Falcon Entertainment Corp

SECURITIES AND EXCHANGE COMMISSION

FORM 10KSB Annual and transition reports of small business issuers [Section 13 or 15(d), not S-B Item 405]

Filing Date: 2000-09-13 | Period of Report: 2000-05-31 SEC Accession No. 0000912057-00-041260

(HTML Version on secdatabase.com)

FILER FALCON ENTERTAINMENT CORP Mailing Address Business Address 71 GREAT PASTURE ROAD 71 GREAT PASTURE ROAD CIK:1089046| State of Incorp.:DE | Fiscal Year End: 0531 REDDING CT 06896 REDDING CT 06896 Type: 10KSB | Act: 34 | File No.: 000-26443 | Film No.: 722471 2039380737 SIC: 4833 Television broadcasting stations

FORM 10-KSB

(Mark One)

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended MAY 31, 2000 ------

|_| 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 ------

FALCON ENTERTAINMENT CORP. ------(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code (212) 557-5557 ------

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.00005 per share ------(Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No

Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. | |

Issuer's revenues for the fiscal year ended May 31, 2000 were $76,549.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer, based upon the closing price of such common equity on August 31, 2000, as reported on the OTC Bulletin Board, was approximately $28,287,000 (affiliates being, for these purposes only, directors, executive officers and holders of more than 5% of the issuer's common stock).

As of September 13, 2000, the Registrant had 13,375,724 shares of common stock outstanding.

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

CERTAIN STATEMENTS CONTAINED IN THIS ANNUAL REPORT ON FORM 10-KSB, INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES", "ANTICIPATES", "ESTIMATES", "EXPECTS", AND WORDS OF SIMILAR IMPORT, CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. READERS ARE REFERRED TO THE "RISK FACTORS" SECTION CONTAINED HEREIN, WHICH IDENTIFIES IMPORTANT RISK FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD LOOKING STATEMENTS.

OVERVIEW

Falcon Entertainment Corp. (collectively with its subsidiaries, "Falcon" or the "Company") is a diversified entertainment company that broadcasts music videos of amateur and professional artists over cable and direct satellite television on its television channel, IMNTV, and that webcasts those videos over the Internet through its web site, www.IMNTV.com. It also operates a record label, InVision Records, and intends to commence operations of a second record label, Ecity Records. Through these labels, the Company intends to produce and mass market the music of artists and bands, including certain of those who submit videos for broadcast over IMNTV. It further intends to develop its web site into a web portal to promote the Company's products and services, promote the musicians signed to its record labels, provide music news and related informational services and provide links to related web sites.

To date, the Company has not generated revenues from the operation of its current business model. For the fiscal years ended May 31, 2000 and 1999, the Company incurred losses of $5,866,842 and $62,619, respectively. In March 2000, the Company completed a private offering of its common stock, raising approximately $7,395,000 after deductions for commissions, fees and offering expenses.

The Company was incorporated in March 1986 under the laws of the State of Delaware under the name AVTR Systems, Inc. In April 1999 the Company changed its name to Independent Music Group, Inc., and in December 1999 it changed its name to Falcon Entertainment Corp. In April 1999, the Company acquired all of the issued and outstanding capital stock of Independent Music Network, Inc., a Delaware corporation, from the Company's President, Chief Executive Officer and Chairman.

INDUSTRY BACKGROUND

The Company believes that the broadcast television market for music videos and music programming has grown significantly since the introduction of MTV in 1981. Music enthusiasts are now able to view musical genres ranging from country to rock to rap to salsa on cable television, with major channels generating significant revenues from growing cable subscriptions and increasing advertiser support. The Company's research indicates that the amateur music industry has experienced a corresponding significant growth phase. According to the Gallup Organization of Princeton, New Jersey ("Gallup"), in 1999 approximately 53% of all U.S. households owned at least one musical instrument, 50% of all U.S. households had one member who played an instrument and 40% of U.S. households had two or more members who played an instrument. According to Gallup, in the U.S. alone, nearly $6.8 billion was spent on musical instruments and accessories in 1999, representing an increase of approximately 27% from 1994.

According to a 1999 study by the Recording Industry Association of America ("RIAA"), the demographic profile of consumers of recorded music has aged along with the population. Consumers age 29 and under accounted for 44.2% of music purchases in 1999 as compared to 57.0% in 1990. Similarly, consumers over the age of 45 comprised 24.7% of the market in 1999 compared with 11.1% in 1990. Based on RIAA data, there have been significant gains in popular music listenership among the 35 and over category, tracking the aging of the "baby boomer" generation. While spending by young Americans remains

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document predictably strong, the baby boomers (particularly those in the age 40-44 category) have shown the most notable increase, jumping from a 7.8% market share in 1990 to 9.3% in 1999. These shifting demographic patterns strengthen the Company's belief that its concept will appeal to a wide domestic audience.

The Company believes that no medium currently exists which gives amateur musicians the opportunity to present themselves on national television. Channels such as MTV and VH1 primarily program well-known artists who are listed on the Billboard 100 or similar charts. The Company also believes that many major and independent record labels and talent agencies are seeking a cost-effective method to discover and showcase new talent on a non-preferential basis.

IMNTV

The Company began broadcasting music videos of independent artists over its television channel, Independent Music Network, or IMNTV, on June 1, 2000. Through an agreement with Yahoo! Inc., IMNTV's programming is simulcast over the Internet. Independent Music Network's programming currently consists of a variety of music video content packaged into 1/2-hour segments, each including approximately seven music videos. Independent Music Network's programming is presently being broadcast in the Miami, Florida; Orlando, Florida; Norfolk, Virginia; Los Angeles, California and San Diego, California television markets and other limited national television markets to a subscriber base of approximately 2,325,000 households. The Company intends to:

o continually increase the length and quality of IMNTV's programming;

o expand the size and number of broadcast markets in which its programming is available;

o begin selling advertising time during its broadcasts; and

o build a music and entertainment based web portal that supports its television broadcasting activities.

Based on Gallup and RIAA statistics, the Company believes that a large number of amateur musicians will attempt to air their music videos on IMNTV and that the wide population of amateur musicians constitutes a ready-made audience for this programming. The Company expects to derive revenues by selling advertising time during its broadcasts.

IMNTV currently airs music videos submitted by independent artists and bands, as well as videos provided by major and independent record labels. After videos are screened for acceptable broadcast content and are professionally packaged and edited, they are broadcast on IMNTV and are simultaneously webcast on IMNTV.com and Yahoo! Broadcast.

PROMOTIONAL ACTIVITIES

On April 15, 2000, the Company launched an international print and broadcast advertising campaign to promote IMNTV and to provide amateur musicians with information on how to register and submit their music videos. The advertising campaign included approximately 1,200 television spots and print advertisements in over 75 publications. The international advertising campaign targeted men and women primarily aged 16 to 36, and included a series of 15-, 30-, 45- and 60-second spots, plus print, outdoor and Internet advertisements. The television commercials aired on VH1, MTV, E!, The Sci-Fi Channel, NBC, CBS and TBS and in the United States, Mexico and Central and South America. The print advertisements appeared in publications such as Billboard, CMJ Monthly, Guitar Player, Electronic Musician and Spin. The television campaign aired from April to June of 2000 and the print advertising campaign was distributed from April to August of 2000.

WEB SITE

The Company's advertising campaign created substantial activity on Independent Music Network's web site, located at www.IMNTV.com. Through the IMNTV.com web site, artists are able to obtain information as to the IMNTV video submission process. Each artist or band that submits an acceptable video is also listed on the IMNTV.com web site, through which simultaneous and archived streaming audio clips of its performances may be heard and other related information is displayed.

IMNTV's programming content is broadcast on the Internet pursuant to a broadcast services agreement with Yahoo!, Inc., which gives consumers access to a range of independent music video programming on both

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document IMNTV.com and on Yahoo! Broadcast, streamed 24 hours a day, seven days a week simultaneously with Independent Music Network's television programming. IMNTV's programming can be viewed on Yahoo! at http://www.broadcast.com/television/imntv.

WEB PORTAL

As public awareness of the IMNTV brand name grows, the Company intends to develop IMNTV.com into a web portal that will initially focus on entertainment and information and thereafter expand into a variety of other content and services.

The Company expects that, in addition to the features currently available on the IMNTV.com web site, this web portal will be used for a number of functional and promotional purposes, including:

o contest polling;

o CD sales and audio samples;

o music magazines;

o VJ biographies and stories;

o IMNTV's interactive jukebox;

o sales of IMNTV merchandise;

o music industry news;

o CD release information and reviews;

o independent band information and performance schedules; and

o chat rooms.

TELEVISION BROADCAST

After music videos submitted to the Company are screened, the videos are edited into packaged programming content. IMNTV's programming currently consists of approximately 15 music videos per hour interspersed with Company-sponsored advertising. The Company is initially focusing its broadcast time to reach the amateur band market, where the 10:00 p.m. to 6:00 a.m. time slot offers a combination of what the Company believes to be prime demographic viewership and reduced cost.

IMNTV's programming is transmitted by OlympuSAT, Inc., a subsidiary of Ocean Communications, Inc. Pursuant to the network carriage agreement between the Company and OlympuSAT, OlympuSAT distributes IMNTV's programming to a number of markets throughout the U.S. in exchange for monthly fees paid by the Company. IMNTV's programming is currently being broadcast to more than 2.3 million distinct households and 5.7 million individuals, via cable systems and direct satellite platforms. IMNTV currently broadcasts a digital signal 24 hours per day, seven days a week. Independent Music Network also receives carriage on OlympuSAT's transponder as well as master control (tape playback) services.

The following table summarizes IMNTV's broadcast footprint as of August 31, 2000:

As part of its programming strategy, each month Independent Music Network's advisory board chooses the top artists or bands broadcast on IMNTV during that period. The selected artists will each be featured with a 1/2-hour exclusive television showcase of their videos at no additional cost to them. The top band of the month then may, at its option, be signed to a

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document recording contract with one of the Company's record labels, InVision Records or Ecity Records.

ADVISORY BOARD

Independent Music Network has an advisory board which is comprised of 19 individuals with significant music industry experience. Each month, the advisory board selects the top independent artists on IMNTV. In addition, the advisory board members are available upon request to consult with Company management in their particular areas of expertise. Independent Music Network's Advisory Board is comprised of the following individuals:

STEVE LUKATHER is a musician, songwriter and producer, and a founding member of the group Toto, which over the past 23 years has sold over 30 million records. Steve has been nominated for 14 Grammy Awards and has won 7, including awards for Album of the Year, Record of the Year and Producer of the Year. Mr. Lukather is a renowned guitarist, and has performed on nearly 1,000 recordings for artists including Paul McCartney, Miles Davis, Bruce Springsteen, Eric Clapton, Michael Jackson, George Harrison and Edgar Winter. Mr. Lukather has also released three solo albums.

BILL CHAMPLIN is a two-time Grammy Award-winning songwriter, who has appeared as a vocalist and musician on hundreds of recordings for a wide range of artists throughout his career. Bill has co-written songs for many artists, including "After The Love Is Gone" for Earth, Wind and Fire and "Turn Your Love Around" for George Benson. He has been a member of the band Chicago for 19 years, and is currently producing and developing new artists and working on a new solo release.

RUSSELL FERRANTE is a pianist, keyboardist and producer. Russell is a founding member of the contemporary jazz group The Yellowjackets, which since 1980 has released 14 albums, been nominated for ten Grammy Awards and received two Grammy Awards. Mr. Ferrante has performed on recordings for artists including George Michael, Take 6, Lee Ritenour and Brenda Russell. He is also an adjunct professor at the University of Southern California, and has conducted clinics at music schools and colleges worldwide.

RICKY LAWSON is a Grammy Award-winning writer, and an acknowledged drummer and musician. Mr. Lawson is a founding member of the band The Yellowjackets, and has performed on world tours with artists including Michael Jackson, Whitney Houston, Phil Collins, Stevie Wonder and, most recently, Steely Dan. He has appeared on hundreds of recordings for a wide range of artists, and has written, performed and produced music for soundtracks including EdTV, Toy Story 2, The Bodyguard and Star Trek 5: The Journey Home.

STEVE THOMPSON is a producer, mixer, arranger, and songwriter, and is the recipient of two Grammy Awards. He has produced recordings for artists including Madonna, Korn, Blues Traveler, Whitney Houston, Aretha Franklin, Earth, Wind and Fire and many others. He has mixed albums including Guns and Roses' "Appetite For Destruction", John Lennon's "Milk And Honey" and Mettalica's "And Justice For All", and has mixed singles for bands and artists including The Rolling Stones, Madonna, Paul Simon and Aretha Franklin.

RON SAINT-GERMAIN is a record producer and mixer. Mr. Saint-Germain has produced records for artists including Creed, 311, Living Colour, Bad Brains and Paquito D'Rivera. He has mixed albums for artists including Jimi Hendrix, U2, Mick Jagger, Soundgarden, Diana Ross, Smokey Robinson, Red Hot Chili Peppers, Lou Reed, Cat Stevens and many more. Over the past 29 years, Mr. Saint-Germain has earned over 50 RIAA Gold and Platinum awards, representing 130 million unit sales of records in the aggregate.

LARRY FITZGERALD and MARK HARTLEY are the founders and owners of The Fitzgerald Hartley Company, an entertainment company specializing in personal management, music publishing, marketing, music supervision, touring and consulting. They currently manage artists and bands including Toto, Olivia Newton John, Clint Black,

Vince Gill, Patty Loveless, David Benoit, Joe Ely and Pam Tillis. They have supervised music for films including Tin Cup, Maverick and Something to Talk About.

JULI DAVIDSON is a musician, songwriter and producer, and was employed by MTV Networks from 1982 to 1995. During her tenure at MTV Networks, she held various creative and marketing positions, and in 1989 became Vice President and Creative Director for VH1. In 1990, she was promoted to Senior Vice President of Programming and Production. Ms. Davidson received a Clio Award for excellence in advertising in 1987, and Ace Awards in 1991 and 1992 for producing the VH1 Honors show. She is the president and founder of The Juli Davidson Factor, Inc., a consulting firm to the music and entertainment industries.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document HARLAN LANSKY is president and founder of Matrix Music Works, an artist development and management company located in Hollywood, California. He was co-founder of Soulpower Productions in the United States, where he worked with artists including Whitney Houston, Toni Braxton, Brandy, Monica, 2 Pac and many others. Mr. Lansky is a staff writer/producer with EMI, and is also a musician and recording artist.

BONNIE MILNER is the owner and operator of Long View Farm Studios, a residential recording studio complex located in Massachusetts, which has hosted artists including The Rolling Stones, Aerosmith, Creed, Limp Bizkit, The Mighty Mighty Bosstones and many others. Bonnie is also a musician and producer, and is director of the Cool Kids Choir and All New Voices, a volunteer public schools music program.

WILL LEE is best known as the bassist for the past 15 years for The David Letterman Show. He has lent his considerable talents to more than 1,000 pop, jazz and rock albums and has sung and played on numerous television and radio commercials. Mr. Lee has produced many recordings, and has performed with artists such as Mariah Carey, Steely Dan, Miami Sound Machine, the Bee Gees, Billy Joel, Bette Midler, Liza Minelli, Diana Ross, Barbra Streisand, Frank Sinatra, Mick Jaggar, the Fixx, David Bowie, James Brown, Aretha Franklin, Ray Charles, Al Green, D'Angelo, George Benson, Buddy Rich, Pat Matheny and many others.

RANDY WALDMAN is a pianist, arranger, producer and recording artist. He has performed with artists including Frank Sinatra, Paul Anka, Lou Rawls, George Benson and Barbra Streisand. He has performed and/or arranged music on recordings for artists including Barbra Streisand, Ray Charles, Aretha Franklin, Kenny Rogers, Johnny Mathis, Henry Mancini and many others. His soundtrack credits include Forest Gump, Hoffa, Back To The Future and The Bodyguard. Mr. Waldman is the president and founder of Whirlybird Records.

FRANK QUINTERO is a musician, composer and producer who resides in Caracas, Venezuela. Mr. Quintero is a graduate of Berklee College of Music, and has released numerous records throughout his career. As a performer, he has opened for artists including George Benson, Tina Turner, Joe Cocker, Miguel Bose, Luis Enrique and many others. He has recorded and produced recordings with musicians including Don Grusin, Vinnie Colaiuta, Abraham Laboriel, Alex Acuna and Luis Conte. He recently co-produced a triple album that reunited 30 artists from across Latin America.

MICHAEL GREGORY is a guitarist, vocalist and songwriter who has recorded ten solo albums over the past 20 years. He is also a composer for theatre and dance and has taught music and performance at several music schools and conservatories. He has recorded and/or performed with artists including Mick Jagger, Steve Winwood, Walter Becker, Carlos Santana, Nile Rodgers, Bernard Edwards, Nona Hendryx and Vernon Reid.

BRUCE GAITSCH is a musician and producer who has written songs for over 100 recording artists, including two number one songs for Madonna and Richard Marx. He has played on over 3,000 recording sessions for artists including Madonna, Michael Jackson, Celine Dion, Roger Waters and Don Henley. Mr. Gaitsch has produced music for many artists, and has released numerous solo albums throughout his career.

FRANK CIMLER, JR. is a veteran entertainment attorney and personal manager. Mr. Cimler is the owner of Big C Entertainment, a management and legal services company to the entertainment industry. He earned a B.S. in Business and Finance from the University of Maryland, received his Juris Doctor from the New England School of Law and obtained an LLM from Boston University School of Law.

WILLIE CROES is a pianist, keyboardist, songwriter and producer who lives in Caracas, Venezuela. A graduate of Berklee College of Music, Mr. Croes has been the leader of numerous bands and rhythm sections, and has been instrumental in influencing the musical styles of many Latin artists. He has produced multiple records for artists including Menudo, Yordano, Elisa Rego, Sergio Perez, Guaco, Franco de Vita, and others. He has also produced music for advertising campaigns for companies including Coca Cola, General Motors, Del Monte and Polar.

BENJAMIN BRANDWIJK is a commercial producer, creative director and copywriter, and over the last twelve years has been employed by some of the largest advertising agencies in Venezuela. He earned a B.S. in communications with a minor in audiovisual and mass media studies from the Universidad Catolica Andres Bello in Caracas, Venezuela. His clients have included Pepsi, DHL, Chrysler, Swatch, Digital, NCR and many others.

INVISION RECORDS

The Company recently established its InVision Records record label

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document to produce, record and distribute the music of established and independent artists. To date, InVision has signed three artists, including Ray Charles, to recording contracts. The Company anticipates that InVision's first recording will be distributed beginning in the first quarter of 2001.

The Company believes that most record companies have created an unproductive environment for their artists by concentrating too much on the short term financial success of the record company and failing to provide the means necessary to assist the artists in cultivating a long rewarding career that could be more rewarding for both the artists and the record label. The Company expects that InVision's relationship with Independent Music Network will provide marketing, promotion and overall exposure benefits for InVision and its artists. The Company believes that this resource is a unique component for InVision and that no other record label has a proprietary television network to promote its artists.

The Independent Music Network web site is anticipated to provide another valuable service to InVision in that it will also be used to sell the music of InVision's artists. The Company expects that recordings by InVision's artists will be sold in an IMNTV.com online store and on proprietary web pages dedicated to InVision. InVision also has direct access to the talent pool generated by Independent Music Network and its website IMNTV.com.

INVISION'S ARTISTS

The following artists had signed recording contracts with InVision Records as of August 31, 2000:

DISTRIBUTION

InVision intends to distribute its artists' recordings through "brick and mortar" (conventional) distribution channels to retailers in the U.S. and in international markets, as well as worldwide over the Internet.

The Company expects to make InVision's artists' recordings available through major music retailers in the U.S. and abroad, and through the IMNTV.com website. On the IMNTV.com site, it is anticipated that consumers will be able to choose to purchase physical CDs or to purchase digitally downloadable files of the artists' recordings using emerging download technologies.

The Company expects that InVision's recordings will also be available for purchase on other Internet music sites.

ECITY RECORDS

The Company expects to commence operations of a second record label, Ecity Records. Through this label, the Company intends to record, produce and distribute the music of certain of the independent artists featured on Independent Music Network who agree to sign with Ecity.

EMPLOYEES

As of August 31, 2000, Falcon employed 13 people, including two in sales and marketing, four in technology, two in creative and production and five in support, administration, finance, management and human resources. All employees except one are full-time. The Company believes that its relations with its employees are good.

ITEM 2. DESCRIPTION OF PROPERTY

Falcon's corporate headquarters facility consists of approximately 7,000 square feet of leased office space located at 675 Third Avenue, 12th Floor, New York, New York 10017. The lease has a ten year term that expires in April 2010, and provides for monthly rental payments of approximately $30,000.

ITEM 3. LEGAL PROCEEDINGS.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's common stock is listed on the OTC Bulletin Board of the National Association of Securities Dealers, Inc. under the symbol "INDE" (previously "JNET"). There is currently a limited trading market for shares of the Company's common stock, and the Company does not know whether an active market will develop. The table below lists the high and low bid prices for the Company's common stock as reported by the OTC Bulletin Board for the periods indicated. The prices, which were provided by the research department of the OTC Bulletin Board, reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The information gives effect to a one for forty reverse stock split of the Company's issued and outstanding common stock effective March 19, 1999.

As of August 31, 2000, shares of the Company's common stock were held by approximately 208 holders of record.

The Company has never declared or paid cash dividends on its capital stock. The Company currently intends to retain any earnings for use in its business and does not anticipate paying any cash dividends in the foreseeable future. Future dividends, if any, will be determined by the Company's Board of Directors.

During the fiscal year ended May 31, 2000, the Company sold the following securities without registration under the Securities Act of 1933, as amended (the "Securities Act").

In June 1999, the Company issued an aggregate of 50,000 shares of common stock to an employee of the Company in consideration for services performed for the Company. The issuance was intended to be exempt from registration pursuant to Section 4(2) of the Securities Act.

In August 1999, the Company issued an aggregate of 50,000 shares of common stock to an employee of the Company, and 5,000 shares to a consultant of the Company, in consideration for services performed for the Company. The issuances were intended to be exempt from registration pursuant to Section 4(2) of the Securities Act.

In December 1999, the Company issued an aggregate of 10,000 shares of common stock to certain directors of Falcon in exchange for consulting services. The issuances were intended to be exempt from registration pursuant to Section 4(2) of the Securities Act.

In March 2000, the Company issued an aggregate of 3,400,000 shares of common stock to 147 accredited investors in consideration for an aggregate of $8,500,000 in cash. After deducting commissions, fees and operating expenses, the Company received net proceeds of approximately $7,395,000. Noble International Investments, Inc. ("Noble") acted as the placement agent. In connection with this private placement, the Company granted Noble a warrant to purchase a maximum of 340,000 shares of common stock at an exercise price of $2.50 per share. The issuances were intended to be exempt from registration pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In March 2000, the Company issued an aggregate of 45,832 shares of common stock to certain employees in consideration for services performed for the Company. The issuance was intended to be exempt from registration pursuant to Section 4(2) of the Securities Act.

In April 2000, the Company issued an aggregate of 5,000 shares of common stock to the landlord of its executive offices stock in consideration for a one-time reduction in rental payments. The issuance was intended to be exempt from registration pursuant to Section 4(2) of the Securities Act.

In May 2000, the Company issued an aggregate of 90,000 shares of common stock to the then 18 members of its advisory board, in consideration for their consulting services. These issuances were intended to be exempt from registration pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act.

In May 2000, the Company issued an aggregate of 5,000 shares of common stock to a consultant of the Company in consideration for services performed for the Company. The issuance was intended to be exempt from registration pursuant to Section 4(2) of the Securities Act.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES WHICH APPEAR IN THIS FORM 10-KSB. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE DISCUSSED BELOW AND IN THE SECTION ENTITLED "RISK FACTORS" OF THIS FORM 10-KSB.

OVERVIEW

We are a diverse, development stage entertainment company with an emphasis on the music and music video entertainment industries. Our video programming is delivered on the Internet at www.imntv.com and, since June 1, 2000, on cable television in a limited number of markets in the U.S. We have not generated revenues since entering the entertainment industry in 1999. Independent Music Network, Inc., which we acquired in April 1999, has not generated revenues from operations since its inception in 1997.

PLAN OF OPERATION

Our current plan of operation for the next twelve months includes the continued development of our broadcast programming over national cable television, the continued design and development of our corporate web site, and the development of our record labels, InVision Records and Ecity Records.

We expect that our primary sources of revenue will be derived from Independent Music Network and InVision Records. We anticipate that Independent Music Network will generate revenues primarily from television advertising sales, video broadcasts and merchandising opportunities. We anticipate that revenue streams from InVision will be generated from the sales and licensing of musical recordings, representation and ownership of music publishing, licensing of published and non-published musical compositions and the licensing and merchandising of products related to the artists and musicians we sign. We solicit video tapes from amateur and professional musicians for broadcast over our IMNTV television channel, with the expectation of producing and mass marketing certain of this music under our record labels. To accomplish our goal, we plan to conduct and coordinate all advertising, band recruiting and video editing as well as facilitate the broadcast of the music videos, production and mass marketing the music of bands we sign.

