AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1998
REGISTRATION STATEMENT 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEW JERSEY 2750 22-3561164
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
629 GROVE STREET
JERSEY CITY, NEW JERSEY 07310
(201) 217-1990
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
MR. MICHAEL R. CUNNINGHAM
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
629 GROVE STREET
JERSEY CITY, NEW JERSEY 07310
(201) 217-1990
(Name, Address Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
----------------
Copies of Communications to:
<TABLE>
<S> <C>
JEFFREY A. BAUMEL, ESQ. JEFFREY S. LOWENTHAL, ESQ.
LAWRENCE A. GOLDMAN, ESQ. STROOCK & STROOCK & LAVAN LLP
GIBBONS, DEL DEO, DOLAN, 180 MAIDEN LANE
GRIFFINGER & VECCHIONE, P.C. NEW YORK, NEW YORK 10038
ONE RIVERFRONT PLAZA (212) 806-5400
NEWARK, NEW JERSEY 07102
(973) 596-4500
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS MAXIMUM MAXIMUM AMOUNT
OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OF
TO BE REGISTERED REGISTERED(1) PER SECURITY(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par value..... 2,415,000 $ 13.00 $31,395,000 $9,262
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes 315,000 shares of Common Stock subject to an over-allotment option
granted to the Underwriter by the Company.
(2) Estimated solely for purposes of calculating the registration fee.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 19, 1998
PROSPECTUS
2,100,000 SHARES
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
COMMON STOCK
Cunningham Graphics International, Inc. (the "Company" or "CGII") is hereby
offering (the "Offering") 2,100,000 shares of the Company's common stock, no par
value per share (the "Common Stock"). Prior to the Offering, there has been no
public market for the Common Stock. It is anticipated that the initial public
offering price will be between $11.00 and $13.00 per share. See "Underwriting"
for information relating to the factors to be considered in determining the
initial public offering price. It is expected that approximately 300,000 shares
will be offered outside of the United States.
The Company will apply for listing of the Common Stock on the Nasdaq
National Market System under the symbol "CGII." At the request of the Company,
up to 200,000 shares have been reserved for sale in the Offering to certain
individuals, including directors and employees of the Company, members of their
families, and other persons having business relationships with the Company. See
"Underwriting."
----------------
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
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>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share ....... $ $ $
Total(3) ....... $ $ $
</TABLE>
================================================================================
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $ .
(3) The Company has granted to the Underwriter a 30-day option to purchase up to
315,000 additional shares of Common Stock at the price to the public less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See "Underwriting."
----------------
The shares of Common Stock are being offered by the Underwriter named
herein, subject to prior sale, when, as and if accepted by it and subject to
certain prior conditions including the right of the Underwriter to reject orders
in whole or in part. It is expected that delivery of such shares will be made in
New York, New York, on or about , 1998.
SCHRODER & CO. INC.
The date of this Prospectus is , 1998.
<PAGE>
[GRAPHICS TO FOLLOW]
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<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 and
notes thereto appearing elsewhere in this Prospectus. Prospective investors
should consider carefully the information set forth under "Risk Factors."
Immediately prior to the Offering, Cunningham Graphics, Inc. (the "Predecessor")
will be reorganized (the "Reorganization") such that the stockholders of the
Predecessor will contribute all of the outstanding shares of common stock of the
Predecessor to CGII in exchange for shares of Common Stock and promissory notes
(the "Exchange Notes") in the aggregate principal amount of $2.4 million
(assuming an initial public offering price of $12.00 per share). Concurrently
with the Reorganization, CGII will assume the Predecessor's obligations with
respect to undistributed subchapter S corporation taxable income through the
date of the Reorganization, estimated at $3.6 million, and will issue promissory
notes in such amount to evidence such obligations (the "Distribution Notes" and,
together with the Exchange Notes, the "Reorganization Notes"). See "The Company
- -- The Reorganization." In addition, upon the closing of the Offering, the
Company will acquire (the "Acquisition"), in exchange for consideration
consisting of cash and shares of Common Stock, all of the issued share capital
of Roda Limited ("Roda"), an English corporation. Unless otherwise indicated or
the context otherwise requires, all references herein to the "Company" mean the
Predecessor alone with respect to periods prior to the Offering or CGII and its
subsidiaries (including Roda) with respect to periods after the Offering. In
addition, unless otherwise indicated, (i) all information in this Prospectus
assumes no exercise of the Underwriter's over-allotment option and (ii) the
exchange rate used for conversion from Pounds Sterling to United States Dollars
is $1.63 (the exchange rate in effect on February 12, 1998).
THE COMPANY
Cunningham Graphics International, Inc. provides a wide range of graphic
communications services to financial institutions and corporations, focusing on
producing and distributing time-sensitive analytical research and marketing
materials and on providing on-demand printing services. The Company, which
commenced operations in 1989, currently operates on a global basis through its
facilities in the United States and through alliances with Roda Limited, its
strategic partner in the United Kingdom, and with its strategic partner in Hong
Kong. The Company believes that it is presently among the largest volume
producers of financial research reports in the world, having produced over 2
billion pages during 1997.
The Company estimates that in 1997 the commercial printing and document
production market accounted for more than $80 billion in revenue in the United
States and over $10 billion in revenue in the United Kingdom, based upon
information from certain trade associations and other industry sources. The
printing and document management business in the United States is highly
fragmented with approximately 50,000 companies presently in operation, only
approximately 20% of which are estimated to have annual net sales in excess of
$2 million. The Company believes that the commercial printing and document
production business is similarly fragmented in the United Kingdom and in certain
other markets. The printing and document management industry has evolved
significantly over the last several years, driven in large part by rapid
advances in publishing and electronic information technology. The Company
believes that the growth of the printing and document production industry has
been due to various factors, including (i) the increasing volume, complexity and
variety of documents and printed materials produced by businesses worldwide,
(ii) the increasing demand by businesses for the global dissemination of
time-sensitive information, and (iii) the growing trend of businesses to
outsource their in-house printing operations (e.g., print shops, copy centers
and document management facilities) to document professionals equipped to
provide these services more efficiently and cost-effectively.
Graphic communications services provided by the Company include digital
communications, document management, offset printing, digital printing, data
output, bindery, fulfillment services, mailing services and outsource services.
The Company prints brochures, booklets, confirmations of trade, client
statements and adhesive books to meet the daily, weekly and monthly needs of its
customers. To facilitate the rapid distribution of documents globally, the
Company has designed and implemented the World Research Link(TM),
3
<PAGE>
an array of electronic data communication networks linking each of the Company's
facilities with its strategic operating partners and major customers. To date,
the Company has established extensive client relationships with leading
companies in the financial services, insurance and publishing industries,
including CS First Boston, Inc., Deutsche Morgan Grenfell, Goldman, Sachs & Co.,
Lehman Brothers Inc., Merrill Lynch & Co., Inc., The Prudential Insurance
Company of America, Empire Blue Cross/Blue Shield, New York Life Insurance
Company, FIND/SVP, Inc. and The McGraw-Hill Company, respectively.
The Company has experienced significant growth, with net sales growing from
$17.3 million for the year ended December 31, 1995 to $35.7 million ($42.7
million pro forma for the Acquisition) for the year ended December 31, 1997 and
income from operations growing over the same period from $528,000 to $2.4
million ($3.2 million pro forma for the Acquisition), representing compounded
annual growth rates of 43.6% and 113.2%, respectively. The Company intends to
continue its growth strategy by (i) pursuing acquisitions and establishing
strategic alliances to expand and strengthen the Company's business reach in
target markets worldwide, (ii) pursuing outsourcing opportunities through the
assimilation of in-house printing operations of third-party businesses, (iii)
expanding the scope and volume of services offered, (iv) actively cross-selling
existing or newly-added products or services to its customers worldwide, and (v)
improving the operating efficiency of its existing operations. Pursuant to its
growth strategy, concurrently with the closing of the Offering, the Company will
acquire its London-based strategic partner Roda. Roda provides printing and
document output and management services to financial services companies,
primarily in the United Kingdom and European markets.
The Company's senior officers have extensive experience in the graphic
communications services industry, having been employed by the Company for an
average of approximately 6 years and having an average of approximately 19 years
of industry experience. The Company's Chairman, President and Chief Executive
Officer, Michael R. Cunningham, founded the Company and has been actively
involved in the industry for over 15 years. The Company believes that, based on
the proven track record of its experienced management team and the wide range of
services it provides, it is well-positioned to capitalize on the increasing
outsourcing trend as well as on consolidation opportunities in the industry.
THE OFFERING
Common Stock offered....... 2,100,000 shares
Common Stock to be outstand-
ing after the Offering.... 4,865,000 shares(1)(2)
Use of proceeds.......... Of the total net proceeds from the Offering,
approximately $6.1 million will be used to fund
the cash portion of the purchase price for Roda,
approximately $1.4 million will be used to repay
certain indebtedness of Roda to its stockholders
(the "Roda Seller Debt"), $6.0 million (assuming
an initial public offering price of $12.00 per
share) will be used to repay the Reorganization
Notes, representing certain indebtedness to
existing stockholders of the Company, and up to
$1.0 million will be used to repay bank
indebtedness. The remaining net proceeds will be
used for working capital and for general
corporate purposes, which may include capital
expenditures, marketing activities and future
strategic acquisitions.
Proposed Nasdaq symbol..... CGII
- ----------
(1) Includes shares of Common Stock to be issued in connection with the
Reorganization and the Acquisition.
(2) Does not include 600,000 shares of Common Stock reserved for issuance
pursuant to the Company's stock option plans, under which options to
purchase 230,800 shares have been granted at an exercise price equal to the
initial public offering price, subject to consummation of the Offering. See
"Management -- Stock Option Plans."
4
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data is qualified in its entirety by the
more detailed information in the financial statements of the Predecessor and the
related notes thereto, the consolidated financial statements of Roda and the
related notes thereto and the pro forma financial information appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
1994 1995 1996 1997
---------- ---------- ---------- -----------------------------------------
ACTUAL PRO FORMA(1)
-------------------- --------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales .................................... $15,927 $17,327 $23,193 $ 35,744 $ 42,705
Operating expenses:
Costs of production ......................... 12,085 12,860 17,616 26,894 31,187
Selling, general and administrative ......... 3,151 3,441 4,270 5,794 7,212
Depreciation and amortization ............... 448 498 563 694 1,114
------- ------- ------- ------------ ------------
15,684 16,799 22,449 33,382 39,513
------- ------- ------- ------------ ------------
Income from operations ....................... 243 528 744 2,362 3,192
Interest expense ............................ (173) (257) (234) (250) (595)
Other income ................................ -- 2 48 35 121
------- ------- ------- ------------ ------------
Income before income taxes ................... 70 273 558 2,147 2,718
Provision for income taxes .................. 7 6 56 129 394
------- ------- ------- ------------ ------------
Net income ................................... $ 63 $ 267 $ 502 $ 2,018 $ 2,324
======= ======= ======= ============ ============
PRO FORMA DATA (UNAUDITED):
Income before income taxes ................... $ 2,147 $ 2,718
Pro forma provision for income taxes ........ 880 (2) 1,142 (3)
------------ ------------
Pro forma net income ......................... $ 1,267 $ 1,576
============ ============
Pro forma earnings per share ................. $ 0.41 $ 0.42
============ ============
Pro forma shares outstanding ................. 3,095,261 (4) 3,774,219 (5)
============ ============
Pro forma as adjusted earnings per share ..... $ 0.34 (6)
============
Pro forma as adjusted shares outstanding ..... 4,865,000 (7)
============
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED(8)
--------- ---------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............................................... $ 67 $ 8,447
Working capital ......................................................... 728 8,703
Total assets ............................................................ 10,938 33,367
Long-term debt and capitalized lease obligations, net of current portion 1,517 2,179
Stockholders' equity .................................................... 3,151 21,765
</TABLE>
(See footnotes on following page)
5
<PAGE>
(footnotes from previous page)
(1) Gives effect to the Reorganization and the Acquisition as if they each had
occurred on January 1, 1997. See the Unaudited Pro Forma Combined
Financial Statements.
(2) Reflects an increase of $751,000 for income taxes computed utilizing an
overall effective tax rate of 41% as if the Company had been a C corporation
since January 1, 1997.
(3) Reflects a pro forma provision for income taxes for the Company and Roda on
a combined basis computed utilizing effective tax rates of 41% for United
States income taxes and 31% for United Kingdom income taxes.
(4) Reflects (i) the initial CGII founding share, (ii) 2,595,260 shares to be
issued in the Reorganization, and (iii) 500,000 shares, representing the
number of shares having a value (based upon an assumed initial public
offering price of $12.00 per share) corresponding to the principal amount of
the Reorganization Notes.
(5) Reflects (i) the shares described in footnote (4) above, (ii) 169,739 shares
issuable in connection with the Acquisition, and (iii) 509,219 shares,
representing the number of shares having a value (based upon an assumed
initial public offering price of $12.00 per share) corresponding to the cash
liability payable to the Roda stockholders in connection with the
Acquisition.
(6) Reflects the elimination of interest expense of $142,000 ($98,000 net of
taxes) on the Roda Seller Debt of approximately $1.4 million (850,000
pounds) to be repaid through the application of a portion of the net
proceeds from the Offering. See "Use of Proceeds."
(7) Reflects CGII shares to be outstanding, including (i) the initial CGII
founding share, (ii) 2,595,260 shares to be issued in the Reorganization,
(iii) 169,739 shares issuable in connection with the Acquisition and (iv)
2,100,000 shares to be sold in the Offering. See "The Company -- The
Reorganization."
(8) Gives effect to the following transactions as if they had occurred on
December 31, 1997: (i) the Reorganization; (ii) the Acquisition; and (iii)
the sale of 2,100,000 shares of Common Stock offered hereby and the use of
proceeds therefrom, including: (a) the repayment of the Reorganization
Notes, (b) the satisfaction of the liability for the cash payable to the
Roda stockholders of $6.1 million (assuming an initial public offering price
of $12.00 per share), (c) the repayment of the Roda Seller Debt, and (d) the
repayment of long-term debt of $1.0 million to third-parties. See the
Unaudited Pro Forma Combined Financial Statements and "Use of Proceeds."
6
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock being offered by this
Prospectus involves a high degree of risk. In addition, this Prospectus contains
forward-looking statements which involve risks and uncertainties. Discussions
containing such forward-looking statements may be found in the material set
forth under "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business --
Industry Background," "Business -- Business Strategy," Business -- Graphic
Communications Services," "Business -- Printing Operations," "Business -- Global
Network," "Business -- Sales and Marketing," and "Business -- Competition," as
well as in this Prospectus generally. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those set forth in the following risk
factors and elsewhere in this Prospectus. Accordingly, prospective investors
should consider carefully the following risk factors, in addition to the other
information concerning the Company and its business contained in this
Prospectus, before purchasing the shares of Common Stock offered hereby.
RELIANCE ON LIMITED NUMBER OF CUSTOMERS
The Company's five largest customers accounted for approximately 65% of its
net sales for the year ended December 31, 1997. The Company's largest customer,
Goldman, Sachs & Co. accounted for approximately 24% of the Company's net sales
during 1997. Although the Company has had long-term relationships with its
significant customers, the Company's customers generally may terminate their
relationships with the Company upon minimal, if any, advance notice and there
can be no assurance that these relationships will continue. The termination of
the relationships with any one or more significant customers could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, there has been a trend toward consolidation
in the financial services industry and a merger or acquisition involving any of
the Company's principal customers resulting in the termination of such a
relationship could have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Marketing."
DEPENDENCE ON FINANCIAL SERVICES INDUSTRY
To date, the Company has focused the marketing of its services primarily on
companies within the financial services industry and the Company expects to
continue this focus. As a result, the Company's results of operations will be
particularly sensitive to fluctuations in the economy or financial markets
affecting this industry. Any event adversely affecting the financial services
industry could adversely affect the Company. The Company's success in increasing
its revenues will also depend, in part, on its ability to attract new business
from customers outside the financial services industry. No assurance can be
given that the Company will be successful in attracting new customers in
different industries.
INTEGRATION OF RODA
Following the Acquisition, the success of the Company will depend, in part,
on the Company's ability to centralize accounting and administrative systems and
eliminate unnecessary duplication of functions. Although Roda's business is
similar to a portion of the businesses conducted by the Company's Predecessor,
Roda operates in a foreign market that is distinct from the Predecessor's
market. There are differences in technologies, cultural and business customs,
applicable laws, operating and labor matters and currencies that will place
substantial strains upon the Company's ability to integrate the business of Roda
into its existing business. In addition, management of the Company has no
experience in operating facilities that are outside the United States or
geographically separated. No assurance can be given that the Company's senior
management group will be able to integrate and manage effectively the newly
acquired operations of Roda. Roda's printing operations in London have, to date,
been conducted independently of the Company, as a separate business.
Consequently, there can be no assurance that operating results of the Company
will match or exceed the combined individual operating results achieved by the
Predecessor and Roda prior to the Acquisition.
7
<PAGE>
RISKS RELATED TO THE COMPANY'S EXPANSION STRATEGY
The Company intends to seek to expand its operations through the
acquisition of additional businesses which provide commercial, digital and
time-sensitive printing services and through the expansion of its outsourcing
business by assimilating additional customers' document management operations.
There can be no assurance that the Company will be able to identify,
successfully integrate or profitably manage any such businesses or operations.
The proposed expansion may involve a number of special risks, including possible
adverse effects on the Company's operating results, diversion of management's
attention, inability to retain key personnel, risks associated with
unanticipated events and the financial statement effect of potential impairment
of acquired intangible assets, any of which could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, if competition for acquisition candidates or assumed operations were
to increase, the cost of acquiring businesses or assuming customers' operations
could increase materially. The inability of the Company to implement and manage
its expansion strategy successfully may have a material adverse effect on the
business and future prospects of the Company. See "Business -- Business
Strategy."
MANAGEMENT OF GROWTH
The Company is continuing to experience significant growth, which has
placed, and could continue to place, a strain on the Company's managerial and
other resources. From December 1995 through January 1998, the number of the
Company's employees increased from 186 to 370 and further increases are
anticipated during 1998. The Company's future performance and profitability will
depend, in large part, on its ability to manage its growth, particularly with
respect to a workforce that is geographically dispersed, while continuing to
integrate the operations of additional companies and to expand its current
business. In order to manage growth successfully, the Company will be required
to continue to improve its operational, financial and other internal systems and
the training, motivation and management of its employees. If the Company is
unable to manage growth effectively, the Company's business, financial condition
and results of operations could be materially adversely affected.
NEED FOR ADDITIONAL FINANCING
The Company will need additional funds to implement its acquisition and
internal growth strategies. If the Company does not have sufficient cash
resources, its growth could be limited unless it is able to obtain additional
capital through additional debt or equity financings. Moreover, the Company may
seek to use its Common Stock for all or a portion of the consideration to be
paid in future acquisitions, the issuance of which may result in dilution to
investors in the Offering. The extent to which the Company will be able or
willing to use its Common Stock for this purpose will depend on its market value
from time to time and the willingness of potential acquisition candidates to
accept Common Stock as part of the consideration for the sale of their
businesses. If the Company is unable to use its Common Stock to make future
acquisitions, the Company may be required to use more of its cash resources, if
available, to initiate and maintain its acquisition program. There can be no
assurance that the Company will be able to obtain additional financing as
needed. As a result, the Company might be unable to implement its acquisition
strategy, which would have a material adverse effect on the future prospects of
the Company. See "Business -- Business Strategy."
The Company has a $2.0 million revolving line of credit from Summit Bank
under which $1.8 million was available as of February 1, 1998. The Company
intends to use the line of credit for working capital, equipment purchases and
other general corporate purposes. The Company's line of credit expires on May
30, 1998. Although the Company intends to seek to renew the line, no assurance
can be given that the line of credit will be renewed or that it will be renewed
on terms that are acceptable to the Company. In addition, there can be no
assurance that this or any future line of credit will be sufficient for the
Company's needs or that the Company will be able to obtain other financing on
terms that are acceptable to the Company. See "Business -- Business Strategy."
8
<PAGE>
RISK OF INTERNATIONAL OPERATIONS
On a pro forma basis after giving effect to the Acquisition, sales to
customers outside the United States would have accounted for 16% of the
Company's net sales in the year ended December 31, 1997, and the Company
anticipates that foreign sales will account for a significant portion of net
sales in the foreseeable future. Risks inherent in the Company's international
business activities include the fluctuation of currency exchange rates, various
and changing regulatory requirements, increased sales and marketing expenses,
political and economic instability, difficulty in staffing and managing foreign
operations, potentially adverse taxes, complex foreign laws and treaties and the
possibility of difficulty in accounts receivable collections. There can be no
assurance that any of these factors will not have a material adverse effect on
the Company's business, financial condition and results of operations.
DEPENDENCE ON TECHNOLOGY; RISK OF TECHNOLOGICAL OBSOLESCENCE
The success of the Company will be highly dependent on its ability to
acquire and utilize competitive computer output and document production
technologies that are not readily available on a cost-effective basis to the
Company's existing and potential customers, thereby creating the incentive for
such customers to outsource various services to the Company. Increasing use of
the Internet and other electronic means of delivering information which has
traditionally been delivered in paper form could substantially erode the
Company's core business of printing financial research reports. There can be no
assurance that one or more non-paper-based technologies (whether now existing or
developed in the future) will not reduce or supplant the physical delivery of
documents as a preferred medium for the Company's customers, which could in turn
adversely affect the Company's business. The emergence of services by
competitors of the Company incorporating new technologies could render some or
all of the Company's services unmarketable or obsolete. There can be no
assurance that the Company will be able to obtain the rights to use any such new
technologies, that it will be able to implement effectively such new
technologies on a cost-effective basis or that new technologies will not render
noncompetitive or obsolete the Company's role as a provider of computer output
and document management services. In addition, in order to maintain
state-of-the-art technologies, the Company will have to make significant capital
expenditures, which will require the Company to obtain additional financing.
There can be no assurance that the Company will be able to obtain such
additional financing. See "Business -- Graphic Communications Services."
VARIABILITY OF QUARTERLY RESULTS
The Company's quarterly operating results have been and will continue to be
subject to variation, depending upon factors such as the mix of business among
the Company's services, the cost of materials, labor and technology,
particularly in connection with the delivery of business services, the costs
associated with initiating new outsourcing contracts, the economic condition of
the Company's target markets, seasonal concerns and the costs of acquiring and
integrating new businesses. Although most of the Company's long-term contracts
for the provision of business services provide for pricing adjustments to
reflect the actual costs of materials incurred by the Company, these adjustments
typically occur on a quarterly and annual basis and therefore may add to
fluctuations in quarterly and annual operating results of the Company.
RISK OF BUSINESS INTERRUPTIONS AND DEPENDENCE ON SINGLE FACILITIES FOR CERTAIN
SERVICES
The Company's business is particularly sensitive to meeting deadlines and
performing services for numerous clients on an overnight basis. Certain of the
Company's existing operations are performed exclusively at either its Jersey
City or Manhattan locations and such operations are dependent on the
availability of continuous computer, electrical and telephone service. All of
Roda's operations are performed at its single London location. As a result, any
disruption of day-to-day operations could have a material adverse effect upon
the Company. While the Company has, and intends to develop additional,
reciprocal relationships with major printing and document production companies
in locations elsewhere in the United States and near London for back-up
facilities in the event of emergencies, there can be no assurance that the loss
or disruption of any services affecting one or more of the Company's
9
<PAGE>
facilities would not disable the Company, at least temporarily. Any
interruption in its ability to provide services, however brief, could result in
the Company being unable to satisfy the needs of clients and could adversely
affect the Company's business and its reputation within the industry. See
"Business -- Graphic Communications Services," "-- Printing Operations" and
"-- Facilities."
BENEFITS TO INSIDERS
The Company will use $6.0 million of the net proceeds of the Offering
(assuming an initial public offering price of $12.00 per share) to repay the
Reorganization Notes, which represent indebtedness incurred in connection with
the Reorganization to the stockholders of the Predecessor, Michael R.
Cunningham, Gordon Mays, Timothy Mays and trusts for the benefit of their
respective children. All three individuals are executive officers of the
Company. Mr. Cunningham and Gordon Mays are also directors of the Company. The
representations and warranties made by the stockholders of the Predecessor to
the Company in connection with the Reorganization are limited generally to their
ownership of the equity interests being conveyed and do not cover undisclosed
liabilities or other matters relating to the Predecessor's business.
Accordingly, the Company will have only limited recourse against the
stockholders of the Predecessor. See "The Company -- The Reorganization," "Use
of Proceeds" and "Certain Transactions -- The Reorganization."
COMPETITION
The graphic communications services industry is highly competitive. In each
of the lines of business in which the Company provides services, it competes
with a variety of companies, many of which have greater financial and other
resources than the Company, or are subsidiaries or divisions of larger
organizations. In particular, the industry is characterized by a small number of
large, dominant organizations. No assurances can be given that the Company will
be able to compete effectively against the larger companies in this industry.
During recent periods of economic downturn, excess production capacity in the
Company's business sectors has resulted in more competitive pricing, reducing
the earnings of the Company. In addition, a significant source of competition is
the in-house capability of the Company's target customer base. There can be no
assurance that these businesses will outsource more of their printing and
document management needs or that such businesses will continue to seek such
outsourcing services. See "Business -- Competition."
FLUCTUATIONS IN THE PRICE AND AVAILABILITY OF SUPPLIES
Prices for paper and other raw materials used by the Company may increase
from time to time in the future. Any significant increases in the prices of
these materials that cannot be passed on to customers could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, increases in the prices of supplies and other materials
might cause some of the Company's customers to utilize alternative technologies
in their respective businesses that do not involve the use of paper or the mail,
such as the Internet. Although the Company purchases raw materials from a varied
group of suppliers, it is dependent upon a stable availability of paper and
other supplies to continue its operations. Should shortages develop either for
any of the Company's suppliers or generally within the industry, the Company
would be unable to produce printed materials on a consistent basis and its
business would be materially adversely affected.
RELIANCE ON SENIOR MANAGEMENT
The Company's operations will continue to be dependent on the continued
services of its executive officers, including the senior management of Roda and
additional senior management personnel which the Company intends to employ.
Furthermore, the Company will likely be dependent on the senior management of
any companies that may be acquired in the future. The Company has employment
agreements with each of its senior executive officers. However, if any of these
individuals elect not to continue in their roles with the Company, or if the
Company is unable to attract and retain senior management, the Company's
business could be adversely affected. The Company maintains key executive life
insurance for Michael R. Cunningham, its President and Chief Executive Officer,
in the amount of $3.0 million. See "Management."
10
<PAGE>
NEED TO ATTRACT AND RETAIN KEY PERSONNEL IN HIGHLY COMPETITIVE MARKETPLACE;
LABOR DELAYS
The Company's performance will depend, to a large extent, on the continued
service of key technical employees and its ability to attract, retain and
motivate such personnel. Competition for such personnel is intense, particularly
for highly skilled and experienced technical personnel who perform the Company's
information technology services. Such technical personnel are in great demand
and are likely to remain a limited resource for the foreseeable future. There
can be no assurance that the Company will be able to attract, retain and
motivate such personnel in the future, and the inability to do so could have a
material adverse effect upon the Company's business, financial condition and
results of operations. In addition, a strike or other labor-related delay or
stoppage could have a material adverse effect upon the Company's business,
operations and financial condition.
ENVIRONMENTAL RISKS; GOVERNMENTAL REGULATIONS
The Company's business is subject to a variety of federal, state and local
laws, rules and regulations. Its production facilities in the United States are
governed by laws and regulations relating to workplace safety and worker health,
primarily the Occupational Safety and Health Act ("OSHA") and the regulations
promulgated thereunder. Comparable laws and regulations exist in the United
Kingdom, in particular, the Health and Safety at Work etc. Act 1974 and the
numerous regulations issued under it. The Company believes that it is in
substantial compliance with OSHA and its United Kingdom counterparts.
