<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________to____________
Commission File Number 0-27872
MAY & SPEH, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2992650
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1501 Opus Place, Downers Grove, Illinois 60515
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 964-1501
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section(g) of the Act:
Common Stock, $.01 par value
Preferred Stock Purchase Rights
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $163,839,510 as of December 22, 1997, based upon
the last sale price of such stock as reported by The Nasdaq Stock Market on that
day. In making this calculation, the Registrant has assumed, without admitting
for any purpose, that the Registrant's Employee Stock Ownership Plan and all
executive officers and directors of the Registrant, and no other persons, are
affiliates.
The number of shares of Common Stock of the Registrant outstanding as of
December 22, 1997 was 25,195,854.
Documents Incorporated by Reference: Portions of the Registrant's Proxy
Statement relating to the 1998 Annual Meeting of Stockholders (to be filed
pursuant to Regulation 14A) have been incorporated by reference into Part III of
this report.
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PART I
In addition to historical information, this report contains forward-looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated. Certain of these risks and
uncertainties are described in reports and other documents filed by May & Speh,
Inc., ("May & Speh" or the "Company") with the Securities and Exchange
Commission from time to time, including the Prospectus dated March 26, 1996
included in the Company's Registration Statement on Form S-1 (File No. 33-
98302).
Item 1. Business
May & Speh provides computer-based information management services with a
focus on direct marketing and information technology outsourcing services. The
Company's direct marketing services help companies execute more profitable
direct marketing and customer management programs. Services include strategic
analysis and strategy management; systems consulting; custom data warehouse and
datamart design, build, implementation and management; statistical (predictive)
modeling and analysis; and list processing. May & Speh information technology
outsourcing solutions support multi-platform processing, platform migration and
network management for clients seeking to outsource their information technology
operations, thereby liberating capital and redirecting their focus to more
strategic IT initiatives. The Company's direct marketing and information
technology outsourcing services are complementary and allow the Company to
leverage its investment in its state-of-the-art data processing center as well
as its core competencies in customized software systems development, large
database management, high speed data processing and data center management. May
& Speh's open architecture, multiple platform data center, with processing
capacity of approximately 6,000 million instructions per second ("MIPS"),
provides its clients with superior processing flexibility and speed.
Market Overview
Direct Marketing Services
Direct marketing enables the delivery of a customized message to a defined
audience and the measurement of the response to that message. The marketing
program can then be evaluated, refined and continuously improved. Effective
direct marketing programs require a detailed understanding of customers' and
prospective customers' purchasing patterns to promote more relevant and timely
offers. The ability to measure the response to a specific marketing program
allows the financial return on marketing expenditures to be analyzed.
Demographic shifts and lifestyle changes, combined with a proliferation of
new products and services and the evolution of new marketing mediums (including
cable, telemarketing, direct mail, direct response, on-line services and the
Internet) have made marketing campaigns increasingly complex. At the same time,
marketing costs have been subjected to growing scrutiny by marketing managers.
Many marketers have responded to these pressures by reallocating their
expenditures from traditional mass marketing to direct marketing.
Direct marketing programs depend upon the ability of a marketer to access
information about their customers and prospects. Historically, valuable sales
and customer data within large corporations was often inaccessible as it
resided in various incompatible systems. Through advances in computer and
software technology, it is now possible to compile very large databases using
disparate customer record files combined with data collected from compiled lists
owned by third parties. With the development of relational and multidimensional
databases, marketers can add new categories of data without having to redesign
or rebuild their databases, making it possible to use this data in order to
develop customer profiles based on many different attributes. Finally, the
development of decision support software has allowed utilization of database
marketing at the decision maker level in a client/server environment.
Direct marketing service providers require the technical resources to
manage exceptionally large relational and multidimensional databases and the
software capabilities to convert vast amounts of data into usable information.
These functions must be performed within tight time constraints making
processing speed critical. Many companies choose not to
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invest in the technological resources necessary to build these capabilities and
as a result, choose to outsource database management and list processing
services to a proven vendor as a more effective means of accessing the latest
technological resources and expertise.
Information Technology Outsourcing
Information technology outsourcing includes the provision and management of
all or a portion of a client's data processing and information systems
functions. In essence, the information technology outsourcing services vendor
assumes the client's data center functions and the client continues to retain
direct access to their information, although the hardware and software are no
longer located on the client's premises. Increasingly, companies are
outsourcing their information processing applications as part of an overall
effort to focus internal resources on their core competencies while improving
operating efficiencies and reducing costs.
Many companies' information technology departments are burdened with
increasing demands for instant access and communication of large amounts of data
to multiple locations in real time, requiring high speed processing and
telecommunications capabilities. In addition, because computing technology is
evolving rapidly, companies are increasingly faced with the decision to either
continually invest a significant amount of capital in new technology or to
outsource. The increasing demands on information technology departments coupled
with the significant ongoing investments required to remain technologically
current are key factors in the growing trend towards outsourcing. The
advantages to organizations of outsourcing their data processing activities
include improved flexibility, reduced capital investments, higher performance
and service levels, improved speed of delivery, capacity on demand and cost
control.
The Company believes that the market in which it competes is best defined
by the scale of its clients' data processing requirements, not by such clients'
revenues. Typically, the scale of these requirements is large but not of a size
typically sought by the larger outsourcing service providers such as
International Business Machine Corporation's Global Services division,
Electronic Data Systems Corporation, Computer Sciences Corporation, Perot
Systems, Inc. and SHL Systemhouse, Inc., a subsidiary of MCI Communications
Corporation. The Company believes that its data center processing capabilities,
while not of a similar scale, are similar to or better than the capabilities of
its large competitors in terms of throughput, turnaround capabilities and state-
of-the-art equipment utilized.
May & Speh Services and Products
Direct Marketing Services
May & Speh provides comprehensive direct marketing services, including
database creation, data warehousing, predictive behavioral modeling, list
processing and data enhancement. Rather than selling standard products and
services to it clients, the Company's approach has been to design and implement
creative custom database solutions around the specific needs of its clients.
The principal advantages of customized services include (i) the ability of the
database to expand and adapt to the client's changing business needs, (ii) the
ability to have these services developed on a platform of the client's choosing,
and (iii) the integration of database services with the list processing services
necessary to keep the database current.
Database Management Services. May & Speh's broad range of database
management services begins with the Company's proven approach to database
development which includes planning and analytical processes to determine the
client's needs. Typically, direct marketing databases originate with the
client's own files, both current and historical, which generally include name,
address and gender, as well as frequency and value of products purchased.
May & Speh analyzes all of the client's disparate operational files and
determines what data will add value and can be made actionable. Utilizing both
proprietary and commercial software, the Company consolidates all of the
disparate information and relationships across multiple files and converts the
client's raw information into a clean, consolidated format so that relationships
can be understood at both the customer and household levels.
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Once the client's customer data is consolidated and the database created,
May & Speh enhances the data by utilizing a wide selection of demographic,
geographic, census (age, approximate income level, education level and household
composition) and lifestyle information for over 100 million individuals and
households. May & Speh licenses this information from leading data compilers.
The combination of each client's proprietary customer information with these
external data files provides a complete profile of a client's customers,
enabling the client, through the use of May & Speh's behavior modeling and
analysis services, to act on the data. Through the development of a scoring
model, the client can segment its database and determine its best customers and
prospects in each marketplace. The entire process results in a marketing
program that can be targeted to distinct audiences with a high propensity to buy
the client's products. These databases typically reside at May & Speh's data
center. Because of the dynamic nature and complexity of these databases, May &
Speh is routinely asked by its clients as part of their ongoing direct marketing
efforts to update the databases with the results of recent marketing programs
and to periodically perform the list processing service described below.
List Processing Services. List processing includes the preparation and
generation of comprehensive name and address lists which are used in direct
marketing promotions. May & Speh's state-of-the-art data center and large
volume processing capabilities allow the Company to meet the direct marketing
needs of its clients, processing over seven billion records through its advanced
list processing software services in fiscal 1997. May & Speh customizes a list
processing solution by utilizing a variety of commercial and proprietary
software products, such as Address Conversion and Reformat, Address
Standardization and Enhanced Merge/Purge, as well as products which are licensed
through the United States Postal Service such as National Change of Address,
Delivery Sequence File and Locatable Address Conversion System. Other licensed
products are databases used for suppressions such as the Direct Marketing
Association's Mail Preference File, the American Correctional Association Prison
Suppress File and other files.
May & Speh's list processing services seek to reduce its clients' mailing
costs. For instance, because approximately 15% to 20% of the population moves
each year, mailings may be misaddressed or not delivered at all. Through the
utilization of May & Speh's Merge/Purge, Address Standardization software,
National Change of Address database, Delivery Sequence File and Locatable
Address Conversion Database, the Company can eliminate most duplicate names as
well as reduce the amount of undeliverable items by an average of 6%.
Quiddity(TM). In fiscal year 1997, development activities were
substantially completed for Quiddity and this new product was introduced to
clients and prospects. Quiddity is an on-line relational and open database
management system designed specifically for marketing professionals. The
product's user-friendly format allows non-technical users to easily access and
directly work with marketing databases to create more targeted and profitable
one-to-one marketing programs. Quiddity integrates custom-developed and
commercial software that complement the Company's suite of direct marketing
services. Key features include open architecture, scaleable platforms and an
object-oriented application that is work-flow-oriented and intuitive.
Information Technology Outsourcing
May & Speh's primary information technology outsourcing service is to
manage all or a portion of a client's information processing needs on a cost-
effective basis from the Company's data center. After migrating their workload
to the Company's data center, clients continue to retain direct access to their
information from their remote sites. The Company also provides, to a much
lesser extent, applications outsourcing services which include the replacement
of a client's in-house technical development staff.
The primary outsourcing services provided include migration (takeover and
turnover) support, on-line and batch processing capacity, technical support,
help desk access and support, back-up and recovery, disaster recovery services,
operations support, account management, media (tapes, documents, high speed
Direct Access Storage Devices subsystems ("DASD"), etc.) management and
handling, production control, telecommunications and network management support.
These services and support functions are available 24 hours a day, seven days a
week.
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Historically, the Company's success in outsourcing has resulted in part
from its ability to provide its services with minimal disruption to the client.
The Company has established rigorous formal processes to ensure a successful
ongoing processing of a client's workload at the Company's data center.
Marketing and Sales
The Company markets its direct marketing and information technology
outsourcing services through separate direct sales forces. Maintaining a
separate sales force for each service offering allows the Company's sales
representatives to concentrate on particular services, technology and customer
demands, thereby staying abreast of developments in these areas. Sales
representatives are encouraged to identify cross-selling opportunities. The
Company's sales force compensation system provides incentives to salespeople to
focus on both attracting larger clients and selling the Company's most
profitable services.
Pricing for direct marketing services is dependent upon the complexity of
service required. In general, May & Speh establishes a price list for clients
detailing the prices for a broad range of service options. These prices are
based on the nature and complexity of the services, volume of records to be
processed and the level of customization required. Additionally, if the level
of up-front customization is high, the Company charges development fees based on
the level of customization required.
Pricing for information technology outsourcing services is dependent upon
the anticipated range of resource consumption. Typically, clients are charged a
flat or stepped rate for information technology outsourcing services provided
under multi-year contracts. If the processing time, data storage, retrieval
requirements and output volume exceed the budgeted amounts, the client is
charged additional amounts. Minimum charges and early termination charges are
typically included in contracts.
Clients
The Company has over 180 direct marketing clients, including Fortune 500
companies and other large and medium-sized companies that have significant
direct marketing requirements. These clients are primarily in the financial
services, consumer products, insurance, and retail industries. The 10 largest
direct marketing clients represented approximately 66% of the Company's direct
marketing net revenues in fiscal 1997.
The Company has approximately 150 information technology outsourcing
clients. These clients are located primarily in the mid-western United States.
The 10 largest outsourcing clients represented approximately 40% of the
Company's information technology outsourcing services net revenues in fiscal
1997.
The Company seeks to maintain long-term relationships with its clients. In
fiscal 1997, 66% of net revenues were derived from clients served by the Company
for more than three years including Sears, Roebuck and Company ("Sears"), the
Company's first client in 1947. In fiscal 1997, Sears accounted for
approximately 19.1% of the Company's net revenues. Information technology
outsourcing clients typically operate under contracts, usually three years in
length. Direct marketing clients typically do not operate under formal
contracts, but have traditionally maintained multi-year relationships with May &
Speh.
Technology Resources and Facilities
The Company maintains a state-of-the-art data center with approximately
6,000 MIPS of mainframe and UNIX processing power at its Downers Grove, Illinois
headquarters. The Company's processors include and a Hitachi Skyline Series
mainframe computer, the world's fastest IBM-compatible processor, and a Hitachi
GX/8824 series mainframe computer capable of executing 390 MIPS. For outsourcing
projects, the Company has added four Hitachi Pilot processors, which are the
fastest CMOS, IBM-compatible mainframe. The Company utilizes other state-of-the-
art data center components, such as robotic tape sub-systems, RAID disk systems
and high-speed laser, LED and impact printers. The Company supports multiple
platforms including mainframe, UNIX and other mid-range computer systems.
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The Company maintains a disaster recovery plan with a commercial disaster
recovery service to provide alternative data processing sites in the event the
Company experiences a natural disaster or other interruption at its data center.
The Company conducts recovery exercises several times per year and encourages
its clients to join in this process.
The Company's headquarters building was custom-designed to be a secure data
center environment. Building characteristics include 24-hour security
protection, television surveillance, fire and motion alarms and a fire
protection system backed up by a sprinkler system. The Company added a
generator system which allows it to be self-sufficient if there is a power
outage by operating continually until power is restored by the electric utility
provider.
Competition
The markets in which the Company operates are highly competitive and
fragmented, with no single dominant competitor. Although numerous smaller
companies compete in the direct marketing and outsourcing markets, the Company
regularly competes with companies that have more extensive financial, marketing
and other resources than the Company. Many of the Company's competitors have
substantially greater assets and thus, may have a greater ability to obtain
client contracts where sizable asset purchases or investments are required.
In the direct marketing services market, competition is based on the
quality and reliability of products and services, technological expertise,
historical experience, ability to develop customized solutions for clients,
processing capabilities and price. Management believes that the Company
competes favorably in this market based upon these competitive factors. The
Company's principal competitors include Acxiom Corporation, Database America
Companies, Donnelley Marketing Corp., Harte-Hanks Communication, Inc., Metromail
and NeoData Services.
In the information technology outsourcing market, competition is based on
the quality and reliability of services, technical expertise, processing
capabilities, processing environment and price. Management believes that the
Company competes favorably in this market based upon these competitive factors.
Although there are many competitors within the information technology
outsourcing services marketplace, the Company's principal competitors are
Affiliated Computer Services, Inc., Genix Group, Inc., a wholly-owned subsidiary
of MCN Corporation, Lockheed Martin Corporation, PKS Information Services, Inc.,
Power Computing Company (a division of Philips, N.V.), Western Atlas and other
regional outsourcers. In addition, but on a less frequent basis, the Company
competes with International Business Machine Corporation's Global Services
division, Electronic Data Systems Corporation, Computer Sciences Corporation,
Perot Systems, Inc. and SHL Systemhouse, Inc.
Intellectual Property Rights
The Company relies upon its trade secret protection program and non-
disclosure safeguards to protect its proprietary technologies. The Company
enters into license or other agreements with its clients in the ordinary course
of business which contain terms and conditions prohibiting unauthorized
reproduction of the Company's products. In addition, the Company generally
enters into confidentiality agreements with its employees, clients, potential
clients and suppliers with access to sensitive information and limits access to
and distribution of its software documentation and other proprietary
information. While there can be no assurance that the steps taken by the
Company will be adequate to deter misappropriation of its proprietary rights,
the Company believes that due to the rapid pace of technological change in the
Company's business, legal protections afforded through patent protection for its
products are less significant than the knowledge, ability and experience of its
employees, the frequency of product enhancements and the timeliness and quality
of support.
Employees
As of September 30, 1997, the Company employed 574 persons. None of the
Company's employees are represented by a labor union, and the Company believes
that its relations with employees are good.
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Item 2. Properties.
The Company's executive offices and principal operations are located at
1501 Opus Place, Downers Grove, Illinois, in a 105,352 square foot building
leased from a third party for a term of 20 years. The facility is comprised of
67,352 square feet of office space, 25,000 square feet of raised floor
facilities which house the Company's data center and 13,000 square feet of tape
library. The Company currently leases an additional 127,448 square feet of
warehouse and office space in three separate locations in the metropolitan
Chicago area with lease terms expiring on various dates through August 2002.
The Company has executed a 20 year lease for a 200,000 square foot office
building under construction on property adjacent to the Company's executive
offices. The lease commences upon completion of the building which is expected
in September 1998.
The Company believes that its existing facilities are adequate for its
present needs and that the additional facilities proposed for construction will
be sufficient to sustain the growth of the Company for the foreseeable future.
Notwithstanding, the Company believes that additional space will be available
for lease on commercially reasonable terms on an as needed basis.
Item 3. Legal Proceedings.
The Company is not a party to any litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 4A. Executive Officers of the Registrant.
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Peter I. Mason 45 Chairman, President and Chief Executive Officer
Terrance C. Cieslak 51 Executive Vice President and Chief Technology Officer
Robert C. Early 44 Executive Vice President, Corporate Development
Michael J. Loeffler 40 Executive Vice President, Direct Marketing Services
Eric Loughmiller 38 Executive Vice President, Chief Financial Officer and Secretary
John Jazwiec 37 Senior Vice President and Chief Information Officer
Willard E. Engel, Jr. 50 Vice President, Chief Accounting Officer and Treasurer
</TABLE>
Peter I. Mason became Chairman, President and Chief Executive Officer of
the Company during 1997. Mr. Mason has served as a director of the Company
since 1994. Prior to joining May & Speh, Mr. Mason was a partner in the Chicago
law firm of Freeborn & Peters, which he co-founded in 1983 and served as
chairman of its operating committee from 1986 to 1996. Mr. Mason served on the
board of directors of U.S. Robotics Corporation from 1983 to 1997, and currently
serves as a director of Mastering, Inc., and several privately held businesses.
Terrance C. Cieslak serves as Executive Vice President and Chief Technology
Officer and is responsible for systems management and integration for the
Company. Since joining the Company in 1987, Mr. Cieslak has served in a
variety of senior management positions including Technical Support Manager, Data
Center Manager and Vice President of
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Services and Solutions. Prior to joining the Company, Mr. Cieslak worked with
Electronic Data Systems Corporation and Official Airline Guide.
Robert C. Early serves as Executive Vice President, Corporate Development,
a position he has held since January 1997. Prior to that, Mr. Early served as
Executive Vice President, Chief Financial Officer and Treasurer of the Company
from October 1995 through January 1997 and Director of Corporate Growth for the
Company from 1993 through October 1995. Mr. Early also has served as a director
of the Company since November 1994. Prior to joining the Company, Mr. Early
worked as an independent contractor with business advisory firms, including
Ridge Capital Corp. and Ridge Advisors, Inc., which provide merger and
acquisitions, capital financing and strategic planning advisory services. From
1990 through 1992 Mr. Early was also Vice Chairman of Consolidated Convenience
Systems, Inc., a holding company. Prior to 1990, Mr. Early spent approximately
12 years at Grant Thornton LLP, and was the partner responsible for the Chicago
office Capital Markets Group from 1985 through 1990.
Michael J. Loeffler serves as Executive Vice President, Direct Marketing
Services and is responsible for the direct marketing services group of the
Company. Mr. Loeffler joined May & Speh in 1988 as an Account Executive and has
also served as Vice President of Sales and Sales Manager. Prior to joining May
& Speh, Mr. Loeffler had seven years of experience in the direct marketing
industry with UARCO, Inc. and Colorforms Division of Wallace Press.
Eric Loughmiller serves as Executive Vice President and Chief Financial
Officer. Prior to joining May & Speh, Mr. Loughmiller was an audit partner at
Price Waterhouse LLP where he had spent over 15 years in that firm's Accounting
and Business Advisory Services practice. Mr. Loughmiller is a Certified Public
Accountant.
John Jazwiec serves May & Speh as Senior Vice President and Chief
Information Officer. He joined the Company in 1997 with over 15 years
experience in Data Processing Services with a background in both Mainframe and
Client Server platforms. From 1994 to 1997, Mr. Jazwiec served as Vice
President and CIO of Fiserv, a banking outsourcing firm. Prior to that time, he
served as Vice President and CIO of Siebe Environmentals, a subsidiary of Siebe
PLC.
Willard J. Engel, Jr. has served May & Speh as Vice President and Chief
Accounting Officer since 1986 and in other financial and accounting capacities
since 1972. Effective January 1997, Mr. Engel became Treasurer and Chief
Accounting Officer.
Officers are chosen and serve at the discretion of the Board of Directors.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Price Range of Common Stock
The Company's Common Stock has been traded on The Nasdaq National Market
under the symbol "SPEH" since March 26, 1996, the date of the Company's initial
public offering. The table below sets forth for the fiscal period indicated the
range of high and low sales prices for the Common Stock as reported by The
Nasdaq Stock Market.
<TABLE>
1996 1997
---- ----
Fiscal Quarter High Low High Low
- ------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
Q1 - - 19 7/8 11 1/2
Q2 12 10 15/16 14 7 1/2
Q3 16 1/2 10 7/8 13 1/2 7 3/8
Q4 21 1/2 13 3/4 14 3/4 12
</TABLE>
As of December 22, 1997 , there were 103 holders of record of the Company's
Common Stock.
Dividend Policy
The Company currently intends to retain its earnings for future growth and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The Company's credit agreements prohibit the Company from paying
dividends and making other distributions on its Common Stock without the consent
of its lenders. Any future payment of dividends will depend upon the Company's
results of operations, financial condition, cash requirements and other factors
deemed relevant by the Board of Directors.
Use of Proceeds
On March 26, 1996, the Securities and Exchange Commission declared
effective the Company's Registration Statement on Form S-1 (No. 33-98302),
pursuant to which the Company sold 4,355,000 shares of the Company's Common
Stock with aggregate offering proceeds of $47.9 million, and certain selling
stockholders sold an additional 3,350,000 shares of Common Stock with aggregate
offering proceeds of $36.9 million. The managing underwriters of the offering
were Donaldson, Lufkin & Jenrette Securities Corporation, BT Alex. Brown, Inc.
(formerly Alex. Brown & Sons Incorporated) and ABN AMRO The Chicago Corporation
(formerly The Chicago Corporation). The net proceeds to the Company from the
offering were approximately $43.5 million, after deducting underwriting
discounts and commissions of $3.4 million and offering expenses of approximately
$750,000 of legal, accounting, printing and other services. The Company used
approximately $19.4 million of the net proceeds in connection with its
acquisition of GIS Information Systems, Inc. ("GIS") in July 1996 and Credit
Strategy Management ("CSM") in January 1997, and $14.5 million on purchases of
computer related equipment. The balance of the net offering proceeds are
invested primarily in securities of individual municipalities that are backed by
U.S. Treasuries or a major municipal insurer (principal and interest) and will
be used in manners similar to the above.
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Item 6. Selected Financial Data
The following table sets forth selected financial data of the Company for
the five fiscal years ended September 30, 1997. The selected financial data has
been derived from the Company's audited financial statements. The financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
notes thereto.
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
------------------------------------------------------
1993 1994 1995/(1)/ 1996 1997
Statement of Operations Data: (In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net revenues $41,792 $51,667 $ 61,641 $ 77,223 $ 92,457
Operating expenses:
Wages and benefits 14,709 18,624 20,984 23,950 30,437
Services and supplies 3,240 3,650 4,160 6,839 6,192
Rents, leases and maintenance 9,848 11,156 13,878 18,064 20,137
Depreciation and amortization 740 912 1,230 2,156 4,420
Other operating expenses 3,667 4,034 5,106 6,813 8,433
ESOP principal payments/(2)/ 2,109 2,267 2,411 2,376 2,376
------- ------- ---------- -------- --------
Total operating expenses 34,313 40,643 47,769 60,198 71,995
------- ------- ---------- -------- --------
Operating income 7,479 11,024 13,872 17,025 20,462
ESOP interest 1,208 1,022 864 611 403
Other (income) expense, net 662 474 482 (84) 1,161
------- ------- ---------- -------- --------
Income before income taxes 5,609 9,528 12,526 16,498 18,898
Income taxes 2,203 3,690 4,665 6,274 7,182
------- ------- ---------- -------- --------
Net income $ 3,406 $ 5,838 $ 7,861 $ 10,224 $ 11,716
======= ======= ========== ======== ========
Net income per share $0.15 $0.26 $0.39 $0.42 $0.45
Weighted average shares and common
equivalent shares outstanding 23,406 22,375 20,415 24,429 26,219
Operating and Other Data:
Operating margin/(3)/ 17.9% 21.3% 22.5% 22.0% 22.1%
Number of employees at end of period 272 306 331 434 574
Processing capacity (MIPS)
at end of period 168 198 500 1,329 5,995
</TABLE>
<TABLE>
<CAPTION>
September 30,
----------------------------------------------------
1993 1994 1995 1996 1997
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and marketable securities $ 4,881 $ 4,459 $ 8,602 $ 30,732 $ 22,305
Working capital 10,840 12,091 16,519 46,149 47,040
Total assets 29,971 33,978 46,804 115,218 148,796
Current maturities of long-term debt 2,724 3,035 3,359 5,330 5,811
Long-term debt 17,697 15,051 16,860 22,251 31,546
Total stockholders' equity 3,989 8,701 17,644 75,731 91,135
- ----------------------------------------
</TABLE>
/(1)/ In fiscal 1995, the Company paid a special dividend of $2.5 million, of
which $1.2 million was paid to the Company's Employee Stock Ownership Plan
("ESOP") and is deductible by the Company for federal income tax purposes. The
principal purpose of the dividend was to permit the ESOP to prepay without
penalty a portion of its outstanding loan balance.
/(2)/ Represents annual tax deductible contributions to the Company's ESOP which
are used to service principal payments on the related ESOP loan.
/(3)/Operating margin represents operating income expressed as a percentage of
net revenues.
/(4)/The financial information above has been restated to reflect a 12-for-one
stock split in December 1995.
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
May & Speh celebrated it's 50th anniversary as a provider of information
technology services in 1997. May & Speh provides computer-based information
management services with a focus on direct marketing and information technology
outsourcing services. The Company's direct marketing services help companies
execute more profitable direct marketing and customer management programs.
Services include strategic analysis and strategy management; systems consulting;
data warehouse design and management; modeling and analysis; and list
processing. May & Speh information technology solutions support multi-platform
processing, platform migration and network management for clients seeking to
outsource their information technology operations, thereby liberating capital
and redirecting their focus to more strategic information technology
initiatives.
May & Speh has experienced strong growth in revenues and earnings per share
over the last five years. For the five fiscal years ended September 30, 1997,
the Company's net revenues grew from $41.8 million to $92.5 million and earnings
per share increased from $.15 to $.45. During this period, operating margin
increased from 17.9% to 22.1%, reflecting achievement of certain economies of
scale. The Company has invested in human resources, facilities and technology
at rates consistent with growth in revenues over this period. The number of
employees has increased from 272 at September 30, 1993 to 574 at September 30,
1997, reflecting the addition of new sales and marketing, technical and
administrative personnel to support the Company's emphasis on direct marketing
services along with information technology outsourcing services and overall
growth. In addition, the Company's ESOP principal payments, which have remained
relatively constant in dollar terms, have declined as a percentage of net
revenues to 2.6% for fiscal year 1997 from 5.0% in fiscal 1993.
In fiscal 1997, approximately 61.6% of the Company's net revenues were from
direct marketing services which include database creation, data warehousing,
predictive behavioral modeling, list processing and data enhancement. Revenues
from the Company's existing direct marketing clients are typically recurring in
nature, though such services are not provided under long-term contracts.
Information technology outsourcing services provided approximately 38.4% of net
revenues and are typically performed under multi-year contracts. May & Speh's
direct marketing and information technology outsourcing services are
complementary and leverage the Company's investment in its state-of-the-art data
facility. Investments required to provide services to the new clients are
typically spread across multiple contracts. This approach reduces the Company's
investment risk and allows for economies of scale.
The Company regularly evaluates whether to lease or buy its computer
equipment. An environment of rapidly changing technology and cost efficient
financing arrangements has resulted in the Company leasing most of its computer
equipment under three to ten year leases. The Hitachi Data System Skyline 21,
which the Company purchased during fiscal year 1997 in order to better
facilitate future upgrades, is an exception. Generally, the Company's computer
leases with terms in excess of five years are classified as capital leases.
As of September 30, 1997, the Company had more than 330 clients. The
Company's 20 largest clients accounted for approximately 59.4% of the Company's
net revenues in fiscal year 1997. Sears represented 19.1% of the fiscal 1997
net revenues. The Company's net revenues for fiscal 1996 and 1997 were
concentrated in the following industries:
11
<PAGE>
<TABLE>
<CAPTION>
1996 1997
---- ----
Direct Marketing:
<S> <C> <C>
Financial and banking 27% 23%
Retail 19 18
Consumer goods 10 8
Insurance 6 5
Agency 5 5
Telecommunications and high technology 6 3
Other 1 -
Outsourcing (not industry specific) 26 38
</TABLE>
In October 1988, the Company established an employee stock ownership plan
to facilitate employee ownership of the Company. At the time, the ESOP acquired
43.1% of the Company's Common Stock from certain stockholders and incurred a
loan obligation of $22.5 million. As of September 30, 1997 the ESOP owned
approximately 33% of the Company's outstanding Common Stock. The loan obligation
is being repaid by the Company through annual tax deductible contributions and
as of September 30, 1997, the loan obligation was $3.0 million. ESOP
contributions are reflected in the Company's consolidated statements of
operations as "ESOP principal payments" as an operating expense and as an
interest expense.
The Company has announced that a one-time charge of approximately $2.9
million will be recorded in the first quarter of fiscal 1998. This charge
represents the present value of payments under existing contracts with prior
members of management.
12
<PAGE>
Results of Operations
The following table sets forth, for the period indicated, certain items
derived from the Company's statement of operations as a percentage of revenues:
<TABLE>
<CAPTION>
Fiscal Year
----------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Net revenues:
Direct marketing services 78.6% 73.0% 61.6%
Information technology outsourcing services 21.4 27.0 38.4
----- ----- -----
100.0% 100.0% 100.0%
----- ----- -----
Operating expenses:
Wages and benefits 34.1 31.0 32.9
Services and supplies 6.7 8.9 6.7
Rents, leases and maintenance 22.5 23.4 21.8
Depreciation and amortization 2.0 2.8 4.8
Other operating expenses 8.3 8.8 9.1
ESOP principal payments 3.9 3.1 2.6
----- ----- -----
Total operating expenses 77.5 78.0 77.9
----- ----- -----
Operating income 22.5 22.0 22.1
Interest and other expenses (2.2) (0.7) (1.7)
----- ----- -----
Income before income taxes 20.3 21.3 20.4
Income Taxes (7.6) (8.1) (7.8)
----- ----- -----
Net income 12.7% 13.2% 12.6%
===== ===== =====
</TABLE>
Fiscal Year Ended September 30, 1997 Compared to Fiscal Year Ended September 30,
1996
In fiscal year 1997, net revenues increased to $92.5 million from $77.2
million in fiscal year 1996, an increase of $15.3 million or 20%. Of this net
increase, $13.7 million was attributable to new information technology
outsourcing services clients and $7.9 million to new direct marketing services
clients. These increases were offset by a reduction in revenues of approximately
$6.5 million from credit card issuing clients. The Company's direct marketing
services revenues increased to $57.0 million for fiscal year 1997 versus $56.4
million for fiscal year 1996, an increase of 1%. The Company's information
technology outsourcing services revenues increased to $ 35.5 million for fiscal
year 1997 versus $20.8 million for fiscal year 1996, an increase of 70%.
Wages and benefits increased to $30.4 million for fiscal year 1997 from
$24.0 million for fiscal year 1996, an increase of 27%. The increased expenses
reflect the net addition of 140 employees as a result of the Company's continued
expansion of business volume, the strengthening of its infrastructure, the 1996
acquisition of GIS Information Systems, Inc., the 1997 acquisition of Credit
Strategy Management, Inc., now known as Strategic Decision Services ("SDS"),
and the replacement of temporary labor with full-time employees during 1997.
Services and supplies expenses decreased to $6.2 million for fiscal year
1997 from $6.8 million for fiscal year 1996, a decrease of 10%. This decrease
reflects the reduction in cost for outside consultants as full-time employees
were hired. Services and supplies generally consist of outsourced data entry
services, general supplies, contract labor and costs related to the use of
outside consultants.
Rents, leases and maintenance expenses increased to $20.1 million for
fiscal year 1997 from $18.1 million for fiscal year 1996, an increase of 11%.
The increase was primarily due to leasing computers, computer peripheral
hardware, additional software, and additional facility rent to house print
operations and new employees. A portion of this increase was
13
<PAGE>
due to the acquisition of GIS and its existing computer, computer peripheral
hardware, software and facility leases, and the acquisition of CSM and its
existing facility leases.
Depreciation and amortization expenses increased to $4.4 million for fiscal
year 1997 from $2.2 million for fiscal year 1996, an increase of 105%. The
increase was primarily attributable to continued investment in technology
including the upgrade of the Company's mainframe computer and the conversion of
the lease for the mainframe from an operating lease to a capital lease in the
fourth quarter of fiscal 1996. The Company also purchased the Hitachi Data
System Skyline 21 mainframe computer during the third quarter of fiscal 1997.
In addition, the acquisition of GIS in the fourth quarter of fiscal year 1996
and CSM in the second quarter of fiscal year 1997 created goodwill of
approximately $21 million that is being amortized over 40 years.
Other operating expenses increased to $8.4 million for fiscal year 1997
from $6.8 million for fiscal year 1996, an increase of 24%. The increase was
primarily attributable to variable costs relating to several client contracts.
Research and development costs representing primarily wages and benefits
for information technology staff and reflected as such in the Company's
financial statements increased to $3.4 million for fiscal year 1997 from $2.5
million for fiscal year 1996, an increase of 38%. The Company's research and
development expenses relate primarily to new product development activities.
Income taxes increased to $7.2 million for fiscal year 1997 from $6.3
million for fiscal year 1996. The Company's effective tax rate was 38% for
fiscal year 1997 and for fiscal year 1996.
Fiscal Year Ended September 30, 1996 Compared to Fiscal Year Ended September 30,
1995
In fiscal year 1996, net revenues increased to $77.2 million from $61.6
million in fiscal year 1995, an increase of $15.6 million or 25%. Of the
increase, $12.6 million was attributable to services provided to new clients and
the remainder was attributable to increased demand for services by existing
clients. The Company's direct marketing services revenues increased to $56.4
for fiscal year 1996 versus $48.4 million for fiscal year 1995, an increase of
16%. Of this increase, $1.7 million is attributable to the establishment of
SDS. The Company's information technology outsourcing services revenues
increased to $20.8 million for fiscal year 1996 versus $13.2 million for fiscal
year 1995, an increase of 58%. Of this increase, $3.4 million is attributable
to revenues from GIS. GIS was acquired effective July 1, 1996, and sales
reflect the period from July 1, 1996 through September 30, 1996.
Wages and benefits increased to $24.0 million for fiscal year 1996 from
$21.0 million for fiscal year 1995, an increase of 14%. The increased expenses
reflect the net addition of 103 employees as a result of the Company's continued
expansion of business volume and strengthening of its infrastructure. It also
reflects the addition of GIS' staff of 48 employees during the fiscal fourth
quarter.
Services and supplies expenses increased to $6.8 million for fiscal year
1996 from $4.2 million for the fiscal year 1995, an increase of 64%. Services
and supplies generally consist of outsourced data entry services, general
supplies, contract labor and costs related to the use of outside consultants.
This increase resulted principally from outsourcing of technical support and
data entry services and the use of outside consultants to improve productivity
and to re-engineer certain work flow processes.
Rents, leases and maintenance expenses increased to $18.1 million for
fiscal year 1996 from $13.9 million for fiscal year 1995, an increase of 30%.
The increase was primarily due to leasing computers, computer peripheral
hardware, additional software, and additional facility rent to house print
operations and new employees. A portion of this increase was due to the
acquisition of GIS and its existing computer, computer peripheral hardware,
software and facility leases.
Depreciation and amortization expenses increased to $2.2 million for fiscal
year 1996 from $1.2 million for fiscal year 1995, an increase of 75%. The
increase was primarily attributable to continued investment in technology
including the
14
<PAGE>
upgrade of the Company's mainframe computer and the conversion of the lease
for the mainframe from an operational lease to a capital lease.
Other operating expenses increased to $6.8 million for fiscal year 1996
from $5.1 million for fiscal year 1995, an increase of 33%. The increase was
primarily attributable to variable costs relating to several client contracts.
Research and development costs representing primarily wages and benefits
for information technology staff increased to $2.5 million for fiscal year 1996
from $1.9 million for fiscal year 1995, an increase of 34%. The Company's
research and development expenses relate primarily to new product development
activities.
Income taxes increased to $6.3 million for fiscal year 1996 from $4.7
million for fiscal year 1995. The Company's effective tax rate was 38% for
fiscal year 1996 and 37% for fiscal year 1995.
Liquidity and Capital Resources
The Company's working capital increased to $47.0 million as of September
30, 1997 from $46.1 million as of September 30, 1996. The Company's investment
policy is to invest in marketable, investment-grade debt instruments of the U.S.
Government or tax-free municipal bonds. The Company's investments typically have
maturities of three years or less. The Company historically limits its
concentration of investments in individual municipalities to $500,000 or less.
These tax-free municipal bonds are backed by U.S. Treasuries or insured by a
major municipal insurer (principal and interest). As of September 30, 1997, the
Company's net accounts receivable were $28.6 million, an increase of 36% over
the previous fiscal year end. This increase primarily reflects additional
services performed for clients during August and September 1997.
The Company has available a $2.0 million revolving credit facility. There
were no outstanding borrowings under this credit facility during 1997.
Borrowings under a $12.0 million secured real estate loan were converted into an
unsecured term loan. This loan has a five year term at 8.5% interest. Total
long-term debt increased $9.8 million during fiscal year 1997 as a result of a
sale-leaseback of the Company's primary office facility and the related land.
The assets were sold at net book value. The lease is accounted for as a capital
lease (see Note 6, Notes to Financial Statements). The Company entered into a
loan at the time of the formation of the Company's Employee Stock Ownership
Plan, which currently has an outstanding balance of $3.0 million. Borrowings
under this ESOP loan are being repaid through December 31, 1998 with interest at
9.3% on the fixed portion of the loan ($2.4 million at September 30, 1997), and
at 80% of the lender's prime rate for the floating rate portion of the loan
($0.6 million at September 30, 1997), currently 6.8%. The Company received
waivers from its lenders for violations of certain financial covenants for both
the term loan and the ESOP loan.
In connection with the Company's acquisition of GIS in 1996, the Company
agreed to pay $1 million of the purchase price on a deferred basis. Of this
amount $500,000 was paid during the fourth quarter of fiscal 1997. The balance
will be paid in fiscal 1998. In addition, the Company paid $1,050,000 to the
former GIS shareholder based on the Company's earnings from former GIS clients.
During fiscal 1997, the Company completed its acquisition of Credit Strategy
Management for a cash purchase price of $1.4 million.
Software development costs of $7.1 million were capitalized in fiscal 1997.
The Company does not expect research and development expenses to increase
materially as a percentage of revenue in the future.
Effective April 1, 1997, the Company entered into a new license agreement
with a major software vendor for software used for outsourcing services clients.
This agreement permits the Company to increase its outsourcing client base and
mainframe capacity to nearly double current levels without an increase in the
fixed license fee for seven years. While this new arrangement increased rents,
leases and maintenance expenses for the third and fourth quarters of fiscal
1997, it may provide an opportunity for increased operating margins in the
future as outsourcing revenues increase.
15
<PAGE>
Impact of Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using
two digits, rather than four, to define the applicable year. Accordingly, any of
the Company's computer programs that have date sensitive software may cause
system failures or miscalculations if data entry of "00" is recognized as 1900
rather than 2000.
Based on a recent assessment, the Company determined that it is required to
modify portions of its software so that its computer systems will properly
utilize dates beyond December 31, 1999. The Company believes that with upgrades
or modifications to existing software and conversion to new software, the impact
of the Year 2000 Issue can be mitigated. However, if such upgrades,
modifications and conversions are not made, or are not made in a timely manner,
the Year 2000 Issue could have a material impact on the Company's operations.
The Company will utilize both internal and external resources to reprogram,
or replace, and test software for Year 2000 compliance. The Company has a full-
time manager dedicated to addressing Year 2000 compliance for the Company,
clients and vendors. The Company plans to complete the Year 2000 project not
later than December 31, 1998. The total Year 2000 project cost is estimated to
be $1 million to $3 million. Amounts incurred are expected to be expensed as
incurred, unless new software is purchased which will be capitalized. The
Company has not incurred significant costs prior to September 30, 1997 other
than internal costs to evaluate the extent of Year 2000 compliance and to
develop a remediation plan.
The costs of the Year 2000 project and the date on which the Company plans
to complete Year 2000 modifications are based on managements' best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
16
<PAGE>
MAY & SPEH, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
-----------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,397,858 $ 1,888,817
Marketable securities 20,334,278 20,415,793
Accounts receivable trade, net 21,003,095 28,569,372
Income taxes refundable 3,550,617 6,301,217
Prepaid software royalties 2,652,398 5,442,796
Deferred income taxes and other current assets 1,991,794 2,445,829
------------ ------------
Total current assets 59,930,040 65,063,824
Property, plant and equipment, net 32,289,746 50,228,440
Goodwill 16,863,811 20,099,245
Other assets 6,134,473 13,404,419
------------ ------------
Total assets $115,218,070 $148,795,928
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 5,329,670 $ 5,810,927
Accounts payable 3,713,421 5,017,666
Accrued wages and benefits 3,006,991 4,324,814
Other accrued expenses 1,730,938 2,870,903
------------ ------------
Total current liabilities 13,781,020 18,024,310
Long-term debt 22,250,802 31,546,484
Deferred income taxes 3,455,000 8,090,000
------------ ------------
Total liabilities 39,486,822 57,660,794
------------ ------------
Commitments and contingencies (Note 7)
Stockholders' equity (Note 8):
Preferred stock, no par value, 2,000,000 shares
authorized; no shares issued
Common stock, $.01 par value, 50,000,000 shares
authorized; 24,934,154 shares and 25,147,354
shares issued and outstanding at September 30,
1996 and 1997 249,342 251,474
Additional paid-in capital 46,967,691 48,277,867
Retained earnings 33,860,039 45,575,694
------------ ------------
81,077,072 94,105,035
Unearned ESOP compensation (5,345,824) (2,969,901)
------------ ------------
Total stockholders' equity 75,731,248 91,135,134
------------ ------------
$115,218,070 $148,795,928
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
MAY & SPEH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended September 30,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues $61,641,273 $77,222,960 $92,457,288
----------- ----------- -----------
Operating expenses:
Wages and benefits 20,983,636 23,950,392 30,436,956
Services and supplies 4,160,441 6,839,200 6,191,501
Rents, leases and maintenance 13,878,290 18,064,271 20,137,243
Depreciation and amortization 1,230,066 2,155,481 4,419,933
Other operating expenses 5,106,579 6,812,536 8,433,104
ESOP principal payments 2,410,539 2,375,923 2,375,923
----------- ----------- -----------
47,769,551 60,197,803 71,994,660
----------- ----------- -----------
Operating income 13,871,722 17,025,157 20,462,628
----------- ----------- -----------
Interest and other expense:
ESOP interest expense 863,809 611,552 403,396
Other interest expense 678,843 1,231,263 2,214,705
Interest income (206,594) (1,147,345) (1,050,765)
Other, net 10,118 (167,896) (2,763)
----------- ----------- -----------
1,346,176 527,574 1,564,573
----------- ----------- -----------
Income before income taxes 12,525,546 16,497,583 18,898,055
Income taxes 4,665,000 6,274,000 7,182,400
----------- ----------- -----------
Net income........................ $ 7,860,546 $10,223,583 $11,715,655
=========== =========== ===========
Earnings per common share and
common equivalent shares
outstanding...................... $0.39 $0.42 $0.45
=========== =========== ===========
Weighted average shares and
common equivalent shares
outstanding...................... 20,414,947 24,428,746 26,218,916
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
MAY & SPEH, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Paid-in Common Stock Retained
Common Stock Capital Compensation Earnings Total
-------------------- ------- ------------ -------- -----
Shares Amount
---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance--September 30, 1994............................ 20,465,737 $204,658 $ 1,525,927 ($11,362,877) $18,333,582 $ 8,701,290
Net income for the year ended September 30, 1995..... 7,860,546 7,860,546
ESOP compensation earned during the year ended
September 30, 1995................................ 2,410,539 2,410,539
Dividends declared and paid.......................... 1,230,591 (2,545,332) (1,314,741)
Tax benefit of dividends paid on unallocated
shares held by the ESOP............................ 247,000 247,000
Repurchases and retirement of common stock........... (103,080) (1,031) (259,340) (260,371)
---------- -------- ----------- ------------ ----------- -----------
Balance--September 30, 1995............................ 20,362,657 203,627 1,525,927 (7,721,747) 23,636,456 17,644,263
Net income for the year ended September 30, 1996..... 10,223,583 10,223,583
ESOP compensation earned during the year ended
September 30, 1996 ................................ 2,375,923 2,375,923
Issuance of common stock warrants.................... 1,300,000 1,300,000
Issuance of common stock............................. 4,355,000 43,550 43,005,144 43,048,694
Exercise of stock options............................ 216,497 2,165 1,136,620 1,138,785
---------- -------- ----------- ------------ ----------- -----------
Balance--September 30, 1996............................ 24,934,154 249,342 46,967,691 (5,345,824) 33,860,039 75,731,248
Net income for the year ended September 30, 1997..... 11,715,655 11,715,655
ESOP compensation earned during the year ended
September 30, 1997 ................................ 2,375,923 2,375,923
Exercise of stock options............................ 213,200 2,132 1,310,176 1,312,308
---------- -------- ----------- ------------ ----------- -----------
Balance--September 30, 1997............................ 25,147,354 $251,474 $48,277,867 ($ 2,969,901) $45,575,694 $91,135,134
========== ======== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
MAY & SPEH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended September 30,
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................................... $ 7,860,546 $ 10,223,583 $ 11,715,655
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................................ 1,230,066 2,155,481 4,419,933
Deferred income taxes................................................ 492,000 2,172,000 4,727,000
ESOP principal payments.............................................. 2,410,539 2,375,923 2,375,923
Changes in assets and liabilities, net of effect from purchase of GIS
Information Systems, Inc. & Credit Strategy Management
Accounts receivable, net................................... (879,246) (3,130,272) (7,566,277)
Prepaid expenses and other current assets.................. (196,743) (1,312,277) (3,336,433)
Income taxes payable/refundable............................ (599,526) (2,330,001) (2,750,600)
Accounts payable and accrued expenses...................... 2,558,198 (1,672,404) 4,065,082
Other...................................................... 553,996 (125,673) (108,597)
------------ ------------ ------------
Net cash provided by operating activities............. 13,429,830 8,356,360 13,541,686
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of property............................................... 12,215,528
Purchases of property and equipment.......................................... (6,918,157) (5,189,216) (19,292,880)
Purchases of marketable securities........................................... (647,530) (31,365,521) (13,442,385)
Sales of marketable securities............................................... 1,575,166 12,919,913 13,360,869
Software development costs capitalized, including related equipment.......... (1,227,969) (3,990,359) (7,087,047)
Acquisition of GIS Information Systems, Inc., and Credit Strategy
Management................................................................ - (16,148,513) (3,235,734)
Other....................................................................... (106,114) (74,000) (74,000)
------------ ------------ ------------
Net cash used in investing activities................. (7,324,604) (43,847,696) (17,555,649)
------------ ------------ ------------
Cash flows from financing activities:
Capital lease principal payments............................................. - (1,851,062) (1,890,175)
Proceeds from line of credit................................................. (1,250,000) - -
Proceeds from long-term obligations.......................................... 12,000,000 - -
Repayments of long-term obligations.......................................... (10,266,987) (3,161,105) (3,917,211)
Dividends paid, net of related ESOP remittance............................... (1,314,741) - -
Issuance of common stock..................................................... - 43,048,995 -
Exercise of stock options.................................................... - 1,138,785 1,312,308
Repurchases of common stock.................................................. (202,478) - -
------------ ------------ ------------
Net cash provided by (used in) financing activities... (1,034,206) 39,175,613 (4,495,078)
------------ ------------ ------------
Net change in cash and cash equivalents............... 5,071,020 3,684,277 (8,509,041)
Cash and cash equivalents:
Beginning of period.......................................................... 1,642,561 6,713,581 10,397,858
------------ ------------ ------------
End of period................................................................ 6,713,581 10,397,858 1,888,817
------------ ------------ ------------
Supplemental cash flow information:
Cash paid during the period for:
Interest.................................................................. 1,665,000 1,843,000 2,618,000
------------ ------------ ------------
Income taxes.............................................................. 5,155,000 5,770,773 5,250,000
------------ ------------ ------------
Non-cash financing/investing activities:
Acquisition of property and equipment under capital leases................ 342,000 11,373,000 15,321,000
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
MAY & SPEH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
May & Speh, Inc. ("May & Speh" or the "Company") is a provider of
computer-based information management services primarily for clients with
significant direct marketing requirements. The Company provides direct marketing
services including database creation, data warehousing, predictive behavioral
modeling list processing and data enhancement. The Company also provides
information technology outsourcing services.
In December 1995, the Company effected a 12-for-one stock split. The
accompanying financial statements and related notes thereto have been restated
to reflect the 12-for-one stock split for all periods presented.
Cash and cash equivalents
The Company considers highly liquid investments with an original maturity
of 90 days or less as cash equivalents.
Revenue recognition
Revenue is recognized as services are performed. Direct marketing services
revenues are generally determined based upon the number of records processed and
are recognized as such processes are completed. Information technology
outsourcing services revenues are recognized based upon the amount of computer
time used. Unbilled accounts receivable consist primarily of services performed
which are billable upon project completion or upon occurrence of other specified
events. Unbilled accounts receivable are generally billed within 90 days of
income recognition. Accounts receivable are unsecured.
Marketable securities
Investments are stated at cost, which approximates fair market value; gains
and losses are recognized in the period realized. The Company has classified its
marketable securities as available for sale.
Property, plant and equipment
Property, plant and equipment are recorded at cost. Betterments are
capitalized; repairs and maintenance are expensed as incurred. Depreciation is
computed using straight-line and accelerated methods over the estimated economic
lives of the related assets as follows:
<TABLE>
<CAPTION>
<S> <C>
Computers and related equipment........ 5 to 10 years
Building and improvements.............. 10 to 31.5 years
Office furniture and equipment......... 12 years
Automobiles............................ 5 years
</TABLE>
Capitalized software costs
Development costs for software to be sold or leased to third parties is
expensed as incurred until such time as technological feasibility is
established. Upon establishment of technological feasibility, future costs are
capitalized until the product is available for general release to clients.
Amortization of capitalized software costs is the greater of the amount computed
using (a) the ratio that current gross revenues for a product bears to the total
current and future gross revenues for that product or (b) the straight-line
method over the remaining estimated economic life of the product of five to
seven years. It is reasonably possible that those estimates of
21
<PAGE>
anticipated future gross revenues, the remaining estimated economic life of the
product or both will be reduced in the future. In addition, software costs are
generally subject to technological obsolescence in the future.
Research and development costs
The Company expenses research and development costs incurred until
technological feasibility is established. For the years ended September 30,
1995, 1996 and 1997, the Company expensed $1,860,055, $2,486,247 and $3,425,750,
respectively, as research and development costs. Research and development costs
are primarily wages and benefits for staff and are reflected as such in the
accompanying financial statements.
Income taxes
The Company uses the asset and liability approach under which deferred
income taxes are provided for temporary differences between the financial
reporting and income tax bases of assets and liabilities based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income.
Employee stock ownership plan
Effective October 1, 1988, the Company established the May & Speh, Inc.
Employee Stock Ownership Plan (the ESOP) for the benefit of substantially all of
the Company's employees. The Company borrowed $22,500,000 from a bank (the ESOP
Loan) and loaned the proceeds to the ESOP for the purpose of providing the ESOP
sufficient funds to purchase 9,887,340 shares (43.11%) of the Company's common
stock at $2.28 per share.
The ESOP's obligation to the Company, which is evidenced by a note (the
ESOP Note), was initially recorded as unearned compensation (a direct reduction
to shareholders' equity) and is expensed ratably as the ESOP Note is repaid. The
ESOP Note, which contains provisions substantially similar to the Company's
obligation to the bank, is secured by the unallocated ESOP shares which are
released from suspense and allocated to participants as principal is repaid. The
terms of the ESOP agreement require the Company to make minimum contributions
sufficient to meet the ESOP's debt service obligations.
Goodwill
In connection with its acquisition of GIS Information Systems, Inc.
("GIS") in July 1996, the Company recorded goodwill of $16,970,000. An
additional $2,416,000 was recorded during the year ended September 30, 1997
related to incentive payments and estimated costs to be incurred in
consolidating GIS's operations. The Company also recorded goodwill of $1,295,000
related to its acquisition of Credit Strategy Management, Inc. ("CSM") in 1997.
Total goodwill aggregated $20,681,000 at September 30, 1997. Accumulated
amortization totaled $106,000 and $582,000 at September 30, 1996 and 1997,
respectively. Goodwill is amortized using the straight line method over a 40-
year period for financial reporting purposes.
