial damage or destruction mentioned in this
Article 10 which prevents Tenant from operating its business in the Demised
Premises for more than fifteen (15) Business Days, Tenant may terminate this
Lease by notice to Landlord given within thirty (30) days of the occurrence of
such damage.
Section 10.04. No damages, compensation or claim shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the Building
pursuant to this Article 10. Landlord shall endeavor to effect such repair or
restoration promptly and in such manner as not unreasonably to interfere with
Tenant's business, provided no additional costs, for labor at overtime or
premium rates, or otherwise, are incurred thereby.
Section 10.05. Notwithstanding any of the foregoing provisions of this
Article 10, if Landlord or Overlapped or the holder of any superior mortgage
shall be unable to collect all of the insurance proceeds (including rent
insurance proceeds) applicable to damage or destruction of the Demised Premises
or the Building by fire or other cause by reason of some action or inaction on
the part of Tenant or any of its employees, agents or contractors, then, without
prejudice to any other remedies which may be available against Tenant, there
shall be no abatement of Tenant's rent until the total amount of such rent not
abated which would otherwise have been abated equals the amount of uncollected
insurance proceeds.
Section 10.06. Landlord will not carry separate insurance of any kind on
Tenant's property and Landlord shall not be obligated to repair any damage
thereto or replace the same.
Section 10.07. In the event of the termination of this Lease pursuant to
any of the provisions of this Article 10, this Lease and the Term and estate
hereby granted shall expire as of the date of such termination with the same
effect as if that were the Expiration Date, and the Fixed Rent and additional
rent payable hereunder shall be apportioned as of such date.
section 10.08. The provisions of this Article 10 shall be considered an
express agreement governing any case of damage or destruction of the Demised
Premises by fire or other casualty, and Section 227 of the Real Property Law of
the state of New York providing for a contingency in the absence of an express
agreement, and any other law of like import, now or hereafter in force, shall
have no application to the Demised Premises and this Lease.
<PAGE> 25
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ARTICLE 11
ASSIGNMENT. SUBLETTING. MORTGAGING
----------------------------------
Section 11.01. (a) Tenant will not by operation of law or otherwise,
assign, mortgage or otherwise encumber this Lease, nor the estate and Term
hereby granted, nor sublet or permit the Demised Premises or any part thereof to
be used by others, without Landlord's prior written consent in each instance.
The consent by Landlord to any assignment or subletting shall not in any manner
be construed to relieve Tenant from obtaining Landlord's express written consent
to any other or further assignment or subletting.
If Tenant desires to assign or sublet all or any portion of the Demised
Premises, Tenant agrees to use as its exclusive rental agent for such purpose
the then designated leasing agent of the Building and to notify such leasing
agent of its desire to assign this Lease or sublet the Demised Premises. Upon
obtaining a proposed assignee or subleases, upon terms satisfactory to Tenant,
Tenant shall submit to Landlord in writing (1) the name of the proposed assignee
or subtenant; (2) the terms and conditions of the proposed assignment or
subletting; (3) the nature and character of the business of the proposed
assignee or subtenant and any other information reasonably requested by
Landlord.
Upon receipt of the foregoing submission from Tenant Landlord shall have
the following options to be exercised within thirty (30) business days from the
date of such receipt:
1. If an assignment shall be proposed or if a proposed subletting
shall be for all or substantially all of the Demised Premises, Landlord shall
have the option to terminate this Lease effective as of the date proposed by
Tenant for such assignment or subletting.
2. If a proposed sublease shall be for less than all or
substantially all of the Demised Premises or if it shall be for less than the
balance of the Term of this Lease, Landlord shall have the option to terminate
this Lease as to the portion of the Demised Premises proposed to be sublet for
such portion of the Term as is included in such proposed sublease, effective as
of the effective date of such proposed sublease. In the event of the exercise of
such option under this subparagraph 2, the rent and all other charges payable
hereunder shall be equitably apportioned, and Tenant shall be responsible for
the cost of constructing any necessary demising walls.
3. Landlord shall have the option to require Tenant to execute an
assignment or sublease to Landlord, or to any party designated by Landlord, upon
the same terms and conditions as contemplated with the proposed assignee or
subtenant, except that (A) Landlord (or Landlord's designee) as assignee or
sublease
<PAGE> 26
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shall have an express unlimited right to further assign or sublease to others
and to make any alterations required in connection therewith, and (B) the rent
or consideration payable under such assignment or sublease to Landlord (or
Landlord's designee) shall be the lower of (i) the rental payable by Tenant to
Landlord under this Lease, or (ii) the rental payable by the proposed assignee
or subtenant pursuant to the assignment or sublease originally proposed by
Tenant.
(b) If Landlord shall not exercise any of its foregoing options within
the time set forth above, provided Tenant shall not then be in default
hereunder, Landlord's consent to any such proposed assignment or subletting
shall not be "unreasonably" withheld or delayed, as described in paragraph (c)
of this Section 11. 01.
If Landlord shall not exercise any of the options described in paragraph
(a) above and Tenant shall thereupon assign this Lease or sublet all or any
portion of the Demised Premises, then and in that event Tenant shall pay to
Landlord as additional rent the difference, if any, between the Fixed Rent plus
additional rent allocable to that part of the Demised Premises affected by such
assignment or sublease pursuant to the provisions of this Lease, and the Fixed
Rent and additional rent payable by the assignee or subleases to Tenant. Such
additional rent payments shall be made monthly within five (5) days after
receipt of the same by Tenant. Any other cash or other consideration payable to
Tenant in connection with such assignment or sublease or the sale of Tenant's
property in connection therewith shall be similarly paid over to Landlord when
and as received by Tenant.
If Tenant fails to consummate any proposed assignment or subletting to
which Landlord shall have consented within sixty (60) days after granting such
consent, paragraph (a) shall again apply to said proposed assignment or
subletting.
No option exercised by Landlord pursuant to the above provisions of
paragraph (a), and no assignment or sublease made to Landlord under the above
provisions of paragraph (a), shall be binding upon any purchaser of any ground
or underlying lease who acquires such ground or underlying lease by reason of
the foreclosure of any mortgage to which this Lease is subordinate, nor upon any
assignee of any ground or underlying lease who takes such assignment in lieu of
such foreclosure, it being understood, however, that such purchaser or assignee
may, at its option, elect to enforce such option, assignment or sublease.
(c) In determining reasonableness with respect to its consent to a
proposed assignment or sublease by Tenant, Landlord may take into consideration
all relevant factors surrounding the proposed assignment or sublease, including,
without limitation, the following:
<PAGE> 27
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(i) the financial stability and business reputation of the
proposed assignee or subtenant;
(ii) the nature of the business and the proposed use of the
Demised Premises by the proposed assignee or subtenant in relation to the
majority of other tenants in the Building;
(iii) that the proposed assignee or subtenant shall not be a tenant
of other space in the Building or a party which has dealt with Landlord or
Landlord's agent (directly or through a broker) with respect to space in the
Building during the six (6) months immediately preceding Tenant's request for
Landlord's consent, provided Landlord has space in the Building for such
proposed assignee or subtenant;
(iv) restrictions contained in leases of other tenants of the
Building;
(v) the effect that the proposed assignee's or subtenant's
occupancy or use of the Demised Premises would have upon the operation and
maintenance of the Building and Landlord's investment therein;
(vi) that not more than one entity shall occupy the Demised
Premises at any time.
Section 11.02. If this Lease shall be assigned, or if the Demised
Premises or any part thereof be sublet or occupied by any person or persons
other than Tenant, Landlord may after default by Tenant, c0110ct rent from the
assignee, subtenant or occupant and apply the net amount collected to the rent
herein reserved, but no such assignment, subletting, occupancy or collection of
rent shall be deemed a waiver of the covenants in this Article, nor shall it be
deemed acceptance of the assignee, subtenant or occupant as a tenant, or a
release of Tenant from the full performance by Tenant of all the terms,
conditions and covenants of this Lease.