The Company is also subject to environmental laws and regulations of the
United States, the United Kingdom and the various States in which it operates
concerning emissions into the air, discharges into waterways and the generation,
handling and disposal of waste materials. The printing business generates
substantial quantities of inks, solvents and other waste products requiring
disposal. The Company typically recycles waste paper, and contracts for the
removal of waste ink and other waste products. The Company believes it is in
substantial compliance with all applicable air quality, waste disposal and other
environmental-related laws and regulations. However, there can be no assurance
that future changes in such laws and regulations will not have a material
adverse effect on the Company's operations.
CONTROL BY CERTAIN STOCKHOLDERS
Following the completion of the Offering, the directors and other executive
officers of the Company, and entities affiliated with them, will beneficially
own approximately 54.1% of the then outstanding shares of Common Stock (50.9% if
the Underwriters' over-allotment option is exercised in full). Accordingly,
present management of the Company is likely to continue to exercise substantial
control over the Company's affairs. These stockholders, acting together, would
be able to elect a sufficient number of directors to control the Company's Board
of Directors and would be able to approve or disapprove any matter submitted to
a vote of stockholders. In addition, because the Company has adopted a staggered
Board of Directors, stockholders will be less able to alter the composition of
the Board of Directors. See "Principal Stockholders" and "Description of Capital
Stock -- Staggered Board of Directors."
ABSENCE OF PUBLIC MARKET AND DETERMINATION OF OFFERING PRICE
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained. The initial public offering price for the Common Stock offered
hereby will be determined by negotiations between the Company and the
Underwriter and may bear no relationship to the price at which the Common Stock
will trade after completion of the Offering. See "Underwriting" for factors to
be considered in determining such offering price.
POTENTIAL EFFECTS OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
Upon the consummation of the Reorganization, the Acquisition and the
Offering, 4,865,000 shares of Common Stock will be outstanding. The 2,100,000
shares of Common Stock being sold in the Offering will be freely tradable unless
acquired by affiliates of the Company. The remaining shares
11
<PAGE>
outstanding may be sold publicly only following their effective registration
under the Securities Act, or pursuant to an available exemption (such as
provided by Rule 144 following a holding period for previously unregistered
shares) from the registration requirements of the Securities Act. Upon the
consummation of the Offering, the Company will have outstanding under its stock
option plans options to purchase an aggregate of 230,800 shares of Common Stock
at the initial public offering price. The Company intends to register the shares
issuable upon exercise of options granted under the stock option plans, and,
upon such registration, such shares will be eligible for resale in the public
market. See "Management -- Stock Option Plans." The Company, the existing
stockholders of the Predecessor and the officers and directors of the Company
have agreed for a period of 180 days from the consummation of the Offering not
to offer, sell or otherwise dispose of any shares of Common Stock (or any
securities convertible into or exercisable or exchangeable for Common Stock) or
grant any options or warrants to purchase any shares of Common Stock without the
prior written consent of Schroder & Co. Inc., except that the Company may grant
options pursuant to its stock option plans and may issue privately placed shares
of Common Stock in connection with acquisitions and pursuant to the Company's
stock option plans. See "Shares Eligible For Future Sale." Sales of a
substantial number of shares of Common Stock in the public market could
adversely affect the market price of the Common Stock.
DILUTION
Investors purchasing shares of the Common Stock in the Offering will
experience immediate and substantial dilution of $9.76 per share (assuming an
initial public offering price of $12.00 per share) in the net tangible book
value of their shares. See "Dilution."
EFFECT OF CERTAIN CHARTER PROVISIONS
The Board of Directors of the Company is empowered to issue common stock
and preferred stock without stockholder action. The existence of this
"blank-check" common stock and preferred stock could render more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, merger, proxy contest or otherwise and may adversely affect the
prevailing market price of the Common Stock. The Company currently has no plans
to issue any such securities, other than the Common Stock being issued in
connection with the Reorganization, the Offering and the Acquisition. See "The
Company -- The Reorganization" and "- The Roda Acquisition" and "Description of
Capital Stock." In addition, the New Jersey Shareholders Protection Act
prohibits certain persons from engaging in business combinations with the
Company. See "Description of Capital Stock."
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock offered hereby could be subject to
significant fluctuations in response to various factors and events, including
the liquidity of the market for the securities offered hereby, variations in the
Company's operating results, new statutes or government regulations. In
addition, the stock market in recent years has experienced broad price and
volume fluctuations that often have been unrelated to the operating performance
of particular companies. Such market fluctuations also may adversely affect the
market price of the Common Stock. Accordingly, there can be no assurance that
the market price of the Common Stock will not decline below the initial public
offering price.
DIVIDEND POLICY
The Company expects to retain any earnings to finance the operations and
expansion of the Company's business. The Company's existing Loan and Security
Agreement with Summit Bank may, under certain circumstances, restrict the
Company's ability to pay dividends. Moreover, any additional debt financing that
the Company arranges in the future is likely to restrict the payment of
dividends. Therefore, the payment of any cash dividends on the Common Stock is
unlikely in the foreseeable future. See "Dividend Policy."
12
<PAGE>
THE COMPANY
GENERAL
The Predecessor commenced operations in 1989. The Company was incorporated
in New Jersey in January 1998 in contemplation of the Offering and to effect the
Reorganization. The Company's executive offices are located at 629 Grove Street,
Jersey City, New Jersey and its telephone number is (201) 217-1990.
THE REORGANIZATION
Immediately prior to the Offering, the Predecessor will be reorganized such
that the stockholders of the Predecessor will contribute all of the outstanding
shares of common stock of the Predecessor to CGII in exchange for a total of
2,595,260 shares of Common Stock and the Exchange Notes. Upon completion of the
Reorganization, CGII will have 2,595,261 shares of Common Stock outstanding. The
principal amount of the Exchange Notes will be $2.4 million, assuming an initial
public offering price of $12.00 per share. Such principal amount will be subject
to adjustment for any change in the initial public offering price from $12.00
per share. Concurrently with the Reorganization, CGII will assume the
Predecessor's obligations with respect to undistributed S corporation taxable
income through the date of the Reorganization, estimated to total $3.6 million,
and will issue Distribution Notes in such amount to evidence such obligations.
The principal amount of the Exchange Notes was determined by the Company in
connection with the Reorganization based on a number of factors, including the
value of the enterprise contributed to the Company. The principal amount of the
Distribution Notes was determined by the Company based upon the actual amount of
undistributed S corporation taxable income as of December 31, 1997 and the
anticipated additional undistributed S corporation taxable income during the
period January 1, 1998 through the expected date of the Reorganization. The
Company intends to repay the Reorganization Notes from the net proceeds of the
Offering. The representations and warranties made by the stockholders of the
Predecessor to the Company in connection with the Reorganization are limited
generally to their ownership of the equity interests being conveyed and do not
cover undisclosed liabilities or other matters relating to the Predecessor's
business. Accordingly, the Company will have only limited recourse against the
stockholders of the Predecessor. See "Risk Factors -- Benefits to Insiders,"
"Use of Proceeds" and "Certain Transactions -- The Reorganization."
THE RODA ACQUISITION
Concurrently with the consummation of the Offering, the Company will
acquire all of the issued share capital of Roda pursuant to an agreement dated
January 16, 1998 (the "Roda Purchase Agreement") for an aggregate consideration
of approximately $8.1 million. The $8.1 million consideration will be satisfied
by (i) the delivery of 169,739 shares of Common Stock, which will be valued at
the initial public offering price, and (ii) a cash payment for the balance of
the consideration ($6.1 million, assuming an initial public offering price of
$12.00 per share). In addition to the consideration, Roda's outstanding
indebtedness will be reflected on the Company's consolidated balance sheet from
and after the consummation of the Acquisition. As of December 31, 1997, Roda had
approximately $4.3 million of indebtedness outstanding, including the Roda
Seller Debt. Under the terms of the Roda Purchase Agreement, the Company has
committed to cause Roda to repay the entire $1.4 million (850,000 pounds) of the
Roda Seller Debt within 28 days following the closing. The Company intends to
repay this indebtedness from the proceeds of the Offering. In order to secure
the performance by the selling stockholders of Roda of certain warranties and
covenants, $444,800 (275,000 pounds) of the cash portion of the consideration
will be held in escrow until one year following the closing. The obligations of
the parties under the Roda Purchase Agreement are contingent upon the closing of
the Offering.
Roda provides printing and document output and management services to
financial services companies primarily in the United Kingdom and European
markets, and has been a strategic partner in the World Research Link(TM). Upon
completion of the Offering, Roda will become a wholly-owned subsidiary of the
Company and its day-to-day operations in London will continue to be supervised
by its current management team. Peter L. Furlonge, who has been a senior
executive officer of Roda since
13
<PAGE>
1989, and its chief executive officer since 1995, is continuing in such capacity
pursuant to an employment agreement. Two other key employees of Roda will also
enter into employment agreements with Roda incidental to the Acquisition. See
"Business -- Graphic Communications Services" and "-- Global Network."
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $22.6 million ($26.2 million if the Underwriter's over-allotment
option is exercised in full), assuming an initial public offering price of
$12.00 per share. Of this amount, approximately $6.1 million (assuming an
initial public offering price of $12.00 per share) will be used to fund the cash
portion of the consideration for the acquisition of Roda, and approximately $1.4
million (850,000 pounds) will be used to repay the Roda Seller Debt. See "The
Company -- The Roda Acquisition." The Roda Seller Debt, which has no specified
maturity date, bears interest at the rate of 10% per annum, payable
semi-annually. Pursuant to the Roda Purchase Agreement, the Company has agreed
to repay the Roda Seller Debt within 28 days following the closing of the
Acquisition. The Company expects to use $6.0 million (assuming an initial public
offering price of $12.00 per share) to repay the Reorganization Notes,
representing indebtedness to the stockholders of the Predecessor. See "The
Company -- The Reorganization." The Reorganization Notes bear no interest and
have no specified maturity date. The Company also intends to repay up to $1.0
million of indebtedness to Summit Bank under its term loan. The term loan bears
interest at a rate of 8.5% per annum and matures on December 1, 2001. The
remaining net proceeds of the Offering, estimated to be approximately $8.1
million, will be used for working capital and general corporate purposes, which
may include capital expenditures, marketing activities and strategic
acquisitions. The Company currently has no agreement or understanding with
respect to any future acquisitions. Pending the use of the net proceeds, the
Company will invest the net proceeds in short-term, United States government
securities.
DIVIDEND POLICY
Following the Offering, it will be the policy of the Company's Board of
Directors to retain all future earnings to finance the operation and expansion
of the Company's business. Accordingly, the Company does not anticipate
declaring or paying cash dividends on the Common Stock in the foreseeable
future. The payment of cash dividends in the future will be at the sole
discretion of the Company's Board of Directors and will depend on, among other
things, the Company's earnings, operations, capital requirements, financial
condition, restrictions in then existing financing agreements, and other factors
deemed relevant by the Board of Directors. In addition, the Company's existing
Loan and Security Agreement with Summit Bank may, under certain circumstances,
restrict the Company's ability to pay dividends.
Prior to the Reorganization, the Company was an S corporation within the
meaning of (section)1361 of the Internal Revenue Code of 1986, as amended (the
"Code"), and made distributions to its stockholders in respect of income which
was taxable to such stockholders under the applicable provisions of the Code. In
connection with the Reorganization, the Company will pay to the stockholders of
the Predecessor the amounts of their respective undistributed S corporation
taxable income through the anticipated date of the Reorganization by delivery of
the Distribution Notes. See "The Company -- The Reorganization." A portion of
the net proceeds of the Offering will be used to repay the Distribution Notes.
See "Use of Proceeds."
14
<PAGE>
CAPITALIZATION
The following table sets forth at December 31, 1997, (i) the actual short
term debt and consolidated capitalization of the Predecessor and (ii) the pro
forma capitalization of the Company as adjusted to give effect to the
Reorganization, the Acquisition, and the sale of the Common Stock offered hereby
and the application of the estimated net proceeds therefrom as set forth under
"Use of Proceeds." The capitalization table should be read in connection with
"Selected Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the Unaudited Pro Forma Combined
Financial Statements, the Company's financial statements and related notes
thereto and Roda's consolidated financial statements and related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------
COMPANY
PRO FORMA
PREDECESSOR AS ADJUSTED
------------- ------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Short-term debt, including current portion of long-term
debt and capitalized lease obligations ................ $ 885 $ 1,870
====== =======
Long-term debt and capitalized lease obligations, net
of current portion .................................... $1,517 $ 2,179
Stockholders' equity:
Preferred stock, no par value, 10,000,000 shares
authorized; none issued and outstanding .............. -- --
Common stock, no par value, 30,000,000 shares
authorized; and 4,865,000 shares issued and
outstanding, pro forma as adjusted(1) ................ 6 21,765
Additional paid-in capital .............................. 734 --
Retained earnings ....................................... 2,411 --
------ -------
Total stockholders' equity .............................. 3,151 21,765
------ -------
Total capitalization .................................... $4,668 $23,944
====== =======
</TABLE>
- ----------
(1) Does not include 600,000 shares of Common Stock reserved for issuance
pursuant to the Company's stock option plans, under which options to
purchase 230,800 shares have been granted at the initial public offering
price subject to consummation of the Offering. See "Management -- Stock
Option Plans" and "Underwriting."
15
<PAGE>
DILUTION
The difference between the initial public offering price per share and net
tangible book value per share of Common Stock after this Offering constitutes
the dilution to investors in this Offering. Net tangible book value per share is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) by the number of then outstanding shares
of Common Stock. At December 31, 1997, the Predecessor's net tangible book value
was $3.2 million, or $1.02 per share of Common Stock. After giving effect to (i)
the Reorganization, (ii) the Acquisition, and (iii) the sale of the 2,100,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $12.00 per share and the receipt and application of the estimated net
proceeds therefrom (less underwriting discounts and commissions and estimated
offering expenses), the adjusted pro forma net tangible book value of the
Company as of December 31, 1997 would have been $10.9 million or $2.24 per
share, representing an immediate increase in pro forma net tangible book value
of $1.22 per share to existing stockholders and an immediate dilution of $9.76
per share to new investors.
The following table illustrates the foregoing information with respect to
dilution to new investors on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price ......................... $ 12.00
--------
Predecessor net tangible book value ......................... $ 1.02
Decrease attributable to the Reorganization ................. (1.96)
Decrease attributable to the Acquisition .................... (2.18)
Increase attributable to investors in this offering ......... 5.36
-------
Pro forma as adjusted net tangible book value of the
Company after the Offering .................................. 2.24
--------
Dilution to new investors ..................................... $ 9.76
========
</TABLE>
The following table summarizes the number of shares of Common Stock issued
by the Company, the total consideration paid to the Company, and the average
price per share paid by the existing stockholders, the Roda stockholders and the
new investors. For purposes of the total consideration and average price per
share paid by the existing stockholders, the Company has based such valuation on
the aggregate amount of such stockholders' cash equity contributions to the
Predecessor without deducting distributions paid to such stockholders.
<TABLE>
<CAPTION>
SHARE PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- --------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders ......... 2,595,261 53.3% $ 740,000 2.6% $ 0.29
-----------
Roda stockholders ............. 169,739 3.5 2,037,000 7.3 $ 12.00
New investors ................. 2,100,000 43.2 25,200,000 90.1 $ 12.00
--------- ----- ----------- -----
Total ......................... 4,865,000 100.0% $27,977,000 100.0%
========= ===== =========== =====
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Underwriting."
16
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements are based
on the historical financial statements of the Predecessor and Roda. The
unaudited pro forma combined balance sheet, to the extent indicated, gives
effect to: (i) the Reorganization, (ii) the Acquisition and (iii) the Offering,
as if each occurred as of December 31, 1997. The unaudited pro forma combined
statement of income gives effect to the Acquisition as if it occurred on January
1, 1997. With the exception of share and per share amounts, the Reorganization
and the Offering have no effect on the unaudited pro forma combined statement of
income.
The unaudited pro forma combined financial statements give effect to the
Acquisition under the purchase method of accounting. The Roda financial
statements have been adjusted to conform to United States Generally Accepted
Accounting Principles and have been converted into Dollars using the average
exchange rate of $1.66 to 1.00 pound for the statement of income for the year
ended December 31, 1997 and the year end exchange rate of $1.67 to 1.00 pound
for the balance sheet as of December 31, 1997.
The unaudited pro forma combined statement of income is not necessarily
indicative of operating results which would have been achieved had the
Acquisition been completed on January 1, 1997 and should not be construed as
representative of future operating results. These unaudited pro forma combined
financial statements should be read in conjunction with the historical financial
statements of the Company and Roda Limited including the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
17
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
RODA
REORGANIZATION THE (HISTORICAL
PREDECESSOR ADJUSTMENTS(1)(2) COMPANY CONVERTED)(3)
------------- ------------------- ----------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash .............................................................. $ 67 $ -- $ 67 $ 2
Accounts receivable ............................................... 5,673 -- 5,673 1,381
Inventories ....................................................... 940 -- 940 246
Prepaid expenses and other current assets ......................... 78 -- 78 169
Notes and advances receivable -- stockholder/officers ............. 136 -- 136 --
Deferred income taxes ............................................. 47 295 (1) 342 --
------- ----------- -------- ------
TOTAL CURRENT ASSETS ............................................... 6,941 295 7,236 1,798
Property and equipment, net ....................................... 3,579 -- 3,579 1,442
Goodwill and other assets ......................................... 418 -- 418 3,513
------- ----------- -------- ------
TOTAL ASSETS ....................................................... $10,938 $ 295 $ 11,233 $6,753
======= =========== ======== ======
CURRENT LIABILITIES
Current portion of long-term debt -- third parties ................ $ 407 $ -- $ 407 $ 780
Revolving line of credit .......................................... 300 -- 300 --
Current portion of obligations under capital lease ................ 178 -- 178 205
Accounts payable .................................................. 3,854 -- 3,854 932
Accrued expenses .................................................. 1,474 -- 1,474 579
Reorganization notes .............................................. -- 6,000 (2) 6,000 --
Cash payable to Roda stockholders ................................. -- -- -- --
------- ----------- -------- ------
TOTAL CURRENT LIABILITIES .......................................... 6,213 6,000 12,213 2,496
Long-term debt third parties -- net of current portion ............ 1,185 -- 1,185 1,195
Obligations under capital lease -- net of current portion ......... 332 -- 332 467
Notes payable -- related parties .................................. -- -- -- 1,419
Deferred income taxes ............................................. 57 354 (1) 411 165
Other liabilities ................................................. -- -- -- 138
------- ----------- -------- ------
TOTAL LIABILITIES .................................................. 7,787 6,354 14,141 5,880
TOTAL STOCKHOLDERS' EQUITY ......................................... 3,151 (6,000) (2) (2,908) 873
(59) (1)
------- ----------- -------- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $10,938 $ 295 $ 11,233 $6,753
======= =========== ======== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPANY
ACQUISITION COMPANY OFFERING PRO FORMA
ADJUSTMENTS(4) PRO FORMA ADJUSTMENTS(5) AS ADJUSTED
---------------- ----------- ------------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash .......................................................... $ -- $ 69 $ 22,636 $ 8,447
272
(6,111)
(1,419)
(6,000)
(1,000)
Accounts receivable ........................................... -- 7,054 7,054
Inventories ................................................... -- 1,186 -- 1,186
Prepaid expenses and other current assets ..................... -- 247 -- 247
Notes and advances receivable -- stockholder/officers ......... -- 136 -- 136
Deferred income taxes ......................................... -- 342 -- 342
--------- ------- ---------- -------
TOTAL CURRENT ASSETS ........................................... -- 9,034 8,378 17,412
Property and equipment, net ................................... -- 5,021 -- 5,021
Goodwill and other assets ..................................... (100) 11,206 (272) 10,934
(3,513)
10,888
--------- ------- ---------- -------
TOTAL ASSETS ................................................... $ 7,275 $25,261 $ 8,106 $33,367
========= ======= ========== =======
CURRENT LIABILITIES
Current portion of long-term debt -- third parties ............ $ -- $ 1,187 $ -- $ 1,187
Revolving line of credit ...................................... -- 300 -- 300
Current portion of obligations under capital lease ............ -- 383 -- 383
Accounts payable .............................................. -- 4,786 -- 4,786
Accrued expenses .............................................. -- 2,053 -- 2,053
Reorganization notes .......................................... -- 6,000 (6,000) --
Cash payable to Roda stockholders ............................. 6,111 6,111 (6,111) --
--------- ------- ---------- -------
TOTAL CURRENT LIABILITIES ...................................... 6,111 20,820 (12,111) 8,709
Long-term debt third parties -- net of current portion ........ -- 2,380 (1,000) 1,380
Obligations under capital lease -- net of current portion ..... -- 799 -- 799
Notes payable -- related parties .............................. -- 1,419 (1,419) --
Deferred income taxes ......................................... -- 576 -- 576
Other liabilities ............................................. -- 138 -- 138
--------- ------- ---------- -------
TOTAL LIABILITIES .............................................. 6,111 26,132 (14,530) 11,602
TOTAL STOCKHOLDERS' EQUITY ..................................... (873) (871) 22,636 21,765
2,037
--------- ------- ---------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $ 7,275 $25,261 $ 8,106 $33,367
========= ======= ========== =======
</TABLE>
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) As a result of the conversion from a S corporation to a C corporation the
Company will record: (i) a deferred tax asset of $295,000, (ii) a
deferred tax liability of $354,000, and (iii) the resulting net decrease
in retained earnings of $59,000.
(2) Reflects the issuance of the Reorganization Notes consisting of: (i) the
$3.6 million Distribution Notes, the amount of which approximates the
undistributed S corporation taxable income to the Predecessor
stockholders estimated through the anticipated date of the
Reorganization, and (ii) the $2.4 million Exchange Notes to be issued in
consideration for a portion of the equity of the Predecessor (assuming an
initial public offering price of $12.00 per share).
(3) Historical balances for Roda at December 31, 1997 have been adjusted to
conform to United States Generally Accepted Accounting Principles,
including (i) the recognition of goodwill of $3.5 million related to a
1996 management buyout of Roda, (ii) the recording of a deferred tax
liability of $165,000 and (iii) the resulting net increase to
stockholders' equity of $3.3 million.
(4) The aggregate consideration of $8.1 million payable to the Roda
stockholders will consist of (i) 169,739 shares of Common Stock and (ii)
a cash payment for the balance of the consideration. For presentation
purposes, the shares issuable as part of the consideration have been
valued at $2.0 million (assuming an initial public offering price of
$12.00 per share), resulting in an assumed cash payment of $6.1 million
which has been presented as "Cash Payable to Roda Stockholders." This
liability will be satisfied with a portion of the net proceeds of the
Offering.
The purchase of Roda has been accounted for based upon available
information regarding the estimated fair value of the assets and
liabilities acquired as follows:
<TABLE>
<S> <C>
Purchase price .................. $ 8,148,000
Acquisition costs ............... 100,000
Net liabilities assumed ......... 2,640,000
-----------
Goodwill ........................ $10,888,000
===========
</TABLE>
Roda's stockholders' equity of $873,000 and prior goodwill of $3.5
million have been eliminated in consolidation with the Company.
(5) The Offering adjustments assume an initial public offering price of
$12.00 per share and give effect to (i) the receipt of the assumed net
proceeds of $22.6 million (after deducting underwriting discounts and
commissions of $1.8 million and estimated offering expenses of $800,000),
(ii) the recognition of a $272,000 portion of the offering expenses
previously paid and deferred by the Predecessor at December 31, 1997,
(iii) the repayment of the Reorganization Notes, (iv) satisfaction of the
liability for cash payable to the Roda stockholders of $6.1 million, (v)
the repayment of the $1.4 million (850,000 pounds) Roda Seller Debt and
(vi) the repayment of $1.0 million of long-term debt to third parties.
19
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
RODA
PREDECESSOR/ (HISTORICAL ACQUISITION COMPANY
COMPANY CONVERTED)(1) ADJUSTMENTS PRO FORMA
-------------------- --------------- ----------------- --------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales ............................................ $ 35,744 $6,961 $ -- $ 42,705
Operating expenses:
Costs of production ................................. 26,894 4,293 -- 31,187
Selling, general and administrative ................. 5,794 1,418 -- 7,212
Depreciation and amortization ....................... 694 148 -- 842
Amortization of goodwill ............................ -- 90 (90)(2) 272
272 (2)
------------- ------ --------- -------------
33,382 5,949 (182) 39,513
------------- ------ --------- -------------
Income from operations ............................... 2,362 1,012 (182) 3,192
Interest expense .................................... (250) (345) -- (595)
Other income ........................................ 35 86 -- 121
------------- ------ --------- -------------
Income before income taxes and minority interest...... 2,147 753 (182) 2,718
Provision for income taxes .......................... 129 265 -- 394
------------- ------ --------- -------------
Income before minority interest ...................... 2,018 488 (182) 2,324
Minority interest ................................... -- 106 (106) (3) --
------------- ------ --------- -------------
Net income ........................................... $ 2,018 $ 382 $ (76) $ 2,324
============= ====== ========= =============
PRO FORMA DATA (UNAUDITED):
Income before income taxes ........................... $ 2,147 $ 2,718
Pro forma provision for income taxes ................ 880 (4) 1,142 (5)
------------- -------------
Pro forma net income ................................. $ 1,267 $ 1,576
============= =============
Pro forma earnings per share ......................... $ 0.41 $ 0.42
============= =============
Pro forma shares outstanding ......................... 3,095,261 (6) 3,774,219 (7)
============= =============
Pro forma as adjusted earnings per share ............. $ 0.34 (8)
=============
Pro forma as adjusted shares outstanding ............. 4,865,000 (9)
=============
</TABLE>
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(1) Historical balances for Roda at December 31, 1997 have been adjusted to
conform to United States Generally Accepted Accounting Principles, including
the amortization of goodwill of $90,000 related to a 1996 management buyout
of Roda and the recording of deferred taxes of $75,000.
(2) Reflects (i) the elimination of Roda's amortization of goodwill of $90,000
related to the 1996 management buyout of Roda and (ii) the Company's
recognition of amortization of goodwill of $272,000 resulting from the
Acquisition.
(3) Reflects the elimination of $106,000 of minority interest in the earnings of
Roda.
(4) Reflects an increase of $751,000 for income taxes computed utilizing an
overall effective tax rate of 41% as if the Company had been a C corporation
since January 1, 1997.
(5) Reflects a pro forma provision for income taxes for the Company and Roda on
a combined basis and computed utilizing effective tax rates of 41% for
United States income taxes and 31% for United Kingdom income taxes.
(6) Reflects (i) the initial CGII founding share, (ii) 2,595,260 shares to be
issued in the Reorganization, and (iii) 500,000 shares, representing the
number of shares having a value (based upon an assumed initial public
offering price of $12.00 per share) corresponding to the principal amount of
the Reorganization Notes.
(7) Reflects (i) the shares described in footnote (6) above, (ii) 169,739 shares
issuable in connection with the Acquisition, and (iii) 509,219 shares,
representing the number of shares having a value (based upon an assumed
initial public offering price of $12.00 per share) corresponding to the cash
liability payable to the Roda stockholders in connection with the
Acquisition.
(8) Reflects the elimination of interest expense of $142,000 ($98,000 net of
taxes) on the Roda Seller Debt of approximately $1.4 million (850,000
pounds) to be repaid through the application of a portion of the net
proceeds from the Offering. See "Use of Proceeds."
(9) Reflects CGII shares to be outstanding, including (i) the initial CGII
founding share, (ii) 2,595,260 shares to be issued in the Reorganization,
(iii) 169,739 shares issuable in connection with the Acquisition and (iv)
2,100,000 shares to be sold in the Offering. See "The Company -- The
Reorganization."