The Company reviews the carrying value of goodwill and other long-lived
assets for impairment when events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. This review is performed by
comparing estimated undiscounted future cash flows from use of the asset to the
recorded value of the asset.
Other assets
Other assets include cash surrender value of life insurance policies,
deposits and capitalized software costs. Capitalized software costs of
$5,218,000, and $12,305,000 are included in other assets as of September 30,
1996 and 1997, respectively. Amortization of such costs will commence when the
product is available for general release to clients.
22
<PAGE>
Significant clients
Sears, Roebuck and Co. accounted for 17.1%, 17.6% and 19.1%, of the
Company's net revenues in fiscal 1995, 1996, and 1997, respectively. Capital One
Bank accounted for 10.6% of the Company's revenue in fiscal 1995.
Per share information
Earnings per share are based on the weighted average number of shares of
common stock and common stock equivalents outstanding during periods, computed
using the treasury stock method for stock options in accordance with Staff
Accounting Bulletin No. 83 of the Securities and Exchange Commission.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair value of financial instruments
The carrying amount reported in the consolidated balance sheets for cash,
marketable securities, accounts receivable, prepaid expenses and other current
assets, accounts payable and accrued expenses approximates fair value because of
the immediate or short-term maturity of these financial instruments. The
recorded value of long-term debt is estimated to approximate fair value due to
the interest rates incurred by the Company on such debt.
New accounting pronouncements
SFAS No. 128, "Earnings per Share," issued in February 1997, changes the
method of calculating earnings per share and will be effective for the Company's
financial statements for the year ending September 30, 1998. Earlier application
is not permitted. However, the Company is permitted to disclose pro forma
earnings per share amounts computed using this Statement in periods prior to
adoption. Upon adoption, all prior period earnings per share data presented
shall be restated to conform to this Statement. The calculation of earnings per
share under this Statement is less complex than prior methods and more
consistent with international accounting standards. Adoption of this Statement
is not expected to have a material impact on amounts previously reported as
earnings per common share.
SFAS No. 130, "Reporting Comprehensive Income," issued in June 1997, will
require the Company to disclose, in financial statement format, all non-owner
changes in equity. Such changes include, for example, cumulative foreign
currency translation adjustments, certain minimum pension liabilities and
unrealized gains and losses on available-for-sale securities. This Statement is
effective for fiscal years beginning after December 15, 1997 and requires
presentation of prior period financial statements for comparability purposes.
The Company expects to adopt this Statement beginning with its financial
statements for the year ending September 30, 1999. Adoption of this statement is
not expected to have a material impact on the Company's financial statements.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major clients. Operating segments
are components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
23
<PAGE>
resources to segments. The Company expects to adopt this Statement in its
financial statements for the year ending September 30, 1999.
NOTE 2--MARKETABLE SECURITIES
The Company's marketable securities are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1997
----------------------------------------
Class of security Fair Unrealized
------------------------- ---- ----------
Cost Basis Market Value Gain (loss)
----------- ------------ -----------
<S> <C> <C> <C>
Municipal bonds $18,415,793 $18,700,051 $284,258
Equities and mutual funds 2,000,000 2,000,000 -
----------- ----------- --------
$20,415,793 $20,700,051 $284,258
=========== =========== ========
</TABLE>
The Company determines the cost basis of its marketable securities using
the specific identification method. The net unrealized gain relating to
marketable securities is not significant and has not been reflected in the
accompanying financial statements. The Company's investments in municipal bonds
generally mature in one to three years.
NOTE 3--ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------------
1996 1997
---- ----
<S> <C> <C>
Trade accounts receivable:
Billed........................................ $19,289,683 $21,657,013
Unbilled...................................... 2,066,412 4,817,056
----------- -----------
21,356,095 26,474,069
Less--Allowance for doubtful accounts...... (353,000) (330,000)
----------- -----------
21,003,095 26,144,069
Other accounts receivable........................ - 2,425,303
----------- -----------
$21,003,095 $28,569,372
=========== ===========
</TABLE>
NOTE 4--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------------
1996 1997
---- ----
<S> <C> <C>
Building and improvements..................... $11,297,039 $ 12,814,033
Computers and related equipment............... 20,584,392 36,476,595
Office furniture and equipment................ 3,361,864 5,488,584
Automobiles................................... 190,452 168,789
----------- ------------
35,433,747 54,948,001
Less--Accumulated depreciation................ (9,347,242) (10,754,380)
----------- ------------
26,086,505 44,193,621
Land and land improvements.................... 6,203,241 6,034,819
----------- ------------
$32,289,746 50,228,440
=========== ============
</TABLE>
Assets under capital lease had an initial value of $11,716,000 and
$26,770,978, and accumulated amortization of $362,000 and $1,618,081, at
September 30, 1996 and 1997, respectively. As of September 30,
24
<PAGE>
1996 all assets under capital leases were computer and related equipment. As of
September 30, 1997, $9,103,562 related to buildings and improvements, $5,835,060
related to land and $11,832,356 related to computers and related equipment. The
amortization of these capitalized assets is included in depreciation expense for
the years ended September 30, 1995, 1996 and 1997.
NOTE 5--INCOME TAXES
The Company's provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
For the years ended
-------------------
September 30,
--------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal......................... $3,359,000 $3,125,000 $2,121,200
State........................... 814,000 762,000 334,200
---------- ---------- ----------
4,173,000 3,887,000 2,455,400
---------- ---------- ----------
Deferred:
Federal......................... 399,000 2,081,000 4,143,000
State........................... 93,000 306,000 584,000
---------- ---------- ----------
492,000 2,387,000 4,727,000
---------- ---------- ----------
$4,665,000 $6,274,000 $7,182,400
========== ========== ==========
</TABLE>
The Company's deferred income tax asset (liability) balances are summarized
as follows:
<TABLE>
<CAPTION>
September 30,
---------------------
1996 1997
---- ----
<S> <C> <C>
ESOP expenses........................................... $ 144,000 $ 128,000
Allowance for doubtful accounts......................... 138,000 129,000
Accrued expenses........................................ 433,000 643,000
Deferred charges........................................ 155,000 -
Non-compete agreement................................... 263,000 242,000
Other................................................... - 30,000
----------- -----------
Gross deferred tax assets............................. 1,133,000 1,172,000
----------- -----------
Depreciation............................................ (1,104,000) (3,656,000)
Software development costs capitalized.................. (2,035,000) (4,799,000)
Capital lease payment................................... (545,000) -
Goodwill................................................ (69,000) (173,000)
Other................................................... (109,000) -
----------- -----------
Gross deferred tax liabilities........................ (3,862,000) (8,628,000)
----------- -----------
Net deferred taxes...................................... $(2,729,000) $(7,456,000)
=========== ===========
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
25
<PAGE>
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Income taxes at federal statutory rate.......................... 34% 34% 34%
State taxes, net of federal benefit............................. 5 5 5
Dividends paid on allocated shares held by ESOP................. (2) - -
Municipal bond interest income.................................. - (1) (1)
--- --- ---
37% 38% 38%
==== ===== ====
</TABLE>
NOTE 6--LINE OF CREDIT AND LONG-TERM DEBT
Effective May 16, 1994, the Company entered into a line of credit agreement
with a bank under which the Company may borrow up to $2,000,000 with interest
payable at the bank's prime rate (8.5% at September 30, 1996 and 1997). This
loan is payable on demand and is secured by substantially all of the assets of
the Company. No amounts were outstanding under this agreement as of September
30, 1996 and 1997.
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
September 30,
------------------------------------
1996 1997
---------------- ------------------
<S> <C> <C>
ESOP loan.......................... $ 5,345,823 $ 2,969,901
Term loan.......................... 11,200,000 10,200,000
Capital lease obligations.......... 9,975,431 23,687,510
Deferred acquisition payments...... 1,000,000 500,000
Other.............................. 59,218 -
----------- -----------
27,580,472 37,357,411
Less--Current maturities........... (5,329,670) (5,810,927)
----------- -----------
$22,250,802 $31,546,484
=========== ===========
</TABLE>
ESOP Loan
Effective November 10, 1988, the Company entered into a $22,500,000 term
loan agreement with a bank (the ESOP Loan). Under the terms of the agreement,
the Company must make quarterly payments of principal (in varying amounts as
summarized below) plus interest. This interest rate is subject to adjustments
based upon changes in federal and state tax rates or changes in the proportion
of the bank's income from this loan which is includable in gross income for
federal income tax purposes.
Amounts outstanding under the ESOP Loan are collateralized by the ESOP
Note, an assignment of the pledge agreement between the Company and the ESOP
(whereby the ESOP pledged the unallocated ESOP Shares as collateral for the ESOP
Note) and a security interest in all assets of the Company.
The ESOP Loan contains certain restrictive covenants that, among other
things, limit capital expenditures, additional indebtedness, certain
investments, the repurchase of common stock and the payment of dividends and
require the Company to maintain certain working capital and other financial
measures. The Company was in violation of certain of these restrictive covenants
as of September 30, 1996 and 1997 and waivers of such violations were received
from the bank.
On September 28, 1995, the Company's Board of Directors declared and paid a
$0.125 per share dividend. The portion of this dividend which was paid on shares
held by the ESOP (unallocated and allocated) was used to prepay $1,231,000 of
the ESOP Note and, accordingly, the Company prepaid, without penalty, $1,231,000
of the variable rate portion of the ESOP Loan.
Capital Lease Obligations
The Company entered into a sale-leaseback agreement with a third party
selling the existing building and land, including 10.4 acres located adjacent to
the existing building that will be used to build a new 200,000 square foot
building. The Company has entered into a 20-year lease with the third party on
the existing building,
26
<PAGE>
and it has also entered into a 20-year lease for the new 200,000 square foot
building currently under construction on the property adjacent to the Company's
executive offices. The lease commences upon completion of the building expected
to be completed in September 1998 and is classified as a capital lease. The
existing building and land were sold at its book value of approximately $12.2
million. The interest rate implicit in the Company's capital leases
approximates 8%.
Term Loan
During fiscal 1995, the Company entered into a $12,000,000 credit facility
to finance the expansion of the Company's facilities. The credit facility
requires quarterly principal payments of $200,000 plus interest at 8.5% (fixed
rate) with the balance to be paid in 2005. This credit facility contains certain
restrictive covenants that limit capital expenditures, limit additional
indebtedness, restrict certain investments, restrict the repurchase of common
stock and limit the payment of dividends. This debt agreement was amended during
fiscal 1996 to allow the acquisition of GIS Information Systems, Inc. (see Note
10). The Company is also required to maintain working capital and other
financial measures. The Company was in violation of certain of these restrictive
covenants as of September 30, 1996 and 1997. Waivers of such violations were
received from the bank.
Summary of maturities
A summary of principal maturities relating to long-term obligations is as
follows:
<TABLE>
<CAPTION>
Deferred
Term Capital Acquisition
ESOP Loan Loan Lease Payment Totals
--------- ---- ------- ----------- ------
<S> <C> <C> <C> <C> <C>
1998 $ 2,375,922 $ 800,000 $ 2,135,005 $ 500,000 $ 5,810,927
1999 593,979 800,000 2,471,338 3,865,317
2000 800,000 2,692,799 3,492,799
2001 800,000 2,934,111 3,734,111
2002 800,000 547,497 1,347,497
Thereafter 6,200,000 12,906,760 19,106,760
---------- ----------- ----------- --------- -----------
$2,969,901 $10,200,000 $23,687,510 $ 500,000 $37,357,411
========== =========== =========== ========= ===========
</TABLE>
NOTE 7--COMMITMENTS AND CONTINGENCIES
The Company currently leases warehouse and office space in the metropolitan
Chicago area under the terms of operating leases expiring on various dates
through August 2002. The Company also leases certain computer and other office
equipment under the terms of operating leases.
The aggregate future minimum lease commitments under these operating leases
are as follows:
<TABLE>
<CAPTION>
For the year ending
September 30,
<S> <C>
1998............................ $10,611,508
1999............................ 8,459,609
2000............................ 6,886,069
2001............................ 4,365,069
2002 and thereafter............. $ 1,269,069
</TABLE>
Total rental expense for the years ended September 30, 1995, 1996 and 1997,
under the operating leases approximated $8,644,000, $11,711,000 and $11,511,000
respectively.
27
<PAGE>
NOTE 8--STOCKHOLDERS' EQUITY
On March 29, 1996, the Company completed an initial public offering of
3,350,000 shares of its common stock, par value $.01 per share. Certain
stockholders of the Company sold an additional 3,350,000 shares of common stock
in the offering. In addition, on April 24, 1996, the Company completed the
offering of an additional 1,005,000 shares of common stock that were subject to
an over-allotment option granted to the underwriters of the initial public
offering. The net proceeds to the Company were approximately $43,500,000 after
deducting underwriting discounts and offering expenses.
A summary of share transactions within the ESOP is as follows:
<TABLE>
<CAPTION>
For the years ended September 30,
----------------------------------------------------------------------------------
1995 1996 1997
---- ---- ----
Unallocated Allocated Unallocated Allocated Unallocated Allocated
----------- --------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares
Beginning of year 5,070,900 4,796,904 3,445,788 6,398,941 2,403,717 5,963,115
Released and allocated (1,625,112) 1,625,112 (1,042,071) 1,042,071 (1,098,631) 1,098,631
Distributed to (23,075) (1,188) (162,566)
participants
Sold in Offering (1,476,709)
End of year 3,445,788 6,398,941 2,403,717 5,963,115 1,305,086 6,899,180
</TABLE>
NOTE 9--STOCK OPTION PLANS
Effective September 30, 1994, the Company established the 1994 Executive
Stock Option Plan ("the 1994 plan"). The Company has established the 1995 Key
Employee Stock Option Plan ("the 1995 plan"), as amended and restated August 8,
1996. Under the terms of the 1994 plan, the Compensation Committee (the
Committee) of the Company's Board of Directors may grant options for the
purchase of up to 3,600,000 shares of the Company's common stock with exercise
prices and vesting requirements at the sole discretion of the Committee. The
Committee may grant options for the purchase of up to 2,000,000 shares of common
stock under the terms of the 1995 plan.
During fiscal 1995, 1996 and 1997, the Company granted options to purchase
2,826,000, 1,130,200, and 1,305,200 respectively, shares of common stock at the
estimated fair market value at the date of grant to certain employees. The
exercise price of these options ranged from $2.08 to $19.88 per share. Options
to purchase 600,000 shares and 72,000 were canceled by the Company in fiscal
1995 and fiscal 1997, respectively. No options were canceled in fiscal 1996.
There were no options which expired or were exercised during fiscal 1995. In
fiscal 1996, 216,497 options were exercised at a weighted-average exercise price
of $2.08. In fiscal 1997, 213,200 options were exercised at a weighted-average
exercise price of $2.15.
As of September 30, 1997, options to purchase the Company's common stock
were outstanding as follows:
<TABLE>
<CAPTION>
Shares
------ Weighted-Average
Underlying Per Share Option Shares
---------- --------- --------------
Date of Grant Options Exercise Price Vested
------------- ------- -------------- --------------
<S> <C> <C> <C>
October 1, 1994-June 1, 1995 1,700,303 $2.13 1,249,200
February 1, 1996-September 23, 1996 1,082,200 7.78 216,400
December 24, 1996-August 4, 1997 1,305,200 9.10 -
4,087,703 1,465,600
========= =========
</TABLE>
Generally, these options vest and become exercisable in five equal annual
increments beginning one year after the issue date and expire 10 years after the
issue date.
The fair value of options at date of grant was $5.86 in fiscal 1997 and
$6.03 in fiscal 1996. These values were determined by the Black-Scholes model
with the following weighted average
28
<PAGE>
assumptions for fiscal 1997 and 1996, respectively: interest rate of 6.63% and
6.08%; volatility of 46% and 45%; no annual dividends; and, an expected life of
8 years for all three fiscal years.
The Company generally recognizes no compensation expense with respect to
awards of stock options since the exercise price of the common stock options
awarded are equal to the fair market value of the underlying security on the
date of grant. If the Company adopted Statement of Financial Accounting Standard
Number 123 with respect to stock options, net income would have been $10,433,192
or $0.40 per share in fiscal 1997 and $9,788,696 or $0.40 per share in fiscal
1996. The pro forma effect on net income and earnings per share for fiscal 1997
and 1996 is not representative of the pro forma effect on net income in future
years because it does not take into consideration pro forma compensation expense
related to grants made prior to September 30, 1995.
NOTE 10--ACQUISITIONS
Effective February 3, 1997, the Company acquired the assets of Credit
Strategy Management, Inc. for $1.4 million cash. Credit Strategy Management,
Inc. provides modeling and analysis services and is located in Atlanta, Georgia.
Approximately $1.3 million of the purchase price was allocated to goodwill,
which is amortized using the straight line method over a 40-year period. The
acquisition has been accounted for under the purchase method of accounting.
Effective July 1, 1996, the Company acquired all of the outstanding capital
stock of GIS Information Systems, Inc. ("GIS") for $16,148,000 in cash,
guaranteed deferred payments totaling $1,000,000, common stock warrants to
purchase 180,000 shares of the Company's common stock at $16.51 per share and
certain contingent payments. In connection with the acquisition, liabilities
were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $20,606,581
Issuance of common stock warrants 1,300,000
Cash paid for common stock 16,148,513
-----------
Liabilities assumed $ 3,158,068
===========
</TABLE>
GIS was a provider of data processing outsourcing services and was based in Oak
Brook, Illinois.
The fair value of the warrant to purchase 180,000 shares (which are fully
vested and expire on July 18, 2001) of the Company's common stock approximated
$1,300,000, and is included in part in capital as of September 30, 1996 and
1997. A payment of $1,050,000 was made based upon an earn-out provision for the
period July 1, 1996 through June 30, 1997. A similar additional payment is
expected based on an earn-out provision for the period July 1, 1997 through June
30, 1998. Payments made under these earn-out provisions are reflected as an
increase in goodwill. The Company reserved $1,350,000 in the first quarter of
fiscal 1997 related to costs incurred in consolidating GIS operations. These
costs were paid during fiscal 1997 and primarily consisted of rental commitments
for property having no future economic value to the Company. The amount reserved
was also included as a component of goodwill.
The acquisition has been accounted for under the purchase method of
accounting. Accordingly, the purchase price was allocated to the identifiable
assets acquired and liabilities assumed based on their estimated fair values.
The excess of the purchase price over the net assets acquired was allocated to
goodwill. This goodwill is amortized using the straight line method over a 40-
year period for financial reporting purposes.
The following unaudited pro forma financial information presents the
results of operations of the Company and the acquired business as if the
acquisitions had occurred at the beginning of each fiscal year. The pro forma
information is based on historical results of operations and does not
necessarily reflect the actual results that would have occurred, nor is it
necessarily indicative of future results of operations of the combined
enterprises:
29
<PAGE>
<TABLE>
<CAPTION>
1996
----
<S> <C>
Net Revenues $86,696,000
Net Income 11,217,000
Earnings Per Common Share and Common equivalent share $ 0.46
</TABLE>
NOTE 11--SUBSEQUENT EVENT
In October 1997, the Company announced a one-time charge of approximately
$2.9 million in the first quarter of fiscal 1998, which represents the present
value of payments under existing contracts with prior members of management.
NOTE 12--QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized unaudited quarterly data for the years ended September 30, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1st quarter 2nd quarter 3rd quarter 4th quarter
----------- ----------- ----------- -----------
1996
----
<S> <C> <C> <C> <C>
Net Revenues $16,043,616 $19,132,514 $ 19,997,045 $22,049,785
Operating Income 3,070,007 4,153,782 4,854,828 4,946,541
Net Income 1,661,403 2,368,722 3,067,002 3,126,456
Earnings Per Common Share and
common equivalent share $ 0.08 $ 0.11 $ 0.12 $ 0.12
1997
----
Net Revenue $21,228,730 $21,692,905 $ 23,625,454 $25,910,199
Operating Income 4,090,380 4,347,052 5,347,905 6,677,291
Net Income 2,366,703 2,419,205 3,087,366 3,842,381
Earnings Per Common Share and
common equivalent share $ 0.09 $ 0.09 $ 0.12 $ 0.15
</TABLE>
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of May & Speh, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
May & Speh, Inc. and its subsidiary at September 30, 1996 and 1997 and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1997, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Chicago, Illinois
November 10, 1997
31
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Please refer to the information set forth under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive Proxy Statement to be issued in connection with the 1998
Annual Meeting of Stockholders and the information set forth under Item 4A of
this report, all of which information is incorporated herein by reference.
Item 11. Executive Compensation.
Please refer to the information set forth under the heading "Executive
Compensation" in the Company's definitive Proxy Statement to be issued in
connection with the 1998 Annual Meeting of Stockholders, which is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Please refer to the information set forth under the heading "Ownership of
Securities" in the Company's definitive Proxy Statement to be issued in
connection with the 1998 Annual Meeting of Stockholders, which is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions.
Please refer to the information set forth under the heading "Certain
Relationships and Related Transactions" in the Company's definitive Proxy
Statement to be issued in connection with the 1998 Annual Meeting of
Stockholders, which is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents Filed as Part of this Report
1. Financial Statements (included under Item 8 of this report):
Consolidated Balance Sheets as of September 30, 1997 and 1996
Consolidated Statements of Operations for the years ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years
ended September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
September 30, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants
32
<PAGE>
2. Financial Statement Schedules:
Financial statement schedules are omitted because they are not
applicable, not required or because the required information is
included in the Company's Consolidated Financial Statements and
Notes thereto.
3. Exhibits Required to be filed by Item 601 of Regulation S-K:
3.1 Certification of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1
(File No. 33-98302) (the "Form S-1")
3.2 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Form S-1)
3.3 Designation of Preferences for Series A Preferred Stock
(incorporated by reference to Exhibit 3.3 to the
Form S-1)
4.1 Specimen Certificate for Common Stock (incorporated by
reference to Exhibit 4.1 to the Form S-1)
10.1* May & Speh, Inc. 1994 Executive Stock Option Plan
(incorporated by reference to Exhibit 10.1 to the
Form S-1)
10.2* Form of Stock Option Agreement under the May & Speh, Inc.
1994 Executive Stock Option Plan (incorporated by
reference to Exhibit 10.2 to the Form S-1)
10.3* May & Speh, Inc. 1995 Key Employee Stock Option Plan, as
amended (incorporated by reference to Exhibit 4.6 to the
Registrant's Registration Statement on Form S-8 (File No.
333-13711) (the "Form S-8"))
10.4* Form of Stock Option Agreement under the May & Speh, Inc.
1995 Key Employee Stock Option Plan (incorporated by
reference to Exhibit 4.7 to the Form S-8)
10.5* Employment Agreement with Albert J. Speh, Jr.
(incorporated by reference to Exhibit 10.4 to the
Form S-1)
10.6* Employment Agreement with Lawrence J. Speh (incorporated
by reference to Exhibit 10.5 to the Form S-1)
10.7* Employment Agreement with Michael J. Loeffler
(incorporated by reference to Exhibit 10.6 to the
Form S-1)
10.8 May & Speh, Inc. Employee Stock Ownership Plan
(incorporated by reference to Exhibit 10.8 to the
Form S-1)
10.9 Amendment No. 1 to the May & Speh, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 (the "Form 10-Q"))
10.10 Amendment No. 2 to the May & Speh, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit
10.10 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996)
10.11 May & Speh, Inc. Employee Stock Ownership Trust
(incorporated by reference to Exhibit 10.3 to the
Form 10-Q)
10.12 Term Loan Agreement by and between The Northern Trust
Company and the Registrant dated November 10, 1988, as
amended (incorporated by reference to Exhibit 10.9 to the
Form S-1)
10.13 Amended and Restated Security Agreement dated May 16,
1994 by and between the Registrant and The Northern Trust
Company
33
<PAGE>
(incorporated by reference to Exhibit 10.10 to the
Form S-1)
10.14 Term Loan Agreement by and between the Registrant and
Harris Trust and Savings Bank dated as of March 30, 1995,
as amended (incorporated by reference to Exhibit 10.11 to
the Form S-1)
10.15 Third Amendment to the Term Loan Agreement by and between
the Registrant and Harris Trust and Savings Bank, dated
July 17, 1996 (incorporated by reference to Exhibit 3 to
the Registrant's Current Report on Form 8-K dated July 18,
1996 (the "Form 8-K"))
10.16 Mortgage and Security Agreement with Assignment of Rents
dated as of March 30, 1995 from the Registrant to Harris
Trust and Savings Bank, as amended (incorporated by
reference to Exhibit 10.12 to the Form S-1)
10.17 Stock Purchase Agreement dated July 1, 1996 by and between
the Registrant, Faneuil, Inc. and Faneuil ISG, Inc.,
including the following Exhibits: 2.5(a)(iii) Form of
Opinions of Bingham, Dana & Gould and Thompson Dorfman
Sweatman; 2.5(a)(iv) Form of Disaffiliation Tax Sharing
Agreement; 2.5(b)(ii) Form of Warrant; 2.5(b)(iv) Form of
Opinion of Freeborn & Peters; 2.5(b)(v) Form of Services
Agreement; 2l5(c) Form of Employment Agreement; 2.5(d)
Form of Stock Option Agreement; 10.8 Form of Set-Off
Escrow Agreement (incorporated by reference to Exhibit 1
to the Form 8-K)
10.18 Amendment No. 3 to the May & Speh, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1996)
10.19* Employment Agreement between the Registrant and Eric M.
Loughmiller (incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 ("the March 1997 10-Q")
10.20* Employment Agreement between the Registrant and Peter I.
Mason (incorporated by reference to Exhibit 10.2 to the
March 1997 10-Q)
10.21 Amendment No. 4 to the May & Speh, Inc. Employee Stock
Ownership Plan (incorporated by reference to Exhibit 10.3
to the March 1997 10-Q)
10.22* Employment and Consulting Agreement and General Release
between the Registrant and Lawrence J. Speh (incorporated
by reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997)
10.23* First Amendment to Employment and Consulting Agreement and
General Release between the Registrant and Lawrence J.
Speh (filed herewith)
10.24 Purchase and Sale Agreement dated April 16, 1997 by and
between the Registrant and Finley Partners, L.L.C. (filed
herewith)
10.25 Office Lease for 1501 Opus Place, Downers Grove, Illinois,
dated June 2, 1997, between Bank One, Illinois, N.A., as
Trustee under Trust No. 11097, and the Registrant (the
"1501 Lease") (filed herewith)
10.26 First Amendment to 1501 Lease dated November 1, 1997
(filed herewith)
10.27 Office Lease for 3333 Finley Road, Downers Grove,
Illinois, dated June 2, 1997, between Bank One, Illinois,
N.A., as Trustee under Trust No. 11097, and the Registrant
(the "3333 Lease") (filed herewith)
10.28 First Amendment to 3333 Lease dated November 1, 1997
(filed herewith)
21 Subsidiaries of Registrant (incorporated by reference to
Exhibit 21 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996)
23 Consent of Price Waterhouse LLP (filed herewith)
24 Power of Attorney (contained on signature pages hereto)
27 Financial Data Schedule (filed herewith)
------------------------
* Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the period
covered by this report.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on December 29, 1997.
MAY & SPEH, INC.
/s/ Peter I. Mason
-----------------------------------------
By: Peter I. Mason
Title: Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Eric M. Loughmiller and Willard E. Engel, Jr.,
and each of them, 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 to this report
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,
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.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on December 29, 1997.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ Peter I. Mason Chairman, President and Chief Executive
- -------------------------------------- Officer (principal executive officer)
Peter I. Mason
/s/ Albert J. Speh, Jr. Director
- --------------------------------------
Albert J. Speh, Jr.
/s/ Lawrence J. Speh Director
- --------------------------------------
Lawrence J. Speh
/s/ Robert C. Early Executive Vice President, Corporate
- -------------------------------------- Development and Director
Robert C. Early
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
/s/ Deborah A. Bricker Director
- --------------------------------------
Deborah A. Bricker
/s/ Eric Loughmiller Executive Vice President, Chief
- -------------------------------------- Financial Officer and Secretary
Eric Loughmiller (principal financial officer)
/s/ Willard E. Engel, Jr. Treasurer and Chief Accounting Officer
- -------------------------------------- (principal accounting officer)
Willard E. Engel, Jr.
/s/ Casey Cowell Director
- --------------------------------------
Casey Cowell
/s/ Paul G. Yovovich Director
- --------------------------------------
Paul G. Yovovich
Director
- --------------------------------------
Jonatnan Zakin
</TABLE>
36
<PAGE>
EXHIBIT 10.23
FIRST AMENDMENT TO THE
EMPLOYMENT AND CONSULTING
AGREEMENT AND GENERAL RELEASE
The Employment and Consulting Agreement and General Release, made as of the
29th day of April, 1997, by and between May & Speh, Inc., a Delaware
corporation, and Lawrence J. Speh (the "Agreement"), is hereby amended as of
this 21st day of November, 1997, as follows:
1. In addition to all other payments to which Lawrence J. Speh ("Speh") is
entitled under the Agreement, May & Speh, Inc. (the "Employer") shall pay
Speh, during the term of the Agreement, the sum of $25,000 per calendar
year, such amount to be used by Speh to provide himself with adequate
support and facilities, as required under Paragraph 4B of the Agreement.
The amount shall be payable hereunder in relatively equal quarterly
installments during the term of the Agreement, with the first such
installment to be paid on or about January 15, 1998. Subsequent
installments shall thereafter be payable every ninety (90) days.
2. Speh shall receive a single sum bonus payment of $300,000, to be paid, at
the Employer's discretion, on or before December 31, 1997 or in the
regular payroll dated January 9, 1998.
3. The Board of Directors of the Employer (the "Board") agrees that, for the
term of the Agreement, Speh shall be nominated to serve on the Board,
provided Speh owns at least 500,000 shares of the Employer's common stock
(the "Common Stock") at the time of such nomination.
4. For so long as Speh is a member of the Board or has been nominated to serve
on the Board (provided, however, that this Paragraph 4 also shall continue
to apply if Speh voluntarily resigns from the Board), Speh agrees that he
will not, without the prior written consent of the Board, directly or
indirectly, sell, transfer any beneficial interest in, assign, pledge,
hypothecate or otherwise dispose of or encumber any shares of Common Stock
owned by him (except for any shares held by him in a fiduciary capacity):
(a) in a privately negotiated "block sale", which shall be defined as a
a sale of 100,000 or more shares of Common Stock; or
(b) to any person who has filed Schedule 13D under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
5. For so long as Speh is a member of the Board of has been nominated to
serve on the Board (provided however, that this Paragraph 5 also shall
continue to apply if Speh voluntarily resigns from the Board), Speh
agrees and covenants that he shall vote, or cause to be voted, all shares
of Common Stock of which he is the owner for those nominees slated by the
Board for election to the Board. Speh further agrees and covenants to vote,
or cause to be voted, all shares of Common Stock for which he votes in
<PAGE>
a fiduciary capacity for those nominees slated by the Board for election
to the Board at the next annual stockholders' meeting of the Employer to be
held in 1998.
6. For so long as Speh is a member of the Board or has been nominated to serve
on the Board (provided, however, that this Paragraph 6 also shall continue
to apply if Speh voluntarily resigns from the Board):
(a) Neither Speh nor any person, corporation or other entity controlled by
or under common control with Speh (the "Investor Group") shall solicit
proxies or become a "participant" in a "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act) or seek to
advise or influence any person or entity with respect to the voting of
(or giving of consents with respect to) any Common Stock or other
voting securities of the Employer in opposition to the recommendation
of the majority of the directors of the Employer with respect to any
matter.
(b) No member of the Investor Group shall join a partnership, limited
partnership, syndicate or other group (within the meaning of Section
13(d)(3) of the Exchange Act), or otherwise act in concert with any
other person, for the purpose of acquiring, holding, voting, giving of
consents, or disposing of shares of Common Stock or other voting
securities of the Employer.
(c) Neither Speh nor any member of the Investor Group shall (i) either
alone, or in concert with others, seek to control or influence
the management, Board or policies of the Employer, (ii) tender shares
of Common Stock or other securities of the Employer in a hostile
tender offer or exchange in opposition to a Board recommendation, or
(iii) solicit, induce or encourage any offer to acquire the Employer,
its securities or assets or a merger or consolidation involving the
Employer.
7. Speh, on the one hand, and the Employer, on the other, acknowledge and
agree that irreparable damage would occur in the event any of the
provisions of Paragraphs 4, 5 and 6 were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of Paragraphs 4, 5 and 6 of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction,
without the necessity of posting bond, in addition to any other remedy to
which they may be entitled at law or equity.
8. At any time after the effective date of this First Amendment, Speh may, on
one occasion only, request registration under the Securities Act of 1933
("Securities Act") of all or part of the Common Stock owned directly or in
a fiduciary capacity by him. A registration requested pursuant to this
Paragraph 8 is referred to as "Demand Registration".
2
<PAGE>
(a) If a Demand Registration is in an underwritten public offering and the
managing underwriters advise the Employer in writing that in their
opinion the number of securities requested to be included in such
registration exceeds the number which can successfully be sold in such
offering, the Employer will exclude from such registration the number
of shares of Common Stock requested to be included by Speh which in
the opinion of such underwriters can not be successfully sold.
(b) Notwithstanding the provisions of Paragraph (a) to the contrary, the
Employer may postpone, for up to 120 days, the filing or the
effectiveness of a registration statement for a Demand Registration if
the Employer reasonably believes such Demand Registration would have
an adverse effect on any proposal or plan by the Employer or any of
its subsidiaries to engage in any acquisition of stock or assets or
any merger, consolidation, tender offer or other significant
transaction or to permit the Employer to avoid a special audit.
(c) If the Employer has previously filed a registration statement, and if
such previous registration has not been withdrawn or abandoned, Speh
agrees not to exercise a Demand Registration until a period of 180
days has elapsed from the effective date of such previous
registration.
9. Whenever, from the date of this First Amendment and through the term of the
Agreement the Employer proposes to register any of its securities under the
Securities Act (except on Form S-4 or S-S or any successor forms), the
Employer will give prompt written notice to Speh of the Employer's
intention to effect such a registration and the Employer will use
commercially reasonable efforts to include in such registration all Common
Stock owned directly or in a fiduciary capacity by Speh with respect to
which Speh has given the Employer written request for inclusion therein
within fifteen days after the giving of the Employer's notice to Speh (a
"Piggyback Registration").
(a) If a Piggyback Registration is a part of an underwritten primary
registration on behalf of the Employer, and the managing underwriters
advise the Employer in writing that in their opinion the number of
securities requested to be included in such registration exceeds the
number which can successfully be sold in such offering, the Employer
will include in such registration (i) first, the number of securities
the Employer proposes to sell and (ii) second, the registrable
securities requested to be included in such registration which in the
opinion of such underwriters can be successfully sold, such securities
to be taken from the holders of such registrable securities pro rata
on the basis of the number of shares of such securities for which the
Employer has been given written requests for inclusion therein by each
such holder thereof. In the event of a non-underwritten public
offering, the Employer's Board may in its reasonable and good faith
judgment impose such limitations.
(b) If at Piggyback Registration is a part of an underwritten secondary
registration on behalf of holders of the Employer's securities, and
the managing underwriters
3
<PAGE>
advise the Employer in writing that in their opinion the number of
securities requested to be included in such registration exceeds the
number which can successfully be sold in such offering, the Employer
will include in such registration (i) first, the securities requested
to be included therein by the holders requesting such registration and
(ii) second, the registrable securities requested to be included in
such registration which in the opinion of such underwriters can
successfully be sold, such securities to be taken from the holders of
such registrable securities pro rata on the basis of the number of
shares of such securities for which the Employer has been given
requests for inclusion therein by each such holder thereof. In the
event of a non-underwritten public offering, the Employer's Board may
in its reasonable and good faith judgment impose such limitations.
10. Speh agrees and covenants that he shall not effect any sale, transfer or
other distribution of equity securities of the Employer, or any securities
convertible into or exchangeable or exercisable for such securities, during
the fourteen days prior to and the 90-day period beginning on the effective
date of any underwritten primary registration or secondary registration of
the Common Stock (except as part of such registration). The Employer shall
have the right to select the underwriters in any underwritten registration.
11. If Speh requests that any Common Stock be registered in a Demand
Registration or a Piggyback Registration pursuant to this Agreement, the
Employer will use commercially reasonable efforts to effect the
registration and the sale of such Common Stock, in accordance herewith and
with the intended method of disposition thereof, and pursuant thereto the
Employer will as expeditiously as reasonably practicable:
(a) prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement with respect to such Common
Stock and use commercially reasonable efforts to cause such
registration statement to become and remain effective for such period,
not to exceed six months, as may be reasonably necessary to effect the
sale of such securities;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period, which need not exceed six months, and comply
with the provisions of the Securities Act, with respect to the
disposition of all securities covered by such registration statement
during such period in accordance herewith and with the intended
methods of disposition by the sellers thereof set forth in such
registration statement;
(c) furnish to Speh such number of copies of such registration statement,
each amendment and supplement thereto the prospectus included in such
registration statement (including each preliminary prospectus) and
such other documents as Speh may reasonably request in order to
facilitate the disposition of such Common Stock owned by Speh; and
4
<PAGE>
(d) list such Common Stock on the principal exchange or market for the
Common Stock and register or qualify such Common Stock under such
other securities or blue sky laws of such jurisdictions as Speh
reasonably requests and do any and all other acts and things which may
be reasonably necessary or advisable to enable Speh to consummate the
disposition in such jurisdictions of the Common Stock owned by Speh
(provided, however, that the Employer will not be required to (i) in
the case of a Piggyback Registration, register or qualify such Common
Stock in any jurisdiction where shares to be sold by the Employer are
not to be registered or qualified, (ii) qualify generally to do
business in any jurisdiction where it would not otherwise be required
to qualify but for this subparagraph, (iii) subject itself to taxation
in any such jurisdiction, or (iv) consent to general service of
process in any such jurisdiction).
12. All expenses incident to the Employer's performance of a Demand or
Piggyback Registration, including, without limitation, all registration and
filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of the Employer's independent certified public accountants
and legal counsel, and other persons retained by the Employer, shall be
borne by the Employer, provided, however, underwriting discounts and
commissions, any selling commissions and taxes attributable to the Common
Stock sold by or on behalf of Speh and fees and expenses of any counsel
engaged by Speh shall be borne by Speh.
13. In connection with any registration statement in which Speh is
participating, Speh will furnish to the Employer in writing such
information and affidavits as the Employer reasonably requests for use in
connection with any such registration statement or prospectus or any
amendment thereof or supplement thereto and, in any underwritten
registration, Speh will enter into and execute an underwriting agreement
in the form reasonably requested by the underwriters.
14. The Employer will pay Speh's legal costs (up to $5,000.00) incurred in the
negotiation and preparation of this First Amendment.
IN WITNESS WHEREOF, the parties have signed this First Amendment on the
date first written above.
MAY & SPEH, INC. LAWRENCE J. SPEH
By: /s/ ERIC M. LOUGHMILLER /s/ LAWRENCE J. SPEH
--------------------------------- ----------------------------------
Its: Executive Vice President, CFO
--------------------------------
5
<PAGE>
Exhibit 10.24
PURCHASE AND SALE AGREEMENT
---------------------------
Dated: April 16, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS AND REFERENCES................................. -1-
1.1 DEFINITIONS........................................... -1-
1.2 REFERENCES............................................ -4-
ARTICLE II SALE AND PURCHASE.......................................... -4-
ARTICLE III PURCHASE PRICE............................................. -5-
3.1 PURCHASE PRICE........................................ -5-
3.2 NO ASSUMPTION OF SELLER'S OBLIGATIONS................. -5-
3.3 NO ASSUMPTION OF PURCHASER'S OBLIGATIONS.............. -5-
ARTICLE IV SUBMITTALS................................................. -6-
4.1 SUBMITTALS TO PURCHASER............................... -6-
4.2 REVIEW AND INSPECTION................................. -8-
ARTICLE V REPRESENTATIONS AND WARRANTIES............................. -8-
5.1 REPRESENTATIONS AND WARRANTIES OF SELLER.............. -8-
5.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER........... -11-
5.3 DURATION OF REPRESENTATIONS AND WARRANTIES............ -11-
ARTICLE VI CLOSING MATTERS............................................ -11-
6.1 CLOSING............................................... -11-
6.2 NEW YORK STYLE CLOSING; CLOSING CHARGES............... -12-
6.3 SURVEY, TITLE COMMITMENT AND SEARCHES................. -12-
6.4 DEFECTS AND REMOVAL OF LIENS.......................... -14-
6.5 ESCROW................................................ -15-
ARTICLE VII CLOSING DELIVERIES......................................... -15-
7.1 SELLER'S DELIVERIES................................... -15-
7.2 PURCHASER'S DELIVERIES................................ -17-
7.3 CONCURRENT TRANSACTIONS............................... -17-
7.4 FURTHER ASSURANCES.................................... -17-
7.5 POSSESSION............................................ -18-
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VIII ADJUSTMENTS AND PRORATIONS - CLOSING STATEMENTS............ -18-
8.1 ADJUSTMENTS AND PRORATIONS........................... -18-
8.2 CLOSING STATEMENTS................................... -18-
ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS......................... -18-
9.1 CONDITIONS........................................... -18-
9.2 FAILURE OF CONDITIONS................................ -19-
ARTICLE X CONDITIONS TO PURCHASER'S OBLIGATIONS...................... -19-
10.1 CONDITIONS........................................... -19-
10.2 FAILURE OF CONDITIONS................................ -20-
ARTICLE XI ACTIONS AND OPERATIONS PENDING CLOSING..................... -20-
11.1 ACTIONS AND OPERATIONS PENDING CLOSING............... -20-
ARTICLE XII CASUALTIES AND TAKINGS..................................... -21-
12.1 CASUALTIES........................................... -21-
12.2 TAKINGS.............................................. -21-
ARTICLE XIII INDEMNITIES................................................ -22-
13.1 SELLER'S INDEMNITY................................... -22-
13.2 PURCHASER'S INDEMNITY................................ -22-
13.3 NOTICE OF CLAIMS..................................... -23-
ARTICLE XIV NOTICES.................................................... -23-
ARTICLE XV ADDITIONAL COVENANTS....................................... -24-
15.1 ADDITIONAL COVENANTS................................. -24-
LIST OF EXHIBITS......................................................... -28-
</TABLE>
-ii-
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT is made this 16th day of April, 1997, by
and between May & Speh, Inc., a Delaware corporation ("Seller"), and Finley
Partners L.L.C., an Illinois limited liability company ("Purchaser").
RECITALS:
A. Seller is the fee owner of that certain parcel of land (and the
improvements and buildings thereon) legally described in Exhibit "A-1" ("1501
Land Parcel") and located at 1501 Opus Place, Downers Grove, Illinois, and that
certain parcel of land (and the improvements and buildings thereon) legally
described in Exhibit "A-2" ("3333 Land Parcel"). The 3333 Land Parcel is
adjacent to the 1501 Land Parcel.
B. Seller desires to sell, and Purchaser desires to purchase, the Property
(as hereinafter defined) upon and subject to the terms and conditions
hereinafter set forth.
C. Simultaneously with the purchase of the Property, Purchaser will lease
the 1501 Land Parcel (and the improvements and buildings thereon) pursuant to
the lease attached hereto as Exhibit B ("1501 Lease") and the 3333 Land Parcel
(and the improvements and buildings to be constructed thereon) pursuant to the
lease attached hereto as Exhibit C ("3333 Lease"). Pursuant to the 3333 Lease,
the Landlord will construct a 200,000 square foot office building and parking
facility on the 3333 Land Parcel for use by Seller.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, agreements, covenants and conditions
herein contained, and other good and valuable consideration, Seller and
Purchaser agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
--------------------------
1.1 DEFINITIONS. As used herein, the following terms shall have the
respective meanings indicated below:
Affiliate: With respect to a specific entity, any natural person or any
firm, corporation, partnership, limited liability company, association, trust or
other entity which, directly or indirectly, controls, or is under common control
with, the subject entity, and with respect to any specific entity or person, any
firm, corporation, partnership, association, trust or other entity which is
controlled by the subject entity or person. For purposes hereof, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of any such entity
or the power to veto
<PAGE>
major policy decisions of any such entity, whether through the ownership of
voting securities, by contract, or otherwise.
Agreement: This Purchase and Sale Agreement, including the Exhibits.
Agreement Date: The date of full execution of this Agreement by Seller and
Purchaser.
Assignment: The Assignment, Assumption and Indemnity Agreement in the form
of Exhibit "D" attached hereto.
Closing and Closing Date: As defined in Section 6.1.
Closing Statement: The Closing Statement required under the provisions of
Section 8.2.
Department: Illinois Department of Revenue.
Environmental Laws: As defined in Subsection 5.1(n).
Escrow: The escrow created for the purpose of facilitating the
transactions contemplated hereby pursuant to the Escrow Instructions (as defined
herein).
Escrow Instructions: The escrow instructions to be executed and delivered
by the parties and the Title Company, as escrowee.
1501 Land Parcel: As defined in the Recitals.
1501 Lease: As defined in the Recitals.
Fixtures and Tangible Personal Property: All fixtures, equipment,
machinery, apparatus, and other articles of personal property located on the
Land and Improvements as of the Closing, and used or usable in connection with
any part of the Property, excluding, however, property owned by Seller and used
in its business as opposed to the operation of the Improvements or by other
persons furnishing goods or services to the Property. Improvements.
Hazardous Material: As defined in Subsection 5.1(n).
Impositions: All taxes and other governmental charges of any kind
whatsoever that may at any time be assessed or levied against or with respect to
the Property, or any part thereof or any interest therein, including, without
limitation, all general and special real estate taxes and assessments or taxes
assessed specifically in whole or in part in substitution of general real estate
taxes or assessments; any taxes levied upon or with respect to the revenue,
income or profits of Seller from all or any part of the Property which, if not
paid,
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will become a lien on all or any part of the Property, or a lien or charge on
the rents, revenues or receipts therefrom; all assessed ad valorem taxes; all
utility and other charges incurred in the operation, maintenance, use, occupancy
and upkeep of the Property that may be secured by a lien on the Property and all
assessments and other charges made by any governmental agency for improvements
that may be secured by a lien on the Property.
Improvements: The buildings, structures (surface and sub-surface) and
other improvements, including such fixtures as shall constitute real property,
located on the Land.
Land: The parcel of real estate described in Exhibits "A-1 and A-2"
hereto, together with all rights, title and interest, if any, of Seller in and
to all land lying in any street, alley, road or avenue, open or proposed, in
front of or adjoining said Land, to the centerline thereof, and all right, title
and interest of Seller in and to any award made or to be made in lieu thereof
and in and to any unpaid award for the damage to said Land by reason of change
of grade of any street.
Leases: The 1501 Lease and the 3333 Lease.
Legal Requirements: All laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, directions and requirements of all governments and governmental
authorities having jurisdiction of the Property (including, for purposes hereof,
any local Board of Fire Underwriters) and the operation thereof.
Obligations: All payments required to be made and all representations,
warranties, covenants, agreements and commitments required to be performed under
the provisions of this Agreement by Seller or Purchaser, as applicable.
Permits: Licenses, franchises and permits, certificates of occupancy
authorizations and approvals used in the ownership, occupancy or operation of
any part of the Property as currently operated.
Permitted Exceptions: (i) any Title Defects disclosed by the Survey or any
other matters disclosed by Survey, and (ii) any liens, encumbrances,
restrictions, exceptions and other matters specified in Exhibit "E" to which
title to the Property may be subject on the Closing Date.
Property: (i) the Land; (ii) the Improvements; (iii) the Fixtures and
Tangible Personal Property; and (iv) the Permits all as hereinafter defined.
Purchase Price: As defined in Section 3.1.
Searches: As defined in Subsection 6.3(c).
Section 1445: As defined in Subsection 15.1(g).
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Submittals: As defined in Section 4.1.
Survey: As defined in Subsection 6.3(b).
3333 Lease: As defined in the Recitals.
3333 Land Parcel: As defined in the Recitals.
Title Commitment: As defined in Subsection 6.3(a).
Title Company: Chicago Title Insurance Company.
Title Defect: A lien, claim, charge, security interest, encumbrance,
encroachment or other matter adversely affecting title to the Property other
than a Permitted Exception.
Title Policy: As defined in Subsection 6.3(a).
UCC: The Uniform Commercial Code in effect in Illinois.
Violation: Any condition with respect to the Property which constitutes a
violation of any Legal Requirements or Permits.
1.2 REFERENCES. Except as otherwise specifically indicated, all
references to Section and Subsection numbers refer to Sections and Subsections
of this Agreement, and all references to Exhibits refer to the Exhibits attached
hereto. The words "hereby", "hereof", "herein", "hereto", "hereunder",
"hereinafter", and words of similar import refer to this Agreement as a whole
and not to any particular Section or Subsection hereof. The word "hereafter"
shall mean after, and the term "heretofore" shall mean before the date of this
Agreement. Captions used herein are for convenience only and shall not be used
to construe the meaning of any part of this Agreement.
ARTICLE II
SALE AND PURCHASE
------------------
Seller hereby agrees to sell (or to cause to be sold) to Purchaser, and
Purchaser hereby agrees to purchase from Seller, the Property on the terms and
subject to the conditions of this Agreement.
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ARTICLE III
PURCHASE PRICE
--------------
3.1 PURCHASE PRICE.
--------------
(a) The purchase price ("Purchase Price") for the Property shall be
Twelve Million Three Hundred One Thousand and 00/100 Dollars ($12,301,000.00).
(b) The Purchase Price, subject to prorations and adjustments as
provided in Section 8.1, shall be paid on the Closing Date by wire transfer of
immediately available funds, first to the Title Company and then to an account
specified by Seller, against delivery of instruments of transfer and the other
documents specified in Section 7.1.
3.2 NO ASSUMPTION OF SELLER'S OBLIGATIONS. Except as otherwise
specifically provided herein to the contrary, Purchaser shall not assume, or
become obligated with respect to, any duties, liabilities or other obligations
of Seller, including, but not limited to, the following:
(a) except to the extent that Purchaser agrees to and does receive a
credit therefor on the Closing Statement, any and all obligations, liabilities,
claims, accounts, demands, liens or encumbrances, whether direct or contingent
and no matter how arising, in any way related to the Property, and arising or
accruing prior to the Closing Date or in any way related to or arising from any
act, conduct, omission, contract or commitment of Seller or any predecessor in
interest of Seller, at any time or times prior to the Closing Date (including,
but not limited to, any damage to property or injury to or death of any person);
and
(b) duties, liabilities or other obligations of Seller incurred in
connection with or relating to the transfer of the Property pursuant to this
Agreement, including, without limitation, any federal, state or local income,
sales, transfer or other tax incurred by reason of said transfer, all of which
shall be the sole responsibility of Seller.
3.3 NO ASSUMPTION OF PURCHASER'S OBLIGATIONS. Notwithstanding anything to
the contrary contained herein and except to the extent set forth in the Leases,
Seller shall not assume or become obligated with respect to any obligations,
liabilities, claims, accounts, demands, liens or encumbrances, whether direct or
contingent and no matter how arising, in any way related to the Property, and
arising or accruing from and after the Closing Date or in any way related to or
arising from any act, conduct, omission, contract or commitment of Purchaser at
any time or times from and after the Closing Date (including, but not limited
to, any damage to property or injury to or death of any person).
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ARTICLE IV
SUBMITTALS
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4.1 SUBMITTALS TO PURCHASER. Seller, within twenty (20) days after the
Agreement Date, shall deliver to Purchaser copies of the following (the
"Submittals"):
(a) the Permits;
(b) a descriptive summary of all pending or threatened litigation with
respect to the Property;
(c) reproducible copies of all plans, specifications, drawings,
blueprints, surveys, environmental reports and other documents which Seller has
in its possession as the same relate to the Property, including, but not limited
to those relating to any prior or ongoing construction or rehabilitation of the
Property;
(d) all other documents or instruments of record relating to the
Property;
(e) information reflecting the insurance loss history of the Property
for the five (5) years preceding the date hereof and copies of all insurance
policies relating to the Property;
(f) the notices, reports and registrations Seller has filed, if any,
pursuant to Seller's obligations under the Illinois State Fire Marshal
Regulations for Underground Storage Tanks, SARA Title III, the OSHA Hazard
Communication Standard and/or any other federal, state or local health and
safety regulations;
(g) a copy of the bill or bills issued for the three (3) most recent
years for which bills have been issued for all real estate taxes and personal
property taxes and a copy of any and all notices pertaining to real estate taxes
or assessments applicable to the Property. Seller shall promptly deliver to
Purchaser a copy of any such bills or notices received by Seller after the date
hereof even if received after Closing. In the event that any taxes or
assessments for said years have been appealed, Seller shall provide Purchaser
with copies of all petitions for appeal and evidence of full payment of the cost
of any such appeals including the full payment of attorneys' fees;
(h) copies of all service and maintenance contracts and other written
agreements of any kind pertaining to the Property, and all amendments and
modifications thereto, which Seller or its agents and Affiliates have entered
into in connection with the construction, development, maintenance, ownership
and operation of the Property which might survive Closing and a schedule listing
all such contracts and
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agreements. Purchaser shall inform Seller, not less than five (5) days prior to
Closing, which Contracts, if any, Purchaser wishes Seller to assign to Purchaser
at the Closing;
(i) a copy of all guaranties, warranties and other documents or
instruments relating to the Property;
(j) copies of all contracts for construction, repair or capital
replacement to be performed at the Property or covering such work performed
during the two (2) years immediately preceding the date hereof;
(k) all other studies, reports, maps and documents related to the
Property that are reasonably available to Seller, including without limitation
engineering reports, surveys, environmental impact reports, traffic circulation,
flood control and drainage plans, design renderings, shop drawings, feasibility
studies, and all correspondence with governmental agencies and their personnel
concerning the same, but excluding market analyses;
(l) copies of all notices of health, building and zoning code
violations received in the last five (5) years with respect to the Property;
(m) copies of any soil tests, notices from and correspondence with
state and federal environmental departments;
(n) copies of all agreements relating to the availability or
furnishing of sewer, water, and other utilities to the Property, if any; and
(o) copies of all environmental and engineering reports on all aspects
of the Property, including those related to the roof, asphalt, heating,
ventilating and air-conditioning systems, life safety systems, security systems,
electrical and plumbing systems and the structural elements of the Improvements,
plus copies of all bids and proposals obtained for any work called for by any of
the aforesaid engineering reports.