Section 11.03. Each assignee or transferee shall assume and be deemed to
have assumed this Lease and shall be and remain liable jointly and severally
with Tenant for the payment of the rent, additional rent and adjustments of
rent, and for the due performance of all the terms, covenants, conditions and
agreements herein contained on Tenant's part to be performed for the Term of
this Lease. No assignment shall be binding on Landlord unless such assignee or
Tenant shall deliver to Landlord a duplicate original of the instrument of
assignment which contains a covenant of assumption by the assignee of all of the
obligations aforesaid and shall obtain from Landlord the aforesaid written
consent prior thereto.
Section 11.04. For the purposes of this Lease, any sale, transfer or
assignment of any of the stock of a corporate Tenant
<PAGE> 28
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or any transfer in the control of Tenant by operation of law or otherwise
shall be deemed an assignment.
Section 11.05. The listing of any name other than that of Tenant, whether
on the doors of the Demised Premises, on the Building directory or otherwise,
shall not operate to vest any right or interest in this Lease or the Demised
Premises. It is expressly understood that any such listing is a privilege
extended by Landlord that is revocable at will by written notice to Tenant.
Section 11.06. Tenant shall reimburse Landlord for any costs incurred by
Landlord to review the requested consent provided in Article 11, including
attorneys' fees.
Section 11.07. If Landlord shall recover or come into possession of the
Demised Premises before the Expiration Date, Landlord shall have the right to
take over any sublease made by Tenant and to succeed to all rights of Tenant
thereunder, Tenant hereby assigning (effective as of the date of Landlord's
succession of Tenant's estate in the Demised Premises) such subleases as
Landlord may elect to take over. Every subletting hereunder shall be subject to
the condition that, from and after the termination of this Lease or re-entry by
Landlord hereunder or other succession by Landlord to Tenant's estate in the
Demised Premises, the subtenant under such sublease shall waive any right to
surrender possession or to terminate the sublease and, at Landlord's election,
shall be bound to Landlord for the balance of the term thereof and shall
attorney to and recognize Landlord, as its landlord, under all of the then
executory terms of such sublease, except that Landlord shall not be (a) liable
for any previous act, omission or negligence of Tenant under such sublease, (b)
subject to any counterclaim, defense or offset theretofore accruing to such
subtenant against Tenant, (c) bound by any previous modification or amendment of
such sublease made without Landlord's consent or by any previous prepayment of
more than one month's rent and additional rent unless paid as provided in the
sublease, or (d) obligated to perform any repairs or other work in the subleased
space or the Building beyond Landlord's obligations under this Lease, and each
subtenant shall execute and deliver such instruments as Landlord may reasonably
request to evidence and confirm such attainment.
Section 11.08. Notwithstanding anything to the contrary elsewhere
contained herein (including Section ll.01 (a) hereof), provided that Tenant
shall not be in default in any of the terms of this Lease beyond notice and the
expiration of any applicable grace period, Tenant may, without Landlord's
consent but upon not less than ten (10) days' prior written notice to Landlord,
sublet to any corporations or other business entities which control, are
controlled by, or are under common control with Tenant or any principal officer
and/or director or trustee of Tenant (herein referred to as a "Related Entity")
all or part of the Demised
<PAGE> 29
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Premises or permit any Related Entity to occupy the same for any of the purposes
permitted to Tenant, subject however to compliance with Tenant's obligations
under this Lease. Such subletting or occupancy shall not be deemed to vest in
any such Related Entity any right or interest in this Lease nor shall such
subletting or occupancy relieve, release, impair or discharge any of Tenant's
obligations hereunder. Tenant shall deliver to Landlord a copy of any such
sublease or occupancy agreement for all or any portion of the Demised Premises.
ARTICLE 12
NO LIABILITY ON LANDLORD
------------------------
Section 12.01. 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 plaster, steam, gas,
electricity, water, rain or snow, leaks from any part of the Building or from
the pipes, appliances or plumbing works or from the roof, street or sub-surface
or from any other place or by dampness or by any other cause of whatsoever
nature, 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 the 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. If at any time any windows of the Demised
Premises are temporarily or permanently closed, darkened or bricked up for any
reason whatsoever including but not limited to Landlord's own acts, Landlord
shall not be liable for any damage Tenant may sustain thereby, and Tenant shall
not be entitled to any compensation therefor nor abatement of rent, nor shall
the same release Tenant from its obligations hereunder nor constitute an
eviction.
ARTICLE 13
MOVING OF HEAVY EQUIPMENT
-------------------------
Section 13.01. Tenant shall not move any safe, heavy equipment or bulky
matter in or out of the Building without Landlord's written consent, which
consent Landlord agrees not to unreasonably withhold or delay. If the movement
of such items requires special handling, Tenant agrees to employ only persons
holding a Master Rigger's License to do said work and all such work shall be
done in full compliance with the Administrative Code of the City of New York and
other municipal requirements. All such movements shall be made during hours
which will least interfere with the normal operations of the Building, and all
<PAGE> 30
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damage caused by such movement shall be promptly repaired by Tenant at Tenant's
expense.
ARTICLE 14
CONDEMNATION
------------
Section 14.01. In the event that the whole of the Demised Premises or
access thereto shall be lawfully condemned or taken in any manner for any public
or quasi-public use, this Lease and the Term and estate hereby granted shall
forthwith cease and terminate as of the date of vesting of title. In the event
that only a part of the Demised Premises shall be so condemned or taken, then,
effective as of the date of vesting of title, the rent hereunder for such part
shall be abated. In the event that only a part of the Building shall be so
condemned or taken, then (a) if substantial structural alteration or
reconstruction of the Building shall in the reasonable opinion of Landlord be
necessary or appropriate as a result of such condemnation or taking (whether or
not the Demised Premises be affected), Landlord may, at its option, terminate
this Lease and the Term and estate hereby granted as of the date of such vesting
of title by notifying Tenant in writing of such termination within sixty (60)
days following the date on which Landlord shall have received notice of vesting
of title, or (b) if Landlord does not elect to terminate this Lease, as
aforesaid, this Lease shall be and remain unaffected by such condemnation or
taking, except that the Fixed Rent and additional rent shall be abated to the
extent, if any, heretofore provided in this Article 14. In the event that only
a part of the Demised Premises shall be so condemned or taken and this Lease and
the Term and estate hereby granted are not terminated as heretofore provided,
Landlord will, at its expense, restore with reasonable diligence the remaining
structural portions of the Demised Premises as nearly as practicable to the same
condition as it was prior to such condemnation or taking.
In the event of termination in any of the cases hereinabove provided in
this Article 14, this Lease and the Tern and estate hereby granted shall expire
as of the date of such termination with the same effect as if that were the date
heretofore set for the expiration of the Term of this Lease, and the rent
hereunder shall be apportioned as of such date.
In the event of any condemnation or taking hereinabove mentioned of all
or a part of the Building, Landlord shall be entitled to receive the entire
award in the condemnation proceeding, including any award made for the value of
the estate vested by this Lease in Tenant, and Tenant hereby expressly assigns
to Landlord any and all right, title and interest of Tenant now or hereafter
arising in or to any such award or any part thereof, and Tenant shall be
entitled to receive no part of such award.
<PAGE> 31
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ARTICLE 15
ENTRY. RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING
------------------------------------------------------
Section 15.01. Tenant shall permit Landlord to erect, use and maintain
pipes and conduits in and through the Demised Premises. All such pipes and
conduits shall either be concealed above the suspended ceiling area, or within
the demising walls or installed in the service columns, or shall be installed
along the walls of the Demised Premises and appropriately enclosed, where
feasible. In the event the construction deprives the Tenant of the use of a
material or substantial portion of the usable area of the Demised Premises
(other than on a temporary basis), the Tenant shall be entitled to an pro rata
abatement of rent for the space so permanently taken. Landlord or its agents or
designees shall have the right, but only upon reasonable notice (except in
emergencies, in which event no notice shall be required) given to Tenant or any
authorized employee of Tenant at the Demised Premises, to enter the Demised
Premises at reasonable times during business hours, for the purpose of making
such repairs of alterations as shall be required or as Landlord shall have the
right to make by the provisions of this Lease. Landlord shall be allowed to take
all material into and upon the Demised Premises that may be required for the
repairs and alterations above mentioned without the same constituting an
eviction of Tenant in whole or in part, and the rent reserved hereunder shall in
no wise abate, except as otherwise provided in this Lease, while said repairs or
alterations are being made, by reason of loss or interruption of the business of
Tenant because of the prosecution of any such work, or otherwise. Landlord
agrees to do any work pursuant to this Article in such a manner so as not to
unreasonably interfere with Tenant's business, provided no additional costs, for
labor at overtime or premium rates, or otherwise, are incurred thereby.