21
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for the
Predecessor and selected unaudited pro forma combined financial data for the
Company. The selected historical financial data presented below as of and for
the three years ended December 31, 1995, 1996 and 1997 are derived from the
Predecessor's audited financial statements appearing elsewhere in this
Prospectus and should be read in conjunction with those financial statements and
the related notes appearing elsewhere in this Prospectus. The selected
historical financial data presented below as of and for the years ended December
31, 1993 and 1994 are derived from the unaudited financial statements of the
Predecessor for the year ended December 31, 1993 and audited financial
statements of the Predecessor for the year ended December 31, 1994. The pro
forma data are unaudited. The unaudited financial statements include all
adjustments, consisting of only normal recurring accruals, which management
considers necessary for a fair presentation of the financial position and the
results of operations for these periods. The selected financial data below
should be read in conjunction with the Predecessor financial statements and the
related notes thereto, the Unaudited Pro Forma Combined Financial Statements and
the related notes thereto and the information in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1993 1994 1995 1996
------------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales ................................ $ 13,959 $15,927 $17,327 $23,193
Operating expenses:
Costs of production ..................... 9,637 12,085 12,860 17,616
Selling, general and administrative ..... 3,053 3,151 3,441 4,270
Depreciation and amortization ........... 281 448 498 563
--------- ------- ------- -------
12,971 15,684 16,799 22,449
--------- ------- ------- -------
Income from operations ................... 988 243 528 744
Interest expense ........................ (99) (173) (257) (234)
Other income ............................ 3 -- 2 48
--------- ------- ------- -------
Income before income taxes ............... 892 70 273 558
Provision for income taxes .............. 119 7 6 56
--------- ------- ------- -------
Net income ............................... $ 773 $ 63 $ 267 $ 502
========= ======= ======= =======
PRO FORMA DATA (UNAUDITED):
Income before income taxes ...............
Pro forma provision for income taxes.....
Pro forma net income .....................
Pro forma earnings per share .............
Pro forma shares outstanding .............
Pro forma as adjusted earnings per share..
Pro forma as adjusted shares outstanding..
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1997
-------------------------------------------
ACTUAL PRO FORMA
-------------------- --------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Net sales ................................ $ 35,744 $ 42,705
Operating expenses:
Costs of production ..................... 26,894 31,187
Selling, general and administrative ..... 5,794 7,212
Depreciation and amortization ........... 694 1,114
------------- -------------
33,382 39,513
------------- -------------
Income from operations ................... 2,362 3,192
Interest expense ........................ (250) (595)
Other income ............................ 35 121
------------- -------------
Income before income taxes ............... 2,147 2,718
Provision for income taxes .............. 129 394
------------- -------------
Net income ............................... $ 2,018 $ 2,324
============= =============
PRO FORMA DATA (UNAUDITED):
Income before income taxes ............... $ 2,147 $ 2,718
Pro forma provision for income taxes..... 880 (2) 1,142 (3)
------------- -------------
Pro forma net income ..................... $ 1,267 $ 1,576
============= =============
Pro forma earnings per share ............. $ 0.41 $ 0.42
============= =============
Pro forma shares outstanding ............. 3,095,261 (4) 3,774,219 (5)
============= =============
Pro forma as adjusted earnings per share.. $ 0.34 (6)
=============
Pro forma as adjusted shares outstanding.. 4,865,000 (7)
=============
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------- ------------------------
1993 1994 1995 1996 1997
------------- -------- -------- -------- ------------------------
PRO FORMA
ACTUAL AS ADJUSTED(8)
--------- ------------
(UNAUDITED) (IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ................... $ 71 $ 144 $ 1 $ 543 $ 67 $ 8,447
Working capital ............................. 553 338 32 (867) 728 8,703
Total assets ................................ 3,787 5,680 5,568 9,471 10,938 33,367
Long-term debt and capitalized lease
obligations, net of current portion ........ 623 1,414 1,151 1,300 1,517 2,179
Stockholders' equity ........................ 1,742 1,084 830 1,344 3,151 21,765
</TABLE>
(See footnotes on following page)
22
<PAGE>
(footnotes from previous page)
(1) Gives effect to the Reorganization and the Acquisition as if they each had
occurred on January 1, 1997. See the Unaudited Pro Forma Combined
Financial Statements.
(2) Reflects an increase of $751,000 for income taxes computed utilizing an
overall effective tax rate of 41% as if the Company had been a C corporation
since January 1, 1997.
(3) Reflects a pro forma provision for income taxes for the Company and Roda on
a combined basis computed utilizing effective tax rates of 41% for United
States income taxes and 31% for United Kingdom income taxes.
(4) Reflects (i) the initial CGII founding share, (ii) 2,595,260 shares to be
issued in the Reorganization, and (iii) 500,000 shares, representing the
number of shares having a value (based upon an assumed initial public
offering price of $12.00 per share) corresponding to the principal amount of
the Reorganization Notes.
(5) Reflects (i) the shares described in footnote (4) above, (ii) 169,739 shares
issuable in connection with the Acquisition, and (iii) 509,219 shares,
representing the number of shares having a value (based upon an assumed
initial public offering price of $12.00 per share) corresponding to the cash
liability payable to the Roda stockholders in connection with the
Acquisition.
(6) Reflects the elimination of interest expense of $142,000 ($98,000 net of
taxes) on the Roda Seller Debt of approximately $1.4 million (850,000
pounds) to be repaid through the application of a portion of the net
proceeds from the Offering. See "Use of Proceeds."
(7) Reflects CGII shares to be outstanding, including (i) the initial CGII
founding share, (ii) 2,595,260 shares to be issued in the Reorganization,
(iii) 169,739 shares issuable in connection with the Acquisition and (iv)
2,100,000 shares to be sold in the Offering. See "The Company -- The
Reorganization."
(8) Gives effect to the following transactions as if they had occurred on
December 31, 1997: (i) the Reorganization; (ii) the Acquisition; and (iii)
the sale of 2,100,000 shares of Common Stock offered hereby and the use of
proceeds therefrom, including: (a) the repayment of the Reorganization
Notes, (b) the satisfaction of the liability for the cash payable to the
Roda stockholders of $6.1 million (assuming an initial public offering price
of $12.00 per share), (c) the repayment of the Roda Seller Debt, and (d) the
repayment of long-term debt of $1.0 million to third-parties. See the
Unaudited Pro Forma Combined Financial Statements and "Use of Proceeds."
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company provides a wide range of graphic communications services to
financial institutions and corporations, focusing on producing and distributing
time-sensitive analytical research and marketing materials and on providing
on-demand printing services. The Company commenced its operations in 1989 when
it opened a printing facility in New Jersey to provide overnight printing and
delivery of time-sensitive analytical research and marketing reports for its
financial institution customers in the New York City metropolitan area.
Currently, the Company operates two facilities in the New York City area and has
agreed to acquire London-based Roda, giving the Company its first facility
outside the United States. To date, the Company has experienced significant
growth primarily through the (i) expansion of its existing customer base, (ii)
addition of products and services, (iii) assimilation of in-house printing
operations, (iv) acquisition of selected assets and (v) establishment of
strategic alliances.
Immediately prior to the Offering, the Predecessor will be reorganized such
that the stockholders of the Predecessor will contribute all of the outstanding
shares of common stock of the Predecessor to CGII in exchange for a total of
2,595,260 shares of Common Stock and Exchange Notes in the aggregate principal
amount of $2.4 million (assuming an initial public offering price of $12.00 per
share). Concurrently with the Reorganization, CGII will assume the Predecessor's
obligations with respect to undistributed S corporation taxable income through
the date of the Reorganization, estimated to total $3.6 million, and will issue
Distribution Notes in such amount to evidence such obligations.
Concurrently with the consummation of the Offering, the Company will
acquire all of the issued share capital of Roda pursuant to the Roda Purchase
Agreement for an aggregate consideration of approximately $8.1 million. The $8.1
million consideration will be satisfied by (i) the delivery of 169,739 shares of
Common Stock, which will be valued at the initial public offering price, and
(ii) a cash payment for the balance of the consideration ($6.1 million, assuming
an initial public offering price of $12.00 per share). In addition to the
consideration, Roda's outstanding indebtedness will be reflected on the
Company's consolidated balance sheet from and after the consummation of the
Acquisition. As of December 31, 1997, Roda had $4.3 million of indebtedness
outstanding, including the Roda Seller Debt. Under the terms of the Roda
Purchase Agreement, the Company has committed to cause Roda to repay the entire
$1.4 million (850,000 pounds) of the Roda Seller Debt within 28 days following
the closing. The Company intends to repay this indebtedness from the proceeds of
the Offering. In order to secure the performance by the selling stockholders of
Roda of certain warranties and covenants, $444,800 (275,000 pounds) of the cash
portion of the consideration will be held in escrow until one year following the
closing. The obligations of the parties under the Roda Purchase Agreement are
contingent upon the closing of the Offering. Roda provides printing and document
output and management services to financial services companies in the United
Kingdom and European markets, and has been a strategic partner in the World
Research Link(TM). Following the Offering, Roda will become a wholly-owned
subsidiary of the Company and its day-to-day operations in London will continue
to be supervised by its current management team.
To date, the Predecessor has been taxed as an S corporation. In connection
with the Offering, the Company will become subject to federal and additional
state income taxes upon the termination of the S corporation status.
Concurrently with becoming subject to federal and additional state income taxes,
the Company will record additional deferred tax assets of $295,000 and
additional deferred tax liabilities of $354,000 and a corresponding net tax
expense of $59,000 in its statement of income. These tax items will be reflected
as a special charge in the Company's income statement for the quarter in which
the Reorganization occurs.
The Company's five largest customers, all of which are financial
institutions, accounted for approximately 65% of its net sales for the year
ended December 31, 1997. After giving effect to the Acquisition, net sales to
customers outside the United States would have accounted for 16% of the
Company's pro forma net sales in the year ended December 31, 1997, and the
Company anticipates that foreign sales will account for a significant portion of
net sales in the foreseeable future. As a result,
24
<PAGE>
the Company's operations may be subject to the fluctuation of currency exchange
rates, various and changing regulatory requirements, increased sales and
marketing expenses, political and economic instability, difficulty in staffing
and managing foreign operations, potentially adverse taxes, complex foreign laws
and treaties and the possibility of difficulty in accounts receivable
collections.
The Company's largest customer, Goldman, Sachs & Co., accounted for
approximately 24% of the Company's net sales during 1997. Although the Company
has had long-term relationships with its significant customers, the Company's
customers may terminate their relationship upon minimal, if any, advance notice
and there can be no assurance that these relationships will continue. In
addition, given the concentration of customers in the financial services
industry, the Company's results of operations will be particularly sensitive to
fluctuations in the economy or financial markets affecting this industry.
The Company's net sales are derived primarily from providing printing and
distribution services for customers in the financial services, insurance and
publishing industries, a substantial component of which is the printing and
distribution of financial and analytical research and marketing materials for
the financial services industry. The Company also derives part of its net sales
from providing fulfillment services, including labeling, mailing, inserting, kit
assembly and inventory management for its customers. Finally, the Company
provides computer and data output services and other document related services
for customers.
The Company's operating expenses consist of the following: (i) costs of
production, (ii) selling, general and administrative expenses and (iii)
depreciation and amortization. Costs of production consist primarily of the cost
of paper and other production materials, labor, outside services, insurance and
other production expenses including repairs and maintenance and rent. Selling,
general and administrative expenses consist primarily of management,
administrative and marketing expenses, salaries for officers, salaries and
commissions paid to sales persons and professional fees.
The Company's quarterly operating results have been and will continue to be
subject to variation, depending upon factors such as the mix of business among
the Company's services, the cost of materials, labor and technology,
particularly in connection with the delivery of business services, the costs
associated with initiating new outsourcing contracts or opening new offices, the
economic condition of the Company's target markets, seasonal concerns and the
costs of acquiring and integrating new businesses.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's Statement
of Income as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales ............................................. 100.0% 100.0% 100.0%
Costs of production .................................. 74.2 76.0 75.3
Selling, general and administrative expenses ......... 19.9 18.4 16.2
Depreciation and amortization ........................ 2.9 2.4 1.9
----- ----- -----
Income from operations ................................ 3.0 3.2 6.6
Interest expense ..................................... ( 1.5) ( 1.0) ( 0.7)
Other income ......................................... 0.0 0.2 0.1
----- ----- -----
Income before income taxes ............................ 1.5 2.4 6.0
Provision for income tax ............................. 0.0 0.2 0.4
----- ----- -----
Net income ............................................ 1.5% 2.2% 5.6%
===== ===== =====
</TABLE>
Year ended December 31, 1997 compared to year ended December 31, 1996.
Net sales. The Company reported net sales of $35.7 million for the year
ended December 31, 1997 compared to $23.2 million for the year ended December
31, 1996, an increase of $12.5 million or 54%. The majority of this increase was
attributable to an increase in business with existing customers, with
25
<PAGE>
the balance attributable to the addition of new customers. In 1997, the Company
had four customers each of whom represented in excess of 10% of net sales, and
together represented an aggregate of 57% of net sales. In 1996, the Company had
three customers each of whom represented in excess of 10% of net sales, and
together represented an aggregate of 42% of net sales.
Costs of production. Costs of production were $26.9 million for 1997, as
compared to $17.6 million for 1996, an increase of $9.3 million or 53%. Costs of
production were approximately 75% of net sales for 1997, as compared to
approximately 76% of net sales for 1996. The decrease in costs of production as
a percentage of net sales was primarily a result of economies of scale resulting
from improved utilization of the Company's existing facilities.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to approximately $5.8 million for 1997 from
approximately $4.3 million for 1996, an increase of $1.5 million. The increase
was attributable to costs associated with the addition of personnel to support
future growth. As a percentage of net sales, selling, general and administrative
expenses decreased from approximately 18% for 1996 to approximately 16% for
1997, primarily reflecting greater economies of scale as the Company improved
the utilization of its existing facilities.
Depreciation and amortization. Depreciation and amortization expense was
$694,000 for 1997 as compared to $563,000 for 1996, an increase of $131,000 or
23%. The increase in depreciation and amortization expense was attributable to
the addition of equipment by the Company during 1997. In connection with the
Acquisition, the Company will record goodwill of approximately $10.9 million
which will result in additional amortization expense in the future of
approximately $272,000 per year.
Interest expense. Interest expense was $250,000 for 1997, as compared to
$234,000 for 1996, an increase of $16,000 or 7%. Such increase was largely
attributable to higher levels of borrowings during 1997. Interest expense
reflects interest on notes payable, capital lease obligations and on
utilizations of the line of credit with Summit Bank.
Other income. Other income included $35,000 for 1997, as compared to
$48,000 for 1996, a decrease of $13,000. Other income primarily reflected gains
on the sale of certain depreciated equipment.
Provision for income taxes. Provision for income taxes was $129,000 for
1997, as compared to $56,000 for 1996. The increase is attributable to higher
income generated during the period. As discussed above, upon termination of the
Company's S corporation status, the Company will become subject to federal and
additional state income taxes.
Net income. As a result of the aforementioned, net income increased to $2.0
million for 1997 from $502,000 for 1996, an increase of $1.5 million. As a
percentage of net sales, net income increased to 6% in 1997 from 2% in 1996.
Year ended December 31, 1996 compared to year ended December 31, 1995.
Net sales. The Company had net sales of $23.2 million for the year ended
December 31, 1996 compared to $17.3 million for the year ended December 31,
1995, an increase of $5.9 million or 34%. The majority of this increase was
attributable to an increase in business with existing customers, with the
balance attributable to the addition of new customers. In 1996, the Company had
three customers each of whom represented in excess of 10% of net sales, and
together represented an aggregate of 42% of net sales. In 1995, the Company had
two customers each of whom represented in excess of 10% of net sales, and
together represented an aggregate of 37% of net sales.
Costs of production. Costs of production were $17.6 million for 1996, as
compared to $12.9 million for 1995, an increase of $4.7 million or 37%. Costs of
production were approximately 76% of net sales for 1996, as compared to
approximately 74% of net sales for 1995. The decrease in costs of production as
a percentage of net sales was primarily a result of economies of scale resulting
from improved utilization of the Company's existing facilities.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to approximately $4.3 million for 1996 from
approximately $3.4 million for 1995, an increase of $900,000 or 26%. The
increase was attributable to costs associated with the addition of
26
<PAGE>
personnel to support future growth. As a percentage of net sales, selling,
general and administrative expenses decreased to approximately 18% for 1996
from approximately 20% for 1995, reflecting economies of scale as the Company
increased facilities utilization.
Depreciation and amortization. Depreciation and amortization expense was
$563,000 for 1996 as compared to $498,000 for 1995, an increase of $65,000 or
13%. The increase in depreciation and amortization expense primarily reflects
the addition of equipment by the Company during 1996.
Interest expense. Interest expense was $234,000 for 1996 compared to
$257,000 for 1995, a decrease of $23,000 or 9%.
Other income. Other income included $48,000 for 1996 as compared to $2,000
for 1995. Other income primarily reflected gains on the sale of depreciated
equipment.
Provision for income taxes. Provision for income taxes was $56,000 for 1996
as compared to $6,000 for 1995. The increase is attributable to higher income
generated during the period.
Net income. As a result of the aforementioned, net income increased to
$502,000 for 1996 from $267,000 for 1995, an increase of $235,000 or 88%.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has financed its operations, including working capital
and equipment acquisitions, using bank borrowings, vendor financing, financing
lease transactions, as well as from cash flow generated from operating
activities, and stockholder debt and equity contributions. As of December 31,
1997, the Company had net working capital of $728,000, as compared to a net
working capital deficit at December 31, 1996 of $867,000. Net cash provided by
operating activities was $1.5 million, $1.7 million and $594,000 for each of the
years ended December 31, 1997, 1996 and 1995, respectively. Net cash used in
investing activities was $797,000, $1.6 million and $254,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. Net cash used in investing
activities was primarily attributable to the acquisition of property and
equipment, offset in part by the cash generated from the sale and leaseback of
certain equipment for $1.3 million in 1997. Net cash used in financing
activities totaled $1.1 million in 1997, as compared to net cash generated from
financing activities of $511,000 in 1996. In 1995, net cash used in financing
activities totaled $483,000. In 1997, cash was used in financing activities
primarily to repay indebtedness to related parties and to fund a dividend to the
Company's stockholders. In 1996, cash was provided by financing activities
primarily from the net incurrence of additional third-party indebtedness to
finance the acquisition of equipment and certain other assets. In 1995, cash was
used in financing activities primarily to pay a dividend to the Company's
stockholders, as well as to repay certain indebtedness.
On December 15, 1997, the Company entered into a new Loan and Security
Agreement with Summit Bank (the "Loan and Security Agreement"). The Loan and
Security Agreement provides for a $2.0 million revolving line of credit and a
$1.0 million three-year term loan facility. The revolving line of credit expires
on May 30, 1998. Borrowings under the line of credit and the term loan bear
interest at the bank's prime rate or, at the Company's option, LIBOR plus 2.25%
(8.5% at December 31, 1997). The debt is collateralized by substantially all of
the Company's assets. Among other things, the Loan and Security Agreement
restricts the Company's ability to incur additional indebtedness and requires
the Company to maintain certain financial ratios. As of December 31, 1997,
$300,000 was outstanding under the revolving line of credit and $1.0 million was
outstanding under the term loan facility. The Company intends to repay the term
loan facility with the proceeds of the Offering.
As a result of the Acquisition, the Company will have additional debt
outstanding, including borrowings under Roda's existing credit facility with the
Bank of Scotland (the "Roda Facility") consisting of a $2.0 million (1.2 pounds
million) term loan and a $418,000 (250,000 pounds) revolving line of credit. The
line of credit is reviewed by the bank annually for renewal, but is payable on
demand. Borrowings under both the term loan and the line of credit bear interest
at the bank's base rate plus 2.50% (7.25% as of December 31, 1997). The debt is
collateralized by substantially all of Roda's assets. As of December 31,
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1997, approximately $357,000 (214,000 pounds) was outstanding on the credit
facility and $1.6 million (968,000 pounds) was outstanding under the term loan.
The term loan is payable in equal monthly installments through October 20, 2001.
The Company intends to seek to expand its operations through the
acquisition of additional businesses which provide commercial, digital and
time-sensitive printing services and through the expansion of its outsourcing
business. Such acquisitions could involve the issuance of additional securities
of the Company, the payment of cash, including proceeds from the Offering, or
the incurrence of debt. No assurances can be made that the Company will have
access to necessary financing to pursue its growth strategy. The Company
believes that the combination of the proceeds raised from the Offering, together
with internally generated funds, will provide sufficient cash to meet the
Company's capital and other cash requirements for the next twelve months.
Year 2000 Issues
In the year 2000, the Company's computer programs that have date sensitive
software may recognize a date using "00" as the year 1900 rather than 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
The Company will be required to modify its purchased software program so
that its computer systems will function properly with respect to dates in the
year 2000 and thereafter. The Company has been informed that the vendor for the
purchased software is expected to release an upgrade to address the Year 2000
issue no later than December 31, 1998, which is prior to any anticipated impact
on the Company's operating systems. The cost of the upgrade to the Company is
included in its maintenance contract with its vendor and will not have a
material impact on the Company's future financial results.
The Company has had communications with all of its significant, large
customers and suppliers to determine the extent to which the Company's interface
systems are vulnerable to any failure by third parties to upgrade their own
software. The Company believes that its large customers and suppliers are
addressing the issues and will timely adjust their systems. However, if such
modifications are not made by the Company or its vendors or customers, or are
not completed in a timely manner, the Company's operations could be adversely
affected.
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BUSINESS
OVERVIEW
The Company provides a wide range of graphic communications services to
financial institutions and corporations, focusing on producing and distributing
time-sensitive analytical research and marketing materials and on providing
on-demand printing services. The Company, which commenced operations in 1989,
operates on a global basis through its facilities in the United States and
through alliances with Roda, its strategic partner in the United Kingdom, and
with its strategic partner in Hong Kong. The Company believes that it is
presently among the largest volume producers of financial research reports in
the world, having produced over 2 billion pages during 1997.
Graphic communications services provided by the Company include digital
communications, document management, offset printing, digital printing, data
output, bindery, fulfillment services, mailing services and outsource services.
The Company prints brochures, booklets, confirmations of trade, client
statements and adhesive books to meet the daily, weekly and monthly needs of its
customers. To facilitate the rapid distribution of documents globally, the
Company has designed and implemented the World Research Link(TM), an array of
electronic data communication networks linking each of the Company's facilities
with its strategic operating partners and major customers. To date, the Company
has established extensive client relationships with leading companies in the
financial services, insurance and publishing industries, including CS First
Boston, Inc., Deutsche Morgan Grenfell, Goldman, Sachs & Co., Lehman Brothers
Inc., Merrill Lynch & Co., Inc., The Prudential Insurance Company of America,
Empire Blue Cross/Blue Shield, New York Life Insurance Company, FIND/SVP, Inc.
and The McGraw-Hill Company, respectively.
The Company has experienced significant growth, with net sales growing from
$17.3 million for the year ended December 31, 1995 to $35.7 million ($42.7
million pro forma for the Acquisition) for the year ended December 31, 1997 and
income from operations growing over the same period from $528,000 to $2.4
million ($3.2 million pro forma for the Acquisition), representing compounded
annual growth rates of 43.6% and 113.2%, respectively. The Company intends to
continue to pursue its growth strategy by (i) pursuing acquisitions and
establishing strategic alliances to expand and strengthen the Company's business
reach in target markets worldwide, (ii) pursuing outsourcing opportunities
through the assimilation of in-house printing operations of third-party
businesses, (iii) expanding the scope and volume of services offered, (iv)
actively cross-selling existing or newly-added products or services to its
customers worldwide, and (v) improving the operating efficiency of its existing
operations. As part of its growth strategy, concurrently with the closing of the
Offering, the Company will acquire its London-based strategic partner Roda. Roda
provides printing and document output and management services to financial
services companies, primarily in the United Kingdom and European markets.
The Company's senior officers have extensive experience in the graphic
communications services industry, having been employed by the Company for an
average of approximately 6 years and having an average of approximately 19 years
of industry experience. The Company's Chairman, President and Chief Executive
Officer, Michael R. Cunningham, founded the Company and has been actively
involved in the industry for over 15 years. Furthermore, based on the proven
track record of its experienced management team and the wide range of services
it provides, the Company is well-positioned to capitalize on the increasing
outsourcing trend as well as on consolidation opportunities in the industry.
INDUSTRY BACKGROUND
The Company estimates that the commercial printing and document production
market accounted for more than $80 billion in revenue in the United States and
over $10 billion in revenue in the United Kingdom in 1997, based upon
information from certain trade associations and other industry sources. The
printing and document management business in the United States is highly
fragmented with approximately 50,000 companies presently in operation, only
approximately 20% of which are estimated to have annual net sales in excess of
$2 million. The Company believes that the commercial printing and document
production business is similarly fragmented in the United Kingdom and in certain
other markets.
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The printing and document management industry has evolved significantly
over the last several years driven in large part by rapid advances in publishing
and electronic information technology. The Company believes that the growth of
the printing and document production industry has been due to various factors,
including (i) the increasing volume, complexity and variety of documents and
printed materials produced by businesses worldwide, (ii) the increasing demand
by businesses for the global dissemination of time-sensitive information, and
(iii) the growing trend of businesses to outsource their in-house printing
operations (e.g., print shops, copy centers and document management facilities)
to document professionals equipped to provide these services more efficiently
and cost-effectively.
BUSINESS STRATEGY
The Company believes that the fragmented nature of the graphic
communications industry and the limited capital resources available to many
small, private operators provide the Company with significant opportunities to
expand its base of operations. The Company intends to continue its growth
strategy by (i) pursuing acquisitions and establishing strategic alliances to
expand and strengthen the Company's business reach in target markets worldwide,
(ii) pursuing outsourcing opportunities through the assimilation of in-house
printing operations of third-party businesses, (iii) expanding the scope and
volume of services offered, (iv) actively cross-selling existing or newly-added
products or services to its customers worldwide, and (v) improving the operating
efficiency of its existing operations.
Pursue Acquisitions and Establish Strategic Alliances
The Company will seek to acquire complementary operations throughout the
United States, United Kingdom and other international markets which, the Company
believes, possess attractive characteristics, including concentrations of
prospective customers with significant printing needs, such as financial
institutions. The Company will typically target acquisition candidates with (i)
annual net sales ranging from $3.0 to $15.0 million; (ii) attractive growth
prospects within their respective markets; (iii) complementary technological
capabilities; (iv) opportunities for economies of scale and synergies with the
Company; (v) solid reputation with established customer relationships; and (vi)
an experienced management team. The Company may also seek to make "tuck-in"
acquisitions as a means to expand its existing operations, add product lines and
services as well as expand its customer base.
The Company will also seek to establish additional alliances with strategic
partners in targeted geographic markets. This incremental approach to growth
enables the Company to expand the scope of its operations without the need for
substantial capital investments while mitigating the risks associated with
start-up facilities in new markets. In addition, the Company believes that such
relationships foster significant cross-selling opportunities across each
partners' respective customer bases. The Company believes that such alliances
also provide for future acquisition opportunities. Pursuant to this strategy,
the Company initially established an alliance with Roda, a United Kingdom-based
printing company. As part of its growth strategy, the Company recently entered
into an agreement to acquire Roda, thereby solidifying the Company's presence in
the United Kingdom and European printing markets. See "The Company -- The Roda
Acquisition," "Graphic Communications Services -- Time Sensitive Printing," and
"Global Network."
Expand Provision of Outsourcing Services
To date, the Company has grown, in part, through the assimilation of
certain in-house printing operations of third-party businesses, including the
print shop and data output center of Goldman, Sachs & Co. and the print shop of
Empire Blue Cross/Blue Shield. The Company believes that it is a cost effective
and an efficient provider of a wide range of in-house printing services. The
Company typically provides outsourcing services by assuming all or part of the
document output and distribution responsibilities previously performed by a
customer's in-house operations. In some instances, the Company may take over the
management of a customer's in-house operations. See "Graphic Communications
Services -- Outsourcing Services."
