<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1997
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ASI SOLUTIONS INCORPORATED
(Exact name of registrant as specified in charter)
DELAWARE 8980 13-3903237
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
ASI SOLUTIONS INCORPORATED
780 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 319-8400
(Address including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------
BERNARD F. REYNOLDS, CHIEF EXECUTIVE OFFICER
ASI SOLUTIONS INCORPORATED
780 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 319-8400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies To:
CARL SELDIN KOERNER, ESQ. DAVID F. DIETZ, P.C.
KOERNER SILBERBERG & WEINER, LLP GOODWIN, PROCTER & HOAR LLP
112 MADISON AVENUE EXCHANGE PLACE
NEW YORK, NEW YORK 10016 BOSTON, MASSACHUSETTS 02109-2881
(212) 689-4400 (617) 570-1000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
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, 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. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE (1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value................. $ 20,240,000 $6,133.33
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Representative's Warrants (2)................ $ 2,200 $ 0.67
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Total Registration Fee....................... $6,134.00
</TABLE>
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(1) Includes 330,000 shares of Common Stock which the Underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) To be issued to the Representative of the Underwriters.
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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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JANUARY 24, 1997
PROSPECTUS
2,200,000 SHARES
[LOGO OF ASI SOLUTIONS INCORPORATED APPEARS HERE]
COMMON STOCK
All of the 2,200,000 shares of common stock, par value $0.01 per share (the
"Common Stock"), of ASI Solutions Incorporated (the "Company") offered hereby
are being sold by the Company. Certain stockholders of the Company (the
"Selling Stockholders") have also granted the Underwriters a 30-day option to
purchase up to an aggregate of 330,000 additional shares of Common Stock to
cover over-allotments, if any. The Company will not receive any of the proceeds
from the sale of shares by the Selling Stockholders if such option is
exercised. Prior to this offering (the "Offering"), there has been no public
market for the Common Stock. It is currently anticipated that the initial
public offering price will be between $7 and $8 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. Application has been made for listing the Common Stock
on the Nasdaq National Market under the trading symbol "ASIS", subject to
official notice of issuance.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
"RISK FACTORS" BEGINNING ON PAGE 5.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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<S> <C> <C> <C>
Per share.................................. $ $ $
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Total (3).................................. $ $ $
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</TABLE>
(1) Excludes additional compensation to the Representative of the Underwriters
in the form of warrants to purchase up to 220,000 shares of Common Stock
during the four year period commencing one year after the date of this
Prospectus at an exercise price equal to 150% of the initial public
offering price (the "Representative's Warrants"). The Company and the
Selling Stockholders have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
to be $700,000.
(3) The Selling Stockholders have granted the several Underwriters a 30-day
option to purchase up to 330,000 additional shares of Common Stock on the
same terms and conditions as set forth above solely to cover over-
allotments, if any. If the Underwriters exercise such option in full, the
total Price to Public, Underwriting Discount, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ , $ and $
respectively. See "Underwriting."
-----------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to the approval of certain legal matters by counsel for the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made in Boston,
Massachusetts on or about , 1997.
-----------
H.C. WAINWRIGHT & CO., INC.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
The initial page of the Company's full-color gatefold which appears on the
inside front cover of the Prospectus depicts four icons which are displayed at
the Company's internet address. The icons are each identified as one of the
Company's four core areas of business; assessment and selection, training and
development, customer contact monitoring and employment process
administration. The remainder of this initial page of the gatefold illustrates
an enlarged telephone keypad in the background together with a group of four
professionals working at a conference room table. Overlaid in the foreground
against this background is the face of a customer service representative with
a telephone headset who is engaged in conversation with a customer, as well as
a second professional who is monitoring the telephone conversation. Also in
the foreground appear four additional working professionals. The text which
accompanies these photographs is as follows:
ASI Solutions Incorporated is a leading national provider of a
comprehensive range of human resources outsourcing services in support
of large organizations seeking to hire, train and develop a higher
quality, more effective workforce.
The name of the Company, the Company's logo and the Company's internet
address also appear on this page.
"ASI" and the related logo and ASI Solutions Incorporated are service marks
of the Company. Applications to register such service marks have been filed
with the United States Patent and Trademark Office by the Company. This
Prospectus also includes references to trademarks and tradenames of other
companies.
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY, INCLUDING INITIATING BIDS OR EFFECTING
PURCHASES ON THE NASDAQ NATIONAL MARKET FOR THE PURPOSE OF PREVENTING OR
RETARDING A DECLINE IN THE MARKET PRICE OF THE COMMON STOCK. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
The photograph of the four professionals working at a conference room table
which appears on the first page of the gatefold appears again on the second
page of the gatefold together with an additional photograph of a customer
service representative engaged in conversation with a customer. The text which
accompanies these photographs is as follows:
The wide variety of the Company's services, which include assessment
and selection services, training and development programs, customer
contact monitoring, and employment process administration, including
background reports, position the Company to be a single-source solution
for many organizations which outsource all or a portion of their human
resources functions.
The final page of the gatefold contains the aforementioned four icons which
appear on the first page of the gatefold together with two additional
photographs, one photograph depicting three business professionals in front of
a map of North America and a second photograph of two people shaking hands.
The text which accompanies these photographs is as follows:
. ASI provides services nationwide to a variety of clients, including
American Express Company, Citibank, N.A., Hewlett-Packard Company,
NYNEX Corporation, Inc. and The Proctor & Gamble Company.
. During the twelve months ended September 30, 1996, ASI processed
approximately 256,000 employees and employee applicants of its
clients.
A box containing the Company's industry focus also appears on this page as
follows:
OUR INDUSTRY FOCUS:
. Financial Services . Telecommunications
. Healthcare . Information Technology
. Consumer Products
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. See "Risk
Factors" for information that should be considered by prospective investors.
References to the "Company" include ASI Solutions Incorporated and its
subsidiaries. Unless the context otherwise requires, this Prospectus assumes
(i) the effectiveness of the reorganization thereof, which is described more
fully in "Certain Transactions," (ii) an approximately 1.06-for-1 stock split
to be effected as a stock dividend on the date hereof, and (iii) that the over-
allotment option granted to the Underwriters by the Selling Stockholders is not
exercised.
THE COMPANY
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking
to hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into four core areas; assessment and
selection, training and development, customer contact monitoring and employment
process administration. The Company believes these services position the
Company as a single-source solution for many organizations which outsource all
or a portion of their human resources functions. The Company markets its
services principally to Fortune 500 companies for which customer service, sales
and call center functions are critical components of their businesses.
Industries served by the Company include telecommunications, financial
services, information technology, consumer products and healthcare.
The Company's assessment and selection services entail designing and
implementing assessment processes for the selection of new hires and for the
evaluation of existing employees for advancement to positions of increased
responsibility. The Company's training and development services include live
simulations, competency surveys for job skill evaluation and situational
simulations through which managers are introduced to techniques to improve
their performance. The Company's customer contact monitoring capability is
typically used by clients that engage in the use of call centers for their
customer contact functions, including inbound and outbound calls. The Company's
employment process administration services target clients who have large-scale,
rapid hiring needs and who do not have the in-house capacity to fulfill their
needs.
The Company believes that its business has benefited from a number of
significant industry trends which have increased the market opportunity for the
Company's services. One such trend is an increased focus on the sales and
customer service functions. As global markets have continued to become more
competitive, many businesses have begun to view the interface between customer
and company as an increasingly critical leverage point and have placed
increased emphasis on recruiting and deploying highly skilled and trained sales
and service staffs. Additionally, many businesses have engaged in corporate
downsizing in an effort to remain competitive, which has resulted in inadequate
staffing to meet future growth and peak period activity. Many companies are
also attempting to achieve a greater focus on their core businesses and,
consequently, are outsourcing non-revenue producing functions, such as human
resources. The Company believes that all of these factors have contributed to
an increase in demand for outsourced human resources services.
The Company's strategy is to develop new client relationships through the
initial provision of one or more specific services, and then to promote the
Company's other capabilities as the Company identifies additional opportunities
to address a client's human resources needs. The Company plans to enhance its
market position by applying this strategy to new accounts, as well as to the
continued penetration of existing accounts. The Company also intends to
continue to develop its services in the area of customer contact monitoring in
order to capitalize on the demand for quality assurance in the interaction
between sales and service representatives and their clients. The Company
focuses its
3
<PAGE>
marketing efforts on selected industries which the Company believes are most
likely to benefit from its capabilities such as financial services,
telecommunications, information technology, healthcare and consumer products.
The Company's clients include American Express Company, BellSouth Corporation,
Citibank, N.A., Dean Witter Reynolds, Inc., Georgia-Pacific Corporation,
Hewlett-Packard Company, NYNEX Corporation, Inc., Oxford Health Plans Inc.,
Pepsi-Cola Bottling Co., United Parcel Service of America, Inc. and
Westinghouse Electric Corporation. The Company maintains its principal
executive offices at 780 Third Avenue, New York, New York 10017, its telephone
number is (212) 319-8400 and its internet address is www.asisolutions.com.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock being offered by the Company....... 2,200,000 shares
Common Stock to be outstanding after the
Offering (1).................................... 6,825,158 shares
Use of proceeds................................. To repay indebtedness and for
general corporate purposes,
including working capital,
capital expenditures and
possible acquisitions. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.......... ASIS
</TABLE>
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(1)Excludes (i) 368,533 shares of Common Stock issuable upon exercise of
options outstanding on the date hereof, (ii) 431,467 shares of Common Stock
reserved for issuance under the Company's 1996 Stock Option and Grant Plan
and (iii) 50,000 shares of Common Stock reserved for issuance under the
Company's 1996 Directors' Stock Option Plan. See "Capitalization,"
"Management--Director Compensation," "Management--Stock Option and Grant
Plan" and "Principal Stockholders."
SUMMARY FINANCIAL AND OPERATING DATA (1)
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................ $ 4,268 $ 5,152 $ 6,028 $ 8,023 $ 10,558 $ 5,393 $ 8,053
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations............ (301) 477 232 777 1,412 1,015 1,831
Net income (loss)...... $ (363) $ 243 $ 166 $ 571 $ 732 $ 526 $ 756
========= ========= ========= ========= ========= ========= =========
Proforma net income
(loss) per common and
common equivalent
share................. $ (.08) $ 0.05 $ 0.04 $ 0.12 $ 0.16 $ 0.11 $0.16
Proforma weighted-
average number of
common and common
equivalent shares
outstanding (2)....... 4,667,404 4,667,404 4,667,404 4,667,404 4,667,404 4,667,404 4,667,404
OPERATING DATA:
Number of employees.... 61 75 116 123 145 123 194
Number of candidates
processed............. 40,000 46,000 55,000 84,000 143,000 71,000 184,000
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
ACTUAL AS ADJUSTED (3)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 122 $14,062
Working capital......................................... 518 15,163
Total assets............................................ 4,975 18,915
Total liabilities....................................... 2,886 2,181
Stockholders' equity.................................... 2,089 16,734
</TABLE>
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(1) The Company's statements of operations for the years ended March 31, 1992,
1993, 1994, 1995 and 1996 and for the six months ended September 30, 1995
were prepared on a combined basis for the Company's predecessors,
Assessment Solutions Incorporated and Proudfoot Reports Incorporated, since
these entities were under common control during these periods. As of and
for the six months ended September 30, 1996 the Company's balance sheet and
statement of operations were prepared on a consolidated basis pursuant to a
reorganization which occurred on March 31, 1996 whereby substantially all
of the stockholders of Assessment Solutions Incorporated and all of the
stockholders of Proudfoot Reports Incorporated exchanged their shares for
shares of the Company. The exchange has been accounted for on a historical
cost basis in a manner similar to a pooling of interests. See "Certain
Transactions."
(2) The proforma weighted average number of common and common equivalent shares
outstanding assumes that (i) the reorganization and the related exchange of
shares of common stock had occurred as of April 1, 1991 and (ii)
potentially dilutive instruments issued within one year of the Offering at
a price below the expected initial public offering price were outstanding
for all periods presented.
(3) Reflects the sale of the 2,200,000 shares of Common Stock offered by the
Company hereby after deduction of the underwriting discount and estimated
offering expenses payable by the Company and after application of $705,000
of the net proceeds from the Offering to reduce outstanding indebtedness at
September 30, 1996. The Company estimates that it will apply an additional
$2,195,000 of the net proceeds from the Offering to reduce indebtedness
expected to be outstanding at the time of consummation of the Offering. See
"Use of Proceeds," "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
5
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the shares of Common Stock.
RELIANCE ON SMALL NUMBER OF LARGE CLIENTS; LACK OF LONG-TERM CONTRACTUAL
ARRANGEMENTS
A significant portion of the Company's revenue is generated from a small
number of large clients. Accordingly, the loss of any of these clients could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's five largest clients accounted for
approximately 62% of the Company's total revenue for fiscal years 1994, 1995
and 1996. Accounts receivable from five customers represented approximately
65% of total accounts receivable at each of March 31, 1995 and 1996. The
Company's agreements with clients may generally be terminated by the client on
short notice, typically 30 days. Additionally, the Company's arrangements with
certain clients are based upon course of dealing relationships which can be
terminated immediately. No assurance can be given that any of these clients
will continue to use the Company's services and any reduction in such use
could have a material adverse effect on the Company's business, financial
condition and results of operations.
RELIANCE ON KEY INDUSTRIES
Approximately 74% of the Company's revenue in fiscal 1996 was generated from
clients in the telecommunications, financial services and information
technology industries. Accordingly, a trend in any of these industries not to
use, or to reduce the use of, human resource consulting and outsourcing
services, whether due to adverse business conditions in those industries or
otherwise, could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, due to competitive
conditions in certain relatively concentrated industries, the Company is in
some cases subject to contractual or practical limitations on its ability to
perform services for competitors of existing clients. For example, the Company
recently entered into an agreement that contains a provision prohibiting the
Company from providing this service to any credit card issuer until after
September 30, 1997.
RELIANCE ON KEY PERSONNEL
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees, in
particular, Bernard F. Reynolds, Chairman of the Board and Chief Executive
Officer, Eli Salig, President and Chief Operating Officer, and Seymour Adler,
Executive Vice President. The loss of any of Messrs. Reynolds, Salig or Adler
or certain other key personnel could have a material adverse effect on the
Company's business.
MANAGEMENT OF GROWTH
The Company has recently experienced a period of significant revenue growth,
and an expansion in the number of its employees and the scope of its operating
and financial systems. This growth has resulted in new and increased
responsibility for management personnel. To accommodate recent growth, compete
effectively and manage potential future growth, the Company must continue to
implement and improve information systems, procedures and controls and expand,
train, motivate and manage its work force. These demands will require
additional management personnel, and the Company's future success will depend
to a significant extent on the ability of its current and future management
personnel to operate effectively, both independently and as a group. There can
be no assurance that the Company's personnel, systems, procedures and controls
will be adequate to support the Company's future operations. Any failure to
implement and improve the Company's operational, financial and management
systems or to expand, train, motivate or manage employees could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors--Need to Attract, Retain and Manage
Professional Staff."
6
<PAGE>
NEED TO ATTRACT, RETAIN AND MANAGE PROFESSIONAL STAFF
The Company's business involves the delivery of professional services and is
labor-intensive. The Company's success depends in large part upon its ability
to attract, develop, motivate and retain highly skilled consultants and
professional analysts. There is significant competition for employees with the
skills required to perform the services offered by the Company from other
similar firms. There can be no assurance that the Company will be able to
attract and retain a sufficient number of such employees in the future or that
it will continue to be successful in training, retaining and motivating such
employees. The loss of a significant number of the Company's current
consultants and professionals or the Company's inability to hire a sufficient
number of additional qualified consultants and professionals could have a
material adverse effect on the Company's business, financial condition and
results of operations, including its ability to secure, service and complete
client engagements.
COMPETITION
The human resources outsourcing industry is highly competitive. Although the
industry is highly fragmented, there are several participants in the industry
who have capabilities and resources such as operating experience, research,
development and marketing capabilities comparable to and in certain respects
greater than those of the Company. The Company also competes with the in-house
human resources, training and customer contact staffs of many clients and
potential clients. There can be no assurance that the Company will be able to
compete effectively with such staffs or other existing competitors. In
addition, there can be no assurance that, as the Company's industry continues
to evolve, additional competitors with greater resources than the Company will
not enter the industry, or that the Company's clients will not choose to
service more of their human resources outsourcing needs internally. See
"Business--Competition."
VARIABILITY OF QUARTERLY RESULTS; UNCERTAINTY OF FUTURE OPERATING RESULTS
The Company's quarterly operating results have varied in the past and are
likely to vary in the future. This variability is due to a variety of factors
including, without limitation, demand for the Company's services; seasonal
trends; changes in pricing policies by the Company or its competitors; changes
in the level of the Company's operating expenses; budgeting cycles of the
Company's clients; personnel changes; changes in the Company's strategy; and
general domestic economic conditions.
Revenue is also difficult to forecast because the market for the Company's
services is rapidly evolving, and the Company's sales cycle, from initial
evaluation of a client's needs to purchase and the provision of support
services, is lengthy and varies substantially from customer to customer. Due
to the foregoing, revenue for any future quarter is not predictable with any
significant degree of accuracy. Accordingly, the Company believes that period-
to-period comparisons of its operating results are not necessarily meaningful
and should not be relied upon as indications of future performance. Although
the Company has recently experienced revenue growth, such growth should not be
considered indicative of future revenue growth, if any, or as an indication of
future operating results.
Quarterly revenue and operating results depend, in part, on the significance
of client engagements commenced and completed during a quarter, the number of
working days in a quarter and employee utilization rates. The timing of
revenue is difficult to forecast because the Company's sales cycle is
relatively long in the case of new clients and may depend on factors such as
the size and scope of assignments and general economic conditions. Because a
high percentage of the Company's expenses are relatively fixed, a variation in
the timing of the initiation or the completion of client assignments or a
variation in the length of such assignments, particularly at or near the end
of any quarter, can cause variations in operating results from quarter to
quarter. The Company plans its operating expenditures based on revenue
forecasts and a revenue shortfall below such forecast in any quarter could
likely adversely affect the Company's operating results for that quarter.
Moreover, the Company attempts to manage its personnel utilization rates by
closely monitoring project timetables and staffing requirements for new
projects. On a typical project, a significant number of personnel are provided
by
7
<PAGE>
the Company's clients or third parties. While professional staff must be
adjusted to reflect active projects, the Company must maintain a sufficient
number of senior professionals to oversee existing client projects and
participate with the Company's sales force in securing new client assignments.
In addition, many of the Company's engagements are, and may be in the future,
terminable without client penalty. An unanticipated termination of a major
project would require the Company to maintain or terminate under-utilized
employees, resulting in a higher than expected number of unassigned persons or
severance expense.
PROPRIETARY RIGHTS
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company generally enters into
confidentiality agreements with its employees, consultants, clients and
potential clients and limits access to and distribution of its proprietary
information. The Company also believes that factors such as the technical and
creative skills of its personnel, the Company's corporate knowledge and
expertise in behavioral assessment and name recognition are essential to
establishing and maintaining a leadership position in its industry. The
Company is not aware that it is infringing any proprietary rights of third
parties. There can be no assurance, however, that third parties will not claim
infringement by the Company of their intellectual property rights.
CONTROL BY EXECUTIVE OFFICERS AND CURRENT STOCKHOLDERS
Upon completion of the Offering, Messrs. Reynolds, Salig and Adler will own
or control approximately 63% of the Company's outstanding shares of Common
Stock (approximately 58% if the Underwriters' over-allotment option is
exercised in full). Accordingly, these persons will have the ability to elect
a majority of the Company's Board of Directors and take other corporate
actions requiring stockholder approval, as well as effectively control the
direction and policies of the Company. There can be no assurance that Messrs.
Reynolds, Salig and Adler will not decide to sell all or a portion of their
respective holdings at a future date. In addition, there can be no assurance
that in any transfer of a controlling interest in the Company any other
holders of Common Stock will be allowed to participate in any such transaction
or will realize any premium with respect to their shares of Common Stock. The
foregoing may have the effect of discouraging or preventing certain types of
transactions involving an actual or potential change of control of the
Company. See "Principal Stockholders."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock
of the Company, and there can be no assurance that an active trading market
will develop or be sustained or that shares of Common Stock will be able to be
resold at or above the initial public offering price following the Offering.
The initial public offering price of the Common Stock will be determined by
negotiations among the Company and the Representative of the Underwriters and
may not be indicative of the trading prices of the Common Stock after the
Offering. See "Underwriting" for a description of certain factors considered
in determining the initial public offering price for the Common Stock. The
trading price of the Common Stock following the Offering may be influenced by
many factors, including the depth of the market for the Common Stock, investor
perception of the human resource outsourcing industry or the industry of any
of the Company's significant clients, changes in any securities analysts'
estimates of the Company's future performance, or general market conditions.
In addition, future sales of substantial amounts of Common Stock by existing
stockholders could also adversely affect the prevailing market price of the
Common Stock. See "Shares Eligible for Future Sale."
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company's First Restated Certificate of Incorporation (the
"Certificate") and By-laws (the "By-laws") contain, and certain sections of
the Delaware General Corporation Law also contain, certain provisions
8
<PAGE>
that could discourage potential takeover attempts and make attempts by the
Company's stockholders to change management more difficult. The Certificate
and By-laws require approval of the Chairman of the Board of Directors or at
least 50% of the members of the Board of Directors in order for a special
meeting of stockholders to be called, require advance notice by stockholders
of an intention to nominate persons for election to the Board of Directors or
to make stockholder proposals and if at any time a class of stock of the
Company becomes registered pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and such stock is being traded on a nationally
recognized exchange, any action to be taken at any annual or special meeting
of the stockholders must be taken at a meeting. In addition, the Certificate
authorizes the Board of Directors to issue up to 2,000,000 shares of
undesignated preferred stock (the "Preferred Stock") in one or more classes or
series and to fix the rights, preferences, privileges and restrictions thereof
without stockholder approval and upon such terms as the Board of Directors may
determine. The rights of the holders of Common Stock would be subject to, and
could be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued by the Company in the future. While the Company has
no present intention to issue shares of Preferred Stock, any such issuance
could have the effect of making it more difficult for a third party to acquire
a majority of the outstanding voting stock of the Company. See "Description of
Capital Stock."
FUTURE SALES OF COMMON STOCK; REGISTRATION RIGHTS; POSSIBLE ADVERSE EFFECT ON
FUTURE MARKET PRICE
Upon completion of the Offering, the Company will have a total of 6,825,158
shares of Common Stock outstanding. Of these shares, the 2,200,000 shares of
Common Stock offered hereby (2,530,000 shares if the Underwriters' over-
allotment option is exercised in full) will be freely tradable without
restriction or registration under the Securities Act of 1933, as amended (the
"1933 Act") by persons other than "affiliates" of the Company, as defined in
the 1933 Act. The remaining 4,625,158 shares of Common Stock outstanding
(4,295,158 shares if the Underwriters' over-allotment option is exercised in
full) will be "restricted securities" as that term is defined by Rule 144 as
promulgated under the 1933 Act ("Rule 144"). These restricted securities (the
"Restricted Securities") were issued and sold by the Company in private
transactions in reliance upon exemptions from registration under the 1933 Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Securities
for at least two years, including persons who may be deemed "affiliates" of
the Company, would be entitled to sell within any three-month period a number
of shares that does not exceed the greater of one percent of the number of
shares of Common Stock then outstanding (approximately 68,252 shares upon
completion of the Offering) or the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain manner
of sale provisions and notice requirements, and to the availability of current
public information about the Company. In addition, a person who is not deemed
to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least three years, would be entitled to sell such shares under
Rule 144(k) without regard to the requirements described above.
The Company's executive officers and directors, the Selling Stockholders
and the other current stockholders of the Company (who in the aggregate will
hold all of the Restricted Securities upon completion of the Offering) have
agreed that they will not, directly or indirectly, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of any options to purchase or sale or disposition) of any shares of
Common Stock or other capital stock of the Company, or any securities
convertible into, or exercisable or exchangeable for, any shares of Common
Stock or other capital stock of the Company for a period of 180 days from the
date of this Prospectus. Under Rule 144, upon the expiration of such 180-day
period, 4,292,248 (3,962,248 if the Underwriters' over-allotment option is
exercised in full) of the Restricted Securities will be eligible for sale in
the public market subject to the provisions of Rule 144 and the remaining
332,910 Restricted Securities will become eligible for sale in reliance on
Rule 144(k). In addition, the Company has granted certain registration rights
with respect to (i) shares of Common Stock held by certain stockholders and
(ii) shares of Common Stock underlying the Representative's Warrants.
9
<PAGE>
Registration and sale of such shares could have an adverse effect on the
trading price of the Common Stock. See "Certain Transactions" and
"Underwriting."
Prior to the Offering, there has been no public market for the Common Stock
and no predictions can be made of the effect, if any, that the sale or
availability for sale of additional shares of Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could
occur, could materially and adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through an
offering of its equity securities. See "Shares Eligible for Future Sale."
RISKS RELATED TO REGULATION AND POTENTIAL LIABILITY
The Company is subject to federal and state laws in connection with its
investigative services and consultations regarding hiring potential employees.
The Company is also subject to federal and state laws, and in certain states,
licensing requirements, in connection with its customer contact monitoring
services and to licensing requirements in the State of New York in connection
with certain investigative services. The Company believes that its practices
and policies comply with all applicable laws. However, there can be no
assurance that a review of the Company's operations by regulatory authorities
will not result in a determination that could have a material adverse effect on
the Company.
SIGNIFICANT FLEXIBILITY IN APPLYING NET PROCEEDS OF OFFERING; ABILITY TO
IDENTIFY AND MANAGE ACQUISITIONS
The Company intends to use the net proceeds from the sale of the Common Stock
offered hereby for reduction of indebtedness, capital expenditures, sales and
marketing efforts, management staff additions, working capital and possible
future acquisitions. However, management will have significant flexibility in
applying the net proceeds of the Offering. Failure to utilize the net proceeds
within a reasonable period of time may result in a dilution of the Company's
earnings per share, which could have a material adverse effect on the price of
the Company's Common Stock. See "Use of Proceeds."
The Company intends to use a material portion of the proceeds of the Offering
to make strategic acquisitions or enter into joint ventures. There can be no
assurance that such acquisitions or joint venture opportunities will become
available on terms acceptable to the Company within a reasonable period of
time. Moreover, if the Company is able to identify and consummate such
acquisitions or joint ventures, the Company's management has only limited
experience with acquisitions, which involve numerous risks, including
difficulties in the assimilation of acquired operations and products, the
diversion of management's attention from other business concerns and the
potential loss of key employees of the acquired companies. There can be no
assurance that management will be able to manage these issues successfully.
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price will be substantially higher than the net
tangible book value per share of the Company which, at September 30, 1996, was
$0.44 per share. Investors purchasing shares of Common Stock in the Offering
will suffer immediate, substantial net tangible book value dilution of $5.05
per share, assuming an initial public offering price of $7.50 per share. In
addition, this dilution will be increased to the extent that holders of
outstanding options to purchase Common Stock at prices below the net tangible
book value per share of the Company after the Offering exercise such options.
See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain earnings, if any, for the development of its
business.
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $7.50 per share, after deducting the underwriting discount
and estimated offering expenses payable by the Company of $700,000, are
estimated to be approximately $14,645,000. Such net proceeds are anticipated
to be used as follows:
<TABLE>
<CAPTION>
PERCENTAGE
APPROXIMATE OF NET
AMOUNTS PROCEEDS
----------- ----------
<S> <C> <C>
Reduction of indebtedness:
Lines of credit (1)...................................... $ 2,000,000
Equipment and furniture leases (2)....................... 900,000
-----------
$ 2,900,000 20%
-----------
Capital expenditures:
Expansion of facilities:
Furnishings............................................ $ 525,000
Computer and telephone equipment....................... 975,000
Software development/enhancements........................ 500,000
-----------
$ 2,000,000 14%
-----------
Sales and marketing:
Advertising.............................................. $ 880,000
Marketing materials...................................... 390,000
Conferences.............................................. 150,000
Consulting............................................... 80,000
-----------
$ 1,500,000 10%
-----------
Management staff additions................................. $ 1,150,000 8%
-----------
Working capital and possible acquisitions (3).............. $ 7,095,000 48%
----------- ---
Total................................................ $14,645,000 100%
=========== ===
</TABLE>
- --------
(1) These lines of credit mature on September 30, 1997 and carry annual
interest at the lender's prime rate plus one percent. As of January 24,
1997, the interest rate was 9.25%.
(2) Approximately $393,000 of this amount matures on November 5, 2001 and
carries an annual rate of interest of 9.65%. The remaining $507,000 of
this amount will convert to a term loan which will mature on or about
January 25, 2002 and which will carry an interest rate of 9.25%.
(3) The Company evaluates potential acquisitions from time to time and
believes such transactions may offer an attractive method for the Company
to expand its business. However, the Company presently has no pending
commitments or understandings to enter into any such transactions.
Pending application of the net proceeds from the Offering for the foregoing
purposes, the Company intends to invest the net proceeds in investment grade,
short-term, interest-bearing securities and cash equivalents.
DIVIDEND POLICY
The Company has not paid any dividends with respect to the Common Stock. The
Company currently intends to retain future earnings to finance its growth and
development and therefore does not anticipate the payment of any cash
dividends in the foreseeable future. The declaration and payment of dividends
by the Company are subject to the discretion of its Board of Directors and to
compliance with applicable law. Any determination as to the payment of
dividends in the future will depend upon, among other things, general business
conditions, future earnings and capital requirements of the Company.
11
<PAGE>
CAPITALIZATION
The following table sets forth as of September 30, 1996: (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to reflect (a) the issuance and sale of the 2,200,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$7.50 per share, and (b) receipt of the net proceeds therefrom, after
deducting underwriting discounts and commissions and estimated offering
expenses and (c) the anticipated application of such proceeds to retire
certain indebtedness of the Company. This table should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Notes payable (1) (2)................................... $ 705,000 --
---------- -----------
Stockholders' equity:
Preferred Stock, $.01 par value, none authorized,
actual; 2,000,000 shares authorized, none issued or
outstanding, as adjusted.............................. -- --
Common Stock, $.01 par value, 5,000,000 shares
authorized, 4,625,158 issued and outstanding, actual;
18,000,000 shares authorized, 6,825,158 issued and
outstanding, as adjusted (3).......................... 46,252 $ 68,252
Additional paid in capital............................. 45,822 14,668,822
Retained earnings...................................... 1,996,897 1,996,897
---------- -----------
Total stockholders' equity........................... 2,088,971 16,733,971
---------- -----------
Total capitalization................................. $2,793,971 $16,733,971
========== ===========
</TABLE>
- --------
(1) In addition to the above outstanding notes payable, the Company has
additional lines of credit available for working capital needs and
furniture and equipment purchases aggregating $3,936,000. The Company also
has a commitment letter from a bank for additional short-term financing of
$6 million.
(2) The Company estimates that it will apply an additional $2,195,000 of the
net proceeds from the Offering to reduce indebtedness expected to be
outstanding at the time of consummation of the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
(3) Excludes an aggregate of 51,692 shares of Common Stock issuable upon
exercise of options outstanding as of September 30, 1996.
12
<PAGE>
DILUTION
As of September 30, 1996, the net tangible book value of the Company was
approximately $2,051,234 or $0.44 per share. Net tangible book value per share
represents the amount of tangible net assets of the Company, less total
liabilities, divided by the number of shares outstanding. After giving effect
to the sale by the Company of 2,200,000 shares of Common Stock (at an assumed
initial public offering price of $7.50 per share) and the application of the
net proceeds therefrom, the proforma net tangible book value of the Company at
September 30, 1996 would be $16,696,234 or $2.45 per share. This amount
represents an immediate increase in net tangible book value of $2.01 per share
to existing owners of the Company and an immediate dilution in net tangible
book value per share of $5.05 per share to purchasers of Common Stock in the
Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $7.50
Net tangible book value per share at September 30, 1996....... $0.44
Increase in net tangible book value per share attributable to
new investors................................................. $2.01
Pro forma net tangible book value per share after the
Offering....................................................... $2.45
-----
Dilution per share to new investors............................ $5.05
=====
</TABLE>
The following table summarizes, on a proforma basis, as of September 30,
1996, the differences between existing stockholders and purchasers of shares
in the Offering (at the assumed initial public offering price of $7.50 per
share) with regard to the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders
(1)....................... 4,625,158 67.8% $ 92,074 0.6% $0.02
New investors (1)......... 2,200,000 32.2% $16,500,000 99.4% $7.50
--------- ----- ----------- -----
Total................... 6,825,158 100.0% $16,592,074 100.0%
========= ===== =========== =====
</TABLE>
- --------
(1) If the Underwriters' overallotment option is exercised in full, the number
of shares held by existing stockholders will be reduced to 4,295,158 or
approximately 62.9% of the total outstanding shares, and the number of
shares held by new investors will increase to 2,530,000 or approximately
37.1% of the total outstanding shares, after the Offering.
The foregoing computations assume no exercise of stock options outstanding
as of December 31, 1996. As of January 15, 1997, 368,533 shares of Common
Stock were subject to outstanding options under the Company's 1996 Stock
Option and Grant Plan (the "Option Plan") at a weighted average exercise price
of approximately $5.70 per share. In the event that these options are
exercised, the proforma net tangible equity per share after the Offering will
be $2.61 and dilution per share to new investors in the Offering will be
$4.89. Upon consummation of the Offering, options for an additional 431,467
shares of Common Stock will be available for issuance under the Option Plan
and 25,000 shares of Common Stock will be available for issuance under the
Company's 1996 Directors' Stock Option Plan (the "Directors' Plan"). See
"Capitalization," "Management--Director Compensation," "Management--Stock
Option and Grant Plan," "Description of Capital Stock" and note 11 of notes to
consolidated financial statements.
13
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data set forth below with respect to the Company's
statements of income for the three fiscal years ended March 31, 1994, 1995 and
1996 and balance sheets as of March 31, 1995 and 1996 are derived from audited
financial statements of the Company included elsewhere in this Prospectus. The
Company's statements of operations for the years ended March 31, 1992 and 1993
and the balance sheets as of March 31, 1992, 1993 and 1994 are derived from
unaudited financial statements of the Company not included in this Prospectus.
The statements of operations data for the six months ended September 30, 1995
and 1996 and the balance sheet as of September 30, 1996 are derived from
unaudited financial statements included elsewhere in this Prospectus. The
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, that the Company considers necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the six months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the entire
fiscal year ended March 31, 1997. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA (1):
Revenue................. $ 4,268 $ 5,152 $ 6,028 $ 8,023 $ 10,558 $ 5,393 $ 8,053
Cost of services........ 2,741 2,852 3,207 4,179 5,207 2,538 3,584
--------- --------- --------- --------- --------- --------- ---------
Gross profit............ 1,527 2,300 2,821 3,844 5,351 2,855 4,469
Operating expenses:
General and
administrative........ 1,279 1,169 1,688 1,948 2,225 998 1,441
Sales and marketing.... 503 514 618 744 1,100 524 740
Research and
development........... 46 140 283 375 614 318 458
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations............. (301) 477 232 777 1,412 1,015 1,831
Other income............ -- -- -- 276 -- -- --
Interest (expense)
income, net............ (42) (36) (24) (14) 2 (7) (34)
--------- --------- --------- --------- --------- --------- ---------
Income before provision
for income taxes,
extraordinary item and
cumulative effect of
change in accounting
principle.............. (343) 441 208 1,039 1,414 1,008 1,797
Provision for income
taxes.................. (20) (270) (61) (468) (682) (482) (1,041)
--------- --------- --------- --------- --------- --------- ---------
Income before
extraordinary item and
cumulative effect of
change in accounting
principle.............. (363) 171 147 571 732 526 756
Extraordinary item for
utilization of net
operating loss
carryforwards.......... -- 72 -- -- -- -- --
Cumulative effect of
change in accounting
principle.............. -- -- 19 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)....... $ (363) $ 243 $ 166 $ 571 $ 732 $ 526 $ 756
========= ========= ========= ========= ========= ========= =========
Proforma net income
(loss) per common, and
common equivalent
share.................. $ (0.08) $ 0.05 $ 0.04 $ 0.12 $ 0.16 $ 0.11 $0.16
Proforma weighted-
average number of
common and common
equivalent shares
outstanding............ 4,677,404 4,677,404 4,677,404 4,677,404 4,677,404 4,677,404 4,667,404
OPERATING DATA:
Number of employees..... 61 75 116 123 145 123 194
Number of candidates
processed ............. 40,000 46,000 55,000 84,000 143,000 71,000 184,000
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1992 1993 1994 1995 1996 1996
------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (1):
Cash and cash $ 42 $ 72 $ 22 $ 228 $ 70 $ 122
equivalents...............
Working capital........... (408) (218) (172) 389 530 518
Total assets.............. 1,482 1,776 1,823 2,470 3,179 4,975
Total liabilities......... 1,696 1,662 1,543 1,620 1,846 2,886
Total stockholders' (215) 114 280 850 1,333 2,089
equity....................
</TABLE>
- -------
(1) The Company's statements of operations and balance sheets for the years
ended March 31, 1992, 1993, 1994 and 1995, and for the six months ended
September 30, 1995, and its statement of operations for the year ended
March 31, 1996, were prepared on a combined basis for the Company's
predecessors, Assessment Solutions Incorporated and Proudfoot Reports
Incorporated, since these entities were under common control during these
periods. The Company's balance sheets as of March 31, 1996 and September
30, 1996 and its statement of operations for the six months ended
September 30, 1996 were prepared on a consolidated basis pursuant to a
reorganization which occurred on March 31, 1996 whereby stockholders of
Assessment Solutions Incorporated and Proudfoot Reports Incorporated
exchanged their shares for shares of the Company. The exchange has been
accounted for on a historical cost basis in a manner similar to a pooling
of interests. See "Certain Transactions."
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's historical results of operations
and of its liquidity and capital resources should be read in conjunction with
the Selected Financial and Operating Data of the Company and the consolidated
financial statements of the Company and related notes thereto included
elsewhere in this Prospectus. This Prospectus also contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainty. The Company's actual results could differ significantly from the
results discussed in the forward-looking statements. Factors that could cause
or contribute to such differences include those discussed in "Risk Factors" as
well as those discussed elsewhere in this Prospectus. See "Special Note
Regarding Forward-Looking Statements."
OVERVIEW
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking
to hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into four core areas; assessment and
selection, training and development, customer contact monitoring and
employment process administration. The Company believes these services
position the Company as a single-source solution for many organizations which
outsource all or a portion of their human resources functions. The Company
markets its services principally to Fortune 500 companies for which customer
service, sales and call center functions are critical components of their
businesses. Industries served by the Company include telecommunications,
financial services, information technology, consumer products and healthcare.
The Company was founded in 1978 and initially provided services principally
to companies in the securities industry and later to the regional telephone
companies. In 1986, the Company acquired a background investigation firm to
provide pre-employment screening services. Historically, the Company's revenue
was generated by assessment services and limited employment process
administration services, such as employment background checks. Beginning in
1994, the Company began generating revenue from a broader array of employment
process administration services and its training and development services,
which has favorably impacted the Company's results of operations since that
time. The Company has recently begun providing its customer contact monitoring
services and expects that revenue from such services will represent an
increasing percentage of the Company's total revenue in the future.
The Company has generally experienced higher margins on its newer services,
particularly employment process administration and training and development,
due to several factors. Employment process administration services have tended
to have lower associated labor costs because of efficiencies achieved by the
Company through the use of technology. For example, the Company uses
interactive voice response technology to automate components of its
recruitment processes. In addition internet technologies, which the Company
has incorporated into its worldwide web site, allow remote access to several
of the Company's services. The automation achieved through the use of these
technologies has reduced the Company's staffing level requirements. In
addition, the provision of these services does not require as many advanced
degree personnel as the Company's other services resulting in lower payroll
rates for employment process administration.
Training and development services are typically provided by experienced
staff who have masters or doctoral degrees. The relatively higher payroll
expense associated with such personnel is generally offset by higher pricing
for the services they provide. In addition, provision of the Company's
training and development services has not generally required a significant
increase in the Company's facilities because off-site temporary locations and
client facilities are typically used to provide such services. To date, the
Company has been able to leverage its existing management and administrative
infrastructure to support its expanded services. The Company believes,
however, that additional investment in management personnel, administrative
staff and facilities will be
15
<PAGE>
required to continue to support future growth. Further, the Company intends to
substantially increase its sales and marketing effort through staffing
additions and expenditures for marketing materials and advertising.
The Company enters into a variety of contractual arrangements for its
services, depending on the type of service and the extent of the Company's
relationship with a client. With respect to assessment and selection services,
the Company generally charges a fixed fee for the initial design of the
assessment instruments and selection process, and then delivers the service
for a per applicant fee. The Company's training and development contracts are
generally for a fixed fee per person. Customer contact monitoring is generally
provided on a fee-per-call basis, determined with regard to duration of the
call, aggregate number of calls, and other relevant variables. The Company's
employment process administration services are contracted on a per-unit-fee
basis, depending upon whether the client only needs one type of service, such
as employee background checks, or an entire recruitment and hiring process.
Individual services are also generally provided on a per-unit-fee basis, while
more complete services typically include a base fee component and a unit fee.
The Company's clients generally use the Company's services on an as-needed
basis requiring the Company to be able to respond quickly to changes in the
volume of services it must provide at a given time. The Company has taken a
variety of steps in order to address the operational challenges this situation
presents. The Company engages many of its professionals on a part-time basis
in order to have a large number of staff available on relatively short notice
without associated fixed labor expenses. The Company also cross-trains its
employees in multiple aspects of the delivery of the Company's services giving
the Company as much flexibility as possible with respect to staffing a
particular client engagement. In addition, the Company often provides services
at client facilities or other off-site locations limiting the Company's need
to expand its own facilities in response to rapid increases in clients'
demands for services.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
---------------------- ------------------
1994 1995 1996 1995 1996
------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Revenue............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services................... 53.2 52.1 49.3 47.1 44.5
------ ------ ------ -------- --------
Gross profit....................... 46.8 47.9 50.7 52.9 55.5
Operating expenses:
General and administrative........ 28.0 24.3 21.1 18.5 17.9
Sales and marketing............... 10.3 9.3 10.4 9.7 9.2
Research and development.......... 4.7 4.7 5.8 5.9 5.7
------ ------ ------ -------- --------
Income from operations............. 3.8 9.6 13.4 18.8 22.7
Other income....................... -- 3.4 -- -- --
Interest (expense) income, net..... (0.4) (0.1) -- (0.1) (0.4)
------ ------ ------ -------- --------
Income before provision for income
taxes and cumulative effect of
change in accounting principle.... 3.4 12.9 13.4 18.7 22.3
Provision for income taxes......... (1.0) (5.8) (6.5) (8.9) (12.9)
Cumulative effect of change in
accounting principle.............. 0.3 -- -- -- --
------ ------ ------ -------- --------
Net income......................... 2.7% 7.1% 6.9% 9.8% 9.4%
====== ====== ====== ======== ========
</TABLE>
Six Months Ended September 30, 1996 Compared With Six Months Ended September
30, 1995
Revenue. Revenue increased $2.7 million or 49.3% from $5.4 million for the
six month period ended September 30, 1995 to $8.1 million for the six month
period ended September 30, 1996. This increase was
16
<PAGE>
primarily attributable to increased revenue from the Company's employment
process administration services, as well as modest increases in revenue from
assessment and selection and training and development services. These revenue
gains were primarily the result of higher market demand for human resources
outsourcing services generally, as well as an increase in the Company's
marketing efforts and additions to Company personnel which enabled the Company
to respond to the increased demand for its services.
Cost of services. Cost of services includes payroll and other expenses
directly attributable to the services delivered by the Company, as well as
facilities costs, including telephone expenses, costs for third party data
utilized in background reports (e.g., credit bureau reports) and any necessary
travel directly related to providing such services. Cost of services increased
$1.1 million or 41.2% from $2.5 million for the six month period ended
September 30, 1995 to $3.6 million for the six month period ended September
30, 1996. The increase was primarily attributable to personnel additions,
travel expense associated with training and development services and the cost
of third party data used in the Company's background reports. As a percentage
of revenue, cost of services decreased from 47.1% for the six months ended
September 30, 1995 to 44.5% for the six months ended September 30, 1996,
principally due to the fact that a significant portion of the Company's
outsourcing services and training and development services were performed off-
site at temporary locations and clients' offices which resulted in facilities
costs increasing at a slower rate than the rate of increase in revenue.
General and administrative. General and administrative expense includes
payroll and related expenses attributable to senior management, finance,
information systems, human resources and office administration personnel,
facilities costs and general office expenses pertaining to these functions,
and outside professional fees. General and administrative expense increased
$400,000 or 44.4% from $1.0 million for the six month period ended September
30, 1995 to $1.4 million for the six month period ended September 30, 1996.
This increase was primarily attributable to an increase in salary expense
relating to personnel additions. As a percentage of revenue, general and
administrative expense decreased from 18.5% for the six month period ended
September 30, 1995 to 17.9% for the six month period ended September 30, 1996
due to the Company's ability to service a portion of the additional business
generated during the period with existing personnel. In addition, the Company
reduced its utilization of temporary workers and reduced its costs for medical
premiums by moving to a managed care health plan. As the Company matures, it
expects to employ additional personnel necessary to service its growth.
Sales and marketing. Sales and marketing expense consists of salaries,
commissions and travel-related costs associated with the solicitation of new
business, the cost of designing, producing and distributing marketing
materials, and facilities and office-related expense pertaining to these
activities. Sales and marketing expense increased $216,000 or 41.2% from
$524,000 for the six month period ended September 30, 1995 to $740,000 for the
six month period ended September 30, 1996. Of this increase, approximately
$102,000 was attributable to salaries and related expenses from personnel
additions and approximately $94,000 was attributable to an increase in
expenditures for marketing materials. As a percentage of revenue, sales and
marketing expense decreased from 5.9% for the six month period ended September
30, 1995 to 5.7% for the six month period ended September 30, 1996 due to the
fact that a portion of the increase in revenue during the period was not
subject to commissions and to the fact that revenue increased at a faster rate
than increases in salary expense.
Research and development. Research and development expense includes payroll
and related expenses, facilities costs and necessary travel expenses
pertaining to the professional staff which develops new programs used in the
conduct of assessment and selection testing, training and development
activities and customer contact monitoring. Research and development expense
increased $140,000 or 43.9% from $318,000 for the six month period ended
September 30, 1995 to $458,000 for the six month period ended September 30,
1996. This increase was primarily attributable to the hiring of additional
research and development personnel and the resulting expenditures for payroll
increases which accompanied such hiring. Research and development expense
decreased as a percentage of revenue from 5.9% for the six month period ended
September 30, 1995 to 5.7% for the six month period ended September 30, 1996
due to the largest increase in the Company's revenue during this period being
attributable to service areas which are less dependent upon the research and
development function.
Interest (expense) income, net. Net interest (expense) income represents
interest paid on bank borrowings offset by interest income accrued on notes
receivable due from shareholders. This net expense increased as a
17
<PAGE>
result of a higher utilization of bank lines of credit during the period, the
proceeds of which were invested in equipment and office furnishings.
Provision for income taxes. The difference between the effective federal
income tax provision calculated using statutory rates and the actual provision
recorded is principally due to the effect of state and local taxes. Provision
for income taxes for fiscal 1996 also includes $96,000 relating to the
nondeductibility of certain expenses resulting from an Internal Revenue Service
examination of a prior period.
Fiscal 1996 Compared With Fiscal 1995
Revenue. Revenue increased $2.5 million or 31.6% from $8.0 million in fiscal
1995 to $10.5 million in fiscal 1996. This increase was primarily attributable
to increases in employment process administration revenue as a result of an
increase in the Company's marketing efforts related to background reports
during this period. A portion of this increase was also attributable to
increased training and development revenue due to the expansion of a training
program by one of the Company's regular clients and the retention by that
client of the Company's services in implementing such training program. In
fiscal 1996, the Company also commenced its customer contact monitoring
operations which began to contribute revenue during that year.
Cost of services. Cost of services increased $1.0 million or 24.6% from $4.2
million in fiscal 1995 to $5.2 million in fiscal 1996. The increase was
principally attributable to personnel additions and to fees paid for third
party data used in the Company's background reports. As a percentage of
revenue, cost of services decreased from 52.1% in fiscal 1995 to 49.3% in
fiscal 1996. This decrease was attributable to the Company's ability to utilize
personnel without advanced education on the masters level to perform many of
the Company's outsourcing services. In addition, facilities costs increased at
a slower rate than the rate of increase in revenue since many of the Company's
employment process administration and training and development services were
conducted off-site during fiscal 1996 at the offices of the Company's clients.
General and administrative. General and administrative expense increased
$278,000 or 14.3% from $1.9 million in fiscal 1995 to $2.2 million in fiscal
1996. This increase was primarily attributable to the hiring of additional
management personnel, as well as expenditures for information systems and
office support. As a percentage of revenue, general and administrative expense
decreased from 24.3% in fiscal 1995 to 21.1% in fiscal 1996 as these expenses
increased at a slower rate than the rate of increase in revenue. As the Company
matures and this growth necessitates the hiring of additional personnel and an
additional investment in office support for such personnel, there can be no
assurance that general and administrative expense will continue to increase at
a rate lower than that of revenue.
Sales and marketing. Sales and marketing expense increased $356,000 or 47.8%
from $744,000 in fiscal 1995 to $1.1 million in fiscal 1996. As a percentage of
revenue, sales and marketing expense increased from 9.3% in fiscal 1995 to
10.4% in fiscal 1996 due to an expansion of sales and marketing personnel,
increases in commissions earned from new business developed and increases in
marketing expenses to support ongoing marketing efforts, including maintaining
the Company's internet web site.
Research and development. Research and development expense increased $239,000
or 63.7% from $375,000 in fiscal 1995 to $614,000 in fiscal 1996. This increase
was primarily attributable to the hiring of additional research and development
personnel and the resulting expenditures for payroll increases which
accompanied such hiring. As a percentage of revenue, research and development
expense increased from 4.7% in fiscal 1995 to 5.8% in fiscal 1996 due to an
increase in the number of research personnel utilized during the year to
support business growth and the related costs of operating a larger department.
Other income. Other income represents income earned from the early
termination of a facility lease in fiscal 1995.
Interest (expense) income, net. Net interest (expense) income decreased
during fiscal 1996 principally due to the repayment of notes payable to a bank
and shareholder.
18
<PAGE>
Provision for income taxes. The difference between the effective federal
income tax provision calculated using statutory rates and the actual provision
recorded is principally due to the effect of state and local taxes.
Fiscal 1995 Compared With Fiscal 1994
Revenue. Revenue increased $2.0 million or 33.1% from $6.0 million in fiscal
1994 to $8.0 million in fiscal 1995. Of this increase, approximately $1.5
million or 75% was attributable to increases in assessment and selection
testing activities. The remaining portion of this increase related primarily
to training and development activities conducted by the Company.
Cost of services. Cost of services increased $972,000 or 30.3% from $3.2
million in fiscal 1994 to $4.2 million in fiscal 1995. As a percentage of
revenue, cost of services decreased from 53.2% to 52.1% as a result of payroll
increases which were less than overall revenue gains. This was due in part to
a larger reliance on temporary workers and to the ability of the Company to
utilize its existing staff to perform various services.
General and administrative. General and administrative expense increased
$260,000 or 15.4% from $1.7 million in fiscal 1994 to $1.9 million in fiscal
1995. As a percentage of revenue, this expense decreased from 28.0% in fiscal
1994 to 24.3% in fiscal 1995 due to an increase of 5% in salary expense
compared to an overall revenue increase of 33.1% and facilities costs that
remained consistent with such costs incurred in fiscal 1994. This decrease was
offset in part by increases in both the use of temporary workers and by
increases in telephone expense.
Sales and marketing. Sales and marketing expense increased $126,000 or 20.4%
from $618,000 in fiscal 1994 to $744,000 in fiscal 1995 while decreasing as a
percentage of revenue from 10.3% in fiscal 1994 to 9.3% in fiscal 1995. The
increase in sales and marketing expense was attributable to staffing increases
of 11% and increases in commissions earned of 16% from new business developed.
Research and development. Research and development expense increased $92,000
or 32.3% from $283,000 in fiscal 1994 to $375,000 in fiscal 1995. The increase
in payroll expense, office expense and travel expense related to research and
development was attributable to an expansion in the research and development
department which was required to support new business obtained by the Company
and is consistent with an overall increase in revenue of 33.1%.
Interest (expense) income, net. Net interest (expense) income decreased
$10,000 from $24,000 in fiscal 1994 to $14,000 in fiscal 1995. This decrease
was principally due to the repayment of notes payable to a bank.
Provision for income taxes. The difference between the effective federal
income tax provision calculated using statutory rates and the actual provision
recorded is principally due to the effect of state and local taxes.
Cumulative effect of a change in accounting principle. An adjustment of
$19,000 reflects the impact of the adoption by the Company of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," in
fiscal 1994.
19
<PAGE>
Quarterly results of operations
The following tables set forth unaudited financial data for each of the
eight consecutive fiscal quarters ended September 30, 1996, including such
data expressed as a percentage of the Company's revenue. When read in
conjunction with the Company's consolidated financial statements included
elsewhere in this Prospectus, the Company believes that this information
includes all adjustments, consisting of normal recurring adjustments,
necessary for the fair presentation of such quarterly information. The
operating results of any quarter are not necessarily indicative of the results
of any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------
DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30,
1994 1995 1995 1995 1995 1996 1996 1996
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $2,027 $2,055 $2,579 $2,814 $2,298 $2,867 $3,911 $4,142
Cost of services........ 1,057 1,212 1,183 1,355 1,202 1,467 1,742 1,842
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 970 843 1,396 1,459 1,096 1,400 2,169 2,300
Operating expenses:
General and
administrative........ 489 512 396 602 613 615 741 700
Sales and marketing.... 189 183 219 305 290 286 372 368
Research and
development........... 98 97 148 170 95 201 231 227
------ ------ ------ ------ ------ ------ ------ ------
Income from operations.. 194 51 633 382 98 298 825 1,005
Other income............ 269 -- -- -- -- -- -- --
Interest (expense)
income, net............ 2 5 (3) (4) (1) 10 (27) (7)
------ ------ ------ ------ ------ ------ ------ ------
Income before provision
for income taxes....... 465 56 630 378 97 308 798 998
Provision for income
taxes ................. 201 29 299 183 43 157 367 674
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. $ 264 $ 27 $ 331 $ 195 $ 54 $ 151 $ 431 $ 324
====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUE
THREE MONTHS ENDED
-------------------------------------------------------------------------
DEC. 31, MAR. 31, JUN. 30, SEPT. 30, DEC. 31, MAR. 31, JUN. 30, SEPT. 30,
1994 1995 1995 1995 1995 1996 1996 1996
-------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services........ 52.1 59.0 45.9 48.2 52.3 51.2 44.5 44.5
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 47.9 41.0 54.1 51.8 47.7 48.8 55.5 55.5
Operating expenses:
General and
administrative........ 24.1 24.9 15.4 21.4 26.7 21.4 19.0 16.9
Sales and marketing.... 9.3 8.9 8.5 10.8 12.6 10.0 9.5 8.9
Research and
development........... 4.9 4.7 5.7 6.0 4.1 7.0 5.9 5.5
------ ------ ------ ------ ------ ------ ------ ------
Income from operations.. 9.6 2.5 24.5 13.6 4.3 10.4 21.1 24.2
Other income............ 13.3 -- -- -- -- -- -- --
Interest (expense)
income, net............ -- 0.2 (0.1) (0.1) -- 0.3 (0.7) (0.1)
------ ------ ------ ------ ------ ------ ------ ------
Income before provision
for income taxes....... 22.9 2.7 24.4 13.5 4.3 10.7 20.4 24.1
Provision for income
taxes.................. 9.9 1.4 11.6 6.5 1.9 5.4 9.4 16.3
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. 13.0% 1.3% 12.8% 7.0% 2.4% 5.3% 11.0% 7.8%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
The Company's results of operations have been, and may in the future be,
subject to quarterly fluctuations due to a variety of factors, including the
commencement and implementation of new contracts, a varied and ever-changing
revenue flow and fluctuations in general, administrative, sales and marketing
expenses commensurate with the Company's efforts in developing and supporting
new business. In addition, the Company does experience a certain level of
seasonality as recruiting and training efforts are usually slower in the first
and last calendar quarters of the year, periods which also contain fewer
business days than other quarters. These uncertainties make the estimation of
revenue and the results of operations on a quarterly basis difficult and
increase the potential margin for error in performance forecasts derived from
such estimates. As a result, the Company believes that period-to-period
comparison of its results of operations is not necessary meaningful and should
not be relied upon as any indication of future performance.
20
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from working capital requirements,
capital expenditures and principal and interest payments on debt.
Historically, the Company's primary source of liquidity has been cash flow
from operations, supplemented by borrowings under a bank line of credit. Cash
flow provided by operating activities was $229,000 and $167,000 for the six
month periods ended September 30, 1995 and 1996, respectively, on net income
of $526,000 and $756,000, respectively, offset principally by changes in
working capital; namely accounts and notes receivable, accounts payable and
income taxes payable. Cash flow from operations was $691,000 and $290,000, in
fiscal years 1995 and 1996, respectively, on net income of $571,000 and
$732,000, respectively, offset principally by changes in operating assets and
liabilities; namely accounts and notes receivable, accounts payable and income
taxes payable.
Cash flow used in investing activities was $87,000 and $720,000 for the six
month periods ended September 30, 1995 and 1996, respectively, and $242,000
and $280,000 in fiscal years 1995 and 1996, respectively. Such amounts related
primarily to expenditures, principally for computer equipment, and in the six
month period ended September 30, 1996, such amounts pertain principally to
furniture and equipment purchases necessitated by the Company's establishment
of a new operations center.
Cash flow generated from financing activities was $605,000 for the six month
period ended September 30, 1996 and was attributable to an increase in short-
term bank borrowings. Cash flow used in financing activities was $261,000 for
the six month period ended September 30, 1995 and $243,000 and $169,000 for
the fiscal years ended 1995 and 1996, and such amounts related primarily to
debt repayment, offset by increased short-term bank borrowings of $100,000 in
fiscal 1996 the proceeds of which were used for working capital purposes.
As of January 1, 1997, the Company had available bank lines of credit
aggregating $3.25 million of which approximately $2.0 million was unused. In
addition, the Company has a $1.9 million credit line available to be utilized
for the purchase of furniture and equipment associated with recent office
expansion. Borrowings under this facility convert to term loans payable over
five years after the related assets are placed in service. To date,
approximately $900,000 of borrowings have been converted. At the completion of
the Offering the Company plans to reduce outstanding debt under these
facilities which the Company expects to be approximately $2.9 million. This
will include both short term borrowings and term notes of $2.0 million and
$900,000, respectively, with an interest rate of prime plus one percent.
The Company has received a commitment letter from its principal lender for
an additional credit facility in an amount of up to the lesser of (i) $6.0
million or (ii) one-third of the net proceeds obtained by the Company from the
Offering to assist the Company in funding working capital. The credit facility
will contain customary affirmative and negative covenants, including
restrictions on the ability of the Company to pay cash dividends and financial
covenants under which the Company must operate. Repayments under the credit
facility are expected to be made from cash generated from operations.
The Company believes that funds generated from operations, together with
existing cash, available credit lines under bank facilities and the net
proceeds from the Offering will be sufficient to finance its current
operations, and planned expansion and internal growth for at least the next
twelve months.
NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which prescribes a new method of accounting
for stock-based compensation that determines compensation expense based on
fair value measured at the grant date. SFAS No. 123 gives companies that grant
stock options or other equity instruments to employees, the option of either
adopting the new rules or continuing current accounting; however, disclosure
would be required of the proforma amounts as if the new rules had been
adopted. SFAS No. 123 is effective for transactions entered into in fiscal
years that begin after December 15, 1995. The Company has elected to continue
with the current accounting method and disclose the proforma impact, which is
not expected to be material, of SFAS No. 123 in the notes to its financial
statements which form a part of this Prospectus.
21
<PAGE>
BUSINESS
OVERVIEW
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking
to hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into four core areas; assessment and
selection, training and development, customer contact monitoring and
employment process administration. The Company believes these services
position the Company as a single-source solution for many organizations which
outsource all or a portion of their human resources functions. The Company
markets its services principally to Fortune 500 companies for which customer
service, sales and call center functions are critical components of their
businesses. Industries served by the Company include telecommunications,
financial services, information technology, consumer products and healthcare.
The Company's assessment and selection services entail designing and
implementing assessment processes for the selection of new hires and the
evaluation of existing employees for advancement to positions of increased
responsibility. The Company's training and development services include live
simulations, competency surveys for job skill evaluation and situational
simulations through which managers are introduced to techniques to improve
their performance. The Company's customer contact monitoring capability is
typically used by clients that engage in the use of call centers for their
customer contact functions, including inbound and outbound calls. The
Company's employment process administration services target clients with
large-scale, short-interval hiring needs and insufficient in-house capacity to
fulfill such needs.
The Company believes that its business has benefited from a number of
significant industry trends which have increased the market opportunity for
the Company's services. One such trend is an increased focus on the sales and
customer service functions. As global markets have continued to become more
competitive, many businesses have begun to view the interface between customer
and company as an increasingly critical leverage point and have placed
increased emphasis on recruiting and deploying highly skilled and trained
sales and service staffs. Additionally, many businesses have engaged in
corporate downsizing in an effort to remain competitive, which has resulted in
inadequate staffing to meet future growth and peak period activity. Many
companies are also attempting to achieve a greater focus on their core
businesses and, consequently, are outsourcing non-revenue producing functions,
such as human resources. These factors have contributed to an increase in
demand for the Company's services.
The Company also believes that it has a number of competitive strengths
which are valued by its clients, in particular the Company's expertise in
behavior-based simulation assessment. The Company believes that its use of
realistic, job-specific simulations results in more accurate assessment and a
greater likelihood that applicants who are hired will possess the skills
necessary to perform their required functions. The Company's expertise in this
area is applicable not only to its assessment services, for both new hires and
existing employees, but also for its customer contact monitoring services,
where observation of job-specific performance is a necessary skill. The
Company's proprietary software, which is integral to the delivery of most of
the Company's services, provides a competitive advantage by allowing the
Company to manage and report the large volumes of data generated by its
services quickly and efficiently.
Furthermore, the Company believes that its demonstrated ability to both
develop and deliver large-scale, cost-effective human resources solutions also
provides it with a significant competitive advantage. The Company's ability to
successfully provide one of its services to a client, such as assessment and
selection, has often resulted in requests from that client to provide
additional services, such as employment process administration, customer
contact monitoring or training and development. The Company believes that
these competitive advantages have allowed the Company to provide its services
to clients such as American Express Company, BellSouth Corporation, Citibank,
N.A., Dean Witter Reynolds, Inc., Georgia-Pacific Corporation, Hewlett-Packard
Company, NYNEX Corporation, Inc., Oxford Health Plans Inc., Pepsi-Cola
Bottling Co., United Parcel Service of America, Inc. and Westinghouse Electric
Corporation. The Company has maintained relationships with several of these
clients for over a decade.
22
<PAGE>
STRATEGY
The Company's strategy is to actively market its four core services to
industries that have large-scale customer service, sales and call center
functions. The Company's strategy incorporates the following principal
elements:
Increased penetration of existing accounts. The Company intends to increase
its penetration of existing accounts by promoting the Company's services which
are not currently utilized by those businesses as the Company identifies
additional opportunities to address a client's human resources needs. Once a
business relationship is established between the Company and a client
organization, the Company believes it has significant opportunities to
increase the volume and expand the scope of the services provided by the
Company to a client by utilizing information generated from the initial
engagement to uncover opportunities for the provision of additional services.
Development of new accounts. The Company intends to develop new client
relationships by targeting clients with substantial human resources needs. The
Company currently utilizes a number of techniques to develop new accounts,
including responding to requests for proposals, pursuing client referrals and
actively marketing to potential clients. The Company expects to continue to
focus on the telecommunications and financial services markets and to target
other industries as they expand their telephone customer sales and service
functions. Similar to its strategy with existing accounts, the Company expects
to initially be engaged to provide one or more specific services, and then to
promote the Company's other capabilities as the Company identifies additional
opportunities to address a client's human resources needs. The Company
believes that as it develops an understanding of a client's business and the
requirements of its various job functions, the Company will be able to provide
additional services to further raise the quality level of a client's
workforce. To support this strategy, the Company has recently begun to expand
the scope of its sales and marketing efforts through personnel additions,
development of marketing materials and otherwise.
Continued focus on customer contact monitoring services. The Company intends
to continue to develop programs for the remote monitoring of customer service
call centers in order to capitalize on the growing opportunity in this area.
As the use of call centers by businesses in nearly every industry increases,
organizations are becoming concerned about managing the quality of contact
between their customers and their sales and service representatives. Carefully
designed and professionally executed call monitoring programs are an important
element in managing that quality. In addition, users of both company operated
and outsourced call centers have discovered discrepancies in results between
internal reviews of customer service representatives performance and the
opinions and surveys of their customers, often finding that customers'
opinions of the quality of the customer service provided are lower than the
quality reviews given by the Company's customer service supervisors. The
Company believes that these businesses will continue to look to external
sources for objective monitoring of this function.
Extension of services beyond sales and customer service functions. The
Company's services have historically been directed toward sales and customer
service positions. Those positions have accounted for large numbers of new
hires and replacement hires at client companies. In addition, quality staffing
in those positions has been important to employers, because those positions
are the contact point between an organization and its customers. The Company
believes, however, that its services are also valuable for other functions
within organizations and that the extension of its services to these areas
represents a growth opportunity for the Company. For example, the Company's
assessment services can be utilized to select employees for advancement to
positions of increased responsibility. The Company can also provide employment
process administration for an entire organization, from large-scale
recruitment and assessment of lower-level employees to executive assessment
for top-level management positions. Similarly, the Company can apply its
training and development techniques to functional areas beyond sales and
service, such as, the administrative, operations and manufacturing functions.
23
<PAGE>
SERVICES
The Company offers a wide range of human resources outsourcing services,
including the sourcing, assessment, selection and training of new employees,
and the assessment, selection, training and monitoring of existing employees.
The Company's services are organized into the following four core areas;
assessment and selection, training and development, customer contact monitoring
and employment process administration. The Company has assigned a vice
president to each one of these core areas who is responsible for overseeing the
design and assuring the quality of delivery of the services in each of these
areas.
Assessment and Selection. The Company designs and implements assessment
processes for the selection of new hires and the evaluation of existing
employees for positions of increased responsibility. These assessment services
have generally been provided for positions for which large numbers of staff are
required and where effectiveness in the job directly impacts the business'
revenue. The Company may design either a single assessment instrument, which is
delivered as part of an existing selection process, or the entire selection
process itself, as required by the particular client. Assessment was the first
service provided by the Company and has served as the foundation for several of
its other services.
On a typical engagement, the Company first custom designs the assessment
tools necessary for an effective selection process. This generally involves
field research and job analysis to determine the critical components of the
position and the key competencies required to execute it successfully.
Virtually all of the Company's assessment projects include the use of live
simulations, either in person or over the telephone, in order to ensure that
candidates possess the skill requirements for the position sought. The Company
has found that the use of job-specific, behavior-based techniques to determine
a candidate's ability to actually perform the required tasks provides clients
with a more accurate selection process and a more qualified workforce. The
Company's staff of professional industrial psychologists design each assessment
instrument to meet the standards for test validity established by the Society
for Industrial and Organizational Psychology, Uniform Guidelines on Employee
Selection Procedures issued by the federal government in 1978, as well as other
professional standards. The Company has applied its validation procedures to
selection mechanisms for a wide variety of desired skills, including
multilingual fluency, which the Company believes is becoming an increasingly
important requirement for customer sales and service positions. The Company
believes that the custom-designed nature of its assessment and selection
services, in particular its use of tailored simulation exercises, gives the
Company a significant competitive advantage over off-the-shelf solutions.
Once the Company has designed and validated an assessment process, it then
deploys a team of industrial psychologists and staff to implement the process
in a manner best suited to the particular client and the type of position being
filled. Implementation can range from performing assessments telephonically
from the Company's operations centers to deploying an entire staff to an on-
site facility at the client to administer the selection process. In either
case, the Company typically uses its proprietary database and report generation
software and customizes it to track the process and provide information to the
client. The Company has found that its assessment services are most appropriate
for large-scale hiring needs. However, once it has established and implemented
an effective process, most businesses will retain the Company to provide these
services on an ongoing basis to replace employees lost to attrition, as well as
to hire additional employees as necessary for future growth.
In addition to the assessment of prospective new hires, the Company also
provides assessment services for the evaluation of existing employees for
advancement to positions of increased responsibility. The Company utilizes
techniques similar to those for new hires in order to identify employees who
possess the additional skills necessary for supervisory or management
positions. These techniques are also used to identify specific skills that
24
<PAGE>
require training and development intervention. The Company's programs can be
conducted on the telephone and through correspondence, electronic mail, and
voicemail to replicate the manner in which a particular client's managers
actually interact with their staff. The programs are designed through
extensive field research and job analysis and result in the delivery of
development reports to each participant outlining areas for improvement.
The Company also provides executive assessment services which involve the
evaluation of executive applicants for general and functional management level
positions. The Company uses evaluation methods similar to those used for
operational level employees, however, executive assessments generally involve
more comprehensive procedures, including in-depth interviews and extensive
testing. The Company has recently begun expanding its executive assessment
resources through staff additions and the leasing of additional space. The
Company intends to develop the capability to deliver this service from each of
its three regional offices.
Training and Development. The Company's training and development services
are an outgrowth of the Company's expertise in conducting live simulations for
job skill evaluations. A typical training and development program begins with
the administration of competency evaluation surveys to a manager's colleagues
which are analyzed by the Company's staff. Simulations are then developed in
order to allow further testing by the Company's assessment professionals of
the manager's relevant job skills. Based on the skills necessary for the
particular functions performed by the manager, the Company develops a training
program through which the manager is introduced to techniques for improving
his or her performance. Once the training program is completed, the manager is
often put through another set of simulation exercises to determine how well
the suggested improvements have been understood and adopted by the manager.
The Company then provides each participant with a written development plan for
further improvement.
The Company's training and development services can also be used to assist
in determining the potential for assigning existing employees to newly-created
positions. In one instance, a team of the Company's industrial psychologists
worked with the client to define the new job requirements and design a
telephone-based simulation to assess the employees' aptitude for the new
function. The Company's staff tested more than 2,500 customer service
representatives over a three-month period. The Company's simulation services
are now used to screen over 3,000 prospective new hires for this client
annually for both the sales and service positions.
The Company believes a major opportunity for growth in its training and
development services is in the area of remote management. Through its client
engagements, the Company has developed an understanding of the challenges
inherent in managing large numbers of employees who are geographically
dispersed. As organizations downsize and flatten their organizational
structures, executives are being asked to manage greater numbers of
individuals. In addition, due to the expanding geographical scope of many
businesses and the growing use of telecommuting, managers are being forced to
learn to communicate with, supervise and motivate their employees
telephonically and by electronic mail, rather than through face-to-face
meetings. The Company believes it has developed the knowledge and expertise
necessary to train managers to deal more effectively with these challenges.
Customer Contact Monitoring. The Company provides monitoring services for
clients who engage in large-scale use of call centers for their customer
contact functions. These call centers may consist of clients' employees or
external vendors contracted by the client. The establishment of call centers
as the primary means by which major companies provide customer and sales
related services has led to an increased demand for the Company's services
from existing and potential clients. As heightened domestic and global
competition has led to the availability of an increased number of alternative
or substitute products and services in many industries, the role of customer
service has assumed a greater level of importance in terms of customer
acquisition and retention. As a consequence, companies are becoming
increasingly more vigorous in their efforts to insure that customer service
representatives employed by them or by vendors operating on their behalf are
complying with their service quality standards.
The Company's proprietary monitoring system can provide analyses and results
of customer contact representatives' performance on an individual, team and
call center basis, with comparisons against established service quality
standards and group norms. Over the course of a recent three-month pilot
program performed on
25
<PAGE>
behalf of a financial services client, the Company successfully monitored
approximately 10,500 calls remotely from its Melville, New York facility. The
successful completion of that pilot program resulted in the signing of a
multi-year agreement with the client for the conduct of on-going remote call
monitoring.
Employment Process Administration. The Company offers complete employment
process administration services to clients who have large-scale hiring needs
and who do not have the in-house capacity to fulfill their needs. Employment
processes provided by the Company typically include: advertising for and
recruiting applicants; establishing automated telephonic voice response
systems to screen prospective applicants; arranging for the physical
facilities and equipment necessary for the pre-screening process; performing
background checks on applicants; and conducting testing and simulations
utilizing the Company's assessment expertise to select applicants for
recommendation to the client. The Company can also provide any of these
services individually on an as needed basis. In particular, the Company
provides clients who have their own internal employment processes with ongoing
background check services.
To meet a client's needs, the Company is frequently asked to secure
facilities and equipment, establish an interactive voice response system to
screen prospective applicants, develop proprietary database and report
generation software and staff a facility with test administrators and
coordinators. The Company has in the past scheduled and tested up to 500
applicants per day, provided client access to the database for ongoing status
reports and provided complete support up to the point of hire.
CLIENTS
The Company has long-standing relationships, some of which have extended
beyond a decade, with many of its clients. Historically, clients that provide
in excess of 10% of the Company's revenues have changed from year to year.
During fiscal 1996 Ameritech Corporation and Hewlett-Packard Company each
provided in excess of 10% of the Company's revenues. The Company believes the
following to be a representative list of its existing and recent clients:
<TABLE>
<CAPTION>
INDUSTRY CLIENT
-------------------------------------------------------------------
<S> <C>
Financial Services American Express Company
Citibank, N.A.
Dean Witter Reynolds, Inc.
Mastercard International, Inc.
Moody's Investors Service, Inc.
The Putnam Companies
Republic National Bank of New York
-------------------------------------------------------------------
Telecommunications Ameritech Corporation
Bell Atlantic Corporation
Bell South Corporation
NYNEX Corporation
Southwestern Bell Telephone Company
US WEST, Inc.
-------------------------------------------------------------------
Healthcare Manor Care, Inc.
Oxford Health Plans Inc.
-------------------------------------------------------------------
Information Technology Hewlett-Packard Company
Lucent Technologies Inc.
-------------------------------------------------------------------
Consumer Products Anheuser-Busch Companies, Inc.
Pepsi-Cola Bottling Co.
The Procter & Gamble Company
-------------------------------------------------------------------
Other Georgia-Pacific Corporation
United Parcel Service of America, Inc.
Westinghouse Electric Corporation
</TABLE>
26
<PAGE>
MARKETING AND SALES
The Company has historically developed new accounts by targeting clients
with large volume human resource needs originating primarily from their
customer contact staffing requirements. The Company has acquired such accounts
by responding to requests for proposals, pursuing client referrals and
actively marketing to potential new clients. The Company has generally
solicited prospective accounts through personal contacts by members of the
Company's management team and professional staff. Recently, the Company has
begun to expand the scope of its sales and marketing effort and to dedicate
additional resources to this function.
The Company expects that future initial contact between a client or
prospective client and the Company will occur at the regional sales level and
through divisional vice presidents who have been assigned responsibility for
each of the Company's four core business areas namely: assessment and
selection, training and development, customer contact monitoring and
employment process administration. The Company believes that this structure
enables the Company to be proactive in managing the provision of services to
clients. Accordingly, the Company has reorganized its marketing and sales
effort to decentralize its marketing and sales functions.
Sales efforts are now conducted on two levels; by divisional vice
presidents, each of whom concentrates on developing sales for their respective
practice area, and by the regional vice presidents, each of whom is concerned
with developing sales across all of the Company's services to clients or
potential clients in their respective geographical areas.
The marketing and sales activities of the divisional vice presidents and the
regional vice presidents are directed by a vice president in charge of
marketing and sales with overall responsibility of establishing revenue goals,
targets and timetables. The vice president of marketing and sales is also
responsible for assisting both divisional vice presidents and the regional
vice presidents in responding to requests for proposals and in designing and
developing marketing programs.
The Company believes that this integrated structure enables the Company to
serve its clients effectively at a local level by means of the establishment
of long-term local contacts, while at the same time providing clients with
direct access to the administrative resources and management expertise of a
large organization.
OPERATIONS
Most substantial users of the types of services provided by the Company
purchase such services on an as-required basis and, consequently, the Company
must be capable of scaling its resources rapidly and efficiently to meet a
client's needs. The Company has a large number of highly-skilled personnel
available to it on both a full-time and part-time basis enabling it to deliver
services quickly and in a cost effective manner. Each of the Company's four
key business areas is supported by the Company's operations centers which are
designed to deliver a range of services tailored to the specific needs of the
Company's clients. Clients are serviced by a number of locations: the
Company's corporate headquarters in New York City; its two operations centers
in Melville, New York; and two additional regional offices located in
Campbell, California and St. Louis, Missouri.
The Company's operations centers are responsible for the delivery of all the
Company's services to its clients on a day-to-day basis. The Company's
corporate headquarters, which also serves as the regional office for the
eastern United States, contains the general management, sales and marketing
and financial functions for the Company. It also contains the offices of the
divisional vice presidents in charge of the four core areas of the Company's
business. Most of the Company's training and development services are
conducted and managed from this location although the Company frequently
provides training and development services and certain aspects of the
employment process administration off-site at clients' offices or remote
locations. The Company's Melville operations center supports the employment
processing, assessment and selection and customer contact monitoring services
while the Campbell, California, St. Louis, Missouri, and regional office
component of the New York corporate headquarters maintain contact with both
new and existing clients in order to identify client needs and monitor client
satisfaction with the level of service provided by the Company.
27
<PAGE>
The Company's operations center has the capacity to conduct 500 assessments
per day, and to assess candidates and employees from over 800 client locations
throughout the country. Customer contact monitoring, the newest service
offered by the Company, and employment process administration are also
conducted from the Company's operations center, which has the capacity to
monitor 2,000 calls per day and the capacity to process 1,000 pre-employment
background checks each day.
COMPETITION
The Company believes that the human resources industry is highly fragmented
and that no one participant or small number of participants is dominant in the
industry. The principal competition encountered by the Company across the full
range of services provided by the Company are human resources consulting
firms, smaller companies who are specialized providers of certain services
provided by the Company and consulting firms that are affiliated with large
multinational accounting firms. In addition, the human resources staffs of
many large organizations which are existing or potential clients of the
Company may already provide one or more of the basic services provided by the
Company.
In the area of assessment services, the Company encounters competition from
large firms such as Aon Consulting, Development Dimensions International and
Personnel Decisions International. In the area of training and development,
the Company competes with Aon Consulting, Development Dimensions
International, The Center for Creative Leadership and TeleSpectrum Worldwide.
In the area of employment process administration, the Company competes with
organizations such as Ernst & Young LLP, Fiserve, Inc., Manpower Temporary
Services and Norrell Corporation. In the area of customer contact monitoring,
the Company is presently unaware of any competitors.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company primarily relies on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company generally enters into
confidentiality agreements with its employees and clients that limit access to
and distribution of its proprietary information. The Company also believes
that factors such as the technical and creative skills of its personnel, the
Company's corporate knowledge and expertise in behavioral assessment and name
recognition are essential to establishing and maintaining a leadership
position in its industry. The Company seeks to protect its database,
documentation and other written materials under trade secret and copyright
laws.
EMPLOYEES
As of December 31, 1996 the Company employed 194 employees, of whom 138 were
full-time, and 56 employees were part-time. Approximately 48% of the Company's
employees have masters or doctoral degrees. Historically, the Company has
generally been able to satisfy its hiring needs. The Company's staffing
efforts have been aided by the location of the Company's headquarters in New
York City and its operations center in Melville, New York, both near a number
of colleges and universities, which places the Company in close proximity to a
large, highly-skilled labor pool. No assurance can be given, however, that
this will continue to be the case, particularly if the Company experiences
substantial future growth. The inability of the Company to hire sufficient,
qualified personnel to service its future growth would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Risk Factors -- Management of Growth."
The Company has no collective bargaining agreements or any similar union
agreements and the Company has never experienced any work stoppages. The
Company considers its relations with its employees to be good.
FACILITIES
The Company's corporate headquarters is located in leased offices occupying
approximately 11,300 square feet at 780 Third Avenue, New York, New York
10017. The lease for this space will expire in 2006. The Company also leases
office space at the following locations: Campbell, California; St. Louis,
Missouri; and two
28
<PAGE>
offices in Melville, New York. The terms of these leases expire between 1997
and 2006. It is anticipated that the approximately 20,000 square feet of
office space now occupied by the Melville operations center will be increased
by approximately 25,000 square feet to an aggregate of approximately 45,000
square feet. The Company anticipates that as its business grows, it will
establish more regional offices and continue to enlarge existing offices.
LEGAL PROCEEDINGS
From time-to-time the Company is involved in various legal proceedings that
are incidental to the conduct of its business. The Company is not involved in
any pending or threatened legal proceedings which the Company believes could
reasonably be expected to have a material adverse effect on the Company's
financial condition or results of operations.
29
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the executive officers
and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Bernard F. Reynolds..... 54 Chairman of the Board and Chief Executive Officer
Eli Salig............... 48 President and Chief Operating Officer, Director
Seymour Adler, Ph.D. ... 48 Executive Vice President, Director
William B. Fucarino..... 35 Vice President and Chief Financial Officer
David Tory.............. 54 Director
Michael J. Boylan....... 50 Director
Ilan Kaufthal........... 49 Director
Carl Seldin Koerner,
Esq. ................... 47 Secretary and Director
Dennis L. Stevens....... 44 Vice President, Marketing and Sales
Paul Squires, Ph.D. .... 45 Vice President, Training and Development Services
</TABLE>
BERNARD F. REYNOLDS founded the Company in 1978. Prior to that time, Mr.
Reynolds held positions as a Senior Officer and Director Human Resources and
Training at Dean Witter Reynolds, Inc. and Bache and Company Incorporated. Mr.
Reynolds is a former Chairman of the Wall Street Human Resource Directors
Association, and has served on the Human Resources Management Committee of the
Securities Industry Association.
ELI SALIG is a co-founder of the Company. Previously Mr. Salig worked in
Human Resources and Training at Dean Witter Reynolds, Inc. and immediately
prior to founding the Company, Mr. Salig was a Vice President and a Director
of Corporate Personnel at Dean Witter Reynolds, Inc.
SEYMOUR ADLER, PH.D. is a co-founder of the Company. Prior to Dr. Adler's
present assignments he served as Vice President, Research and Development at
the Company. In addition to having served as a consultant to industry
throughout his professional career, Dr. Adler has been on the faculties of the
City University of New York, and Purdue University, and currently is on the
faculty of Stevens Institute of Technology.
WILLIAM B. FUCARINO has served as Controller and Chief Financial Officer of
the Company since 1991. Prior to joining the Company, Mr. Fucarino was
employed as a General Practice Manager with Coopers & Lybrand.
DAVID TORY joined the Company in 1996 as a Director. Currently, Mr. Tory
acts as an independent consultant to industry. From 1988 through 1995 Mr. Tory
was employed as President and Chief Executive Officer of The Open Software
Foundation, a non-profit consortium comprised of major computer hardware and
software companies and user organizations. From 1978 to 1988, Mr. Tory was
employed by Computer Associates, Inc. in Europe and the United States. Mr.
Tory is a member of the Board of Directors of Ross Systems Inc.
MICHAEL J. BOYLAN joined the Company in 1996 as a Director. He is the Vice
Chairman--Publishing Operations of American Media, Inc., a leading publisher
in the field of personality journalism. Mr. Boylan is also currently employed
as President of MacFadden Publishing, Inc., a privately held New York based
firm which publishes a variety of trade and consumer titles.
ILAN KAUFTHAL joined the Company in 1996 as a Director. Mr. Kaufthal is
Managing Director and head of Mergers and Acquisitions for the Investment
Banking Department of Schroder Wertheim & Co., Inc. Mr. Kaufthal joined
Schroder Wertheim & Co., Inc. in February 1987 and is a member of its
Executive Committee. Prior to joining Schroder Wertheim & Co., Inc., Mr.
Kaufthal was employed by NL Industries Inc., where he served as its Senior
Vice President and Chief Financial Officer. Mr. Kaufthal is a member of the
Boards of Directors of Cambrex Corporation, United Retail Group, Inc., Rexene
Corporation and Russ Berrie and Company, Inc.
30
<PAGE>
CARL SELDIN KOERNER, ESQ. joined the Company in 1996 as a Director and
Secretary. Mr. Koerner is a partner in the law firm of Koerner Silberberg &
Weiner, LLP, counsel to the Company.
DENNIS L. STEVENS joined the Company in 1995. Prior to joining the Company,
Mr. Stevens served for two years as Managing Director, Marketing and
Communications in the Consulting Services division at Price Waterhouse L.L.P.
From 1980 to 1993 Mr. Stevens was a Vice President of Marketing at American
Express Travel Related Services Inc., with overall management responsibility
for product management, new product development, advertising and research.
PAUL SQUIRES, PH.D. joined the Company in 1996. Prior to joining the
Company, from 1979 to 1996 Dr. Squires held senior positions at AT&T Corporate
Human Resources with primary responsibility for selection, testing and
employee development. In 1995, Dr. Squires was Director of Lucent Technologies
Microelectronics International University, responsible for developing a single
world-wide training organization which provided support to 18,000 employees.
Dr. Squires has served as an adjunct professor at Stevens Institute of
Technology since 1986.
BOARD COMMITTEES
The Board of Directors of the Company has established a compensation
committee (the "Compensation Committee") and an audit committee (the "Audit
Committee"). The Compensation Committee, which consists of Messrs. Boylan,
Kaufthal and Koerner, determines the salaries and bonuses of the Company's
executive officers. The Compensation Committee also administers the Company's
1996 Stock Option and Grant Plan (the "Option Plan"), the Company's 1996
Directors' Stock Option Plan (the "Directors' Plan") and the Company's 1996
Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Audit Committee
recommends the appointment of auditors and oversees the accounting and audit
functions of the Company. Messrs. Boylan, Kaufthal and Tory currently serve as
members of the Audit Committee.
DIRECTOR COMPENSATION
Directors are reimbursed for certain expenses incurred by them in connection
with attendance at meetings of the Board and committees thereof. Other than
with respect to reimbursement of expenses, directors who are also employees or
officers of the Company do not receive cash compensation for services as a
director.
The Directors' Plan was adopted by the Company's Board of Directors and
approved by its stockholders on January 15, 1997. Under the Directors' Plan,
options to acquire an aggregate of 50,000 shares of Common Stock may be
granted. Each member of the Board of Directors who is not an employee of the
Company or a subsidiary thereof shall automatically be granted an option to
acquire 5,000 shares of Common Stock on the first day such individual serves
as a director. In addition, each director who is appointed chairperson of a
committee of the Board of Directors shall receive an option to purchase 2,500
shares of Common Stock upon his appointment to such committee. Such options
will vest ratably over three years, provided that any option so granted will
become immediately exercisable in full upon the termination of service of the
director because of disability or death. Options issued under the Directors'
Plan will expire ten years from the date upon which such option is granted.
Under the Directors' Plan, each of Messrs. Kaufthal, Tory, Boylan and Koerner
will be granted an option to purchase 5,000 shares of Common Stock on the date
of this Prospectus, exercisable at the initial public offering price. Mr.
Boylan will be granted an option to purchase an additional 5,000 shares of
Common Stock at the initial public offering price as a result of his
appointment as the chairman of the Audit Committee and Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid or earned during fiscal 1996 by the Company's Chief
Executive Officer and the four other most highly paid executive officers whose
total salary and bonus exceeded $100,000 for services rendered to the Company
and its subsidiaries during fiscal 1996 (collectively, the "Named
Executives"):
31
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ----------------
NAME AND PRINCIPAL POSITION SALARY BONUS STOCK OPTIONS(#)
- --------------------------- ---------- --------- ----------------
<S> <C> <C> <C>
Bernard F. Reynolds....................... $237,169 $30,000 --
Chairman of the Board and Chief Executive
Officer
Eli Salig................................. $237,169 $20,000 --
President and Chief Operating Officer
Seymour Adler, Ph.D. ..................... $223,332 $25,000 --
Executive Vice President
William B. Fucarino....................... $ 87,500 $30,000 25,846(1)
Vice President and Chief Financial
Officer
Dennis Stevens............................ $106,250 -- --
Vice President and Director of Marketing
and Sales
</TABLE>
- --------
(1) Represents options received in connection with the Reorganization. See
"Certain Transactions--The Reorganization."
EMPLOYMENT AGREEMENTS
The Company has entered into executive employment agreements with Bernard F.
Reynolds, Eli Salig and Seymour Adler. The annual base salaries of Messrs.
Reynolds, Salig and Adler under their employment agreements are $260,000,
$240,000 and $230,000, respectively. Each executive is entitled to fringe
benefits and an annual bonus to be determined by the Board of Directors. Each
executive can be terminated for cause (as defined in the employment
agreements) with all future compensation ceasing. If the executive is
terminated without cause, dies during the term, or is unable to competently
and continuously perform the duties assigned to him because of ill health or
other disability (as defined in the employment agreements), the executive or
the executive's estate or beneficiaries shall be entitled to full compensation
for three years following the date thereof. During the period of employment
and for a period of three years thereafter, Messrs. Reynolds, Salig and Adler
are prohibited from competing with the Company.
STOCK OPTION AND GRANT PLAN
The Option Plan was adopted by the Company's Board of Directors as of March
31, 1996 and approved by its stockholders on January 16, 1997. Officers,
directors, employees, consultants and key persons of the Company are eligible
to participate in the Option Plan. The Option Plan is designed to provide
employees and such other individuals with a performance incentive, a direct
stake in the Company's future welfare and an incentive to remain with the
Company. The Company believes that the Option Plan will encourage qualified
persons to seek employment with the Company.
The Option Plan provides for grants of options to purchase shares of Common
Stock intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") ("Incentive Options"),
as well as options that do not so qualify ("Non-Qualified Options"). The
Option Plan provides that options for an aggregate of 800,000 shares of Common
Stock are available for award.
The Option Plan provides that it will be administered by the Compensation
Committee. The Compensation Committee determines which officers, directors,
employees, consultants and key persons shall receive options and the terms and
conditions of the options, including the exercise price of each option, the
term of each option, the number of shares of Common Stock to be covered by
each option and any performance objectives or vesting
32
<PAGE>
standards applicable to each option. Subject to the requirements of the Code,
the Compensation Committee will also designate whether the options granted
shall be Incentive Options or Non-Qualified Options.
Option Grants. As of January 24, 1997 there were 368,533 shares issuable
upon the exercise of outstanding options. The following table sets forth
certain information with respect to stock options granted during fiscal 1996
to the Named Executives pursuant to the Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF TOTAL OF STOCK PRICE APPRECIATION
SHARES SUBJECT TO OPTIONS GRANTED TO OVER OPTION TERM (1)
COMMON STOCK EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ----------------- ------------------ -------------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Bernard F. Reynolds..... -- -- -- -- -- --
Eli Salig............... -- -- -- -- -- --
Seymour Adler, Ph.D. ... -- -- -- -- -- --
William B. Fucarino..... 25,846 -- $1.22(2) -- $ 7,200 $ 30,143
Dennis Stevens.......... -- -- -- -- -- --
</TABLE>
- --------
(1) This column shows the hypothetical gains or "option spreads" of the
options granted based on assumed annual compound stock appreciation rates
of 5% and 10% over the full 10-year term of the options. The 5% and 10%
assumed rates of appreciation are mandated by the rules of the Securities
and Exchange Commission (the "SEC") and do not represent the Company's
estimate or projection of future Common Stock prices.
(2) Fair market value as determined by the Company's Board of Directors on the
date of grant was $0.92 per share.
Option Exercises and Holdings. The following table sets forth the stock
option exercises during fiscal 1996 and the stock option values as of March
31, 1996, in each case for the Named Executives:
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR-END (#) YEAR-END ($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bernard F. Reynolds......... -- -- -- --
Eli Salig................... -- -- -- --
Seymour Adler, Ph.D. ....... -- -- -- --
William B. Fucarino......... -- 25,846 $0 $0
Dennis Stevens.............. -- -- -- --
</TABLE>
- --------
(1) Prior to the Offering, the Common Stock of the Company has not been
publicly traded. The Board of Directors, in connection with grants of
stock options that it makes from time to time, determines the fair market
value of the Common Stock as of the grant date. For purposes of
calculating the value recognized at fiscal year end, the Company has used
the deemed fair market value as of March 31, 1996, as determined by the
Company's Board of Directors, of $0.92 per share.
EMPLOYEE STOCK PURCHASE PLAN
The Stock Purchase Plan provides an opportunity for eligible employees of
the Company to purchase shares of Common Stock, at a discount, through regular
period salary reductions of up to 10% of their pre-tax gross compensation. A
maximum of 250,000 shares of Common Stock may be issued under the Stock
Purchase Plan.
The first offering under the Stock Purchase Plan will begin on the
commencement of this Offering and end on September 30, 1997. Unless otherwise
determined by the Board of Directors or the Compensation Committee, subsequent
offerings will commence on the first business day occurring on or after each
October 1 and April 1 thereafter and will end on the last business day
occurring on or before the following March 31 and September
33
<PAGE>
30, respectively. The Board of Directors or the Compensation Committee may, in
its discretion, select a different offering period for any offering, provided
that the duration of the offering is not more than one year. All employees who
are customarily employed by the Company or a subsidiary designated by the
Board of Directors or the Compensation Committee for more than twenty hours
per week and have been so employed for at least six months as of the first day
of the applicable offering period are eligible to participate in the Stock
Purchase Plan.
The maximum number of shares which may be purchased by a participating
employee of the Company during an offering will be determined by the Board of
Directors or the Compensation Committee. An employee may purchase shares under
the Stock Purchase Plan by authorizing payroll deductions of up to 10% of his
regular pay during this offering period. Unless the employee has previously
withdrawn from the offering, his accumulated payroll deductions will be used
to purchase Common Stock on the last business day of the period at a price
equal to 85% of the offering price of the Common Stock on the offering date or
the exercise date, whichever is lower. Under applicable tax rules, an employee
may purchase no more than $25,000 of the fair market value worth of Common
Stock in any calendar year (determined on the first day of the offering
period(s) in which such stock is purchased); certain other tax limitations may
apply.
The Stock Purchase Plan will be administered by the Board of Directors or
the Compensation Committee. The Board of Directors or the Compensation
Committee may at any time amend the Stock Purchase Plan, subject to the
approval of the Company's stockholders if and to the extent required to comply
with Rule 16b-3 under the Exchange Act or to preserve the favorable tax
treatment of participants, or discontinue the Stock Purchase Plan.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" as defined in Section 423 of the Code, which provides that an
employee will not have income for federal income tax purposes at the start of
an offering or upon receipt of shares of Common Stock at the end of an
offering, but generally will recognize ordinary income, in addition to capital
gain or loss, when the employee sells the shares. The Company generally will
not be entitled to a tax deduction upon either the purchase or sale of shares
issued under the Stock Purchase Plan if certain holding period requirements
are met.
401(K) PLAN
In November 1995, pursuant to a merger between the Assessment Solutions
Incorporated Profit Sharing Plan and the Proudfoot Reports Incorporated Profit
Sharing Plan, the Assessment Solutions Incorporated Profit Sharing Plan was
terminated and the 401(k) feature under the Assessment Solutions Incorporated
Profit Sharing Plan was merged into the 401(k) feature under the Proudfoot
Reports Incorporated 401(k) Retirement Plan. Upon the merger into the
Proudfoot Reports Incorporated 401(k) Retirement Plan, Proudfoot Reports
Incorporated terminated its Pension Plan, effective November 30, 1995.
Any employee who has worked for the Company or its subsidiaries for one year
and is over 21 years of age is eligible to participate in the 401(k) plan.
Each eligible employee may elect to contribute to the 401(k) plan, through
payroll deductions, up to 15% of his or her compensation for services rendered
in any year, not to exceed a statutorily proscribed annual limit. Participants
in the 401(k) plan are fully vested in their own salary deduction
contributions. Contributions can be made by the Company on a discretionary
basis. Each participant becomes fully vested in the Company's contributions
allocated to his or her account upon completion of five years service within
the Company. No such contributions were made in 1995 and 1996. The Company's
contributions are tax deductible to the Company.
34
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock (i) immediately prior to
the consummation of the Offering and (ii) as adjusted to reflect the sale of
the shares of Common Stock pursuant to the Offering by (a) each person who is
known by the Company to own beneficially five percent or more of the
outstanding shares of Common Stock, (b) each of the Company's directors, (c)
each Named Executive and (d) all current directors and executive officers of
the Company as a group. Except as indicated in the footnotes to this table,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
NUMBER OF OWNED (2)(3)
SHARES ---------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER (1) OWNED (2) OFFERING OFFERING (3)
- ---------------------------------------- ------------ -------- ------------
<S> <C> <C> <C>
Bernard F. Reynolds (4)...................................... 2,783,746 60.2% 40.8%
Eli Salig.................................................... 1,269,222 27.4% 18.6%
Seymour Adler, Ph.D. (5)..................................... 364,121 7.8% 5.3%
William B. Fucarino (6)...................................... 25,846 * *
David Tory................................................... -- * *
Michael J. Boylan............................................ -- * *
Ilan Kaufthal................................................ -- * *
Carl Seldin Koerner, Esq. ................................... -- * *
Dennis Stevens............................................... -- * *
All directors and executive officers as
a group (9 persons)......................................... 4,442,935 96.0% 65.1%
</TABLE>
- --------
*Less than 1%.
(1) The address of each beneficial owner is c/o ASI Solutions Incorporated,
780 Third Avenue, New York, New York, 10017.
(2) The number of shares of Common Stock beneficially owned includes shares
issuable pursuant to stock options that may be exercised within sixty days
of January 20, 1997. Shares issuable pursuant to such options are deemed
outstanding for computing the percentage of beneficial ownership of the
person holding such options but are not deemed outstanding for computing
the beneficial ownership of any other person. The number of shares of
Common Stock outstanding after the Offering includes the 2,200,000 shares
of Common Stock being offered for sale by the Company in the Offering.
(3) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(4) Includes 1,391,871 shares held by Mr. Reynolds as trustee.
(5) Includes 124,841 shares subject to stock options held by Dr. Adler
exercisable within sixty days of the date hereof.
(6) Consists of 25,846 shares subject to stock options held by Mr. Fucarino
exercisable within sixty days of the date hereof.
35
<PAGE>
CERTAIN TRANSACTIONS
THE REORGANIZATION
The Company is a holding company with three subsidiaries, Assessment
Solutions Incorporated ("Assessment Solutions"), Proudfoot Reports
Incorporated ("Proudfoot") and C3 Solutions Incorporated ("C3"). The Company
was organized in March 1996 as part of a reorganization (the "Reorganization")
in which it acquired, solely in exchange for Common Stock of the Company, all
of the outstanding capital stock of Proudfoot and 95% of the outstanding
capital stock of Assessment Solutions, which had been separately owned but
commonly controlled companies.
Immediately prior to the Reorganization, Mr. Reynolds sold 521,000 shares of
common stock of Proudfoot to Assessment Solutions in exchange for the
cancellation of $250,000 of indebtedness owed by Mr. Reynolds to Assessment
Solutions. Also in connection with the Reorganization, options to purchase
100,000 shares of Proudfoot common stock held by certain employees of
Proudfoot were exchanged for options to purchase 51,692 shares of Common Stock
of the Company. On November 4, 1996, the remaining 5% of the issued and
outstanding shares of common stock of Assessment Solutions that were not held
by the Company were redeemed by Assessment Solutions, following which
Assessment Solutions, Proudfoot and C3 as wholly-owned subsidiaries of the
Company.
OFFICER LOANS
During fiscal 1996, the Company loaned $233,519, $112,617 and $17,597 to
Messrs. Reynolds, Salig and Adler, respectively. The loans are evidenced by 5-
year notes bearing interest at the rate of 7% per annum and requiring equal
annual principal payments over the term of the notes. Messrs. Reynolds, Salig
and Adler have agreed to repay this indebtedness in full in the event that the
Underwriters' over-allotment option is exercised in full.
RELEASE OF GUARANTEES
Messrs. Reynolds and Salig have personally guaranteed the Company's
indebtedness under its bank credit facility. The Company intends to repay in
full this indebtedness with the proceeds of the Offering. The Company has
obtained the agreement of the bank to release the personal guarantees upon
repayment of such indebtedness. See "Use of Proceeds."
REGISTRATION RIGHTS AGREEMENT
The Company entered into a Registration Rights Agreement with Bernard F.
Reynolds, Eli Salig and Seymour Adler, dated as of January 15, 1997 (the
"Registration Rights Agreement"). The Registration Rights Agreement provides
that Messrs. Reynolds, Salig and Adler are entitled to demand and incidental
registration rights.
INTEREST OF COUNSEL
Carl Seldin Koerner, a director and secretary of the Company, is a managing
partner of the law firm of Koerner Silberberg & Weiner, LLP. Such firm has
been general counsel to the Company since 1989 and is acting as counsel to the
Company in connection with this Offering. The Company believes that the fees
paid to Koerner Silberberg & Weiner, LLP are comparable to those fees that
would have been paid to an unrelated third party law firm. Pursuant to the
Directors' Plan Mr. Koerner will be granted an option to purchase 5,000 shares
of Common Stock on the date of this Prospectus, exercisable at the initial
public offering price.
36
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING COMMON STOCK
The authorized capital stock of the Company upon completion of the Offering
will consist of 18,000,000 shares of Common Stock, of which 6,825,158 shares
will be issued and outstanding, and 2,000,000 shares of undesignated preferred
stock issuable in series by the Board of Directors (the "Preferred Stock"), of
which no shares will be issued and outstanding. The following summary
description of the capital stock of the Company is qualified in its entirety
by reference to the Company's Certificate and By-laws, copies of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part. The Certificate and By-laws have been adopted by the stockholders and
the Board of Directors of the Company.
Common Stock. The holders of Common Stock are entitled to one vote per share
on all matters to be voted on by stockholders. The holders of Common Stock are
not entitled to cumulative voting rights. Therefore, the holders of a majority
of the shares voted in the election of directors can elect all of the
directors then standing for election, subject to the rights of the holders of
Preferred Stock, if and when issued. The holders of Common Stock have no
preemptive or other subscription rights.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor, with each share of Common Stock sharing equally in
such dividends. The possible issuance of Preferred Stock with a preference
over Common Stock as to dividends could impact the dividend rights of holders
of Common Stock.
There are no redemption provisions with respect to the Common Stock. All
outstanding shares of Common Stock, including the shares offered hereby, are,
or will be upon completion of the Offering, fully paid and non-assessable.
The By-laws provide that the number of directors shall be fixed by the Board
of Directors. Any director of the Company may be removed from office only for
cause by the holders of two-thirds of the outstanding shares of the Company
entitled to vote at an election of directors.
Undesignated Preferred Stock. The Board of Directors of the Company is
authorized, without further action of the stockholders of the Company, to
issue up to 2,000,000 shares of Preferred Stock in one or more classes or
series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series or the designation of such series. However, pursuant to the
Certificate, the holders of Preferred Stock would not have cumulative voting
rights with respect to the election of directors. Any such Preferred Stock
issued by the Company may rank prior to the Common Stock as to dividend
rights, liquidation preference or both, may have full or limited voting rights
and may be convertible into shares of Common Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock could adversely affect the
voting power of the holders of Common Stock and could have the effect of
delaying, deferring, or preventing a change in control of the Company.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BY-LAWS
General. A number of provisions of the Certificate and By-laws concern
matters of corporate governance and the rights of stockholders. Certain of
these provisions, as well as the ability of the Board of Directors to issue
shares of Preferred Stock and to set the voting rights, preferences and other
terms thereof, may be deemed to have an anti-takeover effect and may
discourage takeover attempts not first approved by the Board of Directors
(including takeovers which certain stockholders may deem to be in their best
interests). To the extent takeover attempts are discouraged, temporary
fluctuations in the market price of the Common Stock, which may result from
actual or rumored takeover attempts, may be inhibited.
37
<PAGE>
In addition, the By-laws provide that shareholders may remove a director
only for cause and only by the vote of the holders of two-thirds of the
outstanding shares of the Company entitled to vote at an election of
directors. This provision, when coupled with the provision of the By-laws
authorizing only the Board of Directors to fill vacant directorships, will
preclude shareholders from removing incumbent directors without cause and
simultaneously gaining control of the Board of Directors by filling the
vacancies created by such removal with their own nominees, and will make more
difficult, and therefore may discourage, a proxy contest to change control of
the Company. These provisions, together with the ability of the Board to issue
Preferred Stock without further stockholder action, also could delay or
frustrate the removal of incumbent directors or the assumption of control by
stockholders, even if such removal or assumption would be beneficial to
stockholders of the Company. In addition, these provisions could discourage or
make more difficult a merger, tender offer or proxy contest, even if they
would be favorable to the interests of stockholders, and could potentially
depress the market price of the Common Stock. The Board of Directors of the
Company believes that these provisions are appropriate to protect the
interests of the Company and all of its stockholders. The Board of Directors
has no present plans to adopt any other measures or devices which may be
deemed to have an anti-takeover effect.
Meetings of Stockholders. The By-laws provide that, unless otherwise
required by law, a special meeting of stockholders may be called by the
Chairman of the Board or upon the request of at least 51% of the members of
the Board of Directors. The By-laws provide that only those matters brought
before the meeting at the direction of the chairman of the meeting or set
forth in the notice of special meeting may be considered or acted upon at that
special meeting, unless otherwise provided by law. In addition, the By-laws
set forth certain advance notice and informational requirements and time
limitations on any director nomination or any new business which a stockholder
wishes to propose for consideration at an annual or special meeting of
stockholders.
No Stockholder Action by Written Consent. The Certificate provides that if
at any time a class of stock of the Company becomes registered pursuant to the
Exchange Act and the rules and regulations of the SEC and such stock is being
traded on a nationally recognized exchange, any action required or permitted
to be taken by a stockholder of the Company at an annual or special meeting of
stockholders must be effected at a duly called meeting and may not be taken or
effected by a written consent of stockholders in lieu thereof.