Section 15.02. During the twelve (12) months prior to the expiration of
the Term of this Lease, Landlord may exhibit the Demised Premises to prospective
tenants. Landlord shall also have the right to enter the Demised Premises for
the purpose of inspecting the same or exhibiting the same to prospective
purchasers or lessees of the entire Building or to prospective mortgagees of the
property of which the Demised Premises forms a part. The holders of any mortgage
of Landlord's interest in the property, or such holders' agents or designees,
shall also have such right of inspection for itself and for any prospective
assignees of any such mortgagees.
Section 15.03. Landlord shall have the right at any time without thereby
creating an actual or constructive eviction or incurring liability to Tenant
therefor, to change the arrangement or location of such of the following as are
not contained within the Demised Premises or any part thereof: entrances,
<PAGE> 32
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passageways, elevators, doors and doorways, corridors, stairs, toilets and other
like public service portions of the Building.
ARTICLE 16
BANKRUPTCY
----------
Section 16.01. (a) Anything elsewhere in this Lease to the contrary
notwithstanding, this Lease may be cancelled by Landlord by the sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (i) Tenant shall (A) have applied for or
consented to the appointment of a receiver, trustee, liquidator, or other
custodian of Tenant or any of its properties or assets, (B) be unable to pay its
debts generally as they become due or shall have taken any other action which
could result in it becoming the subject of an insolvency or bankruptcy
proceeding, (C) have made a general assignment for the benefit of creditors, (D)
have commenced a voluntary case for relief as a debtor under the United States
Bankruptcy Code or filed a petition to take -advantage of any bankruptcy,
reorganization, insolvency, readjustment of debts, dissolution or liquidation
law or statute or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law, or (E) be adjudicated a
bankrupt or insolvent; or (ii) Without the acquiescence or consent of Tenant an
order, judgment or decree shall have been entered by any court of competent
jurisdiction approving as properly filed a petition seeking relief under the
United States Bankruptcy Code or any bankruptcy, reorganization, insolvency,
readjustment of debts, dissolution or liquidation law or statute with respect to
Tenant or appointing a receiver, trustee, liquidator or other custodian of all
or a substantial part of its properties or assets, and such order, judgment or
decree shall have continued unstayed and in effect for any period of not less
than sixty (60) days. Neither Tenant, nor any person claiming through or under
Tenant or by reason of any statute or order of court, shall thereafter be
entitled to possession of the Demised Premises, but shall forthwith quit and
surrender the Demised Premises. If this Lease shall be assigned in accordance
with its terms, the provisions of this Article shall be applicable only to the
party then owning Tenant's interest in this Lease.
(b) It is stipulated and agreed that in the event of the
termination of this Lease pursuant to paragraph (a) 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
<PAGE> 33
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and reasonable rental value of the Demised Premises for the period for which
such installment was payable shall be discounted to the date of termination at
the rate of four percent (4%) per annum. If the Demised Premises or any part
thereof be re-let by Landlord for the unexpired Term of this Lease, or any part
thereof, before the 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 evidence as to the fair and reasonable rental value for the
part or the whole of the Demised 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 in
effect at the time when, and governing the proceedings in which, such damages
are to be approved, whether or not such amount be greater, equal to, or less
than the amount of the difference referred to above.
ARTICLE 17
DEFAULTS AND REMEDIES AND WAIVER OF REDEMPTION
----------------------------------------------
Section 17.01. (1) If (A) Tenant defaults in fulfilling any of the
covenants of this Lease, with respect to the covenants for the payment of Fixed
Rent or additional rent, and if such default shall continue for seven (7) days
after Landlord shall have given to Tenant a written notice specifying such
default or (B) the Demised Premises are abandoned by Tenant or if the Demised
Premises are damaged by reason of negligence or carelessness of Tenant, its
agents, employees or invitees, or (C) in the case of the happening of a default
or omission (other than in the payment of Fixed Rent, additional rent or other
charges hereunder, and other than the failure to cause a lien against the
Demised Premises, the Building or the Land to be discharged of record within the
time period provided for elsewhere in this Lease) which default shall continue
for twenty (20) days after notice thereof to Tenant (or in the case of the
happening of a default or omission which cannot with due diligence be completely
cured or remedied within such twenty (20) day period, 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 be proceeding
to remedy or cure such default), then, in any such case, Landlord may give to
Tenant a notice of intention to terminate this Lease upon the expiration of
three (3) days from the service of such notice of intention, and upon the
expiration of said three (3) days, this Lease and the Term hereof shall
terminate, and Tenant shall then quit and surrender the Demised Premises to
Landlord, but Tenant shall remain liable as hereinafter provided.
(2) If (A) the notice provided for in (1) hereof shall have been given,
and the Term shall expire as aforesaid; or (B) if Tenant shall make any default
in the payment of Fixed Rent or
<PAGE> 34
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additional rent herein reserved, or any part of either, or in making any other
payment herein provided; or (C) if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the Demised Premises shall
be taken or occupied or attempted to be taken or occupied by someone other than
Tenant; or (D) if Tenant shall make default with respect to any other lease
between Landlord and Tenant; then in any of such events Landlord may, without
notice, re-enter the Demised Premises either by force or otherwise, and
dispossess Tenant and the legal representatives of Tenant or any other occupants
of the Demised Premises by summary proceedings or otherwise and remove their
effects and hold the Demised Premises as if this Lease had not been made. Tenant
hereby waives the service of notice of intention to re-enter or to institute
legal proceedings to the aforesaid 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, but Tenant shall remain liable as hereinafter provided.
Section 17.02. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (i) the rent shall become due
thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration together with such costs 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; (ii) Landlord may re-let the Demised
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 (iii) Tenant or the
legal representatives of Tenant shall also pay Landlord as liquidated damages
for the failure of Tenant to observe and perform Tenant's covenants herein
contained, at the election of Landlord, either:
(a) a sum which at the time of such termination of this Lease or at
the time of any such re-entry by Landlord, as the case may be, represents the
then value of the excess, if any, of (1) the aggregate of the installments of
Fixed Rent and the additional rent (if any) which would have been payable
hereunder by Tenant, had this Lease not so terminated, for the period commencing
with such earlier termination of this Lease or the date of any such re-entry, as
the case may be, and ending with the date heretofore set for the expiration of
the full term hereby granted pursuant to Articles 1 and 2 hereof, over (2) the
aggregate rental value of the Demised Premises for the same period, said lump
sum to be discounted to the Expiration Date of this Lease at the then prevailing
prime rate of interest; or
(b) sums equal to the aggregate of the installments of Fixed Rent
and additional rent (if any) which would have been
<PAGE> 35
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payable by Tenant had this Lease not so terminated, or had Landlord not so
re-entered the Demised Premises, payable upon the due dates therefor specified
herein following such termination or such re-entry and until the date
heretofore set for the expiration of the full Term hereby granted; provided,
however, that if Landlord shall re-let the Demised Premises during said period,
Landlord shall credit Tenant with the net rents received by Landlord for such
re-letting, such net rents to be determined by first deducting from the gross
rents as and when received by Landlord from such re-letting the expenses
incurred or paid by Landlord terminating this Lease or of re-entering the
Demised Premises and of securing possession thereof, including, without
limitation, attorneys' fees and costs of removal and storage of Tenant's
property, as well as the expenses of re-letting, including repairing, restoring,
altering, decorating and preparing the Demised Premises for new tenants,
brokers' commissions, advertising costs, attorneys' fees, and all other similar
or dissimilar expenses chargeable against the Demised Premises and the rental
therefrom in connection with such relenting, it being understood that any such
re-letting may be for a period equal to or shorter or longer than the remaining
Term of this Leas0; provided, further, that (1) in no event shall Tenant be
entitled to receive any excess of such net rents over the sums payable by Tenant
to Landlord hereunder, (2) in no event shall Tenant be entitled in any suit for
the collection of damages pursuant to this paragraph (b) to a credit in respect
of any net rents from a re-letting except to the extent that such net rents are
actually received by Landlord prior to the commencement of such suit, and (3) if
the Demised Premises or any part thereof should be re-let in combination with
other space, then proper apportionment on a square foot area basis shall be made
of the rent received from such re-letting and of the expenses of reletting.