In addition, Seller shall make available for Purchaser's inspection any and all
other documents in Seller's or its Affiliates' possession relating to the
Property.
4.2 REVIEW AND INSPECTION. Purchaser shall have the right to enter upon
the Land and Improvements to inspect the Property and to conduct reasonable non-
destructive tests and investigations at its sole cost and expense, except as
provided herein. Purchaser shall indemnify Seller from and against any loss,
damage, liability, cost or expense incurred by Seller as a direct result of the
entry onto the Property by Purchaser, its employees, representatives or agents
in performing such inspection, tests and investigations. Seller shall cooperate
with Purchaser and its agents in arranging such inspections.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants the following to Purchaser:
(a) Due Organization. Seller is a corporation duly formed, validly
existing and in good standing under the laws of the State of Illinois.
(b) Authority. The execution, delivery and performance of this
Agreement and the Leases have been duly authorized by all requisite action on
the part of Seller, and this Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable in accordance with its terms.
(c) No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, except as otherwise
provided herein, do not require the consent or approval of any governmental
authority, nor shall such execution and delivery result in a breach or Violation
of any Legal Requirement, or constitute a default (or an event which with notice
or passage of time or both will constitute a default) under any contract or
agreement to which Seller or an Affiliate of Seller is a party or by which it or
the Property is bound.
(d) Title to Other Property. Seller has good and marketable title to
all Property free and clear of all options, liens, charges, easements,
agreements, claims, restrictions or other encumbrances of any kind or nature
except as set forth in Exhibit "E". All items of Property have been or on or
before Closing will be fully paid for.
(e) Permits and Legal Requirements. (i) Exhibit "F" sets forth a
complete and correct list of all existing Permits held by Seller or Affiliates
of Seller; (ii) such Permits constitute all of the licenses, franchises and
permits, certificates of occupancy, authorizations and approvals required for
the ownership and operation of the Property as currently operated, (iii) Seller
has not received any written notice of any Violation which has not been
heretofore corrected; (iv) prior to the Closing Date, any uncured Violations
shall be cured by Seller at its sole expense; and (v) all Permits are assignable
to Purchaser.
(f) Impositions. All Impositions due and payable as of the date of
this Agreement have been paid. There is no existing, pending or, to Seller's
best knowledge, contemplated, threatened or anticipated increase in the tax
assessment for the Property other than routine increases which occur from year
to year. Except as set forth in Exhibit "G", there are no pending real estate
tax appeals or protests for the Property and no real estate tax abatements or
reduction programs in effect with respect to the Property. Seller shall not file
any such appeals or protests from and after the date hereof.
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(g) Pending Litigation. Except as described in Exhibit "H", there are
no actions, suits or proceedings pending or, to Seller's best knowledge,
threatened against Seller affecting any of Seller's rights with respect to the
Property, at law or in equity, or before any federal, state, municipal, or other
governmental agency or instrumentality, nor is Seller aware of any facts which
to its knowledge might result in any such action, suit or proceedings.
(h) Condemnation. There are no pending or, to Seller's best knowledge,
threatened condemnation proceedings or condemnation actions (or offer to
purchase in lieu of condemnation) against the Land and Improvements or any of
the rights-of-way located adjacent thereto.
(i) Zoning. The Land is currently zoned for its present use, and no
change in the zoning classification of the Property is pending or, to Seller's
best knowledge, threatened.
(j) Assessments. No governmental assessment for sewer, sidewalk,
water, paving, electrical, power or other improvements is pending or in effect
or, to Seller's best knowledge, threatened.
(k) Utilities. All utility equipment and facilities required for the
normal operation and use of the Property are connected under valid permits and,
to the best of Seller's knowledge, are adequate to service the Property, and,
all agreements for providing utilities are with direct providers.
(l) Material Changes. There are no facts or circumstances not
disclosed to Purchaser of which Seller has actual knowledge which have or could
have a material adverse effect upon the Property, excluding however general
economic conditions. Seller agrees to notify Purchaser immediately of such facts
or circumstances if it becomes aware of the same.
(m) Condition of Property. To the best of Seller's knowledge, the
Improvements, including, without limitation, the roof(s), elevators and
basement(s), are in good operating condition and free from material defects,
subject to normal wear and tear. All plumbing, heating, ventilation, air
conditioning, electrical and other mechanical systems and equipment are, to the
best of Seller's knowledge, in good operating condition and free from material
defects, subject to normal wear and tear.
(n) Environmental Matters. Except as set forth in Exhibit "I", Seller
has no actual knowledge of (i) Hazardous Materials having been discharged,
placed or disposed of at, on or under the Property; (ii) underground storage
tanks having been located on the Property; (iii) the Property having been used
as a dump for waste material; and (iv) the Property or the Seller being in
violation of or liable under any applicable Environmental Law.
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The term Hazardous Materials shall mean and include the following,
including mixtures thereof: (i) any hazardous substance, pollutant, contaminant,
waste, by-product or constituent regulated under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S)9601 et seq., as amended;
(ii) oil and petroleum products and natural gas, natural gas liquids, liquefied
natural gas and synthetic gas usable for fuel; (iii) pesticides regulated under
the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. (S)136 et
seq., as amended; (iv) asbestos and asbestos-containing materials, PCBs and
other substances regulated under the Toxic Substances Control Act, 15 U.S.C.
(S)2601 et seq., as amended; (v) source material, special nuclear material, by-
product material and any other radioactive materials or radioactive wastes,
however produced, regulated under the Atomic Energy Act or the Nuclear Waste
Policy of 1982; (vi) chemicals subject to the OSHA Hazard Communications
Standard, 29 C.F.R. (S)1920.1200 et seq., as amended; (vii) industrial process
and pollution control wastes whether or not hazardous within the meaning of the
Resource Conservation and Recovery Act, 42 U.S.C. (S)6901 et seq., as amended;
and (viii) all other toxic or hazardous substances regulated by federal, state
or local laws. All such above-referenced statutes together with the Clean Air
Act, as amended, the Federal Water Pollution Control Act, as amended, the Safe
Drinking Water Act, as amended, the Toxic Substance Control Act, as amended, the
Emergency Planning and Community Right-To-Know Act of 1986, the Hazardous
Material Transportation Act, as amended, and all other federal, state and local
statutes, laws, ordinances, order, rules, regulations and moratoria relating to
the protection, preservation or restoration of the environment or the use,
storage, treatment, generation, handling, release or disposal of Hazardous
Materials are hereinafter referred to as "Environmental Laws".
(o) Leases. No party has any right to possession or occupancy of any
part of the Property pursuant to a lease, license, option or otherwise.
5.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
represents and warrants the following to Seller:
(a) Due Organization. Purchaser is a limited liability company duly
formed, validly existing and in good standing under the laws of the State of
Illinois.
(b) Authority. The execution, delivery and performance of this
Agreement have been duly authorized by all requisite action on the part of
Purchaser, and this Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms.
(c) No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, except as otherwise
provided herein, do not require the consent or approval of any governmental
authority, nor shall such execution and delivery result in a breach or Violation
of any Legal Requirement, or constitute a default (or an event which with notice
or passage of time or
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both will constitute a default) under any contract or agreement to which
Purchaser or an Affiliate of Purchaser is a party or by which it or the Property
is bound.
5.3 DURATION OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in Sections 5.1 and 5.2 shall be deemed restated on and as
of the Closing Date and shall survive the Closing for a period of one (1) year.
Neither Seller nor Purchaser shall have any claim for breach of a representation
or warranty unless notice of such alleged breach, specifying such breach in
reasonable detail, is delivered to the alleged breaching party on or before one
(1) year after the Closing Date.
ARTICLE VI
CLOSING MATTERS
----------------
6.1 CLOSING. The closing of the transaction contemplated hereby (the
"Closing") shall take place at the offices of the Title Company on June 2, 1997,
subject to possible extensions pursuant to Subsection 6.3 (the "Closing Date").
The Closing shall be effected pursuant to the Escrow Instructions.
6.2 NEW YORK STYLE CLOSING; CLOSING CHARGES. At the request of either
party, the transaction shall be closed by means of a so-called "New York Style
Closing", with the concurrent delivery of the documents of title, transfer of
interests, delivery of the Title Policy described in Subsection 7.1(e) and the
payment of the Purchase Price. Seller shall provide and pay for the cost for
the issuance of the Title Policy, the issuance of extended coverage over the
general exceptions contained in and all endorsements to the Title Policy, the
State of Illinois and DuPage County real estate transfer taxes and all sales and
use taxes in connection with the Closing. Purchaser shall pay one hundred
percent (100%) of any money lender's escrow fees. Seller and Purchaser shall
each pay for fifty percent (50%) of any undertaking (the "Gap Undertaking") to
the Title Company necessary for the New York Style Closing to occur, all
closing, escrow, recording and other charges of the Title Company for such
Closing.
6.3 SURVEY, TITLE COMMITMENT AND SEARCHES. Seller on or before the
expiration of the periods set forth below will deliver the following to
Purchaser:
(a) Title. Within twenty (20) days following the Agreement Date, a
commitment (hereinafter referred to as the "Title Commitment") to issue an ALTA
Form B (1992) Owner's Title Insurance Policy issued by the Title Company in the
amount of the Purchase Price (irrevocable for at least six months), showing fee
simple title in Seller to the Land and Improvements and, in addition, all
access, ingress and egress and utility easements and rights-of-way required
hereunder or used in connection with the Property by the Seller, naming
Purchaser as the proposed insured, with title being subject only to real
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estate taxes not yet due or payable, acts of Purchaser and parties acting
through Purchaser, the Permitted Exceptions and such other exceptions as
approved in writing by Purchaser and any other title exceptions pertaining to
liens or encumbrances of a definite, ascertainable amount which are capable of
being, and shall be, removed by the payment of money by Seller at or prior to
Closing as confirmed by Purchaser with the Title Company (such other title
exceptions being hereinafter referred to as the "Removable Exceptions"). The
Title Commitment shall contain an agreement by the Title Company, or shall be
supplemented with an agreement by the Title Company delivered to Purchaser no
later than five (5) days prior to Closing, stating that the title insurance
policy which will be issued pursuant to the Title Commitment at the Closing
(hereinafter referred to as the "Title Policy") will provide full extended
coverage insurance which shall result in the deletion of all general exceptions.
The Title Policy shall contain the following affirmative endorsements and such
other endorsements as are reasonably requested by Purchaser:
(A) an endorsement insuring Purchaser that there are no
violations of any restrictive covenants, conditions or restrictions
affecting the Land or Improvements, that there are no encroachments by
the Improvements onto any easements or any building lines or setbacks
affecting the Land, or onto any adjacent property, or any
encroachments onto the Land of existing improvements located on
adjoining land;
(B) an access endorsement insuring that all adjoining
streets are public streets and that there is direct and unencumbered
access to the same from the Land and the Improvements;
(C) a survey endorsement insuring that all the property
insured is legally described on a specifically mentioned survey and
foundations in place as of the date of such policy are within the lot
lines and applicable setback lines, that the Improvements do not
encroach onto adjoining land or onto any easements, and that there are
no encroachments of improvements from adjoining land onto the Land or
any part thereof;
(D) a 3.1 zoning endorsement insuring that the Land and the
Improvements are zoned for the present and contemplated building and
business thereon and insuring against loss or damage arising due to a
prohibition of said use or requiring removal of the Improvements due
to a violation of applicable laws or ordinances including but not
limited to laws and ordinances relating to area of the Land, floor
area of the Improvements, setbacks, height and parking;
(E) a contiguity endorsement insuring that all parcels
comprising the Land are contiguous;
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(F) an endorsement insuring that no instrument, covenant or
condition affecting the Land provides for an easement over the Land or
for a private assessment or charge; and
(G) an endorsement insuring that all of the Land and the
Improvements are covered by one or more permanent index numbers which
do not cover other property.
The Title Company shall also undertake to obtain reinsurance
policies with Right of Direct Access in such amounts and with such
companies as may be satisfactory to Purchaser.
(b) Survey. Within thirty (30) days of the Agreement Date, three (3)
copies of a currently dated as-built survey of the Land and of the Improvements
situated thereon (hereinafter referred to as the "Survey"), prepared by a
surveyor licensed by the State of Illinois and acceptable to Purchaser,
certified to Purchaser and the Title Company and any other parties identified by
Purchaser, in manner satisfactory to Purchaser, by such surveyor as being true,
accurate and having been prepared in accordance with the minimum standard detail
requirements for Land Title Surveys adopted by the American Title Association
(now known as the American Land Title Association) and the American Congress on
Surveying and Mapping in 1992, including the following Table A items: 1992 -- 2,
3, 4, 7(a), 7(b)(1), 8, 9, 10, 11. The Survey shall reveal no encroachments onto
the Land from any adjacent property, no encroachments by or from the Land or
Improvements onto any adjacent property, and no violation by any of the
Improvements on the Land of any building line or easement affecting the Land.
Said Survey shall certify that the Land is not in an area identified by an
agency or department of the federal government as having special flood or
mudslide hazards which would require flood insurance under the Flood Insurance
Act of 1968.
If the Title Commitment or Survey is not delivered to Purchaser within the
specified time, Purchaser may, in addition to the remedies available to it under
Section 10.2 hereof, elect, by written notice from Purchaser to Seller (i) to
extend the time for delivery of such items or any of them to a date designated
in such notice or such later date as may be designated from time to time by
Purchaser, or (ii) to obtain such items or any of them and deduct all costs or
expenses incurred thereby from the Purchase Price.
(c) Searches. UCC, judgment and tax lien searches on the names of Seller
covering a date not earlier than seven (7) days prior to the date of closing
(the "Searches") showing no Title Defect as to the Property unless the same is
to be paid by Seller and released at or prior to the Closing.
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6.4 DEFECTS AND REMOVAL OF LIENS.
----------------------------
(a) Defects. If the Title Commitment or the Title Policy discloses Title
Defects, or if the Survey discloses Title Defects then Seller shall have thirty
(30) days from the date of the delivery of the Title Commitment and Survey in
which to have such Title Defects removed from the Title Commitment or Title
Policy, or to remove such defects in the Survey or have the Title Company commit
to insure over same. If such unpermitted exceptions or defects are not removed
or insured over within the permitted time, Purchaser may elect, in addition to
Purchaser's remedies under Section 10.2 hereof, upon written notice to Seller
made within ten (10) days after the expiration of the permitted time (i) to
terminate this Agreement; (ii) to extend the permitted time for fifteen (15)
days in which such exceptions or defects may be removed or insured over; or
(iii) take title as it then is and deduct from the Purchase Price an amount
necessary to discharge and to obtain affirmative title insurance against loss
with respect to any unpermitted liens, encumbrances or restrictions. If
Purchaser fails to make a timely election, such failure shall constitute an
election under clause (ii) above to extend the permitted time in which such
exceptions or defects may be removed or insured over for an additional period of
fifteen (15) days and if such Title Defects are not removed or satisfactorily
insured over within said fifteen (15) days and Purchaser does not elect to
proceed under clause (iii) above within said time, Purchaser shall be deemed to
have elected to terminate this Agreement. Title Defects which are accepted by
Purchaser pursuant to clause (iii) shall thereupon be deemed to be Permitted
Exceptions and Exhibit "E" shall be amended, if necessary, to include such
additional Permitted Exceptions.
(b) Removal of Liens. If on the Closing Date there shall be any Title
Defect of a definite or ascertainable amount which is capable of satisfaction by
the payment of money, then Seller shall either (a) use a portion of the Purchase
Price to satisfy the same, provided Seller shall simultaneously deliver to
Purchaser at the Closing instruments, in recordable form, sufficient to satisfy
such Title Defect of record, together with the cost of recording or filing said
instrument; or (b) in the alternative, make arrangements with the Title Company
in advance of Closing whereby Seller will deposit with the Title Company
sufficient monies (which may be a portion of the Purchase Price), acceptable to
the Title Company, to induce the Title Company to issue the Title Policy to
Purchaser, either free of any such Title Defect or with insurance which "insures
over" such Title Defect.
6.5 ESCROW. This Agreement shall not be merged into the Escrow
Instructions but the Escrow Instructions shall be deemed auxiliary to this
Agreement and, as between the parties hereto, the provisions of this Agreement
shall govern and control.
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ARTICLE VII
CLOSING DELIVERIES
-------------------
7.1 SELLER'S DELIVERIES. At Closing, Seller shall deliver or cause to be
delivered to Purchaser the following, each of which shall be in form and
substance reasonably acceptable to Purchaser and, in the case of documents of
transfer or conveyance, shall be accepted or consented to by all parties
required to make such transfer or conveyance effective:
(a) a recordable Warranty Deed from Seller to Purchaser conveying the Land
and Improvements subject only to the Permitted Exceptions;
(b) a bill of sale, with warranty of title, transferring to Purchaser all
of Seller's right, title and interest in and to the Fixtures and Tangible
Personal Property, to be transferred hereunder subject only to Permitted
Exceptions;
(c) the Assignment conveying and transferring to Purchaser all of Seller's
right, title and interest in, to and under the Permits;
(d) the certificates referred to in Subsection 10.1(b) hereof;
(e) The Title Policy issued by the Title Company in exact conformity with
the Title Commitment, in favor of Purchaser, in the amount of the Purchase
Price, showing good and marketable fee simple title in the Land and Improvements
to be vested in Purchaser subject only to the Permitted Exceptions;
(f) a FIRPTA Certificate;
(g) affidavit of title for the Land and Improvements executed by Seller, in
customary form;
(h) a Bulk Sales Stop Order from the Department under the provisions of the
Illinois Income Tax Act, Ill. Rev. Stat. ch. 120, para. 9-902(d) (1937) and the
Retailers' Occupation Tax Act, Ill. Rev. Stat. ch. 120, para. 444j (1987), dated
not earlier than fifteen (15) days before the Closing Date, and a full release
of claims from the Department with respect to all debts owned by Seller under
the Illinois Income Tax Act and the Retailers' Occupation Tax Act; provided,
however, that if such Stop Order requires the withholding of any portion of the
Purchase Price, Purchaser shall pay such withheld amount into an escrow with
Title Company, which escrow shall provide for the payment of funds therein to
the Department or the Seller, as further ordered by the Department. In no event
shall any funds so deposited be returned to Purchaser or be subject to any claim
or set off by Purchaser;
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<PAGE>
(i) the 1501 Lease and the 3333 Land Lease executed by Seller, as tenant.
(j) the opinion of Seller's counsel as provided by Subsection 10.1(c);
(k) the Closing Statement;
(l) State of Illinois and County of DuPage documentary stamp and
transaction declarations; and
(m) a certificate that the sale hereunder is not subject to RPTA (as
hereinafter defined) or that all filings and deliveries required thereby as
modified by this Agreement have been made or will be made at the Closing.
7.2 PURCHASER'S DELIVERIES. At Closing, Purchaser shall deliver or cause
to be delivered to Seller the following, each of which shall be in form and
substance reasonably acceptable to Seller and, in the case of documents of
transfer or conveyance, shall be accepted or consented to by all parties
required to make such transfer or conveyance effective:
(a) that portion of the Purchase Price required to be paid pursuant to
Sections 3.1 and 8.1 hereof;
(b) the certificate referred to in Subsection 9.1(b) hereof;
(c) the Closing Statement;
(d) the Assignment assuming all of Seller's obligations, duties and
liabilities under the Permits from and after the Closing Date;
(e) State of Illinois and County of DuPage documentary stamp declarations;
(f) the opinion of Purchaser's counsel as provided in Subsection 9.1(c);
and
(g) the 1501 Lease and the 3333 Lease executed by the Landlord under such
leases.
7.3 CONCURRENT TRANSACTIONS. All documents or other deliveries required to
be made by Purchaser or Seller at the Closing, and all transactions required to
be consummated concurrently with the Closing, shall be deemed to have been
delivered and to have been consummated simultaneously with all other
transactions and all other deliveries, and no delivery shall be deemed to have
been made, and no transaction shall
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<PAGE>
be deemed to have been consummated, until all deliveries required by Purchaser,
or its designee, and Seller shall have been made, and all concurrent or other
transactions shall have been consummated.
7.4 FURTHER ASSURANCES. Seller and Purchaser will, at the Closing or at
any time or from time to time thereafter, upon request of either party, execute
such additional instruments, documents or certificates as either party deems
reasonably necessary in order to satisfy and fulfill their respective
Obligations hereunder.
7.5 POSSESSION. Possession of the Property shall be delivered to
Purchaser at the Closing.
ARTICLE VIII
ADJUSTMENTS AND PRORATIONS - CLOSING STATEMENTS
8.1 ADJUSTMENTS AND PRORATIONS. The following matters and items shall be
apportioned between the parties hereto or, where appropriate, credited in total
to a particular party, as of the Closing Date as provided below:
(a) Taxes and Assessments. All ad valorem taxes, special or general
assessments, personal property taxes, water and sewer rents, rates and charges,
and other municipal permit fees (to the extent such permits are transferable)
for the 3333 Land Parcel shall be equitably prorated between the parties. If
the amount of any such item is not ascertainable on the Closing Date, the credit
therefor shall be based on one hundred percent (100%) of the most recent
available bill and shall be reprorated within thirty (30) days after receipt of
the final tax bill for each of 1996 and 1997. There shall be no proration of
the above items for the 1501 Land Parcel because Seller shall continue to be
responsible for such amounts as tenant, under the 1501 Lease.
(b) Other. Such other items as provided for in this Agreement or in the
case of the 3333 Land Parcel, as are normally prorated or adjusted in the sale
of vacant land.
8.2 CLOSING STATEMENTS. At the Closing the representatives of the
parties shall jointly prepare and deliver to each party a Closing Statement
which shall show the net amount due either to Seller or Purchaser as a result
thereof, and such net amount will be added to or subtracted from the payment of
the cash balance of the Purchase Price to be paid to Seller pursuant to Section
3.1 hereof; provided, however, that real estate taxes shall be dealt with in
accordance with Subsection 8.1(b).
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ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATIONS
-----------------------------------
9.1 CONDITIONS. Seller's obligation to close hereunder shall be subject
to the occurrence of each of the following conditions, any one or more of which
may be waived by Seller in writing.
(a) Purchaser's Compliance with Obligations. Purchaser shall have
complied in all material respects with all Obligations required by this
Agreement to be complied with by Purchaser.
(b) Truth of Purchaser's Representations and Warranties. The
representations and warranties of Purchaser contained in Section 5.2 were true
in all material respects when made, and are true in all material respects on the
Closing Date, and Seller shall have received a certificate to that effect signed
by an authorized agent of Purchaser.
(c) Opinion of Purchaser's Counsel. There shall have been delivered to
Seller a favorable opinion of Purchaser's counsel, dated the Closing Date as to
(i) the power and authority of Purchaser to execute and deliver this Agreement
and the Lease; and (ii) the due authorization, execution and delivery by
Purchaser of this Agreement and all other documents required to be executed and
delivered by Purchaser pursuant to Section 7.2 hereof.
9.2 FAILURE OF CONDITIONS. If any condition enumerated in Section 9.1 is
not fulfilled and Seller elect not to waive such conditions, such failure shall
be deemed a default by Purchaser hereunder and Seller shall be entitled to
pursue against Purchaser any and all remedies available to Seller hereunder, at
law or in equity.
ARTICLE X
CONDITIONS TO PURCHASER'S OBLIGATIONS
--------------------------------------
10.1 CONDITIONS. Purchaser's obligation to close hereunder shall be
subject to the occurrence of each of the following conditions, any one or more
of which may be waived by Purchaser in writing.
(a) Seller's Compliance with Obligations. Seller shall have complied in
all material respects with all Obligations required by this Agreement to be
complied with by Seller.
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(b) Truth of Seller's Representations and Warranties. The representations
and warranties of Seller contained in Section 5.1 were true in all material
respects when made, and are true in all material respects on the Closing Date,
and Purchaser shall have received a certificate signed by the Seller to that
effect.
(c) Opinion of Seller's Counsel. There shall have been delivered to
Purchaser a favorable opinion of Seller's counsel, dated the Closing Date as to
(i) the power and authority of Seller to execute and deliver this Agreement; and
(ii) the due authorization, execution and delivery by Seller of this Agreement
and all other documents required to be executed and delivered by Seller pursuant
to Section 7.1 hereof.
(d) No Pending Adverse Litigation. On the Closing Date, there shall not
then be pending or, to the knowledge of either Purchaser or Seller, threatened,
against Seller any litigation, administrative proceeding, investigation or other
form of governmental enforcement or executive or legislative proceeding (other
than any litigation or proceeding arising out of acts or omissions of Purchaser
or anyone claiming by, through or under Purchaser) which, if determined
adversely, would restrain the consummation of any of the transactions herein
referred to, declare illegal, invalid or non-binding any of the covenants or
obligations of the parties herein, or have a material and adverse effect on the
operations of the Property, or materially and adversely affect the value of the
Property or the ability of Purchaser, after the Closing, to operate the Property
as currently operated or to construct an office building on the Vacant Parcel as
contemplated in the Vacant Land Lease.
10.2 FAILURE OF CONDITIONS. If any condition enumerated in Subsection
10.1 is not fulfilled, such failure shall be deemed a default by Seller
hereunder and Purchaser may at its election (x) proceed to close this
transaction or (y) terminate this Agreement, in either case retaining all rights
and remedies against Seller available to Purchaser at law or in equity. If
Purchaser elects to terminate this Agreement, the Deposit and any interest
earned thereon shall be immediately returned to Purchaser.
ARTICLE XI
ACTIONS AND OPERATIONS PENDING CLOSING
---------------------------------------
11.1 ACTIONS AND OPERATIONS PENDING CLOSING. Seller agrees that from and
after the date hereof:
(a) The Property will continue to be operated and maintained substantially
in accordance with present standards.
(b) Seller shall use commercially reasonable efforts to preserve in force
all existing Permits and to cause all those Permits expiring prior to the
Closing Date to be renewed prior to the Closing Date. If any such Permit shall
be suspended or revoked,
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<PAGE>
Seller shall promptly so notify Purchaser and use its best efforts to cause the
reinstatement of such Permit without any additional limitation or condition.
(c) Seller shall notify Purchaser promptly if Seller becomes aware of any
transaction or occurrence prior to the Closing Date which would make any of the
representations or warranties of Seller contained in Section 5.1 not true in any
material respect. Purchaser shall notify Seller promptly if Purchaser becomes
aware of any transaction or occurrence prior to the Closing Date which would
make any of the representations or warranties of Seller contained in Section 5.1
not true in any material respect.
(d) Seller will maintain in effect, all policies of casualty and liability
insurance, or similar policies of insurance, with the same limits of coverage
which it now carries with respect to the Property.
(e) Seller will not dispose of or remove any of the Property, except in
accordance with this Agreement.
(f) Seller shall not create or allow to arise any Title Defect.
ARTICLE XII
CASUALTIES AND TAKINGS
-----------------------
12.1 CASUALTIES. If any damage to the Property shall occur prior to the
Closing Date by reason of fire, windstorm, hail, explosion or other casualty,
and if, in Purchaser's reasonable judgment, the cost of repairing such damage
will materially affect the operation of the Property, or Purchaser's ability to
construct the office building on the Vacant Land Parcel as contemplated in the
Vacant Land Lease, Purchaser may elect to terminate this Agreement by giving
written notice to Seller in which event neither party shall have any further
Obligations or liability whatsoever to the other hereunder.
12.2 TAKINGS. In the event of the actual or threatened taking (either
temporary or permanent) in any condemnation proceedings by exercise of right of
eminent domain, of all or any part of the Land and Improvements, between the
date hereof and the Closing Date, and if, in Purchaser's reasonable judgment,
such taking will result in the inability to conduct the operations of the
Property substantially in accordance with the present standards or the inability
to construct the office building on the Vacant Land Parcel as contemplated in
the Vacant Land Lease, Purchaser may elect to: (i) terminate this Agreement by
giving written notice to Seller, in which event neither party shall have any
further Obligations or liability whatsoever to the other hereunder or (ii)
receive an assignment of all of Seller's rights to any condemnation award
relating to such taking and acquire the Property without any adjustment in the
Purchase Price.
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ARTICLE XIII
INDEMNITIES
------------
13.1 SELLER'S INDEMNITY. Seller agrees to indemnify, defend (with
Purchaser having the right to retain separate counsel for the purpose of
participating in such defense, at its sole cost and expense) and hold Purchaser
harmless against all damages, losses and with respect to the following:
(a) except to the extent that Purchaser receives a credit therefor on the
Closing Statement, any and all obligations, liabilities, claims, accounts,
demands, liens or encumbrances, whether direct or contingent and no matter how
arising, in any way related to the Property, and arising or accruing on or
before the Closing Date or in any way related to or arising from any act,
conduct, omission, contract or commitment (subject to Section 3.3) of Seller, at
any time or times on or before the Closing Date, without limitation on the
generality of the foregoing, Seller indemnifies Purchaser from any claim or
judgment under any lawsuit or proceeding filed or pending prior to the Closing
Date against the Property, or any part thereof, and any costs or expenses
heretofore or hereafter incurred in connection with any such lawsuit or
proceeding;
(b) subject to Section 10.2, any loss or damage to Purchaser resulting
from any inaccuracy in or breach of any representation or warranty of Seller or
resulting from any breach or default by Seller of any Obligation of Seller under
this Agreement; and
(c) all costs and expenses, including reasonable attorneys' fees, related
to any actions, suits or judgments incident to any of the foregoing.
13.2 PURCHASER'S INDEMNITY. Purchaser agrees to indemnify, defend (with
Seller having the right to retain separate counsel for the purpose of
participating in such defense, at its sole cost and expense), and hold Seller
harmless against and with respect to the following:
(a) any loss or damage to Seller, subsequent to the Closing Date,
resulting from any inaccuracy in or breach of any representation or warranty of
Purchaser or resulting from any breach or default by Purchaser of any Obligation
of Purchaser under this Agreement;
(b) any and all obligations, liabilities, claims, accounts, demands, liens
or encumbrances, whether direct or contingent and no matter how arising for
which and to the extent Purchaser receives a credit therefore on the Closing
Statement; and all liabilities accruing after the Closing Date under any
contracts, leases or other obligations which are assumed by Purchaser at the
Closing pursuant to Section 3.3 and Subsection 7.2(d); and
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(c) all costs and expenses, including reasonable attorneys' fees, relating
to any actions, suits or judgments incident to any of the foregoing.
13.3 NOTICE OF CLAIMS. Seller and Purchaser, as applicable, shall
promptly notify the other in the event any claim is made against Seller or
Purchaser as to which the other party has agreed to indemnify, and the
indemnitor shall thereupon undertake to defend and hold the indemnitee saved and
harmless therefrom.
ARTICLE XIV
NOTICES
-------
No notice or other communication shall be deemed given unless sent in any
of the manners, and to the persons, specified in this Article. All notices and
other communications hereunder shall be in writing and shall be deemed given (i)
upon receipt if delivered personally, if sent by overnight courier or if mailed
by registered or certified mail, postage prepaid, return receipt requested, or
(ii) upon the completion of transmission during normal business hours (or if
after normal business hours, the next business day after completion of
transmission) (which is confirmed by telephone or by a statement generated by
the transmitting machine) if transmitted by telecopy or other means of facsimile
which provides immediate or near immediate transmission to compatible equipment
in the possession of the recipient, in any case to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy number for a
party as will be specified by like notice):
If to Seller, to: May & Speh, Inc.
1501 Opus Place
Downers Grove, Illinois 60515
Attention: Eric Loughmiller
Telecopy No.: (630) 719-0447
Confirmation No.: (630) 964-1501
With a copy to: Heying & Watts
600 South Washington Street
Suite 301
Naperville, Illinois 60540-6667
Attention: Mary S. Watts, Esq.
Telecopy No.: 630-717-7887
Confirmation No.: 630-717-7555
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<PAGE>
If to Purchaser, to: Finley Partners
2 North LaSalle Street
Suite 730
Chicago, IL 60602
Attention: Joseph Beale
Telecopy No.: (312) 346-6957
Confirmation No.: (312) 346-9466
With an additional
copy to: Gould & Ratner
222 N. LaSalle St., Suite 800
Chicago, IL 60601
Attention: Stephen P. Sandler, Esq. and
David M. Arnburg, Esq.
Telecopy No.: (312)236-3241
Confirmation No.: (312)236-3003
ARTICLE XV
ADDITIONAL COVENANTS
---------------------
15.1 ADDITIONAL COVENANTS. In addition, the parties agree as follows:
(a) Expenses. Except as set forth in Section 6.2, the fees and expenses of
Seller's designated representatives, accountants and attorneys shall be borne by
Seller, and the fees and expenses of Purchaser's designated representatives,
accountants and attorneys shall be borne by Purchaser.
(b) Brokerage. Purchaser and Seller each covenants, warrants and represents
to the other that no broker or finder has acted on behalf of such party in
connection with this Agreement or the transactions contemplated hereby and that
such party has made no agreement to pay any agent, finder, broker or any other
representative any fee or commission in the nature of a finder's or originator's
fee arising out of or in connection with the subject matter of this Agreement.
Purchaser and Seller each hereby agrees to indemnify, defend and hold the other
harmless against and from any and all manner of claims, liabilities, loss,
damage, attorneys' fees and expenses, incurred by either party and arising out
of, or resulting from, any claim by any such broker or finder in contravention
of its representation and warranty herein contained.
(c) Survival of Covenants, etc. Except as otherwise specifically set forth
herein, the representations, warranties, obligations, covenants, agreements,
undertakings and indemnifications of each of Seller and Purchaser contained
herein shall survive the Closing.
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(d) Construction. This Agreement shall not be construed more strictly
against one party than against the other, merely by virtue of the fact that it
may have been prepared primarily by counsel for one of the parties, it being
recognized that both Purchaser and Seller have contributed substantially and
materially to the preparation of this Agreement.
(e) Publicity. Except as required by law, neither party shall, directly or
indirectly, disclose or confirm to any person that discussions have taken place
between the parties, the existence of or the terms or conditions of this
Agreement or any of the terms, conditions or other facts regarding the
transaction proposed hereby, including the status thereof. The parties hereto
agree to mutually approve the timing, content and dissemination of any public
announcement relating to the transaction contemplated hereby, except to the
extent any party is not reasonably able to consult with or obtain the approval
of the other party in situations in which disclosures are required by applicable
law.
(f) General. This Agreement may be executed in any number of counterparts,
each of which shall constitute an original but all of which, taken together,
shall constitute but one and the same instrument. This Agreement (including all
Exhibits hereto) contains the entire agreement between the parties with respect
to the subject matter hereof, supersedes all prior understandings, if any, with
respect thereto and may not be amended, supplemented or terminated, nor shall
any Obligation hereunder or condition hereof be deemed waived, except by a
written instrument to such effect signed by the party to be charged or as
otherwise specifically set forth herein. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois. The
warranties, representations, agreements and undertakings contained herein shall
not be deemed to have been made for the benefit of any person or entity, other
than the parties hereto and their permitted successors and assigns. Neither
Purchaser nor Seller shall assign its rights or delegate its duties hereunder
without the prior written consent of the other party; provided, Purchaser shall
have the right to assign its rights and obligations under this Agreement to a
limited partnership or limited liability company of which the principals of RERC
Capital Markets L.L.C. or an entity owned by RERC Capital Markets L.L.C. as one
of the general partners or a member, without the consent of Seller. Captions
used herein are for convenience only and shall not be used to construe the
meaning of any part of this Agreement.
(g) FIRPTA, RPTA and Illinois Taxes.
-------------------------------
(i) Seller agrees to furnish Purchaser such evidence as Purchaser may
reasonably request, to establish that Seller is not a foreign person for
the purpose of Section 1445 of the Internal Revenue Code of 1986, as
amended ("Section 1445"). In the event that Seller does not furnish such
certification or a qualifying statement for the U.S. Treasury Department
that the transaction is exempt from the withholding requirements of Section
1445, Seller agrees that the escrowee shall be directed to pay such amount
required by law to the Internal Revenue Service
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in accordance with the laws and regulations regarding the withholding
requirements of Section 1445 out of Seller's net proceeds from the Closing.
(ii) At least thirty-five (35) days prior to closing, Seller shall deliver
to Purchaser evidence reasonably satisfactory to Purchaser that the sale of the
Property to Purchaser hereunder is not subject to, and does not subject
Purchaser to liability under Ill. Rev. Stat. ch. 120, paras. 9-902(d), and 444J;
and ch. 48, para. 750 (1987). If such evidence is not so delivered to Purchaser,
then Seller shall, or Purchaser may, notify the Department and the Illinois
Department of Labor of the pending sale and request the Department and
Department of Labor to make a determination as to whether the Seller has an
assessed, but unpaid taxes and contributions for unemployment compensation. The
parties shall withhold in the Escrow any amounts required by the Department or
the Department of Labor until the appropriate agency furnishes Seller and
Purchaser with a letter advising that all sales and income taxes and
contributions for unemployment compensation due to the State of Illinois from
the Seller have been paid and releasing Purchaser from any withholding
requirements including, but not limited to, those of Ill. Rev. Stat. ch. 120,
paras. 9-902(d), and 444j; and ch. 48, para. 750 (1987) or the period of time to
furnish such letter in accordance with the applicable statutes of the State of
Illinois has expired, whichever is earlier.
(iii) Within twenty (20) days after the Agreement Date, Seller shall
deliver to Purchaser a fully completed and executed disclosure document for the
Property pursuant to the Illinois Responsible Property Transfer Act, Ill. Rev.
Stat. ch. 30, para. 901 et seq. ("RPTA") and shall record such disclosure
document.
(h) Exclusive Negotiations. From and after the date hereof through the
Closing Date or the date that this Agreement is terminated as provided herein,
Seller shall not, directly or indirectly, initiate, encourage or entertain any
bid, submission of proposal or offer to purchase, lease or manage the Property
or any part thereof, or participate in any negotiations regarding, furnish to
any person any information with respect to or otherwise cooperate with, assist,
participate in or encourage any effort or attempt by any person to acquire,
lease or manage the Property, or any part thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed, all as of the day and year first above written.
SELLER:
MAY & SPEH, INC., a Delaware corporation
Attest:
By: /s/ Kathleen Malinger By: /s/ Albert J. Speh, Jr.
Its: ------------------------------------
-------------------- Albert J. Speh, Jr.
Secretary Chairman of the Board of Directors
/s/ Lawrence J. Speh
------------------------------------
Lawrence J. Speh
President and Chief Executor Officer
/s/ Eric M. Loughmiller
------------------------------------
Eric M. Loughmiller
Executive Vice President,
Chief Financial Officer
PURCHASER:
FINLEY PARTNERS L.L.C.,
an Illinois limited liability
company
By: /s/ Joseph Beale
--------------------------------
Joseph Beale
Managing Member
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Exhibit 10.25
Office Lease
For
1501 Opus Place
Downers Grove, Illinois
Between
BANK ONE, ILLINOIS, N.A.
as Trustee under Trust No. 11097,
Landlord,
and
MAY & SPEH, INC.,
a Delaware corporation
Tenant
Dated: June 2, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SCHEDULE OF SIGNIFICANT TERMS............................................ -1-
SUPPLEMENTAL PROVISIONS.................................................. -3-
S.1 Additional Definitions..................................... -3-
S.2 Option to Extend........................................... -3-
S.3 Repair Allowance........................................... -4-
S.4 Tenant's Option To Purchase................................ -5-
S.5 Net Lease.................................................. -5-
S.6 Right of First Offer....................................... -5-
ARTICLE 1. GRANT AND TERM............................................. -10-
1.01 Grant of Lease............................................. -10-
1.02 Possession................................................. -10-
ARTICLE 2. INTENTIONALLY OMITTED...................................... -10-
ARTICLE 3. BASE RENT.................................................. -10-
3.01 Base Rent.................................................. -10-
3.02 Manner of Payment.......................................... -11-
ARTICLE 4. TAXES...................................................... -11-
4.01 Obligation to Pay Tax Rent Adjustments..................... -11-
4.02 Definitions................................................ -11-
4.03 Payments of Tax Rent Adjustments........................... -12-
4.04 Proration and Survival..................................... -13-
ARTICLE 5. USE OF PREMISES............................................ -13-
ARTICLE 6. UTILITIES.................................................. -13-
6.01 Payment for Utilities...................................... -13-
6.02 Utilities.................................................. -13-
ARTICLE 7. CONDITION, CARE AND OPERATION OF PREMISES.................. -14-
7.01 Condition of Premises...................................... -14-
7.02 Tenant's Maintenance and Operation Obligations............. -14-
7.03 Work Performed by Tenant................................... -15-
7.04 Janitorial Service......................................... -15-
7.05 Waste...................................................... -15-
ARTICLE 8. RETURN OF PREMISES......................................... -15-
8.01 Surrender of Possession.................................... -15-
8.02 Installations and Additions................................ -15-
8.03 Trade Fixtures and Personal Property....................... -16-
8.04 Survival................................................... -16-
ARTICLE 9. HOLDING OVER............................................... -16-
</TABLE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 10. RULES AND REGULATIONS...................................... -16-
ARTICLE 11. RIGHTS RESERVED TO LANDLORD................................ -17-
11.01 Rights Reserved to Landlord................................ -17-
ARTICLE 12. ALTERATIONS................................................ -17-
ARTICLE 13. ASSIGNMENT AND SUBLETTING.................................. -18-
13.01 Assignment and Subletting.................................. -18-
13.02 Rentals Based on Net Income................................ -19-
13.03 Tenant to Remain Obligated................................. -19-
13.04 Landlord's Consent......................................... -19-
13.05 Profits.................................................... -20-
13.06 Assignee to Assume Obligations............................. -20-
13.07 Change of Control.......................................... -20-
13.08 Transfer By Merger or Sale or To an Affiliate.............. -21-
13.09 Sublease with Customers.................................... -22-
13.10 Restrictions on Assignment and Sublease.................... -22-
ARTICLE 14. WAIVER OF CERTAIN CLAIMS; INDEMNITY BY TENANT.............. -23-
14.01 Waiver of Certain Claims; Indemnity by Tenant.............. -23-
14.02 Damage Caused by Tenant's Neglect.......................... -23-
14.03 Tenant Responsible for Personal Property................... -23-
14.04 Indemnification............................................ -23-
ARTICLE 15. DAMAGE OR DESTRUCTION BY CASUALTY.......................... -24-
15.01 Tenant's Obligation to Rebuild............................. -24-
15.02 Preconditions to Rebuilding................................ -24-
15.03 Payment for Rebuilding..................................... -24-
15.04 Excess Insurance Proceeds.................................. -25-
15.05 Failure to Rebuild......................................... -25-
15.06 Deposits................................................... -25-
ARTICLE 16. EMINENT DOMAIN............................................. -26-
16.01 Whole Taking............................................... -26-
16.02 Partial Taking............................................. -26-
ARTICLE 17. DEFAULT.................................................... -27-
17.01 Events of Default.......................................... -27-
17.02 Rights and Remedies of Landlord............................ -28-
17.03 Right to Re-Enter.......................................... -28-
17.04 Current Damages............................................ -29-
17.05 Final Damages.............................................. -29-
17.06 Removal of Personal Property............................... -30-
17.07 Attorneys' Fees............................................ -30-
17.08 Assumption or Rejection in Bankruptcy...................... -30-
</TABLE>
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TABLE OF CONTENTS
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ARTICLE 18. SUBORDINATION.............................................. -31-
18.01 Subordination.............................................. -31-
18.02 Liability of Holder of First Mortgage; Attornment.......... -31-
18.03 Modification Required by First Mortgagee................... -31-
18.04 Short Form Lease........................................... -32-
ARTICLE 19. MORTGAGEE PROTECTION....................................... -32-
ARTICLE 20. ESTOPPEL CERTIFICATE....................................... -32-
ARTICLE 21. SUBROGATION AND INSURANCE.................................. -33-
21.01 Waiver of Subrogation...................................... -33-
21.02 Tenant's Insurance......................................... -33-
21.03 Certificates of Insurance.................................. -34-
21.04 Compliance with Requirements............................... -35-
ARTICLE 22. NONWAIVER.................................................. -35-
ARTICLE 23. TENANT'S AUTHORITY......................................... -35-
ARTICLE 24. REAL ESTATE BROKERS........................................ -36-
ARTICLE 25. NOTICES.................................................... -36-
ARTICLE 26. HAZARDOUS MATERIALS........................................ -36-
26.01 Defined Terms.............................................. -36-
26.02 Tenant's Obligations with Respect to Environmental Matters. -38-
26.03 Copies of Notices.......................................... -38-
26.04 Landlord's Right to Inspect................................ -38-
26.05 Tests and Reports.......................................... -38-
26.06 Tenant's Obligation to Respond............................. -39-
26.07 Landlord's Right to Act.................................... -39-
26.08 Indemnification............................................ -39-
ARTICLE 27. TITLE AND COVENANT AGAINST LIENS........................... -40-
ARTICLE 28. MISCELLANEOUS.............................................. -41-
28.01 Successors and Assigns..................................... -41-
28.02 Modifications in Writing................................... -41-
28.03 No Option; Irrevocable Offer............................... -41-
28.04 Financial Statements....................................... -41-
28.05 Definition of Landlord..................................... -41-
28.06 Headings................................................... -41-
28.07 Time of Essence............................................ -41-
28.08 Default Rate of Interest................................... -42-
28.09 Severability............................................... -42-
28.10 Entire Agreement........................................... -42-
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ARTICLE 29. EXCULPATORY PROVISIONS..................................... -42-
Attachments: EXHIBIT A THE LAND
EXHIBIT B CAPITAL REPAIRS
RIDER A BASE RENT
RIDER B RULES AND REGULATIONS
RIDER C CLEANING SPECIFICATIONS
RIDER D INITIAL ESTOPPEL CERTIFICATE
RIDER E PURCHASE CONTRACT
RIDER F OPERATION AND MAINTENANCE STANDARDS
</TABLE>
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<PAGE>
LEASE with MAY & SPEH, INC., a Delaware corporation ("Tenant")
on Premises at 1501 Opus Place
Downers Grove, Illinois 60515
This Lease made as of the Date of Lease set forth in the following Schedule
(the "Schedule"), by and between Bank One, Illinois, N.A., not personally but
solely as Trustee under Trust Agreement dated May 23, 1997, and known as Trust
No. 11097 ("Landlord") and the Tenant identified immediately above.
SCHEDULE OF SIGNIFICANT TERMS
For purposes of this Lease, the terms set forth below shall have the
meanings or be assigned the amounts as follows:
Date of Lease: June 2, 1997
Base Rent (annual amount): See attached Rider A
Monthly Base Rent: One twelfth of annual Base Rent
Commencement Date: The Closing Date under the Purchase and Sale
Agreement, as defined in Section S.1
Expiration Date: The later of (i) the 20th anniversary of the
Commencement Date and (ii) the last day of
the 20th Lease Year (as defined herein) under
the 3333 Lease (as hereinafter defined), or
such earlier date as this Lease is terminated
as provided herein; provided that if the Term
of this Lease is extended for an Extended
Term, the Expiration Date shall be the last
day of such Extended Term.
Term: The period beginning on the Commencement
Date and ending on the Expiration Date.
Land: That certain parcel of real estate legally
described on Exhibit A attached hereto and
made a part hereof.
<PAGE>
Building: The improvements located on the land which is
to be commonly known as 1501 Opus Place,
Downers Grove, Illinois 60515, consisting of
a 100,352 square foot building and related
parking improvements.
Premises: The entire Building and Land.
Tenant's Address for Notices: At the Premises.
Tenant's Authorized
Representative: Eric Loughmiller
Attachments to Lease: Exhibit A The Land
Exhibit B Capital Repairs
Rider A Base Rent
Rider B Rules and Regulations
Rider C Cleaning Specifications
Rider D Initial Estoppel Certificate
Rider E Purchase Contract
Rider F Operation and Maintenance
Standards
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<PAGE>
SUPPLEMENTAL PROVISIONS
S.1 Additional Definitions. As used herein,
(a) "3333 Lease" means the Lease dated the date of this Lease between
Landlord and Tenant for the land adjacent to the Premises on which Landlord
will construct an eight (8) story office building.
(b) "Purchase and Sale Agreement" means the agreement dated April 16,
1997 under which Landlord purchased the Premises and the land leased
pursuant to the 3333 Lease from Tenant.
S.2 Option to Extend.
(a) If (i) Tenant is not then in Default hereunder, and (ii) Tenant
has simultaneously exercised its option to extend the term of the 3333
Lease, then Tenant shall have the option to extend the Term for an
additional five (5) year period commencing on the day next following the
Expiration Date and ending on the fifth (5th) anniversary of the Expiration
Date ("First Extended Term") by giving written notice of said extension to
Landlord not later than nine (9) months prior to the Expiration Date, time
being of the essence.
(b) If (i) Tenant is not then in Default hereunder, and (ii) Tenant
has previously exercised its option to extend the Term for the First
Extended Term and has simultaneously exercised its option to extend the
term of the 3333 Lease for a like period, then Tenant shall have the option
to extend the Term for an additional five (5) year period commencing on the
day next following the fifth (5th) anniversary of the Expiration Date and
ending on the tenth (10th) anniversary of the Expiration Date ("Second
Extended Term") by giving written notice of said extension to Landlord not
later than nine (9) months prior to the end of the First Extended Term,
time being of the essence.
(c) If (i) Tenant is not then in Default hereunder, and (ii) Tenant
has previously exercised its option to extend the Term for the Second
Extended Term and has simultaneously exercised its option to extend the
term of the 3333 Lease for a like period, then Tenant shall have the option
to extend the Term for an additional five (5) year period commencing on the
day next following the tenth (10th) anniversary of the Expiration Date and
ending on the fifteenth (15th) anniversary of the Expiration Date ("Third
Extended Term") by giving written notice of said extension to Landlord not
later than nine (9) months prior to the end of the Second Extended Term,
time being of the essence. The First Extended Term, Second Extended Term
and Third Extended Term are hereinafter individually and collectively
referred to as the "Extended Term".
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<PAGE>
(d) If the Term is extended it shall be so extended on the same terms
and conditions then set forth in this Lease, including the annual Base Rent
as set forth in Rider A.
(e) Landlord and Tenant shall enter into a written supplement to this
Lease confirming the terms, conditions and provisions applicable during the
Extended Term as determined in accordance with the provisions of this
Section S.2. If Tenant fails to timely exercise its option to extend the
Term for the applicable Extended Term, then this Lease shall expire by its
terms on the expiration of the Term or the First Extended Term or the
Second Extended Term, as the case may be.
S.3 Repair Allowance
Landlord shall provide Tenant with an allowance ("Repair Allowance")
of $500,000 to be used for the repairs described in attached Exhibit B
("Capital Repairs"). Tenant may draw funds against the Repair Allowance at
any time and from time to time subject to the following:
(i) Tenant may not make more than one draw in any calendar month;
(ii) Except for the final draw, the maximum amount of any draw
shall not exceed an amount which bears the same ratio to the portion
of the Repair Allowance applicable to the work being done by Tenant as
the cost of such work paid by Tenant and covered by the lien waivers
submitted by Tenant in connection with the draw request bears to the
total cost of such work;
(iii) With each draw request Tenant shall submit to Landlord the
following documents:
(A) A true and correct copy of the application for payment
by Tenant's contractors for the work in question completed to
date, including contractor's affidavits and sworn statements
evidencing cost of the work in question performed to date;
(B) Partial or final lien waivers with respect to the work
in question performed to date;
(C) Tenant's certification to Landlord that the amounts set
forth in all Contractor's sworn statements are owed to Tenant's
contractors for the work in question performed to date;
(D) The total cost of the work in question based on the
plans approved by Landlord, as such cost may change from time to
time;
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<PAGE>
(E) With the final draw request, Tenant shall submit to
Landlord a certificate from Tenant's architect stating that
Second Floor Alterations for the work in question has been
completed in accordance with the Plans approved by Landlord and
applicable zoning, building, environmental and other laws.
(iv) Landlord will disburse the portion of the Repair Allowance
allocable to each draw request to Tenant or Tenant's contractors (at
Tenant's option) within thirty (30) days after Tenant has submitted
the required information for such draw and has otherwise complied with
the requirements hereof.
S.4 Tenant's Option To Purchase. If Tenant exercises its option under
the 3333 Lease to purchase the premises under such lease on the Closing Date
defined below, then Tenant shall have the option to purchase the Premises on
September 1, 2001 or September 1, 2006 (the applicable date chosen by Tenant
herein called the "Closing Date") on the terms and conditions set forth in the
Purchase Contract attached hereto as Rider E ("Purchase Contract"). Tenant shall
exercise such option by delivery of written notice to Landlord on or before
February 1 preceding the Closing Date exercising such option and four copies of
the Purchase Contract, with the Closing Date and Purchase Price filled in,
executed by Tenant. Time is of the essence in the exercise of the option to
purchase set forth in this Section S.4. If Tenant exercises the option as set
forth in this Section, Landlord shall execute the Purchase Contract and deliver
two executed copies thereof to Tenant. The Premises shall be purchased on the
terms and conditions set forth in the Purchase Contract.
