<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 6, 2000
REGISTRATION NO. 333-93065
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TMP WORLDWIDE INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3906555
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
</TABLE>
------------------------
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 977-4200
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------------
ANDREW J. MCKELVEY
CHAIRMAN OF THE BOARD AND CEO
TMP WORLDWIDE INC.
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 977-4200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
<TABLE>
<S> <C>
GREGG BERMAN, ESQ. DEANNA L. KIRKPATRICK, ESQ.
FULBRIGHT & JAWORSKI L.L.P. DAVIS POLK & WARDWELL
666 FIFTH AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10103 NEW YORK, NEW YORK 10017
(212) 318-3000 (212) 450-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of 3,200,000 shares of common stock. The second prospectus relates to
a concurrent offering outside the United States and Canada of an aggregate of
800,000 shares of common stock. The prospectuses for each of the offerings will
be identical with the exception of the alternate front cover page for the
offering outside the United States and Canada. Such alternate page appears in
this Registration Statement immediately following the cover page for the
offering in the United States and Canada.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS (Subject to Completion)
Issued January 6, 2000
4,000,000 SHARES
[LOGO]
COMMON STOCK
-----------------
TMP Worldwide Inc. is offering 4,000,000 shares of its common stock.
-------------------
The common stock is listed on The Nasdaq National Market under the symbol
"TMPW." On January 5, 2000, the last sale price of the common stock was $126 1/4
per share.
-------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 9.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share................................................... $ $ $
Total....................................................... $ $ $
</TABLE>
TMP Worldwide Inc. has granted the underwriters the right to purchase up to an
additional 600,000 shares of common stock to cover over-allotments.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Morgan Stanley & Co. Incorporated expects to deliver the shares of common stock
to purchasers on February , 2000.
-------------------
<TABLE>
<S> <C> <C>
JOINT BOOK-RUNNING MANAGERS CO-LEAD MANAGER
MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY
</TABLE>
DEUTSCHE BANC ALEX. BROWN PAINEWEBBER INCORPORATED U.S. BANCORP PIPER JAFFRAY
, 2000
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS (Subject to Completion)
Issued January 6, 2000
4,000,000 SHARES
[LOGO]
COMMON STOCK
-----------------
TMP Worldwide Inc. is offering 4,000,000 shares of its common stock.
-------------------
The common stock is listed on The Nasdaq National Market under the symbol
"TMPW." On January 5, 2000, the last sale price of the common stock was $126 1/4
per share.
-------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 9.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per Share................................................... $ $ $
Total....................................................... $ $ $
</TABLE>
TMP Worldwide Inc. has granted the underwriters the right to purchase up to an
additional 600,000 shares of common stock to cover over-allotments.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Morgan Stanley & Co. Incorporated expects to deliver the shares of common stock
to purchasers on February , 2000.
-------------------
JOINT BOOK-RUNNING MANAGERS
MORGAN STANLEY DEAN WITTER GOLDMAN SACHS INTERNATIONAL
CO-LEAD MANAGER
SALOMON SMITH BARNEY INTERNATIONAL
DEUTSCHE BANK
PAINEWEBBER INTERNATIONAL
U.S. BANCORP PIPER JAFFRAY
, 2000
<PAGE>
Photo Page
A collage of pictures of the Monster.com(SM) home pages (U.S. and international
versions) will appear on the inside front cover.
A collage of stills from our Monster Talent Market promotion will appear on the
inside back cover.
A collage of stills from Monster.com(SM)'s recent advertising campaign will
appear on the outside back cover.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.................... 4
Special Note Regarding Forward-Looking
Information......................... 9
Risk Factors.......................... 9
Use of Proceeds....................... 16
Dividend Policy....................... 16
Price Range of Common Stock........... 16
Capitalization........................ 17
Selected Consolidated Financial
Information......................... 18
</TABLE>
<TABLE>
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
<CAPTION>
PAGE
--------
<S> <C>
Business.............................. 37
Material U.S. Federal Income Tax
Considerations for Non-U.S.
Holders............................. 48
Underwriters.......................... 51
Legal Matters......................... 53
Experts............................... 53
Where You Can Find More Information... 53
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the common stock.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE OTHER INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. AS USED IN THIS
PROSPECTUS, "GROSS BILLINGS" REFERS TO BILLINGS FOR ADVERTISING PLACED ON THE
INTERNET, ON OUR CAREER WEB SITES, IN NEWSPAPERS AND IN TELEPHONE DIRECTORIES BY
OUR CLIENTS, AND ASSOCIATED FEES FOR RELATED SERVICES AND FEES FOR SEARCH AND
SELECTION AND TEMPORARY CONTRACTING SERVICES. WE EARN COMMISSIONS BASED ON A
PERCENTAGE OF THE BILLING FOR MEDIA ADVERTISING PURCHASED IN TRADITIONAL MEDIA
AS WELL AS ON THIRD PARTY WEB SITES AT A RATE ESTABLISHED BY THE RELATED
PUBLISHER AND ASSOCIATED FEES FOR RELATED SERVICES. AS A RESULT, THE TRENDS IN
OUR GROSS BILLINGS DIRECTLY AFFECT OUR COMMISSIONS AND FEES. ALL AMOUNTS
REFERRED TO BELOW REFLECT THE AMOUNTS DISCLOSED IN OUR SUPPLEMENTAL CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS AND OUR SUPPLEMENTAL CONSOLIDATED FINANCIAL
STATEMENTS INCLUDED IN OUR CURRENT REPORT ON FORM 8-K DATED DECEMBER 1, 1999.
"WE," "US" AND "OUR," WHEN USED IN THIS PROSPECTUS, REFER TO TMP WORLDWIDE INC.
OUR COMPANY
We have built Monster.com(SM) (http://www.monster.com) into the Internet's
leading career destination portal. We are also one of the world's largest
recruitment advertising agencies and one of the world's largest executive search
and selection firms. In addition to offering these career solutions, we are the
world's largest yellow page advertising agency. We have more than 31,000
clients, including over 90 of the Fortune 100 and over 450 of the Fortune 500
companies.
Job seekers look to manage their careers through us by posting their resumes
on Monster.com(SM), by searching Monster.com's(SM) database of over 265,000 paid
job postings, either directly or through the use of customized job search
agents, and by utilizing our extensive career resources. In addition, employers,
who are our clients, look to us to help them find the right employee, whether
they are searching for an entry level candidate or a CEO, which we refer to as
our "intern to CEO" strategy. We believe the Internet offers a substantial
opportunity for us to grow our revenue. We believe our growth will primarily
come from strengthening our leadership position in the online recruitment
market, which is estimated by Forrester Research to grow from $105 million in
1998 to $1.7 billion in 2003, with additional revenue growth opportunities from
the $8 billion executive search and selection market, the $13 billion global
recruitment advertising market, the $130 billion temporary contracting market
and the more than $100 billion which third parties estimate corporations spend
on unassisted recruiting activities. Our strategies to address this opportunity
are to:
- continue to promote the Monster.com(SM) brand through online and
traditional advertising and select alliances or affiliations
- leverage our more than 5,100 client service, marketing and creative
personnel to expand Monster.com(SM)
- continue to pursue strategic acquisitions
OUR SERVICES
MONSTER.COM(SM). Monster.com(SM) (http://www.monster.com), the flagship of
our Internet properties, is the nucleus of our intern to CEO strategy. In
November 1999:
- Neilson I/Pro reported that Monster.com(SM) attracted more than 9.7
million visitors who spent an average of over 14 minutes per visit
- Media Metrix reported that 4.2% of the U.S. Internet population visited
Monster.com(SM), reaching almost twice as many unique visitors as its
closest competitor, and that an average of 31.0 unique pages were viewed
by each visitor
4
<PAGE>
- Based on Media Metrix statistics, Monster.com(SM) reported a power ranking
of 130.2 (reach of 4.2 multiplied by average page views of 31.0), compared
to 26.7 for its closest competitor and 74.9 for its six closest
competitors combined
We believe that the power ranking is significant because, by taking into
account reach and page views, it indicates the products' recognition by and
usefulness to job seekers. As a result, through Monster.com(SM), our clients
have access to over 2.4 million unique resumes of which 1.6 million are active,
and our resume database is growing by an average of more than 6,000 resumes
daily. To attract job seekers to Monster.com(SM), we continue to refine and
refresh the site by introducing value-added features. For example, we have
5.3 million My Monster accounts, which allow our job seekers to manage their
careers online and 1.7 million job search agents, which allow our job seekers to
express their specific job preferences and receive e-mail notification of job
matches. We have also recently introduced Monster Talent Market, which allows
independent contractor professionals to offer their services to the highest
bidder. We believe our clients have recognized the value of online recruitment,
as evidenced by the more than 265,000 paid job postings currently on
Monster.com(SM).
Although Monster.com(SM) had 1.6 million more unique visitors than its
nearest competitor in November 1999, as reported by Media Metrix, we continually
look for ways to drive and retain site traffic. To that end, in December 1999,
we entered into a content and marketing agreement with America Online, Inc.
whereby, for the payment of $100 million over four years, Monster.com(SM) will
be the exclusive provider for four years in the United States and Canada of
career search services to 21 million AOL users across seven AOL brands: AOL, AOL
Canada, Compuserve, ICQ, AOL.com, Netscape and Digital City. We believe that
this agreement has the potential to drive a substantial amount of increased
traffic and new users to Monster.com-SM-. We also customize Monster.com(SM), in
both language and content, for other countries. Currently, local versions of
Monster.com(SM) operate in Canada, the United Kingdom, the Netherlands,
Australia, Belgium, France, Singapore and New Zealand. For the nine months ended
September 30, 1999, Monster.com(SM) generated approximately $66.9 million in
gross billings and $66.2 million in commissions and fees. Our total Internet
gross billings and Internet commissions and fees for this period were $93.7
million and $83.0 million, respectively, reflecting the inclusion of amounts
from Internet related services from our traditional recruitment and yellow page
advertising clients, as well as from searches for permanent employees and
temporary contracting services identified and screened through the Internet,
which were $8.5 million, $3.2 million, $4.0 million and $0.9 million,
respectively.
RECRUITMENT ADVERTISING. We prospect talent for our clients through
traditional recruiting programs that sell, market and brand employers to job
seekers searching for entry level positions to positions paying up to $100,000,
annually. We provide a broad range of recruitment advertising services
including:
- planning and producing advertising campaigns
- media research, planning and buying in both traditional media and on the
Internet
- planning and executing on-campus recruitment programs
SEARCH AND SELECTION. We offer an advanced and comprehensive range of
search and selection services aimed at identifying the appropriate professional
or executive from mid-level to CEO for our clients. Executive search identifies
senior executives who typically earn in excess of $250,000 annually, while
selection identifies mid-level professionals or executives, who typically earn
between $70,000 and $150,000, annually. We entered the executive search field in
1998 because recruitment and online advertising traditionally did not target the
senior executive candidate. Our specialized search and selection services
include:
- identification of candidates
- competency measurement
- assessment of candidate/company cultural fit
5
<PAGE>
- transaction negotiation and closure
With the addition of our executive search services, we believe that we can now
accommodate all of our clients' employee recruitment needs. We also believe that
our search and selection services will help to broaden the universe of both job
seekers and employers who utilize Monster.com(SM).
YELLOW PAGE ADVERTISING. We develop yellow page marketing programs for
national accounts, which are clients who sell products or services in multiple
markets. The national segment of the U.S. yellow page advertising market was
approximately $1.9 billion in 1998. During the period of 1990 through 1998, the
market grew at a compound annual rate of approximately 6.2%. Yellow page
advertising is a complex process involving the creation of effective imagery and
message, and the development of media plans which evaluate approximately 7,000
yellow page directories, of which our larger accounts utilize over 2,000.
Coordinating the placement of advertisements in this number of directories
requires an extensive effort at the local level, and our yellow page sales,
marketing and customer service staff of approximately 850 people provides an
important competitive advantage in marketing and executing yellow page
advertising programs.
We take a proactive approach to yellow page advertising by undertaking
original research on the efficacy of the medium, and by working to quantify the
effectiveness of individual advertising campaigns. We also have a rigorous
quality assurance program designed to ensure client satisfaction. We believe
that this program has enabled us to maintain a yellow page client retention
rate, year to year, in excess of 90%.
For the year ended December 31, 1998 and the nine months ended
September 30, 1999, respectively, our gross billings were $1.7 billion and
$1.4 billion, total commissions and fees were $657.5 million and
$561.5 million, net income (loss) was $20.5 million and $(4.9) million and
EBITDA was $79.1 million and $32.6 million.
Our executive offices are located at 1633 Broadway, New York, New York
10019, our telephone number is (212) 977-4200 and our Internet address is
http://www.tmpw.com.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by TMP.................. 4,000,000
Common stock to be outstanding after this
offering................................... 44,604,263 shares
Use of proceeds.............................. Repayment of indebtedness and general
corporate purposes, including strategic
investments. See "Use of Proceeds."
Nasdaq National Market Symbol................ TMPW
</TABLE>
The number of shares of common stock to be outstanding after this offering
excludes 5,856,194 shares of common stock subject to outstanding stock options.
This number also assumes that the underwriters' over-allotment option to
purchase up to 600,000 shares will not be exercised. If the underwriters do
exercise this option in full there will be 45,204,263 shares of common stock
outstanding following this offering.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Commissions & fees.......................................... $ 399,039 $ 541,828 $ 657,486 $ 496,872 $ 561,481
---------- ---------- ---------- ---------- ----------
Operating expenses:
Salaries and related costs................................ 232,249 310,168 382,689 288,045 327,046
Office and general expenses............................... 115,191 152,824 190,204 136,639 173,053
Merger & integration costs................................ -- -- 22,412 9,577 46,262
Restructuring charges..................................... -- -- 3,543 -- 2,789
Amortization of intangibles............................... 4,732 6,866 10,185 7,394 8,564
Special compensation and special CEO bonus................ 52,019 1,500 1,250 1,125 --
---------- ---------- ---------- ---------- ----------
Total operating expenses.................................. 404,191 471,358 610,283 442,780 557,714
---------- ---------- ---------- ---------- ----------
Operating income (loss)................................... (5,152) 70,470 47,203 54,092 3,767
---------- ---------- ---------- ---------- ----------
Other expense:
Interest expense, net..................................... (14,358) (8,443) (9,828) (7,035) (6,272)
Other, net................................................ (370) 821 (2,042) (932) (851)
---------- ---------- ---------- ---------- ----------
Total other expense, net................................ (14,728) (7,622) (11,870) (7,967) (7,123)
---------- ---------- ---------- ---------- ----------
Income (loss) before provision for income taxes, minority
interests and equity in income (losses) of affiliates..... (19,880) 62,848 35,333 46,125 (3,356)
Provision for income taxes.................................. 11,058 20,565 14,367 16,637 1,154
---------- ---------- ---------- ---------- ----------
Income (loss) before minority interests and equity in income
(losses) of affiliates.................................... (30,938) 42,283 20,966 29,488 (4,510)
Minority interests.......................................... 1,017 296 28 (18) 107
Equity in income (losses) of affiliates..................... 114 (33) (396) (297) (300)
---------- ---------- ---------- ---------- ----------
Net income (loss)........................................... (31,841) 41,954 20,542 29,209 (4,917)
Preferred stock dividend and redemption premium............. (210) (123) -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common and Class B common
stockholders.............................................. $ (32,051) $ 41,831 $ 20,542 $ 29,209 $ (4,917)
========== ========== ========== ========== ==========
Net income (loss) per common and Class B common share:
Basic....................................................... $ (1.04) $ 1.15 $ 0.53 $ 0.75 $ (0.12)
========== ========== ========== ========== ==========
Diluted..................................................... $ (1.04) $ 1.13 $ 0.52 $ 0.73 $ (0.12)
========== ========== ========== ========== ==========
Weighted average shares outstanding:
Basic....................................................... 30,954 36,333 38,736 38,696 39,611
Diluted..................................................... 30,954 36,954 39,639 39,802 39,611
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Current assets.............................................. $529,878 $ 932,694
Current liabilities......................................... 505,869 505,869
Total assets................................................ 883,684 1,286,500
Long-term debt, less current portion........................ 101,198 16,426
Total stockholders' equity.................................. 260,045 747,633
</TABLE>
- ------------------------------
(1) Adjusted to give effect to our sale of 4,000,000 shares of common stock at
the assumed public offering price of $126.25 per share and the application
of the net proceeds as described in "Use of Proceeds."
7
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES AND OFFICES)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross billings:
Internet.................................................. $ 6,939 $ 20,553 $ 56,666 $ 36,077 $ 93,734
Recruitment advertising................................... 369,979 642,872 849,563 646,141 615,488
Search & selection........................................ 194,848 244,153 277,304 215,630 221,699
Temporary contracting..................................... 29,210 41,285 46,989 33,027 44,866
Yellow page advertising................................... 466,230 497,848 520,129 406,349 413,692
---------- ---------- ---------- ---------- ----------
Total gross billings........................................ $1,067,206 $1,446,711 $1,750,651 $1,337,224 $1,389,479
========== ========== ========== ========== ==========
Number of employees......................................... 3,910 5,651 6,278 6,270 6,412
Number of offices........................................... 161 213 254 254 247
</TABLE>
8
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus includes or incorporates forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. You can identify these forward-looking
statements by our use of the words "believes," "anticipates," "plans,"
"expects," "may," "will," "would," "intends," "estimates," and similar
expressions, whether in the negative or affirmative. We cannot guarantee that we
actually will achieve these plans, intentions or expectations. Actual results or
events could differ materially from the plans, intentions and expectations
disclosed in the forward-looking statements we make. We have included important
factors in the cautionary statements in this prospectus, particularly under the
heading "Risk Factors," that we believe could cause our actual results to differ
materially from the forward-looking statements that we make. The forward-looking
statements do not reflect the potential impact of any future acquisitions,
mergers or dispositions. We do not assume any obligation to update any
forward-looking statement we make.
RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CONSIDER CAREFULLY
THESE RISK FACTORS TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS BEFORE YOU DECIDE TO PURCHASE SHARES OF OUR COMMON STOCK.
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH
Our business has grown rapidly in recent periods. As an example, we
completed 80 mergers and acquisitions from January 1, 1996 through October 31,
1999. We entered the executive search field in 1998 and we believe that our
recent acquisition of LAI Worldwide, Inc. has made us one of the largest
executive search firms in the world. This growth of our business has placed a
significant strain on our management and operations. Our expansion has resulted,
and is expected in the future to result, in substantial growth in the number of
our employees. In addition, this growth is expected to result in increased
responsibility for both existing and new management personnel and incremental
strain on our existing operations, financial and management information systems.
Our success depends to a significant extent on the ability of our executive
officers and other members of senior management to operate effectively both
independently and as a group. If we are not able to manage existing or
anticipated growth, our business, financial condition and operating results will
be materially adversely affected.
OUR SUCCESS DEPENDS ON THE VALUE OF OUR BRANDS, PARTICULARLY MONSTER.COM(SM)
Our success depends on our brands and their value. Our business would be
adversely affected if we were unable to adequately protect our brand names
particularly Monster.com(SM). We are also susceptible to others imitating our
products, particularly Monster.com(SM), and infringing our intellectual property
rights. We may not be able to successfully protect our intellectual property
rights, upon which we are materially dependent. In addition, the laws of many
foreign countries do not protect intellectual property rights to the same extent
as the laws of the United States. Imitation of our products, particularly
Monster.com(SM), or infringement of our intellectual property rights could
diminish the value of our brands or otherwise adversely affect our revenues.
WE DEPEND ON TRADITIONAL MEDIA
A substantial portion of our total commissions and fees comes from designing
and placing recruitment advertisements in traditional media such as newspapers
and trade publications. This business constituted approximately 27.0% and 24.0%
of our total commissions and fees for the year ended December 31, 1998 and the
nine months ended September 30, 1999, respectively. We also receive a
substantial portion of our commissions and fees from placing advertising in
yellow page directories. This business constituted approximately 16.2% and 14.2%
of total commissions and fees for the year ended December 31, 1998 and the nine
months ended September 30, 1999, respectively. We cannot assure you that the
total commissions
9
<PAGE>
and fees we receive in the future will equal the total commissions and fees
which we have received in the past.
In addition, new media, like the Internet, may cause yellow page directories
and other forms of traditional media to become less desirable forms of
advertising media. If we are not able to generate Internet advertising fees to
offset any decrease in commissions from traditional media, our business,
financial condition and operating results will be materially adversely affected.
THE ACCEPTANCE AND EFFECTIVENESS OF INTERNET ADVERTISING IS UNPROVEN
Use of the Internet by consumers is at an early stage of development, and
market acceptance of the Internet as a medium for information, entertainment,
commerce and advertising remains subject to a high level of uncertainty. Most of
our clients have only limited experience with the Internet as an advertising
medium and have not devoted a significant portion of their advertising budgets
to Internet-based advertising in the past. There can be no assurance that
advertisers will allocate or continue to allocate portions of their budgets to
Internet-based advertising. If Internet-based advertising is not widely accepted
by our clients, our business, financial condition and operating results,
including our expected rate of commissions and fees growth, will be materially
adversely affected. Although we generated Internet gross billings of $56.7
million and commissions and fees of $50.2 million for the year ended December
31, 1998 and Internet gross billings of $93.7 million and commissions and fees
of $82.9 million for the nine months ended September 30, 1999, our Internet
gross billings and commissions and fees as a percentage of total commissions and
fees for the year ended December 31, 1998 and the nine months ended September
30, 1999 were 3.2% and 7.6% and 6.7% and 14.8%, respectively, and we cannot
assure you that we will generate substantial Internet-based commissions and fees
in the future.
WE FACE RISKS RELATING TO DEVELOPING TECHNOLOGY, INCLUDING THE INTERNET
The market for Internet products and services is characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The emerging character of these products and services and
their rapid evolution will require our continuous improvement in performance,
features and reliability of our Internet content, particularly in response to
competitive offerings. We cannot assure you that we will be successful in
responding quickly, cost effectively and sufficiently to these developments. In
addition, the widespread adoption of new Internet technologies or standards
could require us to make substantial expenditures to modify or adapt our Web
sites and services. This could affect our business, financial condition and
operating results. New Internet services or enhancements which we have offered
or may offer in the future may contain design flaws or other defects that could
require expensive modifications or result in a loss of client confidence. Any
disruption in Internet access or in the Internet generally could have a material
adverse effect on our business, financial condition and operating results.
WE ARE VULNERABLE TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS BROUGHT AGAINST
US BY OTHERS
Successful intellectual property infringement claims against us could result
in monetary liability or a material disruption in the conduct of our business.
We cannot be certain that our products, content and brand names do not or will
not infringe valid patents, copyrights or other intellectual property rights
held by third parties. We expect that infringement claims in our markets will
increase in number as more participants enter the markets. We may be subject to
legal proceedings and claims from time to time relating to the intellectual
property of others in the ordinary course of our business. We may incur
substantial expenses in defending against these third party infringement claims,
regardless of their merit.
In April 1999, Monster Cable Products, Inc. commenced a civil action against
us claiming, among other things, trademark infringement for our use of the
Monster.com name. Although our trademark counsel believes the action to be
without merit, we are currently engaged in settlement discussions. There can be
no assurance, however, as to the ultimate disposition of this claim.
10
<PAGE>
COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS
Computer viruses may cause our systems to incur delays or other service
interruptions and could damage our reputation and have a material adverse effect
on our business, financial condition and operating results. The inadvertent
transmission of computer viruses could expose us to a material risk of loss or
litigation and possible liability. Moreover, if a computer virus affecting our
system is highly publicized, our reputation could be materially damaged and our
visitor traffic may decrease.
INTERNET USERS MAY NOT ACCEPT OUR INTERNET CONTENT
Our future growth depends in part on our ability to attract Internet users
who are valuable to our advertising clients. This in turn depends on our ability
to deliver original and compelling services to these Internet users. We cannot
assure you that our content will be attractive to enough Internet users to
generate material advertising commissions and fees. We also cannot assure you
that we will be able to anticipate, monitor and successfully respond to rapidly
changing consumer tastes and preferences to continue to attract a sufficient
number of Internet users to our Web sites.
Internet users can freely navigate and instantly switch among a large number
of Web sites, many of which offer original content. It is difficult for us to
distinguish our content and attract users. In addition, many other Web sites
offer very specific, highly targeted content. These sites could have greater
appeal than our sites to particular groups within our target audience.
WE FACE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY
We expect our growth to continue, in part, by acquiring businesses. The
success of this strategy depends upon several factors, including:
- the continued availability of financing;
- our ability to identify and acquire businesses on a cost-effective basis;
- our ability to integrate acquired personnel, operations, products and
technologies into our organization effectively; and
- our ability to retain and motivate key personnel and to retain the clients
of acquired firms.
We cannot assure you that financing for acquisitions will be available on
terms we find acceptable, or that we will be able to identify or consummate new
acquisitions, or manage and integrate our recent or future expansions
successfully. Any inability to do so would materially adversely affect our
business, financial condition and operating results. We also cannot assure you
that we will be able to sustain the rates of growth that we have experienced in
the past.
OUR MARKETS ARE HIGHLY COMPETITIVE
The markets for our services are highly competitive. They are characterized
by pressures to:
- reduce prices;
- incorporate new capabilities and technologies; and
- accelerate job completion schedules.
Furthermore, we face competition from a number of sources. These sources
include:
- national and regional advertising agencies;
- Internet portals;
- specialized and integrated marketing communication firms;
- traditional media companies;
- executive search firms; and
- search and selection firms.
11
<PAGE>
In addition, many advertising agencies and publications have started either
to internally develop or acquire new media capabilities, including Internet. We
are also competing with established companies that provide integrated
specialized services like Web advertising services or Web site design, and are
technologically proficient. Many of our competitors or potential competitors
have long operating histories, and some may have greater financial, management,
technological development, sales, marketing and other resources than we do. In
addition, our ability to maintain our existing clients and attract new clients
depends to a large degree on the quality of our services and our reputation
among our clients and potential clients.
We have no significant proprietary technology that would preclude or inhibit
competitors from entering the online advertising, executive search, recruitment
advertising, or yellow page advertising markets. We cannot assure you that
existing or future competitors will not develop or offer services and products
which provide significant performance, price, creative or other advantages over
our services. This could have a material adverse effect on our business,
financial condition and operating results.
OUR OPERATING RESULTS FLUCTUATE FROM QUARTER TO QUARTER
Our quarterly operating results have fluctuated in the past and may
fluctuate in the future. These fluctuations are a result of a variety of
factors, including:
- the timing of acquisitions;
- the timing of yellow page directory closings, the largest number of which
currently occur in the third quarter; and
- the receipt of additional commissions, from yellow page publishers for
achieving a specified volume of advertising, which are typically reported
in the fourth quarter.
Generally our quarterly commissions and fees earned from recruitment
advertising tend to be highest in the first quarter and lowest in the fourth
quarter. Additionally, recruitment advertising commissions and fees tend to be
more cyclical than yellow page commissions and fees. To the extent that a
significant percentage of our commissions and fees are derived from recruitment
advertising, our operating results may be subject to increased cyclicality.
EFFECT OF GLOBAL ECONOMIC FLUCTUATIONS
Demand for our services is significantly affected by the general level of
economic activity in the regions and industries in which we operate. When
economic activity slows, many companies hire fewer permanent employees.
Therefore, a significant economic downturn, especially in regions or industries
where our operations are heavily concentrated, could have a material adverse
effect on our business, financial condition and operating results. Further, we
may face increased pricing pressures during such periods. There can be no
assurance that during these periods our results of operations will not be
adversely affected.
WE DEPEND ON OUR CONSULTANTS
The success of our executive search business depends upon our ability to
attract and retain consultants who possess the skills and experience necessary
to fulfill our clients' executive search needs. Competition for qualified
consultants is intense. We believe that we have been able to attract and retain
highly qualified, effective consultants as a result of our reputation and our
performance-based compensation system. Consultants have the potential to earn
substantial bonuses based on the amount of revenue they generate by:
- obtaining executive search assignments;
- executing search assignments; and
- assisting other consultants to obtain or complete executive search
assignments.
12
<PAGE>
Bonuses represent a significant proportion of consultants' total
compensation. Any diminution of our reputation could impair our ability to
retain existing or attract additional qualified consultants. Our inability to
attract and retain qualified consultants could have a material adverse effect on
our executive search business, financial condition and operating results.
OUR CONSULTANTS MAY DEPART WITH EXISTING EXECUTIVE SEARCH CLIENTS
The success of our executive search business depends upon the ability of our
consultants to develop and maintain strong, long-term relationships with
clients. Usually, one or two consultants have primary responsibility for a
client relationship. When a consultant leaves an executive search firm and joins
another, clients that have established relationships with the departing
consultant may move their business to the consultant's new employer. The loss of
one or more clients is more likely to occur if the departing consultant enjoys
widespread name recognition or has developed a reputation as a specialist in
executing searches in a specific industry or management function. Historically,
we have not experienced significant problems in this area. However, a failure to
retain our most effective consultants or maintain the quality of service to
which our clients are accustomed could have a material adverse effect on our
business, financial condition and operating results. Also, the ability of a
departing consultant to move business to his or her new employer could have a
material adverse effect on our business, financial condition and operating
results.
WE FACE RISKS MAINTAINING OUR PROFESSIONAL REPUTATION AND BRAND NAME
Our ability to secure new executive search engagements and hire qualified
professionals is highly dependent upon our overall reputation and brand name
recognition as well as the individual reputations of our professionals. We
obtain a majority of our new engagements from existing clients or from referrals
by existing clients. Therefore, the dissatisfaction of any client could have a
disproportionate, adverse impact on our ability to secure new engagements. Any
factor that diminishes our reputation or the reputation of any of our personnel
could make it more difficult for us to compete successfully for both new
engagements and qualified consultants. This could have an adverse effect on our
executive search business, financial condition and operating results.
WE FACE RESTRICTIONS IMPOSED BY BLOCKING ARRANGEMENTS
Either by agreement with clients or for marketing or client relationship
purposes, executive search firms frequently refrain, for a specified period of
time, from recruiting certain employees of a client, and possibly other entities
affiliated with such client, when conducting executive searches on behalf of
other clients. This is known as a "blocking" arrangement. Blocking arrangements
generally remain in effect for one or two years following completion of an
assignment. The actual duration and scope of any blocking arrangement, including
whether it covers all operations of a client and its affiliates or only certain
divisions of a client, generally depends on such factors as:
- the length of the client relationship;
- the frequency with which the executive search firm has been engaged to
perform executive searches for the client; and
- the number of assignments the executive search firm has generated or
expects to generate from the client.
Some of our executive search clients are recognized as industry leaders and/or
employ a significant number of qualified executives who are potential candidates
for other companies in that client's industry. Blocking arrangements with a
client of this nature, or the awareness by a client's competitors of such an
arrangement, may make it difficult for us to obtain executive search assignments
from, or to fulfill executive search assignments for, competitors while
employees of that client may not be solicited. As our client base grows,
particularly in our targeted business sectors, blocking arrangements
increasingly may
13
<PAGE>
impede our growth or ability to attract and serve new clients. This could have
an adverse effect on our executive search business, results of operations and
financial condition.
WE FACE RISKS RELATING TO OUR FOREIGN OPERATIONS
We conduct operations in various foreign countries, including Australia,
Belgium, Canada, France, Germany, Japan, the Netherlands, New Zealand,
Singapore, Spain and the United Kingdom. In 1998 and the nine months ended
September 30, 1999, approximately 44.0% and 46.0% of our total commissions and
fees were earned outside of the United States. Such amounts are collected in the
local currency. In addition, we generally pay operating expenses in the
corresponding local currency. Therefore, we are at risk for exchange rate
fluctuations between such local currencies and the dollar. We do not conduct any
significant hedging activities.
We are also subject to taxation in foreign jurisdictions. In addition,
transactions between us and our foreign subsidiaries may be subject to United
States and foreign withholding taxes. Applicable tax rates in foreign
jurisdictions differ from those of the United States, and change periodically.
The extent, if any, to which we will receive credit in the United States for
taxes we pay in foreign jurisdictions will depend upon the application of
limitations set forth in the Internal Revenue Code of 1986, as well as the
provisions of any tax treaties which may exist between the United States and
such foreign jurisdictions.
Other risks inherent in transacting foreign operations include changes in
applicable laws and regulatory requirements, tariffs and other trade barriers
and political instability.
WE DEPEND ON OUR KEY PERSONNEL
Our continued success will depend to a significant extent on our senior
management, including Andrew J. McKelvey, our Chairman of the Board and CEO. The
loss of the services of Mr. McKelvey or of one or more key employees could have
a material adverse effect on our business, financial condition and operating
results. In addition, if one or more key employees join a competitor or form a
competing company, the resulting loss of existing or potential clients could
have a material adverse effect on our business, financial condition and
operating results. If we were to lose a key employee, we cannot assure you that
we would be able to prevent the unauthorized disclosure or use of our
procedures, practices, new product development or client lists.
WE ARE CONTROLLED BY A PRINCIPAL STOCKHOLDER
Following completion of this offering, Andrew J. McKelvey will beneficially
own all of our outstanding Class B common stock and 10,886,564 shares of our
common stock, which together represent approximately 52.9% of the combined
voting power of all classes of our voting stock. Mr. McKelvey can direct the
election of all of the members of our board. He can also exercise a controlling
influence over our business and affairs. This includes any determinations with
respect to mergers or other business combinations, the acquisition or
disposition of our assets, whether or not we incur indebtedness, the issuance of
any additional common stock or other equity securities and the payment of
dividends with respect to common stock. Similarly, Mr. McKelvey may determine
matters submitted to a vote of our stockholders without the consent of our other
stockholders and he has the power to prevent a change of control.
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT OUR ACQUISITION
Some of the provisions of our certificate of incorporation, bylaws and
Delaware law could, together or separately:
- discourage potential acquisition proposals;
- delay or prevent a change in control; and
- limit the price that investors might be willing to pay in the future for
shares of our common stock.
14
<PAGE>
In particular, our board of directors may issue up to 800,000 shares of
preferred stock with rights and privileges that might be senior to our common
stock, without the consent of the holders of the common stock. Our certificate
of incorporation and bylaws provide, among other things, for advance notice of
stockholder proposals and director nominations.
THERE MAY BE VOLATILITY IN OUR STOCK PRICE
The market for our common stock has, from time to time, experienced extreme
price and volume fluctuations. Factors such as announcements of variations in
our quarterly financial results and fluctuations in advertising commissions and
fees, including the percentage of our commissions and fees derived from
Internet-based services and products could cause the market price of our common
stock to fluctuate significantly. Further, due to the volatility of the stock
market generally, the price of our common stock could fluctuate for reasons
unrelated to our operating performance.
The market price of our common stock is based in large part on professional
securities analysts' expectations that our business will continue to grow and
that we will achieve certain levels of net income. If our financial performance
in a particular quarter does not meet the expectations of securities analysts,
this may adversely affect the views of those securities analysts concerning our
growth potential and future financial performance. If the securities analysts
who regularly follow our common stock lower their ratings of our common stock or
lower their projections for our future growth and financial performance, the
market price of our common stock is likely to drop significantly.
WE FACE RISKS ASSOCIATED WITH GOVERNMENT REGULATION
As an advertising agency which creates and places print and Internet
advertisements, we are subject to Sections 5 and 12 of the U.S. Federal Trade
Commission Act. These sections regulate advertising in all media, including the
Internet, and require advertisers and advertising agencies to have
substantiation for advertising claims before disseminating advertisements. The
FTC Act prohibits the dissemination of false, deceptive, misleading, and unfair
advertising, and grants the Federal Trade Commission enforcement powers to
impose and seek civil penalties, consumer redress, injunctive relief and other
remedies upon advertisers and advertising agencies which disseminate prohibited
advertisements. Advertising agencies like us are subject to liability under the
FTC Act if the agency actively participated in creating the advertisement, and
knew or had reason to know that the advertising was false or deceptive.
In the event that any advertising that we have created is found to be false,
deceptive or misleading, the FTC Act could potentially subject us to liability.
The fact that the FTC has recently brought several actions charging deceptive
advertising via the Internet, and is actively seeking new cases involving
advertising via the Internet, indicates that the FTC Act could pose a somewhat
higher risk of liability to the advertising distributed via the Internet. The
FTC has never brought any actions against us.
In addition, we cannot assure you that other current or new government laws
and regulations, or the application of existing laws and regulations will not:
- subject us to significant liabilities;
- significantly dampen growth in Internet usage;
- prevent us from offering certain Internet content or services; or
- otherwise have a material adverse effect on our business, financial
condition and operating results.
WE HAVE NEVER PAID DIVIDENDS
We currently intend to retain earnings, if any, to support our growth
strategy. We do not anticipate paying dividends on our stock in the foreseeable
future. In addition, payment of dividends on our stock is restricted by our
financing agreement.
15
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the 4,000,000 shares of common stock,
assuming a public offering price of $126.25 per share, are estimated to be
$487.6 million, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us.
We will use approximately $120 million of the net proceeds to repay debt
held by our primary lender, which was approximately $110 million at
September 30, 1999, including $25 million which is reflected as a reduction of
accounts receivable. The interest rate on the debt is the higher of (a) the
prime rate or (b) the Federal Funds rate less 0.5% or (c) LIBOR plus a margin
determined by the ratio of debt to EBITDA. At September 30, 1999, this margin
was 0.75%. At September 30, 1999, we were paying interest at the rate of
approximately 6.15%, annually. Our financing agreement provides for borrowings
of up to $185 million at any time outstanding and expires November 5, 2003. In
addition, we plan to make strategic equity investments of approximately $50
million in Internet businesses which have synergies with our traditional
businesses and overseas businesses which have synergies with our current
Internet business. The remaining net proceeds will be used for general corporate
purposes, including working capital. Pending such uses, the net proceeds will be
invested in short term, interest bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our stock. We currently
anticipate that we will retain all future earnings to support our growth
strategy. Accordingly, we do not anticipate paying cash dividends on our stock
for the foreseeable future. Currently, our financing agreement restricts the
payment of dividends on our stock. The payment of any future dividends will be
at the discretion of our Board of Directors and will depend upon, among other
things, future earning, operations, capital requirements, our general financial
condition, contractual restrictions and general business conditions.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the ticker
symbol "TMPW." The following table sets forth for the periods indicated the high
and low reported closing sale prices per share for our common stock as reported
by Nasdaq.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 2000 HIGH LOW
- ---------------------------- -------- --------
<S> <C> <C>
First Quarter (through January 5, 2000)................ $138.93 $123.38
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 HIGH LOW
- ---------------------------- -------- --------
First Quarter. $ 69.88 $ 39.00
<S> <C> <C>
Second Quarter......................................... 89.38 43.00
Third Quarter.......................................... 65.63 44.13
Fourth Quarter......................................... 160.31 50.00
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 HIGH LOW
- ---------------------------- -------- --------
First Quarter. $ 32.62 $ 21.25
<S> <C> <C>
Second Quarter......................................... 34.88 25.50
Third Quarter.......................................... 38.88 27.88
Fourth Quarter......................................... 42.00 20.50
</TABLE>
There were approximately 1,400 stockholders of record of our common stock on
January 5, 2000. On January 5, 2000, the last reported sale price of our common
stock as reported by Nasdaq was $126.25.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999,
(i) on a historical basis and (ii) on a historical basis, as adjusted, to give
effect to our sale of 4,000,000 shares of common stock at an assumed offering
price of $126.25 per share, assuming the underwriters' over-allotment option is
not exercised, and our application of the net proceeds. The table set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and the consolidated
financial statements and notes thereto incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
AS
ACTUAL ADJUSTED
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt........................... $ 8,898 $ 8,898
======== ========
Long-term debt, less current portion........................ $101,198 $ 16,426
-------- --------
Stockholders' equity:
Preferred stock, $.001 par value.
Authorized--800,000 shares; issued and outstanding--none
actual and as adjusted.................................. -- --
Common stock, $.001 par value.
Authorized--200,000,000 shares; issued and outstanding--
actual 37,788,761 and as adjusted 41,788,761............ 38 42
Class B common stock, $.001 par value.