Our ability to continue as a going concern is dependent upon our ability to generate sufficient revenues from operations to meet our working capital requirements. We expect to commence the sale of television advertising time on our network during the first quarter of 2001, and we expect to distribute our first musical recording in early 2001. Until we begin to produce substantive revenues, to sustain our short term capital needs we intend to seek additional financing. Our independent public accountants have raised substantial doubt as to our ability to continue as a going concern if we are unable to obtain such funding in the near future. See Note 2 to the consolidated financial statements included in this Annual Report.

We may experience significant fluctuations in future operating results due to a variety of factors, including:

o the level of traffic on our Internet sites;

o the amount and timing of capital expenditures and other costs relating to the expansion of our operations;

o technical difficulties or system downtime;

o general economic conditions and economic conditions specific to the Internet; and

o consumer acceptance of the artists and musicians signed by our record labels.

RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS FORM 10-KSB, THE FOLLOWING FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING THE COMPANY AND THERE MAY BE ADDITIONAL RISKS THAT THE COMPANY DOES NOT PRESENTLY KNOW OF OR THAT IT MAY CURRENTLY DEEM IMMATERIAL. ALL OF THESE RISKS MAY IMPAIR THE COMPANY'S BUSINESS, PROSPECTS AND RESULTS OF OPERATIONS.

RISKS GENERALLY RELATED TO OUR BUSINESS

IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL IN THE NEAR FUTURE, WE MAY HAVE TO CURTAIL OR CEASE OPERATIONS.

We have historically financed our operations primarily through the sale of our securities. As of May 31, 2000, we had cash and cash equivalents of $1,829,580 and an accumulated deficit of $5,968,847. We expect that we will need to raise additional funds in the immediate future in order to meet our working capital requirements. In this regard, our independent public accountants have raised substantial doubt as to our ability to continue as a going concern. See Note 2 to the consolidated financial statements included in this Annual Report. We may not be able to obtain additional financing on terms favorable to us, if at all. If adequate funds are not available to us, we may have to curtail or cease operations, which would materially harm our business and financial results. To the extent we raise additional funds through further issuances of equity or convertible debt or equity securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Furthermore, any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.

WE HAVE A LIMITED OPERATING HISTORY THAT MAKES AN EVALUATION OF OUR BUSINESS DIFFICULT.

Although we incorporated in March 1986, we did not begin developing our current business model until 1999. We only began broadcasting content over our music channel, in a limited number of markets and during a limited number of time periods, on June 1, 2000. In addition, as of August 31, 2000 we had signed only three artists to our record labels, and we do not anticipate distributing any of our artists' recordings until early 2001. Our extremely limited operating history makes it difficult to evaluate our current business and prospects or to accurately predict our future revenues or results of operations. Our business model, and accordingly our revenue and income potential, is new and unproven. In addition, we are subject to risks and difficulties frequently encountered by early-stage companies in new and rapidly evolving markets.

WE HAVE A NEW AND UNPROVEN BUSINESS MODEL AND MAY NOT GENERATE SUFFICIENT REVENUES FOR OUR BUSINESS TO SURVIVE OR BE SUCCESSFUL.

Our business model is based on the commercial viability of a new national cable television channel devoted to the broadcast of music videos of amateur and professional artists, as well as of two new record labels. In order for our business to be successful, we must not only develop services that directly generate revenues, but also provide content and services that attract consumers to our cable television channel and our web site. Our business model assumes that a large audience will develop for our cable television channel, that cable operators in many markets will air our programming, and that we will be able to generate significant revenues through the sale of advertising time on our channel. Our model further assumes that we will be able to generate significant revenues through the sale of recordings by our musical artists, as well as related merchandise. Each of these assumptions is unproven, and if any of the assumptions is incorrect, we may be unable to generate sufficient revenues to sustain our business or to obtain profitability.

We incurred net losses of $5,866,842 in the fiscal year ended May 31, 2000 and our accumulated deficit as of May 31, 2000 was $5,968,847. We have not achieved profitably and expect to continue to incur losses for the

foreseeable future. We expect those losses to increase from current levels as we continue to incur expenses to develop our products and services. We believe that our business depends on our ability to significantly increase revenues and to limit our operating expenses. If our revenues fail to grow at anticipated rates or our operating expenses increase without a commensurate increase in our revenues, or we fail to adjust operating expense levels appropriately, we may never be able to achieve profitability.

OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO BE VOLATILE, AND MAY CAUSE OUR STOCK PRICE TO FLUCTUATE.

Our future revenues and operating results are likely to vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control. Accordingly, quarter-to-quarter comparisons of our results of operations may not be indicative of future performance. It is possible that in some future periods our operating results will be below the expectations of public market analysts and investors. In this event, the price of our common stock will likely decline. Factors which may cause our revenues and operating results to fluctuate include the following:

o our ability to attract and retain advertisers;

o the willingness of cable operators to broadcast our programming;

o market acceptance of our music channel and our music releases;

o the timing and uncertainty of sales cycles;

o our ability to sign additional artists to our record labels;

o our ability to enter into satisfactory manufacturing and distribution arrangements for our music recordings;

o new services offered by current or future competitors; and

o general economic conditions, as well as economic conditions specific to the music industry.

WE FACE INTENSE COMPETITION FROM BUSINESSES THAT HAVE SIGNIFICANTLY MORE RESOURCES THAN WE DO.

We face intense competition for a finite amount of consumer discretionary spending from numerous other entertainment companies and other businesses in the entertainment industry, including television networks such as MTV and VH1, major recording companies such as Sony, Time Warner, Universal and EMI, and a wide variety of music- and entertainment-related web sites. All of these businesses have substantially greater resources, histories of attracting and retaining talent, obtaining properties and hiring key employees.

There are a number of television channels already on the market that offer music entertainment to their viewers. These channels are backed by large organizations that have more resources than we do. We compete, directly and indirectly, with these and other channels for viewers, consumers, content and service providers, advertisers and sponsors. To be competitive, we must enhance our services and content on a timely and cost-effective basis. There can be no assurance that we will be successful in attracting viewers, advertisers, sponsors or adapting our television channel to user requirements or emerging industry standards. Similarly, the market for recorded music is dominated by the major record companies, certain of which are a part of larger entertainment conglomerates, and have recording divisions with significant financial resources and promotional budgets and large artist and repertoire staffs to compete for a limited number of promising recording artists, producers and writers. Although we intend to use our television channel to promote the videos of our artists, there is also intense competition within the recording industry for "air time" by radio disc jockeys, which is essential to gain attention and create demand for recordings. There can be no assurance that any of our labels' artists, recordings or music videos will gain the exposure required to generate significant market interest or that we will be able to compete successfully.

We will compete with various forms of entertainment which provide similar value, including movies, video and audio cassettes, broadcast television, cable programming, special pay-per-view events, sporting events and other forms of entertainment which may be less expensive or provide other

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document advantages to our targeted viewers. We will also compete for advertising dollars with traditional media. While we believe that IMNTV is currently the only network of its kind, there can be no assurances that other companies are not developing or will not seek to develop

similar networks. If our network is successful, it is possible that other companies may seek to enter or capitalize on such a market and compete directly with us. Many of these companies may have substantially greater financing, personnel, technical and other resources than we do and may have well-established reputations for success in the development, promotion and marketing of entertainment events. There can be no assurance that we will be able to compete successfully with these other entities.

WE ARE SUBJECT TO ALL OF THE RISKS AND UNCERTAINTIES ASSOCIATED WITH THE ENTERTAINMENT INDUSTRY GENERALLY, ANY OF ALL OF WHICH MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS AND RESULTS OF OPERATIONS.

Content acquisition costs, as well as promotion and marketing expenses and third-party participation payable to producers and others, which reduce potential revenues derived from programming events and musical recordings, have increased significantly in recent years. Our future operating results will depend upon numerous factors beyond our control, including the popularity, price and timing of programming and special events being released and distributed, national, regional, and local economic conditions, changes in demographics, the availability of alternative forms of entertainment, critical reviews and public tastes and preferences, which change rapidly and cannot be predicted. If we are unable to successfully anticipate and respond to relatively rapid changes in consumers' tastes and preferences, our business and operating results will be adversely affected.

OUR ABILITY TO ACHIEVE OR MAINTAIN PROFITABILITY WILL BE CONSTRAINED IF WE DO NOT EFFECTIVELY MANAGE OUR ANTICIPATED RAPID GROWTH.

We expect to significantly increase our employee base as we implement our business model and develop our product and service offerings. We currently have only 13 employees. As we expand our operations, we expect to significantly increase the size of our employee base. Our management and operations are likely to be strained by this anticipated growth. To compete effectively and to manage future growth, we must improve our financial and management controls, reporting systems and procedures on a timely basis. We must also expand, train and manage our employee base. If we are not successful in managing our growth, our ability to achieve or maintain profitability may be harmed.

WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL, WHICH WOULD ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND EFFECTIVELY MANAGE OUR BUSINESS.

Our future performance will depend largely on the efforts and abilities of our senior executives and other key personnel. Our success will depend on our ability to attract and retain these key employees in the future. The market for such persons is extremely competitive and we may not find qualified replacements for personnel who leave us. In addition, we do not maintain key person life insurance on any of our key personnel, and have no plans to do so. The loss of, or the inability to attract, any one or more of our key personnel may harm our ability to develop and effectively manage our business.

CURRENT OR FUTURE GOVERNMENT REGULATION MAY ADD TO OUR OPERATING COSTS.

We may face unanticipated operating costs because of the current uncertainty surrounding potential government regulation of the Internet and e-commerce. We believe that we are not currently subject to direct regulation of our current and expected activities, other than regulations applicable to businesses generally. However, the Internet has rapidly emerged as a commerce medium, and governmental agencies have not yet been able to adapt all existing regulations to the Internet environment. Laws and regulations may be introduced and court decisions reached that affect the Internet or other online services, covering issues such as user pricing, user privacy, freedom of expression, access charges, content and quality of products and services, advertising, intellectual property rights and information security. Complying with new regulations would increase our operating costs. Furthermore, as a company with a significant Internet presence, it is unclear in which jurisdictions we are actually conducting business. Our failure to qualify to do business in a jurisdiction that requires us to do so could subject us to fines or penalties and could result in our inability to enforce contracts in that jurisdiction.

In addition, through our agreement with OlympuSAT, Inc., we are indirectly subject to regulation by the Federal Communications Commission in connection with operations of cable television systems, satellite

distribution systems and television broadcasters. From time to time there are pending before Congress various proposals which provide, among other things, for increased rate regulation of cable systems, some form of "must carry" regime for local broadcast stations, limits on the size of multiple system operators and limits on carriage of affiliated program services. In addition, legislation is periodically before Congress which would restore local authority to set cable rates, to require the Federal Communications Commission to determine whether and/or how to limit cable system ownership, and to require cable programmers to sell their product to non-cable distributors under certain circumstances. It is impossible to predict with accuracy whether any of these legislative proposals will be enacted, or, if enacted, the form they will take; however, any legislation which increases rate regulation or effects structural changes in the cable industry could have a material adverse impact on our business and operations.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WHICH COULD RESULT IN THEIR UNAUTHORIZED USE BY OUR COMPETITORS AND HAVE AN ADVERSE IMPACT ON OUR REVENUES.

Our success depends in part on our ability to protect our proprietary rights. There can be no assurance that the measures taken by us to protect our proprietary rights will be adequate to prevent misappropriation or independent development by others of programming and media concepts based upon, or otherwise similar to, those of our network. In addition, although we believe that our programming and concepts have been independently developed and do not infringe on the proprietary rights or trade secrets of others, there can be no assurance that our methods and concepts do not and will not so infringe or that third parties will not assert infringement claims, trade secret violations, competitive torts or other proprietary rights violations against us in the future. In the case of infringement, we could, under certain circumstances, be required to modify our programming or obtain a license. There can be no assurance that we would be able to do either in a timely manner or upon acceptable terms and conditions, and such failure could have a material adverse effect on our operations, cash flows and financial condition. There can also be no assurance that we will have the resources to defend or prosecute proprietary rights infringement action.

In addition, our record label business could be adversely affected by the unauthorized reproduction of recordings for commercial sale and by home taping. Unauthorized recordings of our products could result in the loss of substantial revenues. We may in the future file lawsuits, either on our own behalf or in conjunction with other music publishers, copyright owners and publishing organizations seeking injunctive relief and/or monetary damages from persons and companies who interfere with our property rights. Future actions could be costly and time consuming and may divert management's attention from our business affairs which could have a material adverse effect on our operations. Similarly, new technologies, including digital audio tape and recordable CD technology, may increase the opportunity for contraband reproduction for distribution as well as the opportunity for consumers to make high quality home copies of recordings. In the absence of adequate copyright or other protections, new recording technologies could adversely affect the sale of our music and consequently adversely affect our operating results.

We have filed U.S. trademark applications with respect to a number of our names and marks, including "IMC," "Independent Music Channel," "IMNTV" and "InVision." We cannot assure you that we will be able to secure registration of any of these trademarks. In addition, we do not have any trademarks registered, nor do we have any trademark applications pending, outside of the United States. The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. Effective copyright and trademark protection may not be available in other jurisdictions. If we cannot adequately protect our proprietary rights, our competitors could benefit from the unauthorized use of such rights, resulting in an adverse impact on our revenues. Even if we are able to protect our proprietary rights, we could incur significant costs to defend our rights.

RISKS RELATED TO OUR TELEVISION BUSINESS

IF WE FAIL TO INCREASE THE SIZE OF THE AUDIENCE FOR OUR MUSIC CHANNEL AND WEB SITE, WE MAY NOT BE ABLE TO ATTRACT ADVERTISERS OR STRATEGIC ALLIANCES.

Increasing the size of our audience is critical to selling advertising and to otherwise generating revenues. If we cannot increase the size of our audience, then we may be unable to attract advertisers. In addition, we may be at a relative disadvantage to other media companies with larger audiences that may be able to leverage their audiences

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document to access more advertisers and enter into significant strategic alliances. To increase the size of our audience, we must:

o offer compelling music content;

o conduct effective marketing campaigns to acquire new users and consumers;

o develop and maintain existing distribution relationships with other web sites;

o update and enhance the features of our web site; and

o offer targeted, relevant products and services.

Our failure to achieve one or more of these objectives could adversely affect our business, and we cannot assure you that we will be successful in these efforts.

A significant element of our strategy is to build a loyal community of members on our web site and web portal because we believe community features help retain actively engaged users. If we are not successful in developing such a community, then it may be more difficult to increase the size of our audience.

We also depend on establishing and maintaining relationships with high-traffic web sites to increase our audience. There is intense competition for placements on these sites, and we may not be able to establish such relationships on commercially reasonable terms or at all. Even if we enter into agreements with these web sites, they themselves may not attract significant numbers of users. Therefore, our web site may not obtain additional users from these relationships.

OUR BUSINESS IS DEPENDENT UPON THE DISTRIBUTION OF OUR PROGRAMMING THROUGH CABLE TELEVISION SYSTEMS.

IMNTV must compete for a limited amount of broadcast space on cable television systems with a large number of well-established programmers supplying a variety of alternative programming. We expect that our ability to generate revenues through sales of advertising time on IMNTV will be dependent in large part on our ability to distribute our television programming to a large audience. We do not know how many cable televisions systems have channels available for, or any interest in, programming featuring independent music interests or whether OlympuSAT will be able to secure available channels for our programming on a profitable basis. Accordingly, we cannot assure you that we will be able to secure channel space in a large number of markets or be able to expand our operations as planned. If we are unable to broaden and maintain the distribution of our channel and its programming, our ability to generate revenues and our results of operations would be adversely affected.

IF WE ARE UNABLE TO ATTRACT ADVERTISERS AND SPONSORS TO OUR INDEPENDENT MUSIC NETWORK, OUR BUSINESS WOULD BE HARMED.

We expect to rely heavily upon the sale of advertising time on IMNTV to generate revenues. Such sales will likely be dependent upon our ability to demonstrate that our programming is able to reach the demographics that advertisers and sponsors seek to target. Our success in these efforts will be affected by a number of factors including, among others, our ability to deliver high quality, entertaining programming that is appealing to our targeted viewers. There can be no assurance, however, that we will be successful in our endeavors or that we will receive sufficient advertising revenues to obtain or maintain profitability.

Our ability to generate advertising revenues also may be adversely affected by economic downturns which, if prolonged, might have an adverse impact on television advertising, in general, and on our results of operations, cash flows and financial condition. Additionally, advertising revenues may be adversely impacted by many other factors beyond our control, including the amount of funds that advertisers dedicate to television advertising and sponsorship in general and to our programming in particular, the number of advertisers seeking audiences within the demographic groups to which our programming is targeted, competition within national and regional markets from other media, and regulatory restrictions on advertising and sponsorships such as liquor or cigarette advertising. There can be no assurance that we will be able to attract advertisers. The inability to attract advertisers or to

maintain these relationships once obtained would have an adverse affect on our results of operations, cash flows and financial condition.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document IF IMNTV DOES NOT ATTRACT LOYAL SUPPORT FROM ITS TARGETED VIEWING AUDIENCE, OUR BUSINESS WILL BE ADVERSELY AFFECTED.

Our business plan is predicated on IMNTV attracting active and loyal support from the community of music fans that have an interest in independent music. There can be no assurance that there will be significant support from our anticipated viewership segment or that sufficient public acceptance of our programming will enable IMNTV to operate profitably. Moreover, there can be no assurance that a sufficient number of advertisers will support our programming because it may be considered too far outside mainstream programming, or it may not reach a large enough audience. If we do not engender such support from our targeted audience or advertisers, our results of operations, cash flows and financial condition would be adversely affected.

SEASONALITY IN REVENUES IN THE TELEVISION INDUSTRY MAY HAVE AN ADVERSE AFFECT ON OUR RESULTS OF OPERATIONS, CASH FLOWS AND FINANCIAL CONDITION.

Advertising revenues in the television industry fluctuate due to seasonality. Television network revenues are typically lower in the third quarter due to the number of reruns broadcast during the summer months. In the future, our results of operations may fluctuate from quarter to quarter, which could have a material adverse affect on our results of operations, cash flows and financial condition.

WE MAY NOT BE ABLE TO ESTABLISH THE IMNTV BRAND.

We are new and little known in the entertainment sector and, although we were incorporated in 1986, our efforts in the entertainment industry only commenced in 1999. In order to generate traffic to our web site and web portal and attract an audience to our entertainment channel, we will need to spend significant resources on marketing and promoting our record label, music programming and our web site. If we are unable to establish brand recognition in the areas in which we operate, our business may be negatively affected.

DELIVERY OF OUR CONTENT VIA TELEVISION OR THE INTERNET MAY BE INTERRUPTED DUE TO SYSTEMS FAILURES, NATURAL DISASTERS OR OTHER CAUSES.

We are subject to the risk that delivery of our services via cable television or the Internet may be interrupted as a result of satellite failure, communications and/or network equipment damage caused by natural disasters such as earthquakes and fires, hardware failures, increased stress on communications and/or network hardware, local power losses or other telecommunications failures and/or capacity constraints on us or our vendors' or suppliers' hardware. Any such interruptions may cause us to lose viewers and, accordingly, may adversely affect our business and results of operations.

WE ARE DEPENDENT ON OUR CONTRACT WITH OLYMPUSAT, INC. TO PROVIDE NATIONAL CABLE BROADCASTING SERVICES.

Completion of our business plan of national television broadcasting is dependent upon OlympuSAT, Inc.'s performance of its obligations under the broadcast agreement between us and OlympuSAT to place our programming on additional cable systems. Similarly, completion of our business plan is also dependent upon our ability to perform our obligations under the broadcast agreement. Our obligations include payment of certain monthly transport fees, monthly playback fees and monthly subscriber fees. If we are unable to meet those obligations, OlympuSAT might discontinue performing services under the broadcast agreement, which would adversely affect our business.

WE ARE DEPENDENT ON OUR AGREEMENT WITH YAHOO! TO PROVIDE OUR NATIONAL TELEVISION MUSIC VIDEO PROGRAMMING TO THE INTERNET.

Completion of our business plan of distribution of music video programming on the Internet is dependent upon Yahoo's performance of its obligations under the television station agreement with Yahoo! Inc. Similarly,

completion of the business plan is also dependent upon our ability to perform our obligations under the television station agreement. Our obligations include payment of approximately $8,000 per month to Yahoo! to utilize its streaming software and hardware to transmit Falcon's audio and video programming.

RISKS RELATED TO OUR RECORDING BUSINESS

WE HAVE A LIMITED ARTIST ROSTER AND IT IS UNCERTAINTY THAT THESE ARTISTS WILL EVER GAIN MARKET ACCEPTANCE, WHICH COULD SUBSTANTIALLY HARM OUR BUSINESS.

The success of our business model will depend, in large part, on our ability to generate significant revenues in the future from the exploitation of a limited number of new and unknown recording artists in limited musical genres.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document At present we have only three artists signed to our label. Accordingly, our continued success will be dependent upon our ability to sign and retain promising artists who will appeal to popular taste over a significant period of time. As is typically the case in the record industry, demand and market acceptance for newly introduced and unknown artists and recordings is subject to a high level of uncertainty. Achieving market acceptance for new artists and recordings will require us to spend significant efforts and expenditures for advertising, marketing and promotional activities, including obtaining access to television and radio "air time" to create awareness of and demand for our recordings by consumers. We currently have limited marketing capabilities, resources and personnel. There can be no assurance that we will be able, for financial or other reasons, to successfully promote and market our newly recorded music or that any of our efforts will result in initial or continued market acceptance for our products.

WE ARE SUBJECT TO BUSINESS RISKS ASSOCIATED WITH TALENT DEVELOPMENT.

Currently, we have entered into recording contracts with only three artists. There can be no assurance that we will be able to attract other artists, or, if we are able to attract such talent, that we will be able to develop that talent successfully or in such a manner that significant sales of artist product will result. There can be no assurance that any artist developed by us will not request a release from his or her agreement with us. Because of the highly personal and creative nature of a recording artist's contractual obligations, it is not feasible to force an unwilling artist to perform the terms of his or her contract. The failure to enter into recording contracts with additional talented artists, or the loss of an artist with whom we have signed a recording contract, could have a materially adverse effect on our results of operations.

RECORD PRODUCTION AND PROMOTION ACTIVITIES ARE SPECULATIVE AND ARE SUBJECT TO ALL OF THE RISKS GENERALLY ASSOCIATED WITH THE RECORDING INDUSTRY.

Many commercial recordings released in the United States do not earn sufficient gross receipts to cover the costs of production, promotion, marketing and distribution and to return initial investments. Production costs and promotion, marketing and distribution expenses, as well as third-party participation costs payable to producers, recording artists and others, which reduce potential revenues derived from record sales, have increased significantly in recent years. Our future operating results will depend on numerous factors beyond our control, such as the popularity and timing of other recordings being released, retail prices, national, regional and local economic conditions, changes in consumer demographics and critical reviews and public tastes and preferences, which change rapidly and cannot be accurately predicted. Our ability to plan for record production and promotional activities will be significantly affected by our ability to anticipate and respond to changes in consumer tastes and preferences, primarily those consumers comprising our target market. A decline in the popularity of pre-recorded music, in the recording industry generally or in our particular market segments could materially adversely affect our business prospects and financial results.

Record production activities are also subject to unforeseen events, unanticipated production cost overruns and technical and operating difficulties. Significant up-front expenses associated with record production and promotion could adversely affect our future operating results. Although we expect to seek to reduce the financial risk of individual recordings by limiting our initial production runs, actual production costs may exceed production budgets and the occurrence of material cost overruns could have a material adverse effect on our operating results.

WE HAVE NOT ENTERED INTO ANY AGREEMENTS WITH DISTRIBUTORS TO DISTRIBUTE MUSIC RECORDED FOR OUR RECORD LABELS.

Our success will be largely dependent upon the marketing efforts of our distributors. Any distributors we may engage will continue to distribute other recordings, including recordings in which they may have a large financial interest and, accordingly, more incentive to actively distribute. If we are unable to enter into distribution agreements with recognized distributors on terms satisfactory to us, or if such distribution agreements are cancelled after inception, our business and results of operations will be adversely affected.

ADVANCES IN NEW TECHNOLOGIES MAY INCREASE THE LIKELIHOOD FOR CONTRABAND REPRODUCTION, WHICH COULD HARM OUR BUSINESS.

New technologies, including digital audio tape and recordable CD technology, may increase the opportunity for contraband reproduction for distribution as well as the opportunity for consumers to make high quality home copies of recordings. New recording technologies could adversely affect the sale of CDs and tapes. We expect that our labels' recordings will initially be produced primarily for CDs. A leveling off or a decline in sales of CDs as a

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document result of the introduction of new technologies could adversely affect our business, operating results, cash flows and financial condition.

OUR MUSIC PRODUCTS WILL BE SUBJECT TO RETURN IF NOT SOLD TO CONSUMERS.

At the time of product sales, we may establish a reserve for future returns based primarily on historical return rates and recognize revenues net of estimated product returns. We anticipate that the agreements we may enter into with distributors will permit the distributors to withhold up to approximately 35% of revenues for product returns. Product returns which significantly exceed our reserves would materially adversely affect our operating results.

WE WILL RELY ON THIRD-PARTY VENDORS FOR THE MANUFACTURE OF CDS AND TAPES. WE DO NOT YET, AND MAY NEVER, MAINTAIN AGREEMENTS WITH ANY PRODUCT MANUFACTURERS AND MAY NEED TO PURCHASE CDS AND TAPES PURSUANT TO PURCHASE ORDERS PLACED FROM TIME TO TIME IN THE ORDINARY COURSE OF BUSINESS.