S.5 Net Lease. This is an absolutely net lease to Landlord. It is the
intent of the parties hereto that the Base Rent payable under this Lease shall
be an absolutely net return to the Landlord and that the Tenant shall pay all
costs and expenses relating to the Premises and the business carried on therein,
unless otherwise expressly provided in the Lease. Any amount or obligation
relating to the Premises which is not expressly declared to be that of Landlord
shall be deemed to be an obligation of the Tenant to be performed by the Tenant
at the Tenant's expense. In addition, Tenant acknowledges that it is conveying
title to the Premises to Landlord prior to the execution of this Lease and that
in connection with the sale of the Premises from Tenant to Landlord, no
prorations with respect to Taxes or other expenses or obligations incurred with
respect to the Premises prior to the Commencement Date have been made on the
understanding that all such costs will be paid by Tenant. Accordingly, all Taxes
and other costs and expenses incurred with respect to the Premises prior to the
Commencement Date shall be paid by Tenant, as additional rent, under this Lease.
S.6 Right of First Offer.
(a) Landlord hereby grants to Tenant, the right of first offer on any
disposition of the Premises (as defined in Section 4.02(c)) excepting those
dispositions specified in Section S.6(b) below and subject to Section
S.6(c) below.
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<PAGE>
(b) This right of first offer shall not apply to the following
dispositions of the Premises:
(i) any dispositions to any person or party who may acquire an
interest in the Premises in the nature of a security interest for a
bona fide obligation of any party owning an interest in the Premises
or any transferee thereof, whether by way of pledge, collateral
agreement, or mortgage,
(ii) any person or party who may acquire an interest in the
Premises as a result of the enforcement (or transfer in lieu of
enforcement) of any bona fide obligation secured by an interest in the
Premises, or any transferee thereof, whether by way of purchase at any
Sheriff, judicial, or other sale, termination of lease and eviction of
the lessee thereunder, or any other remedy to which the holder of said
obligation is entitled,
(iii) any disposition to a Landlord Affiliate.
(iv) a leasehold interest in space in the Building, or
(v) any disposition after September 1, 2006.
(c) If Landlord shall desire to dispose of (any type of disposition is
hereinafter called "sale") the Premises in a transaction not excepted by
Section S.6(b), Landlord shall give Tenant written notice to that effect
which notice shall specify the price and financial terms ("Landlord's Price
and Terms") on which Landlord is willing to sell the Premises. Tenant shall
have the right at anytime during the thirty (30) day period following the
giving of such notice to give Landlord notice:
(i) that Tenant will purchase the Premises at Landlord's Price
and Terms, in which event the closing of said purchase shall occur on
a date selected by Tenant which date shall be between sixty (60) and
ninety (90) days after Tenant gives such notice;
(ii) of the price and financial terms ("Tenant's Price and
terms") on which Tenant is willing to purchase the Premises and the
proposed closing date for said purchase which shall be between sixty
(60) and ninety (90) days after the giving of such notice, or
(iii) that Tenant waives its right of first offer to purchase the
Premises.
(d) If Tenant gives the notice stated in Section S.6(c)(ii) then
Landlord by written notice to Tenant within thirty (30) days after receipt
of Tenant's Notice, shall elect either:
-6-
<PAGE>
(i) to sell the Premises at Tenant's Price and Terms, in which
event the closing of such sale shall occur on the closing date set
forth in Tenant's notice, or
(ii) not to sell the Premises to Tenant at Tenant's Price and
Terms.
If Landlord fails to give Tenant any such notice within said thirty
(30) day period, Landlord shall be deemed to have given the notice
specified in (ii) immediately above.
(e) (i) If Landlord gives or is deemed to have given the notice
specified in Section S.6(c)(ii), Landlord may enter into a written
agreement to sell the Premises at any time during the one hundred
eighty (180) day period after receipt of Tenant's notice for a price
and terms equal to or greater than (but not less than) Tenant's Price
and Terms. If Landlord does not enter into said written agreement
within said one hundred eighty (180) day period, or, if said agreement
is entered into, Landlord does not close the sale within two hundred
seventy (270) days after receipt of Tenant's notice, at a price and
terms equal to or greater than Tenant's Price and terms, then Landlord
may not sell the Premises without again giving Tenant notice of its
desire to sell the Premises as required by Section S.6(c).
(ii) If Tenant gave or is deemed to have given the notice in
Section S.6(c)(iii) then Landlord may enter into a written agreement
to sell the Premises at any time during the one hundred eighty (180)
day period after receipt of Tenant's notice or if no notice is given
within two hundred forty (240) days after Landlord's Notice on any
terms and conditions. If Landlord does not enter into said written
agreement within said one hundred eighty (180) or two hundred forty
(240) day period, or, if said agreement is entered into, Landlord does
not close the sale within two hundred seventy (270) days after receipt
of Tenant's notice or three hundred thirty (330) days after Landlord's
Notice, as the case may be, then Landlord may not sell the Premises
without again giving Tenant notice of its desire to sell the Premises
as required by Section S.6(c).
(f) If Tenant does not purchase the Premises offered pursuant to this
Section S.6 and the Premises is sold by Landlord in accordance with this
Section S.6, then Tenant shall have no further right of first offer under
this Section S.6 to purchase the Premises but nothing herein shall affect
Tenant's option to purchase the Premises pursuant to Section S.4 above.
(g) At such time as the rights of first offer of Tenant hereunder
shall cease and be at an end and null and void, then at Landlord's request
Tenant shall execute and deliver to Landlord an instrument in recordable
form releasing all of its right under this Section S.6, which instrument
may be filed of record.
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<PAGE>
(h) In the event request is made of Tenant for written confirmation
that any proposed transaction is not subject to the rights of first offer
granted to Tenant pursuant to the provisions of this Section S.6, then if
Tenant has knowledge of said fact and if such is the case, Tenant, within
ten (10) days after notice of the proposed transaction and requested
confirmation, shall execute and deliver to the holder of any interest in
the Premises requesting said confirmation, a written statement confirming
that Tenant does not have the right of first offer with respect to said
proposed transaction.
(i) Except for the Closing Date and the Price and Terms described
above, Tenant shall purchase the Premises on the terms and conditions set
forth in the Purchase Contract. Within ten (10) days after Tenant accepts
Landlord's Price and Terms or Landlord accepts Tenant's Price and Terms,
Tenant shall deliver to Landlord four (4) copies of the Purchase Agreement
modified to reflect the applicable Price and Terms, the Closing Date and
the property to be purchased. Within ten (10) days thereafter, Landlord
shall execute such Purchase Contract and deliver two (2) execution copies
to Tenant.
(j) If Landlord sells the Premises pursuant to Section S.6(e) above
for a price (before deduction for the costs and expenses incurred in
connection with such sale) ("Sales Price") in excess of the Applicable
Option Price, then Landlord shall pay to Tenant an amount equal to fifty
percent (50%) of the Excess Sale Proceeds (as defined below) at the same
time and in the same manner as such Excess Sale Proceeds are paid to
Landlord by the purchaser of the Premises. This Section S.6(j) shall not
apply to any disposition of the Premises described in Section S.6(b). As
used in this Section S.6(j):
(i) "Applicable Option Price" shall mean the Purchase Price
determined pursuant to Section 3.1 of the Purchase Contract attached
hereto as Rider E assuming (x) the Closing Date under such Contract
was the date the Premises was sold by Landlord and (y) the Total
Project Costs, as such term is used in the Purchase Contract means the
sum of (aa) $7,236,000, (bb) the portion of the $500,000 Repair
Allowance described in Section S.2 of this Lease which has been paid
by Landlord and (cc) all other costs expended by Landlord to acquire
the Premises from Tenant pursuant to the Purchase and Sale Agreement.
(ii) "Excess Sale Proceeds" shall mean the Sale Price less the
Applicable Option Price and all costs and expenses incurred by
Landlord to sell the Premises, including without limitation,
prorations, attorney fees, title insurance and transfer taxes.
(k) As used herein "Landlord Affiliate" shall mean any natural person
or any firm, corporation, partnership, limited liability company,
association, trust or other entity which, directly or indirectly, controls,
or is under common control with landlord (or if Landlord is an Illinois
land trust, the holder of the beneficial interest in such land trust) and
any firm, corporation, partnership, association, trust or other entity
which is
-8-
<PAGE>
controlled by Landlord (or if Landlord is an Illinois land trust, the
holder of the beneficial interest in such land trust). For purposes hereof,
the term "control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of any entity or the power to veto major policy decisions of any entity,
whether through the ownership of voting securities, by contract, or
otherwise.
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<PAGE>
WITNESSETH:
ARTICLE 1.
GRANT AND TERM
1.01 Grant of Lease. Landlord, for and in consideration of the rents
reserved herein and of the covenants and agreements contained herein on the part
of Tenant to be performed, hereby leases to Tenant, and Tenant hereby leases
from Landlord, the Premises for the Term.
1.02 Possession. Tenant shall take possession of the Premises on the
Commencement Date. The Premises are leased subject to the existing state of
title thereof as of the date of this Lease, to any state of facts which an
accurate survey or physical inspection thereof might show, to all zoning
regulations, restrictions, rules and ordinances, and all building restrictions
and other laws and regulations now in effect or hereafter adopted by any
governmental authority having jurisdiction, and with respect to the physical
condition of the Premises, in their condition upon the commencement of the Term
of this Lease and without the representation or warranty of any kind by
Landlord. Tenant represents to Landlord that Tenant has agreed to convey title
to the Premises to Landlord prior to the execution and delivery of this Lease
and has found the same to be satisfactory for all purposes hereunder. There
shall be no merger of this Lease and any other estate of interest in the
Premises, whether owned by Landlord, Tenant or anyone else. LANDLORD MAKES NO
REPRESENTATIONS, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE IN CONNECTION WITH THE
CONDITION OF THE PREMISES OR OF THE IMPROVEMENTS, FIXTURES OR EQUIPMENT ON THE
PREMISES.
ARTICLE 2.
INTENTIONALLY OMITTED
ARTICLE 3.
BASE RENT
3.01 Base Rent. Tenant shall pay an annual base rent (hereinafter
referred to as "Base Rent") to Landlord for the Premises in the amount
stipulated in the Schedule, payable in equal monthly installments in the amount
stipulated in the Schedule, in advance on the first day of the Term and on the
first day of each calendar month thereafter of the Term, and at the same rate
for fractions of a month if the Term begins on any date except the first day of
a calendar month or ends on any day except the last day of a calendar month.
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<PAGE>
3.02 Manner of Payment. Base Rent, Tax Rent Adjustments (as
hereinafter defined), Tax Rent Adjustment Deposits (as hereinafter defined) and
all other amounts becoming due from Tenant to Landlord hereunder (hereinafter
collectively referred to as "Rent") shall be paid in lawful money of the United
States to Landlord at the office of Landlord, or as otherwise designated from
time to time by written notice from Landlord to Tenant. The payment of Rent
hereunder is independent of each and every other covenant and agreement
contained in this Lease, and Rent shall be paid without any setoff, abatement,
counterclaim or deduction whatsoever except as may be expressly provided herein.
ARTICLE 4.
TAXES
4.01 Obligation to Pay Tax Rent Adjustments. In addition to paying
Base Rent specified in Section 3.01, Tenant shall also pay, as additional rent,
the amount of the Taxes due for each Adjustment Year (hereinafter referred to as
"Tax Rent Adjustments"). Tenant agrees and acknowledges that Landlord has made
no representation, warranty or guaranty relating to the amount of Taxes. Tenant
has not relied upon any statements or representations of Landlord or any agent
or affiliate of Landlord in regard to Taxes in executing this Lease and agreeing
to perform the terms and covenants hereof and shall make no claim against
Landlord based thereon.
4.02 Definitions. As used in this Lease,
(a) "Adjustment Year" shall mean the calendar year in which the
Expiration Date falls and each calendar year prior to such date.
(b) "Taxes" shall mean real estate taxes, general or special
assessments, sewer rents, rates and charges, transit and transit district taxes,
taxes based upon the receipt of rent, and any other federal, state or local
governmental charge, whether general, special, ordinary or extraordinary (but
not including income or franchise taxes or any other taxes imposed upon or
measured by Landlord's income or profits, except as provided herein), which may
now or hereafter be levied, assessed or imposed against the Real Property.
Notwithstanding anything contained in this clause (b) to the contrary:
(i) If at any time the method of taxation then prevailing is
altered so that any new or additional tax, assessment, levy, imposition or
charge or any part thereof is imposed upon Landlord in place or partly in
place of any such Taxes or contemplated increase therein, or in addition to
Taxes, and is measured by or is based in whole or in part upon the Real
Property or the rents or other income therefrom, then all such new taxes,
assessments, levies, impositions or charges or part thereof, to the extent
that they are so measured or based, shall be included in Taxes levied,
assessed or imposed against the Real Property to the extent that
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<PAGE>
such items would be payable if the Real Property were the only property of
Landlord subject thereto and the income received by Landlord from the Real
Property were the only income of Landlord.
(ii) Notwithstanding the year for which any such taxes or
assessments are levied, (A) in the case of taxes or special assessments
which may be paid in installments, the amount of each installment, plus any
interest payable thereon, paid during a calendar year shall be included in
Taxes for that year and (B) if any taxes or assessments payable during any
calendar year shall be computed with respect to a period in excess of
twelve (12) calendar months, then taxes or assessments applicable to the
excess period shall be included in Taxes for that year. Except as provided
in the preceding sentence, all references to Taxes "for" a particular year
shall be deemed to refer to taxes levied, assessed or otherwise imposed for
such year without regard to when such taxes are payable.
(iii) Taxes shall also include any personal property taxes
(attributable to the calendar year in which paid) imposed upon the
furniture, fixtures, machinery, equipment, apparatus, systems and
appurtenances which are components of the Real Property.
(c) "Real Property" means the Building and Land.
4.03 Payments of Tax Rent Adjustments. Tenant shall pay Tax Rent
Adjustments to Landlord as follows:
(a) Promptly after receipt of a statement from the appropriate
authority for any installment (including any estimated installment) of Taxes
payable during an Adjustment Year, Landlord shall furnish Tenant a written
notice ("Tax Installment Statement") setting forth the amount of Taxes shown to
be due on such statement of Taxes. Within fifteen (15) days after receipt of
Landlord's Tax Installment Statement, Tenant shall pay to Landlord the Tax
Adjustment shown as due on the Tax Installment Statement.
(b) Prior to the end of the final Adjustment Year, Landlord shall
deliver to Tenant a written notice ("Final Year Tax Notice") setting forth
Landlord's reasonable estimate, forecast or projection (the "Tax Projection") of
Taxes (1) applicable to any prior Adjustment Year which have not yet been paid
by Tenant to Landlord and (2) applicable to such final Adjustment Year. Within
fifteen (15) days following Landlord's delivery of the Final Year Tax Notice,
Tenant shall pay Landlord the Tax Projection shown on the Final Year Tax Notice.
Any Tax Projection paid by Tenant for any Adjustment Year shall be applied as a
credit against the amounts owed by Tenant for such Adjustment Year pursuant to
subparagraph (a) above, provided that if the Taxes for such Adjustment Year are
payable in installments, the Tax Projection applied as a credit shall be divided
equally among the installments to be paid by Tenant.
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<PAGE>
(c) If any First Mortgagee, as defined in Section 18.01 requires
periodic deposits for Taxes or other security for the payment of Taxes, Tenant
shall pay such periodic deposits to Landlord when and as required by the First
Mortgagee or provide such security to the First Mortgagee. Any deposits made by
Tenant for an Adjustment Year shall be applied as a credit against Taxes payable
by Tenant pursuant to subparagraph (a) above and any Tax Projection required
under subparagraph (b) above. Landlord shall use reasonable efforts to exclude
from the First Mortgage documents any requirement for periodic deposits of Taxes
or other security for the payment of Taxes. If Landlord is unable to eliminate
the requirement for periodic deposits of Taxes, Landlord shall use reasonable
efforts to have such deposits held in an interest bearing account with the
interest to be held for Tenant's account.
4.04 Proration and Survival. If the final Adjustment Year does not fall
entirely within the Term, Tenant shall be obligated to pay as Tax Rent
Adjustments for such Adjustment Year only a pro rata share of Tax Rent
Adjustments as herein determined, based upon the number of days of the Term
falling within the Adjustment Year. Following expiration or termination of this
Lease, Tenant shall pay any Tax Rent Adjustments due to Landlord within fifteen
(15) days after the date of each Landlord's Statement sent to Tenant. Without
limitation of other obligations of Tenant which shall survive the expiration of
the Term, the obligation of Tenant to pay Tax Rent Adjustments under this
Article 4 shall survive the expiration or termination of this Lease.
ARTICLE 5.
USE OF PREMISES
Tenant shall use and occupy the Premises for general office purposes and
uses incidental thereto permitted under law and for no other use or purpose.
ARTICLE 6.
UTILITIES
6.01 Payment for Utilities. Tenant will pay, when due, all charges of
every nature, kind or description for utilities and other services furnished to
the Premises prior to or during the Term or chargeable against the Premises with
respect to the Term or any period prior to the Commencement Date, including all
charges for water, sewage, heat, gas, light, garbage, electricity, telephone,
steam, power, or other public or private utility services.
6.02 Utilities. Tenant shall be responsible for contracting directly
with all suppliers of utility services. In the event that any charge or fee is
required by the State of Illinois, or by any agency, subdivision or
instrumentality thereof, or by any utility company or other entity furnishing
services or utilities to the Premises, as a condition precedent to furnishing or
continuing to furnish utilities or services to the Premises, such charge or fee
shall be deemed to be a utility charge payable by Tenant. The provisions of this
paragraph shall include, but shall not be limited to, any charges or fees for
present or future water or sewer capacity to serve the
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Premises, any charges for the underground installation of gas or other utilities
or services, and other charges relating to the extension of or change in the
facilities necessary to provide the Premises with adequate utility services. In
the event that Landlord has paid any such charge or fee after the date hereof,
Tenant shall reimburse Landlord for such utility charge upon Landlord's demand
therefor. The inability of Tenant to obtain, or any stoppage of, the utility
services referred to in this Article 6 resulting from any cause shall not
constitute a constructive eviction, shall not make Landlord liable in any
respect for damages to any person, property or business, and shall not entitle
Tenant to any abatement of Rent or other relief from any of Tenant's obligations
under this Lease.
ARTICLE 7.
CONDITION, CARE AND OPERATION OF PREMISES
7.01 Condition of Premises. Tenant's taking possession of the Premises
or any portion thereof shall be conclusive evidence against Tenant that the
Premises were then in good order and satisfactory condition.
7.02 Tenant's Maintenance and Operation Obligations. Tenant shall keep the
Premises, including any improvements thereto by Tenant, in good order and in a
safe, neat and clean condition and will take all action and will make, except as
otherwise stated herein, all structural and nonstructural, foreseen and
unforeseen and ordinary and extraordinary changes, repairs and replacements.
Tenant's obligations under this Article shall include without limitation all
repairs and replacements to the roof, structure, supports, foundation, floors,
gutters, downspouts, windows, doors, exterior walls, parking areas, and
sidewalks, the maintenance of the landscaping on the Premises in a neat and
attractive condition and the removal of all snow and ice from the walkways,
parking areas and drives on the Premises and the operation, maintenance and
repair of all building systems. It is the intent of the parties hereto, that
Tenant shall bear all responsibility for the maintenance, upkeep and replacement
of the Premises, Building and Land. Tenant's operation, maintenance and repair
of the Premises shall be conducted in accordance with the standards set forth on
Rider F attached hereto and made a part hereof. In the event Tenant fails to
commence promptly and pursue diligently the performance of such maintenance or
the making of such repairs or replacements, then Landlord, at its option, may
perform such maintenance or make such repairs and replacements and Tenant shall
reimburse Landlord, on demand after Tenant receives an invoice therefor, the
cost thereof plus a fee equal to fifteen percent (15%) of the actual costs to
cover the overhead. If Tenant incurs any costs in connection with its
maintenance and repair obligations with respect to the base building
improvements during the last five (5) years of the Term or any Extended Term
(last seven (7) years in the case of a replacement of the roof of the Building)
which under generally accepted accounting principles ("GAAP") is required to be
capitalized and depreciated ("Base Building Capital Costs") and the Term of this
Lease expires prior to the end of the applicable depreciation period under GAAP,
then upon expiration of this Lease, Landlord shall pay to Tenant a pro rata
portion of such costs based on the ratio of the portion of the depreciation
period not included within the Term to the total depreciation period. Tenant
shall not incur any
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Base Building Capital Costs without Landlord's prior written consent.
7.03 Work Performed by Tenant. All repairs made by Tenant pursuant to
Section 7.02 shall be performed in a good and workmanlike manner by contractors
or other repair personnel selected by Tenant and approved by Landlord. All
contracts for such maintenance and repair services shall be subject to
Landlord's reasonable approval. In no event shall such work be done for
Landlord's account or in a manner which allows any liens to be filed against the
Building or the Premises in violation of Article 27.
7.04 Janitorial Service. Tenant shall be responsible for providing
janitorial service for the Premises at Tenant's sole cost and expense in
accordance with the standards attached hereto as Rider C. Such janitorial
service shall be performed by a company and pursuant to a contract reasonably
satisfactory to Landlord.
7.05 Waste. Tenant shall not do or suffer any waste or damage,
disfigurement or injury to the Premises, or any improvements hereafter erected
thereon, or to the fixtures or equipment therein, or permit or suffer any
overloading of the floors or other use of the improvements that would place an
undue stress on the same or any portion thereof beyond that for which the same
was designed.
ARTICLE 8.
RETURN OF PREMISES
8.01 Surrender of Possession. At the termination of this Lease by
lapse of time or otherwise, or upon termination of Tenant's right of possession
without termination of this Lease, Tenant shall surrender possession of the
Premises to Landlord and deliver all keys to the Premises to Landlord and make
known to Landlord the combination of all locks of vaults then remaining in the
Premises, and, subject to Section 8.02, shall return the Premises and all
equipment and fixtures of Landlord therein to Landlord in as good condition as
when Tenant originally took possession, ordinary wear, and damage resulting from
the act of Landlord or its employees and agents excepted, failing which Landlord
may restore the Premises and such equipment and fixtures to such condition and
Tenant shall pay the cost thereof to Landlord on demand.
8.02 Installations and Additions. All installations, additions,
partitions, hardware, light fixtures, non-trade fixtures and improvements,
whether temporary or permanent, except movable furniture and equipment belonging
to Tenant, in or upon the Premises, whether placed there by Tenant or Landlord,
shall be Landlord's property and shall remain upon the Premises, all without
compensation, allowance or credit to Tenant; provided, however, that if prior to
such termination or within ten (10) days thereafter Landlord so directs by
notice, Tenant, at Tenant's sole cost and expense, shall promptly remove such of
the installations, additions, partitions, hardware, light fixtures, non-trade
fixtures and improvements placed in the Premises by Tenant as are designated in
such notice and repair any damage to the Premises caused by such removal,
failing which Landlord may remove the same and repair the Premises and Tenant
shall pay the
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cost thereof to Landlord on demand.
8.03 Trade Fixtures and Personal Property. Tenant also shall remove
Tenant's furniture, machinery, safes, trade fixtures and other items of movable
personal property of every kind and description from the Premises and restore
any damage to the Premises caused thereby, such removal and restoration to be
performed prior to the end of the Term or within ten (10) days following
termination of this Lease or Tenant's right of possession, whichever is earlier.
If Tenant fails to remove such items, Landlord may do so and thereupon the
provisions of Section 17.06 shall apply and Tenant shall pay to Landlord upon
demand the cost of removal and of restoring the Premises.
8.04 Survival. All obligations of Tenant under this Article shall
survive the expiration of the Term or earlier termination of this Lease.
ARTICLE 9.
HOLDING OVER
Tenant shall pay Landlord for each day Tenant retains possession of the
Premises or any part thereof after termination of this Lease, by lapse of time
or otherwise, or of Tenant's right to possession of the Premises, an amount
which is double the amount of Base Rent and Rent Adjustments for a day based on
the annual rate of Base Rent set forth in Section 3.01 and on the Rent
Adjustments provided for in Article 4 in effect immediately prior to such
termination, and Tenant shall also pay all direct damages sustained by Landlord
by reason of such retention. Acceptance by Landlord of rent after such
termination, of itself, shall not constitute a renewal. Nothing contained in
this Section shall be construed or shall operate as a waiver of Landlord's right
of reentry or any other right or remedy of Landlord.
ARTICLE 10.
RULES AND REGULATIONS
Tenant agrees to observe and not to interfere with the rights reserved to
Landlord contained in Article 11 and agrees, for itself, its employees, agents,
contractors, invitees and licensees, to comply with the rules and regulations
set forth in Rider B attached to this Lease and made a part hereof and such
other rules and regulations as may be adopted by Landlord pursuant to Section
11.01(e) of this Lease. Any violation by Tenant of any of the rules and
regulations contained in Rider B or any other Section of this Lease, or as may
hereafter be adopted by Landlord pursuant to Section 11.01(e) of this Lease, may
be restrained; but whether or not so restrained, Tenant acknowledges and agrees
that it shall be and shall remain liable for all damages, loss, costs and
expenses resulting from any violation by Tenant of any of said rules and
regulations.
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ARTICLE 11.
RIGHTS RESERVED TO LANDLORD
11.01 Rights Reserved to Landlord. Landlord reserves the following
rights, exercisable without notice and without liability to Tenant for damage or
injury to property, person or business and without effecting an eviction or
disturbance of Tenant's use or possession or giving rise to any claim for setoff
or abatement of Rent or affecting any of Tenant's obligations under this Lease:
(a) Except for portions of the Premises designated by Tenant as
"secured areas" on floor plans delivered to Landlord, to retain at all times,
and to use in appropriate instances, pass keys to the Premises;
(b) Upon reasonable advance written or telephone notice, to exhibit
the Premises at reasonable hours, and to decorate, remodel, repair, alter or
otherwise prepare the Premises for reoccupancy at any time after Tenant vacates
or abandons the Premises;
(c) To enter the Premises at reasonable hours, upon reasonable prior
notice and for reasonable purposes, including inspection, subject to Tenant's
reasonable security restrictions;
(d) To make any repairs, alterations, improvements and additions in
and about the Building and the Premises during ordinary business hours and, if
Tenant desires to have such work done during other than business hours, Tenant
shall pay all overtime and additional expenses resulting therefrom; and
(e) From time to time to make and adopt such reasonable rules and
regulations, in addition to or other than or by way of amendment or modification
of the rules and regulations contained in Rider B or other Sections of this
Lease, which are not inconsistent with the Terms of this Lease for the
protection and welfare of the Building as Landlord may determine, and Tenant
agrees to abide by and comply with all such rules and regulations.
ARTICLE 12.
ALTERATIONS
Tenant shall not make, without the prior written consent of Landlord, any
alterations, additions or improvements to the Premises. Notwithstanding the
foregoing, Landlord's consent shall not be required for normal decorating work
such as painting and installation of wall coverings and carpeting. Landlord
shall not unreasonably withhold or delay its consent to alterations, additions
or improvements to the Building which do not affect the exterior, or structural
portions of the Building or the base building mechanical, electrical, plumbing,
elevator, security or other systems in the Building. If Landlord consents to
such alterations, additions or improvements, before commencement of the work or
delivery of any materials onto the Premises or into the Building, Tenant shall
furnish to Landlord, for its approval, plans and
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specifications, names and addresses of contractors, copies of contracts,
necessary permits and licenses, and instruments of indemnification against any
and all claims, costs, expenses, damages and liabilities which may arise in
connection with such work, all in such form, substance and amount as may be
satisfactory to Landlord. In addition, prior to commencement of any such work or
delivery of any materials into the Premises, Tenant shall provide Landlord with
appropriate evidence of Tenant's ability to pay for such work and materials in
full. All alterations, additions and improvements shall be installed in a good,
workerlike manner and only new, high-grade materials shall be used. All such
work shall be done only by contractors or mechanics reasonably approved by
Landlord and shall be subject to Landlord's scheduling requirements and
regulations. Tenant further agrees to hold Landlord harmless from any and all
liabilities of every kind and description which may arise out of or be connected
in any way with said alterations, additions or improvements. Before commencing
any work in connection with such alterations, additions or improvements, Tenant
shall furnish Landlord with certificates of insurance from all contractors
performing labor or furnishing materials insuring Landlord against any and all
liabilities which may arise out of or may be connected in any way with said
alterations, additions or improvements. Tenant shall permit Landlord to
supervise construction operations in connection with the foregoing work if
Landlord requests to do so. Tenant shall pay the cost of all such alterations,
additions and improvements, as well as the cost of decorating the Premises
occasioned by such alterations, additions and improvements, including the cost
of labor and materials, contractors' profit, overhead, general conditions and a
reasonable fee to Landlord. Upon completing any alterations, additions or
improvements, Tenant shall furnish Landlord with (i) contractors' affidavits in
form required by law, and full and final waivers of lien and receipted bills
covering all labor and materials expended and used and (ii) "as built" or record
drawings showing all alterations, improvements and additions to the Premises.
All alterations, additions and improvements shall comply with all insurance
requirements and with all city and county ordinances and regulations and with
the requirements of all state and federal statutes and regulations.
ARTICLE 13.
ASSIGNMENT AND SUBLETTING
13.01 Assignment and Subletting. Without the prior written consent of
Landlord in each instance and subject to Sections 13.08 and 13.09 below, Tenant
shall not (a) assign, transfer, mortgage, pledge, hypothecate or encumber or
subject to or permit to exist upon or be subjected to any lien or charge, this
Lease or any interest under it; (b) allow to exist or to occur any transfer of
or lien upon this Lease or Tenant's interest herein by operation of law; (c)
sublet the Premises or any part thereof; or (d) permit the use or occupancy of
the Premises or any part thereof for any purpose not provided for under Article
5 of this Lease or by anyone other than Tenant and Tenant's employees. Landlord
has the absolute right to withhold its consent without giving any reason
whatsoever, except as expressly provided herein to the contrary. In no event
shall this Lease be assigned or assignable by voluntary or involuntary
bankruptcy proceedings or otherwise, and in no event shall this Lease or any
rights or privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency or reorganization proceedings.
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13.02 Rentals Based on Net Income. Without limiting the generality of
the foregoing provisions of this Article, Tenant expressly covenants and agrees
not to enter into any lease, sublease, license, concession or other agreement
for use, occupancy or utilization of the Premises which provides for rental or
other payment for such use, occupancy or utilization based in whole or in part
on the net income or profits derived by any person from the property leased,
used, occupied or utilized (other than an amount based on a fixed percentage or
percentages of receipts or sales), and that any such purported lease, sublease,
license, concession or other agreement shall be absolutely void and ineffective
as a conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises.
13.03 Tenant to Remain Obligated. Consent by Landlord to any
assignment, subletting, use, occupancy or transfer shall not operate to relieve
Tenant from any covenant or obligation hereunder except to the extent, if any,
expressly provided for in such consent, or be deemed to be a consent to or
relieve Tenant from obtaining Landlord's consent to any subsequent assignment,
transfer, lien, charge, subletting, use or occupancy. Tenant shall pay all of
Landlord's costs, charges and expenses, including reasonable attorneys' fees,
incurred in connection with any assignment, transfer, lien, charge, subletting,
use or occupancy made or requested by Tenant. Tenant agrees that all advertising
by Tenant or on Tenant's behalf with respect to the assignment of this Lease or
subletting of space must be approved in writing by Landlord prior to publication
which approval shall not be unreasonably withheld or delayed.
13.04 Landlord's Consent. Tenant shall advise Landlord, by written notice
("Tenant Notice"), of its intention from, on and after a stated date (which
shall not be less than sixty (60) days after the date of Tenant's notice) to
assign this Lease or to sublet any part or all of the Premises for any part of
the Term. Tenant's notice shall state the name and address of the proposed
subtenant or assignee, and a true and complete copy of the proposed sublease or
assignment and sufficient information to permit Landlord to determine the
financial responsibility and character of the proposed subtenant or assignee
shall be delivered to Landlord with said notice. Landlord will not withhold its
consent unreasonably to Tenant's assignment of this Lease or Tenant's subletting
the space covered by its notice. Landlord shall not be deemed to have withheld
its consent unreasonably to a sublease of part or all of the Premises or an
assignment of this Lease if its consent is withheld because: (a) Tenant is then
in Default hereunder; (b) any notice of termination of this Lease or termination
of Tenant's possession is given under Article 17; (c) the portion of the
Premises which Tenant proposes to sublease, including the means of ingress
thereto and egress therefrom and the proposed use thereof, and the remaining
portion of the Premises will violate any city, state or federal law, ordinance
or regulation, including, without limitation, any applicable building code or
zoning ordinances; (d) the proposed use of the Premises by the subtenant or
assignee does not conform with the use permitted by Article 5; (e) in the
reasonable judgment of Landlord, the proposed subtenant or assignee is of a
character or is engaged in a business which would be deleterious to the
reputation of the Building, or the subtenant or assignee is not sufficiently
financially responsible to perform its obligations under the proposed sublease
or assignment; (f) the sublessee's or assignee's business is likely to cause
greater wear and tear to the Premises than occasioned by Tenant's use or (g) the
proposed subtenant or assignee is a government or a government agency; provided,
however, that the foregoing are merely examples of reasons for which Landlord
may withhold its consent
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and shall not be deemed exclusive of any permitted reasons for reasonably
withholding consent, whether similar to or dissimilar from to the foregoing
examples. Landlord shall either approve or disapprove a proposed assignment or
sublease within thirty (30) days after receipt of the information and documents
described in the second sentence of this Section 13.04.
13.05 Profits. If Tenant, having first obtained Landlord's consent to
any sublease or assignment, or if Tenant or a trustee in bankruptcy for Tenant
pursuant to the Bankruptcy Code, assigns this Lease or sublets the Premises, or
any part thereof, at a rental or for other consideration in excess of the Rent
or pro rata portion thereof due and payable by Tenant under this Lease, then
Tenant shall pay to Landlord as additional rent fifty percent (50%) of any such
excess rent or other monetary consideration immediately upon receipt under any
such assignment or, in the case of a sublease, (a) on the first day of each
month during the term of any sublease the excess of all rent and other
consideration due from the subtenant for such month over the Rent then payable
to Landlord pursuant to the provisions of this Lease for said month (or if only
a portion of the Premises is being sublet, the excess of all rent and other
consideration due from the subtenant for such month over the portion of the Rent
then payable to Landlord pursuant to the provisions of this Lease for said month
which is allocable on a square footage basis to the space sublet) and (b)
immediately upon receipt thereof, any other consideration realized by Tenant
from such subletting; it being agreed, however, that Landlord shall not be
responsible for any deficiency if Tenant assigns this Lease or sublets the
Premises or any part thereof at a rental less than that provided for herein.
Notwithstanding the foregoing, Tenant shall not be required to pay Landlord any
amounts pursuant to this Section 13.05 until the amount of the excess rent and
other consideration received by Tenant equals the reasonable out of pocket costs
incurred by Tenant in entering into such sublease or assignment including
without limitation brokers' and attorneys' fees, advertising costs, tenant
buildout costs and construction allowances. The provisions of this Section
13.05 shall not apply to an assignment or sublease described in Sections 13.08
or 13.09 which does not require Landlord's consent.
13.06 Assignee to Assume Obligations. If Tenant assigns this Lease as
permitted herein, the assignee shall expressly assume all of the obligations of
Tenant hereunder in a written instrument satisfactory to Landlord and furnished
to Landlord not later than fifteen (15) days prior to the effective date of the
assignment. If Tenant subleases the Premises as permitted herein, Tenant shall
obtain and furnish to Landlord, not later than fifteen (15) days prior to the
effective date of such sublease and in form satisfactory to Landlord, the
written agreement of such subtenant to the effect that the subtenant will attorn
to Landlord, at Landlord's option and written request, in the event this Lease
or Tenant's right to possession of the Premises terminates before the expiration
of the sublease.
13.07 Change of Control. Notwithstanding anything to the contrary in this
Article, except as provided in 13.08 below, any change during the Term of this
Lease of the ownership of the shares of stock which constitute control of Tenant
other than by reason of gift or death shall be deemed an assignment of this
Lease and shall be subject to the provisions of this Article 13. The term
"control" as used herein means the power, directly or indirectly, to direct or
to cause the direction of the management or policies of Tenant.
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13.08 Transfer By Merger or Sale or To an Affiliate.
(a) Tenant shall have the right, subject to the terms and conditions
hereinafter set forth, without the consent of Landlord, to (i) assign its
interest in this Lease to any corporation or other entity which is a successor
to Tenant either by reincorporation in another jurisdiction, merger or
consolidation, (ii) assign its interest in the Lease to a purchaser of all or
substantially all of Tenant's assets (provided such purchaser shall have also
assumed substantially all of Tenant's liabilities) or Tenant's stock, or (iii)
assign its interest in this Lease or sublease all or any portion of the Premises
to a Tenant Affiliate, all upon the condition that in each case (x) the
principal purpose of such assignment or sublease is not the acquisition of
Tenant's interest in this Lease (except if such assignment or sublease is made
to an Affiliate and is made for a valid intracorporate business purpose and is
not made to circumvent the provisions of Section 13.1 of this Article), (y) any
such assignee shall have a net worth and annual income and cash flow which shall
meet the requirements set forth in Section 13.08(b) below and (z) any such
assignee or subtenant shall consent, in writing, to the exclusive jurisdiction
of the courts of Illinois and the Federal courts located in the County of Cook,
State of Illinois. Tenant shall, within ten (10) business days after execution
thereof, deliver to Landlord (A) if an assignment, a duplicate original
instrument of assignment in form and substance reasonably satisfactory to
Landlord, duly executed by Tenant, (B) if applicable, evidence satisfactory to
Landlord establishing compliance by the assignee or subtenant with the net
worth, annual income and cash flow requirements of clause (z) above, (C) if an
assignment, an instrument in form and substance reasonably satisfactory to
Landlord, duly executed by the assignee, in which such assignee shall assume
observance and performance of, and agree to be personally bound by, all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed and (D) if a sublease, a duplicate original sublease in form and
substance reasonably satisfactory to Landlord, duly executed by Tenant and the
subtenant.
(b) As a condition precedent to any assignment which shall otherwise
be permitted under Section 13.08(a) above, such proposed assignee or subtenant
shall have as of the effective date of such assignment or subletting:
(i) (A) an excess of total assets (including intangible assets)
over total liabilities of not less than One Hundred and Twenty-Five Million
Dollars ($125,000,000.00), provided that the assets (other than intangible
assets) are not less than One Hundred Million Dollars ($100,000,000.00);
(B) a ratio of current assets to current liabilities of not less
than two (2) to one (1); and
(C) an excess of (y) annual gross cash receipts (other than from
a financing, sale of an equity interest in such assignee or guarantor, or
sale of long-term assets), over (z) the sum, without duplication, of annual
cash operating expenses and annual debt service payments and regularly
scheduled amortization of principal (other than so-called "balloon"
payments of principal due at maturity) due on all outstanding indebtedness,
of not less than two (2) times the annual
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Rent due hereunder for each period; or
(ii) a bond rating of "AA" from Standard & Poor's or "AA" from
Moody's as of the date of such assignment and as of the first anniversary
of such assignment; or
(iii) in the case of an insurance company, a "Best's Rating
of "A" and a "Financial Size Category" of at least "VIII" in Best's
Insurance Guide as of the date of such assignment and as of the first
anniversary of such assignment; or
(iv) in the case of any national, foreign or state chartered
commercial bank not rated by Standard & Poor's or Moody's, (y) total assets
in excess of One Billion Dollars ($1,000,000,000.00) and (x) net cash flow
from operations of not less than five (5) times the annual Rent due
hereunder, and be in compliance with all applicable laws and regulations
dealing with capital adequacy, as of the date of such assignment and at the
end of the twelve (12) month period subsequent to the date of such
assignment.
All financial criteria set forth in this Section 13.08(b) shall be
determined in accordance with generally accepted accounting principles
consistently applied (or its equivalent in the case of non-U.S. entities) and
based upon annual reports (or fiscal year-end financial statements) of such
assignee or guarantor certified by an independent public accounting firm.
(c) A Tenant Affiliate shall mean any person, corporation or other
entity which controls or is controlled by or is under common control with
Tenant. As used herein, "control" shall mean the same meaning as set forth in
Section 13.07.
13.09 Sublease with Customers. Tenant shall have the right, without
the consent of Landlord, to sublease portions of the Premises to customers and
clients of Tenant in connection with the provision of Tenant's services to such
customers and clients on the condition that (a) the principal purpose of such
sublease is not the acquisition of Tenant's interest in this Lease and (b) no
more than twenty-five percent (25%) of the Premises shall be covered by
subleases described in this Section 13.09.
13.10 Restrictions on Assignment and Sublease. Notwithstanding
anything in this Lease to the contrary, Tenant may not assign this Lease to any
person or entity or sublease substantially all the Premises to any person or
entity unless Tenant also assigns the 3333 Lease to the same person or entity or
subleases substantially all the Premises under the 3333 Lease to the same person
or entity.
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ARTICLE 14.
WAIVER OF CERTAIN CLAIMS; INDEMNITY BY TENANT
14.01 Waiver of Certain Claims; Indemnity by Tenant. To the extent
not prohibited expressly by law, Tenant releases Landlord and its beneficiaries,
if any, and their agents, servants and employees, from and waives all claims for
damages to person or property sustained by Tenant or by any occupant of the
Premises or the Building, or by any other person, resulting directly or
indirectly from fire or other casualty, cause or any existing or future
condition, defect, matter or thing in or about the Premises, the Building or any
part of it, or from any equipment or appurtenance therein, or from any accident
in or about the Building, or from any act or neglect of any tenant or other
occupant of the Building or any part thereof or of any other person. This
Section shall apply especially, but not exclusively, to damage caused by water,
snow, frost, steam, excessive heat or cold, sewerage, gas, odors or noise, or
the bursting or leaking of pipes or plumbing fixtures, broken glass, sprinkling
or air conditioning devices or equipment, or flooding of basements, and shall
apply without distinction as to the person whose act or neglect was responsible
for the damage and whether the damage was due to any of the acts specifically
enumerated above, or from any other thing or circumstance, whether of a like
nature or of a wholly different nature. Subject to Section 21.01 nothing in
this Section or in Section 14.03 shall release Landlord from liability for its
negligence or the negligence of its agents and employees.
14.02 Damage Caused by Tenant's Neglect. If any damage to the
Premises or the Building or any equipment or appurtenance therein, whether
belonging to Landlord or to other tenants or occupants of the Building, results
from any act or neglect of Tenant, its employees, agents, contractors, licensees
or invitees, Tenant shall be liable therefor and if such damage is not repaired
within thirty (30) days after written notice from Landlord, Landlord may repair
such damage at its option and Tenant shall reimburse Landlord, upon demand by
Landlord, for all costs of such repairs and damages in excess of amounts, if
any, paid to Landlord under insurance covering such damage.
14.03 Tenant Responsible for Personal Property. All personal property
belonging to Tenant or any occupant of the Premises that is in the Building or
the Premises shall be there at the risk of Tenant or other person only and
Landlord shall not be liable for damage thereto or theft or misappropriation
thereof.
14.04 Indemnification.
(a) To the extent not prohibited expressly by law, Tenant agrees to
hold Landlord and its beneficiaries, if any, and their officers, agents,
servants and employees, harmless and to indemnify each of them against claims
and liabilities, including reasonable attorneys' fees, for injuries to all
persons and damage to or theft or misappropriation or loss of property occurring
in or about the Premises arising from Tenant's occupancy of the Premises or the
conduct of its business or from any activity, work, or thing done, permitted or
suffered by Tenant in or about the Premises or from any breach or default on the
part of Tenant in the performance of any covenant or agreement on the part of
Tenant to be performed pursuant to
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the terms of this Lease or due to any other act or omission of Tenant, its
agents, contractors, invitees, licensees or employees, but only to the extent of
Landlord's liability, if any, in excess of amounts, if any, paid to Landlord
under insurance covering such claims or liabilities.
(b) To the extent not prohibited expressly by law, Landlord agrees to
hold Tenant and its officers, agents, servants and employees, harmless and to
indemnify each of them against claims and liabilities, including reasonable
attorneys' fees, for injuries to all persons and damage to or theft or
misappropriation or loss of property occurring in or about the Premises arising
from the negligent acts of Landlord or its beneficiary or their employees,
agents or servants, or from any breach or default on the part of Landlord in the
performance of any covenant or agreement on the part of Landlord to be performed
pursuant to the terms of this Lease or due to any other act or omission of
Landlord or its beneficiaries or their agents, contractors, licensees or
employees, but only to the extent of Tenant's liability, if any, in excess of
amounts, if any, paid to Tenant under insurance covering such claims or
liabilities.
ARTICLE 15.
DAMAGE OR DESTRUCTION BY CASUALTY
15.01 Tenant's Obligation to Rebuild. In the event of damage to, or
destruction of, any improvements on the Premises, or of the fixtures and
equipment therein, by fire or other casualty, Tenant shall promptly, at its
expense, repair, restore or rebuild to the extent possible to the same design,
plans and specifications as existed prior to the casualty. Rent shall not be
reduced or abated during the period of such repair, restoration or rebuilding
even if the improvements are not tenantable.
15.02 Preconditions to Rebuilding. Before Tenant commences such
repairing, restoration or rebuilding involving an estimated cost of more than
Fifty Thousand Dollars ($50,000.00), plans and specifications therefor, prepared
by a licensed architect satisfactory to Landlord shall be submitted to Landlord
for approval and Tenant shall furnish to Landlord (a) an estimate of the cost of
the proposed work, certified to by said architect; (b) satisfactory evidence of
sufficient contractor's comprehensive general liability insurance covering
Landlord, builder's risk insurance, and workmen's compensation insurance; and
(c) such other security as Landlord may require to insure payment for the
completion of all work free and clear of liens. Landlord's approval of the
plans and specifications shall not be unreasonably withheld if such plans and
specifications comply with the provisions of Section 15.01.
15.03 Payment for Rebuilding. All sums arising by reason of loss
under the insurance referred to in Section 21.02(c) shall be deposited with the
Depository pursuant to Section 15.06, and Tenant shall deposit with the
Depository any excess cost of the work over the amount held by the Depository as
proceeds of the insurance within thirty (30) days from the date of the
determination of the cost of the work by the architect in accordance with
Section 15.02. Tenant shall diligently pursue the repair or rebuilding of the
improvements in a good and workmanlike manner, using only high quality workmen
and materials. The Depository shall pay out construction funds from time to
time on the written direction of the architect, after making
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provision for a reasonable holdback, for the purpose of completing such repair
or rebuilding and upon receipt of appropriate contractors' statements, with
supporting affidavits and lien waivers. Notwithstanding the foregoing, if the
cost of the repair or restoration is less than $50,000, all proceeds of
insurance shall be paid to Tenant in trust to be used for restoration and repair
of such damage.
15.04 Excess Insurance Proceeds. Any excess of money received from
insurance remaining with the Depository after the repair or rebuilding of
improvements, if there is no default by Tenant in the performance of the
Tenant's covenants and agreements hereunder, shall be paid to Tenant; otherwise
said monies shall be paid to Landlord. If this Lease shall be terminated
pursuant to Section 15.05, all insurance proceeds shall be paid to Landlord.
15.05 Failure to Rebuild. If (i) Tenant shall not enter upon the
repair or rebuilding of the improvements within a period of ninety (90) days
after the insurance proceeds are made available pursuant to Section 15.03 or
(ii) after commencement of such repair or rebuilding, Tenant does not prosecute
the same thereafter with such dispatch as may be necessary to complete the same
within a reasonable period after said damage or destruction occurs, and the
repair and rebuilding is not completed within one year from the date the
insurance proceeds are made available pursuant to Section 15.03, then, in
addition to whatever other remedies Landlord may have either under this Lease,
at law or in equity, Landlord may retain the insurance proceeds, or the balance
thereof remaining in the hands of the Depository as security for the continued
performance and observance by Tenant of the Tenant's covenants and agreements
hereunder, or Landlord may terminate this Lease or Tenant's possession of the
Premises and then retain the amount so held as damages resulting from the
failure on the part of Tenant to comply with the provisions of this Article.
15.06 Deposits. All insurance proceeds, condemnation awards and
amounts deposited by Tenant ("Net Proceeds") shall be deposited with a bank or
other financial institution designated by the First Mortgagee or, if there is no
First Mortgage, by Tenant (the "Depository"). Tenant may direct the investment
of the amounts so deposited with the Depository in the following:
(a) repurchase obligations of the Depository at all times fully
secured by direct and general obligations of the United States of America or
obligations guaranteed as to principal and interest by the United States of
America;
(b) direct and general obligations of the United States of America or
obligations guaranteed as to principal and interest by the United States of
America purchased at a price not more than par;
(c) certificates of deposit of the Depository at all times secured as
provided by applicable law; or
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(d) commercial paper which is rated "A-1" or better (or comparable
ratings) by Standard & Poor's Corporation or "P-1" or better (or comparable
ratings) by Moody's Investors Service, Inc., or the successors to such rating
organizations.
Such investments of such funds shall mature in such amounts and on
such dates as to provide that amounts shall be available on the draw dates
sufficient to pay the amounts requested, and due to, Landlord or Tenant as the
case may be. The Depository shall not be liable for any loss resulting from the
liquidation of each and every such investment. The terms and conditions
relating to such deposit and investments shall otherwise be satisfactory to
Landlord, Tenant and the Depository. All interest or other earnings net of
investment fees of the Depository shall be added to and deemed to be part of Net
Proceeds.
ARTICLE 16.
EMINENT DOMAIN
16.01 Whole Taking. If the entire Building or a substantial part
thereof is taken or condemned by any competent authority for any public or
quasi-public use or purpose, the Term of this Lease shall end upon and not
before the earlier of the date when the possession of the part so taken is
required for such use or purpose or the effective date of the taking, and
without apportionment of the award to or for the benefit of Tenant. If any
condemnation proceeding is instituted in which it is sought to take or damage
any part of the Building, the taking of which, in Landlord's opinion, would
prevent the economical operation of the Building, or if the grade of any street
or alley adjacent to the Building is changed by any competent authority, and
such taking, damage or change of grade makes it necessary or desirable to
remodel the Building to conform to the taking, damage or changed grade, Landlord
shall have the right to terminate this Lease upon not less than ninety (90)
days' notice prior to the date of termination designated in the notice. In
either of these events, Rent at the then current rate shall be apportioned as of
the date of the termination. No money or other consideration shall be payable by
Landlord to Tenant for the right of termination, and Tenant shall have no right
to share in the condemnation award, whether for a total or partial taking, for
loss of Tenant's leasehold or improvements or other loss or expenses or in any
judgment for damages caused by the change of grade. Tenant may however file a
separate claim for relocation expenses and for any of Tenant's personal property
taken, provided such claim does not reduce Landlord's award.
16.02 Partial Taking. If only a part of the Premises shall be so
taken or condemned, and as a result thereof the balance of the Premises can be
used for the same purpose as prior to such taking, this Lease shall not
terminate and Tenant, at its sole cost and expense, shall repair and restore the
Premises and all improvements thereon to the extent of the condemnation award.
Tenant shall promptly and diligently proceed to make a complete architectural
unit of the remainder of the improvements first complying with the procedure set
forth in Section 15.02. The amount of the award relating to the improvements
and shall be held and disbursed in accordance with the procedure set forth in
Sections 15.03 and 15.06. If Tenant does not make a complete architectural unit
of the remainder of the improvements within a reasonable period after such
taking or condemnation, not to exceed three hundred sixty five (365) days, then,
in
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addition to whatever other remedies Landlord may have either under this Lease,
at law or in equity, Landlord may receive the entire award or the balance
thereof remaining in the custody of the Depository, as the case may be, as
liquidated damages resulting from the failure of Tenant to comply with the
provisions of this Section. Any portion of such award as may not have to be
expended for such repairing or restoration shall be paid to Landlord. There
shall be no abatement or reduction in any rental because of such taking or
condemnation unless a portion of the Building is taken in which event Base Rent
shall abate based on the percentage of the rentable space in the Building so
taken and not replaced pursuant to this Section.
ARTICLE 17.
DEFAULT
17.01 Events of Default. The occurrence of any one or more of the
following matters constitutes a Default by Tenant under this Lease:
(a) Failure by Tenant to pay any Rent when due if such failure
continues for ten (10) days after notice from Landlord of such failure;
(b) Failure by Tenant to pay when due any other moneys required to be
paid by Tenant under this Lease if such failure continues for ten (10) days
after notice from Landlord of such failure;
(c) Failure by Tenant to cure, immediately after receipt of notice
from Landlord, any hazardous condition which Tenant has created in violation of
law or of this Lease;
(d) Failure by Tenant to observe or to perform any other covenant,
agreement, condition or provision of this Lease, if such failure continues for
thirty (30) days after notice thereof from Landlord to Tenant;
(e) The levy upon, under writ of execution or the attachment by legal
process of, the leasehold interest of Tenant, or the filing or creation of a
lien with respect to such leasehold interest, which lien shall not be released
or discharged within ten (10) days from the date of such filing;
(f) Tenant vacates or abandons the Premises or fails to take
possession of the Premises when available for occupancy (the transfer of a
substantial part of the operations, business and personnel of Tenant to some
other location being deemed, without limiting the meaning of the term, "vacates
or abandons," to be a vacation or abandonment within the meaning of this clause
(h) unless Tenant posts a full-time security guard at the Premises), whether or
not Tenant thereafter continues to pay Rent due under this Lease;
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(g) Tenant becomes insolvent or bankrupt or admits in writing its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors, or applies for or consents to the appointment of a trustee
or receiver for Tenant or for the major part of its property;
(h) A trustee or receiver is appointed for Tenant or for the major
part of its property and is not discharged within sixty (60) days after such
appointment;
(i) Any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings for relief under any bankruptcy
law, or similar law for the relief of debtors, are instituted (i) by Tenant or
(ii) against Tenant and are allowed against it or are consented to by it or are
not dismissed within sixty (60) days after such institution; or
(j) A Default occurs under the 3333 Lease.