For the purpose of paragraph (a) of this Section 17.02, the amount of
additional rent which would have been payable by Tenant under Article 3 hereof
for each year, as therein provided, ending after such termination of this Lease
or such re-entry, shall be deemed to be an amount equal to the amount of such
additional rent payable by Tenant for the calendar year and Tax Year ending
immediately preceding such termination of this Lease or such reentry. suit or
suits for the recovery of such damages, or any installments thereof, may be
brought by Landlord from time to time at its election, and nothing contained
herein shall be deemed to require Landlord to postpone suit until the date when
the Term of this Lease would have expired if it had not been terminated under
the provisions of Articles 16 or 17 hereof, or under any provision of law, or
had Landlord not recentered the Demised Premises.
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
<PAGE> 36
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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 any 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 in
equity as if re-entry, summary proceedings and other remedies were not herein
provided for. Mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedy, in law or in equity. Tenant hereby expressly
waives any and all rights of redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed for any cause,
or in the event of Landlord obtaining possession of the Demised Premises, by
reason of the violation by Tenant of any of the covenants and conditions of this
Lease, or otherwise.
ARTICLE 18
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
------------------------------------------------
Section 18.01. If Tenant shall default in the observance or performance
of any term or covenant on its part to be observed or performed under or by
virtue of any of the terms or provisions in any Article of this Lease which
default shall continue after notice and the expiration of any applicable cure
period (except in the event of an emergency in which event no notice shall be
necessary), Landlord, without being under any obligation to do so and without
thereby waiving such default, may remedy such default for the account and at the
expense of Tenant. 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
proceedings, such sums paid or obligations incurred with interest computed at
the Interest Rate and costs shall be deemed to be additional rent hereunder and
shall be paid to it by Tenant on demand.
ARTICLE 19
COVENANT OF QUIET ENJOYMENT
---------------------------
Section 19.01. Landlord covenants that upon Tenant paying the rent and
additional rents and observing and performing all the terms, covenants and
provisions of this Lease on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the Demised Premises, subject nevertheless to
the terms and conditions of this Lease and provided, however, that no eviction
of Tenant by reason of paramount title, the foreclosure of any mortgage now or
hereafter affecting the Demised Premises
<PAGE> 37
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or by reason of any termination of any ground or underlying lease to which this
Lease is subject and subordinate, whether such termination is by operation of
law, by agreement or otherwise, shall be construed as a breach of this covenant
nor shall any action by reason thereof be brought against Landlord, and provided
further that this covenant shall bind and be enforceable against Landlord,
subject to the terms hereof, only so long as Landlord is in possession and is
collecting rent from Tenant but not thereafter.
ARTICLE 20
EXCAVATION
----------
Section 20.01. In the event that an excavation should be made for
building or other purposes upon land adjacent to the Building, or should be
authorized to be made, Tenant shall, if necessary, afford to the person or
persons causing or authorized to cause such excavation, license to enter upon
the Demised Premises for the purpose of doing such work as shall reasonably be
necessary to protect or preserve the wall or walls of the Building, or the
Building, from injury or damage and to support them by proper foundations,
pinning and/or underpinning.
ARTICLE 21
SERVICES AND EQUIPMENT
----------------------
Section 21.01. So long as this Lease is in full force and effect,
Landlord shall, at its cost and expense:
(a) Provide necessary elevator facilities on Business Days from
8:00 A.N. to 6:00 P.M. and shall have sufficient elevators available at all
other times. At Landlord's option, the elevators shall be operated by
automatic control or by manual control, or by a combination of both of such
methods.
(b) (i) Maintain and keep in good order and repair the
air-conditioning, heating and ventilating system installed by Landlord, which
system is further described hereinabove. The "interior" portion of said system
will be operated by Landlord as seasonably required on Business Days from 8:00
A.M. to 6:00 P.M. and the "perimeter" portion of said system shall be under
Tenant's control. Landlord shall have no responsibility or liability for the
ventilating conditions and/or temperature of the Demised Premises during the
hours or days Landlord is not required to furnish heat, ventilation or
air-conditioning pursuant to this paragraph. Landlord has informed Tenant that
the windows of the Demised Premises and the Building may be sealed and that
accordingly, the Demised Premises may become uninhabitable and the air therein
unbreathable during the hours or days when Landlord is not required pursuant to
this paragraph to furnish heat, ventilation or air-conditioning. Such
<PAGE> 38
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condition of the Demised Premises shall not constitute nor be deemed to
constitute a breach or a violation of this Lease or of any provision thereof,
nor shall such condition of the Demised Premises constitute or be deemed to
constitute an eviction and Tenant shall not claim nor be entitled to claim any
abatement of rent or make any claim for any damages or compensation by reason of
such condition of the Demised Premises. Any use. or occupancy of the Demised
Premises during the hours or days Landlord is not required to furnish heat,
ventilation or air-conditioning to the Demised Premises pursuant to this
paragraph shall be at the sole risk, responsibility and hazard of Tenant. Tenant
shall in any event cause all of the windows in the Demised Premises to be kept
closed at all times and shall cause all of the vents, intakes, outlets and
grilles in the Demised Premises to be kept entirely unobstructed at all times.
Additionally, Tenant shall comply with and observe any and all rules,
regulations and requirements hereafter prescribed by Landlord for the proper
functioning of the heating, ventilating and air-conditioning system.
(ii) The heating, ventilating and air-conditioning system
servicing the Demised Premises consists, as of the date hereof, of an interior
duct air distribution system and perimeter units. The perimeter units serve that
portion of the Demised Premises which is within 15 feet from the glass line of
the Building and operate automatically, co lancing operation at 8:00 A.M. and
ceasing operation at 6:00 P.M. The perimeter units may be activated by Tenant at
any other time and upon activation will operate for a prep-programmed period of
time and may be reactivated by Tenant thereafter on a continuing basis. A11
electricity used in connection with the operation of the perimeter units shall
be supplied by Landlord upon and subject to all of the terms and conditions
contained in Article 4 hereof.
(iii) In the event that Tenant shall require operation of the
"interior" portion of the air-conditioning, heating or ventilation system at
times other than as described above, Tenant shall give Landlord at least
twenty-four (24) hours advance notice of such requirement and, if reasonably
practicable, Landlord will arrange for such operation and Tenant shall pay
Landlord's established charges therefor as additional rent, including with
respect to minimum number of hours and/or minimum floor area for such operation.
(c) Provide cleaning and janitorial services on Business Days.
(d) Furnish hot and cold water for lavatory, pantry and drinking
and office cleaning purposes. If Tenant requires, uses or consumes water for any
other purposes, Tenant agrees to Landlord installing a meter or meters or other
means to measure Tenant's water consumption, and Tenant further agrees to
reimburse Landlord for the cost of the meter or meters and the installation
thereof, And to pay for the maintenance of said
<PAGE> 39
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meter equipment and/or to pay Landlord's cost of other means of measuring such
water consumption by Tenant. Tenant shall reimburse Landlord the cost of all
water consumed, as measured by said meter or meters or as otherwise measured,
including sewer rents.