We will be dependent on the ability of third-party manufacturers and other vendors to provide adequate supplies of CDs and tapes on a timely basis and on favorable terms. Several of these manufacturers may require that we purchase certain minimum quantities of CDs and tapes with each purchase order. Although we believe that alternative manufacturing sources are currently available, there can be no assurance that manufacturers will have sufficient production capacity or incentive to satisfy our product and scheduling requirements during any period of sustained demand or that we will not be subject to price fluctuations or periodic delays. Failure or delay by our manufacturers in supplying CDs and tapes to us on favorable terms could result in material interruptions in our operations and adversely affect our ability to deliver our products on a timely and competitive basis.

WE ANTICIPATE THAT A PORTION OF OUR SALES OF CDS AND TAPES WILL BE MADE IN INTERNATIONAL MARKETS, WHICH WILL SUBJECT US TO SPECIAL RISKS.

We expect that a portion of our sales of CDs and tapes will be to foreign countries. Accordingly, we will be subject to increased credit risks, customs duties and other trade restrictions, fluctuations in foreign currency exchange rates, shipping delays and international political and economic developments. A decline in the economic prospects of emerging foreign markets could adversely affect our ability to initiate, and once initiated, expand, international sales. Foreign sales also involve potential difficulties in enforcing foreign license arrangements in the event of non-performance by the licensee.

RISKS RELATED TO OUR COMMON STOCK

OUR COMMON STOCK IS TRADED ON THE "OVER THE COUNTER BULLETIN BOARD" AND THERE IS CURRENTLY ONLY A LIMITED TRADING MARKET FOR OUR SHARES.

Because of the limited trading market for shares of our common stock, historic market prices may not be indicative of the prices at which our shares can be bought or sold. The market price of our common stock may fall due to a number of factors, including:

o actual or anticipated fluctuations in our operating results;

o changes in expectations as to our future financial performance;

o availability of additional shares of common stock for public sale;

o changes in securities analysts' financial estimates; and

o the operating and stock price performance of our competitors and other comparable companies.

THE HOLDINGS OF OUR CONTROLLING STOCKHOLDER MAY LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS SUBJECT TO A STOCKHOLDER VOTE, INCLUDING A SALE OF OUR COMPANY ON TERMS THAT MAY BE ATTRACTIVE TO YOU.

James Fallacaro, our Chief Executive Officer and President and Chairman of our Board of Directors, currently owns approximately 63% of our outstanding common stock. Mr. Fallacaro's stock ownership and management positions enable him to exert considerable influence over us, including the election of directors and the approval of other actions submitted to our stockholders. In addition, without the consent of Mr. Fallacaro, we may be prevented from entering into transactions that could be viewed as beneficial to other stockholders, including a sale of our company. This could prevent you from selling your stock to a potential acquiror at prices that exceed the market price of our stock.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SHARES OF OUR COMMON STOCK ELIGIBLE FOR PUBLIC SALE COULD DEPRESS OUR STOCK PRICE.

The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market, or the perception that these sales could occur. In addition to shares of our common stock that may be eligible for sale under Rule 144 or other exemptions from registration under U.S. securities laws, we are obligated to register a total of 4,190,000 shares of our common stock, including shares issuable upon the exercise of outstanding warrants, for resale.

ITEM 7. FINANCIAL STATEMENTS

The information required by this item is incorporated herein by reference to the consolidated financial statements listed in Item 13 below.

ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The directors and executive officers of the Company, their ages and their positions with the Company are as follows:

JAMES FALLACARO has served as the Chief Executive Officer, President and Chairman of the Board of Falcon since its formation in 1986. Since 1991, Mr. Fallacaro has also served as President of CJS Holdings, Inc., a technology licensing company he founded. From 1986 to 1987, Mr. Fallacaro served as President, and from 1985 to 1986 as a Vice President, of Real Estate Financial Investment Corp., which was in the business of acquiring, syndicating and operating real property. From 1983 to 1985, Mr. Fallacaro was Vice President of Diversified Resources Group, a firm engaged in the business of acquiring, syndicating and managing real estate. From 1979 to 1983, Mr. Fallacaro was President of Valkyerie Technology Group, a firm engaged in licensing of foreign and domestic technology.

ANTHONY ESCAMILLA has served as Executive Vice President, Chief Operating Officer and a director of Falcon since March 1999. Prior to joining Falcon, Mr. Escamilla served as a consultant to the Company. From July 1999 to January 2000, Mr. Escamilla was the Chief Executive and Financial Officer, and a director, of Regent Group, Inc. From November 1997 through July 1999, Mr. Escamilla was principally self employed as a financial consultant to numerous businesses, including MotorSports USA, Inc. From January 1993 through October 1997, he worked for the Long-Term Credit Bank of Japan, Ltd. in its Corporate Finance and Cross Border M&A Departments. From September 1986 through July 1990, Mr. Escamilla worked for Deloitte & Touche in its Audit Department. He earned MBA and BS degrees from the University of Texas at Austin and the University of Connecticut, respectively. Mr. Escamilla is a Certified Public Accountant.

CHRISTOPHER MAURITZ has been Chief Technology Officer of the Company

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document since February 2000. Prior to joining the Company, Mr. Mauritz served as a consultant to Falcon. From June 1999 through February 2000, Mr. Mauritz served as the Chief Operating and Chief Technology Officer of Oven Digital, Inc. From July 1998 through March 1999, Mr. Mauritz was the National Director for System Administration and Network Engineering of Rare Medium Inc. From November 1997 through February 2000, he was a Network Engineer and Member of the Board of Advisors for Net Exchange, Inc. From June 1997 through June 1998, Mr. Mauritz was Network Engineer and Technical Sales Consultant at New York Net, Inc. From May 1996 through June 1997, he was Director of Marketing and Director of Internet Operations at IBS Interactive, Inc. From 1992 through 1997, Mr. Mauritz was the Founder and Chief Executive Officer of Mordor International, an early public access Internet provider in the New York metropolitan area. From November 1989 through May 1995, Mr. Mauritz held various positions in the Latin American Finance Group of The Long-Term Credit Bank of Japan, Ltd. where he was responsible for analyzing Latin American corporate finance transactions,

debt restructuring, and loan portfolio management. Mr. Mauritz received a B.A. in Economics from Columbia University in 1989.

DAVID SIFFORD has served as a Senior Vice President and a director of Falcon since September 1999. Prior to joining Falcon, Mr. Sifford served as a consultant to the Company. From 1995 to present, Mr. Sifford has operated Sifford Consulting Group, a firm that provides strategic consulting and advisory services within the cable and television industries and the entertainment sector of investment banking. From 1987 to 1995, Mr. Sifford was Executive Vice President of Tribune Entertainment Company, where he was responsible for program development, domestic and international sales and marketing for syndicated programs. From 1984 to 1987, Mr. Sifford was president of King World Enterprises, where he was responsible for the negotiation of distribution agreements, the development of a domestic and international sales force and marketing for syndicated programs. From 1969 to 1984, Mr. Sifford held various senior level positions with companies in the entertainment industry. Mr. Sifford received a Bachelor of Arts in Finance and Business from St. Andrews Presbyterian College in 1966. He is a member of The National Association of Television Program Executives ("NATPE") and INTV. Mr. Sifford was a board member of NATPE from 1976 to 1986.

CORINNE FALLACARO has served as Secretary, Treasurer and as a director of Falcon since its inception in 1986. Ms. Fallacaro has also served as Vice-President of CJS Holdings, Inc., a private technology licensing company, since 1991. Ms. Fallacaro is the spouse of James Fallacaro, the Company's Chief Executive Officer, President and Chairman of the Board.

DIRECTOR COMPENSATION

Our directors do not receive compensation for attendance at board meetings or board committee meetings. However, our directors are reimbursed for all reasonable out-of-pocket expenses incurred in connection with their attendance at board and board committee meetings.

SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The rules promulgated under Section 16(a) of the Securities Exchange Act of 1934, as amended, require the Company's officers and Directors, and persons who own more than 10 percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and to furnish the Company with copies. Based solely upon a review of Forms 3, 4 and 5 furnished to the Company during the fiscal year ended May 31, 2000, the Company believes that its officers, directors and 10% stockholders have timely filed all reports required by Section 16(a) to be filed, except that each of Mark Eddinger, Anthony Escamilla, James Fallacaro and Christopher Mauritz failed to timely file a Form 3 upon their respective appointments as officers and/or directors, and Anthony Escamilla failed to timely file one Form 4, reporting an acquisition of shares of common stock.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning the compensation paid by the Company to its Chief Executive Officer and the only other executive officer of the Company who received compensation in excess of $100,000 during the fiscal years ended May 31, 2000, 1999 and 1998.

------1 Represents the fair market value of 20,833 shares of the Company's common stock issued to Mr. Eddinger in March 2000, based on the closing price of the common stock on August 31, 2000, as reported on the OTC Bulletin Board.

EMPLOYMENT AGREEMENTS

On February 15, 2000, the Company entered into a three-year employment agreement with Mark Eddinger, which agreement was terminated effective as of August 28, 2000. Under this agreement, Mr. Eddinger was hired as the President and Chief Operating Officer of InVision Records, and the Company agreed to pay him an annual salary of $120,000. The agreement provided for bonuses based upon the Company's profitability and Mr. Eddinger's progress made towards specific goals set for his office. The agreement also provided for the grant to Mr. Eddinger of 150,000 shares of common stock, vesting at a rate of 12,500 shares per month.

In addition, on February 15, 2000, the Company entered into a consulting agreement with Star West LLC ("Star West"), of which Mr. Eddinger is the President, pursuant to which Star West provided consulting services to the Company. The term of this agreement, which was terminated on June 1, 2000, was to be continuous with Mr. Eddinger's employment with InVision Records. The agreement provided that Star West would be paid a consulting fee of $20,000 per month. In connection with the termination of this agreement on June 1, 2000, Mr. Eddinger's annual salary under his employment agreement was increased to $360,000.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to the Company regarding the beneficial ownership of shares of the Company's common stock as of August 31, 2000 by: (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of its common stock, (ii) each director, (iii) the Chief Executive Officer, and (iv) all executive officers and directors as a group.

In the table below, an asterisk (*) indicates less than one percent ownership. Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of Falcon Entertainment Corp., 675 Third Avenue, 12th Floor, New York, New York 10017.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In March 1999, the Company issued James Fallacaro, the Company's Chief Executive Officer, President and Chairman of the Board, 8,500,000 shares of common stock for an aggregate purchase price of $20,000. In April 1999, the Company acquired all of the issued and outstanding shares of common stock of Independent Music Network, Inc. from Mr. Fallacaro in exchange for 100,000 shares of common stock of the Company and $50,000.

From February 15, 2000 through May 31, 2000, the Company paid Star West, LLC, a company controlled by Mark Eddinger, the President and Chief Operating Officer of the Company's InVision subsidiary, a consulting fee of $240,000 per year pursuant to a consulting agreement dated February 15, 2000. This agreement was terminated effective as of June 1, 2000.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this Form 10-KSB:

1. FINANCIAL STATEMENTS. The following consolidated financial statements of Falcon are filed as a part of this Form 10-KSB on the pages indicated:

2. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B.

* Incorporated by reference to the Company's Registration Statement on Form 10-SB filed with the SEC on June 21, 1999.

** Incorporated by reference to the Company's quarterly report on Form 10-QSB for the period ended November 30, 1999, filed with the SEC on January 14,1999.

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

+ Management contract.

(b) Reports on Form 8-K:

None.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 13th day of September, 2000.

FALCON ENTERTAINMENT CORP.

By: /s/ James Fallacaro ------James Fallacaro, Chairman, Chief Executive Officer President

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints James Fallacaro and Anthony Escamilla, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report on Form 10-KSB, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

* Incorporated by reference to the Company's Registration Statement on Form 10-SB filed with the SEC on June 21, 1999.

** Incorporated by reference to the Company's quarterly report on Form 10-QSB for the period ended November 30, 1999, filed with the SEC on January 14, 1999.

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

+ Management contract.

------

FALCON ENTERTAINMENT CORPORATION AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS MAY 31, 2000

C O N T E N T S

INDEPENDENT AUDITORS' REPORT ------

To the Board of Directors and Stockholders Falcon Entertainment Corporation New York, New York

We have audited the accompanying consolidated balance sheet of Falcon Entertainment Corporation and Subsidiaries (a development stage company) as of May 31, 2000, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended May 31, 2000 and for the period from inception (November 6, 1997) to May 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Falcon Entertainment Corporation and Subsidiaries as of May 31, 2000, and the results of its operations and its cash flows for each of the two years in the period then ended, and for the period from inception (November 6, 1997) to May 31, 2000, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has sustained operating losses and negative cash flows from operations since inception. In the absence of achieving profitable operations and positive cash flows from operations or obtaining debt or equity financing, the Company may have difficulty meeting current obligations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

/s/ Kaufman, Rossin & Co. ------KAUFMAN, ROSSIN & CO.

Miami, Florida

F-1

FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEET MAY 31, 2000

See accompanying notes.

F-2

FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

F-3

FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION (NOVEMBER 6, 1997) TO MAY 31, 2000

See accompanying notes.

F-4

FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS

On June 1, 1999, 50,000 shares of common stock valued at $125,000 were converted to a note payable.

See accompanying notes.

F-5

FALCON ENTERTAINMENT CORPORATION & SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of Falcon Entertainment Corporation (Falcon) and its subsidiaries, Independent Music Network, Inc. (IMN), Independent Music Channel, Inc. (IMC) d/b/a Ecity Records, InVision Records, Inc., and Jump2web.com Corporation (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation.

ORGANIZATION AND BUSINESS ACTIVITY

The Company is a diversified entertainment company that broadcasts music videos of amateur and professional artists over cable and direct satellite television on its television channel, IMNTV, and that webcasts those videos over the Internet through its web site, www.IMNTV.com. It also operates two record labels, InVision Records and Ecity Records through which it intends to produce and mass market the music of artists and bands, including certain of those who submit videos for broadcast over IMNTV. The Company further intends to develop its web site into a web portal to promote its products and services, promote the musicians signed to its record labels, provide music news and related informational services and provide links to related web sites.

The Company was incorporated in March 1986 under the laws of the State of Delaware under the name AVTR Systems, Inc. In April 1999, the Company changed its name to Independent Music Group, Inc. and in December 1999 it changed its name to Falcon Entertainment Corporation. In April 1999, the Company acquired all of the issued and outstanding capital stock of Independent Music Network, Inc., a Delaware corporation, from the Company's President, Chief Executive Officer and Chairman.

The Company is considered to be in the development stage, and the accompanying financial statements represent those of a development stage company.

CASH AND EQUIVALENTS

Cash and equivalents consist of cash and all highly liquid investments readily convertible to cash. The Company, from time to time, maintains cash balances in excess of federally insured limits.

ADVERTISING COSTS

Advertising costs are charged to operations when incurred. Costs of communicating advertising are incurred when the service has been received. Advertising expense amounted to $3,567,956 for the year ended May 31, 2000.

F-6

------NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ------

INCOME TAXES

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company accounts for income taxes according to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which requires a liability approach to calculating deferred income taxes.

USE OF ESTIMATES

The accounting and reporting policies of the Company are in conformity with generally accepted accounting principles. The presentation 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 disclosures of contingent assets and liabilities as of the balance sheet date and the reported amounts of revenues and expenses for the periods presented. Actual results could differ from those estimates.

The Company has recorded a deferred tax asset of approximately $2,520,000 at May 31, 2000 which is completely offset by a valuation allowance. Realization of the deferred tax asset is dependent on generating sufficient taxable income in the future. The amount of deferred tax asset considered realizable could change in the near term if estimates of future taxable income are increased.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" requires that the Company disclose estimated fair values for its financial instruments. The carrying value of the cash and equivalents and certificates of deposit approximates fair value. The carrying value of notes payable - stockholder approximates fair value as the interest rate is not significantly different from market rates available to the Company.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Expenditures for major betterments and additions are charged to the asset accounts, while replacements, maintenance and repairs which do not extend the lives of the respective assets are charged to expense in the period incurred.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization of property and equipment is computed using straight-line methods over the estimated useful lives of the assets. Amortization of leasehold improvements is computed on a straight-line basis of the shorter of the estimated useful lives of the assets or the remaining term of the related lease. The range of useful lives is as follows:

~~Machinery and equipment 5 years Computer and office equipment 5 years Computer software 3 years Leasehold improvements 10 years~~

~~F-7~~

~~------NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ------~~

~~NET LOSS PER SHARE~~

Net loss per share is computed in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share," based on the weighted average number of common shares outstanding, restated to give effect to the recapitalization. Outstanding stock warrants were not considered in the calculation of weighted average number of common shares outstanding, as their effect would have been anti-dilutive.

~~ADVANCES TO ARTISTS AND PRODUCERS~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In accordance with Statement of Financial Accounting Standards No. 50, "Financial Reporting in the Record and Music Industry", advances to artists and producers are capitalized as an asset when the current popularity and past performance of the artist or producer provides a sound basis for estimating the probable future recoverability of such advances from future royalties to be earned by the artist or producer. Advances are charged to expense as subsequent royalties are earned by the artist. Any portion of advances that appear not to be recoverable, are charged to expense during the period that the advances are deemed to be non-recoverable.

The cost of a record master borne by the record company shall be reported as an asset if the past performance and current popularity of the artist provides a sound basis for estimating that the cost will be recovered from future sales. Otherwise, that cost shall be charged to expense. The amount recognized as an asset shall be amortized over the estimated life of the recorded performance using a method that reasonably relates the amount to the net revenue expected to be realized.

~~RECLASSIFICATION~~

~~Certain amounts included in the 1999 financial statements have been reclassified to conform with the 2000 statement presentation.~~

~~------NOTE 2. GOING CONCERN ------~~

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception.

The Company's ability to continue as a going concern is dependent upon achieving profitable operations and positive cash flows from operations or obtaining debt or equity financing. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Management is attempting to raise additional capital of up to $5 million through a private placement on a best efforts basis, which will assist the Company in funding operations and provide the opportunity for the Company to continue as a going concern. Management believes it will be successful in raising capital sufficient to continue operations.

~~F-8~~

~~------NOTE 3. PREPAID EXPENSES ------~~

~~At May 31, 2000, prepaid expenses consisted of the following:~~

Prepaid expenses $ 20,987 Prepaid advertising 324,010 Prepaid consulting 10,000 Prepaid rent 41,212 ------
Total prepaid expenses $ 396,209 ======

~~------NOTE 4. PREPAID ARTIST FEES ------~~

The Company entered into a contract with an established artist in which they paid the artist an initial fee of $250,000, plus legal fees of $10,000. These fees are being amortized on a straight-line basis over the estimated life of the contract of approximately two years.

~~------~~

~~The income tax benefit consisted of the following:~~

~~Deferred income taxes of approximately $2,520,000 are comprised of net operating loss carryforwards and are completely offset by a valuation allowance.~~

The difference between the tax benefits and the amounts computed by applying the federal statutory tax rates to the losses before income taxes are due to increases in the valuation allowance and state tax benefits.

~~The Company has net operating loss carryforwards totaling approximately $6,700,000, expiring in various years through 2019.~~

~~F-9~~

~~------NOTE 6. MATRIX AGREEMENT COSTS ------~~

On May 8, 2000, the Company entered into an income and talent acquisition agreement (Matrix Agreement) with Matrix Music Works (Matrix), a music production company, which currently has a number of artists in development and is a company owned by a shareholder and member of the Company's advisory board. Pursuant to the Matrix Agreement, the Company paid $250,000 for the right to receive (1) 25% of the net income, as defined, of Matrix for an indefinite period, (2) 25% of royalty income derived from Matrix's production contracts for existing artists on the "artist roster" for the term of the respective agreements between Matrix and the artist and (3) 25% of royalty income from any new artists signed by Matrix for the next five years. As recoverability of this investment is dependent upon the popularity of certain Matrix artists and there is no sound basis for estimating future royalties to be earned by these artists this amount has been expensed in the accompanying consolidated statement of operations.

In addition, the Company entered into a right of first refusal agreement with Matrix whereby, for $100,000, the Company received the right of first refusal to review projects and acquire an interest in these projects at fair market value. The agreement has a stated term of five years and has been expensed in the accompanying consolidated statement of operations.

~~------NOTE 7. PROPERTY AND EQUIPMENT ------~~

~~At May 31, 2000, property and equipment consisted of the following:~~

Machinery and equipment $ 7,165 Leasehold improvements 6,185 Computer and office equipment 181,180 Computer software 256,722 ------451,252 Less: accumulated depreciation and amortization (6,717) ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document $ 444,535 ======

~~Depreciation expense amounted to $6,717 for the year ended May 31, 2000.~~

~~------NOTE 8. NOTE PAYABLE - STOCKHOLDER ------~~

At May 31, 2000, note payable - stockholder consisted of amounts due to the majority stockholder and officer of the Company. The note bears interest at 10%, is unsecured and due on demand. Interest expense on the note amounted to $16,347 for the year ended May 31, 2000, $30,574 for the year ended May 31, 1999, and $73,770 for the period from inception (November 6, 1997) to May 31, 2000.

~~F-10~~

~~------NOTE 9. COMMITMENTS ------~~

~~OPERATING LEASES~~

~~The Company is obligated under a non-cancelable operating lease for its office facility located in New York, New York, which expires July 2010.~~

~~Future minimum lease payments under all non-cancelable leases comprised principally of the office lease, are as follows:~~

2001 $ 364,534 2002 335,821 2003 364,534 2004 377,167 2005 378,316 Thereafter 1,964,452 ------
$ 3,784,824 ======

~~Rent expense incurred under all operating leases amounted to $12,597 for the year ended May 31, 2000.~~

~~IRREVOCABLE STANDBY LETTER OF CREDIT~~

The Company has a $344,550 irrevocable standby letter of credit with a bank in favor of the lessor of its New York office facility. This letter of credit is collateralized by a certificate of deposit, terminates in March 2001, and is automatically extended for one year, unless written notice of termination is received thirty days prior to renewal date.

~~PRODUCTION COSTS~~

During the year ended May 31, 2000, the Company entered into recording agreements with various artists whereby, among other things, the Company is obligated to advance funds to produce master recordings. As of May 31, 2000, the future minimum commitments related to the production of these recordings was $200,000 and if certain sales levels are achieved by the artist then the Company would have additional minimum commitments of $492,500.

~~------NOTE 10. STOCKHOLDERS' EQUITY ------~~

~~PRIVATE PLACEMENTS~~

During March 2000, pursuant to a Private Placement Memorandum, the Company issued 3,400,000 shares of common stock for $2.50 per share. Costs associated with this offering amounted to approximately $1,105,000.

~~F-11~~

~~STOCK WARRANTS~~

In connection with the private placement discussed above, the underwriter received warrants to purchase 340,000 of the Company's common stock at $2.50 per share. As of May 31, 2000, none of these warrants were exercised.

~~COMMON STOCK~~

~~On June 1, 1999, the Company redeemed 50,000 shares of common stock from the majority shareholder in exchange for a note payable in the amount of $125,000.~~

~~During the year ended May 31, 2000, the Company issued common stock for non-cash consideration which was valued at the fair market value of the common stock issued.~~

~~F-12~~

~~EMPLOYMENT AGREEMENT~~

This Agreement is effective February 15, 2000 by and between Falcon Entertainment Corp., a Delaware corporation, with its principal place of business being 71 Great Pasture Road, Redding, Connecticut, 06896, hereinafter called ("Employer" or "Company") and Mark Eddinger, an individual, with a principal address of 18 Hobbs Road, North Hampton, New Hampshire, 03862, hereinafter called ("Officer").

Inasmuch as the Employer is desirous of employing the Officer in the position, and upon the terms stated in this Agreement; and, whereas, the Officer is desirous of providing services to the Employer as an Officer.

Now, therefore, in consideration of the mutual promise stated in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Employer and the Officer hereby agree as follows:

~~1. EMPLOYMENT. The Employer hereby employs the Officer and the Officer hereby accepts employment at such location as may be reasonably determined by the Employer.~~

2. OFFICE, DUTIES AND TERM. The Officer shall hold the office and perform the duties of President and COO of a subsidiary record label, owned and operated by Employer as described on Exhibit A attached top this Agreement. The duties of the Officer may be changed form time to time by the Employer. The term of this Agreement shall be for a period of three (3) years beginning February 15, 2000 and such employment shall continue uninterrupted unless terminated as provided in Section 6 below. The Officer shall devote the time, attention, energies and skill to the business of the Company necessary to fulfill the obligations of the office during the term of this Agreement.

3. COMPENSATION AND BENEFITS. The Employer shall pay to the Officer and the Officer accepts as full compensation for all services to be rendered to the Employer the compensation and benefits described in full on Exhibit B attached to this Agreement.