Indemnification and Limitation of Liability. The By-laws and the Certificate
provide that directors and officers of the Company shall be, and, in the
discretion of the Board of Directors, non-officer employees may be,
indemnified by the Company to the fullest extent authorized by Delaware law,
as it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
the Company. The By-laws and the Certificate also provide that the right of
directors and officers to indemnification shall be a contract right and shall
not be exclusive of any other right now possessed or hereafter acquired under
any by-law, agreement, vote of stockholders or disinterested directors of the
Company or otherwise. The Certificate contains a provision permitted by
Delaware law that generally eliminates the personal liability of directors for
monetary damages for breaches of their fiduciary duty, including breaches
involving negligence or gross negligence in business combinations, unless the
director has breached his or her duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or a knowing violation of law, paid a
dividend or approved a stock repurchase in violation of the Delaware General
Corporation Law or obtained an improper personal benefit. This provision does
not alter a director's liability under the federal securities laws. In
addition, this provision does not affect the availability of equitable
remedies, such as an injunction or rescission, for breach of fiduciary duty.
Amendment of the Certificate. The Certificate provides that an amendment
thereof must be approved by a majority of the Board of Directors and (with
certain exceptions) thereafter approved by a majority of the total votes
eligible to be cast by holders of voting stock; provided, that certain types
of amendments relating to the Company's directors and officers, including
amendment of the indemnification provisions set forth in the Certificate, must
be approved by the holders of two-thirds of the total votes eligible to be
cast by holders of voting stock.
Amendment of By-laws. The Certificate provides that the Board of Directors
of the Company is authorized to adopt, amend or repeal any or all of the By-
laws of the Company, including By-law amendments increasing or reducing the
authorized number of directors.
38
<PAGE>
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the Offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person or affiliate, or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved
by the board of directors of the corporation before the person becomes an
interested stockholder; (ii) the stockholder acquired 85% or more of the
outstanding voting stock of the corporation in the same transaction that made
the stockholder an interested stockholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and authorized by the holders of at
least 66% of the corporation's outstanding voting stock at an annual or
special meeting, excluding shares owned by the interested stockholder. Under
Section 203, an "interested stockholder" is defined (with certain limited
exceptions) as any person that is (i) the owner of 15% or more of the
outstanding voting stock of the corporation or (ii) an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether such person
is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action
of its stockholders to exempt itself from coverage, provided that such by-law
or charter amendment shall not become effective until 12 months after the date
it is adopted. Neither the Certificate nor the By-laws of the Company contain
any such exclusion.
REGISTRATION RIGHTS
Pursuant to the Stockholders' Agreement, Bernard F. Reynolds, Eli Salig and
Seymour Adler have certain demand and incidental registration rights. The
demand registration rights provide that following the Offering and after a
specified time, upon written request by a holder of Common Stock, the holder
shall have, with certain limitation, the right to require the Company to
register the requested shares of such holder. Unless otherwise provided by
applicable state securities laws, in connection with one demand registration
the Company shall pay all registration and filing fees, excluding all sales
commissions or other similar selling charges, with respect to the shares
registered. In connection with additional demand registrations, the holder
shall pay all registration and filing fees. The incidental registration rights
provide that if the Company proposes to register any offer or sale of Common
Stock under the 1933 Act for its own account or the account of any
shareholder, the Company shall give such holders notice of the registration
and upon request by a holder, include such holder's shares of Common Stock in
the registration, subject to certain rights of any underwriter of the offering
to which such registration relates to exclude such shares from the
registration. All expenses relating to the Offering, excluding sales
commissions or other similar selling charges, shall be paid by the Company,
unless otherwise provided by applicable state securities laws. The holders of
such registration rights have waived such rights in connection with the
Offering and have also agreed with the Underwriters not to exercise such
rights for a period of 180 days following the date of this Prospectus.
TRANSFER AGENT AND REGISTRAR
The Bank of New York is the transfer agent and registrar for the Common
Stock.
39
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have a total of 6,825,158
shares of Common Stock outstanding. Of these shares, the 2,200,000 shares sold
in the offering (2,530,000 if the Underwriters' over-allotment option is
exercised in full) will be freely transferable without restriction under the
1933 Act, except for any shares held by "affiliates" of the Company as that
term is used under the 1933 Act and the regulations promulgated thereunder and
except to the extent such shares are subject to the agreements with the
Underwriters described below.
The remaining 4,625,158 shares (4,295,158 if the Underwriters' over-
allotment option is exercised in full) are held by officers, directors,
employees and other stockholders of the Company, were sold by the Company in
reliance on exemptions from the registration requirements of the 1933 Act and
are "restricted securities" within the meaning of Rule 144 ("Rule 144")
adopted under the 1933 Act (the "Restricted Securities"). Beginning 180 days
after the effective date of the Registration Statement of which this
Prospectus is a part (the "Effective Date"), upon the expiration of agreements
(the "Lock-up Agreements") entered into between the Underwriters and such
stockholders, 4,292,248 (3,962,248 if the Underwriters' over-allotment option
is exercised in full) of the Restricted Securities will be eligible for sale
in the public market subject to the provisions of Rule 144, the remaining
332,910 Restricted Securities will become eligible for sale in reliance on
Rule 144(k) and an additional 176,553 shares will be eligible for sale subject
to the provisions of Rule 701 ("Rule 701") adopted under the 1933 Act.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned Restricted Securities for at least a two-year period (as
computed under Rule 144) is entitled to sell within any three-month period a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 68,252 shares after giving
effect to the Offering), or (ii) the average weekly trading volume in the
Company's Common Stock during the four calendar weeks immediately preceding
the filing of a Form 144 with respect to such sale. Sales under Rule 144 are
also subject to certain provisions relating to the manner and notice of sale
and the availability of current public information about the Company. In
addition, under Rule 144(k), a person (or persons whose shares are aggregated)
who is not deemed to have been an affiliate of the Company at any time during
the 90 days immediately preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least a three-year period (as computed under
Rule 144), would be entitled to sell such shares under Rule 144(k) without
regard to the volume limitations and other conditions described above.
Affiliates continue to be subject to certain limitations under Rule 144,
including volume of sale limitations, regardless of the time period that
shares are held.
Under the Option Plan and the Directors' Plan, there are an aggregate of
850,000 shares of Common Stock reserved for issuance. As of the Effective
Date, options to purchase 368,533 shares have been granted pursuant to the
Option Plan and the Directors' Plan. Holders of outstanding stock options have
also entered into Lock-up Agreements with the Underwriters. Beginning 180 days
after the Effective Date, upon the expiration of the Lock-up Agreements,
176,533 shares of Common Stock underlying currently exercisable stock options
will be eligible for sale in accordance with the requirements of Rule 701.
Securities issued in reliance on Rule 701 are restricted securities and may be
sold by persons other than affiliates of the Company subject only to the
manner of sale provisions of Rule 144, and may be sold by affiliates of the
Company subject to the volume limitations of Rule 144 and all other provisions
of Rule 144 except its two-year minimum holding period.
The Company intends to file one or more registration statements on Form S-8
under the 1933 Act to register shares of Common Stock reserved for issuance
under the Option Plan and the Directors' Plan. If the Company files one or
more registration statements on Form S-8, non-affiliate holders of shares
registered under the Form S-8 that are issuable upon exercise of stock options
granted pursuant to the Option Plan and the Directors' Plan will be able to
sell such shares in the public market without regard to the restrictions of
Rule 144. Affiliates will
40
<PAGE>
continue to be subject to certain limitations on sale, including the volume
restrictions described above. The Company has agreed with the Underwriters not
to file any such registration statement on Form S-8 with respect to, or
otherwise register for resale with the SEC, shares of Common Stock subject to
stock options, during the 180-day period commencing on the Effective Date.
The Lock-up Agreements provide that the Company's officers, directors, each
of its stockholders and each holder of outstanding options or warrants to
purchase Common Stock will not, without the prior written consent of H.C.
Wainwright & Co., Inc., directly or indirectly, offer, sell, pledge, contract
to sell, grant any option to purchase or otherwise dispose of any shares of
Common Stock beneficially owned or otherwise held or any securities
convertible into, derivative of or exercisable or exchangeable for such Common
Stock during the 180-day period commencing on the Effective Date. The Company
has also agreed that it will not, without the prior written consent of H.C.
Wainwright & Co., Inc., directly or indirectly, offer, sell, pledge, contract
to sell, grant any option to purchase or otherwise dispose of any shares of
Common Stock beneficially owned or otherwise held or any securities
convertible into, derivative of or exercisable or exchangeable for such Common
Stock during the 180-day period commencing on the Effective Date except for
(i) the sale of the shares of Common Stock in the Offering and (ii) upon the
exercise of options to purchase Common Stock outstanding on the Effective
Date.
Prior to the Offering, there has been no public market for the Company's
Common Stock. No prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of such shares for sale
will have on the market price prevailing from time to time. Nevertheless,
sales of substantial amounts of Common Stock in the public market after the
restrictions described above lapse could adversely affect the prevailing
market price and the ability of the Company to raise equity capital in the
future.
41
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below (the "Underwriters"), for whom H.C. Wainwright & Co.,
Inc. is acting as representative (the "Representative"), and each of the
Underwriters has severally agreed to purchase from the Company the respective
number of shares of Common Stock set forth opposite its name below at the
initial public offering price less the underwriting discount set forth on the
cover page of this Prospectus. The Underwriting Agreement provides that,
subject to the terms and conditions set forth therein, the Underwriters are
obligated to purchase all of the shares of Common Stock being sold pursuant to
the Underwriting Agreement if any of the shares of Common Stock are purchased.
Under certain circumstances, under the Underwriting Agreement, the commitments
of non-defaulting Underwriters may be increased.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
H.C. Wainwright & Co., Inc. ................................
Total..................................................... 2,200,000
=========
</TABLE>
The Underwriters have reserved up to 5% of the shares of Common Stock
offered hereby for sale at the initial public offering price to employees and
certain other persons having business relationships with the Company. The
number of shares available for sale to the general public will be reduced to
the extent such persons purchase such reserved shares. Any reserved shares not
so purchased will be offered by the Underwriters to the general public on the
same basis as the other shares offered hereby. Certain individuals purchasing
reserved shares may be required to agree not to sell, offer or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date
of this Prospectus.
The Representative has advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of Common Stock on sales to certain other dealers. After
the initial public offering, the public offering price, concession and
discount may be changed.
The Selling Stockholders have granted the Underwriters an option to purchase
up to an additional 330,000 shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. Such option, which will expire 30 days after the date
of this Prospectus, may be exercised solely to cover over-allotments, if any,
made in connection with the sale of shares of Common Stock offered hereby. To
the extent that the Underwriters exercise this option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof which the number of shares
of Common Stock to be purchased initially by that Underwriter bears to the
total number of shares of Common Stock to be purchased initially by the
Underwriters. If purchased, the Underwriters will offer such additional shares
on the same terms as those on which the 2,200,000 shares of Common Stock are
being offered hereby.
On the closing of the Offering, the Company will sell to the Representative,
individually and not as representative of the Underwriters, for nominal
consideration, the Representative's Warrants entitling the Representative to
purchase an aggregate of 220,000 shares of Common Stock at an initial exercise
price per share equal to 150% of the initial public offering price hereunder.
The Representative's Warrants will be exercisable for a period of four years
commencing one year after the date of this Prospectus and will contain certain
demand and incidental registration rights relating to the underlying Common
Stock. The Representative's
42
<PAGE>
Warrants cannot be transferred, assigned of hypothecated, in whole or in part,
for a period of twelve months from the date of their issuance, except that
they may be assigned to any officer or partner of the Representative. The
Representative's Warrants will contain anti-dilution provisions providing for
appropriate adjustment of the exercise price and the number of shares issuable
upon exercise thereof upon the occurrence of certain events.
For the life of the Representative's Warrants, their holders have, at
nominal cost, the opportunity to profit from a rise in the market price for
the Common Stock without assuming the risk of ownership, with a resulting
dilution in the interest of other security holders. As long as the
Representative's Warrants remain unexercised, the terms under which the
Company could obtain additional capital may be adversely affected. Moreover,
the holders of the Representative's Warrants might be expected to exercise
them at a time when the Company would, in all likelihood, be able to obtain
any needed capital by a new offering of its securities on terms more favorable
than those provided by the Representative's Warrants. Additionally, if the
Representative should exercise its registration rights to effect a
distribution of the underlying shares of Common Stock, the Representative,
prior to and during such distribution, would be unable to make a market in the
Common Stock. If the Representative must cease making a market, the market and
market price for the Common Stock may be adversely affected and holders of the
Common Stock may be unable to sell the Common Stock.
The Company has granted H.C. Wainwright & Co., Inc., the right to act as the
Company's managing underwriter and financial advisor on an exclusive basis
until November 4, 1998 with respect to any sales of equity securities by the
Company, any sale or disposition of the Company or any of its assets or the
acquisition by the Company of any securities or assets of any other business
entity. In addition, the Company has granted to H.C. Wainwright & Co., Inc.
the right to nominate one director to the Company's Board of Directors. H.C.
Wainwright & Co., Inc. intends to nominate an independent director to fill
that position and it is contemplated that this individual will serve on the
Compensation Committee.
The Company and the Company's existing stockholders have, subject to certain
exceptions in the case of the Company for the grant of employee and director
stock options, agreed not to, directly or indirectly, sell, offer to sell,
grant any option for sale of, or otherwise dispose of, any Common Stock of the
Company, or any security convertible or exchangeable into, or exercisable for,
such capital stock, or, in the case of the Company, file any registration
statement with respect to any of the foregoing, for a period of 180 days after
the date of this Prospectus, without the prior written consent of the
Underwriters.
The Representative has advised the Company that the Underwriters do not
intend to confirm sales of Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price of the Common Stock will be determined by
negotiations among the Company and the Underwriters. Among the factors to be
considered in such negotiations, in addition to prevailing market conditions,
will be certain financial information of the Company, an assessment of the
Company's management, estimates of the business potential and earnings
prospects of the Company, the present state of the Company's development and
operations, the present state of the Company's industry in general and other
factors deemed relevant. The initial public offering price set forth on the
cover page of this Prospectus should not, however, be considered an indication
of the actual value of the Common Stock. Such price is subject to change as a
result of market conditions and other factors. There can be no assurance that
an active trading market will develop for the Common Stock or that the Common
Stock will trade in the public market subsequent to the Offering at or above
the initial public offering price.
In connection with the Offering, the Underwriters and certain selling group
members may engage in stabilizing, syndicate short covering transactions or
other transactions that stabilize, maintain or otherwise affect the market
price of the Common Stock. Stabilizing transactions may consist of initiating
bids or effecting purchases on the Nasdaq National Market for the purpose of
preventing or retarding a decline in the market price of the Common Stock.
Bids or purchases effected by the Underwriters or selling group members for
such
43
<PAGE>
purposes may be instituted at prices no higher than the initial public
offering price or the most recent independent bid, whichever is less. Such
transactions may stabilize the market price of the Common Stock at a level
above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
Application has been made for listing of the Common Stock on the Nasdaq
National Market under the symbol ASIS, subject to official notice of issuance.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the 1933 Act or contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Koerner Silberberg & Weiner, llp, New York, New York. Goodwin,
Procter & Hoar llp, Boston, Massachusetts, has acted as counsel for the
Underwriters in connection with the Offering.
EXPERTS
The consolidated balance sheet of ASI Solutions Incorporated as of March 31,
1996, the combined balance sheet of Assessment Solutions Incorporated and
Proudfoot Reports Incorporated as of March 31, 1995 and the combined
statements of income, stockholders' equity and cash flows for each of the
three years ended March 31, 1996 included in this registration statement have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. The report of Coopers & Lybrand L.L.P. for the year
ended March 31, 1994 is based in part upon the audit of Assessment Solutions,
one of the combined entities, conducted by William W. Oliver, CPA. The opinion
of Coopers & Lybrand L.L.P. for 1994, as it relates to the amounts for
Assessment Solutions, is based solely on the report of William W. Oliver, CPA.
The financial statements of Assessment Solutions are referred to based upon
the authority of William W. Oliver, CPA as an expert in accounting and
auditing.
CHANGE IN INDEPENDENT ACCOUNTANTS
Assessment Solutions retained Coopers & Lybrand L.L.P. as its independent
accountants and replaced William W. Oliver, CPA in fiscal 1995. The report of
William W. Oliver, CPA on the financial statements of Assessment Solutions as
of March 31, 1994 and for the fiscal year then ended contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or application of accounting principles. During the
fiscal year ended March 31, 1994 and through the date of replacement, there
were no disagreements with William W. Oliver, CPA on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. The change in independent accountants was approved by the Board of
Directors of Assessment Solutions.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Prospectus summary and under the captions "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such statements may include,
but are not limited to, projections of revenues, income or loss, capital
expenditures, plans for future operations, financing needs or plans and plans
relating to services of the Company, as well as assumptions relating to the
foregoing. Additional written or oral forward-looking statements may be made
by the Company from time to time in filings with the Securities and
44
<PAGE>
Exchange Commission or otherwise. Such forward-looking statements also involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following general economic and business
conditions: the loss of, or the failure to replace, any significant customers;
continued emphasis by many of the Company's clients on reducing operational
expenses and maintaining high quality control which encourages outsourcing of
such clients' non-revenue producing functions; changes in business strategy or
development plans; the timing and success of any enhancements to the Company's
services and programs; the quality of any new management personnel the Company
is able to attract to assist the growth of the Company's business; the
availability, terms and deployment of capital; the business abilities and
judgments of recently hired personnel; the continued availability of qualified
personnel; and other factors referenced in this Prospectus. The words
"believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements which speak only as of the
date of this Prospectus.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the 1933 Act and the rules and
regulations promulgated thereunder, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information regarding the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed as part of the Registration Statement. Statements contained in the
Prospectus concerning the provisions or contents of any contract, agreement or
other document referred to herein are not necessarily complete with respect to
each such contract, agreement or document filed as an exhibit to the
Registration Statement. Reference is made to such exhibits for a more complete
description of the matters involved, and each statement shall be deemed
qualified in its entirety by such reference.
The Registration Statement, including the exhibits and schedules thereto,
may be inspected and copied at the public reference facilities maintained at
the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located
at 7 World Trade Center, 13th Floor, New York, New York 10048 and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. The Company is required
to file electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) System.
The electronically filed documents, including reports, proxy statements and
other information, are maintained by the Commission and may be found at the
World Wide Web site http:// www. sec. gov. Application has been made for
listing of the Common Stock on the Nasdaq National Market. When listed,
certain reports, proxy statements and certain other information can also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
45
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants, Coopers & Lybrand L.L.P. .............. F-2
Report of Independent Accountant, William W. Oliver, C.P.A. .............. F-3
Consolidated Balance Sheets as of March 31, 1995 and 1996, and (unaudited)
September 30, 1996....................................................... F-4
Consolidated Statements of Income for the years ended March 31, 1994, 1995
and 1996, and (unaudited) for the six months ended September 30, 1995 and
1996..................................................................... F-5
Consolidated Statements of Stockholders' Equity for the years ended March
31, 1994, 1995 and 1996, and (unaudited) for the six months ended
September 30, 1995 and 1996.............................................. F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1994,
1995 and 1996, and (unaudited) for the six months ended September 30,
1995 and 1996............................................................ F-7
Notes to Consolidated Financial Statements................................ F-8
</TABLE>
F-1
<PAGE>
The accompanying consolidated financial statements of ASI Solutions
Incorporated have been prepared to give effect to the planned stock split to
be effected as a stock dividend described in Note 11. When this stock split to
be effected as a stock dividend has occurred we will issue the following
report.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
ASI Solutions Incorporated:
We have audited the consolidated balance sheet of ASI Solutions Incorporated
and Subsidiaries as of March 31, 1996 and the combined balance sheet of the
Predecessor (as more fully described in Note 1) as of March 31, 1995, and the
combined statements of income, stockholders' equity and cash flows for each of
the three years ended March 31, 1996. These financial statements are the
responsibility of the Company's and the Predecessor's management. Our
responsibility is to express an opinion on the financial statements based on
our audits. We did not audit the financial statements of Assessment Solutions
Incorporated, one of the combined entities (Note 1), for the year ended March
31, 1994, which statements reflect revenue and net income of $3,454,776 and
$122,140, respectively. These financial statements were audited by another
auditor whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Assessment Solutions Incorporated for the
year ended March 31, 1994 is based solely on the report of the other auditor.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of the other
auditor provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditor, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ASI Solutions Incorporated as
of March 31, 1996, the combined financial position of the Predecessor as of
March 31, 1995 and the combined results of their operations and their cash
flows for each of the three years ended March 31, 1996, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
June 18, 1996, except as to the
information presented in Note 11,
for which the date is January 16, 1997.
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANT
To the Board of Directors and Stockholders of
Assessment Solutions Incorporated:
I have audited the statements of income, stockholders' equity and cash flows
of Assessment Solutions Incorporated for the year ended March 31, 1994 (none
of which is shown separately herein). These financial statements are the
responsibility of Assessment Solutions Incorporated's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the statements of income, stockholders'
equity and cash flows are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of income, stockholders' equity and cash flows. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
statements of income, stockholders' equity and cash flows. I believe that my
audit of the statements of income, stockholders' equity and cash flows
provides a reasonable basis for my opinion.
In my opinion, the statements of income, stockholders' equity and cash flows
referred to above present fairly, in all material respects, the results of
operations and the cash flows of Assessment Solutions Incorporated for the
year ended March 31, 1994, in conformity with generally accepted accounting
principles.
William W. Oliver, C.P.A.
New York, New York
June 24, 1994
F-3
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
--------------------- SEPTEMBER 30,
1995 1996 1996
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 228,453 $ 69,583 $ 121,548
Accounts receivable, net.................. 1,277,539 2,029,045 2,966,596
Prepaid expenses and other current
assets................................... 58,233 54,884 96,961
Notes receivable from stockholders........ 349,288 72,746 72,746
---------- ---------- ----------
Total current assets..................... 1,913,513 2,226,258 3,257,851
Property and equipment, net................ 402,024 520,724 1,134,294
Notes receivable from stockholders......... -- 290,984 303,715
Intangible assets, net..................... 57,956 44,475 37,737
Other assets............................... 96,614 96,768 241,477
---------- ---------- ----------
Total assets............................. $2,470,107 $3,179,209 $4,975,074
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank..................... $ 58,333 $ 100,000 $ 705,000
Notes payable to stockholder.............. 210,789 -- --
Accounts payable and accrued expenses..... 683,049 839,382 1,127,003
Accrued income taxes...................... 572,591 756,503 908,055
---------- ---------- ----------
Total current liabilities................ 1,524,762 1,695,885 2,740,058
Other liabilities.......................... 94,882 150,492 146,045
---------- ---------- ----------
Total liabilities........................ 1,619,644 1,846,377 2,886,103
---------- ---------- ----------
Commitments (Note 6)
Stockholders' equity:
Common stock, $.01 par value; authorized,
5,000,000 shares;
issued and outstanding, 4,625,158
shares................................... 46,252 46,252
Additional paid in capital................ 45,822 45,822
Retained earnings......................... 1,240,758 1,996,897
Net combined equity of Predecessor (Note
1)....................................... 850,463 -- --
---------- ---------- ----------
Total stockholders' equity............... 850,463 1,332,832 2,088,971
---------- ---------- ----------
Total liabilities and stockholders'
equity.................................. $2,470,107 $3,179,209 $4,975,074
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED MARCH 31, ENDED SEPTEMBER 30,
----------------------------------- ----------------------
1994 1995 1996 1995 1996
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................. $6,028,175 $8,022,623 $10,558,113 $5,393,293 $8,052,951
Cost of services........ 3,206,650 4,178,736 5,206,854 2,538,273 3,583,721
---------- ---------- ----------- ---------- ----------
Gross profit............ 2,821,525 3,843,887 5,351,259 2,855,020 4,469,230
Operating expenses:
General and
administrative ....... 1,687,837 1,947,384 2,225,551 998,380 1,441,287
Sales and marketing.... 618,117 744,433 1,100,205 523,856 739,703
Research and
development........... 283,417 375,086 613,906 318,058 457,620
---------- ---------- ----------- ---------- ----------
Income from operations.. 232,154 776,984 1,411,597 1,014,726 1,830,620
Other income............ -- 276,202 -- -- --
Interest (expense)
income, net............ (24,405) (14,374) 2,227 (6,546) (33,917)
---------- ---------- ----------- ---------- ----------
Income before provision
for income taxes and
cumulative effect of
change in accounting
principle.............. 207,749 1,038,812 1,413,824 1,008,180 1,796,703
Provision for income
taxes ................. 60,941 467,876 681,455 481,828 1,040,564
---------- ---------- ----------- ---------- ----------
Income before cumulative
effect of change in
accounting principle... 146,808 570,936 732,369 526,352 756,139
Cumulative effect of
change in accounting
principle.............. 19,091 -- -- -- --
---------- ---------- ----------- ---------- ----------
Net income.............. $ 165,899 $ 570,936 $ 732,369 $ 526,352 $ 756,139
========== ========== =========== ========== ==========
Proforma net income per
common and common
equivalent share (Note
2)..................... $ 0.16 $ 0.16
=========== ==========
Proforma weighted
average common and
common equivalent
shares outstanding
(Note 2)............... 4,667,404 4,667,404
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ASSESSMENT PROUDFOOT
ASI SOLUTIONS SOLUTIONS REPORTS
INCORPORATED INCORPORATED INCORPORATED
COMMON STOCK COMMON STOCK(1) COMMON STOCK(2) ADDITIONAL
----------------- --------------- ------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- ------ --------- ---------- ------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1993.......... 100 $ 16,750 1,900,000 $19,000 $306,324 $ (228,446) $ 113,628
Net income............. 165,899 165,899
------ --------- ---------- ------- -------- ---------- ----------
March 31, 1994.......... 100 16,750 1,900,000 19,000 306,324 (62,547) 279,527
Net income............. 570,936 570,936
------ --------- ---------- ------- -------- ---------- ----------
March 31, 1995.......... 100 16,750 1,900,000 19,000 306,324 508,389 850,463
Net income............. 732,369 732,369
Settlement of stock-
holder note........... (250,000) (250,000)
Recapitalization of
Company............... 4,625,158 $46,252 (100) (16,750) (1,900,000) (19,000) (10,502) --
--------- ------- ------ --------- ---------- ------- -------- ---------- ----------
March 31, 1996.......... 4,625,158 46,252 -- -- -- -- 45,822 1,240,758 1,332,832
Net income (unau-
dited)................ 756,139 756,139
--------- ------- ------ --------- ---------- ------- -------- ---------- ----------
September 30, 1996 (un-
audited)............... 4,625,158 $46,252 -- $ -- -- $ -- $ 45,822 $1,996,897 $2,088,971
========= ======= ====== ========= ========== ======= ======== ========== ==========
</TABLE>
- --------
(1) Assessment Solutions Incorporated common stock has no par value; 200
shares authorized, 100 shares issued and outstanding.
(2) Proudfoot Reports Incorporated common stock is $0.01 par value; 2,000,000
shares authorized, 1,900,000 shares issued and outstanding.
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
ASI SOLUTIONS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------- --------------------
1994 1995 1996 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating
activities
Net income............. $ 165,899 $ 570,936 $ 732,369 $ 526,352 $ 756,139
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization......... 119,013 154,582 174,576 77,356 113,600
Provision for doubtful
accounts............. 10,000 -- (4,956) -- --
Accrual of straight-
line rent............ 7,790 (12,948) 63,553 -- --
Loss on write-off of
leasehold
improvements......... -- 17,120 -- -- --
Deferred income
taxes................ 25,434 (4,317) (7,943) (5,616) (9,887)
Changes in operating
assets and
liabilities:
Accounts receivable... 34,294 (297,824) (746,550) (541,799) (967,551)
Prepaid expenses and
other current
assets............... 7,558 (33,173) 3,349 28,158 (12,077)
Other assets.......... 33,478 (34,167) (154) (12,420) (144,709)
Notes receivable from
stockholders......... (86,855) (41,826) (264,442) (164,610) (12,731)
Accounts payable and
accrued expenses..... (137,584) (19,692) 156,333 (52,076) 287,619
Other liabilities..... 23,893 (49,734) -- 68,001 (4,447)
Accrued income taxes.. (94,593) 442,536 183,912 305,249 161,440
--------- --------- --------- --------- ---------
Net cash provided by
operating
activities........... 108,327 691,493 290,047 228,595 167,396
--------- --------- --------- --------- ---------
Cash flow from investing
activities:
Acquisition of
property and
equipment............ (130,352) (242,154) (279,795) (86,792) (720,431)
--------- --------- --------- --------- ---------
Net cash used in
investing
activities........... (130,352) (242,154) (279,795) (86,792) (720,431)
--------- --------- --------- --------- ---------
Cash flow from financing
activities:
Cash overdraft........ 21,487 (21,487) -- -- --
Notes payable to
stockholder.......... 60,000 51,161 (210,789) (210,789)
Proceeds from
borrowings........... -- -- 100,000 -- 605,000
Principal repayment of
debt................. (109,374) (272,657) (58,333) (50,000) --
--------- --------- --------- --------- ---------
Net cash (used in)
provided by financing
activities........... (27,887) (242,983) (169,122) (260,789) 605,000
--------- --------- --------- --------- ---------
Net increase (decrease)
in cash................ (49,912) 206,356 (158,870) (118,986) 51,965
Cash, at beginning of
the period............. 72,009 22,097 228,453 228,453 69,583
--------- --------- --------- --------- ---------
Cash, at end of the
period................. $ 22,097 $ 228,453 $ 69,583 $ 109,467 $ 121,548
========= ========= ========= ========= =========
Supplemental cash flow
information:
Cash paid for:
Interest.............. $ 23,185 $ 16,296 $ 5,875 $ 3,350 $ 10,400
Income taxes.......... $ 33,374 $ 31,562 $ 463,287 $ 174,339 $ 834,027
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
On March 26, 1996, ASI Solutions Incorporated (the "Company") was
incorporated in the State of Delaware. Effective March 31, 1996, the Company
issued 4,625,158 shares of Common Stock in exchange for substantially all of
the issued and outstanding shares of common stock of Proudfoot Reports
Incorporated ("PRI") and 95% of the Common Stock of Assessment Solutions
Incorporated ("Assessment Solutions"). Subsequent to year end, the remaining
5% of the outstanding common stock of Assessment Solutions was redeemed. The
initial stockholders of the Company were also the principal stockholders of
PRI and Assessment Solutions, the two previously separate but commonly
controlled companies. After the reorganization, Assessment Solutions and PRI
are wholly-owned subsidiaries of the Company. C3 Solutions Incorporated ("C3")
was formed on September 16, 1996 as a wholly-owned subsidiary of the Company.
The Company, Assessment Solutions, PRI and C3 are hereinafter referred to
collectively as the "Company."
Assessment Solutions is a management consulting firm with primary emphasis
on research and the application of simulation technology to the assessment of
sales, service and management personnel. PRI provides pre-employment and post-
employment background checks.
The exchange described above has been accounted for as a reorganization
since all of the entities involved were under common control. Under a
reorganization, the exchange has been accounted for at the historical cost
basis of the entities in a manner similar to a pooling-of-interests. The
balance sheets as of September 30, 1996 and March 31, 1996 and the statement
of income for the six months ended September 30, 1996 have been prepared on a
consolidated basis, including all wholly-owned subsidiaries, and all
intercompany accounts and transactions have been eliminated. The financial
statements for all periods prior to March 31, 1996 have been prepared on a
combined basis for Assessment Solutions and PRI since the entities were under
common control and were subject to the reorganization on March 31, 1996. All
inter-entity accounts and transactions have been eliminated in combination.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates made are for the
recoverability of accounts receivable. Actual results could differ from those
estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration
of credit risk consists of accounts receivable and cash deposits. Cash
deposits generally do not exceed insurable limits. Accounts receivable are
concentrated among a limited number of major companies. To reduce credit risk,
the Company performs credit evaluations of its customers but does not
generally require collateral. For the years ended March 31, 1994, 1995 and
1996, revenues from the Company's top five customers represented approximately
62% of total revenues. Accounts receivable from five customers represented
approximately 65% of total accounts receivable at March 31, 1995 and 1996,
respectively. For the six months ended September 30, 1996, sales to the
Company's top five customers represented 59% of total revenue. Accounts
receivable from five customers represented 74% of total accounts receivable at
September 30, 1996.
F-8
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
Allowances for doubtful accounts were approximately $29,000, $24,000 and
$24,000 as of March 31, 1995 and 1996 and September 30, 1996, respectively.
The majority of the Company's customers are large, established businesses
located throughout the United States and internationally.
Property and Equipment
Furniture and equipment are stated at cost and depreciated over their
estimated useful lives of five years using the straight-line method. Leasehold
improvements are amortized over the shorter of the lease term or estimated
useful life of the related assets. Maintenance and repairs are charged to
expense as incurred; renewals and improvements which extend the life of assets
are capitalized. Gains or losses on the disposition of assets are included in
income.
Intangible Assets
Intangible assets principally include customer lists and the excess of
purchase price over the fair value of identifiable net assets acquired. The
intangible assets are amortized on a straight-line basis over their estimated
useful lives ranging from 10 to 40 years. Amortization expense relating to
intangible assets was $13,481 for the years ended March 31, 1994, 1995 and
1996, respectively, and $6,739 for the six months ended September 30, 1995 and
1996, respectively. Accumulated amortization relating to intangible assets was
$126,909, $140,390 and $147,129 as of March 31, 1995 and 1996 and September
30, 1996, respectively.
Long-lived Assets
If events or changes in circumstances indicate that the carrying amount of a
long-lived asset, including intangible assets, may not be recoverable, the
Company estimates the future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future cash
flows (undiscounted) is less than the carrying amount of the long-lived asset,
an impairment loss is recognized. To date, no impairment losses have been
recognized. Effective April 1, 1995, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 121 ("Accounting for Long-
Lived Assets and Long-Lived Assets to be Disposed of") which did not have a
material impact on the Company's consolidated financial statements.
Cash and Cash Equivalents:
The Company considers all highly liquid investments purchased with an
original maturity date of three months or less from the date of purchase to be
a cash equivalent.
Revenue
The Company recognizes revenue as earned upon completion of services.
Rent Expense
The Company recognizes rent expense for operating leases on a straight-line
basis over the term of the related lease.
F-9
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
Income Taxes
Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
which requires that deferred income taxes be recognized for the tax
consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each year-end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances
are established when necessary, to reduce deferred tax assets to the amount
expected to be realized. Income tax expense consists of the tax payable for
the period and the change during the period in deferred tax assets and
liabilities (See Note 7.) Upon adoption of SFAS No. 109, in fiscal 1994, the
Company recorded a cumulative effect of change in accounting principle of
$19,091.
Proforma Net Income Per Share
Net Income per share for the six months ended September 30, 1996 has been
computed using the weighted average number of common and common equivalent
shares outstanding as of September 30, 1996 of 4,667,404. Since potentially
dilutive instruments issued within one year prior to a proposed initial public
offering, at exercise prices below the expected initial public offering price,
must be treated as outstanding for the entire period, an additional 42,246
shares are reflected in the weighted average number of common shares
outstanding. Proforma net income per share for the year ended March 31, 1996
also assumes that the reorganization transaction as described in Note 1 and
the related exchange of shares of common stock had occurred as of April 1,
1995.
Interim Financial Data (Unaudited)
The Interim financial data as of September 30, 1996 and for the six months
ended September 30, 1995 and 1996 are unaudited; however, in the opinion of
management, such interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
consolidated financial position and the consolidated results of operations and
cash flows for the periods.
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board Issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which prescribes a new method of accounting
for stock-based compensation that determines compensation expense based on
fair value measured at the grant date. SFAS No. 123 gives companies that grant
stock options or other equity instruments to employees, the option of either
adopting the new rules or continuing current accounting, however, disclosure
would be required of the pro forma amounts as if the new rules had been
adopted. SFAS No. 123 is effective for transactions entered into in fiscal
years that begin after December 15, 1995. The Company has elected to continue
with the current accounting method and disclose the proforma impact in the
notes to the consolidated financial statements.
3. RELATED PARTY TRANSACTIONS
The Company has 5-year notes receivable bearing interest at 7% from three
officer-stockholders in the aggregate amount of $363,730 as of March 31, 1996.
The notes provide for annual principal payments of $72,746.
On March 31, 1996, a stockholder of Assessment Solutions transferred 521,000
shares of common stock in PRI to Assessment Solutions in full settlement of a
note receivable from the stockholder in the amount of $250,000. In the
consolidated financial statements, the investment in PRI has been accounted
for as a reduction of additional paid-in capital. A director of the Company is
also a partner of the law firm that is the Company's general counsel. Expenses
incurred by the Company for legal services provided by this law firm were
approximately $38,000 for the year ended March 31, 1996.
F-10
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
4. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------- SEPTEMBER 30,
1995 1996 1996
---------- ---------- -------------
<S> <C> <C> <C>
Furniture and equipment................... $1,093,305 $1,373,100 $2,089,928
Leasehold improvements.................... 110,393 110,393 113,996
---------- ---------- ----------
1,203,698 1,483,493 2,203,924
Less, accumulated depreciation and
amortization.............................. 801,674 962,769 1,069,630
---------- ---------- ----------
$ 402,024 $ 520,724 $1,134,294
========== ========== ==========
</TABLE>
Depreciation and amortization expense relating to property and equipment was
$105,532, $141,101 and $161,095 for the years ended March 31, 1994, 1995 and
1996, respectively. Depreciation and amortization expense relating to property
and equipment was $70,617 and $106,861 for the six months ended September 30,
1995 and 1996, respectively.
5. NOTES PAYABLE TO BANK
Notes payable to bank at March 31, 1996 and September 30, 1996 of $100,000
and $705,000 consist of outstanding lines of credit from a bank which are
payable on demand and bear interest at the bank's prime rate (8.25% at
September 30, 1996) plus 1%. The weighted average interest rate of the
borrowings for the years ended March 31, 1996 and the six months ended
September 30, 1996 was 9.25%. The Company also has a standby letter of credit
with a bank in the amount of $509,000 in connection with a lease for office
space which reduces the amount available under the lines of credit. The unused
amount under these lines of credit at September 30, 1996 is $536,000.
The Company also has a $900,000 line of credit available for furniture and
equipment purchases to be utilized in connection with expansion of existing
and new facilities. As of September 30, 1996, no amounts were outstanding
under this facility. As the purchased assets are placed in service by the
Company, the borrowings convert to five year term loans with interest payable
at the bank's prime rate plus 1%.
As of March 31, 1995, the Company had a $58,333 note payable to a bank,
which matured in October 1995 and bore interest at the bank's prime rate plus
1%.
All of the debt is collateralized by substantially all the assets of the
Company and is guaranteed by two principal stockholders.
6. LEASE COMMITMENTS
The Company leases facilities under various operating leases which expire on
various dates through 2006. The leases include escalations for operating
expenses and real estate taxes. Rent expense charged to operations was
$444,000, $483,000, and $584,000 for the years ended March 31, 1994, 1995 and
1996, respectively and $302,000 and $318,000 for the six months ended
September 30, 1995 and 1996, respectively.
The Company relocated one of its corporate offices during fiscal 1995. The
Company received $217,000 from its former landlord to terminate its office
lease. This amount is recognized as other income in the 1995 combined
statement of income. Also included in the income from lease termination is
$76,322 relating to the reversal of accrued straight line lease adjustments
offset by a $17,120 loss on the write-off of leasehold improvements.
F-11
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
As of March 31, 1996, future minimum annual rental payments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1997............................................................ $643,000
1998............................................................ 579,000
1999............................................................ 560,000
2000............................................................ 529,000
2001............................................................ 280,000
Thereafter...................................................... 177,000
</TABLE>
7. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-------------------------- --------------------
1994 1995 1996 1995 1996
------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Current:
Federal...................... $ 3,856 $285,142 $430,818 $304,613 $ 654,944
State and local.............. 31,651 187,051 258,580 182,831 395,507
Deferred...................... 25,434 (4,317) (7,943) (5,616) (9,887)
------- -------- -------- -------- ----------
$60,941 $467,876 $681,455 $481,828 $1,040,564
======= ======== ======== ======== ==========
</TABLE>
The difference between the effective federal income tax provision calculated
using statutory rates and the actual provision recorded is due principally to
the effect of state and local income taxes and the portion of travel and
entertainment expenses which are not deductible. The tax provision for the six
months ended September 30, 1996 includes a $96,000 charge pertaining to a
recently completed examination by the Internal Revenue Service of the 1993 and
1994 tax returns of Assessment Solutions. Deferred tax assets, which are not
material, are included in prepaid expenses and other current assets and relate
primarily to depreciation and accrued rent payable.
8. RETIREMENT PLANS
PRI had a noncontributory defined contribution plan covering substantially
all employees. The Company contributed an amount equal to one percent of
participants' wages for those individuals who met eligibility requirements.
Contributions approximated $6,900 for the year ended March 31, 1995. Effective
November 30, 1995, the plan was terminated. All employee account balances were
distributed based on their balances as of such date.
The Company has a 401(k) profit sharing plan, covering substantially all
employees. Employees can contribute to a maximum of 15% of their earnings up
to IRS limitations. Contributions can be made by the Company on a
discretionary basis and vest over a five year period. No Company contributions
have been made under this plan.
F-12
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
9. STOCK OPTION PLAN
In August 1991, the shareholders of PRI approved the adoption of a Stock
Option Plan (the "Plan") pursuant to which a maximum 100,000 shares of Common
Stock were available to be issued for non-qualified options. At March 31,
1996, fully vested options to acquire 100,000 shares of Common Stock at an
average price of $.48 per share were issued and outstanding. No options issued
under the Plan had been exercised or expired through March 31, 1996. In
connection with the reorganization, the Plan was terminated and all option
holders exchanged their options for 51,692 options from the newly formed Stock
Option and Grant Plan of the Company. (See Note 11)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, variable rate notes payable and notes receivable
from stockholders are reflected in the accompanying balance sheet at amounts
considered by management to reasonable approximate fair value. The Company
estimates the fair value of its long-term notes receivable and payable using
discounted cash flow analyses based upon current interest rates of notes with
similar maturities.
11. SUBSEQUENT EVENTS
Initial Public Offering
The Company is contemplating an initial public offering (the "Offering") of
2,200,000 shares of common stock. The Company anticipates to use the net
proceeds to pay down debt and for general corporate purposes.
Common Stock Warrants
In connection with the Offering the Company has sold to the representative
of the underwriters at nominal consideration warrants to acquire 220,000
shares of Common Stock during the four year period commencing one year after
the date of the Offering at an exercise price equal to 150% of the Offering
price per common share.
Stock Option and Grant Plan
The Company's Stock Option and Grant Plan (the "Option Plan") was adopted by
the Company's Board of Directors as of March 31, 1996 and approved by its
stockholders on January 16, 1997. Officers, directors, employees, consultants
and key persons of the Company will be eligible to participate in the Option
Plan. The Option Plan provides that options for an aggregate of 800,000 shares
of Common Stock are available for award. Subsequent to September 30, 1996 the
Company granted 316,841 options at a weighted average price of $6.50.
Stock Purchase Plan
In January 1997, the Company created an Employee Stock Purchase Plan (the
"Stock Purchase Plan") which provides for eligible employees to purchase
shares of Common Stock, at a discount (85% of the offering price of the Common
Stock on the offering date or the exercise date, whichever is lower), through
regular period salary reductions of up to 10% of their pre-tax gross
compensation. A maximum of 250,000 shares of Common Stock may be issued under
the Stock Purchase Plan. The first offering under the Stock Purchase Plan will
begin on the commencement of the Offering and end on September 30, 1997. Under
applicable tax rules, an employee may purchase no more than $25,000 of the
fair market value worth of common stock in any calendar year (determined on
the first day of this offering period(s) in which such stock is purchased);
certain other tax limitations may apply. The Stock Purchase Plan is intended
to qualify as an employee stock purchase plan as defined in Section 423 of the
Internal Revenue Service Code.
F-13
<PAGE>
ASI SOLUTIONS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
Directors' Stock Option Plan
In January 1997 the Company adopted a stock option and grant plan for non-
employee directors pursuant to which options to acquire a maximum aggregate of
50,000 shares of Common Stock may be granted to non-employee directors. The
options issued vest ratably over three years, expire ten years from grant date
and cannot have exercise prices less than the fair market value of the Common
Stock on date of grant. On January 15, 1997, 25,000 options were granted and
are exercisable at the Offering price.
Employment Agreements
In January 1997 the Company entered into employment agreements with three
key executives that expire on the third anniversary of the date upon which the
Company notifies the executive of the Company's intention to terminate (except
in the case of termination due to cause) their employment. The agreements
provide for an aggregate salary of $730,000 per annum plus fringe benefits and
an annual bonus to be determined by the Board of Directors. Each employment
agreement includes a covenant not to compete with the Company for a period of
three years after employment ceases.
Notes Payable to Bank
The Company's bank has made available an additional $1,500,000 under its
general line of credit and an additional $1,000,000 under its line of credit
to purchase furniture and equipment. Effective on the Offering date, the
Company will have an additional line of credit from its bank containing
generally the same provisions as its current line of credit with borrowings up
to $6,000,000 and the release of the personal guarantees of two principal
shareholders.
Common Stock
Effective on the Offering date, the Company's Articles of Incorporation will
be restated to increase the number of authorized shares of Common Stock to 18
million shares.
Preferred Stock
Effective on the Offering date, the Board of Directors of the Company is
authorized, without further action of the stockholders of the Company, to
issue up to 2,000,000 shares of Preferred Stock in one or more classes or
series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series or the designation of such series. However, pursuant to the
Certificate, the holders of Preferred Stock would not have cumulative voting
rights with respect to the election of directors. Any such Preferred Stock
issued by the Company may rank prior to the Common Stock as to dividend
rights, liquidation preference or both, may have full or limited voting rights
and may be convertible into shares of Common Stock.
Stock Dividend
In January 1997 the Company's Board of Directors declared an approximately
1.06 for 1 stock split to be effected as a stock dividend on the date of the
prospectus. All references in the financial statements to shares of Common
Stock have been retroactively adjusted to reflect this stock split to be
effected as a stock dividend.
F-14
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IF GIVEN OR MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK
OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SO-
LICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JU-
RISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
The Company.............................................................. 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 11
Dividend Policy.......................................................... 11
Capitalization........................................................... 12
Dilution................................................................. 13
Selected Financial and Operating Data.................................... 14
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 15
Business................................................................. 22
Management............................................................... 30
Principal Stockholders................................................... 35
Certain Transactions..................................................... 36
Description of Capital Stock............................................. 37
Shares Eligible for Future Sale.......................................... 40
Underwriting............................................................. 42
Legal Matters............................................................ 44
Experts.................................................................. 44
Change in Independent Accountants........................................ 44
Special Note Regarding Forward-Looking Statements........................ 44
Additional Information................................................... 45
Index to Consolidated Financial Statements............................... F-1
</TABLE>
-------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,200,000 SHARES
[LOGO OF ASI SOLUTIONS INCORPORATED APPEARS HERE]
COMMON STOCK
-------------
PROSPECTUS
-------------
H.C. WAINWRIGHT & CO., INC.
February , 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses payable by the
Company in connection with the issuance and distribution of the Common Stock:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 6,134.00
Nasdaq National Market Listing Filing Fee....................... 34,563.00
NASD Filing Fee................................................. 2,524.00
Printing and Engraving.......................................... 150,000.00
Accountant's Fees and Expenses.................................. 200,000.00
Legal Fees and Expenses......................................... 250,000.00
Transfer Agent and Registrar Fees............................... 10,000.00
Blue Sky Fees and Expenses (including attorney's fees).......... 5,000.00
Miscellaneous................................................... 41,779.00
-----------
Total......................................................... $700,000.00
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation, subject to the applicable
indemnification provisions of the General Corporation Law of the State of
Delaware. Section 145 of the General Corporation Law of the State of Delaware
empowers a Delaware corporation to indemnify, subject to the standards therein
prescribed, any person in connection with any action, suit or proceeding
brought or threatened by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or was serving as such
with respect to another corporation or other entity at the request of such
corporation.
The Company's Certificate provides that each person who was or is made a
party to (or is threatened to be made a party to) or is otherwise involved in
any civil or criminal action, suit or proceeding by reason of the fact that
such person is or was a director or officer of the Company shall be
indemnified and held harmless by the Company to the fullest extent authorized
by Section 145 of the General Corporation Law of the State of Delaware against
all expense, liability and loss (including without limitation attorneys' fees)
incurred by such person in connection therewith.
Nothing contained in the Company's Certificate shall eliminate or limit the
liability of directors (i) for any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law;
(iii) under Section 174 of the General Corporation Law of the State of
Delaware; or (iv) for any transaction from which the director derived an
improper personal benefit.
The Company maintains directors and officers liability insurance covering
all directors and officers of the Company against claims arising out of the
performance of their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information reflects sales by the Company of unregistered
securities within the past three years. There were no underwriters involved in
the transactions and there were no underwriting discounts or commissions paid
in connection therewith. The issuances of the securities exchanged or sold in
the transactions referenced below were not registered under the 1933 Act in
reliance on the exemption in Section 4(2) of the 1933 Act, as amended, and the
regulations promulgated thereunder. The purchasers of securities in each
II-1
<PAGE>
transaction described below represented their intention to acquire the
securities for investment only and not with a view to or for sale in
connection with any distribution thereof. All purchasers of securities in each
such transaction had access to adequate information concerning the Company.
1. The Company entered into an agreement and plan of reorganization as of
March 31, 1996 (the "Reorganization") with all of the shareholders of
Proudfoot Reports Incorporated ("Proudfoot") and shareholders owning 95% of
the Common Stock of Assessment Systems Incorporated ("Assessment Solutions").
The Reorganization resulted in the issuance of 1,040,346 shares of the
Company's Common Stock in exchange for all of the shares of Proudfoot common
stock and the issuance of 3,870,086 shares of the Company's Common Stock in
exchange for 95% of the Assessment Solutions common stock. As a result of the
Reorganization, Assessment Solutions received 285,274 shares of the Company's
Common Stock which Assessment Solutions then contributed to the capital of the
Company. Subsequent to the Reorganization, the following individuals held the
amount of shares of the Company's Common Stock set forth below:
<TABLE>
<S> <C>
Bernard F. Reynolds......................................... 2,783,742 shares
Eli Salig................................................... 1,269,224 shares
Seymour Adler, Ph.D......................................... 239,280 shares
Tod Parrott................................................. 208,070 shares
F. S. Smith................................................. 124,842 shares
</TABLE>
2. On March 31, 1996 in connection with the Reorganization, Bernard F.
Reynolds, Eli Salig and Seymour Adler, officers of the Company, issued 5-year
notes bearing 7% interest to the Company in the amount of $363,732. The notes
provide for annual principal payments of $72,746 and are currently
outstanding.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
OF EXHIBIT DESCRIPTION
---------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Form of First Restated Certificate of Incorporation of the Company
3.2 Form of By-laws of the Company
*4.1 Specimen of Common Stock Certificate
*5.1 Opinion of Koerner Silberberg & Weiner, LLP as to the legality of
the Common Stock being registered
*10.1 Form of Warrant Agreement by and between the Company and H.C.
Wainwright & Co., Inc.
*10.2 Registration Rights Agreement between the Company, Bernard F.
Reynolds, Eli Salig and Seymour Adler, Ph.D.
10.3 Form of Stock Option and Grant Plan of the Company
10.4 Form of Director's Stock Option Plan of the Company
10.5 Form of Employee Stock Purchase Plan of the Company
*10.6 Form of Employment Agreement between the Company and Bernard F.
Reynolds
*10.7 Form of Employment Agreement between the Company and Eli Salig
*10.8 Form of Employment Agreement between the Company and Seymour Adler,
Ph.D.
10.9 Sublease dated July 2, 1996 between ASI and Nikon Inc. regarding
the space at 1300 Walt Whitman Road, Melville, New York
10.10 Lease dated January 27, 1984 between ASI and 780 Third Avenue
Associates regarding the space at 780 Third Avenue, New York, New
York, and the Third Amendment to the lease dated August 7, 1996
10.11 Sublease dated October 6, 1994 between Proudfoot and Nikon, Inc.
regarding the space at 1300 Walt Whitman Road, Melville, New York,
and the Amendment to the sublease, dated July 2, 1996
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
OF EXHIBIT DESCRIPTION
---------- -----------
<C> <S>
10.12 Lease dated January 25, 1996 between ASI and Pruneyard Associates
regarding the space at 1999 South Bascom Avenue, Campbell,
California
*10.13 Commitment letter dated January 14, 1997 between the Company and
Fleet Bank, N.A.
16.1 Letter regarding change in certifying accountant
21.1 List of Subsidiaries of the Company
*23.1 Consent of Koerner Silberberg & Weiner, LLP (Included in Exhibit
5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of William W. Oliver, C.P.A.
24.1 Power of Attorney (Included in page II-5)
27.1 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide the Underwriter at the closing
specified in the Underwriting Agreement, Common Stock in such denominations
and registered in such names as required by the Underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions referred to under Indemnification of Directors and
Officers or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the 1933
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 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 1933
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A of the 1933 Act and
contained in a form of Prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the 1933 Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 1933 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company, has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunder duly authorized in the City of New York, State of New
York on January , 1997.
ASI SOLUTIONS INCORPORATED
/s/ Bernard F. Reynolds
By: ..................................
Bernard F. Reynolds
Chief Executive Officer and
Chairman
of the Board of Directors
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bernard F. Reynolds and Eli Salig or one of them
acting alone, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign (i) any and all amendments (including post-
effective amendments) to this Registration Statement, and to file the same with
all exhibits thereto, and all other documents in connection therewith, and (ii)
a Registration Statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or any substitute or substitutes of any of them, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
/s/ Bernard F. Reynolds Chairman of the Board and January ,
............................ Chief Executive Officer 1997
BERNARD F. REYNOLDS
/s/ Eli Salig President and Chief January ,
............................ Operating Officer 1997
ELI SALIG
/s/ Seymour Adler, Ph.D. Executive Vice President January ,
............................ 1997
SEYMOUR ADLER, PH.D.
/s/ William B. Fucarino Vice President and Chief January ,
............................ Financial Officer 1997
WILLIAM B. FUCARINO
/s/ David Tory Director January ,
............................ 1997
DAVID TORY
/s/ Michael J. Boylan Director January ,
............................ 1997
MICHAEL J. BOYLAN
/s/ Ilan Kaufthal Director January ,
............................ 1997
ILAN KAUFTHAL
/s/ Carl Seldin Koerner, Secretary and Director January ,
Esq. 1997
............................
CARL SELDIN KOERNER, ESQ.
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
OF EXHIBIT DESCRIPTION
---------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Form of First Restated Certificate of Incorporation of the
Company
3.2 Form of By-laws of the Company
*4.1 Specimen of Common Stock Certificate
*5.1 Opinion of Koerner Silberberg & Weiner, LLP as to the
legality of the Common Stock being registered
*10.1 Form of Warrant Agreement by and between the Company and
H.C. Wainwright & Co., Inc.
*10.2 Registration Rights Agreement between the Company, Bernard
F. Reynolds, Eli Salig and Seymour Adler, Ph.D.
10.3 Form of Stock Option and Grant Plan of the Company
10.4 Form of Director's Stock Option Plan of the Company
*10.5 Form of Employee Stock Purchase Plan of the Company
*10.6 Form of Employment Agreement between the Company and Bernard
F. Reynolds
*10.7 Form of Employment Agreement between the Company and Eli
Salig
*10.8 Form of Employment Agreement between the Company and Seymour
Adler, Ph.D.
10.9 Sublease dated July 2, 1996 between ASI and Nikon Inc.
regarding the space at 1300 Walt Whitman Road, Melville, New
York
10.10 Lease dated January 27, 1984 between ASI and 780 Third
Avenue Associates regarding the space at 780 Third Avenue,
New York, New York, and the Third Amendment to the lease
dated August 7, 1996
10.11 Sublease dated October 6, 1994 between Proudfoot and Nikon,
Inc. regarding the space at 1300 Walt Whitman Road,
Melville, New York, and the Amendment to the sublease, dated
July 2, 1996
10.12 Lease dated January 25, 1996 between ASI and Pruneyard
Associates regarding the space at 1999 South Bascom Avenue,
Campbell, California
*10.13 Commitment letter dated January 14, 1997 between the Company
and Fleet Bank, N.A.
16.1 Letter regarding change in certifying accountant
21.1 List of Subsidiaries of the Company
*23.1 Consent of Koerner Silberberg & Weiner, LLP (Included in
Exhibit 5.1)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of William W. Oliver, C.P.A.
24.1 Power of Attorney (Included in page II-5)
27.1 Financial Data Schedule
</TABLE>
- --------
*To be filed by amendment
<PAGE>
Exhibit 3.1
FORM OF
FIRST RESTATED CERTIFICATE OF INCORPORATION
OF
ASI SOLUTIONS INCORPORATED
ASI Solutions Incorporated, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the Corporation is ASI SOLUTIONS INCORPORATED. The
Corporation's original Certificate of Incorporation was filed with the Secretary
of State on March 22, 1996.
2. This First Restated Certificate of Incorporation restates, integrates
and further amends the original Certificate of Incorporation of the Corporation
by amending and restating in its entirety such original Certificate of
Incorporation.
3. The text of the Certificate of Incorporation, is further amended and
restated hereby to read as herein set forth in full as:
FIRST: The name of the Corporation is:
ASI SOLUTIONS INCORPORATED
SECOND: The address of the registered office of the Corporation in
the State of Delaware and the name of the registered agent at such
address are as follows: National Corporate Research, Ltd., 9 East
Loockerman Street, Dover, Delaware, county of Kent.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware (the "DGCL").
FOURTH:
4.1 Capitalization.
--------------
(a) The aggregate number of shares that the Corporation shall
have the authority to issue is 20,000,000 shares of capital stock
of which: (i) 18,000,000 shares shall be of a class of voting
common stock, par value $.01 per share (the "Common Stock"); and
(ii) 2,000,000 shares shall be of a class of Preferred Stock, par
value $.01 per share (the "Preferred Stock"), for which the Board
of Directors (the "Board") is authorized hereby, subject to the
limitations prescribed by law and the provisions of this Article,
to provide for the issuance of shares of Preferred Stock in
series, and by filing a certificate pursuant to the DGCL to
establish from time to time the number of shares to be included in
each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series of Preferred Stock
and the qualifications, limitations or restrictions
1
<PAGE>
thereof. The authority of the Board with respect to each series of
Preferred Stock, not heretofore designated, shall include, but not be
limited to, determination of the following:
(aa) the number of shares constituting that series (which may be
increased or decreased by the Board) and the distinctive designation of that
series (provided that the aggregate number of shares constituting all series of
Preferred Stock shall not exceed 2,000,000);
(bb) the dividend rate on the shares of that series, whether dividends
shall be cumulative, and if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(cc) whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(dd) whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board shall determine;
(ee) whether or not the shares of that series shall be redeemable, and if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(ff) whether that series shall have sinking fund for redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(gg) the rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(hh) any other relative rights, powers, preferences, qualifications,
limitations or restrictions relating to such series which may be authorized
under the DGCL.
A merger or consolidation of the Corporation with or into any other
corporation, a share exchange involving the Corporation, or a sale, lease,
exchange or transfer of all or any part of the assets of the Corporation shall
not result in the liquidation of the Corporation, and the distribution of its
assets to its stockholders shall not be deemed to be a voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation for purposes of this
Section.
4.2 Right to Vote.
-------------
(1) Each holder of record of shares of Common Stock shall be entitled to
one vote for each share of Common Stock standing in the holder's name
on the stock register of the Corporation.
(2) Cumulative voting shall not be allowed in the election of directors
2
<PAGE>
or for any other purpose.
(3) Each holder of Preferred Stock will have such voting rights as
declared by the Board of Directors.
FIFTH: Election of Directors need not be by written ballot.
SIXTH: Stockholders may take such action by written consent as shall be
permitted by the section 228 of the DGCL provided, however, that if at any time
a class of stock of the Corporation becomes registered pursuant to the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
The Securities and Exchange Commission and such stock is being traded on a
nationally recognized exchange, any action to be taken at any annual or special
meeting of stockholders must be taken at a meeting.
SEVENTH: The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the DGCL (including, without
limitation, paragraph (7) of subsection (B) of Section 102 thereof), as the same
may be amended and supplemented from time to time. The personal liability of
directors for monetary damages for breach of fiduciary duty, including breaches
involving negligence and gross negligence in business combinations, unless the
director has breached his or her duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or knowing violation of law, paid a dividend
or approved a stock repurchase in violation of the DGCL or obtained an improper
personal benefit.
EIGHTH: The Corporation shall, to the fullest extent permitted by the DGCL
(including, without limitation, Section 145 thereof), as the same may be amended
and supplemented from time to time, indemnify any and all persons whom it shall
have power to indemnify under the DGCL. The indemnification provided for herein
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled whether as a matter of law, under any By-law of
the Corporation, by agreement, by vote of stockholders or disinterested
directors of the Corporation or otherwise.
NINTH: The Board of the Corporation is authorized to adopt, amend, or
repeal any or all of the By-Laws of the Corporation, including By-law amendments
increasing or reducing the authorized number of Directors.
TENTH: A special meeting of the stockholders of the Corporation requires
approval of the Chairman of the Board or at least 51% of the members of the
Board of Directors.
ELEVENTH: Nominations of persons for election to the Board of Directors of
the Corporation at a meeting of the Stockholders may be made (a) by or at the
direction of the Board of Directors or (b) by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who provides
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholders notice must be delivered to, or mailed and received by the
Secretary of the Corporation at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting.
TWELFTH: Except as otherwise provided by law, at any annual or special
3
<PAGE>
meeting of the Stockholders, only such business shall be conducted as
shall have been properly brought before the meeting. Such business
must have been brought before the meeting at the direction of the
Chairman of the meeting or specified in written notice given by or on
behalf of a stockholder of record on the record date for such
meeting.
THIRTEENTH: The Corporation reserves the right to amend or repeal
any provisions contained in this Certificate of Incorporation. This
Certificate of Incorporation may be amended or any provisions
repealed by a majority of the Board of Directors; provided, however,
that amendment, modification or repeal of any of the provisions of
Articles Seventh and Eighth herein must be approved by a majority of
the Board of Directors and thereafter approved by the holders of two-
thirds of the total votes eligible to be cast by holders of voting
stock.
4. This first Restated Certificate of Incorporation was duly adopted by
the Board of Directors of the Corporation and by the holders of a majority of
the outstanding stock of the Corporation entitled to vote thereon in accordance
with Sections 141(f), 228 and 245 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Bernard F. Reynolds, its Chairman and Chief Executive Officer, and
attested by Carl Seldin Koerner, its Secretary, as of this ________ day of
December, 1996.
ASI SOLUTIONS INCORPORATED
By:_________________________________________________
Bernard F. Reynolds
Chairman of the Board and Chief Executive Officer
ATTEST:
By:_______________________
Carl Seldin Koerner
Secretary
4
<PAGE>
Exhibit 3.2
FORM OF
BY-LAWS
OF
ASI SOLUTIONS INCORPORATED
ARTICLE I
Offices
-------
The registered office of ASI Solutions Incorporated (the "Corporation")
shall be in the City of Dover, County of Kent, State of Delaware. The
Corporation also may have offices at such other places, within or without the
State of Delaware, as the Board of Directors (the "Board") determines from time
to time or the business of the Corporation requires. Until such time as the
Board otherwise determines, the Corporation shall also have an office in the
City, County and State of New York.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Place of Meetings. Except as otherwise provided in these By-
-----------------
Laws, all meetings of the stockholders shall be held on such dates and at such
times and places, within or without the State of Delaware, as shall be
determined by the Board and as shall be stated in the notice of the meeting or
in waivers of notice thereof. If the place of any meeting is not so fixed, it
shall be held at the registered office of the Corporation in the State of
Delaware.
Section 2. Annual Meetings. The annual meeting of stockholders for the
----------------
election of directors and the transaction of such other proper business as may
be brought before the meeting shall be held on such date after the close of the
Corporation's fiscal year, and at such time, as the Board may from time to time
determine.
Section 3. Special Meetings. Special meetings of stockholders, for any
-----------------
purpose or purposes, may be called by the Chairman of the Board or by the
Chairman of the Board upon the request of at least 50% of the members of the
Board.
1
<PAGE>
Section 4. Notice of Meetings. Except as otherwise required by law,
-------------------
whenever the stockholders are required or permitted to take any action at a
meeting, written notice thereof shall be given, stating the place, date and time
of the meeting and, unless it is the annual meeting, by or at whose direction it
is being issued. The notice also shall designate the place where the
stockholders' list is available for examination, unless the list is kept at the
place where the meeting is to be held. Notice of a special meeting also shall
state the purpose or purposes for which the meeting is called. A copy of the
notice of any meeting shall be delivered personally or shall be mailed, not less
than ten (10) or more than sixty (60) days before the date of the meeting, to
each stockholder of record entitled to vote at the meeting. If mailed, the
notice shall be given when deposited in the United States mail, postage prepaid,
and shall be directed to each stockholder at his or her address as it appears on
the record of stockholders of the Corporation, or to such other address which
such stockholder may have filed by written request with the Secretary of the
Corporation. Notice of any meeting of stockholders shall be deemed waived by
any stockholder who attends the meeting, except when the stockholder attends the
meeting for the express purpose of objecting at the beginning thereof to the
transaction of any business because the meeting is not lawfully called or
convened, or by any stockholder who submits, either before or after the meeting,
a signed waiver of notice. Unless the Board, after the adjournment of a
meeting, shall fix a new record date for the adjourned meeting or unless the
adjournment is for more than thirty (30) days, notice of an adjourned meeting
need not be given if the place, date and time to which the meeting shall be
adjourned are announced at the meeting at which the adjournment is taken.
Section 5. Quorum. Except as otherwise provided by law or, by the
-------
Certificate of Incorporation of the Corporation, at all meetings of
stockholders, the holders of a majority of the outstanding shares of the
Corporation entitled to vote at the meeting shall be present in person or
represented by proxy in order to constitute a quorum for the transaction of
business.
Section 6. Voting. Except as otherwise provided by law or by the
-------
Certificate of Incorporation of the Corporation, at all meetings of the
stockholders, every stockholder of record having the right to vote thereat
shall be entitled to one vote for every share of stock standing in his or her
name as of the record date and entitling him or her to so vote. A stockholder
may vote in person or by proxy. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, any corporate action to be
taken by a vote of the stockholders, other than the election of directors, shall
be authorized by not less than a majority of the votes cast at a meeting by the
stockholders present in person or by proxy and entitled to vote thereon.
Directors shall be elected as provided in Section 3 of Article III of these By-
Laws. Written ballots shall not be required for voting on any matter unless
ordered by the Secretary of the meeting.
Section 7. Proxies. Every proxy shall be executed in writing by the
-------
stockholder or by his or her attorney-in-fact, or otherwise as provided in the
General Corporation Law of the State of Delaware (the "General Corporation
Law").
2
<PAGE>
Section 8. List of Stockholders. At least ten (10) days before every
---------------------
meeting of stockholders, a list of the stockholders (including their addresses)
entitled to vote at the meeting and their record holdings as of the record date
shall be open for examination by any stockholder, for any purpose germane to the
meeting, during ordinary business hours, at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held,
The list also shall be kept at and throughout the meeting, and may be inspected
by any stockholder who is present.
Section 9. Conduct of Meetings. At each meeting of the stockholders, the
-------------------
Chairman of the Board or, in his or her absence, a director chosen by a majority
of the directors then in office shall act as chairman of the meeting. The
Secretary or, in his or her absence, any person appointed by the chairman of the
meeting shall act as secretary of the meeting and shall keep the minutes
thereof. Except as otherwise provided by law, at any annual or special meeting
of stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. Such business must have either been: (A)
brought before the meeting at the direction of the chairman of the meeting; or
(B) specified in a written notice given by or on behalf of a stockholder of
record on the record date for such meeting entitled to vote thereat or a duly
authorized proxy for such stockholder; provided, that the following actions, as
--------
described below, are taken. A notice must be delivered personally to, or mailed
to and received at, the principal executive office of the Corporation, addressed
to the attention of the Secretary, not less than sixty (60) days nor more than
ninety (90) days prior to the meeting; provided, however, that in the event that
-------- -------
less than seventy (70) days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the annual or special
meeting was mailed or such public disclosure was made, whichever first occurs.
Such notice shall set forth: (i) a description of each such item of business
proposed to be brought before the meeting and the reasons for conducting such
business at such meeting; (ii) the name and address of the person proposing to
bring such business before the meeting; (iii) the class and number of shares
held of record, held beneficially and represented by proxy by such person as of
the record date for the meeting (if such date has then been made publicly
available) and as of the date of such notice; and (iv) any material interest of
the stockholder in such item of business. No business shall be brought before
any meeting of stockholders of the Corporation otherwise than as provided in
this Section 9. The chairman of the meeting may, if the facts warrant, determine
that a stockholder proposal was not made in accordance with the foregoing
procedure, and if he or she should so determine, he or she shall so declare to
the meeting and the defective proposal shall be disregarded.
Section 10. Written Consent to Action in Lieu of a Meeting. Stockholders
----------------------------------------------
may take such action by written consent as shall be permitted by section 228 of
the General Corporation Law provided, however, that if at any time a class of
stock of the Corporation becomes registered pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the rules and regulations of
The Securities and Exchange Commission and such stock is being traded on a
nationally recognized exchange, any action to be taken at any annual or special
meeting of
3
<PAGE>
stockholders must be taken at a meeting.
ARTICLE III
Board
-----
Section 1. Number of Board Members. The business, property and affairs of
------------------------
the Corporation shall be managed under the direction of the Board, which shall
consist of three directors. Directors need not be stockholders of the
Corporation. The number of directors may be reduced or increased from time to
time by action of a majority of the entire Board, but no decrease may shorten
the term of an incumbent director. When used in these By-Laws, the phrase
"entire Board" means the total number of directors which the Corporation would
have if there were no vacancies.
Section 2. Nomination. Only persons who are nominated in accordance with
----------
the procedures set forth in these By-Laws shall be eligible to serve as
directors of the Corporation. Nominations of persons for election to the Board
of the Corporation may be made at a meeting of stockholders (a) by or at the
direction of the Board or (b) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 2, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Section 2.
Such nominations, other than those made by or at the direction of the Board,
shall be made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than seventy (70) days' notice or
- -------- -------
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which such notice the date of meeting or such public disclosure was made. Such
stockholder's notice shall set forth (x) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act; and (y) as to the stockholder
giving the notice (A) the name and address, as they appear on the Corporation's
books, of such stockholder and (B) the class and number of shares of the
Corporation which are beneficially owned by such stockholder. At the request of
the Board, any person nominated by the Board for election as a director shall
furnish to the Secretary of the Corporation that information required to be set
forth in a stockholder's notice of nomination which pertains to the nominee.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the procedures
4
<PAGE>
prescribed by the By-Laws, and if he or she should so determine, he or she shall
so declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 2, a stockholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set forth in this
Section.
Section 3. Election and Term. Except as otherwise provided by law, by the
-----------------
Certificate of Incorporation of the Corporation or by these By-Laws, the
directors shall be elected at the annual meeting of the stockholders and the
persons receiving a plurality of the votes cast shall be so elected. Subject to
a director's earlier death, resignation or removal as provided in Sections 4 and
5 of this Article III, each director shall hold office until his or her
successor shall have been duly elected and shall have qualified.
Section 4. Removal. A director may be removed at any time, only for
-------
cause, and only by the vote of the holders of two thirds of the outstanding
shares of the Corporation entitled to vote at an election of directors.
Section 5. Resignations. Any director may resign at any time by giving
------------
written notice of his or her resignation to the Corporation. A resignation
shall take effect at the time specified therein or, if the time when it shall
become effective shall not be specified therein immediately upon its receipt,
and, unless otherwise specified therein, the acceptance of a resignation shall
not be necessary to make it effective.
Section 6. Vacancies. Except as otherwise provided by the Certificate of
---------
Incorporation of the Corporation, any vacancy in the Board arising from an
increase in the number of directors or otherwise shall be filled only by the
vote of a majority of the directors then in office. Subject to his or her
earlier death, removal or resignation as provided in Sections 4 and 5 of this
Article III, each director so elected shall hold office until his successor
shall have been duly elected and shall have qualified.
Section 7. Place of Meetings. Except as otherwise provided in these By-
-----------------
Laws, all meetings of the Board shall be held at such places, within or without
the State of Delaware, as the Board determines from time to time.
Section 8. Annual Meeting. The annual meeting of the Board shall be held
--------------
either (a) without notice immediately after the annual meeting of stockholders
and in the same place, or (b) as soon as practicable after the annual meeting of
stockholders on such date and at such time and place as the Board determines.
Section 9. Regular Meetings. Regular meetings of the Board shall be held
----------------
on such dates and at such places and times as the Board determines. Notice of
regular meetings need not be given, except as otherwise required by law.
5
<PAGE>
Section 10. Special Meetings. Special meetings of the Board may be called
----------------
by the Chairman of the Board and shall be called by the Chairman of the Board or
the Secretary upon the written request of not less than a majority of directors.
The request shall state the date, time, place and purpose or purposes of the
proposed meeting.
Section 11. Notice of Meetings. Notice of each special meeting of the
------------------
Board (and of each annual meeting held pursuant to subdivision (b) of Section 8
of this Article III) shall be given, not later than 24 hours before the meeting
is scheduled to commence, by the Chairman of the Board or the secretary and
shall state the place, date and time of the meeting. Notice of each meeting may
be delivered to a director by hand or given to a director orally (whether by
telephone or in person) or mailed or telecopied to a director at his or her
residence or usual place of business, provided, however, that if notice of less
than 72 hours is given it may not be mailed. If mailed, the notice shall be
deemed to have been given when deposited in the United States mail, postage
prepaid, and if telecopied, the notice shall be deemed to have been given when
oral confirmation of receipt is given. Notice of any meeting need not be given
to any director who shall submit, either before or after the meeting, a signed
waiver of notice or who shall attend the meeting, except if such director shall
attend for the express purpose of objecting at the beginning thereof to the
transaction of any business because the meeting is not lawfully called or
convened. Notice of any adjourned meeting, including the place, date and time of
the new meeting, shall be given to all directors not present at the time of the
adjournment, as well as to the other directors unless the place, date and time
of the new meeting is announced at the adjourned meeting.
Section 12. Quorum. Except as otherwise provided by law or these By-Laws,
------
at all meetings of the Board a majority of the entire Board shall constitute a
quorum for the transaction of business, and the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board. A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another place, date and time.
Section 13. Conduct of Meetings. At each meeting of the Board, the
-------------------
secretary of the Board or, in his or her absence, a director chosen by a
majority of the directors present shall act as secretary of the meeting. The
secretary or, in his or her absence, any person appointed by the secretary of
the meeting shall act as secretary of the meeting and keep the minutes thereof.
The order of business at all meetings of the Board shall be as determined by the
secretary of the meeting.
Section 14. Committees of the Board. The Board, by resolution adopted by
-----------------------
a majority of the entire Board, may designate an audit committee, compensation
committee, executive committee and other committees, each consisting of one (1)
or more directors. Each committee (including the members thereof) shall serve
at the pleasure of the Board and shall keep minutes of its meetings and report
the same to the Board. The Board may designate one or more directors as
alternate members of any committee. Alternate members may replace any absent or
disqualified member or members at any meeting of a committee. Except as limited
by law, each
6
<PAGE>
committee, to the extent provided in the resolution establishing it, shall have
and may exercise all the powers and authority of the Board with respect to all
matters.
Section 15. Operation of Committees. A majority of all of the members of
-----------------------
a committee shall constitute a quorum for the transaction of business, and the
vote of a majority of all the members of a committee present at a meeting at
which a quorum is present shall be the act of the committee. Each committee
shall adopt whatever other rules of procedure it determines for the conduct of
its activities.
Section 16. Written Consent to Action in Lieu of a Meeting. Any action
----------------------------------------------
required or permitted to be taken at any meeting of the Board or of any
committee may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 17. Meetings Held Other Than in Person. Members of the Board or
----------------------------------
any committee may participate in a meeting of the Board or committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and such participation shall constitute presence in
person at the meeting.
ARTICLE IV
Officers
--------
Section 1. Executive Officers Etc.. The executive officers of the
-----------------------
Corporation shall be a Chairman of the Board, a President, a Secretary and a
Treasurer. The Board also may elect or appoint one or more Vice Presidents (any
of whom may be designated as Executive Vice Presidents, Senior Vice Presidents
or otherwise), and any other officers it deems necessary or desirable for the
conduct of the business of the Corporation, each of whom shall have such powers
and duties as the Board determines.
Section 2. Duties.
------
(a) The Chairman of the Board. The Chairman of the Board who shall
-------------------------
be a member of the Board, shall be the chief executive officer of the
Corporation. The Chairman of the Board of Directors shall preside at all
meetings of the stockholders and the Board.
(b) The President. The President shall perform, in the absence or
-------------
disability of the Chairman of the Board, the duties and exercise the powers of
the Chairman of the Board and shall have such other powers and duties as the
Board or the Chairman of the Board assigns to him or to her.
(c) The Vice President. The Vice President or, if there shall be
------------------
more than
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one, the Vice Presidents, if any, in the order of their seniority or in any
other order determined by the Board, shall perform, in the absence or disability
of the President, the duties and exercise the powers of the President and shall
have such other powers and duties as the Board or the President assigns to him
or to her or to them.
(d) The Secretary. Except as otherwise provided in these By-Laws
-------------
or as directed by the Board, the Secretary shall attend all meetings of the
stockholders and the Board; shall record the minutes of all proceedings in books
to be kept for that purpose; shall give notice of all meetings of the
stockholders. and special meetings of the Board; and shall keep in safe custody
the seal of the Corporation and, when authorized by the Board, shall affix the
same to any corporate instrument. The Secretary shall have such other powers and
duties as the Board or the Chairman of the Board assigns to him or her.
(e) The Treasurer. Subject to the control of the Board, the
-------------
Treasurer shall have the care and custody of the corporate funds and the books
relating thereto; shall perform all other duties incident to the office of
treasurer; and shall have such other powers and duties as the Board or Chairman
of the Board assigns to him or her.
Section 3. Election; Removal. Subject to his or her earlier death,
-----------------
resignation or removal, as hereinafter provided, each officer shall hold his or
her office until his or her successor shall have been duly elected and shall
have qualified. Any officer may be removed at any time with or without cause by
the Board.
Section 4. Resignations. Any officer may resign at any time by giving
------------
written notice of his resignation to the Corporation. A resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of a resignation shall not be
necessary to make it effective.
Section 5. Vacancies. If an office becomes vacant for any reason, the
---------
Board or the stockholders may fill the vacancy, and each officer so elected
shall serve for the remainder of his or her predecessor's term and until his
successor shall have been elected or appointed and shall have qualified.
ARTICLE V
Provisions Relating to Stock Certificates and Stockholders
----------------------------------------------------------
Section 1. Certificates. Certificates for the Corporation's capital
------------
stock shall be in such form as required by law and as approved by the Board.
Each certificate shall be signed in the name of the Corporation by the
Secretary, or the Chairman of the Board or President or any Vice President and
by the Secretary, the Treasurer or any Assistant Secretary or any Assistant
Treasurer and shall bear the seal of the Corporation or a facsimile thereof. If
any certificate is
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countersigned by a transfer agent or registered by a registrar, other than the
Corporation or its employees, the signature of any officer of the Corporation
may be a facsimile signature. In case any officer, transfer agent or registrar
who shall have signed or whose facsimile signature as placed on any certificate
shall have ceased to be such officer, transfer agent or registrar before the
certificate shall be issued, it may nevertheless be issued by the Corporation
with the same effect as if he or she were such officer, transfer agent or
registrar at the date of the issue.
Section 2. Lost Certificates, etc. The Corporation may issue a new
----------------------
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed, and the Board may
require the owner of the lost, mutilated, stolen or destroyed certificate, or
his or her legal representatives, to make an affidavit of that fact and to give
the Corporation a bond in such sum as it may direct as indemnity against any
claim that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of the certificate or the issuance of a new
Certificate.
Section 3. Transfers of Shares. Transfers of shares shall be registered
--------------------
on the books of the Corporation maintained for that purpose after due
presentation of the stock certificates therefor appropriately endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer.
Section 4. Record Date. For the purpose of determining the stockholders
-----------
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or the allotment of any
rights, or for the purpose of any other action, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which record date shall not be more
than sixty (60) nor less than ten (10) days before the date of any such meeting
and shall not be more than sixty (60) days prior to any other action.
ARTICLE VI
Indemnification
---------------
Section 1. Indemnification. The Corporation shall, to the fullest extent
---------------
permitted by the General Corporation Law (including, without limitation, Section
145 thereof) or other provisions of the laws of Delaware relating to
indemnification of directors, officers, employees and agents, as the same may be
amended and supplemented from time to time, indemnify any and all such persons
whom it shall have power to indemnify under the General Corporation Law or such
other provisions of law.
Section 2. Statutory Indemnification. Without limiting the generality of
-------------------------
Section 1 of this Article VI, to the fullest extent permitted, and subject to
the conditions imposed, by law, and pursuant to Section 145 of the General
Corporation Law unless otherwise determined by the
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<PAGE>
Board of Directors:
(i) the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against reasonable expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; and
(ii) the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against reasonable expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, except as
otherwise provided by law.
Section 3. Indemnification by Resolution of Stockholders or Directors
----------------------------------------------------------
of Agreement. To the fullest extent permitted by law, indemnification may be
- ------------
granted, and expenses may be advanced, to the persons described in Section 145
of the General Corporation Law or other provisions of the laws of Delaware
relating to indemnification and advancement of expenses, as from time to time
may be in effect, by (i) a resolution of stockholders, (ii) a resolution of
the Board, or (iii) an agreement providing for such indemnification and
advancement of expenses; provided that no indemnification may be made to or on
behalf of any person if a judgment or other final adjudication adverse to the
person establishes that such person's acts were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that such person personally gained in fact a financial
profit or other advantage to which such person was not legally entitled.
Section 4. General. It is the intent of this Article VI to require the
-------
Corporation to indemnify the persons referred to herein for judgments, fines,
penalties, amounts paid in settlement and expenses (including attorneys' fees),
and to advance expenses to such persons, in each and every circumstance in which
such indemnification and such advancement of expenses could lawfully be
permitted by express provision of By-Laws, and the indemnification and expense
advancement provided by this Article VI shall not be limited by the absence of
an
10
<PAGE>
express recital of such circumstances. The indemnification and advancement of
expenses provided by, or granted pursuant to, these By-Laws shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled, whether as a matter of law, under any
provision of the Certificate of Incorporation of the Corporation or these By-
Laws, by agreement, by vote of stockholders or disinterested directors of the
Corporation or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
Section 5. Indemnification Benefits. Indemnification pursuant to these
------------------------
By-Laws shall inure to the benefit of the heirs executors, administrators and
personal representatives of those entitled to indemnification.
ARTICLE VII
General Provisions
------------------
Section 1. Dividends Etc. To the extent permitted by law, the Board
-------------
shall have full power and discretion, subject to the provisions of the
Certificate of Incorporation of the Corporation and the terms of any other
corporate document or instrument binding upon the Corporation, to determine
what, if any, dividends or distributions shall be declared and paid or made.
Section 2. Seal. The Corporation's seal shall be in such form as is
----
required by law and as shall be approved by the Board.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
determined by the Board.
Section 4. Voting Shares in Other Corporations. Unless otherwise directed
-----------------------------------
by the Board, shares in other corporations which are held by the Corporation
shall be represented and voted only by the Chairman of the Board or by a proxy
or proxies appointed by him or her.
ARTICLE VIII
Amendment
---------
By-Laws may be made, altered or repealed by the Board, subject to the right
of stockholders to alter or repeal any By-Laws made by the Board.
11
<PAGE>
Exhibit 10.3
FORM OF
ASI SOLUTIONS INCORPORATED
1996 STOCK OPTION AND GRANT PLAN
1. PURPOSE
This Stock Option and Grant Plan (the "Plan") is intended as a performance
incentive for officers, employees, consultants and other key persons of ASI
Solutions Incorporated ("ASI") and its subsidiaries (unless otherwise indicated
herein, ASI Solutions Incorporated and its subsidiaries are hereinafter referred
to as the "Company") to enable the persons to whom options are granted (the
"Optionees") or to whom shares of common stock are granted (the "Grantees") to
acquire or increase a proprietary interest in the success of the Company. The
Company intends that this purpose will be effected by the granting of "incentive
stock options" ("Incentive Options") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), nonqualified stock options
("Nonqualified Options") and outright grants of common stock under the Plan.
The term "subsidiary" when used in the Plan shall mean any subsidiary of ASI
within the meaning of Section 424(f) of the Code.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options, and shall be designated as such at the time of grant. To
the extent that any option intended to be an Incentive Option shall fail to
qualify as an "incentive stock option" under the Code, such option shall be
deemed to be a Nonqualified Option.
(b) The Plan shall be administered by the Board of Directors of the
Company (the "Board of Directors") or by a committee (the "Compensation
Committee") of not less than three directors of the Company appointed by the
Board of Directors all of whom are (1) not employees of the Company and "non
employee directors" within the meaning of Rule 16b-3(b) (3) (i) promulgated
under the Securities Exchange Act of 1934, as amended (the "Act"), and (2)
"outside directors" within the meaning of Section 162(m) of the Code.
(c) Subject to the terms and conditions of the Plan, the Compensation
Committee shall have the power:
(i) To determine from time to time the options or stock to be
granted to eligible persons under the Plan (hereinafter referred to as the
"Optionees"), to prescribe the terms and
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<PAGE>
provisions (which need not be identical) of options granted under the Plan to
such persons and to approve the grant of options, as the case may be;
(ii) To construe and interpret the Plan and grants thereunder and
to establish, amend, and revoke rules and regulations for administration of the
Plan. In this connection, the Compensation Committee may correct any defect or
supply any omission, or reconcile any inconsistency in the Plan, in any option
agreement, or in any related agreements, in the manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective;
(iii) to accelerate the exercisability or vesting of all or any
portion of any option;
(iv) subject to the provisions of Section 5(a), to extend the
period in which options may be exercised;
(v) generally, to exercise such powers and to perform such acts
as are deemed necessary or expedient to promote the best interests of the
Company with respect to the Plan.
All decisions and determinations by the Compensation Committee in the exercise
of its powers shall be final and binding upon the Company and the Optionees.
3. STOCK
(a) The stock granted under the Plan, or subject to the options granted
under the Plan, shall be shares of the Company's authorized but unissued common
stock, par value $.01 per share (the "Common Stock"). The total number of
shares that may be issued under the Plan shall not exceed an aggregate of
800,000 shares of Common Stock. Such numbers shall be subject to adjustment as
provided in Section 7 hereof.
(b) Whenever any outstanding option under the Plan expires, is canceled or
is otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such option may again be the subject of
options of Common Stock under the Plan.
4. ELIGIBILITY
(a) Incentive Options may be granted only to officers or other employees
of the Company, including members of the Board of Directors who are also
employees of the Company. Nonqualified Options may be granted to officers or
other employees of the Company, members of the Board of Directors who are also
employees of the Company, and consultants and other key persons who provide
services to the Company (regardless of whether they are also employees). Grants
of
2
<PAGE>
Common Stock may be made to any officer, director, employee, consultant or other
key person of the Company.
(b) No Optionee shall be eligible to receive any Incentive Option under
the Plan if, at the date of grant, such Optionee beneficially owns stock
representing in excess of 10% of the voting power of all outstanding capital
stock of the Company or any "parent corporation" within the meaning of Section
424(e) of the Code or any subsidiary (a "Ten Percent Stockholder") unless (i)
the purchase price for the Common Stock subject to such option is at least 110%
of the fair market value of such stock at the time of the grant and (ii) the
option by its terms is not exercisable more than five years from the date of
grant thereof.
(c) Notwithstanding any other provision of the Plan, to the extent that
the aggregate fair market value of the stock with respect to which Incentive
Options are exercisable for the first time by any individual during any calendar
year (under all plans of the Company and its parent) exceeds $100,000, the
options attributable to the excess over $100,000 shall be treated as
Nonqualified Options under the Plan. Such annual limitation shall be applied by
taking Incentive Options into account in the order in which they were granted.
5. TERMS OF THE OPTION AGREEMENTS
Subject to the terms and conditions of the Plan, each option agreement
shall contain such provisions as the Compensation Committee shall from time to
time deem appropriate. Option agreements need not be identical, but each option
agreement by appropriate language shall include the substance of all of the
following provisions:
(a) Expiration; Termination of Employment. Notwithstanding any other
provision of the Plan or of any option agreement, each option shall expire on
the date specified in the option agreement, which date in the case of any
Incentive Option shall not be later than the tenth anniversary of the date on
which the option was granted; provided, however, that if such Incentive Option
is held by a Ten Percent Stockholder, the expiration date of such Incentive
Option shall not be later than five years from the date of grant thereof. If an
Optionee's employment or service as a director with the Company terminates for
any reason, the Compensation Committee may in its discretion provide, at any
time, that any outstanding option granted to such Optionee under the Plan shall
be exercisable, subject to the expiration date of such option, for such period
following termination of employment as may be specified by the Compensation
Committee, which period for purposes of Incentive Options shall not exceed three
months where such termination is not due to death or disability (within the
meaning of Section 22(e) (3) of the Code) or one year where such termination is
due to death or disability. If an Optionee's employment or service as a
director with the Company terminates due to the Optionee's willful actions
against the interests of the Company, the option may be terminated upon written
notice to the Optionee; in such a case, the option will cease to be exercisable
immediately upon the Optionee's receipt of such written notice.
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<PAGE>
(b) Minimum Shares Exercisable. The minimum number of shares with respect
to which an option may be exercised at any one time shall be five hundred (500)
shares, or such lesser number as is subject to exercise under the option at the
time, provided that no fractional shares may be issued.
(c) Exercise. Each option shall be exercisable in such installments
(which need not be equal) and at such times as may be designated by the
Compensation Committee. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the option expires.
(d) Purchase Price. The purchase price per share of Common Stock subject
to each option shall be determined by the Compensation Committee; provided,
however, that the purchase price per share of Common Stock subject to each
Incentive Option shall be not less than the fair market value of the Common
Stock on the date such Incentive Option is granted. For the purposes of the
Plan, the fair market value of the Common Stock shall be determined in good
faith by the Compensation Committee; provided, however, that (i) if the Common
Stock is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") Small-Cap Market on the date the option is
granted, the fair market value shall not be less than the average of the highest
bid and lowest asked prices of the Common Stock on NASDAQ reported for such date
or, if no prices were reported for such date, for the last date preceding such
date on which prices were reported, (ii) if the Common Stock is admitted to
trading on a national securities exchange or the NASDAQ National Market System
on the date the option is granted, the fair market value shall not be less than
the closing price reported for the Common Stock on such exchange or system for
such date or, if no sales were reported for such date, for the last date
preceding such date for which a sale was reported, and (iii) the fair market
value of the Common Stock on the effective date of the registration statement
for the Company's initial public offering shall be the initial offering price.
(e) Rights of Optionees. No Optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any option unless and
until (i) the option shall have been exercised pursuant to the terms thereof,
(ii) all requirements under applicable law and regulations shall have been
complied with to the satisfaction of the Company, (iii) the Company shall have
issued and delivered the shares to the Optionee, and (iv) the Optionee's name
shall have been entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other ownership
rights with respect to such shares of Common Stock.
(f) Transfer. No option granted hereunder shall be transferable by the
Optionee other than by will or by the laws of descent and distribution, and such
option may be exercised during the Optionee's lifetime only by the Optionee, or
his or her guardian or legal representative.
4
<PAGE>
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Any option granted under the Plan may be exercised by the Optionee in
whole or, subject to Sections 5(b) and 5(c) hereof, in part by delivering to the
Company on any business day a written notice specifying the number of shares of
Common Stock the Optionee then desires to purchase (the "Notice"). As a
condition precedent of the exercise of any option, the Optionee shall pay or
make arrangements for the payment of all taxes to be withheld, in accordance
with Section 9 of the Plan.
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be made either: (i) in cash, or by certified or
bank check or other payment acceptable to the Company, equal to the option
exercise price for the number of shares specified in the Notice (the "Total
Option Price"); (ii) if authorized by the applicable option agreement and if
permitted by law, by delivery of shares of Common Stock that the Optionee has
beneficially owned for more than six months and which the Optionee may freely
transfer having a fair market value, determined by reference to the provisions
of Section 5(d) hereof, equal to or less than the Total Option Price, plus cash
in an amount equal to the excess, if any, of the Total Option Price over the
fair market value of such shares of Common Stock; or (iii) by the Optionee
delivering the Notice to the Company together with irrevocable instructions to a
broker to promptly deliver the Total Option Price to the Company in cash or by
other method of payment acceptable to the Company; provided, however, that the
Optionee and the broker shall comply with such procedures and enter into such
agreements of indemnity or other agreements as the Company shall prescribe as a
condition of payment under this clause (iii).
(c) The delivery of certificates representing shares of Common Stock to be
purchased pursuant to the exercise of an option will be contingent upon the
Company's receipt of the Total Option Price and of any written representations
from the Optionee required by the Compensation Committee, and the fulfillment of
any other requirements contained in the option agreement or applicable
provisions of law.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of the Company's Common Stock as a whole are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and proportionate adjustment
shall be made in the number and kind of shares subject to the Plan, and in the
number, kind, and per share exercise price of shares subject to unexercised
options or portions thereof granted prior to any such change. In the event of
any such adjustment in an outstanding option, the Optionee thereafter shall have
the right to purchase the number of shares under such option at the per share
price, as so adjusted, which the
5
<PAGE>
Optionee could purchase at the total purchase price applicable to the option
immediately prior to such adjustment.
(b) Adjustments under this Section 7 shall be determined by the
Compensation Committee and such determinations shall be conclusive. The
Compensation Committee shall have the discretion and power in any such event to
determine and to make effective provision for acceleration of the time or times
at which any option or portion thereof shall become exercisable. No fractional
shares of Common Stock shall be issued under the Plan on account of any
adjustment specified above.
8. EFFECT OF CERTAIN TRANSACTIONS
In the case of (i) the dissolution or liquidation of the Company, (ii) a
reorganization, merger, consolidation or other business combination in which the
Company is acquired by another entity (other than a holding company formed by
the Company) or in which the Company is not the surviving entity, or (iii) the
sale of all or substantially all of the assets of the Company to another entity,
the Plan and the options issued hereunder shall terminate upon the effectiveness
of any such transaction or event, unless provision is made in connection with
such transaction for the assumption of options theretofore granted, or the
substitution for such option of new options of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and the
per share exercise prices, as provided in Section 7. In the event of such
termination, all outstanding options whether or not then currently exercisable
for shares of Common Stock shall be exercisable for at least fifteen (15) days
prior to the date of such termination whether or not otherwise exercisable
during such period.
9. TAX WITHHOLDING
(a) Each Optionee shall, no later than the exercise date of any option,
pay to the Company, or make arrangements satisfactory to the Compensation
Committee regarding payment of any federal, state, or local taxes of any kind
required by law to be withheld with respect to such income. The Company shall,
to the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the Optionee.
(b) To the extent permitted by the Compensation Committee, an Optionee may
elect to have his tax withholding obligation satisfied, in whole or in part, by
(i) authorizing the Company to withhold from shares of Common Stock to be
issued pursuant to any option number of shares with an aggregate fair market
value (determined by reference to the provisions of Section 5(d) hereof), that
would satisfy the withholding amount due, or (ii) transferring to the Company
shares of Common Stock owned by the Optionee with an aggregate fair market value
(determined by reference to the provisions of Section 5(d) hereof) that would
satisfy the withholding amount due.
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10. NON-TRANSFERABILITY OF OPTION RIGHTS
No option shall be transferable except by will or the laws of descent and
distribution. During the lifetime of any Optionee, the option shall be
exercisable only by such Optionee.
11. NO OBLIGATION TO EXERCISE OPTION
Granting of an option shall impose no obligation on the recipient to
exercise such option.
12. USE OF PROCEEDS
The proceeds received from the sale of stock pursuant to the Plan shall be
used for general corporate purposes.
13. RIGHTS AS A STOCKHOLDER
An Optionee shall have no rights as a stockholder with respect to any stock
covered by his or her option until such Optionee shall have become the holder of
record of such stock, and shall not be entitled to any dividends or
distributions or other rights in respect of such stock for which the record date
is prior to the date on which he or she shall have become the holder of record
thereof.
Notwithstanding anything herein to the contrary, the Compensation
Committee, in its sole discretion, may restrict the transferability of all or
any number of shares of stock issued under the Plan upon the exercise of an
option by legending the stock certificate as it deems appropriate.
14. EMPLOYMENT RIGHTS
Nothing in the Plan or in any option granted hereunder shall confer on any
Optionee any right to continue in the employ of the Company, or to interfere in
any way with the right of the Company to terminate the Optionee's employment at
any time.
15. COMPLIANCE WITH THE LAW
The Company is relieved from any liability for the nonissuance or non-
transfer, or any delay in issuance or transfer, of any shares of stock subject
to options under the Plan which results from the inability of the Company to
obtain, or from any delay in obtaining, from any regulatory body having
jurisdiction, all requisite authority to issue or transfer shares of stock of
the Company, if counsel for the Company deems such authority necessary for the
lawful issuance or transfer of any
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<PAGE>
such shares. Appropriate legends may be placed on the stock certificates
evidencing shares issued upon exercise of options to reflect such transfer
restrictions.
Each option granted under the Plan is subject to the requirement that if at
any time the Compensation Committee determines, in its discretion, that the
listing, registration or qualification of shares of stock issuable upon exercise
of options is required by any securities exchange or under any state or Federal
law, or that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the grant of
options or the issuance of shares of stock, no options or shares of stock shall
be issued, in whole or in part, unless such listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions or with such conditions as are acceptable to the Compensation
Committee.
16. CANCELLATION OF OPTIONS
The Compensation Committee, in its discretion, may, with the consent of an
Optionee, cancel any outstanding option held by such Optionee hereunder.
17. AMENDMENT OF THE PLAN
The Board of Directors may discontinue the Plan or amend the Plan at any
time, and from time to time, subject to any required regulatory approval and the
limitation that, except as provided in Sections 7 and 8 thereof, no amendment
shall be effective unless approved by the stockholders of the Company in
accordance with applicable law and regulations at an annual or special meeting
held within twelve months before or after the date of adoption of such
amendment, where such amendment will:
(a) increase the number of shares of Common Stock as to which options may
be granted under the Plan;
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change the minimum option exercise price; or
(d) otherwise materially increase the benefits accruing to individuals
under the Plan.
In addition to the foregoing, other Plan amendments shall be subject to
approval by the Company stockholders if and to the extent determined by the
Compensation Committee to be required by the Act to ensure that options or
grants granted under the Plan are exempt under Rule 16b-3 promulgated under the
Act, or that Incentive Stock Options granted under the Plan are qualified under
Section 422 of the Code.
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Except as provided in Sections 7 and 8 hereof, rights and obligations under
any option granted before any amendment of the Plan shall not be altered or
impaired by such amendment, except with the consent of the Optionee.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including
without limitation, the granting of stock or stock options otherwise than under
the Plan, and such arrangements may be either applicable generally or only in
specific cases.
19. GOVERNING LAW
The Plan shall be governed by Delaware law, except to the extent that such
law is preempted by federal law.
20. EFFECTIVE DATE AND EXPIRATION DATE OF PLAN;
STOCKHOLDER APPROVAL
This Plan shall become effective upon the date that it is approved by the
Board of Directors of the Company; provided, however, that the Plan shall be
subject to the approval of the Company's stockholders in accordance with
applicable laws and regulations at an annual or special meeting held within
twelve months of such effective date. No options granted under the Plan prior
to such stockholder approval may be exercised until such approval has been
obtained. No options may be granted under the Plan after the tenth anniversary
of the effective date of the Plan.
21. MISCELLANEOUS
(a) If the Compensation Committee shall find that any person to whom any
amount is payable under the Plan is unable to care for his affairs because of
illness or accident, or is a minor, or has died, then any payment due to such
person or his estate (unless a prior claim therefor has been made by a duly
appointed legal representative) may, if the Compensation Committee so directs
the Company, be paid to his spouse, child, or other relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Compensation Committee to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a complete discharge
of the liability of the Compensation Committee and the Company therefor.
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(b) No member of the Compensation Committee shall be personally liable by
reason of any contract or other instrument executed by such member or on his
behalf in his capacity as a member of the Compensation Committee nor for any
mistake of judgment made in good faith, and the Company shall indemnify and hold
harmless each member of the Compensation Committee and each other employee,
officer or director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's own fraud or bad
faith; provided, however, that approval of the Company's Board of Directors
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Certificate of Incorporation or By-Laws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
(c) No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Optionees shall have no
rights under the Plan other than as unsecured general creditors of the Company,
except that insofar as they may have become entitled to payment of additional
compensation by performance of services, they shall have the same rights as
other employees under general law.
(d) Each member of the Compensation Committee and each member of the
Company's Board of Directors shall be fully justified in relying, in acting or
failing to act, and shall not be liable for having so relied, acted or failed to
act in good faith, upon any report made by the independent public accountant of
the Company and upon any other information furnished in connection with the Plan
by any person or persons other than such member.
(e) Except as otherwise specifically provided in the relevant plan
document, no payment under the Plan shall be taken into account in determining
any benefits under any pension, retirement, profit-sharing, group insurance or
other benefit plan of the Company.
(f) The expenses of administering the Plan shall be borne by the Company.
* * *
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EXHIBIT 10.4
FORM OF
ASI SOLUTIONS INCORPORATED
1996 DIRECTORS STOCK OPTION PLAN
1. PURPOSE
This Stock Option Plan (the "Plan") is intended as a performance incentive
for non-employee directors of ASI Solutions Incorporated ("ASI") and its
subsidiaries (unless otherwise indicated herein, ASI Solutions Incorporated and
its subsidiaries are hereinafter referred to as the "Company") to enable the
persons to whom options are granted (the "Optionees") to acquire or increase a
proprietary interest in the success of the Company. The Company intends that
this purpose will be effected by the granting of "incentive stock options"
("Incentive Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and nonqualified stock options ("Nonqualified
Options"). The term "subsidiary" when used in the Plan shall mean any
subsidiary of ASI within the meaning of Section 424(f) of the Code.
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options, and shall be designated as such at the time of grant. To
the extent that any option intended to be an Incentive Option shall fail to
qualify as an "incentive stock option" under the Code, such option shall be
deemed to be a Nonqualified Option.
(b) The Plan shall be administered by the Board of Directors of the
Company (the "Board of Directors") or by a committee (the "Compensation
Committee") of not less than three directors of the Company appointed by the
Board of Directors two of whom are (1) not employees of the Company and "non
employee directors" within the meaning of Rule 16b-3(b) (3) (i) promulgated
under the Securities Exchange Act of 1934, as amended (the "Act"), and (2)
"outside directors" within the meaning of Section 162(m) of the Code.
(c) Subject to the terms and conditions of the Plan, the Compensation
Committee shall have the power:
(i) To determine from time to time the options or stock to be
granted to eligible persons under the Plan (hereinafter referred to as the
"Optionees"), to prescribe the terms and provisions (which need not be
identical) of options granted under the Plan to such persons and to approve the
grant of options, as the case may be;
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(ii) To construe and interpret the Plan and grants thereunder and to
establish, amend, and revoke rules and regulations for administration of the
Plan. In this connection, the Compensation Committee may correct any defect or
supply any omission, or reconcile any inconsistency in the Plan, in any option
agreement, or in any related agreements, in the manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective;
(iii) to accelerate the exercisability or vesting of all or any
portion of any option;
(iv) subject to the provisions of Section 5(a), to extend the
period in which options may be exercised;
(v) generally, to exercise such powers and to perform such acts
as are deemed necessary or expedient to promote the best interests of the
Company with respect to the Plan.
All decisions and determinations by the Compensation Committee in the exercise
of its powers shall be final and binding upon the Company and the Optionees.
3. STOCK
(a) The stock granted under the Plan, or subject to the options granted
under the Plan, shall be shares of the Company's authorized but unissued common
stock, par value $.01 per share (the "Common Stock"). The total number of
shares that may be issued under the Plan shall not exceed an aggregate of 50,000
shares of Common Stock. Such numbers shall be subject to adjustment as provided
in Section 7 hereof.
(b) Whenever any outstanding option under the Plan expires, is canceled or
is otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such option may again be the subject of
options of Common Stock under the Plan.
4. ELIGIBILITY AND ENTITLEMENT
(a) Incentive Options and Nonqualified Options may be granted only to non-
employee directors of the Company.
(b) No Optionee shall be eligible to receive any Incentive Option under
the Plan if, at the date of grant, such Optionee beneficially owns stock
representing in excess of 10% of the voting power of all outstanding capital
stock of the Company or any "parent corporation" within the meaning of Section
424(e) of the Code or any subsidiary (a "Ten Percent Stockholder") unless (i)
the purchase price for the Common Stock subject to such option is at least 110%
of the fair market value of such stock at the time of the grant and (ii) the
option by its terms is not exercisable more
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than five years from the date of grant thereof.
(c) Notwithstanding any other provision of the Plan, to the extent that
the aggregate fair market value of the stock with respect to which Incentive
Options are exercisable for the first time by any individual during any calendar
year (under all plans of the Company and its parent) exceeds $100,000, the
options attributable to the excess over $100,000 shall be treated as
Nonqualified Options under the Plan. Such annual limitation shall be applied by
taking Incentive Options into account in the order in which they were granted.
(d) Each individual who first joins the Board of Directors as a non-
employee director shall automatically be granted a Non-Qualified Option to
acquire 5,000 shares of Common Stock on the first day such individual serves as
a non-employee director and an additional 2,500 shares of Common Stock for each
committee of the Board of Directors which such director is appointed to chair.
The exercise price per share for the Common Stock covered by an option granted
hereunder shall be as determined by the Compensation Committee.
On the first anniversary of the grant date, each option granted under this
Section 4(d) shall be 33% vested in the total shares to which the options
relate; on the second anniversary of the grant date each option granted under
this Section 4(d) shall be 66% vested in the total shares to which the options
relate; on the third anniversary of the grant date each option granted under
this Section 4(d) shall be 100% vested in the total shares to which the options
relate provided that the Optionee shall have continued to serve as a director
until such date; and provided, further, that any option so granted shall become
immediately exercisable in full upon the termination of service of the non-
employee director because of disability or death. No option issued under this
Section 4(d) shall be exercisable after the expiration of ten years from the
date upon which such option is granted. For purposes of this Section 4(d),
"disability" means an individual's inability to perform his normal required
services for the Company for a period of six consecutive months by reason of the
individual's mental or physical disability, as determined by the Compensation
Committee in good faith in its sole discretion.