Authorized--39,000,000 shares; issued and outstanding--
actual 2,381,000 and as adjusted 2,381,000.............. 2 2
Additional paid-in capital................................ 300,413 787,997
Other comprehensive loss.................................. (4,363) (4,363)
Deficit................................................... (36,045) (36,045)
-------- --------
Total stockholders' equity.............................. 260,045 747,633
-------- --------
Total capitalization................................ $361,243 $764,059
======== ========
</TABLE>
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information with respect to
our financial position as of December 31, 1996, 1997 and 1998 and our results of
operations for each of the years ended December 31, 1996, 1997 and 1998 have
been derived from our audited consolidated financial statements which are
incorporated by reference in this prospectus. The selected consolidated
financial information with respect to the results of our operations for the nine
months ended September 30, 1998 and 1999 and with respect to our financial
position as of September 30, 1998 and 1999 have been derived from the unaudited
consolidated financial statements which, in the opinion of our management, have
been prepared on the same basis as the audited financial statements and include
all normal and recurring adjustments necessary for a fair presentation of the
information set forth therein. The results for the nine months ended
September 30, 1999 are not necessarily indicative of future results. The
selected consolidated financial information presented below should be read in
conjunction with our supplemental consolidated financial statements and our
supplemental consolidated condensed financial statements and notes thereto,
incorporated by reference in this prospectus, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus. The Other Data presented below has not been audited.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Commissions & fees........................................ $ 399,039 $ 541,828 $ 657,486 $ 496,872 $ 561,481
---------- ---------- ---------- ---------- ----------
Operating expenses:
Salaries and related costs.............................. 232,249 310,168 382,689 288,045 327,046
Office and general expenses............................. 115,191 152,824 190,204 136,639 173,053
Merger & integration costs.............................. -- -- 22,412 9,577 46,262
Restructuring charges................................... -- -- 3,543 -- 2,789
Amortization of intangibles............................. 4,732 6,866 10,185 7,394 8,564
Special compensation and special CEO bonus.............. 52,019(1) 1,500 1,250 1,125 --
---------- ---------- ---------- ---------- ----------
Total operating expenses................................ 404,191 471,358 610,283 442,780 557,714
---------- ---------- ---------- ---------- ----------
Operating income (loss)................................. (5,152) 70,470 47,203 54,092 3,767
---------- ---------- ---------- ---------- ----------
Other expense:
Interest expense, net................................... (14,358) (8,443) (9,828) (7,035) (6,272)
Other, net.............................................. (370) 821 (2,042) (932) (851)
---------- ---------- ---------- ---------- ----------
Total other expense, net.............................. (14,728) (7,622) (11,870) (7,967) (7,123)
---------- ---------- ---------- ---------- ----------
Income (loss) before provision for income taxes, minority
interests and equity in income (losses) of affiliates... (19,880) 62,848 35,333 46,125 (3,356)
Provision for income taxes................................ 11,058 20,565 14,367 16,637 1,154
---------- ---------- ---------- ---------- ----------
Income (loss) before minority interests and equity in
income (losses) of affiliates........................... (30,938) 42,283 20,966 29,488 (4,510)
Minority interests........................................ 1,017 296 28 (18) 107
Equity in income (losses) of affiliates................... 114 (33) (396) (297) (300)
---------- ---------- ---------- ---------- ----------
Net income (loss)......................................... (31,841) 41,954 20,542 29,209 (4,917)
Preferred stock dividend and redemption premium........... (210) (123) -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common and Class B common
stockholders............................................ $ (32,051) $ 41,831 $ 20,542 $ 29,209 $ (4,917)
========== ========== ========== ========== ==========
Net income (loss) per common and Class B common share:
Basic..................................................... $ (1.04) $ 1.15 $ 0.53 $ 0.75 $ (0.12)
========== ========== ========== ========== ==========
Diluted................................................... $ (1.04) $ 1.13 $ 0.52 $ 0.73 $ (0.12)
========== ========== ========== ========== ==========
Weighted average shares outstanding:
Basic..................................................... 30,954 36,333 38,736 38,696 39,611
Diluted................................................... 30,954 36,954 39,639 39,802 39,611
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.............................................. $321,761 $444,144 $475,082 $522,240 $529,878
Current liabilities......................................... 320,038 414,278 431,443 447,827 505,869
Total assets................................................ 475,519 721,066 802,535 825,312 883,684
Long-term debt, less current portion........................ 78,151 130,011 123,106 133,745 101,198
Minority interests.......................................... 3,705 431 509 431 --
Total stockholders' equity.................................. 65,257 166,445 228,750 231,639 260,045
</TABLE>
- ------------------------------
(1) For 1996, special compensation of $52.0 million consists of a non-cash,
non-recurring charge that reflects the value of shares issued in connection
with the acquisition of the minority interests in our predecessors because
the stockholders had received such shares for nominal or no consideration
and, accordingly, were not considered to have made a substantive investment
for their shares. The value of such shares was based on the per share
initial public offering price of $14.00 for our common stock.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT NUMBER OF EMPLOYEES AND OFFICES)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross billings:
Internet................................................ $ 6,939 $ 20,553 $ 56,666 $ 36,077 $ 93,734
Recruitment advertising................................. 369,979 642,872 849,563 646,141 615,488
Search & selection...................................... 194,848 244,153 277,304 215,630 221,699
Temporary contacting.................................... 29,210 41,285 46,989 33,027 44,866
Yellow page advertising................................. 466,230 497,848 520,129 406,349 413,692
---------- ---------- ---------- ---------- ----------
Total gross billings...................................... $1,067,206 $1,446,711 $1,750,651 $1,337,224 $1,389,479
========== ========== ========== ========== ==========
Number of employees....................................... 3,910 5,651 6,278 6,270 6,412
Number of offices......................................... 161 213 254 254 247
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
A substantial part of our growth in recruitment advertising and yellow page
advertising has been achieved through acquisitions. For the period January 1,
1996 through September 30, 1999, we completed 58 acquisitions which were
accounted for under the purchase method and which had estimated annual gross
billings of approximately $662.7 million, based on annual gross billings for the
fiscal year immediately preceding the respective acquisition. Given the
significant number of acquisitions in each of the periods presented, the results
of operations from period to period may not necessarily be comparable. In
addition, for the period May 1, 1998 through October 31, 1999, we completed 20
mergers which were accounted for as poolings of interests.
Of the pooling of interests mergers, the seven completed prior to April 1,
1999 are Johnson, Smith & Knisely Inc. ("JSK"), TASA Holding AG ("TASA"),
Stackig, Inc. ("Stackig"), Recruitment Solutions Inc., Sunquest L.L.C. d.b.a.
The SMART Group and The Consulting Group (International) Limited ("TCG"), in
1998 (the "1998 Mergers"), and Morgan & Banks Limited ("M&B") in January 1999
(the "M&B Merger"). In connection with these mergers, we issued approximately
8.7 million shares of our common stock in exchange for all of the outstanding
common stock of these seven companies. From April 1, 1999 through June 30, 1999,
we completed pooling of interests mergers (the "Second Quarter 1999 Mergers"),
with six companies, Interquest, Pty. Limited ("Interquest"), LIDA
Advertising Inc. ("LIDA"), Maes & Lunau ("M&L"), IN2, Inc. ("IN2"), Lemming &
LeVan, Inc. ("L&L"), and Yellow Pages Unlimited, Inc. ("YPU"), (the "Second
Quarter 1999 Pooled Companies"). In connection with the Second Quarter 1999
Mergers we issued a total of approximately 0.9 million shares of our common
stock in exchange for all of the outstanding stock of the Second Quarter 1999
Pooled Companies. From July 1, 1999 through September 30, 1999, we completed
pooling of interests mergers (the "Third Quarter 1999 Mergers"),with the five
companies, Cameron-Newell Advertising, Inc. ("CNA"), Brook Street Bureau (QLD)
Pty Ltd ("Brook St."), LAI Worldwide, Inc. ("LAI"), Fox Advertising Inc. ("Fox")
and Lampen Group Limited ("Lampen") (the "Third Quarter 1999 Pooled Companies").
In connection with the Third Quarter 1999 Mergers we issued a total of
approximately 2.2 million shares of our common stock in exchange for all of the
outstanding stock of the Third Quarter 1999 Pooled Companies. Furthermore, from
October 1, 1999 through November 19, 1999, we completed mergers with the two
companies listed below (the "Fourth Quarter 1999 Pooled Companies"), which
provided for the exchange of all of the outstanding stock of such companies for
a total of 758,613 shares of our common stock and which were accounted for as
poolings of interests (the "Fourth Quarter 1999 Mergers").
<TABLE>
<CAPTION>
NATURE OF REGION OF NUMBER OF TMP
ENTITY OPERATIONS OPERATIONS ACQUISITION DATE SHARES ISSUED
- ------ ------------------ -------------------- ---------------- -------------
<S> <C> <C> <C> <C>
Highland Search Group
L.L.C.
("Highland")....... Search & selection North America October 21, 1999 699,333
TMC S.r.l. ("Amrop
Italy")............ Search & selection Continental Europe October 27, 1999 59,280
</TABLE>
Accordingly, the following discussion reflects the foregoing mergers which
were accounted for as poolings of interest.
Gross billings refer to billings for advertising placed on the Internet, in
newspapers and telephone directories by our clients, and associated fees for
related services, fees earned for search and selection and related services, and
net fees from temporary contracting services. Gross billings for recruitment
advertising and yellow page advertising are not included in our consolidated
financial statements, because they include a substantial amount of funds that
are collected from our clients but passed through to publishers
20
<PAGE>
for advertisements. However, the trends in gross billings in these businesses
directly impact the commissions and fees earned because, for recruitment and
yellow page advertising, we earn commissions based on a percentage of the media
advertising purchased at a rate established by the related publisher. We also
earn associated fees for related services. Publishers and third party Web sites
typically bill us for the advertising purchased on the website and we in turn
bill our clients for this amount. Generally, the payment terms with yellow page
clients require payment to us prior to the date payment is due to publishers.
The payment terms with recruitment advertising clients typically require payment
when payment is due to publishers. Historically, we have not experienced
substantial problems with unpaid accounts.
Commissions and fees related to our Internet business are derived from:
- job postings and access to the resume database and related services
delivered via the Internet, primarily our own Web site, Monster.com(SM),
- searches for permanent employees and temporary contracting services
conducted through the Internet,
- Internet advertising services provided to our yellow page clients and
- the providing of interactive advertising services and technologies, which
allow advertisers to measure and track sales, repeat traffic and other key
statistics to enable such advertisers to greatly reduce costs, while
driving only the most qualified users to their websites.
For recruitment advertising placements in the U.S., publisher commissions
historically average 15% of recruitment advertising gross billings. We also earn
fees from related services such as campaign development and design, retention
and referral programs, brochures and other collateral services, research and
other creative and administrative services. Outside of the U.S., where,
collectively, we derive the majority of our recruitment advertising commissions
and fees, our commission rates for recruitment advertising vary, historically
ranging from approximately 10% in Australia to 15% in Canada and the United
Kingdom.
Through our search and selection services, we identify and screen candidates
for hiring by clients based on criteria established by such clients. We entered
the executive search business in 1998 by acquiring JSK, the 12th largest
executive search firm in the U.S. according to Kennedy Publications, an official
ranking service for the search industry, TASA, an international executive search
firm, both of which were accounted for as poolings of interests, and five
regional European firms, including TCG, whose acquisition was accounted for as a
pooling of interests. In the first quarter of 1999 we merged with M&B, the
largest search and selection firm in Australia, in a pooling of interests
transaction and acquired two European search and selection firms (one with
operations in eastern Europe and one in Belgium). In the second quarter of 1999,
in pooling of interests transactions, we merged with three companies with
search and selection operations, M&L in the Netherlands, L&L in the United
States and Interquest in Australia. In the third quarter of 1999, in a pooling
of interests transaction, we merged with LAI, the 5th largest executive search
firm in the U.S. (according to Hunt-Scanlon Publishing, Inc., a publication that
follows the executive search industry). In the fourth quarter of 1999, in
pooling of interests transactions, we merged with Highland, based in the United
States, and Amrop Italy. We provide executive search services on a retained
basis whereby we are generally paid a contractually agreed-to fee. In addition,
we expanded our temporary contracting services in Australia, New Zealand and the
United Kingdom with the additions of Brook St. and Lampen, which also have
selection operations in those regions. In general, we bill our temporary
contracting clients for the cost of the temporary contract employees plus a
margin for providing the service. Commissions and fees for temporary contracting
however are reported in our financial statements after deducting the costs of
the temporary contractors.
We design and execute yellow page advertising programs, receiving an
effective commission rate from directory publishers which historically
approximated 20% of yellow page gross billings. However, due to reductions in
commission rates by the publishers and higher discounts granted by us to
clients, the rate has
21
<PAGE>
declined and for 1999 is approximately 19% and is expected to decline to
approximately 18% by the middle of 2000. In general, publishers consider orders
renewed unless formally canceled. In addition to base commissions, certain
yellow pages publishers pay increased commissions for volume placement by
advertising agencies. We typically recognize this additional commission, if any,
in the fourth quarter when it is certain that such commission has been earned.
The amounts reported in the fourth quarters of 1998, 1997 and 1996 were
$0.9 million, $2.2 million and $3.5 million, respectively.
Internet commissions and fees increased from $6.9 million in 1996 to
$50.2 million in 1998 reflecting an increase in the acceptance of our Internet
products by existing and new clients and the effect of increased sales and
marketing activities. Recruitment advertising commissions and fees increased
from $76.6 million in 1996 to $177.8 million in 1998 as a result of acquisitions
made from January 1, 1996 through December 31, 1998 and which are included in
our financial statements using the purchase method of accounting from their
respective dates of acquisition. Search and selection commissions and fees grew
from $185.4 million in 1996 to $276.1 million in 1998 primarily as a result of
increased demand for these services by new and existing clients. Temporary
contracting commissions and fees increased from $29.2 million in 1996 to
$47.0 million in 1998 reflecting a greater demand for executive and information
technology temporary contract personnel. Yellow page advertising commissions and
fees increased from $100.9 million in 1996 to $106.5 million in 1998, as a
result of acquisitions made from January 1, 1996 through December 31, 1998 and
which are included in the financial statements using the purchase method of
accounting. We are continuously monitoring the marketplace for opportunities to
expand our presence in recruitment advertising on the Internet, search and
selection, temporary contracting and yellow page advertising, and intend to
continue our acquisition strategy to supplement our internal growth and the
expansion of our businesses.
Based on our consolidated results for the years ended December 31, 1998,
1997 and 1996, 44%, 42%, and 40%, respectively, of our consolidated commissions
and fees were attributable to clients outside the U.S.
Our total operating expenses have increased significantly since 1996
primarily as a result of acquisitions and added expenses to support gross
billings growth for our Internet and recruitment businesses and marketing for
our Internet business.
Salaries and related costs increased $150.5 million to $382.7 million for
the year ended December 31, 1998 from $232.2 million for the year ended
December 31, 1996, a 64.8% increase, supporting a $683.4 million or a 64.0%
increase in gross billings over the same period. When measured as a percent of
gross billings, salaries and related costs for the year ended December 31, 1998
were 21.9%, up slightly from 21.8% for the comparable 1996 period. Salaries and
related costs include total payroll and associated benefits as well as payroll
taxes, sales commissions, recruitment fees and training costs.
Office and general expenses increased $75.0 million to $190.2 million for
the year ended December 31, 1998 from $115.2 million for the year ended
December 31, 1996, a 65.1% increase. This increase is due primarily to increased
costs needed to support the increased gross billings, the expansion of
recruitment and search and selection offices through acquisitions in the U.S.
and foreign markets, and expansion of our infrastructure and marketing costs to
promote the growth of our Internet business. When measured as a percent of gross
billings, office and general expenses for the year ended December 31, 1998 were
10.9%, a slight increase from 10.8% for the comparable 1996 period. This cost
category includes expenses for office operations, business promotion, market
research, advertising, professional fees and fees paid to our primary lending
institution for its services in the processing and collection of payments for
accounts receivable, gains or losses from the sale of operating assets, and
costs associated with legal settlements.
Merger and integration costs are expenses incurred in connection with
business combinations accounted for under the pooling of interests method of
accounting. In general, these costs are comprised of transaction costs (such as
advisory, legal and accounting fees, printing costs and costs incurred for the
subsequent registration of shares in connection with the transactions), stay
bonuses, costs to eliminate
22
<PAGE>
redundant facilities and personnel, costs to integrate operations of the pooled
entities and acceleration of benefits and separation pay in accordance with
pre-existing contractual change in control provisions.
For the year ended December 31, 1998, we expensed merger and integration
costs of $22.4 million in connection with the 1998 Mergers and the M&B Merger.
These costs consist of (1) $11.9 million of non-cash employee stay bonuses,
(2) $1.5 million of stay bonuses paid as cash to key personnel of the 1998
Pooled Companies and (3) $9.0 million of transaction related costs, including
legal, accounting and advisory fees and the costs incurred for the subsequent
registration of shares issued in the mergers.
For the nine months ended September 30, 1999, we expensed merger and
integration costs of $46.3 million compared with $9.6 million for the same
period in 1998 an increase of $36.7 million or 383.1%. These costs are related
to the 1998 Mergers, the M&B Merger, the Second Quarter 1999 Mergers, and the
Third Quarter 1999 Mergers. The increase of $36.7 million primarily resulted
from the pooling of interests transactions that occurred in the quarter ended
September 30, 1999 and the planned integration of such companies. The increase
is due to: (1) $4.8 million for separation pay and accelerated vesting of
employee stock and stock option grants, both in accordance with pre-existing
contractual change in control provisions, (2) $7.8 million more of transaction
related costs, which include legal, accounting, printing and advisory fees and
the costs incurred for the subsequent registration of shares issued in the
transactions and (3) $25.2 million of office integration costs, which include
the closing of excess leased facilities, the write-off of fixed assets which
will not be used in the future and a reserve for the effect, after reduction for
related compensation, of uncollectible search fees recorded as a result of a
loss of executive search consultants, partially offset by $4.4 million less for
employee stay bonuses paid with our shares and options to certain key personnel
of the merged companies. Approximately $18.5 million of the $46.3 million are
non-cash charges. The after tax effect of these charges on diluted earnings per
share is $(0.73) and $(0.16) for the nine months ended September 30, 1999 and
1998, respectively. We expect to incur additional integration costs in
connection with the Third Quarter 1999 Mergers in future periods. These costs
will be primarily related to severance and will be recorded when the associated
integration plans are finalized. Furthermore, we will incur merger and
integration costs associated with the Fourth Quarter 1999 Mergers, including
amortization of the cost of 160,120 shares of our common stock that were issued
as stay bonuses to certain key employees of Highland and that will vest one year
from the date of grant.
Restructuring costs for the year ended December 31, 1998 were $3.5 million
or, on an after tax basis, $(0.05) per diluted share. These charges relate to
LAI's plan to significantly curtail the operations of its London office, and
include the write-off of leasehold improvements and fixed assets, severance
benefits and costs for consolidation of facilities related to the restructuring.
Amortization of intangibles includes amortization of acquisition related
charges, including the costs in excess of fair market value of net assets of
business acquisitions accounted for under the purchase method and capitalized
costs for non-compete arrangements with the principals of acquired companies.
This acquisition related amortization was $10.2 million, $6.9 million and
$4.7 million for the years ended December 31, 1998, 1997 and 1996, respectively
and $8.6 million and $7.4 million for the nine months ended September 30, 1999
and 1998, respectively.
The special CEO bonus for the years ended December 31, 1998 and 1997 of
$1.3 million and $1.5 million reflects a non-cash charge, recorded in compliance
with Staff Accounting Bulletin No. 79 ("SAB 79"), for a bonus mandated by Andrew
J. McKelvey's employment contract, even though such bonus was irrevocably
waived. The contractual obligation to pay such bonus was eliminated as of
November 1998. The special compensation for the year ended December 31, 1996,
reflects a non-cash, non-recurring charge of approximately $52.0 million
resulting from the issuance of approximately 3.6 million shares of our common
stock to stockholders of our predecessor companies in exchange for their shares
in those companies. This charge was incurred because these stockholders had
received such shares for nominal or no consideration as employees or as
management of such companies and, accordingly, were not considered to have made
substantive investments for their shares.
23
<PAGE>
Net interest expense includes interest: (i) on loans made by our primary
lender under our financing agreement with such lender, (ii) to certain vendors,
(iii) on capitalized lease obligations, (iv) on net amounts payable to the
holders of seller financed notes and (v) on a term loan related to the purchase
of certain transportation equipment. In addition, 1996 net interest expense
includes a non-recurring charge of approximately $2.6 million to reflect, upon
exercise of the warrant issued in connection with our financing agreement, the
difference between the value of the stock issued at the initial public offering
price of $14.00 per share and the value recorded for the warrant when it was
originally issued.
RESULTS OF OPERATIONS
The following table sets forth our gross billings, commissions and fees,
commissions and fees as a percentage of gross billings, EBITDA and cash flow
information.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
GROSS BILLINGS:
Internet(1)........................ $ 6,939 $ 20,553 $ 56,666 $ 36,077 $ 93,734
Recruitment advertising............ 369,979 642,872 849,563 646,141 615,488
Search & selection................. 194,848 244,153 277,304 215,630 221,699
Temporary contracting(2)........... 29,210 41,285 46,989 33,027 44,866
Yellow page advertising............ 466,230 497,848 520,129 406,349 413,692
---------- ---------- ---------- ---------- ----------
Total billings..................... $1,067,206 $1,446,711 $1,750,651 $1,337,224 $1,389,479
========== ========== ========== ========== ==========
COMMISSIONS & FEES:
Internet(1)........................ $ 6,939 $ 19,470 $ 50,158 $ 32,688 $ 82,952
Recruitment advertising............ 76,601 134,291 177,774 133,858 134,928
Search & selection................. 185,406 242,841 276,110 214,765 219,213
Temporary contracting(2)........... 29,210 41,285 46,989 33,027 44,866
Yellow page advertising............ 100,883 103,941 106,455 82,534 79,522
---------- ---------- ---------- ---------- ----------
Total commissions & fees........... $ 399,039 $ 541,828 $ 657,486 $ 496,872 $ 561,481
========== ========== ========== ========== ==========
COMMISSIONS AND FEES AS A
PERCENTAGE OF GROSS BILLINGS:
Internet........................... 100.0% 94.7% 88.5% 90.6% 88.5%
Recruitment advertising............ 20.7 20.9 20.9 20.7 21.9
Search & selection................. 95.2 99.5 99.6 99.6 98.9
Temporary contracting.............. 100.0 100.0 100.0 100.0 100.0
Yellow page advertising............ 21.6 20.9 20.5 20.3 19.2
Total commissions & fees........... 37.4 37.5 37.6 37.2 40.4
EBITDA(3).......................... $ 7,755 $ 92,420 $ 79,075 $ 77,492 $ 32,591
Cash provided by operating
activities....................... 37,097 51,251 63,617 32,686 55,846
Cash used in investing
activities....................... (46,401) (89,726) (66,519) (79,985) (31,952)
Cash provided by (used in)
financing activities............. 13,368 65,524 20,093 32,680 (28,782)
Effect of exchange rate changes on
cash............................. (151) (298) (7) (56) (648)
</TABLE>
- ------------------------
(1) Represents fees earned in connection with recruitment advertising placed on
the Internet, primarily Monster.com(SM), searches for permanent employees
and temporary contracting services conducted through the Internet, Internet
services provided to yellow page clients and from providing interactive
advertising services and technologies.
(2) Amounts for temporary contracting are reported after deducting the costs of
the temporary contractors.
(3) Earnings before interest, income taxes, depreciation and amortization
("EBITDA") is presented to provide additional information about our ability
to meet our future debt service, capital expenditures
24
<PAGE>
and working capital requirements and is one of the measures which determines
our ability to borrow under our credit facility. EBITDA should not be
considered in isolation or as a substitute for operating income, cash flows
from operating activities and other income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as a
measure of our profitability or liquidity.
EBITDA for the indicated periods is calculated as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ----------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income (loss)......................... $(31,841) $41,954 $20,542 $29,209 $(4,917)
Interest expense, net..................... 14,358 8,443 9,828 7,035 6,272
Income tax expense........................ 11,058 20,565 14,367 16,637 1,154
Depreciation and amortization............. 14,180 21,458 34,338 24,611 30,082
-------- ------- ------- ------- -------
EBITDA.................................... $ 7,755 $92,420 $79,075 $77,492 $32,591
======== ======= ======= ======= =======
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
Gross billings for the nine months ended September 30, 1999 were
$1,389.5 million, a net increase of $52.3 million or 3.9% from $1,337.2 million
for the nine months ended September 30, 1998. Commissions and fees for the nine
months ended September 30, 1999 were $561.5 million, an increase of
$64.6 million or 13.0% from $496.9 million in the first nine months of 1998.
Internet commissions and fees for the nine months ended September 30, 1999 were
$83.0 million, an increase of 153.8% or $50.3 million as compared with
$32.7 million for the nine months ended September 30, 1998. This increase in
Internet commissions and fees is due to: (i) an increasing acceptance of our
Internet services and products from existing clients, new clients and Internet
users, (ii) the benefits of Monster.com(SM)'s marketing campaign,
(iii) increases in the services and content available on our Websites,
(iv) expansion into certain European markets and (v) price increases on certain
products. Recruitment commissions and fees were $134.9 million for the nine
months ended September 30, 1999 compared with $133.9 million for the nine months
ended September 30, 1998, an increase of $1.0 million or 0.8% due primarily to
lower discounts to clients and increased ancillary services in North America
offset, in part, by a loss of business in the Asia\Pacific Region which was
ameliorated by an increase in business in Europe. Search and selection
commissions and fees were $219.2 million, an increase of $4.4 million or 2.1%
from $214.8 million for the comparable nine months of 1998, due primarily to
acquisitions and growth in Continental Europe offset by a decline in executive
search due to a loss of consultants, as anticipated, at LAI and TASA, which
resulted from the merger and integration of these companies. Temporary
contracting commissions and fees were $44.9 million, up $11.9 million or 35.8%
from $33.0 million for the period ended September 30, 1998. Our temporary
contracting operations are primarily conducted in Australia and New Zealand. The
35.8% increase reflects an increase in the number of contractors placed,
particularly information technology personnel and executives, which have higher
margins than general and support staff. Yellow page commissions and fees were
$79.5 million for the nine months ended September 30, 1999, a decrease of
$3.0 million or 3.6% from $82.5 million in the first nine months of 1998
primarily due to increased discounts to clients and lower commissions paid by
publishers offset, in part by higher gross billings from internal growth and
acquisitions.
Operating expenses for the nine months ended September 30, 1999 were
$557.7 million compared with $442.8 million for the same period in 1998. The
increase of $114.9 million or 25.9% is due to an increase of $36.7 million in
merger and integration costs related to mergers accounted for as poolings of
interests, acquisitions accounted for as purchases, higher operating and
marketing costs to support our expanding Internet operations and $2.8 million in
restructuring expenses resulting from the closings of LAI's Hong Kong and London
offices.
25
<PAGE>
Salaries and related costs for the nine months ended September 30, 1999 were
$327.0 million or 58.2% of total commissions and fees, compared with
$288.0 million or 58.0% of total commissions and fees for the same period in
1998. The increase of $39.0 million or 13.5% is primarily due to increased staff
for Internet operations additions and acquisitions in search and selection.
Office and general expenses for the nine months ended September 30, 1999
were $173.1 million or 30.8% of total commissions and fees, compared with
$136.6 million or 27.5% of commissions and fees for the same period in 1998. The
increase of $36.5 million or 26.6% is primarily due to acquisitions and higher
costs for our Internet operations, partially offset by reductions in expenses
for the yellow page advertising and recruitment advertising businesses, due to
improved efficiencies. Included in the increase for Internet was $14.8 million
more in marketing costs for Monster.com(SM) and $13.8 million for search related
Internet services at LAIcompass and Highland. The higher ratio of 30.8% compared
to 27.5% is due primarily to marketing costs for search related Internet
services, a slight increase in costs at LAI and a decline in commissions and
fees.
Merger and integration costs for the nine months ended September 30, 1999
were $46.3 million compared with $9.6 million for the same period in 1998 an
increase of $36.7 million or 383.1%. This increase primarily resulted from the
pooling of interests transactions that occurred in the quarter ended
September 30, 1999 and the planned integration of such companies and is due to:
(1) $4.8 million for separation pay and accelerated vesting of employee stock
and stock option grants, both in accordance with pre-existing contractual change
in control provisions, (2) $7.8 million more of transaction related costs, which
include legal, accounting, printing and advisory fees and the costs incurred for
the subsequent registration of shares issued in the transactions and
(3) $25.2 million of office integration costs, which include the closing of
excess leased facilities, the write-off of fixed assets which will not be used
in the future and a reserve for the effect, after reduction for related
compensation, of uncollectible search fees recorded as a result of a loss of
executive search consultants, partially offset by $4.4 million less for employee
stay bonuses paid with our shares and options to certain key personnel of the
merged companies. Approximately $18.5 million of the $46.3 million are non-cash
charges. The after tax effect of these charges on diluted earnings per share is
$(0.73) and $(0.16) for the nine months ended September 30, 1999 and 1998,
respectively.
Restructuring charges for the nine months ended September 30, 1999 were
$2.8 million or, on an after tax basis, $(0.04) per diluted share. These charges
relate to LAI's closing of its London and Hong Kong offices, and include
$0.5 million for the write-off of leasehold improvements and fixed assets,
$1.3 million for severance benefits payable to 24 employees and $1.0 million for
consolidation of facilities related to the restructuring.
As a result of the above, operating income for the nine months ended
September 30, 1999 decreased $50.3 million or 91.7% to $3.8 million from
$54.1 million for the comparable period last year.
Net interest expense for the nine months ended September 30, 1999 was
$6.3 million, a decrease of $0.7 million or 10.8% from $7.0 million for the same
period in 1998, reflecting lower interest rates and borrowing costs resulting
from the amended and restated financing agreement entered into by the Company on
November 5, 1998, partially offset by increased borrowings.
Taxes on income for the nine months ended September 30, 1999 were
$1.2 million on a $2.7 million pretax loss, resulting in an effective tax rate
of (43.4)% compared with a tax expense of $16.6 million on a $46.1 million
pretax profit, resulting in an effective tax rate of 36.1% for the same period
last year. The negative effective tax rate for the 1999 period is caused by
expenses that are not tax deductible. Such expenses are primarily related to
merger costs from pooling of interests transactions and amortization of
intangible assets. For both periods the effective tax rate is benefited by
profits from Highland which were not taxed at the corporate level prior to our
merger.
26
<PAGE>
As a result of the above, the net loss applicable to common and Class B
common stockholders for the nine months ended September 30, 1999 was $(0.12) per
diluted share, a decrease of $0.85 per diluted share or 116.4% from the $0.73
per diluted share for the comparable 1998 period.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
Gross billings for the year ended December 31, 1998 were $1,750.7 million, a
$304.0 million or 21.0% increase when compared to gross billings of
$1,446.7 million for the year ended December 31, 1997. This increase in gross
billings resulted primarily from acquisitions in recruitment advertising, growth
in our Internet business and growth in our temporary contracting business.
Total commissions and fees for the year ended December 31, 1998 were
$657.5 million, an increase of $115.7 million or 21.3% from $541.8 million for
the year ended December 31, 1997. Internet commissions and fees for the year
ended December 31, 1998 were $50.2 million, an increase of 157.6% or
$30.7 million from $19.5 million for the year ended December 31, 1997. The
increase in Internet commissions and fees is due to (i) an increasing acceptance
of our Internet services and products from existing clients and Internet users,
(ii) the benefits of Monster.com(SM)'s marketing campaign, (iii) increases in
the service and content available on our Websites, (iv) expansion into certain
European markets and (v) price increases on certain products. Recruitment
advertising commissions and fees were $177.8 million for the year ended
December 31, 1998 compared with $134.3 million for the year ended December 31,
1997, an increase of $43.5 million or 32.4%. This increase was primarily due to
acquisitions, which contributed approximately $25.1 million, and approximately
$21.4 million from increased client spending and new clients partially offset by
client losses and a decrease in foreign currency translation rates, which had a
negative effect of approximately $3.0 million. Search and selection commissions
and fees were $276.1 million compared with $242.8 million for the year ended
December 31, 1997, an increase of $33.3 million or 13.7%, due primarily to
acquisitions and increased business from existing clients and new clients.
Temporary contracting commissions and fees increased to $47.0 million from
$41.3 million, an increase of $5.7 million or 13.8%. This increase is primarily
due to a greater number of temporary contract workers placed during 1998 as
compared with the prior period, and reflects growth in the executive temporary
contracting business, and to a lesser extent growth for clerical and support
staff. Yellow page commissions and fees were $106.5 million for the year ended
December 31, 1998 compared with $103.9 million for the year ended December 31,
1997, an increase of 2.4% or $2.6 million due primarily to acquisitions.
Total operating expenses for the year ended December 31, 1998 were
$610.3 million, compared with $471.4 million for 1997. The increase of
$138.9 million or 29.5% is due primarily to acquisitions and internal growth,
together with the addition of $22.4 million for merger and integration costs
related to pooling of interests transactions and $3.5 million in restructuring
charges for the closing of LAI's London, England office.
Salaries and related costs for the year ended December 31, 1998 were
$382.7 million or 58.2% of total commissions and fees, compared with
$310.2 million or 57.2% of total commissions and fees for the same period in
1997, representing an increase of $72.5 million or 23.4%. This increase reflects
acquisitions in search and selection and recruitment advertising and growth in
Internet operations.
Office and general expenses increased $37.4 million to $190.2 million for
the year ended December 31, 1998, as compared with $152.8 million for the prior
period primarily due to acquisitions and added marketing and other expenses to
grow our Internet businesses. As a percent of total commissions and fees, office
and general expenses increased to 28.9% for the year ended December 31, 1998
from 28.2% for the year ended December 31, 1997.
Restructuring charges for the year ended December 31, 1998 were
$3.5 million or, on an after tax basis, $(0.05) per diluted share and relate to
LAI's plan to significantly curtail the operations of its international office
in London, England. These charges include $1.1 million for severance, and
$2.4 million for the write-off of leasehold improvements and other costs to
close these facilities.
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In connection with the 1998 Mergers and the M&B Merger, we expensed
merger and integration costs of $22.4 million for the year ended December 31,
1998, consisting of (1) $11.9 million of non-cash employee stay bonuses, which
included (a) $3.6 million for the amortization for our shares set aside for key
personnel of JSK and TCG, who must remain employees for a full year in order to
earn such shares and (b) $8.3 million for our shares to key personnel of TASA
and Stackig as employee stay bonuses, (2) $1.5 million of stay bonuses paid as
cash to key personnel of one of the companies merged in 1998 and
(3) $9.0 million of transaction related costs, including fees for legal,
accounting and advisory services and the costs incurred for the subsequent
registration of shares issued in the acquisitions. The after tax effect of this
charge is $16.7 million or $(0.43) per diluted share. (See Notes 1 and 5 to our
Supplemental Consolidated Financial Statements as of December 31, 1998 and 1997,
and for each of the three years in the period ended December 31, 1998
incorporated by reference in this prospectus.)
Amortization of intangibles was $10.2 million for the year ended
December 31, 1998 compared to $6.9 million for the year ended December 31, 1997.
The increase is due to our continued growth through acquisitions. As a
percentage of total commissions and fees, amortization of intangibles was 1.5%
and 1.3% for the year ended December 31, 1998 and 1997, respectively.
As a result of all of the above, operating income decreased $23.3 million to
$47.2 million for the year ended December 31, 1998 as compared with operating
income of $70.5 million for the year ended December 31, 1997 and, as a percent
of total commissions and fees, operating income decreased to 7.2% from 13.0%.
Net interest expense increased $1.4 million to $9.8 million for the year
ended December 31, 1998 as compared to $8.4 million for the year ended
December 31, 1997, reflecting a net increase in debt as a result of acquisitions
and capital expenditures. In addition, our effective interest rate was 10.8% for
the year ended December 31, 1998 compared with 10.4% for the year ended
December 31, 1997.
Taxes on income decreased $6.2 million to $14.4 million for the year ended
December 31, 1998 from $20.1 million for the year ended December 31, 1997
primarily due to lower pre-tax income. The effective tax rate for the year ended
December 31, 1998 was 40.7% compared with 32.7% for the year ended December 31,
1997. The higher effective rate in 1998 reflects the inability to deduct for
tax, certain costs associated with the 1998 Mergers and the M&B Merger.
For the year ended December 31, 1998, equity in losses of affiliates was
$396,000, reflecting losses at our minority owned real estate advertising
affiliate, as compared with a $33,000 loss for the same period in 1997. Minority
interests in consolidated earnings for the year ended December 31, 1998 were
$28,000 compared with $296,000 for the year ended December 31, 1997.
As a result of all of the above, the net income applicable to common and
Class B common stockholders was $20.5 million for the year ended December 31,
1998, or $0.52 per diluted share, compared with net income of $41.8 million, or
$1.13 per diluted share for the year ended December 31, 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Gross billings for the year ended December 31, 1997 were $1,446.7 million, a
$379.5 million or 35.6% increase when compared to gross billings of
$1,067.2 million for the year ended December 31, 1996. The growth is primarily
due to acquisitions in recruitment advertising, rate increases in yellow page
advertising, increased clients and higher client spending for search and
selection, and a growing acceptance of our Internet products.
Total commissions and fees increased to $541.8 million for the year ended
December 31, 1997 from $399.0 million for the year ended December 31, 1996, an
increase of $142.8 million or 35.8%. This reflects increases, as compared to the
prior year period, in commissions and fees for (a) Internet of $12.5 million or
180.6%, (b) recruitment advertising of $57.6 million or 75.3%, (c) search and
selection of $57.4 million
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or 31.0%, (d) temporary contracting of $12.1 million or 41.3% and (e) yellow
page advertising of $3.1 million or 3.0%. Fees derived from Internet were
generated from job searches and recruitment advertising placed on the Internet,
primarily on our wholly owned Web sites Monster.com(SM) and occ.com, and
reflects the continued customer acceptance of our Internet products both from
our existing clients as well as new clients and price increases on certain
products. A substantial portion of the increase in commissions and fees for
recruitment advertising was due to acquisitions, including $15.5 million from
Austin Knight, acquired in August 1997, and the remainder was due to higher
client spending and new clients. The increase in commissions and fees for search
and selection was primarily due to the healthy economy and related employment
markets in the U.S. The increase in temporary contracting commissions and fees
is due to expansion of the temporary contracting market in Australia. The
increase in commissions and fees for yellow page advertising was due primarily
to increased rates by the yellow page publishers and an acquisition,
substantially offset by lower publisher incentives and the full year effect of
accounts lost and resigned in 1996.
Salaries and related costs increased $77.9 million to $310.2 million for the
year ended December 31, 1997 but as a percent of total commissions and fees,
salaries and related costs decreased to 57.2% for the year ended December 31,
1997 from 58.2% for the year ended December 31, 1996. This $77.9 million
increase was primarily due to additional staff required to service increased
recruitment advertising billings, increased sales staffing for Internet, and
generally higher salaries and related costs for search and selection operations.
Office and general expenses increased $37.6 million to $152.8 million for
the year ended December 31, 1997 as compared with $115.2 million for the prior
period. The increase was primarily due to growth across all lines of business.
However, as a percent of total commissions and fees, office and general expenses
decreased to 28.2% for the year ended December 31, 1997 from 28.9% for the year
ended December 31, 1996. This decrease was primarily due to (1) consolidation of
offices, which slowed the growth of office related expenses, (2) increased
growth in recruitment advertising commissions and fees combined with the
relatively fixed nature of some of these expenses and (3) increased temporary
contracting operations which have relatively stable office and general expenses.
Amortization of intangibles was $6.9 million for the year ended
December 31, 1997 compared to $4.7 million for the year ended December 31, 1996.
The increase is due to our continued growth through acquisitions. As a
percentage of total commissions and fees, amortization of intangibles was 1.3%
and 1.2%, respectively, for the years ended December 31, 1997 and 1996.
For 1996, special compensation of $52.0 million consists of a non-cash,
non-recurring charge that reflects the value of shares issued in connection with
the acquisition of the minority interests in our predecessors because the
stockholders had received such shares for nominal or no consideration and,
accordingly, were not considered to have made a substantive investment for their
shares. The value of such shares was based on the per share initial public
offering price of $14.00 for our common stock.
As a result of the above, operating income for the year ended December 31,
1997 increased $75.7 million to $70.5 million as compared with an operating loss
of $5.2 million for the year ended December 31, 1996 and as a percent of total
commissions and fees increased to 13.0% from (1.3)% for the year ended
December 31, 1996.
Net interest expense decreased $5.9 million to $8.4 million for the year
ended December 31, 1997 as compared to $14.3 million for the year ended
December 31, 1996. This decrease in interest expense is due primarily to the
repayment of a portion of the debt with the net cash proceeds of our initial
public and supplemental offerings. In addition, in 1996 there was a
$2.6 million non-cash, non-recurring charge to reflect, upon exercise of a
warrant issued in connection with our financing agreement, the value of the
stock issued at our initial public offering price of $14.00 per share and the
value recorded for the warrant when it was originally issued. Our effective
interest rate was 10.4% for the year ended December 31, 1997 compared with 15.8%
for the year ended December 31, 1996.
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Taxes on income increased $9.5 million to $20.6 million for the year ended
December 31, 1997 from $11.1 million for the year ended December 31, 1996
primarily due to higher pre-tax income. The effective tax rate for the year
ended December 31, 1997 was 32.7% compared with (55.6)% for the year ended
December 31, 1996. The effective tax rate for 1997 was lower than the U.S.
Federal statutory rate of 34.0% primarily due to profits of pooled entities
taxed directly to owners, partially offset by nondeductible expenses of
approximately $2.9 million and state taxes of $1.1 million. The effective tax
rate for 1996 reflects the non-deductability of a non-cash special compensation
charge of $52.0 million, non-cash interest expense of $2.6 million and state
taxes of $0.4 million, as well as our inability to offset profits at certain
subsidiaries with losses incurred by others.
As a result of all of the above, the net income applicable to common and
Class B common stockholders was $41.8 million for the year ended December 31,
1997, or $1.13 per diluted share, compared with net loss of $32.1 million, or
$(1.04) per diluted share for the year ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements have been to fund (i) acquisitions,
(ii) working capital, (iii) capital expenditures and (iv) marketing and
development of our Internet business. Our working capital requirements are
generally higher in the quarters ending March 31 and June 30 during which
payments to the major yellow page directory publishers are at their highest
levels. We have met our liquidity needs over the last three years through
(a) funds provided by operating activities, (b) equity offerings, (c) long-term
borrowings, (d) capital leases and (e) vendor financing in 1996. In
December 1996, we completed our initial public offering of an aggregate of
4,147,408 shares of common stock at a purchase price of $14.00 per share in an
underwritten public offering managed by Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and Ladenburg Thalmann &
Co. Inc. In the initial public offering, certain stockholders sold an additional
aggregate of 652,592 shares of common stock. The net proceeds that we received
from the initial public offering of $50.8 million were used to repay debt and,
in early 1997, to pay down accounts payable and to redeem preferred stock. In
September 1997, we completed a second public offering of an aggregate of
2,400,000 shares of common stock at a purchase price of $23.00 per share in an
underwritten public offering managed by Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., BT Alex Brown Incorporated, Montgomery Securities and
Ladenburg Thalmann & Co. Inc. In addition, certain stockholders sold an
aggregate of 1,600,000 shares of common stock in such offering. Our net proceeds
from this offering of $63.4 million, including net repayment of borrowings of
$12.2 million paid to us by certain stockholders, were used to repay debt. In
1998, LAI received $41.4 million in net proceeds from its second public
offering. Such proceeds were used to support its international expansion,
support enhancements to its technology-based infrastructure, acquire two search
and selection companies and provide additional working capital.
Net cash provided by operating activities for the nine months ended
September 30, 1999 was $55.8 million compared with $32.7 million provided by
operating activities for the nine months ended September 30, 1998, an increase
of $23.1 million. This increase was primarily due to (a) the net increase in
funds from a $23.5 million greater increase in deferred revenue for the 1999
period over the 1998 period, related mostly to Internet operations, (b) an
$18.0 million increase in cash from work-in-process and prepaid and other
assets, (c) $6.2 million more from tax benefits from the exercise of employee
stock options, (d) a $3.8 million effect from inclusion of losses from companies
accounted for as poolings of interests, in both the current period and the
previous year, because of overlapping reporting periods and (e) a $0.3 million
net increase in the use of funds from increases in accounts receivable over
increases in accounts payable and accrued expenses for the 1999 period over the
1998 period, reduced by a $28.6 million decline in earnings after adjusting for
non-cash items. EBITDA was $32.6 million for the nine months ended
September 30, 1999, a decrease of $44.9 million or 57.9% from $77.5 million for
the nine months ended September 30, 1998. The decrease primarily reflects, for
the 1999 period, a $50.3 million
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decrease in operating profits partially offset by $5.5 million more in
depreciation and amortization costs. As a percentage of commissions and fees,
EBITDA decreased to 5.8% for the nine months ended September 30, 1999 as
compared with 15.6% for the nine months ended September 30, 1998. The lower
percent reflects the increase in merger and integration and restructuring costs,
which were 8.7% and 1.9% of commissions and fees for the 1999 and 1998 periods,
respectively.