4. EXPENSES. The Employer agrees to promptly reimburse the Officer from time to time for all reasonable business expenses incurred by the Officer in performing the Officer's duties for the Employer under this Agreement in accordance with the Employer's policies, provided that the Officer presents to the Employer adequate records and other documented evidence required by the Employer for reimbursement of such expenses incurred on its behalf. All single expenses over one thousand dollars ($1,000.00) shall be pre-approved by James Fallacaro.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5. NON COMPETITION AND PROTECTION OF CONFIDENTIAL INFORMATION. During the term of the Officer's employment and for such longer period as the Officer may receive employment severance payments, the officer shall not, directly or indirectly, as an officer, employer, agent, principal, partner, director or in any other individual or representative capacity, engage or participate in any business or activity that is competitive in any manner whatsoever with the activities and business of the Employer; nor shall the Officer, during the term of the Officer's employment induce or attempt to induce any Officer of the Employer to leave such

employ for the purpose of joining any organization in competition with the Employer. This Section 5 shall survive expiration or termination of this Agreement. The Officer further acknowledges that as a result of his employment with the Company, Officer will obtain secret and confidential information concerning the business of the Company and its affiliates, including, without limitation, financial information, proprietary rights, trade secrets, customers and sources. ("Confidential Information"). Therefore, the Officer agrees that he will not, at any time, divulge to any person or entity any Confidential Information obtained or learned by him as a result of his employment with the Company, except (a) in the course of performing his duties hereunder, (b) with the Company's express written consent or (c) to the extent that any such information is in the public domain other than as a result of Officer's breach of any of his obligations hereunder. Upon termination of his employment with the Company, the Officer will promptly deliver to the Company all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof) relating to the business of the Company and all property associated therewith, which he may then possess or have under his control; provided, however, that Officer shall be entitled to retain copies of such documents reasonably necessary to document his financial relationship with the Company.

~~6. TERMINATION. This Agreement may be terminated by the Employer upon ninety (90) days prior written notice to the officer or the Officer's personal representative in the event that:~~

6.1 (1) The Officer commits any misfeasance in office (including negligence or recklessness) or any act of dishonesty or fraud against the Employer; (2) the Officer commits any unlawful or criminal act involving moral turpitude; (3) the Officer willfully breaches this Agreement or habitually neglects the Officer's duties to the Employer (4) the Officer refuses or fails to carry out specific directions of the Board or CEO which are of a material nature and consistent with his status as President and COO;

6.2 The Officer dies during the term of the employment created hereby or is disabled permanently or otherwise in a manner that prevents the Officer for discharging the Officer's duties under this Agreement; or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 6.3 The Employer determines to terminate this Agreement without cause, which it may do at any time upon ninety (90) days written notice to the Officer, subject to payment of all cash amounts and stock considerations due hereunder for all services rendered until the date of termination.

6.4 At the end of the first (1st) year of operation of the subsidiary record label, if Employer reasonably determines that the operation of the record label subsidiary is no longer financially feasible, then Employer shall have the right to terminate this Agreement, subject to the payment and severance provisions hereof.

~~7. RESIGNATION. The Officer may resign and terminate this Agreement upon ninety (90) days written notice to the Employer.~~

8. NONASSIGNABILITY. Neither the Employer nor the Officer shall have the right to assign this Agreement or any rights or obligations contained in this Agreement without the written consent of the other party. Despite the previous, this Agreement shall be binding upon the successors or assigns of that portion of the business of the Employer with which or for which the Officer is employed. Any such assignment shall invoke the provisions of the Severance Payment, pursuant to Paragraph 8 of Exhibit B.

9. NOTICES. Any notice required or provided to be given under this Agreement shall be sufficient if in writing, sent by first class mail, to the Officer's residence in the case of notice to the Officer or to its principal office in the case of the Employer. Any such notice shall be effective upon delivery if it is hand delivered; upon receipt if it is transmitted by wire or telegram or upon the expiration of ninety-six (96) hours after deposit in the United States mail if mailed.

10. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement by the other party shall no operate or be construed as a waiver of any subsequent breach by such other party.

11. GOVERNING LAW. This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York, and any action brought to enforce any provision of this Agreement or to commence any other action in connection therewith shall have its venue in Westchester County, New York.

12. ENTIRE AGREEMENT. This Agreement contains the entire Agreement of the parties respecting the subject matter of this Agreement. This Agreement may not be changed orally but only by an Agreement in writing executed by both parties. This Agreement supercedes a certain Consulting Agreement

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document between the parties as of January 15, 2000. Nothing herein shall be construed to transfer any intellectual property of Officer.

13. PARTIAL INVALIDITY. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.

14. ATTORNEY FEES. If either party employs an attorney to enforce any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, litigation expenses and costs and expenses incurred in connection with such enforcement or action.

~~15. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, and such counterparts shall constitute and be one and the same instrument.~~

~~In witness of this, the parties have executed this Employment Agreement as of the day and year first above written.~~

~~EXHIBIT A OFFICE AND DUTIES~~

During the tern of this Agreement, and unless otherwise changed from time to time by the mutual written consent of the parties, the Officer shall hold the office and perform the duties for such office as described below:

~~Office: President and Chief Operating Officer~~

Duties of Office: Running as the President and Chief Operating Officer, the day to day operations of the subsidiary record label, its publishing subsidiary, and any other label or enterprise that is operated by the subsidiary label, to include signing, developing, marketing and promoting artists and supervising all label personnel and maintaining overall budget responsibility for the label and its subsidiaries, in cooperation with the Chairman of Falcon Entertainment Corp., the parent Company.

~~1. The Employer shall pay the Officer the following compensation and benefits during the term of this Agreement:~~

2. SALARY. The Employer shall pay the Officer an annual salary of One Hundred and Twenty Thousand Dollars ($120,000.00), payable monthly in accordance with the Employer's normal compensation schedules. The Officer's salary shall be reviewed on an annual basis.

3. BONUS. The Officer may be paid additional compensation, in the form of an annual bonus, as may be determined by the Employer in the Employer's sole and absolute discretion, giving weight to such factors as (1) overall company pre-tax operating profits, and (2) progress made by the Officer towards specific goals and objectives set for the Officer's office. The Officer must be employed by Falcon Entertainment Corp., or a subsidiary thereof, for one (1) full year to be considered eligible for a bonus.

4. DEDUCTIONS. The Employer shall deduct from compensation payable to the Officer such amounts as is required by law to deduct, including but not limited to federal and state withholding taxes, social security taxes and state disability taxes, insurance, and any other amounts as may be required pursuant to the Employer's benefit programs of which the Officer is a participant.

5. VACATION. The Officer shall be entitled to annual vacation time equal to four (4) weeks. The Officer shall also be entitled to paid holidays and illness days as is stated in the Employer's policies from time to time in effect.

~~6. BENEFITS. The Officer shall also be entitled to participate in all of the Employer's benefit programs of general application to the Officers of Falcon Entertainment Corp., or subsidiaries thereof.~~

7. STOCK. In the first (1st) year of the Agreement, the Officer shall be granted One Hundred and Fifty Thousand (150,000) shares of common stock of the Employer, vesting at a rate Twelve Thousand Five Hundred (12,500) shares per month. Beginning with the first (1st) month of the second (2nd) year of this Agreement, the Officer shall be granted an additional One Hundred Thousand (100,000) shares of common stock of the Employer, which shall vest at the rate Eight Thousand Three Hundred and Thirty Three (8,333) per month.

8. SEVERANCE PAYMENT. In the event of the sale of Falcon Entertainment Corp. or the subsidiary record label, or acquisition of the same by a third party, Officer shall receive a severance payment equal to One Million Dollars ($1,000,000.00), coupled with the accelerated vesting of all stock that

~~Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document is due to Officer as referenced in Paragraph 7 of this Exhibit B or otherwise.~~

~~9. OTHER COMPENSATION. In the case that the Officer shall engage in music production, performance on music productions, and or sales or transfers of intellectual properties~~

to and/or for the benefit of the Employer, then the Officer shall be entitled to payment, as applicable, at rates which are determined by mutual agreement of the Officer and Employer to be standard in the music and/or entertainment industries.

10. UNRELATED ACTIVITIES. In the case that the Officer engages in music production and/or sales of intellectual properties or other sales which are not in direct or indirect competition with the Employer, pursuant to the terms and conditions of Paragraph 5 of the Employment Agreement, then the Officer is entitled to receive payment for such services and/or properties from a third party for such unrelated activities.

~~CONSULTING AGREEMENT~~

This Consultant's Agreement ("Agreement") is entered into as of February 15, 2000, by and between Star West LLC, a Delaware Limited Liability Company, t/s/o Mark Eddinger ("Eddinger"), with its principal place of business being 18 Hobbs Road, N. Hampton, New Hampshire, 03862 ("Consultant") and Falcon Entertainment Corp., A Delaware Corporation, with its principal place of business being 71 Great Pasture Road, Redding, Connecticut, 06896 ("Client" or the "Company").

1. General. The Consultant is retained by Client to provide advice and counsel to Client and its executive officers regarding various matters affecting the music and entertainment industries. Throughout the term of this Agreement, the Consultant shall devote a minimum of 100 hours per month performing the consulting services more particularly described on Exhibit "A" attached hereto.

2. Term. The Term of this Agreement shall be conterminous with a certain employment agreement ("Employment Agreement") between the Client and Eddinger of even date. Should Eddinger choose to personally assume all of the responsibilities of Consultant as specified in Section 1 of this Agreement, and should Eddinger's gross annual base salary, exclusive of granted stock, meet or exceed Three Hundred Sixty Thousand Dollars ($360,000.00), then this Agreement shall terminate. Should Eddinger be terminated by the Company, with or without cause, pursuant to the Employment Agreement, then this Agreement shall also terminate immediately.

~~3. Payment. Consultant shall be paid a consulting fee of Twenty Thousand Dollars ($20,000.00) per month on the fifteenth (15th) of each month, beginning February 15, 2000, for the Term.~~

~~4. Incorporation by Reference: All provisions of Employment Agreement, which are not in conflict hereof, are hereby incorporated by reference and included in this Agreement as if fully set forth.~~

~~Consultant Client~~

~~Star West LLC Falcon Entertainment Corp.~~

~~By: /s/ MARK EDDINGER By: /s/ JAMES FALLACARO ------Mark Eddinger James Fallacaro~~

~~EXHIBIT "A"~~

~~CONSULTING SERVICES~~

~~The following consulting services will be provided by Consultant to Client under the terms of this Agreement:~~

1) Consultation on the implementation of structures and procedures for the Independent Music Channel, in the areas of programming, production, screening and editing of videos, conception and production of feature segments, commercial spots and Public Service Announcements (PSAs), and other related issues as requested by Client.

2) Consultation on the implementation of structures and procedures for the IMNTV Intranet and Internet web sites, in the areas of web technologies, web site resources, alliances and co-branding, retail music and merchandising sales, and other related issues as requested by Client.

3) Consultation on the implementation of structures and procedures for the subsidiary record label owned by Company, to the areas of administration, promotion, marketing, publicity, accounting, and any other related issues as requested by Client.

~~4) Other consulting services related to the operations of the above mentioned subsidiaries of Company, as requested by the Chief Executive Officer or the Board of Directors of Company.~~

~~TELEVISION STATION AGREEMENT~~

This Agreement (the "Agreement") is entered into by and between Yahoo! Inc., a Delaware corporation ("Yahoo") and Independent Music Network, Inc., a Delaware corporation ("Station"), known jointly as the Parties, this 20th day of March, 2000. In consideration of the mutual promises contained herein, the Parties agree as follows:

~~1. DEFINITIONS:~~

~~Unless otherwise specified, capitalized terms used in this Agreement shall have the meanings attributed to them in EXHIBIT A hereto.~~

~~2. YAHOO COVENANTS:~~

(a) Yahoo will design, host and maintain the Access Page. The audio and/or audiovisual files of the Programming will be directly accessible from such locations on the System designated by Yahoo, including, but not limited to, the Access Page. Station acknowledges that as between Yahoo and Station, Yahoo has the exclusive right to sell, and all revenue derived from, all advertising on the Yahoo Properties, including sponsorships and advertising on the Access Page, and shall accept or refuse any such advertising in its sole discretion. (b) Yahoo hereby grants Station the right*** (c) Yahoo or a Yahoo Affiliate (as determined by Yahoo) will utilize its streaming software and hardware as necessary to transmit, distribute, perform and display the Programming as provided herein, and will provide the server space for the archive of the Programming. (d) Yahoo grants Station a non-exclusive, worldwide, royalty-free license to use, reproduce, distribute and display the Yahoo Brand Features in connection with Station's marketing and promotion of the Programming, provided that in all such cases, Station's uses of the Yahoo Brand Features are approved in advance by Yahoo in writing and are in compliance with Yahoo's trademark usage guidelines.

~~3. STATION COVENANTS:~~

(a) Station hereby grants to Yahoo and its Affiliates (i) the worldwide, ***, royalty-free right and license to encode, store, publicly distribute, transmit, perform, display, copy, prepare derivative works, and market the Programming on the System solely for the purposes contemplated in paragraph 2(c) of this Agreement, for the term of this Agreement; (ii) the worldwide, ***, royalty-free license to use, reproduce and display Station's Brand Features and the Materials in connection with the presentation of the Programming on the Yahoo Properties, and in connection with the marketing and promotion of the Programming and the Yahoo Properties subject to reasonable quality control standards; (iii) the right to use excerpts from the Programming and Materials, including still images and likenesses, for general business purposes and for promotion of the Yahoo Properties provided appropriate ownership

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document credit is granted to Station; and (iv) the right to grant any sublicenses reasonably necessary to carry out the activities contemplated under this Agreement, subject to prior written approval by Station. In addition, Station grants Yahoo and its Affiliates the right to maintain a copy of the Programming for a period not to exceed thirty (30) days to be made available for on-demand access and use on the System during the term of this Agreement. Nothing in this Agreement obligates Yahoo to provide Station at any time any physical embodiment or electronic copy of any stored images encoded by Yahoo under this Agreement. (b) Station will provide current schedules, lists of artists, bands, musicians and guests, where applicable, and updates of Programming which shall be made available to Yahoo through Station's website. (c) Station agrees to pay Yahoo a fee equal to *** for streaming the Programming at a *** rate during the term of this Agreement. Station agrees to pay Yahoo an additional fee equal to *** for streaming the Programming at a *** rate during the term of this Agreement. Station agrees to pay Yahoo an additional fee equal to $3,000 per month for streaming the Programming at a 100Kbps rate to up to *** simultaneous users during the term of this Agreement. Such fees will be due and payable within *** days after receipt by Station of an invoice from Yahoo. (d) Station agrees to provide Yahoo access to the Programming and to provide technical assistance to Yahoo in accessing the Programming as necessary.

~~(e) Station acknowledges that Yahoo does not make any representations or warranties regarding the ability or exposure of the System.~~

(f) Station hereby agrees that it will use any information and data collected by Yahoo on behalf of Station or otherwise provided to Station pursuant to this Agreement, if any, in accordance with any and all applicable laws and regulations, federal or state, governing the use of user information, including any and all applicable privacy laws. Station

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

acknowledges that Yahoo has the right, at Yahoo's sole discretion, to provide notice to users where any information is being collected by Yahoo on behalf of Station, including links to Station's privacy policy, if any. Further, Station will use such information and data only as authorized by the user, and shall not disclose, sell, license or otherwise transfer any such user information to any third party or use the user information for the transmission of "junk mail," "spam," or any other unsolicited mass distribution of information.

~~4. CONFIDENTIALITY:~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The terms and conditions of this Agreement are confidential and may not be disclosed by Yahoo or Station to any third parties except to their professional advisors, or except: (1) to the extent necessary to comply with any applicable federal, state, and/or local laws, to comply with any regulatory requirements or mandates, or to comply with a valid order of a court of competent jurisdiction, in which event the disclosing party shall notify the other party as promptly as practicable (and, if possible, prior to making any disclosure) and shall in all cases seek confidential treatment of this Agreement; (2) as part of its normal reporting or review procedure to its parent company, accountants, auditors, and its attorneys, provided such parent company, accountants, auditors and attorneys agree to be bound by the provisions of this Agreement, (3) as part of normal and customary due diligence in seeking potential acquisition, merger, joint venture or strategic alliance and/or investment partners or suitors, provided such receiving party agree to be bound by the provisions of this Agreement, or (4) as necessary or appropriate in order to enforce either parties rights under this Agreement. Neither Party shall make any public announcement regarding the existence or content of this Agreement without the other party's prior written approval and consent.

~~5. REPRESENTATIONS AND WARRANTIES:~~

(a) Each Party has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by each Party, constitutes the valid and binding agreement of such Party, and is enforceable against such Party in accordance with its terms. (b) Station hereby represents and warrants to Yahoo that (i) the Programming is owned or licensed by Station, (ii) Station holds all rights material to this Agreement throughout the world, (iii) the encoding, storage, transmission, retransmission, distribution, performance, display and broadcast of the Programming and Materials by Yahoo, and all copying contemplated by this Agreement or necessary to effectuate these activities, and Yahoo's exercise of any other rights granted by Station herein, will not violate or infringe any right of privacy, personality or publicity, any Intellectual Property Right, or any other right of any third party, or result in any tort, injury, damage or harm to any person, (iv) the Programming and Materials as provided by Station to Yahoo do not contain any libelous, defamatory, obscene or slanderous material, and (v) Station has the worldwide right to license to Yahoo the right to encode, store, transmit, perform, retransmit, duplicate, and publicly distribute the Programming and the Materials on the System and all other rights as provided herein. It is understood and agreed that Yahoo does not intend and will not be required to edit or review for accuracy or appropriateness any Programming or Materials. (c) Station will be solely responsible for the acquisition of any and all third party clearances, permissions and licenses which are necessary in connection with the broadcast by Yahoo of the Programming, including, without limitation, with respect to the use of any copyrighted and/or trademarked materials and the use of any names, likenesses and/or biographical materials, and for the payment of any and all applicable

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document guild fees and for any and all residuals, payments, fees or royalties, if any, payable under any collective bargaining agreement or otherwise. By way of example, and not limitation or obligation, as between Yahoo and Station, Station would be liable to pay any residuals required to be paid under any "Basic Agreement" of the Director's Guild of America, the Writer's Guild of America, or the Screen Actor's Guild for "Supplemental Market" showings of the Programming.

~~6. INDEMNIFICATION:~~

*** Station, at its own expense, will indemnify, defend and hold harmless Yahoo, its Affiliates and their employees, representatives, agents and affiliates from and against any and all losses, claims, damages, liabilities, obligations, penalties, judgments, awards, costs, expenses and disbursements, including without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing or defending any action, suit, proceeding or investigation, caused by, relating to, based upon, arising out of or in connection with (i) any breach by Station of the representations or warranties made by it under this Agreement, (ii) the transmission, retransmission, distribution or broadcast of the Programming by Yahoo or its Affiliates, or (iii) any other claim with respect to the Programming. ***

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

penalties, judgments, awards, costs, expenses and disbursements, including without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing or defending any action, suit, proceeding or investigation, caused by, relating to, based upon, arising out of or in connection with any breach by Yahoo of the representations or warranties made by it under this Agreement.

~~7. TERM AND TERMINATION:~~

(a) This Agreement shall be effective commencing April 1, 2000 and ending ***. (b) Notwithstanding the foregoing, this Agreement may be terminated by either Party immediately upon notice if the other Party: (i) becomes insolvent; (ii) files a petition in bankruptcy; (iii) makes an assignment for the benefit of its creditors; or (iv) breaches any of its obligations under this Agreement in any material respect, which breach is not remedied within *** following written notice to such Party. (c) Yahoo may immediately cease the broadcast of any Programming should Yahoo become aware of facts or circumstances from which it is apparent that the transmission of such Programming by Yahoo as contemplated herein infringes upon a copyright of a third party.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document *** (e) Any termination pursuant to Paragraph 7(b) or 7(d) shall be without any liability or obligation of the terminating party, other than with respect to any breach of this Agreement prior to termination and payment of any fees due hereunder. All provisions hereof regarding amounts payable by Station to Yahoo shall survive the expiration or termination of this Agreement until such amounts are paid in full by Station; further provided, Paragraphs 1, 4, 5, 6, 8, 9, and this Paragraph 7(e), and all portions of this Agreement limiting the use of any confidential information, shall survive termination or expiration of this Agreement.

~~8. OWNERSHIP:~~

(a) Yahoo acknowledges and agrees that: (i) as between Station on the one hand, and Yahoo on the other, Station owns all right, title and interest in the Station Brand Features; (ii) nothing in this Agreement shall confer in Yahoo any right of ownership in the Station Brand Features, and (iii) neither Yahoo or its Affiliates shall now or in the future contest the validity of the Station Brand Features. (b) Station acknowledges and agrees that: (i) as between Station on the one hand, and Yahoo on the other, Yahoo owns all right, title and interest in any Yahoo Property and the Yahoo Brand Features; (ii) nothing in this Agreement shall confer in Station any license or right of ownership in the Yahoo Brand Features; and (iii) Station shall not now or in the future contest the validity of the Yahoo Brand Features.

~~9. GENERAL:~~

(a) This Agreement and its exhibits shall constitute the complete and exclusive agreement between the Parties with respect to the subject matter hereof, superseding and replacing any and all prior agreements, communications and understandings, both written and oral, regarding such subject matter. (b) This Agreement shall be governed by and construed in accordance with the laws of the state of California, without reference to conflicts of laws rules, and without regard to its location of execution or performance. The Parties agree that any disputes concerning the subject matter of this Agreement must be filed in either the Superior Court for the County of Santa Clara or the United States District Court for the Northern District of California. (c) If Yahoo develops and displays materials on the Yahoo Properties to advertise the Programming, such materials may incorporate the materials delivered from Station to Yahoo under this Agreement. Notwithstanding anything in this Agreement to the contrary, Yahoo will have sole and absolute discretion to determine all aspects of the Yahoo Properties, including the content, structure and sequence of all material appearing in the Yahoo Properties provided that in all such cases, Yahoo's uses of materials delivered from Station are approved in advance by Station in writing and are in compliance with Station's trademark usage guidelines. Yahoo reserves the right to reject or remove any materials from the Yahoo Properties for any reason at any time, regardless of any prior acceptance, display or transmission of any such materials, and Yahoo reserves the right to modify the Yahoo Properties in its sole discretion at any time during the term of this Agreement.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, YAHOO DOES NOT MAKE, AND HEREBY SPECIFICALLY DISCLAIMS, ANY OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE SERVICES PROVIDED HEREUNDER, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

(e) UNDER NO CIRCUMSTANCES SHALL YAHOO OR A YAHOO AFFILIATE BE LIABLE TO STATION FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE), AND EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. UNDER NO CIRCUMSTANCES SHALL YAHOO OR A YAHOO AFFILIATE BE LIABLE TO STATION FOR ***. (f) YAHOO SHALL NOT BE LIABLE FOR ANY LOSS OF DATA, OR ANY INTERRUPTION OF SERVICE, DUE TO ANY CAUSE. (g) The Parties hereto are independent parties, and no partnership, joint venture, enterprise or employment relationship shall be created or inferred by the existence or performance of this Agreement. (h) If any provision of this Agreement is found invalid or unenforceable, that provision will be enforced to the maximum extent permissible and the other provisions of this Agreement will remain in force. This Agreement may only be modified, or any rights under it waived, by a written document executed by both Parties. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute a single instrument. Execution and delivery of this Agreement may be evidenced by a facsimile transmission. The headings of this Agreement are for convenience of reference only, and do not limit or alter the Parties' respective rights or obligations under this Agreement. No failure of a Party to exercise or enforce any of its rights under this Agreement will act as a waiver of such rights. (i) This Agreement will bind and inure to the benefit of each Party's permitted successors and assigns. Neither Party may assign this Agreement, in whole or in part, without the other Party's written consent; PROVIDED, HOWEVER, that either Party may assign this Agreement without such consent in connection with any merger, consolidation, any sale of all or substantially all of such Party's assets or any other transaction in which more than fifty percent (50%) of such Party's voting securities are transferred. Any attempt to assign this Agreement other than in accordance with this provision shall be null and void. (j) All notices, requests and other communications called for by this Agreement shall be deemed to have been given immediately if made by telecopy or electronic mail (confirmed by concurrent written notice sent first class U.S. mail, postage prepaid), if to Yahoo at 2914 Taylor Street, Dallas, Texas 75226, Fax: *** Attention: Vice President

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (e-mail: ***), with a copy to its Legal Department (e-mail: ***), and if to Station at the physical and electronic mail addresses set forth on the signature page of this Agreement, or to such other addresses as a Party shall specify to the other Parties. Notice by any other means shall be deemed made when actually received by the Party to which notice is provided.

~~IN WITNESS WHEREOF, the Parties hereto have caused the foregoing agreement to be signed by a duly authorized agent of each Party, the day and year first above written.~~

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

~~EXHIBIT A~~

~~DEFINITIONS~~

"ACCESS PAGE" shall mean the Web page(s) with Station Brand Features and Yahoo Brand Features located at such URL(s) designated by Yahoo in its sole discretion through which the Programming will be accessible.

"AFFILIATE" shall mean any company or any other entity world-wide in which Yahoo owns at least a *** ownership, equity, or financial interest, including, without limitation, corporations, partnerships, joint ventures, and limited

"INTELLECTUAL PROPERTY RIGHTS" shall mean all rights in and to trade secrets, patents, copyrights, trademarks, know-how, as well as moral rights and similar rights of any type under the laws of any governmental authority, domestic or foreign.