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Expanding the Scope and Volume of Services Offered
The Company intends to continue to expand the scope and volume of services
provided to its customers through the addition of complementary products and
services. The Company also continually evaluates opportunities to add new
equipment to its existing facilities or enhance its current technology in order
to satisfy the evolving needs of its customer base. In addition, the Company
regularly evaluates opportunities to add capacity to its existing operations to
meet any anticipated increase in demand of its larger customers.
Capitalize on Cross-Selling Opportunities
The Company also intends to actively cross-sell existing and newly-added
products or services to its customers worldwide. By leveraging on the wide range
of products and services offered through both its own facilities and those of
its strategic partners in complementary geographic markets, the Company believes
that it can better serve the needs of international customers by offering a
"one-stop shopping" approach to satisfying global printing needs. In addition,
the Company also believes that it can cultivate new customer relationships as a
result of introductions made by its strategic partners whose respective
customers may require printing output in the United States or other markets
served by the Company. The Company believes that its ability to cross-sell the
products and services of its global alliance provides it with a distinct
competitive advantage. See "Graphic Communications Services -- Time Sensitive
Printing" and "Global Network."
Improve Efficiency of its Existing Operations
Central to the Company's business strategy is to improve the profitability
of its operations by maximizing the efficiency of its existing facilities while
actively managing its operating and administrative costs. The Company believes
that significant economies of scale may be achieved by leveraging its
underutilized daytime production capacity through the increase of
non-time-sensitive business. A significant portion of the Company's
time-sensitive business is currently processed overnight, resulting in available
daytime capacity. The Company also expects to achieve significant economies of
scale in conjunction with its acquisition strategy. In this regard, the Company
expects to (i) consolidate duplicative functions or facilities of newly-acquired
businesses; (ii) leverage its purchasing power with its suppliers and employee
benefit providers; and (iii) use its communication network to improve the
coordination of production, maximize equipment utilization and enhance delivery.
GRAPHIC COMMUNICATIONS SERVICES
Time-Sensitive Services
The Company's primary business focuses on the production of time-sensitive
documents for major financial institutions and corporations. The Company offers
a wide range of time-sensitive services including the printing, assembly and
dissemination of folders, booklets and adhesive books on a daily, weekly and
monthly basis. The Company also prints prospectuses, annual and semi-annual
reports for mutual funds customers. The Company believes that it is presently
among the largest volume producers of time-sensitive equity and fixed-income
financial research reports in the world, having produced over 2 billion pages of
time-sensitive equity and fixed income research reports during 1997.
Typically, the Company converts electronic data received from its customers
on a daily basis into tailored analytical research reports which are printed and
delivered to the Company's customers prior to the start of the next business
day. The Company's production processes include digital communications, offset
and digital printing, multiple binding procedures, branch fulfillment, list
maintenance and prompt distribution. The Company's technological capabilities
enable it to produce colorful, attractive products, and distinguish research
reports produced by the Company from other, ordinarily duplicated documents. In
addition, the Company's World Research Link(TM) network enables the Company to
print and distribute these documents, in conjunction with its strategic
partners, contemporaneously throughout several global locations. See "Global
Network."
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The demand for printed research and other time-sensitive reports has
continued to grow despite continuing developments in electronic data
transmission, such as the Internet, which provide customers with alternative
methods of transmitting time-sensitive information. The Company expects that the
demand for time-sensitive printed documents will continue to grow due to (i) the
increasing globalization of its customers, particularly financial institutions,
(ii) the growth and expansion of global capital markets and (iii) the increasing
volume, complexity and variety of document and printed materials. The Company
believes that printed research reports not only serve as information tools, but
serve as marketing tools as well. As such, the Company believes that customers
will continue to demand high quality and colorful research reports as they seek
to distinguish themselves in their own competition for clients.
Outsourcing Services
The Company typically provides outsourcing services by assuming all or part
of the document output and distribution responsibilities previously performed by
a third party's in-house operations. This service often enables such third party
to focus on its core business and to close all or portions of its in-house print
shop and/or document management and copy centers and permits the Company to
operate and perform all services on a remote basis. Such third party can also
achieve significant cost savings on the cost of technology, material and
services such as paper and shipping by taking advantage of the bulk purchase
arrangements which the Company has with its suppliers. Thereafter, the third
party may transmit computer-generated data to one of the Company's production
and printing facilities, which then processes, produces and distributes all of
the reports, statements and other computer-output documents on an as needed
basis. The Company believes that it can operate print shop, document management
and copy center functions more efficiently and cost effectively than can a
non-graphic communications company.
The Company has an established track record of assimilating into its
existing operations the assets and workforce of third-party in-house print
operations, including its assimilation of the print shop and data output center
of Goldman, Sachs & Co. and the print shop of Empire Blue Cross/Blue Shield. In
each of the foregoing transactions, the Company acquired selected equipment and
inventory on favorable terms and retained a majority of the employees.
Data Output Services
The Company also provides a variety of data output services, including the
production of trade confirmations and brokerage and investment account
statements for a major financial institution. In addition, the Company provides
certain database management services to its customers, including the ability to
output data files of addresses directly onto envelopes or other printed
material, insert flyers and other materials into mailings as well as to offer
presorting of first class mail with bulk postal drop services.
Commercial Printing
The Company produces a broad range of commercial printing products that
include catalogs, directories, brochures, booklets, folders, newsletters,
flyers, sales and marketing kits and manuals. The type of printing varies from
simple one color documents to complex multi-color documents on a wide range of
paper stocks. The Company's customers for commercial printing products include
its financial institution clients, insurance companies, healthcare and
pharmaceutical companies and trade associations. The Company also provides
"overflow" printing for a number of in-house print operations of investment
banking firms. Given the non-time-sensitive nature of many of these projects,
the Company typically produces these products during non-critical daytime hours.
The Company expects to continue to increase the volume of daytime commercial
printing to take advantage of its available non-time-sensitive production
capacity. See "Sales and Marketing."
PRINTING OPERATIONS
The Company provides a broad range of graphic communications services for
a wide variety of commercial purposes. These services commence with the intake
of data, and continue through the prepress and press processes, binding, and
conclude with fulfillment and distribution. The Company
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continuously reviews its printing equipment needs and evaluates advances in
computer hardware, software and peripheral equipment, computer networking and
telecommunications systems as they relate to the Company's operations.
Telecommunications and Order Entry
The Company's capital investment in state-of-the-art telecommunications and
customer on-line ordering systems allows the Company to offer its services
globally and throughout its customers' organizational network. In lieu of manual
delivery of customer data files or artwork, the Company's telecommunications
capabilities allow it to receive direct transmission of files, saving both time
and expense while increasing quality of the work produced.
Customers have many alternatives for sending electronic files to the
Company. Using a modem, customers can contact the Company's private and secure
electronic bulletin board, log-in and transmit or access data files. For
customers with advanced telecommunications requirements, the Company offers ISDN
line communication capability. For some of the Company's most significant
customers, specialized equipment, such as fractional T1 lines have been
installed. Customers having Internet access may use available File Transfer
Protocol ("FTP") and World Wide Web applications to send and receive data in a
secure manner. Secure router-based connections through proxy servers allow the
Company to control traffic and direct files containing the text and graphics of
research reports, marketing materials, mailing lists, order entry, job tickets
and work orders, globally through the World Research Link(TM). In addition, the
Company has developed a customized order entry system. This system links the
customer with the Company and can be accessed by customers through desk-top
computers, thereby permitting customers to create an order while submitting
digital files.
Prepress Operations
At each of its facilities, the Company operates a prepress department that
prepares customer-supplied text, data, artwork and images for document
production. Using computerized prepress equipment, the Company processes digital
files, scanned images and graphics into "composed electronic files." These
electronic files are used with a variety of output options, including digital
printing, conventional offset printing or for electronic publishing, such as on
the Internet. In addition, the Company can distribute composed electronic files
that include text and graphics in various formats through the World Research
Link(TM) to other facilities for document production. See "Global Network."
The Company believes that enhanced digital printing technology will further
facilitate multi-purpose uses by its customers of the same electronic files.
Digital printing technology will augment the Company's ability to return to the
customer a printed document plus a reformatted document which can then be used
on multiple media platforms including the Internet, the customer's intranet,
multiple on-line information services and broadcast faxing.
Press Operations
The Company operates 12 presses in its Jersey City facility, seven of which
are web presses and five of which are sheet-fed presses. The Company also
operates five presses in its Manhattan facility, two of which are web presses
and three of which are sheet-fed presses. In London, Roda operates 10 presses,
all of which are sheet-fed presses. The Company's presses vary in size and speed
and can produce printed materials that range in page size, type of paper, number
of pages and the amount of color required.
The Company currently has four digital presses, one located in Jersey City
and three in New York City, and intends to add digital press capability in
London. Two of the Company's digital presses have in-line binding attachments
which allow for the production of finished booklets. These presses are linked
directly to the Company's computerized network and are currently being utilized
for the production of research reports, personalized health care documents,
confirmations of trade, client statements and general print products. The
Company has developed the ability to provide digital printing services as a
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complement to offset printing. For smaller runs, digital printing is more
efficient and reliable than printing on traditional presses and often results in
a product of higher quality and better resolution. Digital printing involves the
integration of a variety of systems that compile data, scan images, and compose
data and images. Through high-speed computers, data may be received directly
from customers and put directly on the press, eliminating the costly
intermediate steps involved in the traditional printing process.
Binding Services
At each facility, the Company operates a bindery department which provide
various finishing services. The Company's finishing services include cutting and
folding, saddle stitching, punching, collation and inserting, and at the Jersey
City facility, perfect binding and shrink-wrapping. By offering a variety of
finishing services, the Company can offer its clients expeditious service as
well as a wide range of finishing service options.
Fulfillment Services
At each facility, the Company also operates a fulfillment department. Many
of the documents prepared for customers need to be stored for future
distribution, both electronically and physically. The Company's fulfillment
department stores materials and assembles orders for distribution upon customer
request. Printed components are assembled into kits and are packed individually,
or in bulk, for delivery. Upon completion of the order, the fulfillment system
relieves the distribution from the customer's inventory and generates an
activity report for inventory control. For those customers who require mail
distribution, the Company operates a mailing department in each location. Using
inkjet and cheshirre labeling machines, electronic mailing lists are addressed
on envelopes. Documents are inserted into envelopes, sealed and sorted for mail.
Management Information System
The Company's personnel utilize a comprehensive and integrated management
information system which gathers data from all departments and provides
management with job status and historical information. The system is divided
into several fully integrated modules consisting of estimating, production,
purchasing, inventory and accounting modules. This system gives management the
ability to monitor all work orders and department costs against budgets and
profit goals. Using this system, management can also track the status of a
particular work order as it moves through the production process. The system
permits the Company to (i) determine the most efficient and cost-effective means
of completing particular work orders, (ii) give customers pricing estimates
quickly, (iii) measure pressroom efficiency and waste, (iv) analyze buying
patterns, pricing and usage for inventory control purposes and (v) produce
customized financial statements, reports and analyses.
GLOBAL NETWORK
In 1994, the Company, in conjunction with its strategic partners, developed
a global network known as the World Research Link(TM) designed to facilitate the
expeditious distribution of time-sensitive financial research reports globally,
24 hours a day. Through the use of high speed electronic links among the
Company's facilities in the United States and its strategic partners in the
United Kingdom and Hong Kong, the Company is able to print research reports
concurrently throughout these three principal global financial markets.
The Company's strategic partner in the United Kingdom is Roda, a leading
research report printer established in 1976. Roda's principal customers include
the London branches of numerous major international financial institutions,
including CS First Boston, Inc. and Lehman Brothers Inc., as well as other major
international institutions, such as J. Henry Schroder & Co. Limited, Indosuez
W.I. Carr Securities Ltd. and ABN-AMRO Hoare Govett. Concurrently with the
Offering, the Company will acquire all of the capital stock of Roda and will
subsequently seek to integrate its operations within the Company.
The Company's strategic partner in Hong Kong is Workable Co. Ltd.
("Workable"), a leading research report printer established in 1988. Workable's
principal customers include the Hong Kong branches of numerous major
international financial institutions, including CS First Boston, Inc., Merrill
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Lynch & Co., Inc. and Indosuez W.I. Carr Securities Ltd. Workable maintains
around-the-clock operations and provides overnight shipments to other principal
financial centers throughout Asia. Workable has invested in state-of-the art
printing and data communications technology to facilitate the receipt and
distribution of electronic data files and Japanese data transmissions. The
Company and Workable have implemented a joint marketing plan which provides the
Company with potential cross-selling opportunities to Workable's customers who
maintain operations in New York and London.
The Company intends to continue to expand its World Research Link(TM)
through the establishment of additional strategic alliances throughout Europe,
South America and Asia. The Company regards its international relationships as
cross-selling opportunities and intends to develop additional joint marketing
alliances whereby the Company and its strategic partners each expect to derive
business from their respective customers' operations in various global markets.
SALES AND MARKETING
The Company's marketing activities are handled primarily through its own
sales force consisting of nine individuals, a few of whom hold management
positions. Following the Acquisition, the Company will have two salesmen in
London. The Company's sales representatives are generally organized among
customer industry groups, such as financial services, healthcare and insurance
and by specific printing and document output services, such as research reports
and on-demand mutual fund reports and commercial printing. In addition, the
Company employs customer service representatives to provide on-going support to
existing customers and to oversee the implementation of new customer projects.
The Company currently has approximately 350 customers in the United States,
including financial institutions, healthcare companies, trade organizations and
retail and manufacturing firms. The Company's four largest customers, Goldman,
Sachs & Co., The Prudential Insurance Company of America, CS First Boston, Inc.
and Merrill Lynch & Co., Inc. accounted for approximately 24%, 13%, 10% and 10%
respectively, of the Company's net sales for the year ended December 31, 1997.
After giving effect to the Acquisition, the Company's four largest customers,
Goldman, Sach & Co., CS First Boston Incorporated, Lehman Brothers Inc., and The
Prudential Insurance Company of America, accounted for approximately 20%, 12%,
11% and 11%, respectively, of the Company's net sales on a pro forma basis for
the year ended December 31, 1997.
In 1997, Roda's largest customers were Lehman Brothers Inc. and CS First
Boston, Inc., which accounted for approximately 25% and 22%, respectively, of
its sales. Roda's next three largest customers in London were J. Henry Schroder
& Co. Limited, Indosuez W.I. Carr Securities Ltd. and ABN-AMRO Hoare Govett.
Combined, these five customers accounted for approximately 86% of Roda's sales
during 1997.
The Company believes that its quality of its work product, timeliness of
performance, on-going customer support and its ability to customize services to
serve specific client needs have contributed to its record of successful
customer retention. The Company encourages its major customers to enter into
service contracts specifying certain types of business for a defined period. The
Company believes that such contracts enable it to improve its order flow and
provides it with a more predictable volume of business. The Company intends to
add sales representatives and customer support staff to further increase its
customer base in additional markets and to augment its volume of non-financial
commercial printing.
COMPETITION
The commercial printing and document production industry is highly
competitive. The Company competes with a variety of companies, many of which
possess significantly greater financial and other resources than the Company. In
the New York market, the Company competes with Bowne & Co., R.R. Donnelly, Xerox
Business Services, Big Flower Press Holdings, Inc. and Merrill Corporation, and
numerous smaller operations, in the printing of time-sensitive documents. Roda's
major competitor in the London market is Williams Lea Ltd. (a strategic partner
of Bowne & Co.).
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The Company believes that the principal competitive factors in providing
printing and document output services include technological expertise, quality
and accuracy, turnaround time, fulfillment, price, reliability, security of
service, reputation, client industry expertise, capacity and personalized
customer support and service. No assurances can be given that the Company will
be able to compete effectively against the larger companies in the printing
industry.
GOVERNMENTAL REGULATION
Under various environmental laws, ordinances and regulations in effect in
the United States, a current or previous owner or operator of real property may
be held liable for the cost of removal or remediation of certain hazardous or
toxic substances, including, without limitation, asbestos-containing materials,
that could be located on, in or under such property. Such laws and regulations
often impose clean-up responsibility and liability whether or not the owner or
operator knew of, or was responsible for, the presence of the hazardous or toxic
substances, and liability under such laws has been interpreted to be joint and
several unless the harm is divisible and there is a reasonable basis for
allocation of responsibility. Existing laws of a similar nature in the United
Kingdom will be replaced and strengthened when new laws for the remediation of
contaminated land become effective. These laws will impose clean-up
responsibility on a proportionate basis. Primary clean-up responsibility will be
imposed on those who caused or knowingly permitted the presence of the hazardous
or toxic substances. If no such persons can be found, then the current owner or
occupier may have clean-up responsibility. The costs of any required remediation
or removal of hazardous or toxic substances could be substantial and the
liability of an owner or operator as to any property is generally not limited
under such laws and regulations and could exceed the property's value and the
aggregate assets of the owner or operator. The presence of these substances or
failure to remediate such substances properly may also adversely affect the
owner's ability to sell or rent the property, or to borrow using the property as
collateral. Under these laws and regulations in the United States, an owner,
operator or an entity that arranges for the disposal of hazardous or toxic
substances, such as asbestos-containing materials, at a disposal site may also
be liable for the costs of any required remediation or removal of the hazardous
or toxic substances at the disposal site. In the United Kingdom, laws and
regulations require the owner or operator disposing of such substances to ensure
disposal at a properly licensed disposal site. Failure to do so is a violation
of law. In connection with the ownership or operation of its properties, the
Company could be liable for these costs, as well as certain other costs,
including governmental fines and injuries to persons or properties. As a result,
the presence, with or without the Company's knowledge, of hazardous or toxic
substances at any property held or operated by the Company, or acquired or
operated by the Company in the future, could have an adverse effect on the
Company's business, financial condition and results of operations. No assurance
can be given that existing environmental audits with respect to any of the
Company's properties reveal all environmental liabilities. In addition, the
Company's activities are also governed by laws and regulations affecting the
health and safety of its employees, including the United States Occupational
Safety and Health Act ("OSHA") and the United Kingdom Health and Safety at Work
etc. Act 1974 and the numerous regulations issued under it. Among other things,
these laws and regulations require the Company to obtain and maintain licenses
and permits and carry out risk assessments in connection with its operations.
This extensive regulatory framework imposes significant compliance burdens and
risks on the Company. Failure to comply with applicable laws, rules or
regulations or permitting requirements could subject the Company to civil
remedies, including fines and injunctions, as well as possible criminal
sanctions, which would have a material adverse effect on the Company.
LITIGATION
The Company is, from time to time, a party to legal proceedings arising in
the normal course of its business. Management believes that none of the legal
proceedings currently outstanding will have a material adverse effect on the
Company's business, financial condition and results of operations.
FACILITIES
The Company leases approximately 110,000 square feet of office and
production space at its principal location in Jersey City, New Jersey under a
lease which expires on February 29, 2000. The Company also subleases
approximately 25,000 square feet of production space in Manhattan from
36
<PAGE>
Goldman, Sachs & Co. under an agreement which expires December 30, 1999. In the
Southwark area of London, Roda leases approximately 8,000 square feet of office
and production space under an agreement which expires on the date five years
subsequent to the closing of the Acquisition and leases nearby warehouse space
under a lease which expires September 28, 2000.
EMPLOYEES
As of December 31, 1997, the Company had approximately 370 employees in the
United States, all of which were employed on a full-time basis. As of such date,
255 United States-based employees were members of the United Paperworkers
International Union, with which the Company has a memorandum of agreement which
expires on June 30, 2000. As of December 31, 1997, Roda had approximately 50
full-time employees, of which approximately 30 were members of the National
Graphical Association, a labor union in the United Kingdom. The Company believes
that it is in compliance with its labor agreements and that its labor relations
are good.
37
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning each of the
Company's directors, executive officers, designees to the Board of Directors who
will become directors following the consummation of the Offering and a key
employee of Roda:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----------------------------------- ----- ---------------------------------------------
<S> <C> <C>
Directors and Executive Officers
Michael R. Cunningham ............. 38 Chairman of the Board, President and Chief
Executive Officer
Gordon Mays ....................... 41 Director and Executive Vice President
Timothy Mays ...................... 39 Executive Vice President of Sales; Secretary
Robert Needle ..................... 39 Chief Operating Officer
Kenneth G. Hay .................... 48 Vice President of Finance
Ioannis Lykogiannis ............... 46 Senior Vice President, Operations
Peter L. Furlonge ................. 45 Managing Director of Roda
James J. Cunningham ............... 40 Director
Designees to the Board of Directors
Arnold Spinner* ................... 63 Director Designee
Norman R. Malo* ................... 47 Director Designee
</TABLE>
- ----------
* Upon consummation of the Offering, it is anticipated that Messrs. Spinner
and Malo will become directors.
Directors and Officers
Michael R. Cunningham, the principal founder of the Company, has been the
President and Chief Executive Officer of the Company since its inception. He
has spent his entire professional career in the printing and document
production industry. He also teaches Quality Control at the Center for Graphic
Communications Management and Technology of New York University. Mr. Cunningham
has a Masters Degree in Graphic Communications, Management and Technology from
New York University.
Gordon Mays has served as a director and Executive Vice President of the
Company since 1991. He is presently responsible for marketing and business
development and is also responsible for overseeing the Company's management
information services departments, including overseeing cost control measures and
governmental compliance. He has spent his entire professional career in the
printing and document production industry. From 1977 to 1991, Mr. G. Mays was
employed by Latham Process Corporation where he was responsible for production
and sales.
Timothy Mays has served as Executive Vice President of Sales and Secretary
of the Company since 1991. He presently oversees sales to major corporate
clients. He has spent his entire professional career in the printing and
document production industry. From 1979 to 1991, Mr. T. Mays was employed by
Latham Process Corporation where he was engaged in sales. Messrs T. Mays and G.
Mays are first-cousins.
Robert Needle joined the Company in 1995 and has served as Chief Operating
Officer of the Company since February 1998. Mr. Needle has served in various
capacities for the Company since 1995, including Co-Chief Operating Officer from
January 1997 to February 1998. He is responsible for all operations of the
Company. He has spent his entire professional career in the printing and
document production industry. From 1988 to 1995, Mr. Needle was employed by
Goldman Sachs & Co., first as Art Director of the Graphics Department and then
as Manager of Print Operations.
Kenneth G. Hay has served as Vice President of Finance of the Company since
February 1998. Mr. Hay has served as a principal financial officer of the
Company since he joined the Company in 1997. Prior to joining the Company,
during the period 1992 through 1996, he was Vice President Finance and Chief
Financial Officer of Dana Perfumes Corp. He is licensed as a certified public
accountant in the State of New Jersey.
38
<PAGE>
Ioannis Lykogiannis has served as Senior Vice President, Operations of the
Company since 1995. Mr. Lykogiannis has served in various capacities for the
Company since 1991, including Plant Manager from 1991 to 1995. He is responsible
for all internal production operations of the Company. From approximately 1984
to 1991, Mr. Lykogiannis was employed by Latham Process Corporation, most
recently as a Plant Production Manager.
James J. Cunningham has been a Director of the Company since 1989. He has
been engaged in the private practice of law in San Diego, California since
1987, and specializes in workers compensation and labor and employment law. Mr.
Cunningham is the brother of Michael R. Cunningham, the Chairman of the Board,
President and Chief Executive Officer of the Company.
Designees to the Board of Directors
It is expected that upon the consummation of the Offering, each of the
following individuals will become directors of the Company:
Arnold Spinner, Ph.D, has been the Director of the Center for Graphic
Communications Management and Technology of New York University since 1984. He
has held various teaching and administrative positions at New York University
since 1965.
Norman R. Malo has been President and Chief Operating Officer of National
Financial Services Corporation, a subsidiary of Fidelity Investments since
November 1997. From 1993 to November 1997, he was a Managing Director in the
Trading Services Division of Lehman Brothers Inc. From 1991 to 1993, he was a
Director of Corporate Services/Human Resources with Shearson Lehman Brothers.
Key Employees
Peter L. Furlonge has been an executive officer of Roda since 1989 and its
Managing Director since 1995. Prior to his employment by Roda he was a
financial officer for various construction companies, including Foster Wheeler
in South Africa, where he was a manager of financial accounting. Mr. Furlonge
is a Qualified Chartered Secretary in England.
Robert M. Zanisnik has served as Senior Vice President of the Company since
he joined the Company in 1995. He is responsible for all production and customer
service activities of the Company. From 1970 to 1995, Mr. Zanisnik was employed
by The Prudential Insurance Company of America, most recently as a Manager of
Print Operations.
George Leos has served as Vice President, Production of the Company since
1995. Mr. Leos has served in various capacities for the Company since 1992,
including Production Supervisor from 1992 to 1995. He is responsible for all
scheduling and production planning of the Company. From approximately 1971 to
1992, Mr. Leos was employed by Latham Process Corporation, most recently as a
Production/Printing Superintendent.
Richard Monica has served as the controller of the Company since 1991.
Prior thereto, and since 1987, Mr. Monica served as controller of Kenny Press,
Inc., a commercial printer. From 1976 through 1988, he served as an assistant
accounting manager at Automatic Switch, a division of Emerson Electric, Inc.
Classified Board
Effective upon the closing of the Offering, the Company will implement a
staggered Board of Directors consisting of three classes, with each class
containing, as nearly as practicable, an equal number of directors. Mr. Spinner
will be a Class A Director, for a term expiring at the 1999 Annual Meeting of
Stockholders, Messrs. Malo and James J. Cunningham will be Class B
39
<PAGE>
Directors, for a term expiring at the 2000 Annual Meeting of Stockholders, and
Messrs. Gordon Mays and Michael R. Cunningham will be Class C Directors, for a
term expiring at the 2001 Annual Meeting of Stockholders. Commencing with the
1999 Annual Meeting of Stockholders, directors of one class will be elected for
a three year term. See "Description of Securities -- Staggered Board of
Directors."
Executive officers serve at the discretion of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has created two committees, the Audit
Committee and the Compensation Committee. The members of the committees will be
designated following the consummation of the Offering. The Audit Committee
periodically reviews the Company's auditing practices and procedures and makes
recommendations to management or to the Board of Directors as to any changes to
such practices and procedures deemed necessary from time to time to comply with
applicable auditing rules, regulations and practices, and recommends independent
auditors for the Company to be elected by the stockholders. A majority of the
members of the Audit Committee will be outside directors. The Compensation
Committee meets periodically to make recommendations to the Board of Directors
concerning the compensation and benefits payable to the Company's executive
officers and other senior executives and administers the Company's stock option
plan for employees. See "Stock Option Plans."
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities for the Chief Executive Officer
and the four most highly compensated executive officers of the Company
(collectively, the "Named Executive Officers") during the fiscal year ended
December 31, 1997.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(POUNDS)
- ------------------------------------ ------ ----------- ---------- ----------------------
<S> <C> <C> <C> <C>
Michael R. Cunningham,
President and Chief
Executive Officer 1997 $343,233 $ 0 0
1996 $314,814 $ 0 0
1995 $296,671 $ 0 0
Gordon Mays,
Executive Vice President 1997 $161,497 $40,775 0
1996 $148,051 $ 0 0
1995 $130,814 $ 0 0
Timothy Mays,
Executive Vice President of Sales 1997 $220,991 $36,638 0
1996 $211,367 $ 0 0
1995 $258,992 $ 0 0
Robert Needle,
Chief Operating Officer 1997 $149,616 $25,000 0
1996 $141,475 $15,000 0
1995 $ 95,231 $ 0 0
Ioannis Lykogiannis,
Senior Vice President 1997 $111,690 $14,234 0
1996 $101,336 $ 1,500 0
1995 $ 88,933 $ 0 0
</TABLE>
Pursuant to their employment agreements, each of Messrs. Cunningham, G.