Our investing activities for the nine months ended September 30, 1999 used
cash of $32.0 million, which is $48.0 million less than the $80.0 million for
the nine months ended September 30, 1998. This decrease was primarily due to the
use in 1998 of $33.4 million more in investments by a pooled company and
$2.0 million more used for business acquisitions combined with $9.8 million
received from the sale of fixed assets, primarily our plane, in the 1999 period.
We estimate that our expenditures for computer equipment and software,
furniture and fixtures and leasehold improvements will be approximately
$30 million for the year ended 1999 and $60 million for the year ended 2000.
Our financing activities include borrowings and repayments under our bank
financing agreements and issuance of and payments against installment notes used
principally to finance acquisitions and equipment. Our financing activities for
the nine months ended September 30, 1999 used net cash of $28.8 million but
provided $32.7 million for the nine months ended September 30, 1998. The change
of $61.5 million resulted primarily from $41.4 million in proceeds from a common
stock offering by LAI in the 1998 period and net repayments in the 1999 period
of $29.9 million against credit facilities and capitalized lease obligations
compared with a net borrowing of $1.5 million in the prior year period, offset
in part by a $6.8 million increase in cash received from the exercise of
employee stock options and a $4.3 million decline in dividends paid by pooled
companies in the 1999 period from the 1998 period.
Net cash provided by operating activities for the years ended December 31,
1998, 1997 and 1996 was $63.6 million, $51.3 million and $37.1 million,
respectively. The increase in cash of $12.3 million from operating activities
for 1998 over 1997 was primarily due to an increase of $17.9 million in accounts
payable, accrued expenses and other current liabilities, a $12.9 million
increase in depreciation and amortization costs, $8.3 million for the
utilization of our common stock to pay bonuses, a decrease of $7.3 million in
accounts receivable and a $3.2 million increase in deferred revenue, partially
offset by decreases in net income of $21.4 million, $8.1 million in deferred
income taxes and $10.7 million in prepaid and other assets. In addition, in 1998
we paid approximately $13.6 million for restructuring. Such amount was applied
against a reserve set up during 1997 in connection with acquisitions accounted
for using the purchase method. This reserve was increased in 1998 by a
$3.5 million charge to earnings and by $10.1 million, with a corresponding
increase to intangible assets, and reduced by payments of $13.6 million, leaving
a restructuring reserve at December 31, 1998 of $16.7 million. (See Note 5 to
our Supplemental Consolidated Financial Statements as of December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998
incorporated by reference in this prospectus.) The increase in cash from
operating activities for 1997 over 1996 was primarily due to increased net
income, after adding back the effect of non-cash charges in 1996, partially
offset by higher payments of accounts payable, including amounts to
substantially repay vendor financed payables.
EBITDA was $79.1 million for the year ended December 31, 1998, a decrease of
$13.3 million from $92.4 million for the year ended December 31, 1997. As a
percentage of total commissions and fees, EBITDA decreased to 12.0% for the year
ended December 31, 1998 from 17.1% for the year ended December 31, 1997. The
decrease resulted primarily from the $18.0 million charge for merger costs
($22.4 million less $4.4 million in amortization of deferred compensation),
which was 2.7% of total commissions and fees for the year ended December 31,
1998, offset, in part, by increased depreciation and amortization of
$12.9 million. For the year ended December 31, 1997, EBITDA was $92.4 million,
an increase of $84.6 million from $7.8 million for the year ended December 31,
1996. As a percent of total commissions & fees, EBITDA increased to 17.1% for
the year ended December 31, 1997 as compared to
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1.9% for the year ended December 31, 1996 due to a higher operating profit. For
the year ended December 31, 1996, EBITDA was $7.8 million primarily due to the
$52.0 million non-cash special compensation charge.
Net cash used in investing activities for the years ended December 31, 1998,
1997 and 1996 was $66.5 million, $89.7 million and $46.4 million, respectively.
The $23.2 million decrease in 1998 as compared with 1997 was primarily due to
$34.1 million less in payments for acquisitions, reflecting the use of company
stock to make acquisitions of businesses, offset in part by $0.4 million more in
capital expenditures and during 1997 our receipt of a net $11.4 million from
Andrew J. McKelvey and certain other stockholders, who repaid borrowings with
funds received primarily from their sale of shares included with our second
public offering. Payments for businesses acquired using the purchase method of
accounting, excluding $5.5 million in our stock, were $32.8 million in 1998,
$66.9 million in 1997, of which $47.2 million was for Austin Knight, and
$31.3 million in 1996. Capital expenditures, primarily for computer equipment
and furniture and fixtures, were $31.9 million, $31.6 million and $15.4 million
for the years ended December 31, 1998, 1997 and 1996, respectively. In addition,
in 1997, we acquired certain transportation equipment and made capital
improvements for a total of $6.8 million, replacing the transportation equipment
sold during 1996 for $6.1 million, and simultaneously entered into a
$7.8 million financing agreement to fund the purchase and provide additional
operating funds. In December 1996, we sold certain transportation equipment for
$6.1 million receiving a note for $2.7 million and retained $1.2 million in
cash, after payment of related debt.
Our financing activities include equity offerings, borrowings and repayments
under our financing agreement and payments on (i) installment notes, principally
to finance acquisitions, and (ii) capital leases. In the fourth quarter of 1996,
we completed our initial public offering of 4,147,408 shares of common stock for
net proceeds of $50.8 million and in the third quarter of 1997, we completed our
second public offering of 2,400,000 shares of common stock for net proceeds of
$51.2 million. With a portion of the proceeds received from our initial public
offering, in January 1997, we redeemed all of the shares of the cumulative
preferred stock issued by a subsidiary, reported as a minority interest, and our
previously issued preferred stock for approximately $3.1 million and
$2.1 million, respectively. Such redemptions included approximately $100,000
each of premiums. Our financing activities provided net cash of $20.1 million,
$65.5 million and $13.4 million in 1998, 1997 and 1996, respectively. In
November, 1998 and 1997 we amended our financing agreement with our primary
lender to provide for borrowings, under a revolving credit facility, of a
minimum of $175 million. In May 1999 we increased this amount to $185 million.
This facility is used to finance our acquisitions and for working capital
requirements. As of December 31, 1998, there was $97.7 million outstanding and
approximately $77.3 million available under such facility. Our current interest
rate under the agreement is LIBOR plus 75 basis points. In addition, we had
secured lines of credit aggregating $49.0 million for LAI and our operations in
Australia, France, Belgium and the Netherlands of which approximately
$42.5 million was unused at December 31, 1998. Upon consummation of LAI's merger
with us, we eliminated LAI's $25.0 million line of credit. We believe we will be
able to fund our short-term cash needs through funds from operations, our credit
facilities in the United States, the United Kingdom, Canada and Australia and,
to a lesser extent, equipment leases. The borrowings are secured by a lien on
substantially all of our assets. In addition, the financing agreement contains
certain covenants which restrict, among other things, our ability to borrow, pay
dividends, acquire businesses, guarantee debts of others and lend funds to
affiliated companies and contains criteria on the maintenance of certain
financial statement amounts and ratios.
At September 30, 1999, we had a $185 million committed line of credit from
our primary lender pursuant to a revolving credit agreement expiring
November 5, 2003. Of such line, at September 30, 1999, approximately
$58.2 million was unused and accounts receivable as defined in the agreement is
sufficient to allow draw down of the entire amount. In addition, we have lines
of credit aggregating $20.6 million for our operations in Australia, New
Zealand, France, Belgium and the Netherlands of which approximately
$12.0 million was unused at September 30, 1999.
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Cash and cash equivalents at September 30, 1999 were $68.0 million, an
increase of $26.4 million from $41.6 million at September 30, 1998.
Part of our acquisition strategy is to pay, over time, a portion of the
purchase price of certain acquisitions through seller financed notes.
Accordingly, such notes are included in long-term debt, are generally payable
over five years and totaled approximately $13.8 million at December 31, 1998.
We intend to continue our acquisition strategy and marketing and promotion
of our Internet business through the use of operating profits, borrowings
against our long-term debt facility and seller financed notes. We believe that
our anticipated cash flow from operations, as well as the availability of funds
under our existing financing agreements and access to public equity and debt
markets, will provide us with liquidity to meet our current foreseeable cash
needs for at least the next year. However, if we determine that conditions are
favorable, we would consider additional corporate equity or debt transactions.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities" ("SFAS No. 133"), which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. SFAS
No. 133 is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. We do not expect the adoption of this statement to have a
significant impact on our results of operations, financial position or cash
flows.
YEAR 2000 ISSUE
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These systems
and software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
STATE OF READINESS. Since early in 1999, we have been working to position
ourselves as Year 2000 ready before December 31, 1999. We have developed a
comprehensive plan to deal with the Year 2000 issue and have engaged internal
and external resources to focus on this effort. It has been an evolving plan as
we continued to acquire and integrate companies throughout 1999. The plan is
intended to achieve three basic objectives: to ensure that computer systems and
other equipment function in the same manner after December 31, 1999 as it did
before the century date change, to ensure that each business unit follows a
consistent approach for assessment renovation, and validation of all IT and
non-IT assets, and to track the status of all Year 2000 efforts. In addition to
our internal assets, we are assessing and monitoring the Year 2000 readiness of
our key vendors and service providers. We are also monitoring the readiness of
public infrastructure service providers such as power, communications, and
transportation providers.
Our Year 2000 task force has conducted an inventory of and has developed
testing procedures for all software and other systems that we believe might be
affected by Year 2000 issues. Since third parties developed and currently
support many of the systems used, a significant part of this effort will be to
ensure that these third-party systems are Year 2000 ready. Our plan is to
confirm this readiness by obtaining representations by these third parties that
their products' are year 2000 ready and through specific testing of these
systems. We have substantially completed this process as of the end of the third
quarter of 1999 and will fully complete this process by the end of the fourth
quarter. Until such testing is completed and such vendors and providers are
contacted, we will not be able to completely evaluate whether our systems will
need to be revised or replaced.
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COSTS. For 1999, we estimate that we incurred approximately $3.0 million,
globally, in connection with identifying, evaluating and addressing Year 2000
readiness issues. Most of these costs relate to time spent by employees and
consultants in making our systems Year 2000 ready. Such costs are not expected
to have a material adverse effect on our business, results of operations and
financial condition.
RISKS. While we are making every effort to address the Year 2000 issue,
there are inherent risks. We are not currently aware of any Year 2000 readiness
problems relating to our systems that would have a material adverse effect on
our business, results of operations and financial condition, without taking into
account our efforts to avoid or fix such problems. There can be no assurance
that we will not discover Year 2000 readiness problems in our systems and
equipment that will require substantial revision. In addition, there can be no
assurance that third-party software, hardware or services incorporated into our
material systems will not need to be revised or replaced, all of which could be
time-consuming and expensive. Our failure to fix or replace our internally
developed proprietary software or third-party software, hardware or services on
a timely basis could result in lost commissions and fees, increased operating
costs, the loss of customers and other business interruptions, any of which
could have a material adverse effect on our business, results of operations and
financial condition. Moreover, the failure to adequately address Year 2000
readiness issues in our internally developed proprietary software could result
in claims of mismanagement, misrepresentation or breach of contract and related
litigation, which could be costly and time-consuming to defend.
We are heavily dependent on a significant number of third party vendors to
provide both network services and equipment. A significant Year 2000 related
disruption of the network, services or equipment that third-party vendors
provide to us could cause our members and visitors to consider seeking alternate
providers or cause an unmanageable burden on our technical support, which in
turn could materially and adversely affect our business, financial condition and
results of operations.
In addition, we cannot assure you that governmental agencies, utility
companies, internet access companies, third party service providers and others
outside of our control will be Year 2000 ready. The failure by such entities to
be Year 2000 ready could result in a systemic failure beyond our control, such
as a prolonged Internet, telecommunications or electrical failure, which could
also prevent us from delivering our services to our customers, decrease the use
of the Internet or prevent users from accessing our websites which could have a
material adverse effect on our business, results of operations and financial
condition.
CONTINGENCY PLAN. Although we believe our systems are Year 2000 ready, we
have developed contingency plans for critical systems and equipment in the event
of a failure. The results of our Year 2000 simulation testing and the responses
received from third-party vendors and service providers have been taken into
account in determining the nature and extent to which our contingency plans will
be implemented. In addition, we have developed an event planning procedure to
monitor the function of our global operations before, during and after the
century date change.
FLUCTUATIONS OF QUARTERLY RESULTS
Our quarterly commissions and fees are affected by the timing of yellow page
directory closings which currently have a concentration in the third quarter.
Yellow page publishers may change the timing of directory publications which may
have an effect on our quarterly results. Our yellow page advertising results are
also affected by commissions earned for volume placements for the year, which
are typically reported in the fourth quarter. Our quarterly commissions and fees
for recruitment advertising are typically highest in the first quarter and
lowest in the fourth quarter. However, the cyclicality in the economy and our
clients' employment needs have an overriding impact on our quarterly results in
recruitment advertising, search and selection and temporary contracting. (See
Note 2 to our Supplemental Consolidated Financial Statements incorporated by
reference in this prospectus.)
34
<PAGE>
The following table sets forth summary quarterly unaudited financial
information for the nine months ended September 30, 1999 and the years ended
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1999 QUARTERS
------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
--------- -------- -------------
(IN MILLIONS, EXCEPT SHARE AND PER
SHARE AMOUNTS)
<S> <C> <C> <C>
COMMISSIONS & FEES:
Internet.................................................... $ 20.5 $ 25.8 $ 36.7
Recruitment advertising..................................... 45.6 46.3 43.0
Search & selection.......................................... 66.3 70.2 82.7
Temporary contracting....................................... 12.8 16.6 15.5
Yellow page advertising..................................... 23.8 27.2 28.5
------ ------ ------
Total commissions & fees.................................... $169.0 $186.1 $206.4
====== ====== ======
Operating income (loss)..................................... $ (1.2) $ 7.4 $ (2.4)
Net income (loss) applicable to common and Class B common
stockholders.............................................. $ (2.3) $ 3.2 $ (5.8)
Net income (loss) per common and Class B common share:
Basic....................................................... $(0.06) $ 0.08 $(0.15)
Diluted..................................................... $(0.06) $ 0.08 $(0.15)
Weighted average shares outstanding (in thousands):
Basic....................................................... 39,323 39,876 39,992
Diluted..................................................... 39,323 41,596 39,992
</TABLE>
<TABLE>
<CAPTION>
1998 QUARTERS
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
COMMISSIONS & FEES:
Internet.......................................... $ 8.0 $ 11.0 $ 13.7 $ 17.5
Recruitment advertising........................... 45.8 45.7 42.3 43.9
Search & selection................................ 69.9 74.0 70.9 61.3
Temporary contracting............................. 5.6 13.6 13.8 14.0
Yellow page advertising........................... 23.3 27.1 32.1 23.9
------ ------ ------ ------
Total commissions & fees.......................... $152.6 $171.4 $172.8 $160.6
====== ====== ====== ======
Operating income (loss)........................... $ 17.2 $ 21.2 $ 15.7 $ (6.9)
Net income (loss) applicable to common and Class B
common stockholders............................. $ 9.7 $ 11.6 $ 7.9 $ (8.7)
Net income (loss) per common and Class B common
share:
Basic............................................. $ 0.25 $ 0.30 $ 0.20 $(0.22)
Diluted........................................... $ 0.24 $ 0.29 $ 0.20 $(0.22)
Weighted average shares outstanding (in
thousands):
Basic............................................. 38,421 38,748 38,811 38,857
Diluted........................................... 39,735 39,806 39,970 38,857
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
1997 QUARTERS
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------- -------- ------------- ------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
COMMISSIONS & FEES:
Internet.......................................... $ 4.0 $ 4.7 $ 5.0 $ 5.8
Recruitment advertising........................... 27.7 30.8 35.4 40.4
Search & selection................................ 56.8 63.4 59.6 63.0
Temporary contracting............................. 5.3 24.2 5.8 6.0
Yellow page advertising........................... 21.9 25.1 30.6 26.3
------ ------ ------ ------
Total commissions & fees.......................... $115.7 $148.2 $136.4 $141.5
====== ====== ====== ======
Operating income.................................. $ 18.5 $ 19.4 $ 19.9 $ 12.7
Net income applicable to common and Class B common
stockholders.................................... $ 11.2 $ 11.9 $ 11.0 $ 7.7
Net income per common and Class B common share:
Basic............................................. $ 0.32 $ 0.33 $ 0.31 $ 0.20
Diluted........................................... $ 0.31 $ 0.33 $ 0.30 $ 0.20
Weighted average shares outstanding (in
thousands):
Basic............................................. 35,355 35,578 36,171 38,257
Diluted........................................... 35,798 36,204 36,847 38,896
</TABLE>
Earnings (loss) per share calculations for each quarter include the weighted
average effect for the quarter; therefore, the sum of the quarters may not equal
the full year earnings (loss) per share amount, which reflects the weighted
average effect on an annual basis. In addition, diluted earnings per share
calculations for each quarter include the effect of stock options and warrants,
when dilutive to the quarter.
36
<PAGE>
BUSINESS
We provide a comprehensive range of career services and solutions through
our flagship Internet property, Monster.com(SM), and through our recruitment
advertising and executive search and selection businesses. We are also the
world's largest yellow page advertising agency.
INDUSTRY OVERVIEW
INTERNET. The Internet is an increasingly significant global medium for
communications, content and commerce. Growth in Internet usage has been fueled
by a number of factors, including the availability of a growing number of useful
products and services, the large and growing installed base of personal
computers in the workplace and home, advances in the performance and speed of
personal computers and modems, improvements in network infrastructure, easier
and cheaper access to the Internet and increased awareness of the Internet among
businesses and consumers.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium.
Thousands of companies have created corporate Web sites that feature information
about their product offerings and advertise employment opportunities. Through
the Web, Internet content providers are able to deliver timely, personalized
content in a manner not possible through traditional media. Internet content can
be continuously updated, distributed to a large number of consumers on a
real-time basis, and accessed by users at any time. Industry publications
indicate that the historical and projected adoption of online/Internet services
represents a faster rate of penetration than occurred with traditional media,
such as radio, broadcast television and cable television.
For job seekers, online recruiting can provide the ability to rapidly and
more easily build, update and distribute their resumes, conduct job searches and
gather information about employers. Online recruiting can also help to reduce
the time of a job search by permitting job seekers to define their specific job
needs and be contacted automatically when desired jobs become available. Online
recruiting is also proving to be attractive to employers because online job
advertisements can be accessed by job seekers anywhere in the world at anytime
and more cost effectively than print media. Forrester Research estimates that
online spending by employers for recruitment will grow from $105 million in 1998
to $1.7 billion in 2003.
THE RECRUITMENT ADVERTISING MARKET. Recruitment advertising consists
primarily of creating and placing recruitment advertisements in the classified
advertising sections of newspapers. While the recruitment advertising market has
historically been cyclical, during the period of 1990 through 1997, the U.S.
market grew at a compound annual rate of approximately 12%. Classified
readership by job seekers has remained constant over the last ten years and
approximately 85% of companies use newspapers to attract potential employees.
The services provided by recruitment advertising agencies can be complex and
range from the design and placement of classified advertisements to the creation
of comprehensive image campaigns which internationally "brand" a client as a
quality employer. Further, shortages of qualified employees in many industries,
particularly in the technology area, have increased the need for recruitment
advertising agencies to expand the breadth of their service offerings to effect
national and sometimes global recruitment campaigns. For the year ended
December 31, 1998, global spending (billings) in the recruitment classified
advertisement section of newspapers was approximately $13 billion. Agencies
which place recruitment classified advertising are paid commissions generally
equal to 15% of recruitment advertising placed in newspapers and earn fees for
providing additional recruitment services.
THE EXECUTIVE SEARCH AND SELECTION MARKET. The market for executive search
firms is generally separated into two broad categories: retained executive
search firms and contingency executive search firms. Retained executive search
firms service their clients' senior management needs by acting in an ongoing
client-consultant relationship to actively identify, evaluate, assess and
recommend to the client suitable candidates for senior level positions. Retained
search firms are generally engaged on an exclusive basis and paid a
contractually agreed-to fee. Contingency executive search firms typically do not
focus on the senior executives and are generally paid a percentage of the hired
candidate's salary only when a candidate is successfully placed with the client.
Contingency firms are generally not hired on an exclusive
37
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basis and do not focus on the assessment, evaluation or recommendation of a
candidate other than to determine if the candidate's resume qualifies him/her
for the position. We provide executive search services on a retained basis. We
also provide search services on a retained or a contingency basis to identify
for our clients the mid-level executive, those who earn from $70,000 to
$150,000, annually. We refer to this as selection.
THE TEMPORARY CONTRACTING MARKET. According to the Staffing Industry
Report, the United States temporary staffing industry grew from approximately
$29 billion in revenue in 1993 to approximately $62 billion in revenue in 1998.
In addition, third party sources estimate the worldwide temporary staffing
market at more than $130 billion. Our gross revenue for temporary contracting
was $258.4 million and $245.0 million for the year ended December 31, 1998 and
the nine months ended September 30, 1999, respectively. However, temporary
contracting commissions and fees reflect the net of gross revenue reduced by the
cost of the temporary contractors. The temporary staffing industry has
experienced significant growth in response to the changing work environment.
These changes are a result of increasing automation that has resulted and we
believe will continue to result in shorter technological cycles, and global
competitive pressures. Many employers responded to these challenges by turning
to temporary and contract personnel to keep personnel costs variable, achieve
maximum flexibility, outsource highly specialized skills, and avoid the negative
effect of layoffs. We believe fundamental changes in the employer-employee
relationship continue to occur, with employers developing increasingly stringent
criteria for permanent employees, while moving toward project-oriented temporary
and contract hiring.
THE YELLOW PAGE ADVERTISING MARKET. Yellow page directories have been
published in the U.S. since at least the 1890's and, traditionally, have been
published almost exclusively by telephone utilities. In the early 1980's, due in
part to telephone deregulation, independent companies began publishing an
increasing number of directories. Currently, approximately 7,000 yellow
page directories are published annually by 200 publishers and, in the U.S., many
cities with populations in excess of 80,000 are served by multiple directories.
The percentage of adults who use the yellow pages has remained relatively
constant over the last ten years at over 56%, and such readers consult the
yellow pages approximately two times weekly. Accordingly, yellow page
directories continue to be a highly effective advertising medium.
For the year ended December 31, 1998, total spending on yellow page
advertisements in the U.S. was $12.0 billion. Of this amount, approximately
$10.1 billion was spent by local accounts and approximately $1.9 billion was
spent by national accounts. As those terms are used in the yellow
page industry, "local" refers to an advertisement solicited by a yellow
page publisher's own sales staff and "national" refers to an advertisement that
is placed by an advertising agency and that meets certain criteria specified by
the publisher. Local accounts are typically merchants who primarily conduct
their business within the geographic area served by the publisher's directories.
The national account market consists of companies which sell products or
services in multiple markets and is the market in which we compete. Most
national accounts use independent advertising agencies to design and implement
their yellow page advertising programs to create a consistent brand image and
compelling message, to develop an effective media plan and to execute the
placement of the advertising at the local level. Agencies which place national
yellow page advertising are paid commissions by yellow page publishers. The
market has grown each year since 1981. During the period of 1990 through 1998,
the market has grown at a compound average rate of approximately 6.2%.
STRATEGY
Key elements of our strategy are to:
CONTINUE BRANDING MONSTER.COM(SM). We believe our superior content and
service as well as prior advertising campaigns have already branded
Monster.com(SM) (http://www.monster.com) as the leading career destination
portal on the Internet. Our goal is for job seekers to view Monster.com(SM) not
only as the leading career destination portal, but also as the premier tool with
which to manage their careers by posting their resumes and job search agents on
the site. To move to this next level of brand recognition and
38
<PAGE>
loyalty, we are working on a new advertising campaign which will commence during
the 2000 Super Bowl and will focus on building relationships with job seekers.
DIRECT AN INCREASING NUMBER OF JOB SEEKERS AND EMPLOYERS TO
MONSTER.COM(SM). We continuously look for ways to increase traffic to
Monster.com(SM). An example of this is our recent content and marketing
agreement with America Online, Inc. This agreement provides that for the payment
of $100 million over four years Monster.com(SM) will be the exclusive provider
of career search services in the United States and Canada for four years to
certain AOL properties, thereby driving additional traffic to Monster.com(SM).
In addition, our more than 5,100 client service, marketing and creative
personnel constantly promote the advantages of Monster.com(SM) as well as the
Internet generally. Our traditional recruitment advertising and executive search
and selection businesses have already contributed to Monster.com's(SM) job
postings and we believe will continue to drive an increasing number of job
postings to Monster.com(SM). In addition, our executive search and selection
consultants are driving more job seekers to Monster.com(SM) as a way to broaden
employers' recruitment options.
CONTINUE TO GROW OUR NON-INTERNET BUSINESSES. We plan to continue to grow
and enhance our recruitment advertising, executive search and selection and
yellow page advertising businesses through acquisitions and internal growth.
From January 1, 1996 through October 31, 1999, we completed 80 acquisitions. We
intend to pursue additional acquisitions and believe that the fragmented nature
of the recruitment advertising and the executive search businesses gives us the
opportunity to be a leader in the consolidation of these industries. We also
intend to selectively pursue acquisitions in the yellow page advertising
business.
OUR CAREER SOLUTIONS
MONSTER.COM(SM). Monster.com(SM) (http://www.monster.com), the flagship of
our Internet properties, is the nucleus of our intern to CEO strategy. For the
nine months ended September 30, 1999, gross billings and commissions and fees
were $66.9 million and $66.2 million, respectively, and our total Internet gross
billings and commissions and fees were $93.7 million and $83.0 million,
respectively.
Based on experience with our clients, we believe that only 20% to 30% of
open job positions are advertised using traditional print media. We also believe
that online solutions will significantly expand the recruitment advertising
market because of their global reach and continuous availability. Furthermore,
online advertising is extremely cost effective when compared to other
traditional recruitment methods such as print media. Our Internet recruitment
services have been actively marketed since May 1995 and Monster.com(SM) was one
of the first 1,000 commercial web sites out of more than 158,000,000 which
currently exist.
According to Nielson I/PRO, Monster.com(SM) had approximately 9.7 million
visits (the gross number of occasions on which a user looked up a site) in
November 1999 with the average length of each visit exceeding 14 minutes. Media
Metrix reported that for November 1999, 4.2% of the U.S. Internet population
visited Monster.com(SM), almost twice as many unique visitors as its closest
competitor. In addition, for this month, an average of 31.0 unique pages were
viewed by each visitor, resulting in a power ranking of 130.2 (reach of 4.2
multiplied by average page views of 31.0) compared to 26.7 for its closest
competitor and 74.9 for its six closest competitors combined. We believe that
the power ranking is significant because, by taking into account reach and page
views, it indicates the products usefulness and recognition.
Monster.com(SM) allows users to create their own personalized career
page--My Monster. Using My Monster, job seekers can store their resumes, cover
letters and job applications and create multiple Job Search Agents. They can
also track how many times their resume has been viewed by employers. My Monster
is at the center of the Monster.com(SM) job seeker experience, with over
5.3 million job seeker accounts as of December 30, 1999. Monster.com's(SM) Job
Search Agent continuously seeks to find the desired job for the job seeker. Job
seekers can sign up for this free service on the site by creating a simple
personal profile indicating the industry and location in which they want to work
and any job-specific
39
<PAGE>
keywords. The Job Search Agent then continually scans the entire Monster.com(SM)
job database for opportunities that match the requirements and delivers the
leads to job seekers' desktops--even while they are off-line. As of
December 30, 1999, Monster.com(SM) contained over 1.7 million Job Search Agent
profiles and its resume database currently contains over 2.4 million resumes of
which 1.6 million are active, and is growing by an average of more than 6,000
resumes daily. Job seekers post their resumes free of charge in a confidential
searchable access-restricted database. This database can be searched, using
keyword searches, by employers who pay for the service. Job seekers can search
Monster.com's(SM) database of employment opportunities by location, job
category, industry and/or keyword. Keyword searches allow a user to enter
specific keywords to match skills, job titles or other requirements. We have
also recently introduced Monster Talent Market which allows independent
contractor professionals to offer their services to the highest bidder.
As of December 30, 1999, Monster.com(SM) listed approximately 265,000 jobs
from clients such as Blockbuster Entertainment Inc., McDonald's, Adecco,
Procter & Gamble Co., and Dell Computer Corporation.
We also have developed private label applications of our interactive
products. For example, we adapted Monster.com(SM) technology to create a
database of jobs for Fidelity Investments which resides, through a hyper-link,
on the Fidelity home page. The search features have the look, feel and ease of
use associated with Monster.com(SM) while appearing to the user as a seamless
part of the Fidelity site. We intend to continue to market private label
products as a way to increase the size of our databases.
To attract the maximum amount of volume to our Web sites, we intend to
continue to develop additional value-added content, while developing strategic
alliances with other on-line content providers. For example, we recently entered
into a content and marketing arrangement with America Online, Inc., pursuant to
which Monster.com(SM) for the payment of $100 million will be the exclusive
provider of career search services in the United States and Canada for four
years to 21 million AOL members across seven AOL properties: AOL, AOL Canada,
Compuserve, ICQ, AOL.com, Netscape and Digital City. We believe that this
agreement has the potential to drive a substantial amount of increased traffic
and new users to Monster.com(SM).
In addition to the U.S., Monster.com(SM) has been customized, in language
and content, for Canada, the U.K., the Netherlands, Australia, Belgium, France,
Singapore and New Zealand.
RECRUITMENT ADVERTISING. We entered the recruitment advertising business in
1993 and have grown both through acquisitions and internally. For the year ended
December 31, 1998 and the nine months ended September 30, 1999, we had
recruitment advertising gross billings of $849.5 million and $615.5 million,
respectively, and recruitment advertising commissions and fees of $177.8 million
and $134.9 million, respectively. In addition to our worldwide offices, we
maintain relationships with unaffiliated agencies throughout the world to
further enhance our ability to reach qualified job candidates. As a full service
agency, we offer our clients comprehensive recruitment advertising services
including creation and placement of classified advertising, development of
employer image campaigns, creation of collateral materials such as recruiting
brochures and implementation of alternative recruitment programs such as job
fairs, employee referral programs and campus recruiting. We specialize in
designing recruitment advertising campaigns for clients in high growth
industries and in industries with high employee turnover rates. Further, we
believe that as employers find it more difficult to attract qualified employees,
they will increasingly seek out agencies that can implement national and, in
some cases, global recruitment strategies.
Our task in formulating and implementing a global recruitment advertising
program is to design the creative elements of the campaign and to select the
appropriate media and/or other recruitment methods. This is done in the context
of the client's staffing parameters which generally include skill requirements,
job location and advertising budget. In addition, while executing a given
campaign, we will often undertake basic research with respect to demographic
profiles of selected geographic areas to assist the client in developing an
appropriate overall strategy.
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We have historically found that the strongest recruitment advertising
campaigns "brand" the client's image, demonstrate the client's unique selling
points and stress the client's employee benefits and corporate culture.
Effectively differentiating one employer from another has become particularly
important in the technology and healthcare sectors where there is an acute
shortage of qualified job candidates. The success of the campaign may depend on
whether an organization is seen as sufficiently distinct from its competitors.
After completing the design of an advertisement's creative elements, we
develop an appropriate media plan. Typically, a variety of media is used,
including newspapers, trade journals, the Internet, billboards, direct mail,
radio and television. If we recommend use of newspapers, we may recommend
certain newspapers or editions of a particular newspaper which are targeted to a
specific demographic segment of the population. We may also recommend a variety
of advertisement sizes and vary the frequency with which an advertisement
appears.
After an advertisement is placed, we conduct extensive customer analysis to
assure satisfaction, including monitoring the effectiveness of the chosen media.
As an example, for a transportation client, we analyzed cost-per-response,
cost-per-application and cost-per-hire data for over a dozen media vehicles
running in approximately 30 markets in an effort to determine the return on
investment of each media vehicle. Our recruitment advertising division also
maintains a quality assurance program for its larger clients which involves
formal creative reviews by our clients as well as soliciting client feedback.
In the U.S., we receive commissions generally equal to 15% of recruitment
advertising gross billings. Outside of the U.S., where, collectively, we derive
the majority of our recruitment advertising commissions and fees, our commission
rates for recruitment advertising vary, ranging from approximately 10% in
Australia to 15% in Canada and the United Kingdom. In the U.S., we also earn
fees from value-added services such as design, research and other creative and
administrative services which resulted in aggregate commissions and fees equal
to approximately 21% and 22% of recruitment advertising gross billings for the
year ended December 31, 1998 and the nine months ended September 30, 1999
respectively.
SEARCH AND SELECTION. Traditionally, recruitment and online advertising did
not target the senior or mid-level executive. Therefore, in order to expand the
range of services we offer to our recruitment advertising clients, we entered
the executive search field. We currently have 55 executive search offices in 25
countries. We believe that our expansion into the executive search field will
enable us to attract and service new major clients because we can now market
ourselves as a full service firm that can accommodate all of our clients'
employment and recruitment advertising needs. For the nine months ended
September 30, 1999, search and selection gross billings and commissions and fees
were $221.7 million and $219.2 million, respectively.
Our retained executive search process typically targets senior level
executives (those earning over $250,000, annually) and includes the following
steps:
- a TMP executive search consultant interviews the client in order to
analyze the senior executive position that needs to be filled, the general
environment of the client's work place and the character and quality of
candidates that have successfully performed as an executive of the client;
- our consultant then prepares a written synopsis of the position to be
filled in order to attract a suitable, qualified, successful candidate;
- the synopsis is then forwarded to other recruiters in order to assist with
the search for a candidate that fits the criteria set forth in the
synopsis;
- a pool of suitable candidates is gathered and the consultants begin to
schedule interviews;
- the candidates are then interviewed and analyzed by the consultants on our
premises to determine if the candidate meets the requisite experience and
potential cultural fit outlined by the consultant and the client;
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<PAGE>
- reports of the most suitable candidates are prepared by the consultant and
presented to the client, who then chooses the candidates to be met;
- the consultant then organizes a mutually convenient time and place for the
client to personally meet and interview such candidates;
- the consultant will follow up with the successful candidate to obtain any
supplemental information needed or requested by the client, including
references and other documentary materials; and
- the consultant then assists the client in structuring and negotiating the
final compensation package and other benefits for the hired executive
based on all relevant factors researched by the consultant, including
industry comparisons, the experience levels of the executive and future
trends.
Candidates for mid-level positions, the search for whom we term "selection,"
are normally attracted by classified advertising or chosen through a
computerized database file search, as opposed to the detailed search process
used for senior executives. We screen and interview applicants prior to
providing the client with a short list. Upon acceptance of the short list of
suitable candidates, the client then proceeds to interview the selected
candidates. The next steps in the process include reference checking,
negotiation of an offer, confirmation of acceptances and start date, and
performance follow-up at the end of one and three months.
For assignments involving mid-level executives, we have developed and are
introducing the Executive Resourcing process, which is designed to evaluate a
person's capacity to perform in a current or future role. It can be used for
internal and external candidates and is based on the premise that if the
requirements for an individual job are thoroughly understood, it is possible to
develop testing protocols which assess and predict a candidate's ability to
succeed in a specific position. Tools and exercises include aptitude testing,
job simulations, behavioral and situational interviews, leadership and team
exercises, group discussions, role plays and work sample tests. The goals of the
Executive Resourcing process are to put the right people in the right job,
boosting both individual job satisfaction and productivity.
TEMPORARY CONTRACTING. We provide temporary contract employees in
Australasia and the United Kingdom ranging from executives to clerical workers.
The demand for contract employee services was created by organizations' need for
flexible work forces with the types of skills required to meet their particular
circumstances in a changing market. For the nine months ended September 30, 1999
gross billings were $44.9 million, commissions and fees were $44.9 million and
revenue before deducting the costs of temporary contractors was $245.0 million.
We place qualified executives, professionals, clerical and trade labor in
temporary positions, or for specific short term projects. Contractors can be
used for emergency support or to complement the skills of a client's core,
permanent staff. Contracting can be linked to the permanent placement, with the
client employing a "try before you buy" strategy. The period for the contracting
assignment can vary from as little as one day to over 12 months.
In addition to the more general contracting assignments, we provide
executives on a contract basis with our Australian clients, whereby a specific
task is managed by us but staffed by contract executives.
INTERN TO CEO MIGRATION TO THE INTERNET. We believe that our growth in the
career solutions area will continue to come from our Internet properties through
our leadership position at Monster. com(SM), combined with additional online
growth opportunities from the recruitment advertising, search and selection and
temporary contracting markets and by capturing increasing shares of budgets
previously spent by corporations on unassisted recruiting activities. The
following table reflects the quarterly growth in our Internet commissions and
fees for our "intern to CEO" businesses, from the third quarter of fiscal 1995
through the third quarter of fiscal 1999.
42
<PAGE>
INTERN TO CEO
INTERNET COMMISSIONS AND FEES
(IN THOUSANDS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Q3-95 162
<S> <C>
Q4-95 230
Q1-96 944
Q2-96 1371
Q3-96 1984
Q4-96 2360
Q1-97 3,648
Q2-97 4,318
Q3-97 4,593
Q4-97 5,557
Q1-98 7,568
Q2-98 10,439
Q3-98 12,930
Q4-98 16,768
Q1-99 19,857
Q2-99 24,804
Q3-99 35,068
</TABLE>
OUR YELLOW PAGE BUSINESS
We entered the yellow page business in 1967 and have grown to become the
largest yellow page advertising agency in the world based on yellow page gross
billings. For the nine months ended September 30, 1999 we had yellow page gross
billings and commissions and fees of $413.7 million and $79.5 million,
respectively.
CREATING AND PLACING YELLOW PAGE ADVERTISEMENTS. There are currently
approximately 7,000 yellow page directories in the U.S. Each has a separate
closing date for accepting advertisements and one or more of these closings
occur on every working day of the year. The steps involved in placing an
advertisement are numerous and can take as long as nine months.
The first step in the process is the formulation of the advertising
program's creative elements including illustrations, advertising copy, slogans
and other elements which are designed to attract a potential customer's
attention. To assess the effectiveness of a proposed campaign, we generally
undertake extensive research to determine which alternatives best reach the
client's target market. This research typically includes focus group testing and
the running of split-run advertisements. Focus group testing involves forming
groups of potential customers and gauging their reaction to a variety of
potential advertisements. Split-run testing measures the results of specific
campaigns by placing more than one version of an advertisement in various
editions of the same yellow page directory. By using multiple phone numbers and
various monitoring methods, we can then determine which advertisements generate
the most effective response.
After designing an advertising program, we create a media plan which targets
client's customer base in a cost-effective manner. We analyze targeted
directories to determine circulation, rate of usage and demographic profile. We
then recommend advertisements ranging from a full page to as little as a one
line listing. For some of our larger yellow page clients, advertisements are
placed in over 2,000 directories.
To ensure client satisfaction, we maintain an extensive quality control
program. Account teams have frequent in-person client contact as well as formal
annual creative reviews. We also solicit feedback
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through client interviews, written surveys and other methods consisting of focus
groups made up of yellow page users and yellow page user pollings. The principal
aims of this program are client retention and sales growth. We believe our focus
on customer service has enabled us to maintain our client retention rate, year
to year, in excess of 90%.
In addition to traditional advertising, we offer selected yellow page
clients a variety of value-added services ranging from managing the maintenance
and installation of telephone lines for branch locations to the staffing and
operation of fulfillment centers which respond to toll-free calls requesting
product brochures and other information. While beyond the typical scope of
services provided by an advertising agency, these ancillary services are
designed to further integrate us into client processes for the mutual benefit of
both parties.
CLIENTS. Our yellow page clients generally determine the content of their
advertising programs on a centralized basis. Placement of the advertising,
however, requires an extensive local selling and quality control effort because
many of our clients are franchisors or manufacturers who are dependent upon
franchisees or independent dealers for distribution. The participation of
franchisees and dealers in the yellow page program is discretionary and must be
solicited at the local level. As an example of the scale of this task, in 1998,
we visited or had contact with over 570,000 individual store locations.
We have a yellow page sales, marketing and customer service staff of
approximately 1,000 people to implement this local effort. We believe the size
and breadth of this staff, its local client relationships and its databases of
client branch locations, franchisors and dealers provide us with a strong
competitive advantage in executing the yellow page programs of existing clients.
We believe these resources are critical in marketing our services to potential
new clients and in marketing and executing our Internet-based service offerings.
SALES AND MARKETING
At December 1, 1999, we had approximately 5,100 employees focused on our
sales, marketing and customer service efforts worldwide. Our sales, marketing
and customer service staff is divided into two groups: (i) new business
generation (approximately 400 employees) and (ii) existing client relationship
maintenance and improvement (approximately 4,700 employees). Within each group,
we maintain separate sales and marketing staffs for our recruitment advertising
business, yellow page advertising business and Internet business. In addition to
specializing by product, each group is accountable for, and incentivized to,
cross sell our other products. Our Internet sales staff has targeted our
recruitment advertising and yellow page clients to capitalize on the
interactivity and additional services that our Internet products can cost
effectively provide to such clients. In addition to pursuing cross-selling
opportunities within our existing client base, each product sales force also
designs targeted selling campaigns for potential new clients. We assign a
marketing manager to our clients in order to work closely with the client to
develop and design the appropriate marketing and advertising campaign. Our
customer service representative works closely with the marketing manager and the
client to implement the marketing and advertising campaign, evaluate the
effectiveness of the campaign and monitor client satisfaction levels.
At December 1, 1999, we had 95 sales, marketing and customer service offices
located in the United States and 137 offices in the rest of the world. We also
maintained relationships with 7 international recruitment advertising agencies
throughout the world, further enhancing our ability to reach qualified job
candidates.
CLIENTS
At December 1, 1999, we had more than 31,000 clients, including more than 90
of the Fortune 100 companies and approximately 450 of the Fortune 500 companies.
Our clients include: The Home Depot, Inc., Ford Motor Company, CVS Corporation,
Hewlett-Packard Company, Sears, Roebuck and Co., The Allstate Corporation,
Sprint Corporation, United Parcel Service, Inc., Mobil Corporation, Merck & Co.,
Inc., MCI Worldcom, Inc., AT&T Corp., Motorola, Inc., GTE Corporation and Morgan
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Stanley Dean Witter & Co. No one client accounts for more than 5% of the
Company's total annual commissions and fees.