~~"INTERNET" shall mean the collection of computer networks commonly known as the Internet, and shall include, without limitation, the World Wide Web.~~

~~"MATERIALS" shall mean all text, graphics, Station Brand Features, photographs, links and all other material provided by Station to Yahoo for inclusion on the Access Page or elsewhere on the System.~~

"PROGRAMMING" shall include the audio and video of up to *** per day, *** days per week of those broadcasts including all commercial and other breaks which may be contained in such broadcasts of Station.

"STATION AFFILIATE" shall mean any company or any other entity world-wide in which Station owns at least a *** ownership, equity, or financial interest, including, without limitation, corporations, partnerships, joint ventures, and limited liability companies.

~~"STATION BRAND FEATURES" shall mean all trademarks, service marks, logos and other distinctive brand features of Station and Station Affiliates.~~

"SYSTEM" shall mean any wireless network (including, without limitation, third generation networks (3G), direct broadcast satellites, microwave dish facilitated data transmission, Vertical Blanking Interval (VBI), wireless cable and data broadcasting, Teledesic, Iridium and other satellites, and any and all other wireless networks) or wired network (including, without limitation, the Internet, the Internet II, or any other online services network which utilizes computer terminals, terminal servers, modems, cable modems, HFC, coaxial cable, xDSL, routers, splitters, switches, multicasting technology, power lines, or other high speed data connections and any and all other wired networks) that distributes audio, video, or other programming using digital algorithms, one and/or two-way digital services, or any other means now existing or hereafter created (except AM/FM radio broadcast stations).

~~"YAHOO BRAND FEATURES" shall mean all trademarks, service marks, logos and other distinctive brand features of Yahoo that are used in or relate to a Yahoo Property.~~

"YAHOO PROPERTIES" shall mean any Yahoo or Yahoo Affiliate branded or co-branded media properties developed in whole or in part by Yahoo or its Affiliates and distributed or made available by Yahoo or its Affiliates.

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

Content shall be in the form of ***

*** Portions of this Exhibit have been omitted based upon a request for confidential treatment. The omitted material has been filed separately with the Securities and Exchange Commission.

~~INCOME AND TALENT ACQUISITION AGREEMENT~~

This Agreement is made on this 8th day of May, 2000, by and between InVision Records, Inc., a wholly-owned subsidiary of Falcon Entertainment Corp, of 675 3rd Avenue, New York, New York 10036 ("Company"), and Harlan Lansky, d/b/a, Harlan Productions, Inc., p/k/a, Matrix Music Works, of 6430 Sunset Blvd., Suite 650, Hollywood, California 90028 ("Matrix").

Matrix is a music production company, which currently has a number of artists in development e.g., Amanda, Saint Eve, Justin Leigh, etc. (hereinafter the "Artist Roster"). The Company desires to acquire a right to a percentage of the net income generated by Matrix, and a percentage of Matrix' interest in the artist contracts between Matrix and the artists comprising the Artist Roster and New Artists, as later defined. Accordingly, the parties agree as follows:

1. GRANT In exchange for the payment of $250,000.00, the Company, after the date hereof, shall have a right to: a) twenty five (25%) percent of the net income (as determined by Generally Accepted Accounting Principles) generated by Matrix, in all areas, excluding projected income derived from the production contracts to which the Artist Roster and New Artists are signed (hereinafter the "Income Right"); and b) a concomitant interest of twenty five (25%) percent of projected royalty income derived specifically, as and when paid, from the Matrix production contracts to which the Artist Roster is signed, as such Artist Roster currently exists pursuant to Exhibit "A" (hereinafter the "Artist Roster Acquisition") ; and, c) twenty five (25%) percent of royalty income derived specifically, as and when paid, from artists signed to production contracts with Matrix within five (5) years from the date hereof (hereinafter "New Artists").

~~2. BEST EFFORTS Matrix will utilize its best efforts to keep key executives of the Company apprised of all developments, which would add or detract from the Artist Roster.~~

3. TERM/TERRITORY The term of this agreement, as it relates to the Income Right shall be indefinite; the term as it relates to the Artist Roster Acquisition and New Artists shall be equal to the term of the respective agreement between Matrix and the individual artists comprising the Artist Roster and New Artists ( hereinafter the "Term") and shall be on a worldwide basis.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 4. SECURITY INTEREST Matrix does hereby grant a security interest in favor of Company in: a) any and all receivables which constitute the royalty payments due and payable to Matrix from production contracts to which the Artist Roster and/or New Artists are signed; and, b) any and all insurance and/or sales proceeds related thereto, all for the benefit and security of Company (hereinafter the "Collateral"). Matrix will cooperate with Company in perfecting this granted security interest by all means necessary, to include, but not be limited to, signing and/or filing the necessary UCC-1 form(s), if requested. Matrix acknowledges that it is the intent of this granting clause to ensure that Company is provided with a first priority security interest before all other creditors of Matrix. There are no actions, suits or proceedings pending or, to Matrix's knowledge, threatened against or affecting Matrix or the properties of Matrix before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, if determined adversely to Matrix, would have a material adverse effect on the condition, business or operations of Matrix, the ability of Matrix to perform its obligations under this agreement or the security interest and lien of Company upon the Collateral.

5. WARRANTY AND AUTHORITY Matrix warrants and represents that it has the right and legal capacity to enter into this agreement, and that Matrix is not subject to any prior obligations or agreements, whether as a party or otherwise, which would restrict or interfere in any way with the full and prompt performance of its obligations hereunder. Matrix further warrants that it is a corporation in good standing (See Exhibit "B", Certificate of Good Standing), and that its board of directors has authorized Matrix to enter into this transaction (See Exhibit "C", Secretary's Certificate Relating to Incumbency and the Corporate Resolution related thereto).

Matrix agrees to indemnify, save and hold Company harmless from any and all loss and damage (including court costs and reasonable attorneys' fees) arising out of, connected with or as a result of any inconsistency with, failure of, or breach or threatened breach by Matrix of any warranty, representation, agreement, undertaking or covenant contained in this agreement.

This agreement sets forth the entire agreement between the parties with respect to the subject matter hereof. No modification, amendment, waiver, termination or discharge of this agreement shall be binding upon Company unless confirmed by a written instrument signed by an authorized officer of Company, or binding upon you unless confirmed by a written instrument signed by you. A waiver by either you or Company of any term or condition of this agreement in any instance shall not be deemed or construed as a waiver of such term or condition for the future, or of any subsequent breach thereof. All rights, options and remedies in this agreement shall be cumulative and none of them shall be in limitation of any

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document other remedy, option or right available to Company or to you. Should any provision of this agreement be adjudicated by a court of competent jurisdiction as void, invalid or inoperative, such decision shall not affect any other provision hereof, and the remainder of this agreement shall be effective as though such void, invalid or inoperative provision had not been contained herein. The headings of the paragraphs hereof are for convenience only and shall not be deemed to limit or in any way affect the scope, meaning or intent of this agreement or any portion thereof. All accountings and payments required herein, and all grants made herein, shall survive and continue beyond the expiration or earlier termination of this agreement. Neither party shall be entitled to recover damages or to terminate the Term by reason of any breach by the other party of its material obligations, unless the latter party has failed to remedy the breach within a reasonable time following receipt of notice thereof.

THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK AND ITS VALIDITY, CONSTRUCTION, PERFORMANCE AND BREACH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE WHOLLY PERFORMED THEREIN. YOU AGREE TO SUBMIT YOURSELF TO THE JURISDICTION OF THE FEDERAL OR STATE COURTS LOCATED IN NEW YORK CITY IN ANY ACTION WHICH MAY ARISE OUT OF THIS AGREEMENT AND SAID COURTS SHALL HAVE EXCLUSIVE JURISDICTION OVER ALL DISPUTES BETWEEN COMPANY AND YOU OR ARTIST PERTAINING TO THIS AGREEMENT AND ALL MATTERS RELATED THERETO. IN THIS REGARD, ANY PROCESS IN ANY ACTION OR PROCEEDING COMMENCED IN THE COURTS OF THE STATE OF NEW YORK ARISING OUT OF ANY CLAIM, DISPUTE OR DISAGREEMENT UNDER THIS AGREEMENT MAY, AMONG OTHER METHODS, BE SERVED UPON YOU BY DELIVERING OR MAILING THE SAME, VIA REGISTERED OR CERTIFIED MAIL, ADDRESSED TO YOU AT THE ADDRESS PROVIDED HEREIN FOR NOTICES TO YOU; ANY SUCH DELIVERY OR MAIL SERVICE SHALL BE DEEMED TO HAVE THE SAME FORCE AND EFFECT AS PERSONAL SERVICE WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED IN THIS SUBPARAGRAPH 25(b) SHALL PRECLUDE COMPANY FROM JOINING MATRIX IN AN ACTION BROUGHT BY A THIRD

PARTY AGAINST COMPANY IN ANY JURISDICTION, ALTHOUGH COMPANY'S FAILURE TO JOIN MATRIX IN ANY SUCH ACTION IN ONE INSTANCE SHALL NOT CONSTITUTE A WAIVER OF ANY OF COMPANY'S RIGHTS WITH RESPECT THERETO, OR WITH RESPECT TO ANY SUBSEQUENT ACTION BROUGHT BY A THIRD PARTY AGAINST COMPANY. NOTHING CONTAINED HEREIN SHALL CONSTITUTE A WAIVER OF ANY OTHER REMEDIES AVAILABLE TO COMPANY.

~~Agreed to and accepted:~~

~~InVision Records, Inc.~~

~~/s/ Mark Eddinger ------~~

~~InVision Records, Inc~~

~~/s/ Jim Fallacaro ------By: Jim Fallacaro, Chairman Authorized Signatory~~

~~Harlan Productions, Inc d/b/a Matrix Music Works~~

~~/s/ Harlan Lansky ------By: Harlan Lansky, President Authorized Signatory~~

~~RIGHT OF FIRST REFUSAL AGREEMENT~~

This Agreement is made on this 8th day of May, 2000, by and between InVision Records, Inc., a wholly-owned subsidiary of Falcon Entertainment Corp., 675 3rd Avenue, New York, New York 10036 ("Company"), and Harlan Lansky, d/b/a, Harlan Productions, Inc., p/k/a, Matrix Music Works, of 6430 Sunset Blvd., Suite 650, Hollywood, California 90028 ("Matrix").

Matrix is a music production company, which currently has a number of artists and music related projects in development e.g., artists, music soundtrack(s), etc. (hereinafter the "Talent Pool"). The Company desires to acquire a right of first refusal to acquire the projects and/or artists that, from time to time, will constitute the Talent Pool. Accordingly, the parties agree as follows:

1. GRANT In exchange for the payment of $100,000.00, the Company, after the date hereof, shall have a right of first refusal to review projects, for purpose of acquiring an interest therein at fair market value, that Matrix is prepared to offer to the entertainment industry (hereinafter the "Right").

~~2. BEST EFFORTS Matrix will utilize its best efforts to keep key executives of the company apprised of all developments that would add or detract from the Talent Pool.~~

~~3. TERM/TERRITORY The term of this agreement shall be for a period of five (5) years from the date hereof (the Term), and shall include projects within the Talent Pool on a worldwide basis.~~

4. WARRANTY AND AUTHORITY Matrix warrants and represents that it has the right and legal capacity to enter into this agreement, and that Matrix is not subject to any prior obligations or agreements, whether as a party or otherwise, which would restrict or interfere in any way with the full and prompt performance of its obligations hereunder. Matrix further warrants that it is a corporation in good standing (See Exhibit "B", Certificate of Good Standing), and that its board of directors has authorized Matrix to enter into this transaction (See Exhibit "C", Secretary's Certificate Relating to Incumbency and the Corporate Resolution related thereto).

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document This agreement sets forth the entire agreement between the parties with respect to the subject matter hereof. No modification, amendment, waiver, termination or discharge of this agreement shall be binding upon Company unless confirmed by a written instrument signed by an authorized officer of Company, or binding upon you unless confirmed by a written instrument signed by you. A waiver by either you or Company of any term or condition of this agreement in any instance shall not be deemed or construed as a waiver of such term or condition for the future, or of any subsequent breach thereof. All rights, options and remedies in this agreement shall be cumulative and none of them shall be in limitation of any other remedy, option or right available to Company or to you. Should any provision of this agreement be adjudicated by a court of competent jurisdiction as void, invalid or inoperative, such decision shall not affect any other provision hereof, and the remainder of this agreement shall be effective as though such void, invalid or inoperative provision had not been contained herein. The headings of the paragraphs hereof are for convenience only and shall not be deemed to limit or in any way affect the scope, meaning or intent of this agreement or any portion thereof. All accountings and payments required herein, and all grants made herein, shall survive and continue beyond the expiration or earlier termination of this agreement. Neither party shall be entitled to recover damages or to terminate the Term by reason of any breach by the other party of its material obligations, unless the latter party has failed to remedy the breach within a reasonable time following receipt of notice thereof.

PERSONAL SERVICE WITHIN THE STATE OF NEW YORK. NOTHING CONTAINED IN THIS SUBPARAGRAPH 25(b) SHALL PRECLUDE COMPANY FROM JOINING MATRIX IN AN ACTION BROUGHT BY A THIRD PARTY AGAINST COMPANY IN ANY JURISDICTION, ALTHOUGH COMPANY'S FAILURE TO JOIN MATRIX IN ANY SUCH ACTION IN ONE INSTANCE SHALL NOT CONSTITUTE A WAIVER OF ANY OF COMPANY'S RIGHTS WITH RESPECT THERETO, OR WITH RESPECT TO ANY SUBSEQUENT ACTION BROUGHT BY A THIRD PARTY AGAINST COMPANY. NOTHING CONTAINED HEREIN SHALL CONSTITUTE A WAIVER OF ANY OTHER REMEDIES AVAILABLE TO COMPANY.

~~InVision Records, Inc.~~

~~/s/ Mark Eddinger ------By: Mark Eddinger, President Authorized Signatory~~

~~InVision Records, Inc.~~

~~/s/ Jim Fallacaro ------By: Jim Fallacaro, Chairman Authorized Signatory~~

~~Harlan Productions, Inc d/b/a Matrix Music Works~~

~~/s/ Harlan Lansky ------By: Harlan Lansky, President Authorized Signatory~~

~~STANDARD FORM OF OFFICE LEASE The Real Estate Board of New York, Inc.~~

AGREEMENT OF LEASE, made as of this 14 day of April, 2000, between ROYAL REALTY CORP., a New York corporation, having its principal offices at 115 Avenue of the Americas, New York, New York 10036, AS AGENT, party of the first part, hereinafter referred to as "Owner" or "Landlord", and FALCON ENTERTAINMENT CORP., a Delaware corporation having an address at 71 Great Pasture Road, Redding, Connecticut 06896, party of the second part, hereinafter referred to as "Tenant".

WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner the premises (hereinafter hereby called "premises", "demised premises" or "Premises") consisting of Room 1200-20, substantially shown as hatched on the floor plan annexed hereto as Exhibit A and made a part hereof, in the building known as 675 Third Avenue, New York, New York (hereinafter called "building" or "Building"), in the Borough of Manhattan, City of New York, for the term (hereinafter called "term" or "Term"), and at an annual rental rate (hereinafter called "Rent" or "Fixed Rent"), as set forth in Article 37 hereof, together with all other sums of money as shall become due and payable by Tenant under this Lease (hereinafter called "additional rent" or "Additional Rent"), which Tenant agrees to pay in lawful money of the United States by check drawn on a bank or trust company which is a member of the New York Clearing House Association, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof (unless this lease be a renewal).

In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner's predecessor in interest, Owner may at Owner's option and without notice to Tenant add the amount of such arrearages to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent.

~~The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows:~~

~~Rent: 1. Tenant shall pay the rent as above and as hereinafter provided.~~

~~Occupancy: 2. Tenant shall use and occupy the demised premises for executive and general offices and for no other purpose.~~

~~Tenant Alterations: 3. Except as modified by Article 55 hereof, Tenant shall~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document make no changes in or to the demised premises of any nature without Owner's prior written consent. Subject to the prior written consent of Owner, and to the provisions of this article. Tenant, at Tenant's expense, may make alterations, installations, additions or improvements which are non-structural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises by using contractors or mechanics first approved in each instance by Owner. Tenant shall, before making any alterations, additions, installations or improvements, at its expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner and Tenant agrees to carry and will cause Tenant's contractors and sub-contractors to carry such workman's compensation, general liability, personal and property damage insurance as Owner may require subject to the terms hereof. If any mechanic's lien is filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant's expense, by payment or filing the bond required by law. All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon installation become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty days prior to the date fixed as the termination of this lease, elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the premises by Tenant prior to the expiration of the lease, at Tenant's expense. Notwithstanding the foregoing, provided Tenant is not in default on the Expiration Date, Tenant shall not be obligated to remove or restore any alterations which are not of a specialized nature and which are customarily usable by office tenants. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant's removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed, by Tenant at the end of the term remaining in the premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be retained at Owner's property or may be removed from the premises by Owner, at Tenant's expense.

Maintenance and Repairs: 4. Tenant shall, throughout the term of this lease, take good care of the demised premises and the fixtures and appurtenances therein. Tenant shall be responsible for all damage or injury to the demised premises or any other part of the building and the systems and equipment thereof, whether requiring structural or nonstructural repairs caused by or resulting from carelessness, omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents, employees, invitees or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document licensees, or which arise out of any work, labor, service or equipment done for or supplied to Tenant or any subtenant or arising out of the installation, use or operation of the property or equipment of Tenant or any subtenant. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant's fixtures, furniture and equipment. Tenant shall promptly make, at Tenant's expense, all repairs in and to the demised premises for which Tenant is responsible, using only the contractor for the trade or trades in question, selected from a list of at least two contractors per trade submitted by Owner. Any other repairs in or to the building or the facilities and systems thereof for which Tenant is responsible shall be performed by Owner at the Tenant's expense. Owner shall maintain in good working order and repair the exterior and the structural portions of the building, including the structural portions of its demised premises, and the public portions of the building interior and the building plumbing, electrical, heating, air conditioning and ventilating systems (to the extent such systems presently exist) serving the demised premises. Tenant agrees to give prompt notice of any defective condition in the premises for which Owner may be responsible hereunder. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or others making repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. Owner will use commercially reasonable efforts to perform all repairs, alterations, additions and improvements diligently in a manner to minimize any disruption to Tenant's use of the demised premises. Owner will not, in any case, be obligated to employ overtime labor. It is specifically agreed that Tenant shall not be entitled to any setoff or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this Lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of an action for damages for breach of contract. The provisions of this Article 4 shall not apply in the case of fire or other casualty which are dealt with in Article 9 hereof.

Window Cleaning: 5. Tenant will not clean nor require, permit, suffer or allow any window in the demised premises to be cleaned from the outside in violation of Section 202 of the Labor Law or any other applicable law or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction.

Requirements of Law, Fire Insurance, Floor Loads: 6. Prior to the commencement of the lease term, if Tenant is then in possession, and at all times thereafter, Tenant, at Tenant's sole cost and expense, shall promptly comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant's use or manner of use thereof, (including Tenant's permitted use) or, with respect to the building

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document if arising out of Tenant's use or manner of use of the premises or the building, (including the use permitted under the lease). Nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its particular manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto. Tenant may, after securing Owner to

Owner's satisfaction against all damages, interest, penalties and expenses, including, but not limited to, reasonable attorney's fees, by cash deposit or by surety bond in an amount and in a company satisfactory to Owner, contest and appeal any such laws, ordinances, orders, rules, regulations or requirements provided same is done with all reasonable promptness and provided such appeal shall not subject Owner to prosecution for a criminal offense or constitute a default under any lease or mortgage under which Owner may be obligated, or cause the demised premises or any part thereof to be condemned or vacated. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner with respect to the demised premises or the building of which the demised premises form a part, or which shall or might subject Owner to any liability or responsibility to any person or for property damage. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization or other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or damages, which may be imposed upon Owner by reason of Tenant's failure to comply with the provisions of this article and if by reason of such failure the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up" of rate for the building or demised premises issued by the New York Fire Insurance Exchange, or other body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and prevent vibration, noise and annoyance.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Subordination: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may request.

Property Loss, Damage Reimbursement Indemnity: 8. Owner or its agents shall not be liable for any damage to property of Tenant or of others entrusted to employees of the building, nor for loss of or damage to any property of Tenant by theft or otherwise, nor for any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, contractors, servants or employees. Owner or its agents will not be liable for any such damage caused by other tenants or persons in, upon or about said building or caused by operations in construction of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Owner's own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorneys fees paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant's agents, contractors, employees, invitees or licensees. Tenant's liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld.

Destruction, Fire and Other Casualty: 9. (a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give prompt notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth, (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable, (c) If the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document demised premises are totally damaged or rendered wholly unusable or wholly inaccessible by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner reoccupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above) or made accessible subject to Owner's right to elect not to restore the same as hereinafter provided. For the purposes of this Article 9, the demised premises will be deemed to be totally damaged or rendered wholly unusable if the demised premises have been materially and substantially damaged and Tenant is, in the exercise of Owner's reasonable judgment, unable to conduct its business at the demised premises, (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given within 90 days after such fire or casualty, or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Landlord's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control. After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and moveable equipment, furniture, and other property. Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy, (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner's obligation to restore under subparagraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d), and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefiting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's furniture and/or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same, (f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. In the event the demised premises shall be substantially damaged as a result of a casualty, Tenant shall give Owner notice of such condition within thirty (30) days of the casualty, and Tenant may, within such thirty (30) day period, request the opinion hereinafter described. Within ninety (90) days of Tenant's request, Owner shall furnish Tenant with the opinion of an independent architect specifying whether Owner's restoration work can be substantially completed within twelve (12) months from the date of such casualty. If the architect's opinion states that the demised premises cannot be so restored, then Tenant shall have the right to terminate this Lease within thirty (30) days of the furnishing of such opinion (time being of the essence). In addition, in the event of such a casualty where Owner's restoration work shall not be substantially completed within twelve (12) months of such casualty (subject to delays for force majeure), then Tenant may, by written notice given to Owner within thirty (30) days after such twelfth (12th) month (time being of the essence) seek to terminate this Lease and if such restoration work shall not be substantially completed within thirty (30) days of the giving of such notice, this Lease shall terminate as of such thirtieth (30th) day as if it were the Expiration Date.

Eminent Domain: 10. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease and assigns to Owner, Tenant's entire interest in any such award. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant's moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixture and equipment at the end of the term and provided further such claim does not reduce Owner's award.

Assignment, Mortgage, Etc.: 11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representative, successor and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority partnership interest of a partnership Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting.

Electric Current: 12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain.

Access to Premises: 13. Owner or Owner's agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times after reasonable notice (which may be telephonic) to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to the demised premises or to any other portion of the building or which Owner may elect to perform. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided they are concealed within the walls, floor, or ceiling. Owner may, during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Owner will use reasonable efforts not to store materials or equipment within the demised premises where such storage will impede Tenant's operations of the demised premises. All such repairs, replacements and improvements will be performed in a commercially reasonable manner to minimize any disruption to Tenant's use and enjoyment of the demised premises. In no event, however, shall Owner be required to employ overtime labor. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours after reasonable notice (which may be telephonic) for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last twelve months of the term for the purpose of showing the

~~same to prospective tenants. If Tenant is not present to open and permit an entry into the demised premises, Owner or Owner's agents may enter the same~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. See (A) on page 5 attached hereto. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant's obligations hereunder.

Vault, Vault Space, Area: 14. No Vaults, vault space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder, anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility, Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant.

Occupancy: 15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record.

Bankruptcy: 16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this lease may be cancelled by Owner 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: (1) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; or (2) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the premises demised but shall forthwith quit and surrender the premises. If this lease shall be assigned in accordance with its terms, the provisions of this Article 16 shall be applicable only to the party then owning Tenant's interest in this lease.

~~(b) It is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rent reserved hereunder for the unexpired portion of the term demised and the fair and reasonable rental value of the demised premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof be re-let by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such re-letting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above.

Default: 17. (1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises become vacant or deserted; or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if this lease be rejected under Section 235 of Title 11 of the U.S. Code (bankruptcy code); or if Tenant shall fail to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease, then, in any one or more of such events, upon Owner serving a written fifteen (15) days notice upon Tenant specifying the nature of said default and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced curing such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written ten (10) days' notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such ten (10) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided.

(2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document payment herein required for a period of five (5) days after the same is due; then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder beyond any applicable notice and/or grace period prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice.

Remedies of Owner and Waiver of Redemption: 18. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or otherwise, (a) the rent shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner may re-let the premises or any part or parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner's option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease, and/or (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant's covenants herein contained, any deficiency between the rent hereby reserved and/or covenanted to be paid and the net amount, if any, of the rents collected on account of the lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the premises or any part or parts thereof shall not release or affect Tenant's liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner's option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner's sole judgement, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Owner obtaining possession of demised premises, by reason of the violation by Tenant of any of the covenants and conditions of this lease, or otherwise.

Fees and Expenses: 19. If Tenant shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and without notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorneys' fees, in instituting, prosecuting or defending any action or proceeding and prevails in any such action or proceeding then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner, as damages.