Section 21.02. Landlord reserves the right to interrupt, curtail or
suspend the services required to be furnished by Landlord under this Article 21
when the necessity therefor arises by reason of accident, emergency, mechanical
breakdown, or when required by any law, order or regulation of any federal,
state, county or municipal authority, or for any other cause beyond the
reasonable control of Landlord. Landlord shall do any work pursuant to this
Article in such a manner so as to minimize interference with Tenant's business,
provided no additional costs, for labor at overtime or premium rates, or
otherwise, are incurred thereby. No diminution or abatement of rent or other
compensation shall or will be claimed by Tenant as a result of any interruption,
curtailment or suspension of services, nor shall this Lease or any of the
obligations of Tenant be affected or reduced by reason of such interruption,
curtailment or suspension.
Section 21.03. Tenant shall reimburse Landlord for the cost to Landlord
of removal from the Demised Premises and the Building of so much of any refuse
and rubbish of Tenant as shall exceed that ordinarily accumulated daily in the
routine of business office occupancy or by any use of the Demised Premises after
customary business hours.
Section 21.04. It is expressly agreed that only Landlord or any one or
more persons, firms or corporations authorized in writing by Landlord will be
permitted to furnish laundry, linen, towels, drinking water, ice and other
similar supplies and services to tenants and licensees in the Building. Landlord
may fix, in its sole and absolute discretion, at any time and from time to time,
the hours during which and the regulations under which such supplies and
services are to be furnished. Landlord expressly reserves the right to act as or
to designate, at any time and from time to time, an exclusive supplier of all or
any one or more of the said supplies and services, provided that the quality
thereof and the charges therefor are reasonably comparable to that of other
suppliers and Landlord furthermore expressly reserves the right to exclude from
the Building any person, firm or corporation attempting to furnish any of said
supplies or services but not so designated by Landlord.
Section 21.05. It is expressly agreed that only Landlord or any one or
more persons, firms or corporations authorized in writing by Landlord will be
permitted to sell, deliver or furnish any food or beverages, either personally
or through the use of vending machines, for consumption within the Demised
Premises or elsewhere in the Building. Landlord expressly reserves the right
<PAGE> 40
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to act as or to designate at any time, or from time to time, an exclusive
supplier or suppliers of such food and beverages sold in the Building and
Landlord further expressly reserves the right to exclude from the Building any
person, firm or corporation attempting to purvey any such food or beverages but
not so designated by Landlord. It is understood, however, that Tenant or regular
office employees of Tenant who are not employed by any supplier of such food or
beverages or by any person, firm or corporation engaged in the business of
purveying such food or beverages, may personally bring or have delivered into
the Building food or beverages for consumption within the Demised Premises by
employees of Tenant, but not for resale to or for consumption by any other
tenant. Landlord may fix in its absolute discretion, at any time and from time
to time, the hours during which and the regulations under which foods and
beverages may be brought or delivered into the Building by or for regular
employees of Tenant. Notwithstanding the foregoing, it is understood that Tenant
or regular office employees of Tenant who are not employed by any supplier of
such food or beverages or by any person, firm or corporation engaged in the
business of purveying such food or beverages, may personally bring food or
beverages into the Building for consumption within the Demised Premises by
employees of Tenant, but not for resale to or for consumption by any other
tenant. It is further understood that Tenant may order food and beverages for
delivery to Tenant in the Demised Premises for consumption by Tenant's employees
and invitees from contractors, restaurants and caterers selected by Tenant,
without obtaining Landlord's prior consent, provided however that if Landlord
determines that the delivery by any such contractor, restaurant or caterer poses
a security risk to the Building personnel or to other tenants in the Building or
otherwise causes a nuisance or disruption in the Building, Landlord may exclude
same from the Building.
Section 21.06. Tenant agrees to employ such office maintenance contractor
as Landlord may from time to time designate, for all waxing, polishing, lamp
replacement, cleaning (other than those cleaning services Landlord is obligated
to furnish) and the maintenance work in the Demised Premises, provided that the
quality thereof and the charges therefor are reasonably comparable to that of
other contractors. Tenant shall not employ any other contractor without
Landlord's prior written consent, which shall not be unreasonably withheld.
Section 21.07. Landlord will not be required to furnish any other
services, except as otherwise provided in this Lease.
Section 21.08. (a) Tenant, at its sole cost and expense, shall cause the
Demised Premises to be exterminated on a monthly basis to the satisfaction of
Landlord and shall for such purposes employ exterminators designated by
Landlord.
<PAGE> 41
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(b) If Tenant shall have facilities on the Demised Premises for
cooking, drinking, eating, washing and/or storage of food, or similar items,
Tenant shall, on a weekly basis, cause the portion of the Demised Premises on
which such facilities are located to be exterminated to the satisfaction of
Landlord by exterminators designated by Landlord. The foregoing shall not,
however, constitute any approval or consent to the use of the Demised Premises
for such purposes.
(c) If Tenant fails to comply with the provisions of this Section
21.08, Landlord, in addition to any other remedies available to it under this
Lease or pursuant to law, may perform such service, and the cost therefor shall
be paid by Tenant on demand as additional rent hereunder.
ARTICLE 22
DEFINITION OF LANDLORD
----------------------
Section 22.01. The term "Landlord" wherever used in this Lease shall be
limited to mean and include only the owner or owners at the time in question of
the Land and the Building or the Building or the tenant under a ground or
underlying lease affecting the Land and the Building or the Building, or both,
to whom this Lease may be assigned, or a mortgagee in possession, so that in the
event of any sale, assignment or transfer of the Land and the Building or the
Building, or of such ground or underlying lease, such owner, tenant under a
ground lease or mortgagee in possession shall thereupon be released and
discharged from all covenants, conditions and agreements of Landlord thereafter
accruing hereunder; but such covenants, conditions and agreements shall be
binding upon each new owner, tenant under a ground or underlying lease, or
mortgagee in possession for the time being of the Land and the Building, until
sold, assigned or transferred.
ARTICLE 23
INVALIDITY OF ANY PROVISION
---------------------------
Section 23.01. If any term, covenant, condition or provision of this
Lease or the application thereof to any circumstance or to any person, firm or
corporation shall be invalid or unenforceable to any extent, the remaining
terms, covenants, conditions and provisions of this Lease, or the application
thereof to any circumstances or to any person, firm or corporation other than
those as to which any term, covenant, condition or provision is held invalid or
unenforceable, shall not be affected thereby and each remaining tern, covenant,
condition and provision of this Lease shall be valid and shall be enforceable to
the fullest extent permitted by law.
<PAGE> 42
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ARTICLE 24
BROKER
------
Section 24.01. The parties hereto agree that Daniel N. Davis and
SageGroupAssociates Inc. (collectively, the "Brokers") were the only brokers who
negotiated and brought about this transaction, and Landlord agrees to pay the
Brokers a commission therefor as per separate agreements. Tenant represents and
warrants that it has not dealt with any broker in connection with this
transaction other than the Brokers, and Tenant agrees to indemnify and save
Landlord harmless from any claims made by other brokers claiming to have dealt
with Tenant. Landlord represents that it has not dealt with any broker in
connection with this transaction other than the Brokers, and Landlord agrees to
indemnify and save Tenant harmless from any claims made by other brokers
claiming to have dealt with Landlord in connection with this transaction.
ARTICLE 25
SUBORDINATION
-------------
Section 25.01. This Lease is subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
leases or the Building of which the Demised Premises forms a part, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative, and no further instrument of subordination
shall be required by any mortgage. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Landlord may request. Tenant
hereby constitutes and appoints Landlord the Tenant's attorney-in-fact to
execute any such certificate or certificates for and on behalf of Tenant.