5. TERMS OF THE OPTION AGREEMENTS
Subject to the terms and conditions of the Plan, each option agreement
shall contain such provisions as the Compensation Committee shall from time to
time deem appropriate. Option agreements need not be identical, but each option
agreement by appropriate language shall include the substance of all of the
following provisions:
(a) Expiration; Termination of Employment. Notwithstanding any other
provision of the Plan or of any option agreement, each option shall expire on
the date specified in the option agreement, which date in the case of any
Incentive Option shall not be later than the tenth anniversary of the date on
which the option was granted; provided, however, that if such Incentive Option
is held by a Ten Percent Stockholder, the expiration date of such Incentive
Option shall not
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be later than five years from the date of grant thereof. If an Optionee's
service as a director with the Company terminates for any reason, the
Compensation Committee may in its discretion provide, at any time, that any
outstanding option granted to such Optionee under the Plan shall be exercisable,
subject to the expiration date of such option, for such period following
termination of service as may be specified by the Compensation Committee, which
period for purposes of Incentive Options shall not exceed three months where
such termination is not due to death or disability (within the meaning of
Section 22(e) (3) of the Code) or one year where such termination is due to
death or disability. If an Optionee's service as a director with the Company
terminates due to the Optionee's willful actions against the interests of the
Company, the option may be terminated upon written notice to the Optionee; in
such a case, the option will cease to be exercisable immediately upon the
Optionee's receipt of such written notice.
(b) Minimum Shares Exercisable. The minimum number of shares with respect
to which an option may be exercised at any one time shall be five hundred (500)
shares, or such lesser number as is subject to exercise under the option at the
time, provided that no fractional shares may be issued.
(c) Exercise. Each option shall be exercisable in such installments
(which need not be equal) and at such times as may be designated by the
Compensation Committee. To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, at any time after becoming
exercisable, but not later than the date the option expires.
(d) Purchase Price. The purchase price per share of Common Stock subject
to each option shall be determined by the Compensation Committee; provided,
however, that the purchase price per share of Common Stock subject to each
Incentive Option shall be not less than the fair market value of the Common
Stock on the date such Incentive Option is granted. For the purposes of the
Plan, the fair market value of the Common Stock shall be determined in good
faith by the Compensation Committee; provided, however, that (i) if the Common
Stock is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") Small-Cap Market on the date the option is
granted, the fair market value shall not be less than the average of the highest
bid and lowest asked prices of the Common Stock on NASDAQ reported for such date
or, if no prices were reported for such date, for the last date preceding such
date on which prices were reported, (ii) if the Common Stock is admitted to
trading on a national securities exchange or the NASDAQ National Market System
on the date the option is granted, the fair market value shall not be less than
the closing price reported for the Common Stock on such exchange or system for
such date or, if no sales were reported for such date, for the last date
preceding such date for which a sale was reported, and (iii) the fair market
value of the Common Stock on the effective date of the registration statement
for the Company's initial public offering shall be the initial offering price.
(e) Rights of Optionees. No Optionee shall be deemed for any purpose to
be the owner of any shares of Common Stock subject to any option unless and
until (i) the option shall have been exercised pursuant to the terms thereof,
(ii) all requirements under applicable law and regulations
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<PAGE>
shall have been complied with to the satisfaction of the Company, (iii) the
Company shall have issued and delivered the shares to the Optionee, and (iv)
the Optionee's name shall have been entered as a stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting, dividend
and other ownership rights with respect to such shares of Common Stock.
(f) Transfer. No option granted hereunder shall be transferable by the
Optionee other than by will or by the laws of descent and distribution, and such
option may be exercised during the Optionee's lifetime only by the Optionee, or
his or her guardian or legal representative.
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Any option granted under the Plan may be exercised by the Optionee in
whole or, subject to Sections 5(b) and 5(c) hereof, in part by delivering to the
Company on any business day a written notice specifying the number of shares of
Common Stock the Optionee then desires to purchase (the "Notice"). As a
condition precedent of the exercise of any option, the Optionee shall pay or
make arrangements for the payment of all taxes to be withheld, in accordance
with Section 9 of the Plan.
(b) Payment for the shares of Common Stock purchased pursuant to the
exercise of an option shall be made either: (i) in cash, or by certified or
bank check or other payment acceptable to the Company, equal to the option
exercise price for the number of shares specified in the Notice (the "Total
Option Price"); (ii) if authorized by the applicable option agreement and if
permitted by law, by delivery of shares of Common Stock that the Optionee has
beneficially owned for more than six months and which the Optionee may freely
transfer having a fair market value, determined by reference to the provisions
of Section 5(d) hereof, equal to or less than the Total Option Price, plus cash
in an amount equal to the excess, if any, of the Total Option Price over the
fair market value of such shares of Common Stock; or (iii) by the Optionee
delivering the Notice to the Company together with irrevocable instructions to a
broker to promptly deliver the Total Option Price to the Company in cash or by
other method of payment acceptable to the Company; provided, however, that the
Optionee and the broker shall comply with such procedures and enter into such
agreements of indemnity or other agreements as the Company shall prescribe as a
condition of payment under this clause (iii).
(c) The delivery of certificates representing shares of Common Stock to be
purchased pursuant to the exercise of an option will be contingent upon the
Company's receipt of the Total Option Price and of any written representations
from the Optionee required by the Compensation Committee, and the fulfillment of
any other requirements contained in the option agreement or applicable
provisions of law.
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7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of the Company's Common Stock as a whole are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, combination of shares, exchange of shares, change in
corporate structure or the like, an appropriate and proportionate adjustment
shall be made in the number and kind of shares subject to the Plan, and in the
number, kind, and per share exercise price of shares subject to unexercised
options or portions thereof granted prior to any such change. In the event of
any such adjustment in an outstanding option, the Optionee thereafter shall have
the right to purchase the number of shares under such option at the per share
price, as so adjusted, which the Optionee could purchase at the total purchase
price applicable to the option immediately prior to such adjustment.
(b) Adjustments under this Section 7 shall be determined by the
Compensation Committee and such determinations shall be conclusive. The
Compensation Committee shall have the discretion and power in any such event to
determine and to make effective provision for acceleration of the time or times
at which any option or portion thereof shall become exercisable. No fractional
shares of Common Stock shall be issued under the Plan on account of any
adjustment specified above.
8. EFFECT OF CERTAIN TRANSACTIONS
In the case of (i) the dissolution or liquidation of the Company, (ii) a
reorganization, merger, consolidation or other business combination in which the
Company is acquired by another entity (other than a holding company formed by
the Company) or in which the Company is not the surviving entity, or (iii) the
sale of all or substantially all of the assets of the Company to another entity,
the Plan and the options issued hereunder shall terminate upon the effectiveness
of any such transaction or event, unless provision is made in connection with
such transaction for the assumption of options theretofore granted, or the
substitution for such option of new options of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and the
per share exercise prices, as provided in Section 7. In the event of such
termination, all outstanding options whether or not then currently exercisable
for shares of Common Stock shall be exercisable for at least fifteen (15) days
prior to the date of such termination whether or not otherwise exercisable
during such period.
9. TAX WITHHOLDING
(a) Each Optionee shall, no later than the exercise date of any option,
pay to the Company, or make arrangements satisfactory to the Compensation
Committee regarding payment of any federal, state, or local taxes of any kind
required by law to be withheld with respect to such income.
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The Company shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the Optionee.
(b) To the extent permitted by the Compensation Committee, an Optionee may
elect to have his tax withholding obligation satisfied, in whole or in part, by
(i) authorizing the Company to withhold from shares of Common Stock to be
issued pursuant to any option number of shares with an aggregate fair market
value (determined by reference to the provisions of Section 5(d) hereof), that
would satisfy the withholding amount due, or (ii) transferring to the Company
shares of Common Stock owned by the Optionee with an aggregate fair market value
(determined by reference to the provisions of Section 5(d) hereof) that would
satisfy the withholding amount due.
10. NON-TRANSFERABILITY OF OPTION RIGHTS
No option shall be transferable except by will or the laws of descent and
distribution. During the lifetime of any Optionee, the option shall be
exercisable only by such Optionee.
11. NO OBLIGATION TO EXERCISE OPTION
Granting of an option shall impose no obligation on the recipient to
exercise such option.
12. USE OF PROCEEDS
The proceeds received from the sale of stock pursuant to the Plan shall be
used for general corporate purposes.
13. RIGHTS AS A STOCKHOLDER
An Optionee shall have no rights as a stockholder with respect to any stock
covered by his or her option until such Optionee shall have become the holder of
record of such stock, and shall not be entitled to any dividends or
distributions or other rights in respect of such stock for which the record date
is prior to the date on which he or she shall have become the holder of record
thereof.
Notwithstanding anything herein to the contrary, the Compensation
Committee, in its sole discretion, may restrict the transferability of all or
any number of shares of stock issued under the Plan upon the exercise of an
option by legending the stock certificate as it deems appropriate.
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14. EMPLOYMENT RIGHTS
Nothing in the Plan or in any option granted hereunder shall confer on any
Optionee any right to continue in the employ of the Company, or to interfere in
any way with the right of the Company to terminate the Optionee's employment at
any time.
15. COMPLIANCE WITH THE LAW
The Company is relieved from any liability for the nonissuance or non-
transfer, or any delay in issuance or transfer, of any shares of stock subject
to options under the Plan which results from the inability of the Company to
obtain, or from any delay in obtaining, from any regulatory body having
jurisdiction, all requisite authority to issue or transfer shares of stock of
the Company, if counsel for the Company deems such authority necessary for the
lawful issuance or transfer of any such shares. Appropriate legends may be
placed on the stock certificates evidencing shares issued upon exercise of
options to reflect such transfer restrictions.
Each option granted under the Plan is subject to the requirement that if at
any time the Compensation Committee determines, in its discretion, that the
listing, registration or qualification of shares of stock issuable upon exercise
of options is required by any securities exchange or under any state or Federal
law, or that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the grant of
options or the issuance of shares of stock, no options or shares of stock shall
be issued, in whole or in part, unless such listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions or with such conditions as are acceptable to the Compensation
Committee.
16. CANCELLATION OF OPTIONS
The Compensation Committee, in its discretion, may, with the consent of an
Optionee, cancel any outstanding option held by such Optionee hereunder.
17. AMENDMENT OF THE PLAN
The Board of Directors may discontinue the Plan or amend the Plan at any
time, and from time to time, subject to any required regulatory approval and the
limitation that, except as provided in Sections 7 and 8 thereof, no amendment
shall be effective unless approved by the stockholders of the Company in
accordance with applicable law and regulations at an annual or special meeting
held within twelve months before or after the date of adoption of such
amendment, where such amendment will:
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(a) increase the number of shares of Common Stock as to which options may
be granted under the Plan;
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change the minimum option exercise price; or
(d) otherwise materially increase the benefits accruing to individuals
under the Plan.
In addition to the foregoing, other Plan amendments shall be subject to
approval by the Company stockholders if and to the extent determined by the
Compensation Committee to be required by the Act to ensure that options or
grants granted under the Plan are exempt under Rule 16b-3 promulgated under the
Act, or that Incentive Stock Options granted under the Plan are qualified under
Section 422 of the Code.
Except as provided in Sections 7 and 8 hereof, rights and obligations under
any option granted before any amendment of the Plan shall not be altered or
impaired by such amendment, except with the consent of the Optionee.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including
without limitation, the granting of stock or stock options otherwise than under
the Plan, and such arrangements may be either applicable generally or only in
specific cases.
19. GOVERNING LAW
The Plan shall be governed by Delaware law, except to the extent that such
law is preempted by federal law.
20. EFFECTIVE DATE AND EXPIRATION DATE OF PLAN;
STOCKHOLDER APPROVAL
This Plan shall become effective upon the date that it is approved by the
Board of Directors of the Company; provided, however, that the Plan shall be
subject to the approval of the Company's stockholders in accordance with
applicable laws and regulations at an annual or special meeting held within
twelve months of such effective date. No options granted under the Plan prior
to such stockholder approval may be exercised until such approval has been
obtained. No options may be
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granted under the Plan after the tenth anniversary of the effective date of the
Plan.
21. MISCELLANEOUS
(a) If the Compensation Committee shall find that any person to whom any
amount is payable under the Plan is unable to care for his affairs because of
illness or accident, or is a minor, or has died, then any payment due to such
person or his estate (unless a prior claim therefor has been made by a duly
appointed legal representative) may, if the Compensation Committee so directs
the Company, be paid to his spouse, child, or other relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Compensation Committee to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a complete discharge
of the liability of the Compensation Committee and the Company therefor.
(b) No member of the Compensation Committee shall be personally liable by
reason of any contract or other instrument executed by such member or on his
behalf in his capacity as a member of the Compensation Committee nor for any
mistake of judgment made in good faith, and the Company shall indemnify and hold
harmless each member of the Compensation Committee and each other employee,
officer or director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan may be allocated or delegated,
against any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's own fraud or bad
faith; provided, however, that approval of the Company's Board of Directors
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Certificate of Incorporation or By-Laws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
(c) No provision of the Plan shall require the Company, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Optionees shall have no
rights under the Plan other than as unsecured general creditors of the Company,
except that insofar as they may have become entitled to payment of additional
compensation by performance of services, they shall have the same rights as
other employees under general law.
(d) Each member of the Compensation Committee and each member of the
Company's Board of Directors shall be fully justified in relying, in acting or
failing to act, and shall not be liable for having so relied, acted or failed to
act in good faith, upon any report made by the independent public accountant of
the Company and upon any other information furnished in connection with the Plan
by any person or persons other than such member.
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(e) Except as otherwise specifically provided in the relevant plan
document, no payment under the Plan shall be taken into account in determining
any benefits under any pension, retirement, profit-sharing, group insurance or
other benefit plan of the Company.
(f) The expenses of administering the Plan shall be borne by the Company.
* * *
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Exhibit 10.5
FORM OF
ASI SOLUTIONS INCORPORATED
1996 EMPLOYEE STOCK PURCHASE PLAN
The purpose of the ASI Solutions Incorporated 1996 Employee Stock Purchase
Plan (the "Plan") is to provide eligible employees of ASI Solutions Incorporated
(the "Company") and certain of its subsidiaries with opportunities to purchase
shares of the Company's common stock, $.01 par value (the "Common Stock"). Two
hundred fifty thousand (250,000) shares of Common Stock in the aggregate have
been approved for this purpose. The Plan is intended to constitute an "employee
stock purchase plan" within the meaning of Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be interpreted in
accordance with that intent.
1. Administration. The Plan will be administered by the Company's Board
---------------
of Directors (the "Board") or by a committee appointed by the Board for such
purpose (the "Committee"). The Board or the Committee has authority to make
rules and regulations for the administration of the Plan, and its
interpretations and decisions with regard thereto shall be final and conclusive.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
2. Offerings. The Company will make one or more offerings to eligible
----------
employees to purchase Common Stock under the Plan ("Offerings"). The initial
Offering will begin on the date of the Initial Public Offering and will end on
September 30, 1997 (the "Initial Offering"). Thereafter, an Offering will begin
on the first business day occurring on or after each October 1 and April 1 and
will end on the last business day occurring on or before the following March 31
and September 30, respectively. The Board or the Committee may, in its
discretion, select a different offering period for any offering, provided that
the duration of the offering is not longer than one year.
3. Eligibility. All employees of the Company (including employees who are
------------
also directors of the Company) and all employees of each Designated Subsidiary
(as defined in Section 11) are eligible to participate in any one or more of the
Offerings under the Plan, provided that as of the first day of the applicable
Offering (the "Offering Date") they are customarily employed by the Company or a
Designated Subsidiary for more than twenty (20) hours a week and have completed
at least six (6) months of employment.
4. Participation. An employee eligible on any Offering Date may
--------------
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least ten (10) business days before the Offering Date (or by
such other deadline as shall be established for the Offering). The form will
(a) state the percentage to be deducted from his Compensation (as defined in
Section 11) per pay period, (b) authorize the purchase of Common Stock for him
in each Offering in accordance with terms of the Plan and (c) specify the exact
name or names in
<PAGE>
which shares of Common Stock purchased for him are to be issued pursuant to
Section 10. An employee who does not enroll in accordance with these procedures
will be deemed to have waived his right to participate. Unless an employee
files a new enrollment form or withdraws from the Plan, his deductions and
purchases will continue at the same percentage of compensation for future
Offerings, provided he remains eligible. Notwithstanding the foregoing,
participation in the Plan will neither be permitted nor be denied contrary to
the requirements of the Code.
5. Employee Contributions. Each eligible employee may authorize payroll
------------------------
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his Compensation for each pay period. The Company will maintain book
accounts showing the amount of the payroll deductions made by each
participating employee for each Offering. No interest will accrue or be paid on
payroll deductions.
6. Deductions Changes. An employee may not increase or decrease his
-------------------
payroll deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering (subject to the limitations of
Section 5) by filing a new enrollment form at least ten (10) business days
before the next Offering Date (or by such other deadline as shall be established
for the Offering).
7. Withdrawal. An employee may withdraw from participation in the Plan by
-----------
delivering a written notice of withdrawal to his appropriate payroll location.
The employee's withdrawal will be effective as of the next business day.
Following an employee's withdrawal, the Company will promptly refund to him his
entire account balance under the Plan (after payment for any Common Stock
purchased before the effective date of withdrawal). Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Offering, but may enroll in a subsequent Offering in accordance with
Section 4.
8. Grant of Options. On each Offering Date, the Company will grant to
-----------------
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, whole shares of Common Stock
reserved for the purposes of the Plan up to a maximum determined by dividing ten
percent (10%) of such employee's projected Compensation for the period of the
Offering by eighty five percent (85%) of the Fair Market Value of the Common
Stock (as defined in Section 11) on the Offering Date. The purchase price for
each share purchased under such Option (the "Option Price") will be 85% of the
Fair Market Value of the Common Stock on the Offering Date or the Exercise Date,
whichever is less.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the proceeding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
2
<PAGE>
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
rights to purchase stock under the Plan, and any other employee stock purchase
plan of the Company and its Parents and Subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such stock (determined on the option
grant date or dates) for each calendar year in which the Option is outstanding
at any time. The purpose of the limitation in the preceding sentence is to
comply with Section 423(b)(8) of the Code.
9. Exercise of Option and Purchase of Shares. Each employee who continues
------------------------------------------
to be a participant in the Plan on the Exercise Date shall be deemed to have
exercised his Option on such date and shall acquire from the Company such number
of whole shares of Common Stock reserved for the purpose of the Plan as his
accumulated payroll deductions on such date will purchase at the Option Price,
subject to any other limitations contained in the Plan. Any balance remaining
in an employee's account at the end of an Offering will be refunded to the
employee promptly; provided that any balance remaining in an employee's account
at the end of an Offering solely by reason of the inability to purchase a
fractional share will be carried forward to the next Offering.
10. Issuance of Certificates. Certificates representing shares of Common
-------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship or in the name of a broker authorized by the
employee to be his, or their, nominee for such purpose.
11. Definitions
-----------
The term "Compensation" means the amount of total cash compensation, prior
to salary reduction pursuant to either Section 125 or 401(k) of the code,
including base pay, commissions, overtime, and incentive and bonus awards, but
excluding allowances and reimbursements for expenses such as relocation
allowances or travel expenses, income or gains or the exercise of Company stock
options, and similar items.
The term "Designated Subsidiary" means any present or future
Subsidiary (as defined below) that is designated from time to time by the Board
or the Committee to participate in the Plan. subsidiaries may be so designated
either before or after the Plan is approved by the stockholders.
The term "Fair Market Value of the Common Stock" means the last
reported sale price of the Common Stock on the Nasdaq National Market ("NASDAQ")
on a given day or, if no sales of Common Stock were made on that day, the last
reported sale price of the Common Stock on the next preceding day on which sales
were made.
The term "Parent" means a "parent corporation" with respect to the
Company, as
3
<PAGE>
defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to
the Company, as defined in Section 424(f) of the Code.
12. Rights on Retirement, Death, or Other Termination of Employment. If a
----------------------------------------------------------------
participating employee's employment terminates for any reason before the
Exercise Date for any Offering, no payroll deduction will be taken from any pay
due and owing to the employee and the balance in his account will be paid to him
or, in the case of his death, to his designated beneficiary as if he had
withdrawn from the Plan under Section 7. An employee will be deemed to have
terminated employment, for this purpose, if the corporation that employs him,
having been a Designated Subsidiary, ceases to be a Subsidiary, or if the
employee is transferred to any corporation other than the Company or a
Designated Subsidiary.
13. Optionees Not Stockholders. Neither the granting of an Option to an
---------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under the Plan
until such shares have been purchased by and issued to him.
14. Rights Not Transferable. Rights under the Plan are not transferable
------------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
15. Application of Funds. all funds received or held by the Company
---------------------
under the Plan may be combined with other corporate fund and may be used for any
corporate purpose.
16. Adjustment in Case of Changes Affecting Common Stock. In the event of
-----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
17. Amendment of the Plan. The Board or the Committee may at any time,
----------------------
and from time to time, amend the Plan in any respect, except that without the
approval, within twelve (12) months of such Board or Committee action, by the
holders of a majority of the shares of stock of the Company present or
represented and entitled to vote at a meeting of stockholders, no amendment
shall be made (a) increasing the number of shares approved for the Plan or (b)
redefining the class of corporations whose employees are eligible to receive
options under the Plan.
18. Insufficient Shares. If the total number of shares of Common Stock
--------------------
that would
4
<PAGE>
otherwise be purchased on any Exercise Date plus the number of shares purchased
under previous Offerings under the Plan exceeds the maximum number of shares
issuable under the Plan, the shares then available shall be apportioned among
participants in proportion to the amount of payroll deductions accumulated on
behalf of each participant that would otherwise be used to purchase Common Stock
on such Exercise Date.
19. Termination of the Plan. The Plan may be terminated at any time by
------------------------
the Board or the Committee. Upon termination of the Plan, all amounts in the
accounts of participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
-------------------------
deliver Common Stock under the Plan is subject to listing on NASDAQ (or other
national exchange) and obtaining all governmental approvals required in
connection with the authorization, issuance, or sale of such stock.
The Plan shall be governed by Delaware law except to the extent that
such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Any provision
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan. To ensure compliance with such Rule, the Board or the
Committee may limit the right of covered employees to withdraw from the Plan or
to resume participation following withdrawal.
21. Issuance of Shares. Shares may be issued upon exercise of an Option
-------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Tax Withholding. Participation in the Plan is subject to any required
----------------
tax withholding on income of the participant in connection with the Plan. Each
employee agrees, by entering the Plan, that the Company and its Subsidiaries
shall have the right to deduct any such taxes from any payment of any kind
otherwise due to the employee, including shares issuable under the Plan.
23. Notification upon Sale of Shares. Each employee agrees, by entering
---------------------------------
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
--------------------------------------------
effect on the first day of the Company's initial public offering, subject to
approval by the holders of a majority of the shares of stock of the Company
Present or represented and entitled to vote at a meeting of stockholders, which
approval must occur within twelve (12) months of the adoption of the Plan
5
<PAGE>
by the Board.
<PAGE>
Exhibit 10.9
SUBLEASE
This SUBLEASE, made as of July 2, 1996 between NIKON INC., a New York
corporation having an address at 1300 Walt Whitman Road, Melville, New York
11747-3064 ("Sublessor"), and ASSESMENT SYSTEMS INC., a New York corporation,
having an office at 780 Third Avenue, New York, New York 10017 ("Subtenant"),
W I T N E S S E T H:
--------------------
Sublessor and Subtenant hereby agree as follows:
SECTION 1. DEFINITIONS
- ----------------------
For the purposes of this Sublease, unless the context requires otherwise,
the following terms shall have the meanings herein specified:
1.01 "Lease" shall mean the Agreement of Lease dated as of June 1, 1990
between Omni 110 Associates, a New York limited partnership, as landlord, and
Sublessor, as tenant, (a copy of which heretofore has been delivered to
Subtenant) and any and all future amendments or other modifications thereof.
1.02 "Landlord" shall mean the person or entity at any relevant time
entitled to enforce the rights of the landlord under the Lease.
1.03 "Building" shall mean the building located at 1300 Walt Whitman
Road, Melville, New York, and of which the Sublease Premises are a part.
1.04 "Permitted Uses" shall mean general office purposes in connection
with Subtenant's business involving sales and human resources consulting, and
employment and related investigations and verifications. Specifically, but
without limitation, any use prohibited under Section 2 of this Sublease or under
the Lease shall not be a Permitted Use.
1.05 "Subleased Premises" shall mean the space substantially as shown on
the Omnitech Drawing #96-651-F dated March 13, 1996 annexed hereto as Exhibit A,
which space is on the first floor of the Building and which consists of
approximately 7,288 rentable square feet.
1.06 "Land" shall mean the parcel of land described in Exhibit B.
SECTION 2. SUBLEASE, TERM, PERMITTED USES
- ------------------------------------------
2.01 Subject to the provisions hereof, Sublessor subleases to Subtenant
and Subtenant subleases from Sublessor the Subleased Premises for a term (the
"Original Term") commencing on the date Sublessor's Work (as herein defined)
shall be completed (as such term is defined in Section 8.02 hereof) (the
"Commencement Date") and expiring at midnight on December 31, 2003 (the
"Expiration Date"). The Subleased Premises shall be occupied and used
exclusively for Permitted Uses and in accordance with the provisions of this
Sublease. The Original Term together with any renewal or extension thereof shall
be referred to as the "Term".
2.02 The parties have targeted on or about
<PAGE>
August 1, 1996 as the Commencement Date, and the Subtenant fully understands
that such time period is only a target and that there is no assurance as to the
actual Commencement Date. Furthermore, notwithstanding anything to the contrary
contained in this Sublease, Subtenant fully understands that the Subleased
Premises is presently occupied by two (2) separate subtenants under two separate
sublease agreements and that the commencement of this Sublease is subject to
said subtenants vacating the Subleased Premises and, if Subtenant shall be
delayed in obtaining possession of the Subleased Premises, as a result of the
foregoing existing tenancies or for any other reason whatsoever, or if Sublessor
shall be delayed in the comencement or the construction of Sublessor's Work as a
result of the foregoing existing tenancies or for any reason whatsoever,
Sublessor shall not be subject to any liability, and the effectiveness of this
Sublease shall not be affected but the Fixed Rent (herein defined) shall be
abated (provided Subtenant is not responsible for the delay in obtaining
possession, or in the commencement or construction of Sublessor's Work or any
other work permitted to be performed by Subtenant) until possession shall have
been made available to Subtenant. In the event Sublessor's Work shall not be
completed, through no fault of Subtenant, within seven (7) months after the
Subleased Premises become vacant and Sublessor's Work commences, Subtenant shall
have the right to terminate this Sublease provided Subtenant gives Sublessor
notice of its intention to terminate no later than fifteen (15) business days
prior to the expiration of said seven (7) month period. The provisions hereof
are intended to constitute "an express provision to the contrary" within the
meaning of Section 223-a of the New York Real Property Law.
2.03 (i) Subtenant shall not use or permit all or any part of the
Subleased Premises to be used in any manner which in Sublessor's sole judgment
does or is likely to impair the character or dignity of the Building or
Sublessor's business or any other subtenant's business.
(ii) If any governmental license or permit shall be required for
the proper and lawful conduct of Subtenant's business in the Subleased Premises,
Subtenant shall duly procure and maintain such permit or license and comply with
its terms and conditions throughout the Term.
(iii) Any business machine or mechanical equipment with causes
vibration, noise, cold or heat shall be placed and maintained, at Subtenant's
sole cost and expense, in setting of cork, rubber or spring-type vibration
eliminators sufficient in Sublessor's sole judgment to absorb such vibration and
noise or prevent transmissions of cold and heat.
SECTION 3. LEASE
- -----------------
This Sublease and the covenants, provisions, terms and conditions hereof
are subject and subordinate to the covenants, provisions, terms and conditions
of the Lease and to all other matters set forth in Section 18 hereof.
SECTION 4. OBLIGATIONS UNDER LEASE
- -----------------------------------
Subtenant agrees (i) to be bound by and to perform and comply with all the
covenants, provisions, terms and conditions of the Lease during the Term of this
Sublease to
-2-
<PAGE>
the extent applicable to the Subleased Premises or Sublessor with respect to the
Subleased Premises other than those set forth in Sections 3(A), (B), (C), (D)
and (E); 5(A), (B), (C), (D), (E), (F), and (G); 6; 7(A), (B), (C) and (E); 8;
9(A), (B), (C) and (D); 10(A), (B), (C), (D) and (E); 15(A), (B), (C), (D), (E),
(F), (G) and (H); 23(D); and 39, and (ii) not to commit or permit to be
committed any act, or to create or permit to be created any condition, that
would constitute a default under the Lease. In the event any provision of this
Sublease is inconsistent with a provision of the Lease, such inconsistency shall
be resolved in favor of the provision of this Sublease, unless use of the
Subleased Premises or any action or inaction in accordance with said provision
may become the basis of a default under the Lease, in which situation the
inconsistency shall be resolved in favor of the provision of the Lease.
Sublessor represents to Subtenant that the Lease is in full force and effect and
has not been amended or modified as of the date hereof, that the Subleased
Premises may be used for all Permitted Uses, and that Subtenant's rights and
obligations as set forth in this Sublease do not constitute a default under the
Lease, and that as of the date hereof Sublessor is in compliance with Article 19
of the Lease and is not in default under the Lease. Notwithstanding anything to
the contrary contained herein, if Landlord, in writing, shall claim or otherwise
allege that a use of, action or inaction involving, or other circumstance
concerning the Subleased Premises (or any use, whether permitted hereby,
pursuant to law or prohibited hereby or thereby, of the Building by Subtenant,
its employees, agents and contractors) is in violation of any provision of or
may become a default under the Lease, Subtenant, immediately upon notice from
Sublessor an without limiting the rights of Sublessor hereunder, shall cease
such use or action and take such action or cause such circumstance to be changed
so that the basis or alleged basis for such claim or allegation shall no longer
exist.
SECTION 5. FIXED RENT, OPERATING EXPENSES, TAXES AND ADDITIONAL RENT
- --------------------------------------------------------------------
5.01 During the Original Term, Subtenant shall pay (i) an annualized
base fixed rent of $156,048.00 from the Commencement Date through the end of the
twenty-fourth calendar month of the Original Term which shall be payable in
equal monthly installments of $13,004.00 per month; (ii) an annual base fixed
rent of $161,836.00 from the beginning of the twenty-fifth calendar month
through the end of the forty-eighth calendar month of the Original Term which
shall be payable in equal monthly installments of $13,486.33 per month; and
(iii) an annual base fixed rent of $167,624.00 from the beginning of the forty-
ninth calendar month through the Expiration Date which shall be payable in equal
monthly installments of $13,968.67 per month (collectively the "Fixed Rent").
Subtenant agrees to pay the Fixed Rent as specified in the preceding sentence in
advance on the first day of each calendar month during the Original Term, except
that the Fixed Rent for the first, second and third full calendar months of the
Original Term less a Fixed Rent credit of $20,258.00, shall be paid at the time
of the execution hereof. The Fixed Rent shall be prorated for any portion of a
month during the Term and, if the first month of the Term is not a full calendar
month, Subtenant shall pay the prorated Fixed Rent due therefor on the
Commencement Date.
5.02 For purposes of this Section 5, unless the context requires
otherwise, the following terms shall have
-3-
<PAGE>
the meanings herein specified:
(i) "Base Operating Amount" shall mean the Base Operating
Expenses for the Base Operating Year.
(ii) "Base Operating Year" shall mean the twelve (12) month
period commencing August 1, 1996 and ending July 31, 1997.
(iii) "Operating Expenses" shall mean the sum of all costs and
expenses paid or incurred by Sublessor in respect of the repair, replacement,
cleaning, maintenance, management, insurance, operation, restoration, safety
(including, without limitation, fire safety) and/or security of the Building and
the Land.
(iv) "Building Operating Expense Statement" shall mean a
writing setting forth the Operating Expense Payment (as herein defined) payable
by Subtenant for a specified Operating Year pursuant to this Section 5.02.
(v) "Operating Year" shall mean each twelve (12) month period
commencing August 1 during any part of the Term.
(vi) "Subtenant's Share" shall mean the quotient, expressed as a
percentage, obtained by dividing the rentable square feet of the Subleased
Premises, which is deemed to be 7,288 square feet for purposes of this Sublease,
by the rentable square feet of the portion of the Building which is available
for occupancy, which is deemed to be 132,360 square feet for purposes of this
Sublease. On the date hereof, Subtenant's Share shall mean 5.50%. In no event
shall such deemed square footages constitute or imply any representation or
warranty by Sublessor whatsoever as to the actual size of the Subleased Premises
or the Building, but same shall constitute an express agreement between
Sublessor and Subtenant with respect to such actual sizes thereof.
(vii) "Taxes" shall mean all real estate taxes, sewer charges or
rents, water frontage charges, and assessments, special or otherwise, rates and
charges, county taxes, transit taxes levied, assessed or imposed including any
abatements or exemptions by the County of Suffolk or any other taxing authority
upon or with respect to the Building and the Land, all taxes assessed or imposed
with respect to the rentals payable hereunder other than general income and
gross receipts taxes (except that general income and gross receipts taxes shall
be included if covered by the provisions of the following sentence). Taxes shall
also include any taxes, charges or assessments levied, assessed or imposed by
any taxing authority in addition to or in lieu of the present method of real
estate taxation, provided such substitute taxes, charges and assessments are
computed as if the property were the sole property of the Sublessor subject to
said substitute tax, charge or assessment. With respect to any Tax Year (as
herein defined), all expenses, including, without limitation, legal fees,
experts' and other witnesses' fees, incurred in contesting the validity or
amount of any Taxes or in obtaining a refund of Taxes, shall be considered as
part of the Taxes for such Tax Year. In addition, the term Taxes shall mean any
tax, charge assessment, or sum included within the definition of the term
"Taxes" in the Lease.
(viii) "Tax Year" shall mean each period of
-4-
<PAGE>
twelve (12) months, commencing on the first day of December 1 of each such
period, in which occurs any part of the Term, or such other period of twelve
(12) months occurring during the Term as hereafter may be duly adopted as the
fiscal year for real estate tax purposes of the County of Suffolk.
(ix) "Base Tax Amount" shall mean the Taxes due for the Tax
Year commencing on December 1, 1996 and ending November 30, 1997 based at full
assessment and including any tax abatements.
5.03 (i) For each Operating Year, including the Operating Year in
which the Commencement Date occurs, any part of which shall occur during the
Term of this Sublease, Subtenant shall pay an amount (herein called an
"Operating Expense Payment") equal to Subtenant's Share of the amount by which
the Operating Expenses for such Operating Year exceed the Base Operating Amount.
Sublessor and Subtenant agree that the Operating Expense Payment for any
Operating Year in which the term of this Sublease commences or expires shall be
prorated.
(ii) Sublessor may furnish to Subtenant, prior to the
commencement of each Operating Year, a written statement setting forth
Sublessor's reasonable estimate of the Operating Expense Payment for such
Operating Year. Subtenant shall pay to Sublessor on the first day of each month
during the Operating Year in which the Operating Expense Payment will be due, an
amount equal to one-twelfth (1/12th) of Sublessor's estimate of the Operating
Expense Payment for such Operating Year. If, however, Sublessor shall not
furnish any such estimate for an Operating Year or if Sublessor shall furnish
any such estimate for an Operating Year subsequent to the commencement thereof,
then (A) until the first day of the month following the month in which such
estimate is furnished to Subtenant, Subtenant shall pay to Sublessor on the
first day of each month an amount equal to the monthly sum payable by Subtenant
to Sublessor under this Section 5.03 in respect of the last month of the
preceding Operating Year; (B) after such estimate is furnished to Subtenant,
Sublessor shall give notice to Subtenant stating whether the installments of the
Operating Expense Payment previously made for such Operating Year were greater
or less than the installments of the Operating Expense in which the Operating
Expense Payment will be due in accordance with such estimate, and (x) if there
shall be a deficiency, Subtenant shall pay the amount thereof within twenty (20)
days after demand therefor, or (y) if there shall have been an overpayment,
Sublessor shall refund to Subtenant the amount thereof (or at Sublessor's
option, credit same against the Additional Rent next due); and (C) on the first
day of the month following the month in which such estimate is furnished to
Subtenant and monthly thereafter throughout the remainder of such Operating
Year, Subtenant shall pay to Sublessor an amount equal to one-twelfth (1/12th)
of the Operating Expense Payment shown on such estimate. Sublessor may, at any
time and from time to time during each Operating Year, furnish to Subtenant a
revised statement of Sublessor's reasonable estimate of the Operating Expense
Payment for such Operating Year, and in each such case the Operating Expense
Payment for such Operating Year shall be adjusted and paid or refunded or
credited as the case may be, in the same manner as provided in the preceding
sentence.
5.04 (i) If Taxes payable for any Tax Year, including the Tax Year
in which the Commencement Date occurs,
-5-
<PAGE>
shall exceed the Base Tax Amount, Subtenant shall pay to Sublessor as Additional
Rent for such Tax Year an amount (herein called the "Tax Payment") equal to
Subtenant's Share of the amount by which the Taxes for such Tax Year are greater
than the Base Tax Amount. The Tax Payment for each Tax Year shall be due and
payable in installments in the same manner that Taxes for such Tax Year are due
and payable by Sublessor to the County of Suffolk. Subtenant shall pay
Subtenant's Share of each such installment within twenty (20) days after the
receipt of a writing rendering of a statement therefor by Sublessor to
Subtenant, which statement may be rendered by Sublessor so as to require
Subtenant's Share of Taxes to be paid by Subtenant not more than thirty (30)
days prior to the date such Taxes (or any installment thereof) first become due.
The statement to be rendered by Sublessor shall set forth, in reasonable detail,
the computation of the Tax Payment with respect to the particular installment(s)
being billed. If there shall be any increase or decrease in the Taxes for any
Tax Year, whether during or after such Tax Year, the Tax Payment for such Tax
Year shall be appropriately adjusted and paid or refunded, as the case may be,
in accordance herewith; in no event, however, shall Taxes be reduced below the
Base Tax Amount. If during the Term, Sublessor shall be required to pay Taxes
(either to the appropriate taxing authorities or as tax escrow payments to a
superior mortgagee or superior lessor (including, without limitation, Landlord)
in full or in monthly, quarterly, or other installments, on any other date or
dates than as presently required, then at Sublessor's option, Subtenant's Tax
Payments shall be correspondingly accelerated or revised so that said
Subtenant's Tax Payments are due no more than thirty (30) days prior to the date
payments are due to the taxing authorities or such superior mortgagee or
superior lessor.
(ii) If the Taxes comprising the Base Tax Amount are reduced as a
result of an appropriate proceeding or otherwise, the Taxes as so reduced shall,
for all purposes, be deemed to be the Taxes for purposes of determining the Base
Tax Amount and Sublessor shall give notice to Subtenant of the amount by which
the Tax Payment previously made were less than the Tax Payment required to be
made and Subtenant shall pay the amount of the deficiency within twenty (20)
days after receipt of written demand therefor.
5.05 The expiration or termination of this Sublease during any Tax Year or
Operating Year (for any part or all of which there is due a Tax Payment or
Operating Expense Payment under this Sublease) shall not affect the rights or
obligations of the parties hereto respecting such payments and any Sublessor's
Statement or tax bill, as the case may be, relating to such payment may be sent
to Subtenant subsequent to, and all such rights and obligations shall survive,
any such expiration or termination. Any payments due under such Operating
Expenses Statement or Tax Payment, as the case may be, shall be payable within
twenty (20) days after such statement or bill is sent to Subtenant.
5.06 Sublessor's failure to render or delay in rendering an Operating
Expense Statement with respect to any Operating Year shall not prejudice
Sublessor's right to thereafter render an Operating Expense Statement with
respect to any such Operating Year, nor shall the rendering of an Operating
Expense Statement for any Operating Year prejudice Sublessor's right to
thereafter render a corrected Operating
-6-
<PAGE>
Expense Statement for such Operating Year. Sublessor's failure to render or
delay in rendering a bill with respect to any installment of Taxes shall not
prejudice Sublessor's right to thereafter render such a bill for such
installment, nor shall the rendering of a bill for any installment prejudice
Sublessor's right to thereafter render a corrected bill for such installment.
5.07 No payment by Subtenant or receipt or acceptance by Sublessor of a
lesser sum than the correct Fixed Rent or Additional Rent shall be deemed to be
other than a payment on account, nor shall any endorsement or statement on any
check or letter accompanying any check or payment be deemed an accord and
satisfaction, and Sublessor may accept such check or payment without prejudice
to Sublessor's right to recover the balance or pursue any remedy in this
Sublease or as provided at law.
5.08 Sublessor shall have the same rights and remedies in the event
Subtenant fails to pay Additional Rent as in the situation in which Subtenant
fails to pay Fixed Rent.
5.09 All payments due pursuant to this Section 5 and all other sums or
charges that may become due pursuant to this Sublease (other than Fixed Rent)
shall be additional rent ("Additional Rent") and shall be due and payable as
specified herein or determined in accordance herewith or, if no time is so
specified or determined, within ten (10) days of receipt of written demand.
5.10 All payments due Sublessor hereunder shall, unless expressly set
forth herein to the contrary, be paid without notice or demand and without
set-off, deduction or abatement whatsoever and shall be delivered to Sublessor
at its address set forth in Section 43 of this Sublease or at such other
address as Sublessor shall specify in writing, by good, unendorsed checks.
SECTION 6. ELECTRICITY
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6.01 (i) All electric current to be furnished to the Subleased Premises
shall be measured by a separate submeter which shall be installed and maintained
by Sublessor. Subtenant shall purchase from and promptly pay to Sublessor the
cost for all electric current that is consumed in the Subleased Premises at
charges not to exceed those being charged by the public utility company or
agency supplying electric current to the Building together with any taxes or
other charges levied on such electric current. Any such charges for electric
current shall be Additional Rent and shall be due and payable to Sublessor
within ten (10) days after the receipt of a written rendering of a statement
therefor.
(ii) Sublessor shall not be liable in any way to Subtenant for any
failure or defect in the supply or character of the electric energy or other
utility being furnished to the Subleased Premises.
6.02 Subtenant's use of electric energy in the Subleased Premises shall
be solely for the purpose of conducting its business therein and shall not at
any time exceed the capacity of any of the electrical conductors, machinery and
equipment in or otherwise servicing the Subleased Premises or the Building. In
order to insure that
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such capacity is not exceeded and to avert possible adverse effect upon the
Building's electric service, Subtenant shall not, without Sublessor's prior
written consent in each instance (i) connect any additional fixtures, machinery,
appliances or equipment to the Building's electric distribution system other
than lamps, typewriters, personal-type computer and related computer terminals,
desk-top copying machines, desk-top communications equipment (such as telephones
and telecopies), and other small office machines that consume comparable or less
amounts of electric energy, or (ii) make any alteration or addition to
Subtenant's machinery, appliances or equipment.
6.03 Sublessor shall not be liable or responsible to Subtenant for any
loss, damage or expense which Subtenant may sustain or incur if (1) the supply
or electric energy to the Subleased Premises is interrupted, or (ii) the
quantity or character of electric service is changed or is no longer available
or suitable to Subtenant's requirements unless directly resulting from
Sublessor's willful misconduct. A change in the availability, supply, quality or
character of electric energy shall not be deemed a constructive eviction of
Subtenant unless caused by Sublessor's willful misconduct.
SECTION 7. SERVICES
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7.01 Sublessor shall provide to the Subleased Premises (i) Monday through
Saturday (except Federal, State and local municipal holidays) from 7:00 a.m. to
7:00 p.m. heat and air conditioning as and when seasonably required but never
with respect to air conditioning between October 15 and May 15 except at
Sublessor's sole election; (ii) water for ordinary drinking and lavatory
purposes, but if Subtenant uses or consumes water for any other purposes or in
unusually large quantities (of which fact Sublessor shall be the sole judge),
Sublessor may install a water meter at Subtenant's sole cost and expense, which
meter Subtenant shall thereafter maintain at its sole cost and expense in good
working order and Subtenant shall pay for water consumed as registered by such
meter; and (iii) Monday through Friday (except Federal, State and local
municipal holidays), cleaning services, in the evenings or early morning,
provided Subtenant keeps the Subleased Premises in reasonable order and provided
further that Sublessor does not require extra or additional cleaning because of
the existence of large quantities of glass, computer, or special installments or
equipment. If the Subleased Premises are not kept in reasonable order by
Subtenant all cleaning shall be done at Subtenant's expense and any extra
cleaning required as set forth above shall be done at Subtenant's expense, all
to Sublessor's satisfaction, by Sublessor's cleaning contractor.
7.02 Any use or occupancy of the Subleased Premises during the hours or
days on or during which Sublessor is not required to furnish heat or
air-conditioning to the Subleased Premises shall be at the sole risk,
responsibility and hazard of Subtenant. Subtenant shall comply with and observe
all Building-wide regulations and requirements prescribed by Sublessor for the
proper functioning of the heating, ventilating and air-conditioning systems.
7.03 In the event that Subtenant shall require air-conditioning, heating
or ventilation at such times as same are not required to be furnished by
Sublessor, Subtenant shall give Sublessor at least forty-eight (48) hours
advance written notice of such requirement and, provided that no
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Event of Default shall be continuing and such service shall not overload or
overtax the Building's systems, same shall be furnished by Sublessor, and
Subtenant agrees to pay one hundred percent (100%) of Sublessor's cost therefor
as Additional Rent (Subtenant acknowledges that Sublessor's cost may include the
cost of labor and electric energy for minimum time periods even if the air
conditioning, heating or ventilating is not utilized for the entire minimum time
period).
7.04 Sublessor reserves the right to interrupt, curtail or suspend the
services which it is required to furnish under this Section 7 when the need
therefor arises or is reasonably desirable by reason of accident, emergency,
mechanical breakdown or strike, or to accomplish the replacement, repair or
modification of any machinery, or when required or recommended under any law,
order, regulation or pronouncement of any federal, state, county or municipal
authority, or when required to modify, repair, improve or alter the Building or
for any cause beyond the reasonable control of Sublessor (including, without
limitation, a default by Landlord under the Lease ). Sublessor shall use
reasonable efforts to complete all required repairs (or to cause Landlord to
perform and complete same to the extent of Landlord's obligations under the
Lease) or other necessary work expeditiously so that Subtenant's inconvenience
resulting from the curtailment of services may be for as short a period of time
as circumstances will permit (but Sublessor shall not be obligated to utilize
overtime labor or incur extraordinary expenses in connection therewith). No
diminution or abatement of rent or other compensation shall or will be claimed
by Subtenant as a result of such interruption, curtailment, or suspension, nor
shall this Sublease or any of the obligations of Subtenant be affected or
reduced by reason of such interruption, curtailment or suspension.
7.05 Subtenant shall reimburse Sublessor for the cost to Sublessor of
removal from the Subleased Premises and the Building of so much of any refuse
and rubbish of Subtenant as shall exceed that ordinarily accumulated daily in
the routine of business office occupancy (as reasonably determined by Sublessor
or its contractor).
7.06 Sublessor, its cleaning contractor and their respective employees
shall have access to the Subleased Premises after 5:00 p.m. and before 7:00 a.m.
and shall have the right to use, without charge, all light, power and water
required to clean the Subleased Premises as required by this Sublease.
7.07 Sublessor will not be required to furnish any additional services,
except as expressly provided in this Sublease, and to the extent Sublessor shall
agree to furnish additional services to Subtenant, Subtenant shall pay Sublessor
therefor at Sublessor's then current charges.
7.08 (i) In addition to the services Subtenant shall be entitled to
receive pursuant to the provisions of this Sublease, Subtenant shall be entitled
to receive from Landlord with respect to the Subleased Premises, all of the
services which Sublessor is entitled to receive with respect to the Subleased
Premises pursuant to the Lease. Subtenant agrees to look solely to Landlord for
such services and promptly pay to either Landlord or Sublessor, as the case may
be, all charges by Landlord for any such services which Landlord is not required
to furnish without additional
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charge.
(ii) If Landlord fails to provide any services or otherwise perform
any obligations under the Lease (including, without limitation, its obligation,
if any, to repair and maintain the Building or any part thereof) and said
failure has a material adverse effect on the Subleased Premises, Subtenant or
the conduct of its business, Sublessor, promptly after receipt of notice from
Subtenant, shall notify Landlord and use reasonable afforts to have Landlord
perform its duties, and Sublessor shall have no further obligation in connection
therewith. If Landlord shall thereafter not perform, Subtenant shall not be
entitled to any set-off or deduction from the Fixed Rent or Additional Rent due
hereunder.
SECTION 8. CONDITION OF SUBLEASED PREMISES
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8.01 Subtenant has fully inspected the Subleased Premises and agrees to
accept same "as is" in its condition on the commencement Date hereof, and
Sublessor shall have no obligation to perform any improvements in or about the
Subleased Premises, except Sublessor's Work (as herein defined.
8.02 Sublessor shall perform, finish, install and provide, or shall
cause to be performed, finished, installed and provided in a good and
workmanlike manner those items of work set forth in the Scope of Work dated May
1, 1996 and the Omnitech Drawing #96-651-F dated March 13, 1996 which have been
approved by Subtenant and are attached hereto as EXHIBIT "A" (collectively known
as the "Plans & Specifications"), together with any drawings, plans, permits,
certificates and municipal authorizations needed to complete the foregoing items
of work ("the Sublessor's Work"). Sublessor represents that Sublessor's Work
will be free from defects in material and workmanship for a period of one (1)
year from the Commencement Date. Sublessor's Work will be completed such that it
will be substantially in accordance with the Plans and Specifications. For
purposes of this Section 8, the term "substantially in accordance" shall mean
work conforming to detailed measurements contained in the Plans and
Specifications coordinated to take into account the fact that all of the Plans
and Specifications should be complementary, and in the joining and coordinating
of such documents, ambiguities or implications may occur, and the Sublessor's
Work should be deemed to fairly reflect the intended result. It is acknowledged
by Subtenant (and same shall not be an objection) that (a) contractors must
join, cut, correlate or complete and combine work existing either outside the
scope of the Plans and Specifications or by other trades to accommodate field
conditions or ambiguity in the correlation of Plans and Specifications; (b)
contractors must patch, cut or join work as a result of subsequent change orders
so that such Sublessor's Work shall be harmonious with the existing completed
work, or so that the existing work may receive such changes; (c) changes may
occur in existing work to receive equipment or materials, the specifications for
which were incorrect in the original contract documents; (d) minor or desirable
deviations may be necessary to cause the specific function or working parts to
connect or provide the utility intended; (e) modifications, patching, blending
or joining of Sublessor's Work may occur in order to accommodate field
conditions not reflected in the Plans and Specifications; and
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(f) there may exist and be performed other work, which in accordance with good
trade practices, would be required in order to accommodate Subtenant's intended
requirements as reasonably implied from the correlation of all requirements
under the Plans and Specifications.
8.03 Notwithstanding anything to the contrary set forth in this Sublease,
if for any reason the Commencement Date is delayed by any action or inaction of
Subtenant, then, at Sublessor's option, Subtenant shall (i) pay Fixed Rent and
Additional Rent in the amounts set forth in this Sublease from the date on which
the Commencement Date would have occurred through the day immediately preceding
the Commencement Date, and (ii) Subtenant shall comply with all of the other
terms and conditions of this Sublease as if the Term had commenced.
8.04 Sublessor's Work shall be deemed completed notwithstanding the fact
that portions of such work remain to be performed, furnished, installed and/or
provided, so long as the same does not, and completion thereof will not,
prevent Subtenant from occupying the Subleased Premises for the conduct of its
business or materially interfere with Subtenant's use and occupancy of the
Subleased Premises for normal office purposes. Provided Subtenant shall deliver
to Sublessor, within thirty (30) days of the Commencement Date, a list of all
unperformed items of Sublessor's Work, Sublessor shall complete same to the
extent required by 8.02 of this Sublease.
8.05 Sublessor shall cause to be obtained any permits, certificates and
municipal authorizations required to be obtained such that Sublessor's Work
complies with, and can be performed in compliance with all applicable laws,
legal requirements, orders, ordinances, codes and regulations.
8.06 In connection with the performance of Sublessor's Work, Sublessor
shall have the right, without having to obtain Subtenant's consent, to (i) make
changes and modifications to the Plans and specifications to comply with any
governmental or inspecting authorities, laws, codes, rules, regulations or
permits, and (ii) make changes and substitutions of materials from those set
forth on the Plans and Specifications, provided such changed or substituted
materials are at least equivalent in quality and design to those set forth in
the Plans and Specifications. Notwithstanding anything to the contrary contained
in this Sublease any changes or modifications to the Plans and Specifications
attached hereto as Exhibit A which are either requested by the Subtenant or are
required to comply with any governmental or inspecting authorities, laws, codes,
rules, regulations or permits, shall be the sole responsibility of Subtenant and
shall be paid by Subtenant, as additional Rent within ten (10) days of the date
on which Sublessor shall send a statement to Subtenant requesting payment
thereof.
SECTION 9. ALTERATIONS
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9.01 Subtenant shall not make any improvements, installations, additions,
alterations or other changes (herein sometimes collectively called
"Alterations") in or to the Subleased Premises without the prior written consent
of Sublessor in each instance which consent shall not be unreasonably withheld
or delayed, and, if required by the Lease, Landlord. Subtenant acknowledges that
in no event shall Subtenant make nor will Sublessor grant consent to
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Alterations which are in the form of entrances to or exits from the Subleased
Premises or the Building or which as a result thereof require the construction
of any additional entrances to or exits from the Subleased Premises or the
Building.
9.02 If Subtenant shall obtain all required consents, any Alterations to
the Subleased Premises (and the performance of all work required in connection
therewith) shall in all respects comply with the provisions of this Sublease,
the Lease and the consents given with respect thereto.
SECTION 10. REPAIRS AND MAINTENANCE
- ------------------------------------
10.01 Subtenant shall, at its sole cost and expense, throughout the
Term, (i) take good care of the Subleased Premises and the equipment, fixtures
and improvements located therein (including, without limitation, the property
which is deemed the Sublessor's at the end of the Term pursuant to the
provisions of this Sublease), (ii) be responsible for all non-structural
repairs, in and to the Subleased Premises excluding the heating, ventilating,
air conditioning, plumbing and electrical systems. Notwithstanding the
preceding sentence, Subtenant shall be responsible for the cost of all
repairs, interior and exterior, structural and non-structural, in and to the
Building, the Land, the Subleased Premises and the facilities and systems
thereof, but only to the extent the need for such repairs to the Building, the
Land, the Subleased Premises and the facilities and systems thereof arises out
of (a) the performance or existence of Alterations performed by or on behalf of
Subtenant, (b) the installation, use or operation of any equipment, fixtures or
property by Subtenant, its employees, agents, contractors or invitees, (c) the
moving of any equipment, fixtures or property into or out of the Subleased
Premises or the Building by any person or entity other than Landlord,
Sublessor, its employees or agents, or (d) the act, omission, misuse or
neglect of Subtenant or any of its subtenants or its or their employees,
agents, contractors or invitees. Any repairs in or to the Land, the Building and
the Subleased Premises and the facilities and systems thereof for which
Subtenant is responsible shall be performed by or on behalf of Sublessor at
Subtenant's sole cost and expense; but Sublessor may, at its option, before
commencing any such work or at any time thereafter, require Subtenant to (1)
perform same, and/or (2) furnish to Sublessor such security, in form and amount
as Sublessor shall deem necessary, to assure the payment for such work by
Subtenant.
10.02 (i) Subject to Section 7.08 (ii), Sublessor, at its sole cost and
expense, shall repair and maintain (or shall cause to be repaired and
maintained), in good working order and repair (a) the structural and the public
portions of the Building, and (b) the systems and facilities of the Building
serving the Subleased Premises, including the Building heating, ventilating or
air-conditioning, plumbing and electrical systems, except Subtenant and not
Sublessor shall be responsible for all the foregoing repairs and maintenance as
and to the extent provided for in Section 10.01 hereof.
(ii) Subtenant shall give Sublessor prompt notice of any defective
condition known to Subtenant in any plumbing, heating, air-conditioning or
ventilation system or electrical lines located in, servicing or passing through
the
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Subleased Premises. Sublessor will endeavor to minimize interference with
Subtenant's use of the Subleased Premises in making any repairs or changes which
Sublessor is required or permitted by this Sublease, or required by law, to make
in or to the fixtures, equipment or appurtenances of the Building or the
Subleased Premises.
10.03 Notwithstanding the foregoing, Sublessor shall have no liability to
Subtenant, nor shall Subtenant's covenants and obligations under this Sublease
be reduced or abated in any manner whatsoever, by reason of any inconvenience,
annoyance, interruption or injury arising from Sublessor or any party acting on
Sublessor's behalf making any repairs or changes wich Sublessor is required or
permitted by this Sublease, or required by law, to make in or to the fixtures,
equipment or appurtenances of the Building or the Subleased Premises.
SECTION 11. INSURANCE
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11.01 Subtenant, at its sole cost and expense, shall maintain in effect
throughout the Term, for the mutual benefit of Sublessor and Subtenant,
insurance covering all of the property of Subtenant, against loss or damage by
fire and such risks as are customarily included in "all-risk" and extended
coverage endorsements attached to fire insurance policies, including "agreed
amount" coverage with no co-insurance penalties, on an "occurrence basis" in an
amount not less than the full replacement value thereof.
11.02 Subtenant, at its sole cost and expense, shall maintain in effect
for the entire Term, for the mutual benefit of Sublessor and Subtenant (and for
the benefit of the additional insureds described by the provisions of 11.05)
comprehensive general liability insurance in the broadest form generally
obtained on a commercially reasonable basis for the first class commercial
buildings of approximately the same age as the Subleased Premises and located in
the area in which the Subleased Premises are located, on an occurrence basis in
the minimum amount of Three Million Dollars ($3,000,000.00) for each occurrence,
(with a combined maximum amount of Five Million Dollars ($5,000,000.00) for all
occurrences per policy year) combined single limit for bodily injury, including
death, property damage and contractual liability (covering all contractual
obligations of Subtenant including those obligations under this Sublease). Such
policies shall cover the Subleased Premises, inclusive of sidewalk and parking
areas.
11.03 The insurance required under this Section 11 shall be effected by
valid and enforceable policies issued by insurance companies approved by
Sublessor, which approval shall not be unreasonably withheld or delayed, and
licensed to do business in the State of New York.
11.04 Upon the Term Commencement Date and thereafter, not less than ten
(10) days prior to the expiration date of any expiring policies theretofore
furnished pursuant to this Section 11, copies of such policies or certificates
of insurance therefor, or renewal policies or certificates of insurance
therefor, as the case may be, shall be delivered by Subtenant to Sublessor. If
the Subleased Premises are covered by a Superior Instrument, certificates of the
policies for the insurance required under this Section 11 shall, at Sublessor's
request, also be delivered to the holder of such Superior Instruments(s) whose
name and address
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shall have been delivered to Subtenant.
11.05 Except as otherwise stated, all policies of insurance required under
this Section 11 shall name Sublessor and Subtenant as the insureds as their
interest may appear; and such holders of Superior Instruments as Sublessor shall
request as additional insureds. Each policy of insurance required under this
Section 11 shall contain an agreement by the insurer that it will not be
cancelled or terminated, or the amount of insurance or type of coverage reduced
without at least thirty (30) days prior notice to Sublessor, Landlord and the
holder of any other Superior Instrument(s) named therein, and that no act or
omission of any insured party (including, without limitation, Sublessor and any
such holder named therein) shall serve to invalidate, cancel, release or relieve
the insurer thereunder from any liability which it may have to any other named
insured party.
11.06 Subtenant shall have included in all of its insurance policies a
waiver of the insurer's right of subrogation against Landlord, Sublessor and
others required by the Lease, if any. Subtenant hereby waives any and all right
of recovery it might otherwise have against Landlord, Sublessor and others, if
any, required by the Lease, their respective officers, directors, employees,
agents and contractors, for loss or damage to Subtenant's property by fire or
other casualty notwithstanding that such loss or damage may result from the
negligence or fault of Landlord, Sublessor or such others as aforementioned,
their respective officers, directors, employees, agents or contractors.
Sublessor hereby waives any and all right of recovery it might otherwise have
against Subtenant, its officers, directors, employees, agents and contractors,
for loss or damage to Sublessor's property covered under its insurance policies
for fire or other casualties to the Building, notwithstanding that such loss or
damage may result from the negligence or fault of Subtenant, its officers,
directors employees, agents or contractors. If the foregoing waivers of
subrogation are only obtainable with additional cost, the party responsible to
obtain such insurance shall notify the other party, and, in such event, such
other party may at its option pay such additional cost, in which event such
waiver shall be obtained.
11.07 Notwithstanding any provisions in this Sublease to the contrary, if,
in order to avoid a default under the Lease or any Superior Instrument,
Sublessor or Subtenant is required to maintain broader type coverage or more
insurance coverage with respect to the Subleased Premises than required by this
Sublease (or name other parties as additional insured thereunder), Subtenant
shall comply with all provisions of the Lease and any Superior Instrument
respecting such insurance and shall maintain all insurance required thereby.
SECTION 12. DAMAGE OR DESTRUCTION
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12.01 If the Subleased Premises shall be damaged or destroyed by fire or
other casualty (and if this Sublease shall not be terminated as hereinafter
provided), Sublessor shall make reasonable, diligent and good faith efforts to
cause Landlord to repair the damage to and restore and rebuild the Building to
the extent of Landlord's obligations under the Lease. Sublessor shall repair the
damage to and restore and rebuild the Subleased Premises with and to the extent
of the insurance proceeds provided by the insurance required under Section 11.01
excluding Subtenant's property
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as soon as possible, but in no event more than six (6) months, subject to force
majeure, after the damage or destruction (provided Landlord has performed its
restoration obligations).
12.02 Subject to the provisions of 12.05, if all or part of the Subleased
Premises shall be damaged, destroyed or rendered completely or partially
untenantable on account of fire or other casualty, the Fixed Rent and the
Additional Rent under Section 5 of this Sublease shall be abated in the
proportion that the untenantable area of the Subleased Premises bears to the
total area of the Subleased Premises. Such abatement shall be effective from the
period commencing upon the date of the damage or destruction and ending on the
date the damage to the Subleased Premises shall be substantially restored,
provided, however, should Subtenant or any of its subtenants reoccupy a portion
of the Subleased Premises during the period the restoration is taking place and
prior to the date that the Subleased Premises are substantially repaired or made
tenantable, the Fixed Rent and the Additional Rent allocable to such reoccupied
portion, based upon the proportion which the area of the reoccupied portion of
the Subleased Premises bears to the total area of the Subleased Premises, shall
be payable by Subtenant from the date of such reoccupancy.
12.03 (i) If the Subleased Premises shall be substantially damaged or
destroyed by fire or other casualty, Sublessor shall obtain for and deliver to
Subtenant an estimate from an independent contractor, architect or professional
engineer, as to the time required for Landlord to restore and repair the
Subleased Premises, as appropriate (the "Estimate"). The date set forth in the
Estimate shall hereinafter be referred to as the "Outside Date".
(ii) If the Subleased Premises shall be damaged or destroyed by fire
or other casualty, such that the Outside Date is more than one hundred eighty
(180) days after the date of the casualty, either Subtenant or Sublessor may
terminate this Sublease by giving the other party notice to such effect. Such
termination shall be effective on the date specified in such termination notice,
but not earlier than thirty (30) days nor later than ninety (90) days after the
date of such notice. Upon such termination, the Term shall expire as if it were
the Expiration Date.
12.04 Except as expressly set forth in 12.03, Subtenant shall not be
entitled to terminate this Sublease on account of a fire or other casualty and
in the event of a fire or other casualty, Sublessor shall have no liability to
Subtenant for inconvenience, loss of business or annoyance arising on account of
the fire or other casualty or from any repair or restoration of any portion of
the Subleased Premises or of the Building.
12.05 Notwithstanding any of the foregoing provisions of this Section 12,
if by reason of some act or omission on the part of Subtenant or any of its
subtenants or its or their partners, directors, officers, servants, employees,
agents or contractors, Sublessor or Landlord shall be unable to collect all of
the insurance proceeds (including without limitation, rent insurance proceeds)
applicable to the damage or destruction of the Subleased Premises or the
Building (by fire or other casualty), there shall be no abatement or reduction
of Fixed Rent or Additional Rent to the extent of such uncollected insurance
proceeds.
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12.06 Sublessor has no obligation to carry insurance of any kind on
Subtenant's property, furnishings, equipment, or trade fixtures and,
notwithstanding anything to the contrary set forth herein, Sublessor shall not
be obligated to repair any damage thereto, and Subtenant agrees to look solely
to its insurance for recovery of any damage to or loss thereto.
12.07 The provisions of this Section 12 shall be deemed an express
agreement governing any case of damage or destruction of the Subleased Premises
by fire or other casualty, and Section 227 of the Real Property Law of the State
of New York, providing for such a contingency in the absence of an express
agreement, and any other law of like import, now or hereinafter in force, shall
have no application in such case.
SECTION 13. EMINENT DOMAIN
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13.01 If the Lease is terminated (whether by Sublessor or Landlord) by
reason of a condemnation (or other taking for a quasi-public or public purpose),
or if the whole or any part of the Subleased Premises or access to shall be
taken by condemnation or in any other manner for any public or quasi-public use
or purpose, this Sublease and the term and estate hereby granted shall terminate
as of the date of vesting of title on such taking (herein called "Date of the
Taking") as if such date were the Expiration Date.
13.02 Except as expressly provided in this 13.02, Sublessor shall be
entitled to receive the entire award or payment in connection with any taking
without reduction therefrom for any estate vested in Subtenant by this Sublease
or any value attributable to the unexpired portion of the Term, and Subtenant
shall receive no part of such award except as hereinafter expressly provided.
Subtenant hereby expressly assigns to Sublessor all of its right, title and
interest in and to every such award or payment and waives any right to the value
of the unexpired portion of the Term. Nothing contained herein shall be deemed
to prevent Subtenant from making a separate claim in any condemnation proceeding
for the then value of Subtenant's personal property which has been taken, and
moving expenses incurred as a result thereof, provided such claim does not
reduce the amount of the award payable to Sublessor.
SECTION 14. SUBLESSOR'S AND SUBTENANT'S PROPERTY; END OF TERM
- --------------------------------------------------------------
14.01 (i) All fixtures, equipment, materials, additions, improvements,
appurtenances and other property attached to, or built into the Subleased
Premises, whether Sublessor's Work pursuant to Section 8 of this Sublease or
during the Term and whether at the expense of Sublessor or Subtenant, shall be
and remain a part of the Subleased Premises and at the expiration of the Term
shall be deemed the property of the Sublessor and same shall not be removed by
Subtenant, except as expressly provided in 14.01(ii). Notwithstanding the
foregoing, but subject nevertheless to the provisions of Section 8 of this
Sublease, neither Sublessor nor Landlord shall be liable in any manner for
payment or otherwise to any contractor, subcontractor, laborer or supplier in
connection with the purchase or furnishing after the date hereof of any such
materials or equipment or the installation thereof. Neither Sublessor nor
Landlord shall have any obligation to pay any compensation to
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Subtenant by reason of the acquisition of title to such materials and equipment
by the Sublessor pursuant to the provisions of this Section 14.
(ii) Upon written notice to Subtenant given prior to the
Expiration Date or within 10 days after any earlier expiration of the Term,
Sublessor may require Subtenant to remove (and thereupon Subtenant shall remove)
all or part of the fixtures, equipment, materials, improvements, appurtenances
and other property described in the first sentence of 14.01(i) other than
Sublessor's Work pursuant to Section 8 hereof which Sublessor did not note had
to be removed at the time of Sublessor's approval thereof. In connection with
any such removal, Subtenant shall immediately and at its expense, repair and
restore the Subleased Premises to the condition existing prior to installation
and repair any damage to the Subleased Premises or the Building due to such
removal.
14.02 Notwithstanding anything to the contrary set forth in 14.01 above,
all movable partitions, business and trade fixtures, and office equipment, to
the extent installed in the Subleased Premises by or for the account of
Subtenant without expense to Sublessor and removable without structural damage
to the Building or the Subleased Premises, and all furniture, furnishing and
other articles of movable personal property owned by Subtenant and located in
the Subleased Premises (herein sometimes collectively called "Subtenant's
property" or "property of Subtenant") shall be and shall remain the property of
Subtenant and may be removed by Subtenant at any time during the Term; provided
that if any of Subtenant's property is removed, Subtenant shall repair or pay
the cost of repairing any damage to the Subleased Premises or to the Building
resulting from the installation and/or removal thereof.
14.03 At or before the Expiration Date (or within 10 days after any
earlier termination of this Sublease) Subtenant, at its expense, shall remove
from the Subleased Premises all of Subtenant's property, and Subtenant shall
repair any damage to the Subleased Premises or the Building resulting from any
installation and/or removal thereof.
14.04 After Subtenant vacates the Subleased premises, any items of
Subtenant's property which shall remain in the Subleased Premises may at the
option of Sublessor, be deemed to have been abandoned, and in such case such
items may be retained by Sublessor as its property or disposed of by Sublessor,
without accountability, in such manner as Sublessor shall determine, at
Subtenant's sole cost and expense.
14.05 The provisions of this Section 14 shall survive the Expiration Date
or earlier termination of the Term.
SECTION 15. ACCESS, NAME OF BUILDING, AND SIGNS
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15.01 Except for the space within the inside surfaces of all exterior
walls bounding the Subleased Premises, hung ceilings, floors, exterior windows
and doors bounding the Subleased Premises, all of the remaining portions of the
Building, including, without limitation, exterior walls, core corridor walls and
doors and any corridor entrance, any space located within or adjacent to the
Subleased Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts,
electric or other utilities, sinks or other Building facilities, and
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the use thereof, as well as access thereto through the Subleased Premises for
the purposes of operation, maintenance and repair, are reserved to Sublessor and
Landlord and persons authorized by Sublessor or Landlord. Sublessor reserves the
right, and Subtenant shall permit Sublessor and persons authorized by Sublessor,
to install, erect, use and maintain pipes, shafts, ducts and conduits in and
through the Subleased Premises.
15.02 Sublessor and persons authorized by Sublessor shall have the right
to enter and/or pass through the Subleased Premises at any time or times upon
such notice as is reasonable under the circumstances (it being agreed that one
(1) Business Day's notice shall always be deemed to be reasonable notice and
that no notice need be given in an emergency) (i) to examine the Subleased
Premises and to show them to Landlord and to actual and prospective purchasers,
mortgagees or lessees of the Building (ii) to make such repairs, alterations,
additions and improvements in or to the Subleased Premises and/or to the
Building or to its facilities and equipment as Sublessor is or persons
authorized by Sublessor are required or reasonably desire to make, and (iii) to
read any utility meter or submeter located therein. Sublessor and any authorized
persons shall be allowed to take all materials into and upon the Subleased
Premises that may be required in connection therewith, without any liability to
Subtenant (except to the extent of Sublessor's gross negligence or willful
misconduct) and without any reduction of Subtenant's covenants and obligations
hereunder.
15.03 During the time period of six (6) months prior to the Expiration
Date, Sublessor and persons authorized by Sublessor may exhibit the Subleased
Premises to prospective tenants in accordance with 15.02 above.
15.04 To the extent Sublessor shall deem necessary or desirable, Sublessor
reserves the right, at any time, without it being deemed a constructive eviction
and without incurring any liability to Subtenant therefor, or affecting or
reducing any of Subtenant's covenants and obligations hereunder, to make or
permit to be made such changes, alterations, additions and improvements in or to
the Land, the Building, and the fixtures and equipment thereof, as well as in or
to the street entrances, doors, halls, passages, lavatories, facilities, parking
lots, walkways, landscaped areas and other public part thereof provided that
Subtenant's access to the Subleased Premises is not materially adversely
affected or impeded by such changes, alterations, additions or improvements.
15.05 Sublessor reserves the right to change the address of the Building
and/or to place signs above the entrances to the Building at any time and from
time to time. Neither this Sublease nor any use by Subtenant shall give
Subtenant any easement or other right in or to the use of any door, parking lot
or any passage or any plaza connecting the Building with any other building or
to any public or private conveniences, and the use of such doors, parking lots,
passages, plazas and conveniences may without notice to Subtenant, be regulated
or discontinued at any time by Sublessor (except if expressly set forth to the
contrary herein).
15.06 If Subtenant shall not be personally present to open and permit an
entry into the Subleased Premises at any
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time when for any reason an entry therein shall be necessary by reason of fire
or other emergency, Sublessor or Landlord or its or their agents may forcibly
enter the same without rendering Sublessor or Landlord or its or their agents
liable therefor and without in any manner affecting the obligations and
covenants of this Sublease.
15.07 (i) In no event shall Subtenant, without Sublessor's prior written
consent in each instance (and Landlord's prior written consent, if required),
place or affix any signs or devices of any kind on the exterior of the Building,
or within or upon the Subleased Premises or the Building such that same are
visible from the outside of the Building or the Subleased Premises. Any such
consents to signs and/or devices shall be of the size, color, design and
location designated and approved by Sublessor (and Landlord if required ) in
writing.
(ii) Any such consented to signs and devices shall be placed or
affixed at Subtenant's sole cost and expense and shall be in conformity with all
applicable laws, codes, permits, ordinances and regulations. Subtenant, at its
sole cost and expense, shall remove such signs and/or devices at the expiration
of the Term (or earlier termination of this Sublease) and shall repair any
damage resulting from the installation, maintenance or removal thereof.
Subtenant shall hold Sublessor and Landlord harmless from any claims or
liability that may arise by virtue of the installation, maintenance or removal
of any such signs and/or devices.
SECTION 16. ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
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16.01 Subtenant shall not voluntarily or involuntarily (a) assign or
otherwise transfer this Sublease or the estate hereby granted, (b) sublet the
Subleased Premises (c) allow the Subleased Premises to be used or occupied by
others, or (d) mortgage, pledge or encumber this Sublease or the Subleased
Premises or any part thereof, without, in each instance, obtaining the prior
written consent of Sublessor, (and if required by the Lease, Landlord) except as
otherwise expressly provided in this Section 16.
The sale, assignment, transfer, pledge or issuance of shares of any
corporation which is the Subtenant hereunder or other occupant of the Subleased
Premises (whether by sub-sublease or assignment of this Sublease) which at one
time or in the aggregate results in a reduction of the holdings of the
shareholders of such corporation (on the date hereof or the date such
corporation first became the Subtenant or occupant of the Subleased Premises, as
appropriate) to less than 51% of the shares in such corporation shall be deemed
an assignment of this Sublease. The transfer, sale, pledge, issuance or
assignment of partnership interests in any partnership which is the Subtenant
hereunder or other occupant of the Subleased Premises (whether by sub-sublease
or assignment of the Sublease) which at one time or in the aggregate results in
a reduction of the holdings of the partners of such partnership (on the date
hereof or the date such partnership first became the Subtenant or occupant of
the Subleased Premises, as appropriate) to less than 51% of the ownership
interests in such partnership shall be deemed an assignment of this Sublease.
16.02 The provisions of Section 16.01 hereof shall not apply to (a) an
assignment to a corporation into or with
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which Subtenant is merged or consolidated or to an entity to which substantially
all of Subtenant's assets are transferred (provided such merger, or
consolidation or transfer of assets is for a good business purpose and not
principally for the purpose of transferring this Sublease or the leasehold
estate created hereby, and provided further, that the resultant corporation or
the assignee, as the case may be, has a net worth at least equal to or in excess
of the net worth of Subtenant immediately prior to such merger, or consolidation
(or transfer) or (b) an assignment to an Affiliated Entity, provided such
assignment is for a good business purpose and not principally for the purpose of
avoiding the application of Section 16.01 of this Sublease. As used in this
Section 16.02, an "Affiliated Entity" means a corporation controlled by,
controlling or under common control with the Subtenant. A corporation, for this
purpose, shall not be deemed controlled by another unless at least fifty-one
(51%) percent of its voting stock is owned both beneficially and of record by
such other.
16.03 Any assignment, subletting or transfer, whether made with
Sublessor's consent as required by Section 16.01 or without Landlord's or
Sublessor's consent pursuant to Section 16.02, shall be made only if, and shall
not be effective unless and until all of the following shall have been fulfilled
at least thirty (30) days prior to the effective date of the contemplated
assignment or subletting:
(a) Subtenant shall furnish Sublessor with the name and business
address of the proposed subtenant or assignee, information with respect to the
nature and character of the proposed subtenant's or assignee's business or
activities, and current financial information with respect to net worth, credit
and financial responsibility of the proposed subtenant or assignee;
(b) In the case of an assignment, Subtenant shall deliver to
Sublessor an executed counterpart thereof, and all ancillary agreements with the
proposed assignee (including all documents from which the considerations to be
received by Subtenant referred to in Section 16.07 hereof can be ascertained);
(c) In the case of a contemplated subletting, Subtenant shall
deliver to Sublessor, an executed counterpart of the proposed sublease and all
ancillary agreements with the proposed sublessee (including all documents from
which the considerations to be received by Subtenant referred to in Section
16.07 hereof can be ascertained);
(d) In the case of an assignment, the assignee shall execute,
acknowledge and deliver to Sublessor a recordable agreement, in form and
substance reasonably satisfactory to Sublessor, whereby the assignee shall
assume and agree to fulfill the obligations and performance of this Sublease and
the assignment and agree to be personally bound by and upon the covenants,
agreements, terms, provisions and conditions hereof on the part of Subtenant to
be performed or observed and whereby the assignee shall agree that the
provisions of Section 16.01 hereof shall, notwithstanding such an assignment or
transfer, continue to be binding upon it in the future;
(e) Each sublease or assignment referred to in clauses (b) and
(c) of this Section 16.03 shall specifically state that (i) it is subject to all
of the
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terms, covenants, agreements, provisions, and conditions of this Sublease, (ii)
the Subtenant or Assignee, as the case may be, will not have the right to a
further assignment thereof or sublease thereunder, or to allow the Subleased
Premises to be used by others, without the consent of Sublessor (and if required
by the Lease, the Landlord) in each instance, (iii) a consent by Sublessor
thereto shall not be deemed or construed to modify, amend or affect the terms
and provisions of this Sublease, or Subtenants's obligations hereunder, which
shall continue to apply to the Subleased Premises, and the occupants thereof, as
if the sublease or assignment had not been made, (iv) if Subtenant defaults in
the payment of any Fixed or Additional Rent, Sublessor is authorized to collect
any rent due or accruing from any assignee, subtenant or other occupant of the
Subleased Premises and to apply the net amounts collected to the Fixed Rent or
Additional Rent, (v) the receipt by Sublessor of any amounts from an assignee or
subtenant, or other occupant of any part of the Subleased Premises shall not be
deemed or construed as releasing Subtenant from Subtenant's obligations
hereunder or the acceptance of that party as a direct tenant.
16.04 The liability of Subtenant, and the due performance by Subtenant of
the obligations on its part to be performed under this Sublease, shall not be
discharged, released or impaired in any respect by an agreement or stipulation
made by Sublessor or any grantee or assignee of Sublessor, by way of mortgage or
otherwise, extending the time of or modifying any of the obligations contained
in this Sublease, or by any waiver or failure of Sublessor to enforce any of the
obligations on Subtenant's part to be performed under this Sublease, and
Subtenant shall continue to be liable hereunder.
16.05 Sublessor shall not unreasonably withhold or delay its consent to a
subletting of the Subleased Premises for substantially the remainder of the
Term, provided:
(a) The proposed Subtenant is a party whose reputation, financial
net worth, credit and financial responsibility is, considering the
responsibilities involved, reasonably satisfactory to Sublessor.
(b) The nature and character of the proposed Subtenant, its
business or activities and intended use of the Subleased Premises is, in
Sublessee's judgment, in keeping with the standards of the Building and the area
in which the Building is located and does not conflict with the provisions of
Section 2.01 of this Sublease;
(c) No such subletting shall constitute or cause (with or without
notice or lapse of time or otherwise) a default under any mortgage; and
(d) Subtenant shall have complied with all of the provisions of
Section 16.03 and Sublessor shall not have made any of the elections provided
for in Section 16.07.
16.06 Subtenant shall pay to Sublessor, as Additional Rent:
(a) in the case of an assignment, an amount equal to all sums and
other considerations paid to Subtenant by the assignee for or by reason of such
assignment (including, but not limited to, sums paid for the sale of Tenant's
fixtures, leasehold improvements, equipment, furniture, furnishings or other
personal property, less, in
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the case of a sale thereof, the then net unamortized or undepreciated cost
thereof determined on the basis of Subtenant's federal income tax returns); and
(b) in the case of a sublease, any rents, additional charges or
other consideration payable under the sublease to Subtenant (including, but not
limited to, sums paid for the sale or rental of Subtenant's fixtures, leasehold
improvements, equipment, furniture or other personal property, less, in the case
of the sale thereof, the then net unamortized or undepreciated cost thereof
determined on the basis of Subtenant's federal income tax returns, which are in
excess of the Fixed Rent of the Subleased Space that Subtenant is then paying
Sublessor in accordance with this Sublease.
The sums payable under Subdivisions (a) and (b) preceding shall be paid to
Sublessor as and when paid by the subtenant to Subtenant.
Subtenant shall furnish Sublessor with a written statement, semi-annually,
certified by Subtenant, from which the additional rent to which Sublessor may be
entitled by reason of the application of Subdivisions (a) and (b) preceding can
be determined. Subtenant shall keep books of account in accordance with
generally accepted accounting principles consistently applied and supporting
material relating to the matters reflected in Subdivisions (a) and (b)
preceding, and shall make the same available to Sublessor at all reasonable
times for inspection at the Subleased Premises for the purpose of verifying any
statement furnished or to be furnished by Subtenant. Sublessor shall have the
right to delegate this inspection to a duly authorized representative and, in
addition, may make such copies thereof as it reasonably requires, but only for
the purposes enumerated in this Section.
16.07 Notwithstanding anything to the contrary contained in this Sublease,
in the event Subtenant desires to assign or otherwise transfer this Sublease or
sublet the Subleased Premises, Sublessor shall have the right (a) in the case of
an assignment other than to an "Affilated Entity", to cancel this Sublease and
(b) in the case of a subletting other than to an "Affiliated Entity", to
recapture the Subleased Premises by giving Subtenant written notice thereof
within 30 days after Subtenant has fulfilled all its obligations pursuant to
this Section 16 hereof. Such cancellation or recapture as the case may be shall
become effective as of the effective date of the contemplated assignment or
subletting.
SECTION 17 COMPLIANCE WITH LAWS
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17.01 Subtenant, at Subtenant's sole cost and expense, shall in a prompt
and diligent manner and on a timely basis, comply with all present and future
laws, ordinances, orders, codes, permits and regulations of Federal, State,
County and Municipal authorities, and with all directions, pursuant to law, of
all public officers which shall impose any compulsory and enforceable duty upon
Landlord, Sublessor or Subtenant with respect to the Subleased Premises or the
use or occupancy thereof. If a structural change, addition or repair is required
for such compliance, and if such change, addition or repair is not required
because of Landlord's or Sublessor's failure to comply with then applicable laws
at time of construction, Subtenant shall promptly modify its use
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to obviate the requirement of such change or inform Sublessor thereof (in which
event Sublessor may, on Subtenant's behalf make such change, addition or
repair). In such later event, Subtenant shall pay to Sublessor, as Additional
Rent, in equal monthly installments from the date of the completion of such
structural change, addition or repair and until the expiration of the Term, a
sum equal to either: (i) that fraction of the cost of such change, addition or
repair of which the numerator is the number of months from the date of
completion of such change, addition or repair until the expiration of the Term,
and the denominator is the number of months of the "useful life" based on the
applicable guideline issued by U.S. Internal Revenue Service for straight-line
(unaccelerated) depreciation of such change, addition or repair for tax purposes
(if the "useful life" is not less than the time then remaining in the Term); or
(ii) the full cost of such change, addition or repair if the "useful life" is
less than the time then remaining in the Term.
17.02 Except as otherwise provided in this Sublease, Subtenant agrees to
fully comply with, and not to take action or fail to take any action which shall
or may result in a violation of the Comprehensive Environmental Response
Compensation Liability Act or the Resource Conservation and Recovery Act or any
other Federal, State or local statute, regulation, law or ordinance generally
considered as having environmental implication or significance, or any statute
which shall be a successor to, or in lieu of, any of the foregoing. In the event
any lien shall be asserted against Landlord, Sublessor, any property of Landlord
or Sublessor or the Subleased Premises in connection with any such statute and
as a result of any such act or omission by Subtenant, Subtenant covenants and
agrees to immediately discharged, so that such lien, or cause the same to be
discharges, so that such lien shall no longer be asserted against Landlord or
Sublessor or the Subleased Premises or against any other property of Landlord or
Sublessor, as the case may be. Sublessor represents that there shall be no
condition existing on the Subleased Premises upon the Commencement Date nor
shall Sublessor cause any condition thereafter which may result in a violation
of the Comprehensive Environmental Response compensation Liability Act or the
Resource Conservation and Recovery Act or any other Federal, State or local
statute, regulation, law or ordinance generally considered as having
environmental implication or significance, or any statute which shall be a
successor to, or in lieu of any of the foregoing.
17.03 Subtenant shall give prompt written notice to Sublessor of any
notice it receives of the violation of any law with respect to the Subleased
Premises.
SECTION 18 SUBORDINATION
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18.01 (i) This Sublease is and shall remain subject and subordinate to (a)
the Lease and the terms and provisions thereof, (b) all matters to which the
Lease is now or hereafter subordinate or subject to and (c) all mortgages which
may now or hereunder affect all or any portion of the Building and to all
renewals, extensions, supplements, amendments, modifications, consolidations and
replacements thereof or thereto, substitutions therefor, and advances made
thereunder [(a), (b) and (c) are collectively referred to herein as "Superior
Instruments"]. This Section 18.01 shall be self-operative, and no further
instrument of subordination shall be required. In confirmation of such
subordination,
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Subtenant shall, upon Sublessor's request, promptly execute, acknowledge and
deliver any instrument that any holder of a Superior Instrument may request to
confirm such subordination. Sublessor, however, shall endeavor to obtain from
any current or future mortgagees its standard nondisturdance and attornment
agreement.
18.02 Without limiting any of the provisions of this Sublease, in the
event that the holder of a Superior Instrument or its assigns shall succeed to
the interest of Sublessor, then, at such holder's (or its assigns') option, this
Sublease shall nevertheless continue in full force and effect and Subtenant
shall and does hereby agree to attorn to such holder or its assigns, and to
recognize such holder, or its assigns as Sublessor, except that such holder as
successor Sublessor shall not be (i) bound by any payments of rent, for more
than one (1) month in advance, (ii) required to perform any portion of the
Sublessor's Work, (iii) responsible for any monies owed to Subtenant by
Sublessor, or (iv) subject to any credits, offsets, claims or counterclaims
which Subtenant may have against Sublessor.
18.03 Subtenant shall, at any time upon not less than ten (10) days prior
notice by Sublessor, execute, acknowledge and deliver to Sublessor a statement
in writing certifying that this Sublease is in full force and effect and
unmodified (or, if modified, stating the modifications), and the dates to which
Fixed Rent, Additional Rent and other charges have been paid in advance, if any,
and stating whether or not, to the best knowledge of Subtenant, Sublessor is in
default under this Sublease and, if so, specifying each such default, and any
other statement reasonably requested by Sublessor or the holder of any Superior
Instrument, it being intended that any such statement delivered pursuant hereto
may be relied upon by any prospective purchaser of the Land and/or the Building
or any interest or estate therein, any mortgagee or prospective mortgagee
thereof or any prospective assignee of any such mortgage. Subtenant agrees at
any time to enter into reasonable modifications of this Sublease requested by
the holder of any Superior Instrument; provided, however, that no such
modifications shall (i) increase the rent reserved herein, (ii) shorten the
Term, (iii) adversely affect Subtenant's ability to use or occupy all of the
Subleased Premises or (iv) diminish Subtenant's rights hereunder.
18.04 Subtenant shall promptly furnish to Sublessor all financial
information and other information concerning Subtenant (if available) reasonably
required by any institutional mortgagee to whom Sublessor or Landlord applies
for mortgage financing on the Building, and Subtenant shall execute any
documents reasonably required by such mortgagee. Subtenant shall be under no
obligation to furnish such information unless Sublessor and any such
institutional mortgagee shall agree in advance in writing to treat all such
information received from Subtenant as confidential, and not to disclose or use
the same except for the sole purpose of mortgage financing on the Building.
18.05 If required by the provisions of any Superior Instrument of all or
any portion of the Building, and provided the name and address of any holder of
each such mortgage have been provided to Subtenant, Sublessor and Subtenant,
without first obtaining the written consent of the holder of any such mortgage,
shall not enter into any agreement, the effect of which would be to: (i) modify,
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cancel, terminate or surrender this Sublease except as provided in this
Sublease; (ii) grant any concessions in respect thereof; (iii) reduce the Fixed
Rent or Additional Rent or require the prepayment of any Fixed Rent or
Additional Rent in advance of the due date thereof; (iv) create any offsets or
claims against Fixed Rent or Additional Rent; or (v) assign in whole or in part
any of the Fixed Rents or Additional Rents therefrom or Subtenant's interest in
this Sublease or sublet the whole in any portion of the Subleased Premises,
except as provided in this Sublease.
18.06 Subtenant shall not be entitled to assert against the holder of any
Superior Instrument (in its capacity as successor Sublessor on account of
foreclosure or acceptance of a deed in lieu of foreclosure, should such holder,
ever assume such capacity) any claim or liability based on events which have
occurred or shall occur before such holder becomes the Sublessor hereunder, if
ever.
18.07 In the event of any act or omission by Sublessor which would give
Subtenant the right to terminate this Sublease or to claim a partial or total
eviction, Subtenant shall not exercise such right until (i) it shall have given
written notice, by certified or registered mail, of such act or omission to the
holder of any Superior Instrument whose name and address shall have been
furnished to Subtenant in writing, at the last address so furnished, and (ii)
fifteen (15) days shall have elapsed following the giving of such notice, and
then only if following the giving of such notice, Sublessor or said holder shall
not, with reasonable diligence, have commenced and continued to remedy such act
or omission or to cause the same to be remedied.
SECTION 19 PROPERTY LOSS, DAMAGE, REIMBURSEMENT
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Except as otherwise provided in this Sublease, neither Sublessor nor its
employees, officers, directors, contractors, invitees, licensees or agents shall
be liable for any loss of or damage to any property belonging to Subtenant or
any other occupant of the Subleased Premises, whether such loss or damage is
occasioned by fire, casualty, theft or otherwise. Neither Sublessor nor its
employees, officers, directors, contractors, invitees, licensees or agents
shall be liable for any injury or damage to persons, property, or business
resulting from fire, explosion, falling plaster, steam, gas, electricity,
electrical disturbance, 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 subsurface or from any other place or by dampness or by any other
cause of whatsoever nature, unless caused by or due to the gross negligence or
willful misconduct of Sublessor, its employees, officers, directors,
contractors, invitees, licensees or agents, nor shall Sublessor be liable for
any such damage caused by other tenants, subtenants or persons in the Building
or caused by operations in construction of any private, public or quasi-public
work. Subtenant shall reimburse and compensate Sublessor, as Additional Rent,
for all damages or fines sustained or incurred by Sublessor due to
non-performance or non-compliance with or breach or failure to observe any term,
covenant or condition of this Sublease upon Subtenant's part to be kept,
observed, performed and complied with.
SECTION 20 CERTIFICATE OF OCCUPANCY
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Subtenant will not at any time use or occupy (or allow
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the use or occupancy of) the Subleased Premises in a manner which is or is
likely to be in violation of the certificate of occupancy issued for the
Subleased Premises.
SECTION 21 DEFAULT
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21.01 Upon the occurrence at any time prior to or during the Term, of
any one or more of the following events ("Events of Default"):
(i) If Subtenant shall default in the payment when due of any
installment of the Fixed Rent or Additional Rent and such default shall continue
for a period of ten (10) days after notice thereof; or (ii) if Subtenant shall
default in the observance or performance of any term, covenant or condition of
this Sublease on Subtenant's part to be observed or performed (other than the
covenants for the payment of Fixed Rent and Additional Rent) and Subtenant shall
fail to remedy such default within thirty (30) days after notice thereof by
Sublessor, provided, that if such default is of such a nature that it cannot be
completely remedied within said period of thirty (30) days, if Subtenant shall
not commence within said period of thirty (30) days, or shall not thereafter
diligently prosecute to completion, all steps necessary to remedy such default
prior to (a) a reasonable period of time, (b) the imposition of any penalty or
other liability by any governmental authority, or (c) said event constituting a
default under a Superior Instrument; or (iii) if Subtenant shall file a
voluntary petition in a bankruptcy or insolvency, or shall be adjudicated a
bankrupt or become insolvent, or shall file any petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under the present or any future Federal bankruptcy act or any
other present or future applicable Federal, State or other statute or law, or
shall make an assignment for the benefit of creditors or shall seek or consent
to or acquiescence in the appointment of any trustee, receiver or liquidator of
Subtenant or of all or a portion of the assets of Subtenant; or (iv) if
Subtenant's interest in this Sublease shall devolve upon or pass to any person,
whether by operation of law or otherwise, in violation of the provisions of this
Sublease; then, Sublessor, at any time thereafter, at Sublessor's option, may
give Subtenant a three (3) day notice of termination of this Sublease and, in
the event such notice is given, this Sublease and the Term shall come to an end
and expire (whether or not the Term shall have commenced) upon the expiration of
said three (3) days with the same effect as if the date of expiration of said
three (3) days were the Expiration Date, but Subtenant shall remain liable for
damages as provided in Section 23 of this Sublease.
SECTION 22 REMEDIES
- --------------------
22.01 In addition to all of the remedies available to Sublessor under
Section 21, during the continuance of an Event of Default, Sublessor may, with
or without terminating this Sublease pursuant to Section 21, exercise one or
more of the following remedies:
(i) Sublessor and its agents and servants may immediately, or at
any time after such default or after the date upon which this Sublease and the
Term shall expire and come to an end, re-enter the Subleased Premises or any
part thereof, without notice, either by summary proceedings or by any other
applicable action or proceedings or otherwise as
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permitted by law, and may repossess the Subleased Premises and dispossess
Subtenant and any other occupants from the Subleased Premises and remove any and
all of their property and effects from the Subleased Premises; and
(ii) Sublessor, at Sublessor's option, may relet the whole or any
part or parts of the Subleased Premises from time to time, either in the name of
Sublessor or otherwise, to such party or parties, for such term or terms ending
before, on or after the Expiration Date, at such rental or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Sublessor, in its discretion, may determine. Sublessor shall have no obligation
to relet the Subleased premises or any part thereof and shall in no event be
liable for refusal or failure to relet the Subleased Premises or any part
thereof, or, in the event of any such reletting, for refusal or failure to
collect any rent due upon any such reletting, and no such refusal or failure
shall operate to relieve Subtenant of any liability under this Sublease or
otherwise to affect any such liability. Sublessor, at Sublessor's option, may
make such repairs, replacements, alterations, additions, improvements,
decorations and other physical changes in and to the Subleased Premises as
Sublessor, in its discretion, deems advisable or necessary in connection with
any such reletting or proposed reletting, without relieving Subtenant of any
liability under this Sublease or otherwise affecting any such liability.
22.02 In the event a breach or threatened breach by Subtenant, or by any
persons claiming through or under Subtenant, of any term, covenant or condition
of this Sublease on such party's part to be observed or performed, Sublessor
shall have the right to enjoin such breach and the right to invoke any other
remedy allowed by law or in equity as if re-entry, summary proceedings and other
special remedies were not provided in this Sublease for such breach.
The right to invoke the remedies hereinbefore set forth are cumulative and shall
not preclude Sublessor from invoking any other remedy allowed at law or in
equity.
22.03 If Subtenant shall default in the payment when due of any
installment of Fixed Rent or Additional Rent for more than five (5) days after
the same becomes due and payable, then Subtenant shall pay Sublessor a later
charge of five ($.05) cents for each dollar ($1.00) of such Fixed Rent or
Additional Rent not paid when due. Such late charge shall be without prejudice
to any of Sublessor's rights and remedies hereunder or at law for non-payment of
rent and shall be in addition thereto.
22.04 If Subtenant shall fail to pay (i) any installment of Fixed Rent or
Additional Rent within five (5) days after the same becomes due and payable,
Subtenant shall pay interest thereon at the Rate calculated on the basis of the
actual days elapsed and based on a 360-day year, from the date on which such
installment or payment is due to the date of payment thereof, and such interest
shall deemed to be Additional Rent.
SECTION 23 DAMAGES
- -------------------
23.01 If this Sublease and the Term shall expire and come to an end as
provided in Section 21 or by or under any summary proceedings or any other
action or proceedings, or if
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Sublessor shall re-enter the Subleased Premises as provided in Section 22 or by
or under any summary proceeding or any other action or proceedings, then, in any
of said events:
(i) Subtenant shall pay to Sublessor all Fixed Rent, Additional
Rent and other charges payable under this Sublease by Subtenant to Sublessor to
the date upon which this Sublease and the Term shall have expired and come to an
end or to the date of re-entry upon the Subleased Premises by Sublessor, as the
case may be; and
(ii) Subtenant shall also be liable for and shall pay to Sublessor,
as damages, any deficiency (referred to as "Deficiency") between the Fixed Rent
and Additional Rent reserved in this Sublease for the period which otherwise
would have constituted the unexpired portion of the Term, and the net amount, if
any, of rents collected under any reletting effected pursuant to the provisions
of Section 23.01 for any part of such period (first deducting from the rents
collected under any such reletting all of Sublessor's expenses in connection
with the termination of this Sublease or Sublessor's re-entry upon the Subleased
Premises and such reletting including, but not limited to, all repossession
costs, brokerage commissions, legal expenses, attorneys' fees, alteration costs
and other expenses of preparing the Subleased Premises for such reletting). Any
such Deficiency shall be paid in monthly installments by Subtenant on the days
specified in this Sublease for payment of installments of Fixed Rent. Sublessor
shall be entitled to recover from Subtenant each monthly Deficiency as the same
shall arise, and no suit to collect the amount of the Deficiency for any month
shall prejudice Sublessor's right to collect the Deficiency for any subsequent
month by a similar proceeding; or
(iii) At any time after the Term shall have expired and come to an
end or Sublessor shall have re-entered upon the Subleased Premises, as the case
may be, whether or not Sublessor shall have collected any Deficiency as
aforesaid, Sublessor shall be entitled to recover from Subtenant, and Subtenant
shall pay to Sublessor, on demand, as and for liquidated and agreed final
damages, a sum equal to the amount by which the Fixed Rent and Additional Rent
reserved in this Sublease for the period which otherwise would have constituted
the unexpired portion of the Term exceeds the fair and reasonable rental value
of the Subleased Premises for the same period. If, before presentation of proof
of such, the Subleased Premises, or any part thereof, shall have been relet by
Sublessor in an "at arms length" transaction, for the period which otherwise
would have constituted the unexpired portion of the Term, or any part thereof,
the amount of rent reserved upon such reletting shall be deemed, prima facie, to
be the fair and reasonable rental value for the part of the whole of the
Subleased Premises so relet during the term of the reletting. Subtenant's
payment of liquidated and agreed final damages as hereinabove provided shall
be reduced by the rent actually received by Sublessor upon such reletting.
23.02 Subtenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents shall exceed the rent
reserved in this Sublease. Solely for the purposes of this Section 23, the
terms Fixed Rent as used in Section 23 shall mean the Fixed Rent in effect
immediately prior to the date upon which this Sublease and the Term shall have
expired and come to an end,
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or the date of re-entry upon Subleased Premises by Sublessor, as the case may
be, plus any Additional Rent, pursuant to the provisions of Section 5 payable
for the Lease Year immediately preceding such event (or if less than twelve (12)
months have elasped since the Commencement Date, all of the calendar months
immediately preceding such termination, as annualized to reflect a full calendar
year). Nothing contained in Sections 21 or 22 or this Section 23 shall be deemed
to limit or preclude the recovery by Sublessor from Subtenant of the maximum
amount allowed to be obtained as damages by any statute or rule of law, or of
any sums or damages to which Sublessor may be entitled in addition to the
damages set forth in this Section 23.
SECTION 24 RELEASE; INDEMNITY
- ------------------------------
24.01 Neither Sublessor nor Sublessor's officers, directors, employees,
agents or contractors (disclosed or undisclosed) shall be liable to Subtenant or
Subtenant's officers, directors, employees, agents, contractors, invitees or
licensees or any other occupant of the Subleased Premises except for their gross
negligence or willful misconduct. Subtenant shall, subject to the waiver and
release described in 11.06, save Sublessor, Sublessor's officers, directors,
employees, agents and contractors and the holder of any Superior Instrument, and
their respective officers, directors, employees, agents and contractors harmless
from any loss, cost, liability, claim, damage, expense (including, without
limitation, reimburseable attorneys' fees and disbursements), penalty or fine
incurred in connection with or arising during the Term or during any period
while Subtenant is in occupancy of any part of the Subleased Premises and
resulting from an injury to Subtenant or to any other person or for any damage
to, or loss (by theft or otherwise) of, any of Subtenant's property or of the
property of any other person, irrespective of the cause of such injury, damage
or loss (including the acts or negligence of any tenant, subtenant or other
occupant of the Building, or of any owners or occupants of adjacent or
neighboring property or caused by operations in construction of any private,
public or quasi-public work) unless due to the gross negligence or willful
misconduct of Sublessor, its officers, directors, employees, agents and
contractors, invitees or licensees, provided that even if due to such parties'
gross negligence or willful misconduct, Subtenant waives, to the full extent
permitted by law, any claim for damages resulting from loss of business or
profit.
24.02 Subtenant hereby indemnifies and agrees to hold harmless Sublessor,
its officers, directors, employees, agents and contractors and the holder(s) of
any Superior Instruments(s) from and against any loss, cost, liability, claim,
damage, expense (including, without limitation, attorney's fees and
disbursements), penalty or fine suffered or incurred in connection with or
arising from (i) a default by Subtenant in the performance of any of the terms
of this Sublease on Subtenant's part to be performed, (ii) the use or occupancy
or manner of use or occupancy or maintenance of the Subleased Premises, to the
extent such maintenance is Subtenant's obligation hereunder, and (iii) any acts,
omissions or negligence of Subtenant, or the officers, directors, employees,
agents, invitees, subtenants, assignees or licensees of Subtenant or of any such
person, in or about the Subleased Premises either prior to, during or after the
expiration of the Term.
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24.03 In case any action or proceeding be brought against Sublessor or an
employee or agent of Sublessor by reason of any of the foregoing, Subtenant,
upon notice from Sublessor, shall defend such action or proceeding by counsel
chosen by Subtenant who shall be satisfactory to Sublessor. Subtenant or its
counsel shall keep Sublessor fully apprised at all times of the status of such
defense and shall not settle same without the written consent of Sublessor.
SECTION 25 NO WAIVER
- --------------------
No act or thing done by Sublessor or Sublessor's employees, directors,
officers, agents, guests or invitees during the Term shall be deemed an
acceptance of a surrender of the Subleased Premises, and no agreement to accept
such surrender shall be valid unless in writing signed by Sublessor. No employee
of Sublessor or of Sublessor's agents shall have any power to accept the keys to
the Subleased Premises prior to the termination of this Sublease. The delivery
of keys to any agent or employee of Sublessor shall not operate as a termination
of this Sublease or a surrender of the Subleased Premises. In the event of
Subtenant at any time desiring to have Sublessor underlet the Subleased Premises
for Subtenant's account, Sublessor or Sublessor's agents are authorized to
receive said keys for such purposes without releasing Subtenant from any of the
obligations under this Sublease, and Subtenant hereby relieves Sublessor of any
liability for loss of or damage to any of Subtenant's effects in connection with
such subletting. The failure of either party to seek redress for violation of,
or to insist upon the strict performance of, any covenant or condition of this
Sublease, shall not prevent a subsequent act, which would have originally
constituted a violation, from having all the force and effect of an original
violation. The receipt by Sublessor of any Fixed Rent or Additional Rent with
knowledge of the breach of any covenant, term or provision of this Sublease
shall not be deemed a waiver of such breach. No covenant, term or provision of
this Sublease shall be deemed to have been waived by either party unless such
waiver be in writing signed by such party. No payment by Subtenant or receipt by
Sublessor of a lesser amount than the Fixed Rent or Additional Rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated amount then owing, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment be deemed an accord and
satisfaction, and Sublessor may accept such check or payment without prejudice
to Sublessor's right to recover the balance of Fixed Rent or Additional Rent or
to pursue any other remedy in this Sublease or as provided at law. No payment by
Subtenant shall prejudice Subtenant's right to assert any rights thereafter.
SECTION 26 WAIVER OF TRIAL BY JURY; COUNTERCLAIMS
- -------------------------------------------------
To the fullest extent such waiver is permitted by law, Sublessor and
subtenant hereby waive trial by jury in any action, proceeding or counterclaim
brought by Sublessor or Subtenant against the other on any matter whatsoever
arising out of or in any way connected with this Sublease, the relationship of
Sublessor and Subtenant, the use or occupancy of the Subleased Premises by
Subtenant or any person claiming through or under Subtenant, any claim of injury
or damage,and any emergency or other statutory remedy. The provisions of the
foregoing sentence shall survive the expiration or any sooner termination of the
Term. If Sublessor commences any summary proceeding for nonpayment of rent or
otherwise to
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recover possession of the Subleased Premises, Subtenant agrees not to interpose
any counterclaim of any nature or description in any such proceeding, unless the
right to assert such counterclaim would thereby be waived, diminished or
prejudiced.