Building Alterations and Management: 20. Owner shall have the right at any time without the same constituting an eviction and without incurring liability to Tenant therefor to change the arrangement and/or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. Owner agrees that Tenant shall have reasonable access to the Demised Premises. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenants making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner's imposition of such controls of the manner of access to the building by Tenant's social or business visitors as the Owner may deem necessary for the security of the building and its occupants.

No Representations by Owner: 21. Except as may otherwise be herein set forth, neither Owner nor Owner's agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the premises except as herein expressly set forth and no rights, easements or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same "as is", except as may otherwise be herein set forth, and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement

hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought.

End of Term: 22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property. Tenant's obligation to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day.

Quiet Enjoyment: 23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 31 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned.

Failure to Give Possession: 24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document complete construction) until after Owner shall have given Tenant written notice that the Owner is able to deliver possession in condition required by this lease. If permission is given to Tenant to enter into the possession of the demises premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such possession and/or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease except the obligation to pay the fixed annual rent set forth in the preamble to this lease. The provisions of this article are intended to continue "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law.

No Waiver: 25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent and/or additional rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises, and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises.

Waiver of Trial by Jury: 26. It is mutually agreed by and between Owner and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceeding or action for possession including a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims.

~~Inability to Perform: 27. Except as otherwise provided herein, this Lease~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment, fixtures, or other materials if Owner is prevented or delayed from so doing by reason of strike or labor troubles or any cause whatsoever beyond its reasonable control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions which have been or are affected, either directly or indirectly, by war or other emergency.

Bills and Notices: 28. Except as otherwise in this lease provided, a bill, statement, notice or communication which Owner may desire or be required to give to Tenant shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed or any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice.

Services Provided by Owners: 29. As long as Tenant is not in default under any of the covenants of this lease beyond the applicable grace period provided in this lease for the curing of such defaults, Owner shall provide: (a) necessary elevator facilities on business days from 8 a.m. to 6 p.m. and have one elevator subject to call at all other times; (b) heat to the demised premises when and as required by law, on business days from 8 a.m. to 6 p.m.; (c) water for ordinary lavatory purposes, but if Tenant uses or consumes water for any other purposes or in unusual quantities (of which fact Owner shall be the sole judge), Owner may install a water meter at Tenant's expense which Tenant shall thereafter maintain at Tenant's expense in good working order and repair to register such water consumption and Tenant shall pay for water consumed as shown on said meter as additional rent as and when bills are rendered; (d) cleaning service for the demised premises on business days at Owner's expense provided that the same are kept in order by Tenant. If, however, said premises are to be kept clean by Tenant, it shall be done at Tenant's sole expense, in a manner reasonably satisfactory to Owner and no one other than persons approved by Owner shall be permitted to enter said premises or the building of which they are a part for such purpose. Tenant shall pay Owner the cost of removal of any of Tenant's refuse and rubbish from the building; (e) If the demised premises are serviced by Owner's air conditioning/cooling and ventilating system, air conditioning/cooling will be furnished to tenant from May 15th through September 30th on business days (Mondays through Fridays, holidays excepted) from 8:00 a.m. to 6:00 p.m. and

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ventilation will be furnished on business days during the aforesaid hours except when air conditioning/cooling is being furnished as aforesaid. If Tenant requires air conditioning/cooling or ventilation for more extended hours or on Saturdays, Sundays or on holidays, as defined under Owner's contract with Operating Engineers Local 94-94A, Owner will furnish the same at Tenant's expense, which shall not exceed the rate charged to other similarly sized office tenants of the Building in respect to rates and conditions for such additional service; (f) Owner reserves the right to stop services of the heating, elevators, plumbing, air-conditioning, electric, power systems or cleaning or other services, if any, when necessary by reason of accident or for repairs, alterations, replacements or improvements necessary or desirable in the judgment of Owner for as long as may be reasonably required by reason thereof. If the building of which the demised premises are a part supplies manually operated elevator service, Owner at any time may substitute automatic control elevator service and proceed diligently with alterations necessary therefor without in any wise affecting this lease or the obligation of Tenant hereunder.

~~Captions: 30. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provisions thereof.~~

Definitions: 31. The term "office", or "offices", wherever used in this lease, shall not be construed to mean premises used as a store or stores, for the sale or display, at any time, of goods, wares or merchandise, of any kind, or as a restaurant, shop, booth, bootblack or other stand, barber shop, or for other similar purposes or for manufacturing. The term "Owner" means a landlord or lessor, and as used in this lease means only the owner, or the mortgagee in possession, for the time being of the land and building (or the owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner, hereunder. The words "re-enter" and "re-entry" as used in this lease are not restricted to their technical legal meaning. The term "business days" as used in this lease shall exclude Saturdays, Sundays and all days as observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. Wherever it is expressly provided in this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed.

~~Adjacent Excavation-Shoring 32. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent.

Rules and Regulations: 33. Tenant and Tenant's servants, employees, agents, visitors, and licensees shall observe faithfully, and comply strictly with, the Rules and Regulations and such other and further reasonable Rules and Regulations as Owner or Owner's agents may from time to time adopt. Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner's agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within fifteen (15) days after the giving of notice thereof. Nothing

~~Page 4 of 6~~

in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees. Rules and Regulations will not be discriminatorily enforced against Tenant.

Security: 34. Tenant has deposited with Owner the sum of $364,533.90 as * security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the re-letting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises forms part, Owner shall have the right to transfer the security to the vendee or lessee and Owner shall thereupon be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.

Estoppel 35. Tenant, at any time, and from time to time, upon at least Certificate: 10 days' prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this Lease is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under this Lease, and, if so, specifying each such default.

Successors 36. The covenants, conditions and agreements contained in and Assigns: this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise provided in this lease, their assigns. Tenant shall look only to Owner's estate and interest in the land and building, for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner (or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this lease, the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of the demised premises. For so long as Owner shall maintain an electronic directory in the Building's lobby, Tenant shall be entitled to list up to ten (10) names in such directory; however, Owner shall not be required to maintain any such directory.

~~------* Space to be filled in or deleted.~~

(A) In the event that at any time during the term of this Lease, Owner and Tenant shall be engaged in litigation of any nature relating to this Lease, Owner shall have the right, during the entire period of such litigation, to enter the demised premises at any time, whether or not Tenant or its agent or representative is present, for the purpose of showing same to prospective tenants.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written.

~~Witness for Owner: ROYAL REALTY CORP., AS AGENT ------~~

~~By: /s/ [ILLEGIBLE] ------~~

~~Witness for Tenant: FALCON ENTERTAINMENT CORP. ------~~

~~By: /s/ James Fallacaro ------Name: James Fallacaro Title: Pres. & Chairman~~

~~SEE RIDER ANNEXED HERETO CONTAINING ARTICLES 37 THROUGH 61 HEREOF.~~

~~ACKNOWLEDGEMENTS~~

~~STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK )~~

On the 10 day of April in the year 2000, before me, the undersigned, a Notary Public in and for said state, personally appeared JAMES FALLACARO, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity, and that by his signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

~~/s/ George Stiefel ------Notary Public~~

~~GEORGE STIEFEL Notary Public, State of New York No. 4520296 Qualified in Nassau County Commission Expires January 31, 2001~~

~~GUARANTY~~

FOR VALUE RECEIVED, and in consideration for, and as an inducement to Owner making the within lease with Tenant, the undersigned guarantees to Owner, Owner's successors and assigns, the full performance and observance of all the covenants, conditions and agreements, therein provided to be performed and observed by Tenant, including the "Rules and Regulations" as therein provided, without requiring any notice of non-payment, non-performance, or non-observance, or proof, or notice, or demand, whereby to charge the undersigned therefor, all of which the undersigned hereby expressly waives and expressly agrees that the validity of this agreement and the obligations of the guarantor hereunder shall in no way be terminated, affected or impaired by reason of the assertion by Owner against Tenant of any of the rights or remedies reserved to Owner pursuant to the provisions of the within lease. The undersigned further covenants and agrees that this guaranty shall remain and continue in full force and effect as to any renewal, modification or extension of this lease and during any period when Tenant is occupying the premises as a "statutory tenant". As a further inducement to Owner to make this lease and in consideration thereof, Owner and the undersigned covenant and agree that in any action or proceeding brought by either Owner or the undersigned against the other on any matters whatsoever arising out of, under, or by virtue of the terms of this lease or of this guarantee that Owner and the undersigned shall and do hereby waive trial by jury.

~~Dated:______, 19___~~

~~______Guarantor~~

~~______Witness~~

~~______Guarantor's Residence~~

~~______Business Address~~

~~______Firm Name~~

~~STATE OF NEW YORK ) S.S.: COUNTY OF )~~

~~On this day of ,19 , before me~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document personally came______to me known and known to me to be the individual described in, and who executed the foregoing Guaranty and acknowledged to me that he executed the same. ______Notary

~~- IMPORTANT - PLEASE READ -~~

~~RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 33.~~

1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any Tenant or used for any purpose other than for ingress or egress from the demised premises and for delivery of merchandise and equipment in a prompt and efficient manner using elevators and passageways designated for such delivery by Owner. There shall not be used in any space, or in the public hall of the building, either by any Tenant or by jobbers or others in the delivery or receiving of merchandise, any hand trucks, except those equipped with rubber tires and sideguards. If said premises are situated on the ground floor of the building, Tenant thereof shall further, at Tenants expense, keep the sidewalk and curb in front of said premises clean and free from ice, snow, dirt and rubbish.

2. The water and wash closets and plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed and no sweepings, rubbish, rags, soda or other substances shall be deposited therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose clerks, agents, employees or visitors, shall have caused it.

3. No carpet, rug or other article shall be hung or shaken out of any window of the building and no Tenant shall sweep or throw or permit to be swept or thrown from the demised premises any dirt or other substances into any of the corridors or halls, elevators, or out of the doors or windows or stairways of the building and Tenant shall not use, keep or permit to be used or kept any foul or noxious [ILLEGIBLE] or substance in the demised premises, or permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to Owner or other occupants of the building, by reason of noise, odors and/or vibrations, or interfere in any way with other Tenants or those having business therein, nor shall any bicycles, vehicles, animals, fish, or birds be kept in or about the building. Smoking or carrying lighted cigars or cigarettes in the elevators of the building is prohibited.

~~4. No awnings or other projections shall be attached to the outside walls of the building without the prior written consent of Owner.~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside of the demised premises or the building or on the inside of the demised premise if the same is visible from the outside of the premises without the prior written consent of Owner, except that the name of Tenant may appear on the entrance door of the premises. In the event of the violation of the foregoing by any Tenant, Owner may remove same without any liability, and may charge the expense incurred by such removal to Tenant or Tenants violating this rule. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for each Tenant by Owner at the expense of such Tenant, and shall be of a size, color and style acceptable to Owner.

6. No Tenant shall mark, paint, drill into, or in any way deface any part of the demised premises of the building of which they form a part. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised premises, and, if linoleum or other similar floor covering is desired to be used as underlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited.

7. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or mechanisms thereof. Each Tenant must, upon the termination of his Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such Tenant, and in the event of the loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof.

8. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only on the freight elevators and through the service entrances and corridors and only during hours and in a manner approved by Owner. Owner reserves the right to inspect all freight to be brought into the building and to exclude from the building all freight which violates any of these Rules and Regulations of the lease or which these Rules and Regulations are a part.

~~9. Canvassing, loitering and peddling in the building is prohibited and each Tenant shall cooperate to prevent the same.~~

10. Owner reserves the right to exclude from the building all persons who do not present a pass to the building signed by Owner. Owner will furnish passes to persons for whom any Tenant requests same in writing. Each Tenant shall be responsible for all persons for whom he requests such pass and shall be liable to Owner for all acts of such persons. Tenant shall not have a claim against Owner by reason of Owner excluding from the building any person who does not present such pass.

~~11. Owner shall have the right to prohibit any advertising by any Tenant~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document which in Owner's opinion, tends to impair the reputation of the building or its desirability as a building for offices, and upon written notice from Owner, Tenant shall refrain from or discontinue such advertising.

12. Tenant shall not bring or permit to be brought or kept in or on the demised premises, any inflammable, combustible, explosive, or hazardous fluid, material, chemical or substance, or cause or permit any odors of cooking or other processes or any unusual or other objectionable odors to permeate in or emanate from the demised premises.

13. If building contains central air conditioning and ventilation, Tenant agrees to keep all windows closed at all times and to abide by all rules and regulations issued by owner with respect to such services. If Tenant requires air conditioning or ventilation after the usual hours, Tenant shall give notice in writing to the building superintendent prior to 3:00 p.m. in the case of services required on week days, and prior to 3:00 p.m. on the day prior in case of after hours service required on weekends or on holidays. Tenant shall cooperate with Owner in obtaining maximum effectiveness of the cooling system by lowering and closing venetian blinds and/or drapes and curtains when the sun's rays fall directly on the windows of the demised premises.

14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky matter, or fixtures into or out of the building without Owner's prior written consent. If such safe, machinery, equipment, bulky matter or fixtures requires special handling, all work in connection therewith shall comply with the Administrative Code of the City of New York and all other laws and regulations applicable thereto and shall be done during such hours as Owner may designate.

15. Refuse and Trash. (1) Compliance by Tenant. Tenant covenants and agrees, at its sole cost and expense, to comply with all present and future laws, orders, and regulations of all state, federal, municipal, and local governments, departments, commissions and boards regarding the collection, sorting, separation and recycling of waste products, garbage, refuse and trash. Tenant shall sort and separate such waste products, garbage, refuse and trash into such categories as provided by law. Each separately sorted category of waste products, garbage, refuse and trash shall be placed in separate receptacles reasonably approved by Owner. Such separate receptacles may, at Owner's option, be removed from the demised premises in accordance with a collection schedule prescribed by law. Tenant shall remove, or cause to be removed by a contractor acceptable to Owner, at Owner's sole discretion, such items as Owner may expressly designate. (2) Owner's Rights in Event of Noncompliance. Owner has the option to refuse to collect or accept from Tenant waste products, garbage, refuse or trash (a) that is not separated and sorted as required by law or (b) which consists of such items as Owner may expressly designate for Tenant's removal, and to require Tenant to arrange for such collection at Tenant's sole cost and expense, utilizing a contractor satisfactory to Owner. Tenant shall pay all costs, expenses, fines, penalties or damages that may be imposed on Owner or Tenant by reason of Tenant's failure to comply with the provisions of this Building Rule 13,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and, at Tenant's sole cost and expense, shall indemnify, defend and hold Owner harmless (including reasonable legal fees and expenses) from and against any actions, claims and suits arising from such noncompliance, utilizing counsel reasonably satisfactory to Owner.

~~16 See Exhibit C annexed hereto.~~

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~~STANDARD FORM OF [LOGO] OFFICE [LOGO] LEASE~~

~~======~~

~~Dated 19~~

~~Rent Per Year~~

~~Rent Per Month~~

~~Term From To~~

~~Drawn by ______~~

~~Checked by ______~~

~~Approved by ______~~

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~~Page 6 of 6~~

37. COMMENCEMENT DATE; EXPIRATION DATE; FIXED RENT. A. This Lease and the term thereof shall commence on the date on which the Owner's Work (as hereinafter defined in Article 43) is substantially complete (the "Commencement Date") and shall expire on the last day of the tenth Lease Year (the "Expiration Date"), or shall expire on such earlier date upon which said term may expire or be cancelled or terminated pursuant to any of the conditions or covenants of this Lease or pursuant to law. Owner agrees to give Tenant not less ten (10) days' advance written notice of the Commencement Date.

~~B. Tenant shall commence the payment of rent on the Commencement Date, in accordance with the following schedule:~~

~~(i) THREE HUNDRED SIXTY-FOUR THOUSAND FIVE HUNDRED THIRTY-THREE and 90/100 ($364,533.90) Dollars per annum ($30,377.83 per month) for the first Lease Year through the third Lease Year;~~

~~(ii) THREE HUNDRED SEVENTY-EIGHT THOUSAND THREE HUNDRED FIFTEEN and 90/100 ($378,315.90) Dollars per annum ($31,526.33 per month) for the fourth Lease Year through the seventh Lease Year; and~~

~~(iii) THREE HUNDRED NINETY-TWO THOUSAND NINETY-SEVEN and 90/100 ($392,097.90) Dollars per annum ($32,674.83 per month) for the eighth Lease Year through the Expiration Date.~~

For purposes of this Article 37, the first "Lease Year" shall commence on the Commencement Date and expire on the last day of the month in which occurs the fourteenth (14th) monthly anniversary of the Commencement Date; the second "Lease Year" shall mean that period of thirteen (13) months commencing on the day following the last day of the first Lease Year; thereafter, successive Lease Years shall mean that twelve (12) month period of time commencing on the day following the last day of the previous Lease Year.

Fixed Rent shall be payable in equal monthly installments in advance on the first day of each month during the term of this Lease at the office of Owner or such other place as Owner may designate, without any offset or deduction whatsoever, except that in the event the Lease shall commence on a

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document day other than the first day of a calendar month, the rental for the month shall be prorated. Fixed Rent for any portion of the first Lease Year or the second Lease Year, as the case may be, which exceeds twelve (12) months shall be paid at the rate of $30,377.83 per month.

All rent and additional rent payable under this Lease shall be paid by check of Tenant drawn on a bank which is a member of the New York Clearing House Association (the "NYCHA"). Failure to pay rent by such a check shall be deemed a material default by Tenant under this Lease.

Anything to the contrary provided for hereinabove notwithstanding, so long as Tenant shall not be in breach or default of any of the terms and provisions of this Lease beyond any applicable notice or grace periods, Tenant shall not be obligated to pay $28,712.50 of each monthly payment of the Fixed Rent provided for hereinabove (prorated for any partial month) for (i) that sixty (60) day period of time commencing on the Commencement Date and (ii) that thirty (30) day period commencing on the first day of the second Lease Year; Tenant shall, however, continue to be obligated to pay the ERIF and any and all additional rent (including, but not limited to, additional rent payable under Article 39 hereof) and other charges payable by Tenant hereunder in accordance with the terms of this Lease, commencing on the Commencement Date.

C. If any installment of Fixed Rent or additional rent is not paid when due, Tenant shall also pay Owner interest thereon from the due date until paid at 2% per annum above the then published prime interest rate upon unsecured loans charged by The Chase

~~Manhattan Bank on loans of 90 days (herein such announced rate plus 2% per annum being herein called the "Prime Rate").~~

D. The taking of possession of the Demised Premises shall be deemed an acceptance of the same by Tenant except for latent defects and shall be deemed substantial completion by Owner of all of Owner's Work for the purposes of determining the Commencement Date. Tenant shall not be obligated to commence payment of rent until work outlined in Article 43 shall have been substantially completed. For the purposes of this Article, Owner's Work shall be deemed substantially complete even through minor details or adjustments which shall not materially interfere with Tenant's use of the Demised Premises may not then have been completed, but which work Owner agrees, will thereafter be completed with due diligence.

E. Tenant shall accept possession of the Demised Premises on the Commencement Date in its then "as is" condition. Owner shall have no obligation to perform any work in or to the Demised Premises to prepare the same for Tenant's occupancy, except as set forth in Article 43 of this Lease.

~~38. ELECTRICITY. A. With reference to Article 12 hereof, the Owner~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall furnish to the Tenant electricity for normal business purposes as provided in Paragraph 38E hereof in the Demised Premises at no additional charge or rental, subject however to future adjustments after the date hereof, in the event that there is an increase or decrease in the public utility rate schedule or utility or sales taxes thereon pursuant to which electricity shall be furnished to Owner by the public utility company serving the Building in which the Demised Premises are located and the Tenant shall have the right so long as it shall not be in default in the performance of the terms of this Lease to use electricity on an unmetered basis as an additional service. Each such adjustment shall be computed by multiplying the electrical rent inclusion factor ("ERIF") set forth in Paragraph 38E hereof, as adjusted, by the percentage of increase or decrease, as the case may be, in the public utility rate schedule or utility or sales taxes thereon applicable to the Building and by adding or subtracting the product thereof to or from said ERIF to determine the amount of the adjusted rent and the adjusted ERIF.

B. In order that personal safety and property of the tenants, occupants and Owner of the Demised Premises may not be imperiled by overtaxing of the capacity of the electrical distribution system of the Demised Premises or of the Building, the Tenant agrees that without the prior written consent of the Owner, it shall not make any changes in, or alterations to the electrical system of the Demised Premises as the installation of said system shall be indicated by the final electrical plans submitted by the Tenant to the Owner.

C. The Owner shall not be liable to the Tenant for any loss, damage or expense resulting from change in the quantity or character of the electric service or its being no longer suitable for the Tenant's requirements or due to cessation or interruption of the supply of electricity.

D. The Owner, upon thirty (30) days' prior written notice to the Tenant, may discontinue the service of electricity to the Tenant without affecting the tenancy, this Lease or the Tenant's liability hereunder and without liability for loss or damage caused to the Tenant by such discontinuance; except that, in the event of the discontinuance of such service, the Tenant shall be entitled to a monthly rent reduction equal to the then ERIF, and Owner shall thereafter not be obligated to furnish electrical energy to Tenant. The Owner, in that event, shall permit the Tenant to purchase electricity directly from the public utility system servicing the Building and shall permit the Owner's electrical distribution system to be used for that purpose to the extent that it is available and may safely be so used.

E. As of the date of this Lease, the ERIF is $1,665.33 per month which factor is based upon the Tenant's use, during regular business hours, of lighting fixtures and electrically operated equipment which operates on a standard 120 volt convenience receptacle on a 15 Amp general purpose branch circuit with not less than eight (8) outlets on such circuit. The use of

~~-2-~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document electricity on other than regular business hours or for fixtures or equipment which are not accommodated by such base receptacles may be permitted within the limitation of "38B" provided that the ERIF shall be increased in an amount to be determined from a survey made by a reputable independent electrical engineer or consultant selected by Owner. The ERIF is included within the Fixed Rent.

39. ESCALATIONS. The annual rental rate hereinbefore set forth shall be adjusted from time to time as in this Article provided to reflect the decrease or increase in Owner's expenses incurred in operating the Building and Tenant shall pay such rental, as adjusted pursuant to the provisions hereof, as herein before provided. Owner shall have all of the rights and remedies for Tenant's failure to make a payment under this Article as Owner has for Tenant's failure to pay fixed minimum rent.

~~A. For the purposes of this Article:~~

1. "TAX YEAR" shall mean each successive New York City real estate fiscal year commencing on July 1st and expiring on June 30th. If the present use of July 1 to June 30 real estate tax year shall change, then, such changed tax year shall be used with appropriate adjustment for the transition.

2. "TAXES" shall mean (a) the product of the lower of the total transitional or actual assessed valuation of the land and Building of which the Demised Premises are a part for any Tax Year multiplied by the applicable real estate tax rate for such Tax Year, plus (b) any special and extraordinary assessments, and government levies imposed upon or with respect to the land and Building, and (c) any franchise, income, profit, value added, use or other tax imposed in addition to, in whole or partial substitution for, or in lieu of an increase (in whole or part), in such taxes, whether due to a change in the method of taxation or otherwise.

~~3. "BASE TAX" shall mean the sum of the Taxes, as finally determined, for the Tax Year July 1, 2000 through June 30, 2001.~~

~~4. Solely for the purposes of this Article and the calculations to be made hereunder, the parties agree that the Demised Premises shall be deemed to comprise 6,891 square feet.~~

5. "BASE RATE" shall mean the minimum regular hourly wage rate for Porters in Class A office buildings established by agreement between the Realty Advisory Board on Labor Relations, Inc., ("Realty Advisory Board") exclusive of fringe benefits and Local 32BJ of the Building Service Employees International Union AFLCIO ("Local 32B") in effect as of January 1, 2000.

6. "OPERATING EXPENSE RATE" shall mean, for any calendar year, the minimum regular hourly wage rate for Porters in Class A office buildings then established by agreement between the Realty Advisory Board and Local 32B or by the successors to either or both of them. (This rate shall be used in

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document computations under this Article whether or not Porter's wages are actually paid by or for the Owner or by independent contractors who furnish such services to the Demised Premises.)

If any such agreement shall require the regular employment of Porters on days or hours when overtime or other premium pay rates are in effect, then the term "minimum regular average hourly wage rate," as used to determine the Operating Expense Rate, shall mean the average hourly wage rate for the hours in a calendar week during which Porters are required to be regularly employed (e.g., if as of February 1, 1987, an agreement between the Realty Advisory Board and Local 32B required the regular employment of Porters for forty (40) hours during a calendar week at a regular hourly wage rate of $8.50 for the first thirty (30) hours and at an overtime hourly average wage rate of $12.00 for the remaining ten (10) hours, then the minimum regular average hourly wage rate under this subsection as of February 1, 1987 would be the sum arrived at by dividing the total weekly average wages of $375 by the total number of

-3- required hours of employment which is forty (40), resulting in a minimum regular average hourly wage rate of $9.375). The computation of the minimum regular average hourly wage rate shall be on the same basis whether based on an hourly or other pay scale but predicated on the number of required hours in a calendar week.

If the prescribed work week shall be less than forty (40) hours, then the minimum regular average hourly wage rate shall be adjusted to an average amount for forty (40) hours, taking into consideration the overtime hourly wage rate for the number of hours between the prescribed work week and forty (40) hours (in the same manner as above provided where the prescribed work week is forty (40) hours, with a portion of the hours being subject to a regular hourly wage rate and the balance subject to an overtime hourly wage rate). If length of service shall be a factor in determining any element of wage, it shall be conclusively presumed that all employees have at least five (5) years of service and that no probationary period will be included.