17.02 Rights and Remedies of Landlord. If a Default occurs, Landlord
shall have the rights and remedies hereinafter set forth, which shall be
distinct, separate and cumulative and which shall not operate to exclude or
deprive Landlord of any other right or remedy allowed it by law:
(a) Landlord may terminate this Lease by giving to Tenant notice of
Landlord's election to do so, in which event the Term of this Lease shall end,
and all rights, title and interest of Tenant hereunder shall expire, on the date
stated in such notice;
(b) Landlord may terminate the right of Tenant to possession of the
Premises without terminating this Lease by giving notice to Tenant that Tenant's
right of possession shall end on the date stated in such notice, whereupon the
right of Tenant to possession of the Premises or any part thereof shall cease on
the date stated in such notice; and
(c) Landlord may enforce the provisions of this Lease and may enforce
and protect the rights of Landlord hereunder by a suit or suits in equity or at
law for the specific performance of any covenant or agreement contained herein,
or for the enforcement of any other appropriate legal or equitable remedy,
including recovery of all moneys due or to become due from Tenant under any of
the provisions of this Lease.
17.03 Right to Re-Enter. If Landlord exercises either of the remedies
provided in Sections 17.02(a) or (b), Tenant shall surrender possession and
vacate the Premises and shall deliver immediately possession thereof to
Landlord, and Landlord may re-enter and take complete and peaceful possession of
the Premises, with process of law, full and complete license to do so being
hereby granted to Landlord, and Landlord may remove all occupants and property
therefrom, using such force as may be necessary, without being deemed guilty in
any manner of trespass, eviction or forcible entry and detainer and without
relinquishing Landlord's right to rent or any other right given to Landlord
hereunder or by operation of law.
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17.04 Current Damages. If Landlord terminates the right of Tenant to
possession of the Premises without terminating this Lease, Landlord shall have
the right to immediate recovery of all amounts then due hereunder. Such
termination of possession shall not release Tenant, in whole or in part, from
Tenant's obligation to pay the Rent hereunder for the full Term, and Landlord
shall have the right, from time to time, to recover from Tenant, and Tenant
shall remain liable for, all Base Rent, Rent Adjustments and any other sums
accruing as they become due under this Lease during the period from the date of
such notice of termination of possession to the stated end of the Term. In any
such case, Landlord shall use diligent efforts to mitigate its damages and to
relet the Premises or any part thereof for the account of Tenant for such rent,
for such time (which may be for a term extending beyond the Term of this Lease)
and upon such terms as Landlord shall determine and collect the rents from such
reletting. Landlord shall not be required to accept any tenant offered by Tenant
or to observe any instructions given by Tenant relative to such reletting. Also,
in any such case, Landlord may make repairs, alterations and additions in or to
the Premises and redecorate the same to the extent reasonably deemed by Landlord
necessary or desirable and in connection therewith change the locks to the
Premises, and Tenant shall pay upon demand the cost of all the foregoing
together with Landlord's expenses of reletting. The rents from any such
reletting shall be applied first to the payment of the expenses of reentry,
redecoration, repair and alterations and the expenses of reletting and second to
the payment of Rent herein provided to be paid by Tenant. Any excess or residue
shall operate only as an offsetting credit against the amount of Rent due and
owing as the same thereafter becomes due and payable hereunder, and the use of
such offsetting credit to reduce the amount of Rent due Landlord, if any, shall
not be deemed to give Tenant any right, title or interest in or to such excess
or residue and any such excess or residue shall belong to Landlord solely, and
in no event shall Tenant be entitled to a credit on its indebtedness to Landlord
in excess of the aggregate sum, including Base Rent and Rent Adjustments, which
would have been paid by Tenant for the period for which the credit to Tenant is
being determined, had no Default occurred. No such reentry or repossession,
repairs, alterations and additions, or reletting shall be construed as an
eviction or ouster of Tenant or as an election on Landlord's part to terminate
this Lease, unless a written notice of such intention is given to Tenant, or
shall operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, and Landlord, at any time and from time to time, may sue
and recover judgment for any deficiencies from time to time remaining after the
application from time to time of the proceeds of any such reletting.
17.05 Final Damages. If this Lease is terminated by Landlord as
provided in Section 17.02(a), Landlord shall be entitled to recover from Tenant
all Rent accrued and unpaid for the period up to and including such termination
date, as well as all other additional sums payable by Tenant, or for which
Tenant is liable or in respect of which Tenant has agreed to indemnify Landlord
under any of the provisions of this Lease, which may be then owing and unpaid,
and all reasonable costs and expenses, including court costs and attorneys' fees
incurred by Landlord in the enforcement of its rights and remedies hereunder,
and, in addition, Landlord shall be entitled to recover as damages for loss of
the bargain and not as a penalty the aggregate sum which at the time of such
termination represents the excess, if any, of the present value of the aggregate
rents which would have been payable after the termination date had this Lease
not been terminated, including, without limitation, Base Rent at the annual rate
or respective annual rates for the remainder of the Term provided for in Article
2 of this Lease or elsewhere herein
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and the amount projected by Landlord to represent Rent Adjustments for the
remainder of the Term pursuant to Article 3 of this Lease, over the then present
value of the then aggregate fair rental value of the Premises for the balance of
the Term, such present worth to be computed in each case on the basis of a five
percent (5%) per annum discount from the respective dates upon which such
rentals would have been payable hereunder had this Lease not been terminated,
and (c) any damages in addition thereto, including reasonable attorneys' fees
and court costs, which Landlord has sustained as a result of the breach of any
of the covenants of this Lease other than for the payment of Rent.
17.06 Removal of Personal Property. All property of Tenant removed from
the Premises by Landlord pursuant to any provisions of this Lease or of law may
be handled, removed or stored by Landlord at the cost and expense of Tenant, and
Landlord in no event shall be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay Landlord for all expenses incurred by
Landlord in such removal and storage charges against such property as long as
the same is in Landlord's possession or under Landlord's control. All such
property not removed from the Premises or retaken from storage by Tenant within
thirty (30) days after the end of the Term, however terminated, at Landlord's
option, shall be conclusively deemed to have been conveyed by Tenant to Landlord
as by bill of sale without further payment or credit by Landlord to Tenant.
17.07 Attorneys' Fees. Tenant shall pay all of Landlord's costs, charges
and expenses, including court costs and attorneys' fees, incurred in
successfully enforcing Tenant's obligations under this Lease, incurred by
Landlord in any action brought by Tenant in which Landlord is the prevailing
party, or incurred by Landlord in any litigation, negotiation or transaction in
which Tenant causes Landlord, without Landlord's fault, to become involved or
concerned. Landlord shall pay all of Tenant's costs, charges and expenses,
including court costs and attorneys' fees, incurred in successfully enforcing
Landlord's obligations under this Lease, incurred by Tenant in any action
brought by Landlord in which Tenant is the prevailing party, or incurred by
Tenant in any litigation, negotiation or transaction in which Landlord causes
Tenant without Tenant's fault, to become involved or concerned.
17.08 Assumption or Rejection in Bankruptcy. If Tenant is adjudged
bankrupt, or a trustee in bankruptcy is appointed for Tenant, Landlord and
Tenant, to the extent permitted by law, agree to request that the trustee in
bankruptcy determine within sixty (60) days thereafter whether to assume or to
reject this Lease.
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ARTICLE 18.
SUBORDINATION
18.01 Subordination. Landlord intends to execute and deliver and may
execute and deliver hereafter from time to time a first mortgage or first trust
deed in the nature of a mortgage, both being hereinafter referred to as a "First
Mortgage," against the Land and Building or any interest therein. If requested
by the mortgagee or trustee under any First Mortgage (the "First Mortgagee"),
Tenant will either (a) subordinate its interest in this Lease to said First
Mortgage, and to any and all advances made thereunder and to the interest
thereon, and to all renewals, replacements, supplements, amendments,
modifications and extensions thereof, or (b) make certain of Tenant's rights and
interest in this Lease superior thereto; and Tenant will execute and deliver
such agreement or agreements promptly, as may be reasonably required by such
First Mortgagee; provided that, as a condition to subordinating its rights and
interests under this Lease to any mortgage or trust deed, Tenant shall be
entitled to require the First Mortgagee to enter into a non-disturbance and
attornment agreement with Tenant, which agreement shall be in said holder's
standard form not inconsistent with this Lease. Tenant covenants it will not
subordinate this Lease to any mortgage or trust deed other than a First Mortgage
without the prior written consent of the First Mortgagee.
18.02 Liability of Holder of First Mortgage; Attornment. It is further
agreed that (a) if any First Mortgage shall be foreclosed, (i) the First
Mortgagee, or purchaser at any foreclosure sale (or grantee in a deed in lieu of
foreclosure), as the case may be, shall not be (x) liable for any act or
omission of any prior landlord (including Landlord), (y) subject to any offsets
or counterclaims which Tenant may have against a prior landlord (including
Landlord), or (z) bound by any prepayment of Base Rent or Rent Adjustments which
Tenant may have made in excess of the amounts then due for the next succeeding
month, (ii) the liability of the First Mortgagee or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as Landlord
under this Lease shall exist only so long as such trustee, mortgagee, purchaser
or owner is the owner of the Building or Land and such liability shall not
continue or survive after further transfer of ownership; and (iii) upon request
of the First Mortgagee, if the First Mortgage is foreclosed, Tenant will attorn,
as Tenant under this Lease, to the purchaser at any foreclosure sale under any
First Mortgage, and Tenant will execute such instruments as may be necessary or
appropriate to evidence such attornment; and (b) this Lease may not be modified
or amended so as to reduce Rent or shorten the Term provided hereunder, or so as
to affect adversely in any other respect to any material extent the rights of
Landlord, and this Lease shall not be cancelled or surrendered, without the
prior written consent, in each instance, of any First Mortgagee.
18.03 Modification Required by First Mortgagee. Should any prospective
First Mortgagee require a modification or modifications of this Lease, which
modification or modifications will not cause an increased cost or expense to
Tenant or in any other way materially change the rights and obligations of
Tenant hereunder, Tenant agrees that this Lease may be so modified and agrees to
execute whatever documents are required therefor and deliver the same to
Landlord within ten (10) days following the request therefor.
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18.04 Short Form Lease. Should any prospective First Mortgagee require
execution of a short form of lease for recording (containing the names of the
parties, a description of the Premises, and the term of this Lease) or a
certification from Tenant concerning this Lease in such form as may be required
by a prospective mortgagee, Tenant agrees to promptly execute such short form of
lease or certificate and deliver the same to Landlord within ten (10) days
following the request therefor.
ARTICLE 19.
MORTGAGEE PROTECTION
Tenant agrees to give any First Mortgagee, by registered or certified mail,
a copy of any notice or claim of default served upon Landlord by Tenant,
provided that prior to such notice, Tenant has been notified in writing, by way
of service on Tenant of a copy of an assignment of Landlord's interests in
leases, or otherwise, of the address of such First Mortgagee. Tenant further
agrees that if Landlord has failed to cure such default within twenty (20) days
after such notice to Landlord (or if such default cannot be cured or corrected
within that time, then such additional time as may be necessary if Landlord has
commenced within such twenty (20) days and is pursuing diligently the remedies
or steps necessary to cure or correct such default), then the First Mortgagee
shall have an additional thirty (30) days within which to cure or correct such
default (or if such default cannot be cured or corrected within that time, then
such additional time as may be necessary if the First Mortgagee has commenced
within such thirty (30) days and is pursuing diligently the remedies or steps
necessary to cure or correct such default, including the time necessary to
obtain possession if possession is necessary to cure or correct such default).
ARTICLE 20.
ESTOPPEL CERTIFICATE
Upon execution of this Lease by Landlord and Tenant, Tenant shall
simultaneously execute and deliver a copy of the Estoppel Certificate attached
hereto as Rider D. Tenant agrees that from time to time upon not less than ten
(10) days' prior request by Landlord, or any First Mortgagee or any ground
lessor, Tenant (or any permitted assignee, subtenant, licensee, concessionaire
or other occupant of the Premises claiming by, through or under Tenant) will
deliver to Landlord or to any First Mortgagee or ground lessor, a statement in
writing signed by Tenant certifying (a) that this Lease is unmodified and in
full force and effect (or if there have been modifications, that this Lease as
modified is in full force and effect and identifying the modifications); (b) the
date upon which Tenant began paying Rent and the dates to which Rent and other
charges have been paid; (c) that Landlord is not in default under any provision
of this Lease, or, if in default, the nature thereof in detail; (d) that the
Premises have been completed in accordance with the terms hereof and Tenant is
in occupancy and paying Rent on a current basis with no rental offsets or claims
or if not state the exceptions to the items not completed in accordance with the
Final Plans; (e) that there has been no prepayment of Rent other than that
provided for in this Lease; (f) that there are no actions, whether voluntary or
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otherwise, pending against Tenant under the bankruptcy laws of the United States
or any State thereof; and (g) such other matters as may be reasonably required
and not inconsistent with the terms of this Lease by Landlord, the First
Mortgagee or ground lessor.
ARTICLE 21.
SUBROGATION AND INSURANCE
21.01 Waiver of Subrogation. Landlord and Tenant agree to have all "all-
risk" coverage and other property damage insurance and any rent loss or business
interruption insurance which may be carried by either of them endorsed with a
clause providing that any release from liability of or waiver of claim for
recovery from the other party entered into in writing by the insured thereunder
prior to any loss or damage shall not affect the validity of said policy or the
right of the insured to recover thereunder and providing further that the
insurer waives all rights of subrogation which such insurer might have against
the other party. Without limiting any release or waiver of liability or recovery
set forth elsewhere in this Lease, and notwithstanding anything in this Lease
which may appear to be to the contrary, each of the parties hereto waives all
claims for recovery from the other party for any loss or damage to any of its
property insured under valid and collectible insurance policies to the extent of
any recovery collectible under such insurance policies. Notwithstanding the
foregoing or anything contained in this Lease to the contrary, any release or
any waiver of claims shall not be operative, and the foregoing endorsements
shall not be required, in any case where the effect of such release or waiver is
to invalidate insurance coverage or invalidate the right of the insured to
recover thereunder or increase the cost thereof (provided that in the case of
increased cost the other party shall have the right, within ten (10) days
following written notice, to pay such increased cost keeping such release or
waiver in full force and effect).
21.02 Tenant's Insurance. Tenant shall carry insurance during the entire
Term hereof with terms, coverages and in companies satisfactory to Landlord and
with such increases in limits as Landlord may request from time to time, but
initially Tenant shall maintain the following coverages in the following
amounts:
(a) Comprehensive or commercial general liability insurance, including
contractual liability, on an occurrence basis, in an amount not less than
Fifteen Million Dollars ($15,000,000.00) combined single limit per
occurrence, covering Tenant, Landlord and its beneficiaries as a named
insured and Landlord's mortgagee as an additional insured.
(b) Insurance against fire, sprinkler leakage, vandalism and the
extended coverage perils for the full replacement cost of all additions,
improvements and alterations to the Premises owned or made by Tenant, if
any, and of all office furniture, trade fixtures, office equipment,
merchandise and all other items of Tenant's property on the Premises, with
loss or damage payable to Landlord and Tenant as their interests may
appear.
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(c) Standard Fire and Extended Coverage Policy and all other risks of
direct physical loss as insured against under Special Extended Coverage
Endorsement, insuring the improvements at any time situated upon the
Premises against loss or damage by fire, lightning, wind storm, hail storm,
aircraft, vehicles, smoke, explosion, riot or civil commotion. The
insurance coverage shall be for not less than 100% of the full replacement
cost of such improvement with all proceeds of insurance payable to
Landlord. Landlord shall be a named insured on such policies. The insurance
shall include standard mortgagee loss payable clauses for benefit of
Landlord's Mortgagee. The full replacement cost of improvements shall be
determined every five (5) years by an insurance appraiser selected by
Tenant with Landlord's reasonable approval and paid for by Tenant or by
other means reasonably acceptable to Landlord and its First Mortgagee. Any
insurance appraiser hired by Tenant shall submit a written report of his
appraisal to Landlord and Tenant and if said report shows that the
improvements are not insured as herein required, Tenant shall promptly
obtain such additional insurance as is required;
(d) Boiler Insurance, insuring Landlord and Tenant with the same
limits of coverage as provided in subsection (c) for loss or damage by
boiler or internal explosion or break down of boilers;
(e) Worker's Compensation Insurance, insuring Tenant from all worker's
compensation claims;
(f) Plate Glass Insurance, insuring Landlord and Tenant from damage to
any plate glass on the Premises; and
(g) Builders Risk Insurance insuring Landlord and Tenant against "all
risks" including collapse and transit coverage during any construction of
any improvements to or repair of the Premises after the Commencement Date
covering the total value of work performed and equipment, supplies and
material furnished.
Such insurance shall be written by companies of nationally recognized
financial standing, legally qualified to issue such insurance and accorded
a rating by A.M. Best Company, Inc. of A:XII or higher at the time of
issuance of any such policy. Each insurance policy carried by Tenant shall
contain, where appropriate, a clause stating that such policy will be
considered as primary insurance for Landlord and its agents and
beneficiaries and not call into contribution any other insurance that may
be available to Landlord. All insurance claims other than under Worker's
Compensation and contents insurance pertaining to the Premises in amounts
of $25,000 or less shall be adjusted by the insurer with Tenant, and all
claims in excess of $25,000 shall be adjusted by Landlord and Tenant
jointly.
21.03 Certificates of Insurance. Tenant shall furnish to Landlord, prior
to the commencement of the Term and at least thirty (30) days prior to the
expiration of any such policies, policies or certificates evidencing such
coverage, which policies or certificates shall
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state that such insurance coverage may not be reduced, cancelled or not renewed
without at least thirty (30) days' prior written notice to Landlord and Tenant
(unless such cancellation is due to nonpayment of premium, and in that case,
only ten (10) days' prior written notice shall be sufficient).
21.04 Compliance with Requirements. Tenant shall comply with all
applicable laws and ordinances, all orders and decrees of court and all
requirements of other governmental authorities, and shall not make any use of
the Premises, directly or indirectly, which may be prohibited thereby, which may
be dangerous to person or property, which may jeopardize any insurance coverage,
or which may increase the cost of insurance or require additional insurance
coverage.
ARTICLE 22.
NONWAIVER
No waiver of any condition expressed in this Lease shall be implied by any
neglect of Landlord to enforce any remedy on account of the violation of such
condition whether or not such violation is continued or repeated subsequently,
and no express waiver shall affect any condition other than the one specified in
such waiver and that one only for the time and in the manner specifically
stated. Without limiting Landlord's rights under Article 9, it is agreed that no
receipt of moneys by Landlord from Tenant after the termination in any way of
the Term or of Tenant's right of possession hereunder or after the giving of any
notice shall reinstate, continue or extend the Term or affect any notice given
to Tenant prior to the receipt of such moneys. It is also agreed that after the
service of notice or the commencement of a suit or after final judgment for
possession of the Premises, Landlord may receive and collect any moneys due, and
the payment of said moneys shall not waive or affect said notice, suit or
judgment.
ARTICLE 23.
TENANT'S AUTHORITY
Tenant (a) represents and warrants that this Lease has been duly
authorized, executed and delivered by and on behalf of Tenant and constitutes
the valid and binding agreement of Tenant in accordance with the terms hereof,
(b) if Landlord so requests, it shall deliver to Landlord or its agent,
concurrently with the delivery of this Lease executed by Tenant, certified
resolutions of the board of directors (and shareholders, if required)
authorizing Tenant's execution and delivery of this Lease and the performance of
Tenant's obligations hereunder, and (c) until Landlord is notified in writing of
a substitute therefor, Tenant's Authorized Representative set forth in the
Schedule shall have full power and authority to take action on behalf of and to
bind Tenant with respect to all matters relating to this Lease and the Premises.
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ARTICLE 24.
REAL ESTATE BROKERS
Landlord and Tenant each represent that it has not dealt with a broker
in connection with this Lease and agrees to indemnify and hold the other
harmless from all damages, liability and expense, including reasonable
attorneys' fees, arising from any claims or demands of any broker or brokers or
finders for any commission alleged to be due such broker or brokers or finders
in connection with its having introduced Landlord and Tenant or having
participated in the negotiation of this Lease.
ARTICLE 25.
NOTICES
All notices and demands required or desired to be given by either
party to the other with respect to this Lease or the Premises shall be in
writing and shall be delivered personally, sent by overnight courier service,
prepaid, or sent by United States registered or certified mail, return receipt
requested, postage prepaid, and addressed as herein provided. Notices to or
demands upon Tenant shall be addressed to Tenant at the address set forth in the
Schedule prior to its occupancy of the Premises and at the Premises following
its occupancy of the Premises. Notices to or demands upon Landlord shall be
addressed to Landlord c/o RERC Capitol Market Group, L.L.C., at 2 N. LaSalle
Street, Suite 730, Chicago, Illinois 60601, Attn: Joseph Beale. Notices and
demands shall be deemed given and served (a) upon receipt or refusal, if
delivered personally, (b) one (1) business day after deposit with an overnight
courier service or (c) three (3) business days after deposit in the United
States mails, if mailed. Either party may change its address for receipt of
notices by giving notice of such change to the other party in accordance
herewith. Notices and demands from Landlord to Tenant may be signed by Landlord,
its beneficiaries, the managing agent for the Real Property or the agent of any
of them.
ARTICLE 26.
HAZARDOUS MATERIALS
26.01 Defined Terms.
(a) "Claim" shall mean and include any demand, cause of action,
proceeding, or suit for any one or more of the following: (i) actual or punitive
damages, losses, injuries to person or property, damages to natural resources,
fines, penalties, interest, contribution or settlement, (ii) the costs and
expenses of site investigations, feasibility studies, information requests,
health or risk assessments, or Response (as hereinafter defined) actions, and
(iii) the costs and expenses of enforcing insurance, contribution or
indemnification agreements.
(b) "Environmental Laws" shall mean and include all federal, state and
local statutes, ordinances, regulations and rules in effect and as amended from
time to time relating to environmental quality, health, safety, contamination
and cleanup, including, without
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limitation, the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Clean Water
Act, 33 U.S.C. Section 1251 et seq., and the Water Quality Act of 1987; the
Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. Section
136 et seq.; the Marine Protection, Research, and Sanctuaries Act, 33 U.S.C.
Section 1401 et seq.; the National Environmental Policy Act, 42 U.S.C. Section
4321 et seq.; the Noise Control Act, 42 U.S.C. Section 4901 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., as
amended by the Hazardous and Solid Waste Amendments of 1984; the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et
seq., as amended by the Superfund Amendments and Reauthorization Act, the
Emergency Planning and Community Right-to-Know Act, and the Radon Gas and Indoor
Air Quality Research Act; the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
Section 2601 et seq.; the Atomic Energy Act, 42 U.S.C. Section 2011 et seq., and
the Nuclear Waste Policy Act of 1982, 42 U.S.C. Section 10101 et seq.; and the
Environmental Protection Act of Illinois ("IEPA"), Ill. Rev. Stat. ch. 111 1/2,
para. 1001 et seq., and state and local superlien and environmental statutes and
ordinances, with implementing regulations, rules and guidelines, as any of the
foregoing may be amended from time to time. Environmental Laws shall also
include all state, regional, county, municipal, and other local laws,
regulations, and ordinances insofar as they are equivalent or similar to the
federal laws recited above or purport to regulate Hazardous Materials (as
hereinafter defined).
(c) "Hazardous Materials" shall mean and include the following,
including mixtures thereof: any hazardous substance, pollutant, contaminant,
waste, by-product or constituent regulated under CERCLA; oil and petroleum
products and natural gas, natural gas liquids, liquefied natural gas and
synthetic gas usable for fuel; pesticides regulated under FIFRA; asbestos and
asbestos-containing materials, PCBs, and other substances regulated under TSCA;
source material, special nuclear material, by-product material and any other
radioactive materials or radioactive wastes, however produced, regulated under
the Atomic Energy Act or the Nuclear Waste Policy Act; chemicals subject to the
OSHA Hazard Communication Standard, 29 C.F.R. (S) 1910.1200 et seq.; and
industrial process and pollution control wastes whether or not hazardous within
the meaning of RCRA, and any other hazardous substance, pollutant or contaminant
regulated under any other Environmental Law.
(d) "Manage" or "Management" means to generate, manufacture, process,
treat, store, use, re-use, refine, recycle, reclaim, blend or burn for energy
recovery, incinerate, accumulate speculatively, transport, transfer, dispose of
or abandon Hazardous Materials.
(e) "Release" or "Released" shall mean any actual or threatened
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of Hazardous Materials into the
environment, as "environment" is defined in CERCLA.
(f) "Response" or "Respond" shall mean action taken to correct,
remove, remediate, clean up, prevent, mitigate, monitor, evaluate, investigate,
assess or abate the Release of a Hazardous Material.
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26.02 Tenant's Obligations with Respect to Environmental Matters. During
the term of this Lease, (i) Tenant shall comply at its sole cost and expense
with all Environmental Laws; (ii) Tenant shall not Manage, or authorize the
Management of, any Hazardous Materials on the Building or Land, including
installation of any underground storage tanks, without prior written disclosure
to and prior written approval by Landlord; (iii) Tenant shall not take any
action that would subject the Building or Land to the permit requirements under
RCRA for storage, treatment or disposal of Hazardous Materials; (iv) Tenant
shall not dispose of Hazardous Materials in dumpsters; (v) Tenant shall not
discharge Hazardous Materials into drains or sewers on the Real Property; (vi)
Tenant shall not cause or allow the Release of any Hazardous Materials on, to or
from the Real Property and (vii) Tenant shall arrange at its sole cost and
expense for the lawful transportation and off-site disposal at permitted
landfills or other permitted disposal facilities and otherwise in accordance
with all applicable Environmental Laws, of all Hazardous Materials that it
generates.
26.03 Copies of Notices. During the Term of this Lease, Tenant shall
provide Landlord promptly with copies of all summons, citations, directives,
information inquiries or requests, notices of potential responsibility, notices
of violation or deficiency, orders or decrees, Claims, complaints,
investigations, judgments, letters, notices of environmental liens or Response
actions in progress, and other communications, written or oral, actual or
threatened, from the United States Environmental Protection Agency, Occupational
Safety and Health Administration, Illinois Environmental Protection Agency, or
other federal, state, or local agency or authority, or any other entity or
individual, concerning (i) any actual or alleged Release of a Hazardous Material
on, to or from the Premises; (ii) the imposition of any lien on the Premises;
(iii) any actual or alleged violation of, or responsibility under, any
Environmental Laws; or (iv) any actual or alleged liability under any theory of
common law tort or toxic tort, including without limitation, negligence,
trespass, nuisance, strict liability, or ultrahazardous activity.
26.04 Landlord's Right to Inspect. Landlord and Landlord's employees shall
have the right to enter the Premises and conduct appropriate inspections or
tests for the purpose of (i) determining Tenant's compliance with Environmental
Laws, and (ii) determining the type, kind and quantity of all products,
materials and substances brought onto the Premises, or made or produced thereon.
Landlord and its agents and representatives shall have the right to take samples
in quantities sufficient for analysis of all products, materials and substances
present on the Premises including, but not limited to, samples, products,
materials or substances brought onto or made or produced on the Premises by
Tenant or its agents, employees, contractors or invitees. Tenant agrees to
cooperate with such investigations by providing any relevant information
requested by Landlord, including, but not limited to, information Landlord
requests to comply with the Illinois Responsible Property Transfer Act, Ill.
Rev. Stat. ch. 30, para. 901 et seq. (1989), 765 ILCS 90/1 et seq. (1992).
Tenant may not perform any sampling, testing, or drilling to locate Hazardous
Materials in the Building components on the Premises without the Landlord's
prior written consent.
26.05 Tests and Reports. Within ten (10) days of Tenant's receipt of a
written request by Landlord, Tenant shall provide Landlord with (i) copies of
all environmental reports and tests obtained by Tenant; (ii) copies of
transportation and disposal contracts (and related manifests,
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schedules, reports, and other information) entered into or obtained by Tenant
with respect to any Hazardous Materials; (iii) copies of any permits issued to
Tenant under Environmental Laws with respect to the Premises; (iv) copies of any
and all reports, notifications, and other filings made by Tenant to any federal,
state, or local environmental authorities or agencies; and (v) any other
applicable documents and information with respect to environmental matters
relating to the premises. Tenant shall provide Landlord with the results of
appropriate reports and tests, with transportation and disposal contracts for
Hazardous Materials, with any permits issued under Environmental Laws, and with
any other documents necessary to demonstrate that Tenant complies with all
Environmental Laws relating to the Premises.
26.06 Tenant's Obligation to Respond. If Tenant's Management of Hazardous
Materials at the Premises (i) gives rise to liability or to a Claim under any
Environmental Law, or any common law theory of tort or otherwise; (ii) causes a
threat to, or endangers, the public health; or (iii) creates a nuisance or
trespass, Tenant shall, at its sole cost and expense, promptly take all
applicable action in response so as to comply with all applicable Environmental
Laws and eliminate or avoid any liability claim with respect thereto.
26.07 Landlord's Right to Act. In the event that Tenant shall fail to
comply with any of its obligations under this Article 26 as and when required
hereunder, Landlord shall have the right (but not the obligation) to take such
action as is required to be taken by Tenant hereunder and in such event, Tenant
shall be liable and responsible to Landlord for all costs, expenses,
liabilities, claims and other obligations paid, suffered, or incurred by
landlord in connection with such matters. Tenant shall reimburse Landlord
immediately upon demand for all such amounts for which Tenant is liable.
26.08 Indemnification. Notwithstanding anything contained in this Lease to
the contrary, Tenant shall reimburse, defend, indemnify and hold Landlord, and
its beneficiaries, officers, directors, shareholders, employees, and agents,
free and harmless from and against any and all Claims, Response costs, losses,
liabilities, damages, costs, and expenses, including, without limitation, loss
of rental income, loss due to business interruption, and reasonable attorneys'
fees and costs (collectively "Environmental Claims"), arising out of or in any
way connected with any or all of the following:
(i) any Hazardous Materials which, at any time during or prior to
the Term, are or were actually or allegedly Managed, generated,
stored, treated, released, disposed of or otherwise located on or at
the Building or Land (regardless of the location at which such
Hazardous Material are now or may in the future be located or disposed
of), including but not limited to, any and all (1) liabilities under
any common law theory of tort, nuisance, strict liability,
ultrahazardous activity, negligence or otherwise based upon, resulting
from or in connection with any Hazardous Material; (2) obligations to
take Response, cleanup or corrective action pursuant to any
investigation or remediation in connection with the decontamination,
removal, transportation, incineration, or disposal of any of the
foregoing; and
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(ii) any actual or alleged illness, disability, injury, or death
of any person; in any manner arising out of or allegedly arisen out of
exposure to Hazardous Materials or other substances or conditions
present at the Building or Land, regardless of when any such illness,
disability, injury, or death shall have occurred or been incurred or
manifested itself; and
(iii) any actual or alleged failure of Tenant or the Building or
Land at any time and from time to time to comply with all applicable
Environmental Laws, whether before or after the effective date of this
Lease; and
(iv) any failure by Tenant to comply with its obligations under
this Article 26.
In the event any Claims or other assertion of liability shall be made
against Landlord for which Landlord is entitled to indemnity hereunder, Landlord
shall notify Tenant of such Claim or assertion of liability and thereupon Tenant
shall, at its sole cost and expense, assume the defense of such Claim or
assertion of liability and continue such defense at all times thereafter until
completion. The obligations of Tenant under this Article 26 shall survive any
termination or expiration of this Lease. Nothing herein shall require Tenant to
indemnify, defend or hold harmless Landlord from, and Landlord shall reimburse,
defend, indemnify and hold Tenant, its employees, officers, directors,
shareholders and agents free and harmless from and against any Environmental
Claims arising out of or in anyway connected with any Hazardous Materials
Managed or Released on the Premises by Landlord or its agents, contractors or
employees.
ARTICLE 27.
TITLE AND COVENANT AGAINST LIENS
Landlord's title is and always shall be paramount to the title of Tenant
and nothing contained in this Lease shall empower Tenant to do any act which
can, shall or may encumber the title of Landlord. Tenant covenants and agrees
not to suffer or permit any lien of mechanics or materialmen to be placed upon
or against the Premises, the Building, the Land or against Tenant's leasehold
interest in the Premises and, in case of any such lien attaching, to pay and
remove same immediately. Tenant has no authority or power to cause or permit any
lien or encumbrance of any kind whatsoever, whether created by act of Tenant,
operation of law or otherwise, to attach to or to be placed upon the Premises,
the Building or the Land, and any and all liens and encumbrances created by
Tenant shall attach only to Tenant's interest in the Premises. If any such liens
so attach and Tenant fails to pay and remove or bond over the same within thirty
(30) days, Landlord, at its election, may pay and satisfy the same and in such
event the sums so paid by Landlord, with interest from the date of payment at
the rate set forth in Section 28.08 for amounts owed Landlord by Tenant. Such
sums shall be deemed to be additional rent due and payable by Tenant at once
without notice or demand.
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ARTICLE 28.
MISCELLANEOUS
28.01 Successors and Assigns. Each provision of this Lease shall extend to
and shall bind and inure to the benefit not only of Landlord and Tenant, but
also of their respective heirs, legal representatives, successors and assigns,
but this provision shall not operate to permit any transfer, assignment,
mortgage, encumbrance, lien, charge or subletting contrary to the provisions of
this Lease.
28.02 Modifications in Writing. No modification, waiver or amendment of
this Lease or of any of its conditions or provisions shall be binding upon
Landlord unless in writing and signed by Landlord.
28.03 No Option; Irrevocable Offer. Submission of this instrument for
examination shall not constitute a reservation of or option for the Premises or
in any manner bind Landlord and no lease or obligation on Landlord shall arise
until this instrument is signed and delivered by Landlord and Tenant; provided,
however, the execution and delivery by Tenant of this Lease to Landlord or the
agent of Landlord's beneficiary, if any, shall constitute an irrevocable offer
by Tenant to lease the Premises on the terms and conditions contained herein,
which offer may not be revoked for thirty (30) days after such delivery.
28.04 Financial Statements. Tenant shall furnish Landlord annually within
ninety (90) days after the end of Tenant's fiscal year with a copy of its annual
audited and certified statement, prepared in accordance with generally accepted
accounting principles and certified by a financial officer of Tenant. Tenant
agrees that Landlord may deliver a copy of such statements to its mortgagee or
ground lessor, but otherwise Landlord shall treat such statements and
information contained therein, to the extent not otherwise available to the
public, as confidential.
28.05 Definition of Landlord. The term "Landlord" as used in this Lease
means only the owner or owners at the time being of the Building so that in the
event of any assignment, conveyance or sale, once or successively, of said
Building, or any assignment of this Lease by Landlord, said Landlord making such
sale, conveyance or assignment shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder accruing after
such sale, conveyance or assignment, and Tenant agrees to look solely to such
purchaser, grantee or assignee with respect thereto who shall be deemed to have
assumed such covenants and obligations occurring after such sale, conveyance or
assignment. This Lease shall not be affected by any such assignment, conveyance
or sale, and Tenant agrees to attorn to the purchaser, grantee or assignee.
28.06 Headings. The headings of Articles and Sections are for convenience
only and do not limit, expand or construe the contents of the Articles or
Sections.
28.07 Time of Essence. Time is of the essence of this Lease and of all
provisions hereof.
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28.08 Default Rate of Interest. All amounts, including, without
limitation, Base Rent and Rent Adjustments, owed by Tenant to Landlord pursuant
to any provision of this Lease shall bear interest from the date due until paid
at the annual rate of five percent (5%) in excess of the rate of interest
announced from time to time by The First National Bank of Chicago, as its prime,
reference or corporate base rate, changing as and when said prime, reference or
corporate base rate changes, unless a lesser rate shall then be the maximum rate
permissible by law with respect thereto, in which event said lesser rate shall
be charged.
28.09 Severability. The invalidity of any provision of this Lease shall
not impair or affect in any manner the validity, enforceability or effect of the
rest of this Lease.
28.10 Entire Agreement. All understandings and agreements, oral or
written, heretofore made between the parties hereto are merged in this Lease,
which alone fully and completely expresses the agreement between Landlord (and
its beneficiaries, if any, and their agents) and Tenant.
ARTICLE 29.
EXCULPATORY PROVISIONS
It is understood and agreed expressly by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
representations, warranties, covenants, undertakings and agreements made herein
on the part of Landlord, while in form purporting to be the representations,
warranties, covenants, undertakings and agreements of Landlord, are nevertheless
each and every one of them made and intended, not as personal representations,
warranties, covenants, undertakings and agreements by Landlord or for the
purpose or with the intention of binding Landlord personally, but are made and
intended for the purpose only of subjecting Landlord's interest in the Building,
the Land and the Premises to the terms of this Lease and for no other purpose
whatsoever, and in case of default hereunder by Landlord (or default through,
under or by any of its beneficiaries, or agents or representatives of said
beneficiaries), Tenant shall look solely to the interests of Landlord in the
Building and Land; that this Lease is executed and delivered by Landlord not in
its own right, but solely in the exercise of the powers conferred upon it as
trustee; that neither Landlord nor any of Landlord's beneficiaries shall have
any personal liability to pay any indebtedness accruing hereunder or to perform
any covenant, either express or implied, contained herein and no liability or
duty shall rest upon Landlord to sequester the trust estate or the rents, issues
and profits arising therefrom, or the proceeds arising from any sale or other
disposition thereof; and that no personal liability or personal responsibility
of any sort is assumed by, nor at any time shall be asserted or enforceable
against, said Landlord, individually or personally, but only as trustee under
the provisions of the trust agreement establishing the trust, or against any of
the beneficiaries under the trust agreement establishing the trust on account of
this Lease or on account of any representation, warranty, covenant, undertaking
or agreement of Landlord contained in this Lease, either express or implied, all
such personal liability, if any, being expressly waived and released by Tenant
and by all persons claiming by, through or under Tenant.
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IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the date first written above.
LANDLORD: BANK ONE, ILLINOIS, NA
-----------------------------------------
not personally but solely as Trustee
as aforesaid
RIDER ATTACHED HERETO IS HEREBY
By: EXPRESSLY MADE A PART HEREOF.
------------------------------------
Its:
------------------------------------
TENANT:
MAY & SPEH, INC., a Delaware corporation
By: /s/
------------------------------------
Its: Executive Vice President, CFO
------------------------------------
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EXHIBIT A
THE LAND
Lot 1 in Opus West being a Resubdivision of part of the East-West Center a
subdivision in part of the North 1/2 of the Northeast 1/4, Section 31, Township
39 North, Range 11, East of the Third Principal Meridian, in DuPage County,
Illinois.
<PAGE>
RIDER A
BASE RENT
(a) The annual Base Rent payable by Tenant for Term and the Extended Terms
shall be as follows:
(i) Commencement Date through August 31, 2004.
$1,500,262.40
(ii) September 1, 2004 to August 31, 2009.
The annual Base Rent for the period commencing September 1, 2004 and
ending on August 31, 2009, shall be an amount equal to the product
of (A) $1,500,262.40 and (B) the greater of (x) 1.03 and (y) the
lesser of (aa) 1.06 and (bb) the average annual percentage increase,
in the CPI between September 1998 and August 2004.
(iii) September 1, 2009 through August 31, 2014.
The annual Base Rent for the period commencing September 1, 2009 and
ending August 31, 2014 shall be an amount equal to the product of
(A) the annual Base Rent in effect for August 2009, and (B) the
greater of (x) 1.03 and (y) the lessee of (aa) 1.06 and (bb) the
average annual percentage increase in the CPI between August, 2004
and August 2009.
(iv) September 1, 2014 through the last day of the initial Term.
The annual Base Rent for the period commencing September 1, 2014 and
ending on the last day of the initial Term shall be an amount equal
to the product of (A) the annual Base Rent in effect for August 2014
and (B) the greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and
(bb) the average annual percentage increase in the CPI between
August 2009 and August 2014.
(v) First Extended Term.
The annual Base Rent for the First Extended Term, shall be an amount
equal to the greater of (1) the Market Rent for the Premises for the
First Extended Term and (2) the product of (A) the annual Base Rent
in effect on the last day of the Term and (B) the greater of (x)
1.03 and (y) the lesser of (aa) 1.06 and (bb) the average annual
percentage increase, if any, in the CPI between August 2014 and the
month preceding the commencement of the First Extended Term.
<PAGE>
(vi) Second Extended Term.
The annual Base Rent for the Second Extended Term, shall be an
amount equal to the greater of (1) the Market Rent for the Premises
for the Second Extended Term and (2) the product of (A) the annual
Base Rent in effect on the last day of the First Extended Term and
(B) the greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and (bb)
the average annual percentage increase if any, in the CPI between
the month preceding the commencement of the First Extended Term and
the month preceding the commencement of the Second Extended Term.
(vii) Third Extended Term.
The annual Base Rent for the Third Extended Term, shall be an amount
equal to the greater of (1) the Market Rent for the Premises for the
Third Extended Term and (2) the product of (A) the annual Base Rent
in effect on the last day of the Second Extended Term and (B) the
greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and (bb) the
average annual percentage increase, if any, in the CPI between the
month preceding the commencement of the Second Extended Period and
the month preceding the commencement of the Third Extended Period.
If the annual Base Rent for any period described above cannot be determined
as of the first day of such period, then until such amount is determined, Tenant
shall pay Base Rent at the minimum rate set forth for such period. When the
actual annual Base Rent is determined, Landlord shall notify Tenant in writing
of such amount within thirty (30) days thereafter and Tenant, in the case of an
underpayment, shall pay to Landlord any additional Base Rent due for the portion
of such period prior to the date of such payment, or Landlord, in the case of an
overpayment, shall pay to Tenant the amount of such overpayment.
If Tenant exercises its option to extend the Term for an Extended Term,
then within thirty (30) days after receipt of Tenant's notice exercising the
Extension Option (or, if later, eight (8) months prior to the end of the then
Term), Landlord shall notify Tenant of its determination of the Market Rent for
the Extended Term in question. If the Market Rent determined by Landlord is
greater than the Base Rent determined pursuant to clause (2) of paragraphs
(a)(v), (vi) or (vii) above, as the case may be, then within thirty (30) days
after receipt of Landlord's notice of the Market Rent, Tenant shall elect in a
written notice ("Tenant's Rent Determination Notice") delivered to Landlord
either (i) to accept Landlord's determination of the Market Rent or (ii) to have
the Market Rent determined by appraisal pursuant to paragraph (c) below, in
which event Tenant shall also set forth its determination of the Market Rent. If
Tenant fails to timely deliver such notice, Tenant will be deemed to have
accepted Landlord's determination of the Market Rent.
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<PAGE>
(b) As used in this Rider A and in the Lease:
(i) "CPI" shall mean the Revised Consumer Price Index for Urban Wage
Earners and Clerical Workers, All Items (base index year
1982-84=100), for Chicago, Gary, Lake County, IL-IN-WI, as published
by the United States Department of Labor, Bureau of Labor
Statistics. If the manner in which the Consumer Price Index is
determined by the Bureau of Labor Statistics shall be substantially
revised, including, without limitation, a change in the base index
year, a reasonable adjustment shall be made by Landlord in such
revised index which would produce results equivalent, as nearly as
possible, to those which would have been obtained if such Consumer
Price Index had not been so revised. If the Consumer Price Index
shall become unavailable to the public because publication is
discontinued, or otherwise, or if equivalent data is not readily
available to enable Landlord to make the adjustment referred to in
the preceding sentence, then Landlord will substitute therefor a
comparable index based upon changes in the cost of living or
purchasing power of the consumer dollar published by any other
governmental agency or, if no such index is available, then a
comparable index published by a university, a major bank or other
financial institution, or a comparable and recognized financial
publication.
(ii) "Market Rent" shall mean the then prevailing market rental rate per
rentable square foot of area for space comparable to the space to be
leased by Tenant for the term of the lease of such space, taking
into account applicable loss factors, applicable lengths of lease
term, the creditworthiness of the tenants, differences in the size
of the space leased, the then market rental conditions, the
condition of the subject premises and comparable space, the location
of amenities in the Building and comparable buildings, the fact that
this Lease is a triple net lease, differences in operating expenses
and taxes, Rent Concessions and other factors normally taken into
account in determining fair market rent. As used herein, "Rent
Concessions" means market rent credits or abatements, lease buy-outs
or takeovers, the work letters and tenant improvement construction
allowances provided under leases for comparable space and other
market tenant inducement concessions. Market Rent shall be
determined as a rate net of all Rent Concessions.
(c) If the Market Rent is to be determined by appraisal, then:
(i) No later than fifteen (15) days following Tenant's Rent
Determination Notice, Tenant shall select and retain an individual
as an appraiser of its choice and give Landlord written notice of
such appraiser's name, address and telephone number ("Tenant's
Selection Notice").
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<PAGE>
(ii) Within twenty (20) days after receipt of Tenant's Selection Notice,
Landlord shall select and retain an appraiser of its choice and give
Tenant written notice of such appraiser's name, address and
telephone number "(Landlord's Selection Notice").
(iii) The appraisers so selected by Tenant and Landlord shall then select
an individual as a third appraiser within five (5) days after
receipt by Tenant of Landlord's Selection Notice and furnish
Landlord and Tenant written notice of such appraiser's name, address
and telephone number and Landlord and Tenant shall retain the
services of such third appraiser.
(iv) Within fifteen (15) days following selection of the appraisers,
Landlord and Tenant shall each simultaneously submit to the other
their respective determinations of the Market Rent. During the next
seven (7) days both Landlord and Tenant shall prepare a written
critique of the other's determination and on the seventh (7th) day
Landlord's and Tenant's determinations (as previously submitted to
the other party with no modifications or additions whatsoever) and
Landlord's and Tenant's critiques shall be submitted to the
appraisers.
(v) The three (3) appraisers shall then determine by majority vote
whether the Market Rent submitted by Landlord or the Market Rent
submitted by Tenant is the Market Rent for the Premises for the
Extended Term in question.
All appraisers selected pursuant to this paragraph shall have at least ten
(10) years experience with commercial property in the area where the
Premises are situated and have an MAI certification or be licensed leasing
brokers based in Metropolitan Chicago, shall not have a financial interest
in Landlord or Tenant and shall otherwise be impartial.
If Tenant fails to appoint its appraiser in the manner and within the time
specified in (i) above, then the Market Rent shall be the Market Rent
determined by Landlord. If Landlord fails to appoint its appraiser in the
manner and within the time prescribed in clause (ii), then such Market Rent
shall be the Market Rent set forth in the Tenant's Rent Determination
Notice.
If the appraisers selected by Tenant and Landlord fail to appoint the third
appraiser within the time and in the manner prescribed in clause (iii)
above, then Landlord and Tenant shall jointly and promptly apply to the
local office of the American Arbitration Association for the appointment of
the third appraiser.
The decision of the appraisers shall be binding, final and conclusive on
the parties (unless it shall be manifest that the appraiser or one or more
of the appraisers shall not be an impartial person) and shall be
enforceable by either party in a court of competent jurisdiction. The cost
of the foregoing appraisal process (including any court costs) shall be
borne equally by the parties).
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<PAGE>
Exhibit 10.26
FIRST AMENDMENT TO 1501 LEASE
-----------------------------
THIS AMENDMENT, made as of the 1st day of November, 1997, between BANK ONE,
ILLINOIS, N.A., not personally but solely as Trustee under Trust Agreement dated
May 23, 1997, and known as Trust No. 11097 ("Landlord") and MAY & SPEH, INC.
("Tenant").
RECITALS
Landlord and Tenant are parties to a written lease dated June 2, 1997,
("1501 Lease"), for the entire building ("1501 Building") located at 1501 Opus
Place, Downers Grove, Illinois. Section S.4 of the 1501 Lease grants Tenant
certain options to acquire the 1501 Building and the land thereunder; provided
that, Tenant also exercises the option to purchase the building ("3333
Building") to be constructed by Landlord and leased to Tenant on the land
commonly referred to as 3333 Finley Road, Downers Grove, Illinois pursuant to
the option granted in the lease between Landlord and Tenant also dated June 2,
1997 for the 3333 Building ("3333 Lease").
The terms and conditions of Tenant's option to purchase the 1501 Building
are set forth in Rider E to the 1501 Lease and the terms and conditions of the
purchase of the 3333 Building are set forth in Rider E to the 3333 Lease. The
purchase price for the 1501 Building is set forth in Rider E to the 1501 Lease
and the purchase price for the 3333 Building is based on a formula which takes
into account the purchase price for the 1501 Building. Landlord and Tenant
desire to increase the purchase price for the 1501 Building and to make a
similar reduction to the purchase price of the 3333 Building to permit Landlord
to refinance the 1501 Building and to finance the construction of the 3333
Building. Landlord and Tenant have also agreed that Tenant will assume any
financing on the respective buildings if it exercises its option to purchase.
Landlord and Tenant have agreed to modify the Base Building Improvements
under the 3333 Lease to include the construction of a tunnel ("Tunnel") from the
1501 Building to the 3333 Building and modify the Maximum Project Costs to take
into account the change in the Base Building Improvements. The portion of the
Tunnel on the Land is to be included in the Premises.
Tenant is also constructing an approximate 15,000 square foot addition to
the Building for use as storage space ("Storage Addition").
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein, the Lease is hereby amended as follows:
1. All capitalized terms used herein shall have the same meanings as in
the 1501 Lease unless otherwise defined herein.
2. Notwithstanding anything in the 1501 Lease to the contrary, the
Premises shall include the portion of the Tunnel located on the Land and the
Storage Addition and Tenant's obligations under this Lease with respect to the
Premises, including without limitation, its obligations to maintain and repair
the Premises, shall apply to the portion of the Tunnel included in the Premises
and the Storage Addition.
<PAGE>
3. Section 3.1 of the Purchase Contract attached as Rider E to the 1501
Lease is amended in its entirety to read as follows:
3.1 PURCHASE PRICE. The purchase price ("Purchase Price") for
the Property shall be Twelve Million Eight Hundred Thousand and 00/100
Dollars ($12,800,000.00).
Purchaser agrees to pay to Seller and Seller agrees to accept payment
of the Purchase Price as follows:
(a) At Closing, Purchaser shall accept title to the Property
subject to the lien of the First Mortgage (which Purchaser or its nominee
or designee will take subject to, and with respect to which First
Mortgage and the loan evidenced and secured thereby Purchaser or its
nominee or designee shall assume), and the outstanding principal balance
thereunder shall be credited against the Purchase Price.
(b) The remaining portion of the Purchase Price, subject to
prorations and adjustments as provided in Section 8.1, shall be paid on
the Closing Date by wire transfer of immediately available funds, first
to the Title Company and then to an account specified by Seller, against
delivery of instruments of transfer and the other documents specified in
Section 7.1.
4. Except for the provisions of this Amendment, all the terms, covenants,
and conditions of the Lease and all the rights and obligations of Landlord and
Tenant thereunder, shall remain in full force and effect, and are not otherwise
altered, amended, revised or changed.
5. It is understood and agreed expressly by and between the parties
hereto, anything herein to the contrary notwithstanding, that each and all of
the representations, warranties, covenants, undertakings and agreements made
herein on the part of Landlord, while in form purporting to be the
representations, warranties, covenants, undertakings and agreements of Landlord,
are nevertheless each and every one of them made and intended, not as personal
representations, warranties, covenants, undertakings and agreements by Landlord
or for the purpose or with the intention of binding Landlord personally, but are
made and intended for the purpose only of subjecting Landlord's interest in the
Building, the Land and the Premises to the terms of this Lease and for no other
purpose whatsoever, and in case of default hereunder by Landlord (or default
through, under or by any of its beneficiaries, or agents or representatives of
said beneficiaries), Tenant shall look solely to the interests of Landlord in
the Building and Land; that this Lease is executed and delivered by Landlord not
in its own right, but solely in the exercise of the powers conferred upon it as
trustee; that neither Landlord nor any of Landlord's beneficiaries shall have
any personal liability to pay any indebtedness accruing hereunder or to perform
any covenant, either express or implied, contained herein and no liability or
duty shall rest upon Landlord to sequester the trust estate or the rents, issues
and profits arising therefrom, or the proceeds arising from any sale or other
disposition thereof; and that no personal liability or personal responsibility
of any sort is assumed by, nor at any time shall be asserted or enforceable
against, said Landlord, individually
-2-
<PAGE>
or personally, but only as trustee under the provisions of the trust agreement
establishing the trust, or against any of the beneficiaries under the trust
agreement establishing the trust on account of this Lease or on account of any
representation, warranty, covenant, undertaking or agreement of Landlord
contained in this Lease, either express or implied, all such personal liability,
if any, being expressly waived and released by Tenant and by all persons
claiming by, through or under Tenant.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the date first above written.
LANDLORD:
BANK ONE, ILLINOIS, NA, not personally,
but as Trustee aforesaid
RIDER ATTACHED HERETO IS HEREBY
EXPRESSLY MADE A PART HEREOF.