SECTION 27 INABILITY TO PERFORM
- --------------------------------
If, by reason of strike or other labor dispute, fire or other casualty (or
reasonable delays in adjustment of insurance), accident, order or regulation of
any Federal, State, County or municipal authority, or any other cause beyond
Sublessor's reasonable control, whether or not such other cause shall be similar
in nature to those hereinbefore enumerated, Sublessor is unable to fulfill or is
delayed in fulfilling any of Sublessor's obligations under this Sublease or any
collateral instrument, then for a period of time equal to the time period of
such inability or delay, no such inability or delay shall constitute an actual
or constructive eviction, in whole or in part, or impose any liability upon
Sublessor or its officers, directors, employees, agents, contractors or invitees
by reason of inconvenience or annoyance, or injury to or interruption of the
business or otherwise, nor shall any such delay or inability to perform on the
part of Sublessor in anyway affect this Sublease and the obligation of Subtenant
to pay Fixed Rent and Additional Rent hereunder, and the obligation of Subtenant
to perform all of the other covenants and agreements to be performed by it
pursuant to the Terms hereof.
SECTION 28 SUCCESSORS, ASSIGNS, ETC.
- -------------------------------------
The covenants, conditions and agreements contained in this Sublease shall
bind and inure to the benefit of Sublessor and Subtenant and their respective
and permitted heirs, distributees, executors, administrators, successors and
assigns.
SECTION 29 RULES AND REGULATIONS
- ---------------------------------
Subtenant shall comply with all rules and regulations promulgated by
Sublessor for the orderly operation of the Building and the Land including,
without limitation, those set forth on Schedule A hereof and all replacements,
modifications and additions thereto, so long as such replacements, additions or
modifications were furnished to Subtenant and do not contradict with the express
terms of this Sublease. Nothing contained in this Sublease shall be construed or
impose upon Sublessor any duty or obligation to Subtenant to enforce the Rules
and Regulations or the terms, covenants and conditions in any other lease or
sublease, as against any other tenant, and Sublessor shall not be liable to
Subtenant for violation of the same by any other tenant or its employees, agents
or visitors to Subtenant for violation of the same by any other tenant or its
employees, agents or visitors.
SECTION 30 BROKER
- ------------------
Subtenant acknowledges and represents to Sublessor that no broker except
Sutton & Edwards, Inc. ("Broker") is entitled to a commission or fee in
connection with this Sublease transaction, and that Subtenant and its employees
of management level have not viewed or have been shown Subleased Premises with
any broker who is or may be entitled to a commission or fee in connection with
this Sublease
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transaction other than Broker. Subtenant acknowledges that Sublessor is entering
into this Sublease in reliance upon the foregoing acknowledgement and
representation. Subtenant hereby indemnifies and agrees to hold Sublessor, its
officers, directors, employees, agents and contractors harmless from and against
any and all loss, cost, liability, damage, expense (including, without
limitation, attorneys' fees and disbursements), penalty or fine suffered as a
result of breach of the foregoing representations. Subtenant agrees to cooperate
with Sublessor and to provide testimony in any action or proceeding brought
against Sublessor based upon a claim by a broker for a commission or fee in
connection with this Sublease transaction. Sublessor agrees to pay the
commission earned by Broker pursuant to a separate agreement.
SECTION 31 CAPTIONS
- --------------------
The captions throughout and the index at the beginning of this Sublease are
included only as a matter of convenience and for reference, and in no way
define, limit or describe the scope of this Sublease nor the intent of any
provisions thereof.
SECTION 32 RECOVERY FROM SUBLESSOR, SUBLESSOR'S CONSENT
- --------------------------------------------------------
32.01 Anything contained in this Sublease to the contrary notwithstanding,
Subtenant agrees to look solely to the estate and property of Sublessor in the
Building for the satisfaction of Subtenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Sublessor
in the event of any default or breach by Sublessor with respect to any of the
terms, covenants and/or conditions of this Sublease to be observed and/or
performed by Sublessor, subject, however, to the prior rights of the holder of
any Superior Instrument; and except as provided above no other property or
assets of Sublessor or its shareholders, officers, directors, or employees,
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Subtenant's remedies.
32.02 With respect to any provision of this Sublease which provides for
Sublessor's approval and/or consent, Subtenant, in no event, shall be entitled
to make, nor shall Subtenant make any claim, and Subtenant hereby waives any
claim, for money damages, nor shall Subtenant claim any money damages by way of
set-off, counterclaim or defense, based upon any claim or assertion by Subtenant
that Sublessor has unreasonably withheld or unreasonably delayed any such
consent or approval; Subtenant's only remedy in such event being an action for
injunction or specific performance.
SECTION 33 ENTIRE AGREEMENT
- ----------------------------
This Sublease contains the entire agreement between the parties with
respect to the subleasing of the Subleased Premises and all prior negotiations
and agreements are merged herein. Neither Sublessor nor Sublessor's agent or
representative has made any representation, statement, or promise upon which
Subtenant has relied regarding any matter or thing relating to the Subleased
Premises or any other matter whatsoever, except as is expressly set forth in
this Sublease (including, without limitation, any statement, representation or
promise as to the fitness of the Subleased Premises for any particular use, the
services to be rendered to the Subleased Premises or the prospective amount of
any
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item of Additional Rent). No oral or written statement, representation or
promise whatsoever with respect to the foregoing or any other matter made by
Sublessor, its agents or any broker, whether contained in an affidavit,
information circular, or otherwise, shall be binding the Sublessor unless
expressly set forth in this Sublease or in a separate writing delivered in
connection with this Sublease or subsequent thereto. This Sublease may not be
orally changed, modified or discharged, in whole or in part, and no executory
agreement shall be effective to change, modify or discharge, in whole or in
part, this Sublease or any obligations under this Sublease, unless such
agreement is set forth in a written instrument executed by the party against
whom enforcement of the change, modification or discharge is sought.
SECTION 34 FEES AND EXPENSES
- ------------------------------
If Subtenant shall default in the performance of any covenant on
Subtenant's part to be performed, Sublessor may at any time during the
continuance of an Event of Default, perform the same for the account of
Subtenant and Subtenant shall pay the cost thereof as Additional Rent. If
Sublessor at any time is compelled to pay or elects to pay any sum of money or
do any act which will require the payment of any sum of money, by reason of the
failure of Subtenant to comply with any provision of this Sublease, or, if
Sublessor is compelled to or does incur any expense (including, without
limitation, attorneys' fees and disbursements, and the cost of instituting
prosecuting and/or defending any action or proceedings instituted by reason of
any continuing Event of Default of Subtenant hereunder), the sum or sums so paid
by Sublessor with all interest, costs and damages, shall be deemed to be
Additional Rent hereunder.
SECTION 35 SURVIVAL
- --------------------
The terms, covenants and conditions of this Sublease applicable to
Subtenant or Sublessor shall survive the expiration or earlier termination of
the Sublease, and if any credit or setoff shall not have been fully utilized,
Sublessor shall pay such amount immediately following such expiration or
termination.
SECTION 36 APPLICATION LAW
- ---------------------------
This Sublease shall be construed and enforced in accordance with the laws
of the State of New York and any action or court proceeding by Subtenant
hereunder shall be brought and maintained only within the County of Suffolk,
State of New York.
SECTION 37 HOLDOVER
- --------------------
In the event Subtenant remains in possession of the Subleased Premises
after the expiration of the Term or earlier termination of this Sublease,
Subtenant, at the option of Sublessor, shall be deemed to be occupying the
Subleased Premises as a tenant from month to month (subject to Sublessor's right
to terminate such tenancy without notice), at a monthly rental equal to two
times the Fixed Rent and Additional Rent payable during the preceding twelve
(12) month period of the Term for the first three months following the
expiration of the Term or earlier termination of this Sublease, and at a monthly
rental equal to two and one-half (2 1/2) times the Fixed Rent and Additional
Rent
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payable during the preceding twelve (12) month period for the fourth month
following the expiration of the Term or earlier termination of this Sublease and
thereafter, subject to all of the other terms of this Sublease.
SECTION 38 CONSENT TO JURISDICTION
- -----------------------------------
Subtenant hereby (a) irrevocably consents and submits to the jurisdiction
of any Federal, State, County or Municipal Court sitting in the State of New
York in respect to any action or proceeding brought therein by Sublessor against
Subtenant concerning any matters arising out of or in any way relating to this
Sublease; (b) irrevocably waives personal service of any summons and complaint
and consents to the service upon it of process in any such action or proceeding
by the mailing of such process by registered mail, return receipt requested, to
Subtenant at the Subleased Premises and hereby agrees that such service shall be
deemed sufficient; (c) irrevocably waives all objections as to venue and any and
all rights it may have to seek a change of venue with respect to any such act or
proceeding; (d) agrees that the laws of the State of New York shall govern in
any such action or proceeding and waives any defense to any action or proceeding
granted by the laws of any other country or jurisdiction unless such defense is
also allowed by the laws of the State of New York; and (f) agrees that any final
judgment rendered against it in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the judgment
or in any manner provided by law and expressly consent to the affirmation of the
validity of any such judgment by the court of such other jurisdiction so as to
permit execution thereon. Subtenant further agrees that any action or proceeding
by Subtenant against Sublessor in respect to any matters arising out of or in
any way relating to this Sublease shall be brought only in the State of New
York, County of Suffolk. In furtherance of the foregoing, Subtenant hereby
agrees that its address for notices given by Sublessor and service of process
under this Sublease shall be the Subleased Premises.
SECTION 39 SURRENDER
- ---------------------
On the expiration or other termination of this Sublease, Subtenant shall
quit and surrender the Subleased Premises to Sublessor vacant and in good and
broom clean condition (ordinary wear and tear excepted) in accordance with all
the applicable terms and provisions of this Sublease, and Subtenant shall, at
its sole costs and expense, cause all property permitted or required to be
removed by Subtenant to be removed.
SECTION 40 NOTICE OF ACCIDENTS
- -------------------------------
Subtenant shall give Sublessor notice of any fire, casualty or accident in
or about the Subleased Premises or of defects therein or in any fixtures or
equipment, promptly after Subtenant becomes aware thereof.
SECTION 41 EXTENSION OPTION
- ----------------------------
41.01 Subtenant shall have the option to extend the Original Term of this
Sublease for one (1) period of two (2) years upon the terms and conditions in
this Section 41. Subtenant may only exercise its option to extend if:
(i) at the time of the exercise of such option and the commencement
of any extension term, an uncured Event
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of Default shall not exist; and
(ii) at the time of the exercise of such option and the
commencement of any such extension term, the Subtenant named herein shall be in
actual occupancy of all of the Subleased Premises.
41.02 (i) All of the terms, provisions, covenants and conditions of this
Sublease shall apply during the extension term, expect that (1) there will be no
further privilege of extension beyond the period referred to above, (2) the word
"Expiration Date" shall mean (in addition to the meaning set forth herein) the
last day of such extension term, (3) during the extension term the Fixed Rent
payable by Subtenant to Sublessor shall be the fair market rental value of such
leasehold as mutually agreed by the Sublessor and Subtenant, or if Sublessor and
Subtenant shall fail to reach agreement within ninety (90) days after Sublessor
receives written notice from Subtenant of Subtenant's election to exercise its
option as provided in this Section 41, the Fixed Rent shall be the fair market
rental value of the Subleased Premises determined in accordance with Section
41.03, and (4) during the extension term there will be no refurbishing allowance
and Section 8 of this Sublease shall be deleted.
(ii) The fair market rental value of the Subleased Premises shall be
based upon the fair and reasonable annual market rental value of the Subleased
Premises as of the first day of the new term, taking into account the then
current rentals of comparable space in comparable buildings in the general area
of the Building, except that consideration shall also be given to any special
features of the Building and its operation such as floor sizes, hours of
operation, and other Building services. In addition, there shall be taken into
account, on an "as is" basis, all the improvements and installations in the
Subleased Premises either installed by Sublessor or installed by Subtenant and
paid for in whole or in part by Sublessor (or any replacements of such
improvements by Subtenant regardless of who pays for them), but not any other
improvements and installations paid for by Subtenant.
41.03 Any dispute with respect to the fair market value of Subleased
Premises shall be arbitrated in Suffolk County, New York, as follows: Sublessor
and Subtenant shall each appoint a member of the American Institute of Real
Estate Appraisers of the American Society of Appraisers or the Association of
Independent Fee Appraisers having at least ten (10) years appraisal experience
in Suffolk County, New York, and vicinity, to determine the fair market rental
value of the Subleased Premises, and the unanimous decision of such appraisers
shall be final and binding upon Sublessor and Subtenant. If the two appraisers
shall be unable to reach unanimous agreement within fifteen (15) days after both
appraisers have been appointed, then the two shall appoint a third appraiser who
shall have like qualifications, and the three appraisers shall determine the
matter submitted to them; provided, however, that if the two appraisers are
unable to agree upon the appointment of a third appraiser within seven (7) days
after they become obligated so to do, the parties shall apply to the President
of the American Institute of Real Estate Appraisers for such appointment or in
the case of failure to act for any reason, to the American Arbitration
Association. A decision of a majority of said appraisers shall be final and
binding upon Sublessor and Subtenant. Sublessor and Subtenant shall each pay the
fees
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and expenses of the appraiser appointed by and for such party, and all other
necessary expenses and costs to satisfy the procedure outlined in this Section
41, including, without limitation, the fees and expenses of the third appraiser,
shall be borne equally by Sublessor and Subtenant. If either party shall fail to
appoint the second appraiser within fifteen (15) days after the other party
shall have appointed the first appraiser and given notice of such appointment to
the first party, the first appraiser shall alone determine such fair market
rental value.
41.04 Subtenant shall, if at all, exercise its right to any such extension
by notifying Sublessor in writing of Subtenant's election to exercise such
option not later than 270 days prior to the Expiration Date. Time shall be of
the essence in connection with said election and notice thereof and in the event
Subtenant fails to so do as provided above, Subtenant's option shall
conclusively be deemed abandoned. Upon the giving of such notice, this Sublease
shall be deemed extended for the specified period, subject to the provisions of
this Section 41, without execution of any further instrument, except that
Sublessor and Subtenant shall execute an Amendment to this Sublease setting
forth the Fixed Rent and length of such extension term.
SECTION 42 QUIET ENJOYMENT
- ---------------------------
Sublessor covenants and agrees with Subtenant that, upon Subtenant paying
the Fixed Rent, Additional rent and all other sums required to be paid
hereunder, and observing and performing all the terms, covenants and conditions
on Subtenant's part to be observed and performed hereunder, Subtenant may
peaceably and quietly enjoy the Subleased Premises, subject, nevertheless, to
the terms and conditions of this Sublease, the Lease and any Superior
Instruments.
SECTION 43 NOTICES
- -------------------
All notices and other communications required hereunder or given in
connection herewith, shall be in writing and sent by certified or registered
mail, return receipt requested, or by delivery against receipt, as follows:
If to Sublessor:
Nikon Inc.
1300 Walt Whitman Road
Melville, New York 11747-3064
Attention: Legal Department
If to Subtenant:
Assessment Systems Inc.
1300 Walt Whitman Road
Melville, New York 11747-3064
Attention: President
Each party hereto may specify a new address for notices and copies of
notices by notice to the other party hereto. Except for notice specifying a new
address which shall be deemed given only upon actual receipt, notices shall be
deemed given when mailed.
SECTION 44 SECURITY
- --------------------
Subtenant has deposited with Sublessor a check in the sum of $26,008.00,
the proceeds of which shall be held as
-36-
<PAGE>
security in an interest bearing account for the faithful performance and
observance by Subtenant of the terms, provisions and conditions of this
Sublease. It is agreed that during a continuing Event of Default Sublessor may
use, apply or retain the whole or any part of the security including interest so
deposited to the extent required for the payment of any Fixed Rent or Additional
Rent or any other sum as to which Subtenant is in default or for any sum which
Sublessor may expend or may be required to expend by reason of Subtenant's
default in respect of any of the terms, covenants and conditions of this
Sublease, (including, without limitation, any damages or deficiency incurred in
the reletting of the Subleased Premises whether such damages or deficiency
accrued before or after summary proceedings or other re-entry by Sublessor). In
the event of any such use, application or retention, Subtenant, on demand by
Sublessor, shall deposit with Sublessor any amounts so used, applied or
retained, to be held as security in accordance with all the terms hereof. In the
event that Subtenant shall fully and faithfully comply with all of the terms,
provisions, covenants and conditions of this Sublease, the security including
interest (to the extent not used, applied or retained in accordance herewith)
shall be returned to Subtenant after the Expiration Date and after delivery of
entire possession of the Subleased Premises to Sublessor (in the condition
required hereby). Notwithstanding anything to the contrary contained herein, one
(1%) percent of the security shall be retained per annum by Sublessor as and for
administrative purposes.
SECTION 45 PARKING
- ------------------
Subtenant and its employees, customers, guests, and invitees shall have the
non-exclusive right, in common with Sublessor and all others to whom Sublessor
and Landlord have granted or may hereafter grant rights (collectively Permitted
Users), to use those areas on the Land which are striped and designated as
parking spaces for parking of their passenger vehicles. Notwithstanding anything
in this Sublease to the contrary, Subtenant agrees that it will not use or
permit or suffer the use by its employees, customers, guests and invitees of (i)
areas within the Land not designated or striped as parking spaces for parking;
(ii) parking spaces for other than passenger vehicles; and (iii) parking spaces
reserved for Sublessor, its employees, customers, guests and invitees or other
tenants of the Building.
SECTION 46 ADDITIONAL SPACE
- ---------------------------
In the event the space presently occupied by Fahnestock & Co., Inc. on the
first floor of the Building ("Additional Space") becomes vacant or there is an
immediate prospect of it becoming vacant before July 1, 1998, and Sublessor
decides not to use any of the Additional Space for its own use, then in such
event, Sublessor shall give notice thereof to Subtenant. Within fifteen (15)
days after Sublessor gives such notice to Subtenant, Subtenant shall have the
option to add all of the Additional Space to the Subleased Premises for a term
expiring on the Expiration Date of the Original Term by notifying Sublessor in
writing of its decision to exercise its option within said fifteen (15) day
period. Subtenant may only exercise its option to add the Additional Space if:
(i) at the time of the exercise of such option and the commencement of the term
for the Additional Space, an uncured Event of Default shall not exist; and (ii)
at the time of the exercise of such option and the commencement of the term for
-37-
<PAGE>
the Additional space, the Subtenant named herein shall be in actual occupancy of
all of the Subleased Premises. Time shall be of the essence in connection with
said option and Subtenant's notice of its election to exercise said option, and
in the event Subtenant fails to so do as provided herein, Subtenant's option
shall conclusively be deemed abandoned.
If, pursuant to the provisions of this Section 46, the Additional Space
shall be added to the Subleased Premises, the following shall apply:
(a) All of the terms, provisions, covenants and conditions of this Sublease
shall apply to the Additional Space, except (1) the Fixed Rent payable by
Subtenant to Sublessor for the Additional Space shall be the then current,
market rental value as shall be reasonably determined by Sublessor but in no
event less than the then current rate of Fixed Rent for the Subleased Premises;
and (2) the sums payable by Subtenant pursuant to Section 5 other than Fixed
Rent and Section 44 shall be computed as if the Additional Space were a part of
the Subleased Premises at the Commencent Date of the Original Term; and (3) such
other appropriate adjustments for Additional Rent as may be required as a result
of adding the Additional Space to the Subleased Premises.
IN WITNESS WHEREOF, this Sublease has been duly executed by the parties
hereto as of the day and year set forth above.
NIKON INC.
By: Jack Abrams
----------------------------------
Name: Jack Abrams
Title: Chief Operating Officer
Executive Vice-President
ASSESSMENT SYSTEMS INC,
By: /s/ Bernard Reynolds
-------------------------
Name: Bernard Reynolds
Title: President
-38-
<PAGE>
Exhibit 10.10
==============================================================================
780 THIRD AVENUE ASSOCIATES,
LANDLORD
AND
ASSESSMENT SYSTEMS INCORPORATED TENANT
______________________
LEASE
______________________
DATED January 27, 1984
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
<S> <C> <C>
1 Demise; Premises............................................ 1
2 Term....................................................... 1
3 Rent....................................................... 2
4 Completion and Occupancy of Premises....................... 2
5 Use........................................................ 3
6 Floor Load; Telephone Systems.............................. 4
7 Rent Adjustments........................................... 5
8 Insurance.................................................. 11
9 Compliance with Laws....................................... 14
10 Improvements; Tenant's Property............................ 15
11 Repairs.................................................... 18
12 Heating, Ventilation and Air Conditioning.................. 19
13 Electricity................................................ 20
14 Cleaning and Other Services................................ 21
15 Damage to or Destruction of the Premises.................. 22
16 Eminent Domain............................................. 23
17 Conditions of Limitations.................................. 25
18 Re-entry by Landlord; Remedies............................. 26
19 Curing Tenant's Defaults; Fees and Expenses................ 29
20 Non-liability and Indemnification.......................... 29
21 Surrender.................................................. 3X
22 Assignment, Mortgaging Subletting.......................... 3X
23 Subordination and Attornment............................... 3X
24 Access; Change in Facilities............................... 3X
25 Inability to Perform....................................... 4X
26 Legal Proceedings; Waiver of Counterclaims and Jury Trial.. 4X
27 No Other Waiver............................................ 4X
28 Arbitration................................................ 4X
29 Quiet Enjoyment............................................ 4X
30 Rules and Regulations...................................... 4X
31 Building Name.............................................. XX
32 Shoring; No Dedication; Hoists............................. XX
33 Notice of Accidents........................................ XX
34 Vaults..................................................... XX
35 Brokerage.................................................. XX
36 Security Deposit........................................... XX
37 Window Cleaning............................................ XX
38 Consents................................................... XX
39 Notices.................................................... XX
40 Definitions; Construction of Terms......................... XX
41 Estoppel Certificate; Financial Statements: Memorandum..... XX
42 Relocation of Premises..................................... XX
43 Parties Bound.............................................. XX
44 Miscellaneous.............................................. XX
45 . Fixed Rent................................................. 5X
46 . Modification of Prior Provisions........................... 5X
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
A Land............................................................. A-1
B Floor Plan....................................................... B-1
C Work Letter...................................................... C-1
D Cleaning Standards............................................... D-1
E Rules and Regulations........................................... E-1
F Estoppel Certificate............................................. F-1
</TABLE>
<PAGE>
LEASE, dated , 1983 , between 780 THIRD AVENUE ASSOCIATES, a New York
partnership, having an office c/o Cadillac Fairview Urban Development, Inc., 375
Park Avenue, New York, New York 10152 ("Landlord"), and ASSESSMENT SYSTEMS
INCORPORATED, a New York corporation, having an office at 360 Madison Avenue,
New York, New York ("Tenant").
W I T N E S S E T H:
Landlord and Tenant hereby covenant and agree as follows:
ARTICLE 1
Demise; Premises
SECTION 1.01 Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the premises hereinafter described ("Premises") in the building
("Building") constructed or to be constructed by Landlord on the land ("Land")
located at and known by the street address 780 Third Avenue, New York, New York,
in the Borough of Manhattan, City and State of New York, as more particularly
described in Exhibit A annexed hereto and made a part hereof, for the term
hereinafter stated, for the rents hereinafter reserved, and upon and subject to
the terms of this Lease.
SECTION 1.02 The Premises consist of that portion of the 22nd floor in the
Building, substantially as shown on the floor plan(s) annexed hereto as Exhibit
B and made a part hereof, together with all fixtures and improvements which, at
the commencement of this Lease or at any time during the Term, are attached
thereto or installed therin and together with all appurtenaces to the Premises,
including the right to use, in common with others, the Building Equipment.
SECTION 1.03 The definitions of certain terms used in this Lease are set
forth in Section 40.01 and in various other Sections of this Lease.
ARTICLE 2
Term
SECTION 2.01 A. The Premises are leased for a term ("Term") which shall
commence on a date ("Commencement Date") which shall be the earlier of:
(a) the date the Premises are available for occupancy as determined
pursuant to Article 4, or
(b) the date Tenant or anyone claiming under or through Tenant shall
first occupy any part of the Premises for any purpose other than preparing
the same for Tenant's initial occupancy. See Section 46.01.
SECTION 2.02 When the Commencement Date has been determined by Landlord,
Landlord and Tenant shall, upon the request of either of them, execute a
statement prepared by Landlord setting forth such date. Neither Landlord's
failure to request, nor Tenant's failure to execute such agreement shall affect
Landlord's determination of the Commencement Date.
SECTION 2.03 Tenant expressly waives any right to rescind this Lease under
Section 223-a of the New York Real Property Law or under any present or future
statute of similar import then in force and further expressly waives the right
to recover any damages which may result from Landlord's failure to deliver
possession of the Premises on the Commencement Date. Tenant agrees that the
provisions of this Article and Article 4 are intended to constitute "an express
provision to the contrary" within the meaning of said Section 223-a. See Section
46.02.
*by cross hatching
<PAGE>
ARTICLE 3
RENT
SECTION 3.01 A. Tenant shall pay to Landlord, without notice or demand,
in lawful money of the United States of America, by check drawn on a bank or
trust company which is a member of the New York Clearinghouse Association, at
the office of the Landlord or at such other place as Landlord may designate, the
following:
(a) annual fixed rent (such annual fixed rent being referred to
herein as "Fixed Rent") in accordance with Article 45 hereof.
(b) additional rent ("Additional Rent") consisting of all other sums
of money as shall become due from and be payable by Tenant hereunder (for
default in the payment of which Landlord shall have the same remedies as
for a default in the payment of Fixed Rent).
If Tenant shall fail to pay when due any installment of Fixed Rent or any
payment of Additional Rent for a period of 10 days after such installment or
payment shall have become due, Tenant shall pay interest thereon at the Interest
Rate, from the date when such installment or payment shall have become due to
the date of the payment thereof, and such interest shall be deemed Additional
Rent.
B. There shall be no abatement of, deduction from, counter-claim or setoff
against rent.
SECTION 3.02 Notwithstanding the provisions of Section 3.01, Tenant shall
pay $18,383.33 on account of Fixed Rent upon the execution of this Lease, which
shall be credited on a per diem basis toward the payment of the installment(s)
of Fixed Rent first due and payable hereunder. If by reason of any of the
provisions of this Lease, the Commencement Date for all or any part of the
Premises shall be other than the first day of a month, Fixed Rent therefor for
such month shall be pro-rated on a per diem basis.
SECTION 3.03 Tenant covenants to (a) pay the Fixed Rent and Additional
Rent when due and (b) to observe and perform, and not to suffer or permit any
violation of, Tenant's obligations hereunder.
SECTION 3.04 If any of the rent payable under the terms of this Lease
shall be or become uncollectible, reduced or required to be refunded because of
any Legal Requirement, Tenant shall enter into such agreement(s) and take such
other steps (without additional expense 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 rents 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, to the maximum extent legally permissible, an
amount equal to (i) the rents which would have been paid pursuant to this Lease
but for such legal rent restriction less (ii) the rents and payments in lieu of
rents paid by Tenant during the period such legal restriction was in effect.
ARTICLE 4
COMPLETION AND OCCUPANCY OF THE PREMISES
SECTION 4.01 Landlord agrees to perform work and make installations in the
Premises as set forth in Exhibit C ("Work Letter"). All the terms of Exhibit C
are incorporated herein as if fully set forth at length.
SECTION 4.02 For the purposes of Section 2.01, the Premises shall be
conclusively deemed available for occupancy as soon as the following conditions
have been met:
(a) a certificate or certificates of occupancy (temporary or final)
permitting occupancy of the Premises has or have been issued by the
Department of Buildings of The City of New York or any successor
department;
(b) Landlord's Work with respect to the Premises has been
substantially completed. Landlord's Work shall be deemed substantially
completed notwithstanding the fact that (i) minor or insubstantial details
of construction, mechanical adjustment or decoration remain to be performed
or (ii) portions of Landlord's Work have not been completed because under
good construction
2
<PAGE>
scheduling practice such work should be done after still incompleted
finishing or other work to be done by or on behalf of Tenant is completed;
See Section 46.03
(d) five days' notice of the occurrence of the events described in
subdivisions 4.02(a), (b) and (c) has been given to Tenant.
Section 4.03 Notwithstanding the provisions of Section 4.02, if there is a
delay in the availability for occupancy of the Premises, due to any reason set
forth in Paragraph 6 of Exhibit C, then the Premises shall be deemed available
for occupancy on the date when the Premises would have been available but for
such delay even though no certificate of occupancy has been issued or work to be
done by Landlord has not been commenced or completed, and the additional cost to
Landlord to complete the Premises occasioned by such delay shall be promptly
paid by Tenant to Landlord on demand as Additional Rent. For the purposes of the
preceding sentenced, the expression "additional cost to Landlord" shall mean the
cost above such cost as would have been the aggregate cost to Landlord of
completing the Premises had there been no such delay. Tenant hereby indemnifies
Landlord against liability arising out of any such delay. Landlord, at its
option, may, by notice to Tenant, given within 30 days after the Commencement
Date is determined, extend the Term for the period of days equal to the delay in
the availability for occupancy of the Premises due to the reasons set forth in
Paragraph 6 of Exhibit C plus the number of days necessary in order for the Term
to end on the last day of a month. Nothing contained in this Section shall limit
or prejudice any of the other rights of Landlord under this Lease.
Section 4.04 The taking of occupancy of the whole or any part of the
Premises by Tenant shall be conclusive evidence, as against Tenant, that Tenant
accepts possession of the same and that the Premises so occupied and the
Building of which the same form a part are in good and satisfactory condition at
the time such occupancy was so taken and that the Premises or such portion
thereof were substantially as shown on Exhibit B. Notwithstanding the
foregoing, the taking of occupancy shall not be deemed to be conclusive
evidence, as against Tenant, that Landlord shall have satisfactorily completed
all of Landlord's Work with respect to (a) portions of Landlord's Work not
completed, because under good construction scheduling practice such work should
be done after completion of still incompleted finishing or other work to be done
by or on behalf of Tenant, (b) any details of construction of Landlord's Work,
items of decoration included in Landlord's Work or mechanical adjustment of
items included in Landlord's; Work of which Tenant gives Landlord notice within
30 days after the Commencement Date, or (c) any defects in Landlord's Work which
were not known or reasonably discoverable by Tenant by observation or inspection
within 30 days after the Commencement Date (Latent Defects"); provided that, as
to Latent Defects, (i) Tenant conducts at least one inspection of the Premises
with a qualified construction expert within 2 months from the Commencement date
and, (ii) Tenant gives Landlord notice of the Latent Defects within 2 months
after the Commencement Date, which notice shall be accompanied by the
certification of such construction expert that there are Latent Defects in
Landlord's Work. Landlord shall have the right to enter the Premises to complete
or repair any such unfinished items and Latent Defects and entry by Landlord,
its agents, servants, employees or contractors for such purpose shall be without
liability to Tenant.
ARTICLE 5
USE
SECTION 5.01 Tenant shall use and occupy the Premises for general and
administrative offices in connection with Tenant's business and for no other
purpose. Tenant shall not occupy or suffer or permit the use or occupancy of any
part of the Premises in any manner which in Landlord's reasonable judgment would
adversely affect (a) the proper and economical rendition of any service required
to be furnished to any tenant, (b) the use or enjoyment of any part of the
Building by any other tenant or (c) the appearance, character or reputation of
the Building as a first-class office building with retail stores. The statement
as to the nature of the business to be conducted by Tenant in the Premises shall
not constitute a representation or guaranty by Landlord that such business may
be conducted in the Premises or its lawful or permissible under any
certificate(s) of occupancy issued for the Premises or the Building, or is
otherwise permitted by law.
SECTION 5.02 The use of the Premises for the purposes specified in Section
5.01 shall not include, and Tenant shall not use, or permit the use of, the
Premises or any part thereof for:
*discovered through such inspection
3
<PAGE>
(a) sale of wine, ale, beer or other alcoholic beverages located in
the Premises;
(b) sale at retail of any other products or materials kept in the
Premises, by vending machines (except to employees and guests) or
otherwise, or demonstrations to the public, or as a restaurant or bar, or
for the sale of candy, food, cigarettes, cigars, tobacco, newspapers,
magazines, beverages, or similar items, or for the preparation, dispensing
or consumption of food or beverages in any manner whatsoever;
(c) manufacturing, printing or electronic data processing, except for
the operation of normal business office equipment and machines for Tenant's
own requirements (as distinguished from operation for commercial hire or
for the sale of the products or services to others) provided that such use
shall not exceed that portion of the electrical capabilities allocable to
the Premises and shall be subject to the provisions of Section 6.02;
(d) rendition of medical, dental or other diagnostic or therapeutic
services, except that Tenant shall have the right to employ a resident
nurse for Tenant's employees normally working at the Premises;
(e) a school of any kind or an employment or placement agency;
(f) conduct of a public auction of any kind;
(g) conduct or maintenance of any gambling or gaming activities or
any political activities or any club activities, whether private or public;
(h) the offices or business of a governmental or quasi-governmental
bureau, department or agency, foreign or domestic, including an autonomous
governmental corporation or diplomatic or trade mission; or
(i) any use prohibited by Rule 13 of the Rules and Regulations
attached hereto as Exhibit E.
SECTION 5.03 Tenant shall not use, occupy, suffer or permit the Premises
or any part thereof to be used in any manner, or suffer or permit anything to be
brought into or kept therein, which would, in Landlord's reasonable judgment,
(a) violate any of the provisions of the Superior Lease or the Superior
Mortgage, (b) subject to Section 9.02, violate any Legal Requirement or
Insurance Requirement, (c) make void or voidable any insurance policy then in
force with respect to the Real Property or the Premises, (d) make unobtainable
from reputable insurance companies authorized to do business in New York State
at standard rates any fire insurance with extended coverage or liability,
elevator, boiler or other insurance, (e) cause, or be likely to cause, injury or
damage to the Real Property or any part thereof or to any Building Equipment,
(f) constitute a public or private nuisance, (g) violate any certificate of
occupancy for the Premises or the Building, (h) emit or discharge objectionable
noise, fumes, vapors or odors into the Building or the Building Equipment, (i)
impair or interfere with any of the Building services, including the furnishing
of electrical energy by Landlord or the public utility company servicing the
Building, as the case may be, or the proper and economical cleaning, heating,
ventilating, air conditioning or other servicing of the Building, Building
Equipment or the Premises, (j) impair or interfere with the use of any other
area of the Building by, or occasion discomfort, annoyance or inconvenience to,
Landlord or any other tenant, or (k) cause Tenant to default in any of its other
obligations under this Lease. The provisions of this Section and the application
thereof, shall not be deemed to be limited in any way by the terms of any other
Section of this Article or any of the Rules and Regulations.
SECTION 5.04 If any governmental license or permit, other than a
certificate of occupancy, shall be required for the proper and lawful conduct of
Tenant's business in the Premises or any part thereof and if failure to secure
such license or permit would in any way affect Landlord or the Building, then
Tenant, at its expense, shall duly procure and thereafter maintain such license
or permit and submit the same to Landlord for inspection. Tenant shall at all
times comply with the terms and conditions of each such license and permit, but
in no event shall failure to procure or maintain such license or permit by
Tenant affect Tenant's obligations hereunder.
ARTICLE 6
FLOOR LOAD; TELEPHONE SYSTEMS
SECTION 6.01 Tenant shall not place a load upon any floor that exceeds
either the floor load per square foot that such floor was designed to carry or
which is allowed by any Legal Requirement. Subject to the preceding sentence,
but not in limitation thereof, if Tenant wishes to place any safes or vaults,
computer equipment libraries in the Premises, it may do so at its own expense
after giving notice to Landlord, but Landlord reserves
4
<PAGE>
the right to prescribe their weight and position. Business machines, computers,
word processors and mechanical equipment in the Premises shall be placed and
maintained by Tenant, at Tenant's sole expense, in such manner as shall be
sufficient, in Landlord's reasonable judgment, to prevent vibration, noise,
annoyance and inconvenience to Landlord and the other tenants.
SECTION 6.02 Tenant may, with the consent of Landlord, which shall not be
unreasonably withheld, install, maintain, or operate in the Premises telephone
interconnect systems and data processing, teletype and other business machines
customarily used in offices; provided, however, Tenant shall comply with all of
the terms of this Lease that may be applicable to such installation, maintenance
or operation and shall give Landlord prior notice of the installation thereof.
ARTICLE 7
RENT ADJUSTMENTS
SECTION 7.01 For the purposes of this Lease:
A. The term "Premises Area" shall be deemed to mean 5,500 square feet.
B. The term "Building Area" shall be deemed to mean 473,018 square feet.
C. The term "Tenant's Proportionate Share" shall be deemed to mean
1.163%.
D. "Landlord's Statement" shall mean an instrument containing a
computation of Additional Rent due pursuant to the provisions of this Article 7
furnished by Landlord to Tenant.
E. The term "Base Tax Factor" shall mean the sum of $3,074,617.
F. The term "Taxes" shall mean (i) all real estate taxes, assessments
(special or otherwise), sewer and water rents, rates and charges and any other
governmental levies, impositions or charges of a similar or dissimilar nature,
whether general, special, ordinary, extraordinary, foreseen or unforeseen, which
may be assessed, levied or imposed upon all or any part of the Real Property,
whether or not the same constitute one or more tax lots, and (ii) any expenses
(including attorneys' fees and disbursements and experts' and other witness'
fees) incurred by Landlord in contesting any of the foregoing or the assessed
valuation of all or any part of the Real Property, but "Taxes" shall not include
any interest or penalties incurred by Landlord as a result of Landlord's late
payment of Taxes, except for interest payable in connection with the installment
payments of assessments pursuant to the next sentence. If by law, any assessment
may be divided and paid in annual installments, then, provided the same is not
prohibited under the terms of the Superior Lease or the Superior Mortgage, for
the purposes of this Article (x) such assessment shall be deemed to have been so
divided and to be payable in the maximum number annual installments permitted by
law and (y) there shall be deemed included in Taxes for each Tax Year the annual
installment of such assessment becoming payable during such Tax Year, together
with interest payable during such Tax Year on such annual installment and on all
installments thereafter becoming due as provided by law, all as if such
assessment had been so divided. If at any time after the date hereof the methods
of taxation prevailing at the date hereof shall be altered so that in lieu of or
as an addition to or as a substitute for the whole or any part of the taxes,
assessments, rents, rates, charges, levies or impositions now assessed, levied
or imposed upon all or any part of the Real Property, there shall be assessed,
levied or imposed (a) a tax, assessment, levy, imposition or charge based on the
income or rents received therefrom whether or not wholly or partially as a
capital levy or otherwise, or (b) a tax, assessment, levy, imposition or charge
measured by or based in whole or in part upon all or any part of the Real
Property and imposed upon Landlord, or (c) a license fee measured by the rents,
or (d) any other tax, assessment, levy, imposition, charge or license fee
however described or imposed, then all such taxes, assessments, levies,
impositions, charges or license fees or the part thereof so measured or based
shall be deemed to be Taxes; provided that any tax, assessment, levy, imposition
or charge imposed on income from the Real Property shall be calculated a if the
Real Property is the only asset of Landlord.
G. The term "Tax Year" shall mean the 12 month period commencing July 1 of
each year, or such period of 12 months as may be duly adopted as the fiscal
year for real estate tax purposes in The City of New York.
H. The term "Base Utility Factor" shall be deemed to mean $402,065.30.
I. The term "Escalation Year" shall mean each calendar year which shall
include any part of the Term
5
<PAGE>
J. The term "Base Operating Factor" shall mean $1,773,817.50.
K. The term "Operating Expenses" shall mean all costs and expenses (and
taxes thereon, if any) paid or incurred by Landlord or on behalf of Landlord
with respect to the operation, cleaning, repair, safety, management, security
and maintenance of the Real Property, Building Equipment, sidewalks, curbs,
plazas, and other areas adjacent to the Building, and with respect to the
services provided tenants, including: (i) salaries, wages and bonuses paid to,
and the cost of any hospitalization, medical, surgical, union and general
welfare benefits (including group life insurance), any pension, retirement or
life insurance plan and other benefit or similar expense relating to, employees
of Landlord engaged in the operation, cleaning, repair, safety, management,
security or maintenance of the Real Property and the Building Equipment
sidewalks, curbs, plazas, and other areas adjacent to the Building or in
providing services to tenants,**\(ii) social security, unemployment and other
payroll taxes, the cost of providing disability and worker's compensation
coverage imposed by any Legal Requirements, union contract or otherwise with
respect to said employees; (iii) the cost of electricity, gas, steam, water,
heat, ventilation, air conditioning and other fuel and utilities except to the
extent paid for by any tenant (including Tenant); (iv) the cost of casualty,
rent, liability, fidelity, plate glass and any other insurance; (v) the cost of
repairs, maintenance and painting; (vi) expenditures for capital improvements
and capital equipment which under generally applied real estate practice are
expensed or regarded as deferred expenses and capital expenditures which are
made by reason of Legal Requirements or Insurance Requirements, in each case
such expenditures to be included in Operating Expenses for the Escalation Year
in which such costs are incurred and subsequent Escalation Years, on a straight-
line basis, to the extent that such items are amortized over an appropriate
period but not more than 10 years, with interest calculated at an annual rate
equal to 1% above the prime rate at the time of Landlord's having made said
expenditure; (vii) the cost or rental of all building and cleaning supplies,
tools materials and equipment; (viii) the cost of uniforms, work clothes and dry
cleaning; (ix) window cleaning, concierge, guard, watchman or other security
personnel, service or system, if any; (x) management fees or if no managing
agent is employed by Landlord, a sum in lieu thereof which is not in excess of
then prevailing rates for management fees payable in the Borough of Manhattan
for first-class Third Avenue office buildings; (xi) charges of independent
contractors performing work included within this definition of Operating
Expenses; (xii) telephone and stationery; (xiii) legal, accounting and other
professional fees and disbursements incurred in connection with the ownership
operation, repair and management of the Real Property; (xiv) reasonable
association fees and dues; (xv) decorations; (xvi) depreciation of hand tools
and other movable equipment used in the operation, cleaning, repair, safety,
management, security or maintence of the Building;***/ and (xvii) exterior and
interior landscaping.
Provided, however, that the foregoing costs and expenses shall exclude or
have deducted from them, as the case may be:
(a) executives' salaries abve the grade of building manager;
(b) expenditures for capital improvements or capital equipment, other
than those referred to above and in the next succeeding paragraph;
(c) amounts received by Landlord through proceeds of insurance to the
extent they are compensation for sums previously included in Operating
Expenses hereunder;
(d) cost of repairs or replacements incurred by reason of fire or
other casualty or condemnation to the extent Landlord is compensated
therefor;
(e) advertising and promotional expenditures;
(f) costs incurred in performing work or furnishing services for any
tenant (including Tenant), whether such tenant's or Landlord's expense, to
the extent that such work or service is in excess of any work or service
that Landlord is obligated to furnish to Tenant at Landlord's expense;
(g) depreciation, except as provided above and in the next succeeding
paragraph;
(h) brokerage commissions and legal fees incurred in connection with
leasing of space in the Building;
(i) Taxes;
(j) refinancing costs and mortgage interest and amortization
payments; See Section 46.06
*, less all reimbursements, discounts, credits and reductions received by or
allowed to Landlord,
** See Section 46.04
*** See Section 46.05
<PAGE>
If Landlord shall purchase any item of capital equipment or make any
capital expenditure which has the effect of reducing the expenses which would
otherwise be included in Operating Expenses, then the costs of such capital
equipment or capital expenditure are to be included in Operating Expenses for
the Escalation Year in which the costs are incurred and subsequent Escalation
Years, on a straight-line basis, to the extent that such items are amortized
over such period of time as Landlord reasonably estimates such savings or
reductions in Operating Expenses will equal Landlord's costs for such capital
equipment or capital expenditure, with interest calculated at an annual rate of
1% above the prime rate at the time of Landlord's having made said expenditure.
If Landlord shall lease any items of capital equipment designed to result in
savings or reductions in expenses which would otherwise be included in Operating
Expenses, then the rentals and other costs paid pursuant to such leasing shall
be included in Operating Expenses for the Escalation Year in which incurred.
If during all or part of any Escalation Year, Landlord shall not furnish
any particular item(s) of work or service (which would otherwise constitute an
Operating Expense hereunder) to portions of the Building due to the fact that
(i) such portions are not occupied or leased, (ii) such item of work or
service is not required or desired by the tenant of such portion, (iii) such
tenant is itself obtaining and providing such item of work or service or (iv)
any other reason, then, for the purposes of computing Operating Expenses, the
amount of such item for such period shall be deemed to be increased by an amount
equal to the additional costs and expenses which would reasonably have been
incurred during such period by Landlord if it had at its own expense furnished
such item of work or services to such portion of the Building or to such tenant.
L. The term "R.A.B." shall mean the Realty Advisory Board on Labor
Relations, Incorporated, or its successor.
M. The term "Local 32B" shall mean Local 32B-32J of the Building Service
Employees International Union, AFL-CIO, or its successor.
N. The term "Class A Office Buildings" shall mean that classification of
office buildings most nearly comparable to the classification "Class A
buildings" in the current agreements between R.A.B. and Local 32B.
O. The term "Labor Rates" with respect to any Escalation Year shall mean
the regular average hourly wage rate required to be paid to Porters in Class A
Office Buildings pursuant to any agreement between R.A.B. and Local 32B in
effect during such Escalation Year, provided that if any such agreement shall
require Porters to be regularly employed on days or during hours when overtime
or other premium pay rates are in effect, then the term "regular average hourly
wage rate" shall mean the regular average hourly wage rate for the hours in a
calendar week which Porters are required to be regularly employed (whether or
not actually at work in the Building), e.g. if as of November 1, 1982, an
agreement between R.A.B. and Local 32B would require the regular employment of
Porters for 40 hours during a calendar week at a regular hourly wage of $4.00
for the first 30 hours and at an overtime hourly average wage of $5.00 for the
remaining 10 hours, then the regular average hourly wage rate under this
Subsection, as of November 1,1982, would be the sum arrived at by dividing the
total weekly average wages of $170.00 by the total number of required hours of
employment which is 40 and resulting in a regular average hourly wage rate of
$4.25. The computation of the regular average hourly wage rate shall be on the
same basis whether based on an hourly or other pay-scale but predicated on the
number of hours in such respective work weeks, whether paid by Landlord or any
independent contractor. Such regular average hourly wage rate shall also be
inclusive of the monetary value or cost of all payments or benefits of every
nature and kind (including those required to be paid by the employer directly to
taxing authorities or others because of the employment) including social
security, unemployment and other similar taxes, holiday and vacation pay, absent
fund, birthdays, jury duty, medical checkup, relief time and other paid time-
off, incentive pay, sick pay, accident, health and welfare insurance programs,
pension plans, guaranteed payment plans, and supplemental unemployment benefit
programs of a similar or dissimilar nature, irrespective of whether they may be
required by any Legal Requirement or otherwise. If there is no such agreement in
effect from which such regular average hourly wage rate is determinable as of
the date of any estimate of Tenant's Operating Payment pursuant to Section 7.03B
or the date of any Landlord's Statement, the computations shall be made on the
basis of the regular average hourly wage rate being paid by Landlord or by the
contractor performing porter or cleaning services for Landlord as of the date of
such Landlord's Statement and appropriate retroactive adjustments shall be made
when the regular average hourly wage rate is finally determined. If length of
service shall be a factor in determining any element of wages or fringe
benefits, such as vacation pay, it shall be conclusively presumed that all
employees have two years of service.
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P. The term "Porters" shall mean that classification of employee engaged
in the general maintenance and operation of Class A Office Buildings most nearly
comparable to the classification now applicable to porters in the current
agreements between R.A.B. and Local 32B (which classification is presently
termed "others" in said agreement).
Q. The term "Utility Costs" shall mean Landlord's cost (incurred directly
or through independent contractors) for all electricity (to the extent Landlord
is not reimbursed therefor by individual tenants), steam, water, gas and other
fuel and utilities supplied to the Building, including in each case, any
surcharges, fuel adjustments and taxes payable by Landlord in connection
therewith.* If during all or any part of any Escalation Year, Landlord shall not
furnish certain utilities or services which require the consumption of
electricity, steam, water, gas or other fuel or utilities (which are otherwise
required to be furnished by Landlord and the cost of which would otherwise
constitute a Utility Cost hereunder) to portions of the Building due to the fact
that (i) such portions are not occupied or leased, (ii) such utility or service
is not required or desired by the tenant of such portion, (iii) such tenant is
itself providing such utility or service or (iv) for other reasons, then, for
the purposes of computing Utility Costs, the amount included in Utility Costs
for such utility or service for such period shall be deemed to be increased by
an amount equal to the additional costs and expenses which would reasonably have
been incurred during such period by Landlord if it had at its own expense
furnished such utility or service to such portion of the Building.
SECTION 7.02 A. Tenant shall pay as Additional Rent for each Tax Year all
or any portion of which shall be within the Term a sum ("Tenant's Tax Payment")
equal to Tenant's Proportionate Share of the amount by which the Taxes for such
Tax Year exceed the Base Tax Factor. Tenant's Tax Payment for each Tax Year
shall be due and payable in semi-annual installments, in advance, on the first
day of each June and December during each Tax Year, based upon the Landlord's
Statement furnished prior to or after the commencement of such Tax Year, until
such time as a new Landlord's Statement shall become effective. If a Landlord's
Statement is furnished to Tenant after the commencement of a Tax Year in respect
of which such Landlord's Statement is rendered. Tenant shall within 15 days
thereafter, pay to Landlord an amount equal to the amount of any underpayment of
Tenant's Tax Payment with respect to such Tax Year and, in the event of an
overpayment, Landlord shall either pay to Tenant or, at Landlord's election,
credit against subsequent payments under this Section 7.02 or Section 7.03, the
amount of Tenant's overpayment. If there shall be any increase in Taxes for any
Tax Year, whether during or after such Tax Year, or if there shall be any
decrease in the Taxes for any Tax Year during such Tax Year, Landlord may
furnish a revised Landlord's Statement for such Tax Year, and Tenant's Tax
Payment for such Tax Year shall be adjusted and paid or credited or refunded, as
the case may be, substantially in the same manner as provided in the preceding
sentence. If during the Term, Taxes are required to be paid (either to the
appropriate taxing authorities or as tax excrow payments to the Superior Lessor
or the Superior Mortgagee), in full or in monthly, quarterly or other
installments on any other date or dates than as presently required, then
Tenant's Tax Payments shall be correspondingly accelerated or revised so that
said Tenant's Tax Payments are due at least 30 days prior to the date payments
are due to the taxing authorities or the Superior Lessor or the Superior
Mortgagee. The benefit of any discount for any early payment or prepayment of
Taxes relating to all or any part of the Real Property shall accrue solely to
the benefit of Landlord and Taxes shall be computed without subtracting such
discount or taking into account any such exemption or abatement.
B. If the real estate tax fiscal year of The City of New York shall be
changed at any time after the date hereof, any Taxes for such fiscal year, a
part of which is included within a particular Tax Year and a part of which is
not so included, shall be apportioned on the basis of the number of days in such
fiscal year included in the particular Tax Year for the purpose of making the
computations under this Section 7.02.
C. Only Landlord shall be eligible to institute tax reduction or other
proceedings to reduce the assessed valuation of the Real Property. If Landlord
shall receive a refund of Taxes for any Tax Year, Landlord shall either pay to
Tenant, or, at Landlord's election, credit against subsequent payments under
this Section 7.02 or Section 7.03, Tenant's Proportionate Share of the refund;
but not to exceed Tenant's Payment paid for such Tax Yexx. Nothing herein shall
obligate Landlord to file any application or institute any proceeding seeking a
reduction in Taxes or assessed valuation.
D. Tenant's Tax Payment and any credits with respect thereto as provided
in this Section 7.02 shall be made as provided in this Section 7.02 regardless
of the fact that Tenant may be exempt, in whole or in part, from payment of any
taxes by reason of Tenant's diplomatic or other tax exempt status or for any
other reason whatsoever.
*Notwithstanding the foregoing, Utility Costs shall not include Landlord's costs
for such utilities relating to or arising during Basic Construction of the
Building, or costs relating to construction of space occupied by tenants other
than Tenant.
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E. Tenant shall pay to Landlord upon demand as Additional Rent any
occupancy tax or rent tax now in effect or hereafter enacted, if payable by
Landlord in the first instance or hereafter required to be paid by Landlord.
F. If the Commencement Date or the Expiration Date shall occur on a date
other than July 1 or June 30, respectively, any Additional Rent under this
Section 7.02 for the Tax Year in which such Commencement Date or Expiration Date
shall occur shall be apportioned in that percentage which the number of days in
the period from the Commencement Date to June 30 or from July 1 to the
Expiration Date, as the case may be, both inclusive, shall bear to the total
number of days in such Tax Year. In the event of a termination of this Lease,
any Additional Rent under this Section 7.02 shall be paid or adjusted within 30
days after submission of Landlord's Statement. In no event shall Fixed Rent ever
be reduced by operation of this Section 7.02 and the rights and obligations of
Landlord and Tenant under the provisions of this Section 7.02 with respect to
any Additional Rent shall survive the termination of this Lease. See Section
46.07
G. Each Landlord's Statement furnished by Landlord with respect to
Tenant's Tax Payment shall be accompanied by a copy of the real estate tax bill
for the Tax Year referred to therein, but Landlord shall have no obligation to
deliver more than one such copy of the real estate tax bill in respect of any
Tax Year.
Section 7.03 A. Tenant shall pay as Additional Rent for each Escalation
Year an amount ("Tenant's Operating Payment"), calculated as follows:
(a) In the case of the first Escalation Year. A sum equal to (y) the sum
obtained by multiplying the number of square feet of the Premises Area by
the number of cents (inclusive of any fractions of a cent) of any
increase in Labor Rates above those in effect as of January 1, 1984, plus
(z) Tenant's Proportionate Share of the amount by which Utility Costs for
such Escalation Year exceed the Base Utility Factor.
(b) In the case of the Escalation Years subsequent to the first Escalation
Year, subject to the provisions of Section 7.03B, the sum of Tenant's Operating
Payment for the immediately preceding Escalation Year, plus either.
(1) a sum equal to (y) the sum obtained by multiplying the number of
square feet of the Premises Area by the number of cents (inclusive of any
fractions of a cent) of any increase in Labor Rates above those in effect
on January 1 of the immediately preceding Escalation Year, plus (z)
Tenant's Proportionate Share of the amount by which Utility Costs for
such Escalation Year exceed Utility Costs for the immediately preceding
Escalation Year.
or, at Landlord's election, See Section 46.08
(2) a sum equal to Tenant's Proportionate Share of the amount by
which Operating Expenses for such Escalation Year exceed Operating
Expenses for the immediately preceding Escalation Year.
B. Landlord's option to elect either of the methods of calculating
Tenant's Operating Payment set forth in clauses (1) and (2) of subdivision (b)
of Section 7.03A, may be exercised by notice to Tenant contained in a Landlord's
Statement or in any written estimate referred to in Section 7.03* and such
method of calculating Tenant's Operating Payment elected by Landlord shall
remain in effect unless and until Landlord exercises its option
pursuant to this Section 7.03 to elect the other method of calculating Tenant's
Operating Payment. Notwithstanding the foregoing, Landlord's option to elect
either of the methods calculating Tenant's Operating Payment set forth in clause
(2) of subdivision/* with respect to any year after the first Escalation Year
may be exercised by Landlord only (i) once in respect of the/** Escalation
Years, (ii) once in respect of/*** Escalation Years, (iii) once with respect to
each Escalation Year thereafter during the Term/+ and (iv) at any time during
the Term if (y) a determination is made either judicially or pursuant to any
Legal Requirement that the calculation of Tenant's Operating Payment pursuant to
subdivision (a) or clause (l) of subdivision (b) of Section 7.03A is not fully
enforceable and payable when due in accordance with the terms of this Lease, or
or (z) a wage freeze, wage control or similar restriction which affects
increases in Labor Rates exists in respect of Labor Rates
* (b) of Section 7.30A
** second (2nd) through fifth (5th)
*** the sixth (6th) through tenth (10th)
+ as the term may be extended pursuant to this Lease
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or any component thereof; provided, however, that if Landlord elects to
calculate Tenant's Operating Payment pursuant to clause (2) of subdivision (b)
of Section 7.03A by reason of any occurrence referred to in clauses (y) or (z)
above the continuation by Landlord of calculating Tenant's Operating Payment
by such method after the termination of such occurrence, shall be deemed to be
an election pursuant to clause (i) of this Section 7.03B, but an election by
Landlord at the termination of such occurrence to calculate Tenant's Operating
Payment pursuant to subdivision (a) or clause (1) of subdivision (b) of Section
7.03A shall not be deemed to be an election pursuant to clause (i) of this
Section 7.03B.
C. Landlord may furnish to Tenant, with respect to each Escalation Year, a
written statement setting forth Landlord's estimate to Tenant's Operating
Payment for such Escalation Year. Tenant shall pay to Landlord on the first day
of each month during such Escalation Year an amount equal to one-twelfth of
Landlord's estimate of Tenant's Operating Payment for such Escalation Year. If,
however, Landlord shall furnish any such estimate for an Escalation Year
subsequent to the commencement thereof, then (a) until the first day of the
month following the month in which such estimate is furnished to Tenant, Tenant
shall pay to Landlord on the first day of each month an amount equal to the
monthly sum payable by Tenant to Landlord under this Section 7.03 in respect of
the last month of the preceding Escalation Year, (b) promptly after such
estimate is furnished to Tenant or together therewith. Landlord shall give
notice to Tenant stating whether the installments of Tenant's Operating Payment
previously made for such Escalation Year were greater or less than the
installments of Tenant's Operating Payment to be made for such Escalation Year
in accordance with such estimate, and (i) if there shall be a deficiency, Tenant
shall pay the amount thereof within 10 days after demand therefor, or (ii) if
there shall have been an overpayment, Landlord shall either refund to Tenant the
amount thereof or, at Landlord's election, credit the amount thereof against
subsequent payments under this Section 7.03 or Section 7.02; and (c) on the
first day of the month following the month in which such estimate is furnished
to Tenant, and monthly thereafter throughout the remainder of such Escalation
Year, Tenant shall pay to Landlord an amount equal to one-twelfth of Tenant's
Operating Payment shown on such estimate. Landlord may at any time or from time
to time (but not more than twice with respect to any Escalation Year) furnish to
Tenant a revised statement of Landlord's estimate of Tenant's Operating Payment
for such Escalation Year, and in such case, Tenant's Operating Payment for such
Escalation Year shall be adjusted and paid or refunded, as the case may be,
substantially in the same manner as provided in the preceding sentence.
D. After the end of each Escalation Year Landlord shall furnish to Tenant a
Landlord's Statement for such Escalation Year. Each such year end Landlord's
Statement for any Escalation Year in which Tenant's Operating Payment is based
upon Operating Expenses shall be accompanied by a computation of operating
expenses for the Building prepared by an independent certified public accountant
or independent managing agent designated by Landlord from which Landlord shall
make the computation of Operating Expenses hereunder. Each such year end
Landlord's Statement for any Escalation Year in which Tenant's Operating Payment
is based upon Labor Rate and Utility Costs shall be accompanied by a computation
of utility costs for the Building prepared by an independent certified public
accountant or independent managing agent designated by Landlord from which
Landlord shall make the computation of Utility Costs. In making computations of
operating expenses and utility costs the certified public accountant or
managing agent may rely on Landlord's estimate and allocations whenever said
estimates and allocation are needed for this Article. If the Landlord's
Statement shall show that the sum paid by Tenant under Section 7.03C exceeded
Tenant's Operating Payment required to be paid by Tenant for such Escalation
Year, Landlord shall either refund to Tenant the amount of such excess or, at
Landlord's election credit the amount of such excess against subsequent payments
under this Section 7.03 or Section 7.02, and if the Landlord's Statement for
such Escalation Year shall show that the sums so paid by Tenant were less than
Tenant's Operating Payment paid by Tenant were less than Tenant's Operating
Payment paid by Tenant for such Escalation Year, Tenant shall pay the amount of
such deficiency within 10 days after demand therefor.
E. If the Commencement Date or the Expiration Date shall occur on a date
other than January 1, or December 31, respectively, and Additional Rent under
this Section 7.03 for the Escalation Year in which such Commencement Date or
Expiration Date shall occur shall be apportioned in that percentage which the
number days in the period from the Commencement Date to December 31 or from
January 1 to the Expiration Date, the case may be, both inclusive, shall bear to
the total number of days in such Escalation Year. In the event of a termination
of this Lease, any Additional Rent under this Article shall be paid or adjusted
within 30 days after submission of a Landlord's Statement. In no event shall
Fixed Rent ever be reduced by operation of this Section 7.03 and the rights and
obligations of Landlord and Tenant under the provisions of this Article with
respect to any Additional Rent shall survive the termination of this Lease.*
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SECTION 7.04 The computations of Additional Rent under this Article 7
are intended to constitute a formula for an agreed rental adjustment and may or
may not constitute an actual reimbursement to Landlord for costs and expenses
paid by Landlord with respect to the Building. Without limiting the foregoing.
Landlord may compute Tenant's Operating Payment pursuant to subdivision (a) or
clause (1) of subdivision (b) of Section 7.03A whether or not the Building is a
Class A Office Building, whether or not Porters are employed in the Building and
without regard to whether such employees are members of Local 32B.
SECTION 7.05 A. Landlord's failure to render Landlord's Statements with
respect to any Tax year or Escalation Year shall not prejudice Landlord's right
to thereafter render a Landlord's Statement with respect thereto or with respect
to any subsequent Tax Year or Escalation Year, nor shall the rendering of a
Landlord's Statement prejudice Landlord's right to thereafter render a corrected
Landlord's Statement for that Tax Year or Escalation Year, as the case may be.
Nothing herein contained shall restrict Landlord from issuing a Landlord's
Statement at any time there is an increase in Taxes, Utility Costs, Labor Rates
or Operating Expenses during any Tax Year or Escalation Year or any time
thereafter.
B. Each Landlord's Statement shall be conclusive and binding upon Tenant
unless (a) within 30 days after receipt of such Landlord's Statements Tenant
shall notify Landlord that it disputes the correctness of Landlord's Statement,
specifying the particular respects in which Landlord's Statement is claimed to
be incorrect and (b) if such dispute shall not be resolved within 90 days after
the giving of such Landlord's Statement, Tenant shall within 60 days after the
expiration of such 90-day period, submit the dispute to arbitration pursuant to
Article 28 Pending the determination of such dispute, Tenant shall pay
Additional Rent in accordance with the applicable Landlord's Statement, without
prejudice to Tenant's position. If such dispute is ultimately determined in
Tenant's favor, Landlord shall promptly after such determination pay to Tenant
any amount so overpaid by Tenant.
ARTICLE 8
INSURANCE
SECTION 8.01 Tenant shall not do or suffer or permit anything to be done
in or about the Premises or the Building which would: (a) subject Landlord to
any liability for injury to any person or property by reason of an activity
being conducted in the Premises or by Tenant, (b) cause any increase in the
insurance rates applicable to any policies of insurance carried by Landlord
covering the Building or the Building Equipment located therein, (c) result in
the cancellation of or the assertion of any defense by the insurer to any claim
under any policy insurance maintained by or for the benefit of Landlord or (d)
be prohibited by or violate the rules and regulations of the Insurance Service
Organization or any other insurance rating organization having jurisdiction.
SECTION 8.02 If as a result of: (a) any act or omission on the part of
Tenant, or anyone claiming by, through or under Tenant, including the use and
occupancy of the Premises by Tenant or anyone claiming by, through or under
Tenant, whether or not Landlord has consented to the same or whether or not due
to Tenant's use or occupancy, or (b) Tenant's abandonment or failure to occupy
the Premises, the insurance rates applicable to any policies of insurance
carried by Landlord covering the Real Property or the rental income to be
derived therefrom or the Building, Equipment or other property of Landlord shall
be increased, Tenant agrees to pay Landlord as additional rent within ten (10)
days after Landlord's demand therefor, the entire portion of the premiums for
said insurance which shall be attributable to such higher rates. If any such
insurance carried by Landlord shall be cancelled by the insurance carrier as a
result of the aforementioned acts or omissions of Tenant or anyone claiming by,
through or under Tenant, Tenant agrees to indemnify and hold Landlord free and
harmless from all damages, costs, liabilities and expenses (including reasonable
attorneys' fees and disbursement) which Landlord may sustain by reason thereof.
SECTION 8.03 In determining whether any increase in such rates is the
result of any of the aforementioned acts or omissions of Tenant or anyone
claiming by, through or under Tenant, a schedule or rule book issued by the
Insurance Service Organization or any other insurance rating organization having
jurisdiction, or the rating procedures or rules of Landlord's insurance
companies shall be conclusive evidence of the several items and charges which
make up the insurance rates and premiums on the Premises and the Building and
the rental income to be derived therefrom.
SECTION 8.04 A Tenant shall secure and keep in full force and effect
throughout the Term, at Tenant's sole cost and expense, (a) Comprehensive
General Liability Insurance, written on an occurrence basis, to afford
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protection in such amount as Landlord may determine and in no event less than*
combined single limit for bodily injury and/or death arising therefrom and
Broad Form property damage (including a "personal injury" endorsement covering
claims arising out of false arrest, false imprisonment, defamation, libel and
slander, wrongful eviction, discrimination and invasion of privacy without
exclusion of coverage for claims of personal injury brought by employees, agents
or contractors of an insured) arising out of any one occurrence; and which
insurance shall include coverage for contractual liability (including covering
the matters set forth in Article 20 hereof), owner's protective liability,
independent contractor's liability and completed operations liability; (b)
Comprehensive Automobile Liability, covering owned, non-owned and hired
vehicles, providing bodily injury and property damage, all on a per occurrence
basis, at a combined single limit in such amount as Landlord may determine and
in no event less than $1,500,000; (c) insurance upon Tenant's Property and
Improvements made at Tenant's sole cost and expense, in an amount equal to the
full replacement value thereof (including, an "agreed amount" endorsement),
including any increase in value resulting from increased costs, with coverage
against such perils and casualties as are commonly included in "all risk"
insurance policies (including breakage of glass within the Premises, sprinkler
leakage, flood, earthquake and collapse), (d) Broad Form Boiler and Machinery
Insurance on all air conditioning equipment, miscellaneous electrical apparatus,
boilers and other pressure vessels or systems, whether fired or unfired,
installed by Tenant in, adjoining, above or beneath the Premises: and if said
equipment, vessels or systems and the damage that may be caused by or result
from them are not covered by Tenant's extended coverage insurance mentioned in
clause (c) of this Section, such Boiler and Machinery Insurance shall be in
amounts set by Landlord and in no event less than the amount of Two Hundred
Fifty Thousand Dollars ($250,000); (e) during the course of any alterations or
construction by Tenant in the Premises and until completion thereof, Builder's
Risk insurance on an "all risk" basis (including collapse) on a completed value
(non-reporting) form for full replacement value covering the interest of
Landlord and Tenant (and their respective contractors and subcontractors), the
Superior Mortgagee and the Superior Lessor in all work incorporated in the
Building and all materials and equipment in or about the Premises; (f) Worker's
Compensation and Employer's Liability Insurance, as required by law; and (g)
such other insurance in such amounts as Landlord, the Superior Mortgagee or the
Superior Lessor may reasonably require from time to time. Tenant shall have the
right to insure and maintain the insurance coverages set forth in this Section
under blanket insurance policies covering other premises occupied by Tenant so
long as such blanket policies comply as to terms and amounts with the insurance
provisions set forth in this Lease.
B. All such insurance shall be written in form and substance satisfactory
to landlord by an insurance company in a financial size category of not less
than XII and with general policy holder's ratings of not less than A, as rated
in the most current available "Best's" insurance reports, and licensed to do
business in New York State and authorized to issue such policies. Upon failure
of Tenant to procure, maintain and place such insurance and pay all premiums and
charges therefor. Landlord may do so (but shall not be obligated) and in such
event Tenant agrees to pay the amount thereof to Landlord as Additional Rent on
demand. All policies of insurance procured by Tenant shall contain endorsements
providing that (a) such policies may not be materially changed, amended,
reduced, cancelled (including for non-payment of premium) or allowed to lapse
with respect to Landlord, or any Superior Lessor, Superior Mortgagee or Fee
Mortgagee except after 45 days, prior notice from the insurance company to each,
sent by registered mail; and (b) Tenant shall be solely responsible for the
payment of all premiums under such policies and Landlord shall have no
obligation for the payment thereof notwithstanding that Landlord is or may be
named as an insured. Duly executed certificates of insurance (including evidence
of the waivers of subrogation required pursuant to Section 8.05) or, if required
by Landlord or the Superior Lessor, the Superior Mortgagee or the Fee Mortgagee,
original policies, together with reasonable satisfactory evidence of payment of
the premiums therefor, shall be delivered to Landlord, the Superior Lessor and
the Superior Mortgagee and the Fee Mortgagee on or before the Commencement Date.
Any endorsements to any such policies shall also be so deposited upon issuance
thereof and each renewal or replacement of a policy shall be so deposited at
least 20 days prior to the expiration of such policy. Tenant shall not carry
separate or additional insurance, concurrent in form or contributing, in the
event of any loss or damage with any insurance required to be obtained by Tenant
under this Lease. Further, all policies of insurance procured by Tenant shall be
written as primary policies not contributing with nor in excess of coverage that
Landlord may carry.
C. All insurance procured by Tenant under this Article 8 shall be issued
in the names and for the benefit of Landlord (and each member thereof in the
event Landlord is a partnership or joint venture), Tenant and, unless Landlord
otherwise requests, the Superior Lessor, the Superior Mortgagee and the Fee
Mortgagee, as their respective interests may appear, and shall contain an
endorsement that each of Landlord, the Superior Lessor Superior Mortgagee and
the Fee Mortgagee, although named as an insured, nevertheless shall be entitled
to
*$2,000,000 (or such greater amount as may be required by any Superior
Mortgagee)
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recover under said policies for any loss or damage occasioned to it, its
agents, employees, contractors, directors, shareholders, partners and principals
(disclosed and undisclosed) by reason of the negligence of Tenant, its servants,
agents, employees and contractors. In the case of insurance against damage by
fire or other casualty, the policy or policies shall provide that loss shall be
adjusted with Landlord and shall be payable to Landlord, to be held and
disbursed as provided in this Lease, or to the Superior Mortgagee under a
standard mortgagee clause, or to the Superior Lessor.
SECTION 8.05 Each party shall include in each of its insurance policies
(and, with respect to any equipment in the Premises leased by Tenant, in the
insurance policies covering such equipment carried by Tenant or the lessors of
such equipment) covering loss, damage or destruction by fire or other insured
casualty or worker's compensation or employer's liability a waiver of the
insurer's right of subrogation against the other party. If such waiver should be
unobtainable or unenforceable each shall obtain from its insurer (a) an express
agreement that such policy shall not be invalidated if the insured waives or has
waived before the casualty or liability the right of recovery against any party
responsible for a casualty or liability covered by such policies, or (b) any
other form of permission for the release of the other party. If such waiver
shall cease to be obtainable, the insured party shall so notify the other party
promptly after learning thereof.
SECTION 8.06 As long as Landlord's insurance policies include the waiver
of subrogation or agreement or permission to release liability referred to in
Section 8.05, Landlord, to the extent that such insurance is in force and
collectible, hereby waives (a) any obligation on the part of Tenant to make
repairs to the Basic Construction of the Building and Landlord's Work
necessitated or occasioned by fire or other insured casualty, and (b) any right
of recovery against Tenant, any other permitted occupant of the Premises, and
any of their employees, agents or contractors, for any loss occasioned by fire
or other insured casualty. In the event that at any time Landlord's insurance
carriers shall not include such or similar provisions in Landlord's policies,
the waivers set forth in the foregoing sentence shall, upon notice given by
Landlord to Tenant, be deemed of no further force or effect with respect to any
insured risks under such policies from and after the giving of such notice.
During any period while the foregoing waiver of right of recovery is in effect,
Landlord shall look solely to the proceeds of such policies to compensate
Landlord for any loss occasioned by fire or other insured casualty.
SECTION 8.07 As long as Tenant's insurance policies include the waiver of
subrogation or agreement or permission to release liability referred to in
Section 8.05, Tenant to the extent that such insurance is in force and
collectible hereby waives (and agrees to cause all other occupants of the
Premises to execute and deliver to Landlord instruments waiving) any right of
recovery against Landlord, the Superior Lessor, the Superior Mortgagee and the
Fee Mortgagee and any of their employees, agents or contractors, for any loss
occasioned by fire or other insured casualty or liability under any workers'
compensation law, In the event that at any time Tenant's insurance carries shall
not include such or similar provisions in Tenant's policies, the waiver set
forth in the foregoing sentence shall, upon notice given by Tenant to Landlord,
be deemed of no further force or effect with respect to any insured risks under
such policy from and after the giving of such notice (or in the case such
insurer shall not be willing to grant such waiver for all of the required
parties, such waiver shall be of no force or effect only with respect to the
required parties not included in such waiver). In the event Tenant fails to
have casualty insurance in effect as required by this Article 8, the waiver set
forth in the first sentence of this Section 8.07 shall be in full force and
effect to the same extent as if such required insurance (containing a waiver of
subrogation) were in effect. During any period while the foregoing waiver of
right of recovery is in effect, Tenant or any other occupant of the Premises, as
the case may be, shall look solely to the proceeds of such policies to
compensate Tenant or such other occupant for any loss occasioned by fire or
other insured casualty or as a result of any liability under workers'
compensation laws.
SECTION 8.08 Except to the extent expressly provided in Section 8.06,
nothing contained in this Lease shall relieve Tenant of any liability to
Landlord or to its insurance carriers which Tenant may have under law or the
terms of this Lease in connection with any damage to the Premises or the
Building by fire or other casualty.
SECTION 8.09 Except as otherwise provided in Section 8.04, nothing
contained in Sections 8.05, 8.06 or 8.07 shall be deemed to impose upon Landlord
or Tenant any duty to procure or maintain any kinds of insurance or any
particular amounts or limits of any such kinds of insurance. The insurance
policies referred to in Section 8.05 shall be deemed to include policies
procured and maintained by a party for the benefit of its lessor, mortgagee or
pledgee.
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ARTICLE 9
COMPLIANCE WITH LAWS
SECTION 9.01 A. Tenant, at its sole cost and expense, shall comply with all
Legal Requirements and all Insurance Requirements and shall give Landlord prompt
notice of any lack of compliance with any of the foregoing, except that Tenant
shall not be under any obligation to comply with any Legal Requirements or
Insurance Requirements requiring any structural alteration of the Premises
solely by reason of the use thereof for any of the permitted purposes specified
in Section 5.01 unless said alteration (a) is necessitated by a condition which
has been otherwise created by, or at the instance of, Tenant, (b) is
attributable to the use or manner of use to which Tenant puts the Premises,
other than as permitted by Section 5.01, (c) is required by reason of a breach
of Tenant's obligations hereunder, or (d) is occasioned, in whole or in part, by
any act, omission or negligence of Tenant or any person claiming through or
under Tenant, or any of their employees, agents, contractors, invitees or
licensees. Tenant shall pay all costs, expenses, fines, penalties and damages
which may be imposed upon Landlord, the Superior Lessor, the Superior Mortgagee
or the Fee Mortgagee by reason of arising out of Tenant's failure fully and
promptly to comply with the provisions of this Section. Where any structural
alteration of the Premises is required by any such Legal Requirement or
Insurance Requirment and, by reason of the express exception hereinabove
contained, Tenant is not obligated to make such alteration, then Landlord shall
make such alteration and pay the cost thereof. Tenant need not comply with any
such Legal Requirement or Insurance Requirement so long as Tenant shall be
contesting the validity or applicability thereof in accordance with Section
9.02. Subject to the provisions of this Article, Landlord, at its expense, shall
comply with all other Legal Requirements and Insurance Requirements as shall
affect the Premises, but may similarly defer compliance so long as Landlord
shall be contesting the validity or applicability thereof.
B. If in any Escalation Year all or any portion of which shall be within
the Term Landlord shall incur any expenditure in respect of the Real Property
for capital improvements or capital equipment by reason of Legal Requirements or
Insurance Requirements or which under generally accepted real estate practice
would be expensed or regarded as deferred expenses, Tenant shall reimburse
Landlord on demand for Tenant's Proportionate Share of the annual amortization
(reasonably determined by Landlord on a straight-line basis over an appropriate
period not to exceed 10 years, with interest calculated at an annual rate of 1%
above the prime rate at the time of Landlord's having made such expenditures) of
such expenditures; provided, however, that in the event Landlord receives an
exemption or abatement of Taxes by reason of any such capital improvement of
capital equipment (other than an exemption, abatement or credit which is the
result of the application of Section 38 of the Internal Revenue Code of 1954, as
amended, or any similar provision of Federal or New York law), the cost of such
capital improvement or capital equipment shall be reduced by the amount of such
exemption or abatement. Notwithstanding anything to the contrary contained in
this Section 9.01B, if during any Escalation Year all or any portion of which
shall be within the Term, Tenant's Operating Payment is computed in accordance
with Subsection 7.03A(b)(2), the provisions of this Section 9.01B shall not
apply with respect to such Escalation Year.
SECTION 9.02 Tenant, at its expense, after notice to Landlord, may contest,
by appropriate proceedings prosecuted diligently and in good faith, the validity
or applicability of any Legal Requirement or Insurance Requirement, provided
that: (a) Landlord shall not be subject to criminal penalty or to prosecution
for a crime nor shall the Real Property or any part thereof be subject to being
condemned or vacated, nor shall the certificate(s) of occupancy for the Premises
or the Building be suspended or threatened to be suspended by reason of non-
compliance or otherwise by reason of such contest; (b) before the commencement
of such contest, Tenant shall furnish to Landlord either (i) the bond of a
surety company satisfactory to Landlord, in form and substance reasonably
satisfactory to Landlord, and in an amount at least equal to 100% of the cost of
such compliance (as reasonably estimated by Landlord) and shall indemnify
Landlord against the cost of such compliance and liability resulting from or
incurred in connection with such contest or non-compliance, or (ii) other
security reasonably satisfactory in all respects to Landlord; (c) such
non-compliance or contest shall not constitute or result in any violation of the
terms of the Superior Lease or Superior Mortgage, or if any such Superior Lease
and/or Superior Mortgage shall condition such non-compliance or contest upon the
taking of action or furnishing of security by Landlord, such action shall be
taken and such security shall be furnished at the expense of Tenant; and (d)
Tenant shall keep Landlord regularly advised as to the status of such
proceedings. Without limiting the application of the above, Landlord shall be
deemed subject to prosecution for a crime if Landlord, the Superior Lessor, the
Superior Mortgagee, the Fee Mortgagee or any of their officers, directors,
partners, shareholders, agents or employees is charged with a crime of any kind
whatever unless such charge is withdrawn 5 days before Landlord, the Superior
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Lessor, the Superior Mortgagee or the Fee Mortgagee or such officer, director,
partner, shareholder, agent or employee, as the case may be, is required to
plead or answer thereto.
SECTION 9.03 Any Improvements made or performed by or on behalf of Tenant
or any person claiming through or under Tenant pursuant to this Article shall be
made in conformity with and subject to the provisions of Article 10.
SECTION 9.04 Notwithstanding anything to the contrary contained elsewhere
in this Lease, if (a) the New York Board of Fire Underwriters or the Insurance
Service Office or any other body exercising the same or similar functions and
having jurisdiction or cognizance of all or any part of the Real Property or the
Premises requires or recommends that (i) any changes, modifications, alterations
or additional sprinkler heads or other equipment be made or supplied in the
Building sprinkler system by reason of the conduct of Tenant's business or
Tenant's use or occupancy of the Premises, or the location of partitions, trade
fixtures or other contents of the Premises, or (ii) for any reason, any such
changes, modifications, alterations or additions be made in the Premises only,
or (b) such changes, modifications, alterations or additions in the Premises
become necessary to prevent the imposition of a penalty or charge against the
full allowance, if any, for a sprinkler system in Landlord's "all risk"
insurance policy for the Building, Landlord shall make all such changes,
modifications, alterations and additions and Tenant shall pay the cost thereof
to Landlord as Additional Rent on demand.
ARTICLE 10
IMPROVEMENTS; TENANT'S PROPERTY
SECTION 10.01 Upon and subject to the terms of this Article (and, with
respect to Improvements made in connection with Tenant's initial occupancy of
the Premises, subject in the terms of the Work Letter), Tenant at any time and
from time to time during the Term, at its sole cost and expense, may make
Improvements in and to the Premises, excluding structural changes, provided:
(a) The Improvements will not result in a violation of or require a
change in any certificate of occupancy applicable to the Premises or to the
Building
(b) The character, outside appearance, usefulness or rentability of
the Building or any part thereof shall not be affected in any way, and
such Improvements shall not, in the sole opinion of Landlord, weaken or
impair (temporarily or permanently) the structure or lessen the value or
cubic content of the Premises or the Building either during the making of
such Improvements or upon their completion;
(c) No part of the Building outside of the Premises shall be
physically affected;
(d) The proper or economical functioning of the Building Equipment,
in the sole opinion of Landlord shall not be affected;
(e) In performing the work involved in making such Improvements,
Tenant shall be bound by and observe all of the terms of this Article;
(f) Upon the termination of this Lease, Tenant shall, on Landlord's
request restore those portions of the Premises* to their condition prior to
the making of any Improvements by Tenant, reasonable wear and tear damage
by insured casualty expected;
(g) Tenant shall not use the elevators during business hours on
business days for haulage or removal of material or debris;
(h) Before proceeding with any Improvements, Tenant shall submit to
Landlord three copies of detailed plans and specifications therefor, for
Landlord's consent. Tenant shall reimburse Landlord for all reasonable
expenses incurred by Landlord in connection with (i) its decision and the
decision of the Superior Lessor, Superior Mortgagee and the Fee Mortgagee
as to whether to approve the proposed Improvements (ii) inspecting the
Improvements to determine whether the same are being or have been performed
in accordance with the approved plans and specifications therefor and with
all Legal Requirements and Insurance Requirements, including the fees and
expenses of any architect or engineer employed for such purpose. If such
Improvements require consent by or notice to the Superior Lessor, the
Superior Mortgagee or the Mortgagee, Tenant, notwithstanding anything to
the contrary contained in this Article, shall not proceed with the
Improvements until such consent has been received, or such notice has been
given, as the case may be
*with respect to which Landlord specifically retains its rights pursuant to
this subsection 10.01(f) after Landlord's review of the plans and
specifications submitted by tenant,
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and all applicable conditions and provisions of the Superior Lease, the
Superior Mortgage or the Fee Mortgage with respect to the proposed
Improvements have been met or complied with at Tenant's expense; and
Landlord, if it consents to the Improvements, will request such consent or
give such notice, as the case may be. Any Improvements for which consent
has been received shall be performed strictly in accordance with the
approved plans and specifications therefor, and no amendments or additions
thereto shall be made without the prior consent of Landlord;
(i) Tenant shall not be permitted to install and make part of the
Premises any materials, fixtures or articles which are subject to liens,
conditional sales contracts, chattel mortgages or security interests (as
such term is defined in the Uniform Commercial Code as in effect in New
York at the time of the making of the Improvement);
(j) No Improvements estimated to cost more than $50,000 (as estimated
by Landlord's architect or licensed professional engineer or general
contractor) shall be undertaken (i) except under the supervision of a
licensed architect or licensed professional engineer reasonably
satisfactory to Landlord, (ii) except after at least 30 days' prior notice
to Landlord and (iii) prior to Tenant delivering to Landlord either (y) a
performance bond and a labor and materials payment bond (issued by a surety
company satisfactory to Landlord and licensed to do business in New York
State) each in an amount equal to 150% of such estimated cost and otherwise
in form satisfactory to Landlord or (z) such other security as shall be
satisfactory to Landlord;
(k) The sprinkler system design is not thereby modified, altered or
changed: and
(l) Tenant shall not (i) attach or affix any screws or fasteners to
the exterior curtainwall of the Building or (ii) install, without the
written consent of Landlord, any materials that will come in contact with
the exterior curtainwall of the Building.
SECTION 10.02 All Improvements shall at all times comply with all Legal
Requirements and Insurance Requirements and all Rules and Regulations (including
any Landlord may adopt with respect to the making of Improvements) and shall be
made at such times and in such manner as Landlord may from time to time
reasonably designate. Tenant, at its expense, shall (a) obtain all necessary
municipal and other governmental permits, authorizations, approvals and
certificates for the commencement and prosecution of such Improvements and for
final approval thereof upon completion, (b) deliver three copies thereof to
Landlord and (c) cause all Improvements to be performed in a good and first-
class workmanlike manner, using new materials and equipment at least equal in
quality to the original installations of the Premises or the then standards for
the Building established by Landlord. Improvements shall be promptly commenced
and completed and shall be performed in such manner so as not to interfere with
the occupancy of any other tenant nor delay or impose any additional expense
upon Landlord in the construction, maintenance, cleaning, repair, safety,
management security or operation of the Building or the Building Equipment; and
if any such additional expense shall be incurred by Landlord as a result of
Tenant's performance of any Improvements, Tenant shall pay such additional
expense as Additional Rent upon demand. In addition to the foregoing sentence,
with respect to each Improvement estimated to cost more than $5,000 (excluding,
however, Tenant's Work and any Improvement performed or installed by Tenant
pursuant to Paragraph 11 of the Work Letter), Tenant shall pay to Landlord, an
Additional Rent upon demand, 5% of the cost of such Improvement*/ for indirect
job costs, supervision and coordination of the work performed in connection with
such Improvement**/Tenant shall furnish Landlord with satisfactory evidence that
the insurance required during the performance of the Improvements pursuant to
Article 8 is in effect at or before the commencement of the Improvements and, on
request, at reasonable interval thereafter. No Improvements shall involve the
removal of any fixtures, equipment or other property in the Premises which are
not Tenant's Property without Landlord's prior consent and unless they shall be
promptly replaced, at Tenant's expense and free of superior title, liens,
security interests and claims, with fixture equipment or other property, as the
case may be, of like utility and at least equal value, unless Landlord shall
otherwise consent.
SECTION 10.03 Tenant, at its expense, shall promptly procure the
cancellation or discharge of all notices of violation arising from or otherwise
connected with Improvements which shall be issued by any public authority
having or asserting jurisdiction. However, nothing herein shall prevent Tenant
from contesting in good faith and, at its own expense, any such notice of
violation in accordance with the provisions of Sections 9.02.
* (other than the cost of any decorations made by Tenant)
**(except that, with respect to the cost of items of Landlord's Work and
Tenant's Work required to be performed pursuant to Exhibit C, Tenant shall be
required to pay only such Additional Rent as may be specifically set forth in
Exhibit C).
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SECTION 10.04 Tenant hereby indemnifies Landlord against liability for any
and all mechanic's and other liens filed in connection with Improvements or
repairs, including the liens of any conditional sales of, or chattel mortgages,
title retention agreements, security agreements or financing statements upon,
any materials or fixtures installed in and constituting part of the Premises.
Tenant shall promptly pay, in cash, the cost of all Improvements. Tenant, at its
expense, shall procure the discharge of all such liens within 10 days after the
filing of any such lien against the Premises or the Real Property. If Tenant
shall fail to cause any such lien to be discharged within the period aforesaid,
then, in addition to any other right or remedy, Landlord may, but shall not be
obligated to, discharge the same either by paying the amount claimed to be due
or by deposit or bonding proceedings, and in any such event Landlord shall be
entitled, if it elects, to compel the prosecution of an action for the
foreclosure of such lien and to pay the amount of the judgment in favor of the
lienor with interest, costs and allowances. Any amount so paid by Landlord, and
all costs and expenses incurred by Landlord in connection therewith, shall
constitute Additional Rent and shall be paid on demand.
SECTION 10.05 Only Landlord or any one or more persons approved or
designated by Landlord (Landlord or such person being referred to in this
Section as "Designated Contractor") shall be permitted to act as contractor for
any work to be performed in accordance with this Article. Landlord expressly
reserves the right to act as, or to designate, at any time and from time to
time, an exclusive construction contractor and Landlord furthermore expressly
reserves the right to exclude from the Building any person attempting to act as
construction contractor in violation hereof. In the event Tenant proposes to use
any contractor or subcontractor other than the Designated Contractor for the
performance of any Improvement, Tenant shall submit to Landlord, together with
the plans and specifications required pursuant to subsection 10.01(h), the name
of such contractor or subcontractor. If Landlord shall not consent to Tenant's
engaging such contractor or subcontractor for the performance of such
Improvement. See Section 46.10.
SECTION 10.06 Tenant agrees that it will not at any time prior to or during
the Term, either directly or indirectly, employ or permit the employment of any
contractor, mechanic or laborer, or permit any materials in the Premises, if the
use of such contractor, mechanic or laborer or such materials would, in
Landlord's opinion create any difficulty, strike or jurisdictional dispute with
other contractors, mechanics or laborers engaged by Tenant or Landlord or
others, or would in any way disturb the construction, maintenance, cleaning,
repair, management, security or operation of the Building or any part thereof.
In the event of any interference or conflict Tenant, upon demand of Landlord,
shall cause all contractors, mechanics or laborers, or all materials causing
such interference, difficulty or conflict, to leave or be removed from the
Building immediately.
SECTION 10.07 All fixtures, equipment, improvements and appurtenances
attached to, or built into, the Premises at the commencement of or during the
Term (collectively "Fixtures"), whether or not at the expense of Tenant, shall
be surrendered to Landlord upon the termination of this Lease except as
otherwise expressly provided in this Lease: provided, however, that any Fixtures
attached to, or built into, the Premises at the expense of Tenant shall be and
remain the property of Tenant during the Term and any Fixtures attached to, or
built into, the Premises at the expense of Landlord shall be and remain the
property of Landlord during the Term. The Fixtures shall include all electrical,
plumbing, heating and sprinkling equipment, fixtures, outlets, venetian blinds,
partitions, railways, gates, doors, vaults, paneling, molding, shelving,
radiator enclosures, cork, rubber, linoleum and composition floors, ventilating,
silencing, air conditioning and cooling equipment, and all fixtures, equipment,
improvements and appurtenances of a similar nature or purpose whether or not
attached to or built into the Premises.
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SECTION 10.08 If, during the last month of the Term, Tenant shall have
removed all or substantially all of Tenant's Property from the Premises,
Landlord may immediately enter, and alter, renovate and redecorate the Premises,
without abatement of rent or liability to Tenant, and such acts shall have no
effect upon this Lease.
SECTION 10.09 No approval of plans or specifications by Landlord or
consent by Landlord allowing Tenant to make Improvements in the Premises shall
in any way be deemed to be an agreement by Landlord that the contemplated
Improvements comply with any Legal Requirements or Insurance Requirements or the
certificate of occupancy for the Building nor shall it be deemed to be a waiver
by Landlord of the compliance by Tenant of any of the terms of this Lease.
Notice is hereby given that neither Landlord, Landlord's agents, the Superior
Lessor, the Superior Mortgagee nor the Fee Mortgagee shall be liable for any
labor or materials furnished or to be furnished to Tenant upon credit, and that
no mechanic's or other lien for such labor or materials shall attach to or
affect any estate or interest of Landlord or the Superior Lessor, Superior
Mortgagee or Fee Mortgagee in and to the Premises or the Real Property.
SECTION 10.10 Tenant shall keep records of Improvements costing in excess
of $10,000 and of the cost thereof. Tenant shall, within 45 days after demand by
Landlord, furnish to Landlord copies of such records.
ARTICLE II
REPAIRS
SECTION 11.01 Tenant at its sole cost and expense, shall take good care of
the Premises and Building Equipment therein and Tenant's Property and the
Fixtures. Tenant, at its sole cost and expense, shall make and be responsible
for all repairs, interior or exterior, structural and otherwise, ordinary or
extraordinary as and when needed to preserve the Premises and the Building
Equipment therein and Tenant's Property and the Fixtures in good working order
and condition, the need for which arises out of (a) the installation, use,
existence or operation of Improvements. Tenant's Property or Fixtures*/ (b) the
moving of Tenant's Property or Fixtures in or out of the Building or the
Premises. (c) the acts, omissions, negligence or misuse of Tenant or any of its
subtenants or any of its or their employees, agents, contractors, licensees or
invitees or their use or occupancy or manner of use or occupancy of the Premises
otherwise than in accordance with the terms of this Lease (except fire or other
casualty caused by Tenant's negligence if the fire or other casualty insurance
policies insuring Landlord are not invalidated and the rights of Landlord are
not adversely affected by this provision) or (d) pursuant to the provisions of
Section 9.01A: provided, however, that Landlord, as its option, may make any of
the foregoing repairs (other than repairs to Tenant's Property) and in such
event. Tenant shall pay, Landlord the cost thereof as Additional Rent on demand.
In no event shall Tenant be required to make, be responsible for or pay for any
repairs which are required as a result of the negligence of Landlord, its
agents, contractors or employees. Tenant at its sole cost and expense, shall
promptly replace scratched, damaged or broken doors and glass in and about the
Premises and shall be responsible for all repairs and maintenance of wall and
floor coverings in the Premises. Tenant shall promptly make, at its sole cost
and expense, all repairs in or to the Premises for which it is responsible. If
the Premises shall include any space on any ground, street, mezzanine or
basement floor in the Building, Tenant at its sole cost and expense, shall make
all necessary repairs to all windows and other glass in on or about such space
and put, keep and maintain all portions of the Premises and any sidewalks,
curbs, entranceways, passageways and vaults adjoining and/or appurtenant to the
Premises in clean and ordered condition, free of dirt, rubbish, snow, ice and
other accumulations and unlawful obstructions. All repairs made by or on behalf
of Tenant or any person claiming through or under Tenant shall be made and
performed in conformity with the provisions of Article 10, and shall be at least
equal in quality and class to the original work or installation or the then
standards for the Building established by Landlord.
SECTION 11.02 Landlord shall operate the Building as a first-class office
building with retail stores. Landlord shall, at its expense, make or cause to be
made all necessary repairs, interior or exterior, structural or non-structural,
ordinary or extraordinary to keep the Building in good order and repair,
including the Premises and the Building Equipment therein, excluding, however,
(a) repairs of Tenant's Property or Improvements not occasioned by Landlord's
negligence and (b) repairs which Tenant is obligated to make pursuant to Section
11.01 and the other terms of this Lease. Landlord shall, at Tenant's sole cost
and expense, perform all maintenance and make all necessary repairs to the air
conditioning equipment and any security systems or devices which may be
installed in the Premises by Landlord, Tenant or others except the building
standard air conditioning system which (except as otherwise provided in Section
11.01) shall be maintained and repaired at Landlord's sole cost and expense. All
such repairs and replacements shall be of a quality at least equal to that of
the original
* by Tenant or Tenant's contractors, subcontractors, employees or agents,
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installation. Nothing contained in this Section shall require Landlord to paint
the Premises. No liability of Landlord to Tenant shall, however, accrue under
this Section unless and until Tenant has given notice to Landlord of the
specific repair required to be made, or of the failure properly to furnish any
service. Landlord shall endeavor not to unreasonably interfere with Tenant's use
and occupancy of the Premises in making any repairs or performing any
maintenance required pursuant to this Section, but Landlord shall not be
obligated to use overtime labor.
SECTION 11.03 Tenant recognizes and acknowledges that the operation of the
Building Equipment may cause vibration, noise, heat or cold which may be
transmitted throughout the Premises. Landlord shall have no obligation to
endeavor to reduce such vibration, noise, heat or cold beyond what is prevalent
in the Building.
ARTICLE 12
HEATING, VENTILATION AND AIR CONDITIONING
SECTION 12.01 Landlord, at Landlord's expense (except as may be set forth
in Article 13), shall furnish and distribute to the Premises, through the
Building heating, ventilating and air conditioning systems, heat, ventilating
and air conditioning, as may be required for reasonably comfortable occupancy of
the Premises during business hours and on business days. Landlord and Tenant
further agree to operate the heating, ventilating and air conditioning equipment
in accordance with their designs criteria unless a recognized energy or water
conservation program, guidelines, regulations or recommendations promulgated by
any Federal, State, City or other govermental or quasi-governmental bureau,
board, department, agency, office, commission or other subdivision thereof or
the American Society of Heating, Refrigeration and Air-Conditioning Engineers,
Inc. or any successor thereto or other organization serving a similar function
shall provide for any reduction in operations below said design criteria in
which case such equipment shall be operated so as to provide reduced service in
accordance with such program, guidelines, regulations or recommendations.
SECTION 12.02 If Tenant shall require heating, ventilating or air
conditioning service at any time other than during business hours on business
days ("after hours"), Landlord shall furnish the same upon advance notice from
Tenant, given prior to 2.00 P.M. on any business day on which Tenant requires
such after hours heating, ventilating or air conditioning or if Tenant shall
desire heating, ventilation or air conditioning on a day other than a business
day, Landlord shall furnish the same upon advance notice from Tenant given prior
to 2.00 P.M. on the last business day to occur prior to such non-business day,
and Tenant shall pay Landlord's then established charges therefor as Additional
Rent on demand. If any of the other tenants shall request and receive heat after
hours or other tenants on the same floor shall request and receive air
conditioning after hours at the same time as Tenant, only that equitably pro-
rated portion of the charge made by Landlord for such service shall be allocated
to Tenant.
SECTION 12.03. Tenant acknowledges that it has been advised that the
Building has sealed windows and that the Premises may become uninhabitable
during hours or days when Landlord is not required to furnish heat, ventilation
or air conditioning pursuant to this Article 12. Any use or occupancy of the
Premises during such hours or days when Landlord is not so required to furnish
heating, ventilating or air conditioning shall be at the sole risk,
responsibility and hazard of Tenant. Landlord shall have no ability to Tenant
with respect to such condition of the Premises. In addition, Landlord shall not
be responsible if the normal operation of the Building heating or ventilating
system or the air conditioning system serving the Premises shall fail to
provide such service in accordance with the requirements of this Lease in any
portions of the Premises (a) which shall have an electrical load in excess of
3 1/2 watts per square foot of usable area for all purposes (including lighting
and power) or which shall have a human occupancy factor in excess of one person
per 100 square feet of usable area or (b) because of any rearrangement of
partitioning or other Improvements. Tenant shall cooperate fully with Landlord
at all times and abide by all regulations and requirements which Landlord may
reasonably prescribe for the proper functioning and protection of the heating,
ventilating and air conditioning systems. Tenant understand that any subsequent
rearrangement of partitioning after initial installation which interferes with
normal operation of said systems of the use of computer or data processing
machines or other machines and equipment may require changes or alterations in
said systems or in the ducts through which the same operate, and Tenant
according covenants and agrees that any changes so occasioned shall be made only
with Landlord's prior consent and shall be done in accordance with the
provisions of Article 10.
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ARTICLE 13
ELECTRICITY
SECTION 13.01 Landlord shall install in the Building and the Premises, in
accordance with the provisions of the Work Letter and the Plans and
Specifications (as defined in the Work Letter) approved by Landlord, such
electrical risers, feeders and wiring as shall be necessary to permit Tenant to
receive electrical energy for (a) Tenant's reasonable use of normal office
equipment and such lighting, electrical appliances and other machines and
equipment as Landlord may reasonably permit to be installed in the Premises and
(b) the operation of the heating, ventilating and air conditioning system
serving the Premises; provided, however, in no event shall the electrical energy
required by Tenant for such uses exceed the capacities set forth on Schedule A
of the Work Letter.* Landlord will permit the electrical risers, feeders and
wiring in the Building serving the Premises to be used by Tenant to the extent
that they are available, suitable, safe and within the plan and design
capacities for the Building.
SECTION 13.02 Tenant's use of electrical energy shall never exceed the
capacity of the then existing feeders to the Building or the then existing
risers or wiring installation, in each case, as properly allocable to the
Premises based on square foot area. In order to insure that such electrical
capacity is not exceeded and to avert possible adverse effect upon the
Building's electrical system, Tenant shall not, without the prior consent of
Landlord, make or perform or permit any alteration to wiring installations or
other electrical facilities in or serving the Premises or any additions to the
electrical fixtures, business machines or office equipment or appliances (other
than typewriters and similar low energy consuming office machines) in the
Premises which utilize electrical energy. 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 10 days after being
billed therefor, provided that Landlord shall not be obligated to consent to any
such alteration or installation if, in Landlord's judgement, the same are
unnecessary or will cause permanent damage or injury to the Building or the
Premises or will cause or create a hazardous condition or entail excessive or
unreasonable alterations, repairs or expense or interfere with or disturb other
tenants. Rigid conduit only will be allowed or such other wiring or conduit
which will not violate any applicable Legal Requirements.
SECTION 13.03 Landlord shall have no liability to Tenant for any loss,
damage or expense which Tenant may sustain or incur by reason of any change,
failure, inadequacy or defect in the supply or character of the electrical
energy furnished to the Premises or if the quantity or character of the
electrical energy is no longer available or suitable for Tenant's requirements,
except for any actual damage suffered by Tenant by reason of any such failure
inadequacy or defect caused by Landlord's negligence, and then only after actual
notice as provided in Section 11.02.
SECTION 13.04 Landlord shall furnish and install all lighting, tubes,
lamps, starters, bulbs and ballast required in the Premises and Tenant shall pay
to Landlord or its designated contractor the then established charges therefor
as Additional Rent on demand except that any such items installed at the
commencement of the Term for building standard fixtures shall be at Landlord's
sole cost and expense.
SECTION 13.05 If pursuant to a Legal Requirement or the policies of the
public utility company servicing the Building**,/ no longer permitted to
obtain electrical energy***/ Landlord will furnish electrical energy to the
Premises either, at Landlord's option, on a submetering basis or a rent
inclusion basis. Landlord shall give Tenant notice at least 30 days prior to the
date on which Landlord shall commence furnishing electrical energy to the
Premises (unless such notice is not feasible under the circumstances in which
event Landlord will give Tenant such reasonable notice as is possible), which
notice will set forth the method chosen by Landlord for furnishing electrical
energy to the Premises and the terms on which Landlord will so furnish
electrical energy. In the event that Tenant disputes any of such terms, Tenant
shall so notify Landlord within 30 days after the giving of Landlord's notice
and in the event that such dispute is not resolved by Landlord and Tenant within
30 days after the giving of Tenant's notice, Tenant shall, within 30 days after
expiration of such 30-day period, submit such dispute to arbitration in
accordance with Article 28. Pending the determination of such dispute, Tenant
shall comply with all of the terms set forth in Landlord's notice without
prejudice to Tenant's position. If such dispute is ultimately determined in
Tenant's favor, Landlord shall
20
* See Section 46.11
** Tenant is
*** in the manner provided in Section 13.01,
<PAGE>
promptly after such determination pay Tenant any amount overpaid by Tenant for
electrical energy furnished to the premises by Landlord during such period.
Landlord, at Tenant's expense, shall make all alterations and install all wiring
and equipment necessary to enable the Landlord to furnish electrical energy to
the Premises. Landlord, at its option, before commencing any such work to be
paid for by Tenant or at any time thereafter, may require Tenant to furnish to
Landlord such security, whether by surety bond in form and amount and issued by
a corporation licensed to do business in New York State satisfactory to Landlord
or otherwise, as Landlord shall deem necessary to assure the payment for such
work by Tenant.
ARTICLE 14
CLEANING AND OTHER SERVICES
SECTION 14.01 A. Provided Tenant shall keep the Premises in good order,
Landlord shall cause the Premises including the windows thereof (subject to
Tenant maintaining unrestricted access to such windows), but excluding any
portions of the Premises used for the storage, preparation, service or
consumption of food or beverages, to be cleaned, substantially in accordance
with the standards set forth in Exhibit D. Tenant shall pay to Landlord as
Additional Rent on demand Landlord's charges for (a) cleaning work in the
Premises or the Building required because of (i) misuse or neglect on the part
of Tenant or its agents, employees, contractors, licensees or invitees (ii) use
of portions of the Premises for the storage, preparation, service or consumption
of food or beverages reproduction, data processing or computer operations,
private lavatories or toilets or other special purposes requiring greater or
more difficult cleaning work than office areas, (iii) interior glass surfaces,
(iv) non-Building Standard materials or finishes installed by Tenant or at its
request, (v) increases in frequency or scope in any of the items set forth in
Exhibit D as shall have been requested by Tenant, and (b) removal from the
Premises and the Building of (i) so much refuse and rubbish of Tenant as shall
exceed that normally accumulated in the daily routine of ordinary business
office occupancy and (ii) all of the refuse and rubbish of Tenant's machines and
of any eating facilities requiring special handling and (c) additional cleaning
work in the Premises or the Building required because of the use of the Premises
by Tenant after hours. Landlord and its cleaning contractor and their employees
shall have access to the Premises at all times except between 8:00 A.M. and 5:30
P.M. on business days and, to the extent that it will not unreasonably interfere
with the operation of Tenant's business during business hours. Landlord and its
cleaning contractor and their employees shall have the use of Tenant's light
power and water in the Premises, without charge therefor, as may be reasonably
required for the purpose of cleaning the Premises. If Tenant is permitted
hereunder to and does have a separate area for the storage preparation, service
or consumption of food or beverages in the Premises, Tenant, at its sole cost
and expense shall cause all portions of the Premises so used to be cleaned daily
in a manner satisfactory to Landlord and to be exterminated regularly and, in
addition, whenever there shall be evidence of any infestation.
B. The cleaning services required to be furnished by Landlord pursuant to
this Section may be furnished by a contractor or contractors employed by
Landlord and Tenant agrees that Landlord shall not be deemed default of any of
its obligations under this Section unless such default shall continue for an
unreasonable period of time after notice from Tenant to Landlord setting forth
the specific nature of such default.
SECTION 14.02 Landlord, at Landlord's expense, shall furnish necessary
elevator service on business during business hours and shall have an elevator
subject to call at all other times. Landlord shall not be required to furnish
any operator service for automatic elevators. If Landlord shall, at any time,
elect to furnish operator service for any automatic elevators, Landlord shall
have the right to discontinue furnishing such service. In the event Tenant shall
require the use of the Building's elevators for purposes not otherwise supplied
by Landlord after hours. Landlord shall provide a service elevator or passenger
elevator, as the case may be, for the use of Tenant, provided Tenant gives
Landlord reasonable notice of the time and use of such elevators to be made
Tenant and Tenant pays Landlord's usual and reasonable charges for the use
thereof as Additional Rent demand, including, without limitation, any expense
for operator service for such elevator which Landlord may deem necessary in
connection with Tenant's use of such elevator. Landlord shall have the right to
change operation or manner of operating any of the elevators in the Building and
shall have the right to discontinue temporarily or permanently, the use of any
one or more cars in any of these banks of elevators provided reasonable elevator
service is provided to the Premises.