Mays, T. Mays, Needle and Lykogiannis will receive base salaries of $250,000,
$175,000, $150,000, $155,000 and $119,000, respectively following the
completion of the Offering. See "Employment Agreements."
40
<PAGE>
DIRECTORS' COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company receives an annual retainer of $6,000 and an additional fee of
$1,000 for each day's attendance at a Board of Directors meeting and/or
committee meeting or $500 for participation in a telephone conference meeting.
Under the Company's Directors' Stock Option Plan, each non-employee Director has
been granted an option to acquire 15,000 shares of Common Stock at the initial
public offering price and will automatically receive options to acquire 4,000
shares of Common Stock each year, commencing in 1999. See "Stock Option Plans --
The Directors' Stock Option Plan." Directors of the Company are reimbursed for
out-of-pocket expenses incurred in their capacity as directors of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
During the year ended December 31, 1997, there were no stock options
granted to the Named Executive Officers.
EMPLOYMENT AGREEMENTS
Michael R. Cunningham, Gordon Mays, Timothy Mays, Robert M. Zanisnik,
Robert Needle and Ioannis Lykogiannis have entered into employment agreements
with the Company which are effective upon the consummation of the Offering. Mr.
Furlonge will enter into a new employment agreement with the Company which will
become effective upon the closing of the Acquisition.
The agreement with Mr. Cunningham is for a term of three years. He is
employed as President and Chief Executive Officer of the Company with general
supervisory authority of the business of the Company and its subsidiaries and is
charged with the responsibility of preparing and implementing a strategic plan
and seeking out and consummating acquisitions, in accordance with policies set
by the Board of Directors. Pursuant to his employment agreement, Mr. Cunningham
is paid an annual salary of $250,000, which may be increased from time to time
at the discretion of the Board of Directors. He is also entitled to an annual
bonus in an amount determined by the Compensation Committee based upon the
realization of the Company's goals during such year.
The agreement with Mr. G. Mays is for a term of three years. He is employed
as Executive Vice President of the Company with responsibility for marketing,
business development and information systems. Pursuant to his employment
agreement, Mr. G. Mays is paid an annual salary of $175,000, which may be
increased from time to time at the discretion of the Board of Directors. He is
also entitled to an annual bonus in an amount determined by the Compensation
Committee based upon the realization of the Company's goals during such year.
The agreement with Mr. T. Mays is for a term of three years. He is employed
as Executive Vice President of Sales of the Company with responsibility for
overseeing major corporate accounts and identifying new customers. Pursuant to
his employment agreement, Mr. T. Mays is paid an annual salary of $150,000,
which may be increased from time to time at the discretion of the Board of
Directors. He is also entitled to an annual bonus in an amount determined by the
Compensation Committee based upon the realization of the Company's goals during
such year and to commissions on net sales to certain customers of the Company.
The agreement with Mr. Needle is for a term of three years. He is employed
as Chief Operating Officer of the Company with responsibility for all
manufacturing and customer service operations. Pursuant to his employment
agreement, Mr. Needle is paid an annual salary of $155,000, which may be
increased from time to time at the discretion of the Board of Directors. He is
also entitled to an annual bonus in an amount determined by the Compensation
Committee based upon the realization of the Company's goals during such year and
to commissions on net sales to certain customers of the Company.
The agreement with Mr. Lykogiannis is for a term of three years. He is
employed as a Senior Vice President, Operations of the Company with
responsibility for all internal production operations. Pursuant to his
employment agreement, Mr. Lykogiannis is paid an annual salary of $119,000 which
may be increased from time to time at the discretion of the Board of Directors.
41
<PAGE>
The agreement with Mr. Zanisnik is for a term of three years. He is
employed as a Senior Vice President of the Company with responsibility for all
production and customer service activities. Pursuant to his employment
agreement, Mr. Zanisnik is paid an annual salary of $88,000, which may be
increased from time to time at the discretion of the Board of Directors. He is
also entitled to an annual bonus in an amount determined by the Compensation
Committee based upon the realization of the Company's goals during such year and
to commissions on net sales to certain customers of the Company.
The agreements with each of Messrs. Cunningham, G. Mays, T. Mays, Zanisnik,
Needle and Lykogiannis are automatically extended for additional periods of one
year effective on the second anniversary of the commencement date and on each
anniversary thereafter (the "Renewal Date") unless the Company gives notice to
the contrary at least six months prior to the Renewal Date. Each individual is
entitled to a lump sum payment in the amount of one-half times his then annual
salary in the event of a termination without cause, and a lump sum payment in
the amount of two times his then annual salary in the event of a termination of
employment by the employee for "Good Reason" as defined under each of the
respective employment agreements. Each individual is also entitled to a
comprehensive medical indemnity policy for himself and his family, long-term
disability insurance and such other benefits as the Board of Directors shall
adopt and approve. Messrs. Cunningham, G. Mays, T. Mays and Needle also receive
a car allowance.
The agreement between Roda and Mr. Furlonge is for a term of at least 18
months, and continues until terminated by either party upon at least six months'
prior notice. Mr. Furlonge is employed as a senior executive of Roda with the
job title Managing Director. He is paid an annual salary of $163,000 (100,000
pounds), which is subject to increase each year by an amount at least equal to
the percentage increase in a consumer price index over the prior year. He is
also entitled to an annual bonus in an amount determined by the Compensation
Committee based upon the realization of the Company's goals during such year. He
is entitled to a lump sum payment in the amount of two times his then annual
salary following a "Change in Control" of Roda or the Company, provided that he
continues to work for at least six months following the Change of Control (or,
if longer, for such period of time following the Change of Control to ensure
that he has completed at least 18 months of service under the agreement). If his
employment is terminated, except for cause, following a Change in Control, the
lump sum payment would be payable immediately. Mr. Furlonge is also entitled to
medical insurance for himself and his family, continued participation in Roda's
pension plan, life insurance in the amount of four times his annual salary and a
car allowance.
STOCK OPTION PLANS
1998 Stock Option Plan
In February 1998, the Board of Directors and the sole stockholder of the
Company adopted the 1998 Stock Option Plan ("1998 Plan") and reserved 450,000
shares of Common Stock for issuance thereunder. The Plan provides for the
granting to employees (including employee directors and officers) of options
intended to qualify as incentive stock options within the meaning of
(section)422 of the Code and for the granting of nonstatutory stock options to
employees and consultants. The 1998 Plan is currently administered by the
Company's Compensation Committee.
The 1998 Plan provides for the granting of both Incentive Stock Options
("ISOs") and nonstatutory stock options (a "NSO") and in connection with such
options the granting of stock appreciation rights (an "SAR") or additional stock
options, known as progressive stock options, in the event the grantee exercises
such stock options by surrendering shares of Common Stock of the Company (a
"PSO"). NSOs and SARs may be issued to any key employee or officer of the
Company or its subsidiaries, or any other person who is an independent
contractor, agent or consultant of the Company or its subsidiaries but not any
director of the Company who is not an employee of the Company. ISOs may be
issued to key employees and officers of the Company and its subsidiaries, but
not to any independent contractor, agent or consultant. The Compensation
Committee also determines the times at which options will vest and will become
exercisable, their transferability and the dates, not more than ten years
42
<PAGE>
after the date of grant, on which options will expire. In the event of a tender
offer for more than 25% of the Company's outstanding stock, or a "change in
control" (as defined in the 1998 Plan) of the Company, all outstanding options
become immediately exercisable. The fair market value of the stock with respect
to which ISOs under the 1998 Plan or any other plan of the Company first become
exercisable may not exceed $100,000 in any year. The option price of an ISO is
to be at least 100% of the fair market value on the date of grant (110% in the
case of optionees holding more than ten percent of the combined voting power of
all classes of stock of the Company). The 1998 Plan, however, permits the
Compensation Committee to grant NSOs at any exercise price consistent with the
purposes of the 1998 Plan, whether or not such exercise price is equal to the
fair market value of the stock on the date of grant of the NSO. NSOs with an
exercise price of less than fair market value on the date of grant would not
qualify as performance-based compensation under (section)162(m) of the Code and,
therefore, any compensation expense generated by the exercise of such an option
would not be deductible by the Company when the Company is considered to be
subject to such Section, if the optionee is a "covered employee" who is paid
compensation from the Company in an amount in excess of $1,000,000 in the year
of exercise.
Options may be exercised by the payment of the exercise price in cash,
Common Stock or a combination thereof. Subject to compliance with the provisions
of applicable governmental regulations, the Compensation Committee may make a
loan for the purpose of exercising any option granted under the 1998 Plan to an
optionee in an amount not to exceed 100% of the purchase price of the shares
acquired upon exercise of the options. The loan must be secured by a pledge of
shares of the Company having an aggregate purchase price equal to or greater
than the amount of the loan.
The 1998 Plan permits the Compensation Committee to grant SARs in
connection with any option granted under the 1998 Plan. SARs enable an optionee
to surrender an option and to receive a payment in cash or Common Stock, as
determined by the Compensation Committee, equal to the difference between the
fair market value of the Common Stock on the date of surrender of the related
option and the option price.
The 1998 Plan also permits the Compensation Committee to grant PSOs in
connection with any option granted under the 1998 Plan. PSOs enable an optionee
to receive additional stock options in the event the grantee exercises a stock
option, in whole or in part, by surrendering shares of Common Stock of the
Company. Any PSO granted will be for a number of shares equal to the number of
surrendered shares of Common Stock, shall not be exercisable for a minimum of
six months from the grant date of the option, shall have an option price per
share equal to 100% of the fair market value of a share of stock on the grant
date and shall be subject to such other terms and conditions as the Compensation
Committee may determine.
At the time of the Offering, options covering an aggregate of 170,800
shares of Common Stock will be outstanding under the 1998 Plan including options
to purchase 50,000 shares of Common Stock granted to each of Messrs. Needle and
Lykogiannis. All of such options will expire ten years after the date of grant,
and have an exercise price per share, subject to adjustment, equal to the
initial public offering price. Of the above 170,800 options, 130,000 will be
fully vested upon the consummation of the Offering and the remaining 40,800 will
vest over a period of three years.
The Directors' Stock Option Plan
In February 1998, the Board of Directors and the sole stockholder of the
Company adopted the Directors' Stock Option Plan (the "Directors' Plan") and
reserved 150,000 shares of Common Stock for insurance thereunder. The
individuals eligible to participate in the Directors' Plan are each Director of
the Company who is not an employee of the Company or any of its subsidiaries (an
"Outside Director").
Under the terms of the Directors' Plan, upon the closing of the Offering,
each Outside Director automatically receives an NSO to acquire 15,000 shares of
Common Stock at the initial public offering price. Accordingly, at the time of
the Offering, options covering an aggregate of 60,000 shares of Common Stock
will be outstanding under the Directors' Plan. In addition, beginning in 1999,
on the first business day of the month following the month in which
43
<PAGE>
the annual meeting of stockholders occurs, each Outside Director shall
automatically receive an NSO for the purchase of 4,000 shares of Common Stock at
the fair market value of the Common Stock on the date of grant. New Outside
Directors shall receive an NSO for the purchase of 15,000 shares of Common Stock
upon their initial election as directors. All options granted under the
Directors' Plan will be fully vested six months after the date of grant.
Options under the Directors' Plan will have a term of ten years and shall
not be exercisable until six months following the date of grant. Payment upon
exercise may be made only in cash or by check. In the case of a person who
ceases to be an Outside Director for reasons other than death, the options shall
not be exercisable after the third anniversary of the date such person ceased to
be an Outside Director. In the case of death, options that have not expired may
not be exercised by executors, administrators, heirs or distributees, after the
first anniversary of the date of death.
The Board of Directors has the authority to amend, suspend or discontinue
the Directors' Plan but the Board of Directors may not, without the approval of
stockholders, make any amendment which (i) makes a change in the persons
eligible to receive options under the Directors' Plan, (ii) increases the number
of shares of the Common Stock which may be issued under the Directors' Plan,
(iii) increases the maximum option price, (iv) decreases the option price or (v)
changes the number of shares subject to the automatic option.
401(K) PLAN
The Predecessor maintains a salary deferral and savings plan for its
employees (the "401(k) Plan") which is qualified under Section 401(k) of the
Code. Subject to limits set forth in the Code, employees who meet certain age
and service requirements may participate in the 401(k) Plan by contributing
through payroll deductions. The Company, at its discretion, may elect to
contribute to the 401(k) Plan in amounts and at times determined by the Board of
Directors.
RODA PENSION PLAN
Roda maintains a defined contribution pension plan, approved by the United
Kingdom's Inland Revenue, in which employees who meet certain age and service
requirements may participate. The plan is based upon contributions from both the
employer and employees, with Roda's contribution on behalf of each participating
employee being set at 5% of basic salary.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Common Stock, after giving effect to the Reorganization and the
Acquisition, both before and after the Offering, by (i) each person known to the
Company to be the beneficial owner of 5% or more thereof, (ii) each director and
designee who will become a director upon consummation of the Offering, (iii)
each of the Named Executive Officers and (iv) all directors and officers as a
group.
Under the rules of the Securities and Exchange Commission (the
"Commission"), a person is deemed to be a "beneficial owner" of a security if he
or she has or shares the power to vote or direct the voting of such security or
the power to dispose of or direct the disposition of such security. Accordingly,
more than one person may be deemed to be a beneficial owner of the same
security. Shares of Common Stock subject to options held by the directors and
officers that are not exercisable within 60 days of the date hereof are not, in
accordance with beneficial ownership rules promulgated by the Commission, deemed
outstanding for the purpose of computing such director's or officer's beneficial
ownership.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
BENEFICIALLY OWNED
----------------------
AMOUNT AND NATURE
OF BENEFICIAL BEFORE AFTER
NAME OF BENEFICIAL OWNER(1) OWNERSHIP OFFERING OFFERING
- ----------------------------------------------------------- -------------------- ---------- ---------
<S> <C> <C> <C>
Michael R. Cunningham ..................................... 2,050,728 (2) 79.0% 42.2%
Gordon Mays ............................................... 228,198 (3) 8.8% 4.7%
Timothy Mays .............................................. 165,803 (4) 6.4% 3.4%
Robert Needle ............................................. 50,000 (5) * 1.0%
Ioannis Lykogiannis ....................................... 50,000 (5) * *
Arnold Spinner ............................................ 0 * *
James J. Cunningham ....................................... 130,898 (6) 5.0% 2.7%
Norman R. Malo ............................................ 0 * *
All directors and officers as a group (8 persons).......... 2,695,627 (7) 99.2% 54.1%
</TABLE>
- ----------
* Less than 1%.
(1) Unless otherwise indicated, the address of each such person is c/o
Cunningham Graphics International, Inc., 629 Grove St., Jersey City, New
Jersey 07310. All persons listed have sole voting and investment power with
respect to their shares unless otherwise indicated.
(2) Excludes 130,898 shares held by a trust for the benefit of Michael R.
Cunningham's children. The trustee of such trust, James J. Cunningham, the
brother of Mr. M. Cunningham, has the sole right to vote and dispose of such
shares.
(3) Excludes 9,817 shares held by a trust for the benefit of Gordon Mays'
children. The trustee of such trust, William J. Mays, the brother of Mr. G.
Mays, has the sole right to vote and dispose of such shares.
(4) Excludes 9,817 shares held by a trust for the benefit of Timothy Mays'
children. The trustee of such trust, William Edward Shannon, the
brother-in-law of Mr. T. Mays, has the sole right to vote and dispose of
such shares.
(5) Represents shares underlying options which have been granted to the
designated person, all of which are exercisable within 60 days of the date
of this Prospectus.
(6) Includes the 130,898 shares referred to in footnote (2).
(7) Includes 120,000 shares subject to options which have been granted to
officers and which are exercisable within 60 days of the date of this
Prospectus, and excludes the shares referred to in footnotes (3) and (4).
45
<PAGE>
CERTAIN TRANSACTIONS
CAPITALIZATION PRIOR TO THE REORGANIZATION
The Predecessor was initially capitalized in September 1983 through the
sale of 100 shares of common stock of the Predecessor, to Michael R. Cunningham,
the Company's founder. Mr. Cunningham subsequently made gifts of six shares to a
trust created for the benefit of his children.
On June 11, 1991, the Predecessor entered into a stock purchase agreement
(the "Stock Purchase Agreement") with Timothy Mays and Gordon Mays
(collectively, the "Buyers") which entitled the Buyers to purchase from the
Predecessor up to 53.85 shares of common stock, of which up to 11.11 shares of
common stock of the Predecessor could be purchased by the Buyers on June 12,
1991, and the remaining 42.74 shares of common stock of the Predecessor could be
purchased by the Buyers, at certain times after June 12, 1991 but in no event
later than December 1, 1996 ("Purchase Option Termination Date"). On June 12,
1991, pursuant to the terms of the Stock Purchase Agreement, Timothy Mays
purchased 3.67 shares of common stock of the Predecessor, and Gordon Mays
purchased 7.44 shares of common stock of the Predecessor, in consideration for
(i) the return by the Buyers to the Company of a promissory note dated April 12,
1991 evidencing indebtedness of the Company to the Buyers in the principal
amount of $100,000 and (ii) $200,000 paid by the Buyers to the Company. Pursuant
to the terms of the Stock Purchase Agreement, from time to time between June 12,
1991 and the Purchase Option Termination Date, Timothy Mays purchased an
additional 4.38 shares of common stock of the Predecessor, and Gordon Mays
purchased an additional 3.47 shares of common stock of the Predecessor, in
consideration for the retention by the Company of (i) all dividends declared by
the Company and payable to the Buyers and (ii) certain "Additional Compensation"
due to the Buyers under employment agreements with the Company.
Messrs. G. Mays and T. Mays subsequently made gifts of .45 shares of common
stock of the Predecessor each to a trust created for the benefit of their
respective children.
Messrs. Cunningham, G. Mays and T. Mays entered into a shareholders
agreement in 1991 providing for certain restrictions upon the disposition of
shares and upon the voting of stock, which agreement will be terminated
effective upon the consummation of the Reorganization.
LOANS FROM INSIDERS
From time to time, the Company borrowed funds from Michael R. Cunningham
and the trust for the benefit of his children, which are stockholders of the
Company. A total of $227,000 of such loans was outstanding as of December 31,
1996, all of which was repaid in 1997.
THE REORGANIZATION
In connection with the Reorganization, the Company will issue an aggregate
of 2,595,260 shares of Common Stock, Exchange Notes in the aggregate principal
amount of $2.4 million (assuming an initial public offering price of $12.00 per
share) and Distribution Notes in the aggregate principal amount of $3.6 million.
The Exchange Notes and the Distribution Notes will be paid from the proceeds of
the Offering. See "The Company -- The Reorganization." The number of shares of
Common Stock, the principal amounts of the Exchange Notes and the principal
amounts of the Distribution Notes, to be received by each stockholder of the
Predecessor in the Reorganization, are as follows:
<TABLE>
<CAPTION>
SHARES OF COMMON PRINCIPAL OF PRINCIPAL OF
STOCKHOLDER STOCK EXCHANGE NOTES DISTRIBUTION NOTES
- ----------------------------------------- ------------------ --------------- -------------------
<S> <C> <C> <C>
Michael R. Cunningham ................... 2,050,727 $1,896,432 $2,844,655
Gordon Mays ............................. 228,198 211,030 316,543
Timothy Mays ............................ 165,803 153,330 229,993
James J. Cunningham, Trustee ............ 130,898 121,050 181,573
William J. Mays, Trustee ................ 9,817 9,079 13,618
William Edward Shannon, Trustee ......... 9,817 9,079 13,618
Totals: ................................. 2,595,260 $2,400,000 $3,600,000
</TABLE>
46
<PAGE>
POLICY OF THE BOARD OF DIRECTORS
All ongoing and any future transactions with affiliates of the Company, if
any, will be on terms believed by the Company to be no less favorable than are
available from unaffiliated third parties and will be approved by a majority of
disinterested directors.
47
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The summary of the terms of the capital stock of the Company set forth
below does not purport to be complete and is subject to and qualified in its
entirety by reference to the Certificate of Incorporation (the "Certificate of
Incorporation") and By-Laws of the Company, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part. See
"Additional Information."
GENERAL
The Company's Certificate of Incorporation authorizes 30,000,000 shares of
Common Stock, no par value, and 10,000,000 shares of Preferred Stock, no par
value. After giving effect to (i) the Reorganization, (ii) the closing of the
Acquisition and (iii) the completion of the Offering, the Company will have
outstanding 4,865,000 shares of Common Stock and no shares of Preferred Stock.
In addition, the Company will have 450,000 shares of Common Stock reserved for
issuance under the Company's 1998 Stock Option Plan and 150,000 shares of Common
Stock reserved for issuance under the Company's Directors' Stock Option Plan.
See "Management -- Stock Option Plans."
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters voted upon by stockholders, and a majority vote is
required for all action to be taken by stockholders. Cumulative voting of shares
is prohibited. Accordingly, the holders of a majority of the voting power of the
shares voting for the election of directors can elect all of the directors if
they choose to do so. The Common Stock bears no preemptive rights, and is not
subject to redemption, sinking fund or conversion provisions. The shares of
Common Stock offered hereby will be, when issued and paid for, fully paid and
non-assessable.
Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Company's Board of Directors out of funds legally available
therefor, subject to the dividend and liquidation rights of any Preferred Stock
that may be issued (and subject to any dividend restriction contained in any
credit facility which the Company may enter into in the future) and distributed
pro rata in accordance with the number of shares of Common Stock held by each
stockholder. See "Risk Factors -- Dividend Policy."
PREFERRED STOCK
Shares of Preferred Stock may be issued from time to time by the Board of
Directors of the Company, without stockholder approval, in such series and with
such preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or other provisions, as may be fixed
by the Board of Directors when designating any such series.
The Preferred Stock and the variety of characteristics available for it
offers the Company flexibility in financing and acquisition transactions. An
issuance of Preferred Stock could dilute the book value or adversely affect the
relative voting power of the Common Stock. The issuance of such shares could be
used to enable the holder to block an acquisition of the Company. Although the
Board of Directors is required when issuing such stock to act based on its
judgment as to the best interests of the stockholders of the Company, the Board
could act in a manner which would discourage or prevent a transaction some
stockholders might believe is in the Company's best interests or in which
stockholders could or would receive a premium for their shares of Common Stock
over the market price.
STATUTORY BUSINESS COMBINATION PROVISIONS
The New Jersey Business Corporation Act provides that in determining
whether a proposal or offer to acquire a corporation is in the best interest of
the Corporation, the Board may, in addition to considering the effects of any
action on stockholders, consider any of the following: (a) the effects of the
proposed action on the corporation's employees, suppliers, creditors and
customers, (b) the effects on the community in which the corporation operates
and (c) the long-term as well as short-term interests
48
<PAGE>
of the corporation and its stockholders, including the possibility that these
interests may best be served by the continued independence of the corporation.
The statute further provides that if, based on these factors, the Board
determines that any such offer is not in the best interest of the corporation,
it may reject the offer. These provisions may make it more difficult for a
stockholder to challenge the Board's rejection of, and may facilitate the
Board's rejection of, an offer to acquire the Company. The Company will be
subject to the New Jersey Shareholders Protection Act (the "Protection Act"),
which prohibits certain New Jersey corporations from engaging in business
combinations (including mergers, consolidations, significant asset dispositions
and certain stock issuances) with any interested stockholder (defined to
include, among others, any person that becomes a beneficial owner of 10% or more
of the affected corporation's voting power) for five years after such person
becomes an interested stockholder, unless the business combination is approved
by the Board of Directors prior to the date the stockholder became an interested
stockholder. In addition, the Protection Act prohibits any business combination
at any time with an interested stockholder other than a transaction that (i) is
approved by the Board of Directors prior to the date the interested stockholder
became an interested stockholder, or (ii) is approved by the affirmative vote of
the holders of two-thirds of the voting stock not beneficially owned by the
interested stockholder, or (iii) satisfies certain "fair price" and related
criteria.
STAGGERED BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors of not less than three members, with the actual number to be set by
resolution of the Board from time to time. In addition, the Certificate of
Incorporation provides for the implementation of a staggered Board of Directors
effective at the closing of the Offering. Under this provision the Board of
Directors will be divided into three classes, Class A, Class B and Class C, with
each class containing as nearly as practicable, an even number of Directors.
Initially, the Class A Directors will have a term expiring at the 1999 Annual
Meeting of Stockholders, the Class B Directors will have a term expiring at the
2000 Annual Meeting of Stockholders and the Class C Directors will have a term
expiring at the 2001 Annual Meeting of Stockholders. Commencing with the 1999
Annual Meeting of Stockholders, as each class comes up for election, it will be
for a three-year term.
An effect of the staggered Board of Directors is to make it more difficult
or to discourage an attempt to obtain control of the Company by means of a
tender offer, proxy contest, merger or otherwise, and thereby to protect the
continuity of the Company's management.
LIMITATION OF DIRECTORS' LIABILITIES
Pursuant to provisions of the Company's Certificate of Incorporation,
directors of the Company are not personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty, except for
liability in connection with a breach of duty of loyalty, for acts or omissions
not in good faith or any transaction in which a director has derived an improper
personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Continental Stock
Transfer & Trust Company.
49
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock and no
prediction can be made as to the effect, if any, that market sales of Common
Stock or the availability of such shares for sale will have on the market price
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities.
Upon consummation of the Offering, the Company will have outstanding
4,865,000 shares of Common Stock, of which the 2,100,000 Shares offered hereby
will be freely tradable without restriction or further registration under the
Securities Act, except for shares purchased by an "affiliate of the Company" (in
general, a person who has a controlling position with regard to the Company),
which will be subject to the resale limitations of Rule 144 promulgated under
the Securities Act.
The remaining 2,765,000 shares of Common Stock to be outstanding after the
Offering are deemed to be "restricted securities," as that term is defined under
Rule 144 promulgated under the Securities Act, and may only be sold pursuant to
an effective registration under the Securities Act, in compliance with the
exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act. Such restricted shares of Common Stock will become eligible for
sale, under Rule 144, subject to certain volume limitations prescribed by Rule
144. The holders of all of the restricted shares have agreed not to sell any of
their securities of the Company for a period of 180 days following the date of
this Prospectus, under any circumstances.
In general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company (or persons whose
shares are aggregated with an affiliate) who has owned restricted shares of
Common Stock beneficially for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the then outstanding shares of the issuer's Common Stock or the average weekly
trading volume during the four calendar weeks preceding such sale, provided that
certain public information about the issuer as required by Rule 144 is then
available and the seller complies with certain other requirements. A person who
is not an affiliate, has not been an affiliate within three months prior to
sale, and has beneficially owned the restricted shares for at least two years is
entitled to sell such shares under Rule 144 without regard to any of the
limitations described above.
The Company, the directors and officers of the Company (who in the
aggregate beneficially own 2,695,627 shares of Common Stock), have agreed with
the Underwriter that, for a period of 180 days following the Offering, they will
not offer to sell, contract to sell, grant an option to purchase or otherwise
dispose (or announce any offer, sale, grant of any option or other distribution)
of any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock without the prior written consent of Schroder & Co.
Inc. (except that the Company may grant options to purchase or award shares of
Common Stock under the 1998 Plan and the Directors' Plan and issue privately
placed shares in connection with acquisitions). See "Management -- Stock Option
Plans" and "Principal Stockholders."
As soon as practicable following the consummation of the Offering, the
Company intends to file a registration statement under the Securities Act to
register shares of Common Stock issuable pursuant to the 1998 Plan and the
Directors' Plan. See "Management -- Stock Option Plans." Shares of Common Stock
issued pursuant to the 1998 Plan and the Directors' Plan after the effective
date of such registration statement will be available for sale in the open
market, subject to the lock-up agreement described above, if applicable.