By:
------------------------------------
Its:
-----------------------------------
TENANT:
MAY & SPEH, INC.
By: /s/
------------------------------------
Its: CFO
-----------------------------------
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<PAGE>
Exhibit 10.27
Office Lease
For
3333 Finley Road
Downers Grove, Illinois
Between
BANK ONE, ILLINOIS, N.A.,
as Trustee under Trust No. 11097,
Landlord,
and
MAY & SPEH, INC.,
a Delaware corporation
Tenant
Dated: June 2, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
SCHEDULE OF SIGNIFICANT TERMS............................................. -1-
SUPPLEMENTAL PROVISIONS................................................... -3-
S.1 Definitions................................................. -3-
S.2 Option to Extend............................................ -3-
S.3 Vacant Space................................................ -4-
S.4 Tenant's Option To Purchase................................. -5-
S.5 Development of Third Building Parcel........................ -6-
S.6 Net Lease................................................... -6-
S.7 Right of First Offer........................................ -6-
ARTICLE 1. GRANT AND TERM.............................................. -10-
1.01 Grant of Lease.............................................. -10-
1.02 Possession.................................................. -10-
1.03 Lease Year.................................................. -10-
ARTICLE 2. CONSTRUCTION OF IMPROVEMENTS................................ -10-
2.01 Construction of Improvements................................ -10-
2.02 Landlord's Obligations...................................... -11-
2.03 Contractor and Architect.................................... -11-
2.04 Landlord's Right to Make Changes............................ -11-
2.05 Definition of Changes....................................... -12-
2.06 Costs of Changes............................................ -12-
2.07 Substitution of Materials................................... -12-
2.08 Definition of Costs......................................... -12-
2.09 Payment of Costs............................................ -13-
2.10 Tenant's Right to Inspect the Building...................... -13-
2.11 Completion Date for the Building............................ -13-
2.12 Definition of Ready for Occupancy........................... -14-
2.13 Punch List.................................................. -14-
2.14 Contractor's and Landlord's Warranty........................ -15-
2.15 Compliance with Law......................................... -15-
2.16 Definition of Delays........................................ -15-
2.17 Obligations of the Architects............................... -16-
2.18 Limitation of Landlord's Construction Obligation............ -16-
ARTICLE 3. BASE RENT................................................... -17-
3.01 Base Rent................................................... -17-
3.02 Manner of Payment........................................... -17-
i
<PAGE>
ARTICLE 4. TAXES -17-
4.01 Obligation to Pay Tax Rent Adjustments -17-
4.02 Definitions -17-
4.03 Payments of Tax Rent Adjustments -18-
4.04 Proration and Survival -19-
ARTICLE 5. USE OF PREMISES -19-
ARTICLE 6. UTILITIES -19-
6.01 Payment for Utilities -19-
6.02 Utilities -20-
ARTICLE 7. CONDITION, CARE AND OPERATION OF PREMISES -20-
7.01 Condition of Premises -20-
7.02 Tenant's Maintenance and Operation Obligations -20-
7.03 Work Performed by Tenant -21-
7.04 Janitorial Service -21-
7.05 Waste -21-
ARTICLE 8. RETURN OF PREMISES -21-
8.01 Surrender of Possession -21-
8.02 Installations and Additions -22-
8.03 Trade Fixtures and Personal Property -22-
8.04 Survival -22-
ARTICLE 9. HOLDING OVER -22-
ARTICLE 10. RULES AND REGULATIONS -23-
ARTICLE 11. RIGHTS RESERVED TO LANDLORD -23-
11.01 Rights Reserved to Landlord -23-
ARTICLE 12. ALTERATIONS -24-
ARTICLE 13. ASSIGNMENT AND SUBLETTING -25-
13.01 Assignment and Subletting -25-
13.02 Rentals Based on Net Income -25-
13.03 Tenant to Remain Obligated -25-
13.04 Landlord's Consent -25-
13.05 Profits -26-
13.06 Assignee to Assume Obligations -27-
13.07 Change of Control -27-
13.08 Transfer By Merger or Sale or To an Affiliate -27-
13.09 Sublease with Customers -29-
13.10 Restrictions on Assignment and Sublease. -29-
ii
<PAGE>
ARTICLE 14. WAIVER OF CERTAIN CLAIMS; INDEMNITY BY TENANT............... -29-
14.01 Waiver of Certain Claims; Indemnity by Tenant............... -29-
14.02 Damage Caused by Tenant's Neglect........................... -29-
14.03 Tenant Responsible for Personal Property.................... -30-
14.04 Indemnification............................................. -30-
ARTICLE 15. DAMAGE OR DESTRUCTION BY CASUALTY........................... -30-
15.01 Tenant's Obligation to Rebuild.............................. -30-
15.02 Preconditions to Rebuilding................................. -30-
15.03 Payment for Rebuilding...................................... -31-
15.04 Excess Insurance Proceeds................................... -31-
15.05 Failure to Rebuild.......................................... -31-
15.06 Deposits.................................................... -31-
ARTICLE 16. EMINENT DOMAIN.............................................. -32-
16.01 Whole Taking................................................ -32-
16.02 Partial Taking.............................................. -33-
ARTICLE 17. DEFAULT..................................................... -33-
17.01 Events of Default........................................... -33-
17.02 Rights and Remedies of Landlord............................. -34-
17.03 Right to Re-Enter........................................... -35-
17.04 Current Damages............................................. -35-
17.05 Final Damages............................................... -35-
17.06 Removal of Personal Property................................ -36-
17.07 Attorneys' Fees............................................. -36-
17.08 Assumption or Rejection in Bankruptcy....................... -36-
ARTICLE 18. SUBORDINATION............................................... -37-
18.01 Subordination............................................... -37-
18.02 Liability of Holder of First Mortgage; Attornment........... -37-
18.03 Modification Required by First Mortgagee.................... -37-
18.04 Short Form Lease............................................ -38-
ARTICLE 19. MORTGAGEE PROTECTION........................................ -38-
ARTICLE 20. ESTOPPEL CERTIFICATE........................................ -38-
ARTICLE 21. SUBROGATION AND INSURANCE................................... -39-
21.01 Waiver of Subrogation....................................... -39-
21.02 Tenant's Insurance.......................................... -39-
21.03 Certificates of Insurance................................... -40-
21.04 Compliance with Requirements................................ -41-
ARTICLE 22. NONWAIVER................................................... -41-
ARTICLE 23. TENANT'S AUTHORITY.......................................... -41-
iii
<PAGE>
ARTICLE 24. REAL ESTATE BROKERS......................................... -42-
ARTICLE 25. NOTICES..................................................... -42-
ARTICLE 26. HAZARDOUS MATERIALS......................................... -42-
26.01 Defined Terms............................................... -42-
26.02 Tenant's Obligations with Respect to Environmental Matters.. -43-
26.03 Copies of Notices........................................... -44-
26.04 Landlord's Right to Inspect................................. -44-
26.05 Tests and Reports........................................... -44-
26.06 Tenant's Obligation to Respond.............................. -45-
26.07 Landlord's Right to Act..................................... -45-
26.08 Indemnification............................................. -45-
ARTICLE 27. TITLE AND COVENANT AGAINST LIENS............................ -46-
ARTICLE 28. MISCELLANEOUS............................................... -46-
28.01 Successors and Assigns...................................... -46-
28.02 Modifications in Writing.................................... -47-
28.03 No Option; Irrevocable Offer................................ -47-
28.04 Financial Statements........................................ -47-
28.05 Definition of Landlord...................................... -47-
28.06 Headings.................................................... -47-
28.07 Time of Essence............................................. -47-
28.08 Default Rate of Interest.................................... -47-
28.09 Severability................................................ -47-
28.10 Entire Agreement............................................ -48-
ARTICLE 29. EXCULPATORY PROVISIONS -48-
Attachments: EXHIBIT A THE LAND
EXHIBIT B FORM OF COMMENCEMENT NOTICE
EXHIBIT C OUTLINE SPECIFICATIONS FOR BASE BUILDING IMPROVEMENTS
EXHIBIT D SCHEDULE OF PLAN SUBMISSIONS
EXHIBIT E DIVISION OF RESPONSIBILITY BETWEEN BASE BUILDING
IMPROVEMENTS AND OFFICE IMPROVEMENTS
EXHIBIT F APPROVED CONTRACTORS
EXHIBIT G REQUIRED COMPLETION DATES
RIDER A BASE RENT
RIDER B RULES AND REGULATIONS
RIDER C CLEANING SPECIFICATIONS
RIDER D INITIAL ESTOPPEL CERTIFICATE
RIDER E PURCHASE CONTRACT
RIDER F OPERATION AND MAINTENANCE STANDARDS
iv
<PAGE>
LEASE with MAY & SPEH, INC., a Delaware corporation ("Tenant")
on Premises at 3333 Finley Road
Downers Grove, Illinois 60515
This Lease made as of the Date of Lease set forth in the following Schedule
(the "Schedule"), by and between Bank One, Illinois, N.A., not personally but
solely as Trustee under Trust Agreement dated May 23, 1997, and known as Trust
No. 11097 ("Landlord") and the Tenant identified immediately above.
SCHEDULE OF SIGNIFICANT TERMS
For purposes of this Lease, the terms set forth below shall have the
meanings or be assigned the amounts as follows:
Date of Lease: June 2, 1997
Base Rent (annual amount): See attached Rider A
Monthly Base Rent: One Twelfth of annual Base Rent
Commencement Date: The later of (i) September 1, 1998 and (ii)
the last Phase Commencement Date
Expiration Date: The last day of the 20th Lease Year (as
defined herein) or such earlier date as this
Lease is terminated as provided herein;
provided that if the Term of this Lease is
extended for an Extended Term, the
Expiration Date shall be the last day of
such Extended Term.
Term: The period beginning on the first Phase
Commencement Date and ending on the
Expiration Date.
Land: That certain parcel of real estate legally
described on Exhibit A attached hereto and
made a part hereof.
Building: The improvements to be constructed on the
land which is to be commonly known as 3333
Finley Road, Downers Grove, Illinois 60515,
consisting of an eight (8) story office
building, in accordance with Article 2
herein.
<PAGE>
Premises: The entire Building and Land.
Tenant's Address for Notices: At the Premises.
Tenant's Authorized
Representative: Eric Loughmiller
Attachments to Lease: Exhibit A The Land
Exhibit B Form of Commencement Notice
Exhibit C Outline Specifications for Base
Building Improvements
Exhibit D Schedule of Plan Submissions
Exhibit E Division of Responsibility
Between Base Building
Improvements and Office
Improvements
Exhibit F Approved Contractors
Exhibit G Required Completion Dates
Rider A Base Rent
Rider B Rules and Regulations
Rider C Cleaning Specifications
Rider D Initial Estoppel Certificate
Rider E Purchase Contract
Rider F Operation and Maintenance
Standards
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<PAGE>
SUPPLEMENTAL PROVISIONS
S.1 Definitions. As used herein,
(a) "1501 Lease" means the lease dated as of the Date of this Lease
between Landlord and Tenant for the building located at 1501 Opus Place, Downers
Grove, Illinois and the land thereunder.
(b) "Purchase and Sale Agreement" means the agreement dated April 16, 1997
under which Landlord purchased the Land and the premises under the 1501 Lease
from Tenant.
(c) "Phase Commencement Date" means with respect to each Office Space
Phase defined in Exhibit G, the later of (i) September 1, 1998 and (ii) the date
forty-five (45) days after the Ready for Occupancy date (as defined herein) for
such Office Space Phase.
S.2 Option to Extend.
(a) If (i) Tenant is not then in Default hereunder, and (ii) Tenant has
simultaneously exercised its option to extend the term of the 1501 Lease, then
Tenant shall have the option to extend the Term for an additional five (5) year
period commencing on the day next following the Expiration Date and ending on
the fifth (5th) anniversary of the Expiration Date ("First Extended Term") by
giving written notice of said extension to Landlord not later than nine (9)
months prior to the Expiration Date, time being of the essence.
(b) If (i) Tenant is not then in Default hereunder, and (ii) Tenant has
previously exercised its option to extend the Term for the First Extended Term
and has simultaneously exercised its option to extend the term of the 1501 Lease
for a like period, then Tenant shall have the option to extend the Term for an
additional five (5) year period commencing on the day next following the fifth
(5th) anniversary of the Expiration Date and ending on the tenth (10th)
anniversary of the Expiration Date ("Second Extended Term") by giving written
notice of said extension to Landlord not later than nine (9) months prior to the
end of the First Extended Term, time being of the essence.
(c) If (i) Tenant is not then in Default hereunder, and (ii) Tenant has
previously exercised its option to extend the Term for the Second Extended Term
and has simultaneously exercised its option to extend the term of the 1501 Lease
for a like period, then Tenant shall have the option to extend the Term for an
additional five (5) year period commencing on the day next following the tenth
(10th) anniversary of the Expiration Date and ending on the fifteenth (15th)
anniversary of the Expiration Date ("Third Extended Term") by giving written
notice of said extension to Landlord not later than nine (9) months prior to the
end of the Second Extended Term, time being of the essence. The First Extended
Term, Second Extended Term and Third Extended Term are hereinafter individually
and collectively referred to as the "Extended Term".
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<PAGE>
(d) If the Term is extended it shall be so extended on the same terms and
conditions then set forth in this Lease, including the annual Base Rent as set
forth in Rider A.
(e) Landlord and Tenant shall enter into a written supplement to this
Lease confirming the terms, conditions and provisions applicable during the
Extended Term as determined in accordance with the provisions of this Section
S.2. If Tenant fails to timely exercise its option to extend the Term for the
applicable Extended Term, then this Lease shall expire by its terms on the
expiration of the Term or the First Extended Term or the Second Extended Term,
as the case may be.
S.3 Vacant Space
(a) Landlord and Tenant acknowledge that even though the Premises includes
the entire Building, Tenant does not intend to initially occupy the second and
third floors ("Vacant Space") of the Building and the Office Improvements will
not include any construction on such floors. Additionally, prior to September 1,
2000, the annual Base Rent will not include any amount for the Vacant Space
unless Tenant occupies a portion of such floors for the conduct of its business.
Tenant shall notify Landlord in writing at least thirty (30) days prior to the
date Tenant intends to occupy any portion of the Vacant Space for the conduct of
its business (which shall not include use of such space for storage).
(b) All alterations, additions, improvements or modifications required for
Tenant's initial use of the Vacant Space ("Vacant Space Alterations") shall be
made by Tenant, at its sole cost and expense, except as provided below, in
accordance with the provisions of this Lease including without limitation
Article 12. Notwithstanding the foregoing, Landlord shall provide Tenant with an
allowance ("Vacant Space Construction Allowance") of $1,250,000 to be applied to
the cost of the Vacant Space Alterations incurred by Tenant from time to time,
including without limitation, the cost to prepare the plans and specifications
for such work. When and as Tenant occupies portions of the Vacant Space for the
conduct of its business, Landlord shall pay a portion of the Vacant Space
Construction Allowance to Tenant. The portion payable to Tenant upon such
occupancy shall be the lesser of (i) the cost of the Vacant Space Alterations
for the portion of the space occupied by Tenant and (ii) $1,250,000 multiplied
by the decimal equivalent of the percentage of the Vacant Space occupied by
Tenant. Landlord shall pay such portion of the Vacant Space Construction
Allowance to Tenant in accordance with paragraph (c) below.
(c) Tenant may draw funds against the Vacant Space Construction Allowance
at any time and from time to time subject to the following:
(i) Tenant may not make more than one draw in any calendar month;
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<PAGE>
(ii) Except for the final draw, the maximum amount of any draw shall
not exceed an amount which bears the same ratio to the portion of the
Vacant Space Construction Allowance applicable to the space being improved
by Tenant as the cost of the Vacant Space Alterations for such space paid
by Tenant and covered by the lien waivers submitted by Tenant in connection
with the draw request bears to the total cost of the Vacant Space
Alterations for such space;
(iii) With each draw request Tenant shall submit to Landlord the
following documents:
(A) A true and correct copy of the application for payment by
Tenant's contractors for Vacant Space Alterations for the space in
question completed to date, including contractor's affidavits and
sworn statements evidencing cost of Vacant Space Alterations for the
space in question performed to date;
(B) Partial or final lien waivers with respect to Vacant Space
Alterations for the space in question performed to date;
(C) Tenant's certification to Landlord that the amounts set
forth in all Contractor's sworn statements are owed to Tenant's
contractors for Vacant Space Alterations for the space in question
performed to date;
(D) The total cost of Vacant Space Alterations for the space
in question based on the plans approved by Landlord, as such cost may
change from time to time;
(E) With the final draw request, Tenant shall submit to
Landlord a certificate from Tenant's architect stating that Vacant
Space Alterations for the space in question has been completed in
accordance with the Plans approved by Landlord and applicable zoning,
building, environmental and other laws.
(iv) Landlord will disburse the portion of the Vacant Space
Construction Allowance allocable to each draw request to Tenant or Tenant's
contractors (at Tenant's option) within thirty (30) days after Tenant has
submitted the required information for such draw and has otherwise complied
with the requirements hereof.
S.4 Tenant's Option To Purchase. If Tenant exercises its option under the 1501
Lease to purchase the premises under such lease on the Closing Date defined
below, then Tenant shall have the option to purchase the Premises on September
1, 2001 or September 1, 2006 (the applicable date chosen by Tenant herein called
the "Closing Date") on the terms and conditions set forth in the Purchase
Contract attached hereto as Rider E ("Purchase Contract"). Tenant shall exercise
such option by delivery of written notice to Landlord on or before the February
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1 preceding the Closing Date exercising such option and four copies of the
Purchase Contract, with the Purchase Price and Closing Date filled in, executed
by Tenant. Time is of the essence in the exercise of the option to purchase set
forth in this Section S.4. If Tenant exercises the option as set forth in this
Section, Landlord shall execute the Purchase Contract and deliver two executed
copies thereof to Tenant. The Premises shall be purchased on the terms and
conditions set forth in the Purchase Contract.
S.5 Development of Third Building Parcel. Landlord shall have the right
to construct a building on the portion of the Land designated as the Third
Building Parcel on attached Exhibit A provided, that (i) Landlord replaces the
surface parking spaces on such parcel used in connection with the Building with
other surface parking spaces ("Replacement Spaces") on or adjacent to the Land
or in a parking structure constructed by Landlord on or adjacent to the Third
Building Parcel and (ii) Landlord obtains Tenant's consent to any development of
the Third Building Parcel commencing prior to September 1, 2007. Upon the
commencement of any development by Landlord of the Third Building Parcel, the
Third Building Parcel shall be deleted from the Premises and Land for purposes
of this Lease, and Landlord shall provide Tenant with appropriate easements for
access to and use of any Replacement Spaces not located on the Land. If Tenant
consents to the development of the Third Building Parcel prior to September 1,
2007, then Tenant's option to purchase the Premises under Section S.4 above
shall not include the Third Building Parcel.
S.6 Net Lease. This is an absolutely net lease to Landlord. It is the
intent of the parties hereto that the Base Rent payable under this Lease shall
be an absolutely net return to the Landlord and that the Tenant shall pay all
costs and expenses relating to the Premises and the business carried on therein,
unless otherwise expressly provided in the Lease. Any amount or obligation
relating to the Premises which is not expressly declared to be that of Landlord
shall be deemed to be an obligation of the Tenant to be performed by the Tenant
at the Tenant's expense.
S.7 Right of First Offer.
(a) Landlord hereby grants to Tenant, the right of first offer on any
disposition of the Premises excepting those dispositions specified in
Section S.7(b) below and subject to Section S.7(c) below.
(b) This right of first offer shall not apply to the following
dispositions of the Premises:
(i) any dispositions to any person or party who may acquire an
interest in the Premises in the nature of a security interest for a
bona fide obligation of any party owning an interest in the Premises
or any transferee thereof, whether by way of pledge, collateral
agreement, or mortgage,
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(ii) any person or party who may acquire an interest in the
Premises as a result of the enforcement (or transfer in lieu of
enforcement) of any bona fide obligation secured by an interest in the
Premises, or any transferee thereof, whether by way of purchase at any
Sheriff, judicial, or other sale, termination of lease and eviction of
the lessee thereunder, or any other remedy to which the holder of said
obligation is entitled,
(iii) any disposition to a Landlord Affiliate,
(iv) a leasehold interest in space in the Building, or
(v) any disposition after September 1, 2006.
(c) If Landlord shall desire to dispose of (any type of disposition
is hereinafter called "sale") the Premises in a transaction not excepted by
Section S.7(b), Landlord shall give Tenant written notice to that effect
which notice shall specify the price and financial terms ("Landlord's Price
and Terms") on which Landlord is willing to sell the Premises. Tenant shall
have the right at anytime during the thirty (30) day period following the
giving of such notice to give Landlord notice:
(i) that Tenant will purchase the Premises at Landlord's Price
and Terms, in which event the closing of said purchase shall occur on
a date selected by Tenant which date shall be between sixty (60) and
ninety (90) days after Tenant gives such notice;
(ii) of the price and financial terms ("Tenant's Price and
terms") on which Tenant is willing to purchase the Premises and the
proposed closing date for said purchase which shall be between sixty
(60) and ninety (90) days after the giving of such notice, or
(iii) that Tenant waives its right of first offer to purchase
the Premises.
(d) If Tenant gives the notice stated in Section S.7(c)(ii) then
Landlord by written notice to Tenant within thirty (30) days after receipt
of Tenant's Notice, shall elect either:
(i) to sell the Premises at Tenant's Price and Terms, in which
event the closing of such sale shall occur on the closing date set
forth in Tenant's notice, or
(ii) not to sell the Premises to Tenant at Tenant's Price and
Terms.
If Landlord fails to give Tenant any such notice within said thirty
(30) day period, Landlord shall be deemed to have given the notice
specified in (ii) immediately above.
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(e) (i) If Landlord gives or is deemed to have given the notice
specified in Section S.7(c)(ii), Landlord may enter into a written
agreement to sell the Premises at any time during the one hundred
eighty (180) day period after receipt of Tenant's notice for a price
and terms equal to or greater than (but not less than) Tenant's Price
and Terms. If Landlord does not enter into said written agreement
within said one hundred eighty (180) day period, or, if said agreement
is entered into, Landlord does not close the sale within two hundred
seventy (270) days after receipt of Tenant's notice, at a price and
terms equal to or greater than Tenant's Price and terms, then Landlord
may not sell the Premises without again giving Tenant notice of its
desire to sell the Premises as required by Section S.7(c).
(ii) If Tenant gave or is deemed to have given the notice in
Section S.7(c)(iii) then Landlord may enter into a written agreement
to sell the Premises at any time during the one hundred eighty (180)
day period after receipt of Tenant's notice or if no notice is given
within two hundred forty (240) days after Landlord's Notice on any
terms and conditions. If Landlord does not enter into said written
agreement within said one hundred eighty (180) or two hundred forty
(240) day period, or, if said agreement is entered into, Landlord does
not close the sale within two hundred seventy (270) days after receipt
of Tenant's notice or three hundred thirty (330) days after Landlord's
Notice, as the case may be, then Landlord may not sell the Premises
without again giving Tenant notice of its desire to sell said interest
in the Premises as required by Section S.7(c).
(f) If Tenant does not purchase the Premises offered pursuant to this
Section S.7 and the Premises is sold by Landlord in accordance with this
Section S.7, then Tenant shall have no further right of first offer under
this Section S.7 to purchase the Premises, but nothing herein shall affect
Tenant's option to purchase the Premises pursuant to Section S.4 above.
(g) At such time as the rights of first offer of Tenant hereunder
shall cease and be at an end and null and void, then at Landlord's request
Tenant shall execute and deliver to Landlord an instrument in recordable
form releasing all of its right under this Section S.7, which instrument
may be filed of record.
(h) In the event request is made of Tenant for written confirmation
that any proposed transaction is not subject to the rights of first offer
granted to Tenant pursuant to the provisions of this Section S.7, then if
Tenant has knowledge of said fact and if such is the case, Tenant, within
ten (10) days after notice of the proposed transaction and requested
confirmation, shall execute and deliver to the holder of any interest in
the Premises requesting said confirmation, a written statement confirming
that Tenant does not have the right of first offer with respect to said
proposed transaction.
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(i) Except for the Closing Date and the Price and Terms described
above, Tenant shall purchase the Premises on the terms and conditions set
forth in the Purchase Contract. Within ten (10) days after Tenant accepts
Landlord's Price and Terms or Landlord accepts Tenant's Price and Terms,
Tenant shall deliver to Landlord four (4) copies of the Purchase Agreement
modified to reflect the Price and Terms, the Closing Date and the property
to be purchased. Within ten (10) days thereafter, Landlord shall execute
such Purchase Contract and deliver two (2) execution copies to Tenant.
(j) If Landlord sells the Premises pursuant to Section S.7(e) above
for a price (before deduction for the costs and expenses incurred in
connection with such sale) ("Sales Price") in excess of the Applicable
Option Price, then Landlord shall pay to Tenant an amount equal to fifty
percent (50%) of the Excess Sale Proceeds (as defined below) at the same
time and in the same manner as such Excess Sale Proceeds are paid to
Landlord by the purchaser of the Premises. This Section S.7(j) shall not
apply to any disposition of the Premises described in Section S.7(b). As
used in this Section S.7(j):
(i) "Applicable Option Price" shall mean the Purchase Price
determined pursuant to Section 3.1 of the Purchase Contract attached
hereto as Rider E assuming (x) the Closing Date under such Contract
was the date the Premises was sold by Landlord and (y) the Total
Project Costs, as such term is used in the Purchase Contract, shall
not include the sum of (aa) $7,236,000, (bb) the portion of the
$500,000 Repair Allowance described in Section S.2 of the 1501 Lease
which has been paid by Landlord and (cc) all other costs expended by
Landlord to acquire the premises under the 1501 Lease from Tenant
pursuant to the Purchase and Sale Agreement.
(ii) "Excess Sale Proceeds" shall mean the Sale Price less the
Applicable Option Price and all costs and expenses incurred by
Landlord to sell the Premises, including without limitation,
prorations, attorney fees, title insurance and transfer taxes.
(k) As used herein "Landlord Affiliate" shall mean any natural person
or any firm, corporation, partnership, limited liability company,
association, trust or other entity which, directly or indirectly, controls,
or is under common control with landlord (or if Landlord is an Illinois
land trust, the holder of the beneficial interest in such land trust) and
any firm, corporation, partnership, association, trust or other entity
which is controlled by Landlord (or if Landlord is an Illinois land trust,
the holder of the beneficial interest in such land trust). For purposes
hereof, the term "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of any entity or the power to veto major policy decisions of
any entity, whether through the ownership of voting securities, by
contract, or otherwise.
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WITNESSETH:
ARTICLE 1.
GRANT AND TERM
1.01 Grant of Lease. Landlord, for and in consideration of the rents
reserved herein and of the covenants and agreements contained herein on the part
of Tenant to be performed, hereby leases to Tenant, and Tenant hereby leases
from Landlord, the Premises for the Term.
1.02 Possession. Tenant shall take possession of each Office Space Phase
on the Phase Commencement Date for such Phase. If Tenant takes possession of the
Building or any portion thereof for the conduct of its business prior to the
Phase Commencement Date for such space, all terms and provisions of this Lease
shall apply, including the obligation for the payment of Base Rent and Rent
Adjustments (both terms as hereinafter defined) for the portion of the Building
so occupied by Tenant at that time.
Based upon Landlord's reasonable estimate of the progress of construction,
Landlord shall notify Tenant of the anticipated Commencement Date not less than
sixty (60) days prior thereto. Not less than five (5) days after the
Commencement Date, Landlord shall deliver to Tenant a factually correct
Commencement Notice in the form attached hereto as Exhibit B, setting forth the
Commencement Date, and the other matters set forth in said form, and Tenant
shall execute and return a copy of such notice to Landlord. The Commencement
Notice shall be conclusive and binding on Tenant as to all matters set forth
therein. Notwithstanding the foregoing, neither Landlord's failure to request
nor Tenant's failure to execute any Commencement Notice shall affect the
determination of the Commencement Date. If the Commencement Date occurs on other
than the first day of a calendar month, Tenant shall pay a proportionate Base
Rent in advance at the monthly rate set forth herein for such partial month, as
well as any Rent Adjustments for such partial month.
1.03 Lease Year. As used in this Lease, the term "Lease Year" shall mean
(i) if the Commencement Date is the first day of a calendar month, the twelve
(12) month period commencing on the Commencement Date or (ii) if the
Commencement Date is not the first day of a calendar month, the period
commencing on the Commencement Date and ending on the last day of the twelfth
(12th) full calendar month of the Term, and in either case, each succeeding
twelve (12) month period thereafter which falls in whole or in part during the
Term.
ARTICLE 2.
CONSTRUCTION OF IMPROVEMENTS
2.01 Construction of Improvements. Subject to the terms and conditions
set forth in Sections 2.02 through 2.18, Landlord shall cause the Improvements,
as defined in Section 2.02, to be constructed on the Land.
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2.02 Landlord's Obligations. Landlord agrees to furnish all of the
material, labor and equipment for the construction of the improvements (the
"Base Building Improvements") specified in the "Outline Specifications for "Base
Building Improvements" attached hereto as Exhibit C and by this reference made a
part hereof. Landlord shall construct the Base Building Improvements in
accordance with the final plans and specifications for the Base Building
Improvements (the "Final Base Building Plans"), which Landlord shall cause to be
prepared in accordance with the "Schedule of Plan Submissions" attached hereto
as Exhibit D and by this reference made a part hereof. In addition, Landlord
agrees to furnish all of the material, labor and equipment for construction of
the Tenant office improvements (the "Office Improvements") in accordance with
final plans and specifications (the "Final Office Plans") which Tenant shall
cause to be prepared in accordance with the Schedule of Plan Submissions. The
term "Improvements" shall mean the Base Building Improvements and the Office
Improvements, collectively. The division of the Improvements between Base
Building Improvements and Office Improvements ("Tenant Improvement Work") is set
forth on attached Exhibit E. The Improvements shall be constructed in a good
and workerlike manner and in accordance with Applicable Laws, as hereinafter
defined. The Final Base Building Plans and Final Office Plans (collectively, the
"Final Plans") shall be (a) subject to the approval of Landlord and any local
governmental agencies having jurisdiction over the construction of the
Improvements and (b) revised, and the Improvements shall be modified, to
incorporate any revisions thereto required by any governmental agency or
Landlord. Landlord shall submit a cost estimate for the Office Improvements to
Tenant together with a schedule for completing the Improvements which shall set
forth any Tenant Delays and costs attributable thereto that have become apparent
during the designing and pricing of the Improvements.
2.03 Contractor and Architect. All work involved in the construction and
installation of the Improvements shall be carried out by a general contractor
selected by Landlord (the "Contractor"), under the sole direction of Landlord.
The Contractor shall be subject to Tenant's prior approval, such approval not to
be unreasonably withheld and such approval or disapproval shall be given to
Landlord within five (5) business days after requested by Landlord. Tenant
approves the Contractors listed on attached Exhibit F and by this reference made
a part hereof.
Tenant shall engage an architect ("Tenant's Architect") licensed to
practice in the State of Illinois, to prepare the Final Office Plans. Tenant and
Tenant's Architect shall cooperate with Landlord, Contractor and Architect to
promote the efficient and expeditious completion of such work. Tenant's
Architect shall be subject to Landlord's reasonable approval.
2.04 Landlord's Right to Make Changes. Landlord may (i) in preparing the
Final Base Building Plans, depart from the scope of the Outline Specifications
for Base Building Improvements due to reasons other than Changes, provided that
Tenant shall have the right to approve any Landlord Scope Changes materially
affecting the Building and (ii) make changes to the Final Plans provided the
Final Plans as modified, are consistent with the Base Building Improvements.
Landlord shall notify Tenant of any material changes to the Final Plans.
Tenant's consent shall be required for any changes having a value in excess of
$100,000. Tenant shall approve or disapprove such changes within three (3)
business days after Landlord's request for such consent.
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2.05 Definition of Changes. "Changes" shall mean any revisions to the
Improvements or the Final Plans which are (a) requested by Tenant and approved
by Landlord in Landlord's sole discretion, including, without limitation,
changes from the Outline Specifications for Base Building Improvements
(including any change in the square footage of the Building) which are
incorporated into the Final Plans during the initial preparation thereof, or (b)
required by any governmental agency in order to comply with any statutes,
ordinances, regulations or codes.
2.06 Costs of Changes. If Landlord approves Changes requested by Tenant,
or if Changes are required by any governmental agency, Landlord shall reasonably
determine any changes in the Costs (as defined herein) of the Improvements and
deliver to Tenant a notice setting forth a pricing schedule (the "Pricing
Schedule") setting forth a schedule of the Costs of the Changes and its non-
binding estimate of any Tenant Delays resulting from such changes. Landlord
shall revise the Pricing Schedule from time to time to reflect any further
Changes since the prior Pricing Schedule. Tenant shall be deemed to have
approved all Costs of Changes in connection with Changes that are required by
any governmental agency in order to comply with any statutes, ordinances,
regulations or codes. In the case of Changes requested by Tenant, Tenant shall
approve or disapprove in writing the Costs of the Changes shown in the Pricing
Schedule or any revised Pricing Schedule within seven (7) days after Landlord
submits the revised Pricing Schedule to Tenant and, if such approval is not
received by Landlord within the applicable seven (7) day period, Tenant shall be
deemed to have disapproved the Costs of such Changes. If Landlord approves
Changes requested by Tenant and Tenant approves the revised Pricing Schedule in
writing, or if Changes are required by a governmental agency, the work to be
performed by Landlord shall include the revisions to the Improvements shown in
the revised Final Plans.
2.07 Substitution of Materials. Landlord, at its option, may substitute
for items or materials provided for in the Final Plans, as revised from time to
time, other items or materials of equal or better kind and quality if, in
Landlord's reasonable judgment, the use of the items or materials provided for
in the Final Plans would cause delay in the completion of construction;
provided, however, that any substitutions which will materially and adversely
affect Tenant's use and occupancy of the Premises for its intended purpose shall
only be made with Tenant's prior written consent, which consent shall not be
unreasonably withheld or delayed.
2.08 Definition of Costs. As used herein, the term "Costs" shall mean and
refer to all costs expended by Landlord relative to the construction of the
Improvements and acquisition of the Land, which shall include, without
limitation, the costs of equipment, material and labor, contractor's field
overhead and fees, architectural, design and engineering fees, fees and expenses
of architects and other professionals for presentations to governmental
agencies, construction management fees, space studies, working drawings,
governmental agency fees, permit expenses, interest on construction financing
from the date of disbursement until such financing shall be repaid in full at
the rate charged to Landlord by its construction lender, construction loan fees,
insurance premiums, title insurance premiums, testing and inspection costs,
sales and use taxes, permits, plan check fees, impact fees, bonds, zoning costs,
subdivision expenses, infrastructure improvements and donations, Taxes (as
hereinafter defined), closing costs, land acquisition costs, legal expenses,
costs to prepare "as built" plans and documentations for the Building and
materials necessary to properly maintain the Building, and other costs directly
or indirectly related to the construction of the Improvements.
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2.09 Payment of Costs. Landlord shall pay the Costs of the work provided
for in the Outline Specifications for Base Building Work and the amount of any
increases in the Costs of the work due to Landlord Scope Changes, and Changes
required by governmental authority which are not related to Tenant Delay or
Changes requested by Tenant or required as a result of Changes requested by
Tenant ("Base Building Governmental Changes"). Within ten (10) days after
receipt from Landlord from time to time of invoices therefor, Tenant shall pay
the amount of any net increases in the Costs of the work provided for in the
Outline Specifications for Base Building Improvements due to (i) Changes other
than Landlord Scope Changes and Base Building Governmental Changes or (ii)
Tenant Delay. Landlord shall contribute Six Million Dollars ($6,000,000) as
Landlord's share of the Costs of the Office Improvements. All Costs of the
Office Improvements in excess of Six Million Dollars ($6,000,000) (the "Excess
Costs") shall be paid by Tenant following Landlord's expenditure of Six Million
Dollars ($6,000,000) for Costs of Office Improvements as follows, subject to
adjustment when the actual Costs of the Office Improvements are finally
determined:
(a) The Costs of the Office Improvements in excess of Six Million
Dollars ($6,000,000) shall be paid by the Tenant within ten (10) days of
Tenant's receipt from Landlord of an invoice for such Excess Costs.
(b) If the Costs of the Office Improvements are less than Six Million
Dollars ($6,000,000) the difference shall be applied to pay the Costs due to (i)
Changes other than Landlord Scope Changes and Base Building Governmental Changes
and (ii) Tenant Delays, or to reimburse Tenant for such Costs previously paid by
Tenant. Tenant shall not be entitled to any rebate or credit from Landlord or
any abatement of Rent for any portion of such difference not applied to the
Costs of Changes or Tenant Delays because such difference is taken into account
in determining the Base Rent.
2.10 Tenant's Right to Inspect the Building. In the event Tenant
desires to inspect the Building prior to the time it is Ready for Occupancy,
Tenant shall so notify Landlord thereof in writing and Landlord shall attempt to
schedule the desired inspection with Contractor or Architect, provided that in
no event shall Tenant's inspection interrupt or interfere with any work then
being performed by Landlord or its contractors or agents at the time of such
inspection.
2.11 Completion Date for the Building. Construction of the Improvements
shall be pursued diligently so that portions of the Building shall be Ready For
Occupancy by the dates set forth on attached Exhibit G ("Required Completion
Dates"), subject to extension due to Tenant Delays and Force Majeure Delays. If
the applicable portions of the Building are not Ready for Occupancy on the
Required Completion Dates for reasons other than Tenant Delay or Force Majeure
Delays, then as Tenant's sole remedy for such delay, Tenant shall be entitled to
abate Base Rent, on a per diem basis, as follows: (i) for the first thirty (30)
days that the Ready for Occupancy date is so delayed, one and five tenths (1.5)
days for each day of such delay and (ii) for any period in excess of thirty (30)
days of delay, two (2) days for such day that the Ready for Occupancy date is
delayed. If Landlord believes that it will not be in a position to deliver the
Building Ready for Occupancy on or before the Required Completion
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Date, Landlord shall be required to give Tenant thirty (30) days' advance notice
of the date upon which the Building shall be Ready for Occupancy.
2.12 Definition of Ready for Occupancy. Portions of the Building shall be
deemed "Ready for Occupancy" on the date of Substantial Completion (as defined
in Section 2.13) of the Improvements applicable to such portions of the
Building, or if the date of Substantial Completion is delayed due to Tenant
Delay (as hereinafter defined), the date Substantial Completion of the
Improvements applicable to such portions of the Building, would have occurred
but for such Tenant Delay.
2.13 Punch List. Not less than five (5) days prior to the Substantial
Completion of the Improvements, Landlord shall notify Tenant of a time and date
for inspection of the Improvements. Following Tenant's receipt of Landlord's
notice of a time and date for inspection of the Improvements, Tenant and
Tenant's Architect shall participate with Architect and Landlord in such
inspection, and Architect shall consult with Tenant's Architect regarding the
date of Substantial Completion and regarding the development by Architect of a
"Punch List" of items that are not yet completed; provided, however, that
Architect's determination of Substantial Completion and the Punch List shall be
conclusive. Tenant shall cause Tenant's Architect to cooperate with Architect in
developing the Punch List. Tenant agrees that, at the request of Landlord from
time to time, Tenant shall initial such Punch List or execute revised Punch
Lists to reflect partial completion of prior Punch List items. Landlord shall
diligently complete as soon as reasonably possible any items of work and
adjustment not completed on the date of Substantial Completion, and in
connection therewith, Landlord may enter into the Building to complete same.
Tenant may complete any Punch List items not completed within ninety (90) days
after date of Substantial Completion unless Landlord's failure to complete such
items was due to Landlord's or contractor's inability to obtain required
materials, Force Majeure Delays or Tenant Delays, Landlord shall reimburse
Tenant for the reasonable costs incurred by Tenant in completing the Punch List
items in accordance with this Section within thirty (30) days after receipt of
Tenant's invoice for such costs. Any costs incurred by Tenant to complete the
Punch List shall be included in the Costs of the Improvements. Such entry by
Landlord, its agents, employees, contractors or representatives for such purpose
shall not constitute an actual or constructive eviction, in whole or in part, or
entitle Tenant to any abatement or diminution of Base Rent or Rent Adjustments,
or relieve Tenant from any of its obligations hereunder, or impose any other
liability, on Landlord, its agents, employees, contractors or representatives.
As used herein, "Substantial Completion" means (i) for the Base Building Work,
the date certified by the architect as the date on which the Base Building
Improvements are substantially complete and (ii) for each Office Space Phase
described in Exhibit G, the date certified by the Architect as the date on which
the Improvements for such Office Space Phase are substantially complete so
Tenant can occupy the Office Space Phase for its normal business activity,
except for normal Punch List items not unreasonably interfering with Tenant's
use of the Office Space Phase and the mechanical, electrical, plumbing, heating,
ventilation and air conditioning systems serving the Office Space Phase are in
good working order.
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2.14 Contractor's and Landlord's Warranty. In lieu of all other
warranties and liability by reason of the construction of the Improvements or
otherwise, Landlord and Contractor shall warrant, for a period of one (1) year
from the date that the Building is Ready for Occupancy, that the Building is
free from all defects in materials or workmanship, including latent defects.
Landlord shall assign said Contractor's warranty to Tenant upon completion of
the Improvements and deliver all operation and maintenance manuals to Tenant. At
Tenant's request, Landlord shall enforce any rights it has under the
construction contract or the agreement with Landlord's architect and engineers
with respect to defects in materials or workmanship or design of the Building or
assign such rights to Tenant for enforcement during the Term.
2.15 Compliance with Law. Landlord represents and agrees that the Base
Building Improvements shall be designed in compliance with and in conformity to
all lawful requirements, rules, regulations, laws and ordinances of all legally
constituted authorities relating thereto ("Applicable Laws"), including without
limitation all "Environmental Laws" (as such term is hereinafter defined), and
Landlord shall cause Architect to furnish a certificate to Tenant that the Base
Building Improvements have been designed in compliance and conformance with
applicable building codes (i) as a condition to obtaining Tenant's approval of
the Final Base Building Plans and (ii) promptly following substantial completion
of the Improvements. Tenant warrants and agrees that the Office Improvements
shall be designed in compliance with and conformance with all Applicable Laws
and Tenant shall cause Tenant's Architect to furnish a certificate to Landlord
that the Office Improvements have been designed in accordance with applicable
building codes (i) as a condition to obtaining Landlord's approval of the Final
Office Plans and (ii) promptly following substantial completion of the
Improvements. If it becomes necessary to obtain any governmental permit or
approval, other than the customary building permit, in order to construct the
Improvements, Tenant agrees to cooperate fully with Landlord in all respects in
order to obtain the same.
2.16 Definition of Delays. As used in this Lease:
(a) "Tenant Delay" shall mean any delay in Landlord's completion of
the Improvements caused by:
(i) Tenant's or Tenant's Architect's failure to deliver or approve
plans within the time periods specified in the Schedule of Plan Submissions;
(ii) The Office Improvements are not in compliance with law;
(iii) Tenant's failure to approve Landlord's estimates for the Costs
of the Office Improvements or Changes within the time periods specified herein;
(iv) Changes requested by Tenant in the Improvements or the Final
Plans, notwithstanding Landlord's subsequent approval of such Changes,
including, without limitation, Changes from the Outline Specifications for Base
Building Improvements which are incorporated into the Final Base Building Plans
during the initial preparation thereof;
(v) Tenant's selection of so-called "long lead time items" whether
as to materials, finishes or installations;
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(vi) Tenant's failure to complete any work which Tenant is obligated
to perform and which is required for the issuance of a certificate of occupancy,
including, but not limited to, fire alarm installation in the Building; and
(vii) Any other delays caused by or significantly contributed to by
Tenant, Tenants' Architect, or their officers, employees, agents, contractors,
licensees or their representatives.
(b) "Force Majeure Delay" shall mean any delay in the completion of the
Improvements which is attributable to any: (1) actual delay or failure to
perform attributable to any regional or industry-wide strike, lockout or other
labor or industrial disturbance (whether or not on the part of the employees of
either party hereto), civil disturbance, act of a public enemy, war, riot,
sabotage, blockade, embargo, inability to secure customary materials, supplies
or labor through ordinary sources by reason of regulation or order of any
government or regulatory body; (2) delay attributable to the failure of Landlord
to secure building permits and approvals within the same time period that
normally prevailed for obtaining such permits at the time this Lease was
negotiated; (3) delay in completing the Final Plans because of changes in any
Applicable Laws or the interpretation thereof; or (4) delay attributable to
lightning, earthquake, fire, storm, hurricane, tornado, flood, washout,
explosion, or any other similar industry-wide or Building-wide cause beyond the
reasonable control of the party from whom performance is required, or any of its
contractors or other representatives.
2.17 Obligations of the Architects. Architect and Tenant's Architect,
within the scope of their respective duties, shall (a) be responsible for the
preparation of plans and specifications described in Section 2.02 on or before
the dates set forth in the Schedule of Plan Submissions, (b) cooperate with
Landlord, Contractor and Tenant to enable completion of the Improvements in
accordance with the Final Plans, including the preparation of drawings for the
modification of those Final Plans if Landlord and Tenant so require, and (c)
deliver a statement to Landlord, Tenant and any lender of Landlord upon
completion of the Improvements and from time to time during construction at the
time of each construction draw, as to the Improvements provided for in the Final
Plans prepared by such architect, in the form required by Landlord's lender,
that the Improvements have been completed in a good and workmanlike manner in
substantial compliance with the Final Plans so prepared by Architect or Tenant's
Architect (as the case may be) and all governmental regulations and ordinances.
Landlord and Tenant shall deliver to each other evidence of errors and omissions
insurance coverage carried by their respective architects with limits of
liability of not less than Two Million Dollars ($2,000,000).
2.18 Limitation of Landlord's Construction Obligation. Except as expressly
set forth in this Lease, Landlord has no agreement with Tenant and has no
obligation to do any other work with respect to the Premises. Any other work in
the Premises which Tenant may be permitted by Landlord to perform prior to
commencement of the Term shall be done at Tenant's sole cost and expense and in
accordance with the terms and conditions of the Lease, and shall be subject to
such requirements as Landlord deems reasonably necessary or desirable. Any
additional work or alterations to the Premises desired by Tenant after the
commencement of the Term shall be subject to the provisions of the Lease.
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ARTICLE 3.
BASE RENT
3.01 Base Rent. Tenant shall pay an annual base rent (hereinafter referred
to as "Base Rent") to Landlord for the Premises in the amount stipulated in the
Schedule, payable in equal monthly installments in the amount stipulated in the
Schedule, in advance on the first day of the Term and on the first day of each
calendar month thereafter of the Term, and at the same rate for fractions of a
month if the Term begins on any date except the first day of a calendar month or
ends on any day except the last day of a calendar month.
3.02 Manner of Payment. Base Rent, Tax Rent Adjustments (as hereinafter
defined), Tax Rent Adjustment Deposits (as hereinafter defined) and all other
amounts becoming due from Tenant to Landlord hereunder (hereinafter collectively
referred to as "Rent") shall be paid in lawful money of the United States to
Landlord at the office of Landlord, or as otherwise designated from time to time
by written notice from Landlord to Tenant. The payment of Rent hereunder is
independent of each and every other covenant and agreement contained in this
Lease, and Rent shall be paid without any setoff, abatement, counterclaim or
deduction whatsoever except as may be expressly provided herein.
ARTICLE 4.
TAXES
4.01 Obligation to Pay Tax Rent Adjustments. In addition to paying Base
Rent specified in Section 3.01, Tenant shall also pay, as additional rent, the
amount of the Taxes due for each Adjustment Year (hereinafter referred to as
"Tax Rent Adjustments"). Tenant agrees and acknowledges that Landlord has made
no representation, warranty or guaranty relating to the amount of Taxes. Tenant
has not relied upon any statements or representations of Landlord or any agent
or affiliate of Landlord in regard to Taxes in executing this Lease and agreeing
to perform the terms and covenants hereof and shall make no claim against
Landlord based thereon.
4.02 Definitions. As used in this Lease,
(a) "Adjustment Year" shall mean the calendar year in which the first
Phase Commencement Date occurs and each subsequent calendar year, all or any
part of which falls within the Term.
(b) "Taxes" shall mean real estate taxes, general or special
assessments, sewer rents, rates and charges, transit and transit district taxes,
taxes based upon the receipt of rent, and any other federal, state or local
governmental charge, whether general, special, ordinary or extraordinary (but
not including income or franchise taxes or any other taxes imposed upon or
measured by Landlord's income or profits, except as provided herein), which may
now or hereafter be levied, assessed or imposed against the Real Property.
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Notwithstanding anything contained in this clause (b) to the contrary:
(i) If at any time the method of taxation then prevailing is
altered so that any new or additional tax, assessment, levy,
imposition or charge or any part thereof is imposed upon Landlord in
place or partly in place of any such Taxes or contemplated increase
therein, or in addition to Taxes, and is measured by or is based in
whole or in part upon the Real Property or the rents or other income
therefrom, then all such new taxes, assessments, levies, impositions
or charges or part thereof, to the extent that they are so measured or
based, shall be included in Taxes levied, assessed or imposed against
the Real Property to the extent that such items would be payable if
the Real Property were the only property of Landlord subject thereto
and the income received by Landlord from the Real Property were the
only income of Landlord.
(ii) Notwithstanding the year for which any such taxes or
assessments are levied, (A) in the case of taxes or special
assessments which may be paid in installments, the amount of each
installment, plus any interest payable thereon, paid during a calendar
year shall be included in Taxes for that year and (B) if any taxes or
assessments payable during any calendar year shall be computed with
respect to a period in excess of twelve (12) calendar months, then
taxes or assessments applicable to the excess period shall be included
in Taxes for that year. Except as provided in the preceding sentence,
all references to Taxes "for" a particular year shall be deemed to
refer to taxes levied, assessed or otherwise imposed for such year
without regard to when such taxes are payable.
(iii) Taxes shall also include any personal property taxes
(attributable to the calendar year in which paid) imposed upon the
furniture, fixtures, machinery, equipment, apparatus, systems and
appurtenances which are components of the Real Property.
(c) "Real Property" means the Building and Land.
4.03 Payments of Tax Rent Adjustments. Tenant shall pay Tax Rent
Adjustments to Landlord as follows:
(a) Promptly after receipt of a statement from the appropriate
authority for any installment (including any estimated installment) of Taxes
payable during an Adjustment Year, Landlord shall furnish Tenant a written
notice ("Tax Installment Statement") setting forth the amount of Taxes shown to
be due on such statement of Taxes. Within fifteen (15) days after receipt of
Landlord's Tax Installment Statement, Tenant shall pay to Landlord the Tax
Adjustment shown as due on the Tax Installment Statement.
(b) Prior to the end of the final Adjustment Year, Landlord shall
deliver to Tenant a written notice ("Final Year Tax Notice") setting forth
Landlord's reasonable estimate, forecast or projection (the "Tax Projection") of
Taxes (1) applicable to any prior Adjustment Year which have not yet been paid
by Tenant to Landlord and (2) applicable to such final
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Adjustment Year. Within fifteen (15) days following Landlord's delivery of the
Final Year Tax Notice, Tenant shall pay Landlord the Tax Projection shown on the
Final Year Tax Notice. Any Tax Projection paid by Tenant for any Adjustment Year
shall be applied as a credit against the amounts owed by Tenant for such
Adjustment Year pursuant to subparagraph (a) above, provided that if the Taxes
for such Adjustment Year are payable in installments, the Tax Projection applied
as a credit shall be divided equally among the installments to be paid by
Tenant.
(c) If any First Mortgagee (as defined in Section 18.01) requires
periodic deposits for Taxes or other security for the payment of Taxes, Tenant
shall pay such periodic deposits to Landlord when and as required by the First
Mortgagee or provide such security to the First Mortgagee. Any deposits made by
Tenant for an Adjustment Year shall be applied as a credit against Taxes payable
by Tenant pursuant to subparagraph (a) above and any Tax Projection required
under subparagraph (b) above. Landlord shall use reasonable efforts to exclude
from the First Mortgage documents any requirement for periodic deposits of Taxes
or other security for the payment of Taxes. If Landlord is unable to eliminate
the requirement for periodic deposits of Taxes, Landlord shall use reasonable
efforts to have such deposits held in an interest bearing account with the
interest to be held for Tenant's account.
4.04 Proration and Survival. With respect to any Adjustment Year which
does not fall entirely within the Term, Tenant shall be obligated to pay as Tax
Rent Adjustments for such Adjustment Year only a pro rata share of Tax Rent
Adjustments as herein determined, based upon the number of days of the Term
falling within the Adjustment Year. Following expiration or termination of this
Lease, Tenant shall pay any Tax Rent Adjustments due to Landlord within fifteen
(15) days after the date of each Landlord's Statement sent to Tenant. Without
limitation of other obligations of Tenant which shall survive the expiration of
the Term, the obligation of Tenant to pay Tax Rent Adjustments provided for in
this Article 4 accruing during the Term shall survive the expiration or
termination of this Lease.
ARTICLE 5.
USE OF PREMISES
Tenant shall use and occupy the Premises for general office purposes and
uses incidental thereto permitted under law and for no other use or purpose.
ARTICLE 6.
UTILITIES
6.01 Payment for Utilities. Tenant will pay, when due, all charges of
every nature, kind or description for utilities and other services furnished to
the Premises during the Term or chargeable against the Premises with respect to
the Term, including all charges for water, sewage, heat, gas, light, garbage,
electricity, telephone, steam, power, or other public or private utility
services. Tenant shall also pay for all utilities or services at the Premises
used by it or
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its agents, employees or contractors prior to commencement of the Term.