SECTION 14.03 Landlord shall supply reasonably adequate quantities of hot
and cold water to a point or points in the Premises for ordinary lavatory,
cleaning and drinking purposes. If Tenant requires, uses or consumes water for
any other purpose, Landlord may install a water meter and measure Tenant's
consumption of water for
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purposes. Tenant shall pay Landlord the cost of any such meter and its
installation and the cost of keeping such meter and any such installation
equipment in good working order and repair as Additional Rent on demand. Tenant
agrees to pay for water consumed as shown on said meter and all sewer and any
other rent, tax, levy or charge based thereon which now or hereafter is
assessed, imposed or a lien upon the Premises or the Building, as and when bills
are rendered.
SECTION 14.04 Landlord reserves the right to stop, interrupt or reduce
service of the heating, ventilating or air conditioning systems, elevator,
electrical energy, or plumbing or any other service or systems, because of Force
Majeure, Legal Requirements or Insurance Requirements or for repairs or
improvements, which, in the judgment of Landlord, are desirable or necessary,
until the reason for such stoppage has been eliminated. Landlord shall have no
liability to Tenant for failure to supply any such service or system during
such period. Landlord agrees, however, that any such repairs, alterations and
improvements shall be made with a minimum amount of inconvenience to Tenant and
that Landlord will diligently proceed therewith to completion, subject to Force
Majeure.
SECTION 14.05 Only Landlord or one or more persons approved by Landlord
will be permitted to furnish laundry, linen, towels, drinking water, ice, food,
beverages, bootblacking, barbering and other similar supplies and services to
tenants. Landlord may fix the hours during which and the regulations under which
such supplies and services are to be furnished. Landlord expressly reserves the
right to act as or to designate, at any time and from time to time, an exclusive
supplier of all or any one or more of said supplies and services, provided that
the quality therof and the charges therefor are reasonably comparable to that of
other suppliers; and Landlord furthermore expressly reserves the right to
exclude from the Building any person attempting to furnish any of said supplies
or services but not so designated by Landlord. However, Tenant, its regular
office employees, or invitees may personally bring food or beverages into the
Building for consumption within the Premises solely by Tenant, its regular
office employees or invitees. In all events, all food and beverages shall be
carried in closed containers.
SECTION 14.06 Only Landlord or one or more persons approved by Landlord
shall be permitted to act as maintenance contractor for all waxing, polishing,
lamp replacement, cleaning and maintenance work in the Premises, provided that
the quality thereof and the charges therefor are reasonably comparable to that
of other contractors servicing a first class office building with retail
space. Nothing herein contained shall prohibit Tenant from performing such work
for itself by use of its own regular employees. Landlord may fix the hours
during which and regulations under which such services are to be furnished.
Landlord expressly reserves the right to act as or to designate, at any
time and from time to time, an exclusive contractor for all or any one or more
of said services, provided that the quality thereof and the charges therefor are
reasonably comparable to that of other contractors: and Landlord furthermore
expressly reserves the right to exclude from the Building any person
attempting to furnish any of said services but not so designated by Landlord.
SECTION 14.07 Landlord will not be required to furnish any services,
including window or other cleaning services, except as otherwise provided in
Articles 12 and 14 and Sections 13.04 and 13.05.
ARTICLE 15
DAMAGE TO OR DESTRUCTION OF THE PREMISES
SECTION 15.01 If the Premises or any part thereof shall be damaged or
rendered Untenantable by fire or extended coverage peril and Tenant gives prompt
notice thereof to Landlord and this Lease is not terminated pursuant to any
provision of this Article, Landlord shall proceed, with reasonable diligence
after the collection of the insurance proceeds attributable to such damage, to
repair or cause to be repaired such damage to the Basic Construction of the
Building and Landlord's Work. All other repairs required by reason of such
casualty shall be performed by Tenant, at its sole cost and expense, promptly
and with due diligence. Except as provided in Section 15.07, the rent shall be
equitably abated to the extent that the Premises shall have been rendered
Untenantable, such abatement to be from the date of such damage to the date the
Premises shall no longer be Untenantable; provided, however, should Tenant
reoccupy a portion of the Premises during the period the repair work is taking
place and prior to the date the Premises are no longer Untenantable, the rent
allocable to such reoccupied portion based upon the proportion which the
reoccupied portion of the Premises bears to the total area of the Premises,
shall be payable by Tenant from the date of such occupancy.
SECTION 15.02 If the Premises shall be totally damaged or rendered
wholly Untenantable by fire or other casualty, and Landlord has not terminated
this Lease pursuant to Section 15.03 and Landlord has not*/ completed
*See Section 46.12
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the making of the required repairs to the Premises and access thereto within 6
months from the date of such damage or destruction and such additional time
after such date (but in no event to exceed 6 months), as shall equal the
aggregate period Landlord may have been delayed in doing so by Force Majeure or
adjustment of insurance, Tenant, within 30 days after the date on which Landlord
is required to complete the repairs pursuant to this Section, may serve notice
on Landlord of its intention to terminate this Lease, and if 30 days thereafter
Landlord shall not have completed the making of the required repairs, this Lease
shall terminate on the expiration of such 30 days period as if such termination
date were the Expiration Date without prejudice, however, to Landlord's rights
and remedies against Tenant under the terms of this Lease.
SECTION 15.03 If the Premises shall be totally damaged or rendered wholly
Untenantable by fire or other casualty or if the Building shall be so damaged by
fire or other substantial alteration or reconstruction of the Building shall, in
Landlord's sole opinion, be required (whether or not the Premises shall have
been damaged by such fire or other casualty), then in any such event Landlord
may, at its option, terminate this Lease, by giving Tenant 30 days' notice of
such termination, within 90 days after the date of such fire or other casualty.
In the event that such notice of termination shall be given, this Lease shall
terminate as of the date provided in such notice of termination (whether or not
the Term shall have commenced) with the same effect as if that date were the
Expiration Date without prejudice, however, to Landlord's rights and remedies
against Tenant under the terms of this Lease. If, at any time prior to Landlord
giving Tenant the aforesaid notice of termination or commencing the repair
pursuant to Section 15.01, there shall be a Successor Landlord, such Successor
Landlord shall have a further period of 60 days from the date of so taking
possession to terminate this Lease by 30 days' notice to Tenant and in the event
that such a notice of termination shall be given, this Lease shall termination
as of the date provided in such 30 day notice of termination (whether or not the
Term shall have commenced) with the same effect as if that date were the
Expiration Date without prejudice, however, to Landlord's (or Successor
Landlord's) rights against Tenant under the terms of this Lease.
SECTION 15.04 Landlord shall not be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting in any way
from any such damage by fire or other casualty or the repair thereof Landlord
will not carry insurance of any kind on Tenant's Property or any Improvements
made Tenant's sole cost and expense, and Landlord shall not be obligated to
repair any damage thereto or replace the same.
SECTION 15.05 Except as expressly provided in Section 8.06, nothing herein
contained shall relieve Tenant from any liability to Landlord or to its
insurers in connection with any damage to the Premises or the Building by fire
or other casualty if Tenant shall be legally liable in such respect.
SECTION 15.06 This Article shall be considered an express agreement
governing any case of damage to or destruction of the Building or any part
thereof by fire or other casualty, and Section 227 of the Real Property Laws of
the Sate of New York providing for such a contingency in the absence of such
express agreement, and any other law of like import now or hereafter enacted,
shall have no application in such case.
SECTION 15.07 Notwithstanding any of the foregoing provisions of this
Article, if, by reason of some action or inaction on the part of Tenant or any
of its employees, agents, licensees or contractors, either (a) Landlord or the
Superior Lessor, the Superior Mortgagee or the Fee Mortgagee shall be unable to
collect all of the insurance proceeds (including rent insurance proceeds)
applicable to damage or destruction of the Premises or the Building by fire or
other casualty or (b) the Premises or the Building shall be damaged or destroyed
or rendered complete or partially Untenantable on account of fire or other
casualty then, without prejudice to any other remedy which may be available
against Tenant, the abatement of rent provided for in this Article shall not be
effective to the extent of the uncollected insurance proceeds.
ARTICLE 16
EMINENT DOMAIN
SECTION 16.01 A. If the whole of the Real Property or the Premises shall
be acquired or condemned eminent domain for any public or quasi-public use or
purpose, this Lease shall terminate as of the date of vesting or acquisition of
title in the condemning authority with the same effect as if said date were the
Expiration Date. If only a part of the Premises shall be so acquired or
condemned then, except as otherwise provided in this Article, this Lease shall
continue in force and effect but, from and after the date of the vesting of
title, the Fixed Rent shall be an amount which bears the same ratio to the
Fixed Rent payable immediately prior to such condemnation as the value of the
untaken portion of the Premises (appraised after the taking and repair of any
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damage to the Building pursuant to this Section) bears to the value of the
entire Premises immediately before the taking and any Additional Rent payable
shall be adjusted to reflect the diminution of the Premises. The value of the
Premises before and after the taking shall be determined for the purposes of
this Section by an independent appraiser chosen jointly by Landlord and Tenant.
Pending such determination, Tenant shall pay to Landlord rent as fixed by
Landlord, subject to adjustment after such determination.
B. If only a part of the Real Property shall be so acquired or condemned,
then (i) whether or not the Premises shall be affected, Landlord, at Landlord's
sole option, may give to Tenant within 60 days following the date upon which
Landlord shall have received notice of vesting of title, 30 days' notice of
termination of this Lease, or (ii) if part of the Building is so acquired or
condemned and shall contain more than 25% of the total area of the Premises
immediately prior to such acquisition or condemnation and the balance of the
Premises is thereby rendered Untenantable, or if, by reason of such acquisition
or condemnation, Tenant no longer has reasonable means of access to the
Premises, Tenant, at Tenant's sole option, within 60 days following the date
upon which Tenant shall have received notice of vesting of title, may give to
Landlord 30 days' notice of termination of this Lease. In the event any such 30
day notice of termination if given by Landlord or Tenant, this Lease shall
terminate upon expiration of said 30 days with the same effect as if that date
were the Expiration Date without prejudice, however, to Landlord's rights
against Tenant under the terms of this Lease in effect prior to such
termination. If a part of the Premises shall be so acquired or condemned, and
this Lease shall not be terminated pursuant to the provisions of this Section,
Landlord, at Landlord's expense, shall proceed with reasonable diligence after
collection of the condemnation award, to restore that part of the Premises not
so acquired or condemned to a self-contained rental unit; provided, however,
that Landlord shall not be required to spend for such restoration any amount in
excess of the amount of such award or compensation actually received by Landlord
as damages for the acquisition or condemnation of such part of the Premises. In
the event of any termination of this Lease pursuant to the provisions of this
Section, the rent shall be apportioned as of the date of sooner termination and
any prepaid portion of rent for any rent for any period after such date shall be
refunded by Landlord to Tenant.
SECTION 16.02 In the event of any such acquisition or condemnation of all
or any part of the Real Property Landlord shall be entitled to receive the
entire compensation or award for any such acquisition or condemnation. Tenant
shall have no claim against Landlord or the condemning authority for the value
of any unexpired portion of the Term or for Tenant's leasehold interest and
Tenant hereby expressly assigns to Landlord all of its right, title and interest
in and to any such award, and also agrees to execute any and all further
documents that may be required in order to facilitate the collection thereof by
Landlord. Nothing contained in this Section shall be deemed to prevent Tenant
from making a separate claim in any condemnation proceeding for any moving
expenses or for the value of any Tenant's Property which would be removable at
the end of the Term pursuant to the provisions of Article 10, but only if such
award shall be made by the condemnation court in addition to, and shall not
result in a reduction of, the award made by it for the Real Property and the
Building Equipment so taken.
SECTION 16.03 If the temporary use or occupancy of all or any part of the
Premises shall be condemned or taken for any public or quasi-public use or
purpose during the Term, this Lease and the Term shall be and remain unaffected
by such condemnation or taking and Tenant shall continue responsible for all of
its obligation hereunder (except to the extent prevented from so doing by reason
of such condemnation or taking) and it shall continue to pay the rent in full.
In the event of any such condemnation or taking, Tenant shall be entitled to
appear, claim, prove and receive the entire award unless the period of temporary
use or occupancy extends beyond the Expiration Date, in which event Landlord
shall be entitled to appear, claim, prove and receive the entire award as
represents the cost of restoration of the Premises and the balance of any such
award shall be apportioned between Landlord and Tenant as of the Expiration
Date. At the termination of such occupancy prior to the Expiration Date, Tenant,
at its own expense, will restore the Premises as nearly as possible to their
condition prior to the condemnation or taking. Notwithstanding the foregoing,
any lump sum award received by Tenant as compensation for temporary use and
occupancy of the Premises shall be delivered to and held by Landlord in trust
for the making of rent payments. The rights and interests of Landlord and Tenant
to any award received or receivable with respect to a condemnation or taking for
temporary use or occupancy shall be in all other respects governed by the
applicable provisions of the Superior Lease and the Superior Mortgage and in
event of any conflict between the terms of this Section and of the Superior
Lease and the Superior Mortgage, those of the Superior Lease and the Superior
Mortgage shall govern.
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SECTION 16.04 If the grade of any street upon which the Real Property is
situated or abuts shall be changed by any competent authority, this Lease and
the Term shall nevertheless continue in full force and effect, and Landlord
shall be entitled to collect from such authority the entire award or
compensation that may be made in such proceedings. Tenant hereby expressly
assigns to Landlord all of its right, title and interest in and to every such
award or compensation and agrees to execute any and all further documents that
may be required in order to facilitate the collection thereof by Landlord.
SECTION 16.05 The terms "condemnation" and "acquisition" as used herein
shall include any agreement in lieu of or in anticipation of the exercise of the
power of eminent domain between the Superior Lessor or Landlord and any
governmental authority authorized to exercise the power of eminent domain. In
the event that there shall be any dispute between Landlord and Tenant arising
out of provisions of this Article, such dispute shall be settled by arbitration
pursuant to Article 28.
SECTION 16.06 Should any part of the Premises be taken to effect
compliance with any Legal Requirement other than in the manner hereinabove
provided in this Article, then if such compliance is the obligation of Tenant,
Tenant shall not be entitled to any diminution or abatement of rent or other
compensation from Landlord therefor, but if such compliance is the obligation of
Landlord, the rent shall be equitably adjusted in the manner provided in Section
16.01.
ARTICLE 17
CONDITIONS OF LIMITATION
SECTION 17.01 This Lease and the Term and estate hereby granted are
subject to the limitations that:
(a) if Tenant shall file a voluntary petition in bankruptcy or
insolvency, or shall be adjudicated bankrupt or insolvent, or shall file
any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
the present or any future federal bankruptcy act or any other present or
future applicable federal, state or other statute or law (foreign
domestic), or shall make an assignment for the benefit of creditors or
shall seek or consent or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any part of Tenant's
Property; or
(b) if, within 90 days after the commencement of any proceeding
against Tenant, whether by the filing a petition or otherwise, seeking
any reorganization, arrangement, composition, readjustment, liquidation
dissolution or similar relief under any present or future federal
bankruptcy act or any other present or future applicable federal, state or
other statute or law (foreign or domestic), such proceeding shall not have
been dismissed, or if, within 90 days after the appointment of any trustee,
receiver or liquidator of Tenant or of all or any part of Tenant's
Property, without the consent or acquiescence of Tenant, such appointment
shall not have been vacated or otherwise discharged, or if any execution or
attachment shall be issued against Tenant or any of Tenant's Property
pursuant to which the Premises shall be taken or occupied or attempted to
taken or occupied; or
(c) if Tenant shall default in the payment when due of any installment
of Fixed Rent or in the payment when due of any Additional Rent, and such
default shall continue for a period of 10 days after notice that such rent
is due
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(d) if Tenant shall default in the performance of any term of this
Lease on Tenant's part to be performed (other than the payment of Fixed
Rent and Additional Rent) and Tenant shall fail to remedy such default
within 30 days after notice by Landlord to Tenant of such default, or if
such default is of such a nature that it cannot be completely remedied
within said period of 30 days if Tenant shall not (x) promptly upon the
giving by Landlord of such notice, advise Landlord of Tenant's intention to
institute all steps necessary to remedy such situation, (y) promptly
institute and thereafter diligently prosecute to completion all steps
necessary to remedy the same, and (z) complete such remedy within a
reasonable time after the date of the giving of said notice by Landlord and
in any event prior to such time as would either (i) subject Landlord,
Landlord's agents, the Superior Lessor, the Superior Mortgagee or the Fee
Mortgagee to prosecution for a crime or (ii) cause a default under the
Superior lease or the Superior Mortgage; or
(e) if any event shall occur or any contingency shall arise whereby
this Lease or the estate hereby granted or the unexpired balance of the
Term would, by operation of law or otherwise, devolve upon or pass to any
person other than Tenant except as is expressly permitted under Article 22;
or
(f) if the Premises shall become abandoned for a period of 10
consecutive days or if Tenant shall fail to take occupancy of the Premises
within 30 days after the Commencement Date; or
(g) if Tenant shall default in the performance of any term, covenant,
agreement or condition on Tenant's part to be observed or performed under
any other lease with Landlord of space in the Building and such default
shall continue beyond the grace period, if any, set forth in such other
lease for the remedying of such default,
then in any of said events Landlord may give to Tenant notice of intention to
terminate this Lease and to end the term and the estate hereby granted at the
expiration of 5 days from the date of the giving of such notice, and in the
event such notice is given, this Lease and the Term and estate hereby granted
(whether or not the Term shall have commenced) shall terminate upon the
expiration of said 5 days with the same effect as if that day were the
Expiration Date, but Tenant shall remain liable for damages as provided in
Article 18.
However, if Tenant shall default (i) in the timely payment of Fixed Rent or
Additional Rent, and any such default shall continue or be repeated for 2
consecutive months or for a total of 4 months in any period of 12 months or
(ii) more than 3 times in any period of 6 months, in the performance of any
other term of this Lease to be performed by Tenant, then, notwithstanding that
such defaults shall have each been cured within the applicable period, if any,
as above provided, any further similar default shall be deemed to be deliberate
and Landlord thereafter may serve the said 3 days' notice of termination upon
Tenant without affording to Tenant an opportunity to cure such further default.
SECTION 17.02 Nothing in Section 17.01 shall be deemed to require Landlord
to give the notices therein provided for prior to the commencement of a summary
proceeding for nonpayment of rent or a plenary action for the recovery of rent
on account of any default in the payment of the same, it being intended that
such notices are for the sole purpose of creating a conditional limitation
hereunder pursuant to which this Lease shall terminate and if Tenant thereafter
remains in possession or occupancy, it shall become a holdover tenant.
SECTION 17.03 If, at any time, (a) Tenant shall be comprised of two or more
persons, or (b) there is a Guarantor of any Tenant's obligations under this
Lease, or (c) Tenant's interest in this Lease shall have been assigned, the word
"Tenant", as used in Subsections (a) and (b) of Section 17.01 and this Section
17.03, shall mean any one or more of the persons primarily or secondarily liable
for Tenant's obligations under this Lease.
SECTION 17.04 If the notice provided for in Section 17.01 shall have been
given and this Lease shall be terminated or if the Premises shall be or become
vacant, deserted or abandoned; then, in any such event Landlord may without
notice terminate all services.
ARTICLE 18
RE-ENTRY BY LANDLORD; REMEDIES
SECTION 18.01 A. If Tenant shall default in the payment when due of any
installment of Fixed Rent or in payment when due of any Additional Rent and such
default shall continue for a period of 5 days after notice from Landlord to
Tenant of such default or if this Lease and the Term shall terminate as provided
in Article 17:
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(a) Landlord and Landlord's agents may immediately, or at any time
after such default or after the date upon which this Lease and the Term
shall terminate, re-enter the Premises or any part thereof, without notice,
either by summary proceedings or by any other applicable action or
proceeding, or by force or otherwise (without being liable to indictment,
prosecution or damages therefor), and may repossess the Premises and
dispossess Tenant and any other persons from the Premises and remove any
and all of its or their property and effects from the Premises, without
liability for damage thereto, to the end that Landlord may have, hold and
enjoy the Premises and in no event shall re-entry be deemed an acceptance
of surrender of this Lease; and
(b) Landlord, at its option, may relet the whole or any part or parts
of the Premises from time to time, either in the name of Landlord or
otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Expiration Date, at such rental or rentals and upon such
other conditions, which may include concessions and free rent periods, as
Landlord in its sole discretion may determine. Landlord shall have no
obligation to relet the Premises or any part thereof and shall in no event
be liable for refusal or failure to relet the Premises or any part thereof,
or, in the event of any such reletting, for refusal or failure to collect
any rent upon any such reletting, and no such refusal or failure shall
operate to relieve Tenant of any liability under this Lease of otherwise to
affect any such liability. Landlord, at Landlord's option, may make such
repairs, improvements, alterations, additions, decorations and other
physical changes in and to the Premises as Landlord, in its sole
discretion, considers advisable or necessary in connection with any such
reletting or proposed reletting, without relieving Tenant of any liability
under this Lease or otherwise affecting any such liability.
B. No such re-entry or taking possession of the Premises by Landlord
shall be construed as an election by Landlord to terminate this Lease, unless
Landlord gives written notice to Tenant of such election. In the event Landlord
relets the whole or any part or parts of the Premises pursuant to this Article
18 without terminating this Lease, Landlord may at any time thereafter elect to
terminate this Lease for such previous default.
SECTION 18.02 Tenant, on its own behalf and on behalf of all persons
claiming through or under Tenant, including all creditors, does hereby expressly
waive any and all rights, so far as is permitted by law, which Tenant and all
such persons might otherwise have to (a) the service of any notice of intention
to re-enter or to institute legal proceedings to that end, (b) redeem the
Premises or any interest therein, (c) re-enter or repossess the Premises, or (d)
restore the operation of this Lease, after Tenant shall have been dispossessed
by a judgement or by a warrant of any court or judge, or after any re-entry by
Landlord, or after any termination of this Lease, whether such dispossess, re-
entry by Landlord or termination shall be by operation of law or pursuant to the
provisions of this Lease. The word "re-enter", "re-entry" and "re-entered" as
used in this Lease shall not be deemed to be restricted in their technical legal
meanings.
SECTION 18.03 In the event of any breach or threatened breach by Tenant or
any person claiming through or under Tenant of any of the terms of this Lease,
Landlord shall be entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right allowed at law or in equity, by statute or
otherwise, as if re-entry, summary proceedings or other specific remedies were
not provided for in this Lease.
SECTION 18.04 If this Lease shall terminate as provided in Article 17, or
by or under any summary proceeding or any other action or proceeding, or if
Landlord shall re-enter the Premises as provided in this Article, or by or under
any summary proceeding or any other action or proceeding, then, in any of said
events:
(a) Tenant shall pay to Landlord all rent to the date upon which this
Lease shall have been terminated or to the date of re-entry upon the
Premises by Landlord, as the case may be;
(b) Landlord shall be entitled to retain all monies, if any, paid by
Tenant to Landlord, whether as advance rent, security or otherwise, but
such monies shall be credited by Landlord against any rent due at the time
of such termination or re-entry or, at Landlord's option, against any
damages payable by Tenant;
(c) Tenant shall be liable for and shall pay to Landlord, as damages,
any deficiency between the rent payable hereunder for the period which
otherwise would have constituted the unexpired portion of the Term
(conclusively presuming the Additional Rent to be the same as was payable
for the year immediately preceding such termination or re-entry) and the
net amount, if any, of rents ("Net Rent") collected under any reletting
effected pursuant to the provisions of Section 18.01 for any part of such
period (first deducting from the rents collected under any such reletting
all of Landlord's expenses in connection with the termination of this Lease
or Landlord's re-entry upon the Premises and in connection with such
reletting including all
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repossession costs, brokerage commissions, legal expenses, alteration costs
and other expenses of preparing the Premises for such reletting);
(d) Any deficiency in accordance with subdivision (c) above shall be
paid in monthly installments by Tenant on the days specified in this Lease
for the payment of installments of Fixed Rent. Landlord shall be entitled
to recover from Tenant each monthly deficiency as the same shall arise and
no suit to collect the amount of the deficiency for any month shall
prejudice Landlord's right to collect the deficiency for any prior or
subsequent month by a similar proceeding. Alternatively, suit or suits for
the recovery of such deficiencies may be brought by Landlord from time to
time at its election;
(e) Whether or not Landlord shall have collected any monthly
deficiencies as aforesaid, Landlord shall be entitled to recover from
Tenant, and Tenant shall pay Landlord, on demand, as and for liquidated and
agreed final damages and not as a penalty, a sum equal to the amount by
which the Fixed Rent and Additional Rent payable hereunder for the period
to the Expiration Date from the latest of the date of termination of this
Lease, the date of re-entry or the date through which monthly deficiencies
shall have been paid in full (conclusively presuming the Additional Rent to
be the same as payable for the year immediately preceding such termination
or re-entry) exceeds the then fair and reasonable rental value of the
Premises for the same period, both discounted at the rate of 4% per annum
to present worth. If, before presentation of proof of such liquidated
damages to any court, commission or tribunal, the Premises, or any part
thereof, shall have been relet by Landlord for the period which otherwise
would have constituted the unexpired portion of the Term, or any part
thereof, the amount of rent upon such reletting shall be deemed, prima
facie, to be the fair and reasonable rental value for the part or the whole
of the Premises (as the case may be) so relet during the term of the
reletting; and
(f) In no event shall Tenant be entitled (i) to receive any excess of
any Net Rent under subdivision (c) over the sums payable by Tenant to
Landlord hereunder or (ii) in any suit for the collection of damages
pursuant to this Section, to a credit in respect of any Net Rent from a
reletting except to the extent that such Net Rent is actually received by
Landlord prior to the commencement of such suit. If the Premises or any
part thereof should be relet in combination with other space, then proper
apportionment on a square foot area basis shall be made of the rent
received from such reletting and the expenses of reletting.
SECTION 18.05 A. If this Lease be terminated as provided in Article 17 or
by or under any summary proceeding or any other action or proceeding, or if
Landlord shall re-enter the Premises, Tenant covenants and agrees,
notwithstanding anything to the contrary contained in this Lease:
(a) That the Premises shall be, upon such earlier termination or re-
entry, in the same condition as that iXX which Tenant has agreed to
surrender them to Landlord on the Expiration Date;
(b) That Tenant, on or before the occurrence of any event of default
hereunder, shall have performed every covenant contained in this Lease for
the making of any Improvement to the Premises or for repairing any part
thereof; and
(c) That, for the breach of either Subdivision (a) or (b) of this
Subsection, or both, Landlord shall be entitled immediately, without notice
or other action by Landlord, to recover, and Tenant shall pay, as and for
agreed damages therefor, the then cost of performing such covenants, plus
interest thereon at the Interest Rate for the period between the date of
the occurrence of any event of default and the date when any such work or
act, the cost of which is computed, should have been performed under the
other terms of this Lease had such event of default not occurred.
B. Each and every covenant contained in this Section shall be deemed
separate and independent, and not dependent on any other term of this Lease for
the use and occupation of the Premises by Tenant, and the performance of any
such term shall not be considered to be rent or other payment for the use of
said Premises. It is understood that the consideration for the covenants in this
Section is the making of this Lease, and the damages for failure to perform the
same shall be in addition to and separate and independent of the damages
accruing by reason of default in observing any other term of this Lease.
SECTION 18.06 Nothing herein contained shall be construed as limiting or
precluding the recovery by Landlord against Tenant of any sums or damages to
which, in addition to the damages particularly provided above, Landlord may
lawfully be entitled by reason of any default hereunder on the part of Tenant.
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SECTION 18.07 Each right of Landlord provided for in this Lease shall be
cumulative and shall be in addition to every other right provided for in this
Lease or now or hereafter existing at law or in equity, by statute or otherwise,
and the exercise or beginning of the exercise by Landlord of any one or more of
such rights shall not preclude the simultaneous or later exercise by Landlord
of any or all other rights provided for in this Lease or now or hereafter
existing at law or in equity, by statute or otherwise.
ARTICLE 19
CURING TENANT'S DEFAULTS; FEES AND EXPENSES
SECTION 19.01 If Tenant shall default in the performance of any term of
this Lease on Tenant's part to be performed, landlord, without thereby waiving
such default and without liability to Tenant in connection therewith, may, but
shall not be obligated to, perform the same for the account and at the expense
of Tenant, without notice in case of emergency and upon 5 days' prior notice in
all other cases. Landlord may enter the Premises at any time to cure any default
without any liability to Tenant. Bills for any expenses incurred by Landlord in
connection with any such performance or involved in collecting or endeavoring to
collect rent or enforcing or endeavoring to enforce any rights against Tenant
under or in connection with this Lease or pursuant to law, including any cost,
expense and disbursement involved in instituting and prosecuting summary
proceedings, as well as bills for any property, material, labor or services
provided, furnished or rendered, including reasonable attorney's fees and
disbursements, shall be paid by Tenant as Additional Rent on demand. In the
event that Tenant is in arrears in payment of rent, Tenant waives Tenant's
right, if any, to designate the items against which any payments made by Tenant
are to be credited and Landlord may apply any payments made by Tenant to any
items Landlord sees fit, irrespective of and notwithstanding any designation or
requests by Tenant as to the items against which any such payments shall be
credited. Landlord reserves the right, without liability to Tenant to suspend
furnishing to Tenant any services to be provided by Landlord pursuant to this
Lease,(including heat, ventilating and air conditioning), whenever Landlord is
obligated to furnish the same after hours or otherwise at Tenant's expense the
event that (but only for so long as) Tenant is in arrears in paying Landlord
therefor.
ARTICLE 20
NON-LIABILITY AND INDEMNIFICATION
SECTION 20.01 Neither Landlord nor Landlord's agents, officers, directors,
shareholders, partners or principals(disclosed or undisclosed) shall be liable
to Tenant or Tenant's agents, employees, contractors, invitees or licensees or
any other occupant of the Premises, and Tenant hereby indemnifies Landlord
against any loss, cost, liability, claim, damage, expense (including reasonable
attorney's fees and disbursement), penalty or fine incurred in connection with
or arising from any injury to Tenant or to any other person or for any damage
to, or loss, (by theft or otherwise) of, any of Tenant's Property or of the
property of any other person, irrespective of the cause of such injury, damage
or loss (including the acts or negligence of any tenant or of any owners or
occupants of adjacent or neighboring property or caused by operations in
construction of any private, public or quasi-public work) unless due to the sole
negligence of Landlord or Landlord's agents, it being understood that no
property other than such as might normally be brought upon or kept in the
Premises as incidental to the reasonable use of the Premises for the purposes
herein permitted will be brought upon or be kept in the Premises; provided,
however, that even if due to any such negligence of Landlord or Landlord's
agents, Tenant waives, to the full extent permitted by law, any claim for
consequential damages in connection therewith. Landlord and Landlord's agents
shall not be liable, to the extent of Tenant's insurance coverage, for any loss
or damage to any person or property even if due to the negligence of Landlord or
Landlord's agents. Any Building employee to whom any property shall be entrusted
by or on behalf of Tenant shall be deemed to be acting as Tenant's agent with
respect to such property and neither Landlord nor landlord's agents shall be
liable for any loss of or damage to any such property by theft or otherwise.
SECTION 20.02 Neither any (a) performance by landlord, Tenant or others of
any repairs, improvements, alterations, additions, installations, substitutions,
betterments or decorations in or to the Real property. Building Equipment or
Premises, (b) failure of Landlord or others to make any repairs or improvements,
(c) damage to the Building Equipment, Premises or Tenant's Property, (d) injury
to any persons, caused by other tenants or persons in the Building, or by
operations in the construction of any private, public or quasi-public work, or
by any other
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cause, (e) latent defect in the Building, Building Equipment or Premises, (f)
temporary covering or bricking up of any windows of the Premises for any reason
whatsoever including Landlord's own acts, nor any permanent covering or bricking
up of any such windows if required by any Legal Requirement or Insurance
Requirement or the Declaration, nor (g) inconvenience or annoyance to Tenant or
injury to or interruption of Tenant's business by reason of any of the events or
occurrences referred to in the foregoing subdivisions (a) through (f) shall
impose any liability on Landlord to Tenant (other than such liability as may be
imposed upon Landlord by law for Landlord's negligence or the negligence of
Landlord's agents in the operation or maintenance of the Building or the
Building Equipment or for the breach by Landlord of any express covenant of this
Lease on Landlord's part to be performed) nor shall Tenant be entitled to any
compensation therefor or abatement or diminution of rent nor shall the same
release Tenant from its obligations hereunder or constitute an eviction. No
representation, guaranty or warranty is made or assurance given that the
communications or security systems, devices or procedures of the Building will
be effective to prevent injury to Tenant or any other person or damage to, or
loss (by theft or otherwise) of, any of Tenant's Property or of the property of
any other person, and Landlord reserves the right to discontinue or modify at
any time such communications or security systems or procedures without liability
to Tenant.
SECTION 20.03 Tenant hereby indemnifies Landlord against liability in
connection with or arising from (a) any default by Tenant in the performance of
any of the terms of this Lease on Tenant's part to be performed, or (b) the use
or occupancy or manner of use or occupancy of the Premises by Tenant or any
person claiming under Tenant in violation of the provisions of this Lease, or
(c) any acts, omissions or negligence of Tenant (or of Tenant and Landlord) or
any such person, or the contractors, agents, employees, invitees or licensees of
Tenant or any such person, in or about the Premises or the Real Property either
prior to, during or after the expiration of, the Term. If any action or
proceeding shall be brought against Landlord or Landlord's agents, or the
Superior Lessor, the Superior Mortgagee or the Fee Mortgagee, based upon any
such claim and if Tenant, upon notice from Landlord, shall cause such action or
proceeding to be defended at Tenant's expense by counsel reasonably satisfactory
to Landlord, without any disclaimer of liability by Tenant in connection with
such claim, Tenant shall not be required to indemnify Landlord, Landlord's
agents, or the Superior Lessor, the Superior Mortgagee or the Fee Mortgagee for
attorneys' fees and disbursements in connection with such action or proceeding.
SECTION 20.04 Tenant shall pay to Landlord as Additional Rent, within 5
days following rendition by Landlord to Tenant of bills of statements therefor,
sums equal to all losses, costs, liabilities, claims, damages, fines, penalties
and expenses referred to in Section 20.03.
SECTION 20.05 The provisions of Sections 20.01 and 20.03 are subject to
the provisions of Sections 8.06 and 8.07 and in the event of any inconsistency
the provisions of 8.06 and 8.07 shall control.
ARTICLE 21
SURRENDER
SECTION 21.01 On the Expiration Date or upon the sooner termination of
this Lease or upon any re-entry by Landlord upon the Premises, Tenant shall, at
its sole cost and expense, quit, surrender, vacate and deliver the Premises to
Landlord "broom clean" and in good order, condition and repair except for
ordinary wear, tear and damage by fire or other insured casualty, together with
all Improvements and Fixtures (except as otherwise provided for in this Lease).
Tenant shall remove from the Real Property all of Tenant's Property and all
personal property and personal effects of all persons claiming through or under
Tenant, and shall pay the cost of repairing all damage to the Premises and the
Real Property occasioned by such removal. Any Tenant's Property or other
personal property which shall remain in the Premises after the termination of
this Lease shall be deemed to have been abandoned and either may be retained by
Landlord as its property or may be disposed of in such manner as Landlord may
see fit. If such Tenant's Property or other personal property or any part
thereof shall be sold, Landlord may receive and retain the proceeds of such sale
as the property of Landlord. Any expense incurred by Landlord in removing or
disposing of such Tenant's Property or other personal property shall be
reimbursed to Landlord by Tenant as Additional Rent on demand.
SECTION 21.02 If the Expiration Date or the date of sooner termination of
this Lease shall fall on a day which is not a business day, then Tenant's
obligations under Section 21.01 shall be performed on or prior to the
immediately preceding business day.
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SECTION 21.03 Tenant expressly waives, for itself and for any person
claiming through or under Tenant, any rights which Tenant or any such person may
have under the provisions of Section 22.01 of the New York Civil Practice Law
and Rules and of any similar or successor law of same import then in force, in
connection with any holdover proceedings which Landlord may institute to enforce
the provisions of this Article.
SECTION 21.04 If the Premises are not surrendered upon the termination of
this Lease, Tenant hereby indemnifies Landlord against liability resulting from
delay by Tenant in so surrendering the Premises, including any claims made by
any succeeding tenant or prospective tenant founded upon such delay.
SECTION 21.05 In the event Tenant remains in possession of the Premises
after the termination of this Lease without the execution of a new lease,
Tenant, at the option of Landlord, shall be deemed to be occupying the Premises
as a tenant from month to month, at a monthly rental equal to three times the
Fixed Rent and Additional Rent payable during the last month of the Term,
subject to all of the other terms of this Lease insofar as the same are
applicable to a month-to-month tenancy.
SECTION 21.06 Tenant's obligations under this Article shall survive the
termination of this Lease.
ARTICLE 22
ASSIGNMENT, MORTGAGING AND SUBLETTING
SECTION 22.01 Neither this Lease nor any part hereof nor the interest of
Tenant in any sublease or the rentals thereunder, shall by operation of law or
otherwise be assigned, mortgaged, pledged, encumbered or otherwise transferred
by Tenant, Tenant's legal representatives or successors in interest and neither
the Premises, nor any part thereof, nor any Tenant's Property shall be
encumbered in any manner by reason of any act or omission on the part of Tenant
or anyone claiming under or through Tenant, or shall be sublet or be used,
occupied or utilized for desk space or for mailing privileges by anyone other
than Tenant, without the prior consent of Landlord, except as expressly
otherwise provided in this Article. For purposes of this Article 22, (i) the
issuance of interests in Tenant, Guarantor or any subtenant (whether stock,
partnership interest or otherwise) to any person or group of related persons,
whether in a single transaction or a series of related or unrelated
transactions, in such quantities that after such instance such person or group
shall have control of Tenant, Guarantor or such subtenant, shall be deemed an
assignment of this Lease or such sublease, as the case may be, (ii) a transfer
of more than 50% in interest of Tenant, Guarantor or any subtenant (whether
stock, partnership interest or otherwise) by any party or parties in interest
whether in a single transaction or a series of related or unrelated transactions
shall be deemed an assignment of this Lease, or such sublease, as the case may
be, except that the transfer of the outstanding capital stock of any corporate
Tenant, Guarantor or subtenant, by persons or parties (other than persons or
parties owning 5% or more of the voting stock of such corporation) through the
"over-the-counter" market or any recognized national securities exchange, shall
not be included in the calculation of such 50%, (iii) a take-over agreement
shall be deemed an assignment of this Lease, (iv) any person or legal
representative or Tenant, to whom Tenant's interest under this Lease passes by
operation of law, or otherwise, shall be bound by the provisions of this Article
22, and (v) a modification, amendment or extension of a sublease shall be deemed
a sublease.*/ Any assignment, sublease, mortgage, pledge, encumbrance or
transfer by Tenant in contravention of this Article 22 shall be void. For the
purposes of clause (ii) of the preceding sentence, stock ownership shall be
determined in accordance with the principles set in Section 544 of the Internal
Revenue Code of 1954, as the same existed on August 16, 1954. If Tenant shall
assign this Lease or sublet the Premises or a portion thereof in accordance with
this Article 22, any such assignee or subtenant may use the Premises for
executive and administrative offices in connection with such assignee's or
sublessee's business, provided such use does not conflict with any Legal
Requirement, Insurance Requirement or any of the other terms of this Lease.
SECTION 22.02 If this Lease be assigned, whether or not in violation of
the terms to this Lease, Landlord may collect rent from the assignee. If the
Premises or any part thereof be sublet or be used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default by Tenant and expiration of Tenant's time to cure such default, if any,
collect rent from the subtenant or occupant. In either event, Landlord may apply
the net amount collected to the rent herein reserved. The consent by Landlord to
an assignment, transfer, encumbering or subletting pursuant to any provision of
this Lease shall not in any way be considered to relieve Tenant from obtaining
the express prior consent of Landlord to any other or further assignment,
transfer, encumbering or subletting. References in this Lease to use or
occupancy by anyone other than Tenant shall not be construed as limited to
subtenants and those claiming under or through subtenants but
*Notwithstanding the fact that a modification or amendment of a sublease is
deemed to be a sublease, the provisions of Sections 22.06A(c) and 22.06B shall
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not be applicable to any minor modification or amendment, and Landlord shall
not unreasonably withhold or delay its consent to any such minor modification
or amendment.
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as including also licensees and others claiming under Tenant, immediately or
remotely. The listing of any name other than that of Tenant on any door of the
Premises or on any directory or in any elevator in the Building, or otherwise,
shall not operate to vest in the person so named any right or interest in this
Lease or the Premises, or be deemed to constitute, or serve as a substitute for,
any consent of Landlord required under this Article, and it is understood that
any such listing shall constitute a privilege extended by Landlord, revocable at
Landlord's will by notice to Tenant. Tenant agrees to pay to Landlord reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proposed assignment of this Lease or any proposed subletting of the Premises or
any part thereof. Neither any assignment of this Lease nor any subletting,
occupancy or use of the Premises or any part thereof by any person other than
Tenant, nor any collection of rent by Landlord from any person other than
Tenant, nor any application of any such rent as provided in this Article shall,
under any circumstances be deemed a waiver of any of the provisions of Section
22.01 or, except as set forth in Section 22.04, relieve, impair, release or
discharge Tenant of its obligations fully to perform the terms of this Lease on
Tenant's part to be performed and Tenant shall remain fully and primarily liable
therefor; provided, however, that in the event that any amendment or
modification of this Lease is entered into without the consent of the Tenant
named herein subsequent to an assignment of this Lease by the Tenant named
herein (other than to a "related corporation" or "successor corporation", as
such terms are defined in Sections 22.03 and 22.04, respectively), which
amendment or modification increases the obligations of Tenant under this Lease,
the liability hereunder of the Tenant shall continue but only to the same extent
as if such amendment or modification had not been made.
SECTION 22.03 Tenant may permit any corporations or other business
entities which control, are controlled by, or are under common control with
Tenant (herein referred to as "related corporation") to sublet all or part of
the Premises for any of the purposes permitted to Tenant (subject however to
compliance with Tenant's obligations under this Lease), provided that (a) Tenant
shall not be in default in the performance of any of its obligations under this
Lease, (b) prior to such subletting Tenant furnishes Landlord with the name of
any such related corporation, together with a certification of Tenant, and such
other proof as Landlord may reasonably request, that such sublessee is a related
corporation of Tenant, (c) in the reasonable judgment of Landlord the proposed
subtenant is of a character such as is in keeping with the standards of Landlord
for the Building and (d) there shall be no rent payable to Tenant by any such
related corporation and Tenant shall certify to this effect prior to such
subletting. In connection with the information to be provided to Landlord
pursuant to this Section, Landlord shall have the right, at any reasonable time
and from time to time, to examine such books and records of Tenant as may be
necessary to establish that such subtenant remains a related corporation of
Tenant and that no rent is being paid to Tenant by such related corporation.
Such subletting shall not be deemed to vest in any such related corporation any
right or interest in this Lease or the Premises nor shall it relieve, release,
impair or discharge any of Tenant's obligations hereunder. For the purposes
hereof, "control" shall be deemed to mean ownership of not less than 50% of all
of the voting stock of such corporation or not less than 30% of all of the legal
and equitable interest in any other business entities.
SECTION 22.04 Tenant may assign or transfer its entire interest in this
Lease and the leasehold estate hereby created to a successor corporation of
Tenant (as hereinafter defined), provided that Tenant shall not be in default in
the performance of any of its obligations under this Lease. A "successor
corporation", as used in this Section, shall mean (a) a corporation into which
or with which Tenant, its corporate successors or assigns, is merged or
consolidated, in accordance with applicable statutory provisions for the merger
or consolidation of corporations, provided that by operation of law or by
effective provisions contained in the instruments of merger or consolidation
the liabilities of the corporations participating in such merger or
consolidation are assumed by the corporation surviving such merger or
consolidation, or (b) a corporation acquiring this Lease and the Term and the
estate hereby granted, the goodwill and all or substantially all of the other
property and assets (other than capital stock of such acquiring corporation) of
Tenant, its corporate successors or assigns, and assuming all or substantially
all of the liabilities of Tenant, its corporate successors and assigns, or
(c) any corporate successor to a successor corporation becoming such by either
of the methods described in subdivisions (a) and (b) above; provided that, (i)
such merger or consolidation, or such acquisition and assumption, as the case
may be, is for a good business purpose and not principally for the purpose of
transferring the leasehold estate created hereby, (ii) the guaranty of this
Lease by each Guarantor is in full force and effect, (iii) immediately after
giving effect to any such merger or consolidation or such acquisition and
assumption, as the case may be, the corporation surviving such merger or created
by such consolidation or acquiring such assets and assuming such liabilities, as
the case may be, shall have assets, capitalization and a net worth, as
determined in accordance with generally accepted accounting principles,
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certified to Landlord by an independent certified public accountant, at least
equal to the assets, capitalization and net worth, similarly determined, of
Tenant at the beginning of the Term or of Tenant, its corporate successors or
assigns, immediately prior to such merger or consolidation or such acquisition
and assumption, as the case may be, whichever is the greater and (iv)
immediately after giving effect to any such merger or consolidation, or such
acquisition and assumption, as the case may be, each Guarantor shall have
assets, capitalization and a net worth, as determined in accordance with
generally accepted accounting principles and certified to Landlord by an
independent certified public accountant, as least equal to the assets,
capitalization and net worth, similarly determined, of such Guarantor at the
beginning of the Term or of such Guarantor immediately prior to such merger or
consolidation or such acquisition and assumption, as the case may be, whichever
is greater. The acquisition by Tenant, its corporate successors or assigns, of
all or substantially all of the assets, together with the assumption of all or
substantially all of the obligations and liabilities of any corporation, shall
be deemed to be a merger for the purposes of this Article. Upon the delivery to
Landlord by any successor corporation to whom this Lease may be and is assigned
or transferred with the consent of Landlord pursuant to the provisions of this
Section, of the current balance sheet of such successor corporation, certified
by its chief financial officer or a certified public accountant, together with
the agreement of such corporation to assume all the terms of this Lease to be
performed by Tenant, and to be bound thereby, the corporation so assigning or
transferring this Lease shall thereafter be released and discharged from any
obligations thereafter arising under this Lease.
SECTION 22.05 No assignment made pursuant to Section 22.04 and no
assignment otherwise consented to by Landlord shall be valid unless, within 10
days after the execution thereof, Tenant shall deliver to Landlord a duplicate
original instrument of assignment and assumption in form and substance
reasonably satisfactory to Landlord, duly executed by Tenant and by the
assignee, in which such assignee shall assume performance of all terms of this
Lease on Tenant's part to be performed.
SECTION 22.06 A. Notwithstanding anything contained in Sections 22.01 and
22.02 to the contrary, but subject to the rights of Tenant under Sections 22.03
and 22.04, in the event that at any time Tenant desires to sublet all or any
part of the Premises or to assign its interest in this Lease, Tenant:
(a) shall submit to Landlord the name and address of the proposed
subtenant or assignee, a reasonably detailed description of such person's
business, reasonably detailed character and financial references for such
person (including its most recent balance sheet and income statements
certified by its chief financial officer or a certified public
accountant), a certification by Tenant that this Lease and Tenant's
Property are free of all liens and encumbrances and any other information
reasonably requested by Landlord;
(b) shall submit to Landlord (i) a conformed or photostatic copy of
the proposed assignment or sublease, the effective date of which shall be
at least 30 days after the date of the giving of such notice and which
shall be conditioned on Landlord's consent thereto and (ii) an agreement by
Tenant to indemnify Landlord against liability 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;
(c) in the case of a proposed sublease, shall be deemed to have
granted Landlord the option, to be exercised within 30 days after receipt
of all items to be submitted by Tenant pursuant to this Section 22.06A, to
sublet (or designate another party to sublet) from Tenant such space so
proposed to be sublet upon the terms and conditions hereinafter set forth;
See Section 46.13.
(d) in the case of a proposed assignment of this Lease, shall be
deemed to have granted Landlord the option, to be exercised within 30 days
after receipt of all items to be submitted by Tenant pursuant to this
Section 22.06A, to terminate this lease upon the terms and conditions
hereinafter set forth in Section 22.06B; and
(e) shall not offer such space for assignment or subletting to anyone
other than the proposed assignee or subtenant until 31 days have elapsed
after receipt by Landlord of all items to be submitted by Tenant pursuant
to this Section 22.06A.
B. If Tenant's request is for an assignment of this Lease or for a
subletting of the Premises as a whole or for a subletting in part for a term
which expires less than 1 year prior to the Expiration Date and which will leave
Tenant or its "successor corporation" and "related corporations" in possession
of less than 50% of the original Premises, Landlord may then, in addition to
Landlord's options contained in Subdivisions (c) and (d) or Subsection A, by
notice to such effect given to Tenant within 30 days after receipt of all items
to be submitted by
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Tenant pursuant to Section 22.06A, terminate this Lease in whole or as to the
part proposed to be sublet (as Landlord may elect) on a date to be specified in
said notice ("termination date") which shall be not earlier than 1 day before
the effective date of the proposed assignment or subletting nor later than 10
days after said effective date. Tenant shall then vacate and surrender the
Premises, or the part thereof proposed to be sublet (as Landlord may have
elected), on or before the termination date and the Term of this Lease as to the
entire Premises or the part thereof proposed to be sublet shall end on the
termination date as if that were the Expiration Date. Landlord shall be free to
and shall have no liability to Tenant if Landlord should lease the Premises (or
such part thereof) to Tenant's prospective assignee or subtenant. If a part of
the Premises is surrendered to Landlord pursuant hereto, Landlord, at Landlord's
sole cost and expense, shall make such alterations as may be required physically
to separate such surrendered space from the remainder of the Premises and to
comply with all Legal Requirements and Insurance Requirements and, shall repair
or restore to tenantable condition any part of the remainder of the Premises
which is physically affected by such separation; if necessary, Tenant shall
afford Landlord and its agents, tenants, undertenants or licensees reasonably
appropriate means of ingress and egress to and from such surrendered space; and
Landlord and Tenant shall execute and deliver a supplementary agreement
modifying this Lease, as of the day following such surrender, by eliminating
such surrendered space from the Premises, equitably reducing the rent allocable
to the remaining Premises and appropriately modifying the other terms of this
Lease to reflect the elimination of such surrendered space from the Premises.
C. In the event Landlord exercises Landlord's option to sublet such space
pursuant to Section 22.06A(c), such sublease by Tenant to Landlord (or its
designee) shall be at a rent equal to the lesser of (i) the rentals set forth in
the proposed sublease or (ii) the rents for the entire Premises, or equal to an
equitable apportionment of such rents if such sublease shall be in respect of
less than the whole of the Premises, and shall be for the same term as that of
the proposed subletting (but in no event for a term ending later than one day
prior to the Expiration Date). With respect to each sublease by Tenant to
Landlord pursuant to Section 22.06A(c) it is expressly agreed that:
(a) The sublease shall be expressly subject to all of the terms of
this Lease except such as are not relevant or applicable, and except as is
otherwise expressly set forth to the contrary in this Section;
(b) The sublease shall give Landlord (or, if Landlord requests, its
designee) the absolute right, without Tenant's permission, to assign such
sublease or any interest therein and/or to sublet the space covered by such
sublease or any part of such space. Tenant agrees that (i) any such
assignment or subletting by Landlord (or its designee) may be for any
purpose or purposes that Landlord (or its designee), in its absolute
discretion, shall deem appropriate, (ii) if the sublease is of less than
the entire Premises, Tenant, at Tenant's expense, shall at all times
provide and permit reasonably appropriate means of ingress to and egress
from such space so sublet by Tenant to Landlord (or its designee), and
(iii) at the expiration of the term of such sublease, Tenant will accept
the space covered by such sublease in its then existing condition, subject
to the obligation of Landlord (or its designee) to make such repairs
thereto as may be necessary to preserve such space in good order and
condition:
(c) The sublease shall provide that Landlord (or its designee) and any
assignee or subtenant of Landlord (or its designee) may, at Landlord's (or
such designee's) election, be permitted to make any and all improvements,
in such space or any part thereof and shall also provide in substance that
the same may be removed, in whole or in part, by Landlord (or its designee)
or such assignee or subtenant prior to or upon the expiration or other
termination of such sublease provided that Landlord (or its designee) or
such assignee or subtenant, at its expense, shall repair any damage and
injury to such space caused by such removal;
(d) The sublease shall also provide that the parties to such sublease
expressly negate any intention that any estate created under such sublease
be merged with any other estate held by either of said parties;
(e) If the sublease is for less than an entire floor it shall provide
that Landlord (or its designee), at Landlord's sole cost and expense, will
erect the partitions required to separate the portion of the Premises to be
sublet from the remainder of the Premises and will provide any doors
required to provide an independent means of access from the elevators
and/or staircase on the floor to the portion of the Premises to be sublet,
and shall install all other equipment or facilities which may be required
in order to use such sublet portion of the Premises as a unit separate from
the remainder of the floor;
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(f) Any consent required of Tenant, as the Landlord under the
sublease, shall be deemed granted if consent with respect thereto is
granted by Landlord under this Lease; and
(g) Any failure of Landlord (or its designee) to comply with the
provisions of the sublease, other than with respect to the payment of rent
to Tenant, shall not constitute a default thereunder or hereunder if
Landlord shall have consented to such non-compliance.
D. In the event that within 30 days after Tenant shall have requested
Landlord's consent to any such subletting or assignment and shall have submitted
to Landlord all items required by Section 22.06A, Landlord does not exercise its
option to so sublet such space, as referred to in Subsection A or to terminate
this Lease, in whole or in part, as referred to in Subsection B, Landlord's
consent to such subletting or assignment, as the case may be, shall not be
unreasonably withheld, provided that all of the following conditions have been
satisfied:
(a) In the reasonable judgment of Landlord the proposed subtenant or
assignee, as the case may be, is of a character and financial worth such as
is in keeping with the standards of Landlord in those respects for the
Building, and the nature of the proposed subtenant's or assignee's business
and its reputation is in keeping with the character of the Building and its
tenancies;
(b) The purposes for which the proposed subtenant or assignee intends
to use the Premises or the applicable portion thereof are uses expressly
permitted by and not prohibited by this Lease or by any other lease in the
Building;
(c) Tenant shall not have (i) advertised or publicized in any way the
availability of all or part of the Premises without Landlord's consent,
which shall not be unreasonably withheld, and no advertisement shall state
the name or the address of the Building or the proposed rental or (ii)
listed or publicly advertised the Premises for subletting or assignment,
whether through a broker, agent, representative or otherwise, at a rental
rate less than the greater of (y) the rent then payable hereunder for such
space or (z) the rent at which Landlord is then offering to lease
comparable space in the Building; however, Tenant may negotiate and
consummate a sublease or assignment at a lesser rate of rent insofar as
permitted under the provisions of this Article;
(d) The proposed occupancy shall not materially increase the office
cleaning requirements or impose a material extra burden upon the
Building Equipment or Building services;
(e) Any such subletting will result in there being no more than 2
tenants in addition to Tenant on the floor on which the premises to be
sublet are situated;
(f) The proposed sublease or assignment may permit assignment or
subletting;***
(g) The proposed sublease shall be expressly subject and subordinate
to all of the provisions of this Lease;
(h) (i) In the case of a subletting the fixed rent and additional rent
for any such subletting shall not be less than the then going market rental
rate for comparable space and for a comparable term in the Building (or if
none is or has been currently leased or subleased, then comparable space
and term in a comparable building in The City of New York, as reasonably
determined by Landlord);
(i) Tenant shall not be in default* in the performance of any of its
obligations under this Lease either the time Landlord's consent to such
subletting or assignment is requested or at the commencement of the term of
any proposed sublease or upon the effective date of any such assignment;
(j) Tenant shall reimburse Landlord for any reasonable costs that may
be incurred by Landlord** in connection with said sublease or assignment,
including the costs of making investigations as to the acceptability of a
proposed subtenant or assignee;
(k) The proposed subtenant or assignee shall not then be a tenant of
any space in the Building or a related corporation of any other tenant or a
party who dealt with Landlord or Landlord's agent (either
*beyond any applicable grace period
**(other than as expressly assumed by Landlord hereunder)
***but any such further assignment or subletting shall be subject to
Landlord's consent.
<PAGE>
directly or through a broker) for the rental of any space in the Building
within the 6 months immediately preceding Tenant's request for Landlord's
consent;
(l) 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;
(m) The proposed subtenant or assignee shall not be a person then
negotiating with Landlord or Landlord's agent (either directly or through a
broker) for the rental of any space in the Building; and
(n) In the case of a subletting of a portion of the Premises the space
proposed to be sublet shall be regular in shape and suitable for normal
renting purposes.
E. With respect to each and every sublease or subletting or assignment
authorized by the provisions of this Section, it is further agreed and
understood between Landlord and Tenant as follows:
(a) No subletting shall be for a term ending later than one day prior
to the Expiration Date and that part, if any, of the proposed term of any
sublease or any renewal or extension thereof which shall extend beyond a
date one day prior to the Expiration Date or the sooner termination of the
Term, is hereby deemed to be a nullity; and
(b) There shall be delivered to Landlord, within 10 days after the
commencement of the term of the proposed sublease, notice of such
commencement, or in the case of an assignment, notice of the effectiveness
of such assignment.
F. In the event that (a) Landlord fails to exercise any of its opinions
under Subsections A and B of this Section 22.06 and consents to the proposed
sublease or assignment and (b) the assignment or sublease to which Landlord
shall have consented does not become effective on or before the date set forth
in the conformed or photostatic copy thereof furnished to Landlord pursuant to
subdivision (b) of Section 22.06A, then, Tenants shall again comply with all of
the provisions and conditions of this Article before assigning this Lease or
subletting all or any part of the Premises.
SECTION 22.07 Notwithstanding anything to the contrary contained herein,
if Landlord shall consent to any assignment or subletting and Tenant shall
either (a) receive any consideration from its assignee (other than a successor
corporation) in connection with the assignment of this Lease, Tenant shall pay
over to Landlord so much, if any, of such consideration (including, without
limitation, sums designated by the assignee as paid for the purchase of Tenant's
Property in the Premises, less the then net unamortized or underpreciated cost
thereof determined on the basis of Tenant's federal income tax returns, or, if
Tenant does not file such returns, on the same basis as carried on Tenant's
books) as shall exceed the brokerage commissions and attorneys' fees and
disbursements reasonably incurred by Tenant for such assignment or (b) sublet
the Premises or any portion thereof to anyone for rents, additional charges or
other consideration (including, without limitation, sums designated by the
subtenant as paid for the purchase of Tenant's Property in the Premises, less
the then net unamortizied or underpreciated cost thereof determined on the basis
of Tenant's federal income tax returns or, if Tenant does not file such returns,
on the same basis as carried on Tenant's books) which for any period shall
exceed the rents payable for the subleased space under this Lease for the same
period, Tenant shall pay Landlord, as Additional Rent, such excess less
brokerage commissions and attorneys' fees and disbursements reasonably incurred
by Tenant for such subletting. All sums payable to Landlord pursuant to Section
22.07(a) shall be paid on the effective date of such assignment and all sums
payable to Landlord pursuant to Section 22.07(b) shall be paid on the date or
dates such sums are payable to Tenant by the subtenant.
SECTION 22.08 If Landlord shall recover or come into possession of the
Premises before the date herein fixed for the termination of this Lease,
Landlord shall have the right, at its option, to take over any and all subleases
or sublettings of the Premises or any part thereof made by Tenant and to
succeed to all the rights of said subleases and sublettings or such of them as
it may elect to take over. Tenant hereby expressly assigns and transfers to
Landlord such of the subleases and sublettings as Landlord may elect to take
over at the time of such recovery of possession, such assignment and transfer
not to be effective until the termination of this Lease or re-entry by Landlord
hereunder or if Landlord shall otherwise succeed to Tenant's estate in the
Premises, at which time Tenant shall upon request of Landlord, execute,
acknowledge and deliver to Landlord such further assignments and transfers as
may be necessary to vest in Landlord the then existing subleases and
sublettings. Every subletting hereunder is subject to the condition and by its
acceptance of and entry into a sublease, such subtenant thereunder
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shall be deemed conclusively to have thereby agreed from and after the
termination of this Lease or re-entry by Landlord hereunder or if Landlord shall
otherwise succeed to Tenant's estate in the Premises, that such subtenant shall
waive any right to surrender possession or to terminate the sublease and, at
Landlord's election, such subtenant shall be bound to Landlord for the balance
of the term of such sublease and shall attorn to and recognize Landlord, as its
landlord, under all of the then executory terms of such sublease, except that
Landlord shall not (i) be liable for any previous act, omission or negligence of
Tenant under such sublease, (ii) be subject to any counterclaim, defense or
offset not expressly provided for in such sublease, which theretofore accrued to
such subtenant against Tenant, (iii) be bound by any previous modification or
amendment of such sublease or by any previous prepayment of more than one
month's rent and additional rent which shall be payable as provided in the
sublease, unless such modification or prepayment shall have been approved in
writing by Landlord, (iv) be obligated to repair the subleased space or the
Building or any part thereof, in the event of total or substantial total damage
beyond such repair as can reasonably be accomplished from the net proceeds of
insurance actually made available to Landlord, (v) be obligated to repair the
subleased space or the Building or any part thereof, in the event of partial
condemnation beyond such repair as can reasonably be accomplished from the net
proceeds of any award actually made available to Landlord as consequential
damages allocable to the part of the subleased space or the Building not taken
or (vi) be obligated to perform any work in the subleased space or the Building
or to prepare them for occupancy beyond Landlord's obligations under this Lease,
and the subtenant shall execute and deliver to Landlord any instruments Landlord
may reasonably request to evidence and confirm such attornment. Each subtenant
or licensee of Tenant shall be deemed automatically upon and as a condition of
occupying or using the Premises or any part thereof, to have given a waiver of
the type described in and to the extent and upon the conditions set forth in
Section 8.07.
SECTION 22.09 In the event that, at any time after Tenant named herein may
have assigned its interest in this Lease, this Lease shall be disaffirmed or
rejected in any proceeding of the types described in subdivisions (a) or (b) of
Section 17.01 or in any similar proceeding, or in the event of termination of
this Lease by reason of any such proceeding or by reason of lapse of time
following notice of termination given pursuant to Article 17 based upon any of
the conditions of limitation set forth in said subdivisions, Tenant named
herein, upon request of Landlord given within 30 days after such disaffirmance,
rejection or termination (and actual notice thereof to Landlord in the event of
a disaffirmance or rejection or in the event of termination other than by act of
Landlord), shall (a) pay to Landlord all Fixed Rent, Additional Rent and other
charges due and owing by the assignee to Landlord under this Lease to and
including the date of such disaffirmance, rejection or termination, and (b) as
"tenant", enter into a new lease with Landlord of the Premises for a term
commencing on the effective date of such disaffirmance, rejection or termination
and ending on the Expiration Date, unless sooner terminated as in such lease
provided, at the same Fixed Rent and upon the then executory terms, covenants
and conditions as are contained in this Lease, except that (i) the rights of
Tenant named herein under the new lease shall be subject to the possessory
rights of the assignee under this Lease and the possessory rights of any persons
claiming through or under such assignee or by virtue of any statute or of any
order of any court, (ii) such new lease shall require all defaults existing
under this Lease to be cured by Tenant named herein with due diligence, and
(iii) such new lease shall require Tenant named herein to pay all Additional
Rent which, had this Lease not been so disaffirmed, rejected or terminated,
would have become due under the provisions of Article 7 after the date of such
disaffirmance, rejection or termination with respect to any period prior
thereto. In the event Tenant named herein shall default for a period of 10 days
after Landlord's request in its obligations to enter into said new lease then,
in addition to all other rights and remedies by reason of such default, either
at law or in equity, Landlord shall have the same rights and remedies against
Tenant named herein as if it had entered into such new lease and such new lease
had thereafter been terminated as at the commencement date thereof by reason of
the default thereunder of Tenant named herein.
ARTICLE 23
SUBORDINATION AND ATTORNMENT
SECTION 23.01 A. This Lease and all rights of Tenant hereunder are and
shall be subject and subordinate in all respects to (a) all present and future
ground leases, operating leases, superior leases, overriding leases and
underlying leases and grants of term of the Land and the Building or any portion
thereof (collectively, including the applicable items set forth in Subdivision
(d) of this Section 23.01, the "Superior Lease"), (b) all mortgages and building
loan agreements, including leasehold mortgages and spreader and consolidation
agreements, which may now or hereafter affect the Land, the Building or the
Superior Lease (collectively, including the applicable item
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set forth in Subdivisions (c) and (d) of this Section 23.01, the "Superior
Mortgage") whether or not the Superior Mortgage shall also cover other lands or
buildings or leases except that a mortgage on the Land only shall not be a
Superior Mortgage so long as there is in effect a Superior Lease which is not
subordinate to such mortgage, (c) each advance made or to be made under the
Superior Mortgage, (d) all renewals, modifications, replacements, supplements,
substitutions and extensions of the Superior Lease and the Superior Mortgage and
all spreaders and consolidations of the Superior Mortgage and (e) the
Declaration. The provisions of this Section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver, at its own cost and
expense, any instrument, in recordable form if requested, that Landlord, the
Superior Lessor or the Superior Mortgagee may reasonably request to evidence
such subordination; and if Tenant fails to execute, acknowledge or deliver any
such instrument within 10 days after request therefor, Tenant hereby irrevocably
constitutes and appoints Landlord as Tenant's attorney-in-fact, coupled with an
interest, to execute, acknowledge and deliver any such instruments for and on
behalf of Tenant. The Superior Mortgagee may elect that this Lease shall have
priority over its Superior Mortgage and, upon notification by the Superior
Mortgagee to Tenant, this Lease shall be deemed to have priority over such
Superior Mortgage, whether this Lease is dated prior to or subsequent to the
date of such Superior Mortgage. If, in connection with the obtaining, continuing
or renewing of financing for which the Building, Land or the interest of the
lessee under the Superior Lease represents collateral, in whole or in part, a
savings or commercial bank or trust company, insurance company, savings and loan
association, a welfare, pension or retirement fund or system or any other lender
shall be or be willing to become the Superior Mortgagee and shall request
reasonable modifications of this Lease as a condition of such financing, Tenant
will not unreasonably withhold its consent thereto, provided that such
modifications do not materially and adversely either increase the obligations of
Tenant hereunder or affect the rights of Tenant under this Lease.
See Section 46.14
SECTION 23.02 Tenant shall not do or suffer or permit anything to be done
which would constitute a default under the Superior Mortgage, the Superior Lease
or the Declaration or cause the Superior Lease to be terminated or forfeited by
virtue of any rights of termination or forfeiture reserved or vested in the
Superior Lessor.
See Section 46.15
SECTION 23.03 Landlord hereby notifies Tenant that this Lease may not be
cancelled or surrendered, or modified or amended so as to reduce the rent,
shorten the Term or adversely affect in any other respect to any material extent
the rights of Landlord hereunder and that Landlord may not accept prepayments of
any installments of rent except for prepayments in the nature of security for
the performance of Tenant's obligations hereunder without the consent of the
Superior Lessor and the Superior Mortgagee in each instance, except that said
consent shall not be required to the institution or prosecution of any action or
proceedings against Tenant by reason of a default on the part of Tenant under
the terms of this Lease.
SECTION 23.04 If, at any time prior to the termination of this Lease, the
Superior Lessor or the Superior Mortgagee or any person, or the Superior
Lessor's or Superior Mortgagee's or such person's successors or assigns (the
Superior Lessor, Superior Mortgagee and any such person or successor or assign
being herein collectively referred to as "Successor Landlord") shall succeed to
the rights of Landlord under this Lease through possession or foreclosure or
delivery of a new lease or deed or otherwise. Tenant agrees, at the election and
upon request of any such Successor Landlord, to fully and completely attorn,
from time to time, to and recognize any such Successor Landlord, as Tenant's
landlord under this Lease upon the then executory terms of this Lease; provided
such Successor Landlord shall agree in writing to accept Tenant's attornment.
The foregoing provisions of this Section shall inure to the benefit of any such
Successor Landlord, shall apply notwithstanding that, as a matter of law, this
Lease may terminate upon the termination of the Superior Lease, shall be
self-operative upon any such demand, and no further instrument shall be required
to give effect to said provisions. Tenant, however, upon demand of any such
Successor Landlord agrees to execute, from time to time, instruments to evidence
and confirm the foregoing provisions of this Section, satisfactory to any such
Successor Landlord, acknowledging such attornment and setting forth the terms
and conditions of its tenancy and Tenant hereby constitutes and appoints
Landlord attorney-in-fact for Tenant to execute any such instrument for and on
behalf of Tenant, such appointment being coupled with an interest. Upon such
attornment this Lease shall continue in full force and effect as a direct lease
between such Successor Landlord and Tenant upon all of the then executory terms
of this Lease except that such Successor Landlord shall not be (a) liable for
any previous act or omission of negligence of Landlord under this Lease; (b)
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; (c) obligated to perform any Work; (d) bound
by any previous modification or amendment of this Lease or by any previous
prepayment of more than one month's rent, unless such modification or prepayment
shall have been
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approved in writing by the Superior Lessor or the Superior Mortgagee through or
by reason of which the Successor Landlord shall have succeeded to the rights of
Landlord under this Lease; (e) obligated to repair the Premises or the Building
or any part thereof, in the event of total or substantial total damage beyond
such repair as can reasonably be accomplished from the net proceeds of insurance
actually made available to Successor Landlord; or (f) obligated to repair the
Premises or the Building or any part thereof, in the event of partial
condemnation beyond such repair as can reasonably be accomplished from the net
proceeds of any award actually made available to Successor Landlord, as
consequential damages allocable to the part of the Premises or the Building not
taken. Nothing contained in this Section shall be construed to impair any right
otherwise exercisable by any such owner, holder or lessee.
SECTION 23.05 If any act or omission by Landlord would give Tenant the
right, immediately or after the lapse of time, to cancel or terminate this Lease
or to claim a partial or total eviction, Tenant will not exercise any such right
until (a) it has given written notice of such act or omission to each Superior
Mortgagee and each Superior Lessor, whose name and address shall have previously
been furnished to Tenant, by delivering notice of such act or omission addressed
to such party at its last address so furnished and (b) a reasonable period for
remedying such act or omission shall have elapsed following such giving of
notice and following the time when such Superior Mortgagee or Superior Lessor
shall have become entitled under such Superior Mortgage or Superior Lease, as
the case may be, to remedy the same (which shall in no event be less than the
period to which Landlord would be entitled under this Lease to effect such
remedy) provided such Superior Mortgagee or Superior Lessor shall, with
reasonable diligence, give Tenant notice of intention to, and commence and
continue to, remedy such act or omission or to cause the same to be remedied.
See Section 46.16
ARTICLE 24
ACCESS; CHANGE IN FACILITIES
SECTION 24.01 Nothing herein contained shall be construed as a letting by
Landlord to Tenant of (a) the faces of exterior walls, (b) the space above the
hung ceiling of the Premises and below the underside of the floor slab of any
higher floor, (c) the space below the underside of the Premises, (d) the land
below the sub-base of or air rights above, the Premises or the Building, (e) the
roof, or (f) the common areas and facilities of the Building. All parts (except
surfaces facing the interior of the Premises) of all walls, windows and doors
bounding the Premises, all balconies, terraces, stairs, landings, and roofs
adjacent to the Premises, all space in or adjacent to the Premises used for
shafts, stacks, stairways, conduits, pipes, ductwork, air conditioning rooms,
telephone rooms, fan rooms, heating, ventilating, air conditioning, plumbing,
electrical and other mechanical facilities, service closets and other Building
Equipment, and the use thereof, as well as access thereto through the Premises
for the purposes of operation, decoration, cleaning, maintenance, safety,
security, alteration and repair, are hereby reserved to Landlord. Landlord
reserves the right, at any time, without incurring any liability to Tenant
therefor, to make such changes in or to the Building and the Building Equipment,
as well as in the entrances, doors, corridors, elevators, stairs, landings,
toilets and other public parts of the Building, as it may deem necessary or
desirable, provided any such change (a) does not unreasonably deprive Tenant of
access to the Premises, (b) does not interfere with the use of the Premises or
the services furnished to the Premises for an unreasonable length of time, and
(c) does not reduce the area of the Premises in excess of 1% (without an
appropriate adjustment in rent).
SECTION 24.02 Tenant shall permit Landlord to install, use and maintain
pipes, ducts, wires and conduits within or through the Premises, or through the
walls, columns and ceilings therein, provided that the installation work is
performed at such times and by such methods as will not unreasonably interfere
with Tenant's use and occupancy of the Premises, or damage the appearance
thereof, reduce the floor area thereof by more than 1% (without an appropriate
adjustment in rent) or materially affect the layout of the Premises. Landlord
shall endeavor to install any such pipes, ducts, wires and conduits in the
walls, columns or ceilings of the Building, provided installation in the walls,
columns and ceilings is structually possible and Landlord shall not incur any
additional costs in making such installations which are not reimbursed by Tenant
on demand. Landlord, at its expense, shall promptly repair any damage caused by
any such installations, use or maintenance. Where access doors are required in
or adjacent to the Premises for mechanical trades, Landlord shall furnish and
install such access doors and confine their location wherever practical to
closets, coat rooms, toilet rooms, corridors and kitchen or party rooms.
Landlord and Tenant shall cooperate with each other in the location of
Landlord's and Tenant's facilities requiring such access doors.
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SECTION 24.03 Landlord or Landlord's agents or designees shall have the
right to enter the Premises at all reasonable times, whether or not during
normal business hours but upon reasonable advance notice to Tenant, except in an
emergency in which case no notice shall be required for any of the purposes
specified in this Article and (a) to examine the Premises or for the purpose of
performing any obligation of Landlord or exercising any right reserved to
Landlord in this Lease; (b) to exhibit the Premises to others; (c) to make or
cause to be made such repairs or improvements, or to perform such maintenance,
including the maintenance of Building Equipment, (i) as Landlord may deem
necessary or desirable or (ii) as may be required pursuant to any Legal
Requirements; (d) to take into and store upon the Premises all materials that
may be required in connection with any such repairs, improvements or
maintenance; and (e) to alter, renovate and decorate the Premises at any time
during the Term if Tenant shall have removed all or substantially all of
Tenant's Property from the Premises. Landlord agrees, however, that all such
repairs, improvements and maintenance shall be made with a minimum of
inconvenience to Tenant and that Landlord will diligently proceed therewith to
completion but without obligation to employ overtime labor and subject to Force
Majeure. If Tenant, its agents or employees shall not be present or shall not
permit an entry into the Premises at any time when such entry shall be
permissible, Landlord may use a master key or forcibly enter the Premises. The
Superior Lessor, the Superior Mortgagee and the Fee Mortgagee shall have the
right to enter the Premises at all times to examine the Premises or for the
purpose of exercising any right reserved to Landlord under this Section. During
the period commencing twelve (12) months prior to the expiration of the term (or
any renewal thereof), Landlord may place upon the exterior of the Premises "For
Lease", "To Let" or "For Rent" signs of reasonable size which signs shall not be
removed, obliterated or hidden by Tenant.
SECTION 24.04 Landlord or Landlord's agents shall have the right to permit
access to the Premises at any time, whether or not Tenant shall be present, to
any receiver, trustee, marshal or other person entitled to, or reasonably
purporting to be entitled to, such access for the purpose of taking possession
of, or removing, any Tenant's Property or property of any other occupant of the
Premises, or for any other lawful purpose, or by any representative of the fire,
police, building, sanitation or other department or instrumentality of the
borough, city, state or federal governments. Nothing contained in, nor any
action taken by Landlord under, this Section shall be deemed to constitute
recognition by Landlord that any person other than Tenant has any right or
interest in this Lease or the Premises.
SECTION 24.05 Landlord reserves the right to light, from time to time, all
or any portion of the Premises at night for display purposes but shall reimburse
or credit Tenant for any expenses for electricity incurred by Tenant for such
display lighting after 9:00 P.M.
SECTION 24.06 The exercise of any right reserved to Landlord in this
Article shall be without liability of Landlord to Tenant.
ARTICLE 25
INABILITY TO PERFORM
SECTION 25.01 This Lease and the obligations of Tenant to pay rent and
perform all of the terms of this Lease on the part of Tenant to be performed
shall in no way be affected because Landlord is unable or delayed in fulfilling
any of its obligations under this Lease by reason of Force Majeure. Landlord
shall in each instance exercise reasonable diligence to effect performance when
and as soon as possible. However, Landlord shall be under no obligation to
employ overtime labor.
ARTICLE 26
LEGAL PROCEEDINGS; WAIVER OF COUNTERCLAIMS AND JURY TRIAL
SECTION 26.01 In the event Landlord commences any summary proceeding or
action for non-payment of rent, Tenant covenants and agrees that it will not
interpose, by consolidation of actions or otherwise, any counterclaim or other
claim seeking affirmative relief of whatsoever nature or description in any such
proceeding. To the extent permitted by applicable law, Landlord and Tenant
hereby waive trial by jury in any action or proceeding, and with respect to any
claim asserted in any such action or proceeding, brought by either of the
parties against the other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises, any claim of injury or damage,
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or any emergency or other statutory remedy with respect thereto. Tenant hereby
represents to Landlord that it is not entitled, directly or indirectly, to
diplomatic or sovereign immunity and Tenant agrees that in all disputes arising,
directly or indirectly out of this Lease, Tenant shall be subject to service of
process in, and the jurisdiction of the courts of the State of New York. The
provisions of this shall Article survive the termination of this Lease.
ARTICLE 27
NO OTHER WAIVER
SECTION 27.01 The failure of Landlord to insist in any instance upon the
strict performance of any term of this Lease, or to exercise any right herein
contained, shall not be construed as a waiver or relinquishment for the future
of the performance of such obligation of this Lease or of the right to exercise
any such right, but the same shall continue and remain in full force and effect
with respect to any subsequent breach, act or omission.
SECTION 27.02 The following specific provisions of this Section shall not
limit the generality of the provisions of this Article.
(a) No agreement to accept a surrender of all or any part of the
Premises or this Lease shall be valid unless in writing and signed by
Landlord. No delivery of keys shall operate as a termination of this Lease
or a surrender of the Premises or this Lease. Without limiting the
generality of the preceding sentence, if, subject to the provisions of
Article 22, Tenant shall at any time request Landlord to sublet the
Premises for Tenant's account, Landlord or Landlord's agent is authorized
to receive said keys for such purpose without releasing Tenant from any of
its obligations under this Lease, and Tenant hereby releases Landlord from
any liability for loss or damage to any of Tenant's Property in connection
with such subletting.
(b) The receipt or acceptance by Landlord of rent with knowledge of
breach by Tenant of any term of this Lease shall not be deemed a waiver of
such breach.
(c) No payment by Tenant or receipt by Landlord of a lesser amount
than the correct rent shall be deemed to be other than a payment on
account, nor shall any endorsement or statement on any check or any
accompanying letter be deemed to effect or evidence an accord and
satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance or pursue any other
right of Landlord.
(d) Neither any option granted to Tenant in this Lease or in any
collateral instrument to renew or extend the Term, nor the exercise of any
such option by Tenant, shall prevent Landlord from exercising any option or
right granted or reserved to Landlord in this Lease or in any collateral
instrument or that Landlord may otherwise have to terminate this Lease or
any renewal or extension of the Term either during the original Term or
during the renewed or extended term. Any termination of this Lease shall
serve to terminate any such renewal or extension of the Term and any right
of Tenant to any such renewal or extension, whether or not Tenant shall
have exercised any option to renew or extend the Term. Any such option or
right on the part of Landlord to terminate this Lease shall continue during
any extension or renewal of the Term. No option granted to Tenant to renew
or extend the Term shall be deemed to give Tenant any further option to
renew or extend the Term.
(e) No waiver by Landlord in favor of any other tenant or occupant of
the Building shall constitute a waiver in favor of the Tenant named herein.
ARTICLE 28
ARBITRATION
SECTION 28.01 The parties hereto shall not be deemed to have agreed to
determination of any dispute arising out of this Lease by arbitration unless
determination in such manner shall have been specifically provided for in this
Lease.
SECTION 28.02 The party desiring arbitration shall give notice to that
effect to the other party and shall in such notice appoint a person as
arbitrator on its behalf. Within 10 days, the other party by notice to the
original party shall appoint a second person as arbitrator on its behalf. The
arbitrators thus appointed shall appoint a third person, and such three
arbitrators shall as promptly as possible determine such matter, provided,
however, that
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(a) if the second arbitrator shall not have been appointed as aforesaid,
the first arbitrator shall proceed to determine such matter; and
(b) if the two arbitrators appointed by the parties shall be unable to
agree, within 10 days after the appointment of the second arbitrator, upon the
appointment of a third arbitrator, they shall give written notice to the parties
of such failure to agree, and, if the parties fail to agree upon the selection
of such third arbitrator within 10 days after the arbitrators appointed by the
parties give notice as aforesaid, then within 5 days thereafter either of the
parties upon notice to the other party may request such appointment by the
American Arbitrator Association (or any organization successor thereto), or in
its absence, refusal, failure or inability to act, may apply for a court
appointment of such arbitrator.
SECTION 28.03 Each arbitrator shall be a fit and impartial person who
shall have had at least 10 years' experience in the County of New York in
calling connected with the matter of the dispute.
SECTION 28.04 The arbitration shall be conducted, to the extent consistent
with this Article, in accordance with the then prevailing rules of the American
Arbitration Association (or any organization successor thereto). The decision
and award shall be rendered by the arbitrators, upon the concurrence of at
least two of their number, within 30 days after the appointment of the third
arbitrator, or, in the case of a determination by a single arbitrator pursuant
to subdivision (a) of Section 28.02, within 30 days after the expiration of the
period during which a second arbitrator may be appointed. Such decision and
award shall be in writing and shall be final and conclusive on the parties, and
counterpart copies thereof shall be delivered to each of the parties. In
rendering such decision and award, the arbitrators shall not add to, subtract
from or otherwise modify the provisions of this Lease. Judgment may be had on
the decision and award of the arbitrator(s) so rendered in any court of
competent jurisdiction.
SECTION 28.05 Each party shall pay the fees and expenses of the one of the
two original arbitrators appointed by or for such party and the fees and
expenses of the third arbitrator and all other expenses of the arbitration
(other than the fees and disbursements of attorneys or witnesses for each party)
shall be borne by the parties equally.
SECTION 28.06 Notwithstanding the provisions of this Article, if any delay
in complying with any requirement of this Lease by Tenant might subject Landlord
to any fine or penalty, or to prosecution for a crime, or if it would constitute
a default by Landlord under the Superior Mortgage or the Superior Lease,
Landlord may exercise its right under Article 19 to remedy such default and in
such event the sole question to be determined by the arbitrators under this
Article shall be whether Tenant is liable under Article 19 for Landlord's costs
and expenses of curing such default.
SECTION 28.07 Notwithstanding anything to the contrary elsewhere provided
in this Lease, if the subject matter of a dispute which is provided in this
Lease to be determined by arbitration is (a) one which would directly affect the
liability of an insurer under any of the policies of insurance referred to
in Sections 8.04, 8.06 and 10.02, and the party which is the insured under such
policy so notifies the other party, or (b) one which cannot be the subject of
arbitration under the Superior Lease or the Superior Mortgage, then unless such
insurer or the Superior Lessor or the Superior Mortgagee gives its written
consent to the determination of such matter by arbitration, the dispute shall
not be determined by arbitration and the parties shall be left to such other
remedies as they may have.
ARTICLE 29
QUIET ENJOYMENT
SECTION 29.01 If, and so long as, Tenant pays the rent and keeps, observes
and performs each and every term of this Lease on the part of Tenant to be kept,
observed and performed, Tenant shall peaceably and quietly enjoy the Premises
throughout the Term subject to the terms of this Lease and of the Superior Lease
and the Superior Mortgage. This covenant shall be construed as a covenant
running with the Land and shall not be construed as a personal covenant or
obligation of Landlord, except to the extent of Landlord's interest in this
Lease and then subject to the terms of Section 43.02.
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ARTICLE 30
RULES AND REGULATIONS
SECTION 30.01 Tenant and its employees, agents, invitees and licensees
shall faithfully observe and strictly comply with, and shall not permit
violation of, the Rules and Regulations annexed hereto as Exhibit E, and such
reasonable changes therein and additions thereto as Landlord hereafter may make
and communicate to Tenant ("Rules and Regulations"). Tenant's right to dispute
the reasonableness of any changes in the Rules and Regulations and additional
Rules and Regulations shall be deemed waived unless asserted to Landlord within
10 days after Landlord shall have given Tenant notice of the adoption of any
such additional Rules and Regulations. In case of any conflict or inconsistency
between the provisions of this Lease and any Rules and Regulations, the
provisions of this Lease shall control. Landlord shall have no duty or
obligation to enforce any Rule or Regulation, or any term, covenant or condition
of any other lease, against any other tenant, and Landlord's failure or refusal
to enforce any Rule or Regulation or any term, covenant or condition of any
other lease against any other tenant shall be without liability of Landlord to
Tenant. Landlord shall not discriminate against Tenant in the enforcement of the
Rules and Regulations.
SECTION 30.02 Notwithstanding anything to the contrary in any of the Rules
and Regulations, whenever Landlord shall claim by notice to Tenant that Tenant
is violating any of the provisions of the Rules and Regulations and Tenant shall
in good faith dispute such claim to Landlord within 10 days after service of
Landlord's notice of the violation, the dispute shall be determined by
arbitration pursuant to Article 28.
ARTICLE 31
BUILDING NAME
SECTION 31.01 The Building may be designated and known by any name or
address Landlord may choose and such designated name or address may be changed
from time to time in Landlord's sole discretion. Tenant agrees not to refer to
the Building by any name or address other than as designated by Landlord. The
Building may be named after any person, firm, or otherwise, whether or not such
name is, or resembles, the name of a tenant of the Building. In no event shall
Tenant use, in connection with its business or otherwise, any photographic or
other type of representation of the Building. In the event the Building is named
after any person, firm or otherwise, Tenant, in connection with its business or
otherwise, shall not refer to the Building by such name but shall only use the
street address of the Building.
ARTICLE 32
SHORING; NO DEDICATION; HOISTS
SECTION 32.01 If an excavation or other substructure work shall be
undertaken or authorized upon land adjacent to the Building or in the vaults
beneath the Building or in subsurface space adjacent to said vaults, Tenant,
without liability on the part of Landlord therefor, shall afford Landlord or the
person causing such excavation or other substructure work, license to enter upon
the Premises for the purpose of doing such work as Landlord or such person shall
deem necessary to protect any of the walls or structures of the Building or
surrounding land from injury or damage and to support the same by proper
foundations, pinning and/or underpinning, and, except in case of emergency,
Landlord shall endeavor to have such entry accomplished during reasonable hours
in the presence of a representative of Tenant, who shall be designated by Tenant
promptly upon Landlord's request. Such license to enter shall be without
liability of Landlord to Tenant.
SECTION 32.02 Landlord shall have the right to erect any gate, chain or
other obstruction or to close off any portion of the Real Property to the public
at any time to the extent necessary to prevent a dedication thereof for public
use.
SECTION 32.03 Tenant has been advised that Landlord may leave functioning
a construction hoist or hoists on the outside of the Building. The hoist(s) will
remain for an indefinite period of time which may continue beyond the
Commencement Date. The parties agree that the existence of such hoist(s) shall
not affect the Commencement Date. Tenant consents to such operation and
recognizes certain windows on floors adjacent to the hoist tower(s) may be
temporarily closed off. When such hoist tower(s) are finally removed, Landlord
shall install the permanent glass subject to the provisions of the Declaration.
Landlord shall have no liability to Tenant because of
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the continued presence of the hoist(s) and hoist tower(s) herein referred to. No
deliveries shall be made from the hoist tower(s) through the premises after the
Commencement Date.
ARTICLE 33
NOTICE OF ACCIDENTS
SECTION 33.01 Tenant shall give notice to Landlord, promptly after Tenant
learns thereof, of any accident, emergency, occurrence for which Landlord might
be liable, fire or other casualty and all damages to or defects in the Premises,
the Building or the Building Equipment for the repair of which Landlord might be
responsible or which constitutes Landlord's property. Such notice shall be given
by telegram or personal delivery to the address of Landlord then in effect for
notices.
ARTICLE 34
VAULTS
SECTION 34.01 No vaults, vault space or other space not within the property
line of the Building is leased hereunder notwithstanding anything contained in
or indicated on any sketch, blueprint or plan, or elsewhere in this Lease to the
contrary. Landlord makes no representation as to the location of the property
line of the Building. All vaults and vault space and all other space not
within the property line of the Building, which Tenant may be permitted to use
and/or occupy, are to be used and/or occupied under a license revocable by
Landlord on 10 day's notice to Tenant and if any such license be revoked by
Landlord, or if the amount of any such vaults, vault space or other space be
diminished or required by any federal, state or municipal authority or public
utility, Landlord shall be without liability to Tenant. Any fee, tax or charge
imposed by any governmental authority for any such vault, vault space or other
space shall be paid by Tenant. Landlord shall have the right from time to time,
to substitute for the basement space, if any, then occupied by Tenant,
comparable space in the basement, provided Landlord shall give Tenant at least
30 days' notice of Landlord's intention so to do.
ARTICLE 35
BROKERAGE
SECTION 35.01 Tenant represents that in the negotiation of this Lease it
dealt with no brokers other than Cushman & Wakefield and Harper-Lawrence, Inc.
and that so far as Tenant is aware said broker(s) (are) the sole broker(s) who
negotiated this Lease. Landlord agrees to pay said broker(s) commissions in
accordance with a separate agreement. Tenant hereby indemnifies Landlord against
liability arising out of any inaccuracy or alleged inaccuracy of the above
representation. Landlord shall have no liability for brokerage commissions
arising out of an assignment or a sublease by Tenant and Tenant shall and does
hereby indemnify Landlord and hold it harmless from any and all liability for
brokerage commissions arising out of any such assignment or sublease. The
covenants, representations and agreements of Tenant set forth in this Section
35.01 shall survive the termination of this Lease.
ARTICLE 36
SECURITY DEPOSIT
SECTION 36.01 Tenant has deposited with Landlord the sum of $ 34,166.66
(if by check subject to collection) as security for the full and punctual
performance by Tenant of all of the terms of this Lease. In the event Tenant
defaults in the performance of any of the terms of this Lease, including the
payment of rent. Landlord may use, apply or retain the whole or any part of the
security so deposited to the extent required for the payment of any rent or for
any sum which Landlord may expend or may be required to expend by reason of
Tenant's default in respect of any of the terms of this Lease, including any
damages or deficiency in the reletting of the Premises, whether accruing before
or after summary proceedings or other re-entry by Landlord. In the case of every
such use, application or retention, Tenant shall, on demand, pay to Landlord
the sum so used, applied or retained which shall be added to the security
deposit so that the same shall be replenished to its former amount. If Tenant
shall fully and punctually comply with all of the terms of this Lease the
security, without
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interest, shall be returned to Tenant after the termination of this Lease and
delivery of exclusive possession of the Premises to Landlord. In the event of a
sale or lease of the Building, Landlord shall have the right to transfer the
security to the vendee or lessee and Landlord shall ipso facto be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look solely to the new landlord for the return of said security; and it is
agreed that the provisions hereof shall apply to every transfer or assignment
made of the security to a new landlord. Tenant shall not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance or attempted assignment or encumbrance.
See Section 46.17
ARTICLE 37
WINDOW CLEANING
SECTION 37.01 Tenant will not (a) require, permit, suffer or allow the
cleaning of any window in the Premises from the outside (within the meaning of
Section 202 of the New York Labor Law or any successor statute thereto) unless
the equipment and safety devices required by all Legal Requirements including
Section 202 of the New York Labor Law or any successor statute thereto, are
provided and used or (b) permit, suffer or allow the cleaning of the outside of
any window from within the Premises except by persons employed by Landlord; and
Tenant hereby indemnifies Landlord against liability as a result of the Tenant's
(i) requiring, permitting, suffering or allowing any window in the Premises to
be cleaned from the outside in violation of any Legal Requirement or (ii)
permitting, suffering or allowing the outside of any window to be cleaned from
within the Premises other than by persons employed by Landlord.
ARTICLE 38
CONSENTS
SECTION 38.01 Wherever it is specifically provided in this Lease that a
party's consent is not to be unreasonably withheld, a response to a request for
such consent shall also not be unreasonably delayed. If either Landlord or
Tenant considers that the other has unreasonably withheld or delayed a consent,
it shall so notify the other party within 10 days after receipt of notice of
denial of the requested consent or, in case notice of denial is not received,
within 20 days after making its request for the consent.
SECTION 38.02 Tenant hereby waives any claim against Landlord which it may
have based upon any assertion that Landlord has unreasonably withheld or
unreasonably delayed any such consent, and Tenant agrees that its sole remedy
shall be an action or proceeding to enforce any such provision or for specific
performance, injunction or declaratory judgment. In the event of such a
determination, the requested consent shall be deemed to have been granted;
however, Landlord shall have no liability to Tenant for its refusal or failure
to give such consent. The sole remedy for Landlord's unreasonably withholding or
delaying of consent shall be as provided in this Section.
SECTION 38.03 Notwithstanding anything to the contrary provided in this
Lease, in any instance where the consent of the Superior Lessor and/or the
Superior Mortgagee is required Landlord shall not be required to give its
consent until and unless the Superior Lessor and/or the Superior Mortgagee has
given its consent. Landlord agrees to seek such consent if Landlord would
otherwise consent in such instance.
ARTICLE 39
NOTICES
SECTION 39.01 A. Except as otherwise expressly provided in this Lease or
pursuant to any Legal Requirement, any bills, statements, notices, demands,
requests, consents or other communications (collectively, "notices") given or
required to be given under or in connection with this Lease or pursuant to any
Legal Requirement shall be effective only if in writing and
(a) if to Tenant, then, at the option of Landlord,
(i) sent to the attention: by
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registered or certified mail, return receipt requested, postage prepaid,
addressed to Tenant's address as set forth in this Lease if mailed prior to
the Commencement Date or at the Building if subsequent to the Commencement
Date, or to such other address as Tenant may designate for such purpose by
like notice, or
(ii) delivered personally to Tenant,
(b) if to Landlord, sent by registered or certified mail, return receipt
requested, postage prepaid, addressed to Landlord c/o Cadillac Fairview Urban
Development, Inc., 1910 Pacific Avenue, Suite 400, Dallas, Texas 75201 Attn.:
with a copy to Rosenman Colin Freund Lewis & Cohen at 575 Madison Avenue,
New York, New York 10022, Attn: Donald H. Siskind, Esq. or to such other or
further address or addresses as Landlord may designate for such purpose by like
notice; or
(c) if to any other person, sent by registered or certified mail, return
receipt requested and postage prepaid addressed to such person's last known
principal address or to such other address as such person may designate to
Landlord and Tenant as its address for such purpose by like notice.
B. Notices shall be deemed to have been rendered or given (a) on the date
delivered, if delivered to Tenant personally, or (b) on the date mailed, if
mailed as provided in this Section, unless mailed outside of The City of New
York, in which case it shall be deemed to have been rendered or given 3 business
days after mailing. Notices given by counsel for either party shall be deemed
valid notices if addressed and sent in accordance with the provisions of this
Article.
SECTION 39.02 A. Notwithstanding the provisions of Section 39.01, notices
requesting after hours services pursuant to Article 12 may be given by delivery
to the Building superintendant or any other person in the Building designated by
Landlord to receive such notices.
B. If there occurs any interruption of certified and registered mail
service, lasting more than 5 consecutive business days, notices may be given by
telegram or personal delivery, but shall not be effective until personally
received by an executive officer of a party which is a corporation, or a partner
of a party which is a partnership, or a principal of any other entity.
ARTICLE 40
DEFINITIONS; CONSTRUCTION OF TERMS
SECTION 40.01 For the purposes of this Lease and all agreements
supplemental to this Lease:
(a) "Additional Rent" shall have the meaning given in Section 3.01A.
(b) "after hours" shall have the meaning given in Section 12.02.
(c) "Basic Construction of the Building" shall have the meaning given
in Exhibit C.
(d) "Building" shall have the meaning given in Section 1.01.
(e) "Building Equipment" shall mean all machinery, apparatus,
equipment, personal property, fixtures and systems of every kind and nature
whatsoever now or hereafter attached to or used in connection with the
operation or maintenance of the Building, including all electrical,
heating, mechanical, sanitary, sprinkler, utility, power, plumbing,
cleaning, fire prevention, refrigeration, ventilation, air cooling, air
conditioning, elevator and escalator systems, apparatus and equipment and
any and all renewals and replacements of any thereof, but excluding,
however, (i) Tenant's Property, (ii) property of any other tenant, (iii)
property of contractors servicing the Building and (iv) improvements for
water, gas, steam and electricity and other similar equipment owned by any
public utility company or any governmental agency or body.
(f) "business days" shall mean all days except Saturdays, Sundays and
the days observed by the Federal or the New York State or City governments
as legal holidays and such other days as shall be designated as holidays by
the applicable operating engineers union or building service employees
union contract.
(g) "business hours" shall mean the hours from 8:00 A.M. to 6:00 P.M.
(h) "Commencement Date" shall have the meaning given in Section
2.01A.
(i) "Expiration Date" shall have the meaning given in Section 2.01A.
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(j) "Declaration" shall mean the Declaration, dated July 27, 1981,
made by Landlord, recorded in the Office of the Register of the City of New
York on August 20, 1981, as No. 10726 in Reel 579 of Conveyances at page
1641. The Declaration requires, among other things, that in the event the
building now known as 155 East 48th Street, New York, New York or the
building now known as 150 East 49th Street, New York, New York shall be
altered or reconstructed so as to come within a certain distance of the
exterior wall openings on the west lot line of the Land, such exterior
wall openings will be closed, at Landlord's expense, with construction
meeting the fire rating resistant requirement for exterior wall
construction.
(k) "Fee Mortgage" shall mean, collectively, any mortgage which does
not constitute a Superior Mortgage and which encumbers the Land and all
renewals, modifications, replacements, substitutions, supplements,
extensions, spreaders and consolidations thereof.
(l) "Fee Mortgagee" shall mean, collectively, all holders at the time
of the Fee Mortgage.
(m) "Fixed Rent" shall have the meaning given in Section 3.01A.
(n) "Fixtures" shall have the meaning given in Section 10.07.
(o) "Force Majeure" shall mean any and all causes beyond Landlord's
reasonable control, including delays caused by Tenant, other tenants,
governmental restriction, regulation or control, labor dispute, accident,
mechanical breakdown, shortages or inability to obtain labor, fuel, steam,
water, electricity or materials, acts of God, enemy action, civil
commotion, fire or other casualty.
(p) "Guarantor" shall mean any person who guarantees any or all of
Tenant's obligations under this Lease.
(q) "Improvements" shall mean improvements made by or on behalf of
Tenant or any person claiming through or under Tenant.
(r) "Improvements" shall mean improvements, alterations, additions,
installations, substitutions, betterments and decorations.
(s) "Insurance Requirements" shall mean all requirements of any
insurance policy covering or applicable to all of any part of the Real
Property or the Premises or the use thereof, all requirements of the issuer
of any such policy and all orders, rules, regulations, recommendations and
other requirements of the New York Board of Fire Underwriters or the
Insurance Service Office or any other body exercising the same or similar
functions and having jurisdiction or cognizance of all or any other part of
the Real Property or the Premises.
(t) "Interest Rate" shall mean a rate per annum equal to the lesser
of (a) 2% above the prime rate in effect from time to time (but in no event
less than 15% per annum) or (b) the maximum applicable legal rate, if any.
(u) "Land" shall have the meaning given in Section 1.01.
(v) "Landlord" shall have the meaning given in Section 43.02
(w) "Landlord's Work" shall have the meaning given in Exhibit C.
(x) "Legal Requirements" shall mean laws, statutes and ordinances
(including building codes and zoning regulations and ordinances) and the
orders, rules, regulations, directives and requirements of all federal,
state, county, city and borough departments, bureaus, boards, agencies,
offices, commissions and other subdivisions thereof, or of any official
thereof, or of any other governmental, public or quasi-public authority,
whether now or hereafter in force, which may be applicable to the Real
Property or the Premises or any part thereof or the sidewalks, curbs or
areas adjacent thereto and the Declaration and all requirements,
obligations and conditions of all instruments of record on the date of this
Lease.
(y) "Premises" shall have the meaning given in Section 1.01.
(z) "prime rate" shall mean the annual rate of interest from time to
time publicly announced by The Chase Manhattan Bank, N.A., as its prime
lending rate.
(aa) "Real Property" shall mean the Building and the Land and all
easements, air rights, development rights and other appurtenances thereto.
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(bb) "Rules and Regulations" shall have the meaning given in Section
30.01.
(cc) "Superior Lease" shall have the meaning given in Section 23.01.
(dd) "Superior Lessor" shall mean, collectively, all lessors at the
time of the Superior Lease.
(ee) "Superior Mortgage" shall have the meaning given in Section
23.01.
(ff) "Superior Mortgage" shall mean, collectively, all holders at the
time of the Superior Mortgage.
(gg) "Successor Landlord" shall have the meaning given in Section
23.04.
(hh) "Tenant" shall have the meaning given in Section 43.04.
(ii) "Tenant's Property" shall mean all fixtures, Improvements and
other property (i) installed at the sole expense of Tenant, (ii) with
respect to which Tenant has not been granted at any credit or allowance by
Landlord, (iii) which are removable without material damage to the Premises
and (iv) which are not replacements of any property of Landlord, whether
any such replacement is made at Tenant's expense or otherwise.
(jj) "Tenant's Work" shall have the meaning given in Exhibit C.
(kk) "Term" shall have the meaning given in Section 2.01A.
(ll) "Untenantable" shall mean the extent to which Tenant is actually
unable to use any or all of the Premises in the normal course of its
business.
(mm) "Work Letter" shall have the meaning given in Section 4.01.
SECTION 40.02 A. If any of the provisions 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 provision
or provisions to persons or circumstances other than those as to whom or which
it is held invalid or unenforceable, shall not be affected thereby, and every
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
B. If any term of this Lease is found invalid or unenforceable to any
extent by a final judgment or award which shall not be subject to change by
appeal, then either party may initiate an arbitration in accordance with the
provisions of Article 28. Said arbitrators shall devise a valid and enforceable
substitute term for this Lease which shall as nearly as possible carry out the
intention of the parties with respect to the term of this Lease found invalid or
unenforceable. Such substitute term as so devised shall thereupon be deemed a
part of this Lease.
SECTION 40.03 For the purposes of this Lease and all agreements
supplemental to this Lease, unless the context otherwise requires:
(a) The terms "include", "including" and "such as" shall be construed
as if followed by the phrase "without being limited to". The words
"herein", "hereof", "hereunder" and words of similar import shall be
construed to refer to this Lease as a whole and not to any particular
Article or Section unless expressly so stated.
(b) The term "obligation of this Lease" and words of like import,
shall mean the covenants to pay rent and all of the other terms of 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.
(c) The term "Tenant's obligation 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 and words of like import shall
be construed as "performance and observance". Tenant's obligations
hereunder shall be construed in every instance as conditions as well as
covenants.
(d) Reference to Tenant being "in default hereunder", or words of like
import, shall mean that Tenant is in default in the performance of one or
more of Tenant's obligations hereunder.
(e) Reference 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
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total, or to receive any abatement or diminution of rent, or to be relieved in
any manner of any its other obligations hereunder, or to be compensated for loss
or injury suffered or to enforce any other right or kind of liability whatsoever
against Landlord under or with respect to this Lease or with respect to Tenant's
use or occupancy of the Premises.
(f) The term "repair" shall be deemed to include restoration, rebuilding
and replacement as may be necessary to achieve and maintain good working order
and condition.
(g) Reference to "termination of this Lease" and words of like import
includes expiration or sooner termination of this Lease and the Term and the
estate hereby granted or cancellation of this Lease pursuant to any of the
provisions of this Lease or to law. Upon the termination of this Lease, the Term
and estate granted by this Lease shall end at noon of the date of termination as
if such date were the Expiration Date and neither party shall have any further
obligation or liability to the other after such termination except (i) as shall
be expressly provided for in this Lease, and (ii) for such obligations as by
their 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 be apportioned as of such termination) which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this Lease.
(h) The term "in full force and effect" when used in reference to this
Lease as a condition to the existence or exercise of a right on the part of
Tenant shall be construed in each instance as including the further condition
that at the time in question no default on the part of Tenant exists, and no
event has occurred which has continued to exist for such period of time (after
notice, if any, required by this Lease), as would entitle Landlord in either
such instance to terminate this Lease or to dispossess Tenant.
(i) The term "the terms of this Lease" or "the terms of this Article"
shall be deemed to include all terms, covenants, conditions, provisions,
obligations, limitations, restrictions, reservations and agreements of this
Lease or such Article, as the case may be.
(j) The term "rights" shall be deemed to include rights, remedies, powers
and privileges.
(k) The term "rent" or "rents" shall be deemed to mean Fixed Rent and
Additional Rent.
(l) The term " Landlord's agents" shall be deemed to include all agents,
contractors, and employees of Landlord.
(m) The term "person" shall be deemed to include individuals,
corporations, partnerships, firms, associations and any other legal entities.
(n) The term "tenant" shall be deemed to include any and all occupants of
the Building.
(o) The term "consent" shall mean prior consent and approval and the
consent by either party to any particular action shall not in any way be
considered as relieving the other party from obtaining the express consent to
any subsequent or further action.
(p) The words "Tenant hereby indemnifies Landlord against liability" and
words of similar import shall mean that Tenant hereby agrees to and hereby does
indemnify, hold and save Landlord and Landlord's agents and the Superior
Lessor, Superior Mortgagee and Fee Mortgagee and their respective agents,
employees, contractors, officers, directors, shareholders, partners and
principals (disclosed or undisclosed) harmless from and against any and all
loss, cost, liability, claim, damage, fine, penalty and expense, including
reasonable attorneys' fees and disbursements, but the same shall not be
construed as indemnifying any of the foregoing named persons against its own
negligence.
(q) 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.
(r) 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.
(s) All references in this Lease to numbered or lettered Articles,
Sections, Subsections, Subdivisions and Exhibits are references to Articles,
Sections, Subsections and Subdivisions of this Lease, and Exhibits annexed to
(and thereby made part of) this Lease, as the case may be, unless the context
clearly indicates the contrary.
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(t) Each term, covenant, agreement, obligation or other provision of
this Lease on Tenant's part to be performed shall be deemed and construed
as a seperate and independent covenant of Tenant, not dependent upon any of
the other terms of this Lease. This Lease shall be construed without regard
to any presumption or other rule requiring construction against the party
causing this Lease to be drafted. In the event of any action, suit,
arbitration, dispute, or proceeding affecting the terms of this Lease, no
weight shall be given to any deletions or striking out of any of the terms
of this Lease contained in any draft of this Lease and no such deletion or
strike out shall be entered into evidence in any action, suit, arbitration,
dispute or proceeding nor given any weight therein.