COMPETITION
The markets for our services and products are highly competitive and are
characterized by pressure to reduce prices, incorporate new capabilities and
technologies, and accelerate job completion schedules.
We face competition from a number of sources. These sources include national
and regional advertising agencies, media companies, as well as specialized and
integrated marketing communication firms. Many advertising agencies and media
companies have started to either internally develop or acquire new media
capabilities. New boutique businesses that provide integrated or specialized
services (such as advertising services or Web site design) and are
technologically proficient, especially in the new media arena, are also
competing with us. Many of our competitors or potential competitors have long
operating histories, and some have greater financial, management, technological,
development, sales, marketing and other resources than do we. In addition, our
ability to maintain our existing clients and generate new clients depends to a
significant degree on the quality of our services, pricing and our reputation
among our clients and potential clients.
We believe that our largest competitors in online recruiting are
Headhunter.net, Dice.com, HotJobs.com, CareerPath.com, CareerMosaic.com and
CareerBuilder.com although, as illustrated below, for the first eleven months of
1999, Monster.com(SM) attracted the greatest number of visitors (derived from
Media Metrix data) and in November 1999, Monster.com(SM) had the greatest power
ranking (reach multiplied by average page views per visitor):
MONTHLY VISITOR TRENDS*
JANUARY THROUGH NOVEMBER 1999
(IN THOUSANDS)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CAREERBUILDER.COM CAREERMOSAIC.COM CAREERPATH.COM HEADHUNTER.NET HOTJOBS.COM MONSTER.COM
<S> <C> <C> <C> <C> <C> <C>
Jan 252 795 917 574 388 1779
Feb 275 882 1019 636 810 2322
Mar 256 965 1111 576 344 2067
Apr 282 753 861 481 258 1739
May 336 790 1052 599 436 2416
Jun 353 808 1585 777 669 2605
Jul 293 800 1115 810 760 2515
Aug 376 742 727 949 882 2457
Sep 326 584 734 1004 687 2582
Oct 471 607 891 1668 654 2757
Nov 546 653 1,104 914 568 2717
</TABLE>
* Source: Media Metrix.
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POWER RANKING FOR THE MONTH OF NOVEMBER 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
AVERAGE
PAGES PER POWER
CAREER SITE REACH* VISITOR* RANKING
------------------------------- --- ---- -----
1. Monster.com 4.2 31.0 130.2
2. HeadHunter.net 1.4 19.1 26.7
3. Dice.com 0.4 30.6 12.2
4. HotJobs.com 0.9 13.3 12.0
5. CareerPath.com 1.7 7.0 11.9
6. CareerMosaic.com 1.0 7.2 7.2
7. CareerBuilder.com 0.8 6.1 4.9
* Source: Media Metrix.
</TABLE>
We believe that our three largest competitors in the recruitment advertising
segment are Bernard Hodes Advertising, Inc., a subsidiary of Omnicom, Nationwide
Advertising Service, Inc., controlled by the Gund Brothers, and JWT Specialized
Communications, a subsidiary of the WPP Group USA, Inc. We also compete with
hundreds of Internet content providers. We believe that our largest competitors
in the executive search segment are Korn/Ferry International, Heidrick &
Struggles International Inc., Spencer Stuart & Associates and Russell Reynolds
Associates, Inc.
INTELLECTUAL PROPERTY
Our success and ability to compete is dependent in part on the protection of
our original content for the Internet and on the goodwill associated with our
trademarks, trade names, service marks and other proprietary rights. We rely on
copyright laws to protect the original content that we develop for the Internet.
In addition, we rely on Federal trademark laws to provide additional protection
for the appearance of our Internet sites. A substantial amount of uncertainty
exists concerning the application of copyright laws to the Internet, and there
can be no assurance that existing laws will provide adequate protection for our
original content. In addition, because copyright laws do not prohibit
independent development of similar content, there can be no assurance that
copyright laws will provide any competitive advantage to us.
We also assert common law protection on certain names and marks that we have
used in connection with our business activities.
We rely on trade secret and copyright laws to protect the proprietary
technologies that we have developed to manage and improve our Internet sites and
advertising services, but there can be no assurance that such laws will provide
sufficient protection to us, that others will not develop technologies that are
similar or superior to ours, or that third parties will not copy or otherwise
obtain and use our technologies without authorization. We have filed patent
applications with respect to certain of our software systems, methods and
related technologies, but there can be no assurance that such applications will
be granted or that any future patents will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide us with a
competitive advantage. In addition, we rely on certain technology licensed from
third parties, and may be required to license additional technology in the
future, for use in managing our Internet sites and providing related services to
users and advertising customers. Our ability to generate fees from Internet
commerce may also depend on data encryption and authentication technologies that
we may be required to license from third parties. There can be no assurance that
these third party technology licenses will be available or will continue to be
available to us on acceptable commercial terms or at all. The inability to enter
into and maintain any of these technology licenses could have a material adverse
effect on our business, financial condition and operating results.
Policing unauthorized use of our proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford us little or no
effective protection of our intellectual property. In addition, there can be no
assurance that third parties will not bring claims of
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<PAGE>
copyright or trademark infringement against us or claim that our use of certain
technologies violates a patent. We anticipate an increase in patent infringement
claims involving Internet-related technologies as the number of products and
competitors in this market grows and as related patents are issued. Further,
there can be no assurance that third parties will not claim that we have
misappropriated their creative ideas or formats or otherwise infringed upon
their proprietary rights in connection with our Internet content. Any claims of
infringement, with or without merit, could be time consuming to defend, result
in costly litigation, divert management attention, require us to enter into
costly royalty or licensing arrangements or prevent us from using important
technologies or methods, any of which could have a material adverse effect on
our business, financial condition or operating results.
GOVERNMENT REGULATION
As an advertising agency which creates and places print and Internet
advertisements, we are subject to Sections 5 and 12 of the Federal Trade
Commission Act (the "FTC Act") which regulate advertising in all media,
including the Internet, and require advertisers and advertising agencies to have
substantiation for advertising claims before disseminating advertisements. The
FTC Act prohibits the dissemination of false, deceptive, misleading, and unfair
advertising, and grants the Federal Trade Commission ("FTC") enforcement powers
to impose and seek civil penalties, consumer redress, injunctive relief and
other remedies upon advertisers and advertising agencies which disseminate
prohibited advertisements. Advertising agencies are subject to liability under
the FTC Act if the agency actively participated in creating the advertisement,
and knew or had reason to know that the advertising was false or deceptive.
In the event that any advertising created by us was found to be false,
deceptive or misleading, the FTC Act could potentially subject us to liability.
The fact that the FTC has recently brought several actions charging deceptive
advertising via the Internet, and is actively seeking new cases involving
advertising via the Internet, indicates that the FTC Act could pose a somewhat
higher risk of liability to the advertising distributed via the Internet. The
FTC has never brought any actions against us.
There can be no assurance that other current or new government laws and
regulations, or the application of existing laws and regulations, will not
subject us to significant liabilities, significantly dampen growth in Internet
usage, prevent us from offering certain Internet content or services or
otherwise cause a material adverse effect on our business, financial condition
or operating results.
LEGAL PROCEEDINGS
We are involved in various legal proceedings that are incidental to the
conduct of our business. We are not involved in any pending or threatened legal
proceedings which we believe could reasonably be expected to have a material
adverse effect on our financial condition or results of operations.
On February 19, 1998, a class action complaint was filed against TMP by
several former employees. Presently, the claims brought by the plaintiffs in the
complaint are that TMP misclassified the named plaintiffs and purported class
members as exempt from the overtime requirements of California wage and hour law
and failed to pay them overtime wages. Discovery has indicated the purported
class to include approximately 100 members. By Order of the Court dated
November 15, 1999, a class of current and former employees in five job
categories of the California recruitment offices was certified. We intend to
seek a writ to appeal the Court's Order. The parties will also be attending a
mediation session with a neutral mediator on January 17, 2000. TMP otherwise
intends to continue to vigorously defend the overtime claim and continues to
deny all allegations as it did in its answer to the complaint filed on
March 18, 1998. Management presently believes that the disposition of these
claims will not have a material adverse effect on TMP's financial position,
operations or liquidity. In addition, please see "Risk Factors--We are
vulnerable to intellectual property infringement claims brought against us by
others."
EMPLOYEES
At December 1, 1999, we employed approximately 6,400 people, of whom
approximately 3,300 were client services personnel, approximately 400 were sales
and marketing personnel, approximately 1,100 were search and selection personnel
and approximately 300 were creative and graphics personnel. The remainder of our
personnel are information systems, financial and administrative personnel. Our
employees are not represented by a labor union or a collective bargaining
agreement. We regard our employee relations as generally excellent.
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MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a general discussion of the material U.S. federal income
and estate tax considerations with respect to the ownership and disposition of
common stock applicable to Non-U.S. Holders. In general, a "Non-U.S. Holder" is
any holder other than
- a citizen or resident of the United States
- a corporation created or organized in the United States or under the laws
of the United States or of any state
- an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source
- a trust if
-- a court within the United States is able to exercise primary
supervision over the administration of the trust, and
-- one or more U.S. persons have the authority to control all
substantial decisions of the trust
This discussion is based on current provisions of the Internal Revenue Code,
Treasury Regulations promulgated under the Internal Revenue Code, judicial
opinions, published positions of the Internal Revenue Service, and all other
applicable authorities, all of which are subject to change, possibly with
retroactive effect. This discussion does not address all aspects of income and
estate taxation or any aspects of state, local, or non U.S. taxes, nor does it
consider any specific facts or circumstances that may apply to a particular
Non-U.S. Holder that may be subject to special treatment under the U.S. federal
income tax laws, such as insurance companies, tax-exempt organizations,
financial institutions, brokers, dealers in securities, and U.S. expatriates.
ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX
CONSIDERATIONS OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate of the gross amount, or a lower rate prescribed by
an applicable income tax treaty, unless the dividends are effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States. Dividends effectively connected with such a U.S. trade or business
generally will not be subject to U.S. withholding tax if the Non-U.S. holder
files the required forms, including Internal Revenue Service Form 4224, or any
successor form, with the payor of the dividend, and generally will be subject to
U.S. federal income tax on a net income basis, in the same manner as if the
Non-U.S. Holder were a resident of the United States. A Non-U.S. Holder that is
a corporation may be subject to an additional branch profits tax at a rate of
30%, or such lower rate as may be specified by an applicable income tax treaty,
on the repatriation from the United States of its "effectively connected
earnings and profits," subject to adjustments. To determine the applicability of
a tax treaty providing for a lower rate of withholding under the currently
effective Treasury Regulations, the "Current Regulations", and published
Internal Revenue Service positions, dividends paid to an address in a foreign
country are presumed to be paid to a resident of that country absent knowledge
to the contrary. Under Treasury Regulations issued on October 6, 1997, the
"Final Regulations", and generally effective for payments made after
December 31, 2000, however, a Non-U.S. Holder, including, for some Non-U.S.
Holders that are entities, the owner or owners of such entities, will be
required to satisfy certification requirements in order to claim a reduced rate
of withholding under an applicable income tax treaty.
48
<PAGE>
GAIN OR SALE OR OTHER DISPOSITION OF COMMON STOCK
In general, a Non-U.S. Holder will not be subject to U.S. federal income tax
on any gain realized upon the sale or other disposition of the holder's shares
of common stock unless
- the gain is effectively connected with a trade or business carried on by
the Non-U.S. Holder within the United States, in which case the branch
profits tax discussed above may also apply if the Non-U.S. Holder is a
corporation
- the Non-U.S. Holder is an individual who holds shares of common stock as a
capital asset and is present in the United States for 183 days or more in
the taxable year of disposition and meets other tests
- the Non-U.S. Holder is subject to tax under the provisions of the Internal
Revenue Code regarding the taxation of U.S. expatriates, or
- we are or have been a U.S. real property-holding corporation for U.S.
federal income tax purposes, which we do not believe that we have been,
currently are, or will become, at any time within the shorter of the
five-year period preceding such disposition and such Non-U.S. Holder's
holding period
If we were or were to become a U.S. real property holding corporation at any
time during this period, gains realized upon a disposition of common stock by a
Non-U.S. Holder that did not directly or indirectly own more than 5% of the
common stock during this period generally would not be subject to U.S. federal
income tax, provided that common stock is "regularly traded on an established
securities market (within the meaning of Section 897(c)(3) of the Code)."
ESTATE TAX
Common stock owned or treated as owned by an individual who is not a citizen
or resident, as defined for U.S. federal estate tax purposes, of the United
States at the time of death will be includible in the individual's gross estate
for U.S. federal estate tax purposes, unless an applicable estate tax treaty
provided otherwise, and therefore may be subject to U.S. federal estate tax.
INFORMATION REPORTING, BACKUP WITHHOLDING AND OTHER REPORTING REQUIREMENTS
Generally, we must report annually to the Internal Revenue Service and to
each Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of this information also may be made available under the provisions of a
specific treaty or agreement with the tax authorities in the country in which
the Non-U.S. Holder resides or is established.
Under the Current Regulations, U.S. backup withholding tax, which generally
is imposed at the rate of 31% on applicable payments to persons that fail to
furnish the information required under the U.S. information reporting
requirements, as well as information reporting requirements, other than those
discussed in the previous paragraph, generally will not apply to dividends paid
on common stock to a Non-U.S. Holder at an address outside the United States.
Backup withholding and information reporting generally will apply, however, to
dividends paid on shares of common stock to a Non-U.S. Holder at an address in
the United States if the holder fails to establish an exemption or to provide
other required information to the payor.
Under the Current Regulations, the payment of proceeds from the disposition
of common stock to or through a U.S. office of a broker will be subject to
information reporting and backup withholding, unless the beneficial owner, under
penalties of perjury, certifies, among other things, its status as a Non-U.S.
Holder or otherwise establishes an exemption. The payment of proceeds from the
disposition of common
49
<PAGE>
stock to or through a Non-U.S. office of a broker generally will not be subject
to backup withholding and information reporting, unless the payee is
- A U.S. person
- a "controlled foreign corporation" for U.S. federal income tax purposes,
or
- a foreign person 50% or more of whose gross income from a specified period
is effectively connected with a U.S. trade or business, information
reporting, but not backup withholding, will apply unless the broker has
documentary evidence in its files that the owner is a Non U.S. Holder and
other conditions are satisfied, or the beneficial owner otherwise
establishes an exemption, and the broker has no actual knowledge to the
contrary
Under the Final Regulations, generally effective for payments made after
December 31, 2000, the payment of dividends or the payment of proceeds from the
disposition of our common stock to a Non-U.S. Holder may be subject to
information reporting and backup withholding unless the recipient satisfies the
certification requirements of the Final Regulations or otherwise establishes an
exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. Holder can be refunded or
credited against the Non-U.S. Holder's U.S. federal income tax liability, if
any, PROVIDED that the required information is furnished to the Internal Revenue
service in a timely manner.
THE FOREGOING DISCUSSION OF THESE U.S. FEDERAL INCOME TAX CONSIDERATIONS IS
NOT TAX ADVICE AND IS NOT BASED ON AN OPINION OF COUNSEL. ACCORDINGLY, EACH
PROSPECTIVE NON-U.S. HOLDER OF COMMON STOCK SHOULD CONSULT THAT HOLDER'S OWN TAX
ADVISER WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON STOCK.
50
<PAGE>
UNDERWRITERS
WITH RESPECT TO THE OFFERING OF SHARES IN THE UNITED STATES AND CANADA,
MORGAN STANLEY & CO. INCORPORATED AND GOLDMAN, SACHS & CO. ARE ACTING AS JOINT
BOOK-RUNNING MANAGERS AND SALOMON SMITH BARNEY INC. IS ACTING AS CO-LEAD
MANAGER. WITH RESPECT TO THE OFFERING OF SHARES OUTSIDE OF THE UNITED STATES AND
CANADA, MORGAN STANLEY & CO. INTERNATIONAL LIMITED AND GOLDMAN SACHS
INTERNATIONAL ARE ACTING AS JOINT BOOK-RUNNING MANAGERS AND SALOMON BROTHERS
INTERNATIONAL LIMITED IS ACTING AS CO-LEAD MANAGER.
Under the terms and subject to the conditions contained in the underwriting
agreement, dated the date of this prospectus, the U.S. underwriters named below,
for whom Morgan Stanley & Co., Incorporated, Goldman, Sachs & Co., Salomon Smith
Barney Inc., Deutsche Bank Securities Inc., Paine Webber Incorporated and U.S.
Bancorp Piper Jaffray Inc. are acting as U.S. representatives, and the
international underwriters named below for whom Morgan Stanley & Co.
International Limited, Goldman Sachs International, Salomon Brothers
International Limited, Deutsche Bank AG London, PaineWebber International (U.K.)
Ltd. and U.S. Bancorp Piper Jaffray Inc. are acting as international
representatives, have severally agreed to purchase, and we have agreed to sell
to them, the respective number of shares of common stock set forth opposite the
names of these underwriters below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................................................
Goldman, Sachs & Co. ........................................................................
Salomon Smith Barney Inc. ...................................................................
Deutsche Bank Securities Inc. ...............................................................
PaineWebber Incorporated.....................................................................
U.S. Bancorp Piper Jaffray Inc. .............................................................
-----------
Subtotal................................................................................... 3,200,000
-----------
International Underwriters:
Morgan Stanley & Co. International Limited...................................................
Goldman Sachs International..................................................................
Salomon Brothers International Limited.......................................................
Deutsche Bank AG London......................................................................
PaineWebber International (U.K.) Ltd.........................................................
U.S. Bancorp Piper Jaffray Inc. .............................................................
-----------
Subtotal................................................................................... 800,000
-----------
Total.................................................................................... 4,000,000
===========
</TABLE>
The U.S. underwriters and the international underwriters, and the U.S.
representatives and the international representatives, are collectively referred
to as the underwriters and the representatives, respectively. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered in this prospectus are
subject to the approval of specified legal matters by their counsel and to other
conditions. The underwriters are obligated to take and pay for all the shares of
common stock offered hereby, except those shares covered by the U.S.
underwriters' over-allotment option described below, if any shares are taken.
The underwriters initially propose to offer a portion of the shares of
common stock directly to the public at the public offering price set forth on
the cover page of this prospectus and a portion to some dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. Any underwriter may allow, and these dealers may reallow, a
concession not in excess of $ per share to other underwriters or to other
dealers. After the initial offering of the shares of common stock, the offering
price and other selling terms may be varied by the representatives.
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<PAGE>
We have granted to the U.S. underwriters an option, exercisable for 30 days
from the date of this prospectus to purchase up to an aggregate of 600,000
additional shares at the public offering price set forth on the cover page of
this prospectus, less underwriting discounts and commissions. The U.S.
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares
offered in this prospectus. To the extent this option is exercised, each U.S.
underwriter will become obligated, subject to specified conditions, to purchase
about the same percentage of additional shares as the number set forth next to
the U.S. underwriter's name in the preceding table bears to the total number of
shares set forth next to the names of all U.S. underwriters in the preceding
table. If the U.S. underwriters' option is exercised in full, the total price to
the public for the offering would be $ , the total underwriting discounts
and commissions would be $ and the total proceeds to TMP Worldwide Inc.
would be $ .
We and our directors and executive officers have agreed that, without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters, we will not, during the period ending 90 days after the date of
this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into exercisable or exchangeable for common stock or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock, whether any of these transactions described above is to be settled
by delivery of common stock or any other securities, in cash or otherwise
The restrictions described in the preceding list do not apply in a number of
circumstances, including:
- the exchange of shares of Class B common stock for shares of common stock
under the terms of our certificate of incorporation
- the granting of options to officers, directors, employees or consultants,
PROVIDED that these options are not generally exercisable prior to the end
of the lock-up period
- the issuance by us of shares of common stock upon the exercise of options
or warrants or the conversion of securities outstanding on the date of the
underwriting agreement or as of the closing date of this offering, of
which the underwriters have been advised in writing
- the issuance of shares to acquire HW Group plc and the issuance of up to
2,500,000 shares of common stock in connection with other acquisitions
- the exercise of options granted pursuant to our stock option plans or
- the sale or other transfer of any shares of common stock by the foregoing
persons to any associate, as this term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934, if this person agrees to be bound by the
foregoing provisions.
In order to facilitate our offering of common stock, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the common stock. Specifically, the underwriters may over-allot in connection
with the offering, creating a short position in common stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
common stock, the underwriters may bid for, and purchase, shares of common stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing common stock
in the offering, if the syndicate repurchases previously distributed common
stock in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of common stock above independent market levels. The underwriters
are not required to engage in these activities, and may end any of these
activities at any time.
52
<PAGE>
Some of the underwriters engage in transactions with, and perform services
for, our company in the ordinary course of business and have engaged and may in
the future engage in commercial banking and investment banking transactions with
us, for which they receive customary compensation.
We have agreed with the underwriters to indemnify each other against some
liabilities relating to this offering, including liabilities under the
Securities Act of 1933.
LEGAL MATTERS
The validity of the shares of common stock we are offering will be passed
upon for us by Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York
10103. Certain legal matters in connection with this offering will be passed
upon for the underwriters by Davis Polk & Wardwell.
EXPERTS
The consolidated financial statements and schedules of TMP incorporated by
reference in this prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods indicated in
their reports incorporated in this prospectus by reference, and are incorporated
in this prospectus in reliance upon such reports given upon the authority of
that firm as experts in accounting and auditing.
The consolidated balance sheets of Morgan & Banks Limited as of
December 31, 1998 and March 31, 1998 and 1997, the consolidated statements of
operations and stockholders' equity for the year ended December 31, 1998 and
each of the three years in the period ended March 31, 1998 and the statements of
cash flows for the nine months ended December 31, 1998 and the three years in
the period ended March 31, 1998, are incorporated by reference in this
prospectus in reliance on the report of Pannell Kerr Forster, independent
auditors, given upon the authority of that firm as experts in accounting and
auditing.
The consolidated audited financial statements and schedule of LAI Worldwide,
Inc. incorporated by reference in this prospectus and elsewhere in this
registration statement, have been audited by Arthur Andersen LLP, independent
certified public accountants, as indicated in their reports with respect thereto
and are incorporated by reference in reliance upon the authority of said firm as
experts in giving said reports.
Darby & Darby P.C., our special trademark counsel, has reviewed statements
concerning trademark matters contained in "Risk Factors--We are vulnerable to
intellectual property claims brought against us by others" and such statements
have been included upon the authority of such firm as experts in trademark law.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from our website at http:// www.tmpw.com or at the SEC's website at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 until this offering is finished. This prospectus is part of a
registration statement we filed with the SEC (Registration No. 333-93065).
53
<PAGE>
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999.
(c) The description of the Company's common stock contained in Item 1 of
the Company's Registration Statement on Form 8-A, dated October 16, 1996.
(d) The Company's Current Report on Form 8-K/A, dated January 4, 2000,
relating to the financial statements of Highland Search Group L.L.C. as of
September 30, 1999 and December 31, 1998 and for the nine months ended
September 30, 1999 and 1998 and for the year ended December 31, 1998 and the
unaudited pro forma financial statements relating to the merger between the
Company and Highland Search Group L.L.C.
(e) The Company's Current Report on Form 8-K, dated December 1, 1999,
which includes the supplemental consolidated condensed financial statements
and the supplemental consolidated financial statements relating to the
restatement of the Company's consolidated financial statements as of
September 30, 1999 and December 31, 1998 and 1997 and for the nine months
ended September 30, 1999 and 1998 and for each of the three years in the
period ended December 31, 1998 to reflect the mergers with Highland Search
Group L.L.C. on October 21, 1999 and TMC S.r.l. on October 27, 1999, which
are being accounted for as poolings of interests.
(f) The Company's Current Report on Form 8-K, dated October 21, 1999,
relating to the announcement of the acquisition of the Highland Search Group
L.L.C.
(g) Pages F-1 through F-22 and pages 48-53 of the Company's Registration
Statement on Form S-4, file No. 333-82531, filed July 9, 1999 relating to
the consolidated financial statements of LAI Worldwide, Inc. as of
February 28, 1999 and 1998 and for each of the three years in the period
ended February 28, 1999 and the unaudited pro forma condensed combined
financial statements relating to the merger with LAI Worldwide, Inc.
(h) The Company's Current Report on Form 8-K, dated March 5, 1999,
relating to a press release announcing the results of operations of the
Company for the year ended December 31, 1998, issued by the Company on
March 2, 1999.
(i) The Company's Current Report on Form 8-K, dated February 12, 1999,
relating to the financial statements of Morgan & Banks Limited as of
September 30, 1998 and March 31, 1998 and 1997, for the six months ended
September 30, 1998 and 1997 and for each of the three years in the period
ended March 31, 1998 and the unaudited pro forma condensed combined
financial information relating to the acquisition of Morgan & Banks Limited.
(j) The Company's Current Report on Form 8-K, dated February 1, 1999,
relating to the announcement of the Morgan & Banks Limited acquisition and
the release of the results of the Company's operations for the one month and
ten months ended October 31, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
TMP Worldwide Inc.
1633 Broadway, 33rd Floor, New York, New York 10019
Attention: Investor Relations
(Tel. No. (212) 977-4200)
The contents of our web sites are not part of this prospectus. This
prospectus contains certain of our trademarks and service marks and those of
third parties.
54
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts and commissions) are estimated to be as follows:
<TABLE>
<S> <C>
SEC filing fee.............................................. $ 159,086.40
NASD filing fee............................................. 30,500.00
Nasdaq National Market Listing Fee.......................... 17,500.00
Printing expenses........................................... 200,000.00
Legal fees and expenses..................................... 250,000.00
Accounting fees and expenses................................ 250,000.00
Blue sky expenses and counsel fees.......................... 5,000.00
Transfer agent and registrar fees........................... 10,000.00
Miscellaneous............................................... 77,913.60
-------------
Total..................................................... $1,000,000.00
=============
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
permits indemnification of directors, officers and employees of a corporation
under certain conditions and subject to certain limitations. Article VI of the
By-Laws of the Registrant contains provision for the indemnification of
directors, officers, and employees within the limitations permitted by
Section 145. In addition, the Company has entered into Indemnity Agreements with
its directors and officers which provide the maximum indemnification allowed by
Section 145. The Company's officers and directors are insured against losses
arising from any claim against them as such for wrongful acts or omissions,
subject to certain limitations.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding legality.
10.1 Amendment No. 2 to Employment Agreement between TMP
Worldwide Inc. and James J. Treacy, effective as of
October 1, 1999.*
10.2 Content License and Interactive Marketing Agreement, dated
as of December 1, 1999, between America Online, Inc. and TMP
Interactive, Inc. d/b/a Monster.com.*+
10.3 Indenture of Lease, dated December 13, 1999 between 622
Building Company LLC and TMP Worldwide Inc.
23.1 (a) Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1).
(b) Consent of BDO Seidman, LLP.
(c) Consent of Pannell Kerr Forster.
(d) Consent of Arthur Andersen LLP.
(e) Consent of Darby & Darby P.C.
24 Power of Attorney (on signature page).*
</TABLE>
- ------------------------
* Previously filed.
+ Portions of Exhibit 10.2 have been afforded confidential treatment and have
been filed separately with the Commission.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person of the
registrant in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on January 5, 2000.
<TABLE>
<S> <C> <C>
TMP WORLDWIDE INC.
By: /s/ ANDREW J. MCKELVEY
-----------------------------------------
Andrew J. McKelvey
CHAIRMAN AND CEO
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ANDREW J. MCKELVEY Chairman, CEO and Director
------------------------------------------- (PRINCIPAL EXECUTIVE January 5, 2000
Andrew J. McKelvey OFFICER)
Executive Vice President,
* Chief Operating Officer
------------------------------------------- and January 5, 2000
James J. Treacy Director
* Chief Financial Officer
------------------------------------------- (PRINCIPAL FINANCIAL AND January 5, 2000
Bart W. Catalane ACCOUNTING OFFICER)
*
------------------------------------------- Director January 5, 2000
George R. Eisele
*
------------------------------------------- Director January 5, 2000
Michael Kaufman
*
------------------------------------------- Director January 5, 2000
John Swann
</TABLE>
<TABLE>
<S> <C> <C>
/s/ ANDREW J. MCKELVEY
----------------------------------------
Andrew J. McKelvey
*By: ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- ---------------------
<C> <S> <C>
</TABLE>
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding legality.
10.1 Amendment No. 2 to Employment Agreement between TMP
Worldwide Inc. and James J. Treacy, effective as of
October 1, 1999.*
10.2 Content License and Interactive Marketing Agreement, dated
as of December 1, 1999, between America Online, Inc. and TMP
Interactive, Inc. d/b/a Monster.com.*+
10.3 Indenture of Lease, dated December 13, 1999 between 622
Building Company LLC and TMP Worldwide Inc.
23.1 (a) Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1).
(b) Consent of BDO Seidman, LLP.
(c) Consent of Pannell Kerr Forster.
(d) Consent of Arthur Andersen LLP.
(e) Consent of Darby & Darby P.C.
24 Power of Attorney (on signature page).
</TABLE>
- ------------------------
* Previously filed.
+ Portions of Exhibit 10.2 have been afforded confidential treatment and have
been filed separately with the Commission.
<PAGE>
4,000,000 SHARES
TMP WORLDWIDE INC.
COMMON STOCK, $.001 PAR VALUE
UNDERWRITING AGREEMENT
January __, 2000
<PAGE>
January __, 2000
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Salomon Smith Barney
Deutsche Bank Securities Inc.
PaineWebber Incorporated
U.S. Bancorp Piper Jaffray Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Goldman Sachs International
Salomon Brothers International Limited
Deutsche Bank AG London
PaineWebber International (U.K.) Ltd.
U.S. Bancorp Piper Jaffray Inc.
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
TMP Worldwide Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS"), an aggregate of 4,000,000 shares of the common stock (par value
$.001 per share) of the Company (the "FIRM SHARES").
It is understood that, subject to the conditions hereinafter stated,
3,200,000 Firm Shares (the "U.S. FIRM SHARES") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. UNDERWRITERS") in
1
<PAGE>
connection with the offering and sale of such U.S. Firm Shares in the United
States and Canada to the United States and Canadian Persons (as such terms are
defined in the Agreement Between U.S. and International Underwriters of even
date herewith), and 800,000 Firm Shares (the "INTERNATIONAL SHARES") will be
sold to the several International Underwriters named in Schedule II hereto (the
"INTERNATIONAL UNDERWRITERS") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., Salomon Smith Barney Inc., Deutsche Bank Securities
Inc., PaineWebber Incorporated and U.S. Bancorp Piper Jaffray Inc. shall act as
representatives (the "U.S. REPRESENTATIVES") of the several U.S. Underwriters,
and Morgan Stanley & Co. International Limited, Goldman Sachs International,
Salomon Brothers International Limited, Deutsche Bank AG London,
PaineWebber International (U.K.) Ltd. and U.S. Bancorp Piper Jaffray Inc. shall
act as representatives (the "INTERNATIONAL REPRESENTATIVES") of the several
International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the Underwriters.
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 600,000 shares of the common stock (par
value $.001 per share) of the Company (the "ADDITIONAL SHARES") if and to the
extent that the U.S. Representatives shall have determined to exercise, on
behalf of the U.S. Underwriters, the right to purchase such shares of common
stock granted to the U.S. Underwriters in Section 2 hereof. The Firm Shares and
the Additional Shares are hereinafter collectively referred to as the "SHARES".
The shares of common stock (par value $.001 per share) of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK".
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement contains two prospectuses to be used in
connection with the offering and sale of the Shares: the U.S. prospectus, to be
used in connection with the offering and sale of Shares in the United States and
Canada to United States and Canadian Persons, and the international prospectus,
to be used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States and Canadian Persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front cover page. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the U.S. prospectus and the
international prospectus
2
<PAGE>
in the respective forms first used to confirm sales of Shares are hereinafter
collectively referred to as the "PROSPECTUS" (including, in the case of all
references to the Registration Statement and the Prospectus, documents
incorporated therein by reference). If the Company has filed an abbreviated
registration statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"),
then any reference herein to the term "REGISTRATION STATEMENT" shall be deemed
to include such Rule 462 Registration Statement.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to
and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by
the Commission.
(b) (i) Each document filed or to be filed pursuant to the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and
incorporated by reference in the Prospectus complied or will comply when
so filed in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (ii) the Registration
Statement, when it became effective, did not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (iii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iv) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
set forth in this paragraph 1(b) do not apply to statements or omissions
in the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
3
<PAGE>
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority
to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid
and non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares
will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be
4
<PAGE>
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or
to which any of the properties of the Company or any of its subsidiaries
is subject that are required to be described in the Registration Statement
or the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 424 under the Securities Act, complied when so
filed in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder.
(m) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
(n) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
5
<PAGE>
(o) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement.
(p) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
(q) The Company and each other person or entity that, together with
the Company, is treated as a single employer under Section 414 of the
Internal Revenue Code of 1986, as amended (the "CODE") (each such person
or entity being an "ERISA AFFILIATE"), complies, in all material respects
with the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and, to the extent applicable, the Code with respect to each
pension plan (as defined in Section 3(2) of ERISA) maintained by the
Company or such ERISA Affiliate, and neither the Company nor any of its
ERISA Affiliates has incurred any material liability to any pension plan
or to the Pension Benefit Guaranty Corporation that has not been fully
paid or reserved for as reflected on the financial statements set forth in
the Registration Statement and Prospectus as of the date hereof.
(r) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local
or foreign regulatory authorities necessary to conduct their respective
businesses as described in the Prospectus, except where failure to possess
such certificates, authorizations or permits would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the
revocation or any other modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(s) Except as described in or contemplated by the Prospectus, the
Company and its subsidiaries own or possess all material patents, patent
rights, licenses, inventions, copyrights, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service
marks, trade
6
<PAGE>
names and other intellectual property rights ("INTELLECTUAL PROPERTY")
currently employed by them in connection with the business now operated by
them, and neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to the Intellectual Property which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(t) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations of
the Company or any of its subsidiaries will be affected by the Year 2000
Problem (that is, any significant risk that computer hardware or software
applications used by the Company and its subsidiaries will not, in the
case of dates or time periods occurring after December 31, 1999, function
at least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000); as a result of such review, (i) the Company has
no reason to believe, and does not believe, that (A) there are any issues
related to the Company's preparedness to address the Year 2000 Problem
that are of a character required to be described or referred to in the
Registration Statement or Prospectus which have not been accurately
described in the Registration Statement or Prospectus and (B) the Year
2000 Problem will have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, or result in any material
loss or interference with the business or operations of the Company and
its subsidiaries, taken as a whole; and (ii) the Company reasonably
believes, after due inquiry, that the material suppliers, vendors,
customers or other material third parties used or served by the Company
and such subsidiaries are addressing or will address the Year 2000 Problem
in a timely manner, except to the extent that a failure to address the
Year 2000 Problem by any material supplier, vendor, customer or material
third party would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business or operations of the
Company and its subsidiaries, taken as a whole.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company at U.S. $[___] a share (the "PURCHASE PRICE") the number of Firm Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) set forth in Schedules I and II hereto opposite its name.
7
<PAGE>
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 600,000
Additional Shares at the Purchase Price. If the U.S. Representatives, on behalf
of the U.S. Underwriters, elect to exercise such option, the U.S.
Representatives shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the exchange of shares of Class B
Common Stock for shares of Common Stock under the terms of the Company's
certificate of incorporation, (C) the granting of options or restricted shares
of Common Stock to officers, directors, employees or consultants, provided that
these options and restricted shares of Common Stock are not generally
exercisable or do not generally vest prior to the end of the 90 day period
described above, (D) the issuance by the Company of shares of Common Stock upon
the exercise of options or warrants or the conversion of securities outstanding
on the date hereof or as of the Closing Date of which the Underwriters have been
advised in writing, (E) the issuance of
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shares of Common Stock to acquire H W Group plc and the issuance of up to
2,500,000 shares of Common Stock in connection with other acquisitions or (F)
the exercise of options granted pursuant to the Company's stock option plans.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at U.S.
$[___] a share (the "PUBLIC OFFERING PRICE") and to certain dealers selected by
you at a price that represents a concession not in excess of U.S. $[__] a share
under the Public Offering Price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of U.S. $[___] a share, to any
Underwriter or to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made to the
Company in Federal or other funds immediately available in New York City against
delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 A.M., New York City time, on February [__], 2000, or at
such other time on the same or such other date, not later than February [__],
2000, as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "CLOSING DATE".
Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several U.S. Underwriters
at 10:00 A.M., New York City time, on the date specified in the notice described
in Section 3 or at such other time on the same or on such other date, in any
event not later than March [__], 2000, as shall be designated in writing by the
U.S. Representatives. The time and date of such payment are hereinafter referred
to as the "OPTION CLOSING DATE".
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
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5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 4:00 P.M. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date.
The officer signing and delivering such certificate may rely upon the best
of his or her knowledge as to proceedings threatened.
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(c) The Underwriters shall have received on the Closing Date an
opinion of (A) Fulbright & Jaworski L.L.P., outside counsel for the
Company and its U.S. Significant Subsidiaries (as such term is defined in
Regulation S-X of the Securities Act), with respect to the Company; and
(B) Dunhill Madden Butler, Australian counsel to the Company, with respect
to the Company's Australian Significant Subsidiary, each dated the Closing
Date. The opinion of Fulbright & Jaworski L.L.P shall be to the effect set
forth below and the opinion of Dunhill Madden Butler shall be to the
extent set forth in clauses (ii), (vii), (ix) and (xiv) below.
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
state of Delaware, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each Significant Subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or to be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken
as a whole;
(iii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus;
(iv) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable;
(v) the Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this
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Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any
preemptive or similar rights;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or, to the
best of such counsel's knowledge, any agreement or other instrument
binding upon the Company or any of its subsidiaries that is material
to the Company and its subsidiaries, taken as a whole, or, to the
best of such counsel's knowledge, any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency
is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Shares by the Underwriters;
(viii) such counsel has considered the statements (A) in the
Prospectus under the captions "Business-Government Regulation" and
"Underwriters" and (B) in the Registration Statement in Item15, in
each case relating to legal matters, documents or proceedings, and
in the opinion of such counsel, such statements fairly summarize in
all material respects such matters, documents or proceedings;
(ix) except as described in or contemplated by the Prospectus,
after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company
or any of its subsidiaries is a party or to which any of the
properties of the Company or any of its subsidiaries is subject that
are required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or
filed as required;
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(x) to such counsel's knowledge, except as described in the
Prospectus, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company or to
require the Company to include such securities with the Shares
registered pursuant to the Registration Statement;
(xi) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
(xii) the Company and each other person or entity that,
together with the Company, is treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended (the
"CODE") (each such person or entity being an "ERISA AFFILIATE"),
complies, to such counsel's knowledge, in all material respects with
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and, to the extent applicable, the Code with respect to
each pension plan (as defined in Section 3(2) of ERISA) maintained
by the Company or such ERISA Affiliate, and neither the Company nor
any of its ERISA Affiliates has incurred any material liability to
any pension plan or to the Pension Benefit Guaranty Corporation that
has not been fully paid or reserved for as reflected on the
financial statements set forth in the Registration Statement and
Prospectus as of the date hereof;
(xiii) Neither the Company nor any of its subsidiaries, to
such counsel's knowledge after due inquiry, has received any notice
of proceedings relating to the revocation or any other modification
of any certificate, authorization or permit issued by federal,
state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the Prospectus, which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the Company and its subsidiaries, taken as a whole;
(xiv) except as described in or contemplated by the
Prospectus, to such counsel's knowledge after due inquiry, the
Company and its subsidiaries own or possess all material patents,
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<PAGE>
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures), trademarks,
service marks, trade names and other intellectual property rights
("INTELLECTUAL PROPERTY") currently employed by them in connection
with the business now operated by them, and neither the Company nor
any of its subsidiaries has received, to such counsel's knowledge
after due inquiry, any notice of infringement of or conflict with
asserted rights of others with respect to the Intellectual Property
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the Company and its subsidiaries, taken as a whole; and
(xv) such counsel has no reason to believe that (A) any
document filed pursuant to the Exchange Act and incorporated by
reference in the Registration Statement and the Prospectus (except
for financial statements and schedules and other financial and
statistical data included therein as to which such counsel need not
express any belief) did not comply when so filed as to form in all
material respects with the Exchange Act and the rules and
regulations of the Commission thereunder and (B) the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein
as to which such counsel need not express any belief) do not comply
as to form in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder.
Such counsel shall also state that no facts have come to its attention
that cause such counsel to believe that (A) the Registration Statement and
Prospectus (except for the financial statements and financial schedules and
other financial and statistical data included therein, as to which such counsel
need not express any belief) do not comply as to form in all material respects
with the requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder or (B) (x) the Registration Statement
and the prospectus included therein (except for the financial statements and
financial schedules and other financial and statistical data included therein,
as to which such counsel need not express any belief) at the time the
Registration Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; or (y) the
Prospectus (except as stated) as of its date and as of the Closing Date
contained or contains any untrue statement of a material fact or
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<PAGE>
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of (A) Myron F. Olesnyckyj, Esq., Vice President-General Counsel
of the Company and its U.S. Significant Subsidiaries, with respect to the
Company and (B) Dunhill Madden Butler, Australian counsel for the Company,
with respect to the Company's Australian Significant Subsidiary, each
dated the Closing Date, to the effect that:
(i) the Company and its Significant Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the Prospectus,
except where failure to possess such certificates, authorizations or
permits would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
(e) The Underwriters shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraphs (v), (vi),
(viii) (but only as to the statements in the Prospectus under the caption
"Underwriters") and the paragraph following subparagraph (xv) of paragraph
(c) above.
With respect to the paragraph following subparagraph (xv) of paragraph (c)
above, Fulbright & Jaworski L.L.P. and Davis Polk & Wardwell may state that
their belief is based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and review and discussion of the contents thereof, but is without independent
check or verification, except as specified. With respect to paragraph (c) above,
Fulbright & Jaworski L.L.P. may rely, with respect to factual matters and to the
extent such counsel deems appropriate, upon certificates of officers of the
Company.
The opinions described in paragraphs (c) and (d) above shall be rendered
to the Underwriters at the request of the Company and shall so state therein.
(f) The Underwriters shall have received, on each of the date hereof
and the Closing Date, letters dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the
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Underwriters, from (A) BDO Seidman, LLP, independent certified public
accountants for the Company, (B) Pannell Kerr Forster, independent
auditors for Morgan & Banks Limited and (C) Arthur Andersen LLP,
independent certified public accountants for LAI Worldwide, Inc.,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained or
incorporated by reference in the Registration Statement and the
Prospectus; PROVIDED that the letters delivered on the Closing Date shall
use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain stockholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the
Closing Date.