6.02 Utilities. Tenant shall be responsible for contracting directly with
all suppliers of utility services. In the event that any charge or fee is
required by the State of Illinois, or by any agency, subdivision or
instrumentality thereof, or by any utility company or other entity furnishing
services or utilities to the Premises, as a condition precedent to furnishing or
continuing to furnish utilities or services to the Premises, such charge or fee
shall be deemed to be a utility charge payable by Tenant. The provisions of this
paragraph shall include, but shall not be limited to, any charges or fees for
present or future water or sewer capacity to serve the Premises, any charges for
the underground installation of gas or other utilities or services, and other
charges relating to the extension of or change in the facilities necessary to
provide the Premises with adequate utility services to the extent such
installations or extensions are not reflected in the Final Plans or any Changes
thereto. Tenant may elect to cause the Final Plans to provide for separate
metering of utilities to various portions of the Building. If Tenant makes such
an election, the Costs of such separate metering shall be paid in the same
manner as all other Costs of the Office Improvements by Tenant. In the event
that Landlord has paid any such charge or fee after the date hereof, Tenant
shall reimburse Landlord for such utility charge upon Landlord's demand
therefor. The inability of Tenant to obtain, or any stoppage of, the utility
services referred to in this Article 6 resulting from any cause shall not
constitute a constructive eviction, shall not make Landlord liable in any
respect for damages to any person, property or business, and shall not entitle
Tenant to any abatement of Rent or other relief from any of Tenant's obligations
under this Lease.
ARTICLE 7.
CONDITION, CARE AND OPERATION OF PREMISES
7.01 Condition of Premises. Tenant's taking possession of the Premises or
any portion thereof shall be conclusive evidence against Tenant that the portion
of the Premises for which possession was taken in good order and satisfactory
condition, subject to Landlord's obligation to complete Punch List items and
latent defects in the Improvements.
7.02 Tenant's Maintenance and Operation Obligations. Tenant shall keep
the Premises, including any improvements thereto by Tenant, in good order and in
a safe, neat and clean condition and will take all action and will make, except
as otherwise stated herein, all structural and nonstructural, foreseen and
unforeseen and ordinary and extraordinary changes, repairs and replacements.
Tenant's obligations under this Article shall include without limitation all
repairs and replacements to the roof, structure, supports, foundation, floors,
gutters, downspouts, windows, doors, exterior walls, parking areas, and
sidewalks, the maintenance of the landscaping on the Premises in a neat and
attractive condition and the removal of all snow and ice from the walkways,
parking areas and drives on the Premises and the operation, maintenance and
repair of all building systems. It is the intent of the parties hereto, that
Tenant shall bear all responsibility for the maintenance, upkeep and replacement
of the Premises, Building and Land. Tenant's operation, maintenance and repair
of the Premises shall be conducted in accordance with the standards set forth on
Rider F attached hereto and made a part
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hereof. In the event Tenant fails to commence promptly and pursue diligently the
performance of such maintenance or the making of such repairs or replacements,
then Landlord, at its option, may perform such maintenance or make such repairs
and replacements and Tenant shall reimburse Landlord, on demand after Tenant
receives an invoice therefor, the cost thereof plus a fee equal to fifteen
percent (15%) of the actual costs to cover the overhead. No representations
respecting the condition of the Premises or the Building have been made by
Landlord to Tenant except as specifically set forth in this Lease.
Notwithstanding the foregoing to the contrary, Tenant shall not have any
obligation to repair or replace any item covered by Landlord's and Contractor's
warranty described in Section 2.14. If Tenant incurs any costs in connection
with its maintenance and repair obligations with respect to the Base Building
Improvements during the last five (5) years of the Term or any Extended Term
(last seven (7) years in the case of a replacement of the roof of the Building)
which under generally accepted accounting principles ("GAAP") is required to be
capitalized and depreciated ("Base Building Capital Costs") and the Term of this
Lease expires prior to the end of the applicable depreciation period under GAAP,
then upon expiration of this Lease, Landlord shall pay to Tenant a pro rata
portion of such costs based on the ratio of the portion of the depreciation
period not included within the Term to the total depreciation period. Tenant
shall not incur any Base Building Capital Costs without Landlord's prior written
consent.
7.03 Work Performed by Tenant. All repairs made by Tenant pursuant to
Section 7.02 shall be performed in a good and workmanlike manner by contractors
or other repair personnel selected by Tenant and approved by Landlord. All
contracts for such maintenance and repair services shall be subject to
Landlord's reasonable approval. In no event shall such work be done for
Landlord's account or in a manner which allows any liens to be filed against the
Building or the Premises in violation of Article 27.
7.04 Janitorial Service. Tenant shall be responsible for providing
janitorial service for the Premises at Tenant's sole cost and expense in
accordance with the standards attached hereto as Rider C. Such janitorial
service shall be performed by a company and pursuant to a contract reasonably
satisfactory to Landlord.
7.05 Waste. Tenant shall not do or suffer any waste or damage,
disfigurement or injury to the Premises, or any improvements hereafter erected
thereon, or to the fixtures or equipment therein, or permit or suffer any
overloading of the floors or other use of the improvements that would place an
undue stress on the same or any portion thereof beyond that for which the same
was designed.
ARTICLE 8.
RETURN OF PREMISES
8.01 Surrender of Possession. At the termination of this Lease by lapse
of time or otherwise, or upon termination of Tenant's right of possession
without termination of this Lease, Tenant shall surrender possession of the
Premises to Landlord and deliver all keys to the Premises to Landlord and make
known to Landlord the combination of all locks of vaults then
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remaining in the Premises, and, subject to the following paragraph, shall return
the Premises and all equipment and fixtures of Landlord therein to Landlord in
as good condition as when Tenant originally took possession or, if there is a
Punch List, when the work provided for in the Punch List is completed, ordinary
wear, and damage resulting from the act of Landlord or its employees and agents
excepted, failing which Landlord may restore the Premises and such equipment and
fixtures to such condition and Tenant shall pay the cost thereof to Landlord on
demand.
8.02 Installations and Additions. All installations, additions,
partitions, hardware, light fixtures, non-trade fixtures and improvements,
whether temporary or permanent, except movable furniture and equipment belonging
to Tenant, in or upon the Premises, whether placed there by Tenant or Landlord,
shall be Landlord's property and shall remain upon the Premises, all without
compensation, allowance or credit to Tenant; provided, however, that if prior to
such termination or within ten (10) days thereafter Landlord so directs by
notice, Tenant, at Tenant's sole cost and expense, shall promptly remove such of
the installations, additions, partitions, hardware, light fixtures, non-trade
fixtures and improvements placed in the Premises by Tenant as are designated in
such notice and repair any damage to the Premises caused by such removal,
failing which Landlord may remove the same and repair the Premises and Tenant
shall pay the cost thereof to Landlord on demand.
8.03 Trade Fixtures and Personal Property. Tenant also shall remove
Tenant's furniture, machinery, safes, trade fixtures and other items of movable
personal property of every kind and description from the Premises and restore
any damage to the Premises caused thereby, such removal and restoration to be
performed prior to the end of the Term or within ten (10) days following
termination of this Lease or Tenant's right of possession, whichever is earlier.
If Tenant fails to remove such items, Landlord may do so and thereupon the
provisions of Section 17.06 shall apply and Tenant shall pay to Landlord upon
demand the cost of removal and of restoring the Premises.
8.04 Survival. All obligations of Tenant under this Article shall survive
the expiration of the Term or earlier termination of this Lease.
ARTICLE 9.
HOLDING OVER
Tenant shall pay Landlord for each day Tenant retains possession of the
Premises or any part thereof after termination of this Lease, by lapse of time
or otherwise, or of Tenant's right to possession of the Premises, an amount
which is double the amount of Base Rent and Rent Adjustments for a day based on
the annual rate of Base Rent set forth in Section 3.01 and on the Rent
Adjustments provided for in Article 4 in effect immediately prior to such
termination, and Tenant shall also pay all direct damages sustained by Landlord
by reason of such retention. Acceptance by Landlord of rent after such
termination, of itself, shall not constitute a renewal. Nothing contained in
this Section shall be construed or shall operate as a waiver of Landlord's right
of reentry or any other right or remedy of Landlord.
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ARTICLE 10.
RULES AND REGULATIONS
Tenant agrees to observe and not to interfere with the rights reserved to
Landlord contained in Article 11 and agrees, for itself, its employees, agents,
contractors, invitees and licensees, to comply with the rules and regulations
set forth in Rider B attached to this Lease and made a part hereof and such
other rules and regulations as may be adopted by Landlord pursuant to Section
11.01(e) of this Lease. Any violation by Tenant of any of the rules and
regulations contained in Rider B or any other Section of this Lease, or as may
hereafter be adopted by Landlord pursuant to Section 11.01(e) of this Lease, may
be restrained; but whether or not so restrained, Tenant acknowledges and agrees
that it shall be and shall remain liable for all damages, loss, costs and
expenses resulting from any violation by Tenant of any of said rules and
regulations.
ARTICLE 11.
RIGHTS RESERVED TO LANDLORD
11.01 Rights Reserved to Landlord. Landlord reserves the following
rights, exercisable without notice and without liability to Tenant for damage or
injury to property, person or business and without effecting an eviction or
disturbance of Tenant's use or possession or giving rise to any claim for setoff
or abatement of Rent or affecting any of Tenant's obligations under this Lease:
(a) Except for portions of the Premises designated by Tenant as
"secured areas" on floor plans, delivered to Landlord, to retain at all times,
and to use in appropriate instances, pass keys to the Premises;
(b) Upon reasonable advance written or telephone notice, to exhibit
the Premises at reasonable hours, and to decorate, remodel, repair, alter or
otherwise prepare the Premises for reoccupancy at any time after Tenant vacates
or abandons the Premises;
(c) To enter the Premises at reasonable hours, upon reasonable prior
notice and for reasonable purposes, including inspection, subject to Tenant's
reasonable security restrictions;
(d) To make any repairs, alterations, improvements and additions in
and about the Building and the Premises during ordinary business hours and, if
Tenant desires to have such work done during other than business hours, Tenant
shall pay all overtime and additional expenses resulting therefrom; and
(e) From time to time to make and adopt such reasonable rules and
regulations, in addition to or other than or by way of amendment or modification
of the rules and regulations contained in Rider B or other Sections of this
Lease, which are not inconsistent
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with the Terms of this Lease for the protection and welfare of the Building as
Landlord may determine, and Tenant agrees to abide by and comply with all such
rules and regulations.
ARTICLE 12.
ALTERATIONS
Tenant shall not make, without the prior written consent of Landlord, any
alterations, additions or improvements to the Premises. Notwithstanding the
foregoing, Landlord's consent shall not be required for normal decorating work
such as painting and installation of wall coverings and carpeting. Landlord
shall not unreasonably withhold or delay its consent to alterations, additions
or improvements to the Building which do not affect the exterior, or structural
portions of the Building or the base building mechanical, electrical, plumbing,
elevator, security or other systems in the Building. If Landlord consents to
such alterations, additions or improvements, before commencement of the work or
delivery of any materials onto the Premises or into the Building, Tenant shall
furnish to Landlord, for its approval, plans and specifications, names and
addresses of contractors, copies of contracts, necessary permits and licenses,
and instruments of indemnification against any and all claims, costs, expenses,
damages and liabilities which may arise in connection with such work, all in
such form, substance and amount as may be satisfactory to Landlord. In addition,
prior to commencement of any such work or delivery of any materials into the
Premises, Tenant shall provide Landlord with appropriate evidence of Tenant's
ability to pay for such work and materials in full. All alterations, additions
and improvements shall be installed in a good, workerlike manner and only new,
high-grade materials shall be used. All such work shall be done only by
contractors or mechanics reasonably approved by Landlord and shall be subject to
Landlord's scheduling requirements and regulations. Tenant further agrees to
hold Landlord harmless from any and all liabilities of every kind and
description which may arise out of or be connected in any way with said
alterations, additions or improvements. Before commencing any work in connection
with such alterations, additions or improvements, Tenant shall furnish Landlord
with certificates of insurance from all contractors performing labor or
furnishing materials insuring Landlord against any and all liabilities which may
arise out of or may be connected in any way with said alterations, additions or
improvements. Tenant shall permit Landlord to supervise construction operations
in connection with the foregoing work if Landlord requests to do so. Tenant
shall pay the cost of all such alterations, additions and improvements, as well
as the cost of decorating the Premises occasioned by such alterations, additions
and improvements, including the cost of labor and materials, contractors'
profit, overhead, general conditions and a reasonable fee to Landlord. Upon
completing any alterations, additions or improvements, Tenant shall furnish
Landlord with (i) contractors' affidavits in form required by law, and full and
final waivers of lien and receipted bills covering all labor and materials
expended and used and (ii) "as built" or record drawings showing all
alterations, additions and improvements to the Premises. All alterations,
additions and improvements shall comply with all insurance requirements and with
all city and county ordinances and regulations and with the requirements of all
state and federal statutes and regulations.
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ARTICLE 13.
ASSIGNMENT AND SUBLETTING
13.01 Assignment and Subletting. Without the prior written consent of
Landlord in each instance and subject to Sections 13.08 and 13.09 below, Tenant
shall not (a) assign, transfer, mortgage, pledge, hypothecate or encumber or
subject to or permit to exist upon or be subjected to any lien or charge, this
Lease or any interest under it; (b) allow to exist or to occur any transfer of
or lien upon this Lease or Tenant's interest herein by operation of law; (c)
sublet the Premises or any part thereof; or (d) permit the use or occupancy of
the Premises or any part thereof for any purpose not provided for under Article
5 of this Lease or by anyone other than Tenant and Tenant's employees. Landlord
has the absolute right to withhold its consent without giving any reason
whatsoever, except as expressly provided herein to the contrary. In no event
shall this Lease be assigned or assignable by voluntary or involuntary
bankruptcy proceedings or otherwise, and in no event shall this Lease or any
rights or privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency or reorganization proceedings.
13.02 Rentals Based on Net Income. Without limiting the generality of the
foregoing provisions of this Article, Tenant expressly covenants and agrees not
to enter into any lease, sublease, license, concession or other agreement for
use, occupancy or utilization of the Premises which provides for rental or other
payment for such use, occupancy or utilization based in whole or in part on the
net income or profits derived by any person from the property leased, used,
occupied or utilized (other than an amount based on a fixed percentage or
percentages of receipts or sales), and that any such purported lease, sublease,
license, concession or other agreement shall be absolutely void and ineffective
as a conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises.
13.03 Tenant to Remain Obligated. Consent by Landlord to any assignment,
subletting, use, occupancy or transfer shall not operate to relieve Tenant from
any covenant or obligation hereunder except to the extent, if any, expressly
provided for in such consent, or be deemed to be a consent to or relieve Tenant
from obtaining Landlord's consent to any subsequent assignment, transfer, lien,
charge, subletting, use or occupancy. Tenant shall pay all of Landlord's costs,
charges and expenses, including reasonable attorneys' fees, incurred in
connection with any assignment, transfer, lien, charge, subletting, use or
occupancy made or requested by Tenant. Tenant agrees that all advertising by
Tenant or on Tenant's behalf with respect to the assignment of this Lease or
subletting of space must be approved in writing by Landlord prior to publication
which approval shall not be unreasonably withheld or delayed.
13.04 Landlord's Consent. Tenant shall advise Landlord, by written notice
("Tenant Notice"), of its intention from, on and after a stated date (which
shall not be less than sixty (60) days after the date of Tenant's notice) to
assign this Lease or to sublet any part or all of the Premises for any part of
the Term. Tenant's notice shall state the name and address of the proposed
subtenant or assignee, and a true and complete copy of the proposed sublease or
assignment and sufficient information to permit Landlord to determine the
financial responsibility and character of the proposed subtenant or assignee
shall be delivered to Landlord with said notice. Landlord will not withhold its
consent unreasonably to Tenant's assignment of this Lease
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or Tenant's subletting the space covered by its notice. Landlord shall not be
deemed to have withheld its consent unreasonably to a sublease of part or all of
the Premises or an assignment of this Lease if its consent is withheld because:
(a) Tenant is then in Default hereunder; (b) any notice of termination of this
Lease or termination of Tenant's possession is given under Article 17; (c) the
portion of the Premises which Tenant proposes to sublease, including the means
of ingress thereto and egress therefrom and the proposed use thereof, and the
remaining portion of the Premises will violate any city, state or federal law,
ordinance or regulation, including, without limitation, any applicable building
code or zoning ordinances; (d) the proposed use of the Premises by the subtenant
or assignee does not conform with the use permitted by Article 5; (e) in the
reasonable judgment of Landlord, the proposed subtenant or assignee is of a
character or is engaged in a business which would be deleterious to the
reputation of the Building, or the subtenant or assignee is not sufficiently
financially responsible to perform its obligations under the proposed sublease
or assignment; (f) the sublessee's or assignee's business is likely to cause
greater wear and tear to the Premises than occasioned by Tenant's use or (g) the
proposed subtenant or assignee is a government or a government agency; provided,
however, that the foregoing are merely examples of reasons for which Landlord
may withhold its consent and shall not be deemed exclusive of any permitted
reasons for reasonably withholding consent, whether similar to or dissimilar
from to the foregoing examples. Landlord shall either approve or disapprove a
proposed assignment or sublease within thirty (30) days after receipt of the
information and documents described in the second sentence of this Section
13.04.
13.05 Profits. If Tenant, having first obtained Landlord's consent to any
sublease or assignment, or if Tenant or a trustee in bankruptcy for Tenant
pursuant to the Bankruptcy Code, assigns this Lease or sublets the Premises, or
any part thereof, at a rental or for other consideration in excess of the Rent
or pro rata portion thereof due and payable by Tenant under this Lease, then
Tenant shall pay to Landlord as additional rent fifty percent (50%) of any such
excess rent or other monetary consideration immediately upon receipt under any
such assignment or, in the case of a sublease, (a) on the first day of each
month during the term of any sublease the excess of all rent and other
consideration due from the subtenant for such month over the Rent then payable
to Landlord pursuant to the provisions of this Lease for said month (or if only
a portion of the Premises is being sublet, the excess of all rent and other
consideration due from the subtenant for such month over the portion of the Rent
then payable to Landlord pursuant to the provisions of this Lease for said month
which is allocable on a square footage basis to the space sublet) and (b)
immediately upon receipt thereof, any other consideration realized by Tenant
from such subletting; it being agreed, however, that Landlord shall not be
responsible for any deficiency if Tenant assigns this Lease or sublets the
Premises or any part thereof at a rental less than that provided for herein.
Notwithstanding the foregoing, Tenant shall not be required to pay Landlord any
amounts pursuant to this Section 13.05 until the amount of the excess rent and
other consideration received by Tenant equals the reasonable out of pocket costs
incurred by Tenant in entering into such sublease or assignment including
without limitation brokers' and attorneys' fees, advertising costs, tenant
buildout costs and construction allowances. The provisions of this Section 13.05
shall not apply to an assignment or sublease described in Sections 13.08 or
13.09 which does not require Landlord's consent.
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13.06 Assignee to Assume Obligations. If Tenant assigns this Lease as
permitted herein, the assignee shall expressly assume all of the obligations of
Tenant hereunder in a written instrument satisfactory to Landlord and furnished
to Landlord not later than fifteen (15) days prior to the effective date of the
assignment. If Tenant subleases the Premises as permitted herein, Tenant shall
obtain and furnish to Landlord, not later than fifteen (15) days prior to the
effective date of such sublease and in form satisfactory to Landlord, the
written agreement of such subtenant to the effect that the subtenant will attorn
to Landlord, at Landlord's option and written request, in the event this Lease
or Tenant's right to possession of the Premises terminates before the expiration
of the sublease.
13.07 Change of Control. Notwithstanding anything to the contrary in this
Article, except as provided in 13.08 below, any change during the Term of this
Lease of the ownership of the shares of stock which constitute control of Tenant
other than by reason of gift or death shall be deemed an assignment of this
Lease and shall be subject to the provisions of this Article 13. The term
"control" as used herein means the power, directly or indirectly, to direct or
to cause the direction of the management or policies of Tenant.
13.08 Transfer By Merger or Sale or To an Affiliate.
(a) Tenant shall have the right, subject to the terms and conditions
hereinafter set forth, without the consent of Landlord, to (i) assign, its
interest in this Lease to any corporation or other entity which is a successor
to Tenant either by reincorporation in another jurisdiction, merger or
consolidation, (ii) assign its interest in this Lease to a purchaser of all or
substantially all of Tenant's assets (provided such purchaser shall have also
assumed substantially all of Tenant's liabilities) or Tenant's stock, or (iii)
assign its interest in this Lease or sublease all or any portion of the Premises
to a Tenant Affiliate, all upon the condition that in each case (x) the
principal purpose of such assignment or sublease is not the acquisition of
Tenant's interest in this Lease (except if such assignment or sublease is made
to an Affiliate and is made for a valid intracorporate business purpose and is
not made to circumvent the provisions of Section 13.1 of this Article), (y) any
such assignee shall have a net worth and annual income and cash flow which shall
meet the requirements set forth in Section 13.08(b) below and (z) any such
assignee or subtenant shall consent, in writing, to the exclusive jurisdiction
of the courts of Illinois and the Federal courts located in the County of Cook,
State of Illinois. Tenant shall, within ten (10) business days after execution
thereof, deliver to Landlord (A) if an assignment, a duplicate original
instrument of assignment in form and substance reasonably satisfactory to
Landlord, duly executed by Tenant, (B) if applicable, evidence satisfactory to
Landlord establishing compliance by the assignee or subtenant with the net
worth, annual income and cash flow requirements of clause (z) above, (C) if an
assignment, an instrument in form and substance reasonably satisfactory to
Landlord, duly executed by the assignee, in which such assignee shall assume
observance and performance of, and agree to be personally bound by, all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed and (D) if a sublease, a duplicate original sublease in form and
substance reasonably satisfactory to Landlord, duly executed by Tenant and the
subtenant.
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(b) As a condition precedent to any assignment which shall otherwise
be permitted under Section 13.08(a) above, such proposed assignee or subtenant
shall have as of the effective date of such assignment or subletting:
(i) (A) an excess of total assets (including intangible
assets) over total liabilities of not less than One Hundred Twenty-
Five Million Dollars ($125,000,000.00), provided that the assets
(other than intangible assets) are not less than One Hundred Million
Dollars ($100,000,000.00);
(B) a ratio of current assets to current liabilities of
not less than two (2) to one (1); and
(C) an excess of (y) annual gross cash receipts (other
than from a financing, sale of an equity interest in such assignee or
guarantor, or sale of long-term assets), over (z) the sum, without
duplication, of annual cash operating expenses and annual debt service
payments and regularly scheduled amortization of principal (other than
so-called "balloon" payments of principal due at maturity) due on all
outstanding indebtedness, of not less than two (2) times the annual
Rent due hereunder for each period; or
(ii) a bond rating of "AA" from Standard & Poor's or "AA" from
Moody's as of the date of such assignment and as of the first
anniversary of such assignment; or
(iii) in the case of an insurance company, a "Best's Rating of
"A" and a "Financial Size Category" of at least "VIII" in Best's
Insurance Guide as of the date of such assignment and as of the first
anniversary of such assignment; or
(iv) in the case of any national, foreign or state chartered
commercial bank not rated by Standard & Poor's or Moody's, (y) total
assets in excess of One Billion Dollars ($1,000,000,000.00) and (x)
net cash flow from operations of not less than five (5) times the
annual Rent due hereunder, and be in compliance with all applicable
laws and regulations dealing with capital adequacy, as of the date of
such assignment and at the end of the twelve (12) month period
subsequent to the date of such assignment.
All financial criteria set forth in this Section 13.08(b) shall be
determined in accordance with generally accepted accounting principles
consistently applied (or its equivalent in the case of non-U.S. entities) and
based upon annual reports (or fiscal year-end financial statements) of such
assignee or guarantor certified by an independent public accounting firm.
(c) A Tenant Affiliate shall mean any person, corporation or other
entity which controls or is controlled by or is under common control with
Tenant. As used herein, "control" shall mean the same meaning as set forth in
Section 13.07.
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13.09 Sublease with Customers. Tenant shall have the right, without the
consent of Landlord, to sublease portions of the Premises to customers and
clients of Tenant in connection with the provision of Tenant's services to such
customers and clients on the condition that (a) the principal purpose of such
sublease is not the acquisition of Tenant's interest in this Lease and (b) no
more than twenty-five percent (25%) of the Premises shall be covered by
subleases described in this Section 13.09.
13.10 Restrictions on Assignment and Sublease. Notwithstanding anything
in this Lease to the contrary, Tenant may not assign this Lease to any person or
entity or sublease substantially all the Premises to any person or entity unless
Tenant also assigns the 1501 Lease to the same person or entity or subleases
substantially all the Premises under the 1501 Lease to the same person or
entity.
ARTICLE 14.
WAIVER OF CERTAIN CLAIMS; INDEMNITY BY TENANT
14.01 Waiver of Certain Claims; Indemnity by Tenant. To the extent not
prohibited expressly by law, Tenant releases Landlord and its beneficiaries, if
any, and their agents, servants and employees, from and waives all claims for
damages to person or property sustained by Tenant or by any occupant of the
Premises or the Building, or by any other person, resulting directly or
indirectly from fire or other casualty, cause or any existing or future
condition, defect, matter or thing in or about the Premises, the Building or any
part of it, or from any equipment or appurtenance therein, or from any accident
in or about the Building, or from any act or neglect of any tenant or other
occupant of the Building or any part thereof or of any other person. This
Section shall apply especially, but not exclusively, to damage caused by water,
snow, frost, steam, excessive heat or cold, sewerage, gas, odors or noise, or
the bursting or leaking of pipes or plumbing fixtures, broken glass, sprinkling
or air conditioning devices or equipment, or flooding of basements, and shall
apply without distinction as to the person whose act or neglect was responsible
for the damage and whether the damage was due to any of the acts specifically
enumerated above, or from any other thing or circumstance, whether of a like
nature or of a wholly different nature. Subject to Section 21.01 nothing in this
Section or in Section 14.03 shall release Landlord from liability for its
negligence or the negligence of its agents and employees.
14.02 Damage Caused by Tenant's Neglect. If any damage to the Premises or
the Building or any equipment or appurtenance therein, whether belonging to
Landlord or to other tenants or occupants of the Building, results from any act
or neglect of Tenant, its employees, agents, contractors, licensees or invitees,
Tenant shall be liable therefor and if such damage is not repaired within thirty
(30) days after written notice from Landlord, Landlord may repair such damage at
its option and Tenant shall reimburse Landlord, upon demand by Landlord, for all
costs of such repairs and damages in excess of amounts, if any, paid to Landlord
under insurance covering such damage.
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14.03 Tenant Responsible for Personal Property. All personal property
belonging to Tenant or any occupant of the Premises that is in the Building or
the Premises shall be there at the risk of Tenant or other person only and
Landlord shall not be liable for damage thereto or theft or misappropriation
thereof.
14.04 Indemnification.
(a) To the extent not prohibited expressly by law, Tenant agrees to
hold Landlord and its beneficiaries, if any, and their officers, agents,
servants and employees, harmless and to indemnify each of them against claims
and liabilities, including reasonable attorneys' fees, for injuries to all
persons and damage to or theft or misappropriation or loss of property occurring
in or about the Premises arising from Tenant's occupancy of the Premises or the
conduct of its business or from any activity, work, or thing done, permitted or
suffered by Tenant in or about the Premises or from any breach or default on the
part of Tenant in the performance of any covenant or agreement on the part of
Tenant to be performed pursuant to the terms of this Lease or due to any other
act or omission of Tenant, its agents, contractors, invitees, licensees or
employees, but only to the extent of Landlord's liability, if any, in excess of
amounts, if any, paid to Landlord under insurance covering such claims or
liabilities.
(b) To the extent not prohibited expressly by law, Landlord agrees to
hold Tenant and its officers, agents, servants and employees, harmless and to
indemnify each of them against claims and liabilities, including reasonable
attorneys' fees, for injuries to all persons and damage to or theft or
misappropriation or loss of property occurring in or about the Premises arising
from the negligent acts of Landlord or its beneficiary or their employees,
agents or servants, or from any breach or default on the part of Landlord in the
performance of any covenant or agreement on the part of Landlord to be performed
pursuant to the terms of this Lease or due to any other act or omission of
Landlord or its beneficiaries or their agents, contractors, licensees or
employees, but only to the extent of Tenant's liability, if any, in excess of
amounts, if any, paid to Tenant under insurance covering such claims or
liabilities.
ARTICLE 15.
DAMAGE OR DESTRUCTION BY CASUALTY
15.01 Tenant's Obligation to Rebuild. In the event of damage to, or
destruction of, any improvements on the Premises, or of the fixtures and
equipment therein, by fire or other casualty, Tenant shall promptly, at its
expense, repair, restore or rebuild to the extent possible to the same design,
plans and specifications as existed prior to the casualty. Rent shall not be
reduced or abated during the period of such repair, restoration or rebuilding
even if the improvements are not tenantable.
15.02 Preconditions to Rebuilding. Before Tenant commences such
repairing, restoration or rebuilding involving an estimated cost of more than
Fifty Thousand Dollars ($50,000.00), plans and specifications therefor, prepared
by a licensed architect satisfactory to Landlord shall be submitted to Landlord
for approval and Tenant shall furnish to Landlord (a)
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an estimate of the cost of the proposed work, certified to by said architect;
(b) satisfactory evidence of sufficient contractor's comprehensive general
liability insurance covering Landlord, builder's risk insurance, and workmen's
compensation insurance; and (c) such other security as Landlord may require to
insure payment for the completion of all work free and clear of liens.
Landlord's approval of the plans and specifications shall not be unreasonably
withheld if such plans and specifications comply with the provisions of Section
15.01.
15.03 Payment for Rebuilding. All sums arising by reason of loss under
the insurance referred to in Section 21.02(c) shall be deposited with the
Depository pursuant to Section 15.06, and Tenant shall deposit with the
Depository any excess cost of the work over the amount held by the Depository as
proceeds of the insurance within thirty (30) days from the date of the
determination of the cost of the work by the architect in accordance with
Section 15.02. Tenant shall diligently pursue the repair or rebuilding of the
improvements in a good and workmanlike manner, using only high quality workmen
and materials. The Depository shall pay out construction funds from time to time
on the written direction of the architect, after making provision for a
reasonable holdback, for the purpose of completing such repair or rebuilding and
upon receipt of appropriate contractors' statements, with supporting affidavits
and lien waivers. Notwithstanding the foregoing, if the cost of the repair or
restoration is less than $50,000, all proceeds of insurance shall be paid to
Tenant in trust to be used for restoration and repair of such damage.
15.04 Excess Insurance Proceeds. Any excess of money received from
insurance remaining with the Depository after the repair or rebuilding of
improvements, if there is no default by Tenant in the performance of the
Tenant's covenants and agreements hereunder, shall be paid to Tenant; otherwise
said moneys shall be paid to Landlord. If this Lease shall be terminated
pursuant to Section 15.05, all insurance proceeds shall be paid to by Landlord.
15.05 Failure to Rebuild. If (i) Tenant shall not enter upon the repair
or rebuilding of the improvements within a period of ninety (90) days after the
insurance proceeds are made available by Landlord pursuant to Section 15.03 or
(ii) after commencement of such repair or rebuilding, Tenant does not prosecute
the same thereafter with such dispatch as may be necessary to complete the same
within a reasonable period after said damage or destruction occurs, and the
repair and rebuilding is not completed within one year from the date the
insurance proceeds are made available pursuant to Section 15.03, then, in
addition to whatever other remedies Landlord may have either under this Lease,
at law or in equity, Landlord may retain insurance proceeds, or the balance
thereof remaining in the hands of Landlord as security for the continued
performance and observance by Tenant of the Tenant's covenants and agreements
hereunder, or Landlord may terminate this Lease or Tenant's possession of the
Premises and then retain the amount so held as damages resulting from the
failure on the part of Tenant to comply with the provisions of this Article.
15.06 Deposits. All insurance proceeds, condemnation awards and amounts
deposited by Tenant ("Net Proceeds") shall be deposited with a bank or other
financial institution designated by the First Mortgagee, or if there is no First
Mortgagee, by Tenant (the "Depository"). Tenant may direct the investment of the
amounts so deposited with the Depository in the following:
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(a) repurchase obligations of the Depository at all times fully
secured by direct and general obligations of the United States of America or
obligations guaranteed as to principal and interest by the United States of
America;
(b) direct and general obligations of the United States of America or
obligations guaranteed as to principal and interest by the United States of
America purchased at a price not more than par;
(c) certificates of deposit of the Depository at all times secured as
provided by applicable law; or
(d) commercial paper which is rated "A-1" or better (or comparable
ratings) by Standard & Poor's Corporation or "P-1" or better (or comparable
ratings) by Moody's Investors Service, Inc., or the successors to such rating
organizations.
Such investments of such funds shall mature in such amounts and on such
dates as to provide that amounts shall be available on the draw dates sufficient
to pay the amounts requested, and due to, Landlord or Tenant as the case may be.
The Depository shall not be liable for any loss resulting from the liquidation
of each and every such investment. The terms and conditions relating to such
deposit and investments shall otherwise be satisfactory to Landlord, Tenant and
the Depository. All interest or other earnings net of investment fees of the
Depository shall be added to and deemed to be part of Net Proceeds.
ARTICLE 16.
EMINENT DOMAIN
16.01 Whole Taking. If the entire Building or a substantial part thereof
is taken or condemned by any competent authority for any public or quasi-public
use or purpose, the Term of this Lease shall end upon and not before the earlier
of the date when the possession of the part so taken is required for such use or
purpose or the effective date of the taking, and without apportionment of the
award to or for the benefit of Tenant. If any condemnation proceeding is
instituted in which it is sought to take or damage any part of the Building, the
taking of which, in Landlord's opinion, would prevent the economical operation
of the Building, or if the grade of any street or alley adjacent to the Building
is changed by any competent authority, and such taking, damage or change of
grade makes it necessary or desirable to remodel the Building to conform to the
taking, damage or changed grade, Landlord shall have the right to terminate this
Lease upon not less than ninety (90) days' notice prior to the date of
termination designated in the notice. In either of these events, Rent at the
then current rate shall be apportioned as of the date of the termination. No
money or other consideration shall be payable by Landlord to Tenant for the
right of termination, and Tenant shall have no right to share in the
condemnation award, whether for a total or partial taking, for loss of Tenant's
leasehold or improvements or other loss or expenses or in any judgment for
damages caused by the change of grade. Tenant may however file a separate claim
for Allocation expenses and for any of Tenant's personal property taken,
provided such claim does not reduce Landlord's award.
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16.02 Partial Taking. If only a part of the Premises shall be so taken or
condemned, and as a result thereof the balance of the Premises can be used for
the same purpose as prior to such taking, this Lease shall not terminate and
Tenant, at its sole cost and expense, shall repair and restore the Premises and
all improvements thereon to the extent of the condemnation award. Tenant shall
promptly and diligently proceed to make a complete architectural unit of the
remainder of the improvements first complying with the procedure set forth in
Section 15.02. The amount of the award relating to the improvements and shall be
held and disbursed in accordance with the procedure set forth in Sections 15.03
and 15.06. If Tenant does not make a complete architectural unit of the
remainder of the improvements within a reasonable period after such taking or
condemnation, not to exceed three hundred sixty five (365) days, then, in
addition to whatever other remedies Landlord may have either under this Lease,
at law or in equity, Landlord may receive the entire award or the balance
thereof remaining in the custody of the Depository, as the case may be, as
liquidated damages resulting from the failure of Tenant to comply with the
provisions of this Section. Any portion of such award as may not have to be
expended for such repairing or restoration shall be paid to Landlord. There
shall be no abatement or reduction in any rental because of such taking or
condemnation unless a portion of the Building is taken in which event Base Rent
shall abate based on the percentage of the rentable space in the Building so
taken and not replaced pursuant to this Section.
ARTICLE 17.
DEFAULT
17.01 Events of Default. The occurrence of any one or more of the
following matters constitutes a Default by Tenant under this Lease:
(a) Failure by Tenant to pay any Rent when due if such failure
continues for ten (10) days after notice from Landlord of such failure;
(b) Failure by Tenant to pay when due any other monies required to be
paid by Tenant under this Lease if such failure continues for ten (10) days
after notice from Landlord of such failure;
(c) Failure by Tenant to cure, immediately after receipt of notice
from Landlord, any hazardous condition which Tenant has created in violation of
law or of this Lease;
(d) Failure by Tenant to observe or to perform any other covenant,
agreement, condition or provision of this Lease, if such failure continues for
thirty (30) days after notice thereof from Landlord to Tenant;
(e) The levy upon, under writ of execution or the attachment by legal
process of, the leasehold interest of Tenant, or the filing or creation of a
lien with respect to such leasehold interest, which lien shall not be released
or discharged within ten (10) days from the date of such filing;
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(f) Tenant vacates or abandons the Premises or fails to take
possession of the Premises when available for occupancy (the transfer of a
substantial part of the operations, business and personnel of Tenant to some
other location being deemed, without limiting the meaning of the term, "vacates
or abandons," to be a vacation or abandonment within the meaning of this clause
(h) unless Tenant posts a full-time security guard at the Premises), whether or
not Tenant thereafter continues to pay Rent due under this Lease;
(g) Tenant becomes insolvent or bankrupt or admits in writing its
inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors, or applies for or consents to the appointment of a trustee
or receiver for Tenant or for the major part of its property;
(h) A trustee or receiver is appointed for Tenant or for the major
part of its property and is not discharged within sixty (60) days after such
appointment;
(i) Any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings for relief under any bankruptcy
law, or similar law for the relief of debtors, are instituted (i) by Tenant or
(ii) against Tenant and are allowed against it or are consented to by it or are
not dismissed within sixty (60) days after such institution;
(j) The aggregate number of days of Tenant Delay shall exceed
thirty (30); or
(k) A Default occurs under the 1501 Lease.
17.02 Rights and Remedies of Landlord. If a Default occurs, Landlord shall
have the rights and remedies hereinafter set forth, which shall be distinct,
separate and cumulative and which shall not operate to exclude or deprive
Landlord of any other right or remedy allowed it by law:
(a) Landlord may terminate this Lease by giving to Tenant notice of
Landlord's election to do so, in which event the Term of this Lease shall end,
and all rights, title and interest of Tenant hereunder shall expire, on the date
stated in such notice;
(b) Landlord may terminate the right of Tenant to possession of the
Premises without terminating this Lease by giving notice to Tenant that Tenant's
right of possession shall end on the date stated in such notice, whereupon the
right of Tenant to possession of the Premises or any part thereof shall cease on
the date stated in such notice; and
(c) Landlord may enforce the provisions of this Lease and may
enforce and protect the rights of Landlord hereunder by a suit or suits in
equity or at law for the specific performance of any covenant or agreement
contained herein, or for the enforcement of any other appropriate legal or
equitable remedy, including recovery of all moneys due or to become due from
Tenant under any of the provisions of this Lease.
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17.03 Right to Re-Enter. If Landlord exercises either of the remedies
provided for in Sections 17.02(a) or (b), Tenant shall surrender possession and
vacate the Premises and shall deliver immediately possession thereof to
Landlord, and Landlord may re-enter and take complete and peaceful possession of
the Premises, with process of law, full and complete license to do so being
hereby granted to Landlord, and Landlord may remove all occupants and property
therefrom, using such force as may be necessary, without being deemed guilty in
any manner of trespass, eviction or forcible entry and detainer and without
relinquishing Landlord's right to rent or any other right given to Landlord
hereunder or by operation of law.
17.04 Current Damages. If Landlord terminates the right of Tenant to
possession of the Premises without terminating this Lease, Landlord shall have
the right to immediate recovery of all amounts then due hereunder. Such
termination of possession shall not release Tenant, in whole or in part, from
Tenant's obligation to pay the Rent hereunder for the full Term, and Landlord
shall have the right, from time to time, to recover from Tenant, and Tenant
shall remain liable for, all Base Rent, Rent Adjustments and any other sums
accruing as they become due under this Lease during the period from the date of
such notice of termination of possession to the stated end of the Term. In any
such case, Landlord shall use diligent efforts to mitigate its damages and to
relet the Premises or any part thereof for the account of Tenant for such rent,
for such time (which may be for a term extending beyond the Term of this Lease)
and upon such terms as Landlord shall determine and collect the rents from such
reletting. Landlord shall not be required to accept any tenant offered by Tenant
or to observe any instructions given by Tenant relative to such reletting. Also,
in any such case, Landlord may make repairs, alterations and additions in or to
the Premises and redecorate the same to the extent reasonably deemed by Landlord
necessary or desirable and in connection therewith change the locks to the
Premises, and Tenant shall pay upon demand the cost of all the foregoing
together with Landlord's expenses of reletting. The rents from any such
reletting shall be applied first to the payment of the expenses of reentry,
redecoration, repair and alterations and the expenses of reletting and second to
the payment of Rent herein provided to be paid by Tenant. Any excess or residue
shall operate only as an offsetting credit against the amount of Rent due and
owing as the same thereafter becomes due and payable hereunder, and the use of
such offsetting credit to reduce the amount of Rent due Landlord, if any, shall
not be deemed to give Tenant any right, title or interest in or to such excess
or residue and any such excess or residue shall belong to Landlord solely, and
in no event shall Tenant be entitled to a credit on its indebtedness to Landlord
in excess of the aggregate sum, including Base Rent and Rent Adjustments, which
would have been paid by Tenant for the period for which the credit to Tenant is
being determined, had no Default occurred. No such reentry or repossession,
repairs, alterations and additions, or reletting shall be construed as an
eviction or ouster of Tenant or as an election on Landlord's part to terminate
this Lease, unless a written notice of such intention is given to Tenant, or
shall operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, and Landlord, at any time and from time to time, may sue
and recover judgment for any deficiencies from time to time remaining after the
application from time to time of the proceeds of any such reletting.
17.05 Final Damages. If this Lease is terminated by Landlord as provided
in Section 17.02(a), Landlord shall be entitled to recover from Tenant all Rent
accrued and unpaid for the period up to and including such termination date, as
well as all other additional sums payable
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by Tenant, or for which Tenant is liable or in respect of which Tenant has
agreed to indemnify Landlord under any of the provisions of this Lease, which
may be then owing and unpaid, and all reasonable costs and expenses, including
court costs and attorneys' fees incurred by Landlord in the enforcement of its
rights and remedies hereunder, and, in addition, Landlord shall be entitled to
recover as damages for loss of the bargain and not as a penalty the aggregate
sum which at the time of such termination represents the excess, if any, of the
present value of the aggregate rents which would have been payable after the
termination date had this Lease not been terminated, including, without
limitation, Base Rent at the annual rate or respective annual rates for the
remainder of the Term provided for in Article 2 of this Lease or elsewhere
herein and the amount projected by Landlord to represent Rent Adjustments for
the remainder of the Term pursuant to Article 3 of this Lease, over the then
present value of the then aggregate fair rental value of the Premises for the
balance of the Term, such present worth to be computed in each case on the basis
of a five percent (5%) per annum discount from the respective dates upon which
such rentals would have been payable hereunder had this Lease not been
terminated, and (c) any damages in addition thereto, including reasonable
attorneys' fees and court costs, which Landlord has sustained as a result of the
breach of any of the covenants of this Lease other than for the payment of Rent.
17.06 Removal of Personal Property. All property of Tenant removed from
the Premises by Landlord pursuant to any provisions of this Lease or of law may
be handled, removed or stored by Landlord at the cost and expense of Tenant, and
Landlord in no event shall be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay Landlord for all expenses incurred by
Landlord in such removal and storage charges against such property as long as
the same is in Landlord's possession or under Landlord's control. All such
property not removed from the Premises or retaken from storage by Tenant within
thirty (30) days after the end of the Term, however terminated, at Landlord's
option, shall be conclusively deemed to have been conveyed by Tenant to Landlord
as by bill of sale without further payment or credit by Landlord to Tenant.
17.07 Attorneys' Fees. Tenant shall pay all of Landlord's costs, charges
and expenses, including court costs and attorneys' fees, incurred in
successfully enforcing Tenant's obligations under this Lease, incurred by
Landlord in any action brought by Tenant in which Landlord is the prevailing
party, or incurred by Landlord in any litigation, negotiation or transaction in
which Tenant causes Landlord, without Landlord's fault, to become involved or
concerned. Landlord shall pay all of Tenant's costs, charges and expenses,
including court costs and attorneys' fees, incurred in successfully enforcing
Landlord's obligations under this Lease, incurred by Tenant in any action
brought by Landlord in which Tenant is the prevailing party, or incurred by
Tenant in any litigation, negotiation or transaction in which Landlord causes
Tenant without Tenant's fault, to become involved or concerned.
17.08 Assumption or Rejection in Bankruptcy. If Tenant is adjudged
bankrupt, or a trustee in bankruptcy is appointed for Tenant, Landlord and
Tenant, to the extent permitted by law, agree to request that the trustee in
bankruptcy determine within sixty (60) days thereafter whether to assume or to
reject this Lease.
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ARTICLE 18.
SUBORDINATION
18.01 Subordination. Landlord intends to execute and deliver and may
execute and deliver hereafter from time to time a first mortgage or first trust
deed in the nature of a mortgage, both being hereinafter referred to as a "First
Mortgage," against the Land and Building or any interest therein. If requested
by the mortgagee or trustee under any First Mortgagee, Tenant will either (a)
subordinate its interest in this Lease to said First Mortgage, and to any and
all advances made thereunder and to the interest thereon, and to all renewals,
replacements, supplements, amendments, modifications and extensions thereof, or
(b) make certain of Tenant's rights and interest in this Lease superior thereto;
and Tenant will execute and deliver such agreement or agreements promptly, as
may be reasonably required by such First Mortgagee; provided that, as a
condition to subordinating its rights and interests under this Lease to any
mortgage or trust deed, Tenant shall be entitled to require the First Mortgagee
to enter into a non-disturbance and attornment agreement with Tenant, which
agreement shall be in said holder's standard form not inconsistent with this
Lease. Tenant covenants it will not subordinate this Lease to any mortgage or
trust deed other than a First Mortgage without the prior written consent of the
First Mortgagee.
18.02 Liability of Holder of First Mortgage; Attornment. It is further
agreed that (a) if any First Mortgage shall be foreclosed, (i) the holder of the
First Mortgagee, or purchaser at any foreclosure sale (or grantee in a deed in
lieu of foreclosure), as the case may be, shall not be (x) liable for any act or
omission of any prior landlord (including Landlord), (y) subject to any offsets
or counterclaims which Tenant may have against a prior landlord (including
Landlord), or (z) bound by any prepayment of Base Rent or Rent Adjustments which
Tenant may have made in excess of the amounts then due for the next succeeding
month, (ii) the liability of the First Mortgagee or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as Landlord
under this Lease shall exist only so long as such trustee, mortgagee, purchaser
or owner is the owner of the Building or Land and such liability shall not
continue or survive after further transfer of ownership; and (iii) upon request
of the First Mortgagee, if the First Mortgage is foreclosed, Tenant will attorn,
as Tenant under this Lease, to the purchaser at any foreclosure sale under any
First Mortgage, and Tenant will execute such instruments as may be necessary or
appropriate to evidence such attornment; and (b) this Lease may not be modified
or amended so as to reduce Rent or shorten the Term provided hereunder, or so as
to affect adversely in any other respect to any material extent the rights of
Landlord, and this Lease shall not be cancelled or surrendered, without the
prior written consent, in each instance, of the First Mortgagee.
18.03 Modification Required by First Mortgagee. Should any prospective
First Mortgagee require a modification or modifications of this Lease, which
modification or modifications will not cause an increased cost or expense to
Tenant or in any other way materially change the rights and obligations of
Tenant hereunder, Tenant agrees that this Lease may be so modified and agrees to
execute whatever documents are required therefor and deliver the same to
Landlord within ten (10) days following the request therefor.
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18.04 Short Form Lease. Should any prospective First Mortgagee require
execution of a short form of lease for recording (containing the names of the
parties, a description of the Premises, and the term of this Lease) or a
certification from Tenant concerning this Lease in such form as may be required
by a prospective mortgagee, Tenant agrees to promptly execute such short form of
lease or certificate and deliver the same to Landlord within ten (10) days
following the request therefor.
ARTICLE 19.
MORTGAGEE PROTECTION
Tenant agrees to give any First Mortgagee, by registered or certified mail,
a copy of any notice or claim of default served upon Landlord by Tenant,
provided that prior to such notice, Tenant has been notified in writing, by way
of service on Tenant of a copy of an assignment of Landlord's interests in
leases, or otherwise, of the address of such First Mortgagee. Tenant further
agrees that if Landlord has failed to cure such default within twenty (20) days
after such notice to Landlord (or if such default cannot be cured or corrected
within that time, then such additional time as may be necessary if Landlord has
commenced within such twenty (20) days and is pursuing diligently the remedies
or steps necessary to cure or correct such default), then the First Mortgagee
shall have an additional thirty (30) days within which to cure or correct such
default (or if such default cannot be cured or corrected within that time, then
such additional time as may be necessary if such First Mortgagee has commenced
within such thirty (30) days and is pursuing diligently the remedies or steps
necessary to cure or correct such default, including the time necessary to
obtain possession if possession is necessary to cure or correct such default).
ARTICLE 20.
ESTOPPEL CERTIFICATE
Upon execution of this Lease by Landlord and Tenant, Tenant shall
simultaneously execute and deliver a copy of the Estoppel Certificate attached
hereto as Rider D. Tenant agrees that from time to time upon not less than ten
(10) days' prior request by Landlord, or any First Mortgagee or any ground
lessor, Tenant (or any permitted assignee, subtenant, licensee, concessionaire
or other occupant of the Premises claiming by, through or under Tenant) will
deliver to Landlord or to any First Mortgagee or ground lessor, a statement in
writing signed by Tenant certifying (a) that this Lease is unmodified and in
full force and effect (or if there have been modifications, that this Lease as
modified is in full force and effect and identifying the modifications); (b) the
date upon which Tenant began paying Rent and the dates to which Rent and other
charges have been paid; (c) that Landlord is not in default under any provision
of this Lease, or, if in default, the nature thereof in detail; (d) that the
Premises have been completed in accordance with the terms hereof and Tenant is
in occupancy and paying Rent on a current basis with no rental offsets or claims
or if not state the exceptions to the items not completed in accordance with the
Final Plans; (e) that there has been no prepayment of Rent other than that
provided for in this Lease; (f) that there are no actions, whether voluntary or
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otherwise, pending against Tenant under the bankruptcy laws of the United States
or any State thereof; and (g) such other matters as may be reasonably required
and not inconsistent with the terms of this Lease by Landlord, the First
Mortgagee or ground lessor.
ARTICLE 21.
SUBROGATION AND INSURANCE
21.01 Waiver of Subrogation. Landlord and Tenant agree to have all "all-
risk" coverage and other property damage insurance and any rent loss or business
interruption insurance which may be carried by either of them endorsed with a
clause providing that any release from liability of or waiver of claim for
recovery from the other party entered into in writing by the insured thereunder
prior to any loss or damage shall not affect the validity of said policy or the
right of the insured to recover thereunder and providing further that the
insurer waives all rights of subrogation which such insurer might have against
the other party. Without limiting any release or waiver of liability or recovery
set forth elsewhere in this Lease, and notwithstanding anything in this Lease
which may appear to be to the contrary, each of the parties hereto waives all
claims for recovery from the other party for any loss or damage to any of its
property insured under valid and collectible insurance policies to the extent of
any recovery collectible under such insurance policies. Notwithstanding the
foregoing or anything contained in this Lease to the contrary, any release or
any waiver of claims shall not be operative, and the foregoing endorsements
shall not be required, in any case where the effect of such release or waiver is
to invalidate insurance coverage or invalidate the right of the insured to
recover thereunder or increase the cost thereof (provided that in the case of
increased cost the other party shall have the right, within ten (10) days
following written notice, to pay such increased cost keeping such release or
waiver in full force and effect).
21.02 Tenant's Insurance. Tenant shall carry insurance during the entire
Term hereof with terms, coverages and in companies satisfactory to Landlord and
with such increases in limits as Landlord may request from time to time, but
initially Tenant shall maintain the following coverages in the following
amounts:
(a) Comprehensive or commercial general liability insurance,
including contractual liability, on an occurrence basis, in an amount not
less than Fifteen Million Dollars ($15,000,000.00) combined single limit
per occurrence, covering Tenant, Landlord and its beneficiaries as a named
insured and Landlord's mortgagee as an additional insured.
(b) Insurance against fire, sprinkler leakage, vandalism and the
extended coverage perils for the full replacement cost of all additions,
improvements and alterations to the Premises owned or made by Tenant, if
any, and of all office furniture, trade fixtures, office equipment,
merchandise and all other items of Tenant's property on the Premises, with
loss or damage payable to Landlord and Tenant as their interests may
appear.