SECTION 40.04 The various terms which are defined in other Articles of
this Lease or are defined in Exhibits annexed hereto shall have the meanings
specified in such other Articles and such Exhibits for all purposes of this
Lease and all agreements supplemental thereto, unless the context clearly
indicates the contrary.
SECTION 40.05 The Article headings in this Lease and the Table of Contents
to this Lease are inserted only as a matter of convenience or reference, and are
not to be given any effect in construing this Lease.
ARTICLE 41
ESTOPPEL CERTIFICATE; FINANCIAL STATEMENTS; MEMORANDUM
SECTION 41.01 (a) At any time and from time to time upon not less than 10
days' prior notice by Landlord or the Superior Lessor or Superior Mortgagee to
Tenant, Tenant shall, without charge, execute, acknowledge and deliver a
statement in writing in the form annexed hereto as Exhibit F addressed to such
party as Landlord, or the Superior Lessor or the Superior Mortgagee, as the case
may be, may designate (with such additions or charges as may be reasonably
requested) or in form satisfactory to Landlord, or the Superior Lessor or the
Superior Mortgagee, as the case may be, certifying all or any of the following:
(i) 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), (ii) whether the Term has commenced and Fixed Rent
and Additional Rent have become payable hereunder and, if so, the dates to which
they have been paid, (iii) whether or not, to the best knowledge of the signer
of such certificate, Landlord is in default in performance of any of the terms
of this Lease and, if so, specifying each such default of which the signer may
have knowledge, (iv) whether Tenant has accepted possession of the Premises, (v)
whether Tenant has made any claim against Landlord under this Lease and, if so,
the nature thereof and the dollar amount, if any, of such claim, (vi) whether
there exist any offsets or defenses against enforcement of any of the terms of
this Lease upon the part of Tenant to be performed, and, if so, specifying the
same, (vii) either that Tenant does not know of any default in the performance
of any provision of this Lease or specifying any default of which Tenant may
have knowledge and stating what action Tenant is taking or proposes to take with
respect thereto, (viii) that, to the knowledge of Tenant, there are no
proceedings pending or threatened against Tenant or Guarantor before or by any
court or administrative agency which, if adversely decided, would materially and
adversely affect the financial condition or operations of Tenant or Guarantor
or, if any such proceedings are pending or threatened to the knowledge of
Tenant, specifying and describing the same and (ix) such further information
with respect to the Lease or the Premises as Landlord may reasonably request or
the Superior Mortgagee or Superior Lessor may require, it being intended that
any such statement delivered pursuant hereto may be relied upon by any
prospective purchaser of the Real Property or any part thereof or of the
interest of Landlord in any part thereof, by any mortgagee or prospective
mortgagee thereof, by any lessor or prospective lessor thereof, by any lessee or
prospective lessee thereof, or by any prospective assignee of any mortgage
thereof.
(b) The failure of Tenant to execute, acknowledge and deliver to Landlord
a statement in accordance with the provisions of this Section within said 10
day period shall constitute an acknowledgement by Tenant, which may be relied on
by any person who would be entitled to reply upon any such statement, that such
statement as submitted by Landlord is true and correct.
SECTION 41.02 Tenant will furnish to Landlord:
(1) Within 120 days after the end of each fiscal year of Tenant and
each Guarantor, respectively, annual consolidated financial statements
(balance sheets and profit and loss statements) of Tenant and each
Guarantor, respectively, in comparative form, certified by an independent
certified public accountant of recognized standing (selected by Tenant or
such Guarantor, as the case may be), if such certified statements
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are delivered to shareholders or any other party, and otherwise certified
by the chief financial officer of Tenant or such Guarantor, as the case may
be; and
(2) Such other information regarding the condition (financial or
otherwise) of Tenant and each Guarantor as Landlord may reasonably request.
Each financial statement of Tenant and each Guarantor shall be accompanied by
a certificate of its chief financial officer that (a) he has reviewed this Lease
and has obtained no knowledge of any default hereunder or of any condition or
event which, with notice or lapse of time or both, would constitute a default
hereunder (or, if any such default, condition or event shall exist, the nature
and period of existence thereof and the action to be taken by Tenant or such
Guarantor with respect thereto), and (b) no material adverse change in the
business, condition (financial or otherwise), operations or prospects of Tenant
or its affiliates or such Guarantor or its affiliates has occurred during the
period covered by such statement.
SECTION 41.03 At the request of either party, Landlord and Tenant shall
promptly execute, acknowledge and deliver a memorandum with respect to this
Lease sufficient for recording setting forth only the matters required to be set
forth pursuant to Section 291-c of the New York Real Property Law. Such
memorandum shall not in any circumstance be deemed to change or otherwise affect
any of the terms of this Lease. Tenant agrees not to record this Lease or any
other document related hereto other than any such memorandum.
ARTICLE 42
RELOCATION OF PREMISES
ARTICLE 43
PARTIES BOUND
SECTION 43.01 The terms of this Lease shall bind and benefit the
successors and assigns of the parties with the same effect as if mentioned in
each instance where a party is named or referred to, except that no violation of
the provisions of Article 22 shall operate to vest any right in any successor or
assignee of Tenant and that the provision of this Article shall not be construed
as modifying the conditions of limitation contained in Article 17.
SECTION 43.02 A. The term "Landlord" shall mean only the owner at the time
in question of the present landlord's interest in the Building and in the event
of a sale or transfer of the Building (by operation of law or otherwise), or in
the event of the making of a lease of all or substantially all of the Building
or in the event of a sale or transfer (by operation of law or otherwise) of the
leasehold estate under any such lease, the grantor,
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transferor or lessor, as the case may be, shall be and hereby is (to the extent
of the interest or portion of the Building or leasehold estate sold, transferred
or leased) automatically and entirely released and discharged, from and after
the date of such sale, transfer or leasing, of all liability in respect of the
performance of any of the terms of this Lease on the part of Landlord thereafter
to be performed; provided that the purchaser, transferee or lessee
(collectively, "Transferee") shall be deemed to have assumed and agreed to
perform, subject to the limitations of this Section and Section 23.04 (and
without further agreement between the then parties hereto, or among such parties
and the Transferee) and only during and in respect of the Transferee's period of
ownership of the Landlord's interest under this Lease, all of the terms of this
Lease on the part of Landlord to be performed during such period of ownership,
which terms shall be deemed to "run with the land" it being intended that
Landlord's obligations hereunder shall, as limited by this Article, be binding
on Landlord, its successors and assigns, only during and in respect of their
respective successive periods of ownership.
B. No recourse shall be had on any of Landlord's obligations hereunder or
for any claim based thereon or otherwise in respect thereof against any
incorporator, subscriber to the capital stock, shareholder, officer or director,
past, present or future, of any corporation or any partner or joint venturer
which shall be Landlord hereunder or included in the term "Landlord" or of any
successor of any such corporation, or against any principal, disclosed or
undisclosed, or any affiliate of any party which shall be Landlord or included
in the term "Landlord", whether directly or through Landlord or through any
receiver, assignee, trustee in bankruptcy or through any other person, firm or
corporation, whether by virtue of any constitution, statute or rule of law or by
enforcement of any assessment or penalty or otherwise, all such liability being
expressly waived and released by Tenant.
C. Tenant shall look solely to Landlord's estate and interest in the
Building for the satisfaction of any right of Tenant for the collection of a
judgement or other judicial process or arbitration award requiring the payment
of money by Landlord and no other property or assets of Landlord, Landlord's
agents, incorporators, shareholders, officers, directors, partners, principals
(disclosed or undisclosed) or affiliates shall be subject to levy, lien,
execution, attachment, or other enforcement procedure for the satisfaction of
Tenant's rights and remedies under or with respect to this Lease, the
relationship of Landlord and Tenant hereunder or under law, or Tenant's use and
occupancy of the Premises or any other liability of Landlord to Tenant.
SECTION 43.03 The term "Tenant" shall mean the Tenant herein named or any
assignee or other successor in interest (immediate or remote) of the Tenant
herein named, which at the time in question is the owner of the Tenant's estate
and interest granted by this Lease; but the foregoing provisions of this
subsection shall not be construed to permit any assignment of this named Lease
or subletting of the Premises or to relieve the Tenant herein named or any
assignee or other sucessor in interest (whether immediate or remote) of the
Tenant herein named from the full and prompt performance of Tenant's obligations
hereunder.
SECTION 43.04 Nothing contained in this Lease shall be deemed to confer
upon any tenant, or anyone claiming under or through any tenant, any right to
insist upon, or to enforce against Landlord or Tenant the performance of
Tenant's obligations hereunder.
SECTION 43.05 The submission by Landlord to Tenant of this Lease in draft
form shall be deemed submission solely for Tenant's consideration and not for
acceptance and execution. Such submission shall have no binding force and
effect, shall not constitute an option for the leasing of the Premises, and
shall not confer any rights or impose any obligations upon either party. The
submission by Landlord of this Lease for execution by Tenant and the actual
execution and delivery thereof by Tenant to Landlord shall similarly have no
binding force and effect on Landlord unless and until Landlord shall have
executed this Lease and a counterpart thereof shall have been delivered to
Tenant. Further, this Lease is subject to the written approval of The
Toronto-Dominion Bank, the existing Superior Mortgagee. Landlord agrees to
submit this Lease for such approval promptly after the date hereof and both
parties agree to use their best efforts to obtain such approval. In the event
that such approval is not obtained within the period of 60 days after the date
hereof, either Landlord or Tenant may elect to terminate this Lease by giving
written notice to the other party of such election (unless such approval has
been obtained prior to the giving of such notice), and in such event, this Lease
shall terminate as of the date on which such notice is given as if such date
were the Expiration Date, and if the Commencement Date has not occurred,
Landlord shall refund to Tenant any rent paid by Tenant pursuant to Section 3.02
and any security deposited by Tenant pursuant to Article 36.
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ARTICLE 44
MISCELLANEOUS
SECTION 44.01 This lease contains the entire agreement between the parties
and all prior negotiations and agreements are merged into this Lease. This Lease
may not be changed, modified, abandoned or discharged, in whole or in part, nor
any of its provisions waived except by a written instrument which (a) expressly
refers to this Lease, (b) is executed by the party against whom enforcement of
the change, modification, abandonment, discharge or waiver is sought and (c) is
permissible under the Superior Mortgage and the Superior Lease.
SECTION 44.02 Tenant expressly acknowledges that neither Landlord nor
Landlord's agents has made or is making, and Tenant, in executing and delivering
this Lease, is not relying upon, any warranties, representations, promises or
statements, except to the extent that the same are expressly set forth in this
Lease, and no rights, easements or licenses are or shall be acquired by Tenant
by implication or otherwise unless expressly set forth in this Lease.
SECTION 44.03 Any apportionments or prorations of rent to be made under
this Lease shall be computed on the basis of a 360 day year, with 12 months of
30 days each.
SECTION 44.04 The laws of the State of New York applicable to contracts
made and to be performed wholly within the State of New York shall govern and
control the validity, interpretation, performance and enforcement of this Lease.
SECTION 44.05 If Tenant is a corporation, each person executing this Lease
on behalf of Tenant hereby covenants, represents and warrants that Tenant is a
duly incorporated or duly qualified (if foreign) corporation and is authorized
to do business in the State of New York (a copy of evidence thereof to be
supplied to Landlord upon request); and that each person executing this Lease on
behalf of Tenant is an officer of Tenant and that he is duly authorized to
execute, acknowledge and deliver this Lease to Landlord (a copy of a resolution
to that effect to be supplied to Landlord upon request).
SECTION 44.06 A. If Tenant is a partnership (or is comprised of 2 or more
persons, individually, or as joint venturers or as copartners of a partnership)
or if Tenant's interest in this Lease shall be assigned to a partnership (or to
2 or more persons, individually, or as joint venturers or as copartners of a
partnership) pursuant to Article 22 (any such partnership and such persons are
referred to in this Article as "Partnership Tenant"), the following provisions
of this Section shall apply to such Partnership Tenant: (a) the liability of
each of the parties comprising Partnership Tenant shall be joint and several,
and (b) each of the parties comprising Partnership Tenant hereby consents in
advance to, and agrees to be bound by, any modifications, termination, discharge
or surrender of this Lease which may hereafter be made and by any notices,
demands, requests or other communications which may hereafter be given, by
Partnership Tenant or by any of the parties comprising Partnership Tenant, and
(c) any bills, statements, notices, demands, requests or other communications
given or rendered to Partnership Tenant or to any of the parties comprising
Partnership Tenant shall be deemed given or rendered to Patnership Tenant and
to all such parties and shall be binding upon Partnership Tenant and all
parties, and (d) if Partnership Tenant shall admit new partners, all such new
partners shall, by their admission to Partnership Tenant, be deemed to have
assumed performance of all of the terms, covenants and conditions of this Lease
on Tenant's part to be observed and performed, and (e) Partnership Tenant shall
give prompt notice to Landlord of the admission of any such new partners, and
upon demand of Landlord, shall cause each such new partner to execute and
deliver to Landlord an agreement in form satisfactory to Landlord, wherein each
such new Partner shall assume performance of all of the terms, covenants and
conditions of this Lease on Tenant's part to be observed and performed (but
neither Landlord's failure to request any such agreement nor the failure of any
such new partner to execute or deliver any such nor the failure of any such new
partner to execute or deliver any such agreement to Landlord shall vitiate the
provisions of Subdivision (d) of this Section 44.06 A).
SECTION 44.07 All Exhibits to this Lease and any and all Rider provisions
attached to this Lease are hereby incorporated into this Lease. If any provision
contained in any Rider hereto is inconsistent or in conflict with any printed
provision of this Lease, the provision contained in such Rider shall supersede
said printed provision and shall control.
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IN WITNESS WHEREOF Landlord and Tenant have duly executed this Lease as of
the day and year first above written.
780 THIRD AVENUE ASSOCIATES
By: Cadillac Fairview 48th Street Corp.,
General Partner
WITNESS: /s/
WITNESS: By /s/
/s/ ----------------------------
- ------------------------- Landlord
ASSESSMENT SYSTEMS INCORPORATED
By /s/
-----------------------------
Tenant
(CORPORATE SEAL)
WITNESS:
/s/
- -------------------------
ATTEST:
/s/
- -------------------------
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RIDER ANNEXED TO AND MADE A PART OF
LEASE, DATED AS OF , 1983,
BETWEEN 780 THIRD AVENUE ASSOCIATES,
AS LANDLORD, AND ASSESSMENT SYSTEMS
INCORPORATED, AS TENANT
-------------------------------------
The provisions of this Rider shall supersede any inconsistent
provisions contained in the printed portion of this Lease.
ARTICLE 45
----------
FIXED RENT
Section 45.01. The Fixed Rent payable by Tenant pursuant to Section
------------- -------
3.01A shall be as follows:
- -----
(a) For the period commencing on the date which is four (4) calendar
months after months after the Commencement Date ("Rent Commencement Date") and
ending on the day before the fifth (5th) anniversary of the Rent Commencement
Date, at the rate of $220,000.00 per annum, payable in equal monthly
installments in advance on the first day of each and every month during such
period; and
(b) For the 5-year period commencing on the fifth (5th) anniversary
of the Commencement Date and ending on the Expiration Date, at the rate of
$233,750.00 per annum, payable in equal monthly installments in advance on the
first day of each and every month during such period.
55
<PAGE>
ARTICLE 46
----------
MODIFICATION OF PRIOR PROVISIONS
Section 46.01. The following is added at the end of Section 2.01A:
------------- -------------
"Notwithstanding anything contained in the preceding subparagraphs (a) and
(b), in no event shall the Commencement Date occur before February 1, 1984.
"The Term shall end on the last day of the month in which the tenth
(10th) anniversary of the Commencement Date occurs ("Expiration Date")
unless the Term shall sooner terminate pursuant to any of the terms of this
Lease or pursuant to law."
Section 46.02. The following is added after Section 2.03:
------------- ------------
"Section 2.04. In the event Landlord shall fail to cause the Premises
------------
to be available for occupancy in accordance with Section 4.02 (other than
------------
as a result, in whole or in part, of any act, omission or negligence of
Tenant or any of its related corporations, agents or contractors) on or
before August 1, 1984, (plus such period of time as Landlord shall be
unable to cause the Initial Space to be available for occupancy in
accordance with Section 4.02, as a result of Force Majeure), then Tenant
------------
may elect to terminate this Lease, provided Tenant shall not be in default
beyond any applicable grace period of its obligations under this Lease, by
notice given to Landlord within thirty (30) days after such date and if
such notice is given and if Landlord shall not cause the Premises to be
available for occupancy in accordance with Section 4.02A on or before the
-------------
date which is thirty (30) days after such notice is given by Tenant, this
Lease shall be terminated as of midnight of the date which is thirty (30)
days after such notice is given, as if the termination date were the
Expiration Date."
Section 46.03. The following is added after Section 4.02(b):
------------- ---------------
"(c) the ground floor lobby of the Building, the lobby and the
lavatories on the twenty-second (22nd) floor of the Building and the public
corridor from the twenty-second (22nd) floor lobby to the Premises shall be
substantially completed to allow reasonable access to the Premises, there
shall be no unreasonable obstructions on the ground floor lobby or twenty-
second (22nd) floor lobby of the Building, the plaza adjacent to the ground
floor lobby of the Building shall be clear of construction machinery and
equipment, except for the construction hoist(s) referred to in Section
-------
32.03 (but in no event shall the landscaping be required to be completed by
-----
Landlord), at least one (1) public elevator and one (1) freight elevator
serving the Premises shall be substantially completed and in good operating
order and condition (in accordance with and subject to the
56
<PAGE>
terms and conditions of this Lease), all Building Equipment (excluding any
security systems to be installed by Landlord, if any) reasonably necessary
to service the Premises shall be in good operating order and condition (in
accordance with and subject to the terms and conditions of this Lease), and
all windows on the exterior walls of the Premises shall be installed (other
than windows which are adjacent to or near the construction hoist(s)
referred to in Section 32.03 and which are being repaired by Landlord in
-------------
accordance with the terms and conditions of the Lease); and"
Section 46.04. The following is added at the end of Section 7.01K(i):
------------- ----------------
", provided, however, that with respect to any employees of Landlord who
are engaged in providing services both to the Building and to buildings
owned by Landlord other than the Building, Operating Expenses shall include
only that portion of the total amount of salaries, wages, bonuses and other
benefits enumerated above which bears the same ratio to the total amount of
such salaries, wages, bonuses and other benefits paid or relating to such
employees as the portion of work performed by such employees at or with
respect to the Building, Real Property, and the areas adjacent thereto or
connected therewith, bears to the total amount of work performed by such
employees in the course of their employment by Landlord"
Section 46.05. The following is added at the end of Section
------------- -------
7.01K(xvi):
- ----------
", provided, however, that the actual cost of replacement of any item
depreciated pursuant to this subparagraph shall be included in Operating
Expenses only to the extent that such depreciation has not been taken"
Section 46.06. The following is added after Section 7.01K(j):
------------- ----------------
"(k) costs of services provided by Landlord to tenants occupying
retail space in the Building, which services are not provided to tenants
occupying office space in the Building; and
"(l) costs of services paid to any entity affiliated with Landlord
which are in excess of the then prevailing rates for such services in the
Borough of Manhattan for first class Third Avenue office buildings."
Section 46.07. The following is added at the end of Section 7.02F:
------------- -------------
"Notwithstanding anything to the contrary contained in Section 7.02
------------
Tenant's obligation to pay to Landlord Tenant's Tax Payment shall not
commence until the Rent Commencement Date."
Section 46.08. The following is added after the words "or, at
-------------
Landlord's election" which follow Subsection
----------
57
<PAGE>
7.03A(b)(1):
- ------------
"(which election may be made by Landlord once during the period from the
end of the first (1st) Escalation Year through the end of the fifth (5th)
Escalation Year, and once during the period from the end of the fifth (5th)
Escalation Year through the end of the tenth (10th) Escalation Year),"
Section 46.09. The following is added at the end of Section 7.03C:
------------- -------------
"Notwithstanding anything to the contrary contained in Section 7.03
------------
Tenant's obligation to pay to Landlord Tenant's Operating Payment shall not
commence until the Rent Commencement Date."
Section 46.10. The following is added at the end of Section 10.05:
------------- -------------
"Landlord shall submit to Tenant a list containing the names of at least
three (3) contractors or subcontractors which are acceptable to Landlord,
two (2) of which are not controlled directly or indirectly by, or
affiliated with, Landlord."
Section 46.11. The following is added after the first sentence of
-------------
Section 13.01:
- --------------
"Landlord has installed, at Landlord's expense, a meter for the purpose of
measuring electrical consumption on the twenty-second (22nd) floor of the
Building. Landlord shall maintain, service, repair and, if necessary,
replace such meter. Tenant, upon demand by Landlord, shall pay to Landlord,
as Additional Rent, an amount equal to 55.98% of the costs incurred by
------
Landlord in connection with such maintenance, service, repair and
replacement. Following the Commencement Date, Landlord shall cause an
electrical engineer or a utility consultant selected by Landlord to make a
survey of Tenant's connected power load and the connected power load of
that portion of the rentable area of the twenty-second (22nd) floor of the
Building not included within the Premises. Landlord, at Landlord's option,
shall have the right, at any time and from time to time during the Term, to
cause similar surveys to be made. Tenant's Share shall mean that percentage
equal to Tenant's percentage of the aggregate of the connected power load
for the entire rentable area of the twenty-second (22nd) floor of the
Building as determined from time to time pursuant hereto. The findings of
Landlord's engineer or consultant shall be binding on Landlord and Tenant,
subject to adjustment as hereinafter provided. Promptly after receipt by
Landlord of a bill from the public utility company furnishing electrical
energy to the twenty-second (22nd) floor of the Building, Landlord shall
furnish to Tenant a copy thereof together with a request for payment to
Landlord by Tenant of Tenant's Share of such bill. Tenant shall promptly
pay to Landlord, as Additional Rent, Tenant's Share of such bill. In the
event Tenant shall dispute any findings of the engineer or consultant
designated by Landlord, Tenant
58
<PAGE>
may, within thirty (30) days of receiving notice of such findings,
designate by notice to Landlord an independent electrical engineer or
utility consultant to make, at Tenant's sole cost and expense, another
determination of Tenant's connected power load. If the engineer or
consultant selected by Tenant shall determine that Tenant's connected power
load is less than as determined by Landlord's engineer or consultant and
the two are unable to adjust such difference within twenty (20) days after
the determination made by Tenant's engineer or consultant is delivered
Landlord, the dispute shall be resolved by arbitration in accordance with
Article 28. Pending a final determination pursuant to such arbitration,
----------
however, Tenant shall pay to Landlord for such electrical energy based on
the determination of Landlord's engineer or consultant; and, if it is
determined that Tenant has overpaid, Landlord shall reimburse Tenant for
any overpayment at the conclusion of such arbitration. In any such
arbitration, the third arbitrator to be appointed shall be an electrical
engineer having at least five (5) years experience in similar matters in
New York City."
Section 46.12. The following is added before the word "completed" on
-------------
the second line of Section 15.02:
-------------
"(i) delivered to Tenant notice that Landlord believes, in good faith, that
the repairs required to be made to the Premises and the means of access
thereto can be completed within six (6) months from the date of such damage
or destruction plus such additional time after such six (6) month period
(but in no event to exceed six (6) months), as shall equal the aggregate
period Landlord may be delayed in doing so by Force Majeure or adjustment
of insurance, and (ii) actually"
Section 46.13. In reference to Section 22.06A, if Landlord exercises
------------- --------------
its option pursuant to Section 22.06A(c) to sublet from Tenant the space
-----------------
proposed to be sublet by Tenant, (i) the performance by Landlord or its designee
under a sublease of such space shall be deemed performance by Tenant of any
similar obligation under this Lease and (ii) any default under any such sublease
shall not give rise to a default under a similar obligation contained in this
Lease, nor shall Tenant be liable for any default under this Lease or deemed to
be in default herein if such default is occasioned by or arises from any act or
omission of the tenant or occupant holding under or pursuant to any such
sublease.
Section 46.14. The following is added after Section 23.01A:
------------- --------------
"B. Landlord shall use reasonable efforts to obtain a Non-Disturbance
Agreement (as hereinafter defined) from any Superior Lessor or Superior
Mortgagee; provided, however, that (a) Tenant shall cooperate with Landlord
in obtaining any such agreement and (b) Landlord shall not be required to
(i) make any payment to any Superior Lessor or Superior Mortgagee, or (ii)
alter any of the terms of its financing with any Superior Mortgagee, or
(iii) alter any of the terms of any Superior Lease with any Superior
Lessor, or any of the terms of any Superior Mortgage with any Superior
Mortgagee, in
59
<PAGE>
order to obtain such agreement. The term "Non-Disturbance Agreement" shall
mean either an agreement, in recordable form, between Tenant and any
Superior Lessor or Superior Mortgagee, as the case may be, or an agreement
contained in any Superior Lease or Superior Mortgage, as the case may be,
which shall provide in substance that as long as Tenant is not in default
beyond any applicable grace period under this Lease, such Superior Lessor
or Superior Mortgagee, as the case may be, shall not name or join Tenant as
a party defendant or otherwise, in any suit, action or proceeding to
enforce (unless Tenant is deemed a necessary party under any law then in
effect), nor will this Lease be terminated by enforcement of any rights
given to such Superior Lessor or Superior Mortgagee, as the case may be,
pursuant to the terms, covenants or conditions contained in such Superior
Lease or Superior Mortgage, as the case may be; provided, however, that the
provisions set forth in Section 23.04 shall be applicable to, and may be
-------------
incorporated in, any such agreement."
Section 46.15. In reference to Section 23.02, Tenant shall not be
------------- -------------
deemed to be doing anything that would (i) constitute a default under the
Superior Lease or the Superior Mortgage or (ii) cause the Superior Lease to be
terminated or forfeited, if such action by Tenant does not otherwise result in a
default beyond the applicable grace periods hereunder.
Section 46.16. In reference to Article 23, Tenant shall have no duty
------------- ----------
or obligation to or for the benefit of any Superior Lessor or Superior Mortgagee
unless and until Tenant shall be furnished with the name and address of such
Superior Lessor and/or Superior Mortgagee.
Section 46.17. The following is added at the end of Section 36.01:
------------- -------------
"Tenant shall have the right to deposit with Landlord, as the security
deposit required pursuant to Article 36, an irrevocable commercial letter
----------
of credit in the aggregate amount of $34,166.66 in form and substance and
issued by a member bank of The New York Clearinghouse Association or other
bank, acceptable to Landlord, payable upon the presentation by Landlord to
such bank of a sight-draft, together with a certificate executed by an
officer of Landlord to the effect that Landlord is entitled to payment of
Tenant's commercial letter of credit pursuant to Article 36, which letter
----------
of credit shall provide (a) for the continuance of such credit for the
period of at least one year from the date of this Lease, (b) for the
automatic extension of such letter of credit for additional periods of one
year from the initial and each future expiration date thereof (the last
such extension to provide for the continuance of such letter of credit for
at least three (3) months beyond the Expiration Date) unless such bank
gives Landlord notice of its intention not to renew such letter of credit,
in accordance with Article 39, not less than seventy-five (75) days prior
----------
to the initial or any future expiration date of such letter of credit and
(c) that in the event such notice is given by such bank, Landlord shall
have the right to draw on such bank at
60
<PAGE>
sight for the balance remaining in such letter of credit and to hold and apply
such balance as provided in Article 36. Each letter of credit to be deposited
----------
and maintained with Landlord (or the proceeds thereof) shall be held by Landlord
as security for the faithful performance and observance by Tenant of the terms
of this Lease as provided in Article 36, and in the event that (i) any default
----------
occurs as provided in Article 17 which default continues beyond the applicable
----------
grace period, or (ii) Landlord transfers its right, title and interest under
this Lease to a third party and the bank issuing such letter of credit does not
consent to the transfer of such letter of credit to such third party, or (iii)
notice is given by the bank of its intention not to renew as above provided,
then, in any such event, Landlord may draw on such letter of credit, and the
proceeds of such letter of credit shall then be held and applied as security
(and be replenished, if necessary) as provided in Article 36."
----------
61
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF LAND
All that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:
BEGINNING at the corner formed by the intersection of the southerly side of East
49th Street and the Westerly side of 3rd Avenue; running
thence southerly along the westerly side of 3rd Avenue 200 feet 10 inches to the
northerly side of East 48th Street;
thence westerly along the northerly side of East 48th Street 120 feet;
thence northerly and parallel with the westerly side of 3rd Avenue 100 feet 5
inches to the center line of the block;
thence easterly along the center line of the block and parallel with the
northerly side of East 48th Street 20 feet;
thence northerly and parallel with the westerly side of 3rd Avenue 100 feet 5
inches to the southerly side of East 49th Street;
thence easterly along the southerly side of East 49th Street 100 feet to the
westerly side of 3rd Avenue, the point or place of BEGINNING.
A-1
<PAGE>
EXHIBIT B
FLOOR PLAN
[FLOORING DEPICTING FLOOR REFERENCED 780 THIRD AVENUE]
<PAGE>
EXHIBIT C
WORK LETTER
In connection with this Lease, Landlord has agreed to perform certain work
in the Premises, and Tenant has agreed to undertake certain obligations in
connection therewith, as hereinafter set forth.
Landlord has engaged Lehrer/McGovern, Inc. ("Contractor") as construction
manager to supervise the Basic Construction of the Building and the performance
of the Work (or the portion thereof) to be performed by Landlord pursuant to
this Work Letter (as such capitalized terms are hereinafter defined).
1. Landlord shall, at the sole cost and expense of Landlord and subject
to the limitations and provisions hereof, furnish and install, or cause to be
furnished and installed, those items of work described on Schedule A
("Landlord's Work") to the extent shown on the Plans (as hereinafter defined)
approved by Landlord, all of which Landlord's Work, and the labor and materials
in connection with Landlord's Work, shall be Building standard unless otherwise
specifically provided.
2. On or before the dates ("Plan Submission Dates") hereinafter set
forth, Tenant shall submit to Landlord, for Landlord's approval, and to
Contractor the following plans, working drawings, specifications and information
(collectively, "Plans"):
(a) On or before the date which is 15 days after the date*/ of this
Lease, (i) the location and extent of floor loading in excess of the design
capacity of the Building, and location of all floor openings, including any
interconnecting stairwells, (ii) the location and description of special
plumbing requirements, and (iii) the location, loads and dimensions of
telephone and other equipment rooms, if other than as shown on Landlord's
floor plans.
(b) On or before the date which is 20 days after the date*/ of this
Lease, a partial set of architectural drawings, specifications and details,
showing, among other things, (i) the estimated total electrical
requirements indicating connected electrical loads, location and type, and
a fixture schedule, (ii) air condi-
C-1
*of execution and delivery
<PAGE>
tioning requirements, including, but not limited to, the number of people,
equipment and special air conditioning requirements (as hereinafter
defined), and (iii) specific plumbing requirements, including, without
limitation, plans and sections.
(c) On or before the date which is 30 days after the date*/of this
Lease, a complete set of architectural drawings, specifications and
details, showing, among other things, (i) the floor plan(s), (iii)
partition locations and full sections of types of partitions used, (iv)
door locations, size and type, and hardware schedule, (v) reflected ceiling
plans, (vi) details of special conditions encountered, (vii) the estimated
total electrical requirements indicating connected electrical loads,
location and type, and a fixture schedule, (viii) the location of
electrical outlets and telephone outlets, (ix) any cabinet work, ornamental
metal work, non-Building standard flooring, architectural installations and
details and other information affecting other trades, (x) air conditioning
requirements, including, but not limited to the number of people, equipment
and special air conditioning requirements (as hereinafter defined), (xi)
any ceiling heights and materials which are not Building standard, (xii)
specific plumbing requirements, including, without limitation, plans and
sections, (xiii) finish schedules and related plans, if any, including,
without limitation, information and specifications for paint schedule,
floor covering, draperies and wall covering, and (xiv) any other
information which Landlord will need to order material and perform the
Work. The term "finish schedules" shall mean the complete listing of the
finishes to be applied to all wall and floor surfaces forming a part of the
Work, and detailed specifications of such draperies and wall and floor
coverings, including, without limitation, color samples, itemization of
materials by manufacturers' catalogue numbers, if applicable, and any other
information requested by Landlord.
3.A. The Plans shall (a) be fully detailed, (b) show complete dimensions,
(c) have designated thereon all points of location and other matters, including,
without limitation, the finish schedules, required by Landlord to perform or let
contracts for the performance of the Work, and (d) consist of the final plans
and specifications (including air conditioning, ventilating, electrical,
plumbing and engineering drawings and specifications (collectively, "Mechanical
Plans"), which Mechanical Plans shall be prepared by Landlord's archi-
C-2
*of execution and delivery
<PAGE>
tect or engineer, and the cost of which shall be included in Tenant's Cost)
prepared by Tenant's licensed interior architect or designer to describe the
manner in which Tenant desires the Premises to be finished for Tenant,
including, without limitation, any changes thereto from time to time requested
by Tenant or made to obtain the approvals or permits referred to in Paragraph 5
hereof. The Plans shall comply with and conform to Landlord's plans, the design
capacities for the Building, and all Legal Requirements and Insurance
Requirements relating to construction of the Building and/or the Premises. All
drawings submitted hereunder shall be to scale of 1/4" = 1' and all details
submitted hereunder shall be to scale of 1 1/2" = 1', unless otherwise requested
by Landlord.
B. Prior to the commencement of the Work, the Plans shall have been
approved in writing by Landlord, but such approval shall be as to layout only,
shall not be deemed to be an approval of the legality or the cost of the Work or
the Plans and shall not be deemed a waiver of any of Landlord's rights under
this Work Letter with respect to any delays which may result from the materials,
services or work required by the Plans. Landlord shall notify Tenant of the
manner, if any, in which, in Landlord's judgement, the Plans, as submitted by
Tenant, fail to conform with the applicable provisions of this Work Letter.
Within ten (10) days after such notifications, Tenant shall revise or correct
such Plans and shall submit such revisions or corrections to Landlord.
Landlord's approval of the Plans will be evidenced by endorsement to that effect
on one (1) set of the Plans and the return of such signed set to Tenant. Whether
or not consented to or approved by Landlord, Tenant shall be fully and solely
responsible for all aspects of the Work (other than Landlord's Work), including,
without limitation, the design and construction of the Work, the accuracy and
sufficiency of the Plans and their compliance with Legal Requirements and
Insurance Requirements. Notwithstanding anything to the contrary contained
herein and whether or not Landlord would have been able to commence construction
of the Work, in no event shall Landlord be obligated to commence to perform the
Work unless and until all of the Plans have been submitted by Tenant to Landlord
and Landlord has approved such Plans. The Plans shall not be changed or modified
by Tenant after such approval by Landlord without the approval in writing of
Landlord. Landlord will not unreasonably withhold its approval of the Plans or
any change or modification thereof; provided, however, that Landlord shall not
in any event be obligated to approve any change or modification of the Plans
which in Landlord's sole opinion will cause any delay in the completion of the
Work or any additional cost or expense to Land-
C-3
<PAGE>
lord. In no event may any changes be made in the Plans after Landlord has given
Tenant the notice referred to in Section 4.02 of the Lease.
4. As used in this Exhibit C ("Work Letter"), the following terms have
the following respective meanings:
(a) air conditioning requirements - shall mean the information and
drawings specified in Paragraph 2, supplied by Tenant, from which Landlord
and Landlord's engineer can design the air conditioning and ventilating
systems for the Premises, and purchase, fabricate and install the duct work
and other materials therefor, including, without limitation, (i) partition
and reflected ceiling plans showing dimensioned locations with reference to
Building column center lines, existing column faces, core walls, window
mullions, or elements such as those, and specifications for special
lighting fixtures, giving the length, width, height and weight of that
portion of such fixtures which is to be installed above the level of the
finished ceiling, (ii) the number of occupants expected in each room, (iii)
the heat dissipated in each room by Tenant's equipment, and (iv) any
special air conditioning requirements and special ventilating required by
Tenant;
(b) special air conditioning requirements - shall mean and include
any of the following which do not exceed the design capabilities of the
heating, ventilating and air conditioning system serving the Premises (i)
any separate air conditioning and/or ventilation systems serving only the
Premises, (ii) air conditioning and/or ventilating equipment for space in
the Premises not used solely for offices, such as auditoriums, conference
rooms, pantries, toilet rooms or reproduction or other rooms: (A) where the
heat released is greater than in normal office space, (B) which are subject
to greater variation in heat release or in occupancy than in normal office
space, or (C) which require greater or less than normal office control of
humidification (including, without limitation, reheat coils, strip heaters,
thermostats, control valves, fans, duct connected exhausts and thermal
acoustical insulation), and (iii) any equipment serving the Premises which
is required to achieve a special architectural effect (such as strip line
diffusers or return registers), or satisfy any other special conditions of
Tenant's layout, or the proposed conduct of its business in the Premises;
C-4
<PAGE>
(c) Basic Construction of the Building - shall mean, in addition to the
structure itself, the mechanical and electrical systems (other than the portion
of the heating, ventilating and air conditioning system described on Schedule A
of this Work Letter) and the distribution thereof to locations from which each
floor can be served, and the elevators, lobby and other common areas and any
other necessary construction, excepting only any materials or work to finish any
portion for occupancy by particular tenants;
(d) Work - shall mean all (except as allowed by the provisions of
Paragraph 11) materials and work to be added to the Basic Construction of the
Building to finish the Premises for Tenant, including, without limitation, any
electrical or plumbing work required to meet Tenant's electrical and plumbing
requirements and any air conditioning work required to be done in the Premises
to meet the design conditions contained in Paragraph 4 of Schedule A and
Tenant's special air conditioning requirements (such electrical, plumbing and
air conditioning work to be in accordance with plans and specifications designed
by Landlord's engineers to fit the Plans, which plans and specifications shall
be available for review and suggestion by Tenant, but such suggestion shall not
be binding on Landlord); provided, however, that no (i) furniture, trade
fixtures or decorative effects (such as drapes and pictures), (ii) office
equipment, (iii) telephone installation, or (iv) subject to Paragraph 11,
cabinetry or special decorative effects, shall be a part of the work;
(e) Tenant's Work - shall mean all Work not included in Landlord's work;
(f) Indirect Job Costs - shall mean reasonable charges paid or incurred by
Landlord (other than charges paid to the Contractor and included in subparagraph
(i) of Paragraph 4(h) of this Work Letter) for on-the-job services performed or
supplied (such as clean-up removal of waste and debris, protection of work in
progress of completed, guard service, temporary maintenance and services,
Utilities and the use of elevators and hoists) in connection with Tenant's work
and work performed by Tenant pursuant to Paragraph 11;
(g) Change Costs - shall mean all*/ fees, costs and expenses
incurred by LandLord as a result of the exercise by Tenant of its right of
substitution allowed by paragraph of its right of substitution allowed by
Paragraph 4(h) or as a result of any request by Tenant
* reasonable
C-5
<PAGE>
for a change in, or any change in, the Plans (including, without, limitation,
one caused by a direction by Tenant to omit any item of work contained in the
Plans) as allowed by Paragraph 10(b) or air conditioning requirements or in any
of Tenant's other plans or specifications, including (whether or not the change
is to Landlord's Work) fees, costs or expenses relating to: (i) any additional
architectural, engineering or construction services, (ii) any changes to
materials in process of fabrications, (iii) cancellation or modification of
supply or fabricating contracts, or (iv) removal or alteration of work or plans
completed or in process;
(h) Tenant's Cost - shall mean the total of (i) the actual cost of work
(including any amount charged by the Contractor for general conditions and the
Contractor's fee) performed or caused to be performed by Landlord*/ paid or
incurred directly by Landlord), its architects and engineers and by its
contractors, suppliers and work forces for materials and labor in connection
with that portion of the Work, if any, which was not included in Landlord's
Work, (ii) any Indirect Job Costs, (iii) any Change Costs, (iv) any costs
incurred by Landlord attributable to the design and construction of special air
conditioning requirements or other special requirements, and (v) architectural
services in connection with the review of the Plans and engineering services in
connection with the review of the Plans and the preparation and revision of the
Mechanical Plans, plus 5% on the foregoing items (i) through (iv); provided,
however, that if any part of the Work not included in Landlord's Work shall be
of a similar type but of equal or better quality than the corresponding part of
Landlord's Work (Tenant's right of substitution being limited to substitutions
which shall be of a like nature and of equal or greater cost and quality than
that for which the substitution is made), Tenant shall receive a credit equal to
the net cost (with no addition of 5%) to Landlord of the part replaced.
Notwithstanding the foregoing, Tenant shall receive credit for any part of
Landlord's Work omitted or not installed; **/ In the event Tenant shall elect
not to install the Building standard carpeting to be furnished by Landlord
pursuant to Schedule A, then Tenant shall be entitled to a credit against the
net cost of any other carpeting installed by Tenant equal to $9.00 per square
yard of the carpeting which would have actually been installed by Landlord in
the Premises pursuant to Schedule A. Notwithstanding the foregoing, in no event
shall Tenant receive any cash credits.
* so long as such costs are
** provided, however, that if Tenant does not use the maximum number of any of
the items of Landlord's work, Tenant shall be entitled to credits against
Tenant's Cost for each such item not used by Tenant. The credit against
Tenant's Cost for each such item shall be equal to the net cost (with no
addition of 5%) to Landlord of such item, provided, however, that Tenant's
credit shall in no event be more than the credit which Landlord receives from
its suppliers.
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(i) Business Days - shall, as used in this Work Letter only, mean all
days other than Saturdays, Sundays and days proclaimed as legal holidays by
the State of New York or the Federal Government or the unions involved in
doing the Work;
(j) Notice - shall, as used in this Work Letter only, and
notwithstanding the general provisions of Article 39, mean any letter,
memorandum or other written communication which is either mailed to
Landlord or Tenant, as the case may be, in a postage prepaid envelope
(which shall be registered or certified mail, return receipt requested), or
delivered to an authorized representative of Landlord or of Tenant,
addressed, in the case of Landlord, to Landlord c/o Cadillac Fairview Urban
Development, Inc., 375 Park Avenue, New York, New York 10152, Attention:
, with copies to (i) Rosenman Colin Freund Lewis &
Cohen, 575 Madison Avenue, New York, New York 10022, Attention: Donald H.
Siskind, Esq., and (ii) or to such other or further address or addresses as
Landlord may designate by like notice; and, in the case of Tenant, such
Notice shall be similarly mailed or delivered, addressed to Tenant at the
Premises, with a copy to Webster and Sheffield, One Rockefeller Plaza, New
York, New York 10020, Attention: Karl B. Holtzschue, Esq., or to such other
address as Tenant may designate by like notice; provided, however, that the
aforesaid authorized representative of Tenant shall be designated in
writing by Tenant; and if Tenant's architect is not one of the foregoing
parties, then Tenant may subsequently, by such Notice to Landlord, specify
such architect in a similar fashion; and provided further that any such
Notice shall be deemed to be given when received by mail or delivered to an
authorized representative.
5.A. Upon written approval by Landlord of the Plans, Tenant shall (a),
with reasonable speed and diligence so as not to delay Landlord's Work, file (by
Building Notice Application, in the case of the Department of Buildings of the
City of New York and by related miscellaneous applications, in the case of fire
protection) with the appropriate governmental authority or authorities the
Plans, the Mechanical Plans and any other plans prepared by Landlord's
architects and engineers for air conditioning, ventilating, heating, mechanical,
electrical and plumbing work or structural changes in the Building forming a
part of the Work; and (b) take whatever action shall be necessary ( including
modifications approved by Landlord of the Plans) to obtain and maintain all
governmental certifications, permits, authorizations and approvals which may be
required in connection with the
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Work. Immediately after receipt of any such certifications, permits,
authorizations or approvals, Tenant shall deliver copies of all of the same to
Landlord. Tenant shall pay all filing fees and other costs in connection
therewith. Tenant shall deliver copies of all such permits and authorizations to
Landlord. Each floor of the Premises shall be filed for separately. Landlord
shall cooperate with Tenant in connection with the aforesaid. Tenant will
promptly furnish to Landlord copies of all stamped Building Department approved
drawings. Notwithstanding the foregoing, Landlord, at Landlord's election, may
do all such filings and procure all such permits and authorizations on Tenant's
behalf and at Tenant's sole cost and expense.
B. Notwithstanding the provisions of this Work Letter, (a) in the
event Tenant elects not to install the Building standard flooring, the non-
Building standard flooring and underlayment to be installed by Tenant shall be
subject to Landlord's approval, which approval shall be in the sole and absolute
discretion of Landlord, and (b) in the event Tenant elects to install decorative
window treatment in addition to the Building standard blinds, then such
decorative window treatment shall allow for the proper circulation of air in and
around the windows and shall be subject to the approval of Landlord, which
approval shall be in Landlord's sole and absolute discretion.
6.A. If a delay shall occur in obtaining a certificate of occupancy
(temporary or final) for the Premises or the Building or in completion of the
Work by Landlord as the result of (a) any failure to furnish when due the Plans
or revisions thereto or to timely file the same with appropriate governmental
authorities, (b) any change by Tenant in any air conditioning requirement, the
Plans or any other plan, specification or finish information furnished by
Tenant, (c) any state of facts which gives rise to a change referred to in the
definition of Change Cost, (d) the quality of performance or completion of work
by a person, firm or corporation employed by Tenant, (e) the fact that
non-Building standard work requires lead time to obtain or construction time to
perform, in excess of that required for Building standard work, (f) work is to
be done by or on behalf of Tenant which under good construction scheduling
practices should be completed before some portion of the Work is done, and such
work by Tenant is not completed on schedule or it delays the completion of the
Work, (g) any work to be performed by Tenant, including the installation of
Tenant's telephone and/or other communications systems, (h) any direction by
Tenant that Landlord hold up proceeding with a segment of Tenant's Work
preliminary to a possible change therein or for
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any other reason, (i) any other act or omission of Tenant, its agents, employees
or contractors, including any default by Tenant in the performance of its
obligations under this Work Letter or Lease, or any delay in giving
authorizations or approvals pursuant to this Work Letter, or (j) any
displacement (resulting from any of the foregoing) of any portion of the Work
from its place in Landlord's overall construction schedule for finishing space
in the Building for tenants and the rescheduling of such Work (due regard being
given to the need to minimize disturbance to the overall work schedule for
finishing space in the Building for other tenants as well as Tenant), then any
such delay, at Landlord's option, shall be included in the calculations of the
Commencement Date under Article 4 of this Lease with the Commencement Date
becoming one day earlier than provided for in Section 2.01A(a) for each day of
such delay.
B. If a delay in the completion of the Work by Landlord, or any
portion of such delay, is the result of Force Majeure (including, without
limitation, strikes), then any such delay, which would not have occurred but for
a delay described in subdivision (A) of the preceding paragraph, shall be deemed
added to the delay described in such subdivision (A).
7. Tenant shall comply strictly with the Plan Submission Dates and any
change or modification of the Plan Submission Dates shall not be valid or
binding unless agreed to in writing by Landlord. Provided Landlord has not
unreasonably withheld its approval thereof, the Plans shall be deemed to have
been submitted on the date of final approval by Landlord.
8. Notwithstanding any other provisions of this Lease and in addition to
Landlord's other right, if Tenant fails, within 30 days after notice, to cure a
default in complying with the Plan Submission Dates, Landlord may, but shall not
be required to, at any time prior to such cure of a default, as Landlord shall
in the sole judgement of Landlord determine, either (a) proceed with Landlord's
Work as shown on Schedule A, or any part thereof, insofar as Landlord is able or
willing to so proceed, and in such event, Landlord may substantially complete
the Premises in a Building standard manner and Landlord shall have no
obligation to do further Work, (b) proceed to complete the Premises as an open
area with ceilings, floors and such partitions as Tenant shall have previously
designated to Landlord in writing and Landlord shall have no obligation to do
further Work, or (c) terminate the Lease upon not less than 10 days' prior
written notice to Tenant.
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9. Landlord may make such changes in the plans and specifications of the
Building as Landlord may desire, except that (a) such changes shall not
materially adversely affect the occupancy of the Premises by Tenant, and (b) it
such changes relate to the Premises, such changes (except as shall be required
by any Legal Requirement) will not be made without the prior written consent of
Tenant, which consent Tenant agrees not to unreasonably withhold or delay, and
if Tenant fails to respond to a request for such consent within the period of 7
days after such request is made, such consent shall be deemed given by Tenant.
In addition, Landlord, at its option and without the necessity of any consent of
Tenant, may substitute for Building standard materials other materials of
comparable kind and quality.
10.A. Landlord shall perform the Work in accordance with the approved
Plans. Landlord's Work shall be without cost to Tenant, but Tenant, prior to and
during the progress of the Work, shall pay, as Additional Rent, Tenant's Cost.
Such payment shall be made to Landlord or, at Landlord's election, to
Contractor, in installments, reasonably specified by Landlord or Contractor,
within ten days after rendition of bills therefor by Landlord or Contractor, so
that the full amount of Tenant's Cost shall be paid during the progress of the
Work and the balance, if any, upon demand after substantial completion of the
Work.
B. Within a reasonable time (considering the amount of detail
required and so as not to affect the time table of the work involved) after
receipt of any of the Plans, or of any change thereto, Landlord or Contractor
shall give Notice to Tenant of Landlord's (or Contractor's) estimate
("Estimate") of the amount, if any, of Tenant's Cost, including any Change Cost,
arising therefrom. Landlord's (or Contractor's) representatives shall be
available to Tenant to discuss the Estimate. Tenant shall be deemed to have
agreed to the amount set forth in the Estimate unless within 5 business days
after receipt thereof Tenant shall give Notice to Landlord and Contractor in
detail of any disagreement therewith, in which event Landlord and Tenant shall
attempt to resolve such disagreement within 3 Business Days. If no such Notice
by Tenant is given, or if agreement is reached, then the amount set forth in the
Estimate, or the amount agreed upon, as the case may be, shall thereafter be
conclusively binding as an estimate, on Tenant. If such Notice by Tenant is
given and no agreement is reached, Landlord shall nevertheless proceed with the
Work, but Tenant may direct Landlord to omit any item thereof; subject, however,
to Landlord's right to withdraw its approval of the Plans by reason of any such
omission. Landlord shall use reasonable efforts to ob-
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<PAGE>
tain any Work at a reasonable cost to Tenant, but, in all events, Tenant shall
pay Tenant's Cost of any Work. Nothing contained in this Subparagraph B shall
permit Tenant to delay the completion by Landlord of the Work (or any portion
thereof), whether or not the cost thereof is in dispute. If at any time any of
the Plans or any of the Mechanical Plans or any other plans and specifications
prepared by Landlord's architect or engineer for Tenant are changed by Tenant so
as to eliminate or change any item of Tenant's Work in progress of engineering,
fabrication or construction, the process of such engineering, fabrication or
construction shall not be stopped or altered until Tenant directs such action by
a Notice containing an acceptance by Tenant of any addition to Tenant's Cost
which may result therefrom.
11.A. If Tenant wishes to do work which is of a special nature through its
own employees or contractors (such as cabinet work or special decorative
effects, telephone and communications systems), then Tenant shall so specify in
detail on the Plans and shall simultaneously furnish to Landlord the names of
the contractors Tenant proposes to use for such work. Landlord shall be deemed
to have consented to the performance of such work by the contractors designated
by Tenant unless, within 10 Business Days after receipt of the Plans involved,
it notifies Tenant (a) that it does not consent thereto (which consent Landlord
shall not unreasonably withhold), in which event such work shall be deemed to be
and become a part of Tenant's Work to be done by Landlord, or (b) that it
consents thereto upon such reasonable conditions as Landlord may set forth in
such Notice, with the work involved to be effected in accordance with the
requirements of this Work Letter and of Articles 9 and 10 of this Lease. The
Indirect Job Costs related thereto shall be a part of Tenant's Cost. The
foregoing time periods shall not give rise to a delay under Paragraph 6.
B. Notwithstanding anything to the contrary contained in this Work
Letter (including Schedule A), Landlord shall not be obligated to furnish or
install as a portion of the Work, any telephone or other communication systems.
The installation of any telephone or other communication systems shall be
performed by Tenant, at its sole cost and expense, in accordance with the terms
and conditions of this Work Letter (including Paragraph 12 of this Work Letter)
and of Article 8, 9 and 10 of this Lease; provided, however, in the event Tenant
shall be required to install, pursuant to any Legal Requirement or Insurance
Requirement, any conduit in the walls or ceilings for the installation of any
such telephone or other communication system, then, Landlord shall install such
conduit (but not the wiring), at Tenant's sole
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cost and expense, and such cost and expense shall be paid by Tenant as part of
Tenant's Cost.
12.A. Landlord agrees to allow Tenant (and the architects, contractors and
decorators of Tenant) access to the Premises prior to the Commencement Date for
the purpose of making inspections, taking measurements, making installations
therein which are part of the work to be performed by Tenant pursuant to this
Work Letter and performing its decorative work, such as carpeting and draperies;
provided, however, that such work will not require any structural change, and
provided further that the construction of the Building and the Premises shall
have reached a point, in Landlord's sole judgment, exercised in good faith, such
that Landlord will not be delayed or hampered in the completion thereof by the
performance by Tenant of such work.
B. In connection with any access by Tenant pursuant to Paragraph 12A
of this Work Letter, Tenant covenants (a) to cease promptly upon request by
Landlord any activity or work during any period which, in Landlord's sole
judgement, shall interfere with or delay Landlord's prosecution or completion of
the Work to be performed by Landlord pursuant to this Work Letter or of the
Building at the earliest possible date, (b) that Tenant shall comply promptly
with all procedures and regulations (including access to the hoist) prescribed
by Landlord from time to time for coordinating such work and activities with any
other activity or work in the Premises or the Building, (c) that such access
shall be at the sole risk of Tenant and shall be deemed to be a license, (d)
that prior to exercising such right, Tenant shall deliver to Landlord the
policies of insurance required by the Lease, including public liability,
property damage and Worker's Compensation to protect Landlord and Tenant during
the period of Tenant's access, in amounts and with such companies as are
satisfactory to Landlord and that Landlord and Contractor, as well as the other
parties mentioned in Article 8 of this Lease, shall be named as an insured under
all such policies, (e) that Tenant shall indemnify and hold harmless Landlord,
the Superior Lessor, the Superior Mortgagee and the Building from and against
any and all claims arising from, or claimed to arise from, or out of the
performance of any work by or on behalf of Tenant in the Premises, or which may
arise by reason of any matter collateral thereto, and from and against any all
claims arising from, or claimed to arise from, any negligence, act, or failure
to act, of Tenant, its contractors, decorators, servants, agents or employees or
for
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any other reason whatsoever arising out of Tenant's access to or being in the
Premises or in connection with the work to be performed by or for Tenant by
anyone other than Landlord, (f) that Tenant shall not employ or permit the
employment of any contractor, mechanic or laborer, or permit any materials in
the Premises, if the use of such contractor, mechanic or laborer would, in
Landlord's sole opinion, create any difficulty, strike or jurisdictional dispute
with other contractors, mechanics or laborers employed by Tenant, Landlord or
others, or would in any way disturb, interfere with or delay any work being
performed by Landlord or any other Tenant or their respective contractors, (g)
that, as frequently and in such manner as Landlord may direct, all debris,
rubbish and surplus materials caused by or resulting from the work being
performed by Tenant shall be removed and disposed of, at Tenant's sole cost and
expense, and (h) to pay any loss or additional expense caused Landlord by any
delay in the completion of the Work or the Building resulting from Tenant's
access and work. Any access by Tenant pursuant to this Work Letter, whether
prior to or on or after the Commencement Date, shall be deemed to be pursuant to
all the provisions of this Lease (including those contained in Articles 8, 9 and
10) and Tenant shall comply therewith, except that the obligation to pay rent
shall not commence until the Commencement Date or as provided for in Section
2.10B of the Lease. No material or equipment shall be incorporated in the
Premises in connection with the making of such installations which is subject to
any lien, charge, mortgage or other encumbrance of any kind whatsoever, or
subject to any conditional sale or other similar or dissimilar title retention
agreement. If Tenant fails to comply with any of the foregoing obligations,
then, in addition to all other rights and remedies hereunder, Landlord may by
Notice require Tenant to cease the performance of such activity and work until
the Work and the Building have been completed.
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22050-55605 Real Estate
SCHEDULE A
----------
TO EXHIBIT C
------------
Landlord shall provide and install the following facilities and material
and complete the following work as Landlord's Work (as hereinafter defined) in
accordance with the Plans and Specifications. For purposes of this Lease,
"Landlord's Work" shall be deemed to mean:
1. PARTITIONS:
Landlord shall furnish and install one (1) linear foot of drywall
partitions for each fifteen (15) square feet of Premises Area. All drywall
partitions shall (a) consist of one (1) layer of 5/8" gypsum board each side of
1 1/2" steel studs, (b) terminate 3" above the suspended ceiling and (c) be
spackled and taped. Partitions ending at an exterior wall of the Building shall
meet a column without interfering with access to the peripheral enclosure or
bisecting or in any other way interfering with a vision light or the operation
of the exterior windows of the Building. Any jogs, curves or angles in any
partitions shall be furnished by Landlord, at Tenant's sole cost and expense.
2. DOOR, FRAMES, HARDWARE:
Landlord shall furnish and install all Building standard interior doors and
frames (not more than one interior door and frame for every thirty (30) linear
feet of partitions to be supplied by Landlord pursuant to this Schedule A).
Interior door frames shall be pressed steel 16 guage hollow metal 3'0" in width
full height with rubber silencers. Interior doors shall be (a) flush type,
non-firerated, solid core, with a hardwood veneer finish and (b) 8'0" in height.
Hardware for all interior doors to be furnished and installed by Landlord
pursuant to this Schedule A shall consist of a Building standard lever handle
latchset, 1 1/2 pairs of 4 1/2" x 4 1/2" hinges and door mounted stops.
3. ELECTRICAL CONSTRUCTION:
Landlord shall furnish and install the following:
a. Lighting: Landlord shall furnish and install 2'0" x 4'0" Building
--------
standard parabolic fluorescent light fixtures, with sockets for 3 standard 40
watt fluorescent
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Real Estate
lamps (Building standard-227 volts), in the quantity of seventy-eight (78) per
floor.
b. Wiring: Electrical capacity with respect to each floor of the
------
Premises will be supplied to a panel on each floor, sufficient for electric load
not to exceed 2 watts per square foot of area served of 277/480 volt single
phase for lighting and power and 2 watts per square foot of 120/208 volt single
phase for receptacles.
c. Power and Telephone Outlets: Furnish and install one (1) Building
---------------------------
standard duplex power outlet and one (1) Building standard telephone outlet, as
follows:
(i) 1 duplex power outlet for each 150 rentable square feet;
and
(ii) 1 telephone outlet for each 200 rentable square feet.
All telephone outlets shall be typical wall outlets and shall be located in the
partitions. All electrical outlets shall be located in the partitions. Initial
lamping and relamping for light fixtures shall be Building standard lamp color
and shall be supplied and installed by Landlord, at Tenant's sole cost and
expense. For the purposes of this Schedule A, the term "Building standard lamp
color" shall mean "Warm White".
d. Switches: Switches for the purpose of servicing the Building
--------
standard light fixtures to be furnished and installed by Landlord pursuant to
this Schedule A as required by the New York City Building Code (not to be less
than one (1) switch per room); provided, however, in the event Tenant shall have
installed partitions in excess of the partitions to be furnished and installed
by Landlord pursuant to this Schedule A, then the additional switches required
by the New York City Building Code as a result of such increase in partitioning
shall be furnished and installed at Tenant's sole cost and expense.
4. HEATING, VENTILATION AND AIR CONDITIONING SYSTEM:
Landlord shall furnish and install an H.V.A.C. System which will meet the
following criteria:
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22050-55605 Real Estate
Summer Inside................... 78 degrees D.B., 50% R.H.
Outside.................. 89 degrees D.B., 73% W.B.
Winter Inside................... 70 degrees D.B.
Outside.................. 15 degrees D.B.
The H.V.A.C. System is designed to meet the criteria set forth above
within tolerances appropriate for a first class office building provided that:
(i) Within any given room of Tenant's Demised Premises, the
occupancy does not exceed one (1) person for each 100 square feet of
area served;
(ii) Total electrical load, including lighting and power, does
not exceed 3-1/2 watts per square foot of area served;
(iii) All Building standard venetian blinds shall be down and
closed when any sun load exists (including winter, fall, spring and
summer seasons); and
(iv) The maximum ventilation rate shall be .25 CFM per square
foot of enclosed area.
The H.V.A.C. System shall be furnished and installed by Landlord in
accordance with the following:
(i) Heating: All heat to be provided pursuant to this
-------
Schedule A shall be provided through enclosed perimeter fin tube hot
water radiation, which shall be floor mounted below all exterior
windows of the Premises;
(ii) Ventilation and Air Conditioning: All ventilation and air
--------------------------------
conditioning shall be provided through a self-contained unit located
in the mechanical room on each floor of the Building, which unit shall
be connected to the Building condensor water system;
(iii) Air Distribution:
----------------
(a) Diffusers: Each floor of the Building shall be
provided with (A) forty-five (45) Building standard 2' x 2' ceiling
diffusers,
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22050-55605 Real Estate
set on splines and (B) eight (8) Building standard slot linear
diffusers (two (2) of each slot diffusers shall be located at each
corner of the Building).
(b) Variable Air Volume Boxes and Thermostats: The
perimeter air distribution system for each floor shall be provided
with five (5) Building standard variable air volume boxes and five (5)
thermostats and the interior air distribution system for each floor
shall be provided with two (2) building standard variable air volume
boxes and five (5) thermostats.
(c) Return Air: Return air shall be through the Building
standard lighting fixtures.
Landlord shall locate all such variable air volume boxes and thermostats
in accordance with Tenant's Plans and shall furnish and install all duct work
required for the operation of the H.V.A.C. System to be supplied by Landlord
pursuant to this Schedule A of the Work Letter.
5. CEILINGS:
Landlord shall furnish and install Building standard acoustic tile
ceilings in a concealed spline suspended system. Ceiling height throughout the
Premises shall be 8'5", without breaks, except in such areas as such height may
be impracticable due to specific field conditions.
6. FLOORING:
Landlord shall furnish and install (a) Building standard carpeting in all
areas of the Premises (other than restrooms, mechanical rooms, stairwells and
other service rooms), (b) 4" black vinyl based on all columns and all partitions
furnished and installed by Landlord pursuant to this Schedule A, (c) straight
base in the portion of the Premises which is carpeted and (d) cove base in all
areas of the Premises which are not carpeted. Tenant shall select the color of
all such carpeting from Landlord's color chart. For purposes of this Schedule A,
the term "Building standard carpeting" shall mean Hollytax "Macarthur Park"
Antron III nylon pile, textured loop. In the event Tenant elects in accordance
with the Work letter to install non-Building standard flooring, such flooring
and underlayment shall be subject to Landlord's and Landlord's architects'
approval, which approval shall be in
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Landlord's and Landlord's architects' sole and absolute discretion.
7. PAINTING:
All partitions and door frames to be provided pursuant to this Schedule A
and all exterior perimeter walls within the Premises shall be painted with one
(1) primer coat and one (1) finish coat.
No color breaks, dados or special "designer" colors shall be provided by
Landlord. All colors shall be selected from Landlord's color chart, with no more
than one color in any office. Any painting shall be restricted to surfaces,
Building standard items or materials provided pursuant to this Schedule A. Doors
shall be pre-finished hardwood veneer.
The color of all soffits and jambs at the exterior windows of the Building
shall only be in accordance with samples approved by Landlord and Landlord's
architect, in their sole and absolute discretion.
8. BLINDS:
Landlord shall furnish and install for each exterior window of the Building
one (1) Building standard narrow slat venetian blind. No substitutions or
deletions of exterior venetian blinds shall be permitted. Any additional
decorative window treatment shall allow for the proper circulation of air in and
around the window glass area, and shall be subject to the approval of Landlord
and Landlord's architect which approval shall be made in Landlord's and
Landlord's architects' sole and absolute discretion.
9. SPRINKLER:
Landlord shall furnish and install on each floor a sufficient number of
flush concealed sprinkler heads to meet the requirements of Local Law 5 of the
Building Code of the City of New York, as enacted in 1972, based upon tenant
layout and head count; provided, however, in no event shall the number of flush
concealed sprinkler heads that Landlord is obligated of install pursuant to this
Schedule A exceed fifty-four (54) in respect of each floor. Landlord shall
furnish and install all sprinkler heads in the core area of the Building. All
sprinkler heads shall be installed with white finish painted caps.
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22050-55605 Real Estate
Notwithstanding the foregoing, in no event shall Landlord be obligated,
pursuant to this Schedule A, to furnish and install any heads for special
density applications or for hazardous material storage areas (e.g. rack deluge
or deluge type heads at interconnecting stairways).
10. DRINKING FOUNTAIN:
Landlord shall install in the core area of each floor of the Building
roughed in plumbing for a drinking fountain in a location designated by
Landlord. The location and the type of any drinking fountain to be installed by
Tenant in the Premises shall be as specified by Landlord and Landlord's
architect in their sole and absolute discretion, and any such drinking fountain
shall be supplied and installed at Tenant's sole cost and expense.
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22050-55605 Real Estate
ADDENDUM TO SCHEDULE A TO EXHIBIT C
-----------------------------------
FOR MULTIPLE TENANT OCCUPANCY FLOORS
------------------------------------
For multiple tenant occupancy floors, the building standard allowance will be
modified as follows:
1. PARTITIONS:
----------
Landlord will provide demising partitions between tenant spaces, as well as
between the tenant and corridor space. The construction will be 2-1/2" steel
studs with one layer of 5/8" gypsum board on each side. Demising partitions are
to terminate at the slab above, and insulated with 2-1/2" batt insulation.
Half of the lineal footage of demising partition and corridor partition will be
considered as part of the allowance referred to in the main body, number 1.
2. DOORS AND FRAMES:
----------------
In addition to the allowance contained herein, each tenant will be entitled to
one (1) entrance door and frame.
Frame to be pressed steel 16 gauge hollow metal 3'0" wide, full height with
rubber silencers.
Doors shall be flush type, firerated in accordance with the City of New York,
solid core, with hardwood veneer finish, 8'0" height.
3. HARDWARE:
--------
Each entrance door pursuant to item No. 2 above shall be fitted with 2 pairs of
4-1/2" x 4-1/2" hinges, lever handle lock set with master key in compliance with
building management, closure, and door mounted stop.
4. PLUMBING:
--------
Connection for a drinking fountain has been installed in the core area in
recessed location. Drinking fountain to be supplied by Landlord.
(i)
<PAGE>
22050-55605 Real Estate
GENERAL NOTE:
- ------------
Lighting fixtures, ceiling diffusers, variable air volume boxes, thermostats,
and sprinkler heads for the Premises will be provided in accordance with the
allowances set forth in Schedule A multiplied by the ratio that the tenant's net
rentable area bears to the net rentable area of the floor.
SPRINKLER HEADS
- ---------------
In certain circumstances if a portion of the floor is completed and has received
a Temporary Certificate of Occupancy prior to Tenant's plans being made
available, sprinklers may have to be installed throughout the floor. Sprinkler
relocation to meet Tenant's requirements, if necessary, will be at the cost of
Tenant.
(ii)
<PAGE>
EXHIBIT D
CLEANING STANDARDS
GENERAL CLEANING
NIGHTLY - BUSINESS DAYS
General Offices:
1. All hardsurfaced flooring to be swept using approved dustdown
preparation.
2. Carpet sweep all carpets, moving only light furniture (desks, file
cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and window sills.
4. Empty and clean all ash trays and screen all sand urns.
5. Empty and clean all waste receptacles and remove wastepaper.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
8. Sweep all private stairways.
Lavatories:
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled
surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles in lavatories and restrooms.
6. Paper towel and sanitary receptacles emptied and cleaned.
7. Fill toilet tissue holders and soap dispensers.
WEEKLY
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvres and other ventilating louvres within a person's
reach.
3. Wipe clean all interior metal and remove fingermarks.
MONTHLY
High dust Premises completely including the following:
1. Dust all pictures, frames, charts, graphs and similar wall hangings
not reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors,
bucks and other surfaces not reached in nightly cleaning.
3. Dust all pipes, ventilating and air-conditioning louvres, ducts, high
mouldings and other high areas not reached in nightly cleaning.
4. Dust all venetian blinds.
WASH ALL WINDOWS. (Periodically, when necessary, as determined by Landlord in
its sole and absolute discretion.)
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EXHIBIT E
RULES AND REGULATIONS
1. No tenant shall obstruct or encumber or use for any purpose (other than
ingress and egress to and from its premises) the common areas, sidewalks,
driveways, entrances, passages, courts, lobbies, esplanade areas, atrium,
plazas, elevators, escalators, stairways, vestibules, corridors, halls and other
public portions of the Building ("Public Areas"), and no tenant shall permit any
of its employees, agents, licensees or invitees to congregate or loiter in any
of the Public Areas. No tenant shall invite to, or permit to visit, its premises
persons in such numbers or under such conditions as may interfere with the use
and enjoyment by others of the Public Areas. Fire exits and stairways are for
emergency use only, and they shall not be used for any other purposes by any
tenant, or the employees, agents, licensees or invitees of any tenant. Landlord
reserves the right to control and operate, and to restrict and regulate the use
of, the Public Areas 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, including the right to allocate certain
elevators for delivery service, and the right to designate which Building
entrances shall be used by persons making deliveries in the Building. No tenant
shall place or leave in any public hall or outside any entry door of its
premises a doormat of any kind whatsoever.
2. No awnings or other projections shall be attached to the outside walls
of the Building. No curtains, blinds, shades, louvered openings or screens shall
be attached to or hung in, or used in connection with, any window or door of any
tenant's premises, without the consent of Landlord. Such curtains, blinds,
shades or screens must be of a quality, type, design and color, and attached in
the manner, approved by Landlord. In order that the Building can and will
maintain a uniform appearance to those persons outside of the Building, each
tenant occupying the perimeter areas of the Building shall (x) use only building
standard lighting in areas where lighting is visible from the outside of the
Building and (y) use only building standard blinds in window areas which are
visible from the outside of the Building.
3. No tenant shall, without the prior consent of Landlord, exhibit,
inscribe, paint or affix any sign, insignia, advertisement, lettering, notice or
other object on any part of the outside or inside of its premises or the
Building or on corridor walls or which shall be readily visible from the Public
Areas. Any sign placed by a tenant on any entry door of its premises shall
conform to building standard signs, samples of which are on display in
Landlord's rental office. Such signs shall, at the expense of the tenant, be
inscribed, painted or affixed by signmakers approved by 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 in such removal to the
tenant violating this rule. Interior signs, elevator cab designations, if any,
and lettering on doors and the Building directory shall, if and when approved by
Landlord, be inscribed, painted or affixed for each tenant by Landlord, at the
expense of such tenant, and shall be of a size, color and style acceptable to
Landlord. Only the tenant named in a lease covering its premises shall be
entitled to appear on the directory tablet. Additional names may be added in
Landlord's sole discretion under such terms and conditions as the Landlord may
approve.
4. No tenant shall (a) cover or obstruct the sashes, sash doors, skylights
or windows that reflect or admit light and air into the halls, passageways or
other public places in the Building or the heating, ventilating and air
conditioning vents and doors, or (b) place any bottles, parcels or other
articles on the window sills or on the peripheral heating enclosures. Whenever
the heating, ventilating or air conditioning systems are in operation, each
tenant shall draw the shades, blinds or other window coverings, as required
because of the position of the sun. No tenant shall have any right to remove or
change shades, blinds or other window coverings within its premises without
Landlord's consent.
5. No tenant shall put or place any showcases or other articles in front of
or affixed to any part of the exterior of its premises or the Building, or in
the Public Areas.
6. No acids, vapors or other harmful materials shall be discharged, or
permitted to be discharged, into the waste lines, vents or flues of the
Building. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed and
constructed, and no sweepings, rubbish, rags, acids or other foreign substances
shall be thrown or deposited therein. Nothing shall be swept or thrown into the
Public Areas or other areas of the Building, or into or upon any heating or
ventilating vents or registers or plumbing apparatus in the Building, or upon
adjoining buildings or land or the street. The cost of repairing any damage
resulting from any misuse of such fixtures, vents, registers and apparatus and
the cost of repairing any damage to the Building, or to any facilities of the
Building, or to any adjoining building or property, caused by any
E-1
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messenger service, travel or tourist agency, retail, wholesale or discount shop
for sale of merchandise, retail service shop, labor union, classroom, company
engaged in the business of renting office or desk space, or for a public finance
(personal loan) business, or as a hiring employment agency, or as a stock
brokerage board room. No tenant shall engage or pay any employee on its
premises, except those actually working for such tenant on its premises, nor
advertise for laborers giving an address at the Building. No tenant shall use
its premises or any part thereof, or permit the Premises or any part thereof to
be used, as a restaurant, shop, booth or other stand, or for the conduct of any
business or occupation which predominantly involves direct patronage of the
general public, or for manufacturing, or for the sale at retail or auction of
merchandise, goods or property of any kind.
14. Landlord shall have the right to prohibit any advertising or the use of
identifying sign by any tenant which, in the judgment of Landlord, tends to
impair the appearance or reputation of the Building or the desirability of the
*office space as part of a mixed use building, and upon written notice from
Landlord, such tenant shall refrain from and discontinue such advertising or
identifying sign.
15. Landlord reserves the right to exclude from the Building all employees
of any tenant who do not present a pass to the Building signed by such tenant.
Landlord or its agent will furnish passes to persons for whom any tenant
requests same in writing. Landlord reserves the right to require all other
persons entering the Building to sign a register, to be announced to the tenant
such person is visiting, and to be accepted as a visitor by such tenant or to be
otherwise properly identified (and, if not so accepted or identified, reserves
the right to exclude such persons from the Building) and to require persons
leaving the Building to sign a register or to surrender a pass given to such
person by the tenant visited. Each tenant shall be responsible for all persons
for whom it requests any such pass or any person who such tenant so accepts, and
such tenant shall be liable to Landlord for all acts or omissions of such
persons. Any person whose presence in the Building at any time shall, in the
judgment of Landlord, be prejudicial to the safety, character, security,
reputation or interests of the Building or the tenants of the Building may be
denied access to the Building or may be ejected from the Building. In the event
of invasion, riot, public excitement or other commotion, Landlord may prevent
all access to the Building during the continuance of the same by closing the
doors or otherwise, for the safety of tenants and the protection of property in
the Building.
16. Unless Landlord shall otherwise request in connection with Landlord's
rights under Section 24.05 of the Lease, each tenant, before closing and leaving
its premises at any time, shall see that all lights in its premises are turned
out. All entrance doors in its premises shall be kept locked by each tenant when
its premises are not in use. Entrance doors shall not be left open at any time.
17. Each tenant shall, at the expense of such tenant, provide light, power
and water for the employees of Landlord, and the agents, contractors and
employees of Landlord, while doing janitor service or other cleaning in such
tenant's premises and while making repairs or alterations in its premises.
18. No tenant shall use its premises for lodging or sleeping or for any
immoral or illegal purpose.
19. The requirements of tenants will be attended to only upon application
at the office of the Building. Employees of Landlord shall not perform any work
or do anything outside of their regular duties, unless under special
instructions from Landlord.
20. Canvassing, soliciting and peddling in the Building are prohibited and
each tenant shall cooperate to prevent the same.
21. The employees, agents, licensees and invitees of any tenant shall not
loiter around the Public Areas or the front, roof or any part of the Building
used in common by other occupants of the Building.
22. There shall not be used in any space, or in the Public Areas, either by
any tenant or by others, in the moving or delivery or receipt of safes, freight,
furniture, packages, boxes, crates, paper, office material or any other matter
or thing, any hand trucks except those equipped with rubber tires, side guards
and such other safeguards as Landlord shall require. No hand trucks shall be
used in passenger elevators.
23. No tenant shall cause or permit any odors of cooking or other
processes, or any unusual or objectionable odors, to emanate from its premises
which would annoy other tenants or create a public or private nuisance. No
tenant shall do, cause to be done or permit any cooking in its premises except
as is expressly permitted in the lease covering its premises of which these
Rules and Regulations are a part.
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<PAGE>
24. All paneling, doors, trim or other wood products not considered
furniture shall be of fire-retardant materials. Before installation of any
such materials, certification of the materials' fire-retardant characteristics
shall be submitted to and approved by Landlord, and installed in a manner
approved by Landlord.
25. Whenever any tenant shall submit to Landlord any plan, agreement or
other document for the consent or approval of Landlord, such tenant shall pay to
Landlord, on demand, a processing fee in the amount of the reasonable fees for
the review thereof, including the services of any architect, engineer or
attorney employed by Landlord to review such plan, agreement or document.
26. Landlord reserves the right to rescind, alter, waive or add, as to one
or more or all tenants, any rule or regulation at any time prescribed for the
Building when, in the judgement of Landlord, Landlord deems it necessary or
desirable for the reputation, safety, character, security, care, appearance or
interests of the Building, or the preservation of good order therein, or the
operation or maintenance of the Building, or the equipment thereof, or the
comfort of tenants or others in the Building. No rescission, alteration, waiver
or addition of any rule or regulation in respect of one tenant shall operate as
a rescission, alteration or waiver in respect of any other tenant.
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EXHIBIT F
TENANT ESTOPPEL CERTIFICATE AND AGREEMENT
(PREMISES, 780 THIRD AVENUE, NEW YORK CITY)
TO: ("Mortgagee")
THIS IS TO CERTIFY THAT:
1. The undersigned is the lessee (the "Tenant") under that certain lease
(the "Lease") dated as specified in 10(a) below, by and between 780 THIRD
AVENUE ASSOCIATED, as Lessor (the "Landlord"), and the undersigned or the person
specified in 10(b) below, as Lessee, covering those certain premises commonly
known and designated as the floors or portions thereof specified in 10(c) below
(the "Premises"), at 780 Third Avenue, in the Borough of Manhattan, City, County
and State of New York.
2. The Lease (i) constitutes the entire agreement between the undersigned
and the Landlord with respect to the Premises, (ii) has not been modified,
changed, altered or amended in any respect (except as indicated in 10(g) below)
and (iii) is the only Lease between the undersigned and the Landlord affecting
the Premises.
3. The undersigned has accepted and now occupies the entire premises
covered by the Lease, and all improvements required by the terms of the Lease to
by made by the Landlord have been completed to the satisfaction of the
undersigned.
4.(i) No party to the Lease is in default, (ii) the Lease is in full force
and effect, (iii) full rental is accruing thereunder and (iv) as of the date
hereof the undersigned has no charge, lien or claim of off-set (and no claim for
any credit or deduction) under the Lease or otherwise, against rents or other
charges due or to become due thereunder or on account of any prepayment of rent
more than one (1) month in advance of its due date.
5. Since the date of the Lease, to the best knowledge of the undersigned,
there has been no material adverse change in the financial condition of the
undersigned, and there are no actions, whether voluntary or otherwise, pending
against the undersigned under the bankruptcy, reorganization, arrangement,
moratorium or similar laws of the United States, any state thereof or any other
jurisdiction.
6. This certification is made to induce Mortgagee to consummate a mortgage
loan to be evidenced by a promissory note and secured by a mortgage on the land
and/or building containing the Premises and an assignment of the rents due under
the Lease, knowing that Mortgagee relies upon the truth of this certificate in
disbursing funds for such loan.
7. The undersigned, as Tenant under the Lease, acknowledges (i) that
Mortgagee will be the holder of the mortgage and assignment of rents referred to
in paragraph 6 this certificate, and (ii) that the name and address of the
Mortgagee is , Attention: , and
agrees that such Mortgagee and its successors, as holder ("Holder") of such note
and mortgage, shall be entitled to prompt notice of any default by the Landlord,
or any other landlord under the Lease, and shall have the rights of a mortgagee
under the provisions of the Lease. The undersigned understands that the
interest of the Landlord in the Lease has been assigned to the Holder for
application on account of the indebtedness secured by the mortgage as specified
in the assignment, and the Holder assumes no duty, liability or obligation
whatever under the Lease or any extension or renewal thereof.
8. The undersigned further agrees with each Holder that from and after the
date hereof the undersigned (i) will not pay any rent under the Lease more than
one (1) month in advance of its due date, (ii) will not surrender or consent to
the modification of any of the terms of the Lease or to the termination thereof
by the Landlord, (iii) will continue to pay rent under the Lease to the Landlord
in accordance with the terms of the Lease (unless and until notified otherwise
in writing by the Holder in case of an event of default under such mortgage, in
which event the undersigned will pay the rent due under the Lease directly to
the Holder or its designee) and (iv) will not seek to terminate the Lease or
claim partial or total eviction or seek or assert any set-off or counterclaim
against the rent or additional rent by reason of any act or omission of the
Landlord, until the undersigned shall have given written notice of such act or
omission to the Holder (at such Holder's last address as furnished the
undersigned) and until a reasonable period of time shall have elapsed following
the giving of such notice, during which period the Holder shall have the right,
but shall not be obliged, to remedy such act or omission. The agreement
contained in this paragraph 8 shall be of no effect in favor of a Holder unless
the undersigned is
F-1
<PAGE>
furnished by such Holder or its predecessor in interest with notice of any
restrictive agreement made to it with reference to Section 29I-f of the New York
Real Property Law, and shall terminate as to that Holder or its successor upon
the subsequent termination of any such restrictive agreement. Any payments made
to the Holder by the Tenant shall not affect or impair the other rights and
remedies of the Holder under its mortgage or otherwise against the Landlord.
9. The undersigned understands that your closing is to be held on or
before 198 , and will advise you of any material changes in the information
herein occurring before that date.
10. (a) The date of the Lease is , 198 .
(b) The original Lessee of the Lease, if different from the
undersigned, was
(c) The premises covered by the Lease are
(d) The term of the Lease began (or is scheduled to begin) on
, 198 .
(e) The fixed rent for the Premises has been paid to and including
, 198 .
(f) The fixed rent being paid pursuant to the Lease is at the annual
rate of $ .
Such fixed annual rent, together with additional rent payable pursuant
to the Lease for the current year results in an aggregate annual rent of
$ .
(g) The following constitute the only modifications, changes,
alterations or amendments to the Lease:
Dated:_____________________________ ___________________________________
Tenant
By: _______________________________
(Title: ___________________________
(Signed on _________________, 198 )
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<PAGE>
THIRD AMENDMENT TO LEASE
AGREEMENT, dated as of August 7th, 1996 between 780 THIRD AVENUE
---
ASSOCIATES, a New York partnership, having an office at 780 Third Avenue, New
York, New York 10017 ("Landlord"), and ASSESSMENT SYSTEMS, INC., a New York
corporation, having an office at 780 Third Avenue, New York, New York 10017 and
PROUDFOOT REPORTS, INC., a New York corporation, having an office at 780 Third
Avenue, New York, New York 10017 (collectively, "Tenant").
STATEMENT OF FACTS
------------------
By Lease dated January 27, 1984 as amended by that certain Amendment to
Lease and Extension Agreement dated as of August 31, 1993 and further amended by
that certain Second Amendment to Lease dated as of September 9, 1994 (the
"Lease"), Landlord leased to Assesment Systems, Inc. a portion of the
twenty-second (22nd) floor (the "Premises") in the building located at 780 Third
Avenue, New York, New York (the "Building"), as more particularly described in
the Lease. Landlord and Tenant now agree to change the location of the Premises
to the entire sixth (6th) floor of the Building and to extend the term of the
Lease, and to otherwise amend the Lease as hereinafter expressly provided.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant
agree and covenant to the following:
1. Relocation of the Premises.
--------------------------
(a) The Commencement Date shall be the date hereof. Effective as of
the "Completion Date" as defined in Paragraph 1b, the term "Premises", as such
term is used in the Lease, shall mean the entire sixth (6th) floor of the
Building (the "6th Floor") and the Lease shall be amended by deleting the floor
plan set forth in Schedule B of the Lease, and by inserting in lieu thereof the
floor plan set forth in Exhibit A hereto.
(b) Tenant shall continue to occupy the 22nd floor of the Building
(the "22nd Floor") upon the same terms and conditions contained in the Lease and
at a Fixed Rent of $249,274.00 per annum ($20,772.83 per month) until the
earlier of November 1, 1996 or the date the construction of Improvements (as
defined in Section 6) is completed (the "Completion Date"). In the event the
construction of Improvements is not completed by November 1, 1996 due to the
delay on the part of the Landlord only, and not Tenant by reason of Tenant's
changes, modifications or revisions to the Plans attached hereto as Exhibit B,
Tenant shall continue to occupy the 22nd Floor until the date the Improvements
are completed and shall not be
<PAGE>
required to pay rent on the 6th Floor. Tenant shall begin to pay rent for the
6th Floor as defined in Section 3A starting on the Completion Date. If the
Completion Date is prior to November 1, 1996, Tenant shall be permitted use and
enjoyment of the Premises rent free until November 1, 1996. In no event shall
Tenant be requested to pay rent for both the 22nd Floor and the 6th Floor
simultaneously. In the event the Improvements are not completed by January 1,
1997, Tenant shall have the right to cancel the Amendment, and the Lease will
remain in effect.
2. Term.
-----
Effective as of the Commencement Date, the term of the Lease shall be
extended for a period commencing on November 1, 2000 and ending on the day
immediately preceding the tenth (10th) anniversary of the Commencement Date (the
"Expiration Date"), both dates inclusive, upon all of the terms, covenants and
conditions contained in the Lease, except as otherwise herein provided.
3. Rent.
-----
Effective on and after the Commencement Date, Section 45.01 of the
Lease is hereby amended and restated in its entirety as follows:
"The Fixed Rent payable by Tenant pursuant to Section 3.01 A
shall be as follows: (a) annual fixed rent (such annual fixed
rent being referred to herein as `Fixed Rent') of:
(i) $406,800.00 ($33,900.00 per month) for the period commencing
on the Commencement Date and ending on the day immediately
preceding the fifth (5th) anniversary of the Commencement
Date, both dates inclusive;
(ii) $452,000.00 ($37,667.67 per month) for the period
commencing on the fifth (5th) anniversary of the
Commencement Date and ending on the Expiration Date, both
dates inclusive,
payable in equal monthly installments, in advance, on the first
(1st) day of each and every calendar month during the Term"
2
<PAGE>
4. Rent Adjustments.
-----------------
Effective on and after the Commencement Date, Section 7.01 of the
Lease shall be amended as follows:
(a) The term Premises set forth in Section 7.01 A shall be amended by
deleting the number "7,023" and by inserting in lieu thereof the
number "11,300", and the term "Building Area" set forth in Section
7.01 B. shall be amended by deleting the number "473,018" and by
inserting in lieu thereof the number "470,000.";
(b) Tenant's Proportionate Share set forth in Section 7.01 C shall be
amended by deleting the number ".36%" and by inserting in lieu thereof
the number "2.4%";
(c) The Base Tax Factor set forth in Section 7.01 E shall be amended
by deleting the words "Taxes for the 1993/94 Tax Year" and by
inserting in lieu thereof the words "Taxes for the 1996/97 Tax Year";
(d) The Base Operating Factor set forth in Section 7.01 J shall be
amended by deleting the words "Landlord's actual Operating Expenses
for the 1994 calendar year" and by inserting in lieu thereof the words
"Landlord's actual Operating Expenses for the 1996 calendar year";
(e) Paragraph 5 of that certain Amendment to Lease and Extension
Agreement dated August 31, 1993 (the "First Amendment to Lease") shall
be deemed deleted from the Lease in its entirety and of no further
force and effect.
5. Electricity.
-----------
Effective on and after the Commencement Date, Section 13.01 of the Lease shall
be amended and restated in its entirety as follows:
"Section 13.01 Landlord has installed in the Building and the
Premises, such electrical risers, feeders and wiring as shall be
necessary to permit Tenant to receive electrical energy for (a)
Tenant's reasonable use of normal office equipment including, but not
limited to, small office computers, photocopying machine and water
fountain as Landlord may reasonably permit to be installed in the
Premises and (b) the operation of the heating, ventilating and air
conditioning system servicing the Premises. Tenant shall obtain and
pay for Tenant's entire separate supply of electric current (including
without limitation, the electric current consumed in connection with
the operation of said heating, ventilation and air conditioning
system) by
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direct application to an arrangement with the public utility company
servicing the Building. Landlord will permit the electrical risers,
feeders and wiring in the Building serving the Premises to be used by
Tenant for such purpose to the extent set forth in the first sentence
of this section."
6. Repairs.
--------
Landlord agrees to install and perform all maintenance on the Building
standard HVAC system throughout the term of the Lease.
7. Improvements.
-------------
The first sentence of Section 10.05 of the Lease shall be restated as
follows: "Only Landlord or any one or more persons approved or designated by
Landlord and approved by Tenant (such person being referred to in this Section
as `Designated Contractor') shall be permitted to act as contractor for any work
to be performed in accordance with this Article."
8. Construction Allowances.
------------------------
Landlord shall provide Tenant with a construction allowance to be
used for the construction of the Improvements set forth in the Plans attached
hereto as Exhibit B in accordance with Article 10. The amount of the allowance
(the "Allowance") shall be equal to the lesser of (i) $508,500.00 or (ii) the
total cost of the Improvements as evidenced by invoices therefor. Landlord shall
make direct payment of the Allowance to the contractors performing the
Improvements. Tenant shall be liable for all charges in excess of $508,500.00.
Landlord shall, at Tenant's expense (but Tenant may use part of the Allowance
towards this expense) be required to obtain all necessary governmental permits
and certificates for the commencement and prosecution of the Improvements and
should cause the Improvements to be made and installed in compliance therewith,
as well as with all applicable laws and requirements of public authorities and
all applicable insurance requirements, in a good and workmanlike manner using
materials and equipment as specified in the Plans attached hereto as Exhibit B.
4
<PAGE>
9. Delivery of Possession.
-----------------------
Tenant acknowledges that it has made a full and complete inspection of
the Premises and is thoroughly familiar with the condition thereof, and Tenant
agrees to accept possession of the Premises in its then "as-is" condition after
Landlord has completed the Improvements set forth in Paragraph 7. If and when
Tenant shall take actual possession of the Premises, it shall be conclusively
presumed that the same are in satisfactory condition, except for any punch list
items.
10. Security Deposit.
-----------------
The security deposit shall increase from $34,166.66 to the lesser of
$508,500.00 or the cost of Improvements. The parties agree that the security
will be provided in the form of a Letter of Credit in substantially the same
form as the Letter of Credit currently held by Landlord and shall be delivered
to Landlord within 35 days from the date of this Agreement. Beginning August 1,
1999, the security deposit shall be reduced by one-half and then further reduced
in equal monthly installments each month for 24 months, until it is reduced to
$100,000 and thereafter shall remain at $100,000 for the remainder of the term
of the Lease. On the Commencement Date, Landlord shall return to Tenant the
existing security deposit of $34,166.66, by either a certified check or as a
credit towards the first month's rent for the Premises.
11. No Broker.
----------
Landlord and Tenant covenant, warrant and represent that there was no
broker or finder instrumental in consummating this Agreement and that no
negotiations were had with any broker or finder. Landlord and Tenant agree to
indemnify and to hold each other harmless from and against any claims or suits
for a brokerage commission or finder's fee arising out of any negotiations had
by Tenant or Landlord with any broker or finder.
12. The following Section 22.14 shall be added to the Lease:
"Section 22.14 Notwithstanding anything to the contrary contained in
Article 22, Tenant shall have the privilege, subject to the terms and
conditions hereinafter set forth, without the consent of Landlord, to
assign its interest in this lease (i) to a purchaser of all or
substantially all of Tenant's assets (provided such purchaser shall have
also assumed substantially all of Tenant's liabilities) or with whom Tenant
shall merge or consolidate, or (ii) to a corporation or partnership entity
or limited liability company which shall control, be under the control of,
or be under common control with, Tenant (the term "control" as
5
<PAGE>
used herein shall be deemed to mean ownership of more than 50% of the
outstanding voting stock of a corporation, or other majority equity and
controlling interest if the assignee is not a corporation) (any such
purchaser or entity being a "Related Entity"). Tenant may, without consent
of Landlord, also sublease all or any portion of the Premises to any
corporation or other entity which is a Related Entity only for so long as
such corporation or other entity shall remain a Related Entity. Any
assignment or subletting described above may be made upon the condition
that (A) the principal purpose of such assignment or sublease is not the
acquisition of Tenant's interest in this Lease (except if such assignment
or sublease is made to a Related Entity and is made for valid business
purpose) and (B) no such assignment shall be valid unless Tenant shall,
within ten (10) business days after execution thereof, deliver to Landlord
(x) a duplicate original instrument of assignment in form and substance
reasonably satisfactory to Landlord, duly executed by the Tenant and (y) a
duplicate original instrument in form and substance reasonably satisfactory
to Landlord, duly executed by the assignee, in which such assignee shall
assume observance and performance of, and agree to be bound by, all of
the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed and (C) no such sublease shall be valid unless
Tenant shall, within ten (10) business days after the execution thereof,
deliver to landlord a duplicate original sublease in form and substance
reasonably satisfactory to Landlord, duly executed by Tenant and subtenant.
If at any time following such subletting to a Related Entity, such
subtenant shall cease to be a Related Entity, then Tenant shall not more
than three (3) business days after the date such subtenant shall cease to
be a Related Entity, deliver to Landlord a duplicate original instrument or
assignment and assumption in form and substance reasonably satisfactory to
Landlord duly executed by such subtenant and Tenant whereby the subtenant
shall assign this Lease and all right such subtenant many have hereunder to
Tenant."
13. Miscellaneous.
--------------
A. Tenant acknowledges and agrees that notwithstanding any prior
agreements between Landlord and Tenant, the Lease, as modified by this
Agreement, constitutes the entire agreement and understanding between the
parties with respect to the subject matter hereof.
6
<PAGE>
B. Except as expressly provided herein, all of the terms, covenants
and conditions of the Lease shall remain and continue unmodified, in full force
and effect and binding upon the parties hereto, their successors, heirs,
administrators, and executors snd, except as be otherwise expressly provided in
the Lease, their permitted assigns.
IN WITNESS WHEREOF Landlord and Tenant have executed this Third Amendment
to Lease as of the date first above written.
780 THIRD AVENUE ASSOCIATES
By: Jaymont Properties, Inc.,
its managing agent
/s/ Mark S. James
------------------------------------
Name: Mark S. James
Title: Managing Director
ASSESSMENT SYSTEMS, INCORPORATED
/s/ BERNARD REYNOLDS
By: -------------------------------
Name: BERNARD REYNOLDS
Title: PRESIDENT
PROUDFOOT REPORTS, INCORPORATED
By: ___________________________
Name:
Title:
7
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[FLOORING DEPICTING FLOOR REFERENCED 780 THIRD AVENUE]
<PAGE>
[FLOORING DEPICTING FLOOR REFERENCED 780 THIRD AVENUE]
<PAGE>
Exhibit 10.11
SUBLEASE
THIS SUBLEASE, made as of October 6, 1994 between NIKON INC., a New York
corporation having an address at 1300 Walt Whitman Road, Melville, New York
11747-3064 ("Sublessor"), and PROUDFOOT REPORTS, INC., a New York corporation,
having an office at 70 Street, Glen Cove, New York 11542 ("Subtenant"),
W I T N E S S E T H:
--------------------
Sublessor and Subtenant hereby agree as follows:
SECTION 1. DEFINITIONS
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For the purposes of this Sublease, unless the context requires otherwise,
the following terms shall have the meanings herein specified:
1.01 "Lease" shall mean the Agreement of Lease dated as of June 1, 1990
between Omni 110 Associates, a New York limited partnership, as landlord, and
Sublessor, as tenant, (a copy of which heretofore has been delivered to
Subtenant) and any and all future amendments or other modifications thereof.
1.02 "Landlord" shall mean the person or entity at any relevant time
entitled to enforce the rights of the landlord under the Lease.
1.03 "Building" shall mean the building located at 1300 Walt Whitman
Road, Melville, New York, and of which the Subleased Premises are a part.
1.04 "Permitted Uses" shall mean general office purposes in connection
with Subtenant's business involving employment related investigations and
verifications. Specifically, but without limitation, any use prohibited under
Section 2 of this Sublease or under the Lease shall not be a Permitted Use.
1.05 "Subleased Premises" shall mean the space substantially as shown on
the floor plan annexed as Exhibit A, which space is on the first floor of the
Building and which consists of approximately 13,342 rentable square feet.
1.06 "Land" shall mean the parcel of land described in Exhibit B.
SECTION 2. SUBLEASE, TERM, PERMITTED USES
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2.01 Subject to the provisions hereof, Sublessor subleases to Subtenant
and Subtenant subleases from Sublessor the Subleased Premises for a term (the
"Original Term") commencing on the date Sublessor's Work (as herein defined)
shall be completed (as such term is defined in Section 8.02 hereof) (the
"Commencement Date") and expiring at midnight on the last day of the calendar
month which is eighty-four (84) full months after the Commencement Date (the
"Expiration Date"). The Subleased Premises shall be occupied and used
exclusively for Permitted Uses and in accordance with the provisions of this
Sublease. The Original Term together with any renewal or extension thereof shall
be referred to as the "Term". In the event Sublessor's Work shall not be
completed by April 1, 1995 through no fault of
<PAGE>
Subtenant, Subtenant shall have the right to terminate this Sublease upon notice
to Sublessor no later than April 5, 1995.
2.02 The parties have targeted on or about December 1, 1994 as the
Commencement Date, and the Subtenant fully understands that such time period is
only a target and that there is no assurance as to the actual Commencement Date.
Furthermore, nothwithstanding the foregoing, if Subtenant shall be delayed in
obtaining possession of the Subleased Premises because of delays in construction
or for any other reason, Sublessor shall not be subject to any liability, and
the effectiveness of this Sublease shall not be affected but the Fixed Rent
(herein defined) shall be abated (provided Subtenant is not responsible for the
delay in obtaining possession, or in construction of Sublessor's Work or any
other work permitted to be performed by Subtenant) until possession shall have
been made available to Subtenant. The provisions hereof are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law.
2.03 (i) Subtenant shall not use or permit all or any part of the
Subleased Premises to be used in any manner which in Sublessor's sole judgement
does or is likely to impair the character or dignity of the Building or
Sublessor's business or any other subtenant's business.
(ii) If any governmental license or permit shall be required for
the proper and lawful conduct of Subtenant's business in the Subleased Premises,
Subtenant shall duly procure and maintain such permit or license and comply with
its terms and conditions throughout the Term.
(iii) Any business machine or mechanical equipment which causes
vibration, noise, cold or heat shall be placed and maintained, at Subtenant's
sole cost and expense, in setting of cork, rubber or spring-type vibration
eliminators sufficient in Sublessor's sole judgement to absorb such vibration
and noise or prevent transmissions of cold and heat.
SECTION 3. LEASE
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This Sublease and the covenants, provisions, terms and conditions hereof
are subject and subordinate to the covenants, provisions, terms and conditions
of the Lease and to all other matters set forth in Section 18 hereof.
SECTION 4. OBLIGATIONS UNDER LEASE
- ----------------------------------
Subtenant agrees (i) to be bound by and to perform and comply with all the
covenants, provisions, terms and conditions of the Lease during the Term of this
Sublease to the extent applicable to the Subleased Premises or Sublessor with
respect to the Subleased Premises other than those set forth in Sections 3(A),
(B), (C), (D) and (E); 5(A), (B), (C), (D), (E), (F), and (G); 6; 7(A), (B),
(C), and (E); 8; 9(A), (B), (C) and (D); 10(A), (B), (C), (D) and (E); 15(A),
(B), (C), (D), (E), (F), (G), and (H); 23(D); and 39, and (ii) not to commit or
permit to be committed any act, or to create or permit to be created any
condition, that would constitute a default under the Lease. In the event any
provision of this Sublease is inconsistent with a provision of the Lease, such
inconsistency shall be resolved in favor of the provision of this Sublease,
unless use of the Subleased
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<PAGE>
Premises or any action or inaction in accordance with said provision may become
the basis of a default under the Lease, in which situation the inconsistency
shall be resolved in favor of the provision of the Lease. Sublessor represents
to Subtenant that the Lease is in full force and effect and has not been amended
or modified as of the date hereof, that the Subleased Premises may be used for
all Permitted Uses, and that Subtenant's rights and obligations as set forth in
this Sublease do not constitute a default under the Lease, and that as of the
date hereof Sublessor is in compliance with Article 19 of the Lease and is not
in default under the Lease. Nothwithstanding anything to the contrary contained
herein, if Landlord, in writing, shall claim or otherwise allege that a use of,
action or inaction involving, or other circumstance concerning the Subleased
Premises (or any use, whether permitted hereby, pursuant to law or prohibited
hereby or thereby, of the Building by Subtenant, its employees, agents, and
contractors) is in violation of any provision of or may become a default under
the Lease, Subtenant, immediately upon notice from Sublessor and without
limiting the rights of Sublessor hereunder, shall cease such use or action and
take such action or cause such circumstance to be changed so that the basis or
alleged basis for such claim or allegation shall no longer exist.
SECTION 5. FIXED RENT, OPERATING EXPENSES, TAXES AND ADDITIONAL RENT
- --------------------------------------------------------------------
5.01 During the Original Term, Subtenant shall pay a total base fixed
rent of $1,805,617.31 (the "Fixed Rent") which shall be payable in equal monthly
installments as follows: (i) $22,236.67 per month from the eight month through
the twenty-fourth month of the Original Term; (ii) $23,348.50 per month from the
twenty-fifth month through the sixtieth month of the Original Term, and (iii)
$24,460.33 per month from the sixty-first month through the Expiration Date
Subtenant agrees to pay the Fixed Rent as specified in the preceding sentence in
advance on the first day of each calendar month during the Original Term, except
that the Fixed Rent for the eight full calendar month of the Original Term shall
be paid at the time of the execution hereof. The Fixed Rent shall be prorated
for any portion of a month during the Term and, if the first month of the Term
is not a full calendar month, Subtenant shall pay the prorated Fixed Rent due
therefor on the Commencement Date.
5.02 For purposes of this Section 5, unless the context requires
otherwise, the following terms shall have the meanings herein specified:
(i) "Base Operating Amount" shall mean the Base Operating
Expenses for the Base Operating Year.
(ii) "Base Operating Year" shall mean the calendar year
commencing January 1, 1995.
(iii) "Operating Expenses" shall mean the sum of all costs and
expenses paid or incurred by Sublessor in respect of the repair, replacement,
cleaning, maintenance, management, insurance, operation, restoration, safety
(including, without limitation, fire safety) and/or security of the Building and
the Land.
(iv) "Building Operating Expense Statement" shall mean a writing
setting forth the Operating Expense Payment (as herein defined payable by
Subtenant for a
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<PAGE>
specified Operating Year pursuant to this Section 5.02.
(v) "Operating Year" shall mean each calendar year in which
occurs any part of the Term.
(vi) "Subtenant's Share" shall mean the quotient, expressed as a
percentage, obtained by dividing the rentable square feet of the Subleased
Premises, which is deemed to be 13,342 square feet for purposes of this
Sublease, by the rentable square feet for purposes of this Sublease, by the
rentable square feet of the portion of the Building which is available for
occupancy, which is deemed to be 132,360 square feet for purposes of this
Sublease. On the date hereof, Subtenant's Share shall mean 10.08% In no event
shall such deemed square footages constitute or imply any representation or
warranty by Sublessor whatsoever as to the actual size of the Subleased Premises
or the Building, but same shall constitute an express agreement between
Sublessor and Subtenant with respect to such actual sizes thereof.
(vii) "Taxes" shall mean all real estate taxes, sewer charges or
rents, water frontage charges, and assessments, special or otherwise, rates and
charges, county taxes, transit taxes levied, assessed or imposed including any
abatements or exemptions by the County of Suffolk or any other taxing authority
upon or with respect to the Building and the Land, all taxes assessed or imposed
with respect to the rentals payable hereunder other than general income and
gross receipts taxes (except that general income and gross receipts taxes shall
be included if covered by the provisions of the following sentence). Taxes shall
also include any taxes, charges or assessments levied, assessed or imposed by
any taxing authority in addition to or in lieu of the present method of real
estate taxation, provided such substitute taxes, charges and assessments are
computed as if the property were the sole property of the Sublessor subject to
said substitute tax, charge or assessment. With respect to any Tax Year (as
herein defined), all expenses, including, without limitation, legal fees,
experts' and other witnesses' fees, incurred in contesting the validity or
amount of any Taxes or in obtaining a refund of Taxes, shall be considered as
part of the taxes for such Tax Year. In addition, the term Taxes shall mean any
tax, charge assessment, or sum included within the definition of the term
"Taxes" in the Lease.
(viii) "Tax Year" shall mean each period of twelve (12) months,
commencing on the first day of December 1 of each such period, in which occurs
any part of the Term, or such other period of twelve (12) months occurring
during the Term as hereafter may be duly adopted as the fiscal year for real
estate tax purposes of the County of Suffolk.
(ix) "Base Tax Amount" shall mean the Taxes due for the Tax Year
commencing on December 1, 1994 and ending November 30, 1995 based at full
assessment and including any tax abatements.
5.03 (i) For each Operating Year, including the Operating Year in
which the Commencement Date occurs, any part of which shall occur during the
Term of this Sublease, Subtenant shall pay an amount (herein called an
"Operating Expense Payment") equal to Subtenant's Share of the amount by which
the Operating Expenses for such Operating Year exceed the Base Operating Amount.
Sublessor and Subtenant agree that the Operating Expense Payment for any
Operating Year in
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<PAGE>
which the term of this Sublease commences or expires shall be prorated.