The several obligations of the U.S. Underwriters to purchase Additional
Shares hereunder are subject to the delivery to the U.S. Representatives on the
Option Closing Date of such documents as they may reasonably request with
respect to the good standing of the Company, the due authorization and issuance
of the Additional Shares and other matters related to the issuance of the
Additional Shares.
6. COVENANTS OF THE COMPANY. In further consideration of the agreements of
the Underwriters herein contained, the Company covenants with each Underwriter
as follows:
(a) To furnish to you, without charge, 7 signed originals of the
Registration Statement (including exhibits thereto and documents
incorporated therein by reference) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without
exhibits thereto but including documents incorporated therein by
reference) and to furnish to you in New York City, without charge, prior
to 10:00 A.M. New York City time on the business day next succeeding the
date of this Agreement and during the period mentioned in paragraph (c)
below, as many copies of the Prospectus, any documents incorporated
therein by reference and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request. The terms
"SUPPLEMENT" and "AMENDMENT" or "AMEND" as used in this Agreement shall
include all documents subsequently filed by the Company with the
Commission pursuant to the Exchange Act that are deemed to be incorporated
by reference in the Prospectus.
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(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment
or supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders
and to you as soon as practicable an earning statement covering the
twelve-month period ending March 31, 2001 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
7. EXPENSES. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
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with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under state
securities laws as provided in Section 6(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with any Blue Sky
memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities Dealers, Inc.,
(v) all costs and expenses incident to listing the Shares on the Nasdaq National
Market, (vi) the cost of printing certificates representing the Shares, (vii)
the costs and charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations on any
"road show" undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (ix) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section 8 entitled "Indemnity and Contribution", and
the last paragraph of Section 10 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
8. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by
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any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
any amendment thereof, any preliminary prospectus or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only with reference to
information relating to such Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to paragraph (a) or (b) of this
Section 8, such person (the "indemnified party") shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying
party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the
indemnified
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party shall have mutually agreed to the retention of such counsel or (ii)
the named parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is
understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for (i) the fees
and expenses of more than one separate firm (in addition to any local
counsel) for all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act and (ii) the fees and expenses of more
than one separate firm (in addition to any local counsel) for the Company,
its directors, the Company's officers who sign the Registration Statement
and each person, if any, who controls the Company within the meaning of
either such Section and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for
the Underwriters and such control persons of any Underwriters, such firm
shall be designated in writing by Morgan Stanley & Co. Incorporated. In
the case of any such separate firm for the Company and such directors,
officers and control persons of the Company, such firm shall be designated
in writing by the Company. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement
or judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered
into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to
the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
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(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 8 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute
to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party or parties on
the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other
hand in connection with the offering of the Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering
of the Shares (before deducting expenses) received by the Company and the
total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover of the Prospectus,
bear to the aggregate Public Offering Price of the Shares. The relative
fault of the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 8 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 8 were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (f) of
this Section 8. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such
21
<PAGE>
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise
be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter or by or on behalf of the Company, its
officers or directors or any person controlling the Company and (iii)
acceptance of and payment for any of the Shares.
9. TERMINATION. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of any of the Company shall have been suspended on any exchange or in
any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
10. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
22
<PAGE>
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I or Schedule II bears to the
aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; PROVIDED that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 11 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Firm Shares and the aggregate number of Firm Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Firm Shares to be purchased, and arrangements satisfactory to you and
the Company for the purchase of such Firm Shares are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any U.S.
Underwriter or U.S. Underwriters shall fail or refuse to purchase Additional
Shares and the aggregate number of Additional Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Additional
Shares to be purchased, the non-defaulting U.S. Underwriters shall have the
option to (i) terminate their obligation hereunder to purchase Additional Shares
or (ii) purchase not less than the number of Additional Shares that such
non-defaulting U.S. Underwriters would have been obligated to purchase in the
absence of such default. Any action taken under this paragraph shall not relieve
any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
23
<PAGE>
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
11. COUNTERPARTS. This Agreement may be signed in two or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
12. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
13. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
24
<PAGE>
Very truly yours,
TMP WORLDWIDE INC.
By ______________________
Name:
Title:
25
<PAGE>
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY INC.
DEUTSCHE BANK SECURITIES INC.
PAINEWEBBER INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
Acting severally on behalf
of themselves and the
several U.S. Underwriters named
in Schedule I hereto.
By Morgan Stanley & Co.
Incorporated
By __________________________
Name:
Title:
26
<PAGE>
MORGAN STANLEY & CO.
INTERNATIONAL LIMITED
GOLDMAN SACHS INTERNATIONAL
SALOMON BROTHERS INTERNATIONAL LIMITED
DEUTSCHE BANK AG LONDON
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
U.S. BANCORP PIPER JAFFRAY INC.
Acting severally on behalf
of themselves and the
several International Underwriters named
in Schedule II hereto.
By Morgan Stanley & Co International.
Limited
By ____________________________
Name:
Title:
27
<PAGE>
SCHEDULE I
U.S. UNDERWRITERS
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. Incorporated..............
Goldman, Sachs & Co. ..........................
Salomon Smith Barney Inc. .....................
Deutsche Bank Securities Inc...................
PaineWebber Incorporated ......................
U.S. Bancorp Piper Jaffray Inc. ...............
Total Firm Shares..............................
<PAGE>
SCHEDULE II
INTERNATIONAL UNDERWRITERS
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
Morgan Stanley & Co. International Limited.....
Goldman Sachs International....................
Salomon Brothers International Limited.........
Deutsche Bank AG London........................
PaineWebber International (U.K.) Ltd...........
U.S. Bancorp Piper Jaffray Inc.................
Total International Firm Shares.............
<PAGE>
EXHIBIT A
FORM OF LOCK-UP LETTER
___________, 2000
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Salomon Smith Barney Inc.
Deutsche Bank Securities Inc.
PaineWebber Incorporated
U.S. Bancorp Piper Jaffray Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Morgan Stanley & Co. International Limited
Goldman Sachs International
Salomon Brothers International Limited
Deutsche Bank AG London
PaineWebber International (U.K.) Ltd.
U.S. Bancorp Piper Jaffray Inc.
Deutsche Banc Alex. Brown
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("MORGAN STANLEY") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with TMP Worldwide Inc., a Delaware corporation (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters,
<PAGE>
including Morgan Stanley (the "UNDERWRITERS"), of up to 4,000,000 shares (the
"Shares") of the Common Stock ($.001 par value per share) of the Company (the
"COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date of the final prospectus relating to the Public Offering (the "PROSPECTUS")
and ending 90 days thereafter, (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (2) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (a) transactions relating to shares of
Common Stock or other securities acquired in open market transactions after the
completion of the Public Offering, (b) the sale or other transfer of any shares
of Common Stock to any "associate", as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), provided that
(i) the transferee agrees to be bound by the terms of this agreement and (ii) if
the donor or transferee is a reporting person subject to Section 16(a) of the
Exchange Act, any gifts or transfers made in accordance with this clause (b)
shall not require such person to, and such person shall not voluntarily, file a
report of such transaction on Form 4 under the Exchange Act or (c) any
transaction completed prior to the date of the final prospectus. In addition,
the undersigned agrees that, without the prior written consent of Morgan Stanley
on behalf of the Underwriters, it will not, during the period commencing on the
date of the Prospectus and ending 90 days thereafter, make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation among the Company and the Underwriters.
Very truly yours,
-------------------------
(Name)
-------------------------
(Address)
<PAGE>
Exhibit 5.1
[LETTERHEAD OF FULBRIGHT & JAWORSKI L.L.P.]
January 4, 2000
TMP Worldwide Inc.
1633 Broadway
New York, NY 10019
Ladies and Gentleman:
In connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed by TMP Worldwide Inc., a Delaware corporation
(the "Company"), under the Securities Act of 1933, as amended (the "Act"),
relating to the public offering by the Company of up to 4,600,000 shares (the
"Shares") of the Company's common stock, par value $.001 per share ("Common
Stock"), we, as counsel for the Company, have examined such corporate records,
other documents and questions of law as we have considered necessary or
appropriate for the purposes of this opinion. Our opinion set forth below is
limited to the General Corporation Law of the State of Delaware.
We assume that appropriate action will be taken, prior to the offer and
sale of the Shares, to register and qualify the Shares for sale under all
applicable state securities or "blue sky" laws.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies, and the authenticity of the originals
of such latter documents.
Based on and subject to the foregoing, we advise you that in our
opinion:
The Shares to be sold by the Company have been duly and validly
authorized and, when issued and sold in the manner contemplated by the
Underwriting Agreement, a form of which has been filed as an exhibit to the
Registration Statement (the "Underwriting Agreement"), and upon receipt by the
Company of payment therefor as provided in the Underwriting Agreement, will be
legally issued, fully paid and non-assessable.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the prospectus contained therein. This consent is not to be
construed as an admission that we are a party whose consent is required to be
filed with the Registration Statement under the provisions of the Act or the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder. The opinion expressed herein is solely for your benefit, and may be
relied upon only by you.
Very truly yours,
/s/ Fulbright & Jaworski L.L.P.
<PAGE>
Exhibit 10.3
INDENTURE OF LEASE (the "Lease") made as of this 13th day of
December, 1999, between 622 BUILDING COMPANY LLC, a New York limited
liability company, having an office at 750 Lexington Avenue, New York, New
York 10022 ("Landlord") and TMP WORLDWIDE, INC., a New York corporation
having an office at 1633 Broadway, New York, New York 10019 ("Tenant").
W I T N E S S E T H :
ARTICLE 1
PREMISES; TERM
Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the following space ("Demised Premises"): the entire 36th, 37th, 38th
and 39th floors as shown crosshatched on the floor plan (Schedule A) attached
hereto, in the office building known as and by the street number 622 Third
Avenue, in the Borough of Manhattan, City and State of New York ("Building"),
upon and subject to the terms, covenants and conditions hereafter set forth.
TO HAVE AND TO HOLD the Demised Premises unto Tenant for a term
commencing on the Commencement Date (as defined in Article 2 hereof) and ending
on a date (the "Expiration Date") which shall be fifteen (15) years and eight
(8) months after the Commencement Date, plus the number of days required, if
any, to have such term expire on the last day of a calendar month, or on such
earlier date upon which said term may expire or terminate pursuant to the
conditions of this Lease or pursuant to law.
IT IS MUTUALLY COVENANTED AND AGREED between Landlord and Tenant as
follows:
ARTICLE 2
COMMENCEMENT OF TERM
Section 2.01. The term of this Lease, for which the Demised Premises
are hereby leased, shall commence on the date, but not prior to February 1, 2000
(the "Commencement Date") that Landlord's work , as hereinafter set forth in
Section 2.02, shall be substantially completed and Landlord has delivered
possession of the Demised Premises to Tenant in accordance with the terms of
this Lease. Landlord's work shall be deemed to be substantially completed
all of Landlord's work, except for minor details or adjustments,
<PAGE>
none of which materially interfere with Tenant's access to and possession of the
Demised Premises for Tenant's work, have been completed.
Section 2.02. Tenant has fully inspected the Demised Premises, is
familiar with the condition thereof and agrees to accept possession of the same
on the Commencement Date. Except as hereinafter provided, Landlord shall not be
required to do any work therein to make the same suitable for the operation of
Tenant's business. However, Landlord, at its expense shall do the following
work:
(i) Demolish only those portions of the improvements (i.e.,
walls, ductwork) in the Demised Premises as shown on Tenant's demolition
plans and deliver space broom clean. Tenant agrees to deliver said
demolition plans to Landlord by 5:00 p.m. on December 10, 1999. If Tenant
fails to deliver said plans by such date, then the Commencement Date of
this Lease shall be accelerated by the number of days of such delay.
(ii) Deliver an ACP-5 certificate, provided Landlord shall not
be required to remove the adhesive material securing the old floor
covering nor remove the existing VCT tile. However Landlord shall flash
patch the area abutting the VCT tile to make same level, ready for
installation by Tenant of its floor covering.
(iii) Provide electricity of at least six (6) watts demand
load per usable square foot, exclusive of Building HVAC.
(iv) Put core bathrooms and elevator call buttons on the
floors of the premises in compliance with the Americans with Disability
Act.
(v) Place sprinkler system in good working order.
(vi) Place Building HVAC system in good working order.
(vii) If required, without charge by Landlord, provide
sufficient connection points in the appropriate existing TDS panel in
accordance with Tenant's plans, for its use set forth in Section 4.01 and
in compliance with New York City Fire Department Code and Regulations.
(viii) Remove mail conveyor and install slab over floor
openings.
(ix) Repair existing broken or cracked glass as of the date
hereof.
2
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(x) All base building electric panels to be in place in
electrical closets on the floors of the Premises.
Section 2.03. Promptly after the Commencement Date, Landlord and
Tenant shall execute a mutually satisfactory statement in recordable form
confirming the agreed upon Commencement and Expiration Dates of this Lease, in
accordance with the foregoing provisions.
Section 2.04. Landlord shall use its best efforts to substantially
complete its work as set forth in Section 2.02 by February 1, 2000, as extended
by the number of days following December 10, 1999 that Tenant has failed to
deliver its demolitions plans to the date of delivery thereof, as provided in
Section 2.02(i) above. If Landlord fails to substantially complete its work by
April 1, 2000 (as extended by the number of days that Tenant has failed to
deliver its demolition plans), then Tenant may complete such work on behalf of
Landlord. In such event, Landlord shall reimburse Tenant for the reasonable cost
of the work performed by Tenant within ten (10) days after delivery to Landlord
of receipted bills evidencing the cost of such work together with waivers of
mechanics lien. Landlord may perform its work at the same time that Tenant is
performing its initial work in the Demised Premises, provided Landlord's and
Tenant's contractors shall work in harmony and not interfere with the other.
ARTICLE 3
RENT
Section 3.01. Commencing on the Commencement Date, Tenant shall pay
as rent for the Demised Premises, the following:
(a) a fixed minimum rent (the "minimum rent") at the annual
rate of $4,992,000 per annum (or $416,000 per month), provided if the
Commencement Date is not the first day of a month, then the minimum rent
for such month shall be prorated based upon the actual number of days in
such month; and
(b) all other sums and charges required to be paid by Tenant
under the terms of this Lease (including without limitation, the payments
required to be made under Article 22), which shall be deemed to be and are
sometimes referred to hereafter as additional rent.
3
<PAGE>
Section 3.02. Notwithstanding the provisions of Section 3.01 hereof
and provided Tenant is not then in monetary default under any of the provisions
of this Lease on its part to be performed, Tenant shall be entitled to an
abatement of the minimum rent only as follows: (i) the amount of $416,000 for
each of the 1st, 2nd, 3rd, 4th, 5th and 6th, months of the term and (ii) the
amount of $208,000 for each of the 7th, 8th, 9th, and 10th months following the
Commencement Date, provided the balance of minimum rent for each of such months
of $208,000 shall be payable by Tenant. Tenant acknowledges that the
consideration for the aforesaid abatement of minimum rent is Tenant's agreement
to perform all of the terms, covenants and conditions of this Lease on its part
to be performed. Therefore, if this Lease shall be terminated by reason of
Tenant's default prior to the fifth (5th) anniversary of the Commencement Date,
the aggregate amount of all minimum rent that was abated shall immediately
thereafter become due and payable by Tenant to Landlord. In the event of
Tenant's failure to pay such aggregate amount to Landlord, Landlord shall be
entitled to the same rights and remedies as in the event of Tenant's default in
the payment of minimum rent. Tenant shall be required to pay additional rent
from and after the Commencement Date.
Section 3.03. The minimum rent shall be payable in equal monthly
installments in advance on the first day of each and every month during the term
of this Lease, except that the amount of $416,000 shall be paid upon the
execution of this Lease and applied to the payment of minimum rent for the 7th
and 8th month of the terms.
Landlord and Tenant agree that Tenant shall pay minimum rent,
additional rent and other amounts now due or hereafter to become due to the
Landlord or its agents as provided for in this Lease, (as and when due) directly
to the following lock-box account:
622 Building Company LLC
P.O. Box 41007
Newark, New Jersey 07101-8700
All rent checks shall be made payable to 622 Building Company LLC.
Section 3.04. Tenant shall pay the minimum rent and additional rent
in lawful money of the United States which shall be legal tender for the payment
of all debts, public and private, at the time of payment.
Section 3.05. The minimum rent and additional rent shall be payable
by Tenant without any set-off, abatement or deduction whatsoever and without
notice or demand, except as otherwise expressly provided herein.
4
<PAGE>
ARTICLE 4
USE
Section 4.01. Tenant shall use and occupy the Demised Premises for
administrative, executive and general office purposes only, and uses incidental
thereto.
Section 4.02. Notwithstanding the provisions of Section 4.01, Tenant
shall not use or allow the use of the Demised Premises or any part thereof (1)
for the cooking and/or sale of food, except that Tenant may warm foods through a
microwave; (2) for storage for sale of any alcoholic beverage in the Demised
Premises; (3) for the storage and/or sale of any product or material from the
Demised Premises; (4) for manufacturing or printing purposes; (5) for the
conduct of a school or training facility or similar type of business which
results in the presence of the general public in the Demised Premises; (6) for
the conduct of the business of an employment agency or personnel agency, except
a mid-management and/or executive search agency shall be allowed; (7) for the
conduct of any public auction or public exhibition; (8) for occupancy by a
foreign, United States, state, municipal or other governmental or
quasi-governmental body, agency or department or any authority or other entity
which is affiliated therewith or controlled thereby and which has diplomatic or
sovereign immunity or the like with respect to a commercial lease; (9) for
messenger or delivery service (excluding Tenant's own employees or outside
services); (10) as a public stenographer or typist; (11) as a telephone or
telegraph agency; (12) as a company engaged in the business of renting office(s)
or desk space in the Demised Premises; (13) as medical offices or a laboratory;
(14) as a travel agency; (15) as a dating service; (16) as a restaurant; (17) as
a night club, discotheque, arcade or like kind establishments; (18) as a public
or quasi-public health facility, radiation treatment facility, methadone clinic
or other drug related clinic, abortion clinic, or for any practice conducted in
or through the format of a clinic; (19) as a pawn shop; (20) as an off-track
betting parlor; (21) as a homeless shelter, soup kitchen or similar use; (22)
for the sale or display or pornographic products or services; (23) for the use
or storage of flammable liquids or chemicals (unless incidental to a permitted
use); (24) as a funeral parlor; (25) for the sale or grooming of pets; or (26)
for any form of spiritualist services, such a fortune telling or reading.
Furthermore, the Demised Premises shall not be used for any purpose that would,
in Landlord's reasonable judgment, tend to lower the first-class character of
the Building, create unreasonable or excessive elevator or floor loads,
unreasonably impair or interfere with any of the Building operations or the
proper and economic heating, air-conditioning, cleaning or any other services of
the Building, unreasonably interfere with the use of the other areas of the
Building by any other tenants, or impair the appearance of the Building. Neither
Tenant nor any person within Tenant's control shall use, generate, store, treat
and/or dispose of any Hazardous Materials (as hereinafter defined) in, on, under
or about the Demised Premises.
Section 4.03. If any governmental license or permit, other than a
Certificate of Occupancy is required for the proper and lawful conduct of
Tenant's business in the
5
<PAGE>
Demised Premises, or any part thereof, and if failure to secure such license or
permit would in any way adversely affect Landlord, Tenant, at its expense, shall
duly procure and thereafter maintain such license or permit and submit the same
for inspection by Landlord, unless the requirement for the same by Tenant is
attributable to an act or omission of Landlord. Tenant shall at all times comply
with the terms and conditions of each such license or permit.
Section 4.04. Tenant shall not at any time use or occupy, or permit
anyone to use or occupy, the Demised Premises, or do or permit anything to be
done in the Demised Premises, in violation of the Certificate of Occupancy, for
the Demised Premises , and will not permit or cause any act to be done or any
condition to exist on the Demised Premises which may be dangerous unless
safeguarded as required by law, or which in law constitutes a nuisance, public
or private, or which may make void or voidable any insurance maintained by
Landlord then in force covering the Building and building equipment. Landlord
represents to Tenant that as of the Commencement Date the Certificate of
Occupancy for the Building permits the use of the Demised Premises in the manner
required in Section 4.01 of this Lease.
ARTICLE 5
ALTERATIONS, FIXTURES
6
<PAGE>
Section 5.01. Tenant, without Landlord's prior consent, shall make
no structural alterations, installations, additions, or improvements in or to
the Demised Premises ("work") including, but not limited to, an air-conditioning
or cooling system, or any unit or part thereof or other apparatus of like or
other nature, railings, mezzanine floors, galleries and the like. However,
subject to Landlord's consent which shall not be unreasonably withheld or
delayed, Tenant may make non-structural interior work not adversely affecting
the Building systems. Tenant, subject to plans and specifications approved by
Landlord and the provisions of Section 5.01, may install a stairway between the
respective floors (including the Additional Space referred to in Article 38) of
the Demised Premises. With respect to any work requiring Landlord's approval and
performance by any contractor other than Landlord, Tenant shall pay to Landlord
during the five (5) years of the term of this Lease following February 1, 2000,
five (5%) percent and during the term of this Lease following February 1, 2000
seven and one half (7-1/2%) percent of the cost of such work for supervision,
coordination and other expenses incurred by Landlord in connection therewith.
However, such five (5%) or seven and one half (7-1/2%) percent charge, as the
case may be, shall not apply to Tenant's initial work in the Demised Premises or
initial work in any Additional Space or Further Additional Space referred to in
Article 38, nor to any future work therein not requiring a building permit from
the applicable municipal authorities. Tenant acknowledges that the ICIP Program
(as hereinafter defined) may impose requirements with respect to the hiring and
training practices, among other matters, of contractors and subcontractors
engaged to perform certain work in the Building for Tenant (collectively, herein
called "Tenant's Contractors"). Tenant shall use Tenant's Contractors (subject
to Landlord's approval) that qualify under the applicable requirements of the
ICIP Program for the performance of Tenant's initial work and any subsequent
alterations to the Demised Premises and Tenant will require Tenant's Contractors
to comply with the provisions of the ICIP Program. If Landlord is notified of
any violation of the ICIP Program by Tenant's Contractors, Landlord shall
promptly advise Tenant, and Tenant shall take all necessary actions to cure such
violations. Workers' compensation and public liability insurance and property
damage insurance, all in amounts and with companies and/or forms reasonably
satisfactory to Landlord, shall be provided and at all times maintained by
Tenant's contractors engaged in the performance of the work, and before
proceeding with the work, certificates of such insurance shall be furnished to
Landlord. If consented to by Landlord, all such work shall be done at Tenant's
sole expense and in full compliance with all requirements of governmental
authorities having jurisdiction thereover. Upon completion of such work, Tenant
shall deliver to Landlord 1/4" scale "as built" plans for the same. All work
affixed to the realty or if not so affixed but for which Tenant shall have
received a credit from Landlord, shall become the property of Landlord, subject
to Tenant's right to replace same during the term hereof with items of equal
quality, class and value, and shall remain upon, and be surrendered with, the
Demised Premises as a part thereof at the end of the term or any renewal or
extension term, as the case may be, without allowance to Tenant or charge to
Landlord, unless Landlord elects otherwise on notice to Tenant given at the time
Landlord has consented to the work. However, if Landlord shall elect, otherwise,
Tenant at Tenant's expense, at or prior to any termination of this Lease, shall
remove all such work or such portion thereof as Landlord shall elect and Tenant
shall restore the Demised Premises to its
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original condition, reasonable wear and tear excepted, at Tenant's expense.
Notwithstanding the foregoing, Tenant shall not be required to remove any of its
initial work in the Demised Premises or any Additional Space or Further
Additional Space referred to in Article 38. However Tenant, at its expense, at
the expiration or termination of this Lease, shall remove any internal stairway
installed by it and restore such portion of the floor where the same has been
removed to its original condition. If any Building facilities or services,
including but not limited to air-conditioning and ventilating equipment
installed by Landlord, are adversely affected or damaged by reason of the work
by Tenant, Tenant, at its expense, shall repair such damage to the extent such
damage has been caused by Tenant's work and shall correct the work so as to
prevent any further damage or adverse effect on such facilities or services.
Section 5.02. Prior to commencing any work pursuant to the
provisions of Section 5.01, Tenant shall furnish to Landlord:
(a) Plans and specifications for the work to be done.
(b) Copies of all governmental permits and authorizations
which may be required in connection with such work. Landlord shall execute
any required application for such building permits, subject to Landlord's
approval of the plans and specifications for the work covering the
applicable permit referred to in (a) above and subject to the provisions
of Section 5.01.
(c) A certificate evidencing that Tenant (or Tenant's
contractor) has procured workers' compensation insurance covering all
persons employed in connection with the work who might assert claims for
death or bodily injury against Landlord, Tenant, any mortgagee or the
Building.
(d) Such additional personal injury and property damage
insurance (over and above the insurance required to be carried by Tenant
pursuant to the provisions of Section 9.03) as Landlord may reasonably
require because of the nature of the work to be done by Tenant, provided
that landlords of buildings comparable to and in the vicinity of the
Building typically requite the same insurance for such work.
Section 5.03. Within ten (10) business days of Landlord's receipt of
any plans and specifications, or revised plans and specifications, from Tenant
relating to any work proposed to be completed by Tenant in the Demised Premises,
Landlord shall approve the same or issue detailed comments to same, and upon
Landlord's failure to do so, said plans and specifications, or revised plans and
specifications, shall be deemed approved.
Section 5.04. Where furnished by or at the expense of Tenant (except
the replacement of an item theretofore furnished and paid for by Landlord or for
which Tenant has
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received a credit from Landlord for furniture or personal property), all movable
property, furniture, furnishings, roller files, equipment and trade fixtures
("personalty") other than those affixed to the realty shall remain the property
of and shall be removed by Tenant on or prior to any termination or expiration
of this Lease, and, in the case of damage by reason of such removal, Tenant, at
Tenant's expense, promptly shall repair the damage. If Tenant does not remove
any such personalty, Landlord, at its election, (a) may cause the personalty to
be removed and placed in storage at Tenant's expense or (b) may treat the
personalty as abandoned and may dispose of the personalty as it sees fit without
accounting to Tenant for any proceeds realized upon such disposal.
Section 5.05. Tenant agrees that in the exercise of its rights
pursuant to the provisions of this Article 5 Tenant shall endeavor to complete
such work in a manner which would not create any work stoppage, picketing, labor
disruption or dispute or violate Landlord's union contracts affecting the
Building or interfere with the business of Landlord or any Tenant or occupant of
the Building. In the event of the occurrence of any condition described above
arising from the exercise by Tenant of its right pursuant to the provisions of
this Article 5, Tenant shall, promptly upon notice from Landlord, cease the
manner of exercise of such right giving rise to such condition. In the event
Tenant fails to cease such manner of exercise of its rights as aforesaid,
Landlord, in addition to any rights available to it under this Lease and
pursuant to law, shall have the right to injunction without notice. With respect
to Tenant's work, Tenant shall make all arrangements for, and pay all expenses
incurred in connection with, use of the freight elevators servicing the Demised
Premises during those hours other than as provided in Section 21.01(a) in
accordance with Landlord's customary charges therefor, provided that there shall
be no freight elevator charges for the first sixteen (16) hours of such use.
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ARTICLE 6
REPAIRS
Section 6.01. Tenant shall take good care of the Demised Premises
and the fixtures therein and all portions of the HVAC, mechanical, plumbing and
electrical systems within and exclusively serving the Demised Premises, and at
its sole cost and expense make all repairs thereto as and when needed to
preserve them in good working order and condition. All damage or injury to the
Demised Premises or the Building or to any building equipment or systems caused
by Tenant moving property in or out of the Building or by installation or
removal of personalty or resulting from negligence or conduct of Tenant, its
employees, agents, contractors, customers, invitees and visitors, shall be
repaired, promptly by Tenant at Tenant's expense, and whether or not involving
structural changes or alterations, to substantially the condition which existed
prior to such damage or injury. All repairs shall include replacements or
substitutions where necessary and shall be at least equal to the quality, class
and value of the property repaired, replaced or substituted and shall be done in
a good and workmanlike manner.
Section 6.02. Landlord, at its expense, shall maintain in a
first-class manner and make all repairs and replacements, structural and
otherwise, to the exterior and public portions of the Building and to the
Demised Premises, unless Tenant is required to make them under the provisions of
Section 6.01 or unless required as a result of the performance or existence of
alterations performed by Tenant or on Tenant's behalf, in which event Tenant, at
its expense, shall perform such maintenance, repairs or replacements. Upon
becoming aware of the need therefor, Tenant shall notify Landlord of the
necessity for any repairs for which Landlord may be responsible in the Demised
Premises under the provisions of this Section. Any and all work performed by
Landlord pursuant to this Section 6.02 shall be performed in a good and
workman-like manner. Landlord shall have no liability to Tenant by reason of any
inconvenience, annoyance, interruption or injury to business arising from
Landlord's making any repairs or changes which Landlord is required or permitted
by this Lease, or required by law, to make in or to any portion of the Building
or the Demised Premises, or in or to the fixtures, equipment or appurtenances of
the Building or the Demised Premises. However, Landlord shall use reasonable
efforts to perform all such maintenance, and complete all such repairs and
replacements, as expeditiously as possible and in a manner to minimize its
interference with the normal conduct of Tenant's business, provided Landlord
shall not be required to employ overtime or premium labor.
Section 6.03. Tenant shall not store or place any materials or other
obstructions in the lobby or other public portions of the Building, or on the
sidewalk abutting the Building.
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ARTICLE 7
FLOOR LOAD; NOISE
Section 7.01. Tenant shall not place a load upon any floor of the
Demised Premises which exceeds the load per square foot which such floor was
designed to carry (50 lbs. live per square foot) and which is allowed by law.
Section 7.02. Business machines and mechanical equipment belonging
to Tenant which cause noise, vibration or any other nuisance that may be
transmitted to the structure or other portions of the Building or to the Demised
Premises, to such a degree as to be reasonably objectionable to Landlord or
which unreasonably interfere with the use or enjoyment by other tenants of their
premises or the public portions of the Building, shall be placed and maintained
by Tenant, at Tenant's expense, in settings of cork, rubber or spring type
vibration eliminators sufficient to eliminate such objectionable or interfering
noise or vibration.
ARTICLE 8
LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES
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Section 8.01. (a) Tenant, at its expense, shall comply with all
laws, orders, ordinances, rules and regulations and directions of Federal,
State, County and Municipal authorities and departments thereof having
jurisdiction over the Demised Premises and the Building, including but not
limited to the Americans With Disabilities Act ("Governmental
Requirements"), referable to Tenant or the Demised Premises, arising by
reason of Tenant's particular use or manner of use of the Demised Premises
(as distinguished from its use merely as offices) or any installations
made therein by or at Tenant's request, or any default by Tenant under
this Lease. Landlord represents that on the Commencement Date the Demised
Premises will be in compliance with all applicable Governmental
Requirements, including, without limitation, the Americans with
Disabilities Act and those covering Hazardous Materials (as hereinafter
defined). Tenant may use the existing fire stairways connecting the floors
of the Demised premises for ingress and egress between the floors thereof
and install appropriate security devices and cameras, provided such use
shall not interfere with the intended use of such stairways in the event
of fire or other emergency and shall be in compliance with all applicable
Governmental Requirements.
(b) Tenant covenants and agrees that Tenant shall, at Tenant's
sole cost and expense, comply at all times with all Governmental
Requirements governing the use, generation, storage, treatment and/or
disposal of any "Hazardous Materials" (which term shall mean any
biologically or chemically active or other toxic or hazardous wastes,
pollutants or substances, including, without limitation, asbestos, PCBs,
petroleum products and by-products, substances defined or listed as
"hazardous substances" or "toxic substances" or similarly identified in or
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601 ET SEQ., and as hazardous wastes under
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6010 ET Seq.,
any chemical substance or mixture regulated under the Toxic Substance
Control Act of 1976, as amended, 15 U.S.C. ss. 2601 ET SEq., any "toxic
pollutant" under the Clean Water Act, 33 U.S.C. ss. 466 ET SEq., as
amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C.
ss. 7401 ET SEq., hazardous materials identified in or pursuant to the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 ET SEq., and
any hazardous or toxic substances or pollutant regulated under any other
Governmental Requirements). Tenant shall indemnify and hold harmless
Landlord, its partners, officers, shareholders, members, directors and
employees and any mortgagee (collectively, the "Indemnitees"), from and
against any loss, cost, damage, liability or expense (including attorneys'
fees and disbursements) arising by reason of any cleanup, removal,
remediation, detoxification action or any other activity required of any
Indemnitees by any government authority by reason of the presence in or
about the Land, the
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Building or the Demised Premises of any Hazardous Materials, as a result
of or in connection with the act or omission of Tenant or any person or
entity within Tenant's control or the breach of this Lease by Tenant or
any person or entity within Tenant's control. The foregoing covenants and
indemnity shall survive the expiration or any termination of this Lease.
(c) Landlord, at its expense, shall comply with and cure all
Governmental Requirements relating to the public portions of the Building
and to the Demised Premises, provided non-compliance will materially
curtail Tenant's use or access to the Demised Premises, and provided that
Tenant is not obligated to comply with them under the provisions of
subdivision (a) of this Section. Landlord, at its expense, may contest the
validity of any Governmental Requirements and postpone compliance
therewith pending such contest, provided, however, that Landlord shall
undertake such contest promptly and pursue same with due diligence if
non-compliance will adversely affect Tenant's use of or access to the
Demised Premises.
(d) Landlord represents that, on the Commencement Date the
Demised Premises will be free of (i) asbestos, except with respect to any
asbestos in the adhesive material securing the existing floor covering,
and (ii) Hazardous Materials. Landlord agrees to indemnify and hold Tenant
harmless from and against any and all losses, costs, damages, liabilities,
penalties, judgments, fines and expenses, including, without limitation,
attorney's fees and disbursements and court costs, which Tenant may incur
as a result of a violation by Landlord of this subdivision (d). If
Landlord breaches this subdivision (d), and Landlord fails to commence to
cure such breach within thirty (30) days of written notice from Tenant of
such breach, Tenant shall be entitled to cure such breach on behalf of
Landlord and within ten (10) days of Tenant's demand, Landlord shall
reimburse Tenant for any such reasonable costs incurred by Tenant to cure
such breach by Landlord.
Section 8.02. If Tenant receives written notice of any violation of
any Governmental Requirements applicable to the Demised Premises, it shall give
prompt notice thereof to Landlord.
Section 8.03. Tenant will not clean, nor allow any window in the
Demised Premises to be cleaned, from the outside in violation of Section 202 of
the Labor Law or the rules of the Board of Standards and Appeals or of any other
board or body having or asserting jurisdiction.
Section 8.04. Landlord shall remove all then existing violations of
record against the Building issued by any governmental authority which prevents
Tenant from obtaining its building permits and/or performing its initial work.
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ARTICLE 9
INSURANCE
Section 9.01. Tenant shall not do or permit to be done any act or
thing in or upon the Demised Premises which will invalidate or be in conflict
with the terms of the insurance policies covering the Building and the property
and equipment therein; and Tenant, at its expense, shall comply with all rules,
orders, regulations and requirements of the New York Board of Fire Underwriters
or any other similar body having jurisdiction, and of the insurance carriers,
and shall not knowingly do or permit anything to be done in or upon the Demised
Premises in a manner which itself increases the rate of insurance for the
Building or any property or equipment therein over the rate in effect on the
Commencement Date.
Section 9.02. If, solely by reason of Tenant's failure to comply
with the provisions of Section 9.01 or any of the other provisions of this
Lease, the rate of insurance for the Building or the property and equipment of
Landlord shall be higher than on the Commencement Date, Tenant shall pay to
Landlord any additional or increased insurance premiums to the extent resulting
solely therefrom thereafter paid by Landlord, and Tenant shall make such payment
within ten (10) days of receipt of a demand of Landlord. In any action or
proceeding wherein Landlord and Tenant are parties, a schedule or "make up" of
any insurance rate for the Building or Demised Premises issued by the New York
Fire Insurance Exchange, or other body establishing fire insurance rates for the
Building, shall be conclusive evidence of the facts therein stated and of the
several items and charges in the insurance rates then applicable to the Building
or Demised Premises.
Section 9.03. (a) Tenant covenants to provide on or before the
Commencement Date and to keep in force during the term hereof, the
following insurance coverage:
(i) For the benefit of Landlord, Tenant and any
mortgagee, a commercial policy of liability insurance protecting and
indemnifying Landlord, Tenant and any mortgagee against any and all
claims for personal injury, death or property damage occurring upon,
in or about the Demised Premises, and the public portions of the
Building in connection with any act of Tenant, its employees,
agents, contractors, customers, invitees and visitors including,
without limitation, personal injury, death or property damage
resulting from any work performed by or on behalf of Tenant, with
coverage of not
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less than $5,000,000.00 combined single limit for personal injury,
death and property damage arising out of one occurrence or accident.
(ii) Fire and extended coverage in an amount adequate to
cover the cost of replacement of all personal property, fixtures,
furnishings and equipment, including Landlord's work as provided in
Section 2.02 and Tenant's work (as referred to in Section 5.01),
located in the Demised Premises.
(b) All such insurance shall (i) be effected under valid and
enforceable policies, (ii) be issued by insurers of recognized
responsibility authorized to do business in the State of New York, (iii)
contain a provision whereby the insurer agrees not to cancel the insurance
without thirty (30) days (if reasonably obtainable) prior written notice
to Landlord, and (iv) contain a provision that no act or omission of
Tenant shall result in forfeiture of the insurance as against Landlord.
On or before the Commencement Date, Tenant shall deliver to Landlord
duplicate originals of the aforesaid policies or certificates evidencing the
aforesaid insurance coverage, and renewal policies or certificates shall be
delivered to Landlord at least thirty (30) days prior to the expiration date of
each policy with proof of payment of the premiums thereof.
Section 9.04. Landlord and Tenant shall each secure an appropriate
clause in, or an endorsement upon, each fire or extended coverage policy
obtained by it and covering the Building, the Demised Premises or the personal
property, fixtures and equipment located therein or thereon, pursuant to which
the respective insurance companies waive subrogation or permit the insured,
prior to any loss, to agree with a third party to waive any claim it might have
against said third party. The waiver of subrogation or permission for waiver of
any claim herein before referred to shall extend to the agents of each party and
its employees and, in the case of Tenant, shall also extend to all other persons
and entities occupying or using the Demised Premises in accordance with the
terms of this lease. If and to the extent that such waiver or permission can be
obtained only upon payment of an additional charge, then, the party benefitting
from the waiver or permission shall pay such charge upon demand, or shall be
deemed to have agreed that the party obtaining the insurance coverage in
question shall be free of any further obligations under the provisions hereof
relating to such waiver or permission.
Subject to the foregoing provisions of this Section 9.04, and
insofar as may be permitted by the terms of the insurance policies carried by
it, (i) each party hereby releases the other with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party for loss, damages or destruction with respect to its property by
fire or other casualty (including rental value or business interruption, as the
case may be) occurring
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during the term of this Lease and (ii) Tenant releases other tenants but only to
the extent that the policies of such other tenants permit a similar waiver for
the benefit of Tenant and such other tenant gives such a waiver.
ARTICLE 10
DAMAGE BY FIRE OR OTHER CAUSE
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Section 10.01. If the Demised Premises shall be damaged by fire or
other casualty, the damage shall be repaired by and at the expense of Landlord
and the minimum rent and additional rent pursuant to the provisions of Article
22 until such repairs shall be made, shall be apportioned according to the part
of the Demised Premises which is usable by Tenant for its normal business
purpose. Landlord shall have no responsibility to repair any damage to
Landlord's work performed pursuant to Section 2.02 or Tenant's work (as referred
to in Section 5.01), the same being the responsibility of Tenant. No penalty
shall accrue for delays which may arise by reason of adjustment of insurance by
Landlord, unavoidable delays (as hereinafter defined), or any other cause beyond
Landlord's reasonable control. Tenant shall give notice to Landlord promptly
upon learning thereof in case of fire or other damage to the Demised Premises.
If the Demised Premises are totally or substantially damaged or are rendered
wholly or substantially unusable for Tenant's normal business purpose by fire or
any such other casualty, or if the Building shall be so damaged that Landlord
shall decide to demolish it or to rebuild it (whether or not the Demised
Premises shall have been damaged), Landlord at its election may terminate this
Lease by written notice to Tenant, within ninety (90) days after such fire or
other casualty, and thereupon the term of this Lease shall expire by lapse of
time upon the third (3rd) day after such notice is given, and Tenant shall
vacate and surrender the Demised Premises to Landlord. If more than twenty-five
(25%) percent of the rentable square feet of the Demised Premises shall be
damaged during the last two (2) years of the term hereof, either Landlord or
Tenant may terminate this Lease by written notice to the other within thirty
(30) days after such fire or other casualty, and thereupon the term of this
Lease shall expire upon the third (3rd) day after such notice is given and
Tenant shall vacate and surrender the Demised Premises to Landlord.
Notwithstanding the foregoing provisions of this Section 10.01, if Landlord does
not substantially complete such repairs in all of the Demised Premises or in any
one or more full floor of the Demised Premises, as the case may be, within six
(6) months from the date of such casualty (subject to provisions of Article 34),
Tenant may elect to terminate this Lease with respect to all of the Demised
Premises or any one or more full floor in which such repairs have not been
substantially completed, as the case may be, by notice to Landlord within ten
(10) days following the expiration of such time period, and thereupon the term
of this Lease for all of the Demised Premises or one or more full floor set
forth in said notice, as the case may be, shall expire on the thirtieth (30th)
day after such notice is given, and Tenant shall vacate and surrender all of the
Demised Premises or one or more full floor, set forth in said notice as the case
may be, to Landlord, unless within such thirty (30) day period, Landlord
substantially completes such restoration or rebuilding in which event this Lease
for all of the Demised Premises shall remain in full force and effect. Tenant
shall not be liable under this Lease for anything accruing after the date of
such expiration. Tenant hereby waives the provisions of Section 227 of the Real
Property Law, and the provisions of this Article shall govern and control in
lieu thereof. If the damage is due to the fault or neglect of Tenant, the debris
shall be removed by, and at the expense of, Tenant.
Section 10.02. No damages of compensation shall be payable by
Landlord nor shall Tenant make any claim for inconvenience, loss of business or
annoyance arising from any repair or restoration of any portion of the Demised
Premises or of the Building. Landlord
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shall use its best efforts to commence and effect such repairs promptly and in
such manner as not to unreasonably interfere with Tenant's occupancy.