Section 25.02. At the option of Landlord or any successor landlord or the
holder of any mortgage affecting the Demised Premises, Tenant agrees that
neither the cancellation nor termination of any ground or underlying lease to
which this Lease is now or may hereafter become subject or subordinate, nor any
foreclosure of a mortgage affecting said premises, nor the institution of any
suit, action, summary or other proceeding against Landlord herein or any
successor landlord, or any foreclosure proceeding brought by the holder of any
such mortgage to recover possession of such property, shall by operation of law
or otherwise result in cancellation or termination of this Lease or the
obligations of Tenant hereunder, and upon the request of any such landlord,
successor landlord, or the holder of such mortgage, Tenant covenants and agrees
to attorn to Landlord or to any successor to Landlord's interest in the
Demised Premises, or to such holder of such mortgage or to the purchaser of the
mortgaged premises in foreclosure.
<PAGE> 43
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Section 25.03. In the event of any act or omission by Landlord which
would give Tenant the right to terminate this Lease or to claim a partial or
total eviction, pursuant to the terms of this Lease, if any, Tenant will not
exercise any such right until:
(i) it has given written notice of such act or omission to the following
(whose names and addresses shall previously have been furnished to Tenant) by
delivering such notice of such act or omission addressed to such holders at the
last address so furnished:
(a) the holder of any first mortgage, and
(b) the landlord under any ground or underlying lease to which
this Lease is subject and subordinate; and
(ii) a reasonable period for remedying such act or omission shall have
elapsed following such giving of notice during which such parties, or any of the
parties, with reasonable diligence, following the giving of such notice, has not
commenced and continued to remedy such act or omission or to cause the same to
be remedied.
Section 25.04. If, in connection with obtaining financing, a banking,
insurance or other recognized institutional lender shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not, in Tenant's reasonable opinion, increase the obligations
of Tenant hereunder or materially adversely affect the leasehold interest hereby
created or Tenant's use and enjoyment of the Demised Premises.
ARTICLE 26
ESTOPPEL CERTIFICATE
--------------------
Section 26.01. Tenant agrees, at any time, and from time to time, upon
not less than seven (7) days prior notice from Landlord, to execute, acknowledge
and deliver to Landlord a statement in writing addressed to Landlord certifying
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates to which the Fixed Rent,
additional rental and other charges have been paid, and stating whether or not
to the best knowledge of the signer of such certificate, there exists any
default in the performance of any covenant, agreement, term, provision or
condition contained in this Lease, and any claim or offset in favor of Tenant,
and, if any, specifying each such default, claim or offset in favor of Tenant,
and, if any, specifying each such default, claim or offset of which signer may
<PAGE> 44
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have knowledge, it being intended that any such statement delivered pursuant
hereto may be relied upon by Landlord and by any purchaser or prospective
purchaser of the Building and/or the Land and by any mortgagee or prospective
mortgagee of any mortgage affecting the Building and/or the Land, and by any
landlord under a ground or underlying lease affecting the Land or the Building.
ARTICLE 27
LEGAL PROCEEDINGS, WAIVER OF JURY TRIAL
---------------------------------------
Section 27.01. Landlord and Tenant hereby waive, to the extent such
waiver is not prohibited by law, the right to a jury trial in any action,
summary proceeding or legal proceeding between or among the parties hereto or
their successors arising out of this Lease or Tenant's occupancy of the Demised
Premises or Tenant's right to occupy the Demised Premises.
Section 27.02. Tenant hereby waives the right to interpose a counterclaim
(other than a compulsory counterclaim) in any summary proceeding instituted by
Landlord against Tenant or in any action instituted by Landlord for unpaid rent
or additional rent under this Lease.
Section 27.03. Tenant hereby agrees that the existence of any legal
proceeding arising under this Lease, or any judgment resulting therefrom, shall
remain confidential and to that end shall not discuss with, or make public
disclosure of, the same to the press, other tenants of the Building, or
otherwise. The parties hereto understand and agree that the papers filed in the
course of any such legal proceeding may be available to the public but this
Section 27.03 is understood by Tenant as a prohibition against any public
discussion or disclosure of the same, including any response to any query from
the press, other tenants of the Building or otherwise.
Section 27.04. In the event Tenant claims or asserts that Landlord has
violated or failed to perform a covenant of Landlord not to unreasonably
withhold or delay Landlord's consent or approval, or in any case where
Landlord's reasonableness in exercising its judgment is in issue, Tenant's sole
remedy shall be an action for specific performance, declaratory judgment or
injunction, and in no event shall Tenant be entitled to any money damages for a
breach of such covenant, and in no event shall Tenant claim or assert any claims
in any money damages in any action or by way of set-off, defense or
counterclaim, and Tenant hereby specifically waives the right to any money
damages or other remedies.
<PAGE> 45
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ARTICLE 28
SURRENDER OF PREMISES/HOLDOVER
------------------------------
Section 28.01. Upon the expiration or other termination of the Term of
this Lease, Tenant shall quit and surrender the Demised Premises in good order
and condition, ordinary wear and tear and damage by fire or other casualty, the
elements and any cause beyond Tenant's reasonable control excepted, and shall
remove all its property therefrom, except as otherwise provided in this Lease.
Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of the Term of this Lease.
Section 28.02. If at any time during the last month of the Term of this
Lease, Tenant shall have removed all or substantially all of Tenant's property
from the Demised Premises, Landlord may, and Tenant irrevocably grants to
Landlord a license to, immediately enter and alter, renovate and redecorate the
Demised Premises, without diminution or abatement of rent, or incurring
liability to Tenant for any compensation, and such acts shall have no effect on
this Lease.
Section 28.03. Tenant agrees it shall indemnify and save Landlord
harmless against all costs, claims, loss or liability resulting from delay by
Tenant in surrendering the Demised Premises upon expiration or sooner
termination of the term of this Lease, including, without limitation, any claims
made by any succeeding tenant founded on such delay. The parties recognize and
agree that the damage to Landlord resulting from any failure by Tenant timely to
surrender the Demised Premises will be substantial, will exceed the amount of
monthly rent theretofore payable hereunder, and will be impossible of accurate
measurement. Tenant therefore agrees that if possession of the Demised Premises
is not surrendered to Landlord within two (2) days after the date of the
expiration or sooner termination of the Term of this Lease, then Tenant will pay
Landlord as liquidated damages for each month and for each portion of any month
during which Tenant holds over in the Demised Premises after expiration or
sooner termination of the Term of this Lease, a sum equal to two and one-half
(2 1/2) times the average rent and additional rent which was payable per month
under this Lease during the six (6) month period preceding such expiration or
termination of the Term of this Lease. The aforesaid obligations shall survive
the expiration of sooner termination of the Term of this Lease.
ARTICLE 29
RULES AND REGULATIONS
---------------------
Section 29.01. Tenant, its servants, employees, agents, visitors, and
licensees shall observe faithfully and comply strictly with the rules and
regulations set forth in Schedule C
<PAGE> 46
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attached hereto and made a part hereof. Landlord shall have the right from time
to time during the Term of this Lease to make reasonable changes in and
additions to the rules thus set forth.
Section 29.02. Any failure by Landlord to enforce any rules and
regulations now or hereafter in effect, either against Tenant or any other
tenant in the Building, shall not constitute a waiver of any such rules and
regulations.
ARTICLE 30
NOTICES
-------
Section 30.01. Any notice, request or demand permitted or required to be
given by the terms and provisions of this Lease, or by any law or governmental
regulation, either by Landlord to Tenant or by Tenant to Landlord, shall be in
writing. Unless otherwise required by such law or regulation, such notice,
request or demand shall be given, and shall be deemed to have been served and
given by Landlord and received by Tenant, three (3) days after Landlord (1)
shall have deposited such notice, request or demand by registered or certified
mail return receipt requested enclosed in a securely closed postpaid wrapper, in
a United States Government general or branch post office, addressed to Tenant at
the Demised Premises, and until Tenant has moved its offices to the Demised
Premises, (2) shall have deposited such notice, request or demand by registered
or certified mail return receipt requested enclosed in a securely closed
postpaid wrapper in such a post office addressed to Tenant at its address as
stated on the first page of this Lease. Such notice, request or demand shall be
given, and shall be deemed to have been served and given by Tenant and received
by Landlord, three (3) days after Tenant shall have deposited such notice,
request or demand by registered or certified mail return receipt requested
enclosed in a securely closed postpaid wrapper in such a post office addressed
to Landlord at 777 Third Avenue, New York, New York 10017. Notices may also be
sent by Federal Express or other similar nationally recognized overnight courier
and shall be deemed to have been served and given the next Business Day after
deposit with such overnight courier. Either party may, by notice as aforesaid,
designate a different address or addresses for notices, requests or demands to
it.