(ii) Sublessor may furnish to Subtenant, prior to the commencement
of each Operating Year, a written statement setting forth Sublessor's reasonable
estimate of the Operating Expense Payment for such Operating Year. Subtenant
shall pay to Sublessor on the first day of each month during the Operating Year
in which the Operating Expense Payment will be due, an amount equal to one-
twelfth (1/12th) of Sublessor's estimate of the Operating Expense Payment for
such Operating Year. If, however, Sublessor shall not furnish any such estimate
for an Operating Year or if Sublessor shall furnish any such estimate for an
Operating Year subsequent to the commencement thereof, then (A) until the first
day of the month following the month in which such estimate is furnished to
Subtenant, Subtenant shall pay to Sublessor on the first day of each month an
amount equal to the monthly sum payable by Subtenant to Sublessor under this
Section 5.03 in respect of the last month of the preceding Operating Year; (B)
after such estimate is furnished to Subtenant, Sublessor shall give notice to
Subtenant stating whether the installments of the Operating Expense Payment
previously made for such Operating Year were greater or less than the
installments of the Operating Expense in which the Operating Expense Payment
will be due in accordance with such estimate, and (x) if there shall be a
deficiency, Subtenant shall pay the amount thereof within twenty (20) days after
demand therefor, or (y) if there shall have been an overpayment, Sublessor
shall refund to Subtenant the amount thereof (or at Sublessor's option, credit
same against the Additional Rent next due); and (C) on the first day of the
month following the month in which such estimate is furnished to Subtenant and
monthly thereafter throughout the remainder of such Operating Year, Subtenant
shall pay to Sublessor an amount equal to one-twelfth (1/12th) of the Operating
Expense Payment shown on such estimate. Sublessor may, at any time and from time
to time during each Operating Year, furnish to Subtenant a revised statement of
Sublessor's reasonable estimate of the Operating Expense Payment for such
Operating Year, and in each such case the Operating Expense Payment for such
Operating Year shall be adjusted and paid or refunded or credited as the case
may be, in the same manner as provided in the preceding sentence.
5.04 (i) If Taxes payable for any Tax Year, including the Tax Year in
which the Commencement Date occurs, shall exceed the Base Tax Amount, Subtenant
shall pay to Sublessor as Additional Rent for such Tax Year an amount (herein
called the "Tax Payment") equal to Subtenant's Share of the amount by which the
Taxes for such Tax Year are greater than the Base Tax Amount. The Tax Payment
for each Tax Year shall be due and payable in installments in the same manner
that Taxes for such Tax Year are due and payable by Sublessor to the County of
Suffolk. Subtenant shall pay Subtenant's Share of each such installment within
twenty (20) days after the receipt of a writing rendering of a statement
therefor by Sublessor to Subtenant, which statement may be rendered by Sublessor
so as to require Subtenant's Share of Taxes to be paid by Subtenant not more
than thirty (30) days prior to the date such Taxes (or any installment thereof)
first become due. The statement to be rendered by Sublessor shall set forth, in
reasonable detail, the computation of the Tax Payment with respect to the
particular installment(s) being billed. If there shall be any increase or
decrease in the Taxes for any Tax Year, whether during or after such Tax
-5-
<PAGE>
Year, the Tax Payment for such Tax Year shall be appropriately adjusted and paid
or refunded, as the case may be, in accordance herewith; in no event, however,
shall Taxes be reduced below the Base Tax Amount. If during the Term, Sublessor
shall be required to pay Taxes (either to the appropriate taxing authorities or
as tax escrow payments to a superior mortgagee or superior lessor (including,
without limitation, Landlord) in full or in monthly, quarterly, or other
installments, on any other date or dates than as presently required, then at
Sublessor's option, Subtenant's Tax Payments shall be correspondingly
accelerated or revised so that said Subtenant's Tax Payments are due no more
than thirty (30) days prior to the date payments are due to the taxing
authorities or such superior mortgagee or superior lessor.
(ii) If the Taxes comprising the Base Tax Amount are reduced as
a result of an appropriate proceeding or otherwise, the Taxes as so reduced
shall, for all purposes, be deemed to be the Taxes for purposes of determining
the Base Tax Amount and Sublessor shall give notice to Subtenant of the amount
by which the Tax Payment previously made were less than the Tax Payment required
to be made and Subtenant shall pay the amount of the deficiency within twenty
(20) days after receipt of written demand therefor.
5.05 The expiration or termination of this Sublease during any Tax Year
or Operating Year (for any part or all of which there is due a Tax Payment or
Operating Expense Payment under this Sublease) shall not affect the rights or
obligations of the parties hereto respecting such payments and any Sublessor's
Statement or tax bill, as the case may be, relating to such payment may be sent
to Subtenant subsequent to, and all such rights and obligations shall survive,
any such expiration or termination. Any payments due under such Operating
Expense Statement or Tax Payment, as the case may be, shall be payable within
twenty (20) days after such statement or bill is sent to Subtenant.
5.06 Sublessor's failure to render or delay in rendering an Operating
Expense Statement with respect to any Operating Year shall not prejudice
Sublessor's right to thereafter render an Operating Expense Statement with
respect to any such Operating Year, nor shall the rendering of an Operating
Expense Statement for any Operating Year prejudice Sublessor's right to
thereafter render a corrected Operating Expense Statement for such Operating
Year. Sublessor's failure to render or delay in rendering a bill with respect to
any installment of Taxes shall not prejudice Sublessor's right to thereafter
render such a bill for such installment, nor shall the rendering of a bill for
any installment prejudice Sublessor's right to thereafter render a corrected
bill for such installment.
5.07 No payment by Subtenant or receipt or acceptance by Sublessor of a
lesser sum than the correct Fixed Rent or Additional Rent shall be deemed to be
other than a payment on account, nor shall any endorsement or statement on any
check or letter accompanying any check or payment be deemed an accord and
satisfaction, and Sublessor may accept such check or payment without prejudice
to Sublessor's right to recover the balance or pursue any remedy in this
Sublease or as provided at law.
5.08 Sublessor shall have the same rights and remedies
-6-
<PAGE>
in the event Subtenant fails to pay any Additional Rent as in the situation in
which Subtenant fails to pay Fixed Rent.
5.09 All payments due pursuant to this Section 5 and all other sums or
charges that may become due pursuant to this Sublease (other than Fixed Rent)
shall be additional rent ("Additional Rent") and shall be due and payable as
specified herein or determined in accordance herewith or, if no time is so
specified or determined, within ten (10) days of receipt of written demand.
5.10 All payments due Sublessor hereunder shall, unless expressly set
forth herein to the contrary, be paid without notice or demand and without
set-off, deduction or abatement whatsoever and shall be delivered to Sublessor
at its address set forth in Section 46 of this Sublease or at such other address
as sublessor shall specify in writing, by good, unendorsed checks.
SECTION 6. ELECTRICITY
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6.01 (i) All electric current to be furnished to the Subleased
Premises shall be measured by a separate submeter which shall be installed and
maintained by Sublessor. Subtenant shall purchase from and promptly pay to
Sublessor the cost for all electric current that is consumed in the Subleased
Premises at charges not to exceed those being charged by the public utility
company or agency supplying electric current to the Building together with any
taxes or other charges levied on such electric current. Any such charges for
electric current shall be Additional Rent and shall be due and payable to
Sublessor within ten (10) days after the receipt of a written rendering of a
statement therefor.
(ii) Sublessor shall not be liable in any way to Subtenant for
any failure or defect in the supply or character of the electric energy or other
utility being furnished to the Subleased Premises.
6.02 Subtenant's use of electric energy in the Subleased Premises shall be
solely for the purpose of conducting its business therein and shall not at any
time exceed the capacity of any of the electrical conductors, machinery and
equipment in or otherwise servicing the Subleased Premises or the Building. In
order to insure that such capacity is not exceeded and to avert possible adverse
effect upon the Building's electric service, Subtenant shall not, without
Sublessor's prior written consent in each instance (i) connect any additional
fixtures, machinery, appliances or equipment to the Building's electric
distribution system other than lamps, typewriters, personal-type computer and
related computer terminals, desk-top copying machines, desk-top communications
equipment (such as telephones and telecopies), and other small office machines
that consume comparable or less amounts of electric energy, or (ii) make any
alteration or addition to Subtenant's machinery, appliances or equipment.
6.03 Sublessor shall not be liable or responsible to Subtenant for any
loss, damage or expense which Subtenant may sustain or incur if (1) the supply
or electric energy to the Subleased Premises is interrupted, or (ii) the
quantity or character of electric service is changed or is no longer available
or suitable to Subtenant's requirements unless
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<PAGE>
directly resulting from Sublessor's willful misconduct. A change in the
availability, supply, quality or character of electric energy shall not be
deemed a constructive eviction of Subtenant unless caused by Sublessor's willful
misconduct.
SECTION 7. SERVICES
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7.01 Sublessor shall provide to the Subleased Premises (i) Monday through
Saturday (except Federal, State and local municipal holidays) from 7:00 a.m to
7:00 p.m. heat and air conditioning as and when seasonably required but never
with respect to air conditioning between October 15 and May 15 except at
Sublessor's sole election; (ii) water for ordinary drinking and lavatory
purposes, but if Subtenant uses or consumes water for any other purposes or in
unusually large quantities (of which fact Sublessor shall be the sole judge),
Sublessor may install a water meter at Subtenant's sole cost and expense, which
meter Subtenant shall thereafter maintain at its sole cost and expense, in good
working order and Subtenant shall pay for water consumed as registered by such
meter; and (iii) Monday through Friday (except Federal, State and local
municipal holidays), cleaning services, in the evenings or early morning,
provided Subtenant keeps the Subleased Premises in reasonable order and provided
further that Sublessor does not require extra or additional cleaning because of
the existence of large quantities of glass, computer, or special installations
or equipment. If the Subleased Premises are not kept in reasonable order by
Subtenant all cleaning shall be done at Subtenant's expense and any extra
cleaning required as set forth above shall be done at Subtenant's expense, all
to Sublessor's satisfaction, by Sublessor's cleaning contractor.
7.02 Any use or occupancy of the Subleased Premises during the hours or
days on or during which Sublessor is not required to furnish heat or
air-conditioning to the Subleased Premises shall be at the sole risk,
responsibility and hazard of Subtenant. Subtenant shall comply with and observe
all Building-wide regulations and requirements prescribed by Sublessor for the
proper functioning of the heating, ventilating and air-conditioning systems.
7.03 In the event that Subtenant shall require air-conditioning, heating
or ventilation at such times as same are not required to be furnished by
Sublessor, Subtenant shall give Sublessor at least forty-eight (48) hours
advance written notice of such requirement and, provided that no Event of
Default shall be continuing and such service shall not overload or overtax the
Building's systems, same shall be furnished by Sublessor, and Subtenant agrees
to pay one hundred percent (100%) of Sublessor's cost therefor as Additional
Rent (Subtenant acknowledges that Sublessor's cost may include the cost of labor
and electric energy for minimum time periods even if the air conditioning,
heating or ventilating is not utilized for the entire minimum time period).
7.04 Sublessor reserves the right to interrupt, curtail or suspend the
services which it is required to furnish under this Section 7 when the need
therefor arises or is reasonably desirable by reason of accident, emergency,
mechanical breakdown or strike, or to accomplish the replacement, repair or
modification of any machinery, or when required or recommended under any law,
order, regulation or pronouncement of any federal, state, county or municipal
authority, or when required to modify, repair, improve or alter the Building or
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<PAGE>
for any cause beyond the reasonable control of Sublessor (including, without
limitation, a default by Landlord under the Lease). Sublessor shall use
reasonable efforts to complete all required repairs (or to cause Landlord to
perform and complete same to the extent of Landlord's obligations under the
Lease) or other necessary work expeditiously so that Subtenant's inconvenience
resulting from the curtailment of services may be for as short a period of time
as circumstances will permit (but Sublessor shall not be obligated to utilize
overtime labor or incur extraordinary expenses in connection therewith). No
diminution or abatement of rent or other compensation shall or will be claimed
by Subtenant as a result of such interruption, curtailment, or suspension, nor
shall this Sublease or any of the obligations of Subtenant be affected or
reduced by reason of such interruption, curtailment or suspension.
7.05 Subtenant shall reimburse Sublessor for the cost to Sublessor of
removal from the Subleased Premises and the Building of so much of any refuse
and rubbish of Subtenant as shall exceed that ordinarily accumulated daily in
the routine of business office occupancy (as reasonably determined by Sublessor
or its contractor).
7.06 Sublessor, its cleaning contractor and their respective employees
shall have access to the Subleased Premises after 5:00 p.m. and before 7:00 a.m.
and shall have the right to use, without charge, all light, power and water
required to clean the Subleased Premises as required by this Sublease.
7.07 Sublessor will not be required to furnish any additional services,
except as expressly provided in this Sublease, and to the extent Sublessor shall
agree to furnish additional services to Subtenant, Subtenant shall pay Sublessor
therefor at Sublessor's then current charges.
7.08 (i) In addition to the services Subtenant shall be entitled to
receive pursuant to the provisions of this Sublease, Subtenant shall be entitled
to receive from landlord with respect to the Subleased Premises, all of the
services which Sublessor is entitled to receive with respect to the Subleased
Premises pursuant to the Lease. Subtenant agrees to look solely to Landlord for
such services and promptly pay to either landlord or Sublessor, as the case may
be, all charges by Landlord for any such services which Landlord is not required
to furnish without additional charge.
(iii) If Landlord fails to provide any services or otherwise perform
any obligations under the Lease (including, without limitation, its obligation,
if any, to repair and maintain the Building or any part thereof) and said
failure has a material adverse effect on the Subleased Premises, Subtenant or
the conduct of its business, Sublessor, promptly after receipt of notice from
Subtenant, shall notify Landlord and use reasonable efforts to have Landlord
perform its duties, and Sublessor shall have no further obligation in connection
therewith. If Landlord shall thereafter not perform, Subtenant shall not be
entitled to any set-off or deduction from the Fixed Rent or Additional Rent due
hereunder.
SECTION 8. CONDITION OF SUBLEASED PREMISES
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<PAGE>
8.01 Subtenant has fully inspected the Subleased Premises and agrees to
accept same "as is" in its condition on the Commencement Date hereof. Sublessor
shall have no obligation to perform any improvements in or about the Subleased
Premises, except Sublessor's Work (as herein defined), which Landlord has
approved.
8.02 Sublessor shall perform, finish, install and provide, or shall cause
to be performed, finished, installed and provided in a good and workmanlike
manner those items of work set forth in the Plans and Specifications which have
been approved by Subtenant and are attached hereto as EXHIBIT "A" (the
Sublessor's Work"). Sublessor represents that Sublessor's Work will be free from
defects in material and workmanship for a period of one (1) year from the
Commencement Date. Sublessor's Work will be completed such that it will be
substantially in accordance with the Plans and Specifications. For purposes of
this Section 8, the term "substantially in accordance" shall mean work
conforming to detailed measurements contained in the Plans and Specifications
coordinated to take into account the fact that all of the Plans and
Specifications should be complementary, and in the joining and coordinating of
such documents, ambiguities or implications may occur, and the Sublessor's Work
should be deemed to fairly reflect the intended result. It is acknowledged by
Subtenant (and same shall not be an objection) that (a) contractors must join,
cut, correlate or complete and combine work existing either outside the scope of
the Plans and Specifications or by other trades to accommodate field conditions
or ambiguity in the correlation of Plans and Specifications; (b) contractors
must patch, cut or join work as a result of subsequent change orders so that
such Sublessor's Work shall be harmonious with the existing completed work, or
so that the existing work may receive such changes; (c) changes may occur in
existing work to receive equipment or materials, the specifications for which
were incorrect in the original contract documents; (d) minor or desirable
deviations may be necessary to cause the specific function or working parts to
connect or provide the utility intended; (e) modifications, patching, blending
or joining of Sublessor's Work may occur in order to accommodate field
conditions not reflected in the Plans and Specifications; and (f) there may
exist and be performed other work, which in accordance with good trade
practices, would be required in order to accommodate Subtenant's intended
requirements as reasonably implied from the correlation of all requirements
under the Plans and Specifications.
8.03 Notwithstanding anything to the contrary set forth in this Lease
Agreement, if for any reason the Commencement Date is delayed by any action or
inaction of Subtenant, then, at Sublessor's option, Subtenant shall (i) pay
Fixed Rent and Additional Rent in the amounts set forth in this Sublease from
the date on which the Commencement Date would have occurred through the day
immediately preceding the Commencement Date, and (ii) Subtenant shall comply
with all of the other terms and conditions of this Sublease as if the Term had
commenced.
8.04 Sublessor's Work shall be deemed completed notwithstanding the fact
that portions of such work remain to be performed, furnished, installed and/or
provided, so long as the same does not, and completion thereof will not, prevent
Subtenant from occupying the Subleased Premises for the conduct of its business
or materially interfere with Subtenant's use and occupancy of the Subleased
Premises for
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normal office purposes. Provided Subtenant shall deliver to Sublessor, within
thirty (30) days of the Commencement Date, a list of all unperformed items of
Sublessor's Work, Sublessor shall complete same to the extent required by 8.02
of this Sublease.
8.05 Sublessor shall cause to be obtained any permits, certificates
and municipal authorizations required to be obtained such that Sublessor's Work
complies with, and can be performed in compliance with all applicable laws,
legal requirements, orders, ordinances, codes and regulations.
8.06 In connection with the performance of Sublessor's Work, Sublessor
shall have the right, without having to obtain Subtenant's consent, to (i) make
changes and modifications to the Plans and Specifications to comply with any
governmental or inspecting authorities, laws, codes, rules, regulations or
permits, and (ii) make changes and substitutions of materials from those set
forth on the Plans and Specifications, provided such changed or substituted
materials are at least equivalent in quality and design to those set forth in
the Plans and Specifications. Notwithstanding anything to the contrary contained
in this Lease Agreement any changes or modifications to the Plans and
Specifications attached hereto as Exhibit A which are either requested by the
Subtenant or are required to comply with any governmental or inspecting
authorities, laws, codes, rules, regulations or permits, shall be the sole
responsibility of Subtenant and shall be paid by Subtenant, as additional Rent
within ten (10) days of the date on which Sublessor shall sent a statement to
Subtenant requesting payment thereof.
SECTION 9. ALTERATIONS
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9.01 Subtenant shall not make any improvements, installations, additions,
alterations or other changes (herein sometimes collectively called
"Alterations") in or to the Subleased Premises without the prior written consent
of Sublessor in each instance which consent shall not be unreasonably withheld
or delayed, and, if required by the Lease, Landlord. Subtenant acknowledges that
in no event shall Subtenant make nor will Sublessor grant consent to Alterations
which are in the form of entrances to or exists from the Subleased Premises or
the Building or which as a result thereof require the construction of any
additional entrances to or exits from the Subleased Premises or the Building.
9.02 If Subtenant shall obtain all required consents, any Alterations to
the Subleased Premises (and the performance of all work required in connection
therewith) shall in all respects comply with the provisions of this Sublease,
the Lease and the consents given with respect thereto.
SECTION 10. REPAIRS AND MAINTENANCE
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10.01 Subtenant shall, at its sole cost and expense, throughout the Term,
(i) take good care of the Subleased Premises and the equipment, fixtures and
improvements located therein (including, without limitation, the property which
is deemed the Sublessor's at the end of the Term pursuant to the provisions of
this Sublease), (ii) be responsible for all non-structural repairs, in and to
the Subleased Premises excluding the heating, ventilating, air conditioning,
plumbing and electrical systems. Notwithstanding the
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preceding sentence, Subtenant shall be responsible for the cost of all repairs,
interior and exterior, structural and non-structural, in and to the Building,
the Land, the Subleased Premises and the facilities and systems thereof, but
only to the extent the need for such repairs to the Building, the Land, the
Subleased Premises and the facilities and systems thereof arises out of (a) the
performance or existence of Alterations performed by or on behalf of Subtenant,
(b) the installation, use or operation of any equipment, fixtures or property by
Subtenant, its employees, agents, contractors or invitees, (c) the moving of any
equipment, fixtures or property into or out of the Subleased Premises or the
Building by any person or entity other than Landlord, Sublessor, its employees
or agents, or (d) the act, omission, misuse or neglect of Subtenant or any of
its subtenants or its or their employees, agents, contractors or invitees. Any
repairs in or to the Land, the Building and the Subleased Premises and the
facilities and systems thereof for which Subtenant is responsible shall be
performed by or on behalf of Sublessor at Subtenant's sole cost and expense;
but Sublessor may, at its option, before commencing any such work or at any time
thereafter, require Subtenant to (1) perform same, and/or (2) furnish to
Sublessor such security, in form and amount as Sublessor shall deem necessary,
to assure the payment for such work by Subtenant.
10.02 (i) Subject to Section 7.08 (ii), Sublessor, at its sole cost
and expense, shall repair and maintain (or shall cause to be repaired and
maintained), in good working order and repair (a) the structural and the public
portions of the Building, and (b) the systems and facilities of the Building
serving the Subleased Premises, including the Building heating, ventilating or
air-conditioning, plumbing and electrical systems, except Subtenant and not
Sublessor shall be responsible for all the foregoing repairs and maintenance as
and to the extent provided for in Section 10.01 hereof.
(ii) Subtenant shall give Sublessor prompt notice of any
defective condition known to Subtenant in any plumbing, heating,
air-conditioning or ventilation system or electrical lines located in, servicing
or passing through the Subleased Premises. Sublessor will endeavor to minimize
interference with Subtenant's use of the Subleased Premises in making any
repairs or changes which Sublessor is required or permitted by this Sublease, or
required by law, to make in or to the fixtures, equipment or appurtenances of
the Building or the Subleased Premises.
10.03 Notwithstanding the foregoing, Sublessor shall have no liability to
Subtenant, nor shall Subtenant's covenants and obligations under this Sublease
be reduced or abated in any manner whatsoever, by reason of any inconvenience,
annoyance, interruption or injury arising from Sublessor or any party acting on
Sublessor's behalf making any repairs or changes which Sublessor is required or
permitted by this Sublease, or required by law, to make in or to the fixtures,
equipment or appurtenances of the Building or the Subleased Premises.
SECTION 11. INSURANCE
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11.01 Subtenant, at its sole cost and expense, shall maintain in effect
throughout the Term, for the mutual benefit of Sublessor and Subtenant,
insurance covering all of the property of Subtenant, against loss or damage by
fire and
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such risks as are customarily included in "all-risk" and extended coverage
endorsements attached to fire insurance policies, including "agreed amount"
coverage with no co-insurance penalties, on an "occurrence basis" in an amount
not less than the full replacement value thereof.
11.02 Subtenant, at its sole cost and expense, shall maintain in effect
for the entire Term, for the mutual benefit of Sublessor and Subtenant (and for
the benefit of the additional insureds described by the provisions of 11.05)
comprehensive general liability insurance in the broadest form generally
obtained on a commercially reasonable basis for first class commercial buildings
of approximately the same age as the Subleased Premises and located in the area
in which the Subleased Premises are located, on an occurrence basis in the
minimum amount of Three Million Dollars ($3,000,000.00) for each occurrence,
(with a combined maximum amount of Five Million Dollars ($5,000,000.00) for all
occurrences per policy year) combined single limit for bodily injury, including
death, property damage and contractual liability (covering all contractual
obligations of Subtenant including those obligations under this Sublease). Such
policies shall cover the Subleased Premises, inclusive of sidewalk and parking
areas.
11.03 The insurance required under Section 11 shall be effected by valid
and enforceable policies issued by insurance companies approved by Sublessor,
which approval shall not be unreasonably withheld or delayed, and licensed to do
business in the State of New York.
11.04 Upon the Term Commencement Date and thereafter, not less than ten
(10) days prior to the expiration date of any expiring policies theretofore
furnished pursuant to this Section 11, copies of such policies or certificates
of insurance therefor, or renewal policies or certificates of insurance
therefor, as the case may be, shall be delivered by Subtenant to Sublessor. If
the Subleased Premises are covered by a Superior Instrument, certificates of the
policies for the insurance required under this Section 11 shall, at Sublessor's
request, also be delivered to the holder of such Superior Instrument(s) whose
name and address shall have been delivered to Subtenant.
11.05 Except as otherwise stated, all policies of insurance required under
this Section 11 shall name Sublessor and Subtenant as the insureds as their
interest may appear; and such holders of Superior Instruments as Sublessor shall
request as additional insureds. Each policy of insurance required under this
Section 11 shall contain an agreement by the insurer that it will not be
cancelled or terminated, or the amount of insurance or type of coverage reduced
without at least thirty (30) days prior notice to Sublessor, Landlord and the
holder of any other Superior Instrument(s) named therein, and that no act or
omission of any insured party (including, without limitation, Sublessor and any
such holder named therein) shall serve to invalidate, cancel, release or relieve
the insurer thereunder from any liability which it may have to any other named
insured party.
11.06 Subtenant shall have included in all of its insurance policies a
waiver of the insurer's right of subrogation against Landlord, Sublessor and
others required by the Lease, if any. Subtenant hereby waives any and all right
of recovery it might otherwise have against Landlord, Sublessor and others, if
any, required by the Lease, their
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respective officers, directors, employees, agents and contractors, for loss or
damage to Subtenant's property by fire or other casualty notwithstanding that
such loss or damage may result from the negligence or fault of Landlord,
Sublessor or such others as aforementioned, their respective officers,
directors, employees, agents or contractors. Sublessor hereby waives any and all
right of recovery it might otherwise have against Subtenant, its officers,
directors, employees, agents and contractors, for loss or damage to Sublessor's
property covered under its insurance policies for fire or other casualties to
the Building, notwithstanding that such loss or damage may result from the
negligence or fault of Subtenant, its officers, directors employees, agents or
contractors. If the foregoing waivers of subrogation are only obtainable with
additional cost, the party responsible to obtain such insurance shall notify
the other party, and, in such event, such other party may at its option pay such
additional cost, in which event such waiver shall be obtained.
11.07 Notwithstanding any provisions in this Sublease to the Contrary,
if, in order to avoid a default under the Lease or any Superior Instrument,
Sublessor or Subtenant is required to maintain broader type coverage or more
insurance coverage with respect to the Subleased Premises than required by this
Sublease (or name other parties as additional insured thereunder), Subtenant
shall comply with all provisions of the Lease and any Superior Instrument
respecting such insurance and shall maintain all insurance required thereby.
SECTION 12. DAMAGE OR DESTRUCTION
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12.01 If the Subleased Premises shall be damaged or destroyed by fire
or other casualty (and if this Sublease shall not be terminated as hereinafter
provided), Sublessor shall make reasonable, diligent and good faith efforts to
cause Landlord to repair the damage to and restore and rebuild the Building to
the extent of Landlord's obligations under the Lease. Sublessor shall repair the
damage to and restore and rebuild the Subleased Premises with and to the extent
of the insurance proceeds provided by the insurance required under Section 11.01
excluding Subtenant's property as soon as possible, but in no event more than
six (6) months, subject to force majeure, after the damage or destruction
(provided Landlord has performed its restoration obligations).
12.02 Subject to the provisions of 12.05, if all or part of the
Subleased Premises shall be damaged, destroyed or rendered completely or
partially untenantable on account of fire or other casualty, the Fixed Rent and
the Additional Rent under Section 5 of this Sublease shall be abated in the
proportion that the untenantable area of the Subleased Premises bears to the
total area of the Subleases Premises. Such abatement shall be effective from
the period commencing upon the date of the damage or destruction and ending on
the date the damage to the Subleased Premises shall be substantially restored,
provided, however, should Subtenant or any of its subtenants reoccupy a portion
of the Subleased Premises during the period the restoration is taking place and
prior to the date that the Subleased Premises are substantially repaired or made
tenantable, the Fixed Rent and the Additional Rent allocable to such reoccupied
portion, based upon the proportion which the area of the reoccupied portion of
the Subleased Premises bears to the total area of the Subleased Premises, shall
be payable by Subtenant from
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the date of such reoccupancy.
12.03 (i) If the Sublease Premises shall be substantially damaged or
destroyed by fire or other casualty, Sublessor shall obtain for and deliver to
Subtenant an estimate from an independent contractor, architect or professional
engineer, as to the time required for Landlord to restore and repair the
Sublease Premises, as appropriate (the "Estimate"). The date set forth in the
Estimate shall hereinafter be referred to as the "Outside Date".
(ii) If the Sublease Premises shall be damaged or destroyed by
fire or other casualty, such that the Outside Date is more than one hundred
eighty (180) days after the date of the casualty, either Subtenant or Sublessor
may terminate this Sublease by giving the other party notice to such effect.
Such termination shall be effective on the date specified in such termination
notice, but not earlier than thirty (30) days nor later than ninety (90) days
after the date of such notice. Upon such termination, the Term shall expire as
if it were the Expiration Date.
12.04 Except as expressly set forth in 12.03, Subtenant shall not be
entitled to terminate this Sublease on account of a fire or other casualty and
in the event of a fire or other casualty, Sublessor shall have no liability to
Subtenant for inconvenience, loss of business or annoyance arising on account of
the fire or other casualty or from any repair or restoration of any portion of
the Subleased Premises or of the Building.
12.05 Notwithstanding any of the foregoing provisions of this Section
12, if by reason of some act or omission on the part of Subtenant or any of its
subtenants or its or their partners, directors, officers, servants, employees,
agents or contractors, Sublessor or Landlord shall be unable to collect all of
the insurance proceeds (including without limitation, rent insurance proceeds)
applicable to the damage or destruction of the Subleased Premises or the
Building (by fire or other casualty), there shall be no abatement or reduction
of Fixed Rent or Additional Rent to the extent of such uncollected insurance
proceeds.
12.06 Sublessor has no obligation to carry insurance of any kind on
Subtenant's property, furnishings, equipment, or trade fixtures and,
notwithstanding anything to the contrary set forth herein, Sublessor shall not
be obligated to repair any damage thereto, and Subtenant agrees to look solely
to its insurance for recovery of any damage to or loss thereto.
12.07 The provisions of this Section 12 shall be deemed an express
agreement governing any case of damage or destruction of the Subleased Premises
by fire or other casualty, and Section 227 of the Real Property Law of the
State of New York, providing for such a contingency in the absence of an
express agreement, and any other law of like import, now or hereinafter in
force, shall have no application in such case.
SECTION 13. EMINENT DOMAIN
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13.01 If the Lease is terminated (whether by Sublessor or Landlord) by
reason of a condemnation (or other taking for a quasi-public or public purpose),
or if the whole or any part of the Subleased Premises or access to shall be
taken by
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condemnation or in any other manner for any public or quasi-public use or
purpose, this Sublease and the term and estate hereby granted shall terminate as
of the date of vesting of title on such taking (herein called "Date of the
Taking") as if such date were the Expiration Date.
13.02 Except as expressly provided in this 13.02, Sublessor shall be
entitled to receive the entire award or payment in connection with any taking
without reduction therefrom for any estate vested in Subtenant by this Sublease
or any value attributable to the unexpired portion of the Term, and Subtenant
shall receive no part of such award except as hereinafter expressly provided.
Subtenant hereby expressly assigns to Sublessor all of its right, title and
interest in and to every such award or payment and waives any right to the value
of the unexpired portion of the Term. Nothing contained herein shall be deemed
to prevent Subtenant from making a separate claim in any condemnation proceeding
for the then value of Subtenant's personal property which has been taken, and
moving expenses incurred as a result thereof, provided such claim does not
reduce the amount of the award payable to Sublessor.
SECTION 14. SUBLESSOR'S AND SUBTENANT'S PROPERTY; END OF TERM
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14.01 (i) All fixtures, equipment, materials, additions,
improvements, appurtenances and other property attached to, or built into the
Subleased Premises, whether Sublessor's Work pursuant to Section 8 of this
Sublease or during the Term and whether at the expense of Sublessor or
Subtenant, shall be and remain a part of the Subleased Premises and at the
expiration of the Term shall be deemed the property of the Sublessor and same
shall not be removed by Subtenant, except as expressly provided in 14.01(ii).
Notwithstanding the foregoing, but subject nevertheless to the provisions of
Section 8 of this Sublease, neither Sublessor nor Landlord shall be liable in
any manner for payment or otherwise to any contractor, subcontractor, laborer or
supplier in connection with the purchase or furnishing after the date hereof of
any such materials or equipment or the installation thereof. Neither Sublessor
nor Landlord shall have any obligation to pay any compensation to Subtenant by
reason of the acquisition of title to such materials and equipment by the
Sublessor pursuant to the provisions of this Section 14.
(ii) Upon written notice to Subtenant given prior to the
Expiration Date or within 10 days after any earlier expiration of the Term,
Sublessor may require Subtenant to remove (and thereupon Subtenant shall remove)
all or part of the fixtures, equipment, materials, improvements, appurtenances
and other property described in the first sentence of 14.01(i) other than
Sublessor's Work pursuant to Section 8 hereof which Sublessor did not note had
to be removed at the time of Sublessor's approval thereof. In connection with
any such removal, Subtenant shall immediately and at its expense, repair and
restore the Subleased Premises to the condition existing prior to installation
and repair any damage to the Subleased Premises or the Building due to such
removal.
14.02 Notwithstanding anything to the contrary set forth in 14.01 above,
all movable partitions, business and trade fixtures, and office equipment, to
the extent installed in the Subleased Premises by or for the account of
Subtenant
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without expense to Sublessor and removable without structural damage to the
Building or the Subleased Premises, and all furniture, furnishing and other
articles of movable personal property owned by Subtenant and located in the
Subleased Premises (herein sometimes collectively called "Subtenant's property"
or "property of Subtenant") shall be and shall remain the property of Subtenant
and may be removed by Subtenant at any time during the Term; provided that if
any of Subtenant's property is removed, Subtenant shall repair or pay the cost
of repairing any damage to the Subleased Premises or to the Building resulting
from the installation and/or removal thereof.
14.03 At or before the Expiration Date (or within 10 days after any earlier
termination of this Sublease) Subtenant, at its expense, shall remove from the
Subleased Premises all of Subtenant's property, and Subtenant shall repair any
damage to the Subleased Premises or the Building resulting from any installation
and/or removal thereof.
14.04 After Subtenant vacates the Subleased premises, any items of
Subtenant's property which shall remain in the Subleased Premises may at the
option of Sublessor, be deemed to have been abandoned, and in such case such
items may be retained by Sublessor as its property or disposed of by Sublessor,
without accountability, in such manner as Sublessor shall determine, at
Subtenant's sole cost and expense.
14.05 The provisions of this Section 14 shall survive the Expiration Date
or earlier termination of the Term.
SECTION 15. ACCESS, NAME OF BUILDING, AND SIGNS
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15.01 Except for the space within the inside surfaces of all exterior
walls bounding the Subleased Premises, hung ceilings, floors, exterior windows
and doors bounding the Subleased Premises, all of the remaining portions of the
Building, including, without limitation, exterior walls, core corridor walls and
doors and any corridor entrance, any space located within or adjacent to the
Subleased Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts,
electric or other utilities, sinks or other Building facilities, and the use
thereof, as well as access thereto through the Subleased Premises for the
purposes of operation, maintenance and repair, are reserved to Sublessor and
Landlord and persons authorized by Sublessor or Landlord. Sublessor reserves the
right, and Subtenant shall permit Sublessor and persons authorized by Sublessor,
to install, erect, use and maintain pipes, shafts, ducts and conduits in and
through the Subleased Premises.
15.02 Sublessor and persons authorized by Sublessor shall have the right
to enter and/or pass through the Subleased Premises at any time or times upon
such notice as is reasonable under the circumstances (it being agreed that one
(1) Business Day's notice shall always be deemed to be reasonable notice and
that no notice need be given in an emergency) (i) to examine the Subleased
Premises and to show them to Landlord and to actual and prospective purchasers,
mortgagees or lessees of the Building (ii) to make such repairs, alterations,
additions and improvements in or to the Subleased Premises and/or to the
Building or to its facilities and equipment as Sublessor is or persons
authorized by Sublessor are required or reasonably desire to make, and (iii) to
read any utility meter or submeter located
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therein. Sublessor and any authorized persons shall be allowed to take all
materials into and upon the Subleased Premises that may be required in
connection therewith, without any liability to Subtenant (except to the extent
of Sublessor's gross negligence or willful misconduct) and without any reduction
of Subtenant's covenants and obligations hereunder.
15.03 During the time period of six (6) months prior to the Expiration
Date, Sublessor and persons authorized by Sublessor may exhibit the Subleased
Premises to prospective tenants in accordance with 15.02 above.
15.04 To the extent Sublessor shall deem necessary or desirable, Sublessor
reserves the right, at any time, without it being deemed a constructive eviction
and without incurring any liability to Subtenant therefor, or affecting or
reducing any of Subtenant's covenants and obligations hereunder, to make or
permit to be made such changes, alterations, additions and improvements in or to
the Land, the Building, and the fixtures and equipment thereof, as well as in or
to the street entrances, doors, halls, passages, lavatories, facilities, parking
lots, walkways, landscaped areas and other public part thereof provided that
Subtenant's access to the Subleased Premises is not materially adversely
affected or impeded by such changes, alterations, additions or improvements.
15.05 Sublessor reserves the right to change the address of the Building
and/or to place signs above the entrances to the Building at any time and from
time to time. Neither this Sublease nor any use by Subtenant shall give
Subtenant any easement or other right in or to the use of any door, parking lot
or any passage or any plaza connecting the Building with any other building or
to any public or private conveniences, and the use of such doors, parking lots,
passages, plazas and conveniences may without notice to Subtenant, be regulated
or discontinued at any time by Sublessor (except if expressly set forth to the
contrary herein).
15.06 If Subtenant shall not be personally present to open and permit an
entry into the Subleased Premises at any time when for any reason an entry
therein shall be necessary by reason of fire or other emergency, Sublessor or
Landlord or its or their agents may forcibly enter the same without rendering
Sublessor or Landlord or its or their agents liable therefor and without in any
manner affecting the obligations and covenants of this Sublease.
15.07 (i) In no event shall Subtenant, without Sublessor's prior written
consent in each instance (and Landlord's prior written consent, if required),
place or affix any signs or devices of any kind on the exterior of the Building,
or within or upon the Subleased Premises or the Building such that same are
visible from the outside of the Building or the Subleased Premises. Any such
consents to signs and/or devices shall be of the size, color, design and
location designated and approved by Sublessor (and Landlord if required) in
writing.
(ii) Any such consented to signs and devices shall be placed or
affixed at Subtenant's sole cost and expense and shall be in conformity with all
applicable laws, codes, permits, ordinances and regulations. Subtenant, at its
sole cost and expense, shall remove such signs and/or
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devices at the expiration of the Term (or earlier termination of this Sublease)
and shall repair any damage resulting from the installation, maintenance or
removal thereof. Subtenant shall hold Sublessor and Landlord harmless from any
claims or liability that may arise by virtue of the installation, maintenance or
removal of any such signs and/or devices
SECTION 16. ASSIGNMENT, MORTGAGING, SUBLETTING, ETC.
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16.01 Subtenant shall not voluntarily or involuntarily (a) assign or
otherwise transfer this Sublease or the estate hereby granted, (b) sublet the
Subleased Premises (c) allow the Subleased Premises to be used or occupied by
others, or (d) mortgage, pledge or encumber this Sublease or the Subleased
Premises or any part thereof, without, in each instance, obtaining the prior
written consent of Sublessor, (and if required by the Lease, Landlord) except as
otherwise expressly provided in this Section 16.
The sale, assignment, transfer, pledge or issuance of shares of any
corporation which is the Subtenant hereunder or other occupant of the Subleased
Premises (whether by sub-sublease or assignment of this Sublease) which at one
time or in the aggregate results in a reduction of the holdings of the
shareholders of such corporation (on the date hereof or the date such
corporation first became the Subtenant or occupant of the Subleased Premises, as
appropriate) to less than 51% of the shares in such corporation shall be deemed
an assignment of this Sublease. The transfer, sale, pledge, issuance or
assignment of partnership interests in any partnership which is the Subtenant
hereunder or other occupant of the Subleased Premises (whether by sub-sublease
or assignment of the Sublease) which at one time or in the aggregate results in
a reduction of the holdings of the partners of such partnership (on the date
hereof or the date such partnership first became the Subtenant or occupant of
the Subleased Premises, as appropriate) to less than 51% of the ownership
interests in such partnership shall be deemed an assignment of this Sublease.
16.02 The provisions of Section 16.01 hereof shall not apply to (a) an
assignment to a corporation into or with which Subtenant is merged or
consolidated or to an entity to which substantially all of Subtenant's assets
are transferred (provided such merger, or consolidation or transfer of assets is
for a good business purpose and not principally for the purpose of transferring
this Sublease or the leasehold estate created hereby, and provided further, that
the resultant corporation or the assignee, as the case may be, has a net worth
at least equal to or in excess of the net worth of Subtenant immediately prior
to such merger, or consolidation or transfer) or (b) an assignment to an
Affiliated Entity, provided such assignment is for a good business purpose and
not principally for the purpose of avoiding the application of Section 16.01 of
this Sublease. As used in this Section 16.02, an "Affiliated Entity" means a
corporation controlled by, controlling or under common control with the
Subtenant. A corporation, for this purpose, shall not be deemed controlled by
another unless at least fifty-one (51%) percent of its voting stock is owned
both beneficially and of record by such other.
16.03 Any assignment, subletting or transfer, whether made with
Sublessor's consent as required by Section 16.01 or without Landlord's or
Sublessor's consent pursuant to Section
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16.02, shall be made only if, and shall not be effective unless and until all of
the following shall have been fulfilled at least thirty (30) days prior to the
effective date of the contemplated assignment or subletting:
(a) Subtenant shall furnish Sublessor with the name and business
address of the proposed subtenant or assignee, information with respect to the
nature and character of the proposed Subtenant's or assignee's business or
activities, and current financial information with respect to net worth, credit
and financial responsibility of the proposed subtenant or assignee;
(b) In the case of an assignment, Subtenant shall deliver to
Sublessor an executed counterpart thereof, and all ancillary agreements with the
proposed assignee (including all documents from which the considerations to be
received by Subtenant referred to in Section 16.07 hereof can be ascertained);
(c) In the case of a contemplated subletting, Subtenant shall
deliver to Sublessor, an executed counterpart of the proposed sublease and all
ancillary agreements with the proposed sublessee (including all documents from
which the considerations to be received by Subtenant referred to in Section
16.07 hereof can be ascertained);
(d) In the case of an assignment, the assignee shall execute,
acknowledge and deliver to Sublessor a recordable agreement, in form and
substance reasonably satisfactory to Sublessor, whereby the assignee shall
assume and agree to fulfill the obligations and performance of this Sublease and
the assignment and agree to be personally bound by and upon the covenants,
agreements, terms, provisions and conditions hereof on the part of Subtenant to
be performed or observed and whereby the assignee shall agree that the
provisions of Section 16.01 hereof shall, notwithstanding such an assignment or
transfer, continue to be binding upon it in the future;
(e) Each sublease or assignment referred to in clauses (b) and
(c) of this Section 16.03 shall specifically state that (i) it is subject to all
of the terms, covenants, agreements, provisions, and conditions of this
Sublease, (ii) the Subtenant or Assignee, as the case may be, will not have the
right to a further assignment thereof or sublease thereunder, or to allow the
Subleased Premises to be used by others, without the consent of Sublessor (and
if required by the Lease, the Landlord) in each instance, (iii) a consent by
Sublessor thereto shall not be deemed or construed to modify, amend or affect
the terms and provisions of this Sublease, or Subtenants's obligations
hereunder, which shall continue to apply to the Subleased Premises, and the
occupants thereof, as if the sublease or assignment had not been made, (iv) if
Subtenant defaults in the payment of any Fixed or Additional Rent, Sublessor is
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authorized to collect any rent due or accruing from any assignee, subtenant or
other occupant of the Subleased Premises and to apply the net amounts collected
to the Fixed Rent or Additional Rent, (v) the receipt by Sublessor of any
amounts from an assignee or subtenant, or other occupant of any part of the
Subleased Premises shall not be deemed or construed as releasing Subtenant from
Subtenant's obligations hereunder or the acceptance of that party as a direct
tenant.
16.04 The liability of Subtenant, and the due performance by Subtenant of
the obligations on its part to be performed under this Sublease, shall not be
discharged, released or impaired in any respect by an agreement or stipulation
made by Sublessor or any grantee or assignee of Sublessor, by way of mortgage or
otherwise, extending the time of or modifying any of the obligations contained
in this Sublease, or by any waiver or failure of Sublessor to enforce any of the
obligations on Subtenant's part to be performed under this Sublease, and
Subtenant shall continue to be liable hereunder.
16.05 Sublessor shall not unreasonably withhold or delay its consent to a
subletting of the Subleased Premises for substantially the remainder of the
Term, provided:
(a) The proposed Subtenant is a party whose reputation, financial net
worth, credit and financial responsibility is, considering the responsibilities
involved, reasonably satisfactory to Sublessor.
(b) The nature and character of the proposed Subtenant, its business
or activities and intended use of the Subleased Premises is, in Sublessee's
judgment, in keeping with the standards of the Building and the area in which
the Building is located and does not conflict with the provisions of Section
2.01 of this Sublease;
(c) No such subletting shall constitute or cause (with or without
notice or lapse of time or otherwise) a default under any mortgage; and
(d) Subtenant shall have complied with all of the provisions of
Section 16.03 and Sublessor shall not have made any of the elections provided
for in Section 16.07.
16.06 Subtenant shall pay to Sublessor, as Additional Rent:
(a) in the case of an assignment, an amount equal to all sums and
other considerations paid to Subtenant by the assignee for or by reason of such
assignment (including, but not limited to, sums paid for the sale of Tenant's
fixtures, leasehold improvements, equipment, furniture, furnishings or other
personal property, less, in the case of a sale thereof, the then net unamortized
or undepreciated cost thereof determined on the basis of Subtenant's federal
income tax returns); and
(b) in the case of a sublease, any rents, additional charges or other
consideration payable under the sublease to Subtenant (including, but not
limited to, sums paid for the sale or rental of Subtenant's fixtures, leasehold
improvements, equipment, furniture or other personal property, less, in the case
of the sale thereof, the then net unamortized or undepreciated cost thereof
determined on the basis of Subtenant's federal income tax returns, which
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are in excess of the Fixed Rent for the Subleased Space that Subtenant is then
paying Sublessor in accordance with this Sublease.
The sums payable under Subdivisions (a) and (b) preceding shall be paid to
Sublessor as and when paid by the subtenant to Subtenant.
Subtenant shall furnish Sublessor with a written statement, semi-annually,
certified by Subtenant, from which the additional rent to which Sublessor may be
entitled by reason of the application of Subdivisions (a) and (b) preceding can
be determined. Subtenant shall keep books of account in accordance with
generally accepted accounting principles consistently applied and supporting
material relating to the matters reflected in Subdivisions (a) and (b)
preceding, and shall make the same available to Sublessor at all reasonable
times for inspection at the Subleased Premises for the purpose of verifying any
statement furnished or to be furnished by Subtenant. Sublessor shall have the
right to delegate this inspection to a duly authorized representative and, in
addition, may make such copies thereof as it reasonably requires, but only for
the purposes enumerated in this Section.
16.07 Notwithstanding anything to the contrary contained in this Sublease,
in the event Subtenant desires to assign or otherwise transfer this Sublease or
sublet the Subleased Premises, Sublessor shall have the right (a) in the case of
an assignment other than to an "Affiliated Entity", to cancel this Sublease and
(b) in the case of a subletting other than to an "Affiliated Entity", to
recapture the Subleased Premises by giving Subtenant written notice thereof
within 30 days after Subtenant has fulfilled all its obligations pursuant to
this Section 16 hereof. Such cancellation or recapture as the case may be shall
become effective as of the effective date of the contemplated assignment or
subletting.
SECTION 17 COMPLIANCE WITH LAWS
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17.01 Subtenant, at Subtenant's sole cost and expense, shall in a prompt
and diligent manner and on a timely basis, comply with all present and future
laws, ordinances, orders, codes, permits and regulations of Federal, State,
County, and Municipal authorities, and with all directions, pursuant to law, of
all public officers which shall impose any compulsory and enforceable duty upon
Landlord, Sublessor or Subtenant with respect to the Subleased Premises or the
use or occupancy thereof. If a structural change, addition or repair is required
for such compliance, and if such change, addition or repair is not required
because of Landlord's or Sublessor's failure to comply with then applicable laws
at time of construction, Subtenant shall promptly modify its use to obviate the
requirement of such change or inform Sublessor thereof (in which event Sublessor
may, on Subtenant's behalf make such change, addition or repair). In such later
event, Subtenant shall pay to Sublessor, as Additional Rent, in equal monthly
installments from the date of the completion of such structural change, addition
or repair and until the expiration of the Term, a sum equal to either: (i) that
fraction of the cost of such change, addition or repair of which the numerator
is the number of months from the date of completion of such change, addition or
repair until the expiration of the Term, and the denominator is the number of
months of the "useful life" based on the applicable guideline
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issued by U.S. Internal Revenue Service for straight-line (unaccelerated)
depreciation of such change, addition or repair for tax purposes (if the "useful
life" is not less than the time then remaining in the Term); or (ii) the full
cost of such change, addition or repair if the "useful life" is less than the
time then remaining in the Term.
17.02 Except as otherwise provided in this Sublease, Subtenant agrees to
fully comply with, and not to take action or fail to take any action which shall
or may result in a violation of the Comprehensive Environmental Response
Compensation Liability Act or the Resource Conservation and Recovery Act or any
other Federal, State or local statute, regulation, law or ordinance generally
considered as having environmental implication or significance, or any statute
which shall be a successor to, or in lieu of, any of the foregoing. In the event
any lien shall be asserted against Landlord, Sublessor, any property of Landlord
or Sublessor or the Subleased Premises in connection with any such statute and
as a result of any such act or omission by Subtenant, Subtenant covenants and
agrees to immediately discharge such lien, or cause the same to be discharged,
so that such lien shall no longer be asserted against Landlord or Sublessor or
the Subleased Premises or against any other property of Landlord or Sublessor,
as the case may be. Sublessor represents that there shall be no condition
existing on the Subleased Premises upon the Commencement Date nor shall
Sublessor cause any condition thereafter which may result in a violation of the
Comprehensive Environmental Response Compensation Liability Act or the Resource
Conservation and Recovery Act or any other Federal, State or local statute,
regulation, law or ordinance generally considered as having environmental
implication or significance, or any statute which shall be a successor to, or in
lieu of any of the foregoing.
17.03 Subtenant shall give prompt written notice to Sublessor of any notice
it receives of the violation of any law with respect to the Subleased Premises.
SECTION 18 SUBORDINATION
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18.01 (i) This Sublease is and shall remain subject and subordinate to (a)
the Lease and the terms and provisions thereof, (b) all matters to which the
Lease is now or hereafter subordinate or subject to and (c) all mortgages which
may now or hereafter affect all or any portion of the Building and to all
renewals, extensions, supplements, amendments, modifications, consolidations and
replacements thereof or thereto, substitutions therefor, and advances made
thereunder [(a), (b) and (c) are collectively referred to herein as "Superior
Instruments"]. This Section 18.01 shall be self-operative, and no further
instrument of subordination shall be required. In confirmation of such
subordination, Subtenant shall, upon Sublessor's request, promptly execute,
acknowledge and deliver any instrument that any holder of a Superior Instrument
may request to confirm such subordination. Sublessor, however, shall endeavor to
obtain from any current or future mortgagees its standard non-disturbance and
attornment agreement.
18.02 Without limiting any of the provisions of this Sublease, in the event
that the holder of a Superior Instrument or its assigns shall succeed to the
interest of Sublessor, then, at such holder's (or its assigns') option, this
Sublease shall nevertheless continue in full force and
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effect and Subtenant shall and does hereby agree to attorn to such holder or its
assigns, and to recognize such holder, or its assigns as Sublessor, except that
such holder as successor Sublessor shall not be (i) bound by any payments of
rent, for more than one (1) month in advance, (ii) required to perform any
portion of the Sublessor's Work, (iii) responsible for any monies owed to
Subtenant by Sublessor, or (iv) subject to any credits, offsets, claims or
counterclaims which Subtenant may have against Sublessor.
18.03 Subtenant shall, at any time upon not less than ten (10) days prior
notice by Sublessor, execute, acknowledge and deliver to Sublessor a statement
in writing certifying that this Sublease is in full force and effect and
unmodified (or, if modified, stating the modifications), and the dates to which
Fixed Rent, Additional Rent and other charges have been paid in advance, if
any, and stating whether or not, to the best knowledge of Subtenant, Sublessor
is in default under this Sublease and, if so, specifying each such default, and
any other statements reasonably requested by Sublessor or the holder of any
Superior Instrument, it being intended that any such statement delivered
pursuant hereto may be relied upon by any prospective purchaser of the Land
and/or the Building or any interest or estate therein, any mortgagee or
prospective mortgagee thereof or any prospective assignee of any such mortgage.
Subtenant agrees at any time to enter into reasonable modifications of this
Sublease requested by the holder of any Superior Instrument; provided, however,
that no such modifications shall (i) increase the rent reserved herein, (ii)
shorten the Term, (iii) adversely affect Subtenant's ability to use or occupy
all of the Subleased Premises or (iv) diminish Subtenant's rights hereunder.
18.04 Subtenant shall promptly furnish to Sublessor all financial
information and other information concerning Subtenant (if available) reasonably
required by any institutional mortgagee to whom Sublessor or Landlord applies
for mortgage financing on the Building, and Subtenant shall execute any
documents reasonably required by such mortgagee. Subtenant shall be under no
obligation to furnish such information unless Sublessor and any such
institutional mortgagee shall agree in advance in writing to treat all such
information received from Subtenant as confidential, and not to disclose or use
the same except for the sole purpose of mortgage financing on the Building.
18.05 If required by the provisions of any Superior Instrument of all or
any portion of the Building, and provided the name and address of any holder of
each such mortgage have been provided to Subtenant, Sublessor and Subtenant,
without first obtaining the written consent of the holder of any such mortgage,
shall not enter into any agreement, the effect of which would be to: (i) modify,
cancel, terminate or surrender this Sublease except as provided in this
Sublease; (ii) grant any concessions in respect thereof; (iii) reduce the Fixed
Rent or Additional Rent or require the prepayment of any Fixed Rent or
Additional Rent in advance of the due date thereof; (iv) create any offsets or
claims against Fixed Rent or Additional Rent; or (v) assign in whole or in part
any of the Fixed Rents or Additional Rents therefrom or Subtenant's interest in
this Sublease or sublet the whole in any portion of the Subleased Premises,
except as provided in this Sublease.
18.06 Subtenant shall not be entitled to assert against
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the holder of any Superior Instrument (in its capacity as successor Sublessor on
account of foreclosure or acceptance of a deed in lieu of foreclosure, should
such holder, ever assume such capacity) any claim or liability based on events
which have occurred or shall occur before such holder becomes the Sublessor
hereunder, if ever.
18.07 In the event of any act or omission by Sublessor which would give
Subtenant the right to terminate this Sublease or to claim a partial or total
eviction, Subtenant shall not exercise such right until (i) it shall have given
written notice, by certified or registered mail, of such act or omission to the
holder of any Superior Instrument whose name and address shall have been
furnished to Subtenant in writing, at the last address so furnished, and (ii)
fifteen (15) days shall have elapsed following the giving of such notice, and
then only if following the giving of such notice, Sublessor or said holder shall
not, with reasonable diligence, have commenced and continued to remedy such act
or omission or to cause the same to be remedied.
SECTION 19 PROPERTY LOSS, DAMAGE, REIMBURSEMENT
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Except as otherwise provided in this Sublease, neither Sublessor nor its
employees, officers, directors, contractors, invitees, licensees or agents shall
be liable for any loss of or damage to any property belonging to Subtenant or
any other occupant of the Subleased Premises, whether such loss or damage is
occasioned by fire, casualty, theft or otherwise. Neither Sublessor nor its
employees, officers, directors, contractors, invitees, licensees or agents shall
be liable for any injury or damage to persons, property, or business resulting
from fire, explosion, falling plaster, steam, gas, electricity, electrical
disturbance, 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 subsurface
or from any other place or by dampness or by any other cause of whatsoever
nature, unless caused by or due to the gross negligence or willful misconduct of
Sublessor, its employees, officers, directors, contractors, invitees, licensees
or agents, nor shall Sublessor be liable for any such damage caused by other
tenants, subtenants or persons in the Building or caused by operations in
construction of any private, public or quasi-public work. Subtenant shall
reimburse and compensate Sublessor, as Additional Rent, for all damages or fines
sustained or incurred by Sublessor due to non-performance or non-compliance with
or breach or failure to observe any term, covenant or condition of this Sublease
upon Subtenant's part to be kept, observed, performed and complied with.
SECTION 20 CERTIFICATE OF OCCUPANCY
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Subtenant will not at any time use or occupy (or allow the use or occupancy
of) the Subleased Premises in a manner which is or is likely to be in violation
of the certificate of occupancy issued for the Subleased Premises.
SECTION 21 DEFAULT
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21.01 Upon the occurrence at any time prior to or during the Term, of any
one or more of the following events ("Events of Default"):
(i) if Subtenant shall default in the payment when due of any
installment of the Fixed Rent or Additional
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Rent and such default shall continue for a period of ten (10) days after notice
thereof; or (ii) if Subtenant shall default in the observance or performance of
any term, covenant or condition of this Sublease on Subtenant's part to be
observed or performed (other than the covenants for the payment of Fixed Rent
and Additional Rent) and Subtenant shall fail to remedy such default within
thirty (30) days after notice thereof by Sublessor, provided, that if such
default is of such a nature that it cannot be completely remedied within said
period of thirty (30) days, if Subtenant shall not commence within said period
of thirty (30) days, or shall not thereafter diligently prosecute to completion,
all steps necessary to remedy such default prior to (a) a reasonable period of
time, (b) the imposition of any penalty or other liability by any governmental
authority, or (c) said event constituting a default under a Superior Instrument;
or (iii) if Subtenant shall file a voluntary petition in a bankruptcy or
insolvency, or shall be adjudicated a bankrupt or become insolvent, or shall
file any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
present or any future Federal bankruptcy act or any other present or future
applicable Federal, State or other statute or law, or shall make an assignment
for the benefit of creditors or shall seek or consent to or acquiescence in the
appointment of any trustee, receiver or liquidator of Subtenant or of all or a
portion of the assets of Subtenant; or (iv) if Subtenant's interest in this
Sublease shall devolve upon or pass to any person, whether by operation of law
or otherwise, in violation of the provisions of this Sublease; then, Sublessor,
at any time thereafter, at Sublessor's option, may give Subtenant a three (3)
day notice of termination of this Sublease and, in the event such notice is
given, this Sublease and the Term shall come to an end and expire (whether or
not the Term shall have commenced) upon the expiration of said three (3) days
with the same effect as if the date of expiration of said three (3) days were
the Expiration Date, but Subtenant shall remain liable for damages as provided
in Section 23 of this Sublease.
SECTION 22 REMEDIES
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22.01 In addition to all of the remedies available to Sublessor under
Section 21, during the continuance of an Event of Default, Sublessor may, with
or without terminating this Sublease pursuant to Section 21, exercise one or
more of the following remedies:
(i) Sublessor and its agents and servants may immediately, or at
any time after such default or after the date upon which this Sublease and the
Term shall expire and come to an end, re-enter the Subleased Premises or any
part thereof, without notice, either by summary proceedings or by any other
applicable action or proceedings or otherwise as permitted by law, and may
repossess the Subleased Premises and dispossess Subtenant and any other
occupants from the Subleased Premises and remove any and all of their property
and effects from the Subleased Premises; and
(ii) Sublessor, at Sublessor's option, may relet the whole or any
part or parts of the Subleased Premises from time to time, either in the name of
Sublessor or otherwise, to such party or parties, for such term or terms ending
before, on or after the Expiration Date, at such rental or rentals and upon such
other conditions, which may include concessions and free periods, as Sublessor,
in its
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discretion, may determine. Sublessor shall have no obligation to relet the
Subleased premises or any part thereof and shall in no event be liable for
refusal or failure to relet the Subleased Premises or any part thereof, or, in
the event of any such reletting, for refusal or failure to collect any rent due
upon any such reletting, and no such refusal or failure shall operate to relieve
Subtenant of any liability under this Sublease or otherwise to affect any such
liability. Sublessor, at Sublessor's option, may make such repairs,
replacements, alterations, additions, improvments, decorations and other
physical changes in and to the Subleased Premises as Sublessor, in its
discretion, deems advisable or necessary in connection with any such reletting
or proposed reletting, without relieving Subtenant of any liability under this
Sublease or otherwise affecting any such liability.
22.02 In the event a breach or threatened breach by Subtenant, or by any
persons claiming through or under Subtenant, of any term, covenant or condition
of this Sublease on such party's part to be observed or performed, Sublessor
shall have the right to enjoin such breach and the right to invoke any other
remedy allowed by law or in equity as if re-entry, summary proceedings and other
special remedies were not provided in this Sublease for such breach.
The right to invoke the remedies hereinbefore set forth are cumulative and
shall not preclude Sublessor from invoking any other remedy allowed at law or in
equity.
22.03 If Subtenant shall default in the payment when due of any
installment of Fixed Rent or Additional Rent for more than five (5) days after
the same becomes due and payable, then Subtenant shall pay Sublessor a later
charge of five ($.05) cents for each dollar ($1.00) of such Fixed Rent or
Additional Rent not paid when due. Such late charge shall be without prejudice
to any of Sublessor's rights and remedies hereunder or at law for non-payment of
rent and shall be in addition thereto.
22.04 If Subtenant shall fail to pay (i) any installment of Fixed Rent or
Additional Rent within five (5) days after the same becomes due and payable,
Subtenant shall pay interest thereon at the Rate calculated on the basis of the
actual days elapsed and based on a 360-day year, from the date on which such
installment or payment is due to the date of payment thereof, and such interest
shall be deemed to be Additional Rent.
SECTION 23 DAMAGES
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23.01 If this Sublease and the Term shall expire and come to an end as
provided in Section 21 or by or under any summary proceedings or any other
action or proceedings, or if Sublessor shall re-enter the Subleased Premises as
provided in Section 22 or by or under summary proceeding or any other action or
proceedings, then, in any of said events:
(i) Subtenant shall pay to Sublessor all Fixed Rent, Additional
Rent and other charges payable under this Sublease by Subtenant to Sublessor to
the date upon which this Sublease and the Term shall have expired and come to
an end or to the date of re-entry upon the Subleased Premises by Sublessor, as
the case may be; and
(ii) Subtenant shall also be liable for and
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shall pay to Sublessor, as damages, any deficiency (referred to as "Deficiency")
between the Fixed Rent and Additional Rent reserved in this Sublease for the
period which otherwise would have constituted the unexpired portion of the
Term, and the net amount, if any, of rents collected under any reletting
effected pursuant to the provisions of Section 23.01 for any part of such period
(first deducting from the rents collected under any such reletting all of
Sublessor's expenses in connection with the termination of this Sublease or
Sublessor's re-entry upon the Subleased Premises and such reletting including,
but not limited to, all repossession costs, brokerage commissions, legal
expenses, attorneys' fees, alteration costs and other expenses of preparing the
Subleased Premises for such reletting). Any such Deficiency shall be paid in
monthly installments by Subtenant on the days specified in this Sublease for
payment of installments of Fixed Rent. Sublessor shall be entitled to recover
from Subtenant each monthly Deficiency as the same shall arise, and no suit to
collect the amount of the Deficiency for any month shall prejudice Sublessor's
right to collect the Deficiency for any subsequent month by a similar
proceeding; or
(iii) At any time after the Term shall have expired and come to
an end or Sublessor shall have re-entered upon the Subleased Premises, as the
case may be, whether or not Sublessor shall have collected any Deficiency as
aforesaid, Sublessor shall be entitled to recover from Subtenant, and Subtenant
shall pay to Sublessor, on demand, as and for liquidated and agreed final
damages, a sum equal to the amount by which the Fixed Rent and Additional Rent
reserved in this Sublease for the period which otherwise would have constituted
the unexpired portion of the Term exceeds the fair and reasonable rental value
of the Subleased Premises for the same period. If, before presentation of
proof of such, the Subleased Premises, or any part thereof, shall have been
relet by Sublessor in an "at arms length" transaction, for the period which
otherwise would have constituted the unexpired portion of the Term, or any part
thereof, the amount of rent reserved upon such reletting shall be deemed, prima
facie, to be the fair and reasonable rental value for the part of the whole of
the Subleased Premises to relet during the term of the reletting. Subtenant's
payment of liquidated and agreed final damages as hereinabove provided shall be
reduced by the rent actually received by Sublessor upon such reletting.
23.02 Subtenant shall in no event be entitled to any rents collected or
payable under any reletting, whether or not such rents shall exceed the rent
reserved in this Sublease. Solely for the purposes of the Section 23, the terms
Fixed Rent as used in Section 23 shall mean the Fixed Rent in effect immediately
prior to the date upon which this Sublease and the Term shall have expired and
come to an end, or the date of re-entry upon the subleased Premises by
Sublessor, as the case may be, plus any additional Rent, pursuant to the
provisions of Section 5 payable for the Lease Year immediately preceding such
event (or if less than twelve (12) months have elapsed since the Commencement
Date, all of the calendar months immediately preceding such termination, as
annualized to reflect a full calendar year). Nothing contained in Sections 21 or
22 or this Section 23 shall be deemed to limit or preclude the recovery by
Sublessor from Subtenant of the maximum amount allowed to be obtained as damages
by any statute or rule of law, or of any sums or damages to which Sublessor may
be entitled in addition to the
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damages set forth in this Section 23.
SECTION 24 RELEASE; INDEMNITY
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24.01 Neither Sublessor nor Sublessor's officers, directors, employees,
agents or contractors (disclosed or undisclosed) shall be liable to Subtenant or
Subtenant's officers, directors, employees, agents, contractors, invitees or
licensees or any other occupant of the Subleased Premises except for their gross
negligence or willful misconduct. Subtenant shall, subject to the waiver and
release described in 11.06, save Sublessor, Sublessor's officers, directors,
employees, agents and contractors and the holder of any Superior Instrument, and
their respective officers, directors, employees, agents and contractors harmless
from any loss, cost, liability, claim, damage, expense (including, without
limitation, reimburseable attorneys' fees and disbursements), penalty or fine
incurred in connection with or arising during the Term or during any period
while Subtenant is in occupancy of any part of the Subleased Premises and
resulting from an injury to Subtenant or to any other person or for any damage
to, or loss (by theft or otherwise) of, any of Subtenant's property or of the
property of any other person, irrespective of the cause of such injury, damage
or loss (including the acts or negligence of any tenant, subtenant or other
occupant of the Building, or of any owners or occupants of adjacent or
neighboring property or caused by operations in construction of any private,
public or quasi-public work) unless due to the gross negligence or willful
misconduct of Sublessor, its officers, directors, employees, agents and
contractors, invitees or licensees, provided that even if due to such parties'
gross negligence or willful misconduct, Subtenant waives, to the full extent
permitted by law, any claim for damages resulting from loss of business or
profit.
24.02 Subtenant hereby indemnifies and agrees to hold harmless Sublessor,
its officers, directors, employees, agents and contractors and the holder(s) of
any Superior Instruments(s) from and against any loss, cost, liability, claim,
damage, expense (including, without limitation, attorney's fees and
disbursements), penalty or fine suffered or incurred in connection with or
arising from (i) a default by Subtenant in the performance of any of the terms
of this Sublease on Subtenant's part to be performed, (ii) the use or occupancy
or manner of use or occupancy or maintenance of the Subleased Premises, to the
extent such maintenance is Subtenant's obligation hereunder, and (iii) any acts,
omissions or negligence of Subtenant, or the officers, directors, employees,
agents, invitees, subtenants, assignees or licensees of Subtenant or of any such
person, in or about the Subleased Premises either prior to, during or after the
expiration of the Term.
24.03 In case any action or proceeding be brought against Sublessor or an
employee or agent of Sublessor by reason of any of the foregoing, Subtenant,
upon notice from Sublessor, shall defend such action or proceeding by counsel
chosen by Subtenant who shall be satisfactory to Sublessor. Subtenant or its
counsel shall keep Sublessor fully apprised at all times of the status of such
defense and shall not settle same without the written consent of Sublessor.
SECTION 25 NO WAIVER
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No act or thing done by Sublessor or Sublessor's
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employees, directors, officers, agents, guests or invitees during the Term shall
be deemed an acceptance of a surrender of the Sublease Premises, and no
agreement to accept such surrender shall be valid unless in writing signed by
Sublessor. No employee of Sublessor or of Sublessor's agents shall have any
power to accept the keys to the Subleased Premises prior to the termination of
this Sublease. The delivery of keys to any agent or employee of Sublessor shall
not operate as a termination of this Sublease or a surrender of the Subleased
Premises. In the event of Subtenant at any time desiring to have Sublessor
underlet the Subleased Premises for Subtenant's account, Sublessor or
Sublessor's agents are authorized to receive said keys for such purposes without
releasing Subtenant from any of the obligations under this Sublease, and
Subtenant hereby relieves Sublessor of any liability for loss of or damage to
any of Subtenant's effects in connection with such subletting. The failure of
either party to seek redress for violation of, or to insist upon the strict
performance of, any covenant or condition of this Sublease, shall not prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation. The receipt by Sublessor of
any Fixed Rent or Additional Rent with knowledge of the breach of any covenant,
term or provision of this Sublease shall not be deemed a waiver of such breach.
No covenant, term or provision of this Sublease shall be deemed to have been
waived by either party unless such waiver be in writing signed by such party. No
payment by Subtenant or receipt by Sublessor of a lesser amount than the Fixed
Rent or Additional Rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated amount then owing, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed an accord and satisfaction, and Sublessor may accept such check or
payment without prejudice to Sublessor's right to recover the balance of Fixed
Rent or Additional Rent or to pursue any other remedy in this Sublease or as
provided at law. No payment by Subtenant shall prejudice Subtenant's right to
assert any rights thereafter.
SECTION 26 WAIVER OF TRIAL BY JURY; COUNTERCLAIMS
- --------------------------------------------------
To the fullest extent such waiver is permitted by law, Sublessor and
Subtenant herby waive trial by jury in any action, proceeding or counterclaim
brought by Sublessor or Subtenant against the other on any matter whatsoever
arising out of or in any way connected with this Sublease, the relationship of
Sublessor and Subtenant, the use or occupancy of the Subleased Premises by
Subtenant or any person claiming through or under Subtenant, any claim of injury
or damage, and any emergency or other statutory remedy. The provisions of the
foregoing sentence shall survive the expiration or any sooner termination of the
Term. If Sublessor commences any summary proceeding for nonpayment of rent or
otherwise to recover possession of the Subleased Premises, Subtenant agrees not
to interpose any counterclaim of any nature or description in any such
proceeding, unless the right to assert such counterclaim would thereby be
waived, diminished or prejudiced.
SECTION 27 INABILITY TO PERFORM
- --------------------------------
If, by reason of strike or other labor dispute, fire or other casualty (or
reasonable delays in adjustment of insurance), accident, order or regulation of
any Federal,State, County or municipal authority, or any other cause
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<PAGE>
beyond Sublessor's reasonable control, whether or not such other cause shall be
similar in nature to those hereinbefore enumerated, Sublessor is unable to
fulfill or is delayed in fulfilling any of Sublessor's obligations under this
Sublease or any collateral instrument, then for a period of time equal to the
time period of such inability or delay, no such inability or delay shall
constitute an actual or constructive eviction, in whole or in part, or impose
any liability upon Sublessor or its officers, directors, employees, agents,
contractors or invitees by reason of inconvenience or annoyance, or injury to or
interruption of the business or otherwise, nor shall any such delay or inability
to perform on the part of Sublessor in anyway affect this Sublease and the
obligation of Subtenant to pay Fixed Rent and Additional Rent hereunder, and the
obligation of Subtenant to perform all of the other covenants and agreements to
be performed by it pursuant to the Terms hereof.
SECTION 28 SUCCESSORS, ASSIGNS, ETC.
- ------------------------------------
The covenants, conditions and agreements contained in this Sublease shall
bind and inure to the benefit of Sublessor and Subtenant and their respective
and permitted heirs, distributees, executors, administrators, successors and
assigns.
SECTION 29 RULES AND REGULATIONS
- --------------------------------
Subtenant shall comply with all rules and regulations promulgated by
Sublessor for the orderly operation of the Building and the Land including,
without limitation, those set forth on Schedule A hereof and all replacements,
modifications and additions thereto, so long as such replacements, additions or
modifications were furnished to Subtenant and do not contradict with the express
terms of this Sublease. Nothing contained in this Sublease shall be construed
or impose upon Sublessor any duty or obligation to Subtenant to enforce the
Rules and Regulations or the terms, covenants and conditions in any other lease
or sublease, as against any other tenant, and Sublessor shall not be liable to
Subtenant for violation of the same by any other tenant or its employees, agents
or visitors to Subtenant for violation of the same by any other tenant or its
employees, agents or visitors.
SECTION 30 BROKER
- -----------------
Subtenant acknowledges and represents to Sublessor that no broker except
Cushman & Wakefield, Inc. and Sutton & Edwards, Inc. ("Broker") is entitled to a
commission or fee in connection with this Sublease transaction, and that
Subtenant and its employees of management level have not viewed or have been
shown Subleased Premises with any broker who is or may be entitled to a
commission or fee in connection with this Sublease transaction other that
Broker. Subtenant acknowledges that Sublessor is entering into this Sublease in
reliance upon the foregoing acknowledgement and representation. Subtenant hereby
indemnifies and agrees to hold Sublessor, its officers, directors, employees,
agents and contractors harmless from and against any and all loss, cost,
liability, damage, expense (including, without limitation, attorneys' fees and
disbursements), penalty or fine suffered as a result of a breach of the
foregoing representations. Subtenant agrees to cooperate with Sublessor and to
provide testimony in any action or proceeding brought against Sublessor based
upon a claim by a
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<PAGE>
broker for a commission or fee in connection with this Sublease transaction.
Sublessor agrees to pay the commission earned by Broker pursuant to a separate
agreement.
SECTION 31 CAPTIONS
- -------------------
The captions throughout and the index at the beginning of this Sublease are
included only as a matter of convenience and for reference, and in no way
define, limit or describe the scope of this Sublease nor the intent of any
provisions thereof.
SECTION 32 RECOVERY FROM SUBLESSOR, SUBLESSOR'S CONSENT
- -------------------------------------------------------
32.01 Anything contained in this Sublease to the contrary notwithstanding,
Subtenant agrees to look solely to the estate and property of Sublessor in the
Building for the satisfaction of Subtenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Sublessor
in the event of any default or breach by Sublessor with respect to any of the
terms, covenants and/or conditions of this Sublease to be observed
and/or performed by Sublessor, subject, however, to the prior rights of the
holder of any Superior Instrument; and except as provided above no other
property or assets of Sublessor or its shareholders, officers, directors, or
employees, shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Subtenant's remedies.
32.02 With respect to any provision of this Sublease which provides for
Sublessor's approval and/or consent, Subtenant, in no event, shall be entitled
to make, nor shall Subtenant make any claim, and Subtenant hereby waives any
claim, for money damages, nor shall Subtenant claim any money damages by way of
set-off, counterclaim or defense, based upon any claim or assertion by
Subtenant that Sublessor has unreasonably withheld or unreasonably delayed any
such consent or approval; Subtenant's only remedy in such event being an action
for injunction or specific performance.
SECTION 33 ENTIRE AGREEMENT
- ---------------------------
This Sublease contains the entire agreement between the parties with
respect to the subleasing of the Subleased Premises and all prior negotiations
and agreements are merged herein. Neither Sublessor nor Sublessor's agent or
representative has made any representation, statement, or promise upon which
Subtenant has relied regarding any matter or thing relating to the Subleased
Premises or any other matter whatsoever, except as is expressly set forth in
this Sublease (including, without limitation, any statement, representation or
promise as to the fitness of the Subleased Premises for any particular use, the
services to be rendered to the Subleased Premises or the prospective amount of
any item of Additional Rent). No oral or written statement, representation or
promise whatsoever with respect to the foregoing or any other matter made by
Sublessor, its agents or any broker, whether contained in an affidavit,
information circular, or otherwise, shall be binding the Sublessor unless
expressly set forth in this Sublease or in a separate writing delivered in
connection with this Sublease or subsequent thereto. This Sublease may not be
orally changed, modified or discharged, in whole or in part, and no executory
agreement shall be effective to change, modify or discharge, in whole or in
part, this Sublease or any obligations under this Sublease, unless such
agreement is set forth in a
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<PAGE>
written instrument executed by the party against whom enforcement of the change,
modification or discharge is sought.
SECTION 34 FEES AND EXPENSES
- ----------------------------
If Subtenant shall default in the performance of any covenant on
Subtenant's part to be performed, Sublessor may at any time during the
continuance of an Event of Default, perform the same for the account of
Subtenant and Subtenant shall pay the cost thereof as Additional Rent. If
Sublessor at any time is compelled to pay or elects to pay any sum of money or
do any act which will require the payment of any sum of money, by reason of the
failure of Subtenant to comply with any provision of this Sublease, or, if
Sublessor is compelled to or does incur any expense (including, without
limitation, attorneys' fees and disbursements, and the cost of instituting
prosecuting and/or defending any action or proceedings instituted by reason of
any continuing Event of Default of Subtenant hereunder), the sum or sums so paid
by Sublessor with all interest, costs and damages, shall be deemed to be
Additional Rent hereunder.
SECTION 35 SURVIVAL
- -------------------
The terms, covenants and conditions of this Sublease applicable to
Subtenant or Sublessor shall survive the expiration or earlier termination of
the Sublease, and if any credit or setoff shall not have been fully utilized,
Sublessor shall pay such amount immediately following such expiration or
termination.
SECTION 36 APPLICABLE LAW
- -------------------------
This Sublease shall be construed and enforced in accordance with the laws
of the State of New York and any action or court proceeding by Subtenant
hereunder shall be brought and maintained only within the County of Suffolk,
State of New York.
SECTION 37 HOLDOVER
- -------------------
In the event Subtenant remains in possession of the Subleased Premises
after the expiration of the Term or earlier termination of this Sublease,
Subtenant, at the option of Sublessor, shall be deemed to be occupying the
Subleased Premises as a tenant from month to month (subject to Sublessor's right
to terminate such tenancy without notice), at a monthly rental equal to two
times the Fixed Rent and Additional Rent payable during the preceding twelve
(12) month period of the Term for the first three month following the expiration
of the Term or earlier termination of this Sublease, and at a monthly rental
equal to two and one-half (2 1/2) times the Fixed Rent and Additional Rent
payable during the preceding twelve (12) month period for the fourth month
following the expiration of the Term or earlier termination of this Sublease and
thereafter, subject to all of the other terms of this Sublease.
SECTION 38 CONSENT TO JURISDICTION
- ----------------------------------
Subtenant hereby (a) irrevocably consents and submits to the jurisdiction
of any Federal, State, County or Municipal Court sitting in the State of New
York in respect to any action or proceeding brought therein by Sublessor against
Subtenant concerning any matters arising out of or in any way
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<PAGE>
relating to this Sublease; (b) irrevocably waives personal service of any
summons and complaint and consents to the service upon it of process in any such
action or proceeding by the mailing of such process by registered mail, return
receipt requested, to Subtenant at the Subleased Premises and hereby agrees that
such service shall be deemed sufficient; (c) irrevocably waives all objections
as to venue and any and all rights it may have to seek a change of venue with
respect to any such act or proceeding; (d) agrees that the laws of the State of
New York shall govern in any such action or proceeding and waives any defense to
any action or proceeding granted by the laws of any other country or
jurisdiction unless such defense is also allowed by the laws of the State of New
York; and (f) agrees that any final judgment rendered against it in any such
action or proceeding shall be conclusive and may be enforced in any other
jurisdiction by suit on the judgment or in any manner provided by law and
expressly consent to the affirmation of the validity of any such judgment by the
court of such other jurisdiction so as to permit execution thereon. Subtenant
further agrees that any action or proceeding by Subtenant against Sublessor in
respect to any matters arising out of or in any way relating to this Sublease
shall be brought only in the State of New York, County of Suffolk. In
furtherance of the foregoing, Subtenant hereby agrees that its address for
notices given by Sublessor and service of process under this Sublease shall be
the Subleased Premises.
SECTION 39 SURRENDER
- --------------------
On the expiration or other termination of this Sublease, Subtenant shall
quit and surrender the Subleased Premises to Sublessor vacant and in good and
broom clean condition (ordinary wear and tear excepted) in accordance with all
the applicable terms and provisions of this Sublease, and Subtenant shall, at
its sole costs and expense, cause all property permitted or required to be
removed by Subtenant to be removed.
SECTION 40 NOTICE OF ACCIDENTS
- ------------------------------
Subtenant shall give Sublessor notice of any fire, casualty or accident in
or about the Subleased Premises or of defects therein or in any fixtures or
equipment, promptly after Subtenant becomes aware thereof.
SECTION 41 EXTENSION OPTION
- ---------------------------
41.01 Subject to 41.05 Subtenant shall have the option to extend the
Original Term of this Sublease for one (1) period of three (3) years upon the
terms and conditions in this Section 41. Subtenant may only exercise its option
to extend if:
(i) at the time of the exercise of such option and the commencement
of any extension term, an uncured Event of Default shall not exist; and
(ii) at the time of the exercise of such option and the commencement
of any such extension term, the Subtenant named herein shall be in actual
occupancy of all of the Subleased Premises.
41.02 (i) All of the terms, provisions, covenants and conditions of this
Sublease shall apply during the extension term except that (1) there will be no
further privilege of extension beyond the period referred to above, (2) the word
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<PAGE>
"Expiration Date" shall mean (in addition to the meaning set forth herein) the
last day of such extension term, (3) during the extension term the Fixed Rent
payable by Subtenant to Sublessor shall be the fair market rental value of such
leasehold as mutually agreed by the Sublessor and Subtenant, or if Sublessor and
Subtenant shall fail to reach agreement within ninety (90) days after Sublessor
receives written notice from Subtenant of Subtenant's election to exercise its
option as provided in this Section 41, the Fixed Rent shall be the fair market
rental value of the Subleased Premises determined in accordance with Section
41.03, and (4) during the extension term there will be refurbishing allowance
and Section 8 of the Sublease shall be deleted.
(ii) The fair market rental value of the Subleased Premises shall be
based upon the fair and reasonable annual market rental value of the Subleased
Premises as of the first day of the new term, taking into account the then
current rentals of comparable space in comparable buildings in the general area
of the Building, except that consideration shall also be given to any special
features of the Building and its operation such as floor sizes, hours of
operation, and other Building services. In addition, there shall be taken into
account, on an "as is" basis, all the improvements and installations in the
Subleased Premises either installed by Sublessor or installed by Subtenant and
paid for in whole or in part by Sublessor (or any replacements of such
improvements by Subtenant regardless of who pays for them), but not any other
improvements and installations paid for by subtenant.
41.03 Any dispute with respect to the fair market value of Subleased
Premises shall be arbitrated in Suffolk County, New York, as follows: Sublessor
and Subtenant shall each appoint a member of the American Institute of Real
Estate Appraisers of the American Society of Appraisers or the Association of
Independent Fee Appraisers having at least ten (10) years appraisal experience
in Suffolk County, New York, and vicinity, to determine the fair market rental
value of the Subleased Premises, and the unanimous decision of such appraisers
shall be final and binding upon Sublessor and Subtenant. If the two appraisers
shall be unable to reach unanimous agreement within fifteen (15) days after both
appraisers have been appointed, then the two shall appoint a third appraiser who
shall have like qualifications, and the three appraisers shall determine the
matter submitted to them; provided, however, that if the two appraisers are
unable to agree upon the appointment of a third appraiser within seven (7) days
after they become obligated so to do, the parties shall apply to the President
of the American Institute of Real Estate Appraisers for such appointment or in
the case of failure to act for any reason, to the American Arbitration
Association. A decision of a majority of said appraisers shall be final and
binding upon Sublessor and Subtenant. Sublessor and Subtenant shall each pay the
fees and expenses of the appraiser appointed by and for such party, and all
other necessary expenses and costs to satisfy the procedure outlined in this
Section 41, including, without limitation, the fees and expenses of the third
appraiser, shall be borne equally by Sublessor and Subtenant. If either party
shall fail to appoint the second appraiser within fifteen (15) days after the
other party shall have appointed the first appraiser and given notice of such
appointment to the first party, the first appraiser shall alone determine such
fair market rental value.
-35-
<PAGE>
41.04 Subtenant shall, if at all, exercise its right to any such extension
by notifying Sublessor in writing of Subtenant's election to exercise such
option not later than 270 days prior to the Expiration Date. Time shall be of
the essence in connection with said election and notice thereof and in the event
Subtenant fails to so do as provided above, Subtenant's option shall
conclusively be deemed abandoned. Upon the giving of such notice, this Sublease
shall be deemed extended for the specified period, subject to the provisions of
this Section 41, without execution of any further instrument, except that
Sublessor and Subtenant shall execute an Amendment to this Sublease setting
forth the Fixed Rent and length of such extension term.
41.05 Notwithstanding anything to the contrary contained in this Sublease,
in the event Subtenant exercises its option in accordance with this Section 41,
Sublessor shall have the right to recapture this Subleased Premises by notifying
the Subtenant in writing ninety (90) days after Sublessor receives written
notice from Subtenant of its election to exercise its option hereunder. Said
recapture shall become effective as of the Expiration Date, wherupon this
Sublease will come to an end.
SECTION 42 QUIET ENJOYMENT
- ---------------------------
Sublessor covenants and agrees with Subtenant that, upon Subtenant paying
the Fixed Rent, Additional rent and all other sums required to be paid
hereunder, and observing and performing all the terms, covenants and conditions
on Subtenant's part to be observed and performed hereunder, Subtenant may
peaceably and quietly enjoy the Subleased Premises, subject, nevertheless, to
the terms and conditions of this Sublease, the Lease and any Superior
Instruments.
SECTION 43 NOTICES
- -------------------
All notices and other communications required hereunder or given in
connection herewith, shall be in writing and sent by certified or registered
mail, return receipt requested, or by delivery against receipt, as follows:
If to Sublessor:
Nikon Inc.
1300 Walt Whitman Road
Melville, New York 11747-3064
Attention: Legal Department
If to Subsequent:
Proudfoot Reports, Inc.
1300 Walt Whitman Road
Melville, New York 11747-3064 Attention: President
Each party hereto may specify a new address for notices and copies of
notices by notice to the other party hereto. Except for notice specifying a new
address which shall be deemed given only upon actual receipt, notices shall be
deemed given when mailed.
SECTION 44 SECURITY
- --------------------
Subtenant has deposited with Sublessor a check in the sum of $44,500.00,
the proceeds of which shall be held as security in an interest bearing account
for the faithful
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<PAGE>
performance and observance by Subtenant of the terms, provisions and conditions
of this Sublease. It is agreed that during a continuing Event of Default
Sublessor may use, apply or retain the whole or any part of the security
including interest so deposited to the extent required for the payment of any
Fixed Rent or Additional Rent or any other sum as to which Subtenant is in
default or for any sum which Sublessor may expend or may be required to expend
by reason of Subtenant's default in respect of any of the terms, covenants and
conditions of this Sublease, (including, without limitation, any damages or
deficiency incurred in the reletting of the Subleased Premises whether such
damages or deficiency accrued before or after summary proceedings or other
re-entry by Sublessor). In the event of any such use, application or retention,
Subtenant, on demand by Sublessor, shall deposit with Sublessor any amounts so
used, applied or retained, to be held as security in accordance with all the
terms hereof. In the event that Subtenant shall fully and faithfully comply with
all of the terms, provisions, covenants and conditions of this Sublease, the
security including interest (to the extent not used, applied or retained in
accordance herewith) shall be returned to Subtenant after the Expiration Date
and after delivery of entire possession of the Subleased Premises to Sublessor
(in the condition required hereby). Notwithstanding anything to the contrary
contained herein, one (1%) percent of the security shall be retained per annum
by Sublessor as and for administrative purposes.
SECTION 45 PARKING
- ------------------
Subtenant and its employees, customers, guests, and invitees shall have the
non-exclusive right, in common with Sublessor and all others to whom Sublessor
and Landlord have granted or may hereafter grant rights (collectively Permitted
Users), to use those areas on the Land which are stripped and designated as
parking spaces for parking of their passenger vehicles. Notwithstanding anything
in this Sublease to the contrary, Subtenant agrees that it will not use or
permit or suffer the use by its employees, customers, guests and invitees of (i)
areas within the Land not designated or striped as parking spaces for parking;
(ii) parking spaces for other than passenger vehicles; and (iii) parking spaces
reserved for Sublessor, its employees, customers, guests and invitees or other
tenants of the Building.
IN WITNESS WHEREOF, this Sublease has been duly executed by the parties
hereto as of the day and year set forth above.
NIKON INC.
BY: /s/ Jack Abrams
-----------------------------------
Name: Jack Abrams
Title: Chief Operating Officer
Executing Vice-President
PROUDFOOT REPORTS, INC.
BY: /s/ Bernard Reynolds
-----------------------------------
Name: Bernard Reynolds
Title: President
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<PAGE>
EXHIBIT B
---------
All that certain plot, piece or parcel of land, with the building and
improvements thereon erected, situate, lying and being at Melville, Town of
Huntington, County of Suffolk, State of New York, known and designated as and by
Lot 2 on a certain map entitled, "Map of Omni 110 Corporate Center Park" filed
on June 4, 1986 in the Office of the Clerk of the County of Suffolk under Map #
8125; which said lot is more particularly bounded and described as follows:
BEGINNING at a point on the easterly side of Walt Whitman Road as widened, said
point being located 1553.65 feet northerly as measured along the easterly side
of Walt Whitman Road as widened, from the intersection thereof with the
northerly side of Long Island Expressway (North Service Road).
RUNNING THENCE along the easterly side of Walt Whitman Road as widened, the
following four (4) courses and distances:
(1) North 42 degrees 13 minutes 30 seconds east, 20.35 feet;
(2) North 44 degrees 34 minutes 30 seconds east, 199.93 feet;
(3) North 46 degrees 09 minutes 30 seconds east, 200.44 feet;
(4) Northeast 48 degrees 03 minutes 50 seconds east, 659.24 feet to land
now or formerly of Reckson Associates.
THENCE along said land the following two (2) courses and distances:
(1) South 06 degrees 07 minutes 00 seconds east, 87.16 feet;
(2) South 04 degrees 59 minutes 10 seconds east, 495.83 feet to Lot 1 as
shown on Map of Omni 110 Corporate Center Park, situated at Melville,
Town of Huntington, County of Suffolk, State of New York, filed in the
Office of the Clerk of the County of Suffolk on June 4, 1986 under
file no. 8125 (the "Map").
1
<PAGE>
SCHEDULE A
----------
RULES AND REGULATIONS
---------------------
Capitalized words and phrases appearing herein shall have the meaning
ascribed to them in the Sublease to which these rules and regulations are
attached as an exhibit.
The term "Subtenant" regardless of whether used in the singular or plural
or capitalized or not capitalized shall include its employees, agents,
contractors and invitees. The term "Common Areas of the Building" regardless of
whether used in the singular or plural or capitalized or not capitalized shall
mean the lavatories on the first floor of the building and the hallway leading
to the lavatories. The term "Common Areas of the Land" regardless of whether
used in the singular or plural or capitalized or not capitalized shall mean the
plazas, sidewalks, curbs, streets, parking areas located adjacent to the
Building and located on the Land.
1. Common Areas of the Building and Land shall not be utilized by
Subtenant in such numbers or conditions as to unreasonably limit the use of such
common areas by other tenants. Such Common Areas shall be used only for their
intended purposes.
2. Subtenant shall not obstruct or permit the obstruction of any part of
the common areas of the Building and Land including by way of illustration and
not in limitation, the parking of motor vehicles in a portion of such common
areas not designated for such purposes or by the placing of any rubbish,
equipment, merchandise or other objects or materials within such common areas.
3. Any person whose presence in the Building or on the Land including but
not limited to the Subleased Premises at any time, in the judgment of Sublessor
or Landlord, reasonably exercised, shall be prejudicial to the safety, character
or reputation of the Building or its tenants, may be denied access to the
Building or the Land or may be ejected therefrom. In the case of invasion, riot,
public excitement or other commotion, Sublessor or Landlord may prevent all
access to the Building and the Land during the continuance of the same for the
safety of the tenants and protection of property. Sublessor and Landlord shall
not be liable to Subtenant for damages or loss arising from the
<PAGE>
admission, exclusion or ejection of any persons to or from the Building or Land
including the Subleased Premises, under the provisions of this rule.
4. No awnings or other projections over or beyond the windows or doorways
to the Subleased Premises or the Building shall be installed by Subtenant.
5. No hand trucks, except those equipped with rubber tires and side
guards, shall be used in the Building by Subtenant in the delivery or receipt of
merchandise or mail.
6. All entrance doors to the Subleased Premises shall be locked when such
premises are not in use.
7. The cost of repairing any damage to the Building caused by Subtenant
shall be paid by Subtenant.
8. No loudspeakers, radios, television receivers or other devices or
equipment shall be utilized within the Building or on the Land by Subtenant
which in the reasonable judgment of Sublessor or Landlord might disturb other
tenants of the Building.
9. No cooking shall be permitted in the Subleased Premises.
10. No act shall be taken or permitted in the Subleased Premises and
nothing shall be brought into or kept in the Subleased Premises which would
impair or interfere with Building services or the use and occupancy of the
Building by other tenants.
11. No dangerous or flammable, combustible or explosive object shall be
brought into the Building including the Subleased Premises or on to the Land by
Subtenant or with the permission of Subtenant.
12. No acids, vapors or noxious materials shall be discharged on the Land
or in the Building including any Building systems, or, systems serving the
Building or Land.
13. No smoking shall be permitted in the Building.
14. Water and wash closets and other plumbing fixtures shall not be used
by Subtenant for any purpose other than the purpose for which they were designed
or constructed and no rubbish, rags or other foreign substances shall be
deposited
<PAGE>
therein. Any damage resulting from Subtenant's misuse of any fixtures or systems
within the Building or on the Land shall be borne by Subtenant.
15. No additional locks or bolts of any kind shall be placed upon any of
the exterior doors or windows in the Subleased Premises and no lock on any such
door or window shall be altered in any respect unless not less than five
Business Days notice shall have been given to Sublessor. Duplicate keys for any
such locks or bolts shall be furnished to Sublessor promptly after request for
the same shall be made.
16. Subtenant shall, at its own cost and expense, provide artificial light
in the Subleased Premises for Sublessor's or Landlord's agents, contractors and
employees while performing services or making repairs or alterations in such
Subleased Premises.
17. Subtenant shall not loiter around the Building.
<PAGE>
AMENDMENT TO SUBLEASE
---------------------
THIS AMENDMENT is entered into as of the 2nd day of July, 1996, by and
between NIKON INC., a New York corporation, having an office at 1300 Walt
Whitman Road, Melville, New York 11747-3064 ("Sublessor"), and PROUDFOOT
REPORTS, INC., a New York corporation, having its office at 1300 Walt Whitman
Road, Melville, New York 11747-3064 ("Subtenant").
WITNESSETH:
-----------
WHEREAS, Sublessor and Subtenant entered into a sublease agreement dated as
of October 6, 1994 (the "Sublease Agreement") for approximately 13,342 rentable
square feet of space on the first floor of the building located at 1300 Walt
Whitman Road, Melville, New York (the "Building"); and
WHEREAS, Sublessor and Subtenant agree to amend the Sublease Agreement upon
the terms and conditions hereinafter set forth provided Subtenant's affiliate
company, ASSESSMENT SYSTEMS INC. ("ASI"), enters into a sublease agreement with
Sublessor for approximately 7,288 rentable square feet of space on the first
floor of the Building and takes actual possession of said space in the Building
and commences business in accordance with the terms and conditions of its
sublease agreement with Sublessor.
NOW, THEREFORE, in consideration of the premises and the terms and
condition hereinafter set forth, Sublessor and Subtenant agree as follows:
1. 2.01 of Section 2 of the Sublease Agreement shall be deleted in its
entirety and the following substituted in its place:
"2.01 Subject to the provisions hereof, Sublessor subleases to
Subtenant and Subtenant subleases from Sublessor the Subleased Premises for a
term (the "Original Term") commencing on December 8, 1994 (the "Commencement
Date") and expiring at midnight on December 31, 2003 (the "Expiration"). The
Subleased Premises shall be occupied and used exclusively for Permitted Uses and
in accordance with the provisions of this Sublease. The Original Term, together
with any renewal or extension thereof shall be referred to as the "Term"."
2. 5.01 of Section 5 of the Sublease Agreement shall be deleted in its
entirety and the following substituted in its place:
<PAGE>
"5.01 During the Original Term, Subtenant shall pay a total base
fixed rent of $2,435,847.52 (the "Fixed Rent") which sum shall be payable in
equal monthly installments as follows:
(i) $22,236.67 per month from July 8, 1995 through December
31, 1996; (ii) $23,348.50 per month from January 1, 1997 through December 31,
1999; (iii) $24,460.33 per month from January 1, 2000 through December 31, 2001;
and (iv) $25,572.17 per month from January 1, 2002 through the Expiration Date.
Subtenant agrees to pay the Fixed Rent as specified in the preceding sentence in
advance on the first day of each calendar month during the Original Term, except
that the Fixed Rent for the eighth full calendar month of the Original Term
shall be paid at the time of execution hereof. The Fixed Rent shall be prorated
for any portion of a month during the Term and, if the first month of the Term
is not a full calendar month, Subtenant shall pay the prorated Fixed Rent due
therefor on the Commencement Date."
3. 41.01 of Section 41 of the Sublease Agreement shall be deleted in its
entirety and the following substituted in its place:
"41.01 Subtenant shall have the option to extend the Original Term
of this Sublease for one (1) period of two (2) years upon the terms and
conditions in this Section 41. Subtenant may only exercise its option to extend
if:
(i) at the time of the exercise of such option and the
commencement of any extension term, and uncured Event of Default shall not
exist; and
(ii) at the time of the exercise of such option and the
commencement of any such extension term, the Subtenant named herein shall be in
actual occupancy of all of the Subleased Premises."
4. 41.05 of Section 41 of the Sublease Agreement shall be deleted in its
entirety.
5. Except as amended, modified, changed or supplemented by this Amendment
to Sublease Agreement, the Sublease Agreement between Sublessor and Subtenant
remains in full force and effect, and both Sublessor and Subtenant hereby ratify
and confirm all of the terms, covenants, conditions and obligations of the
Sublease Agreement.
6. Notwithstanding anything to the contrary contained in this Amendment to
Sublease Agreement, Subtenant hereby acknowledges and agrees that this Amendment
to Sublease Agreement shall only be effective, if, as and when (i) a sublease
agreement for approximately 7,288 rentable square feet of space on the first
floor of the Building is unconditionally executed between Sublessor and ASI, and
(ii) ASI takes actual possession of said space in the Building and commences
business in accordance with the terms and conditions of its sublease agreement
with Sublessor. In the event the conditions set forth in (i) and (ii) in the
immediately preceding sentence of this Paragraph 5 are not satisfied
2
<PAGE>
for any reason whatsoever, this Agreement shall be deemed null and void, ab
initio, and of no force and effect.
IN WITNESS WHEREOF, this Amendment to Sublease has been duly executed by
the parties hereto as of the day and year first set forth above.
NIKON INC. PROUDFOOT REPORTS, INC.
By: /s/ Jack Abrams By: /s/ Bernard Reynolds
--------------------------- ---------------------------
Jack Abrams Bernard Reynolds
Chief Operating Officer President
Executive Vice President
3
<PAGE>
Exhibit 10.12
BASIC LEASE INFORMATION
Lease Date: For identification purposes only, the date of this
Lease is January 25, 1996.
Landlord: PRUNEYARD ASSOCIATES, LLC,
a California limited liability company.
Tenant: ASSESSMENT SYSTEMS, INC.,
a New York corporation
Project: THE PRUNEYARD OFFICE TOWERS
Building: PRUNEYARD OFFICE TOWER II
1999 South Bascom Avenue
Campbell, California
Rentable Area of
Building: 117,476 rentable square feet
Premises: Floor: Ninth(9th)
Suite Number: 905
Rentable area: 1,036 rentable square feet
Term: 36 Months (plus any partial month at the beginning of
the Term)
Scheduled
Commencement Date: April 1, 1996
Expiration Date: The last day of the 36th full calendar month following
the Commencement Date
Base Rent: First Lease Year: $1,968.40 per month
Second Lease Year: $2,020.20 per month
Remainder of Term: $2,072.00 per month
Base Year: The calendar year 1996
Tenant's Share: 0.88%
<PAGE>
Security Deposit: $2,020.20
Landlord's Address for
Payment of Rent: PRUNEYARD ASSOCIATED, LLC
c/o William Wilson & Associates
2929 Campus Drive, Suite 450
San Mateo, California 94403
Attn: Vice President, Property Management
Business Hours: 7:00 a.m. to 6:00 p.m., Monday - Friday; and
9:00 a.m. to 3:00 p.m., Saturday (except holidays)
Standard Electrical
Usage: 1.5 kilowatt-hours per usable square foot per
month
Landlord's Address
for Notices: PRUNEYARD ASSOCIATES, LLC
c/o William Wilson & Associates
2929 Campus Drive, Suite 450
San Mateo, California 94403
Attn: Vice President, Property Management
with a copy to:
PRUNEYARD ASSOCIATES, LLC
c/o William Wilson & Associates
1999 South Bascom Avenue, Suite 200
Campbell, California 95008
Attn: Property Manager
ii
<PAGE>
Tenant's Address Assessment Systems, Inc.
for Notices: 1999 South Bascom Avenue, Suite 905
Campbell, California 95008
with copy to:
Koerner, Silverberg & Weiner
Attn: Frank Bisk
112 Madison Avenue
New York, New York 10016
Broker(s): CB Commercial Real Estate Group, Inc. (Marne Michaels)
Guarantor(s): (None)
Property Manager: William Wilson & Associates
Exhibits:
Exhibit A: The Premises
Exhibit B: Construction Rider
Exhibit C: Building Rules
Exhibit D: Asbestos Notification
Exhibit E: Janitorial Specifications
The Basic Lease Information set forth above is part of the Lease and
capitalized terms shall be defined terms in the Lease. In the event of any
conflict between any Basic Lease Information and the Lease, the Lease shall
control.
iii
<PAGE>
LEASE AGREEMENT
between
PRUNEYARD ASSOCIATES, LLC
as "Landlord"
and
ASSESSMENT SYSTEMS, INC.
as "Tenant"
<PAGE>
<TABLE>
<S> <C>
1. PREMISES................................................................ 1
2. TERM; POSSESSION........................................................ 1
3. RENT.................................................................... 1
4. SECURITY DEPOSIT........................................................ 5
5. USE AND COMPLIANCE WITH LAWS............................................ 5
6. ALTERATIONS............................................................. 8
7. MAINTENANCE AND REPAIRS................................................. 9
8. TENANT'S TAXES.......................................................... 10
9. UTILITIES AND SERVICES.................................................. 11
10. EXCULPATION AND INDEMNIFICATION........................................ 12
11. INSURANCE.............................................................. 13
12. DAMAGE OR DESTRUCTION.................................................. 15
13. CONDEMNATION........................................................... 16
14. ASSIGNMENT AND SUBLETTING.............................................. 18
15. DEFAULT AND REMEDIES................................................... 20
16. LATE CHARGE AND INTEREST............................................... 22
17. WAIVER................................................................. 23
18. ENTRY, INSPECTION AND CLOSURE.......................................... 23
19. SURRENDER AND HOLDING OVER............................................. 23
20. ENCUMBRANCES........................................................... 24
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS......................... 25
22. NOTICES................................................................ 26
23. ATTORNEYS' FEES........................................................ 26
24. QUIET POSSESSION....................................................... 26
25. SECURITY MEASURES...................................................... 26
26. FORCE MAJEURE.......................................................... 27
27. RULES AND REGULATIONS.................................................. 27
28. LANDLORD'S LIABILITY................................................... 27
29. CONSENTS AND APPROVALS................................................. 27
30. BROKERS................................................................ 28
31. RELOCATION OF PREMISES................................................. 28
32. ENTIRE AGREEMENT....................................................... 28
33. MISCELLANEOUS.......................................................... 28
34. AUTHORITY.............................................................. 29
</TABLE>
iv
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Additional Rent.......................................................... 3
Alterations.............................................................. 8
Award.................................................................... 16
Base Operating Costs..................................................... 2
Base Taxes............................................................... 2
Broker................................................................... 28
Building................................................................. 1
Building Rules........................................................... 27
Building Systems......................................................... 6
Business Days............................................................ 11
Business Hours........................................................... 11
Claims................................................................... 12
Commencement Date........................................................ 1
Condemnation............................................................. 16
Condemnor................................................................ 16
Construction Rider....................................................... 1
Controls................................................................. 10
Date of Condemnation..................................................... 16
Encumbrance.............................................................. 24
Environmental Losses..................................................... 6
Environmental Requirements............................................... 6
Event of Default......................................................... 20
Expiration Date.......................................................... 1
Handled by Tenant........................................................ 6
Handling by Tenant....................................................... 6
Hazardous Materials...................................................... 6
HVAC..................................................................... 6
Interest Rate............................................................ 22
Land..................................................................... 1
Laws..................................................................... 2
Lease Year............................................................... 1
Mortgagee................................................................ 25
Operating Costs.......................................................... 2
Parking Facility......................................................... 1
Permitted Hazardous Materials............................................ 7
Premises................................................................. 1
Project.................................................................. 1
Property................................................................. 1
Property Manager......................................................... 14
Rental Tax............................................................... 11
Representatives.......................................................... 6
Scheduled Commencement Date.............................................. 1
Service Failure.......................................................... 12
Taxes.................................................................... 3
Tenant Improvements...................................................... 1
Tenant's Share........................................................... 3
Tenant's Taxes........................................................... 10
Term..................................................................... 1
Trade Fixtures........................................................... 9
Transfer................................................................. 18
Transferee............................................................... 18
Visitors................................................................. 6
</TABLE>
v
<PAGE>
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information("LANDLORD"), and the Tenant identified in the Basic Lease
Information("TENANT"). Landlord and Tenant hereby agree as follows:
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon the terms and subject to the conditions of this Lease, the office
space identified in the Basic Lease Information (the "PREMISES"), in the
Building identified in the Basic Lease Information (the "BUILDING"). The
approximate configuration and location of the Premises is shown on Exhibit A.
---------
Landlord and Tenant agree that the rentable area of the Premises for all
purposes under this Lease shall be the Rentable Area specified in the Basic
Lease Information. The Project identified in the Basic Lease Information(the
"PROJECT") includes the Building, the parking facilities serving the Building
(the "PARKING FACILITY"), and the parcel(s) of Land on which the Building and
the Parking Facility are situated (the "LAND"). The Building, the Parking
Facility and the Land are sometimes collectively referred to in this Lease as
the PROPERTY.