7. The term "PORTERS" shall mean that classification of employee engaged in the general maintenance and operation of Class A Office Buildings most nearly comparable to the classification now applicable to porters in the current agreements between the Realty Advisory Board and Local 32B (which classification is presently termed "others" in said agreement).

8. The term "CLASS A OFFICE BUILDINGS" shall mean office buildings in the same class or category as the Building under any building operation agreement between the Realty Advisory Board and Local 32B, regardless of the designation given to such office buildings in any such agreement.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document B. If the Operating Expense Rate in effect as of January 1st of any year of the term of this Lease shall be such as to constitute an increase above the Base Rate, then Tenant shall pay to Owner, as additional rent, for such year an amount equal to a sum computed at the rate of one cent per square foot of the rentable area in the Demised Premises for each one cent or part thereof that the Operating Expense Rate in effect as of January 1st of any year of the Lease shall constitute an increase above the "Base Rate". For example, assuming the area of the Demised Premises were 1,000 rentable square feet and assuming there were a 15 cent increase in the Operating Expense Rate, there would be a $150.00 increase in the annual rent by reason thereof (1 cent x 15 x 1,000). Owner shall advise Tenant by a written statement by Owner's accountant or by Owner or its agent, of any change in Operating Expense Rate and the effective date thereof. Such Operating Expense Rate statement shall show the Tenant's new annual rental rate caused by each change and the monthly installments which shall be one-twelfth (1/12) thereof, and the manner in which the adjustment is computed with the appropriate adjustment if the Commencement Date shall not be the first day of a calendar month. Any decrease in annual rental rate under this Paragraph B can be applied only to reduce prior increases under this Paragraph.

C. The annual rental rate shall be increased for each Tax Year during the term of this Lease by two and 29/100 percent (2.29%) of the amount by which the Taxes Owner is required to pay in each such Tax Year exceeds the Base Tax. Owner shall advise Tenant, by a written statement by Owner's accountant or by Owner or its agent, of any change in Taxes and the effective date thereof, which statement shall be accompanied by a copy of the tax bill issued to Owner, if available. The statement shall show the Tenant's new annual rental rate caused by each change and the monthly installments shall be one-twelfth (1/12th) thereof, and the manner in which the adjustment is computed, including any adjustments in real estate tax assessments affecting the Taxes for any Tax Year. Said one-twelfth (1/12th) of such increase shall be due and payable with monthly installments of fixed minimum annual rent. Notwithstanding the foregoing, if Taxes are required to be paid prior to the expiration of the appropriate calendar quarter or calendar half-year or whatever other period by which Taxes must be paid or prior to the expiration of any Tax Year to avoid a penalty or late charge, then Owner may immediately elect to bill Tenant for its above specified percentage of any increase in Taxes in excess of the Base Tax with respect to such calendar quarter or other period of such Tax Year, as the case may

-4- be, and Tenant shall pay same within five (5) days thereafter. Any decrease in annual rental rate under this Paragraph C can be applied only to reduce prior increases under this Paragraph. To the extent that the change is relevant to a period for which Tenant has paid its monthly installments of fixed minimum rent, a retroactive lump sum payment shall be made by Tenant as and when billed for the same by Owner. If, prior to any increase in the annual rent pursuant to this Paragraph C, Owner shall have obtained a

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document reduction of the proposed assessed valuation of the land and Building of which the Demised Premises are a part and therefore of the Taxes, then the term "Taxes" for that Tax Year shall be deemed to include the amount of Owner's expenses in obtaining such reduction in proposed assessed valuation, including attorneys' and appraisers' fees.

D. Owner's failure to render a statement with respect to any increases in the Taxes and/or an Operating Expense Rate statement with respect to any Operating Expense Rate year shall not prejudice Owner's right to render a Owner's statement retroactively respecting increases in the Taxes and/or an Owner's Operating Expense Rate statement and/or with respect to any subsequent Operating Expense Rate year and/or subsequent Tax Year. The obligations of Tenant under the provisions of this Article with respect to any increase in the rent shall survive the expiration or sooner termination of the term. Following rendition of a Owner's Operating Expense Rate statement which shows an increase in the rent for any Operating Expense Rate year, Tenant shall pay to Owner on the first day of each month during such Operating Expense Rate year a sum equal to one-twelfth (1/12th) of the increase in the rent shown upon such Owner's Operating Expense Rate statement for such Operating Expense Rate year. If any such Operating Expense Rate Statement shall be rendered after the commencement of any Operating Expense Rate year, Tenant shall pay to Owner on the first day of the calendar month next following the rendition of such Owner's Operating Expense Rate statement (in addition to the payment required by the immediate preceding sentence), a sum equal to one-twelfth (1/12th) of the increase in the rent for such Operating Expense Rate year shown on such statement multiplied by the number of months which may have elapsed between January 1st of such Operating Expense Rate year and the month in which such payment is required to be made. All sums payable by Tenant to Owner pursuant to the provisions of this Article shall be collectible by Owner in the same manner as any installment of fixed minimum annual rent.

E. In the event that any controversy arises concerning: (i) the designation under this Article of a successor to any of the organizations named herein, in the event any or all shall no longer exist; or (ii) the proper substitute for the "Operating Expense Rate" if a rate for or the category in which Porters are presently classified shall cease to exist, then, such controversy shall be determined by arbitration in accordance with the provisions of Article 40 hereof. Pending the entry of a judgment confirming the award in such arbitration, the annual rental rate shall be payable in accordance with Owner's initial determination. The arbitrators shall not have the authority to modify this Lease or substitute a different method of calculating rental adjustments other than as expressly set forth herein.

40. ARBITRATION. Whenever in this Lease it is provided that a dispute shall be determined by arbitration, the arbitration shall be conducted as provided in this Article. The party desiring such arbitration shall give written notice to that effect to the other, specifying the dispute to be arbitrated and the name and address of the person designated to act as the arbitrator in its behalf. Within ten (10) days after said notice is given,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the other party shall give written notice to the first party, specifying the name and address of the person designated to act as arbitrator on its behalf. If the second party fails to notify the first party of the appointment of its arbitrator as aforesaid by the time above specified, then the appointment of the second arbitrator shall be made in the same manner as hereinafter provided for the appointment of a third arbitrator. The arbitrators so chosen shall meet within ten (10) days after the second arbitrator is appointed and within thirty (30) days thereafter shall decide the dispute. If within said person they cannot agree upon their decision, they shall appoint a third arbitrator and if they cannot agree upon said appointment, the third arbitrator shall be appointed upon their application or upon the application of either party, by the American Arbitration Association in the City of New York. The three arbitrators shall meet and decide the dispute. A decision in which two of the

-5- three arbitrators concur shall be binding and conclusive upon the parties. In designating arbitrators and in deciding the dispute, the arbitrator shall act in accordance with the rules then in force of the American Arbitration Association subject, however, to such limitations as may be placed upon them by the provisions of this Lease. The cost of any arbitration conducted pursuant to this Article 40 shall be paid in accordance with the terms and conditions set by the arbitrators conducting such arbitration.

~~The obligation of Owner and Tenant to submit a dispute to arbitration is limited to disputes arising under those Articles of this Lease which specifically provide for arbitration.~~

41. BROKERAGE. Tenant covenants, warrants and represents that the sole broker with whom it has dealt in this transaction is Insignia/ESG, Inc. (the "Broker"), and that no conversations or negotiations were had with any broker or finder other than the Broker concerning this Lease or the renting of the Demised Premises. Tenant agrees to indemnify, defend and hold Owner harmless from and against any and all claims for fees and commissions and against any liability (including reasonable attorneys' fees) arising out of any conversations or negotiations had by Tenant with any broker or finder other than the Broker.

~~Owner agrees to pay the Broker's commission pursuant to separate agreement.~~

42. NOT BINDING. This Lease is submitted to Tenant on the understanding that it shall not be considered an offer and shall not bind Owner in any way until (i) Tenant has duly executed and delivered duplicate originals to Owner, (ii) Owner has executed and unconditionally delivered one of said originals to Tenant and any mortgagee (if required) and lessor of any over lease (if required) shall consent thereto in writing.

~~43. OWNER'S WORK. Owner, at its sole cost and expense, shall perform~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the following work in or to the Demised Premises in order to prepare the same for Tenant's occupancy (collectively, "Owner's Work"), using materials of Building-standard quality, color and design: (i) paint the Demised Premises in a color selected by Tenant from the Building-standard color chart; and (ii) re-carpet the Demised Premises. Owner shall use reasonable efforts (without being obligated to employ overtime labor or to incur any extraordinary expenses in connection therewith, and subject to delays caused by Tenant or by force majeure) to complete Owner's Work in a timely manner.

The taking of possession of the Demised Premises shall be deemed an acceptance of the same by Tenant and shall be deemed substantial completion by Owner of all of Owner's Work for the purposes of determining the Commencement Date. For the purposes of this Article, the work to be done by Owner shall be deemed substantially complete even though minor details or adjustments which shall not materially interfere with Tenant's use and occupancy of the Demised Premises may not then have been completed, but which work Owner agrees, will thereafter be completed. Owner shall have no obligation to perform any work in the Demised Premises other than Owner's Work.

~~Tenant acknowledges that all telephone, data and communication cabling and associated equipment is to be installed by Tenant at Tenant's sole cost and expense.~~

~~44. AFTER-HOURS HVAC; CONDENSER WATER. ADDENDUM to Article 29(e) of printed form of Lease:~~

A. If Tenant shall require HVAC service at any time other than during business hours on business days, Owner shall furnish such service (herein called "after hours air-conditioning service") upon advance written notice from Tenant as specified below. Tenant shall pay to Owner the sum of $250.00 per hour for overtime air-cooling and $225.00 per hour for overtime heat on Owner's demand as additional rent. Such sums shall be increased over the term of this Lease as Owner's cost for providing the service is increased including the cost of labor, maintenance (including the cost of replacement parts), utilities, depreciation and supplies used in providing such after hours air-conditioning service. If Tenant shall not pay the same, Tenant

~~-6-~~

shall also pay interest thereon at the then Prime Rate. Requests for after hours service shall be submitted in writing to the Building manager, by a person designated by Tenant as authorized to make such requests, before 1:00 P.M. on a non-holiday weekday for such weekday and at least thirty-six (36) hours prior to a holiday or weekend.

B. Owner shall furnish, if required and available, condenser water to support up to two (2) tons of supplemental air-conditioning systems in the Demised Premises, at a cost to Tenant of $630.00 per ton per year. If after

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the date of this Lease, the cost to Owner of furnishing condenser water for such air-conditioning system shall be increased, then the aforesaid cost to Tenant shall be increased to fairly reflect the amount of the actual increase incurred by Owner.

~~45. RULES AND REGULATIONS. ADDENDA to Rules and Regulations of printed form of Lease:~~

A. Because of requirements of Local Law 5 regarding certain fire safety regulations, it is necessary that Owner know at all times the approximate number of persons within the Demised Premises after normal business hours (i.e. after 6:00 P.M. on weekdays and on weekends and holidays). Accordingly, within thirty (30) days after the date hereof, Tenant shall submit to Owner its best estimate of the number of Tenant's employees, agents, visitors and other persons which Tenant expects to occupy the Demised Premises at any time after normal business hours. Prior to 5:00 P.M. of each weekday or prior to 5:00 P.M. on the day preceding a weekend or holiday, Tenant shall inform the building manager's office whenever Tenant knows, or has reason to believe, that the number of its employees, agents, visitors and other persons occupying the Demised Premises after normal working or business hours that evening or the next day(s), as the case may be, will exceed this estimate. Tenant also shall keep reasonable records which indicate the number of persons entering and leaving the Demised Premises after normal business hours, and shall provide copies of such records to Owner at Owner's request.

B. At the expiration of Tenant's lease term, if Owner shall not require Tenant to remove any supplemental air-conditioning system which Tenant has installed or utilized in its Demised Premises, Owner reserves the right to require Tenant, at Tenant's own sole cost and expense, to (a) remove the refrigerant from said supplemental air-conditioning system, in full compliance with all applicable provisions of this Lease and with any and all applicable laws, ordinances, orders, rules, and regulations relating to such removal and (b) promptly repair any and all damage caused by, or resulting from, such removal.

C. Notwithstanding anything contained herein to the contrary, in the event that Tenant makes, or causes, permits or authorizes to be made, any alterations, modifications or decorations to the Demised Premises which in any manner affect the existing or proposed Building standard security system, Tenant agrees that concurrently with the making of any such alterations, modifications or decorations, Tenant shall, at Tenant's sole cost and expense, modify such existing or proposed system, or add any additional security devices to such existing or proposed system, which may be required in Owner's sole judgment.

46. ASSIGNMENT AND SUBLETTING. A. Tenant or its legal representatives, will not by operation of law or otherwise, assign (in whole or in part), mortgage or encumber this Lease, or sublet or permit the Demised Premises or any part thereof to be used or occupied by others, without Owner's prior written consent in each instance. The consent by the Owner to any assignment or subletting, whether by Tenant or any other tenant in the Building, shall

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document not be waiver of or constitute a diminution of Owner's right to withhold its consent to any other assignment or subletting and shall not be construed to relieve Tenant from obtaining Owner's express written consent to any other or further assignment or subletting. Such reasonable out-of-pocket attorneys' fees as may be incurred by Owner in connection with Tenant's request for consent to an assignment or subletting shall be paid by Tenant.

~~B. If Tenant or its legal representatives desires to assign this Lease or sublet all or any portion of the Demised Premises, Tenant shall promptly notify the then managing~~

-7- agent of the Building in writing of its desire to assign or sublet. Upon obtaining a proposed assignee or subtenant upon acceptable terms, Tenant shall submit to Owner in writing: (1) the name of the proposed assignee or subtenant; (2) the terms of the proposed assignment or sublease; and (3) the nature and character of the business which the proposed assignee or subtenant will conduct in the Demised Premises, together with all financial data concerning it; and thereafter shall submit to the Owner any other information concerning the assignment or sublease which the Owner may reasonably request.

C. Owner shall have the option to be exercised within thirty (30) days from the submission of the aforesaid information: (i) to cancel this Lease with respect to the space to be sublet for the duration of the proposed sublease; or (ii) to require the Tenant to execute and deliver an assignment or sublease to the Owner (or its designee) upon the same terms as submitted by Tenant to Owner, except that Owner shall have the unrestricted right to assign or sublet and/or alter the space. In the event of a proposed assignment, or of a proposed sublease which, in the aggregate with all other subleases, demises 50% or more of the Demised Premises, Owner shall have the further option to be exercised within the said thirty (30) day period, to cancel and terminate Tenant's Lease effective on the date of Tenant's proposed assignment or sublease, in which event this Lease and the term hereof shall expire and terminate on the date as if it was the date herein fixed for the termination and expiration of the term of this Lease.

D. If Owner shall not exercise either of its foregoing options within the time set forth above, its consent to the proposed assignment or subletting shall not be unreasonably withheld or delayed; provided however, that it may withhold consent thereto if in the reasonable exercise of its judgement it determines that:

1. The financial condition and general reputation for good character of the proposed assignee or subtenant are insufficient or not consistent with the obligation and responsibility undertaken by the proposed assignment or sublease; or

~~2. The proposed business to be conducted in the Demised Premises is not appropriate for the Building or in keeping with the character of the existing~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document tenancies or permitted by this Tenant's Lease, or the use is not expressly permitted by this Lease; or

3. The nature of the occupancy of the proposed assignee or subtenant will cause a greater density of employees or traffic or make greater demands on the Building's services or facilities than that made by Tenant (other than in a de minimis way); or

~~4. The Tenant has made assignments or sublettings, which have changed the configuration of the Demised Premises; or~~

5. The Tenant proposes to assign or sublet to one who at the time is a tenant (or subsidiary or affiliate of a tenant) or to a person in possession of premises in the Building, or in the buildings owned by Owner or an entity affiliated with Owner located at 655 Third Avenue, New York, New York, 205 East 42nd Street, New York, New York, 733 Third Avenue, New York, New York, 825 Third Avenue, New York, New York or to one with whom Owner is negotiating a lease or sublease for space in any building owned by Owner or an entity affiliated with Owner; or

~~6. The assignee or subtenant shall have or enjoy diplomatic immunity; or~~

~~7. Such proposed subletting would result in the Demised Premises being divided into more than two (2) rental units in the aggregate including Tenant's premises; or~~

8. Tenant has advertised that its rental of the proposed space to be assigned and/or sublet is less than the Fixed Rent plus escalations under Articles 38 and 39 applicable to such space, but the foregoing shall not be deemed to prohibit Tenant from responding to broker's solicitations and any other inquiries regarding the proposed rental rate or from negotiating a transaction at a lesser rate of rent; or

~~-8-~~

~~9. Any combination of the foregoing conditions exists.~~

~~If this Lease shall be assigned or sublet in accordance with this Article, such assignee or subtenant shall not be permitted to further assign or sublet in whole or in part.~~

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, Owner may, after default by Tenant, collect 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

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document release of Tenant from the full performance by Tenant of all the terms, conditions and covenants of this Lease.

Tenant may sublet or assign this Lease to any Subsidiary, Parent Company or Affiliate (but only if such Subsidiary, Parent Company, or Affiliate has a net worth (exclusive of good will) at lease equal to the average net worth of Tenant for the twelve (12) month period prior to the proposed sublet or assignment) or to any successor by merger or consolidation or a person to whom all or substantially all of Tenant's assets, stock or membership interests are transferred (such successor or person being herein called a "Successor") without the consent of Owner (but only if (a) the Successor has a net worth (exclusive of goodwill) at least equal to the average net worth of Tenant for the twelve (12) month period prior to the proposed sublet or assignment and (b) such merger, consolidation or transfer of assets is not effected for the primary purpose of transferring this Lease or subleasing the Demised Premises). For purposes of this Section, a "Subsidiary", "Parent Company" and "Affiliate" of Tenant shall mean the following: (a) "Subsidiary" shall mean any corporation not less than 51% of whose outstanding capital and voting stock shall, at the time, be owned directly or indirectly, by Tenant; (b) "Parent Company" shall mean any corporation which shall own, directly or indirectly, at least 51% of the outstanding capital and voting stock of Tenant at the time; and (c) "Affiliate" shall mean any corporation or other entity which, directly or indirectly, controls or is controlled by or is under common control with Tenant. For this purpose, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities or by contract or otherwise. Furthermore, no such assignment or sublease shall be permitted or effective if Tenant is then in default under this Lease beyond any applicable notice and cure period and unless (i) Tenant gives Owner at least ten (10) days' prior written notice of such assignment or sublease, and reasonably acceptable proof of the compliance of such transaction with the conditions set forth in this Section, (ii) such assignee assumes all of Tenant's obligations hereunder, and (iii) Tenant gives Owner a signed copy of the final assignment or sublease within ten (10) days after it is executed.

Notwithstanding any provision of this Lease to the contrary, for purposes of this Article or Article 11 of this Lease, the transfer of a majority of the issued and outstanding capital stock of any corporate tenant or subtenant, however accomplished, whether in a single transaction or in a series or related or unrelated transactions, shall be deemed an assignment of this Lease, or of such sublease, as the case may be, except that the transfer of the outstanding capital stock of any corporate tenant or subtenant shall be deemed not to include the sale of such stock by persons or parties, through the "over-the-counter market" or through any recognized stock exchange, other than those deemed "insiders" within the meaning of the Securities Act of 1934, as amended, or an initial public offering of Tenant's stock through any recognized stock exchange.

~~Each permitted assignee or transferee shall assume and be deemed~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document to have assumed this Lease and shall be and remain liable jointly and severally with Tenant for the payment of the rent and additional rent and for the due performance of all the terms, covenants, conditions and agreement herein contained on Tenant's part to be performed for the term of this Lease. No assignment shall be effective unless Tenant shall promptly deliver to Owner a duplicate original of the instrument of assignment, in form reasonably satisfactory to Owner.

~~-9- containing a covenant of assumption by the assignee of all of the obligations aforesaid and shall obtain from Owner the aforesaid written consent, prior thereto.~~

Notwithstanding any provision of this Lease to the contrary, 75% of any rentals and/or consideration paid or payable by the subtenant or assignee in excess of the rentals reserved and/or payable under this lease shall be paid by Tenant as and when received by Tenant to Owner, less expenses proven to have been occurred by Tenant in subleasing its space. Such expenses shall include, but not be limited to brokerage fees, attorneys' fees and disbursements advertising costs, reasonable concessions, including, without limitation, free rent or work contributions, and the costs incurred in connection with alterations, decorations and installations made by Tenant in the space to be occupied.

47. EXTERMINATION. If the premises demised to Tenant become infested with vermin, Tenant, at its sole cost and expense, shall cause its premises to be exterminated, from time to time, to the reasonable satisfaction of Owner, and shall employ such exterminators therefor as shall be reasonably approved by Owner.

48. OWNER'S REPRESENTATION. Owner represents that, to the best of its knowledge, according to the current definition of friable asbestos as that term is used by the Environmental Protection Agency of the United States, there is no friable asbestos within the Demised Premises.

49. HAZARDOUS MATERIALS. Tenant shall not cause or permit any Hazardous Materials (as defined below) to be used, transported, stored, released, handled, produced or installed in, on or from, the Demised Premises or the Building, except for such Hazardous Materials (such as cleaning and photocopying fluids) that are customarily used in the operation of offices, provided that such Hazardous Materials are used in compliance with all laws and/or requirements of public authorities. The term "Hazardous Materials" shall mean any flammable, explosive, or radioactive materials, or hazardous wastes, hazardous and toxic substances, or related materials, asbestos or any material, containing asbestos, or any other such substance or material, as defined by any federal, state or local environmental law, ordinance, rule or regulation including, without limitation, the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Recovery Act, as amended, and in the regulations adopted and publications promulgated pursuant to each of the foregoing. In the event of a breach by Tenant of the provisions of this Article 49, Owner shall, in addition to all of its rights and remedies under this Lease and pursuant to law, require Tenant to remove any such Hazardous Materials from the Demised Premises or the Building in the manner prescribed for such removal by all requirements of law. The provisions of this Article 49 shall survive the expiration or sooner termination of this Lease.

50. INCONSISTENT PROVISIONS. In the event of any conflict or inconsistency between the provisions of this Rider and the provisions of the printed form of Lease to which the Rider is annexed, the provisions of this Rider shall govern and control.

51. INSURANCE. A. Tenant shall not violate, or permit the violation of, any condition imposed by the standard fire insurance policy then issued for office buildings in the Borough of Manhattan, City of New York, and shall not do, permit anything to be done, keep, or permit anything to be kept, in the Demised Premises that would: (i) subject Owner to any liability or responsibility for personal injury, death, or property damage; (ii) increase the fire or other casualty insurance rate on the building or the property therein over the rate that would otherwise then be in effect (unless Tenant pays the resulting premium as provided in Section G of this Article 51); or (iii) result in insurance companies of good standing refusing to insure the building or any of such property in amounts reasonably satisfactory to Owner.

~~B. Tenant covenants to provide on or before the Commencement Date, and to keep in force during the term hereof, the following insurance coverage:~~

~~- 10 -~~

1. for the benefit of Owner and Tenant, a comprehensive policy of liability insurance protecting Owner and Tenant against any liability whatsoever occasioned by accident on or about the Demised Premises or any appurtenances thereto. Such policy is to be written by good and solvent insurance companies authorized to do business in the State of New York, and the limits of liability thereunder shall not be less than the respective amounts of Five Million ($5,000,000.00) Dollars of combined single limit coverage on a per occurrence basis and Five Hundred Thousand ($500,000.00) Dollars in respect of property damage. Such insurance may be carried under a blanket policy or policies covering the Demised Premises and other locations of Tenant, if any; and

2. fire and extended coverage in an amount adequate to cover the cost of replacement of all personal property, fixtures, furnishing and equipment, including Tenant's Work, located in the Demised Premises. Such policy shall be written by good and solvent insurance companies authorized to do business in the State of New York.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Prior to the time that such insurance is first required to be carried by Tenant, and thereafter, at least thirty (30) days prior to the expiration of any such policies, Tenant agrees to deliver to Owner either duplicate originals of the aforesaid policies or certificates evidencing such insurance, provided that said certificate contains an endorsement in the "Cancellation" section thereof that such insurance may not be modified or canceled except upon thirty (30) days' prior notice to Owner, together with evidence of payment for the policy. Attached hereto as Exhibit "D" is a sample insurance certificate showing the lower right-hand "Cancellation" section requirements which must be met to conform the certificate to the provisions of this Section. Tenant's failure to provide and keep in force the aforementioned insurance shall be regarded as a material default hereunder, entitling Owner to exercise any or all of the remedies as provided in this lease in the event of Tenant's default.

C. Owner and Tenant shall each endeavor to secure an appropriate clause in, or an endorsement upon, each fire or extended coverage 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 waiver of subrogation or permission for waiver of any claim hereinbefore referred to shall extend to the agents of each party and its employees and, in the case of Tenant, shall also extend to all other persons and entities occupying or using the Demised Premises in accordance with the terms of this lease. If, and to the extent that, such waiver or permission can be obtained only upon payment of an additional charge, then, except as provided in Sections D and E of this Article 51, the party benefiting from the waiver or permission shall pay such charge upon 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.