ARTICLE 31
NO WAIVER: ENTIRE AGREEMENT
---------------------------
Section 31.01. The failure of Landlord to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of this
Lease, or any of the Rules and Regulations set forth 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
<PAGE> 47
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violation. The receipt by Landlord of rent with knowledge of the breach of any
covenant of this Lease shall not be deemed a waiver of such breach. The failure
of Landlord to enforce any of the Rules and Regulations set forth, or hereafter
adopted, against Tenant and/or any other tenant in the Building shall not be
deemed a waiver of any such Rules and Regulations. No provision of this Lease
shall be deemed to have been waived by Landlord, unless such waiver be in
writing signed by Landlord. No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment 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.
Section 31.02. This Lease with the Schedules annexed hereto, if any,
contains the entire agreement between Landlord and Tenant, and any executory
agreement hereafter made between Landlord and Tenant shall be ineffective to
change, modify, waive, release, discharge, terminate, or effect an abandonment
of this Lease, in whole or in part, unless such executory agreement is in
writing and signed by the party against which enforcement of the change,
modification, waiver, release, discharge, termination or the effecting of the
abandonment is sought.
ARTICLE 32
CAPTIONS
--------
Section 32.01. The captions of Articles in this Lease are inserted only
as a matter of convenience and for reference, and they in no way define, limit
or describe the scope of this Lease or the intent of any provision thereof.
ARTICLE 33
INABILITY TO PERFORM
--------------------
Section 33.01. This Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on the
part of Tenant to be performed shall in no way be affected, impaired or excused
because Landlord is unable to fulfill any of its obligations under this Lease or
to supply or is delayed in supplying any service expressly or implied to be
supplied or is unable to make, or is delayed in making any repair, additions,
alterations or decorations or is unable to supply or is delayed in supplying any
equipment or fixtures if Landlord is prevented or delayed from so doing by
reason of strike or labor troubles or any outside cause whatsoever including but
not limited to, governmental preemption in connection with a National Emergency
or by reason of any rule,
<PAGE> 48
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order or regulation of any department or subdivision thereof of any government
agency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency.
ARTICLE 34
NO REPRESENTATION BY LANDLORD
-----------------------------
Section 34.01. Landlord or Landlord's agents have made no representations
or promises with respect to the Building, the Land or the Demised Premises
except as herein expressly set forth, and no rights, easements or licenses are
acquired by Tenant by implication or otherwise except as expressly set forth in
the provisions of this Lease. The taking of possession of the Demised Premises
by Tenant shall be conclusive evidence, as against Tenant, that Tenant accepts
said premises and that the Demised Premises and the Building of which the sane
form a part were in good and satisfactory condition at the time such possession
was so taken.
ARTICLE 35
NAME OF BUILDING
----------------
Section 35.01. The Building may be known as or by such name as Landlord,
in its sole discretion, may elect, and Landlord shall have the right from time
to time to change such designation or name without Tenant's consent.
ARTICLE 36
SUCCESSORS AND ASSIGNS
----------------------
Section 36.01. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and, except as otherwise
provided herein, their assigns.
ARTICLE 37
DEFERRED COLLECTIONS
--------------------
Section 37.01. If all or any part of the Fixed Rent or additional rents,
as above defined, shall at any time become uncollectible, reduced or required to
be refunded by virtue of any rules, regulations, orders, laws and ordinances
(including, without limitation, rent control or stabilization laws), or
governmental or quasi-governmental authorities having jurisdiction ("Laws and
Ordinances"), then for the period prescribed by said Laws and Ordinances, Tenant
shall pay to Landlord the maximum amounts permitted pursuant to said Laws and
<PAGE> 49
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Ordinances. Upon the expiration of the applicable period of time during which
such amounts shall be uncollectible, reduced or refunded, Tenant shall pay to
Landlord as additional rent, within fifteen (15) days after demand, all such
uncollected, reduced or refunded amounts that would have been payable for the
period absent such Laws and Ordinances; provided, however, that the retroactive
collection thereof shall then be lawful.
ARTICLE 38
FEES/INTEREST/LATE CHARGES
--------------------------
Section 38.01. Whenever any default by Tenant causes Landlord to incur
attorneys' fees and/or any other costs or expenses, Tenant agrees that it shall
pay and/or reimburse Landlord for such fees, costs or expenses promptly upon
being billed therefor.
Section 38.02. If any monies owing by Tenant under this Lease are paid
more than five (5) days after the date such monies are payable pursuant to the
provisions of this Lease, Tenant shall pay Landlord interest thereon, at the
Interest Rate, for the period from the date such monies were originally payable
to the date such monies are paid. In the event that twice in any twelve (12)
month period Tenant shall have defaulted beyond any applicable notice and curs
period in the payment of Fixed Rent or additional rent, or any part of either,
then any further default by Tenant within such twelve (12) month period shall
permit Landlord to collect from Tenant, upon demand, in addition to any interest
payable pursuant to this Article 38, or elsewhere in this Lease, a late charge
equal to ten percent (10%) of the amount of Fixed Rent and additional rent so
due as compensation to Landlord for the costs incurred by it as a result of such
defaults, Landlord and Tenant acknowledging that the actual amount of such costs
would be impossible to ascertain.
ARTICLE 39
INTENTIONALLY OMITTED
---------------------
ARTICLE 40
MUTUAL TERMINATION OPTION
-------------------------
Section 40.01. Landlord and Tenant shall each have the option to cancel
and terminate this Lease, effective as of (i) November 30, 1997 and (ii)
February 28, 1998 (either date is herein referred to as the "Early Termination
Date") by written notice (the "Termination Notice") delivered to the other no
later than ninety (90) days prior to such Early Termination Date. Upon timely
delivery of the Termination Notice, this Lease will expire on the Early
Termination Date as if such date were the Expiration
<PAGE> 50
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Date set forth herein and Tenant shall vacate the Demised Premises on or before
the Early Termination Date leaving the same in the condition otherwise required
upon the expiration or sooner termination of this Lease.
Section 40.02 The effectiveness of Tenant's exercise of the foregoing
option is expressly conditioned upon there not being any uncured default by
Tenant hereunder, beyond notice and the expiration of any applicable cure
period, at the time of the exercise of said option and at the time of
termination (unless Landlord, in its sole discretion, elects to waive such
condition).
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
SAGE REALTY CORPORATION, AGENT
By: _______________________________
Landlord
ATLANTIC REALTY TRUST
By: _______________________________
Tenant
<PAGE> 51
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ACKNOWLEDGMENTS
State of New York )
ss.:
County of Queens )
On the 16th day of January 1997, before me personally came Robert
Kaufman to me known, who being by me duly sworn, did depose and say that he
resides at 18 Marlin Court, Great Neck, NY, that he is the Executive V.P. of
SAGE REALTY CORPORATION, the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation, and that he signed his
name thereto by like order.
/s/ Claudia J. Whitfield
- --------------------------------
Notary Public
CLAUDIA J. WHITFIELD
NOTARY PUBLIC, State of New York
No. 41-5004514
Qualified in Queens County
Commission Expires 11/16/98
CORPORATE TENANT
State of New York )
ss.:
County of New York )
On the 13th day of January, 199__, before me personally came Joel M.
Pashcow to me known, who, being by me duly sworn did depose and say that (s)he
resides at 21 Fir Dr., Great Neck, NY 11024, that (s)he is the Chairman &
President of ATLANTIC REALTY TRUST, the corporation described in and which
executed the above instrument; and that (s)he signed (her) his name by order of
the board of directors of such corporation.