ARTICLE 11
ASSIGNMENT, SUBLETTING, MORTGAGING, SIGNAGE
Section 11.01. Tenant will not, by operation of law or otherwise,
assign, mortgage or encumber this Lease, or sublet or permit the Demised
Premises or any part thereof to be occupied or used by others for desk space,
mailing privileges or otherwise, without Landlord's prior written consent in
each instance. If this Lease be assigned, or if the Demised Premises or any part
thereof be underlet or occupied by anybody other than Tenant, Landlord, may,
after default by Tenant, collect rent from the assignee, undertenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
assignment, underletting, occupancy or collection shall be deemed a waiver of
the provisions hereof, the acceptance of the assignee, undertenant or occupant
as tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Landlord to any
assignment, subletting, mortgage or encumbrance shall not in any manner be
construed to relieve Tenant from obtaining Landlord's express consent to any
other or further assignment, subletting, mortgage or encumbrance. In no event
shall any permitted sublessee assign or encumber its sublease or further sublet
all or any portion of its sublet space, or otherwise suffer or permit the sublet
space or any part thereof to be used or occupied by others, without Landlord's
prior written consent in each instance, subject to the provisions of Section
11.05.
Section 11.02. If Tenant shall at any time or times during the term
of this Lease desire to assign this Lease or sublet all or part of the Demised
Premises, Tenant shall give notice thereof to Landlord, which notice shall be
accompanied by (a) an executed copy of the term sheet setting forth the material
terms of the proposed assignment or sublease, the effective or commencement date
of which shall be not less than forty-five (45) nor more than 180 days after the
giving of such notice , (b) a statement setting forth in reasonable detail the
identity of the proposed assignee or subtenant, the nature of its business and
its proposed use of the Demised Premises, and (c) current financial information
with respect to the proposed assignee or subtenant, including, without
limitation, its most recent financial report. Such notice shall be deemed an
offer from Tenant to Landlord whereby Landlord (or Landlord's designee) may, at
its option, (i) terminate this Lease (if the proposed transaction is an
assignment or a sublease (whether by one sublease or a series of related or
unrelated subleases) of all or substantially all of the Demised Premises for
more than one-half of the then remaining term of this Lease, or (ii) terminate
this Lease with respect to the space being sublet if the proposed transaction is
a sublease of part of the Demised Premises for more than one-half of
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the then remaining term of this Lease). Said options may be exercised by
Landlord by notice to Tenant at any time within forty-five (45) days after such
notice has been given by Tenant to Landlord; and during such forty-five (45) day
period Tenant shall not assign this Lease nor sublet such space to any person.
Notwithstanding the foregoing, subject to the provisions of Sections 11.05,
11.07, and 11.08, Tenant may initially sublet all or parts of one full floor of
the Demised Premises, provided a duly executed counterpart of any such sublease,
in form satisfactory to Landlord, is delivered to Landlord at least ten (10)
days prior to its effective date, and in such event the options set forth in
clauses (i) and (ii) above shall not be applicable.
Section 11.03. If Landlord exercises its option to terminate this
Lease in the case where Tenant desires either to assign this Lease or sublet
(whether by one sublease or a series of related or unrelated subleases) all or
substantially all of the Demised Premises for more than one-half of the then
remaining term of this Lease, then this Lease shall end and expire on the date
that such assignment or sublet was to be effective or commence, as the case may
be, and the minimum rent and additional rent shall be paid and apportioned to
such date.
Section 11.04. If Landlord exercises its option to terminate this
Lease in part in any case where Tenant desires to sublet part of the Demised
Premises for more than one-half of the then remaining term of this Lease, then
(a) this Lease shall end and expire with respect to such part of the Demised
Premises on the date that the proposed sublease was to commence; and (b) from
and after such date the minimum rent and additional rent shall be adjusted,
based upon the proportion that the rentable area of the Demised Premises
remaining bears to the total rentable area of the Demised Premises; and (c)
Tenant shall pay to Landlord, upon demand, the costs incurred by Landlord in
physically separating such part of the Demised Premises from the balance of the
Demised Premises and in complying with any laws and requirements of any public
authorities relating to such separation.
Section 11.05. Notwithstanding the provisions of Section 11.01 to
the contrary, in the event Landlord does not exercise an option provided to it
pursuant to Section 11.02 and provided that Tenant is not in default in any of
Tenant's monetary obligations under this Lease, Landlord's consent (which must
be in writing and in form reasonably satisfactory to Landlord) to any proposed
assignment or sublease shall not be unreasonably withheld or delayed, provided
and upon condition that:
(a) Tenant shall have complied with the provisions of Section
11.02 and Landlord shall not have exercised any of its options under said
Section 11.02 within the time permitted therefor;
(b) In Landlord's reasonable judgment, the proposed assignee
or subtenant is engaged in a business and the Demised Premises, or the
relevant part thereof, will be used in a manner which (i) is limited to
the use
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expressly permitted under Sections 4.01 and 4.02 of this Lease, and (ii)
is in keeping with the then standards of the Building;
(c) The proposed assignee or subtenant is a reputable person
of good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable
proof thereof;
(d) Neither (i) the proposed assignee or sublessee nor (ii)
any person which, directly or indirectly, controls, is controlled by or is
under common control with, the proposed assignee or sublessee, is then an
occupant of any part of the Building, provided there is no comparable
space then available for leasing by the Landlord;
(e) The proposed assignee or sublessee is not a person with
whom Landlord is currently negotiating to lease space in the Building;
(f) The proposed sublease shall be in form reasonably
satisfactory to Landlord and shall comply with the provisions of this
Article;
(g) At any one time there shall not be more than three (3)
subtenants (including Landlord or its designee) on any one (1) floor of
the Demised Premises;
(h) Tenant shall reimburse Landlord on demand for any
reasonable out of pocket costs that may be incurred by Landlord in
connection with said assignment or sublease, including, without
limitation, the reasonable costs incurred in making investigations as to
the acceptability of the proposed assignee or subtenant, and reasonable
legal costs incurred in connection with the granting of any requested
consent, provided such costs shall not exceed $5,000 with respect to any
one transaction;
(i) Tenant shall not have (i) advertised the availability of
the Demised Premises by Building name or address without prior notice to
Landlord, or (ii) listed the Demised Premises at a rental rate less than
the minimum rent or additional rent at which Landlord is then offering to
lease other comparable space in the Building for a comparable term; and
(j) The proposed subtenant or assignee shall not be entitled,
directly or indirectly, to diplomatic or sovereign immunity and shall be
subject to the service of process in and the jurisdiction of the courts of
New York State.
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Each subletting pursuant to this Article shall be subject to all of
the covenants, agreements, terms, provisions and conditions contained in this
Lease. Notwithstanding any such subletting to a subtenant and/or acceptance of
rent or additional rent by Landlord from any subtenant, Tenant shall and will
remain fully liable for the payment of the minimum rent and additional rent due
and to become due hereunder and for the performance of all the covenants,
agreements, terms, provisions and conditions contained in this Lease on the part
of Tenant to be performed and all acts and omissions of any licensee or
subtenant or anyone claiming under or through any subtenant which shall be in
violation of any of the obligations of this Lease, and any such violation shall
be deemed to be a violation by Tenant. Tenant further agrees that
notwithstanding any such subletting, no other and further subletting of the
Demised Premises by Tenant or any person claiming through or under Tenant shall
or will be made except upon compliance with and subject to the provisions of
this Article. If Landlord reasonably shall decline to give its consent to any
proposed assignment or sublease, or if Landlord shall exercise its option under
Section 11.02, Tenant shall indemnify, defend and hold harmless Landlord against
and from any and all loss, liability, damages, costs and expenses (including
reasonable counsel fees) resulting from any claims that may be made against
Landlord by the proposed assignee or sublessee or by any brokers or other
persons claiming a commission or similar compensation in connection with the
proposed assignment or sublease.
Section 11.06. In the event that (a) Landlord fails to exercise its
options under Section 11.02 and consents to a proposed assignment or sublease,
and (b) Tenant fails to execute and deliver the assignment or sublease to which
Landlord consented within ninety (90) days after the giving of such consent,
then, Tenant shall again comply with all of the provisions and conditions of
Section 11.02 before assigning this Lease or subletting all or part of the
Demised Premises. Notwithstanding the foregoing, if Landlord fails to respond to
Tenant's request for Landlord's consent a proposed assignment or sublease within
fifteen (15) days after receipt of such request together with all required
documentation, Landlord shall be deemed to have consented to such request.
Section 11.07. With respect to each and every sublease or subletting
authorized by Landlord under the provisions of this Lease, it is further agreed:
(a) No subletting shall be for a term ending later than one
day prior to the expiration date of this Lease;
(b) No sublease shall be valid, and no subtenant shall take
possession of the Demised Premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord;
(c) Each sublease shall provide that it is subject and
subordinate to this Lease and to the matters to which this Lease is or
shall be subordinate, and that in the event of termination, re-entry or
dispossess by Landlord under this Lease Landlord may, at its option, take
over all of the
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right, title and interest of Tenant, as sublessor, under such sublease,
and such subtenant shall, at Landlord's option, attorn to Landlord
pursuant to the then executory provisions of such sublease, except that
Landlord shall not (i) be liable for any previous act or omission of
Tenant under such sublease, (ii) be subject to any offset, not expressly
provided in such sublease, which thereto accrued to such subtenant against
Tenant, or (iii) be bound by any previous modification of such sublease or
by any previous prepayment of more than one month's rent.
Section 11.08. If Landlord gives its consent to any assignment of
this Lease or to any sublease, Tenant shall, in consideration therefor, pay to
Landlord, as additional rent:
(a) in the case of an assignment of this Lease or an
assignment by any sublessee of its interest in a sublease, an amount equal
to one-half of all sums and other considerations paid to Tenant from the
assignee for such assignment or paid to Tenant by any sublessee or other
person claiming through or under Tenant for such assignment (including,
but not limited to sums paid for the sale of Tenant's or sublessee's
fixtures or leasehold improvements, less, in case of a sale thereof, the
then net unamortized or undepreciated cost thereof determined on the basis
of Tenant's or sublessee's federal income tax returns). The sums payable
to Landlord under this Section 11.08(a) shall be paid to Landlord as and
when paid by such assignee to Tenant; and
(b) in the case of a sublease, an amount equal to one-half of
the rents and charges and other consideration payable under the sublease
to Tenant by the subtenant or paid to Tenant by any such sublessee or
other person claiming through or under Tenant in connection with such
subletting which is in excess of the minimum rent and escalation rent
under Article 22 accruing during the term of the sublease in respect of
the subleased space (at the rate per square foot payable by Tenant
hereunder or such sublessee) pursuant to the terms of this Lease
(including, but not limited to, sums paid for the sale or rental of
Tenant's fixtures or leasehold improvements, less, in the case of the sale
thereof, the then net unamortized or undepreciated cost thereof determined
on the basis of Tenant's or sublessee's federal income tax returns). The
sums payable to Landlord under this Section 11.08(b) shall be paid to
Landlord as and when paid by such subtenant to Tenant.
(c) For the purposes of computing the sums payable by Tenant
to Landlord under subparagraphs (a) and (b) hereof, there shall be
excluded from the consideration payable to Tenant by any assignee or
sublessee any transfer taxes, rent concession, reasonable attorneys' fees,
reasonable brokerage commissions, advertising costs and fix-up costs paid
by
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Tenant with respect to such assignment or subletting, but only to the
extent any such sums are allocable to the period of this Lease (in the
case of any assignment), or the term of any sublease.
Section 11.09. If Tenant or any subtenant is a corporation,
partnership, limited liability company or other entity, the provisions of
Section 11.01 shall apply to a transfer (by one or more transfers) of a majority
of the stock, partnership, membership or other ownership interests of Tenant or
such subtenant, as the case may be, as if such transfer of a majority of the
stock, partnership, membership or other ownership interests of Tenant or such
subtenant were an assignment of this Lease; but said provisions and the
provisions of Sections 11.02 and 11.09 shall not apply to transactions with a
corporation, partnership, limited liability company or other entity into or with
which Tenant or such subtenant is merged or consolidated or to which
substantially all of Tenant's or such subtenant's assets, stock, partnership,
membership or other ownership interests are sold or transferred or to any
corporation, partnership, limited liability company or other entity which
controls or is controlled by Tenant or such subtenant or is under common control
with Tenant or such subtenant, provided that in any of such events (i) the
successor to Tenant or such subtenant has a net worth computed in accordance
with generally accepted accounting principles at least equal to the net worth of
Tenant herein named on September 30, 1999 or the net worth of such subtenant on
the date of such sublease, and (ii) proof satisfactory to Landlord of such net
worth shall have been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction. Notwithstanding the foregoing, without
Landlord's consent, but subject to the provisions of the last paragraph of
Section 11.05 (except the last two sentences thereof) and Section 11.07, Tenant
may sublet all or any part of the Demised Premises, and subject to the
provisions of Section 11.10 may assign this Lease, to a wholly-owned subsidiary
or an affiliate controlled or under common control with Tenant, provided notice
thereof and a duly executed counterpart of any such sublease or assignment, in
form reasonably satisfactory to Landlord together with an assumption of this
Lease by the assignee in form reasonably satisfactory to Landlord, is delivered
to Landlord at least ten (10) days prior to the effective date of such sublease
or assignment, as the case may be. Tenant, without Landlord's consent, may also
allow a portion of the Demised Premises to be occupied by a wholly owned
subsidiary of or an affiliate controlled or under common control with Tenant,
provided such occupancy shall not create any landlord or tenant relationship or
privity between Landlord and such occupant, such occupant shall have no rights
under this Lease and Tenant shall give Landlord at least ten (10) days prior
written notice of such proposed occupancy.
Section 11.10. Any assignment or transfer, whether made with
Landlord's consent pursuant to Section 11.05 or without Landlord's consent
pursuant to Section 11.09 shall be made only if, and shall not be effective
until, the assignee shall execute, acknowledge and deliver to Landlord an
agreement in form and substance reasonably satisfactory to Landlord whereby the
assignee shall assume the obligations of this Lease on the part of Tenant to be
performed or observed and whereby the assignee shall agree that the provisions
in this Article 11 shall, notwithstanding such assignment or transfer, continue
to be binding upon it in respect of all future assignments and transfers. The
original named Tenant covenants that,
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notwithstanding any assignment or transfer, whether or not in violation of the
provisions of this Lease, and notwithstanding the acceptance of minimum rent
and/or additional rent by Landlord from an assignee, transferee, or any other
party, the original named Tenant shall remain fully liable for the payment of
the minimum rent and additional rent and for the other obligations of this Lease
on the part of Tenant to be performed or observed, unless otherwise agreed to by
Landlord in writing.
Section 11.11. The joint and several liability of Tenant and any
immediate or remote successor in interest of Tenant and the due performance of
the obligations of this Lease on Tenant's part to be performed or observed shall
not be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord extending the time of, or modifying any of the
obligations of, this Lease, or by any waiver or failure of Landlord to enforce
any of the obligations of this Lease, unless such agreement is made with a party
other than such Tenant and increases the liability or obligation of Tenant under
this Lease.
Section 11.12. The listing of any name other than that of Tenant,
whether on the doors of the Demised Premises, or the Building directory, if any,
or otherwise, shall not operate to vest any right or interest in this Lease or
in the Demised Premises, nor shall it be deemed to be the consent of Landlord to
any assignment or transfer of this Lease, to any sublease of the Demised
Premises, or to the use or occupancy thereof by others. Tenant shall be entitled
initially, without charge, to 200 listings on the Building lobby directory, or
its prorata share of listings on an electronic Building directory. Landlord has
a signage plan for the display of the names of certain tenants in the Building
which will be maintained at a location near the concierge desk in the Building
lobby. Tenant may participate in said plan and display its name thereon, which
shall conform with Landlord's design criteria for similar displays by other
tenants in the Building. Tenant, at its cost, shall pay for the sign and
installation of same and shall keep its sign clean and in good condition and
repair.
Section 11.13. Notwithstanding anything in this Lease to the
contrary, subject to Landlord's consent which shall not be unreasonably withheld
as provided in Section 11.05, any subtenants of Tenant subleasing one full floor
or more of space in the Building shall be entitled to further sublease said
premises as if said subtenant were Tenant under this Lease.
ARTICLE 12
LIABILITY OF LANDLORD AND INDEMNITY BY TENANT
Section 12.01. Tenant shall indemnify Landlord against and save
Landlord harmless from any liability to and claim by or on behalf of any person,
firm, governmental authority, corporation or entity for personal injury, death
or property damage, arising:
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(a) from the use by Tenant of the Demised Premises, or from
any work whatsoever done or omitted to be done by Tenant, its employees,
agents, contractors, customers, invitees or visitors, or from any accident
thereat; and
(b) from any breach or default by Tenant of and under any of
the terms, covenants and conditions of this Lease on Tenant's part to be
performed.
Tenant also shall indemnify Landlord against and save Landlord
harmless from all costs, reasonable counsel fees, expenses and penalties
incurred by Landlord in connection with any such liability or claim other than
such liability or claim incurred as a result of Landlord's negligence or willful
misconduct.
If any action or proceeding shall be brought against Landlord in
connection with any such liability or claim, Tenant, on notice from Landlord,
shall defend such action or proceeding, at Tenant's expense, by counsel
reasonably satisfactory to Landlord, or by the attorney for Tenant's insurance
carrier whose insurance policy covers the liability or claim, if any.
Section 12.02. Landlord shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the Building, nor for
the loss of or damage to any property of Tenant by theft or otherwise, except if
due to the negligence or willful act of Landlord, its agents, contractors or
employees. Landlord and its agents shall not be liable for any injury or damage
to persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water, rain or snow or leaks from any part of the Building or
from the pipes, appliances or plumbing works or from the roof, street or
sub-surface or from any other place or by dampness or by any other cause of
whatsoever nature, except if due to the negligence or willful act of Landlord,
its agents, contractors or employees; nor shall Landlord be liable for any such
damage caused by other tenants or persons in the Building or caused by
operations in construction of any public or quasi-public work, unless Landlord
knew, or reasonably should have known that such damage would occur and Landlord
did nothing to prevent it, provided Landlord was reasonably capable of
preventing same; nor shall Landlord be liable for any latent defect in the
Demised Premises or in the Building, unless Landlord willfully concealed same.
If, at any time any windows of the Demised Premises are permanently closed,
darkened or bricked up by reason of the requirements of law or temporarily
closed or darkened by reason of repairs, alterations or maintenance by Landlord,
Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor nor abatement of rent
nor shall the same release Tenant from its obligations hereunder nor constitute
an eviction.
Tenant shall reimburse and compensate Landlord, as additional rent,
within ten (10) days after rendition of a statement, for all expenditures made,
and for all losses, liabilities,
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claims, damages, fines, penalties and expenses incurred, by Landlord arising
from any default by Tenant under this Lease.
Tenant shall give reasonably prompt notice to Landlord, based upon
the circumstances, upon its discovery of accidents in the Demised Premises.
Section 12.03.(a) If in this Lease it is provided that Landlord's
consent or approval as to any matter will not be unreasonably withheld or
delayed, and it is established by a court or body having final jurisdiction
thereover that Landlord has been unreasonable, the only effect of such finding
shall be that Landlord shall be deemed to have given its consent or approval;
but Landlord shall not be liable to Tenant in any respect for money damages by
reason of withholding its consent.
(b) In the event of any dispute under Sections 5.01 or 11.05
relating to the reasonableness of the withholding of a consent or approval by
Landlord, Tenant shall have the right to submit such dispute to binding
arbitration under the Expedited Procedures provisions ( in the current edition
as amended and effective on January 1, 1999) of the Commercial Dispute
Resolution Procedures of the American Arbitration Association ("AAA"). The sole
issue to be submitted to the arbitrator, which shall be included as part of his
oath, shall be the reasonableness of Landlord's determination to withhold
consent or approval under the provisions of this Lease. The decision of the
arbitrator shall be final and conclusive and the arbitrator shall not have any
right or power to consider, determine or resolve any other issue or dispute
between the parties, or to alter, modify or amend any of the provisions of this
Lease. The part subject to an adverse arbitral determination shall be
responsible for all reasonable costs and fees of such arbitration.
ARTICLE 13
MOVING OF HEAVY EQUIPMENT
Tenant shall not move any safe, heavy equipment or bulky matter in
or out of the Building without Landlord's written consent, which shall not be
unreasonably withheld or delayed. If any Governmental Requirement requires that
the movement of such items requires special handling, Tenant agrees to employ
only persons holding a Master Rigger's License to do said work and all such work
shall be done in full compliance with the Administrative Code of the City of New
York and other municipal requirements. All such movements shall be made during
hours which will least interfere with the normal operations of the Building, and
all damage caused by such movement shall be promptly repaired by Tenant at
Tenant's expense.
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ARTICLE 14
CONDEMNATION
Section 14.01. In the event that the whole of the Demised Premises
or access thereto shall be permanently condemned or taken in any manner for any
public or quasi-public use, this Lease and the term and estate hereby granted
shall forthwith cease and terminate as of the date of vesting of title. In the
event that only a part of the Demised Premises shall be so condemned or taken,
then, effective as of the date of vesting of title, the minimum rent and
additional rent hereunder for such part shall be equitably abated based on the
number of rentable square feet so taken and this Lease shall continue as to such
part not so taken. In the event that only a part of the Building shall be so
condemned or taken, then (a) if substantial structural alteration or
reconstruction of the Building shall, in the opinion of Landlord, be necessary
or appropriate as a result of such condemnation or taking (whether or not the
Demised Premises be affected), Landlord may, at its option, terminate this Lease
and the term and estate hereby granted as of the date of such vesting of title
by notifying Tenant in writing of such termination within one-hundred eighty
(180) days following the date on which Landlord shall have received notice of
the vesting of title, or (b) if Landlord does not elect to terminate this Lease,
as aforesaid, this Lease shall be and remain unaffected by such condemnation or
taking, except that the minimum rent and additional rent shall be abated to the
extent, if any, hereinbefore provided. In the event that only a part of the
Demised Premises shall be so condemned or taken and this Lease and the term and
estate hereby granted are not terminated as hereinbefore provided, Landlord will
restore with reasonable diligence the remaining structural portions of the
Demised Premises as nearly as practicable to the same condition as it was in
prior to such condemnation or taking.
Section 14.02. In the event of termination in any of the cases
hereinabove provided, this Lease and the term and estate hereby granted shall
expire as of the date of such termination with the same effect as if that were
the Expiration Date and all rent hereunder shall be apportioned as of such date.
Section 14.03. In the event of any condemnation or taking
hereinabove mentioned of all or a part of the Building, Landlord shall be
entitled to receive the entire award in the condemnation proceeding, including
any award made for the value of the estate vested by this Lease in Tenant, and
Tenant hereby expressly assigns to Landlord any and all right, title and
interest of Tenant now or hereafter arising in or to any such award or any part
thereof, and Tenant shall be entitled to receive no part of such award.
Notwithstanding the foregoing, Tenant may make a separate claim for Tenant's
moveable trade fixtures and moving expenses, provided the same shall not affect
or reduce Landlord's award.
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ARTICLE 15
ENTRY, RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING
Section 15.01. Tenant shall permit Landlord, on prior reasonable
notice (except no notice in an emergency) to erect, use and maintain pipes and
conduits concealed in and through the walls, within the ceiling or below the
floors of the Demised Premises and shall not reduce the usable area of the
Demised Premises. Landlord, or its agents or designee shall have the right, on
at least twenty-four (24) hours prior written notice (except no notice in an
emergency), to enter the Demised Premises for the purpose of making such repairs
or alterations as Landlord shall desire, shall be required or shall have the
right to make under the provisions of this Lease; and shall also have the right
to enter the Demised Premises for the purpose of inspecting them or exhibiting
them to prospective purchasers or lessees of the Building or to prospective
mortgagees or to prospective assignees of any such mortgagees. Landlord shall,
during the progress of any work in the Demised Premises, be allowed to take all
material into and upon the Demised Premises that may be required for the repairs
or alterations above mentioned without the same constituting an eviction of
Tenant in whole or in part and the rent reserved shall in no wise abate, except
as otherwise provided in this Lease, while said repairs or alterations are being
made. However, Landlord shall use reasonable efforts to perform such repairs or
alterations in a manner to minimize its interference with the normal conduct of
Tenant's business, provided Landlord shall not be required to employ overtime or
premium labor. Landlord shall, at its expense, (i) restore any damage to the
Demised Premises occurring during any such entry into the Demised Premises for
such purpose, (ii) replace any personalty of Tenant, its employees and officers,
which is damaged, lost or misappropriated during any such entry, and (iii)
maintain Landlord's work area in a neat and clean condition and restore the
Demised Premises to the condition which existed prior to any such entry at the
conclusion of such work.
Section 15.02. During the eighteen (18) months prior to the
expiration of the term of this Lease, as the same may be extended, Landlord may
exhibit the Demised Premises to prospective tenants.
Section 15.03. Landlord shall have the right at any time without
thereby creating an actual or constructive eviction or incurring any liability
to Tenant therefor, to change the arrangement or location of such of the
following as are not contained within the Demised Premises: entrances,
passageways, doors and doorways, corridors, elevators, stairs, toilets, and
other like public service portions of the Building, provided the same does not
unreasonably interfere with Tenant's access to or use of the Demised Premises.
All parts (except surfaces facing the interior of the Demised Premises) of all
walls, windows and doors bounding the Demised Premises (including exterior
Building walls, exterior core corridor walls, exterior doors and entrances), all
space in or adjacent to the Demised Premises used for
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shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms, heating,
air cooling, plumbing and other mechanical facilities, service closets and other
Building facilities are not part of the Demised Premises and Landlord shall have
the use thereof, as well as access thereto through the Demised Premises for the
purposes of operation, maintenance, alteration and repair.
Section 15.04. Landlord shall have the right at any time to name the
Building as it desires and to change any and all such names at any time
thereafter.
ARTICLE 16
CONDITIONAL LIMITATIONS, ETC.
Section 16.01. If at any time during the term of this Lease:
(a) Tenant or any guarantor of this Lese shall file a petition
in bankruptcy or insolvency or for reorganization or arrangement or for
the appointment of a receiver of all or a portion of Tenant's or such
guarantor's property, or
(b) Any petition of the kind referred to in subdivision (a) of
this Section shall be filed against Tenant and such guarantor and such
petition shall not be vacated, discharged or withdrawn within ninety (90)
days of the filing thereof, or
(c) Tenant or such guarantor shall be adjudicated a bankrupt
by any court, or
(d) Tenant or such guarantor shall make an assignment for the
benefit of creditors, or
(e) a permanent receiver shall be appointed for the property
of Tenant or such guarantor by order of a court of competent jurisdiction
by reason of the insolvency of Tenant or such guarantor (except where such
receiver shall be appointed in an involuntary proceeding, if he shall not
be withdrawn within ninety (90) days after the date of his appointment),
then Landlord, at Landlord's option, may terminate this Lease on five (5) days
notice to Tenant, and upon such termination, Tenant shall quit and surrender the
Demised Premises to Landlord.
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Section 16.02 (a) If Tenant assumes this Lease and proposes to
assign the same pursuant to the provisions of the Bankruptcy Code, 11
U.S.C. ss. 101 et seq. (the "Bankruptcy Code") to any person or entity who
shall have made a bona fide offer to accept an assignment of this Lease on
terms acceptable to Tenant, then notice of such proposed assignment,
setting forth (i) the name and address of such person, (ii) all of the
terms and conditions of such offer, and (iii) the adequate assurance to be
provided Landlord to assure such person's future performance under the
Lease, including, without limitation, the assurance referred to in section
365(b)(1) of the Bankruptcy Code, shall be given to Landlord by Tenant not
later than twenty (20) days after receipt by Tenant but in no event later
than ten (10) days prior to the date that Tenant shall make application to
a court of competent jurisdiction for authority and approval to enter into
such assignment and assumption, and Landlord shall thereupon have the
prior right and option, to be exercised by notice to Tenant given at any
time prior to the effective date of such proposed assignment, to accept an
assignment of this Lease upon the same terms and conditions and for the
same consideration, if any, as the bona fide offer made by such person,
less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.
(b) If this Lease is assigned to any person or entity pursuant
to the provisions of the Bankruptcy Code, any and all monies or other
considerations payable or otherwise delivered in connection with such
assignment shall be paid or delivered to Landlord, shall be and remain the
exclusive property of Landlord and shall not constitute property of Tenant
or of the estate of Tenant within the meaning of the Bankruptcy Code. Any
and all monies or other considerations constituting Landlord's Property
under the preceding sentence not paid or delivered to Landlord shall be
held in trust for the benefit of Landlord and shall be promptly paid to
Landlord.
(c) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code, shall be deemed without
further act or deed to have assumed all of the obligations arising under
this Lease on and after the date of such assignment. Any such assignee
shall upon demand execute and deliver to Landlord an instrument confirming
such assumption.
(d) Nothing contained in this Section shall, in any way,
constitute a waiver of the provisions of this Lease relating to
assignment. Tenant shall not, by virtue of this Section, have any further
rights relating to assignment other than those granted in the Bankruptcy
Code.
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(e) Notwithstanding anything in this Lease to the contrary,
all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated as rent, shall constitute rent
for the purposes of Section 502(b)(6) of the Bankruptcy Code.
(f) The term "Tenant" as used in this Section includes any
trustee, debtor in possession, receiver, custodian or other similar
officer.
Section 16.03. If this Lease shall terminate pursuant to the
provisions of Section 16.01:
(a) Landlord shall be entitled to recover from Tenant arrears
in minimum rent and additional rent and, in addition thereto as liquidated
damages, an amount equal to the difference between the minimum rent and
additional rent for the unexpired portion of the term of this Lease which
had been in force immediately prior to the termination effected under
Section 16.01 of this Article and the fair and the reasonable rental value
of the Demised Premises, on the date of termination, for the same period,
both discounted at the rate of eight (8%) percent per annum to the date of
termination; or
(b) Landlord shall be entitled to recover from Tenant arrears
in minimum rent and additional rent and, in addition thereto as liquidated
damages, an amount equal to the maximum allowed by statute or rule of law
in effect at the time when and governing the proceedings in which such
damages are to be proved, whether or not such amount be greater or less
than the amount referred to in subdivision (a) of this Section.
Section 16.04. (a) If Tenant shall fail to make any payment of any
minimum rent or additional rent when the same becomes due and payable, or
if the Demised Premises are abandoned by Tenant, or if Tenant shall fail
to cancel or discharge any mechanic's lien or other lien within the time
period as provided in Section 17.02, and if any of the foregoing defaults
shall continue for a period of seven (7) days after notice thereof by
Landlord, except such period shall be thirty (30) days after notice with
respect to any initial change in the billing of a Tax Escalation Payment
under Section 22.01(b)(i) or any initial change in the billing of an
increase in the Wage Rate under Section 22.02(b), or
(b) If Tenant shall be in default in the performance of any of
the other terms, covenants and conditions of this Lease and such default
shall not have been remedied within thirty (30) days after notice by
Landlord to Tenant specifying such default and requiring it to be
remedied; or where
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such default reasonably cannot be remedied within such period of thirty
(30) days, if Tenant shall not have commenced the remedying thereof within
such period of time and shall not be proceeding with due diligence to
remedy it.
then Landlord, at Landlord's election, may terminate this Lease on five (5)
days' notice to Tenant, and upon such termination Tenant shall quit and
surrender the Demised Premises to Landlord.
Section 16.05. If this Lease shall terminate as provided in this
Article or if Tenant shall be in default in the payment of minimum rent or
additional rent when the same become due and payable, and such default shall
continue for a period of seven (7) days after notice by Landlord to Tenant,
except such period shall be thirty (30) days after notice with respect to any
initial change in the billing of a Tax Escalation Payment under Section
22.01(b)(i) or any initial change in the billing of an increase in the Wage Rate
under Section 22.02(b).
(a) Landlord may re-enter and resume possession of the Demised
Premises and remove all persons and property therefrom either by summary
dispossess proceedings or by a suitable action or proceeding, at law or in
equity, or otherwise, without being liable for any damages therefor, and
(b) Landlord may re-let the whole or any part of the Demised
Premises for a period equal to, greater or less than the remainder of the
then term of this Lease, at such rental and upon such terms and conditions
as Landlord shall deem reasonable to any tenant it may deem suitable and
for any use and purpose it may deem appropriate. Landlord shall not be
liable in any respect for failure to re-let the Demised Premises or, in
the event of such re-letting, for failure to collect the rent thereunder
and any sums received by Landlord on a re-letting in excess of the rent
reserved in this Lease shall belong to Landlord.
Section 16.06. If this Lease shall terminate as provided in this
Article or by summary proceedings (except as to any termination under Section
16.01), Landlord shall be entitled to recover from Tenant as damages, in
addition to arrears in minimum rent and additional rent,
(a) an amount equal to (i) all expenses incurred by Landlord
in recovering possession of the Demised Premises and in connection with
the re-letting of the Demised Premises, including, without limitation, the
cost of repairing, renovating or remodeling the Demised Premises, (ii) the
cost of performing any work required to be done by Tenant under this
Lease, (iii) the cost of placing the Demised Premises in the same
condition as that in which Tenant is required to surrender them to
Landlord under this Lease, and (iv) all
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brokers' commissions and legal fees incurred by Landlord in re-letting the
Demised Premises, which amounts set forth in this subdivision (a) shall be
due and payable by Tenant to Landlord at such time or times as they shall
have been incurred; and
(b) an amount equal to the deficiency between the minimum rent
and additional rent which would have become due and payable had this Lease
not terminated and the net amount, if any, of rent collected by Landlord
on re-letting the Demised Premises. The amounts specified in this
subdivision shall be due and payable by Tenant on the several days on
which such minimum rent and additional rent would have become due and
payable had this Lease not terminated. Tenant consents that Landlord shall
be entitled to institute separate suits or actions or proceedings for the
recovery of such amount or amounts, and Tenant hereby waives the right to
enforce or assert the rule against splitting a cause of action as a
defense thereto.
Landlord, at its election, which shall be exercised by the
service of a notice on Tenant in accordance with Article 31 of this Lease, at
any time after such termination of this Lease, may collect from Tenant and
Tenant shall pay, in lieu of the sums becoming due, under the provisions of
subdivision (b) of this Section, an amount equal to the difference between the
minimum rent and additional rent which would have become due and payable had
this Lease not terminated (from the date of the service of such notice to the
end of the term of this Lease which had been in force immediately prior to any
termination effected under this Article) and the then fair and reasonable rental
value of the Demised Premises for the same period, both discounted to the date
of the service of such notice at the rate of eight (8%) percent per annum.
Section 16.07. Tenant, for itself and for all persons claiming
through or under it, to the extent permitted by law hereby waives any and all
rights which are or may be conferred upon Tenant by any present or future law to
redeem the Demised Premises after a warrant to dispossess shall have been issued
or after judgment in an action of ejectment shall have been made and entered.
Section 16.08. The words "re-enter" and "re-entry", as used in this
Article, are not restricted to their technical legal meanings.
Section 16.09. Landlord shall not be required to give any notice of
its intention to re-enter, except as otherwise provided in this Lease, or as
required by law.
Section 16.10. In any action or proceeding brought by Landlord
against Tenant, predicated on a default in the payment of minimum rent or
additional rent, Tenant shall not have the right to and shall not interpose any
set-off or counterclaim of any kind whatsoever, other than a claim which would
be legally barred for failure to raise as a counterclaim in such
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action or proceeding. If Tenant has any claim, Tenant shall be entitled only to
bring an independent action therefor; and if such independent action is brought
by Tenant, Tenant shall not be entitled to and shall not consolidate it with any
pending action or proceeding brought by Landlord against Tenant for a default in
the payment of minimum rent or additional rent.
ARTICLE 17
MECHANIC'S LIENS
Section 17.01. Subject to and notwithstanding Landlord's consent as
required under this Lease, if Tenant shall cause any changes, alterations,
additions, improvements, installations or repairs to be made to or at the
Demised Premises or shall cause any labor to be performed or material to be
furnished in connection therewith, neither Landlord nor the Demised Premises,
under any circumstances, shall be liable for the payment of any expense incurred
or for the value of any work done or material furnished, and all such changes,
alterations, additions, improvements, installations and repairs and labor and
material shall be made, furnished and performed upon Tenant's credit alone and
at Tenant's expense, and Tenant shall be solely and wholly responsible to
contractors, laborers, and materialmen furnishing and performing such labor and
material. Nothing contained in this Lease shall be deemed or construed in any
way as constituting the consent or request of Landlord, express or implied, to
any contractor, laborer or materialman to furnish or perform any such labor or
material.
Section 17.02. If, because of any act or omission (or alleged act or
omission) of Tenant any mechanic's or other lien, charge or order for the
payment of money shall be filed against the Demised Premises or the Building or
Landlord's estate as tenant under any ground or underlying lease (whether or not
such lien, charge or order is valid or enforceable as such), for work claimed to
have been for, or materials furnished to, Tenant, Tenant, at Tenant's expense,
shall cause it to be cancelled or discharged of record by bonding or otherwise
within thirty (30) days after such filing, and Tenant shall indemnify Landlord
against and save Landlord harmless from and shall pay all reasonable costs,
expenses, losses, fines and penalties, including, without limitation, reasonable
attorneys' fees, resulting therefrom.
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ARTICLE 18
LANDLORD'S AND TENANT'S RIGHT TO PERFORM OBLIGATIONS
Section 18.01. If Tenant shall default in the performance of any of
the terms or covenants and conditions of this Lease, Landlord, without being
under any obligation to do so and without hereby waiving such default, may
remedy such default for the account and at the expense of Tenant. Any payment
made or expense incurred by Landlord for such purpose (including, but not
limited to, reasonable attorneys' fees) with interest at the legal rate, shall
be deemed to be additional rent hereunder and shall be paid by Tenant to
Landlord on demand, or at Landlord's election, added to any subsequent
installment or installments of minimum rent.
Section 18.02. If Landlord shall fail to perform any repair or
maintenance obligation required to be performed by Landlord in the Demised
Premises pursuant to the provisions of this Lease, then Tenant shall give
Landlord written notice (the "Repair Notice") stating the repair or maintenance
obligation which affects the Demised Premises. If Landlord fails to remedy the
condition set forth in the Repair Notice within thirty (30) days after such
Repair Notice is given, then, to the extent such repair or maintenance may be
performed by Tenant solely within the Demised Premises, Tenant may perform the
same. Landlord shall reimburse Tenant for the reasonable actual costs and
expenses of performing the same, within twenty (20) days after receipt from
Tenant of paid receipts therefor, together with waivers of liens with respect
thereto.
ARTICLE 19
COVENANT OF QUIET ENJOYMENT
Landlord covenants that upon Tenant paying the minimum rent and
additional rent and observing and performing all the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the Demised Premises, subject nevertheless to
the terms and conditions of this Lease.,
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ARTICLE 20
EXCAVATION
In the event that construction is to be commenced or an excavation
is made or authorized for building or other purposes upon land adjacent to the
Building, Tenant shall, if necessary, afford to the person or persons causing or
authorized to commence construction or cause such excavation or to engage in
such other purpose, license to enter upon the Demised Premises for the purpose
of doing such work as shall reasonably be necessary to protect or preserve the
Building, from injury or damage and to support the Building and any new
structure to be built by proper foundations, pinning and/or underpinning, or
otherwise.
ARTICLE 21
SERVICES AND EQUIPMENT
Section 21.01. Landlord shall, at its cost and expense:
(a) Provide operatorless passenger elevator service Mondays
through Fridays from 8:00 A.M. to 6:00 P.M., holidays excepted. A
passenger elevator will be available at all other times. A freight
elevator shall be available Mondays through Fridays, holidays excepted,
only from 8:00 to 6:00 P.M. The freight elevator shall be available on a
"first come, first served" basis during the said days and hours and on a
reservation "first come, first served" basis other than on said days and
hours at Landlord's customary charges therefor.
(b) Maintain and repair the Building standard heating,
ventilating and air conditioning system servicing the Demised Premises
(the "HVAC System") installed by Landlord, except for those repairs which
are the obligation of Tenant pursuant to Article 6 of this Lease. The HVAC
System will be operated by Landlord as and when required by law, or for
reasonably comfortable occupancy of the Demised Premises during the
applicable seasons, on Mondays through Fridays, holidays excepted, from
8:00 A.M. to 6:00 P.M.; provided that Tenant shall draw and close the
draperies or blinds for the windows of the Demised Premises whenever the
HVAC system is in operation and the position of the sun so requires and
shall, at all times, cooperate fully with Landlord and abide by all of the
Rules and Regulations which Landlord reasonably may prescribe for the
proper functioning of the
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HVAC System. Landlord agrees to operate the HVAC System servicing the
Demised Premises in accordance with their design criteria. Said system is
designated to be capable of manufacturing, within tolerances normal in
first-class office buildings, inside space conditions averaging 78 degrees
Fahrenheit dry bulbs and 50% relative humidity when outside conditions are
95 degrees Fahrenheit dry bulb and 75 degrees Fahrenheit wet bulb, and a
temperature of not lower than an average of 68 degrees Fahrenheit when
outside temperature is 50 degrees Fahrenheit or lower.Tenant expressly
acknowledges that some or all windows are or may be hermetically sealed
and will not open and Landlord makes no representation as to the
habitability of the Demised Premises at any time the HVAC System is not in
operation. Tenant hereby expressly waives any claims against Landlord
arising out of the cessation of operation of the HVAC System, or the
suitability of the Demised Premises when the same is not in operation,
whether due to normal scheduling or the reasons set forth in Section
21.03. Landlord will not be responsible for the failure of the HVAC System
if such failure results from the occupancy of the Demised Premises by more
than an average of one (1) person for each one hundred (100) square feet
in any separate room or area or if Tenant shall install and operate
machines, incandescent lighting and appliances the total connected
electrical load of which is in excess of six (6) watts per usable square
foot . If Tenant shall occupy the Demised Premises at an occupancy rate of
greater than that for which the HVAC System was designed, or if the total
connected electrical load is in excess six (6) watts per usable square
foot, or if Tenant's partitions shall be arranged in such a way as to
interfere with the normal operation of the HVAC System, Landlord may elect
to make changes to the HVAC System or the ducts through which it operates
required by reason thereof, and the cost thereof shall be reimbursed by
Tenant to Landlord, as additional rent, within twenty (20) days after
presentation of a bill therefor. Subject to the conditions set forth in
Section 15.01, Landlord, throughout the term, shall have free access to
all mechanical installations of Landlord, including but not limited to
air-cooling, fan, ventilating and machine rooms and electrical closets,
and Tenant shall not construct partitions or other obstructions that may
interfere with Landlord's free access thereto, or interfere with the
moving of Landlord's equipment to and from the enclosures containing said
installations. Neither Tenant nor any person or entity within Tenant's
control shall at any time enter the said enclosures or tamper with,
adjust, touch or otherwise in any manner affect said mechanical
installations, except as set forth herein with respect to the thermostatic
controls within the Demised Premises.