50
<PAGE>
UNDERWRITING
The Underwriter named below (the "Underwriter") has agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the
Company, and the Company has agreed to sell to the Underwriter, the number of
shares of Common Stock set forth opposite its respective name:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ------------------------------ -----------------
<S> <C>
Schroder & Co. Inc. .......... 2,100,000
</TABLE>
The Underwriting Agreement provides that the Underwriter is obligated to
purchase all of the shares of Common Stock offered hereby, if any such shares
are purchased.
The Underwriter has advised the Company that it proposes to offer the
shares of Common Stock directly to the public, initially at the offering price
set forth on the cover page of this Prospectus; that the Underwriter proposes
initially to allow a concession not in excess of $ per share to certain dealers;
and that the Underwriter may initially allow a concession not in excess of $ per
share to other dealers. After the initial offering of the shares of Common
Stock, the public offering price and such concessions may be changed by the
Underwriter.
The Company has granted an option to the Underwriter, exercisable for 30
days from the date of this Prospectus, to purchase up to 315,000 additional
shares of Common Stock, at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriter may
exercise such option only to cover over-allotments in connection with the sale
of the Common Stock offered hereby.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
federal securities laws, or will contribute to payments that the Underwriter may
be required to make in respect thereof.
The Underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in accordance with Regulation
M under the Exchange Act. Overallotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specific maximum. Syndicate covering
transactions involve purchases of the securities in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriter to reclaim a selling concession from a
syndicate member when the securities originally sold by such syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the securities to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on Nasdaq or otherwise and, if commenced, may be discontinued at any
time.
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 negotiation between the Company and the Underwriter. Among the factors to be
considered in determining the initial public offering price, in addition to
prevailing market and general economic conditions, are the history of, and
prospects for, the industry in which the Company operates, the ability of the
Company's management, the Company's past and present operations, the Company's
historical results of operations, the Company's earnings prospects, the prices
of similar securities of comparable companies, and other relative factors. There
can be no assurance, however, that the price at which the Common Stock will sell
in the public market after the Offering will not be lower than the price at
which it is being sold by the Underwriter.
The Company, the directors and officers of the Company (who in the
aggregate beneficially own 2,695,627 shares of Common Stock), have agreed with
the Underwriter that, for a period of 180 days following the Offering, they will
not offer to sell, contract to sell, grant an option to purchase or otherwise
dispose (or announce any offer, sale, grant of any option or other distribution)
of any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock without the prior written consent of Schroder & Co.
Inc. (except that the Company may grant options to purchase or award shares of
Common Stock under the 1998 Plan and the Directors' Plan and issue privately
placed shares in connection with acquisitions). See "Management -- Stock Option
Plans" and "Principal Stockholders."
51
<PAGE>
At the request of the Company, up to 200,000 shares of Common Stock have
been reserved for sale in the Offering to certain individuals, including
directors and employees of the Company, members of their families and/or
friends, and other persons having business relationships with the Company. The
price of such shares to such persons will be the initial public offering price
set forth on the cover of this Prospectus. The number of shares available for
sale to the general public will be reduced to the extent these persons purchase
such reserved shares. Any reserved shares not purchased will be offered by the
Underwriter to the general public on the same basis as the other shares offered
hereby.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Gibbons, Del Deo, Dolan,
Griffinger & Vecchione, a Professional Corporation, Newark, New Jersey. Certain
legal matters in connection with the Offering will be passed upon for the
Underwriter by Stroock & Stroock & Lavan LLP, New York, New York.
EXPERTS
The predecessor financial statements of Cunningham Graphics International,
Inc. for each of the three years in the period ended December 31, 1997,
appearing in this Prospectus and Registration Statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
the authority of such firm as experts in accounting and auditing.
The financial statements of Roda Limited for the year ended December 31,
1997 and for the four months ended December 31, 1996, and of Roda Print Concepts
Limited for the ten month period ended October 31, 1996, appearing in this
Prospectus and Registration Statement, have been audited by Ernst & Young,
Chartered Accountants, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-1 under the
Securities Act with the Commission in Washington, D.C. with respect to the
securities offered hereby. This Prospectus, which is part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the securities offered hereby, reference is hereby
made to the Registration Statement and the exhibits and schedules filed as a
part thereof. Statements contained in this Prospectus as to the contents of any
agreement or any other document referred to are not necessarily complete, and in
each instance, if such agreement or document is filed as an exhibit, reference
is made to the copy of such agreement or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference to such exhibit. The Registration Statement, including exhibits
and schedules thereto, may be inspected and copied at the principal office of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's Regional Offices at 7 World Trade Center, New
York, New York 10048, and Northwest Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material may also be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, 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 Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
52
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors .......................................................... F-2
Predecessor Balance Sheets as of December 31, 1996 and 1997 ............................. F-3
Predecessor Statements of Income for the years ended
December 31, 1995, 1996 and 1997 ....................................................... F-4
Predecessor Statements of Stockholders' Equity for the years ended
December 31, 1995, 1996 and 1997 ....................................................... F-5
Predecessor Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 ....................................................... F-6
Notes to Predecessor Financial Statements ............................................... F-7
</TABLE>
RODA LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, AND 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors .......................................................... F-16
Consolidated Profit and Loss Account for the year ended 31 December 1997 and the period
from incorporation (29 August 1996) to 31 December 1996 and the Profit and Loss Account
of Roda Print Concepts Limited for the ten-month period ended 31 October 1996 .......... F-17
Consolidated Balance Sheets as of December 31, 1996 and 1997 ............................ F-18
Consolidated Statement of Cash Flows for the year ended 31 December 1997 and the period
from incorporation (29 August 1996) to 31 December 1996 and the Statement of
Cash Flows of Roda Print Concepts Limited for the ten-month period ended 31
October 1996 ........................................................................... F-19
Notes to Financial Statements ........................................................... F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cunningham Graphics International, Inc.
We have audited the accompanying predecessor balance sheets of Cunningham
Graphics International, Inc. as of December 31, 1996 and 1997, and the related
predecessor statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the predecessor financial statements referred to above
present fairly, in all material respects, the financial position of Cunningham
Graphics International, Inc. at December 31, 1996 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Princeton, New Jersey
January 16, 1998
F-2
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
PREDECESSOR BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
1996 1997 1997
-------- ---------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash .............................................................. $ 543 $ 67
Accounts receivable (net of allowance for doubtful accounts of
$28 in 1996 and $50 in 1997) .................................... 4,607 5,673
Inventories ....................................................... 541 940
Prepaid expenses and other current assets ......................... 70 78
Notes and advances receivable -- stockholder/officers ............. 158 136
Deferred income taxes ............................................. -- 47
------ -------
Total current assets ............................................... 5,919 6,941
Property and equipment -- net ...................................... 3,458 3,579
Other assets ....................................................... 94 418
------ -------
$9,471 $10,938
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt, third-party .................... $ 414 $ 407
Revolving line of credit .......................................... 1,350 300
Current portion of notes payable -- related parties ............... 73 --
Current portion of obligations under capital leases ............... 183 178
Accounts payable .................................................. 3,661 3,854
Accrued expenses .................................................. 1,105 1,474
------ -------
Total current liabilities .......................................... 6,786 6,213
Long-term debt, third-party -- net of current portion .............. 631 1,185
Notes payable -- related parties -- net of current portion ......... 154 --
Obligations under capital leases -- net of current portion ......... 515 332
Deferred income taxes .............................................. 41 57
------ -------
Total liabilities .................................................. 8,127 7,787
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 2,507 shares authorized,
119 shares in 1996 and 1997 issued and outstanding,
stated at $50 per share.......................................... 6 6 $ --
Additional paid-in capital ........................................ 734 734 (2,908)
Retained earnings ................................................. 604 2,411 --
------ ------- --------
Total stockholders' equity ......................................... 1,344 3,151 $ (2,908)
------ ------- =========
$9,471 $10,938
====== =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
PREDECESSOR STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales ..................................... $17,327 $23,193 $35,744
Operating expenses:
Costs of production .......................... 12,860 17,616 26,894
Selling, general and administrative .......... 3,441 4,270 5,794
Depreciation and amortization ................ 498 563 694
------- ------- -------
16,799 22,449 33,382
Income from operations ........................ 528 744 2,362
Interest expense ............................. (257) (234) (250)
Other income ................................. 2 48 35
------- ------- -------
Income before income taxes .................... 273 558 2,147
Provision for income taxes ................... 6 56 129
------- ------- -------
Net income .................................... $ 267 $ 502 $ 2,018
======= ======= =======
PRO FORMA DATA (UNAUDITED)
Income before income taxes .......................................... $ 2,147
Pro forma provision for income taxes ............................... 880
---------
Pro forma net income ................................................ $ 1,267
=========
Pro forma earnings per share ........................................ $ 0.41
=========
Pro forma shares outstanding ........................................ 3,095,261
=========
</TABLE>
See accompanying notes.
F-4
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
PREDECESSOR STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ........... 118 $ 6 $722 $ 356 $1,084
Net income .......................... -- -- -- 267 267
Distributions ....................... -- -- -- (521) (521)
--- --- ---- ------ ------
Balance at December 31, 1995 ......... 118 6 722 102 830
Net income .......................... -- -- -- 502 502
Sale of common stock ................ 1 -- 12 -- 12
--- --- ---- ------ ------
Balance at December 31, 1996 ......... 119 6 734 604 1,344
Net income .......................... -- -- -- 2,018 2,018
Distributions ....................... -- -- -- (211) (211)
--- --- ---- ------ ------
Balance at December 31, 1997 ......... 119 $ 6 $734 $2,411 $3,151
=== === ==== ====== ======
</TABLE>
See accompanying notes.
F-5
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
PREDECESSOR STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------------ ----------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................. $ 267 $ 502 $ 2,018
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ............................. 498 563 694
Gain on sale of equipment ................................. -- (48) (18)
Deferred income taxes ..................................... (1) 32 (31)
Changes in operating assets and liabilities:
Increase in accounts receivable ......................... (34) (2,161) (1,066)
(Increase) decrease in inventories ...................... (436) 509 (399)
Increase in prepaid expenses and other current assets (29) (86) (8)
Increase in other assets ................................ (9) (45) (324)
Increase (decrease) in advance to officers .............. 257 (94) 22
Increase in accounts payable ............................ 219 1,835 193
(Decrease) increase in accrued expenses ................. (138) 664 369
------- -------- ---------
Net cash provided by operating activities .................. 594 1,671 1,450
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the disposition of equipment ................ -- 71 1,349
Acquisition of property and equipment ..................... (254) (1,711) (2,146)
------- -------- ---------
Net cash used in investing activities ...................... (254) (1,640) (797)
CASH FLOWS FROM FINANCING ACTIVITIES
Net principal proceeds (payments) on revolving line of
credit .................................................. 306 444 (1,050)
Proceeds from long-term borrowings, third-party ........... -- 614 1,023
Principal payments on long-term borrowings, third-party . (200) (302) (476)
Principal payments on obligations under capital lease ..... (138) (139) (188)
Proceeds from issuance of notes payable -- related
parties ................................................. 70 24 --
Principal payments on notes payable -- related parties..... -- (142) (227)
Shareholder distribution .................................. (521) -- (211)
Proceeds from sale of common stock ........................ -- 12 --
------- -------- ---------
Net cash (used in) provided by financing activities ........ (483) 511 (1,129)
------- -------- ---------
Net (decrease) increase in cash ............................ (143) (542) (476)
Cash, beginning of year .................................... 144 1 543
------- -------- ---------
Cash, end of year .......................................... $ 1 $ 543 $ 67
------- -------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA
Income taxes paid .......................................... $ 10 $ 40 $ 169
======= ======== =========
Interest paid .............................................. $ 254 $ 235 $ 251
======= ======== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Acquisition of equipment under capital lease ............... $ 23 $ 422 $ --
======= ======== =========
</TABLE>
See accompanying notes.
F-6
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying predecessor financial statements include the operations of
Cunningham Graphics, Inc. (the "Company" or the "Predecessor Entity"). As
further discussed in Note 14, a reorganization of the Predecessor is planned for
1998.
DESCRIPTION OF COMPANY
The Company provides a wide range of graphic communication services to
financial institutions and corporations in the eastern United States, focusing
on producing and distributing time-sensitive analytical research and marketing
materials and on providing on-demand printing.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash balances and highly liquid
investments with a maturity of three months or less when acquired. The carrying
amount reported for cash equivalents approximates fair value.
CONCENTRATION OF CREDIT RISK
The Company performs periodic credit evaluations of its customers and
generally does not require collateral.
INVENTORIES
Inventories are stated at the lower of cost or market by the specific
identification method. Inventory consists of raw materials and work in process.
Finished goods are shipped upon completion.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization of
assets, including those under capital lease, are computed using the
straight-line method over the lesser of the estimated useful lives of the
related assets or the lease term. Useful lives range from 3 to 10 years.
INCOME TAXES
The Company and its stockholders have elected to be taxed as an S
Corporation pursuant to the Internal Revenue Code and certain state and local
tax regulations. Therefore, no provision has been made in the accompanying
financial statements for federal and certain state and local income taxes, since
such taxes are the liability of the stockholders. The provision for income taxes
principally reflects taxes levied by certain state and local governments. (See
Notes 11 and 14).
Deferred taxes are computed based on the tax effects in future years of the
differences between financial and tax reporting bases of assets and liabilities.
Deferred tax assets and liabilities are classified as current and noncurrent
based on the classification of the related asset or liability for financial
reporting purposes, or based on the expected reversal date for deferred taxes
that are not related to an asset or liability.
REVENUE RECOGNITION
Revenue is recognized upon shipment of products to customers.
F-7
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --(CONTINUED)
USE OF ESTIMATES
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. Statement 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is
similar to the previously required fully diluted earnings per share. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Raw materials (net of valuation allowance of $200 at
December 31, 1996 and $194 at December 31, 1997)......... $477 $805
Work-in-process .......................................... 64 135
---- ----
$541 $940
==== ====
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Machinery and equipment ............................ $ 4,711 $ 4,813
Furniture, fixtures and office equipment ........... 653 974
Leasehold improvements ............................. 261 471
Autos and transportation equipment ................. 214 280
-------- --------
5,839 6,538
Accumulated depreciation and amortization .......... (2,381) (2,959)
-------- --------
$ 3,458 $ 3,579
======== ========
</TABLE>
The gross amount of the leased property included in property and equipment
is $1,062 and $1,069, and accumulated amortization is $341 and $386 at December
31, 1996 and 1997, respectively.
F-8
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
4. OTHER ASSETS
Included in other assets is approximately $342 of costs related to the
anticipated initial public offering and the acquisition of Roda Limited (Note
14).
5. ACCRUED EXPENSES
Other accrued liabilities consists of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Employee compensation .......... $ 761 $ 689
Other .......................... 344 785
------ ------
$1,105 $1,474
====== ======
</TABLE>
6. REVOLVING LINE OF CREDIT, LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASE
On December 15, 1997, the Company entered into a new Loan and Security
Agreement with a bank (the "Loan and Security Agreement"). The Loan and Security
Agreement provides for a $2,000 revolving line of credit and a $1,000 3-year
term loan (the "Term Loan"). The revolving line of credit expires on May 30,
1998. Borrowings under both the line of credit and the Term Loan bear interest
at the bank's prime rate or at the Company's option LIBOR plus 2.25% (8.5% at
December 31, 1997). The debt is collateralized by substantially all of the
Company's assets. Among other things, the Loan and Security Agreement restricts
the Company's ability to incur additional indebtedness and requires the Company
to maintain certain financial ratios.
At December 31, 1996, the revolving line of credit represents the amount
outstanding under a previous $2,000 revolving line of credit with a bank.
Borrowings under this agreement carried interest at the bank's prime rate plus
.5% (8.75% at December 31, 1996) and were secured by substantially all of the
Company's assets and guaranteed by the principal stockholder of the Company.
The Company leases property and equipment under capital leases expiring in
various years through 2001. Amortization ($74, $105 and $119 in 1995, 1996 and
1997, respectively) of assets under capital leases is included in depreciation
expense.
Long-term debt consists of the following (excluding notes payable to
related parties, see Note 7):
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Term loan, payable with interest only through December 1998 with principal
payments beginning January 1999 through December 2001 .......................... $ -- $1,000
Notes payable to finance companies, payable in monthly installments with interest
at rates ranging from 7.48% to 11.75%, through various dates from December
1998 to October 1999 (secured by certain equipment with a carrying value of
approximately $358)............................................................. 518 262
Non-interest bearing note payable in monthly installments through December
1999 (discounted based on imputed interest rate of 8%) ......................... 449 308
Various capital lease obligations ............................................... 698 510
Other (secured by equipment with a carrying value of $135)....................... 78 22
------ ------
1,743 2,102
Less current maturities ......................................................... 597 585
------ ------
$1,146 $1,517
====== ======
</TABLE>
F-9
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
6. REVOLVING LINE OF CREDIT, LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASE
--(CONTINUED)
Maturities of long-term debt and obligations under capital lease (principal
and interest) for each of the next five years are as follows:
<TABLE>
<CAPTION>
OBLIGATIONS
UNDER
LONG-TERM CAPITAL
DEBT LEASE
----------- ------------
<S> <C> <C>
1998 ................................................ $407 $236
1999 ................................................ 516 185
2000 ................................................ 333 119
2001 ................................................ 336 84
----
Total minimum lease payments ........................ 624
Less amount representing interest ................... 114
----
Present value of net minimum lease payments ......... $510
====
</TABLE>
7. RELATED PARTY TRANSACTIONS
Included in notes and advances receivable -- stockholder/officers are notes
receivable aggregating $22 at December 31, 1996 and advances of $136 at December
31, 1996 and 1997. The notes bear interest at an annual rate of 8% and were
repaid in 1997. Advances receivable represent cash advances with no specific
repayment terms. The stockholder intends to repay the advances as a part of the
Offering. Notes payable to related parties consists of the following:
<TABLE>
<CAPTION>
1996 1997
------ -----
<S> <C> <C>
Note payable to stockholder/officer, payable in
monthly installments with interest at the prime rate
(8.5% at December 31, 1996) ........................... $112 $--
Note payable to Cunningham Children Trust, payable
in monthly installments with interest at the prime rate
(8.5% at December 31, 1996) ........................... 115 --
---- ---
227 --
Less current portion .................................... 73 --
---- ---
$154 $--
==== ===
</TABLE>
In December 1997, the Company repaid the outstanding balances under these
notes payable.
F-10
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases office facilities, equipment and automobiles under
noncancelable operating leases expiring in various years through 2000. One of
the facility leases requires the Company to pay additional rents based on its
proportionate share of certain costs of the facility.
In March 1997, the Company entered into a sale-leaseback arrangement. Under
the arrangement, the Company sold equipment and leased it back for a period of
six years. The leaseback has been accounted for as an operating lease. No gain
or loss was recorded on the transaction. Upon expiration of the lease, the
Company has agreed to acquire the equipment at terms more fully described in the
lease agreement.
Future minimum rental payments for each of the next five years and in the
aggregate under the above lease agreements are as follows:
<TABLE>
<S> <C>
1998 $1,094
1999 1,085
2000 360
2001 286
2002 237
Thereafter .................. 39
------
$3,101
======
</TABLE>
Rent expense under all operating leases was $282, $463 and $631 for the
years ended December 31, 1995, 1996 and 1997, respectively.
9. CONCENTRATIONS
Sales to customers, each comprising 10% or more of the Company's sales (two
customers in 1995, three customers in 1996 and four customers in 1997)
represented revenues of $6,445, $9,812 and $20,375, respectively. Included in
trade accounts receivable are amounts due from these customers of $1,648 and
$2,989 as of December 31, 1996 and 1997, respectively.
The Company has 370 employees, approximately 69 of whom are members of a
union which are covered under a memorandum of agreement which expires on June
30, 2000.
10. STOCKHOLDERS' EQUITY
On June 11, 1991, the Company entered into an agreement with two
stockholders which entitled the two stockholders to purchase from the Company up
to 53.85 shares of its common stock through December 1, 1996. Through the
expiration of the agreement and pursuant to the terms of the agreement, the
stockholders purchased 18.96 shares (including one share in 1995 for an
aggregate consideration of $12).
F-11
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
11. INCOME TAXES
The provision for state income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
--------- ------ -------
<S> <C> <C> <C>
Current ................................... $ 8 $24 $ 160
Deferred .................................. (2) 32 (31)
------ --- -----
Total provision for income taxes .......... $ 6 $56 $ 129
===== === =====
</TABLE>
The significant components of the Company's deferred tax liabilities and
assets include depreciation, accounts receivable and inventory reserves and
accrued expenses. (See Note 14 regarding conversion from S Corporation to C
Corporation for tax purposes.)
12. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution pension plan pursuant to Section
401(k) of the Internal Revenue Code covering substantially all employees. The
Company, at its discretion, may elect to contribute to the plan at amounts and
dates determined by the Board of Directors. For the years ended December 31,
1995, 1996 and 1997 the Company made contributions of $24, $-0- and $52,
respectively, to the plan.
13. SUBSEQUENT EVENTS
Acquisition of Roda
On January 16, 1998, the Company and Roda entered into an agreement (the
"Roda Purchase Agreement") such that concurrently with the consummation of the
Offering, the Company will close the acquisition of all the outstanding capital
stock of Roda under the Roda Purchase Agreement for an aggregate purchase price
of $8,148. The purchase price will be satisfied by the delivery of 169,739
shares of common stock, which will be valued at the initial public offering
price, and a cash payment equal to the balance of the purchase price. Under the
terms of the Roda Purchase Agreement, the Company has committed to cause the
repayment of 850 pounds (approximately $1,400) of indebtedness to the present
Roda stockholders within 28 days following the closing. The Company intends to
use a portion of the proceeds of the Offering to repay this indebtedness. In
order to secure the performance by the selling stockholders of Roda of certain
warranties and covenants, 275 pounds (approximately $459) will be held in escrow
until one year following the closing. The acquisition of Roda will be accounted
for under the purchase method of accounting.
F-12
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
14. FORMATION OF CUNNINGHAM GRAPHICS INTERNATIONAL, INC., PLANNED INITIAL PUBLIC
OFFERING AND PRO FORMA ADJUSTMENTS (UNAUDITED)
Reorganization and Planned Public Offering
The Company intends to proceed with a reorganization and a concurrent
initial public offering of the common stock of the reorganized entity.
Immediately prior to the initial public offering of shares of common stock of
Cunningham Graphics International, Inc. (CGII) (the "Offering"), the Company
will be reorganized (the "Reorganization") such that all of the stockholders of
the Predecessor will contribute all of the outstanding shares of common stock of
the Predecessor to CGII, in exchange for a total of 2,595,260 shares of common
stock and promissory notes (the "Exchange Notes") in the aggregate principal
amount of $2,400 (assuming an initial offering price of $12.00 per share).
Concurrently with the Reorganization, CGII will assume the Predecessor's
obligations with respect to undistributed S corporation taxable income through
the date of the Reorganization estimated to total $3,600, and will issue
promissory notes in such amount to evidence such obligations (the "Distribution
Notes" and, together with the Exchange Notes, the "Reorganization Notes"). The
principal amount of the Reorganization Notes was determined by the Company in
connection with the Reorganization based on a number of factors, including the
value of the enterprise contributed to the Company. The principal amount of the
Distribution Notes was determined by the Company based upon the actual amount of
undistributed S corporation taxable income as of December 31, 1997 and the
anticipated additional undistributed S corporation taxable income during the
period January 1, 1998 through the expected date of the Reorganization. The
Company intends to pay the Reorganization Notes from the net proceeds of the
Offering.
1998 Stock Option Plan
In February 1998, the Board of Directors and the sole stockholder of the
Company adopted the 1998 Stock Option Plan ("1998 Plan") and reserved 450,000
shares of Common Stock for issuance thereunder. The Plan provides for the
granting to employees (including employee directors and officers) of options
intended to qualify as incentive stock options within the meaning of
(section)422 of the Code and for the granting of nonstatutory stock options to
employees and consultants. The Board of Directors has granted options to
purchase 170,800 shares of Common Stock under the 1998 Plan subject to
consummation of the Offering.
The Directors' Stock Option Plan
In February 1998, the Board of Directors and the sole stockholder of the
Company adopted the Directors' Stock Option Plan (the "Directors' Plan") and
reserved 150,000 shares of Common Stock for insurance thereunder. The
individuals eligible to participate in the Directors' Plan are each Director of
the Company who is not an employee of the Company or any of its subsidiaries (an
"Outside Director"). The Board of Directors has granted options to purchase
60,000 shares of Common Stock under the Directors' Plan subject to consummation
of the Offering.
F-13
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
14. FORMATION OF CUNNINGHAM GRAPHICS INTERNATIONAL, INC., PLANNED INITIAL
PUBLIC OFFERING AND PRO FORMA ADJUSTMENTS (UNAUDITED)--(CONTINUED)
Pro Forma Adjustments (Unaudited)
The following table sets forth the capitalization of the Company at
December 31, 1997, and the pro forma capitalization of the Company as of such
date after giving effect to the issuance of the Reorganization Notes, to the
stockholders and the recording of a net deferred tax liability of approximately
$59 in connection with the Company becoming subject to federal and additional
state and local income taxes.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
-------- ------------
<S> <C> <C>
Common stock ........................ $ 6 $ --
Additional paid-in capital .......... 734 (2,908)
Retained earnings ................... 2,411 --
------ --------
Total stockholders' equity .......... $3,151 $ (2,908)
====== ========
</TABLE>
As discussed in Note 1, the Company has elected to be taxed as an S
corporation pursuant to the Internal Revenue Code and certain state and local
tax regulations. In connection with the Offering made hereby, the Company will
become subject to federal and additional state income taxes. Accordingly, in the
quarter in which the Offering is completed, the Company will record additional
deferred tax assets of $295 and additional deferred tax liabilities of $354 and
a corresponding net tax expense of $59 in the statement of income in accordance
with the provisions of SFAS No. 109.
The pro forma provision for income taxes represents the income tax
provisions that would have been reported had the Company been subject to federal
and additional state income taxes during the year ended December 31, 1997. The
unaudited pro forma net income for the year ended December 31, 1997 reflects an
increase of $751 for the year ended December 31, 1997 for income taxes based
upon income before income taxes as if the Company had become subject to federal
and additional state income taxes on that date.
Pro forma deferred income taxes will reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
pro forma financial reporting and the amounts used for income tax purposes.
Significant components of the Company's pro forma net deferred tax liability as
of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Tax over book depreciation ..................... $ (411)
Allowance for doubtful accounts ................ 20
Inventory capitalization and reserves .......... 100
Other book accruals ............................ 232
------
$ (59)
======
</TABLE>
The pro forma income tax provision consists of the following:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Current:
Federal ...................................... $ 820
State and local .............................. 300
------
1,120
Deferred income tax benefit .................. (240)
------
$ 880
======
</TABLE>
F-14
<PAGE>
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
NOTES TO PREDECESSOR FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)-(CONTINUED)
14. FORMATION OF CUNNINGHAM GRAPHICS INTERNATIONAL, INC., PLANNED INITIAL PUBLIC
OFFERING AND PRO FORMA ADJUSTMENTS (UNAUDITED)--(CONTINUED)
A reconciliation setting forth the differences between the pro forma
effective tax rate of the Company and the U.S. federal statutory tax rate is as
follows:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Federal statutory rate ...................................... 34.0%
State and local taxes, net of federal tax benefits .......... 7.0
----
Effective tax rate .......................................... 41.0
====
</TABLE>
Pro Forma Earnings Per Share (Unaudited)
The Pro Forma shares outstanding of 3,095,261 represent the total equity
value for the Common Stock of the Predecessor contributed to the Company in the
Reorganization and includes (i) the initial CGII founding share, (ii) 2,595,260
shares to be issued in the Reorganization and (iii) 500,000 shares, representing
the value of the $6,000 principal amount of the Reorganization Notes (based upon
the assumed initial public offering price of $12.00 per share).