/s/ Maureen G. Dudley
- ----------------------------------
Notary Public
MAUREEN G. DUDLEY
NOTARY PUBLIC, State of New York
No. 01DU5088584
Qualified in Richmond County
Commission Expires November 4, 1998
<PAGE> 52
SCHEDULE "C"
RULES AND REGULATIONS
---------------------
1. The rights of tenants in the entrances, corridors, elevators and
escalators of the Building are limited to ingress to and egress from the
tenants' premises for the tenants and their employees, licensees and invitees,
and no tenant shall use, or permit the use of, the entrances, corridors,
escalators or elevators for any other purpose. No bicycles, dogs or other
animals may be brought into the Building by Tenant, or its employees, licensees
or invitees. No tenant shall invite to the tenant's premises, or permit the
visit of, persons in such numbers or under such conditions as to interfere with
the use and enjoyment of any of the plazas, entrances, corridors, escalators,
elevators and other facilities of the Building by other tenants. Tenant shall
not use or permit its employees to use the elevators before 10:00 A.M. in a
"Down" direction for purposes of taking a coffee break or similar activities.
Fire exits and stairways are for emergency use only, and they shall not be used
for any other purposes by the tenants, their employees, licensees or invitees.
No tenant shall encumber or obstruct, or permit the encumbrance or obstruction
of, any of the sidewalks, plazas, entrances, corridors, escalators, elevators,
fire exits or stairways of the Building. Landlord reserves the right to control
and operate the public portions of the Building and the public facilities, as
well as facilities furnished for the common use of the tenants, in such manner
as it deems best for the benefit of the tenants generally.
2. The cost of repairing any damage to the public portions of the
Building or the public facilities or to any facilities used in common with other
tenants, caused by a tenant or the employees, licensees or invitees of the
tenant, shall be paid by such tenant.
3. Landlord may refuse admission to the Building outside of
ordinary business hours to any person not known to the watchman in charge or not
having a pass issued by Landlord or not properly identified, and may require all
persons admitted to or leaving the Building outside of ordinary business hours
to register. Tenant's employees, agents and visitors shall be permitted to enter
and leave the Building whenever appropriate arrangements have been previously
made between Landlord and Tenant with respect thereto. Each tenant shall be
responsible for all persons for whom he requests such permission and shall be
liable to Landlord for all acts of such persons. Any person whose presence in
the Building at any time shall, in the judgment of Landlord, be prejudicial to
the safety, character, reputation and interests of the Building or its tenants
may be denied access to the Building or may be ejected therefrom. In case of
invasion, riot, public excitement or other commotion, Landlord may prevent all
access to the Building during the continuance of the same, by closing the doors
or otherwise, for the safety of the tenants and protection of property in the
Building. Landlord may require any
<PAGE> 53
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person leaving the Building with any package or other object to exhibit a pass
from the tenant from whose premises the package or object is being removed, but
the establishment and enforcement, or failure to enforce, of such requirements
shall not impose any responsibility on Landlord for the protection of any tenant
against the removal of property from the premises of the tenant. Landlord shall,
in no way, be liable to any tenant for damages or loss arising from the
admission, exclusion or ejection of any person to or from the tenant's premises
or the Building under the provisions of this rule.
4. No tenant shall obtain or accept or use in its premises ice,
drinking water, food, beverage, towel, barbering, boot blacking, floor
polishing, lighting maintenance, cleaning or other similar services from any
persons not authorized by Landlord in writing to furnish such services, provided
always that the charges for such services by persons authorized by Landlord are
not excessive. Such services shall be furnished only at such hours, in such
places within the tenant's premises and under such regulations as may be fixed
by Landlord.
5. No awnings or other projections over or around the windows shall
be installed by any tenant and only such window blinds as are supplied, or
permitted by Landlord shall be used in a tenant's premises.
6. There shall not be used in any space, or in the public halls of
the Building, either by Tenant or by jobbers or others, in the delivery or
receipt of merchandise or mail, any hand trucks, except those equipped with
rubber tires and side guards.
7. All entrance doors in each tenant's premises shall be left
locked when the tenant's premises are not in use. Entrance doors shall not be
left open at any time. All windows in each tenant's premises shall be kept
closed at all times, and all blinds or drapes therein above the ground floor
shall be lowered or closed when and as reasonably required because of the
position of the sun, during the operation of the Building air conditioning
system to cool or ventilate the tenant's premises.
8. No noise, including the playing of any musical instruments,
radio or television, which, in the judgment of Landlord, might disturb other
tenants in the Building shall be made or permitted by any tenant and no cooking
shall be done in Tenant's premises except as expressly approved by Landlord.
Nothing shall be done or permitted in any tenant's premises and nothing shall be
brought into or kept in any tenant's premises which would impair or interfere
with any of the Building services or the proper and economic heating, cleaning
or other servicing of the Building or the premises, or the use or enjoyment by
any other tenant of any other premises, nor shall there be installed by any
tenant any ventilating, air conditioning, electrical or
<PAGE> 54
- 3 -
other equipment of any kind which, in the judgment of Landlord, might cause any
such impairment or interference. No dangerous, inflammable, combustible or
explosive object or material shall be brought into the Building by any tenant or
with the permission of any tenant.
9. Tenant shall not permit any cooking or food odors emanating
from the Demised Premises to seep into other portions of the Building.
10. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures in
or serving any tenant's premises shall not be used for any purpose other than
the purpose for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein. All
damages resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
11. No signs, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any tenant on any part of the
outside or inside the premises or the Building without the prior written consent
of Landlord. In the event of the violation of the foregoing by any tenant,
Landlord may remove the same without any liability, and may charge the expense
incurred by such removal to the tenant or tenants violating this rule. Interior
signs and lettering on doors and elevators 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.
Landlord shall have the right to prohibit any advertising by any
tenant which impairs the reputation of the Building or its desirability as a
building for offices, and upon written notice from Landlord, Tenant shall
refrain from or discontinue such advertising.
12. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows in any tenant's premises, and no lock on any door
therein shall be changed or altered in any respect. Duplicate keys for a
tenant's premises and toilet rooms shall be procured only from Landlord, which
may make a reasonable charge therefor. Upon the termination of a tenant's lease,
all keys to the tenant's premises and toilet rooms shall be delivered to
Landlord.
13. No tenant shall mark, paint, drill into, or in any way deface
any part of the Building or the premises demised to such tenant. Not boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Landlord, and
<PAGE> 55
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as Landlord may direct. Not tenant shall install any resilient tile or similar
floor covering in the premises demised to such tenant except in a manner
approved by Landlord.
14. No tenant shall use or occupy, or permit any portion of the
premises demised to such tenant to be used or occupied, as an office for a
public stenographer or typist, or as a barber or manicure shop, or as an
employment bureau. No tenant or occupant shall engage or pay any employees in
the Building, except those actually working for such tenant or occupant in the
Building or advertise for laborers giving an address at the Building.
15. No premises shall be used, or permitted to be used, at any
time, as a store for the sale or display of goods or merchandise or any king, or
as a restaurant, shop, booth, bootblack or other stand, or for the conduct of
any business or occupation which involves direct patronage of the general public
on the premises demised to such tenant, or for manufacturing or for other
similar purposes.
16. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside for the regular duties, unless under
special instructions from the office of the Landlord.
17. Each tenant shall, at its expense, provide artificial light in
the premised demised to such tenant for Landlord's agents, contractors and
employees while performing janitorial or other cleaning services and making
repairs or alterations in said premises.
18. Employees of Tenant shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.
19. Any cuspid or similar containers or receptacles used in the
Demised Premises shall be cared for and cleaned by and at the expense of Tenant.
20. Any and all wet and/or food garbage, including coffee grinds,
is to be deposited in a plastic liner bag in a waste basket or other receptacle.
21. Tenant shall separate all refuse and rubbish of Tenant in
accordance with the methods and procedures set forth, from time to time, by
Landlord.
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<ARTICLE> 5
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<PERIOD-START> MAY-11-1996
<PERIOD-END> DEC-31-1996
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<PP&E> 36,995,500
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0
0
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