(c) Provide Building standard cleaning services in Tenant's
office space and public portions of the Building, except no services shall
be performed Saturdays, Sundays and holidays, in accordance with Schedule
"D" annexed hereto and made part hereof. If, however, any additional
cleaning of
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the Demised Premises is to be done by Tenant, it shall be done at Tenant's
sole expense, in a manner reasonably satisfactory to Landlord and no one
other than persons approved by Landlord shall be permitted to enter the
Demised Premises or the Building for such purpose. Tenant, at its own
cost, may utilize its own employees or outside contractors to perform
additional cleaning services in the Demised Premises, provided such
employees or outside contractors do not cause any labor disruption or
dispute or violate Landlord's union contracts affecting the Building.
However, such use of outside contractors shall be subject to the right of
Landlord to match the costs chargeable by such outside contractors, in
which event Landlord shall perform such services at such cost, to be paid
by Tenant within ten (10) days after being billed therefor. Tenant shall
pay to Landlord the cost of removal of any of Tenant's refuse and rubbish
from the Demised Premises and the Building (i) to the extent that the
same, in any one day, exceeds the average daily amount of refuse and
rubbish usually attendant upon the use of such Demised Premises as
offices, as described and included in Landlord's cleaning contract for the
Building or recommended by Landlord's cleaning contractor, and (ii)
related to or deriving from the preparation or consumption of food or
drink (other than individual meals for employees of Tenant). Bills for the
same shall be rendered by Landlord to Tenant at such time as Landlord may
elect and shall be due and payable as additional rent within ten (10) days
after the time rendered. Whenever there is evidence of the need therefor
caused by Tenant, Tenant, at Tenant's expense, shall cause the Demised
Premises to be exterminated to the satisfaction of Landlord and
additionally shall cause all portions of the Demised Premises used for the
storage, preparation, service or consumption of food or beverages to be
cleaned daily in a manner reasonably satisfactory to Landlord, and to be
treated against infestation by vermin, rodents or roaches, whenever there
is evidence of any infestation. Tenant shall not permit any person to
enter the Demised Premises or the Building for the purpose of providing
such extermination services, unless such persons have been approved by
Landlord.
(d) Furnish hot and cold water for lavatory and drinking
purposes. If Tenant requires, uses or consumes water for any other
purposes, Landlord may install a meter or meters or other means to measure
Tenant's water consumption, at Tenant's expense, and shall pay for the
maintenance of said meter equipment . Tenant shall pay to Landlord on
demand the cost of all water consumed as measured by said meter or meters
or as otherwise measured.
(e) If Tenant shall require and request any of the foregoing
services at times other than above provided, and if such request is made
at least eight (8) hours prior to the time when such additional services
are required, Landlord will provide them and Tenant shall pay to Landlord
promptly
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thereafter the charges therefor at the then Building standard rate charged
to other tenants in the Building.
Section 21.02. Holidays shall be deemed to mean all federal
holidays, New York State holidays and Building Service Employees Union Contract
holidays.
Section 21.03. Landlord reserves the right to temporarily interrupt,
curtail or suspend the services required to be furnished by Landlord under this
Lease when necessary by reason of accident, emergency, mechanical breakdown or
when required by any law, order or regulation of any Federal, State, County or
Municipal authority, or for any other cause beyond the control of Landlord.
Landlord shall use due diligence to complete all required repairs or other
necessary work as quickly as possible so that Tenant's inconvenience resulting
therefrom may be for as short a period of time as circumstances will reasonably
permit. Tenant shall not be entitled to nor shall Tenant make claim for any
diminution or abatement of minimum rent or additional rent or other
compensation, nor shall this Lease or any of the obligations of Tenant be
affected or reduced by reason of such interruption, curtailment, suspension,
work or inconvenience.
Section 21.04. Notwithstanding anything to the contrary contained in
this Lease, if through no fault of Landlord, Landlord shall fail to provide
elevator, heating, ventilating or air conditioning services, as provided in this
Lease (collectively, a Service "Interruption"), and such Service Interruption
shall materially impair the customary operation of Tenant's business in all or
any part of the Demised Premises (other than a de minimis part), and if (i) such
Service Interruption shall continue for a period in excess of thirty (30)
consecutive days following receipt by Landlord of notice from Tenant describing
such Service Interruption and (ii) such Service Interruption shall not have been
caused by an act or omission in violation of this Lease by or the negligence of
Tenant, or of Tenant agents, servants, employees or contractors (a Service
Interruption that satisfied all of the foregoing conditions being referred to
hereinafter as a "Material Interruption"), then Tenant shall be entitled to an
abatement of the minimum rent and escalation rent payable under Article 22 (such
abatement to be prorated if only a part of the Demised Premises shall be so
affected by such Material Interruption),which shall begin on the 31st
consecutive day of such Material Interruption and shall end upon the date such
Material Interruption has been terminated.
Section 21.05. If Tenant shall request Landlord to furnish any
services in addition to those hereinabove provided or perform any work not
required under this Lease, and Landlord agrees to furnish and/or perform the
same, Tenant shall pay to Landlord promptly thereafter the charges therefor,
which charges are deemed to be additional rent and payable as such. Provided
Tenant is not then in default hereunder, Landlord's charges for such services
shall not be greater than the amount charged to any other tenant.
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ARTICLE 22
ESCALATION
Section 22.01. Taxes. Tenant shall pay to Landlord, as additional
rent, tax escalation in accordance with this Section:
(a) Definitions: For the purpose of this Section, the
following definitions shall apply:
(i) The term "Tax Base Factor" shall mean the higher of
(i) the average of the real estate taxes for the Building Project
for the periods from July 1, 1999 to June 30, 2000, and from July 1,
2000 to June 30, 2001, or (ii) the real estate taxes for the
Building Project for the period from July 1, 1999 to June 30, 2000
(i.e., $6,144,670.80), as finally determined.
(ii) The term the "Building Project" shall mean the
parcel of Land described in Schedule B of this Lease and the
Building .
(iii) The term "Comparative Tax Year" shall mean the New
York City real estate tax year commencing on July 1, 2000 and each
subsequent New York City real estate tax year. If the present use of
July 1-June 30 New York City real estate tax year shall hereafter be
changed, then such changed tax year shall be used with appropriate
adjustment for the transition.
(iv) The term "Real Estate Taxes" shall mean the total
of all taxes and special or other assessments and charges of any
Special Business Improvement District levied, assessed or imposed at
any time by any governmental authority: (a) upon or against the
Building Project, and (b) in connection with the receipt of income
or rents from the Building Project to the extent that same shall be
in lieu of all or a portion of any of the aforesaid taxes or
assessments, or additions or increases thereof. Income, franchise,
transfer, inheritance, corporate, mortgage recording or capital
stock taxes of Landlord, or penalties or interest thereon, shall be
excluded from "Real Estate Taxes" for the purposes hereof. If, due
to a future
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change in the method of taxation or in the taxing authority, or for
any other reason, a franchise, income, transit, profit or other tax
or governmental imposition, however designated, shall be levied
against Landlord in substitution in whole or in part for the Real
Estate Taxes, or in lieu of or addition to or increase of Real
Estate Taxes, then such franchise, income, transit, profit or other
tax or governmental imposition shall be included within "Real Estate
Taxes." Tenant acknowledges that the Tax Escalation Payment (as
hereinafter defined) constitutes a method by which Landlord is
seeking to compensate for increases in expenses and that the Tax
Escalation Payment shall be calculated and paid by Tenant to
Landlord whether or not Real Estate Taxes have then been paid by
Landlord.
(v) The term "the Percentage" for purposes of computing
tax escalation, shall mean 10.7%.
(b) (i) In the event that the Real Estate Taxes payable for
any Comparative Tax Year shall exceed the Tax Base Factor, Tenant
shall pay to Landlord, as additional rent for such Comparative Tax
Year, an amount for tax escalation ("Tax Escalation Payment")equal
to the Percentage of the excess. Before or after the start of each
Comparative Tax Year, Landlord shall furnish to Tenant a statement
of the Tax Escalation Payment payable for such Comparative Tax Year,
together with a copy of the tax bill (together with a copy of the
tax bills for the Tax Base Factor). Tenant shall make its aforesaid
Tax Escalation Payment to Landlord, in installments in the same
manner and not later than thirty (30) days prior to the last date
that Real Estate Taxes are payable by Landlord to the governmental
authority. If a statement is furnished to Tenant after the
commencement of the Comparative Tax Year in respect of which such
statement is rendered, Tenant shall, within ten (10) days
thereafter, pay to Landlord an amount equal to those installments of
the total Tax Escalation Payment then due. If, during the term of
this Lease, Real Estate Taxes are required to be paid, in full or in
monthly or other installments, on any other date or dates than as
presently required, or if Landlord shall be required to make monthly
deposits of Real Estate Taxes to the holder of any mortgage, then
Tenant's Tax Escalation Payment(s) shall be correspondingly adjusted
so that the same are due to Landlord in corresponding installments
not later than thirty (30) days
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prior to the last date on which the applicable installment of such
Real Estate Taxes shall be due and payable to the governmental
authority or such mortgagee.
(ii) If in any tax certiorari proceeding regarding Real
Estate Taxes payable for any Comparative Tax Year or in otherwise
establishing such taxes, Landlord has incurred expenses for legal
and/or consulting services rendered in applying for, negotiating or
obtaining a reduction of the assessment upon which the Real Estate
Taxes are predicated, Tenant shall pay an amount equal to the
Percentage of such expenses.
(iii) The statements of the Tax Escalation Payment to be
furnished by Landlord as provided above shall constitute a final
determination as between Landlord and Tenant of the Tax Escalation
Payment for the periods represented thereby, except for mathematical
error in computation.
(iv) In no event shall the fixed minimum rent under this
Lease be reduced by virtue of this Section 22.01.
(v) Upon the date of any expiration or termination of
this Lease, whether the same be the date hereinabove set forth for
the expiration of the term or any prior or subsequent date, a
proportionate share of the Tax Escalation Payment for the
Comparative Tax Year during which such expiration or termination
occurs shall immediately become due and payable by Tenant to
Landlord, if it was not theretofore already billed and paid, or due
and payable by Landlord to Tenant if the amount paid by Tenant
exceeded such proportionate share. The said proportionate share
shall be based upon the length of time that this Lease shall have
been in existence during such Comparative Tax Year. Prior to or
promptly after said expiration or termination, Landlord shall
compute the Tax Escalation Payment due from or owed to Tenant, as
aforesaid and Tenant shall promptly pay Landlord any amount unpaid
and Landlord shall promptly pay Tenant any amount overpaid by
Tenant. If Landlord shall receive a refund or a tax credit of any
amount of Real Estate Taxes for any Comparative Tax Year for which
Tenant has made a payment, Landlord shall pay to Tenant within
fifteen (15) days
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of its receipt of such refund the Percentage of any such refund,
less the Percentage of any legal fees and other expenses provided
for in Section 22.01(b)(ii) to the extent the same have not
theretofore been paid by Tenant.
(vi) Landlord's and Tenant's obligations to make the
adjustments referred to in subdivision (v) above shall survive any
expiration or termination of this Lease.
(vii) Any delay or failure of Landlord in billing any
Tax Escalation Payment hereinabove provided shall not constitute a
waiver of or in any way impair the continuing obligation of Tenant
to pay such Tax Escalation Payment hereunder.
(viii) Landlord represents to Tenant that the Building
Project is not subject to any tax abatement program or partial tax
abatement which would reduce the Real Estate Taxes during the Tax
Base Factor below what Real Estate Taxes ordinarily would be for the
Tax Base Factor, in the absence of such abatement or partial
abatement.
(c) Notwithstanding any language to the contrary contained in
this Lease, Landlord and Tenant agree that for the purposes of this
Section 22.01, Real Estate Taxes and Tax Escalation Payments shall be
calculated without regard to any deductions, credits, abatements, or
deferral of Real Estate Taxes which Landlord may receive pursuant to
ss.ss.11.256 through 11-267 of the Administrative Code of the City of New
York, authorized by Title 2-D of Article 4 of the New York Real Property
Tax Law and any and all rules and regulations promulgated thereunder
(herein collectively called the "ICIP Program").
Section 22.02. Porter's Wage Rate. Tenant shall pay to the Landlord,
as additional rent, a porter's wage rate escalation in accordance with this
Section:
(a) For the purpose of this Section, the following definitions
shall apply:
(i) "Wage Rate" shall mean the minimum regular hourly
rate of wages in effect as of January 1st of each year paid or to be
paid to Porters in Class A office buildings pursuant to an Agreement
between Realty Advisory Board on Labor Relations, Incorporated
("Advisory Board"), or any
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successor thereto, and Local 32B-32J of the Building Service
Employees International Union, AFL-CIO ("Union"), or any successor
thereto. Notwithstanding the foregoing, if at any time, including
the Base Wage Rate year, such hourly wage rate is different for new
hire and old hire Porters set forth in the above referred to
agreement, then thereafter such hourly wage rate shall be based on
the mathematical average of the wage rates for the different
classifications of Porters.
(ii) "Base Wage Rate" shall mean the Wage Rate in effect
for the calendar year 2000.
(iii) The term "Porters" shall mean that classification
of non-supervisory employees employed in and about the Building who
devote a major portion of their time to general cleaning,
maintenance and miscellaneous services essentially of a
non-technical and non-mechanical nature and are the type of
employees who are presently included in the classification of "Class
A-Others" in the Commercial Building Agreement between the Advisory
Board and the aforesaid Union.
(iv) The term "minimum regular hourly rate of wages"
shall not include any payments for fringe benefits or adjustments of
any kind, nor shall it be based on actual hours worked or required
to work.
(v) The term "Multiplication Factor" shall mean 104,000.
(b) If the Wage Rate for any calendar year during the term
shall be increased above the Base Wage Rate, then Tenant shall pay, as
additional rent, an amount equal to the product obtained by multiplying
the Multiplication Factor by 100% of the number of cents (including any
fraction of a cent) by which the Wage Rate is greater than the Base Wage
Rate, such payment to be made in equal one-twelfth (1/12th) monthly
installments commencing with the first monthly installment of minimum rent
falling due on or after the effective date of such increase in Wage Rate
(payable retroactive from said effective date) and continuing thereafter
until a new adjustment shall have become effective in accordance with the
provisions of this Article. Landlord shall give Tenant notice of each
change in Wage Rate which will be effective to create or change Tenant's
obligation to pay additional rent pursuant to the provisions of this
Section 22.02 and such notice shall contain Landlord's
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calculation in reasonable detail and certified as true by an authorized
partner of Landlord or of its managing agent, of the annual rate of
additional rent payable resulting from such increase in Wage Rate. Such
amounts shall be prorated for any partial calendar years during the term.
(c) Every notice given by Landlord pursuant to Section
22.02(b) hereof shall be conclusive and binding upon Tenant, except for
error in computation or in applying an incorrect Wage Rate.
(d) Any delay or failure of Landlord in billing any wage rate
escalation hereinabove provided shall not constitute a waiver of or in any
way impair the continuing obligation of Tenant to pay such Wage Rate
Escalation hereunder.
(e) The "Wage Rate" is intended to be a substitute comparative
index of economic costs and does not necessarily reflect the actual costs
of wages or other expenses of operating the Building. The Wage Rate shall
be used whether or not the Building is a Class A office building and
whether or not Porters are employed in the Building and without regard to
whether such employees are members of the Union referred to in subsection
(a) hereof.
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ARTICLE 23
ELECTRICITY
Section 23.01.
(a) Landlord shall provide electricity to the Demised Premises
on a submetering basis from the existing risers and switches on the floor.
Tenant's consumption of electricity shall be measured by one independent
time of day (or use) submeter measuring electrical consumption only in the
Demised Premises furnished and installed by Landlord, at the cost of
Landlord , and read by Landlord (Tenant shall have the right to have a
representative present when such meter is read). If Tenant shall require
electricity exceeding the available service capacity, any additional
risers, feeders and similar electrical equipment which may be required,
shall be installed by Tenant , at the expense of Tenant, to and for the
use of Tenant in the Demised Premises during the term hereof. Landlord
represents that the available service capacity of electricity in the
Demised Premises will be not less than six (6) watts demand load per
usable square foot (exclusive of Building HVAC). Any riser(s) shall
terminate at a disconnect switch to be located at a point designated by
Landlord in electrical closet(s) on each floor of the Demised Premises.
Such disconnect switch shall be the sole source from which Tenant is to
obtain electricity. Such submeter shall at all times be maintained by
Tenant, at its expense, unless damaged due to the negligence or willful
misconduct of Landlord, its agents, employees or contractors. Tenant
covenants and agrees to purchase electric power from Landlord or
Landlord's designated agent at charges, terms and rates set, from time to
time, during the term of this Lease by Landlord, but in no event more than
those actually incurred by Landlord to purchase electric current from the
Electric Service Provider or Alternate Service Provider (as said terms are
hereinafter defined), as the case may be, plus a fee equal to six (6%)
percent of such charges, representing agreed upon administrative and
overhead costs to Landlord. Bills therefor shall be rendered monthly (and
if more than one submeter, billing of all submeters to be made
conjunctively) or at such other times as Landlord may elect (but no more
frequently than monthly) and the amount, as computed from such meter,
shall be deemed to be, and be paid as, additional rent, within fifteen
(15) days thereafter, without any set-off or deduction. If any tax is
imposed upon Landlord's receipt from the sale or resale of electric energy
to Tenant by any federal, state or municipal authority, Tenant covenants
and agrees that, where permitted by law, Tenant's PRO RATA share of such
taxes shall be passed on to, and included in the bill of, and paid by,
Tenant to Landlord.
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(b) Landlord has advised Tenant that presently Con Edison
("Electric Service Provider") is the utility company selected by Landlord
to provide electricity service for the Building. Notwithstanding the
foregoing, if permitted by law, Landlord shall have the right at any time
and from time to time during the term of this Lease to either contract for
service from a different company or companies providing electricity
service for the office tenants of the Building (each such company shall
hereinafter be referred to as an "Alternate Service Provider") provided
the rates of such Alternate Service Provider shall be competitive, or
continue to contract for service from the Electric Service Provider.
(c) Tenant shall cooperate with Landlord, the Electric Service
Provider, and any Alternate Service Provider at all reasonable times and,
upon prior reasonable notice, as reasonably necessary, shall allow
Landlord, Electric Service Provider, and any Alternate Service Provider
reasonable access to the Building's electric lines, feeders, risers,
wiring, and any other machinery within the Demised Premises, provided that
during any such access such parties shall use reasonable efforts to
minimize interference with the normal conduct of Tenant's business,
provided overtime or premium labor shall not be required, and shall repair
any damage to the Demised Premises resulting from such access.
Section 23.02. Landlord shall not be liable in any way for any loss,
damage or expense that Tenant may sustain or incur by reason of or any failure,
change, interruption or defect in the supply or character of electric energy
furnished to the Demised Premises by reason of any requirement, act or omission
of the Electric Service Provider or Alternate Service Provider serving the
Building with electricity and no such failure, change, interruption or defect
shall constitute an act of constructive eviction, in whole or in part, or
entitle Tenant to any abatement of minimum rent or additional rent or relieve
Tenant of its obligations under this Lease. Tenant shall furnish and install, at
its sole cost and expense, all lighting fixtures, tubes, lamps, bulbs, ballasts
and outlets relating to Tenant's electrical equipment.
Section 23.03. Tenant's connected electrical load in the Demised
Premises, including lighting, shall not at any time exceed the capacity of any
of the electrical conductors and equipment in or servicing the Demised Premises.
In order to insure that such capacity is not exceeded and to avert possible
adverse effect upon the Building electric service, Tenant shall not, without
Landlord's prior consent in each instance, which consent shall not be
unreasonably withheld or delayed, connect any additional fixtures, appliances or
equipment (other than ordinary office equipment) or make any alteration or
addition to the electric service of the Demised Premises existing on the date
Tenant first occupies the Demised Premises for its business purpose. Should
Landlord grant such consent, all additional risers or other equipment required
therefor shall be provided by Landlord and the cost thereof shall be paid by
Tenant within fifteen (15) days after demand therefor.
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Section 23.04. Landlord reserves the right to discontinue furnishing
electric energy at any time, whether or not Tenant is in default under this
Lease, upon not less than thirty (30) days' notice to Tenant, provided Landlord
discontinues furnishing electricity to all other tenants in the Building. If
Landlord exercises such right of discontinuance, this Lease shall continue in
full force and effect and shall be unaffected thereby, except only that, from
and after the effective date of such discontinuance, Landlord shall not be
obligated to furnish electric energy to Tenant. If Landlord so elects to
discontinue furnishing electric energy to Tenant, Tenant shall arrange to obtain
electric energy directly from the Public Service Provider or Alternate Service
Provider furnishing electric service to the Building. Notwithstanding the
foregoing, Landlord shall not discontinue furnishing electric energy until
Tenant is able to obtain such electric energy directly from said Public Service
Provider or Alternate Service Provider. Such electric energy may be furnished to
Tenant by means of the then existing Building system feeders, risers and wiring
to the extent that they are available, suitable and safe for such purposes. All
meters and additional panel boards, feeders, risers, wiring and other conductors
and equipment which may be required to obtain electric energy directly from such
public utility company, and which are to be located within the Demised Premises,
shall be installed and maintained by Tenant at its expense.
ARTICLE 24
BROKER
Landlord and Tenant covenant and represent that the sole brokers who
negotiated and brought about this transaction were Newmark & Company Real
Estate, Inc. and Cohen Brothers Realty Corporation and Landlord agrees to pay a
commission therefor as per separate agreements. Landlord and Tenant agree to
hold the other harmless against any claims for a brokerage commission arising
out of a breach by the other of the representations contained in this Article.
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ARTICLE 25
SUBORDINATION AND GROUND LEASE
Section 25.01. This Lease is subject and subordinate to (a) all
ground and underlying leases on the Land and/or Building now or hereafter
existing, and (b) to all mortgages which may now or hereafter affect any such
ground and underlying leases or the Land and/or the Building, and to all
renewals, modifications, amendments, consolidations, replacements or extensions
of any of the foregoing. This clause shall be self-operative and no further
instrument of subordination shall be required. However, in confirmation of such
subordination, Tenant, at any time and from time to time, shall execute
promptly, and within fifteen (15) days of such request, any certificate and
document that Landlord may reasonably request which reasonably evidences such
subordination. Notwithstanding the above, Landlord, within forty-five (45) days
from the date hereof, agrees to obtain from Credit Suisse First Boston Mortgage
Capital, LLC, the holder of the existing mortgage which is a lien on the
Building Project, an agreement (the "non-disturbance and attornment agreement")
providing in substance that Tenant's possession of and rights in the Demised
Premises and under this Lease shall remain undisturbed, so long as Tenant is not
in default under the provisions of this Lease, after any notice and the
expiration of any applicable periods of grace, and provided Tenant agrees in
said instrument to attorn to such mortgagee as its landlord under this Lease. If
a fully executed and acknowledged original copy of such non-disturbance and
attornment agreement is not delivered to Tenant within such forty-five (45) day
period, Tenant, as its sole remedy for Landlord's failure to obtain the
non-disturbance and attornment agreement, may by notice given within twenty-one
(21) days after the expiration of such forty-five (45) day period, terminate
this Lease on a date specified in such notice which shall not be later than
thirty (30) days after the date of said notice, unless prior to such termination
date all such copies are delivered to Tenant or Tenant elects to rescind such
notice. In the event of such termination, neither Landlord nor Tenant shall have
any further liability to each other except that Landlord shall return to Tenant
all moneys given to Landlord upon the execution of this Lease. Concurrently with
the execution of this Lease, Tenant has executed a non-disturbance and
attornment agreement with respect to such mortgagee. Notwithstanding the first
three (3) sentences of this Section 25.01, it is further agreed that this Lease
shall not be subject and subordinate to and Tenant shall not be required to
attorn to any mortgages or any ground or underlying leases which may hereafter
affect the Building Project, unless the holder of each such mortgage or lessor
under each such lease executes such non-disturbance and attornment agreement in
the then customary form of such mortgagee or lessor, with such changes as are
reasonably acceptable to Tenant consistent with the form being executed
concurrently herewith. Landlord represents to Tenant that there is no ground or
underlying lease affecting the Building Project, or any portions thereof.
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Section 25.02. (a) Tenant covenants and agrees that if by reason of
a default under any underlying lease, or under any mortgage, such
underlying lease and the leasehold estate of the Landlord in the Demised
Premises is terminated, or the Land and/or the Building are foreclosed
upon or transferred in lieu of a foreclosure, the Tenant will attorn to
the then holder of the reversionary interest in the premises demised by
this Lease or the foreclosure purchaser or transferee in lieu of
foreclosure, and will recognize such holder, purchaser or transferee as
the Tenant's Landlord under this Lease, unless, subject to the provisions
of any non-disturbance and attornment agreement, the lessor under such
underlying lease or the holder of any such mortgage shall, in any
proceeding to terminate such underlying lease or foreclose such mortgage,
elects to terminate this Lease and the rights of Tenant hereunder
provided, however, the holder of the reversionary interest or the
foreclosure purchaser or transferee in lieu of foreclosure shall not be
(i) liable for any act or omission or negligence of Landlord under this
Lease; (ii) subject to any counterclaim, defense or offset, not expressly
provided for in this Lease and asserted with reasonable promptness which
theretofore shall have accrued to Tenant against Landlord; (iii) obligated
to perform, undertake or complete any work in the Demised Premises or to
prepare it for occupancy; (iv) bound by any previous modification or
amendment of this Lease or by any previous prepayment of more than one (1)
month's rent, unless such modification or prepayment shall have been
approved in writing by the holder of such Mortgage; (v) obligated to
repair the Demised Premises, or the Building, or any part thereof, in the
event of any damage beyond such repair as can reasonably be accomplished
from the net proceeds of insurance actually made available to the then
holder of the reversionary interest or the foreclosure purchaser or
transferee in lieu of foreclosure; (vi) obligated to repair the Demised
Premises or the Building, or any part thereof, in the event of partial
condemnation of the Demised Premises or the Building; (vii) required to
account for any security deposit of Tenant unless actually delivered to
such holder, purchaser or transferee by Landlord; (viii) bound by any
obligation to make any payment to Tenant or grant any credits (other than
in Article 3), except for services, repairs, maintenance and restoration
provided for under this Lease to be performed by Landlord after the date
of attornment; or (ix) responsible for any monies owing by Landlord to
Tenant. Nothing contained in this subparagraph shall be construed to
impair any right otherwise exercisable by any such holder, purchaser or
transferee. Tenant agrees to execute and deliver, at any time and from
time to time, upon the request of the Landlord of or the lessor under any
such underlying lease or the holder of any such mortgage any instrument
which may be reasonably necessary or appropriate to evidence such
attornment. The Tenant further waives the provisions of any statute or
rule or law now or hereafter in effect which may give or purport to give
Tenant any right of election to terminate this Lease or to surrender
possession of the premises demised hereby in the event,
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any proceeding is brought by the lessor under any underlying lease or the
holder of any such mortgage to terminate the same, and agrees that this
Lease shall not be affected in any way whatsoever by any such proceeding.
(b) Upon Tenant's receipt of a written notice from the lessor
under any underlying lease or the holder of any such mortgage (the name
and address of such lessor or mortgagee having been previously provided to
Tenant by notice from the Landlord) to the effect that (i) the lessor of
said underlying lease or the holder of any such mortgage is entitled to
send a notice to the Landlord, as tenant under said underlying lease,
terminating said lease, or such holder is entitled to performance by
Tenant under this Lease, and (ii) the Tenant should pay the minimum rent
and additional rent thereafter due and payable under this Lease to said
lessor or the holder of any such mortgage at a place designated in such
notice, Tenant shall pay such minimum rent and additional rent to said
lessor under said underlying lease or the holder of any such mortgage at
such designated place until such time as said lessor or holder shall
notify Tenant that Landlord is no longer in default under said underlying
lease or such mortgage and that Tenant may resume paying all minimum rent
and additional rent thereafter due and payable under this Lease to
Landlord. Tenant shall have no liability to the Landlord for paying any
minimum rent or additional rent to said lessor under the underlying lease
or holder of any such mortgage or otherwise acting in accordance with the
provisions of any notice sent to it under this paragraph and shall be
relieved of its obligations to pay Landlord any minimum rent or additional
rent under this Lease to the extent such payments are made to said lessor
under the underlying lease, or to such mortgagee, and any such payments so
made by Tenant shall be deemed payments under this Lease. Tenant shall be
entitled to rely on any notice sent to it which appears to be sent by the
said lessor under an underlying lease or said mortgagee whose name and
address have been previously furnished to Tenant in writing, without any
liability on the part of Tenant.
Section 25.03. In the event of any act or omission by Landlord which
would give Tenant the right to terminate this Lease or to claim a partial or
total eviction, pursuant to the terms of this Lease, if any, Tenant will not
exercise any such right until:
(a) it has given a written notice (concurrently with any
notice given to Landlord), regarding such act or omission to the holder of
any mortgage and to the landlord of any ground or underlying lease, whose
names and addresses shall previously have been furnished to Tenant by
Landlord, addressed to such holder and landlord at the last addresses so
furnished, and
(b) a reasonable period of time (not to exceed the period in
this Lease) for remedying such act or omission shall have elapsed
following
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such giving of notice and the expiration of any grace period applicable
thereto in favor of Landlord hereunder, during which such holder and
landlord, or any of them, with reasonable diligence, following the giving
of such notice, shall not have commenced or have commenced are not
continuing to remedy such act or omission or to cause the same to be
remedied with due diligence.
Section 25.04. Any permitted subtenants of Tenant (immediate or
remote) subleasing one full floor or more space in the Demised Premises shall be
entitled to a non-disturbance and attornment agreement from Landlord, in form
and substance reasonably satisfactory to such subtenant, but providing, at a
minimum, that so long as such subtenant is not then in default under the terms
and conditions of its sublease beyond applicable notice and cure periods, if
any, Landlord shall not disturb the occupancy of such subtenant if, for any
reason, this Lease is terminated by Landlord, and Landlord shall recognize such
subtenant as a direct tenant of Landlord upon the terms and conditions set forth
in such subtenant's sublease.
Section 25.05. If, in connection with obtaining financing for the
Building, or of Landlord's interest in any ground or underlying lease, a
banking, insurance or other recognized institutional lender shall request
modifications in this Lease as a condition to such financing, Tenant will not
withhold, delay or defer its consent thereto and its execution and delivery of
such modification agreement, provided that such modifications do not increase
the obligations of Tenant hereunder or adversely affect the leasehold interest
hereby created or Tenant's use and enjoyment of the Demised Premises or reduce
the obligations of Landlord hereunder.
ARTICLE 26
ESTOPPEL CERTIFICATE
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Landlord or Tenant shall at any time, and from time to time, within
fifteen (15) days after so requested by the other execute, acknowledge and
deliver to the other, a statement addressed to the other or its designee or (in
the case of Landlord) the holder of any mortgage encumbering the Land and/or
Building and (in the case of Tenant) any proposed subtenant or assignee (a)
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and stating the modifications), (b) stating the dates to which the
minimum rent and additional rent have been paid, (c) stating to the best of such
party's knowledge whether or not there exists any default by the other party
under this Lease, and, if so, specifying each such default, and (d) such other
information as may be reasonably required by such party or any mortgagee, it
being intended that any such statement may be relied upon by Landlord, by any
mortgagee or prospective mortgagee of any mortgage affecting the Building or the
leasehold estate under any ground or underlying lease affecting the land
described in Schedule B and/or Building and improvements thereon, or may be
relied upon by the landlord under any such ground or underlying lease or a
purchaser of Lessee's estate under any such ground or underlying lease or any
interest therein, or by Tenant, or any subtenant or assignee of Tenant.
ARTICLE 27
WAIVER OF JURY TRIAL
Tenant hereby waives the right to trial by jury in any summary
proceeding that may hereafter be instituted against it or in any action or
proceeding that may be brought by Landlord on matters which are connected with
this Lease, or any of its provisions or Tenant's use or occupancy of the Demised
Premises, including any claims for injury or damage, or any emergency or other
statutory remedy with respect thereto.
ARTICLE 28
SURRENDER OF PREMISES
Section 28.01. Upon the expiration or other termination of the term
of this Lease, Tenant shall quit and surrender the Demised Premises, vacant,
broom clean, in good order and condition, ordinary wear and tear and damage by
fire or other casualty excepted, and shall remove all its property therefrom,
except as otherwise provided in this Lease. Tenant's obligation to observe or
perform this covenant shall survive the expiration or other termination of the
term of this Lease.
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Section 28.02. In the event Tenant shall remain in possession of the
Demised Premises after the expiration or other termination of the term of this
Lease, such holding over shall not constitute a renewal or extension of this
Lease. Landlord, may, at its option, elect to treat Tenant as one who is not
removed at the end of the term, and thereupon be entitled to all of the remedies
against Tenant provided by law in that situation or Landlord may elect to
construe such holding over as a tenancy from month-to-month, subject to all of
the terms and conditions of this Lease, except as to the duration thereof, and
the minimum rent shall be due, in either of such events, at a monthly rental
rate equal to two (2) times the monthly installment of minimum rent which would
otherwise be payable for such month, together with any and all additional rent.
ARTICLE 29
RULES AND REGULATIONS
Section 29.01. Tenant, its servants, employees, agents, visitors and
licensees shall observe faithfully and comply with the rules and regulations set
forth in Schedule "C" attached hereto and made a part hereof. Landlord shall
have the right from time to time during the term of this Lease to make
reasonable changes in and additions to the rules thus set forth provided such
changes and additions are applicable to all other office tenants in the
Building. All rules and regulations shall be enforced in a non-discriminatory
manner. Any conflict between the terms of this Lease and the terms of the rules
and regulations shall be resolved in favor of the terms set forth in this Lease.
Section 29.02. Any failure by Landlord to enforce any rules and
regulations now or hereafter in effect, either against Tenant or any other
tenant in the Building, shall not constitute a breach hereunder or waiver of any
such rules and regulations.
ARTICLE 30
SUCCESSORS AND ASSIGNS AND DEFINITIONS
Section 30.01. The covenants, conditions and agreements contained in
this Lease shall bind and enure to the benefit of Landlord and Tenant and their
respective distributees, legal representatives, successors and, except as
otherwise provided herein, their assigns.
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Section 30.02. The term "Landlord" as used in this Lease, so far as
the covenants and agreements on the part of Landlord are concerned shall be
limited to mean and include only the owner or owners at the time in question of
the tenant's estate under any ground or underlying lease covering the Land
described in Schedule B hereto annexed and/or the fee title of Landlord covering
the Land and/or the Building and improvements thereon. In the event of any
assignment or assignments of such tenant's estate or transfer of such title,
Landlord herein named (and in case of any subsequent assignment or transfer, the
then assignor or transferor) shall be automatically freed and relieved from and
after the date of such assignment or transfer of all personal liability as
respects to performance of any of Landlord's covenants and agreements thereafter
to be performed, and such assignee or transferee automatically shall be bound by
all of such covenants and agreements; it being intended that Landlord's
covenants and agreements shall be binding on Landlord, its successors and
assigns only during and in respect of their successive periods of such
ownership.
However, in any event, the members in Landlord shall not have any
personal liability or obligation by reason of any default by Landlord under any
of Landlord's covenants and agreements in this Lease. In case of such default,
Tenant will look only to Landlord's estate, as tenant, under such ground or
underlying lease and/or its interest in the Land and/or Building, to recover any
loss or damage resulting therefrom; and Tenant shall have no right to nor shall
Tenant assert any claim against nor have recourse to Landlord's other property
or assets to recover such loss or damage.
Section 30.03. All pronouns or any variation thereof shall be deemed
to refer to masculine, feminine or neuter, singular or plural as the identity of
the person or persons may require; and if Tenant shall consist of more than one
(1) person, the obligations of such persons, as Tenant, under this Lease, shall
be joint and several.
Section 30.04. The definitions contained in Schedule E annexed
hereto are hereby made a part of this Lease.
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ARTICLE 31
NOTICES
Any notice, statement, certificate, request, approval, consent or
demand required or permitted to be given under this Lease shall be in writing
sent by registered or certified mail (or reputable, commercial overnight courier
service regularly maintaining a record of receipt) return receipt requested,
addressed, as the case may be, to Landlord, at 750 Lexington Avenue, New York,
New York 10022, and to Tenant prior to the Commencement Date at 1633 Broadway,
New York, New York 10019, Attention: General Counsel, and after the Commencement
Date at the Demised Premises, with a copy sent in the same manner to Fulbright &
Jaworski L.L.P., 666 Fifth Avenue, New York, New York 10103, Attention: Douglas
J. Danzig, Esq. or to such other addresses as Landlord or Tenant respectively
shall designate in the manner herein provided. Such notice, statement,
certificate, request, approval, consent or demand shall be deemed to have been
given on the date when received, if mailed, as aforesaid, or on the date of
delivery by overnight courier or refusal to accept delivery.
ARTICLE 32
NO WAIVER; ENTIRE AGREEMENT
Section 32.01. The specific remedies to which Landlord may resort
under the provisions of this Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which Landlord may be
lawfully entitled in case of any breach or threatened breach by Landlord of any
of the terms, covenants and conditions of this Lease. The failure of Landlord to
insist upon the strict performance of any of the terms, covenants and conditions
of this Lease, or to exercise any right or remedy herein contained, shall not be
construed as a waiver or relinquishment for the future of such term, covenant,
condition, right or remedy. A receipt by Landlord of minimum rent or additional
rent with knowledge of the breach of any term, covenant or condition of this
Lease shall not be deemed a waiver of such breach. This Lease may not be changed
or terminated orally. In addition to the other remedies in this Lease provided,
Landlord shall be entitled to seek to restrain by injunction, the violation or
attempted or threatened violation of any of the terms, covenants and conditions
of this Lease or to a decree, any court having jurisdiction in the matter,
compelling performance of any such terms, covenants and conditions.
Section 32.02. No receipt of monies by Landlord from Tenant, after
any re-entry or after the cancellation or termination of this Lease in any
lawful manner, shall reinstate the Lease; and after the service of notice to
terminate this Lease, or after
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commencement of any action, proceeding or other remedy, Landlord may demand,
receive and collect any monies due, and apply them of account of Tenant's
obligations under this Lease but without in any respect affecting such notice,
action, proceeding or remedy, except that if a money judgment is being sought in
any such action or proceeding, the amount of such judgment shall be reduced by
such payment.
Section 32.03. If Tenant is in arrears in the payment of minimum
rent or additional rent, Tenant waives its right, if any, to designate the items
in arrears against which any payments made by Tenant are to be credited and
Landlord may apply any of such payments to any such items in arrears as
Landlord, in its sole discretion, shall determine, irrespective of any
designation or request by Tenant as to the items against which any such payments
shall be credited.
Section 32.04. No payment by Tenant nor receipt by Landlord of a
lesser amount than may be required to be paid hereunder shall be deemed to be
other than on account of any such payment, nor shall any endorsement or
statement on any check or any letter accompanying any check tendered as payment
be deemed an accord and satisfaction and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
payment due or pursue any other remedy in this Lease provided.
Section 32.05. This Lease and the Schedules annexed hereto
constitute the entire agreement between Landlord and Tenant referable to the
Demised Premises, and all prior negotiations and agreements are merged herein.
Section 32.06. If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
Section 32.07. Tenant acknowledges that Landlord will contract or
has contracted with one or more providers of telecommunications services for the
installation of cable, wire and related electrical, electronic or mechanical
devices in the Building sufficient to provide telecommunications services to the
Demised Premises, and Tenant agrees to engage such a provider, as designated by
Landlord, to provide such services, unless another provider selected by Tenant
and approved by Landlord agrees to provide such services to Tenant at a lower
cost than the provider designated by Landlord. In such event Landlord shall have
the right to cause the service provider designated by Landlord to match the cost
chargeable by the provider selected by Tenant, in which event Tenant agrees to
engage the provider designated by Landlord, provided such provider designated by
Landlord shall be able to provide substantially equivalent service as that to be
provided by Tenant's service provider. However, if the provider is an affiliate
or client of Tenant, Tenant may use such provider.
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Section 32.08. Tenant, at its cost, may use its prorata share of the
available space in the Building's telephone risers, for the installation of its
telecommunication/data wiring, as shown on Tenant's approved plans. Tenant, at
its cost, shall repair any damage to the Building caused by the installation
and/or maintenance of such wiring.
ARTICLE 33
CAPTIONS
The captions of Articles in this Lease are inserted only as a matter
of convenience and for reference and they in no way define, limit or describe
the scope of this Lease or the intent of any provision thereof.
ARTICLE 34
INABILITY TO PERFORM
Tenant's obligation to pay minimum rent and additional rent and to
perform all of the other terms, covenants and conditions of this Lease shall not
be affected, diminished, or excused if by reason of unavoidable delays (as
hereinafter defined) Landlord fails or is unable to supply any services or make
any repairs or perform any work which under this Lease Landlord has expressly
agreed to supply, make or perform, and the time for the performance or
observance thereof shall be extended for the period of time as Landlord shall
have been so delayed.
The words "unavoidable delays", as used in this Lease shall mean (a)
the enactment of any law or issuance of any governmental order, rule or
regulation (i) prohibiting or restricting performance of work of the character
required to be performed by Landlord under this Lease, or (ii) establishing
rationing or priorities in the use of materials, or (iii) restricting the use of
labor, and (b) strikes, lockouts, acts of God, inability to obtain labor or
materials, enemy action, civil commotion, fire, unavoidable casualty or other
similar types of causes beyond the reasonable control of Landlord, other than
financial inability.
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ARTICLE 35
NO REPRESENTATIONS BY LANDLORD
Neither Landlord nor any agent or employee of Landlord has made any
representation whatsoever with respect to the Demised Premises except as
expressly set forth in this Lease.
ARTICLE 36
RENT CONTROL
In the event the minimum rent and/or additional rent or any part
thereof provided to be paid by Tenant under the provisions of this Lease during
the demised term shall become uncollectible or shall be reduced or required to
be reduced or refunded by virtue of any federal, state, county or city law,
order or regulation, or by any direction of a public officer or body pursuant to
law, or the orders, rules, code or regulations of any organization or entity
formed pursuant to law, Tenant shall enter into such agreement(s) and take such
other steps (without additional expense or liability to Tenant) as Landlord may
reasonably request and as may be legally permissible to permit Landlord to
collect the maximum rents which from time to time during the continuance of such
legal rent restriction may be legally permissible (and not in excess of the
amounts reserved therefor under this Lease). Upon the termination of such legal
rent restriction, (a) the minimum rent and/or additional rent shall become and
thereafter be payable in accordance with the amounts reserved herein for the
periods following such termination, and (b) Tenant shall pay to Landlord
promptly upon being billed, to the maximum extent legally permissible, an amount
equal to (i) minimum rent and/or additional rent which would have been paid
pursuant to this Lease but for such legal rent restriction less (ii) the rents
paid by Tenant during the period such legal rent restriction was in effect.