2. TERM; POSSESSION. The term of this Lease (the "TERM") shall commence on the
Commencement Date as described below and, unless sooner terminated, shall expire
on the Expiration Date set forth in the Basic Lease Information (the "EXPIRATON
DATE"). The "COMMENCEMENT DATE" shall be (a) the date on which Landlord has
"Substantially Completed" Landlord's construction obligations, if any, with
respect to the improvements (the "TENANT IMPROVEMENTS") to be constructed and
installed in the Premises by Landlord (or, in the event of any "Tenant Delay,
"the date on which Landlord could have done so had there been no such "Tenant
Delay"), all as provided in the Construction Rider attached as Exhibit B (the
---------
"CONSTRUCTION RIDER", and tendered possession of the Premises to Tenant; or (b)
any earlier date upon which Tenant, with Landlord's written permission, actually
occupies and conducts business in any portion of the Premises. The parties
anticipate that the Commencement Date will occur on or about the Scheduled
Commencement Date set forth in the Basic Lease Information (the "SCHEDULED
COMMENCEMENT DATE"). When the Commencement Date has been established, Landlord
and Tenant shall confirm the Commencement Date and Expiration Date in writing.
As used in this Lease, the first "LEASE YEAR" shall be the period from (and
including) the Commencement Date through (and including) the last day of the
calendar month in which the first anniversary of the Commencement Date falls,
and each period of twelve full consecutive calendar months thereafter shall be a
subsequent Lease Year.
3. RENT.
3.1 Base Rent. Tenant agrees to pay to Landlord the Base Rent set forth in
---------
the Basic Lease Information, without prior notice or demand, on the first day of
each and every calendar month during the Term, except that Base Rent for the
first full calendar month in which Base Rent is payable shall be paid upon
execution of this Lease and Base Rent for any partial month at the beginning of
the Term shall be paid on the Commencement Date. Base Rent for any partial
1
<PAGE>
month at the beginning or end of the Term shall be prorated based on the actual
number of days in the month.
3.2 Additional Rent: Increases in Operating Costs and Taxes.
-------------------------------------------------------
(A) Definitions
-----------
(1) "BASE OPERATING COSTS" means Operating Costs for the
calendar year specified as the Base Year in the Basic Lease Information
(excluding therefrom, however, any Operating Costs of a nature that would not
ordinarily be incurred on an annual, recurring basis).
(2) "BASE TAXES" means Taxes for the calendar year specified
as the Base Year in the Basic lease Information.
(3) "OPERATING COSTS" means all costs of managing,
operating, maintaining and repairing the Property, including all costs,
expenditures, fees and charges for: (A) operation, maintenance and repair of the
Property (including maintenance, repair and replacement of glass, the roof
covering or membrane, and landscaping); (B) utilities and services (including
telecommunications facilities and equipment, recycling programs and trash
removal), and associated supplies and materials; (C)compensation (including
employment taxes and fringe benefits) for persons who perform duties in
connection with the management, operation, maintenance and repair of the
Building, such compensation to be appropriately allocated for persons who also
perform duties unrelated to the Building; (D) property (including coverage for
earthquake and flood if carried by Landlord), liability, rental income and other
insurance relating to the Property, and expenditures for deductible amounts paid
under such insurance; (E) licenses, permits and inspections; (F) complying with
the requirements of any law, statute, ordinance or governmental rule or
regulation or any orders pursuant thereto (collectively"LAWS"); (G) amortization
of capital improvements required to comply with Laws, or which are intended to
reduce Operating Costs or improve the utility, efficiency or capacity of any
Building System, with interest on the unamortized balance at the rate paid by
Landlord on funds borrowed to finance such capital improvements (or, if Landlord
finances such improvements out of Landlord's funds without borrowing, the rate
that Landlord would have paid to borrow such funds, as reasonably determined by
Landlord), over such useful life as Landlord shall reasonably determine; (H) an
office in the Project for the management of the Property, including expenses of
furnishing and equipping such office and the rental value of any space occupied
for such purposes; (I) property management fees; (J) accounting, legal and other
professional services incurred in connection with the operation of the Property
and the calculation of Operating Costs and Taxes; (K) a reasonable allowance for
depreciation on machinery and equipment used to maintain the Property and on
other property owned by Landlord in the Property (including window coverings and
carpeting in common areas); (L) contesting the validity or applicability of any
Laws that may affect the Property; (M) the Building's Share of any shared or
common area maintenance fees and expenses; and (N) any other expense or charge,
whether or not hereinbefore described, which in accordance with generally
accepted property management
2
<PAGE>
practices would be considered an expense of managing, operating, maintaining and
repairing the Property. Operating Costs for any year during which average
occupancy of the Building is less than ninety five percent (95%) shall be
calculated based upon the Operating Costs that would have been incurred if the
Building had an average occupancy of ninety five percent(95%) during the entire
calendar year.
Operating Costs shall not include (i) capital improvements (except as
otherwise provided above); (ii) costs of special services rendered to individual
tenants (including Tenant) for which a special charge is made; (iii) interest
and principal payments on loans or indebtedness secured by the Building; (iv)
costs of improvements for Tenant or other tenants of the Building; (v) costs of
services or other benefits of a type which are not available to Tenant but which
are available to other tenants or occupants, and costs for which Landlord is
reimbursed by other tenants of the Building other than through payment of
tenants' shares of increases in Operating Costs and Taxes; (vi) leasing
commissions, attorneys' fees and other expenses incurred in connection with
leasing space in the Building or enforcing such leases; (vii) depreciation or
amortization, other than as specifically enumerated in the definition of
Operating Costs above; and (viii) costs, fines or penalties incurred due to
Landlord's violation of any Law.
(4) "TAXES" means: all real property taxes and general, special
or district assessments or other governmental impositions, of whatever kind,
nature or origin, imposed on or by reason of the ownership or use of the
Property; governmental charges, fees or assessments for transit or traffic
mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing police, fire or other
governmental service or purported benefits to the Property; personal property
taxes assessed on the personal property of Landlord used in the operation of the
Property; service payments in lieu of taxes and taxes and assessments of every
kind and nature whatsoever levied or assessed in addition to, in lieu of or in
substitution for existing or additional real or personal property taxes on the
Property or the personal property described above; any increases in the
foregoing caused by changes in assessed valuation, tax rate or other factors or
circumstances; and the reasonable cost of contesting by appropriate proceedings
the amount or validity of any taxes, assessments or charges described above. To
the extent paid by Tenant or other tenants as "Tenant's Taxes" (as defined in
Section 8 -Tenant's Taxes), "Tenant's Taxes" shall be excluded from Taxes.
(5) "TENANT'S SHARE" means the Rentable Area of the Premises
divided by the total Rentable Area of the Building, as set forth in the Basic
Lease Information. If the Rentable Area of the Building is changed or the
Rentable Area of the Premises is changed by Tenant's leasing of additional space
hereunder or for any other reason, Tenant's Share shall be adjusted accordingly.
(b) Additional Rent.
---------------
(1) Tenant shall pay Landlord as "ADDITIONAL RENT" for each
calendar year or portion thereof during the Term Tenant's Share of the sum of
(x) the amount (if any) by
3
<PAGE>
which Operating Costs for the period exceed Base Operating Costs, and (y) the
amount (if any) by which Taxes for such period exceed Base Taxes.
(2) Prior to the end of the Base Year and each calendar year
thereafter, Landlord shall notify Tenant of Landlord's estimate of Operating
Costs, Taxes and Tenant's Additional Rent for the following calendar year.
Commencing on the first day of January of each calendar year and continuing on
the first day of every month thereafter in such year, Tenant shall pay to
Landlord one-twelfth (1/12th) of the estimated Additional Rent. If Landlord
thereafter estimates that Operating Costs or Taxes for such year will vary from
Landlord's prior estimate, Landlord may, by notice to Tenant, revise the
estimate for such year (and Additional Rent shall thereafter be payable based on
the revised estimate).
(3) As soon as reasonably practicable after the end of the Base
Year and each calendar year thereafter, Landlord shall furnish Tenant a
statement with respect to such year, showing Operating Costs, Taxes and
Additional Rent for the year, and the total payments made Tenant with respect
thereto. Unless Tenant raises any objections to Landlord's statement within
ninety (90) days after receipt of the same, such statement shall conclusively be
deemed correct and Tenant shall have no right thereafter to dispute such
statement or any item therein or the computation of Additional Rent based
thereon. If Tenant does object to such statement, Landlord shall provide Tenant
with reasonable verification of the figures shown on the statement and the
parties shall negotiate in good faith to resolve any disputes. Any objection of
Tenant to Landlord's statement and resolution of any dispute shall not postpone
the time for payment of any amounts due Tenant or Landlord based on Landlord's
statement, nor shall any failure of Landlord to deliver Landlord's statement in
a timely manner relieve Tenant of Tenant's obligation to pay any amounts due
Landlord based on Landlord's statement.
(4) If Tenant's Additional Rent as finally determined for the
year exceeds the total payments made by Tenant on account thereof, Tenant shall
pay Landlord the deficiency within fifteen (15) days of Tenant's receipt of
Landlord's statement. If the total payments made Tenant on account thereof
exceed Tenant's Additional Rent as finally determined for the year, Tenant's
excess payment shall be credited toward the rent next due from Tenant under this
Lease. For any partial calendar year at the beginning or end of the Term,
Additional Rent shall be prorated on the basis of a 365-day year by computing
Tenant's Share of the increase in Operating Costs and Taxes for the entire year
and then prorating such amount for the number of days during such year included
in the Term. Notwithstanding the termination of this Lease, Landlord shall pay
to Tenant or Tenant shall pay to Landlord, as the case may be within ten (10)
days after Tenant's receipt of Landlord's final statement for the calendar year
in which this Lease terminates, the difference between Tenant's Additional Rent
for that year, as finally determined by Landlord, and the total amount
previously paid by Tenant on account thereof.
If for any reason Base Taxes or Taxes for any year during the Term are
reduced, refunded or otherwise changed, Tenant's Additional Rent shall be
adjusted accordingly. If Taxes are temporarily reduced as a result of space in
the Building being leased to a tenant that is entitled to
4
<PAGE>
an exemption from property taxes or other taxes, then for purposes of
determining Additional Rent for each year in which Taxes are reduced by any such
exemption, Taxes for such year shall be calculated on the basis of the amount
the Taxes for the year would have been in the absence of the exemption. The
obligations of Landlord to refund any overpayment of Additional Rent and of
Tenant to pay any Additional Rent not previously paid shall survive the
expiration of the Term. Notwithstanding anything to the contrary in this Lease,
if there is at any time a decrease in Taxes below the amount of the Taxes for
the Base Year, then for purposes of calculating Additional Rent for the year in
which such decrease occurs and all subsequent periods, Base Taxes shall be
reduced to equal the Taxes for the year in which the decrease occurs.
3.3 Payment of Rent. All amounts payable or reimbursable by Tenant under
---------------
this Lease, including late charges and interest, shall constitute rent and shall
be payable and recoverable as rent in the manner provided in this Lease. All
sums payable to Landlord on demand under the terms of this Lease shall be
payable within fifteen (15) days after notice from Landlord of the amounts due.
All rent shall be paid without offset, recoupment or deduction in lawful money
of the United States of America to Landlord at Landlord's Address for Payment of
Rent as set forth in the Basic Lease Information, or to such other person or at
such other place as Landlord may from time to time designate.
4. SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with
Landlord the sum set forth in the Basic Lease Information, in cash, as security
for the performance of Tenant's obligations under this Lease. Landlord may (but
shall have no obligation to) use the security deposit or any portion thereof to
cure any Event of Default under this Lease or to compensate Landlord for any
damage Landlord incurs as a result of Tenant's failure to perform any of
Tenant's obligations hereunder. In such event Tenant shall immediately pay to
Landlord an amount sufficient to replenish the security deposit to the sum
initially deposited with Landlord. If Tenant is not in default at the expiration
or termination of this Lease, Landlord shall return to Tenant the security
deposit or the balance thereof then held by Landlord and not applied as provided
above. Landlord may commingle the security deposit with Landlord's general and
other funds, and Landlord shall not be required to pay interest on the security
deposit to Tenant.
5. USE AND COMPLIANCE WITH LAWS.
5.1 Use. The Premises shall be used for general business office purposes
---
and for no other use or purpose. Tenant shall comply with all present and future
Laws relating to Tenant's use or occupancy of the Premises (and make any
repairs, alterations or improvements as required to comply with all such Laws),
and shall observe the "Building Rules" (as defined in Section 27 - Rules and
Regulations). Tenant shall not do, bring, keep or sell anything in or about the
Premises that is prohibited by, or that will cause a cancellation of or an
increase in the existing premium for, any insurance policy covering the Property
or any part thereof. Tenant shall not permit the Premises to be occupied or used
in any manner that will constitute waste or a nuisance, or disturb the quiet
enjoyment of or otherwise annoy other tenants in the Building. Without limiting
the foregoing, the Premises shall not be used for educational activities,
practice of medicine or any of the healing arts, providing social services, or
for any governmental use
5
<PAGE>
(including embassy or consulate use). Tenant shall not, without the prior
consent of Landlord, (i) bring into the Building or the Premises anything that
may cause substantial noise, odor or vibration, overload the floors in the
Premises or the Building or any of the heating, ventilating and air-conditioning
("HVAC"), mechanical, elevator, plumbing, electrical, fire protection, life
safety, security or other systems in the Building ("BUILDING SYSTEMS"), or
jeopardize the structural integrity of the Building or any part thereof; (ii)
connect to the utility systems of the Building any apparatus, machinery or other
equipment other than typical office equipment; or (iii) connect (directly, or
indirectly through use of intermediate devices, electrified strip molding, or
otherwise) to any electrical circuit in the Premises any equipment or other load
with aggregate connected load requirements in excess of 20 amps.
5.2 Hazardous Materials
-------------------
(a) Definitions.
-----------
(1) "HAZARDOUS MATERIALS" shall mean any substance: (A) that now
or in the future is regulated or governed by, requires investigation or
remediation under, or is defined as a hazardous waste, hazardous substance,
pollutant or contaminant under any governmental statute, code, ordinance,
regulation, rule or order, and any amendment thereto, including for example only
the Comprehensive Environmental Response Compensation and Liability Act, 42
U.S.C. (Section)9601 et seq., and the Resource Conservation and Recovery Act, 42
U.S.C. (Section)6901 et seq., or (B) that is toxic, explosive, corrosive,
flammable, radioactive, carcinogenic, dangerous or otherwise hazardous,
including gasoline, diesel fuel, petroleum hydrocarbons, polychlorinated
biphenyls (PCBs), asbestos, radon and urea formaldehyde foam insulation.
(2) "ENVIRONMENTAL REQUIREMENTS" shall mean all present and
future Laws, orders, permits, licenses, approvals, authorizations and other
requirements of any kind applicable to Hazardous Materials.
(3) "HANDLED BY TENANT" and "HANDLING BY TENANT" shall mean and
refer to any installation, handling, generation, storage, use, disposal,
discharge, release, abatement, removal, transportation, or any other activity of
any type by Tenant or its agents, employees, contractors, licensees, assignees,
sublessees, transferees or representatives (collectively, "REPRESENTATIVES") or
its guests, customers, invitees, or visitors (collectively, "VISITORS"), at or
about the Premises in connection with or involving Hazardous Materials.
(4) "ENVIRONMENTAL LOSSES" shall mean all costs and expenses of
any kind, damages, including foreseeable and unforeseeable consequential
damages, fines and penalties incurred in connection with any violation of and
compliance with Environmental Requirements and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on
marketability or use of any portion of the Premises or Property.
6
<PAGE>
(b) Tenant's Covenants. No Hazardous Materials shall be Handled by
------------------
Tenant at or about the Premises or Property without Landlord's prior written
consent, which consent may be granted, denied, or conditioned upon compliance
with Landlord's requirements, all in Landlord's absolute discretion.
Notwithstanding the foregoing, normal quantities and use of those Hazardous
Materials customarily used in the conduct of general office activities, such as
copier fluids and cleaning supplies ("PERMITTED HAZARDOUS MATERIALS"), may be
used and stored at the Premises without Landlord's prior written consent,
provided that Tenant's activities at or about the Premises and Property and the
Handling by Tenant of all Hazardous Materials shall comply at all times with all
Environmental Requirements. At the expiration or termination of the Lease,
Tenant shall promptly remove from the Premises and Property all Hazardous
Materials Handled by Tenant at the Premises or the Property. Tenant shall keep
Landlord fully and promptly informed of all Handling by Tenant of Hazardous
Materials other than Permitted Hazardous Materials. Tenant shall be responsible
and liable for the compliance with all of the provisions of this Section by all
of Tenant's Representatives and Visitors, and all of Tenant's obligations under
this Section (including its indemnification obligations under paragraph (e)
below) shall survive the expiration or termination of this Lease.
(c) Compliance. Tenant shall at Tenant's expense promptly take all
----------
actions required by any governmental agency or entity in connection with or as a
result of the Handling by Tenant of Hazardous Materials at or about the Premises
or Property, including inspection and testing, performing all cleanup, removal
and remediation work required with respect to those Hazardous Materials,
complying with all closure requirements and post-closure monitoring, and filing
all required reports or plans. All of the foregoing work and all Handling by
Tenant of all Hazardous Materials shall be performed in a good, safe and
workmanlike manner by consultants qualified and licensed to undertake such work
and in a manner that will not interfere with any other tenant's quiet enjoyment
of the Property or Landlord's use, operation, leasing and sale of the Property.
Tenant shall deliver to Landlord prior to delivery to any governmental agency,
or promptly after receipt from any such agency, copies of all permits,
manifests, closure or remedial action plans, notices, and all other documents
relating to the Handling by Tenant of Hazardous Materials at or about the
Premises or Property. If any lien attaches to the Premises or the Property in
connection with or as a result of the Handling by Tenant of Hazardous Materials,
and Tenant does not cause the same to be released, by payment, bonding or
otherwise, within ten (10) days after the attachment thereof, Landlord shall
have the right but not the obligation to cause the same to be released and any
sums expended by Landlord in connection therewith shall be payable by Tenant on
demand.
(d) Landlord's Rights. Landlord shall have the right, but not the
-----------------
obligation, to enter the Premises at any reasonable time (i) to confirm Tenant's
compliance with the provisions of this Section, and (ii) to perform Tenant's
obligations under this Section if Tenant has failed to do so after reasonable
notice to Tenant. Landlord shall also have the right to engage qualified
Hazardous Materials consultants to inspect the Premises and review the Handling
by Tenant of Hazardous Materials, including review of all permits, reports,
plans, and other documents regarding same. Tenant shall pay to Landlord on
demand the costs of Landlord's consultants' fees and all costs incurred by
Landlord in performing Tenant's obligations under this Section.
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Landlord shall use reasonable efforts to minimize any interference with Tenant's
business caused by Landlord's entry into the Premises, but Landlord shall not be
responsible for any interference caused thereby.
(e) Tenant's Indemnification. Tenant agrees to indemnify, defend and
------------------------
hold harmless Landlord and its partners or members and its or their partners,
members, directors, officers, shareholders, employees and agents from all
Environmental Losses and all other claims, actions, losses, damages,
liabilities, costs and expenses of every kind, including reasonable attorneys',
experts' and consultants' fees and costs, incurred at any time and arising from
or in connection with the Handling by Tenant of Hazardous Materials at or about
the Property or Tenant's failure to comply in full with all Environmental
Requirements with respect to the Premises.
(f) Asbestos. Tenant acknowledges that Tenant has received the
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asbestos notification letter attached as Exhibit D hereto pursuant to California
---------
Health and Safety Code Sections 25915 et seq. (as amended from time to time, the
"CONNELLY ACT"), disclosing the existence of asbestos in the Building. As part
of Tenant's obligations under paragraph (c) of this Section, Tenant agrees to
comply with the Connelly Act, including providing copies of Landlord's asbestos
notification letter to all of Tenant's "employees" and "owners," as those terms
are defined in the Connelly Act.
6. ALTERATIONS.
6.1 Tenant shall not make any alterations, improvements or changes to the
Premises (including installation of any security system or telephone or data
communication wiring), other than the Tenant Improvements ("ALTERATIONS"),
without Landlord's prior written consent. Any such Alterations shall be
completed by Tenant at Tenant's sole cost and expense: (i) with due diligence,
in a good and workmanlike manner, using new materials; (ii) in compliance with
plans and specifications approved by Landlord; (iii) in compliance with the
construction rules and regulations promulgated by Landlord from time to time;
(iv) in accordance with all applicable Laws (including all work, whether
structural or non-structural, inside or outside the Premises, required to comply
fully with all applicable Laws and necessitated by Tenant's work); and (v)
subject to all conditions which Landlord may in Landlord's discretion impose.
Such conditions may include requirements for Tenant to: (i) provide payment or
performance bonds or additional insurance (from Tenant or Tenant's contractors,
subcontractors or design professionals); (ii) use contractors or subcontractors
designated by Landlord; and (iii) remove all or part of the Alterations prior to
or upon expiration or termination of the Term, as designated by Landlord. If
any work outside the Premises, or any work on or adjustment to any of the
Building Systems, is required in connection with or as a result of Tenant's
work, such work shall be performed at Tenant's expense by contractors designated
by Landlord. Landlord's right to review and approve (or withhold approval of)
Tenant's plans, drawings, specifications, contractor(s) and other aspects of
construction work proposed by Tenant is intended solely to protect Landlord, the
Property and Landlord's interests. No approval or consent by Landlord shall be
deemed or construed to be a representation or warranty by Landlord as to the
adequacy, sufficiency, fitness or suitability
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thereof or compliance thereof with applicable Laws or other requirements. Except
as otherwise provided in Landlord's consent, all Alterations shall upon
installation become part of the realty and be the property of Landlord.
6.2 Before making any Alterations, Tenant shall submit to Landlord for
Landlord's prior approval reasonably detailed final plans and specifications
prepared by a licensed architect or engineer, a copy of the construction
contract, including the name of the contractor and all subcontractors proposed
by Tenant to make the Alterations and a copy of the contractor's license. Tenant
shall reimburse Landlord upon demand for any expenses incurred by Landlord in
connection with any Alterations made by Tenant, including reasonable fees
charged by Landlord's contractors or consultants to review plans and
specifications prepared by Tenant and to update the existing as-built plans and
specifications of the Building to reflect the Alterations. Tenant shall obtain
all applicable permits, authorizations and governmental approvals and approvals
and deliver copies of the same to Landlord before commencement of any
Alterations.
6.3 Tenant shall keep the Premises and the Property free and clear of all
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. If any such lien attaches to the Premises or the Property,
and Tenant does not cause the same to be released by payment, bonding or
otherwise within ten (10) days after the attachment thereof, Landlord shall have
the right but not the obligation to cause the same to be released, and any sums
expended by Landlord in connection therewith shall be payable by Tenant on
demand with interest thereon from the date of expenditure by Landlord at the
Interest Rate (as defined in Section 16.2 - Interest). Tenant shall give
Landlord at least ten (10) days' notice prior to the commencement of any
Alterations and cooperate with Landlord in posting and maintaining notices of
non-responsibility in connection therewith.
6.4 Subject to the provisions of Section 5 - Use and Compliance with Laws
and the foregoing provisions of this Section. Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures ("TRADE FIXTURES") in the Premises, provided that the Trade Fixtures do
not become an integral part of the Premises or the Building. Tenant shall
promptly repair any damage to the Premises or the Building caused by any
installation or removal of such Trade Fixtures.
7. MAINTENANCE AND REPAIRS.
7.1 By taking possession of the Premises Tenant agrees that the Premises
are then in a good and tenantable condition. During the Term, Tenant at Tenant's
expense but under the direction of Landlord, shall repair and maintain the
Premises, including the interior walls, floor coverings, ceiling (ceiling tiles
and grid), Tenant Improvements, Alterations, fire extinguishers, outlets and
fixtures, and any appliances (including dishwashers, hot water heaters and
garbage disposers) in the Premises, in a first class condition, and keep the
Premises in a clean, safe and orderly condition.
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7.2 Landlord shall maintain or cause to be maintained in reasonably good
order, condition and repair, the structural portions of the roof, foundations,
floors and exterior walls of the Building, the Building Systems, and the public
and common areas of the Property, such as elevators, stairs, corridors and
restrooms; provided, however, that Tenant shall pay the cost of repairs for
damage occasioned by Tenant's use of the Premises or the Property or any act or
ommission of Tenant or Tenant's Representatives or Visitors. Landlord shall be
under no obligation to inspect the Premises. Tenant shall promptly report in
writing to Landlord any defective condition known to Tenant which Landlord is
required to repair. As a material part of the consideration for this Lease,
Tenant hereby waives any benefits of any applicable existing or future Law,
including the provisions of California Civil Code Sections 1932(1), 1941 and
1942, that allows a tenant to make repairs at its landlord's expense.
7.3 Landlord hereby reserves the right, at any time and from time to time,
without liability to Tenant, and without constituting an eviction, constructive
or otherwise, or entitling Tenant to any abatement of rent or terminate this
Lease or otherwise releasing Tenant from any of Tenant's obligations under this
Lease:
(a) To make alterations, additions, repairs, improvements to or in or
to decrease the size of area of, all or any part of the Building, the fixtures
and equipment therein, and the Building Systems;
(b) To change the Building's name or street address;
(c) To install and maintain any and all signs on the exterior and
interior of the Building;
(d) To reduce, increase, enclose or otherwise change at any time and
from time to time the size, number, location, lay-out and nature of the common
areas and other tenancies and premises in the Property and to create additional
rentable areas through use or enclosure of common areas; and
(e) If any governmental authority promulgates or revises any Law or
imposes mandatory or voluntary controls or guidelines on Landlord or the
Property relating to the use or conservation of energy or utilities or the
reduction of automobile or other emissions or reduction or management of traffic
or parking on the Property (collectively"CONTROLS"), to comply with such
Controls, whether mandatory or voluntary, or make any alterations to the
Property related thereto.
8. TENANTS TAXES. "TENANT'S TAXES" shall mean (a) all taxes, assessments,
license fees and other governmental charges or impositions levied or assessed
against or with respect to Tenant's personal property or Trade Fixtures in the
Premises, whether any such imposition is levied directly against Tenant or
levied against Landlord or the Property, (b) all rental, excise, sales or
transaction privilege taxes arising out of this Lease (excluding, however, state
and federal personal or corporate income taxes measured by the income of
Landlord from all sources)
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imposed by any taxing authority upon Landlord or upon Landlord's receipt of any
rent payable by Tenant pursuant to the terms of this Lease ("RENTAL TAX"), and
(c) any increase in Taxes attributable to inclusion of a value placed on
Tenant's personal property, Trade Fixtures or Alterations. Tenant shall pay any
Rental Tax to Landlord in addition to and at the same time as Base Rent is
payable under this Lease, and shall pay all other Tenant's Taxes before
delinquency (and, at Landlord's request, shall furnish Landlord satisfactory
evidence thereof). If Landlord pays Tenant's Taxes or any portion thereof,
Tenant shall reimburse Landlord upon demand for the amount of such payment,
together with interest at the Interest Rate from the date of Landlord's payment
to the date of Tenant's reimbursement.
9. UTILITIES AND SERVICES.
9.1 Description of Services. Landlord shall furnish to the Premises
-----------------------
reasonable amounts of electricity, water (including water for the "InstaHot" hot
water heater to be installed as part of the Tenant Improvements pursuant to the
Construction Rider), heat and air-conditioning, and janitorial service. Landlord
shall also furnish normal fluorescent tube replacement, window washing, elevator
service, and common area toilet room supplies. Landlord shall furnish heat,
ventilation and air-conditioning during the Business Hours specified in the
Basic Lease Information ("BUSINESS HOURS"). As used in this Lease, the term
"BUSINESS DAYS" means weekdays except public holidays. Current Building Standard
janitorial specifications are outlined in Exhibit E. Any additional utilities or
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services that Landlord may agree to provide (including lamp or tube replacement
for other than Building Standard lighting fixtures) shall be at Tenant's sole
expense.
9.2 Payment for Additional Utilities and Services.
---------------------------------------------
(a) Upon request by Tenant in accordance with the procedures
established by Landlord from time to time for furnishing HVAC service at times
other than Business Hours on Business Days, Landlord shall furnish such service
to Tenant and Tenant shall pay for such services on an hourly basis at the then
prevailing rate established for the Building by Landlord.
(b) If the temperature otherwise maintained in any portion of the
Premises by the HVAC systems of the Building is affected as a result of (i) any
lights, machines or equipment used by Tenant in the Premises, or (ii) the
occupancy of the Premises by more than one person per 150 square feet of
rentable area, then Landlord shall have the right to install any machinery or
equipment reasonably necessary to restore the temperature, including
modifications to the standard air-conditioning equipment. The cost of any such
equipment and modifications, including the cost of installation and any
additional cost of operation and maintenance of the same, shall be paid by
Tenant to Landlord upon demand.
(c) If Tenant's usage of electricity exceeds the Building's Standard
Electrical Usage as set forth in the Basic Lease Information, Landlord may
determine the amount of such excess use by any reasonable means (including the
installation at Landlord's request but at Tenant's expense of a separate meter
or other measuring device) and charge Tenant for the cost of
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<PAGE>
such excess usage. In addition, Landlord may impose a reasonable charge for the
use of any additional or unusual janitorial services required by Tenant because
of any unusual Tenant Improvements or Alterations, the carelessness of Tenant or
the nature of Tenant's business (including hours of operation).
9.3 Interruption of Services. In the event of an interruption in or
------------------------
failure or inability to provide any services or utilities to the Premises or
Building for any reason (A "SERVICE FAILURE"), such Service Failure shall not,
regardless of its duration, impose upon Landlord any liability whatsoever,
constitute an eviction of Tenant, constructive or otherwise, entitle Tenant to
an abatement of rent or to terminate this Lease or otherwise release Tenant from
any of Tenant's obligations under this Lease. Tenant hereby waives any benefits
of any applicable existing or future Law, including the provisions of California
Civil Code Section 1932(1), permitting the termination of this Lease due to such
interruption, failure or inability.
10. EXCULPATION AND INDEMNIFICATION.
10.1 Landlord shall not be liable to Tenant for any loss, injury or other
damage to any person or property (including Tenant or Tenant's property) in or
about the Premises or the Property from any cause (including defects in the
Property or in any equipment in the Property; fire, explosion or other casualty;
bursting, rupture, leakage or overflow of any plumbing or other pipes or lines,
sprinklers, tanks, drains, drinking fountains or washstands in, above, or about
the Premises or the Property; or acts of other tenants in the Property). Tenant
hereby waives all claims against Landlord for such damage and the cost and
expense of defending against claims relating to such damage, except that
Landlord shall indemnify, defend and hold Tenant harmless from and against any
claims, actions, liabilities, damages, costs or expenses, including reasonable
attorneys' fees and costs incurred in defending against the same ("CLAIMS") for
such damages, to the extent the same are caused by the willful or grossly
negligent acts or omissions of Landlord or its authorized representatives. In no
event, however, shall Landlord be liable to Tenant for any punitive or
consequential damages or damages for loss of business by Tenant.
10.2 Tenant shall indemnify, defend and hold Landlord harmless from and
against Claims arising from (a) the acts or omissions of Tenant or Tenant's
Representatives or Visitors in or about the Property, or (b) any construction or
other work undertaken by Tenant on the Premises (including any design defects),
or (c) any breach or default under this Lease by Tenant, or (d) any accident,
injury or damage, howsoever and by whomsoever caused, to any person or property,
occurring in or about the Premises during the Term; excepting only such Claims
for any accident, injury or damage to the extent they are caused by the
negligent or willful acts or omissions of Landlord or its authorized
representatives.
10.3 The obligations of the parties under this Section 10 shall survive
the expiration or termination of this Lease.
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11. INSURANCE.
11.1 Tenant's Insurance
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(a) Tenant shall maintain in full force throughout the Term,
commercial general liability insurance providing coverage on an occurrence form
basis with limits of not less than Two Million Dollars ($2,000,000.00) each
occurrence for bodily injury and property damage combined, Two Million Dollars
($2,000,000.00) annual general aggregate, and Two Million Dollars
($2,000,000.00) products and completed operations annual aggregate. Tenant's
liability insurance policy or policies shall: (i) include premises and
operations liability coverage, products and completed operations liability
coverage, broad form property damage coverage including completed operations,
blanket contractual liability coverage including, to the maximum extent
possible, coverage for the indemnification obligations of Tenant under this
Lease, and personal and advertising injury coverage; (ii) provide that the
insurance company has the duty to defend all insureds under the policy; (iii)
provide that defense costs are paid in addition to and do not deplete any of the
policy limits; (iv) cover liabilities arising out of or incurred in connection
with Tenant's use or occupancy of the Premises or the Property; and (v) extend
coverage to cover liability for the actions of Tenant's Representatives and
Visitors.
(b) Tenant shall at all times maintain in effect with respect to
any Alterations and Tenant's Trade Fixtures and personal property, commercial
property insurance providing coverage, at a minimum, for "broad form" perils, to
the extent of 80% of the full replacement cost of covered property. Tenant may
carry such insurance under a blanket policy, provided that such policy provides
equivalent coverage to a separate policy. During the Term, the proceeds from any
such policies of insurance shall be used for the repair or replacement of the
Alterations, Trade Fixtures and personal property so insured. Landlord shall be
provided coverage under such insurance to the extent of its insurable interest
and, if requested by Landlord, both landlord and Tenant shall sign all documents
reasonably necessary or proper in connection with the settlement of any claim
or loss under such insurance. Landlord will have no obligation to carry
insurance on any Alterations or on Tenant's Trade Fixtures or personal property.
(c) Each policy of insurance required under this Section shall: (i)
be in a form, and written by an insurer, reasonably acceptable to Landlord, (ii)
be maintained at Tenant's sole cost and expense, and (iii) require at least
thirty (30) days' written notice to Landlord prior to any cancellation,
nonrenewal or modification of insurance coverage. Insurance companies issuing
such policies shall have rating classifications of "A" or better and financial
size category ratings of "VII" or better according to the latest edition of the
A.M. Best Key Rating Guide. All insurance companies issuing such policies shall
be licensed to do business in the state where the Property is located. Any
deductible amount under such insurance shall not exceed $5,000. Tenant shall
provide to Landlord, upon request, evidence that the insurance required to be
carried by Tenant pursuant to this Section, including any endorsement effecting
the additional insured status, is in full force and effect and that premiums
therefor have been paid.
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(d) Tenant shall increase the amounts of insurance as required by any
Mortgagee, and, not more frequently than once every three (3) years, as
recommended by Landlord's insurance broker, if, in the opinion of either of
them, the amount of insurance then required under this Lease is not adequate.
Any limits set forth in this Lease on the amount or type of coverage required
by Tenant's insurance shall not limit the liability of Tenant under this Lease.
(e) Each policy of liability insurance required by this Section
shall: (i) contain a cross liability endorsement or separation of insureds
clause; (ii) provide that any waiver of subrogation rights or release prior to a
loss does not void coverage; (iii) provide that it is primary to and not
contributing with, any policy of insurance carried by Landlord covering the
same loss; (iv) provide that any failure to comply with the reporting provisions
shall not affect coverage provided to Landlord, its partners, property managers
and Mortgagees; and (v) name Landlord, its partners, the Property Manger
identified in the Basic Lease Information (the "PROPERTY MANAGER"), and such
other parties in interest as Landlord may from time to time reasonably designate
to Tenant in writing, as additional insureds. Such additional insureds shall be
provided the same extent of coverage as provided to Tenant under such policies.
All endorsements effecting such additional insured status shall be acceptable to
Landlord and shall be at least as broad as additional insured endorsement form
number CG 20 11 11 85 promulgated by the Insurance Services Office.
(f) Prior to occupancy of the Premises by Tenant, and not less than
thirty (30) days prior to expiration of any policy thereafter, Tenant shall
furnish to Landlord a certificate of insurance reflecting that the insurance
required by this Section is in force, accompanied by an endorsement showing the
required additional insureds satisfactory to Owner in substance and form.
Notwithstanding the requirements of this paragraph, Tenant shall at Landlord's
request provide to Landlord a certified copy of each insurance policy required
to be in force at any time pursuant to the requirements of this Lease or its
Exhibits.
11.2 Landlord's Insurance. During the Term, Landlord shall maintain in
--------------------
effect insurance on the Building against "broad form" perils (to the extent
such coverages are available), with responsible insurers, insuring the Building
and the Tenant Improvements in an amount equal to at least eighty percent (80%)
of the replacement cost thereof, excluding land, foundations, footings and
underground installations. Landlord may, but shall not be obligated to, carry
insurance against additional perils and/or in greater amounts.
11.3 Property Insurance - Waiver of Subrogation. Landlord and Tenant each
------------------------------------------
hereby waive any right of recovery against the other and the partners, members,
shareholders, officers, directors and authorized representatives of the other
for any loss or damage that is covered by any policy of property insurance
maintained by either party (or required by this Lease to be maintained) with
respect to the Premises or the Property or any operation therein. If any such
policy of insurance relating to this Lease or to the Premises or the Property
does not permit the foregoing waiver or if the coverage under any such policy
would be invalidated as a result of such waiver, the party maintaining such
policy shall obtain from the insurer under such policy a
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waiver of all right of recovery by way of subrogation against either party in
connection with any claim, loss or damage covered by such policy.
12. DAMAGE OR DESTRUCTION.
12.1 Landlord's Duty to Repair.
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(a) If all or a substantial part of the Premises are rendered
untenantable or inaccessible by damage to all or any part of the Property from
fire or other casualty then, unless either party is entitled to and elects to
terminate this Lease pursuant to Sections 12.2 - Landlord's Right to Terminate
and 12.3 - Tenant's Right to Terminate, Landlord shall, at its expense, use
reasonable efforts to repair and restore the Premises and/or the Property, as
the case may be, to substantially their former condition to the extent permitted
by then applicable Laws; provided, however, that in no event shall Landlord have
any obligation for repair or restoration beyond the extent of insurance proceeds
received by Landlord for such repair or restoration, or for any of Tenant's
personal property, Trade Fixtures or Alterations.
(b) If Landlord is required or elects to repair damage to the
Premises and/or the Property, this Lease shall continue in effect, but Tenant's
Base Rent and Additional Rent from the date of the casualty through the date of
substantial completion of the repair shall be abated with regard to any portion
of the Premises that Tenant is prevented from using by reason of such damage or
its repair. In no event shall Landlord be liable to Tenant by reason of any
injury to or interference with Tenant's business or property arising from fire
or other casualty or by reason of any repairs to any part of the Property
necessitated by such casualty.
12.2 Landlord's Right to Terminate. Landlord may elect to terminate this
-----------------------------
Lease following damage by fire or other casualty under the following
circumstances:
(a) If, in the reasonable judgment of Landlord, the Premises and the
Property cannot be substantially repaired and restored under applicable Laws
within one (1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate proceeds are
not, for any reason, made available to Landlord from Landlord's insurance
policies (and/or from Landlord's funds made available for such purpose, at
Landlord's sole option) to make the required repairs;
(c) If the Building is damaged or destroyed to the extent that, in
the reasonable judgment of Landlord, the cost to repair and restore the Building
would exceed twenty-five percent (25%) of the full replacement cost of the
Building, whether or not the Premises are at all damaged or destroyed; or
(d) If the fire or other casualty occurs during the last year of the
Term.
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If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall notify Tenant in writing of
that fact within one hundred and twenty (120) days after the date of the
casualty and in such notice Landlord shall also advise Tenant whether Landlord
has elected to terminate this Lease as provided above.
12.3 Tenant's Right to Terminate. If all or a substantial part of the
---------------------------
Premises are rendered untenantable or inaccessible by damage to all or any part
of the Property from fire or other casualty, then Tenant may elect to terminate
this Lease under the following circumstances:
(a) Where Landlord fails to commence the required repair within one
hundred and twenty (120) days after the date of the casualty, in which event
Tenant may elect to terminate this Lease upon notice to Landlord given within
ten (10) days after such one hundred and twenty (120)-day period.
(b) In the circumstance described in Subsection 12.2 (a) above; in
which event Tenant may elect to terminate this Lease by giving Landlord notice
of such election to terminate within thirty (30) days after Landlord's notice to
Tenant pursuant to Section 12.2 - Landlord's Right to Terminate.
12.4 Waiver. Landlord and Tenant each hereby waive the provisions of
------
California Civil Code Sections 1932(2), 1933(4) and any other applicable
existing or future Law permitting the termination of a lease agreement in the
event of damage or destruction under any circumstances other than as provided in
Sections 12.2 - Landlord's Right to Terminate and 12.3 - Tenant's Right to
Terminate.
13. CONDEMNATION.
13.1 Definitions.
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(a) "AWARD" shall mean all compensation, sums, or anything of value
awarded, paid or received on a total or partial Condemnation.
(b) "CONDEMNATION" shall mean (i) a permanent taking (or a temporary
taking for a period extending beyond the end of the Term) pursuant to the
exercise of the power of condemnation or eminent domain by any public or
quasi-public authority, private corporation or individual having such power
("CONDEMNOR"), whether by legal proceedings or otherwise, or (ii) a voluntary
sale or transfer by Landlord to any such authority, either under threat of
condemnation or while legal proceedings for condemnation are pending.
(c) "DATE OF CONDEMNATION" shall mean the earlier of the date that
title to the property taken is vested in the Condemnor or the date Condemnor
has the right to possession of the property being condemned.
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13.2 Effect on Lease
---------------
(a) If the Premises are totally taken by Condemnation, this Lease
shall terminate as of the Date of Condemnation. If a portion but not all of the
Premises is taken by Condemnation, this Lease shall remain in effect; provided,
however, that if the portion of the Premises remaining after the Condemnation
will be unsuitable for Tenant's continued use, then upon notice to Landlord
within thirty (30) days after Landlord notifies Tenant of the Condemnation,
Tenant may terminate this Lease effective as of the Date of Condemnation.
(b) If twenty-five percent (25%) or more of the Land or of the Parking
Facility or of the floor area in the Building is taken by Condemnation, or if as
a result of any Condemnation the Building is no longer reasonably suitable for
use as an office building, whether or not any portion of the Premises is taken,
Landlord may elect to terminate this Lease, effective as of the Date of
Condemnation, by notice to Tenant within thirty (30) days after the Date of
Condemnation.
(c) If all or a portion of the Premises is temporarily taken by a
Condemnor for a period not extending beyond the end of the Term, this Lease
shall remain in full force and effect.
13.3 Restoration. If this Lease is not terminated as provided in Section
-----------
13.2 - Effect on Lease, Landlord, at its expense, shall diligently proceed to
repair and restore the Premises to substantially its former condition (to the
extent permitted by then applicable Laws) and/or repair and restore the Building
to an architecturally complete office building; provided, however, that
Landlord's obligations to so repair and restore shall be limited to the amount
of any Award received by Landlord and not required to be paid to any Mortgagee
(as defined in Section 20.2 below). In no event shall Landlord have any
obligation to repair or replace any improvements in the Premises beyond the
amount of any Award received by Landlord for such repair or to repair or replace
any of Tenant's personal property, Trade Fixtures, or Alterations.
13.4 Abatement and Reduction of Rent. If any portion of the Premises is
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taken in a Condemnation or is rendered permanently untenantable by repairs
necessitated by the Condemnation, and this Lease is not terminated, the Base
Rent and Additional Rent payable under this Lease shall be proportionally
reduced as of the Date of Condemnation based upon the percentage of rentable
square feet in the Premises so taken or rendered permanently untenantable. In
addition, if this Lease remains in effect following a Condemnation and Landlord
proceeds to repair and restore the Premises, the Base Rent and Additional Rent
payable under this Lease shall be abated during the period of such repair or
restoration to the extent such repairs prevent Tenant's use of the Premises.
13.5 Awards. Any Award made shall be paid to Landlord, and Tenant hereby
------
assigns to Landlord, and waives all interest in or claim to, any such Award,
including any claim for the value of the unexpired Term; provided, however, that
Tenant shall be entitled to receive, or to prosecute a separate claim for, an
Award for a temporary taking of the Premises or a portion
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thereof by a Condemnor where this Lease is not terminated (to the extent such
Award relates to the unexpired Term), or an Award or portion thereof separately
designated for relocation expenses or the interruption of or damage to Tenant's
business or as compensation for Tenant's personal property, Trade Fixtures or
Alterations.
13.6 Waiver. Landlord and Tenant each hereby waive the provisions of
------
California Code of Civil Procedure Section 1265.130 and any other applicable
existing or future Law allowing either party to petition for a termination of
this Lease upon a partial taking of the Premises and/or the Property.
14. ASSIGNMENT AND SUBLETTING.
14.1 Landlord's Consent Required. Tenant shall not assign, mortgage,
---------------------------
pledge, hypothecate or encumber this Lease or any interest therein, or sublet or
license or permit the use or occupancy of the Premises or any part thereof by or
for the benefit of anyone other than Tenant, or in any other manner transfer all
or any part of Tenant's interests under this Lease (each and all a "TRANSFER"),
without the prior written consent of Landlord, which (subject to the other
provisions of this Section 14) shall not be unreasonably withheld. If Tenant is
a business entity, any direct or indirect transfer of fifty percent (50%) or
more of the ownership interest of the entity (whether in a single transaction or
in the aggregate through more than one transaction) shall be deemed a Transfer.
Notwithstanding any Provision in this Lease to the contrary, Tenant shall not
mortgage, pledge, hypothecate or otherwise encumber all or any portion of
Tenant's interest under this Lease.
14.2 Reasonable Consent.
------------------
(a) If Tenant complies with the following conditions, Landlord shall
not unreasonably withhold its consent to the subletting of the Premises or any
portion thereof or the assignment of this Lease. Prior to any proposed Transfer,
Tenant shall submit in writing to Landlord (i) the name and legal composition of
the proposed assignee, subtenant, user or other transferee (each a
"TRANSFEREE"); (ii) the nature of the business proposed to be carried on in the
Premises; (iii) a current balance sheet, income statements for the last two
years and such other reasonable financial and other information concerning the
proposed Transferee as Landlord may request; and (iv) a copy of the proposed
assignment, sublease or other agreement governing the proposed Transfer. Within
fifteen (15) Business Days after Landlord receives all such information it shall
notify Tenant whether it approves or disapproves such Transfer or if it elects
to proceed under Section 14.7 - Landlord's Right to Space.
(b) The parties hereto agree and acknowledge that, among other
circumstances for which Landlord could reasonably withhold consent to a proposed
Transfer, it shall be reasonable for Landlord to withhold consent where (i) the
proposed Transferee does not intend itself to occupy the entire portion of the
Premises assigned or sublet, (ii) Landlord reasonably disapproves of the
Transferee's business operating ability or history, reputation or
creditworthiness or the character of the business to be conducted by the
Transferee at the
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Premises, (iii) the Transferee is a governmental agency or unit or an existing
tenant in the Project, (iv) the proposed Transfer would violate any
"exclusive" rights of any tenants in the Project, (v) the rental and other
consideration payable by the Transferee is less than that currently being paid
by tenants under new leases of comparable space in the Building, or (vi)
Landlord otherwise determines that the proposed Transfer would have the effect
of decreasing the value of the Building or increasing the expenses associated
with operating, maintaining and repairing the Property. In no event may Tenant
publicly offer or advertise all or any portion of the Premises for assignment or
sublease at a rental less than that then sought by Landlord for a direct lease
(non-sublease) of comparable space in the Project.
14.3 Excess Consideration. If Landlord consents to the Transfer, Tenant
--------------------
shall pay to Landlord additional rent, within ten (10) days after receipt by
Tenant, any consideration paid by the Transferee for the Transfer, including, in
the case of a sublease, the excess of the rent and other consideration payable
by the subtenant over the amount of Base Rent and Additional Rent payable
hereunder applicable to the subleased space.
14.4 No Release Of Tenant. No consent by Landlord to any Transfer shall
--------------------
relieve Tenant of any obligation to be performed by Tenant under this Lease,
whether occurring before or after such consent, assignment, subletting or other
Transfer. Each Transferee shall be jointly and severally liable with Tenant (and
Tenant shall be jointly and severally liable with each Transferee) for the
payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease) and for the performance of all other terms and provisions of this
Lease. The consent by Landlord to any Transfer shall not relieve Tenant or any
such Transferee from the obligation to obtain Landlord's express prior written
consent to any subsequent Transfer by Tenant or any Transferee. The acceptance
of rent by Landlord from any other person shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be consent to any Transfer.
14.5. Expenses and Attorneys' Fees. Tenant shall pay to Landlord on demand
----------------------------
all costs and expenses (including reasonable attorneys' fees) incurred by
Landlord in connection with reviewing or consenting to any proposed Transfer
(including any request for consent to, or any waiver of Landlord's rights in
connection with, any security interest in any of Tenant's property at the
Premises).
14.6 Effectiveness of Transfer. Prior to the date on which any permitted
-------------------------
Transfer (whether or not requiring Landlord's consent) becomes effective,
Tenant shall deliver to Landlord a counterpart of the fully executed Transfer
document and Landlord's standard form of Consent to Assignment or Consent to
Sublease executed by Tenant and the Transferee in which each of Tenant and the
Transferee confirms its obligations pursuant to this Lease. Failure or refusal
of a Transferee to execute any such instrument shall not release or discharge
the Transferee from liability as provided herein. The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual cancellation by Landlord
and Tenant, shall not work a merger, and any such surrender or cancellation
shall, at the option of Landlord, either terminate all or any existing subleases
or operate as an assignment to Landlord of any or all of such subleases.
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14.7 Landlord's Right to Space. Notwithstanding any of the above
-------------------------
provisions of this Section to the contrary, if Tenant notifies Landlord that it
desires to enter into a Transfer, Landlord, in lieu of consenting to such
Transfer, may elect (x) in the case of an assignment or a sublease of the entire
Premises, to terminate this Lease, or (y) in the case of a sublease of less than
the entire Premises, to terminate this Lease as it relates to the space proposed
to be subleased by Tenant. In such event, this Lease will terminate (or the
space proposed to be subleased will be removed from the Premises subject to this
Lease and the Base Rent and Tenant's Share under this Lease shall be
proportionately reduced) on the date the Transfer was proposed to be effective,
and Landlord may lease such space to any party, including the prospective
Transferee identified by Tenant.
14.8 Assignment of Sublease Rents. Tenant hereby absolutely and
----------------------------
irrevocably assigns to Landlord any and all rights to receive rent and other
consideration from any sublease and agrees that Landlord, as assignee or as
attorney-in-fact for Tenant for purposes hereof, or a receiver for Tenant
appointed on Landlord's application may (but shall not be obligated to) collect
such rents and other consideration and apply the same toward Tenant's
obligations to Landlord under this Lease; provided, however, that Landlord
grants to Tenant at all times prior to occurrence of any breach or default by
Tenant a revocable license to collect such rents (which license shall
automatically and without notice be and be deemed to have been revoked and
terminated immediately upon any Event of Default).
14.9 Transfer to Affiliate. Notwithstanding the foregoing, Tenant
---------------------
may assign this Lease, sublet all or part of the Premises or otherwise transfer
Tenant's right to occupy all or part of the Premises, without Landlord's
consent, but subject to the provisions of Sections 14.4, 14.5, 14.6 and 14.8, to
any subsidiary, parent holding company or other corporation or other entity
which controls, is controlled by, or is under common control with Tenant (and
the provisions of Section 14.3 and 14.7 shall not apply with respect to any such
Transfer to an affiliate, so long as Tenant continues as a going concern and
Tenant and the affiliated Transferee continue to be so affiliated).
15. DEFAULT AND REMEDIES.
15.1 Events of Default. The occurrence of any of the following shall
-----------------
constitute an "EVENT OF DEFAULT" by Tenant:
(a) Tenant fails to make any payment of rent when due, or any amount
required to replenish the security deposit as provided in Section 4 above, if
payment in full is not received by Landlord within three (3) Business Days
after written notice that it is due.
(b) Tenant abandons the Premises.
(c) Tenant fails to deliver any estoppel certificate requested by
Landlord within the period described in subsection 21.1 below.
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(d) Tenant violates the restrictions on Transfer set forth in Section
14- Assignment and Subletting.
(e) Tenant ceases doing business as a going concern; makes an
assignment for the benefit of creditors; is adjudicated an insolvent, files a
petition (or files an answer admitting the material allegations of a petition)
seeking relief under any state or federal bankruptcy or other statute, law or
regulation affecting creditors' rights; all or substantially all of Tenant's
assets are subject to judicial seizure or attachment and are not
released within 30 days, or Tenant consents to or acquiesces in the appointment
of a trustee, receiver or liquidator for Tenant or for all or any substantial
part of Tenant's assets.
(f) Tenant fails, within ninety (90) days after the commencement of
any proceedings against Tenant seeking relief under any state or federal
bankruptcy or other statute, law or regulation affecting creditors' rights, to
have such proceedings dismissed, or Tenant fails, within ninety (90) days after
an appointment, without Tenant's consent or acquiescence, of any trustee,
receiver or liquidator for Tenant or for all or any substantial part of Tenant's
assets, to have such appointment vacated.
(g) Tenant fails to perform or comply with any provision of this
Lease other than those described in (a) through (f) above, and does not fully
cure such failure within such twenty (20) days after notice to Tenant or, if
such failure cannot be cured within twenty (20) day period, Tenant fails within
such twenty (20) day period to commence, and thereafter diligently proceed with,
all actions necessary to cure such failure as soon as reasonably possible but in
all events within ninety (90) days of such notice; provided however, that if
Landlord in Landlord's reasonable judgment determines that such failure cannot
or will not be cured by Tenant within such ninety (90) days, then such failure
shall constitute an Event of Default immediately upon such notice to Tenant.
15.2 Remedies. Upon the occurrence of an Event of Default, Landlord shall
--------
have the following remedies, which shall not be exclusive but shall be
cumulative and shall be in addition to any other remedies now or hereafter
allowed by law:
(a) Landlord may terminate Tenant's right to possession of the
Premises at any time by written notice to Tenant. Tenant expressly acknowledges
that in the absence of such written notice from Landlord, no other act of
Landlord, including re-entry into the Premises, efforts to relet the Premises,
reletting of the Premises for Tenant's account, storage of Tenant's personal
property and Trade Fixtures, acceptance of keys to the Premises from Tenant or
exercise of any other rights and remedies under this Section, shall constitute
an acceptance of Tenant's surrender of the Premises or constitute a termination
of this Lease or of Tenant's right to possession of the Premises. Upon such
termination in writing of Tenant's right to possession of the Premises, as
herein provided, this Lease shall terminate and Landlord shall be entitled to
recover damages from Tenant as provided in California Civil Code Section 1951.2
and any other applicable existing or future Law providing for recovery of
damages for such breach, including
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the worth at the time of award of the amount by which the rent which would be
payable by Tenant hereunder for the remainder of the Term after the date of the
award of damages, including Additional Rent as reasonably estimated by Landlord,
exceeds the amount of such rental loss as Tenant proves could have been
reasonably avoided, discounted at the discount rate published by the Federal
Reserve Bank of San Francisco for member banks at the time of the award plus one
percent (1%).
(b) Landlord shall have the remedy described in California Civil Code
Section 1951.4 (Landlord may continue this Lease in effect after Tenant's breach
and abandonment and recover rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's expense. If
Landlord pays any sum or incurs any expense in curing the Event of Default,
Tenant shall reimburse Landlord upon demand for the amount of such payment or
expense with interest at the Interest Rate from the date the sum is paid or the
expense is incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all Tenant's property from the Premises, and
such property may be stored by Landlord in a public warehouse or elsewhere at
the sole cost and for the account of Tenant. If Landlord does not elect to store
any or all of Tenant's property left in the Premises, Landlord may consider such
property to be abandoned by Tenant, and Landlord may thereupon dispose of such
property in any manner deemed appropriate by Landlord. Any proceeds realized by
Landlord on the disposal of any such property shall be applied first to offset
all expenses of storage and sale, then credited against Tenant's outstanding
obligations to Landlord under this Lease, and any balance remaining after
satisfaction of all obligations of Tenant under this Lease shall be delivered to
Tenant.
16. LATE CHARGE AND INTEREST.
16.1 Late Charge. If any payment of rent is not received by Landlord
-----------
within ten (10) days after the same is due, Tenant shall pay to Landlord on
demand as a late charge an additional amount equal to four percent (4%) of the
overdue payment. A late charge shall not be imposed more than once on any
particular installment, but imposition of a late charge on any payment not made
within ten (10) days after the same is due does not eliminate or supersede late
charges imposed on other (prior) payments not made within ten (10) days after
the same are due or preclude imposition of a late charge on other installments
or payments not made within ten (10) days after the same are due.
16.2 Interest. In addition to the late charges referred to above, which
--------
are intended to defray Landlord's costs resulting from late payments, any
payment from Tenant to Landlord not paid when due shall at Landlord's option
bear interest from the date due until paid to Landlord by Tenant at the rate of
fifteen percent (15%) per annum or the maximum lawful rate that Landlord may
charge to Tenant under applicable laws, whichever is less (the "INTEREST RATE").
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Acceptance of any late charge and/or interest shall not constitute a waiver of
Tenant's default with respect to the overdue sum or prevent Landlord from
exercising any of its other rights and remedies under this Lease.
17. WAIVER. No provisions of this Lease shall be deemed waived by Landlord
unless such waiver is in a writing signed by Landlord. The waiver by Landlord of
any breach of any provision of this Lease shall not be deemed a waiver of such
provision or of any subsequent breach of the same or any other provision of this
Lease. No delay or omission in the exercise of any right or remedy of Landlord
upon any default by Tenant shall impair such right or remedy or be construed as
a waiver. Landlord's acceptance of any payments of rent due under this Lease
shall not be deemed a waiver of any default by Tenant under this Lease
(including Tenant's recurrent failure to timely pay rent) other than Tenant's
nonpayment of the accepted sums, and no endorsement or statement on any check or
accompanying any check or payment shall be deemed an accord and satisfaction.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to waive or render unnecessary
Landlord's consent to or approval of any subsequent act by Tenant.
18. ENTRY,INSPECTION AND CLOSURE. Upon reasonable oral or written notice to
Tenant (and without notice in emergencies), Landlord and its authorized
representatives may enter the Premises at all reasonable times to determine
whether the Premises are in good condition, to determine whether Tenant is
complying with its obligations under this Lease, to perform any maintenance or
repair of the Premises or the Building that Landlord has the right or obligation
to perform, to install or repair improvements for other tenants where access to
the Premises is required for such installation or repair, to serve, post or keep
posted any notices required or allowed under the provisions of this Lease, to
show the Premises to prospective brokers, agents, transferees, Mortgagees or
tenants, or to do any other act or thing necessary for the safety or
preservation of the Premises or the Building. When reasonably necessary Landlord
may temporarily close entrances, doors, corridors, elevators or other facilities
in the Building without liability to Tenant by reason of such closure. Landlord
shall conduct its activities under this Section in a manner that will minimize
inconvenience to Tenant without incurring additional expense to Landlord. In no
event shall Tenant be entitled to an abatement of rent on account of any entry
by Landlord, and Landlord shall not be liable in any manner for any
inconvenience, loss of business or other damage to Tenant or other persons
arising out of Landlord's entry on the Premises in accordance with this Section.
No action by Landlord pursuant to this paragraph shall constitute an eviction of
Tenant, constructive or otherwise, entitle Tenant to an abatement of rent or to
terminate this Lease or otherwise release Tenant from any of Tenant's
obligations under this Lease.
19. SURRENDER AND HOLDING OVER.
19.1 Surrender. Upon the expiration or termination of this Lease, Tenant
---------
shall surrender the Premises and all Tenant Improvements and Alterations to
Landlord broom-clean and in their original condition, except for reasonable wear
and tear, damage from casualty or condemnation and any changes resulting from
approved Alterations; however, that
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prior to the expiration or termination of this Lease Tenant shall remove all
telephone and other cabling installed in the Building by Tenant and remove from
the Premises all Tenant's personal property, Trade Fixtures and Alterations that
Tenant has the right or is required by Landlord to remove under the provisions
of this Lease, and repair any damage caused by such removal. If such removal is
not completed before the expiration or termination of the Term, Landlord shall
have the right (but no obligation) to remove the same, and Tenant shall pay
Landlord on demand for all costs of removal and storage thereof and for the
rental value of the Premises for the period from the end of the Term through the
end of the time reasonably required for such removal. Landlord shall also have
the right to retain or dispose of all any portion of such property if Tenant
does not pay all such costs and retrieve the property within ten (10) days after
notice from Landlord (in which event title to all such property described in
landlord's notice shall be transferred to and vest in Landlord). Tenant waives
all Claims against Landlord for any damage or loss to Tenant resulting from
Landlord's removal, storage, retention, or disposition of any such property.
Upon expiration or termination of this Lease or of Tenant's possession,
whichever is earliest, Tenant shall surrender all keys to the Premises or any
other part of the Building and shall deliver to Landlord all keys for or make
known to landlord the combination of locks on all safes, cabinets and vaults
that may be located in the Premises. Tenant's obligations under this Section
shall survive the expiration or termination of this Lease.
19.2 Holding Over. If Tenant (directly or through any Transferee or other
------------
successor-in-interest of Tenant) remains in possession of the Premises after the
expiration or termination of this Lease, Tenant's continued possession shall be
on the basis of a tenancy at the sufferance of Landlord. In such event, Tenant
shall continue to comply with or perform all the terms and obligations of Tenant
under this Lease, except that the monthly Base Rent during Tenant's holding over
shall be twice the Base Rent payable in the last full month prior to the
termination hereof. Acceptance by Landlord of rent after such termination shall
not constitute a renewal of this Lease; and nothing contained in this provision
shall be deemed to waive Landlord's right of re-entry or any other right
hereunder or at law. Tenant shall indemnify, defend and hold Landlord harmless
from and against all Claims arising or resulting directly or indirectly from
Tenant's failure to timely surrender the Premises, including (i) any rent
payable by or any loss, cost, or damages claimed by any prospective tenant of
the Premises, and (ii) Landlord's damages as a result of such prospective tenant
rescinding or refusing to enter into the prospective lease of the Premises by
reason of such failure to timely surrender the Premises.
20. ENCUMBRANCES.
20.1 Subordination. This Lease is expressly made subject and subordinate
-------------
to any mortgage, deed of trust, ground lease, underlying lease or like
encumbrance affecting any part of the Property or any interest of Landlord
therein which is now existing or hereafter executed or recorded ("ENCUMBRANCE");
provided, however, that such subordination shall only be effective, as to future
Encumbrances, if the holder of the Encumbrance agrees that this Lease shall
survive the termination of the Encumbrance by lapse of time, foreclosure or
otherwise so long as Tenant is not in default under this Lease. Provided the
conditions of the preceding sentence are satisfied, Tenant shall execute and
deliver to Landlord, within ten (10) days after written request therefor
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by Landlord an in a form reasonably requested by Landlord, any additional
documents evidencing the subordination of this Lease with respect to any such
Encumbrance and the nondisturbance agreement of the holder of any such
Encumbrance. If the interest of Landlord in the Property is transferred pursuant
to or in lieu of proceedings for enforcement of any Encumbrance, Tenant shall
immediately and automatically attorn to the new owner, and this Lease shall
continue in full force and effect as a direct lease between the Purchaser and
Tenant on the terms and conditions set forth in this Lease.
20.2 Mortgagee Protection. Tenant agrees to give and holder of any
--------------------
Encumbrance covering any part of the Property ("MORTGAGEE"), by registered mail,
a copy of any notice of default served upon Landlord, provided that prior to
such notice Tenant has been notified in writing (by way of notice of assignment
of rents and leases, or otherwise) of the address of such Mortgagee. If Landlord
shall have failed to cure default within thirty (30) days from the effective
date of such notice of default, then the Mortgagee shall have an additional
thirty (30) days within which to cure such default or if such default cannot be
cured within that time, then such additional time as may be necessary to cure
such default (including the time necessary to foreclose of otherwise terminate
its Encumbrance, if necessary to effect such cure), and this Lease shall not
terminated so long as such remedies are being diligently pursued.
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 Estoppel Certificates. Within ten (10) days after written request
---------------------
therefor, Tenant shall execute and deliver to Landlord, in a form provided by or
satisfactory to Landlord, a certificate stating that this Lease is in full force
and effect, describing any amendments or modifications hereto, acknowledging
that this Lease is subordinate or prior, as the case may be, to any Encumbrance
and stating any other information Landlord may reasonably request, including the
Term, the monthly Base Rent, the date to which Rent has been paid, the amount of
any security deposit or prepaid rent, whether either party hereto is in default
under the terms of the Lease, and whether Landlord has completed its
construction obligations hereunder (if any). Any person or entity purchasing,
acquiring an interest in or extending financing with respect to the Property
shall be entitled to reply upon any such certificate. If Tenant fails to deliver
such certificate within ten (10) days after Landlord's second written request
therefor, Tenant shall be liable to Landlord for any damages incurred by
Landlord including any profits or other benefits from any financing of the
Property or any interest therein which are lost or made unavailable as a result,
directly or indirectly, of Tenant's failure or refusal to timely execute or
deliver such estoppel certificate.
21.2 Financial Statements. Upon request by Landlord, not more than once a
--------------------
year, Tenant shall deliver to Landlord a copy of Tenant's financial statements
(including at least a year end balance sheet and a statement of profit and loss)
for each of the three most recently completed years, prepared in accordance with
generally accepted accounting principles (and, if such is Tenant's normal
practice, audited by an independent certified public accountant), all then
available subsequent interim statements, and such other financial information as
may reasonably be requested by Landlord or required by any Mortgagee (provided,
however, that Tenant's
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obligations pursuant to this provision shall be limited to furnishing copies of
financial statements then available to Tenant; Tenant shall not be required to
prepare new financial statements in response to a request by Landlord under this
provision).
22. NOTICES. Any notice, demand, request, consent or approval that either party
desires or is required to give to the other party under this Lease shall be in
writing and shall be served personally, delivered by messenger or courier
service, or sent by U.S. certified mail, return receipt requested, postage
prepaid, addressed to the other party at the party's address for notices set
forth in the Basic Lease Information. Notices delivered personally will be
effective immediately upon receipt (or refusal of delivery or receipt); notices
sent by independent messenger or courier service will be effective one (1) day
after acceptance by the independent service for delivery; notices sent by mail
in accordance with this Section will be effective three (3) days after mailing.
Either party may change its address for notices hereunder by a notice to the
other party complying with this Section. If Tenant sublets the Premises,
notices from Landlord shall be effective on the subtenant when given to Tenant
pursuant to this Section.
23. ATTORNEYS' FEES.
23.1 Disputes between Landlord and Tenant. In the event of any litigation
------------------------------------
or arbitration regarding any rights and obligations under this Lease, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
court costs in addition to any other relief which may be granted. The
"prevailing party" shall mean the party receiving substantially the relief
desired, whether by settlement, dismissal, summary judgment, judgment, or
otherwise.
23.2 Other Litigation. If Landlord, without gross negligence or other
----------------
fault on Landlord's part, is made a party to any litigation instituted by Tenant
or by any third party against Tenant, or by or against any Transferee or other
occupant of the Premises or otherwise arising out of or resulting from any act
or transaction of Tenant or of any such Transferee or occupant, Tenant shall
hold Landlord harmless from any judgment rendered against Landlord or the
Premises or any part thereof, and reimburse Landlord upon demand for all costs
and expenses, including reasonable attorneys' fees, incurred by Landlord in or
in connection with such litigation.
24. QUIET POSSESSION. Subject to Tenant's full and timely performance of all of
Tenant's obligations under this Lease and subject to the terms of this Lease,
including Section 20 - Encumbrances, Tenant shall have the quiet possession of
the Premises throughout the Term as against any persons or entities lawfully
claiming by, through or under Landlord.
25. SECURITY MEASURES. Landlord may, but shall be under no obligation to,
implement security measures for the Property, such as the registration or search
of all persons entering or leaving the Building, requiring identification for
access to the Building, evacuation of the Building for cause, suspected cause,
or for drill purposes, the issuance of magnetic pass cards or keys for Building
or elevator access and other actions that Landlord deems necessary or
appropriate to prevent any threat of property loss or damage, bodily injury or
business
26
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interruption; provided, however, that such measures shall be implemented in a
way as not to inconvenience tenants of the Building unreasonably. Landlord shall
at all times have the right to change, alter or reduce any such security
services or measures. Tenants shall cooperate and comply with, and cause
Tenant's Representatives and Visitors to cooperate and comply with, such
security measures. Landlord, its agents and employees shall have no liability to
Tenant or its Representatives or Visitors for the implementation or exercise of,
or the failure to implement or exercise, any such security measures or for any
resulting disturbance of Tenant's use or enjoyment of the Premises.
26. FORCE MAJEURE. If Landlord is delayed, interrupted or prevented from
performing any of its obligations under this Lease, including its obligations
under the Construction Rider (if any), and such delay, interruption or
prevention is due to fire, act of God, governmental act or failure to act, labor
dispute, unavailability of materials or any cause outside the reasonable control
of Landlord, then the time for performance of the affected obligations of
Landlord shall be extended for a period equivalent to the period of such delay,
interruption or prevention.
27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply with the
rules and regulations attached to and made a part of this Lease as Exhibit C to
---------
the extent those rules and regulations are not in conflict with the terms of
this Lease, as well as any reasonable rules and regulations hereafter adopted by
Landlord for all tenants of the Building, upon notice to Tenant thereof
(collectively, the "BUILDING RULES"). Landlord shall not be responsible to
Tenant or to any other person for any violation of, or failure to observe, the
Building Rules by any other tenant or other person.
28. LANDLORD'S LIABILITY. The term "Landlord," as used in this Lease, shall
mean only the owner or owners of the Building at the time in question. In the
event of any conveyance of title to the Building, then from and after the date
of such conveyance, the transferor Landlord shall be relieved of all liability
with respect to Landlord's obligations to be performed under this Lease after
the date of such conveyance. Notwithstanding any other term or provision of this
Lease, the liability of Landlord for its obligations under this Lease is limited
solely to Landlord's interest in the Building as the same may from time to time
be encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against Landlord's partners
or members or its or their respective partners, shareholders, members,
directors, officers or managers on account of any of Landlord's obligations or
actions under this Lease.
29. CONSENTS AND APPROVALS.
29.1 Determination in Good Faith. Wherever the consent, approval, judgment
---------------------------
or determination of Landlord is required or permitted under this Lease, Landlord
may exercise its good faith business judgment in granting or withholding such
consent or approval or in making such judgment or determination without
reference to any extrinsic standard of reasonableness, unless the provision
providing for such consent, approval, judgment or determination specifies that
Landlord's consent or approval is not to be unreasonably withheld, or that such
judgment or
<PAGE>
determination is to be reasonable, or otherwise specifies the standards under
which Landlord may withhold its consent. If it is determined that Landlord
failed to give its consent where it was required to do so under this Lease,
Tenant shall be entitled to injunctive relief but shall not to be entitled to
monetary damages or to terminate this Lease for such failure.
29.2 No Liability Imposed on Landlord. The review and/or approval by
--------------------------------
Landlord of any item or matter to be reviewed or approved by Landlord under the
terms of this Lease or any Exhibits or Addenda hereto shall not impose upon
Landlord any liability for the accuracy or sufficiency of any such item or
matter or the quality or suitability of such item for its intended use. Any such
review or approval is for the sole purpose of protecting Landlord's interest in
the Property, and no third parties, including Tenant or the Representatives and
Visitors of Tenant or any person or entity claiming by, through or under Tenant,
shall have any rights as a consequence thereof.
30. BROKERS. Landlord shall pay the fee or commission of the broker or brokers
identified in the Basic Lease Information (the "BROKER") in accordance with
Landlord's separate written agreement with the Broker, if any. Tenant warrants
and represents to Landlord that in the negotiating or making of this Lease
neither Tenant nor anyone acting on Tenant's behalf has dealt with any broker or
finder who might be entitled to a fee or commission for this Lease other than
the Broker. Tenant shall indemnify and hold Landlord harmless from any claim or
claims, including costs, expenses and attorney's fees incurred by Landlord
asserted by any other broker or finder for a fee or commission based upon any
dealings with or statements made by Tenant or Tenant's Representatives.
31. RELOCATION OF PREMISES. [Provisions intentionally deleted].
32. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Addenda
attached hereto, and the documents referred to herein, if any, constitute the
entire agreement between Landlord and Tenant with respect to the leasing of
space by Tenant in the Building, and supersede all prior or contemporaneous
agreements, understandings, proposals and other representations by or between
Landlord and Tenant, whether written or oral. Neither Landlord nor Landlord's
agents have made any representations or warranties with respect to the Premises,
the Building, the Project or this Lease except as expressly set forth herein,
and no rights, easements or licenses shall be acquired by Tenant by implication
or otherwise unless expressly set forth herein. The submission of this Lease for
examination does not constitute an option for the Premises and this Lease shall
become effective as a binding agreement only upon execution and delivery thereof
by Landlord to Tenant.
33. MISCELLANEOUS. This Lease may not be amended or modified except by a
writing signed by Landlord and Tenant. Subject to Section 14 - Assignment and
Subletting and Section 28 - Landlord's Liability, this Lease shall be binding on
and shall inure to the benefit of the parties and their respective successors,
assigns and legal representatives. The determination that any provisions hereof
may be void, invalid, illegal or unenforceable shall not impair any other
provisions hereof and all such other provisions of this Lease shall remain in
full force and effect.
28
<PAGE>
The unenforceability, invalidity or illegality of any provision of this Lease
under particular circumstances shall not render unenforceable, invalid or
illegal other provisions of this Lease, or the same provisions under other
circumstances. This Lease shall be construed and interpreted in accordance with
the laws (excluding conflict of laws principles) of the State in which the
Building is located. The provisions of this Lease shall be construed in
accordance with the fair meaning of the language used and shall not be strictly
construed against either party. When required by the context of this Lease, the
singular includes the plural. Wherever the term "including" is used in this
Lease, it shall be interpreted as meaning "including, but not limited to" the
matter or matters thereafter enumerated. The captions contained in this Lease
are for purposes of convenience only and are not to be used to interpret or
construe this Lease. If more than one person or entity is identified as Tenant
hereunder, the obligations of each and all of them under this Lease shall be
joint and several. Time is of the essence with respect to this Lease, except as
to the conditions relating to the delivery of possession of the Premises to
Tenant. Neither Landlord nor Tenant shall record this Lease.
34. AUTHORITY. If Tenant is a corporation, partnership, limited liability
company or other form of business entity, each of the persons executing this
Lease on behalf of Tenant warrants and represents that Tenant is a duly
organized and validly existing entity, that Tenant has full right and authority
to enter into this Lease and that the persons signing on behalf of Tenant are
authorized to do so and have the power to bind Tenant to this Lease. Tenant
shall provide Landlord upon request with evidence reasonably satisfactory to
Landlord confirming the foregoing representations.
29
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of
the date first above written.
TENANT: LANDLORD:
ASSESSMENT SYSTEMS, INC., PRUNEYARD ASSOCIATES, LLC,
a New York corporation a California limited liability company
By: /s/
------------------------ By: OPPORTUNITY CAPITAL PARTNERS,
Name: William Fucarino
----------------- L.P., a California limited partnership,
Title: Chief Financial Managing Member
Officer
----------------- By: OFFICE OPPORTUNITY
CORPORATION, a California corporation
General Partner
By: By: /s/
--------------------------- ----------------------------
Name: Name: DAVID
-------------------- ----------------------
Title: Title: /s/
-------------------- ---------------------
30
<PAGE>
EXHIBIT A
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF JANUARY 25, 1996
BETWEEN
PRUNEYARD ASSOCIATES, LLC, AS LANDLORD,
AND
ASSESSMENT SYSTEMS, INC., AS TENANT (the "LEASE")
[FLOOR PLAN APPEARS HERE]
EXHIBIT A, Page 1
<PAGE>
EXHIBIT B
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF JANUARY 25, 1996
BETWEEN
PRUNEYARD ASSOCIATES, LLC, AS LANDLORD,
AND
ASSESSMENT SYSTEMS, INC., AS TENANT (the "LEASE")
CONSTRUCTION RIDER
------------------
1. Tenant Improvements. Landlord shall with reasonable diligence through a
-------------------
contractor designated by Landlord (which contractor may be an affiliate of
Landlord), construct and install in the Premises the improvements and fixtures
provided for in this Construction Rider ("Tenant Improvements").
1.1 Plans. The Tenant Improvements shall be constructed and installed
-----
substantially as shown on the plans prepared by S.J. Sung & Associates and
approved in writing by Landlord and Tenant (the "Final Construction Documents").
1.2 Construction. Landlord shall proceed with reasonable diligence to
------------
cause the Tenant Improvements to be Substantially Completed on or prior to the
Scheduled Commencement Date. The Tenant Improvements shall be deemed to be
"Substantially Completed" when they have been completed in accordance with the
Final Construction Documents except for finishing details, minor omissions,
decorations and mechanical adjustments of the type normally found on an
architectural "punch list". (The definition of Substantially Completed shall
also define the terms "Substantial Completion" and "Substantially Complete.")
Following Substantial Completion of the Tenant Improvements and before
Tenant takes possession of the Premises, Landlord and Tenant shall inspect the
Premises and jointly prepare a "punch list" of agreed items of construction
remaining to be completed. Landlord shall complete the items set forth in the
punch list as soon as reasonably possible. Tenant shall cooperate with and
accommodate Landlord and its workers in completing the items on the punch list.
1.3 Cost of Tenant Improvements. Landlord shall pay for the cost of
---------------------------
design, construction and installation of the Tenant Improvements in accordance
with the Final Construction Documents, except with respect to any items shown or
noted as being not included ("N.I.C.") or as Tenant options or Tenant-cost
items (the cost of which shall be borne by Tenant).
EXHIBIT B, Page 1
<PAGE>
1.4 Changes. If Tenant requests any change, addition or alteration in
-------
or to any Final Construction Documents ("Changes") Landlord shall cause the
space planner or architect designated by Landlord (the "Space Planner") to
prepare additional Plans implementing such Change. As soon as practicable after
the completion of such additional Construction Documents, Landlord shall notify
Tenant of the estimated cost of the Changes. Within three (3) working days after
receipt of such cost estimate, Tenant shall notify Landlord in writing whether
Tenant approves the Change. If Tenant approves the Change, Landlord shall
proceed with the Change and Tenant shall be liable for any Additional Cost
resulting from the Change. If Tenant fails to approve the Change within such
three (3) day period, construction of the Tenant Improvements shall proceed as
provided in accordance with the original Final Construction Documents.
1.5 Delays. Tenant shall be responsible for, and shall pay to Landlord,
------
any and all costs and expenses incurred by Landlord in connection with any delay
in the commencement or completion of any Tenant Improvements and any increase in
the cost of Tenant Improvements caused by (i) Tenant's failure to submit
information to the Space Planner or approve any Space Plan, Construction
Documents or cost estimates within the time periods required herein, (ii) any
delays in obtaining any items or materials constituting part of the Tenant
Improvements requested by Tenant, (iii) any Changes, or (iv) any other delay
requested or caused by Tenant (collectively, "Tenant Delays").
2. Delivery or Premises. Upon Substantial Completion of the Tenant
--------------------
Improvements, Landlord shall deliver possession of the Premises to Tenant. If
Landlord has not Substantially Completed the Tenant Improvements and tendered
possession of the Premises to Tenant on or before the Scheduled Commencement
Date specified in Section 2 - Term; Possession of the Lease, or if Landlord is
unable for any other reason to deliver possession of the Premises to Tenant on
or before such date, neither Landlord nor its representatives shall be liable to
Tenant for any damage resulting from the delay in completing such construction
obligations and/or delivering possession to Tenant and the Lease shall remain in
full force and effect unless and until it is terminated under the express
provisions of this Paragraph. If any delays in Substantially Completing the
Tenant Improvements are attributable to Tenant Delays, then the Premises shall
be deemed to have been Substantially Completed and delivered to Tenant on the
date on which Landlord could have Substantially Completed the Premises and
tendered the Premises to Tenant but for such Tenant Delays.
Notwithstanding the foregoing, if the Commencement Date has not occurred or
been deemed to have occurred within three months days after the Scheduled
Commencement Date, either party, by written notice to the other party given
within ten (10) days after the expiration of such three month period, may
terminate this Lease without any liability to the other party; provided,
however, that if the delay in the Commencement Date is caused by delays of the
type described in Section 26 - Force Majeure of the Lease, and if Tenant elects
to terminate as provided above, then Tenant shall reimburse Landlord, within
thirty (30) days after receipt of notification from Landlord of the amounts due,
for any amounts expended by Landlord for the construction and installation of
the Tenant Improvements. If Tenant fails to perform any of Tenant's obligations
under this Construction Rider within the time periods specified herein,
EXHIBIT B, Page 2
<PAGE>
Landlord may, in lieu of terminating the Lease under the foregoing provisions,
treat such failure of performance as an Event of Default under the Lease.
3. Access to Premises. Landlord shall allow Tenant or Tenant's
------------------
Representatives to enter the Premises prior to the Commencement Date to permit
Tenant to make the Premises ready for its use and occupancy; provided, however,
that prior to such entry of the Premises, Tenant shall provide evidence
reasonably satisfactory to Landlord that Tenant's insurance, as described in
Section 11.1 - Tenant's Insurance of the Lease, shall be in effect as of the
time of such entry. Such permission may be revoked at any time upon twenty-four
(24) hours' notice, and Tenant and its Representatives shall not interfere with
Landlord or Landlord's contractor in completing the Building or the Tenant
Improvements.
Tenant agrees that Landlord shall not be liable in any way for any injury,
loss or damage which may occur to any of Tenant's property placed upon or
installed in the Premises prior to the Commencement Date, the same being at
Tenant's sole risk, and Tenant shall be liable for all injury, loss or damage to
persons or property arising as a result of such entry of the Premises by Tenant
or its Representatives.
4. Ownership of Tenant Improvements. All Tenant Improvements, whether
--------------------------------
installed by Landlord or Tenant, shall become a part of the Premises, shall be
the property of Landlord and, subject to the provisions of the Lease, shall be
surrendered by Tenant with the Premises, without any compensation to Tenant, at
the expiration or termination of the Lease, in accordance with the provisions of
the Lease.
EXHIBIT B, Page 3
<PAGE>
EXHIBIT C
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF JANUARY 25, 1996
BETWEEN
PRUNEYARD ASSOCIATES, LLC, AS LANDLORD,
AND
ASSESSMENT SYSTEMS, INC., AS TENANT (the "LEASE")
BUILDING RULES
--------------
The following Building Rules are additional provisions of the foregoing
Lease to which they are attached. The capitalized terms used herein have the
same meanings as these terms are given in the Lease.
1. Use of Common Areas. Tenant will not obstruct the sidewalks, halls,
-------------------
passages, exits, entrances, elevators or stairways of the Building ("Common
Areas"), and Tenant will not use the Common Areas for any purpose other than
ingress and egress to and from the Premises. The Common Areas, except for the
sidewalks, are not open to the general public and Landlord reserves the right to
control and prevent access to the Common Areas of any person whose presence, in
Landlord's opinion, would be prejudicial to the safety, reputation and interests
of the Building and its tenants.
2. No Access to Roof. Tenant has no right of access to the roof of the
-----------------
Building and will not install, repair or replace any antenna, aerial, aerial
wires, fan, air-conditioner or other device on the roof of the Building, without
the prior written consent of the Landlord. Any such device installed without
such written consent is subject to removal at Tenant's expense without notice at
any time. In any event Tenant will be liable for any damages or repairs
incurred or required as a result of its installation, use, repair, maintenance
or removal of such devices on the roof and agrees to indemnify and hold harmless
Landlord from any liability, loss, damage, cost or expense, including reasonable
attorney's fees, arising from any activities of Tenant or of Tenant's
Representatives on the roof of the Building.
3. Signage. No sign, placard, picture, name, advertisement or notice
-------
visible from the exterior of the Premises will be inscribed, painted, affixed or
otherwise displayed by Tenant on or in any part of the Building without the
prior written consent of Landlord. Landlord reserves the right to adopt and
furnish Tenant with general guidelines relating to signs in or on the Building.
All approved signage will be inscribed, painted or affixed at Tenant's expense
by a person approved by Landlord, which approval will not be unreasonably
withheld.
EXHIBIT C, Page 1
<PAGE>
4. Prohibited Uses. The Premises will not be used for manufacturing, for
---------------
the storage of merchandise held for sale to the general public, for lodging or
for the sale of goods to the general public. Tenant will not permit any food
preparation on the Premises except that Tenant may use Underwriters' Laboratory
approved equipment for brewing coffee, tea, hot chocolate and similar beverages
so long as such use is in accordance with all applicable federal, state and city
laws, codes, ordinances, rules and regulations.
5. Janitorial Services. Tenant will not employ any person for the
-------------------
purpose of cleaning the Premises or permit any person to enter the Building for
such purpose other than Landlord's janitorial service, except with Landlord's
prior written consent. Tenant will not necessitate, and will be liable for the
cost of, any undue amount of janitorial labor by reason of Tenant's carelessness
in or indifference to the preservation of good order and cleanliness in the
Premises. Janitorial service will not be furnished to areas in the Premises on
nights when such areas are occupied after 9:30 p.m., unless such service is
extended by written agreement to a later hour in specifically designated areas
of the Premises.
6. Keys and Locks. Landlord will furnish Tenant, free of charge, two
--------------
keys to each door or lock in the Premises. Landlord may make a reasonable
charge for any additional or replacement keys. Tenants will not duplicate any
keys, alter any locks or install any new or additional lock or bolt on any door
of its Premises or on any other part of the Building without the prior written
consent of Landlord and, in any event, Tenant will provide Landlord with a key
for any such lock. On the termination of the Lease, Tenant will deliver to
Landlord all keys to any locks or doors in the Building which have been obtained
by Tenant.
7. Freight. Upon not less than twenty-four hours prior notice to
-------
Landlord, which notice may be oral, an elevator will be made available for
Tenant's use for transportation of freight, subject to such scheduling as
Landlord in its discretion deems appropriate. Tenant shall not transport
freight in loads exceeding the weight limitations of such elevator. Landlord
reserves the right to prescribe the weight, size and position of all equipment,
materials, furniture or other property brought into the Building, and no
property will be received in the Building or carried up or down the freight
elevator or stairs except during such hours and along such routes and by such
persons as may be designated by Landlord. Landlord reserves the right to
require that heavy objects will stand on wood strips of such length and
thickness as is necessary to properly distribute the weight. Landlord will not
be responsible for loss of or damage to any such property from any cause, and
Tenant will be liable for all damage or injuries caused by moving or maintaining
such property.
8. Nuisances and Dangerous Substances. Tenant will not conduct itself or
----------------------------------
permit its agents, employees, contractors, or invitees to conduct themselves, in
the Premises or anywhere on or in the Property in a manner which is offensive or
unduly annoying to any other Tenant or Landlord's property managers. Tenant
will not install or operate any phonograph, radio receiver,
EXHIBIT C, Page 2
<PAGE>
musical instrument, or television or other similar device in any part of the
Common Areas and shall not operate any such device installed in the Premises in
such manner as to disturb or annoy other tenants of the Building. Tenant will
not use or keep in the Premises or the Property any kerosene, gasoline or other
combustible fluid or material other than limited quantities thereof reasonably
necessary for the maintenance of office equipment, or, without Landlord's prior
written approval, use any method of heating or air conditioning other than that
supplied by Landlord. Tenant will not use or keep any foul or noxious gas or
substance in the Premises or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants of
the Building by reason of noise, odors or vibrations, or interfere in any way
with other tenants or those having business therein. Tenants will not bring or
keep any animals in or about the Premises or the Property.
9. Building Name and Address. Without Landlord's prior written consent,
-------------------------
Tenant will not use the name of the Building in connection with or in promoting
or advertising Tenant's business except as Tenant's address.
10. Building Directory. A directory for the Building will be provided for
------------------
the display of the name and location of tenants. Landlord reserves the right to
approve any additional names Tenant desires to place in the directory and, if so
approved, Landlord may assess a reasonable charge for adding such additional
names.
11. Window Coverings. No curtains, draperies, blinds, shutters, shades,
----------------
awnings, screens or other coverings, window ventilators, hangings, decorations
or similar equipment shall be attached to, hung or placed in, or used in or with
any window of the Building without the prior written consent of Landlord, and
Landlord shall have the right to control all lighting within the Premises that
may be visible from the exterior of the Building.
12. Floor Coverings. Tenant will not lay or otherwise affix linoleum,
---------------
tile, carpet or any other floor covering to the floor of the Premises in any
manner except as approved in writing by Landlord. Tenant will be liable for the
cost of repair of any damage resulting from the violation of this rule or the
removal of any floor covering by Tenant or its contractors, employees or
invitees.
13. Wiring and Cabling. Landlord shall have the right to direct Tenant's
-------------------
electricians and other vendors as to where and how data, telephone and
electrical wires and cables are to be installed. No boring or cutting for wires
or cables will be allowed without the prior written consent of Landlord. The
location of burglar alarms, smoke detectors, telephones, call boxes and other
office equipment affixed to the Premises shall be subject to written approval of
Landlord.
14. Office Closing Procedures. Tenant will see that the doors of the
-------------------------
Premises are closed and locked and that all water faucets, water apparatus and
utilities are shut off before Tenant or its employees leave the Premises, so as
to prevent waste or damage. Tenant will be liable for all damage or injuries
sustained by other tenants or occupants of the Building or Landlord resulting
EXHIBIT C, Page 3
<PAGE>
from Tenant's carelessness in this regard or violation of this rule. Tenant will
keep the doors to the Building corridors closed at all times except for ingress
and egress.
15. Plumbing Facilities. The toilet rooms, toilets, urinals, wash bowls
-------------------
and other apparatus shall not be used for any purpose other than that for which
they were constructed and no foreign substance of any kind whatsoever shall be
disposed of therein. Tenant will be liable for any breakage, stoppage or damage
resulting from the violation of this rule by Tenant, its employees or invitees.
16. Use of Hand Trucks. Tenant will not use or permit to be used in the
------------------
Premises or in the Common Areas any hand trucks, carts or dollies except those
equipped with rubber tires and side guards or such other equipment as Landlord
may approve.
17. Refuse. Tenant shall store all Tenant's trash and garbage within the
------
Premises or in other facilities designated by Landlord for such purpose. Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in the city in which the Building is located without being in
violation of any law or ordinance governing such disposal. All trash and
garbage removal will be only through such Common Areas provided for such
purposes and at such times as Landlord may designate.
18. Soliciting. Canvassing, peddling, soliciting and distribution of
----------
handbills or any other written materials in the Building are prohibited, and
Tenant will cooperate to prevent the same.
19. Parking. Tenant will use, and will cause its agents, employees,
-------
contractors and invitees to use, the parking spaces to which it is entitled
under the Lease in a manner consistent with Landlord's directional signs and
markings in the Parking Facility. Specifically, but without limitation, Tenant
will not park, or permit its agents, employees, contractors or invitees to park,
in a manner that impedes access to and from the Building or the Parking Facility
or that violates space reservations for handicapped drivers registered as such
with the California Department of Motor Vehicles. Landlord may use such
reasonable means as may be necessary to enforce the directional signs and
markings in the Parking Facility, including but not limited to towing services,
and Landlord will not be liable for any damage to vehicles towed as a result of
non-compliance with such parking regulations.
20. Fire, Security and Safety Regulations. Tenant will comply with all
-------------------------------------
safety, security, fire protection and evacuation measures and procedures
established by Landlord or any governmental agency.
EXHIBIT C, Page 4
<PAGE>
21. Responsibility for Theft. Tenant assumes any and all responsibility
------------------------
for protecting the Premises from theft, robbery and pilferage, which includes
keeping doors locked and other means of entry to the Premises closed.
22. Sales and Auctions. Tenant will not conduct or permit to be conducted
------------------
any sale by auction in, upon or from the Premises or elsewhere in the Property,
whether said auction be voluntary, involuntary, pursuant to any assignment for
the payment of creditors or pursuant to any bankruptcy or other insolvency
proceeding.
23. Moving Rules.
------------
(A) Moving hours are after 6:00 p.m., Monday through Friday and
weekends.
(B) Landlord will provide padding for the elevator cab. Elevator keys
will need to be picked up in advance from the building management office by a
representative from the moving company or by someone from Tenant's office.
Elevator doors may not be blocked at any time.
(C) No moving of any kind is allowed over the tiles in the lobby or
around the Building unless masonite or plywood has covered all portions of the
tile. In no event may the moving company drive onto or park on the sidewalk.
Masonite must also cover carpets in all common areas (hallways and elevator
lobbies).
(D) Vendors are required to provide Landlord with (a) statutory
workers' compensation insurance for all employees that are involved in the
performance of this work, (b) employer's liability insurance with minimum limits
of $1,000,000. William Wilson & Associates, Managing Agent, and Prune Yard
Associates, LLC, shall be named as additional insured under the public liability
and property damage insurance coverage.
(E) Moving arrangements must be made 24 hours in advance through the
building management office.
24. Enforcement. Landlord may waive any one or more of these Building
-----------
Rules for the benefit of any particular tenant or tenants, but no such waiver by
Landlord will be construed as a waiver of such Building Rules in favor of any
other tenant or tenants nor prevent Landlord from thereafter enforcing these
Building Rules against any or all of the tenants of the Building.
25. Effect on Lease. These Building Rules are in addition to, and shall
---------------
not be construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. Violation of these Building
Rules shall constitute an default under the Lease.
EXHIBIT C, Page 5
<PAGE>
26. Non-Discriminatory Enforcement. Subject to the provisions of the Lease
------------------------------
(and the provisions of other leases with respect to other tenants), Landlord
shall use reasonable efforts to enforce these Building rules in a
non-discriminatory manner, but in no event shall Landlord have any liability for
any failure to do so (and Tenant's sole and exclusive remedy for any such
failure or refusal shall be injunctive relief preventing Landlord from enforcing
any of the Building Rules against Tenant in a manner that discriminates against
Tenant).
27. Additional and Amended Rules. Landlord reserves the right to rescind
----------------------------
or amend these Building Rules and/or adopt any other and reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building and for the preservation of good order
therein.
EXHIBIT C, Page 6
<PAGE>
EXHIBIT D
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS OF JANUARY 25, 1996
BETWEEN
PRUNEYARD ASSOCIATES, LLC, AS LANDLORD,
AND
ASSESSMENT SYSTEMS, INC., AS TENANT (the "LEASE")
ASBESTOS NOTIFICATION
---------------------
In accordance with California law (Health & Safety Code Section
25915), we are writing to provide you with information concerning the presence
of asbestos-containing construction materials ("ACM") in your building.
ACM is present in spray-applied fireproofing on the structural steel
above suspended ceilings in the building, within vinyl floor sheeting in various
parts of the building, and within transit baffles of the cooling tower on the
roof. While ACM was found only in these locations, there are other construction
materials in the building that might contain asbestos, including insulation,
adhesives for floor and wall coverings, roofing materials, and gypsum drywall
mudding compound.
We have been advised that the presence of this ACM at the building,
undisturbed, should not present any health hazards. However, when ACM is broken
up or disturbed, asbestos fibers may become airborne, and exposure to high
levels of airborne asbestos has been associated with an increased incidence of
cancer and respiratory disease. In order to preserve the air quality in the
building and prevent exposure to ACM, any activity that could disturb this
material should be undertaken with care and in accordance with applicable law
and your lease. As a general rule, you should not move, drill or bore any floor,
wall or ceiling panel, attempt to clean textured ceilings, raise suspended
ceiling panels or handle air filters. You should review any contemplated
improvements, alterations, repairs, or other construction with us well in
advance.
The building management has developed and implemented an asbestos
management plan, which provides for the training of custodial and operations and
maintenance personnel in proper techniques and work practices for working in
the building, procedures for monitoring the condition of ACM, procedures for
responding to emergency asbestos fiber releases, and recordkeeping to document
the plan's implementation. The plan is available for your inspection at our
offices during business hours, and a copy of the plan will also be provided to
you if you so request.
Please be aware that you will be responsible for complying with all
legal requirements for notifying your own employees, contractors, subtenants and
agents, if any, of the information contained in this letter. Please contact us
at 408/371-4700 if you have any questions or would like more information
regarding the use and management of ACM in the building.
EXHIBIT D, Page 1
<PAGE>
EXHIBIT E
---------
ATTACHED TO AND FORMING A PART OF
LEASE AGREEMENT
DATED AS
BETWEEN
PRUNEYARD ASSOCIATES, L.P., AS LANDLORD,
AND
JANITORIAL SPECIFICATIONS
-------------------------
MAIN LOBBY
Daily Services - Five (5) days per week.
1. Dust mop hard surface floors and stairwells.
Spot mop with clean water where needed. Remove matter such as gum and
tar which has adhered to the floor.
2. Vacuum all carpeted areas. Spot clean and remove any gum or tar which
has adhered to the floor.
3. Dust all baseboards, ledges, molding, depositories and window frames.
4. Clean cigarette urns. Replace sand as required.
5. Spot clean all metal trim work, removing fingerprints, smudges, water
and other marks.
6. Spot clean all doors, door frames, walls and light switches to remove
fingerprints, spills and other markings.
7. Wash glass on entrance doors, spot clean building directory.
8. Spot clean all wall surfaces to six feet.
9. Clean all entry thresholds and entry pushplates.
ELEVATOR LANDINGS - HALLS AND COMMON AREAS
Daily Services - Five (5) days per week.
1. Empty and damp wipe clean all ash trays and sand urns.
2. Spot clean carpeted floor surfaces.
3. Vacuum carpeted floor surfaces.
4. Dust and spot clean vertical surfaces.
5. Check exit doors and lights.
6. Clean and sanitize all driving fountains.
7. Clean all baseboards.
8. Dust and clean tenant directory signs.
Weekly Services
1. Vacuum air supply and exhaust diffusers.
2. Buff main lobby floor.
3. Dust and clean glass on firehouse boxes.
<PAGE>
RESTROOM SERVICES
DAILY SERVICES - FIVE (5) DAYS PER WEEK.
1. Empty and wipe clean receptacles and dispose of trash.
2. Replenish supplies: towels, tissue, etc.
3. Thoroughly sweep and damp mop all floors with disinfectant.
4. Clean and disinfect seats, bowls and urinals; all surfaces to be wiped
dry.
5. Clean and wipe dry basins.
6. Spot wash doors, partitions and walls.
7. Clean and polish mirrors, shelves and bright work.
8. Empty and wash clean ash trays.
9. Damp wipe and dry all ledges.
WEEKLY SERVICES
1. Wash down all ceramic walls and all toilet compartments.
2. Wash down all containers for toilet tissue, paper towels, rubbish and
sanitary napkins.
3. Perform high dusting and vacuum vents.
4. Pour clean water with germicidal solution in urinal traps, lavatory
traps and toilet bowls.
QUARTERLY SERVICES
1. Scrub and refinish tile floors.
PASSENGER ELEVATORS, SERVICE ELEVATOR
DAILY SERVICES - FIVE (5) DAYS PER WEEK.
1. Clean and polish exterior and interior elevator doors and interior of
cabs.
2. Vacuum door tracks.
3. Wipe and polish switch plates and all metal work.
4. Dust interior light plastics.
5. Keep elevator thresholds polished.
6. Spot clean carpeted flooring.
MONTHLY SERVICES
1. Scrub and refinish elevator flooring.
STAIRWAYS AND LANDINGS
DAILY SERVICES - FIVE (5) DAYS PER WEEK.
1. Check for trash and refuse.
2. Damp mop to remove spillage as required.
WEEKLY SERVICES
1. Sweep all stairs and landings.
2.
<PAGE>
2. Dust all railings.
OFFICE AREAS
DAILY SERVICES - FIVE (5) DAYS PER WEEK.
1. Empty ash trays and damp wipe clean.
2. Empty waste containers, wipe clean and dispose of trash.
3. Dust furniture: desks, chairs, tables and cabinets.
4. Vacuum carpeted floor surfaces.
5. Spot clean carpeted floor surfaces.
6. Clean with chemically treated dust mop resilient floor surfaces.
7. Wet mop resilient floor surfaces where necessary.
8. Spot clean partitions, partition glass, doors, casings and switch
plates.
9. Dust sills and ledges.
10. Clean and disinfect drinking fountains.
11. Clean all baseboards.
12. Lock doors on completion of work and leave on only designated lights.
13. Clean all glass tops with glass cleaner solution and cloth.
14. Spot clean all metal trim work removing fingerprints, smudges, water
and other markings.
WEEKLY SERVICES
1. Clean receiving and speaking end of telephones.
2. Remove fingerprints from woodwork, walls and partitions.
3. Dust picture frames and clean glass.
MONTHLY SERVICES
1. Perform high dusting, i.e. door sashes, tops of partitions, etc.
2. Clean wall and ceiling vents, grills and air conditioning supply and
exhaust diffusers.
3. Vacuum upholstered furniture.
4. Edge vacuum carpeting.
5. Sweep floors in air conditioning and equipment rooms.
RESILIENT TILE FLOOR SURFACES
MONTHLY SERVICES
1. Program scrub and refinish to maintain bright and scruff-free surface.
SEMI-ANNUAL SERVICES
1. Completely strip resilient floor surfaces, apply floor finish and
buff.
WINDOW CLEANING - ADDITIONAL CHARGE
1. Clean all exterior window glass upon request at an additional charge.
2. Clean all interior window glass upon request.
3.
<PAGE>
TRASH REMOVAL FOR ALL AREAS OF BUILDING
1. Trash to be contained and removed to dumpster provided by customer.
GENERAL REQUIREMENTS
1. The Contractor offers to be available for periodic meetings as
required with the Property Management to inspect the building and
discuss the quality of work performed. The Contractor will be
available with the management for any messages or cleaning requests.
2. In conjunction with the Property Management, the Contractor offers to
perform a public relations function as this relates to his cleaning
duties.
3. The name, social security number and address for each person assigned
to the project will be made available to the Property Management upon
request for security and/or other purposes.
4. Minimum lights will be used in the process of cleaning and all lights
will be turned off as cleaning is completed.
5. The Contractor's storage areas and janitorial closets will be
maintained in a neat, clean, orderly and safe condition. The
Contractor will supply all equipment and cleaning supplies.
6. Cleaning agents will be of acceptable quality and in standard use in
the cleaning industry. No abrasive cleaner or pads will be used on
chrome, stainless steel, aluminum or porcelain surfaces or any
surfaces where their use would tend to wear down or scratch the
surfaces.
7. COMMON AREA: carpets will be maintained on an as needed basis, spot
cleaned and/or shampooed.
8. MARBLE LOBBY: Maintain and polish floor as needed. Refinish is to be
determined by Management and will required an extra charge.
9. PROPERTY MANAGEMENT: reserves the right to amend janitorial
operations if and when needed; however, services shall remain
consistent with other first class office buildings or industrial
facilities in San Mateo and Santa Clara Valley.
4.
<PAGE>
Exhibit 16.1
William W. Oliver, C.P.A.
January 24, 1997
Securities and Exchange Commission
Washington, D.C. 20549
I was previously principal accountant for Assessment Solutions Incorporated
and, under date of June 24, 1994, I reported on the financial statements as of
and for the year ended March 31, 1994. During the fiscal year ended March 31,
1995 my appointment was terminated.
I have read ASI Solutions Incorporated's statement under the caption "Change
in Independent Accountants" included in the Registration Statement on Form S-1
to be filed with the Securities and Exchange Commission to be filed on or
about January 24, 1997 and am in agreement with the statements contained
therein.
Very truly yours,
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES
1. Assessment Solutions Incorporated/1/
State of Incorporation: New York
2. Proudfoot Reports Incorporated/2/
State of Incorporation: New York
3. C3 Solutions Incorporated
State of Incorporation: New York
- -------------------------------
/1/ Originally incorporated as Assessment Systems Incorporated, but changed
its corporate name to Assessment Solutions Incorporated on or around November
12, 1996.
/2/ Originally incorporated as PRI Acquisitions, Inc., but changed its
corporate name to Proudfoot Reports Incorporated on or around January 27, 1987.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated June 18, 1996, except as to the information presented in Note
11, for which the date is January 16, 1997, on our audits of the consolidated
balance sheet of ASI Solutions Incorporated as of March 31, 1996 and the
combined balance sheet of Assessment Solutions Incorporated and Proudfoot
Reports Incorporated and the combined statements of income, stockholders'
equity and cash flows for each of the three years ended March 31, 1996. We
also consent to the reference to our firm under the caption "Experts."
New York, New York
January 24, 1997
<PAGE>
Exhibit 23.3
ASI Solutions Incorporated
780 Third Avenue
New York, NY 10017
With regard to the submission of your registration statement Form S-1 to the
Securities and Exchange Commission on or about January 24, 1997, consent
hereby is given (1) to include my recently issued report, dated June 24, 1994,
(relating to the statements of income, stockholders' equity and cash flows of
Assessment Solutions Incorporated for the year ended March 31, 1994 not
presented separately therein) appearing in the Prospectus that is part of the
Form S-1 and (2) to refer to me in that Prospectus as an expert in accounting
and auditing in connection with the aforementioned report and financial
statements.
William W. Oliver, CPA
New York, New York
January 24, 1997
/s/ William W. Oliver, C.P.A.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from ASI
Solutions Incorporated Consolidated Balance Sheets as of March 31, 1996 and
September 30, 1996 and the Consolidated Statements of Income for the fiscal year
ended March 31, 1996 and the six months ended September 30, 1996
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> MAR-31-1996 SEP-30-1996
<PERIOD-START> APR-01-1995 APR-01-1996
<PERIOD-END> MAR-31-1996 SEP-30-1996
<CASH> 70 122
<SECURITIES> 0 0
<RECEIVABLES> 2,053 2,991
<ALLOWANCES> (24) (24)
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,226 3,258
<PP&E> 1,483 2,204
<DEPRECIATION> 963 1,070
<TOTAL-ASSETS> 3,179 4,975
<CURRENT-LIABILITIES> 1,696 2,740
<BONDS> 0 0
0 0
0 0
<COMMON> 46 46
<OTHER-SE> 1,287 2,043
<TOTAL-LIABILITY-AND-EQUITY> 3,179 4,975
<SALES> 10,558 8,053
<TOTAL-REVENUES> 10,558 8,053
<CGS> 5,207 3,584
<TOTAL-COSTS> 9,147 6,223
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2 34
<INCOME-PRETAX> 1,413 1,796
<INCOME-TAX> 681 1,041
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 732 755
<EPS-PRIMARY> 0.16 0.16
<EPS-DILUTED> 0 0
</TABLE>