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(c) Standard Fire and Extended Coverage Policy and all other risks of
direct physical loss as insured against under Special Extended Coverage
Endorsement, insuring the improvements at any time situated upon the Premises
against loss or damage by fire, lightning, wind storm, hail storm, aircraft,
vehicles, smoke, explosion, riot or civil commotion. The insurance coverage
shall be for not less than 100% of the full replacement cost of such improvement
with all proceeds of insurance payable to Landlord. Landlord shall be a named
insured on such policies. The insurance shall include standard mortgagee loss
payable clauses for benefit of Landlord's Mortgagee. The full replacement cost
of improvements shall be determined every five (5) years by an insurance
appraiser selected by Tenant with Landlord's reasonable approval and paid for by
Tenant or by other means reasonably acceptable to Landlord and its First
Mortgagee. Any insurance appraiser hired by Tenant shall submit a written report
of his appraisal to Landlord and Tenant and if said report shows that the
improvements are not insured as herein required, Tenant shall promptly obtain
such additional insurance as is required;
(d) Boiler Insurance, insuring Landlord and Tenant with the same
limits of coverage as provided in subsection (c) for loss or damage by
boiler or internal explosion or break down of boilers;
(e) Worker's Compensation Insurance, insuring Tenant from all
worker's compensation claims;
(f) Plate Glass Insurance, insuring Landlord and Tenant from damage
to any plate glass on the Premises; and
(g) Builders Risk Insurance insuring Landlord and Tenant against "all
risks" including collapse and transit coverage during any construction of
any improvements to or repair of the Premises after the Commencement Date
covering the total value of work performed and equipment, supplies and
material furnished.
Such insurance shall be written by companies of nationally recognized
financial standing, legally qualified to issue such insurance and accorded
a rating by A.M. Best Company, Inc. of A:XII or higher at the time of
issuance of any such policy. Each insurance policy carried by Tenant shall
contain, where appropriate, a clause stating that such policy will be
considered as primary insurance for Landlord and its agents and
beneficiaries and not call into contribution any other insurance that may
be available to Landlord. All insurance claims other than under Worker's
Compensation and contents insurance pertaining to the Premises in amounts
of $25,000 or less shall be adjusted by the insurer with Tenant, and all
claims in excess of $25,000 shall be adjusted by Landlord and Tenant
jointly.
21.03 Certificates of Insurance. Tenant shall furnish to Landlord, prior
to the commencement of the Term and at least thirty (30) days prior to the
expiration of such policies, policies or certificates evidencing such coverage,
which policies or certificates shall state that such insurance coverage may not
be reduced, cancelled or not renewed without at least thirty
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(30) days' prior written notice to Landlord and Tenant (unless such cancellation
is due to nonpayment of premium, and in that case, only ten (10) days' prior
written notice shall be sufficient).
21.04 Compliance with Requirements. Tenant shall comply with all
applicable laws and ordinances, all orders and decrees of court and all
requirements of other governmental authorities, and shall not make any use of
the Premises, directly or indirectly, which may be prohibited thereby, which may
be dangerous to person or property, which may jeopardize any insurance coverage,
or which may increase the cost of insurance or require additional insurance
coverage.
ARTICLE 22.
NONWAIVER
No waiver of any condition expressed in this Lease shall be implied by any
neglect of Landlord to enforce any remedy on account of the violation of such
condition whether or not such violation is continued or repeated subsequently,
and no express waiver shall affect any condition other than the one specified in
such waiver and that one only for the time and in the manner specifically
stated. Without limiting Landlord's rights under Article 9, it is agreed that no
receipt of moneys by Landlord from Tenant after the termination in any way of
the Term or of Tenant's right of possession hereunder or after the giving of any
notice shall reinstate, continue or extend the Term or affect any notice given
to Tenant prior to the receipt of such moneys. It is also agreed that after the
service of notice or the commencement of a suit or after final judgment for
possession of the Premises, Landlord may receive and collect any moneys due, and
the payment of said moneys shall not waive or affect said notice, suit or
judgment.
ARTICLE 23.
TENANT'S AUTHORITY
Tenant (a) represents and warrants that this Lease has been duly
authorized, executed and delivered by and on behalf of Tenant and constitutes
the valid and binding agreement of Tenant in accordance with the terms hereof,
(b) if Landlord so requests, it shall deliver to Landlord or its agent,
concurrently with the delivery of this Lease executed by Tenant, certified
resolutions of the board of directors (and shareholders, if required)
authorizing Tenant's execution and delivery of this Lease and the performance of
Tenant's obligations hereunder, and (c) until Landlord is notified in writing of
a substitute therefor, Tenant's Authorized Representative set forth in the
Schedule shall have full power and authority to take action on behalf of and to
bind Tenant with respect to all matters relating to this Lease and the Premises.
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ARTICLE 24.
REAL ESTATE BROKERS
Landlord and Tenant each represent that it has not dealt with a broker in
connection with this Lease and agrees to indemnify and hold the other harmless
from all damages, liability and expense, including reasonable attorneys' fees,
arising from any claims or demands of any broker or brokers or finders for any
commission alleged to be due such broker or brokers or finders in connection
with its having introduced Landlord and Tenant or having participated in the
negotiation of this Lease.
ARTICLE 25.
NOTICES
All notices and demands required or desired to be given by either party to
the other with respect to this Lease or the Premises shall be in writing and
shall be delivered personally, sent by overnight courier service, prepaid, or
sent by United States registered or certified mail, return receipt requested,
postage prepaid, and addressed as herein provided. Notices to or demands upon
Tenant shall be addressed to Tenant at the address set forth in the Schedule
prior to its occupancy of the Premises and at the Premises following its
occupancy of the Premises. Notices to or demands upon Landlord shall be
addressed to Landlord c/o RERC Capital Market Group, L.L.C., at 2 N. LaSalle
Street, Suite 730, Chicago, Illinois 60601, Attn: Joseph Beale. Notices and
demands shall be deemed given and served (a) upon receipt or refusal, if
delivered personally, (b) one (1) business day after deposit with an overnight
courier service or (c) three (3) business days after deposit in the United
States mails, if mailed. Either party may change its address for receipt of
notices by giving notice of such change to the other party in accordance
herewith. Notices and demands from Landlord to Tenant may be signed by Landlord,
its beneficiaries, the managing agent for the Real Property or the agent of any
of them.
ARTICLE 26.
HAZARDOUS MATERIALS
26.01 Defined Terms.
(a) "Claim" shall mean and include any demand, cause of action,
proceeding, or suit for any one or more of the following: (i) actual or punitive
damages, losses, injuries to person or property, damages to natural resources,
fines, penalties, interest, contribution or settlement, (ii) the costs and
expenses of site investigations, feasibility studies, information requests,
health or risk assessments, or Response (as hereinafter defined) actions, and
(iii) the costs and expenses of enforcing insurance, contribution or
indemnification agreements.
(b) "Environmental Laws" shall mean and include all federal, state
and local statutes, ordinances, regulations and rules in effect and as amended
from time to time relating to environmental quality, health, safety,
contamination and cleanup, including, without limitation, the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et
seq., and the Water Quality Act of 1987; the Federal Insecticide, Fungicide, and
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Rodenticide Act ("FIFRA"), 7 U.S.C. Section 136 et seq.; the Marine Protection,
Research, and Sanctuaries Act, 33 U.S.C. Section 1401 et seq.; the National
Environmental Policy Act, 42 U.S.C. Section 4321 et seq.; the Noise Control Act,
42 U.S.C. Section 4901 et seq.; the Occupational Safety and Health Act, 29
U.S.C. Section 651 et seq.; the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. Section 6901 et seq., as amended by the Hazardous and Solid Waste
Amendments of 1984; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.;
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et seq., as amended by the Superfund
Amendments and Reauthorization Act, the Emergency Planning and Community Right-
to-Know Act, and the Radon Gas and Indoor Air Quality Research Act; the Toxic
Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the Atomic
Energy Act, 42 U.S.C. Section 2011 et seq., and the Nuclear Waste Policy Act of
1982, 42 U.S.C. Section 10101 et seq.; and the Environmental Protection Act of
Illinois ("IEPA"), Ill. Rev. Stat. ch. 111 1/2, para. 1001 et seq., and state
and local superlien and environmental statutes and ordinances, with implementing
regulations, rules and guidelines, as any of the foregoing may be amended from
time to time. Environmental Laws shall also include all state, regional, county,
municipal, and other local laws, regulations, and ordinances insofar as they are
equivalent or similar to the federal laws recited above or purport to regulate
Hazardous Materials (as hereinafter defined).
(c) "Hazardous Materials" shall mean and include the following,
including mixtures thereof: any hazardous substance, pollutant, contaminant,
waste, by-product or constituent regulated under CERCLA; oil and petroleum
products and natural gas, natural gas liquids, liquefied natural gas and
synthetic gas usable for fuel; pesticides regulated under FIFRA; asbestos and
asbestos-containing materials, PCBs, and other substances regulated under TSCA;
source material, special nuclear material, by-product material and any other
radioactive materials or radioactive wastes, however produced, regulated under
the Atomic Energy Act or the Nuclear Waste Policy Act; chemicals subject to the
OSHA Hazard Communication Standard, 29 C.F.R. (S) 1910.1200 et seq.; and
industrial process and pollution control wastes whether or not hazardous within
the meaning of RCRA, and any other hazardous substance, pollutant or contaminant
regulated under any other Environmental Law.
(d) "Manage" or "Management" means to generate, manufacture, process,
treat, store, use, re-use, refine, recycle, reclaim, blend or burn for energy
recovery, incinerate, accumulate speculatively, transport, transfer, dispose of
or abandon Hazardous Materials.
(e) "Release" or "Released" shall mean any actual or threatened
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of Hazardous Materials into the
environment, as "environment" is defined in CERCLA.
(f) "Response" or "Respond" shall mean action taken to correct,
remove, remediate, clean up, prevent, mitigate, monitor, evaluate, investigate,
assess or abate the Release of a Hazardous Material.
26.02 Tenant's Obligations with Respect to Environmental Matters. During
the term of this Lease, (i) Tenant shall comply at its sole cost and expense
with all Environmental Laws; (ii) Tenant shall not Manage, or authorize the
Management of, any Hazardous Materials on the
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Building or Land, including installation of any underground storage tanks,
without prior written disclosure to and prior written approval by Landlord;
(iii) Tenant shall not take any action that would subject the Building or Land
to the permit requirements under RCRA for storage, treatment or disposal of
Hazardous Materials; (iv) Tenant shall not dispose of Hazardous Materials in
dumpsters; (v) Tenant shall not discharge Hazardous Materials into drains or
sewers on the Real Property; (vi) Tenant shall not cause or allow the Release of
any Hazardous Materials on, to or from the the Real Property and (vii) Tenant
shall arrange at its sole cost and expense for the lawful transportation and
off-site disposal at permitted landfills or other permitted disposal facilities
and otherwise in accordance with all applicable Environmental Laws, of all
Hazardous Materials that it generates.
26.03 Copies of Notices. During the Term of this Lease, Tenant shall
provide Landlord promptly with copies of all summons, citations, directives,
information inquiries or requests, notices of potential responsibility, notices
of violation or deficiency, orders or decrees, Claims, complaints,
investigations, judgments, letters, notices of environmental liens or Response
actions in progress, and other communications, written or oral, actual or
threatened, from the United States Environmental Protection Agency, Occupational
Safety and Health Administration, Illinois Environmental Protection Agency, or
other federal, state, or local agency or authority, or any other entity or
individual, concerning (i) any actual or alleged Release of a Hazardous Material
on, to or from the Premises; (ii) the imposition of any lien on the Premises;
(iii) any actual or alleged violation of, or responsibility under, any
Environmental Laws; or (iv) any actual or alleged liability under any theory of
common law tort or toxic tort, including without limitation, negligence,
trespass, nuisance, strict liability, or ultrahazardous activity.
26.04 Landlord's Right to Inspect. Landlord and Landlord's employees
shall have the right to enter the Premises and conduct appropriate inspections
or tests for the purpose of (i) determining Tenant's compliance with
Environmental Laws, and (ii) determining the type, kind and quantity of all
products, materials and substances brought onto the Premises, or made or
produced thereon. Landlord and its agents and representatives shall have the
right to take samples in quantities sufficient for analysis of all products,
materials and substances present on the Premises including, but not limited to,
samples, products, materials or substances brought onto or made or produced on
the Premises by Tenant or its agents, employees, contractors or invitees. Tenant
agrees to cooperate with such investigations by providing any relevant
information requested by Landlord, including, but not limited to, information
Landlord requests to comply with the Illinois Responsible Property Transfer Act,
Ill. Rev. Stat. ch. 30, para. 901 et seq. (1989), 765 ILCS 90/1 et seq. (1992).
Tenant may not perform any sampling, testing, or drilling to locate Hazardous
Materials in the Building components on the Premises without the Landlord's
prior written consent.
26.05 Tests and Reports. Within ten (10) days of Tenant's receipt of a
written request by Landlord, Tenant shall provide Landlord with (i) copies of
all environmental reports and tests obtained by Tenant; (ii) copies of
transportation and disposal contracts (and related manifests, schedules,
reports, and other information) entered into or obtained by Tenant with respect
to any Hazardous Materials; (iii) copies of any permits issued to Tenant under
Environmental Laws with respect to the Premises; (iv) copies of any and all
reports, notifications, and other filings made by Tenant to any federal, state,
or local environmental authorities or agencies; and (v) any other applicable
documents and information with respect to environmental matters relating to the
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premises. Tenant shall provide Landlord with the results of appropriate reports
and tests, with transportation and disposal contracts for Hazardous Materials,
with any permits issued under Environmental Laws, and with any other documents
necessary to demonstrate that Tenant complies with all Environmental Laws
relating to the Premises.
26.06 Tenant's Obligation to Respond. If Tenant's Management of Hazardous
Materials at the Premises (i) gives rise to liability or to a Claim under any
Environmental Law, or any common law theory of tort or otherwise; (ii) causes a
threat to, or endangers, the public health; or (iii) creates a nuisance or
trespass, Tenant shall, at its sole cost and expense, promptly take all
applicable action in response so as to comply with all applicable Environmental
Laws and eliminate or avoid any liability claim with respect thereto.
26.07 Landlord's Right to Act. In the event that Tenant shall fail to
comply with any of its obligations under this Article 26 as and when required
hereunder, Landlord shall have the right (but not the obligation) to take such
action as is required to be taken by Tenant hereunder and in such event, Tenant
shall be liable and responsible to Landlord for all costs, expenses,
liabilities, claims and other obligations paid, suffered, or incurred by
landlord in connection with such matters. Tenant shall reimburse Landlord
immediately upon demand for all such amounts for which Tenant is liable.
26.08 Indemnification. Notwithstanding anything contained in this Lease
to the contrary, Tenant shall reimburse, defend, indemnify and hold Landlord,
and its beneficiaries, officers, directors, shareholders, employees, and agents,
free and harmless from and against any and all Claims, Response costs, losses,
liabilities, damages, costs, and expenses, including, without limitation, loss
of rental income, loss due to business interruption, and reasonable attorneys'
fees and costs (collectively "Environmental Claims"), arising out of or in any
way connected with any or all of the following:
(i) any Hazardous Materials which, at any time during the
Term, are or were actually or allegedly Managed, generated, stored,
treated, released, disposed of or otherwise located on or at the
Building or Land (regardless of the location at which such Hazardous
Material are now or may in the future be located or disposed of),
including but not limited to, any and all (1) liabilities under any
common law theory of tort, nuisance, strict liability, ultrahazardous
activity, negligence or otherwise based upon, resulting from or in
connection with any Hazardous Material; (2) obligations to take
Response, cleanup or corrective action pursuant to any investigation
or remediation in connection with the decontamination, removal,
transportation, incineration, or disposal of any of the foregoing; and
(ii) any actual or alleged illness, disability, injury, or
death of any person; in any manner arising out of or allegedly arisen
out of exposure to Hazardous Materials or other substances or
conditions present at the Building or Land, regardless of when any
such illness, disability, injury, or death shall have occurred or been
incurred or manifested itself; and
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(iii) any actual or alleged failure of Tenant or the Building
or Land at any time and from time to time to comply with all applicable
Environmental Laws, whether before or after the effective date of this
Lease; and
(iv) any failure by Tenant to comply with its obligations under
this Article 26.
In the event any Claims or other assertion of liability shall be made
against Landlord for which Landlord is entitled to indemnity hereunder, Landlord
shall notify Tenant of such Claim or assertion of liability and thereupon Tenant
shall, at its sole cost and expense, assume the defense of such Claim or
assertion of liability and continue such defense at all times thereafter until
completion. The obligations of Tenant under this Article 26 shall survive any
termination or expiration of this Lease. Nothing herein shall require Tenant to
indemnify, defend or hold harmless Landlord from, and Landlord shall reimburse,
defend, indemnify and hold Tenant, its employees, officers, directors,
shareholders and agents free and harmless from and against any Environmental
Claims arising out of or in anyway connected with any Hazardous Materials
Managed or Released on the Premises by Landlord or its agents, contractors or
employees.
ARTICLE 27.
TITLE AND COVENANT AGAINST LIENS
Landlord's title is and always shall be paramount to the title of Tenant
and nothing contained in this Lease shall empower Tenant to do any act which
can, shall or may encumber the title of Landlord. Tenant covenants and agrees
not to suffer or permit any lien of mechanics or materialmen to be placed upon
or against the Premises, the Building, the Land or against Tenant's leasehold
interest in the Premises and, in case of any such lien attaching, to pay and
remove same immediately. Tenant has no authority or power to cause or permit any
lien or encumbrance of any kind whatsoever, whether created by act of Tenant,
operation of law or otherwise, to attach to or to be placed upon the Premises,
the Building or the Land, and any and all liens and encumbrances created by
Tenant shall attach only to Tenant's interest in the Premises. If any such liens
so attach and Tenant fails to pay and remove or bond over the same within thirty
(30) days, Landlord, at its election, may pay and satisfy the same and in such
event the sums so paid by Landlord, with interest from the date of payment at
the rate set forth in Section 28.08 for amounts owed Landlord by Tenant. Such
sums shall be deemed to be additional rent due and payable by Tenant at once
without notice or demand.
ARTICLE 28.
MISCELLANEOUS
28.01 Successors and Assigns. Each provision of this Lease shall extend
to and shall bind and inure to the benefit not only of Landlord and Tenant, but
also of their respective heirs, legal representatives, successors and assigns,
but this provision shall not operate to permit any transfer, assignment,
mortgage, encumbrance, lien, charge or subletting contrary to the provisions of
this Lease.
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28.02 Modifications in Writing. No modification, waiver or amendment of
this Lease or of any of its conditions or provisions shall be binding upon
Landlord unless in writing and signed by Landlord.
28.03 No Option; Irrevocable Offer. Submission of this instrument for
examination shall not constitute a reservation of or option for the Premises or
in any manner bind Landlord and no lease or obligation on Landlord shall arise
until this instrument is signed and delivered by Landlord and Tenant; provided,
however, the execution and delivery by Tenant of this Lease to Landlord or the
agent of Landlord's beneficiary, if any, shall constitute an irrevocable offer
by Tenant to lease the Premises on the terms and conditions contained herein,
which offer may not be revoked for thirty (30) days after such delivery.
28.04 Financial Statements. Tenant shall furnish Landlord annually within
ninety (90) days after the end of Tenant's fiscal year with a copy of its annual
audited and certified statement, prepared in accordance with generally accepted
accounting principles and certified by a reasonable financial officer of Tenant.
Tenant agrees that Landlord may deliver a copy of such statements to its
mortgagee or ground lessor, but otherwise Landlord shall treat such statements
and information contained therein, to the extent not otherwise available to the
public, as confidential.
28.05 Definition of Landlord. The term "Landlord" as used in this Lease
means only the owner or owners at the time being of the Building so that in the
event of any assignment, conveyance or sale, once or successively, of said
Building, or any assignment of this Lease by Landlord, said Landlord making such
sale, conveyance or assignment shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder accruing after
such sale, conveyance or assignment, and Tenant agrees to look solely to such
purchaser, grantee or assignee with respect thereto who shall be deemed to have
assumed such covenants and obligations occurring after such sale, conveyance or
assignment. This Lease shall not be affected by any such assignment, conveyance
or sale, and Tenant agrees to attorn to the purchaser, grantee or assignee.
28.06 Headings. The headings of Articles and Sections are for convenience
only and do not limit, expand or construe the contents of the Articles or
Sections.
28.07 Time of Essence. Time is of the essence of this Lease and of all
provisions hereof.
28.08 Default Rate of Interest. All amounts, including, without
limitation, Base Rent and Rent Adjustments, owed by Tenant to Landlord pursuant
to any provision of this Lease shall bear interest from the date due until paid
at the annual rate of five percent (5%) in excess of the rate of interest
announced from time to time by The First National Bank of Chicago, as its prime,
reference or corporate base rate, changing as and when said prime, reference or
corporate base rate changes, unless a lesser rate shall then be the maximum rate
permissible by law with respect thereto, in which event said lesser rate shall
be charged.
28.09 Severability. The invalidity of any provision of this Lease shall
not impair or affect in any manner the validity, enforceability or effect of the
rest of this Lease.
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<PAGE>
28.10 Entire Agreement. All understandings and agreements, oral or
written, heretofore made between the parties hereto are merged in this Lease,
which alone fully and completely expresses the agreement between Landlord (and
its beneficiaries, if any, and their agents) and Tenant.
ARTICLE 29.
EXCULPATORY PROVISIONS
It is understood and agreed expressly by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
representations, warranties, covenants, undertakings and agreements made herein
on the part of Landlord, while in form purporting to be the representations,
warranties, covenants, undertakings and agreements of Landlord, are nevertheless
each and every one of them made and intended, not as personal representations,
warranties, covenants, undertakings and agreements by Landlord or for the
purpose or with the intention of binding Landlord personally, but are made and
intended for the purpose only of subjecting Landlord's interest in the Building,
the Land and the Premises to the terms of this Lease and for no other purpose
whatsoever, and in case of default hereunder by Landlord (or default through,
under or by any of its beneficiaries, or agents or representatives of said
beneficiaries), Tenant shall look solely to the interests of Landlord in the
Building and Land; that this Lease is executed and delivered by Landlord not in
its own right, but solely in the exercise of the powers conferred upon it as
trustee; that neither Landlord nor any of Landlord's beneficiaries shall have
any personal liability to pay any indebtedness accruing hereunder or to perform
any covenant, either express or implied, contained herein and no liability or
duty shall rest upon Landlord to sequester the trust estate or the rents, issues
and profits arising therefrom, or the proceeds arising from any sale or other
disposition thereof; and that no personal liability or personal responsibility
of any sort is assumed by, nor at any time shall be asserted or enforceable
against, said Landlord, individually or personally, but only as trustee under
the provisions of the trust agreement establishing the trust, or against any of
the beneficiaries under the trust agreement establishing the trust on account of
this Lease or on account of any representation, warranty, covenant, undertaking
or agreement of Landlord contained in this Lease, either express or implied, all
such personal liability, if any, being expressly waived and released by Tenant
and by all persons claiming by, through or under Tenant.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed as of the date first written above.
LANDLORD:
BANK ONE, ILLINOIS, N.A., not personally but
solely as Trustee as aforesaid
RIDER ATTACHED HERETO IS HEREBY
By: EXPRESSLY MADE A PART HEREOF.
------------------------------------------
Its:
--------------------------------------
TENANT:
MAY & SPEH, INC., a Delaware corporation
By: /s/
------------------------------------------
Its: Executive Vice President, CFO
-------------------------------------
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<PAGE>
RIDER A
BASE RENT
(a) The annual Base Rent payable by Tenant for Term and the Extended Terms
shall be as follows:
(i) First Phase Commencement Date through August 31, 2004.
The annual Base Rent for each Office Space Phase for the period
commencing on the Phase Commencement Date for such Space and ending on
the Commencement Date shall be an amount equal to one third of the
product of (x) the Fixed Rental Rate and (y) 50,000. The annual Base
Rent for the period commencing on the Commencement Date and ending
August 31, 2004, shall be an amount equal to the product of (x) the
Fixed Rental Rate and (y) 150,000. The annual Base Rent computed
pursuant to the preceding two sentences shall be subject to adjustment
as follows:
(A) If Tenant occupies any portion of the second and third floors of
the Building prior to September 1, 2000 for the conduct of its
business (including for storage space), then effective as of the
date of such occupancy, the annual Base Rent shall be increased
by the product of (i) the Fixed Rental Rate, (ii) 50,000 and
(iii) the deemed equivalent of the percentage of such floors
occupied by Tenant;
(B) The annual Base Rent for the period commencing September 1, 2001
and ending August 31, 2004, shall not be less than an amount equal
to the product of (x) the Fixed Rental Rate and (y) 175,000;
(C) The annual Base Rent for the period commencing September 1, 2003
and ending August 31, 2004, shall not be less than an amount equal
to the product of (x) the Fixed Rental Rate and (y) 200,000.
(ii) September 1, 2004 to August 31, 2009.
The annual Base Rent for the period commencing September 1, 2004 and
ending on August 31, 2009, shall be an amount equal to the product of
(A) the Fixed Rental Rate, (B) 200,000 and (C) the greater of (x) 1.03
and (y) the lesser of (aa) 1.06 and (bb) the average annual percentage
increase, if any, in the CPI between August 1998 and August 2004.
(iii)September 1, 2009 through August 31, 2014.
The annual Base Rent for the period commencing September 1, 2009 and
ending August 31, 2014 shall be an amount equal to the product of (A)
the annual Base Rent in effect for August 2009, and (B) the greater of
(x) 1.03 and (y) the lessee of (aa) 1.06 and (bb) the average annual
percentage increase in the CPI between August, 2004 and August 2009.
<PAGE>
(iv) September 1, 2014 through the last day of the initial Term.
The annual Base Rent for the period commencing September 1, 2014 and
ending on the last day of the initial Term shall be an amount equal
to the product of (A) the annual Base Rent in effect for August 2014
and (B) the greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and
(bb) the average annual percentage increase in the CPI between
August 2009 and August 2014.
(v) First Extended Term.
The annual Base Rent for the First Extended Term, shall be an amount
equal to the greater of (1) the Market Rent for the Premises for the
First Extended Term and (2) the product of (A) the annual Base Rent
in effect on the last day of the Term and (B) the greater of (x)
1.03 and (y) the lesser of (aa) 1.06 and (bb) the average annual
percentage increase, if any, in the CPI between August 2014 and the
month preceding the commencement of the First Extended Term.
(vi) Second Extended Term.
The annual Base Rent for the Second Extended Term, shall be an
amount equal to the greater of (1) the Market Rent for the Premises
for the Second Extended Term and (2) the product of (A) the annual
Base Rent in effect on the last day of the First Extended Term and
(B) the greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and (bb)
the average annual percentage increase if any, in the CPI between
the month preceding the commencement of the First Extended Term and
the month preceding the commencement of the Second Extended Term.
(vii) Third Extended Term.
The annual Base Rent for the Third Extended Term, shall be an amount
equal to the greater of (1) the Market Rent for the Premises for the
Third Extended Term and (2) the product of (A) the annual Base Rent
in effect on the last day of the Second Extended Term and (B) the
greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and (bb) the
average annual percentage increase, if any, in the CPI between the
month preceding the commencement of the Second Extended Period and
the preceding the commencement of month of the Third Extended
Period.
If the annual Base Rent for any period described above cannot be determined
as of the first day of such period, then until such amount is determined, Tenant
shall pay Base Rent at the minimum rate set forth for such period (or, in the
case of the Base Rent as of Commencement Date, assuming the Fixed Rental Rate
was $13.60). When the actual annual Base Rent is determined, Landlord shall
notify Tenant in writing of such amount within thirty (30) days thereafter and
Tenant, in the case of an underpayment, shall pay to Landlord any additional
Base Rent due for the portion of such period prior to the date of such payment,
or Landlord, in the case of an overpayment, shall pay to Tenant the amount of
such overpayment.
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<PAGE>
If Tenant exercises its option to extend the Term for an Extended Term,
then within thirty (30) days after receipt of Tenant's notice exercising the
Extension Option (or, if later, eight (8) months prior to the end of the then
Term), Landlord shall notify Tenant of its determination of the Market Rent for
the Extended Term in question. If the Market Rent determined by Landlord is
greater than the Base Rent determined pursuant to clause (2) of paragraphs
(a)(v), (vi) or (vii) above, as the case may be, then within thirty (30) days
after receipt of Landlord's notice of the Market Rent, Tenant shall elect in a
written notice ("Tenant's Rent Determination Notice"), delivered to Landlord
either (i) to accept Landlord's determination of the Market Rent or (ii) to have
the Market Rent determined by appraisal pursuant to paragraph (c) below, in
which event Tenant shall also set forth its determination of the Market Rent. If
Tenant fails to timely deliver such notice, Tenant will be deemed to have
accepted Landlord's determination of the Market Rent.
(b) As used in this Rider A and in the Lease:
(i) "Adjusted Rental Costs" shall mean:
(A) An amount equal to the product of (1) the Maximum Project Cost,
(2) the annual constant necessary to amortize the Maximum Total
Project Cost with interest at the Amortization Rate over
twenty-five (25) years, and (3) 1.1; reduced by
(B) $1,500,262.40, which amount is the annual Base Rent payable
under the 1501 Lease.
(ii) "Amortization Rate" shall mean 200 basis points over the annual
yield on ten (10) year United States Treasury Bills issued on a date
prior to the Commencement Date selected by Landlord. Within thirty
(30) days after selection of such date Landlord shall advise Tenant
in writing of the date to be used to determine the Amortization Rate
and such rate.
(iii) "CPI" shall mean the Revised Consumer Price Index for Urban Wage
Earners and Clerical Workers, All Items (base index year 1982-
84=100), for Chicago, Gary, Lake County, IL-IN-WI, as published by
the United States Department of Labor, Bureau of Labor Statistics.
If the manner in which the Consumer Price Index is determined by the
Bureau of Labor Statistics shall be substantially revised,
including, without limitation, a change in the base index year, a
reasonable adjustment shall be made by Landlord in such revised
index which would produce results equivalent, as nearly as possible,
to those which would have been obtained if such Consumer Price Index
had not been so revised. If the Consumer Price Index shall become
unavailable to the public because publication is discontinued, or
otherwise, or if equivalent data is not readily available to enable
Landlord to make the adjustment referred to in the preceding
sentence, then Landlord will substitute therefor a comparable index
based upon changes in the cost of living or purchasing power of the
consumer dollar published by any other governmental agency or, if no
such index is available, then a comparable
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<PAGE>
index published by a university, a major bank or other financial
institution, or a comparable and recognized financial publication.
(iv) "Fixed Rental Rate" shall mean the Adjusted Rental Costs divided by
200,000;
(v) "Maximum Project Cost" shall mean the sum of (A) the portion of the
Total Project Costs (exclusive of Second Floor Construction
Allowance, the Costs of Office Improvements and Costs due to Changes
(other than Landlord Scope Changes and Tenant Delays) not in excess
of $34,861,257 and (B) the portion of the Costs of Office
Improvements, Costs due to Changes (other than Landlord Scope
Changes) and Tenant Delays, not in excess of $6,000,000.
(vi) "Market Rent" shall mean the then prevailing market rental rate per
rentable square foot of area for space comparable to the space to be
leased by Tenant pursuant for the term of the lease of such space,
taking into account applicable loss factors, applicable lengths of
lease term, the creditworthiness of the tenants, differences in the
size of the space leased, the then market rental conditions, the
condition of the subject premises and comparable space, the location
of amenities in the Building and comparable buildings, the fact that
this Lease is a triple net Lease, differences in operating expenses
and taxes, Rent Concessions and other factors normally taken into
account in determining fair market rent. As used herein, "Rent
Concessions" means market rent credits or abatements, lease buy-outs
or takeovers, the work letters and tenant improvement construction
allowances provided under leases for comparable space and other
market tenant inducement concessions. Market Rent shall be
determined as a rate net of all Rent Concessions.
(vii) "Total Project Costs" shall mean the sum of (A) the Costs, as
defined in Section 2.08 of the Lease, (B) all costs expended by
Landlord to acquire the land and Building described in the 1501
Lease, (C) the $500,000 Repair Allowance provided Tenant under the
1501 Lease and (D) to the extent paid by Landlord the $1,250,000
Vacant Space Construction Allowance provided Tenant under Section
S.3 of this Lease. Within 180 days after the Commencement Date,
Landlord shall send Tenant a notice setting forth in detail the
Total Project Costs exclusive of the Repair Allowance and Second
Floor Construction Allowance.
(c) If the Market Rent is to be determined by appraisal, then:
(i) No later than fifteen (15) days following Tenant's Rent
Determination Notice, Tenant shall select and retain an individual
as an appraiser of its choice and give Landlord written notice of
such appraiser's name, address and telephone number ("Tenant's
Selection Notice").
(ii) Within twenty (20) days after receipt of Tenant's Selection Notice,
Landlord shall select and retain an appraiser of its choice and give
Tenant written notice of such appraiser's name, address and
telephone number ("Landlord's Selection Notice").
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<PAGE>
(iii) The appraisers so selected by Tenant and Landlord shall then select
an individual as a third appraiser within five (5) days after
receipt by Tenant of Landlord's Selection Notice and furnish
Landlord and Tenant written notice of such appraiser's name, address
and telephone number and Landlord and Tenant shall retain the
services of such third appraiser.
(iv) Within fifteen (15) days following selection of the appraisers,
Landlord and tenant shall each simultaneously submit to the other
their respective determinations of the Market Rent. During the next
seven (7) days both Landlord and Tenant shall prepare a written
critique of the other's determination and on the seventh (7th) day
Landlord's and Tenant's determinations (as previously submitted to
the other party with no modifications or additions whatsoever) and
Landlord's and Tenant's critiques shall be submitted to the
appraisers.
(v) The three (3) appraisers shall then determine by majority vote
whether the Market Rent submitted by Landlord or the Market Rent
submitted by Tenant is the Market Rent for the Premises for the
Extended Term in question.
All appraisers selected pursuant to this paragraph shall have at least ten
(10) years experience with commercial property in the area where the
Premises are situated and have an MAI certification or be licensed leasing
brokers based in Metropolitan Chicago, shall not have a financial interest
in Landlord or Tenant and shall otherwise be impartial.
If Tenant fails to appoint its appraiser in the manner and within the time
specified in (i) above, then the Market Rent shall be the Market Rent
determined by Landlord. If Landlord fails to appoint its appraiser in the
manner and within the time prescribed in clause (ii), then such Market Rent
shall be the Market Rent set forth in the Tenant's Rent Determination
Notice.
If the appraisers selected by Tenant and Landlord fail to appoint the third
appraiser within the time and in the manner prescribed in clause (iii)
above, then Landlord and Tenant shall jointly and promptly apply to the
local office of the American Arbitration Association for the appointment of
the third appraiser.
The decision of the appraisers shall be binding, final and conclusive on
the parties (unless it shall be manifest that the appraiser or one or more
of the appraisers shall not be an impartial person) and shall be
enforceable by either party in a court of competent jurisdiction. The cost
of the foregoing appraisal process (including any court costs) shall be
borne equally by the parties).
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<PAGE>
Exhibit 10.28
FIRST AMENDMENT TO 3333 LEASE
-----------------------------
THIS AMENDMENT, made as of the 1st day of November, 1997, between BANK ONE,
ILLINOIS, N.A., not personally but solely as Trustee under Trust Agreement dated
May 23, 1997, and known as Trust No. 11097 ("Landlord") and MAY & SPEH, INC.
("Tenant").
RECITALS
Landlord and Tenant are parties to a written lease dated June 2, 1997,
("3333 Lease"), for the entire building ("3333 Building") to be constructed at
3333 Finley Road, Downers Grove, Illinois. Section S.4 of the 3333 Lease grants
Tenant certain options to acquire the 3333 Building and the land thereunder;
provided that, Tenant also exercises the option to purchase the building ("1501
Building") commonly referred to as 1501 Opus Place, Downers Grove, Illinois and
the land thereunder pursuant to the option granted in the lease between Landlord
and Tenant also dated June 2, 1997 for the 1501 Building ("1501 Lease").
The terms and conditions of Tenant's option to purchase the 1501 Building
are set forth in Rider E to the 1501 Lease and the terms and conditions of the
purchase of the 3333 Building are set forth in Rider E to the 3333 Lease. The
purchase price for the 1501 Building is set forth in Rider E to the 1501 Lease
and the purchase price for the 3333 Building is based on a formula which takes
into account the purchase price for the 1501 Building. Landlord and Tenant
desire to increase the purchase price for the 1501 Building and to make a
similar reduction to the purchase price of the 3333 Building to permit Landlord
to refinance the 1501 Building and to finance the construction of the 3333
Building.
Landlord and Tenant also desire to modify the Base Building Improvements
under the 3333 Lease to include the construction of a tunnel ("Tunnel") from the
3333 Building to the 3333 Building and to modify the Maximum Project Costs to
take into account the change in the Base Building Improvements. In addition
Landlord and Tenant have agreed on the interest rate to be used to determine the
Base Rent and wish to set forth such amount in this amendment.
Finally, Landlord exchanged a portion of the Land as described in the Lease
located along Finley Road for a like parcel owned by the Village of Downers
Grove and Landlord and Tenant desire to amend the Lease to reflect the change in
the Land.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the Lease is hereby amended as follows:
1. All capitalized terms used herein shall have the same meanings as in the
3333 Lease unless otherwise defined herein.
2. Exhibit A to the 3333 Lease shall be replaced by Exhibit A to this
Amendment.
3. Notwithstanding anything in the 3333 Lease to the contrary, the Base
Building Improvements shall include the work described on attached Exhibit B.
<PAGE>
4. Notwithstanding anything in the 3333 Lease to the contrary, the Premises
shall include the portion of the Tunnel located on the Land and Tenant's
obligations under this Lease with respect to the Premises, including without
limitation, its obligations to maintain and repair the Premises shall apply to
the portion of the Tunnel included in the Premises.
5. Rider A to the 3333 Lease shall be replaced with Rider A to this
Amendment.
6. Section 3.1 of the Purchase Contract attached as Rider E to the 3333
Lease is amended in its entirety to read as follows:
3.1 PURCHASE PRICE. The purchase price ("Purchase Price") for the
Property shall be __________________ ___________________
($__________________________).
[The purchase price shall be the product of (i), (ii) and (iii) below, less
Twelve Million Eight Hundred Thousand Dollars ($12,800,000.00) :
(i) The Total Project Costs as defined in Rider A to the 3333
Lease;
(ii) 1.125 and
(iii) The lesser of (A) 1.04/N/ (where "N" is the number of years
from January 1, 1997 to the Closing Date) and (B) one plus the percentage
increase, if any, in the CPI (as defined in Rider A of the 3333 Lease) from
January 1, 1997 to the Closing Date.
Purchaser agrees to pay to Seller and Seller agrees to accept payment
of the Purchase Price as follows:
(a) At Closing, Purchaser shall accept title to the Property
subject to the lien of the First Mortgage (which Purchaser or its nominee
or designee will take subject to, and with respect to which First Mortgage
and the loan evidenced and secured thereby Purchaser or its nominee or
designee shall assume), and the outstanding principal balance thereunder
shall be credited against the Purchase Price.
(b) The remaining portion of the Purchase Price, subject to
prorations and adjustments as provided in Section 8.1, shall be paid on the
Closing Date by wire transfer of immediately available funds, first to the
Title Company and then to an account specified by Seller, against delivery
of instruments of transfer and the other documents specified in Section
7.1.
7. Except for the provisions of this Amendment, all the terms, covenants,
and conditions of the Lease and all the rights and obligations of Landlord and
Tenant thereunder, shall remain in full force and effect, and are not otherwise
altered, amended, revised or changed.
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<PAGE>
8. It is understood and agreed expressly by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
representations, warranties, covenants, undertakings and agreements made herein
on the part of Landlord, while in form purporting to be the representations,
warranties, covenants, undertakings and agreements of Landlord, are nevertheless
each and every one of them made and intended, not as personal representations,
warranties, covenants, undertakings and agreements by Landlord or for the
purpose or with the intention of binding Landlord personally, but are made and
intended for the purpose only of subjecting Landlord's interest in the Building,
the Land and the Premises to the terms of this Lease and for no other purpose
whatsoever, and in case of default hereunder by Landlord (or default through,
under or by any of its beneficiaries, or agents or representatives of said
beneficiaries), Tenant shall look solely to the interests of Landlord in the
Building and Land; that this Lease is executed and delivered by Landlord not in
its own right, but solely in the exercise of the powers conferred upon it as
trustee; that neither Landlord nor any of Landlord's beneficiaries shall have
any personal liability to pay any indebtedness accruing hereunder or to perform
any covenant, either express or implied, contained herein and no liability or
duty shall rest upon Landlord to sequester the trust estate or the rents, issues
and profits arising therefrom, or the proceeds arising from any sale or other
disposition thereof; and that no personal liability or personal responsibility
of any sort is assumed by, nor at any time shall be asserted or enforceable
against, said Landlord, individually or personally, but only as trustee under
the provisions of the trust agreement establishing the trust, or against any of
the beneficiaries under the trust agreement establishing the trust on account of
this Lease or on account of any representation, warranty, covenant, undertaking
or agreement of Landlord contained in this Lease, either express or implied, all
such personal liability, if any, being expressly waived and released by Tenant
and by all persons claiming by, through or under Tenant.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the date first above written.
LANDLORD:
BANK ONE, ILLINOIS, NA, not personally, but
as Trustee aforesaid
RIDER ATTACHED HERETO IS HEREBY
By: EXPRESSLY MADE A PART HEREOF.
--------------------------------------------
Its:
-------------------------------------------
TENANT:
MAY & SPEH, INC.
By: /s/
--------------------------------------------
Its: Executive Vice President, CFO
-------------------------------------------
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<PAGE>
RIDER A
BASE RENT
(a) The annual Base Rent payable by Tenant for Term and the Extended Terms
shall be as follows:
(i) First Phase Commencement Date through August 31, 2004.
The annual Base Rent for each Office Space Phase for the period
commencing on the Phase Commencement Date for such Space and
ending on the Commencement Date shall be an amount equal to one
third of the product of (x) the Fixed Rental Rate and (y) 50,000.
The annual Base Rent for the period commencing on the Commencement
Date and ending August 31, 2004, shall be an amount equal to the
product of (x) the Fixed Rental Rate and (y) 150,000. The annual
Base Rent computed pursuant to the preceding two sentences shall
be subject to adjustment as follows:
(A) If Tenant occupies any portion of the second and third
floors of the Building prior to September 1, 2004 for the
conduct of its business (including for storage space), then
effective as of the date of such occupancy, the annual Base
Rent shall be increased by the product of (i) the Fixed
Rental Rate, (ii) 50,000 and (iii) the deemed equivalent of
the percentage of such floors occupied by Tenant;
(B) The annual Base Rent for the period commencing September 1,
2001 and ending August 31, 2004, shall not be less than an
amount equal to the product of (x) the Fixed Rental Rate
and (y) 175,000;
(C) The annual Base Rent for the period commencing September 1,
2003 and ending August 31, 2004, shall not be less than an
amount equal to the product of (x) the Fixed Rental Rate
and (y) 200,000.
(ii) September 1, 2004 to August 31, 2009.
The annual Base Rent for the period commencing September 1, 2004
and ending on August 31, 2009, shall be an amount equal to the
product of (A) the Fixed Rental Rate, (B) 200,000 and (C) the
greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and (bb) the
average annual percentage increase, if any, in the CPI between
August 1998 and August 2004.
<PAGE>
(iii) September 1, 2009 through August 31, 2014.
The annual Base Rent for the period commencing September 1, 2009
and ending August 31, 2014 shall be an amount equal to the product
of (A) the annual Base Rent in effect for August 2009, and (B) the
greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and (bb) the
average annual percentage increase in the CPI between August, 2004
and August 2009.
(iv) September 1, 2014 through the last day of the initial Term.
The annual Base Rent for the period commencing September 1, 2014
and ending on the last day of the initial Term shall be an amount
equal to the product of (A) the annual Base Rent in effect for
August 2014 and (B) the greater of (x) 1.03 and (y) the lesser of
(aa) 1.06 and (bb) the average annual percentage increase in the
CPI between August 2009 and August 2014.
(v) First Extended Term.
The annual Base Rent for the First Extended Term, shall be an
amount equal to the greater of (1) the Market Rent for the
Premises for the First Extended Term and (2) the product of (A)
the annual Base Rent in effect on the last day of the Term and (B)
the greater of (x) 1.03 and (y) the lesser of (aa) 1.06 and (bb)
the average annual percentage increase, if any, in the CPI between
August 2014 and the month preceding the commencement of the First
Extended Term.
(vi) Second Extended Term.
The annual Base Rent for the Second Extended Term, shall be an
amount equal to the greater of (1) the Market Rent for the
Premises for the Second Extended Term and (2) the product of (A)
the annual Base Rent in effect on the last day of the First
Extended Term and (B) the greater of (x) 1.03 and (y) the lesser
of (aa) 1.06 and (bb) the average annual percentage increase if
any, in the CPI between the month preceding the commencement of
the First Extended Term and the month preceding the commencement
of the Second Extended Term.
(vii) Third Extended Term.
The annual Base Rent for the Third Extended Term, shall be an
amount equal to the greater of (1) the Market Rent for the
Premises for the Third Extended Term and (2) the product of (A)
the annual Base Rent in effect on the last day of the Second
Extended Term and (B) the greater of (x) 1.03 and (y) the lesser
of (aa) 1.06 and (bb) the average annual percentage increase, if
any, in the CPI between the month preceding the commencement of
the Second Extended Period and the preceding the commencement of
month of the Third Extended Period.
-2-
<PAGE>
If the annual Base Rent for any period described above cannot be
determined as of the first day of such period, then until such amount is
determined, Tenant shall pay Base Rent at the minimum rate set forth for such
period (or, in the case of the Base Rent as of Commencement Date, assuming the
Fixed Rental Rate was $16.51). When the actual annual Base Rent is determined,
Landlord shall notify Tenant in writing of such amount within thirty (30) days
thereafter and Tenant, in the case of an underpayment, shall pay to Landlord any
additional Base Rent due for the portion of such period prior to the date of
such payment, or Landlord, in the case of an overpayment, shall pay to Tenant
the amount of such overpayment.
If Tenant exercises its option to extend the Term for an Extended Term,
then within thirty (30) days after receipt of Tenant's notice exercising the
Extension Option (or, if later, eight (8) months prior to the end of the then
Term), Landlord shall notify Tenant of its determination of the Market Rent for
the Extended Term in question. If the Market Rent determined by Landlord is
greater than the Base Rent determined pursuant to clause (2) of paragraphs
(a)(v), (vi) or (vii) above, as the case may be, then within thirty (30) days
after receipt of Landlord's notice of the Market Rent, Tenant shall elect in a
written notice ("Tenant's Rent Determination Notice"), delivered to Landlord
either (i) to accept Landlord's determination of the Market Rent or (ii) to have
the Market Rent determined by appraisal pursuant to paragraph (c) below, in
which event Tenant shall also set forth its determination of the Market Rent. If
Tenant fails to timely deliver such notice, Tenant will be deemed to have
accepted Landlord's determination of the Market Rent.
(b) As used in this Rider A and in the Lease:
(i) "CPI" shall mean the Revised Consumer Price Index for Urban Wage
Earners and Clerical Workers, All Items (base index year
1982-84=100), for Chicago, Gary, Lake County, IL-IN-WI, as
published by the United States Department of Labor, Bureau of
Labor Statistics. If the manner in which the Consumer Price Index
is determined by the Bureau of Labor Statistics shall be
substantially revised, including, without limitation, a change in
the base index year, a reasonable adjustment shall be made by
Landlord in such revised index which would produce results
equivalent, as nearly as possible, to those which would have been
obtained if such Consumer Price Index had not been so revised. If
the Consumer Price Index shall become unavailable to the public
because publication is discontinued, or otherwise, or if
equivalent data is not readily available to enable Landlord to
make the adjustment referred to in the preceding sentence, then
Landlord will substitute therefor a comparable index based upon
changes in the cost of living or purchasing power of the consumer
dollar published by any other governmental agency or, if no such
index is available, then a comparable index published by a
university, a major bank or other financial institution, or a
comparable and recognized financial publication.
-3-
<PAGE>
(ii) "Fixed Rental Rate" shall mean $16.51 per rentable square foot;
provided that such amount shall be reduced $0.055 for every
$100,000 (and prorated for amounts less than $100,000) that the
Maximum Project Cost is less than $43,686,805; provided that there
shall be no reduction in the Fixed Rental Rate if the Costs of
Office Improvements, Costs due to changes (other than Landlord
Scope Changes) and Tenant Delays exceeds $5,500,000 but is less
than $6,000,000.
(iii) "Maximum Project Cost" shall mean the sum of (A) the portion of
the Total Project Costs (exclusive of Second Floor Construction
Allowance, the Costs of Office Improvements and Costs due to
Changes (other than Landlord Scope Changes and Tenant Delays) not
in excess of $37,686,805 and (B) the portion of the Costs of
Office Improvements, Costs due to Changes (other than Landlord
Scope Changes) and Tenant Delays, not in excess of $6,000,000.
(iv) "Market Rent" shall mean the then prevailing market rental rate
per rentable square foot of area for space comparable to the space
to be leased by Tenant pursuant for the term of the lease of such
space, taking into account applicable loss factors, applicable
lengths of lease term, the creditworthiness of the tenants,
differences in the size of the space leased, the then market
rental conditions, the condition of the subject premises and
comparable space, the location of amenities in the Building and
comparable buildings, the fact that this Lease is a triple net
Lease, differences in operating expenses and taxes, Rent
Concessions and other factors normally taken into account in
determining fair market rent. As used herein, "Rent Concessions"
means market rent credits or abatements, lease buy-outs or
takeovers, the work letters and tenant improvement construction
allowances provided under leases for comparable space and other
market tenant inducement concessions. Market Rent shall be
determined as a rate net of all Rent Concessions.
(v) "Total Project Costs" shall mean the sum of (A) the Costs, as
defined in Section 2.08 of the Lease, (B) all costs expended by
Landlord to acquire the land and Building described in the 1501
Lease, (C) the $500,000 Repair Allowance provided Tenant under the
1501 Lease and (D) to the extent paid by Landlord the $1,250,000
Vacant Space Construction Allowance provided Tenant under Section
S.3 of this Lease. Within 180 days after the Commencement Date,
Landlord shall send Tenant a notice setting forth in detail the
Total Project Costs exclusive of the Repair Allowance and Second
Floor Construction Allowance.
(c) If the Market Rent is to be determined by appraisal, then:
(i) No later than fifteen (15) days following Tenant's Rent
Determination Notice, Tenant shall select and retain an individual
as an appraiser of its choice and give Landlord written notice of
such appraiser's name, address and telephone number ("Tenant's
Selection Notice").
-4-
<PAGE>
(ii) Within twenty (20) days after receipt of Tenant's Selection
Notice, Landlord shall select and retain an appraiser of its
choice and give Tenant written notice of such appraiser's name,
address and telephone number "(Landlord's Selection Notice").
(iii) The appraisers so selected by Tenant and Landlord shall then
select an individual as a third appraiser within five (5) days
after receipt by Tenant of Landlord's Selection Notice and furnish
Landlord and Tenant written notice of such appraiser's name,
address and telephone number and Landlord and Tenant shall retain
the services of such third appraiser.
(iv) Within fifteen (15) days following selection of the appraisers,
Landlord and Tenant shall each simultaneously submit to the other
their respective determinations of the Market Rent. During the
next seven (7) days both Landlord and Tenant shall prepare a
written critique of the other's determination and on the seventh
(7th) day Landlord's and Tenant's determinations (as previously
submitted to the other party with no modifications or additions
whatsoever) and Landlord's and Tenant's critiques shall be
submitted to the appraisers.
(v) The three (3) appraisers shall then determine by majority vote
whether the Market Rent submitted by Landlord or the Market Rent
submitted by Tenant is the Market Rent for the Premises for the
Extended Term in question.
All appraisers selected pursuant to this paragraph shall have at least
ten (10) years experience with commercial property in the area where the
Premises are situated and have an MAI certification or be licensed
leasing brokers based in Metropolitan Chicago, shall not have a financial
interest in Landlord or Tenant and shall otherwise be impartial.
If Tenant fails to appoint its appraiser in the manner and within the
time specified in (i) above, then the Market Rent shall be the Market
Rent determined by Landlord. If Landlord fails to appoint its appraiser
in the manner and within the time prescribed in clause (ii), then such
Market Rent shall be the Market Rent set forth in the Tenant's Rent
Determination Notice.
If the appraisers selected by Tenant and Landlord fail to appoint the
third appraiser within the time and in the manner prescribed in clause
(iii) above, then Landlord and Tenant shall jointly and promptly apply to
the local office of the American Arbitration Association for the
appointment of the third appraiser.
The decision of the appraisers shall be binding, final and conclusive on
the parties (unless it shall be manifest that the appraiser or one or
more of the appraisers shall not be an impartial person) and shall be
enforceable by either party in a court of competent jurisdiction. The
cost of the foregoing appraisal process (including any court costs) shall
be borne equally by the parties).
-5-
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated November
10, 1997 included in the Annual Report of May & Speh, Inc. on Form 10-K in the
Registration Statement on Form S-8 (No. 333-13711) of May & Speh, Inc.
Price Waterhouse LLP
Chicago, Illinois
December 29, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the financial statements included in the Company's annual report on Form 10-K
for the year ended September 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 1,888,817
<SECURITIES> 20,415,793
<RECEIVABLES> 28,569,372
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65,063,824
<PP&E> 50,228,440
<DEPRECIATION> 10,754,380
<TOTAL-ASSETS> 148,795,928
<CURRENT-LIABILITIES> 18,024,310
<BONDS> 31,546,484
0
0
<COMMON> 251,474
<OTHER-SE> 90,883,660
<TOTAL-LIABILITY-AND-EQUITY> 148,795,928
<SALES> 92,457,288
<TOTAL-REVENUES> 92,457,288
<CGS> 0
<TOTAL-COSTS> 71,994,660
<OTHER-EXPENSES> 1,564,573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,898,055
<INCOME-TAX> 7,182,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,715,655
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