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ARTICLE 37
LANDLORD'S CONTRIBUTION
Subject to the provisions of Article 5 of this Lease, and except for
the work to be performed by Landlord pursuant to Section 2.02, Tenant agrees to
perform the initial work and installations required to make the Demised Premises
suitable for the conduct of Tenant's business. Tenant agrees to deliver to
Landlord, for Landlord's approval the plans and specifications for Tenant's
initial work no later than thirty (30) days following the Commencement Date. In
addition to the work to be performed by Landlord pursuant to Section 2.02 of
this Lease, Landlord agrees to contribute up to the sum of $3,640,000
(Landlord's Contribution") toward the cost of such work, which shall include
hard and soft costs. Landlord shall pay to Tenant, from time to time, but not
more often that once a month, ninety (90%) percent of the cost of the work (such
cost shall include any hold-back to the contractor) requested by Tenant
theretofore performed by the contractor, provided Tenant delivers to Landlord
concurrently with its request, receipted bills (including any contractor's
hold-back) of the contractor involved approved by Tenant, a certificate by
Tenant's architect that such bills have been approved and the work or materials
evidenced by such bills have been satisfactorily performed or delivered and a
waiver of mechanic's lien signed by the contractor with respect to the amount
paid, if any, to such contractor for the immediately preceding month, or prior
payment, as evidenced by the receipted bill, such payment to be made by Landlord
to Tenant within ten (10) days after receipt of Tenant's request together with
the aforesaid documentation. Within ten (10) days after Landlord receives a
certificate from Tenant's architect stating that Tenant's work has been
substantially completed, that the same has been performed in compliance with all
applicable Governmental Requirements and the approved plans and specifications
and delivery to Landlord of the final "sign-off" letters and equipment use
permits (as necessary) for all work performed from the applicable municipal
authorities, Landlord shall pay to Tenant the aggregate of the ten (10%) percent
sums retained by Landlord. Landlord shall have no obligation or responsibility
to pay any cost exceeding the amount of Landlord's Contribution. If the amount
Tenant expends for the cost exceeds the amount of Landlord's Contribution,
Tenant shall be responsible for the payment to the contractors of the excess. If
said amount is less than the amount of Landlord's Contribution, Landlord shall
not be obligated to pay such difference to Tenant. Tenant shall indemnify and
hold Landlord harmless from and against any and all claims, costs and expenses
in connection with such work exceeding the amount of Landlord's Contribution.
Notwithstanding the foregoing provisions of this Article 37, if this Lease shall
be terminated by reason of tenant's default hereunder, in addition to the
damages set forth in Section 16.06, Landlord shall be entitled to recover from
Tenant the unamortized amount of Landlord's Contribution, determined on the
basis that the then remaining term of this Lease (as if this Lease had not
terminated) bears to the initial term of this Lease.
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ARTICLE 38
ADDITIONAL SPACE
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Section 38.01. So long as this Lease is then in full force and
effect and Tenant is not then in default in performing any of the monetary
conditions of this Lease on its part to be performed, both at the time of
Landlord's Availability Notice (as hereinafter defined) and on the Effective
Date (as hereinafter defined) for the Additional Space (as hereinafter defined),
at the time during the term of this Lease that Landlord becomes aware, after the
initial leasing thereof, of the potential availability of not less than 13,000
rentable square feet on the 35th floor of the Building (the "Additional Space"),
which Landlord anticipates will become available for lease and future occupancy
by Tenant during the term of this Lease, Landlord shall then give Tenant notice
thereof (the "Availability Notice"). Such notice shall also state the rentable
square feet of the Additional Space, which for the purposes of this Article 38
is agreed to be 26,000 rentable square feet for the entire 35th floor, and
Landlord's reasonable estimation of the date when such Additional Space will be
available for Tenant"s occupancy (the "Occupancy Date"). If the same is subject
to the prior right of the then tenant thereof to renew the term thereof (the
"Prior Right"), Landlord shall include in its Availability Notice the existence
of such Prior Right and the date by which the same must be exercised by the
existing tenant having such Prior Right. Concurrently with giving the
Availability Notice to Tenant, Landlord shall give to the existing tenant notice
to exercise its Prior Right. Landlord thereafter shall notify Tenant of the
exercise or non-exercise of such Prior Right. Landlord represents that there is
no existing Prior Rights as of the date hereof, and Landlord agrees that it
shall not grant any such rights other than to a tenant occupying the Additional
Space or any Further Additional Space (as hereinafter defined). Tenant shall
have the one time right to exercise its option to lease such Additional Space by
giving Landlord notice of its election to do so (the "Exercise Notice"), within
thirty (30) days from the date of its receipt of the Availability Notice, with
TIME OF THE ESSENCE. However, if such Additional Space is subject to a Prior
Right, Tenant may exercise its option by giving the Exercise Notice within
thirty (30) days from the date of its receipt of notice from Landlord of the
non-exercise of such Prior Right, with TIME OF ESSENCE. Provided Tenant has
given its Exercise Notice to Landlord for the aforesaid Additional Space and the
same has become part of the Demised Premises, then at any future time during the
term of this Lease, excluding the last four (4) years of the term hereof, that
Landlord becomes aware of the potential availability of all or any part of the
remaining space on the 35th floor of the Building adjoining the Additional Space
(the "Further Additional Space") which Landlord anticipates will become
available for lease and future occupancy by Tenant at any time prior to the last
four (4) years of the term hereof, Landlord shall give Tenant the Availability
Notice which shall contain the same information for the Further Additional Space
as required for the Additional Space. Tenant shall have the one time right to
exercise its option to lease any Further Additional Space set forth in the
Availability Notice by delivering its Exercise Notice in the same manner and
subject to the same conditions set forth above with respect to the Additional
Space. If Landlord does not receive the Exercise Notice with respect to the
Additional Space or any Further Additional Space, as the case may be, within the
applicable thirty (30) day period, then Tenant shall have no further rights with
respect to the Additional Space or any Further Additional Space, as the case may
be, set forth in the Availability Notice under this Article 38, and Landlord may
lease such Additional Space
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or any Further Additional Space, as the case may be, set forth in the
Availability Notice to any other party upon such terms and conditions as
Landlord may deem desirable.
Section 38.02. Tenant shall take possession of the Additional Space
and Landlord shall deliver possession thereof to Tenant on the later of the
Occupancy Date and the actual date on which Landlord shall have delivered such
Additional Space or any Further Additional Space, as the case may be, to Tenant
vacant and free of the possessions of any prior tenant, but in no event later
than thirty (30) days after the then tenant occupying such space has vacated
(the "Effective Date"), and from and after the Effective Date such Additional
Space or any Further Additional Space, as the case may be, shall automatically
be deemed added to and made part of the Demised Premises upon all of the terms,
covenants and conditions as are contained in this Lease (except those which by
their terms are no longer applicable), except as follows:
(a) Tenant agrees to accept possession of the Additional Space
or any Further Additional Space, as the case may be, in its then "As Is"
condition and Landlord shall not be required to do any work therein to
prepare the same for Tenant's occupancy, except that (i) Landlord, at
Landlord's expense, shall install a submeter in the Additional Space or
Further Additional Space if the Additional Space or Further Additional
Space is not equipped with a submeter measuring only electrical
consumption in the Additional Space or Further Additional Space, and (ii)
if there is any asbestos located in the Additional Space or Further
Additional Space, except for any asbestos in the adhesive material
securing any existing floor covering, Landlord, at its expense, shall
remove same in accordance with all Governmental Requirements.
(b) The amount of the minimum rent provided in Section 3.01
(a) shall be increased by the amount equal to the fair market annual
rental value ("Rental Value") of the Additional Space or any Further
Additional Space, as the case may be, as of the Effective Date, but not
less than at the aggregate rate per square foot payable for minimum rent
under Article 3 of this Lease and additional rent payable under Article 22
of this Lease immediately prior to the Effective Date. In the event the
parties fail to agree on such Rental Value within ninety (90) days prior
to the Effective Date, such Rental Value shall be determined by
arbitration in the manner as hereinafter provided in Article 40; and the
determination of such arbitration shall be conclusive and binding on the
parties. If for any reason such Rental Value shall not be determined prior
to the commencement of the Effective Date, Tenant, in the meantime shall
pay the monthly installments of minimum rent at the rate per square foot
payable for minimum rent and said additional rent pursuant to this Lease
immediately prior to the Effective Date. If the Rental Value shall be
greater than the amount paid by Tenant for the Additional Space
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or any Further Additional Space, as the case may be, following the
Effective Date, Tenant forthwith after the arbitrators' decision, shall
pay to Landlord the difference between the monthly installments actually
paid and the monthly installments which should have been paid from the
commencement of the Effective Date, and thereafter Tenant shall pay the
monthly installments of the new minimum rent. In determining Rental Value,
the arbitrators shall take into consideration all relevant factors,
including, but not limited to a cash contribution, free rent, and any
Landlord's work then being offered in the open market for a similar lease,
and the term of the lease for the Additional Space or Further Additional
Space.
(c) Notwithstanding subdivision (b) above, in Section
22.01(a), with respect to the Additional Space or Further Additional Space
only, in subdivision (i) the "Tax Base Factor" shall mean the July 1 -
June 30 fiscal year in which the Effective Date occurs; in subdivision
(iii) the "comparative tax year" shall mean the July 1 - June 30 fiscal
year immediately following the Tax Base Factor; and in subdivision (v) the
"Percentage" shall be the percentage that the rentable square feet of the
Additional Space or Further Additional Space bears to the rentable square
feet of the office space in the Building.
(d) In Section 22.02(a), with respect to the Additional Space
or Further Additional Space only, in subdivision (ii), the "Base Wage
Rate" shall mean the Wage Rate in effect for the calendar year in which
the Effective Date occurs; and in subdivision (v) the "Multiplication
Factor" shall mean the rentable square feet of the Additional Space or
Further Additional Space.
Section 38.03. Notwithstanding the provisions of Section 36.02, if
Landlord is unable to give possession of the Additional Space or Further
Additional Space as the case may be, on the Effective Date because of the
holding-over of the tenant thereof, Landlord shall not be subject to any
liability for failure to give possession on the Effective Date, but the
Effective Date shall not be deemed to have occurred for any purpose whatsoever
until the date that Landlord shall actually deliver possession of the Additional
Space or Further Additional Space, as the case may be, to Tenant. In any event,
Landlord shall promptly commence and diligently prosecute holdover proceedings
or such other legal proceedings as may be required in order to obtain prompt
possession of the Additional Space or Further Additional Space as promptly
thereafter as may be practical.
Section 38.04. Following the determination of the Effective Date,
the minimum rent and the escalation rents of the Additional Space or Further
Additional Space, Landlord and Tenant shall execute an agreement amending this
Lease to reflect the foregoing, but the provisions of this Article 38 shall be
effective with respect to the Additional Space or
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Further Additional Space effective from and after the Effective Date whether or
not such an amendment is executed.
Section 38.05. Except as specifically amended in this Article 38,
all of the terms, covenants and conditions of this Lease shall continue in full
force and effect and unchanged.
ARTICLE 39
OPTION FOR RENEWAL TERM
Section 39.01. So long as this Lease is then in full force and
effect and Tenant is not then in default beyond the expiration of any applicable
cure period, both at the time it exercises the Renewal Option (as hereinafter
defined) and at the commencement of the Renewal Term (as hereinafter defined)
under any of the monetary terms, covenants and conditions hereunder on the part
of Tenant to be performed, Tenant, at its option (the "Renewal Option"), shall
have the right to extend the Expiration Date of this Lease for one additional
period of five (5) years (the "Renewal Term"), provided Tenant gives Landlord
notice of its exercise of its option at least fifteen (15) months but not more
than twenty-one (21) months prior to the expiration of the initial term hereof,
with TIME OF THE ESSENCE. If Landlord does not receive Tenant's exercise notice
prior to such date, then Tenant shall have no further rights under this Article
39 and this Article shall be of no further force or effect.
Section 39.02. The Renewal Term shall be upon all of the same terms,
covenants and conditions as are contained in this Lease, except as follows:
(a) Tenant shall have no further right to extend the term of
this Lease.
(b) Landlord shall not be required to do any work in the
Demised Premises and there shall be no rent abatement.
(c) (i) The minimum rent for the Renewal Term shall be an
amount equal to the fair market annual rental value of the Demised
Premises as at the commencement of the Renewal Term (exclusive of
the additional rent under Article 22 which shall continue to be
payable as provided in said Article), but in no event less than the
amount of the minimum rent and additional rent then payable during
the last year of the initial term ("Renewal Rental Value"). In the
event the parties fail to agree on such Renewal Rental Value within
six (6) months
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prior to the Expiration Date of the initial term hereof, then such
Renewal Rental Value shall be determined by arbitration in the
manner as provided in Article 39, and the results of such
arbitration shall be conclusive and binding on the parties. In
making such determination, the arbitrators shall take into
consideration all relevant factors, including, but not limited to a
cash contribution, free rent, and any landlord's work then being
offered in the open market for a similar lease, and the term of the
Renewal Term.
(ii) If for any reason the Renewal Rental Value for the
Renewal Term shall not be determined prior to the commencement of
the Renewal Term, Tenant, in the meantime, shall pay the monthly
installments of minimum rent at the then rate as provided in Section
3.01(a) including the additional rent then payable under Article 22.
If the Renewal Rental Value as determined by arbitration shall be
greater than the amount of the annual minimum rent (exclusive of
additional rent under Article 22) then being payable, then within
twenty (20) days after the arbitrators' decision, the difference
between the monthly installments for minimum rent actually paid and
the monthly installments for minimum rent which should have been
paid from the commencement of the Renewal Term shall be determined
and paid by Tenant to Landlord and thereafter Tenant shall pay the
monthly installments of minimum rent at the new rate.
(d) In Section 22.01(a), in subdivision (i) the "Tax
Base Factor" shall mean the Real Estate Taxes for the Comparative
Tax Year in which the Renewal Term occurs; and in subdivision (iii)
the "Comparative Tax Year shall mean the real estate tax year
following the Base Tax Factor.
(e) In Section 22.02, in subdivision (ii) the "Base Wage
Rate" shall mean the Wage Rate in effect for the Year in which the
Renewal Term occurs.
Section 39.03. Following the determination of the minimum rent,
Landlord and Tenant shall execute an agreement amending this Lease to reflect
the foregoing, but the provisions of this Article 39 shall be effective with
respect to the Renewal Term effective from the commencement of the Renewal Term
whether or not such an amendment is executed.
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ARTICLE 40.
ARBITRATION
Section 40.01. The arbitration provided for in Articles 38 and 39
shall be settled by arbitration in the Borough of Manhattan, City, County and
State of New York, conducted to the extent consistent with this Article 40 in
accordance with the rules then obtaining of the American Arbitration
Association, or any successor body of similar function, governing commercial
arbitration, except that the foregoing shall not be deemed or construed to
require that such arbitration actually be conducted by or before the American
Arbitration Association or any successor body of similar function. The
arbitration shall be conducted before arbitrators selected as follows: The party
desiring arbitration shall appoint a disinterested real estate broker with at
least ten (10) years experience in the matter involved complying with the
provisions of Section 40.02 hereof as arbitrator on its behalf and give notice
thereof to the other party who shall, within twenty (20) days thereafter,
appoint a second disinterested real estate broker with at least ten (10) years
experience in the matter involved as arbitrator on its behalf and give written
notice thereof to the first party. The arbitrators thus appointed shall, within
twenty (20) days after the date of the appointment of the second arbitrator,
appoint a third disinterested person, who shall be a real estate broker licensed
by the State of New York or otherwise qualified and having the necessary
expertise, including at least ten (10) year's experience, in the matter or
discipline which is the primary subject or is primarily involved in such
arbitration. If the arbitrators thus appointed shall fail to appoint such third
disinterested person within said twenty (20) day period, then either party may,
by application to the presiding Justice of Appellate Division of the Supreme
Court of the State of New York for the First Judicial Department, which
application shall be made within fifteen (15) days after the end of said twenty
(20) day period, seek to appoint such third disinterested person, such
appointment being made not later than thirty (30) days after the date of said
application. Upon such appointment, such person shall be the third arbitrator as
if appointed by the original two arbitrators. The decision of the majority of
the arbitrators shall be final, non-appealable, conclusive and binding on all
parties and judgment upon the award may be entered in any court having
jurisdiction. If a party who shall have the right pursuant to the foregoing, to
appoint an arbitrator, fails or neglects to do so, then and in such event the
other party shall select the arbitrator not so selected by the first party, and
upon such selection, such arbitrator shall be deemed to have been selected by
the first party. The expenses of arbitration shall be shared equally by Landlord
and Tenant, but each party shall pay and be separately responsible for its own
counsel and witness fees and disbursements. Landlord and Tenant agree to sign
all documents and to do all other things reasonably necessary to submit any such
matter to arbitration and further agree to, and hereby do, waive any and all
rights they or either of them may at any time have to revoke their agreement
hereunder to submit to arbitration and to abide by the decision rendered
thereunder and agree that a judgment or order may be entered in any court of
competent jurisdiction based on an arbitration award (including the granting of
injunctive relief).
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Section 40.02. The arbitrators shall have the right to retain and
consult experts and competent authorities skilled in the matters under
arbitration, but any such consultation shall be made in the presence of both
parties, with full right on their part to cross-examine such experts and
authorities. The arbitrators shall render their decision and award upon the
concurrence of at least two (2) of their number, not later than sixty (60) days
after appointment of the third arbitrator. Their decision and award shall be in
writing and counterpart copies thereof shall be delivered to each of the
parties. In rendering their decision and award, the arbitrators shall have no
power to modify or in any manner alter or reform any of the provisions of this
Lease, and the jurisdiction of the arbitrators is limited accordingly.
ARTICLE 41
SUPPLEMENTAL AIR CONDITIONING
Tenant, at its own cost and expense, subject to the provisions of
Article 5 and in accordance with plans and specifications approved by Landlord,
may install an air cooled supplemental air conditioning system or systems
(collectively the "System") the Demised Premises. Such System shall be vented
only through the north or south side of the Building. The design, color and
location of any louvers installed in connection therewith shall be subject to
Landlord's reasonable approval. Tenant, at its own cost, shall maintain such
System in good condition and repair and shall make any replacements thereof as
may be required. Tenant, at its own expense, shall obtain in its own name the
use permits for such System and provide Landlord with copies of same. Tenant
shall also obtain and pay for all annual renewal fees in connection therewith,
and provide Landlord with a copy of such annual renewals. Tenant shall indemnify
and hold Landlord harmless from and against any loss, claims, costs and expenses
(including reasonable attorneys' fees) in connection with the repair and
maintenance of said System.
ARTICLE 42.
ROOF EQUIPMENT
Tenant shall have the right to use its prorata share (excluding
areas required by Landlord for the Building) of the available area on the roof
designated by Landlord for the purpose of locating and/or installing, at its own
cost and expense, a satellite dish and /or antenna (collectively "Equipment").
However, if Landlord thereafter is required to use additional area on the roof
in connection with the operation of the Building, and no other area on the roof
is then available for such purpose, Tenant's prorata share thereof shall be
reduced accordingly and Tenant shall remove its Equipment from such area and
repair any damage caused thereby. Tenant shall also have the right, subject to
the provisions of Article 5, to
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install in the Building core area, risers, ducts, conduits or other facilities,
necessary to connect such Equipment to the Demised Premises or any option or
additional space then leased by Tenant. All such Equipment and connecting
facilities shall be installed and maintained in a manner not to unreasonably
disturb the other tenants in the Building, the operation of the Building systems
therein, in compliance with all applicable Governmental Requirements, and
subject to plans showing the type of Equipment and connecting facilities to be
installed and its location and manner of installation, such plans to be approved
by Landlord. Tenant shall cause the Equipment to be covered under Tenant's
liability insurance policy. Tenant shall indemnify and hold Landlord harmless
from and against any loss, claim, damage or expense in connection with or
relating to the installation, maintenance and operation of such Equipment and
connecting facilities. Tenant, at its own cost, shall repair any damage to the
Building, roof and/or Demised Premises caused by such work, and shall at all
times maintain and repair the Equipment and wiring, including any required
replacements thereof.
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IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of the day and year first above written.
622 BUILDING COMPANY LLC,
By: 622 Building Corp.,
its managing member
By: /s/ Charles Steven Cohen
-------------------------------
Charles Steven Cohen, President
Landlord
TMP WORLDWIDE, INC.
By: /s/ Bart W. Catalane
-------------------------------
Name: Bart W. Catalane
Title: Chief Financial Officer
Tenant
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STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 13th day December of in the year 1999 before me, the
undersigned, a Notary Public in and said State, personally appeared Charles
Steven Cohen, personally known to me or proved to me on the basis of
satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
capacity, and that by his signature on the instrument, the individual, or the
entity upon behalf of which the individual acted, executed the instrument.
/s/ Madeline C. Marcus
-----------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 18th day of December in the year 1999 before me, the
undersigned, a Notary Public in and said State, personally appeared Bart W.
Catalane, personally known to me or proved to me on the basis of satisfactory
evidence to be the individual whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his capacity,
and that by his signature on the instrument, the individual, or the entity
upon behalf of which the individual acted, executed the instrument.
/s/ Nancy Rooney
-----------------------------
Notary Public
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SCHEDULE A
FLOOR PLAN
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SCHEDULE B
DESCRIPTION OF LAND
ALL that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, County of New York, City and State of New York, bounded
and described as follows:
BEGINNING at the corner formed by the intersection of the northerly side of 40th
Street with the westerly side of 3rd Avenue;
RUNNING THENCE northerly along the westerly side of 3rd Avenue, 74 feet 3/4 of
an inch;
THENCE westerly parallel with northerly side of 40th Street, 100 feet;
THENCE northerly parallel with the westerly side of 3rd Avenue, 123 feet 5 1/4
inches to the southerly side of 41st Street;
RUNNING THENCE westerly along the southerly side of 41st Street, 228 feet 4
inches to a point distant 91 feet 8 inches east of the easterly side of
Lexington Avenue;
THENCE southerly parallel with the westerly side of 3rd Avenue, 80 feet;
THENCE westerly parallel with the southerly side of 41st Street, 16 feet 8
inches;
THENCE southerly parallel with the westerly side of 3rd Avenue, 18 feet 9
inches;
THENCE easterly parallel with the southerly side of 41st Street, 50 feet;
THENCE southerly parallel with the westerly side of 3rd Avenue, 23 feet 9
inches;
THENCE easterly parallel with the southerly side of 41st Street, 45 feet;
THENCE southerly and parallel with the westerly side of 3rd Avenue, 75 feet to
the northerly side of 40th Street; and
THENCE easterly along the northerly side of 40th Street, 250 feet to the point
or place of BEGINNING.
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SCHEDULE C
RULES AND REGULATIONS
1. The rights of tenants in the entrances, corridors, elevators and
escalators of the Building are limited to ingress to and egress from the
tenants' premises for the tenants and their employees, licensees, guests,
customers and invitees, and no tenant shall use, or permit the use of, the
entrances, corridors, escalators or elevators for any other purpose. No tenant
shall invite to the tenant's premises, or permit the visit of, persons in such
numbers or under such conditions as to interfere with the use and enjoyment of
any of the plazas, entrances, corridors, escalators, elevators and other
facilities of the Building by other tenants. Fire exits and stairways are for
emergency use only, and they shall not be used for any other purposes by the
tenants, their employees, licensees or invitees. No tenant shall encumber or
obstruct, or permit the encumbrance or obstruction of any of the sidewalks,
plazas, entrances, corridors, escalators, elevators, fire exits or stairways of
the Building. The Landlord reserves the right to control and operate the public
portions of the Building and the public facilities, as well as facilities,
furnished for the common use of the tenants, in such manner as it deems best for
the benefit of the tenants generally. Landlord further reserves the right, at
any time, to install a message/package center in an area in the Building
designated by Landlord and reasonably accessible to and for the common use of
tenant's, and the tenants shall comply with the procedures for the same set
forth by the Landlord.
2. The reasonable cost of repairing any damage to the public
portions of the Building or the public facilities or to any facilities used in
common with other tenants, caused by a tenant or the employees, licensees or
invitees of the tenant, shall be paid by such tenant.
3. The Landlord may refuse admission to the Building outside of
ordinary business hours to any person not known to the watchman in charge or not
having a pass issued by the Landlord or not properly identified, and may require
all persons admitted to or leaving the Building outside of ordinary business
hours to register. Tenant's employees, agents and visitors shall be permitted to
enter and leave the building after ordinary business hours, subject to the
reasonable requirements of Landlord previously agreed to between the Landlord
and the Tenant with respect thereto. Each tenant shall be responsible for all
persons for whom he requests such permission and shall be liable to the Landlord
for all acts of such persons. If Landlord issues identification cards for the
use of tenants in the Building, the initial cost thereof shall be borne by
Landlord. Any person whose presence in the Building at any time shall, in the
judgment of the Landlord, be prejudicial to the safety, character, reputation
and interests of the Building or its tenants may be denied access to the
Building or may be rejected therefrom. In case of invasion, riot, public
excitement or other commotion the Landlord may prevent all access to the
Building during the continuance of the same, by closing the doors or otherwise,
for the safety of the tenants and protection of property in the Building. The
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Landlord may require any person leaving the Building with any package or other
object to exhibit a pass from the tenant from whose premises the package or
object is being removed, but the establishment and enforcement of such
requirement shall not impose any responsibility on the Landlord for the
protection of any tenant against the removal of property from the premises of
the tenant. The Landlord shall, in no way, be liable to any tenant for damages
or loss arising from the admission, exclusion or ejection of any person to or
from the tenant's premises or the Building under the provisions of this rule.
4. No tenant shall obtain or accept for use in its premises towel,
barbering, boot blacking, floor polishing, lighting maintenance, cleaning or
other similar services from any persons not authorized by the Landlord in
writing to furnish such services, provided always that the charges for such
services by persons authorized by the Landlord are comparable to the industry
charge. Such services shall be furnished only at such hours, in such places
within the tenant's premises and under such reasonable regulations as may be
fixed by the Landlord.
5. No awnings or other projections over or around the windows shall
be installed by any tenant, and only such window blinds as are supplied or
permitted by the Landlord shall be used in a tenant's premises.
6. There shall not be used in any space, or in the public halls of
the Building, either by the Tenant or by jobbers or others, in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.
7. All entrance doors in each tenant's premises shall be left locked
when the tenant's premises are not in use. Entrance doors shall not be left open
at any time. All windows in each tenant's premises shall be kept closed at all
times and all blinds therein above the ground floor shall be lowered when and as
reasonably required because of the position of the sun, during the operation of
the Building air conditioning system to cool or ventilate the tenant's premises.
8. No noise, including the playing of any musical instruments, radio
or television, which, in the reasonable judgment of the Landlord, might disturb
other tenants in the Building shall be made or permitted by any tenant. Nothing
shall be done or permitted in any tenant's premises, and nothing shall be
brought into or kept in any tenant's premises, which would unreasonably impair
or interfere with any of the Building services or the proper and economic
heating, cleaning or other servicing of the Building or the premises, or the use
or enjoyment by any other tenant of any other premises, nor shall there be
installed by any tenant any ventilating, air conditioning, electrical or other
equipment of any kind which, in the judgment of the Landlord, might cause any
such impairment or interference. No dangerous, flammable, combustible or
explosive object or material shall be brought into the Building by any tenant or
with the permission of any tenant.
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9. Tenant shall not permit any cooking or food odors emanating
within the Demised Premises to seep into other portions of the Building.
10. No acids, vapor or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures in
or serving any tenant's premises shall not be used for any purpose other than
the purpose for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein. All
damages resulting from any misuse by any tenant of the fixtures shall be borne
by the tenant who, or whose servants, employees, agents, visitors or licensees,
shall have caused the same.
11. No signs, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any tenant on any part of the
outside of the Building or inside the premises if visible from outside of the
Building, without the prior written consent of the Landlord. In the event of the
violation of the foregoing by any tenant, Landlord may remove the same without
any liability, and may charge the expense incurred by such removal to the tenant
or tenants violating this rule. Interior signs and lettering on doors and
elevators shall be inscribed, painted, or affixed by each tenant at the expense
of such tenant, and shall be of a size, color and style reasonably acceptable to
Landlord. Landlord shall have the right to prohibit any advertising by any
tenant which impairs the reputation of the building or its desirability as a
building for offices, and upon written notice from Landlord, Tenant shall
refrain from or discontinue such advertising.
12. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows in any tenant's premises and no lock on any door
therein shall be changed or altered in any respect, unless tenant provides the
Landlord with a duplicate key. Upon the termination of a tenant's lease, all
keys of the tenant's premises and toilet rooms shall be delivered to the
Landlord.
13. No tenant shall mark, paint, drill into or in any way deface any
part of the Building or the premises demised to such tenant. No boring, cutting
or stringing of wires shall be permitted, except with the prior written consent
of Landlord, which will not be unreasonably withheld or delayed, and as Landlord
may reasonably direct. No tenant shall install any resilient tile or similar
floor covering in the premises demised to such tenant except in a manner
approved by Landlord.
14. No tenant shall use or occupy, or permit any portion of the
premises demised to such tenant to be used or occupied, as an office for a
public stenographer or typist, or as a barber or manicure shop, or as an
employment bureau. No tenant or occupant shall engage or pay any employees in
the Building, except those actually working for such tenant or occupant in the
Building, nor advertise for laborers giving an address at the Building.
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15. No premises shall be used, or permitted to be used, at any time,
as a store for the sale or display of goods, wares or merchandise of any kind,
or as a restaurant, shop, booth, bootblack or other stand, or for the conduct of
any business or occupation which predominantly involves direct patronage of the
general public in the premises demised to such tenant, or for manufacturing or
for other similar purposes.
16. The requirements of tenants will be attended only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of the regular duties, unless under
special instructions from the office of the Landlord.
17. Each tenant shall, at its expense, provide artificial light in
the premises demised to such tenant for Landlord's agents, contractors and
employees while performing janitorial or other cleaning services and making
repairs or alterations in said premises.
18. The tenant's employees shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.
19. If the premises demised to any tenant become infested with
vermin caused by such tenant, such tenant, at its sole cost and expense, shall
cause its premises to be exterminated, from time to time, to the satisfaction of
Landlord and shall employ such exterminators therefor as shall be approved by
Landlord.
20. No bicycle or other vehicle and no animals shall be allowed in
the showrooms, offices, halls, corridors or any other parts of the Building.
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SCHEDULE D
CLEANING SPECIFICATIONS
for
622 Third Avenue, New York, New York
Landlord will perform cleaning services in the Demised Premises and related
areas as follows:
NIGHTLY
Empty and wipe clean all ash trays.
Empty and wipe clean all waste receptacles.
Wipe clean all areas within hand high reach; including but not
limited to window sills, wall ledgers, chairs, desks, tables,
baseboards, file cabinets, convector enclosures, pictures and all
manner of office furniture.
Wipe clean all glass top desks and tables.
Sweep with treated cloths all composition tile flooring.
Carpet sweep all carpeted areas, and vacuum clean weekly.
PUBLIC LAVATORIES (Nightly or as otherwise designated)
Wash and dry all bowls, seats urinals, washbasins and mirrors.
Wash and wipe dry all metal work.
Insert toilet tissue, toweling and soap in dispensers; materials to
be supplied by Tenant.
Empty paper towel and sanitary napkin disposal receptacles and
remove to designated area.
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Sweep and wash floors.
Wipe clean all sills, partitions and ledges.
Wipe clean exterior of waste cans and dispensing units.
Wash both partitions monthly.
Wash tile walls monthly.
Wash and dry interior of waste cans and sanitary disposal containers
weekly. Machine scrub flooring monthly.
Dust exterior of light fixtures monthly.
FLOOR MAINTENANCE
High Dusting Public Areas.
High dust all walls, ledges, pictures, anemostats, registers,
grilles, etc., not reached in normal nightly cleaning quarterly.
WINDOW CLEANING SERVICES
Clean all exterior windows, inside and out periodically during the
year, as Landlord deems necessary.
RUBBISH REMOVAL SERVICES
Remove all ordinary dry rubbish and paper only from the office
premises of the Demised Premises daily, Monday through Friday,
holidays excepted.
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SCHEDULE E
DEFINITIONS
(a) The term MORTGAGE shall include an indenture of mortgage and
deed of trust to a trustee to secure an issue of bonds, and the term MORTGAGEE
shall include such a trustee.
(b) The terms INCLUDE, INCLUDING and SUCH AS shall each be construed
as if followed by phrase "without being limited to".
(c) The term OBLIGATIONS OF THIS LEASE, and words of like import,
shall mean the covenants to pay rent and additional rent under this lease and
all of the other covenants and conditions contained in this lease. Any provision
in this lease that one party or the other or both shall do or not do or shall
cause or permit or not cause or permit a particular act, condition, or
circumstance shall be deemed to mean that such party so covenants or both
parties so covenant, as the case may be.
(d) The term TENANT'S OBLIGATIONS HEREUNDER, and words of like
import, and the term LANDLORD'S OBLIGATIONS HEREUNDER, and words of like import,
shall mean the obligations of this lease which are to be performed or observed
by Tenant, or by Landlord, as the case may be. Reference to PERFORMANCE of
either party's obligations under this lease shall be construed as "performance
and observance".
(e) Reference to Tenant being or not being IN DEFAULT HEREUNDER, or
words of like import, shall mean that Tenant is in default, after any applicable
notice and cure periods, in the performance of one or more of Tenant's
obligations hereunder, or that Tenant is not in default, after any applicable
notice and cure periods, in the performance of any of Tenant's obligations
hereunder, or that a condition of the character described in Section 16.01 has
occurred and continues or has not occurred or does not continue, as the case may
be.
(f) References to Landlord as having NO LIABILITY TO TENANT or being
WITHOUT LIABILITY TO TENANT, shall mean that Tenant is not entitled to terminate
this lease, or to claim actual or constructive eviction, partial or total, or to
receive any abatement or diminution of rent, or to be relieved in any manner of
any of its other obligations hereunder, or to be compensated for loss or injury
suffered or to enforce any other kind of liability whatsoever against Landlord
under or with respect to this lease or with respect to Tenant's use or occupancy
of the Demised Premises, except as expressly set forth in this Lease.
(g) The term LAWS AND/OR REQUIREMENTS OF PUBLIC AUTHORITIES and
words of like import shall mean laws and ordinances of any or all of the
Federal, state, city, county and
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borough governments and rules, regulations, orders and/or directives of any or
all departments, subdivisions, bureaus, agencies or offices thereof, or of any
other governmental, public or quasi-public authorities, having jurisdiction in
the premises, and/or the direction of any public officer pursuant to law.
(h) The term REQUIREMENTS OF INSURANCE BODIES and words of like
import shall mean rules, regulations, orders and other requirements of the New
York Board of Fire Underwriters and/or the New York Fire Insurance Rating
Organization and/or any other similar body performing the same or similar
functions and having jurisdiction or cognizance of the Building and/or the
Demised Premises.
(i) The term REPAIR shall be deemed to include restoration and
replacement as may be necessary to achieve and/or maintain good working order
and condition.
(j) Reference to TERMINATION OF THIS LEASE includes expiration or
earlier termination of the term of this lease or cancellation of this lease
pursuant to any of provisions of this lease or to law. Upon a termination of
this lease, the term and estate granted by this lease shall end at 5:00 p.m. of
the date of termination as if such date were the date of expiration of the term
of this lease and neither party shall have any further obligation or liability
to the other after such termination (i) except as shall be expressly provided
for in this lease, or (ii) except for such obligation as by its nature or under
the circumstances can only be, or by the provisions of this lease, may be,
performed after such termination, and, in any event, unless expressly otherwise
provided in this lease, any liability for a payment which shall have accrued to
or with respect to any period ending at the time of termination shall survive
the termination of this lease.
(k) The term TENANT shall mean Tenant herein named or any assignee
or other successor in interest (immediate or remote) of Tenant herein named,
while such Tenant or such assignee or other successor in interest, as the case
may be, is in possession of the Demised Premises as owner of the Tenant's estate
and interest granted by this lease and also, if Tenant is not an individual or a
corporation or a limited liability company, all of the persons, firms and
corporations then comprising Tenant.
(l) Words and phrases used in the singular shall be deemed to
include the plural and vice versa, and nouns and pronouns used in any particular
gender shall be deemed to include any other gender.
(m) The rule of EJUSDEM GENERIS shall not be applicable to limit a
general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
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TABLE OF CONTENTS
ARTICLE PAGE
- ------- ----
1. Premises; Term.................................................1
2. Commencement of Term...........................................1
3. Rent...........................................................3
4. Use............................................................5
5. Alterations, Fixtures..........................................6
6. Repairs........................................................9
7. Floor Load; Noise.............................................10
8. Laws, Ordinances, Requirements of Public Authorities..........10
9. Insurance.....................................................13
10. Damage by Fire or Other Cause.................................15
11. Assignment, Subletting, Mortgaging............................16
12. Liability of Landlord and Indemnity by Tenant.................23
13. Moving of Heavy Equipment.....................................25
14. Condemnation..................................................26
15. Entry, Right to Change Public Portions of the Building........27
16. Conditional Limitations, Etc..................................28
17. Mechanic's Liens..............................................33
18. Landlord's and Tenant's Right to Perform Obligations..........34
19. Covenant of Quiet Enjoyment...................................34
20. Excavation....................................................35
21. Services and Equipment........................................35
22. Escalation....................................................39
23. Electricity...................................................45
24. Broker........................................................47
25. Subordination and Ground Lease................................48
26. Estoppel Certificate..........................................51
27. Waiver of Jury Trial..........................................52
28. Surrender of Premises.........................................52
29. Rules and Regulations.........................................53
30. Successors and Assigns and Definitions........................53
31. Notices.......................................................54
32. No Waiver; Entire Agreement...................................55
33. Captions......................................................57
34. Inability to Perform..........................................57
35. No Representations by Landlord................................58
36. Rent Control..................................................58
37. Landlord's Contribution.......................................59
38. Additional Space..............................................60
39. Option for Renewal Term.......................................63
40. Arbitration...................................................65
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TABLE OF CONTENTS
41. Supplemental Air Conditioning.................................66
42. Roof Equipment ..............................................67
Testimonium and Signatures....................................68
Acknowledgments 69
Schedule A Floor Plan....................................70
Schedule B Description of Land...........................71
Schedule C Rules and Regulations.........................72
Schedule D Cleaning Specifications.......................76
Schedule E Definitions...................................78
ii
<PAGE>
----------------------------------------
622 BUILDING COMPANY LLC
Landlord,
TMP WORLDWIDE, INC.
Tenant.
----------------------------------------
----------
LEASE
----------
Premises: 622 Third Avenue
New York, New York 10022
Entire 36TH, 37th, 38th and 39th Floors
<PAGE>
EXHIBIT 23.1(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TMP Worldwide Inc.
New York, New York
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 of our reports
dated March 26, 1999, relating to the consolidated financial statements and
schedule of TMP Worldwide Inc. and Subsidiaries appearing in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 and our
reports dated November 19, 1999, relating to the supplemental consolidated
financial statements and schedule of TMP Worldwide Inc. and Subsidiaries
appearing on the Company's Current Report on Form 8-K dated December 1, 1999.
We also consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 of our report
dated December 16, 1999, relating to the financial statements of Highland
Search Group L.L.C. appearing in the Company's Current Report on Form 8-K/A
dated January 4, 2000.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
/s/ BDO SEIDMAN, LLP
BDO SEIDMAN, LLP
New York, New York
January 5, 2000
<PAGE>
Exhibit 23.1(c)
The Board of Directors
Morgan & Banks Limited
Level 11, Grosvenor Place
225 George Street
SYDNEY NSW 2000
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We hereby consent to the use of our reports:
a) dated 16 June 1998, except for Note 2 of Notes to and forming part of the
Consolidated Financial Statements for which the date is 21 September 1998,
relating to the consolidated balance sheets of Morgan & Banks Limited as at
31 March 1998 and 1997, and the consolidated profit statements and cash flow
statements for each of the years in the three year period ended 31 March 1998
appearing in the Company's Current Report on Form 8-K dated 12 February 1999;
and
b) dated 15 April 1999, relating to the consolidated balance sheets of Morgan
& Banks Limited as at 31 December 1998 and 31 March 1998, and the profit
statements for the years ended 31 December 1998, 31 March 1998 and 31 March
1997, and the cash flow statements for the nine month period ended 31
December 1998 and the years ended 31 March 1998 and 31 March 1997 appearing
in the Company's Current Report on Form 8-K dated December 1, 1999;
which reports are incorporated by reference in the Prospectus constituting a
part of this Registration Statement on Form S-3 of TMP Worldwide Inc.
We also consent to the reference to us under the caption "Experts" in the
Prospectus constituting a part of this Registration Statement.
Sydney, Australia
January 5, 2000
Pannell Kerr Foster
/s/ PANNELL KERR FOSTER
<PAGE>
Exhibit 23.1(d)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement of our reports
dated April 7, 1999, included in TMP Worldwide Inc.'s Registration Statement
No. 333-82531 filed on Form S-4 and included in TMP Worldwide Inc.'s Form 8-K
dated December 1, 1999, and to all references to our firm included in this
registration statement.
Arthur Andersen LLP
Tampa, Florida
January 5, 2000
<PAGE>
Exhibit 23.1(e)
[LETTERHEAD OF DARBY & DARBY]
January 5, 2000 Andrew Baum
MEMBER OF THE FIRM
Reference: 1708/8B945 (212) 527-7722
[email protected]
TMP Worldwide Inc.
1633 Broadway
New York, New York 10019
Re: TMP Worldwide Inc.
Registration Statement on Form S-3
----------------------------------
Dear Sirs:
We consent to the reference to this firm under the captions "Risk Factors -- We
are vulnerable to intellectual property claims brought against us by others" and
"Experts" in the Prospectus contained in the above-referenced Registration
Statement. This consent is not to be construed as an admission that we are a
party whose consent is required to be filed with the Registration Statement
under the provisions of the Securities Act of 1933.
Very truly yours,
DARBY & DARBY P.C.
By /s/ Andrew Baum
--------------------------
Andrew Baum
AB:em