D. In the event that Tenant shall be unable at any time to obtain one of the provisions referred to in Section C above in any of its insurance policies, Tenant shall cause Owner to be named in such policy or policies as one of the assureds, but if any additional premium shall be imposed for the inclusion of Owner as such an assured, Owner shall pay such additional premium upon demand or Tenant shall be excused from its obligations under Section C with respect to the insurance policy or policies for which such additional premiums would be imposed. In the event that Owner shall have been named as one of the assureds in any of Tenant's policies in accordance with the foregoing, Owner shall endorse promptly to the order of Tenant, without recourse, any check, draft, or order for the payment of money representing the proceeds of any such policy, or any other payment growing out of or connected with said policy, and Owner hereby irrevocably waives any and all rights in and to such proceeds and payments.

E. In the event that Owner shall be unable at any time to obtain one of the provisions referred to in Section C above in any of its insurance policies, Owner shall, as Tenant's option, cause Tenant to be named in such

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document policy or policies as one of the assureds, but if any additional premium shall be imposed for the inclusion of Tenant as such an assured,

~~- 11 -~~

Tenant shall pay such additional premium upon demand. In the event that Tenant shall have been named as one of the assureds in any of Owner's policies in accordance with the foregoing, Tenant shall endorse promptly to the order of Owner, without recourse, any check, draft, or order for the payment of money representing the proceeds of any such policy, or any other payment growing out of or connected with said policy, and Tenant hereby irrevocably waives any and all rights in and to such proceeds and payments.

F. Subject to the provisions of Sections C, D and E above, and insofar as may be permitted by the terms of the insurance policies carried by it, each party hereby releases the other with respect to any claim (including a claim for negligence) that 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 interruption, as the case may be) occurring during the term of this lease.

G. If, by reason of a failure of Tenant to comply with the provisions of Section A of this Article 51, the rate of fire insurance with extended coverage on the building or equipment or other property of Owner shall be higher than it otherwise would be, Tenant shall reimburse Owner, on demand, for that part of the premiums for fire insurance and extended coverage paid by Owner because of such failure on the part of Tenant.

H. If any dispute shall arise between Owner and Tenant with respect to the incurrence of amount of any additional insurance premium referred to in Section G above, the dispute shall be determined by arbitration.

I. A schedule or make-up of rates for the building or the Demised Premises, as the case may be, issued by the New York Fire Insurance Rating Organization or other similar body making rates for fire insurance and extended coverage for the premises concerned, shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rate with extended coverage then applicable to such premises.

52. MORTGAGE SUBORDINATION. A. Tenant hereby acknowledges and agrees that: (i) this Lease is expressly subordinate to all of the following: (a) that certain Mortgage (the "Morgan Mortgage Document") and that certain Consolidation, Modification, Spreader and Extension Agreement (the "Spreader Agreement"), both dated as of January 18, 1994, by and among 205 Associates, L.P., The Durst Buildings Corporation, Durst Partners, 675 Associates, and David Durst, Richard Siegler, Douglas Durst, Jonathan Durst and Seymour B. Durst, as trustees, collectively as mortgagors, and Morgan Guaranty Trust Company of New York, as Trustee under Declaration of Trust dated December 9,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1960 as Amended for the Commingled Pension Trust Fund (Fixed Income - Mortgages) ("Morgan"), as mortgagee; (b) that certain Mortgage (the "BNY Mortgage Document") and that certain Agreement of Consolidation and Modification of Mortgage, Assignment of Leases and Rents and Security Agreement (the "Consolidation Agreement"); the Morgan Mortgage Document; the Spreader Agreement, the BNY Mortgage Document and the Consolidation Agreement are sometimes collectively referred to herein as the "Mortgages"), both dated as of February 3, 1997, by and among 205 Associates L.P., The Durst Buildings Corporation, 675 Associates L.L.C., David Durst, Richard Siegel, Douglas Durst, Jonathan Durst, Shirley Durst and Carola Durst, as trustees, Sendur Partners L.L.C. and Durst Partners L.L.C., collectively as mortgagors (together with mortgagors under the Spreader Agreement, "Mortgagors") and The Bank of New York, as mortgagee (together with Morgan, "Mortgagees"); and (c) all amendments, extensions, consolidations, modifications or replacements thereof; (ii) in the event of a default under this lease by Owner, Tenant shall promptly notify Mortgagees in writing of such default and Mortgagees shall have the opportunity (but not the obligation) to cure such default; and (iii) Tenant shall furnish to Mortgagors and Mortgagees a certificate, within ten (10) days after the making of a request therefor by Mortgagors or either Mortgagee, setting forth (w) whether this Lease is in full force and effect; (x) stating whether or not any default or event which, with notice or passage of time or both, would constitute a default, has occurred; (y) listing all amendments, modifications, assignments or extensions of lease; and (z) containing such other information as may be reasonably requested by Mortgagees; such certificates shall be furnished at Tenants's expense.

~~- 12 -~~

B. In addition to the foregoing and notwithstanding anything to the contrary which may be contained in this Lease, Tenant agrees that in the event of the enforcement by any Mortgagee of the remedies provided for by law or by the Mortgages, Tenant will, on request of any person succeeding to the interest of Mortgagors as a result of such enforcement, automatically adorn to said successor-in-interest without change to this Lease, provided that any persons succeeding to the interest of Mortgagors as a result of such enforcement shall not be (w) bound by any payment of rent or additional rent for more than one (1) month or regular billing period in advance; (x) bound by any alteration, amendment, modification or amendment to this Lease which has not been consented to by such Mortgagee; (y) liable for any act or omission of any prior lessor, or (z) subject to any offset or defenses which Tenant may have against any prior lessor.

~~C. Upon request by such successor-in-interest to Mortgagors, Tenant shall execute and deliver an instrument confirming such adornment.~~

D. Tenant agrees to submit to Owner on or before March 31 in each calendar year a copy of the latest annual financial statements of Tenant (and any guarantor of Tenant's obligations under this Lease), certified by an independent certified public accountant reasonably satisfactory to Owner. If Tenant does not regularly issue such financial statements, Tenant shall

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document submit to Owner on or before March 31 in each calendar year a copy of Tenant's latest annual financial statements certified by Tenant's chief financial officer.

~~53. CLEANING SERVICES. The cleaning services to be furnished to Tenant are more particularly set forth on Exhibit B annexed hereto.~~

54. TENANT ALTERATIONS. A. Tenant shall make no alterations, decorations, installations, additions or improvements in or to the Demised Premises or the electrical, plumbing, mechanical or heating, ventilating and air-conditioning systems serving the Demised Premises, including but not limited to, a water cooler, an air-conditioning or cooling system, mechanical or electrical equipment, or any unit or part thereof or other apparatus of like or other nature, without Owner's prior written consent, and then only by contractors or mechanics approved by Owner. 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 Owner may from time to time reasonably designate and in full compliance with all governmental bodies having jurisdiction thereover. As a condition precedent to Owner's consent to the making by Tenant of alterations, decorations, installations, additions or improvements to Demised Premises, upon Owner's request, Tenant agrees to obtain and deliver to Owner a performance bond and a labor and materials payment bond issued by a surety company satisfactory to Owner and licensed to do business in the State of New York, each in an amount equal to 125% of the costs of all work, labor, and such services to be performed and materials to be furnished in connection with such work, signed by such surety and a receipt of payment in full of the premium for such bond. Owner and Owner's designees shall be obligee(s) or insured(s) under such surety bond. Notwithstanding the foregoing, if any mechanic's lien is filed against the Demised Premises or the Building for work claimed to have been done for or materials claimed to have been furnished to Tenant, it shall be discharged by Tenant within ten (10) days thereafter, at Tenant's expense, by filing the bond required by law or payment or otherwise. If Tenant fails to discharge such lien, then Owner (upon ten (10) days prior notice to Tenant) shall have the right to discharge same (by filing the bond required by law or by payment in full of the mechanic's lien or otherwise) and Owner's costs and expense in obtaining such discharge shall be repaid in full by Tenant to Owner as additional rent within ten (10) days after written demand therefor. In addition, Tenant shall defend, save and hold Owner harmless from any such mechanic's lien or claim, including, without limitation, Owner's reasonable attorneys' fees, costs and expenses. Except as otherwise expressly provided herein, Owner shall not be liable for any failure of any Building facilities or services including, but not limited to, the heating, ventilating and air-conditioning installations, and/or additions by Tenant and Tenant shall correct any such faulty installation. Upon Tenant's failure to correct same, Owner may make such correction and charge Tenant for the cost thereof. Such sum due Owner shall be deemed additional rent and

~~-13-~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall be paid by Tenant promptly upon being billed therefor and unless so paid, Tenant shall also pay Owner the then Prime Rate on such additional rent.

Notwithstanding anything to the contrary, Owner's consent shall not be unreasonably withheld for nonstructural alterations that do not affect the Building's systems. In addition, Owner's consent shall not be required for any painting, wallcovering or decorating of the Demised Premises costing no more than $10,000 in the aggregate in any twelve (12) month period, provided Tenant gives Owner ten (10) days' prior written notice of such work.

~~B. Prior to commencing any work pursuant to the provisions of this Section, Tenant shall furnish to Owner:~~

~~1. Copies of all governmental permits and authorizations which may be required in connection with such work.~~

2. A certificate evidencing that Tenant (or Tenant's contractors) has (have) procured workmen's compensation insurance in statutory limits covering all persons employed in connection with the work who might assert claims for death or bodily injury against the holder of the Over-Lease, Owner, Tenant or the Building.

3. Such additional personal injury and property damage insurance (over and above the insurance required to be carried by Tenant pursuant to the provisions of this Lease) and general liability insurance (with completed operations endorsement) for any occurrence in or about the Building, in such limits as Owner may reasonably require because of the nature of the work to be done by Tenant and with insurers satisfactory to Owner.

C. All alterations, decorations, installations, additions or improvements upon the Demised Premises affixed to the realty so that they cannot be removed without material damage, or for which Tenant has received a credit, shall, unless Owner elects otherwise, become the property of Owner and shall remain upon, and be surrendered with, the Demised Premises, as a part thereof, at the end of the term or renewal terms, as the case may be. In the event Owner shall elect otherwise, then such alterations, decorations, installations, additions or improvements made by Tenant upon the Demised Premises as Owner 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. The foregoing shall in no event preclude Tenant from removing its personal property from the Demised Premises.

D. 1. Before proceeding with any alteration and/or addition, Tenant shall submit to Owner three copies of detailed plans and specifications therefor, for Owner's review and approval. In no event by reason thereof shall Tenant's connected electrical load exceed the capacity of the distribution system in and to the Demised Premises.

~~2. Tenant shall promptly reimburse Owner for all reasonable and~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document out-of-pocket expenses incurred by Owner in connection with Owner's review of Tenant's plans.

3. Tenant shall not be permitted to install and make part of the Demised Premises any materials, fixtures or articles which are subject to liens, chattel mortgages or security interests (as such term is defined in the Uniform Commercial Code as then in effect in New York).

4. No alterations and/or additions shall be undertaken (i) except under the supervision of a licensed architect or licensed professional engineer satisfactory to Owner and (ii) except after at least 10 days' prior notice to Owner.

5. All alterations and/or additions shall at all times comply with all legal requirements and insurance requirements and all rules and regulations including any Owner may reasonably adopt with respect to the making of any improvements and shall be made at such times and in such manner as Owner may from time to time reasonably direct. Tenant, at its ex-

-14- pense, shall (a) obtain all necessary municipal and other governmental permits, authorizations, approvals and certificates for the commencement and prosecution of such alterations and/or improvements and for final approval thereof upon completions and Owner shall reasonably cooperate with Tenant, at no cost to Owner, to the extent the law requires Owner to join in any application therefor, (b) deliver three copies to Owner and (c) cause all alterations and/or improvements to be performed in a good and first class workmanlike manner, using new materials and equipment at least equal in quality to the original installations of the Building or the then standards for the Building established by Owner. All alterations and/or additions shall be promptly commenced and completed and shall be performed in such manner so as not to interfere with the occupancy of any other tenant nor delay or impose any additional expense upon Owner in the maintenance, cleaning, repair, safety, management, or security of the Building (or the Building's equipment) or in the performance of any improvements. If any additional reasonable out-of-pocket expense is incurred Owner may collect the same as additional rent from Tenant and Tenant's failure to promptly pay the same when billed shall entitle Owner to treat the non-payment thereof as a non-payment of rent under this Lease and until paid to Owner such additional rent shall bear interest at the then Prime Rate.

6. Tenant, at its sole expense, promptly shall procure the cancellation or discharge of all notices of violation arising from or otherwise connected with it alterations and/or additions which shall be issued by any public authority having or asserting jurisdiction.

7. Subject to Section 54E below, only Owner or persons first approved by Owner shall be permitted to act as contractor for any work to be performed in accordance with this Article. Owner reserves the right to

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document exclude from the Building any person attempting to act as construction contractor in violation of this Article. In the event Tenant shall employ any contractor permitted in this Article, such contractor or any subcontractor may have use of the Building facilities subject to the provisions of this Lease and the Rules and Regulations governing construction. Tenant will advise Owner of the names of any such contractor and subcontractor Tenant proposes to use in the Demised Premises at least 10 days prior to the beginning of work by such contractor or subcontractor.

8. Tenant agrees that it will not at any time prior to or during the term of this Lease, either directly or indirectly employ or permit the employment of any contractor, mechanic or laborer, or permit any materials in the Demised Premises, if the use of such contractor, mechanic or laborer or such materials would, in Owner's sole and exclusive opinion, create any difficulty, work slowdown, sabotage, wild-cat strike, strike or jurisdictional dispute with other contractors, mechanics and/or Laborers engaged by Tenant or Owner or others, or would in any way disturb the peaceful and harmonious construction, maintenance, cleaning, repair, management, security or operation of the Building or any part thereof or in any other building owned by Owner (or an affiliate of Owner or co-venturer of Owner). In the event of any interference or conflict, or perceived interference or conflict, Tenant, upon demand of Owner, shall cause all contractors, mechanics or laborers, or all materials causing, in Owner's sole and exclusive opinion, such interference, difficulty or conflict, to leave or be removed from the Building immediately and Tenant does hereby agree to defend, save and hold Owner harmless from any and all loss arising thereby, including, without limitation, any attorney's fees and any claims made by contractors, mechanics, and/or laborers so precluded from having access to the Building.

9. No approval of any plans or specifications by Owner or consent by Owner allowing Tenant to make any improvements or any inspection of improvements made by or for Owner shall in any way be deemed to be an agreement by Owner that the contemplated improvements comply with any legal requirements or insurance requirements or the certificate of occupancy for the Building nor shall it be deemed to be a waiver by Owner of the compliance by Tenant of any provision of this Lease.

E. In making any alterations, installations, additions or improvements to the Demised Premises, (a) Tenant must comply with the Building Rules and Regulations for Tenant Alterations attached hereto as Exhibit E, (b) all work and materials shall be equal to the Building

~~-15-~~

~~Standards, attached hereto as Exhibit F, and (c) Tenant shall use only Owner's approved contractors, set forth on Exhibit G attached hereto.~~

~~55. REMEDIES. It is stipulated and agreed that in the event of the~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document termination of this Lease pursuant to Article 17 hereof, Owner shall forthwith, notwithstanding any other provisions of this Lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the amount by which the rent reserved hereunder (excluding the ERIF) for the unexpired portion of the term demised exceeds the then fair and reasonable rental value of the Demised Premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the Demised Premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four per cent (4%) per annum. If such premises or any part thereof be re-let by the Owner for the unexpired term of this Lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed prima facie to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to or less than the amount of the difference referred to above.

56. LEGAL FEES. In the event that Owner or Tenant commences, engages in, or threatens to commence or engage in any legal action or proceeding against the other party (including, without limitation, litigation or arbitration) arising out of or in connection with the Lease, the Demised Premises, or the Building (including, without limitation, the enforcement or interpretation of either party's rights or obligations under this Lease, whether in contract, tort, or both, or the declaration of any rights or obligations under this Lease), the prevailing party shall recover its attorneys' fees, disbursements and court costs from the non-prevailing party in connection with such matter. The provisions of this paragraph shall survive the termination or expiration of this Lease.

57. ENTIRE AGREEMENT; NO WAIVER. This Lease with its schedules and annexes contains the entire agreement between Owner and Tenant and any executory agreement hereafter made between Owner 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 signed by the party to be charged. This Lease may not be orally waived, terminated, changed or modified.

58. SECURITY SYSTEM. Tenant and its employees, contractors, agents and invitees shall comply with the Rules and Regulations in effect, from time to time, with regard to the Building's security system. The current Rules and Regulations with regard thereto are the following:

During the hours of 8:00 a.m. to 6:00 p.m. Monday through Friday ("Normal Business Hours") only persons displaying Kastle Systems "key tag" identification ("Keytag") to the lobby attendant shall be granted access to

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Building. During Normal Business Hours, anyone not displaying the Keytag to the lobby attendant shall obtain access to the Building only (i) if that person's arrival was pre-arranged with the lobby attendant with a list of anticipated visitors, or (ii) if not on a pre-arranged list, the person's arrival to the Building can be announced via telephone and then approved by the Tenant. After Normal Business Hours, access to the Building shall only be obtained by Keytag holders, swiping their Keytag on the Keytag reader outside the Building's front doors or by utilizing the telephone link to Kastle Systems personnel, who will in turn call the Tenant's premises to attempt to gain Tenant's approval for access of persons not holding a Keytag.

~~-16-~~

~~59. NO LIABILITY OF OWNER~~

A. No recourse shall be had on any of Owner's obligations under this Lease for any claim based thereon or otherwise in respect thereof against any incorporator of Owner, subscriber to Owner's capital stock, shareholder, employee, agent, officer or director, past, present or future, of any corporation, or any partner or joint venturer of any partnership or joint venture which shall be Owner hereunder or included in the term "Owner" or of any successor of any such corporation, or against any principal, disclosed or undisclosed, or any such corporation, or against any principal, disclosed or undisclosed, or any affiliate of any party which shall be Owner or included in the term "Owner," whether directly or through Owner or through any receiver, assignee, agent, trustee in bankruptcy or through any other person, firm or corporation, whether by virtue of any constitution, statute or rule of law or by enforcement of any assessment or penalty or otherwise, all such liability being expressly waived and released by Tenant.

B. Tenant shall look only and solely to Owner's leasehold estate and interest in and to the Building and the rents and profits therefrom for the satisfaction of any right of Tenant arising out of this Lease or for the collection of judgment or other judicial process or arbitration award requiring the payment of money by Owner and no other property or assets of Owner, Owner's agents, incorporators, shareholders, employees, officers, directors, partners, agents, principal (disclosed or undisclosed), joint venturers, or affiliates shall be subject to levy, lien, execution, attachment, or other enforcement procedure for the satisfaction of Tenant's rights and remedies under or with respect to this Lease, the relationship of Owner and Tenant hereunder or under law, or Tenant's use and occupancy of the Demised Premises or any other liability of Owner to Tenant.

60. TENANT ACCESS. Subject to Owner's maintenance and security requirements and to force majeure, Tenant shall have access to the Demised Premises twenty-four (24) hours per day, seven (7) days per week.

~~61. SECURITY DEPOSIT. A. In lieu of a cash deposit as described in Article 34 of this Lease (the "Security Deposit"), Tenant shall deliver to~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Owner a clean, irrevocable and unconditional Letter of Credit (the "Letter of Credit") issued by and drawn upon any commercial bank which is a member of the New York Clearing House Association (hereinafter referred to as the "Issuing Bank") with offices for banking purposes in the City of New York and having a net worth of not less than One Billion and 00/100 ($1,000,000,000.00) Dollars, which Letter of Credit shall have a term of not less than one year, be in the form attached hereto as Exhibit H, be for the account of Owner and be in the amount of the Security Deposit. Tenant acknowledges that it is a material inducement to Owner to enter into this Lease that the security be maintained in the form of a Letter of Credit and that Tenant's failure to maintain such Letter of Credit throughout the Lease term shall constitute a material default under this Lease, and Tenant further acknowledges that notwithstanding anything in this Lease, Tenant shall not be permitted to provide cash security. The Letter of Credit shall provide that:

(i) The Issuing Bank shall pay to Owner or its duly authorized representative an amount up to the face amount of the Letter of Credit upon presentation of the Letter of Credit and a sight draft in the amount to be drawn;

(ii) The Letter of Credit shall be deemed to be automatically renewed, without amendment, for consecutive periods of one year each during the term of this Lease, unless the Issuing Bank sends written notice (hereinafter referred to as the "Non-Renewal Notice") to Owner by certified or registered mail, return receipt requested, not less than thirty (30) days next preceding the then expiration date of the Letter of Credit, that it elects not to have such Letter of Credit renewed;

(iii) Owner, within twenty (20) days of its receipt of the Non-Renewal Notice, shall have the right, exercisable by a sight draft, to receive the monies represented by the Letter of Credit (which monies shall be held by Owner as a

~~- 17 -~~

cash deposit pursuant to the terms of Article 34 above and this Article 61 pending the replacement of such Letter of Credit or Tenant's default after notice and the expiration of any applicable cure period hereunder; however, Owner's holding of such cash security shall not be deemed a waiver of Tenant's default in its obligation to maintain the security in the form of a Letter of Credit);

~~(iv) Upon Owner's sale of Owner's interest in the land and the Building, the Letter of Credit shall be transferable, without charge, by Owner, as provided in Section 61(B) hereof; and~~

~~(v) If a Bankruptcy Event occurs, Owner shall have the right,~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document exercisable by a sight draft, to receive monies represented by the Letter of Credit.

For purposes of this Article 61, "Bankruptcy Event" shall include any petition in bankruptcy filed by or against Tenant in any court pursuant to any statute either of the United States or of any State at any time prior to the date herein fixed as the Commencement Date, or the commencement of a case under the United States Bankruptcy Code, 11 U.S.C. SECTION 101 et. seq., as amended (the "Bankruptcy Code") by or against Tenant, or a petition filed for insolvency or for reorganization or for the appointment of a receiver or trustee of all or a portion of Tenant's property, which Tenant fails to secure a discharge thereof within thirty (30) days, or an assignment by Tenant for the benefit of creditors, or petitions for or enters into an arrangement with its creditors.

B. In the event of a sale of Owner's interest in the land and the Building, Owner shall have the right to transfer (at no expense to Owner) the cash security or Letter of Credit, as the case may be, deposited hereunder to the vendee or lessee, and Owner shall, after notice to Tenant of such transfer, sent by certified mail, return receipt requested, including the name and address of the transferee, be released by Tenant from all liability for the return of such cash security or Letter of Credit. In such event, Tenant agrees to look solely to the new Owner for the return of said cash security or Letter of Credit. It is agreed that the provisions hereof shall apply to every transfer or assignment made of said cash security or Letter of Credit to a new Owner.

C. Tenant covenants that it will not assign or encumber, or attempt to assign or encumber, the monies or Letter of Credit deposited hereunder as security, and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment, or attempted encumbrance.

D. Owner agrees that it will not draw down the proceeds of the Letter of Credit except in the event of a default, after notice and the expiration of any applicable cure period, by Tenant hereunder or a Bankruptcy Event or the non-renewal of such Letter of Credit by the Issuing Bank.

E. In the event that at any time during the term of this lease, Owner, in Owner's reasonable opinion, believes (a) that the net worth of the Issuing Bank shall be less than the minimum amount specified in Section 61(A) hereof, or (b) that circumstances have occurred indicating that the Issuing Bank may be incapable of, unable to, or prohibited from honoring the then existing Letter of Credit (hereinafter referred to as the "Existing L/C") in accordance with the terms thereof, then, upon the happening of either of the foregoing, Owner may send written notice to Tenant (hereinafter referred to as the "Replacement Notice") requiring Tenant within ten (10) days to replace the Existing L/C with a new letter of credit (hereinafter referred to as the "Replacement L/C") from an Issuing Bank meeting the qualifications described in Section 61(A) hereof. Upon receipt of a Replacement L/C meeting the qualifications of Section 61(A) hereof, Owner shall forthwith return the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Existing L/C to Tenant. In the event that (i) a Replacement L/C meeting the qualifications of Section 61(A) hereof is not received by Owner within the time specified, or (ii) Owner reasonably believes an emergency exists, then in either event, the Existing L/C may be presented for payment by Owner and the proceeds thereof shall be held by Owner in accordance with Article 34 hereof, subject, however, to Tenant's right, at any time

~~- 18 -~~

~~thereafter prior to a Tenant's default hereunder, to replace such cash security with a new letter of credit meeting the qualifications of Section 61(A) hereof.~~

~~- 19 -~~

~~SUBSIDIARIES OF THE REGISTRANT~~

~~Independent Music Channel, Inc. Invision Records, Inc. Jump2Web.com Corp.~~

5
YEAR MAY-31-2000 JUN-01-1999 MAY-31-2000 1,829,580 0 0 0 0 2,376,717 451,252 6,717 3,515,735 1,556,777 0 0 0 662 1,958,296 3,515,735 0 76,549 0 0 5,927,044 0 16,347 0 0 5,866,842 0 0 0 5,866,842 (.57) 0