F-15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Roda Limited
We have audited the accompanying consolidated balance sheet of Roda Limited as
of 31 December 1997 and 1996 and the related consolidated profit and loss
account and statement of cash flows for the year ended 31 December 1997 and the
period from incorporation (29 August 1996) to 31 December 1996 and the profit
and loss account and statement of cash flows of Roda Print Concepts Limited
(Predecessor) for the ten-month period ended 31 October 1996. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances 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 the management, as well as evaluating the overall financial
statements presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Roda Limited at 31
December 1997 and 1996 and the consolidated results of its operations and its
cash flows for the year ended 31 December 1997 and the period from incorporation
(29 August 1996) to 31 December 1996 and the results of operations and cash
flows of Roda Print Concepts Limited for the ten-month period ended 31 October
1996, in conformity with accounting principles generally accepted in the United
Kingdom which differ in certain respects from those followed in the United
States (see Note 25 of Notes to the Financial Statements).
/s/ Ernst & Young Chartered Accountants
Ernst & Young
Chartered Accountants
London, England
11 February 1998
F-16
<PAGE>
RODA LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
COMPANY
PREDECESSOR PERIOD FROM
TEN MONTHS INCORPORATION COMPANY YEAR
ENDED 31 (29 AUGUST 1996) ENDED 31
OCTOBER TO 31 DECEMBER DECEMBER
1996 1996 1997
NOTES POUNDS POUNDS POUNDS
------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
TURNOVER ............................................ 3 3,058,221 625,525 4,198,219
Cost of sales ....................................... (2,035,263) (399,674) (2,589,186)
---------- -------- ----------
GROSS PROFIT ........................................ 1,022,958 225,851 1,609,033
Administrative expenses ............................. (1,067,421) (149,319) (943,590)
---------- -------- ----------
OPERATING (LOSS)/PROFIT ............................. 4 (44,463) 76,532 665,443
Profit on disposal of tangible fixed assets ......... -- -- 52,076
Interest receivable ................................. 30 13 344
Interest payable .................................... 7 (29,995) (37,699) (208,456)
---------- -------- ----------
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION ......................... (74,428) 38,846 509,407
Taxation ............................................ 8 9,070 (11,355) (169,000)
---------- -------- ----------
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION .......................... (65,358) 27,491 340,407
Minority interest ................................... -- (18,130) (64,101)
---------- -------- ----------
(LOSS)/PROFIT FOR THE PERIOD ........................ (65,358) 9,361 276,306
DIVIDENDS
Preference dividend on non-equity shares
of Roda Print Concepts Limited ..................... (45,970) -- --
Ordinary dividend on equity shares of Roda Print
Concepts Ltd ....................................... (28,000) -- --
---------- -------- ----------
RETAINED (LOSS)/PROFIT
FOR THE PERIOD ..................................... 17 (139,328) 9,361 276,306
========== ======== ==========
</TABLE>
There were no recognized gains or losses other than those recorded above.
A summary of the significant adjustments to the profit/(loss) for the period
that would be required if United States generally accepted accounting principles
were to be applied instead of those generally accepted in the United Kingdom is
set forth in Note 25.
The notes to the financial statements are an integral part of the financial
statements.
F-17
<PAGE>
RODA LIMITED
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
31 DECEMBER 31 DECEMBER
1996 1997
NOTES POUNDS POUNDS
------- --------------- ---------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets ........................................ 9 399,465 863,739
CURRENT ASSETS
Stocks ................................................. 11 96,220 148,026
Debtors ................................................ 12 799,336 928,254
Cash at bank and in hand ............................... 89,610 522
------- -------
985,166 1,076,802
CREDITORS: amounts falling due within one year ......... 13 (1,995,006) (1,493,999)
---------- ----------
NET CURRENT LIABILITIES ................................ (1,009,840) (417,197)
---------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES .................. (610,375) 446,542
CREDITORS: amounts falling due after more than
one year .............................................. 14 (1,147,710) (1,928,321)
MINORITY INTEREST ...................................... 21 (100) (100)
---------- ----------
21 (1,758,185) (1,481,879)
========== ==========
CAPITAL AND RESERVES
Called up share capital ................................ 16 200,000 200,000
Share premium .......................................... 17 199,998 199,998
Profit and loss account ................................ 17 (2,158,183) (1,881,877)
---------- ----------
(1,758,185) (1,481,879)
========== ==========
</TABLE>
A summary of the significant adjustments to capital and reserves that would be
required if United States generally accepted accounting principles were to be
applied instead of those generally accepted in the United Kingdom is set forth
in Note 25.
The notes to the financial statements are an integral part of the financial
statements.
F-18
<PAGE>
RODA LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION
TEN MONTHS (29 AUGUST 1996) COMPANY YEAR
ENDED 31 TO 31 DECEMBER ENDED 31
OCTOBER 1996 1996 DECEMBER 1997
NOTES POUNDS POUNDS POUNDS
------- -------------- ------------------ --------------
<S> <C> <C> <C> <C>
RECONCILIATION OF OPERATING
(LOSS)/PROFIT TO NET CASH FLOW
FROM OPERATING ACTIVITIES
Operating (loss)/profit ............................. (44,463) 76,532 665,443
Depreciation charges ................................ 58,889 9,506 88,714
(Increase)/decrease in stocks ....................... (7,170) 8,532 (51,806)
(Increase)/decrease in debtors ...................... (75,115) 203,657 (123,515)
Increase/(decrease) in creditors .................... 297,438 (173,652) (56,337)
------- -------- --------
Net cash inflow from operating activities ........... 229,579 124,575 522,499
------- -------- --------
CASH FLOW STATEMENT
Net cash inflow from operating activities ........... 229,579 124,575 522,499
Returns on investment and servicing of finance . 22 (75,935) (55,816) (272,213)
Taxation ............................................ (46,647) -- (97,865)
Capital expenditure ................................. 22 (29,960) (2,436) (36,382)
Acquisitions ........................................ 10 -- (1,627,222) --
Equity dividends paid ............................... (28,000) -- --
------- ---------- --------
49,037 (1,560,899) 116,039
Management of liquid resources ...................... 22 25,685 -- --
FINANCING ........................................... 22 (183,432) 1,641,546 (410,245)
------- --------
(Decrease)/increase in cash ......................... (108,710) 80,647 (294,206)
======== ========== ========
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT
(Decrease)/increase in cash ......................... (108,710) 80,647 (294,206)
Cash flow from decrease/(increase) in debt and
lease financing .................................... 81,924 (1,241,548) 410,245
Loans and finance leases acquired with
subsidiary ......................................... (54,351) (239,912) --
Loan stock issued ................................... (25,685) (50,000) --
New loan ............................................ -- (816,000) --
New finance leases .................................. -- -- (464,530)
-------- ---------- --------
Change in net debt .................................. (106,822) (2,266,813) (348,491)
Net debt at beginning of period ..................... (328,442) -- (2,266,813)
-------- ---------- ----------
Net debt at end of period ........................... 23 (435,264) (2,266,813) (2,615,304)
======== ========== ==========
</TABLE>
The significant differences between the statement of cash flows presented above
and that required under United States generally accepted accounting principles
are described in Note 25.
The notes to the financial statements are an integral part of the financial
statements.
F-19
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
These financial statements comprise the consolidated financial statements
of Roda Limited ("the Company") and its subsidiary Roda Print Concepts Limited
("the Predecessor") (together, "the Group") for the period from incorporation,
29 August 1996 to 31 December 1996 and for the year ended 31 December 1997,
together with the financial statements of the Predecessor for the 10 months
ended 31 October 1996. The Company acquired Roda Print Concepts Limited on 21
October 1996 (the trading results from 21 October 1996 to 31 October 1996 are
not considered material). Prior to its acquisition of Roda Print Concepts
Limited, Roda Limited did not trade. The acquisition was a management buy-out
and the current shareholders of Roda Ltd are not the same as the original
shareholders of Roda Print Concepts Limited.
2. ACCOUNTING POLICIES
Accounting convention
The financial statements are prepared under the historical cost convention
and in accordance with United Kingdom applicable accounting standards.
Goodwill
Goodwill on acquisition has been set off directly against reserves. If the
subsidiary is subsequently sold or closed, any goodwill arising on acquisition
which was written off to reserves will be taken into account in determining the
profit or loss on sale or closure.
Depreciation
Depreciation is provided on all tangible fixed assets at rates calculated
to write off the cost less estimated residual value of each asset evenly over
its expected useful life, as follows:
<TABLE>
<S> <C> <C>
Leasehold improvements -- over the lease term
Plant and machinery -- 10% per annum
Fixtures, fittings and equipment -- 10% per annum
Motor vehicles -- 20% per annum
</TABLE>
Stocks
Stocks are stated at the lower of cost and net realizable value. Cost
includes all expenses incurred in bringing the products to their present
location and condition. Net realisable value is based on estimated selling
prices less any further costs to be incurred on disposal.
Deferred taxation
Deferred taxation is provided on the liability method for all timing
differences which are expected to reverse in the future, calculated at the rate
at which it is estimated that tax will be payable.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction or at the contracted rate if the transaction is covered
by a forward exchange contract. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange ruling at the
balance sheet date or, if appropriate, at the forward contract rate.
Pensions
The Group contributes to two defined contribution schemes for its directors
and employees. The assets of the schemes are held separately from those of the
Company in independently administered funds. The pension cost charge represents
contributions paid by the Company to the schemes.
F-20
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
2. ACCOUNTING POLICIES - (CONTINUED)
Leasing commitments
Assets held under finance leases, which are leases where substantially all
the risks and rewards of the ownership of the asset have passed to the Company,
are capitalized in the balance sheet and are depreciated over their useful
lives. The capital elements of future obligations under the leases are included
as liabilities in the balance sheet.
The interest elements of the rental obligations are charged in the profit
and loss account over the periods of the leases and represent a constant
proportion of the balance of capital repayments outstanding.
Rentals payable under operating leases are charged in the profit and loss
account on a straight line basis over the lease term.
3. TURNOVER
Turnover, which is stated net of value added tax and represents amounts
invoiced to third parties, and pre-tax profits are wholly attributable to the
Group's one continuing activity of general printing.
An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
United Kingdom ......................... 2,393,100 336,000 2,972,334
Rest of the European Community ......... 236,969 108,918 531,138
Rest of the world ...................... 428,152 180,607 694,747
--------- ------- ---------
3,058,221 625,525 4,198,219
========= ======= =========
</TABLE>
4. OPERATING (LOSS)/PROFIT
This is stated after charging:
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
Auditors' remuneration--audit fees .................. 6,250 1,250 --
Depreciation of owned fixed assets .................. 46,374 7,005 38,751
Depreciation of assets held under finance
leases and hire purchase contracts .................. 12,515 2,501 49,963
Operating lease rentals--land and buildings ......... 30,000 6,000 36,000
====== ===== ======
</TABLE>
F-21
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED )
5. DIRECTORS' EMOLUMENTS
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
Emoluments .................... 225,435 23,131 157,063
Pension contributions ......... 224,389 2,666 14,149
------- ------ -------
449,824 25,797 171,212
======= ====== =======
</TABLE>
Directors' emoluments, excluding pension contributions, were paid by the
subsidiary undertakings and fell within the following ranges:
<TABLE>
<CAPTION>
NO. NO. NO.
----- ----- ----
<S> <C> <C> <C>
nil pounds -- 5,000 pounds ............ 3 3 --
15,000 pounds -- 19,999 pounds ........... -- 1 --
20,000 pounds -- 24,999 pounds ........... -- -- 2
75,000 pounds -- 79,999 pounds ........... 1 -- --
105,000 pounds -- 109,999 pounds .......... -- -- 1
120,000 pounds -- 127,999 pounds .......... 1 -- --
</TABLE>
The emoluments of the highest paid director, were 107,627 pounds (1996 --
120,354 pounds, for the pre-acquisition period and 19,131 pounds for the
consolidated period) (these were not the same directors).
The chairman received no emoluments.
6. STAFF COSTS
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
Wages and salaries ............ 926,724 190,969 1,300,333
Social security costs ......... 88,627 20,677 126,950
Other pension costs ........... 15,886 1,215 13,495
------- ------- ---------
1,031,237 212,861 1,440,778
========= ======= =========
</TABLE>
The average weekly number of employees during the period, including the
directors, was as follows:
<TABLE>
<CAPTION>
NO. NO. NO.
----- ----- ----
<S> <C> <C> <C>
Factory ................. 19 19 37
Administration .......... 12 12 9
Directors ............... 2 2 1
-- -- --
33 33 47
== == ==
</TABLE>
F-22
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED )
7. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
Interest payable on bank overdraft ................. 23,513 4,055 4,759
Finance leases and hire purchase contracts ......... 5,808 1,001 27,469
Other interest payable ............................. 674 32,643 176,228
------ ------ -------
29,995 37,699 208,456
====== ====== =======
</TABLE>
8. TAXATION
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
Based on the (loss)/profit for the period: .........
UK corporation tax at 31.5% (1996 -- 33%) .......... 12,505 (11,355) (115,000)
Corporation tax underprovided in previous years (3,435) -- (54,000)
------ ------- --------
9,070 (11,355) (169,000)
====== ======= ========
</TABLE>
9. TANGIBLE FIXED ASSETS
Company -- year to 31 December 1997
<TABLE>
<CAPTION>
IMPROVEMENT PLANT FIXTURES,
TO AND FITTINGS AND MOTOR
LEASEHOLD MACHINERY EQUIPMENT VEHICLES TOTAL
POUNDS POUNDS POUNDS POUNDS POUNDS
------------- ----------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
COST:
At 1 January 1997 ................ 19,438 469,659 152,290 51,690 693,077
Additions ........................ 4,602 535,881 54,079 2,350 596,912
Disposals ........................ -- (90,597) -- -- (90,597)
------ ------- ------- ------ -------
At 31 December 1997 .............. 24,040 914,943 206,369 54,040 1,199,392
------ ------- ------- ------ ---------
DEPRECIATION:
At 1 January 1997 ................ 5,102 212,736 67,550 8,224 293,612
Provided during the year ......... 2,754 58,203 17,302 10,455 88,714
Disposals ........................ -- (46,673) -- -- (46,673)
------ ------- ------- ------ ---------
At 31 December 1997 .............. 7,856 224,266 84,852 18,679 335,653
------ ------- ------- ------ ---------
Net book value at
31 December 1997 ................ 16,184 690,677 121,517 35,361 863,739
====== ======= ======= ====== =========
Net book value at
31 December 1996 ................ 14,336 256,923 84,740 43,466 399,465
====== ======= ======= ====== =========
</TABLE>
The net book value of tangible fixed assets includes 617,529 pounds in
respect of assets held under finance leases.
F-23
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
9. TANGIBLE FIXED ASSETS - (CONTINUED)
Company -- period from incorporation (29 August 1996) to 31 December 1996
<TABLE>
<CAPTION>
IMPROVEMENT PLANT FIXTURES,
TO AND FITTINGS AND MOTOR
LEASEHOLD MACHINERY EQUIPMENT VEHICLES TOTAL
POUNDS POUNDS POUNDS POUNDS POUNDS
------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
COST:
On incorporation ........................ -- -- -- -- --
Arising on acquisition of ...............
subsidiary undertakings ................. 14,543 263,440 84,785 43,767 406,535
Additions ............................... -- -- 2,436 -- 2,436
------ ------- ------ ------ -------
At 31 December 1996 ..................... 14,543 263,440 87,221 43,767 408,971
------ ------- ------ ------ -------
DEPRECIATION:
On incorporation ........................ -- -- -- -- --
Provided during the period .............. 207 6,517 2,481 301 9,506
------ ------- ------ ------ -------
At 31 December 1996 ..................... 207 6,517 2,481 301 9,506
------ ------- ------ ------ -------
Net book value at
31 December 1996 ....................... 14,336 256,923 84,740 43,466 399,465
====== ======= ====== ====== =======
Net book value on incorporation ......... -- -- -- -- --
====== ======= ====== ====== =======
</TABLE>
The net book value of tangible fixed assets includes 152,999 pounds in
respect of assets held under finance leases.
Predecessor -- ten months to 31 October 1996
<TABLE>
<CAPTION>
IMPROVEMENT PLANT FIXTURES,
TO AND FITTINGS AND MOTOR
LEASEHOLD MACHINERY EQUIPMENT VEHICLES TOTAL
POUNDS POUNDS POUNDS POUNDS POUNDS
------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
COST:
At 1 January 1996 .................. 19,438 453,159 125,933 7,800 606,330
Additions .......................... -- 16,500 23,921 43,890 84,311
------ ------- ------- ------ -------
At 31 October 1996 ................. 19,438 469,659 149,854 51,690 690,641
------ ------- ------- ------ -------
DEPRECIATION:
At 1 January 1996 .................. 3,857 167,079 53,469 812 225,217
Provided during the period ......... 1,038 39,140 11,600 7,111 58,889
------ ------- ------- ------ -------
At 31 October 1996 ................. 4,895 206,219 65,069 7,923 284,106
------ ------- ------- ------ -------
NET BOOK VALUE:
At 31 October 1996 ................. 14,543 263,440 84,785 43,767 406,535
====== ======= ======= ====== =======
At 31 December 1995 ................ 15,581 286,080 72,464 6,988 381,113
====== ======= ======= ====== =======
</TABLE>
The net book value of tangible fixed assets includes 145,500 pounds in
respect of assets held under finance leases.
F-24
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
10. ANALYSIS OF THE ACQUISITION OF RODA PRINT CONCEPTS LIMITED
<TABLE>
<CAPTION>
NET BOOK
VALUE AND
FAIR VALUE
POUNDS
-------------
<S> <C>
Fixed assets ................................ 406,535
Stocks ...................................... 104,752
Debtors ..................................... 1,003,004
Cash ........................................ 23,590
Overdraft ................................... (218,940)
Creditors ................................... (948,599)
Loans and finance leases .................... (239,914)
---------
Net assets .................................. 130,428
Less: Minority interest ..................... (100)
Goodwill arising on the acquisition ......... 2,167,544
---------
2,297,872
=========
DISCHARGED BY:
Loan ........................................ 866,000
Cash ........................................ 1,419,872
Retention account ........................... 12,000
---------
2,297,872
=========
</TABLE>
On 21 October 1996 the Company acquired, from the family interests of D
Boulton, 100% of the equity issued share capital of Roda Print Concepts Limited,
a company incorporated in Great Britain, for a consideration of 2,297,872
pounds.
CASH FLOWS RELATING TO THE ACQUISITION OF RODA PRINT CONCEPTS LIMITED:
<TABLE>
<CAPTION>
POUNDS
---------------
<S> <C>
Net overdraft ....................................................... (195,350)
Cost of acquisition of Roda Print Concepts Limited -- cash .......... (1,419,872)
Cost of acquisition of Roda Print Concepts Limited -- cash placed
in escrow account .................................................. (12,000)
----------
(1,627,222)
==========
</TABLE>
11. STOCKS
<TABLE>
<CAPTION>
1996 1997
POUNDS POUNDS
-------- ----------
<S> <C> <C>
Raw materials .......................... 96,220 133,934
Work in progress ....................... -- 14,092
------ -------
96,220 148,026
====== =======
</TABLE>
12. DEBTORS
<TABLE>
<CAPTION>
1996 1997
POUNDS POUNDS
--------- ----------
<S> <C> <C>
Trade debtors .......................... 766,365 827,353
Other debtors .......................... 16,623 69,399
Prepayments and accrued income ......... 16,348 31,502
------- -------
799,336 928,254
======= =======
</TABLE>
F-25
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
13. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
POUNDS POUNDS
------------ ------------
<S> <C> <C>
Bank loans and overdrafts ..................... 261,594 466,712
Obligations under finance leases .............. 33,618 122,798
Trade creditors ............................... 631,304 558,372
Corporation tax ............................... 63,067 134,202
Advance corporation tax ....................... -- 5,403
Other taxes and social security costs ......... 62,316 41,765
Other creditors ............................... 913,502 133,124
Accruals ...................................... 29,605 31,623
------- -------
1,995,006 1,493,999
========= =========
</TABLE>
14. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
POUNDS POUNDS
------------ ------------
<S> <C> <C>
Loans wholly repayable within five years: .........
Bank loans ........................................ 947,369 715,785
Other creditors ................................... 117,975 82,336
Obligations under finance leases .................. 32,366 280,200
Loan notes ........................................ 50,000 850,000
------- -------
1,147,710 1,928,321
========= =========
</TABLE>
The bank loans and overdraft are secured on the assets of the Group. Other
creditors (notes 13 and 14) include a loan from the directors' pension fund of
130,336 pounds (1996 -- 165,480 pounds) which is unsecured and repayable by
monthly instalments until 30 June 2004. The loan notes are part of the
management buy-out consideration, secured on the assets of the Group. These are
convertible to ordinary shares after a period of 5 years, if unredeemed, at the
option of the stockholder.
The finance lease liabilities mature as follows:
<TABLE>
<CAPTION>
1996 1997
POUNDS POUNDS
----------- ------------
<S> <C> <C>
Within one to two years ................................... 40,011 163,536
Within two to five years .................................. 33,717 321,497
------ -------
73,728 485,033
Less: finance charges allocated to future periods ......... (7,744) (82,035)
------ -------
65,984 402,998
====== =======
</TABLE>
15. PROVISION FOR LIABILITIES AND CHARGES
Deferred taxation not provided is as follows:
<TABLE>
<CAPTION>
NOT PROVIDED
---------------------------
1996 1997
POUNDS POUNDS
------------ ------------
<S> <C> <C>
Capital allowances in advance of depreciation ......... (54,190) (99,000)
======= =======
</TABLE>
F-26
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
16. SHARE CAPITAL
<TABLE>
<CAPTION>
ALLOTTED,
CALLED UP
AUTHORIZED AND FULLY PAID
------------------------- ------------------
1996 1997 1996 1997
POUNDS POUNDS POUNDS POUNDS
------------ ------------ --------- --------
<S> <C> <C> <C> <C>
'A' ordinary shares of 50p each .. 100,000 100,000 100,000 100,000
'B' ordinary shares of 50p each .. 900,000 900,000 100,000 100,000
------- ------- ------- -------
1,000,000 1,000,000 200,000 200,000
========= ========= ======= =======
</TABLE>
On incorporation, 2 ordinary shares of 1 pound each were issued to the
subscribers to the Memorandum and Articles of Association for cash consideration
of 2 pounds. On 21 October 1996 the 1 pound shares were each converted to two
50p ordinary 'A' shares, and the authorised share capital was then increased to
1,000,000 pounds (made up of 200,000 ordinary 'A' shares and 1,800,000 ordinary
'B' shares). 200,000 pounds ordinary 'B' shares and an additional 199,996 pounds
ordinary 'A' shares were then issued for 1 pound each (i.e. at a premium of 50p
per share) for cash as part of the Management Buy-Out Agreement.
All shares have equal rights except on sale.
17. RECONCILIATION OF SHAREHOLDER'S FUNDS AND MOVEMENTS IN RESERVES
<TABLE>
<CAPTION>
TOTAL
SHARE PROFIT AND SHAREHOLDERS'
CAPITAL LOSS ACCOUNT FUNDS
POUNDS POUNDS POUNDS
--------- -------------- --------------
<S> <C> <C> <C>
PREDECESSOR
At 1 January 1996 ........... 200 269,556 269,756
Loss for the period ......... -- (139,328) (139,328)
--- -------- --------
At 31 October 1996 .......... 200 130,228 130,428
=== ======== ========
</TABLE>
<TABLE>
<CAPTION>
PROFIT TOTAL
SHARE SHARE AND LOSS SHAREHOLDERS'
CAPITAL PREMIUM ACCOUNT FUNDS
POUNDS POUNDS POUNDS POUNDS
--------- --------- --------------- --------------
<S> <C> <C> <C> <C>
COMPANY
On incorporation ............................ 2 2
Issue of share capital: on acquisition of
Roda Print Concepts Limited ................ 199,998 199,998 -- 399,996
Goodwill write off .......................... (2,167,544) (2,167,544)
Profit for the period ....................... 9,361 9,361
---------- ----------
At 31 December 1996 ......................... 200,000 199,998 (2,158,183) (1,758,185)
Profit for the year ......................... -- -- 276,306 276,306
------- ------- ---------- ----------
At 31 December 1997 ......................... 200,000 199,998 (1,881,877) (1,481,879)
======= ======= ========== ==========
</TABLE>
18. FINANCIAL COMMITMENTS
The Group had annual commitments under non-cancellable operating leases as
follows:
<TABLE>
<CAPTION>
LAND AND
OTHER BUILDINGS
1996 1997 1996 1997
POUNDS POUNDS POUNDS POUNDS
------- ------- --------- ----------
<S> <C> <C> <C> <C>
Operating leases which expire:
within one year .................. 3,000 4,281 -- --
within two to five years ......... -- -- 36,000 36,000
----- ----- ------ ------
3,000 4,281 36,000 36,000
===== ===== ====== ======
</TABLE>
F-27
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
19. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
The Group has authorised but not contracted for capital expenditure of nil
pounds (1996 -- 120,000 pounds).
20. ULTIMATE CONTROLLING ENTITY
In the opinion of the directors there is no ultimate controlling entity.
21. MINORITY INTERESTS
The non-equity minority interests represents a 100% holding of the
preference shares of Roda Print Concepts Limited by a third party. The holders
of these shares have no rights against other group companies.
22. NOTES TO THE STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996 TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
Interest received .................................... 30 -- 344
Dividends paid on non-equity shares .................. (45,970) -- --
Subsidiary dividend paid ............................. -- (18,130) (64,101)
Interest paid ........................................ (24,187) (36,685) (180,987)
Interest element of finance lease rental payments (5,808) (1,001) (27,469)
------- ------- --------
Net cash outflow from returns on investments
and servicing of finance ........................... (75,935) (55,816) (272,213)
======= ======= ========
CAPITAL EXPENDITURE:
Payments to acquire tangible fixed assets ............ (29,960) (2,436) (132,382)
Receipts from sales of tangible fixed assets ......... -- -- 96,000
------- ------- --------
(29,960) (2,436) (36,382)
======= ======= ========
MANAGEMENT OF LIQUID RESOURCES:
Sale of short term investment ........................ 25,685 -- --
------- ------- --------
Net cash inflow ...................................... 25,685 -- --
------- ------- --------
FINANCING:
Capital element of finance lease rental payments (37,736) (8,114) (127,517)
Capital repayment of pension fund loan ............... (5,866) (333) (35,149)
Capital repayment of bank loan ....................... (38,322) -- (231,579)
Loan to Roda Limited ................................. (101,508) -- --
Repayment of loan .................................... -- -- (16,000)
New secured loan ..................................... -- 1,200,000 --
New unsecured loan ................................... -- 49,995 --
Share capital issued ................................. -- 399,998 --
-------- --------- --------
Net cash (outflow)/inflow from financing ............. (183,432) 1,641,546 (410,245)
======== ========= ========
</TABLE>
F-28
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
23. ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<CAPTION>
AT AS
1 JANUARY OTHER 31 OCTOBER
1996 CASH FLOWS CHANGES 1996
POUNDS POUNDS POUNDS POUNDS
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
PREDECESSOR
Cash at bank and in hand ......... 26,092 (2,502) 23,590
Bank overdraft ................... (112,732) (106,208) (218,940)
-------- -------- --------
(86,640) (108,710) (195,350)
Finance leases ................... (57,486) 37,736 (54,351) (74,101)
Loans ............................ (210,001) 145,696 (101,508) (165,813)
--------
Short term investment ............ 25,685 (25,685)
-------- -------- -------- --------
(328,442) (49,037) (155,859) (435,264)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AT AS
1 NOVEMBER OTHER 31 DECEMBER
1996 CASH FLOWS ACQUISITION CHANGES 1996
POUNDS POUNDS POUNDS POUNDS POUNDS
------------ --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
COMPANY
Cash at bank and in hand ......... -- 89,610 89,610
Bank overdraft ................... -- (8,963) (8,963)
-- ---------- -------- -------- ---------
-- 80,647 80,647
Finance leases ................... -- 8,114 (74,099) (65,985)
Loans ............................ -- (1,249,662) (165,480) (866,333) (2,281,475)
-- ---------- -------- -------- ---------
-- (1,160,901) (239,579) (866,333) (2,266,813)
== ========== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
AT AS
1 JANUARY OTHER 31 OCTOBER
1997 CASH FLOWS CHANGES 1997
POUNDS POUNDS POUNDS POUNDS
--------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C>
COMPANY
Cash at bank and in hand ......... 89,610 (89,088) 522
Bank overdraft ................... (8,963) (205,118) (214,081)
------ -------- --------
80,647 (294,206) (213,559)
Finance leases ................... (65,985) 127,517 (464,530) (402,998)
Loans ............................ (2,281,475) 282,728 (1,998,747)
---------- -------- -------- ----------
(2,266,813) 116,039 (464,530) (2,615,304)
========== ======== ======== ==========
</TABLE>
F-29
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
24. COMPANIES ACT 1985
These financial statements do not comprise statutory accounts within the
meaning of section 240 of the Companies Act 1985 of Great Britain. Statutory
accounts for the year ended 31 December 1996 of Roda Print Concepts Ltd, have
been delivered to the Registrar of Companies for England and Wales. Statutory
accounts for the period from incorporation to 31 December 1997 for Roda Limited
and the year ended 31 December 1997 for Roda Print Concepts Ltd. will be
delivered to the Registrar. The auditors' reports on these accounts were
unqualified.
25. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND UNITED STATES
The Group's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United Kingdom ("UK GAAP")
which differ in certain respects from United States generally accepted
accounting principles ("US GAAP"). The significant differences as they apply to
the Group are summarized below.
Goodwill
Under UK GAAP the goodwill arising on the acquisition of Roda Print
Concepts Limited has been charged to reserves. Under US GAAP such goodwill would
be capitalised and amortised over its estimated useful life of 40 years.
Deferred taxation
Under UK GAAP the Group provides for deferred tax using the liability
method on all timing differences which are expected to reverse in the future
without being replaced, calculated at the rate at which it is anticipated the
timing differences will reverse. Under US GAAP deferred taxation is provided
using the liability method on all temporary differences. Deferred tax
liabilities and assets would be classified as current or non current based on
the classification between the book and tax bases of assets and liabilities.
The following is a summary of the significant adjustments to profit/(loss)
for the period and capital and reserves, which would be required if US GAAP were
to be applied instead of UK GAAP:
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
INCOME
(Loss)/profit for the period as reported in consolidated
statement of income ........................................ (65,358) 9,361 276,306
Amortisation of goodwill ..................................... -- (9,031) (54,189)
Deferred taxation: Methodology ............................... (66,172) 11,982 (44,810)
Prior period tax adjustment .................................. -- (54,000) 54,000
------- ------- -------
Net (loss)/income as adjusted to accord with US GAAP ......... (131,530) (41,688) 231,307
======== ======= =======
</TABLE>
F-30
<PAGE>
RODA LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONTINUED)
25. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND UNITED STATES - (CONTINUED)
<TABLE>
<CAPTION>
31 DECEMBER 31 DECEMBER
1996 1997
--------------- ---------------
<S> <C> <C>
CAPITAL AND RESERVES
Capital and reserves as reported in the consolidated balance
sheet ......................................................... (1,758,185) (1,481,879)
Goodwill ........................................................ 2,149,481 2,104,324
Deferred taxation: Methodology .................................. (54,190) (99,000)
---------- ----------
Shareholders' equity as adjusted to accord with US GAAP ......... 346,138 523,445
========== ==========
</TABLE>
Cash flows
The consolidated statement of cash flows presents substantially the same
information as that required under US GAAP. These statements differ, however,
with regard to classification of items within the statements and as regards the
definition of cash and cash equivalents.
Under US GAAP, cash and cash equivalents would not include bank overdrafts
and borrowings with initial maturities of less than three months. Under UK GAAP,
cash flows are presented separately for operating activities, servicing of
finance and returns on investments, taxation, capital expenditure and financial
investment, equity dividends paid, management of liquid resources and financing.
US GAAP, however, require only three categories of cash flow activity to be
reported: operating, investing and financing. Cash flows from taxation and
servicing of finance and return on investments shown under UK GAAP would, with
the exception of dividends paid, be included as operating activities under US
GAAP. The payment of dividends would be included as a financing activity under
US GAAP. Under US GAAP, capitalised interest is treated as part of the cost of
the asset to which it relates and thus included as part of investing cash flows;
under UK GAAP all interest is treated as part of servicing of finance and
returns on investments.
The categories of cash flow activities under US GAAP can be summarised as
follows:
<TABLE>
<CAPTION>
COMPANY
PERIOD FROM
PREDECESSOR INCORPORATION COMPANY
TEN MONTHS (29 AUGUST YEAR
ENDED 1996) TO ENDED
31 OCTOBER 31 DECEMBER 31 DECEMBER
1996 1996 1997
POUNDS POUNDS POUNDS
------------- --------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities .............. 106,997 68,759 152,421
Cash outflows on investing activities ............. (29,960) (1,629,658) (36,382)
Cash flows from financing activities .............. (79,539) 1,650,509 (205,127)
------- ---------- --------
Increase/(decrease) in cash and cash equivalents . (2,502) 89,610 (89,088)
Cash and cash equivalents at beginning of period . 26,092 -- 89,610
------- ---------- --------
Cash and cash equivalent at end of period ......... 23,590 89,610 522
======= ========== ========
</TABLE>
F-31
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON ASKING 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 THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
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
Risk Factors .................................... 7
The Company ..................................... 13
Use of Proceeds ................................. 14
Dividend Policy ................................. 14
Capitalization .................................. 15
Dilution ........................................ 16
Unaudited Pro Forma Combined Financial
Statements ................................... 17
Selected Financial Data ......................... 22
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 24
Business ........................................ 29
Management ...................................... 38
Principal Stockholders .......................... 45
Certain Transactions ............................ 46
Description of Capital Stock .................... 48
Shares Eligible for Future Sale ................. 50
Underwriting .................................... 51
Legal Matters ................................... 52
Experts ......................................... 52
Additional Information .......................... 52
Index to Financial Statements ................... F-1
</TABLE>
----------------------------------------
UNTIL 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
<PAGE>
================================================================================
2,100,000 SHARES
CUNNINGHAM
GRAPHICS
INTERNATIONAL, INC.
COMMON STOCK
-----------------------------------------------------
PROSPECTUS
-----------------------------------------------------
SCHRODER & CO. INC.
, 1998
================================================================================
<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 to be incurred in
connection with the issuance and distribution of the shares of Common Stock
offered hereby.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee ......... $ 9,262
NASD Filing Fee ............................................. $ 3,640
NASDAQ Listing Fee -- National Market Fee ................... $44,500
Blue Sky Fees and Expenses .................................. $ *
-------
Legal Fees and Expenses ..................................... $ *
Accounting Fees ............................................. $ *
Printing and Engraving Costs ................................ $ *
Transfer Agent Fees ......................................... $ *
Miscellaneous Expenses ...................................... $ *
=======
Total ....................................................... $800,000
========
</TABLE>
- ----------
* To be included by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Certificate of Incorporation contains a provision
eliminating or limiting director liability to the Registrant and its
stockholders for monetary damages arising from acts or omissions in the
director's capacity as director. The provision does not, however, eliminate or
limit the personal liability of a director (i) for any breach of such director's
duty of loyalty to the Registrant or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of the law, (iii) under the New Jersey statutory provision making
directors personally liable, under a negligence standard, for unlawful dividends
or unlawful stock purchases or redemptions or (iv) for any transaction from
which the director derived an improper personal benefit. This provision offers
persons who serve on the Board of Directors of the Registrant protection against
awards of monetary damages resulting from breaches of their duty of care (except
as indicated above). As a result of this provision, the ability of the
Registrant or a stockholder thereof to successfully prosecute an action against
a director for breach of his duty of care is limited. However, the provision
does not affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care. The Securities
and Exchange Commission has taken the position that the provision will have no
effect on claims arising under the federal securities laws.
In addition, the Registrant's Certificate of Incorporation and Bylaws
provide for mandatory indemnification rights, subject to limited exceptions, to
any director or officer of the Registrant who by reason of the fact that he or
she is a director or officer of the Registrant, is involved in a legal
proceeding of any nature. Such indemnification rights include reimbursement for
expenses incurred by such director, officer, employee or agent in advance of the
final deposition of such proceeding in accordance with the applicable provisions
of the New Jersey Business Corporation Act.
Each of the officers and directors of the Company is insured against
certain liabilities which he or she might incur in his or her capacity as an
officer or director pursuant to a Directors and Officers Liability Policy issued
by Federal Insurance Company of Warren, New Jersey. The general effect of this
policy is that if during the policy period any claim or claims are made against
the officers and directors of the Company or any of them individually for a
Wrongful Act (as defined in the policy) while acting in their individual or
collective capacities as directors or officers, and the Company has indemnified
them, the insurer will pay for 100% of any Loss (as defined in the policy). In
those instances where the officers and directors are not indemnified by the
Company, the insurer will pay on behalf of the officers and directors
II-1
<PAGE>
of the Company or any of them, their executors, administrators, or assigns, 100%
of the Loss. The insurer's combined limit of liability is $1,000,000 during any
policy year and $1,000,000 for any single Loss. "Wrongful Act" is defined as any
error, misstatement, misleading statement, act, omission, neglect or breach of
duty actually or allegedly committed or attempted by the officers or directors
of the Company while acting in their individual or collective capacities or in
any matter, not excluded by the terms and conditions of the policy, claimed
against them by reason of their being directors or officers of the Company. The
term "Loss" is defined as any amount which the Company shall be required or
permitted by law to pay to such person as indemnity for a claim or claims made
against them for "Wrongful Acts," and includes damages, judgments, settlements,
costs, charges, and expenses incurred in the defense of actions, suits or
proceedings and appeals therefrom, except that the term "Loss" does not include
fines or penalties imposed by law or matters which may be deemed uninsurable
under the law pursuant to which the policy shall be construed.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Upon formation of the Company, one share of Common Stock was issued to
Michael R. Cunningham.
Immediately prior to the Offering, the Company is closing the private
placement of 2,595,260 shares of Common Stock to the existing stockholders of
the Predecessor in connection with the Reorganization.
The recipients of these securities are the following:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ------------------------------------------------- -----------------
<S> <C>
Michael R. Cunningham .................... 2,050,727
Gordon Mays .............................. 228,198
Timothy Mays ............................. 165,803
James J. Cunningham, Trustee ............. 130,898
William J. Mays, Trustee ................. 9,817
William Edward Shannon, Trustee .......... 9,817
</TABLE>
Contemporaneously with the completion of the Offering, the Company is
closing the private placement of 169,739 shares of Common Stock to the selling
stockholders of Roda as part of the purchase price for the shares of capital
stock of Roda. For purposes of the transaction, a share of Common Stock is being
valued at the initial public offering price.
The recipients of these securities are the following:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- -------------------------------------------------- -----------------
<S> <C>
Peter L. Furlonge ......................... 128,323
Ralph J. Elman ............................ 624
Stelby Holdings Limited ................... 3,999
Central Investments Limited ............... 17,901
The Naggar Family Pension Scheme .......... 3,999
M. L. Tagliaferri ......................... 508
M.O. Moriarty ............................. 51
Mrs. J. Moriarty .......................... 76
George Harvey ............................. 14,258
</TABLE>
The Company relies on Section 4(2) of the Securities Act in making the
foregoing private placements. No offer was made to any person other than the
existing stockholders of the Predecessor and the selling stockholders of Roda
Limited.
No underwriters are involved nor will any commissions be paid in connection
with the foregoing transactions.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement between the Company and Schroder & Co. Inc.
1.2 Agreement for the Sale and Purchase of the Entire Issued Share Capital of Roda
Limited dated January 16, 1998 between P.L. Furlonge and others and the Predecessor
2.1* Reorganization Agreement among Stockholders of the Predecessor and CGII
3.1 Certificate of Incorporation
3.2 By-Laws
4.2* Specimen Common Stock Certificate
5.1* Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione
10.1 1998 Stock Option Plan
10.2 Directors' Stock Option Plan
10.3* Employment Agreement between the Company and M.R. Cunningham
10.4* Employment Agreement between the Company and G. Mays
10.5* Employment Agreement between the Company and T. Mays
10.6* Employment Agreement between the Company and R. Needle
10.7* Form of Service Agreement between Roda Limited and P.L. Furlonge
10.9 Loan and Security Agreement dated December 15, 1997 between the Company and
Summit Bank, as amended
10.10+ Printing Services Agreement dated July 12, 1996 between the Company and Goldman,
Sachs & Co., as amended
10.11 Agreement of Lease dated April 18, 1989 between the Company and Lackawanna
Warehouse Corp. of New Jersey, as amended
10.12 Agreement of Sublease dated July 15, 1996 between the Company and Goldman, Sachs
& Co.
10.13* Form of Roda Lease
10.14* Joint Marketing Agreement among Cunningham Graphics, Inc., Roda Print Concepts Ltd.
and Workable Ltd.
14(a) Financial Statement Schedule
Report of Independent Auditors on Financial Statement Schedule
Schedule II -- Valuation of Qualifying Accounts
21.1 List of all subsidiaries of the Company
23.1* Consent of Gibbons, Del Deo, Dolan, Griffinger & Vecchione (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Ernst & Young Chartered Accountants
24.1 Power of Attorney (Page II -- 5)
27 Financial Data Schedule
99.1 Consent of Arnold Spinner
99.2 Consent of Norman R. Malo
</TABLE>
- ----------
* To be included by amendment
+ Portions of this Exhibit have been omitted and have been filed separately
with the Secretary of the Commission pursuant to Registrant's Application
Requesting Confidential Treatment under Rule 406 of the Securities Act.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to Item 14 hereof, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, 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 of whether
II-3
<PAGE>
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant further undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective;
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the Underwriter,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jersey City, State of New
Jersey, on February 19, 1998.
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
By: /s/ Michael R. Cunningham
------------------------------------------
Michael R. Cunningham
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated. Each person whose signature appears below hereby constitutes
and appoints Michael R. Cunningham and Gordon Mays, or either of them, as such
person's true and lawful attorney-in-fact and agent with full power of
substitution for such person and in such person's name, place and stead, in any
and all capacities, to sign and to file with the Commission, any and all
amendments and post-effective amendments to this Registration Statement, with
exhibits thereto and other documents in connection therewith, granting unto 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 to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or any substitute therefor, may lawfully do or cause to be done by virtue
thereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
- -------------------------------- ------------------------------ -----------------
<S> <C> <C>
/s/ Michael R. Cunningham Chairman of the Board, February 19, 1998
----------------------------- President, Chief Executive
Michael R. Cunningham Officer and Director
(Principal Executive Officer)
/s/ Kenneth G. Hay Principal Financial and February 19, 1998
----------------------------- Accounting Officer
Kenneth G. Hay
/s/ James J. Cunningham Director February 19, 1998
-----------------------------
James J. Cunningham
/s/ Gordon Mays Director February 19, 1998
-----------------------------
Gordon Mays
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cunningham Graphics International, Inc.
We have audited the predecessor financial statements of Cunningham Graphics
International, Inc. as of December 31, 1996 and 1997 and for each of the three
years in the period ended December 31, 1997, and have issued our report thereon
dated January 16, 1998 (included elsewhere in this Registration Statement). Our
audits also included the Financial Statement Schedule listed in Item 14(a) of
this Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the Financial Statement Schedule referred to above, when
considered in relation to the basic Financial Statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Princeton, New Jersey
January 16, 1998
S-1
<PAGE>
ITEM 14(A) FINANCIAL STATEMENT SCHEDULE
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS -- PREDECESSOR COMPANY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COST AND ENDING
DESCRIPTION BALANCE EXPENSE WRITE-OFFS BALANCE
- --------------------------------------------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowances for accounts receivable ......... $28 $31 $ 9 $50
Year ended December 31, 1996:
Allowances for accounts receivable ......... 30 -- 2 28
Year ended December 31, 1995:
Allowances for accounts receivable ......... 30 -- -- 30
</TABLE>
<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COST AND ENDING
DESCRIPTION BALANCE EXPENSE WRITE-OFFS BALANCE
- ------------------------------------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowances for inventories ......... $200 $86 $92 $194
Year ended December 31, 1996:
Allowances for inventories ......... 200 82 82 200
Year ended December 31, 1995:
Allowances for inventories ......... 200 200
</TABLE>
All other schedules are omitted because they are not applicable, not
required, or because the required information is included in the financial
statements or notes thereto.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------------------------- -----
<S> <C>
1.1* Form of Underwriting Agreement between the Company and Schroder & Co. Inc.
1.2 Agreement for the Sale and Purchase of the Entire Issued Share Capital of Roda
Limited dated January 16, 1998 between P.L. Furlonge and others and the Predecessor
2.1* Reorganization Agreement among Stockholders of the Predecessor and CGII
3.1 Certificate of Incorporation
3.2 By-Laws
4.2* Specimen Common Stock Certificate
5.1* Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione
10.1 1998 Stock Option Plan
10.2 Directors' Stock Option Plan
10.3* Employment Agreement between the Company and M.R. Cunningham
10.4* Employment Agreement between the Company and G. Mays
10.5* Employment Agreement between the Company and T. Mays
10.6* Employment Agreement between the Company and R. Needle
10.7* Form of Service Agreement between Roda Limited and P.L. Furlonge
10.9 Loan and Security Agreement dated December 15, 1997 between the Company and
Summit Bank, as amended
10.10+ Printing Services Agreement dated July 12, 1996 between the Company and Goldman,
Sachs & Co., as amended
10.11 Agreement of Lease dated April 18, 1989 between the Company and Lackawanna
Warehouse Corp. of New Jersey, as amended
10.12 Agreement of Sublease dated July 15, 1996 between the Company and Goldman, Sachs
& Co.
10.13* Form of Roda Lease
10.14* Joint Marketing Agreement among Cunningham Graphics, Inc., Roda Print Concepts Ltd.
and Workable Ltd.
14(a) Financial Statement Schedule
Report of Independent Auditors on Financial Statement Schedule
Schedule II -- Valuation of Qualifying Accounts
21.1 List of all subsidiaries of the Company
23.1* Consent of Gibbons, Del Deo, Dolan, Griffinger & Vecchione (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Ernst & Young, Chartered Accountants
24.1 Power of Attorney (Page II -- 5)
27 Financial Data Schedule
99.1 Consent of Arnold Spinner
99.2 Consent of Laurent X. de Marval
99.3 Consent of Norman R. Malo
</TABLE>
- ----------
* To be included by amendment
+ Portions of this Exhibit have been omitted and have been filed separately
with the Secretary of the Commission pursuant to Registrant's Application
Requesting Confidential Treatment under Rule 406 of the Securities Act.
CONFORMED COPY
DATED 16th January 1998
(1) P.L. FURLONGE and OTHERS
(2) CUNNINGHAM GRAPHICS INC
AGREEMENT
FOR THE SALE AND PURCHASE
OF THE ENTIRE ISSUED SHARE CAPITAL
OF RODA LIMITED
CAMERON McKENNA
Mitre House,
160 Aldersgate Street
London EC1A 4DD
T +44(0)171-367 3000
F +44(0)171-367 2000
CDE Box 724
(50177353.06)
<PAGE>
THIS AGREEMENT is made the 16th day of January 1998
BETWEEN:-
(1) THE SEVERAL PERSONS whose respective names and addresses are set out in
column (1) of schedule 1 (the "Vendors");
(2) CUNNINGHAM GRAPHICS INC, a corporation organised under the laws of the
State of New Jersey, USA (the "Purchaser").
WHEREAS:-
(A) Roda Limited (the "Company"), a company registered in England with number
3243754, has at the date of this Agreement an authorised share capital of
(pound)1,000,000 divided into 200,000 A Ordinary Shares of (pound)0.50 each
and 1,800,000 B Ordinary Shares of (pound)0.50 each of which 200,000 of the
said A Ordinary Shares and 200,000 of the said B Ordinary Shares are issued
and fully paid or credited as fully paid and are owned by the Vendors in
the proportions shown opposite their respective names in column (2) of
schedule 1.
(B) The Vendors have agreed to sell the Shares to the Purchaser and the
Purchaser has agreed to purchase the Shares in reliance upon the
representations, warranties and undertakings in this Agreement, for the
consideration and otherwise upon and subject to the terms and conditions of
this Agreement.
WHEREBY IT IS AGREED as follows:-
1. Definitions and Interpretation
1.1 In this Agreement the following words and expressions have the meanings
set opposite them:
"Accounts" the audited balance sheet as at the Balance
Sheet Date and the audited profit and loss
account for the last two accounting
reference periods ended on the Balance Sheet
Date of the Subsidiary and the notes,
reports, statements and other documents
which are or would be required by law to be
annexed to the Accounts of the company
concerned and to be laid before such company
in general meeting for such Financial Year,
a copy of each of which has been initialled
by or on behalf of each of the parties for
the purpose of identification;
"Accounting Standards" statements of standard accounting practice
(including financial reporting standards)
issued pursuant to section 256, CA 85 by the
ASB;
"Affiliate" in relation to any body corporate, any
Holding Company or subsidiary of such body
corporate or any subsidiary of a Holding
Company of such body corporate;
-1-
<PAGE>
"Agreed Extracts" as defined in clause 7.9;
"Agreement" this Agreement including its recitals and
the schedules hereto but not the Deed of Tax
Covenant;
"A Ordinary Shares" the 200,000 issued A Ordinary Shares
of(pound)0.50 each in the capital of the
Company;
"ASB" Accounting Standards Board Limited (no.
2526824) or such other body prescribed by
the Secretary of State from time to time
pursuant to section 256, CA 85;
"Balance Sheet Date" 31 December 1996;
"B Ordinary Shares" the 200,000 issued B Ordinary Shares
of(pound)0.50 each in the capital of the
Company;
"Business" collectively the businesses of the Company
and the Subsidiary at the date hereof;
"Business Day" a weekday (other than a Saturday) when banks
are open for business in London;
"CA 85" Companies Act 1985;
"CAA" Capital Allowances Act 1990;
"Claim" any claim by the Purchaser in connection
with the Vendors' Warranties or the Vendors
in connection with the Purchaser's
Warranties (as the case may be);
"Companies Acts" as defined in section 744, CA 85 together
with the Companies Act 1989;
"Competent Authority" means any person or legal entity (including
any government or government agency) having
regulatory authority and/or any court of law
or tribunal, or any local or national
agency, authority, department, inspectorate,
minister, ministry, official or public or
statutory person (whether autonomous or not)
of, or the government of, the United Kingdom
or the European Community;
"Completion" completion of the sale and purchase of the
Shares pursuant to this Agreement;
"Conditions" the conditions referred to in clause 2.1;
"Confidential Information" all information received or obtained as a
result of entering into or performing, or
supplied by or on behalf of a party in the
negotiations leading to, this Agreement and
the Deed of Tax Covenant and which relates
to:-
(i) the Company and the Subsidiary;
-2-
<PAGE>
(ii) the Business;
(iii) the provisions of this Agreement and
the Deed of Tax Covenant;
(iv) the negotiations relating to this
Agreement and the Deed of Tax
Covenant;
(v) the subject matter of this Agreement
and the Deed of Tax Covenant; or
(vi) the Purchaser and its Affiliates.
"Connected Person" a person connected with any of the Vendors
or the Directors (or any former director of
the Company or any of the Subsidiaries)
within the meaning of section 839, TA 88;
"Consideration Shares" the 169,739 shares of common stock, no par
value of the Purchaser to be issued at
Completion in accordance with clause 4 as
part of the consideration for the Shares.
"Copyright" copyright, design rights, topography rights
and database rights whether or not the same
are registered or unregistered (including
any applications for registration of any
such thing) and rights under licences and
consents in relation to any such thing) and
any similar or analogous rights to any of
the foregoing whether arising or granted
under the law of England or of any other
jurisdiction;
"Deed of Tax Covenant" the deed in the agreed terms containing
certain taxation covenants and indemnities
between the Vendors, the Company, each of
the Subsidiaries and the Purchaser;
"Directors" the directors of the Company and the
Subsidiaries named in schedule 2;
"Disclosed" fairly disclosed by the Disclosure Documents
or by the general disclosures specifically
referred to in the Disclosure Letter and
"Disclosure" shall be construed accordingly;
"Disclosure Documents" the Disclosure Letter, the documents on the
property disclosure list referred to therein
and the two identical bundles of documents
collated by or on behalf of the Vendors the
outside covers of each of which have been
signed for identification by or on behalf of
the Vendors and the Purchaser;
"Disclosure Letter" the letter described as such of even date
herewith addressed by the Vendors to the
Purchaser;
-3-
<PAGE>
"Encumbrance" any interest or equity of any person
(including any right to acquire, option or
right of pre-emption) or any mortgage,
charge, pledge, lien, assignment,
hypothecation, security interest, title
retention or any other security agreement or
arrangement;
"Environment" any and all organisms (including without
limitation man and his senses), ecological
systems, property and the following media:
air (including without limitation, the air
within buildings and the air within other
natural or man-made structures made whether
above or below ground); water (including
without limitation, water under or within
land or in drains or sewers and coastal and
inland waters); and land (including without
limitation, land under water);
"Environmental Agreements" any and all leases or licences or other
agreements which are binding upon the
Company or any of the Subsidiaries but only
to the extent that they relate, either
wholly or in part, to the protection of the
Environment, and/or the prevention of Harm
or Damage;
"Environmental Laws" any and all laws including European
Community or European Union regulations,
directives and decisions; statutes and
subordinate legislation; regulations,
orders, ordinances, Permits, codes of
practice, circulars, guidance notes and the
like; common law, local laws and byelaws;
judgments, notices, orders, directions,
instructions or awards of any Competent
Authority applicable to the Property and/or
conduct of the Business and which have as a
purpose or effect the protection of the
Environment, and/or prevention of Harm or
Damage and/or the provision of remedies in
respect of Harm or Damage;
"Environmental Liability" liability (including liability in respect of
Remedial Action) on the part of the Company
or any of the Subsidiaries and/or any of
their directors or officers or shareholders
under Environmental Laws;
"EPCA" the Employment Protection (Consolidation)
Act 1978;
"Escrow Agreement" the escrow agreement to be made between the
Vendors, the Purchaser, Mundays and Cameron
McKenna in the agreed terms;
"Event" any payment, transaction, act, omission or
occurrence of whatever nature whether or not
the Company or the Purchaser is a party
thereto and including:-
(a) the execution of this Agreement and
completion of the sale of the Shares
to the Purchaser; and
-4-
<PAGE>
(b) the death of any person being a
Vendor or connected with a Vendor;
and references to an Event occurring on or
before Completion shall include an Event
deemed, pursuant to any Taxation Statute, to
occur or be treated or regarded as occurring
on or before Completion;
"FA" Finance Act;
"Filing Date" each date on which a registration statement
or an amendment thereto is filed by the
Purchaser with the SEC, and including the
date on which the registration statement is
declared effective by the SEC and the date
of Completion;
"Financial Year" a Financial Year within the meaning ascribed
to such expression by section 223, CA 85;
"GAAP" Accounting Standards, the legal principles
set out in schedules 4 and 4A to CA 85,
rulings and abstracts of the urgent issues
task force of the ASB and guidelines,
conventions, rules and procedures of
accounting practice in the United Kingdom
which are regarded as permissible by the
ASB;
"Group" together the Company and the Subsidiary;
"Harm or Damage" harm or damage to or other interference with
the Environment;
"Hazardous Matter" any and all matter (whether alone or in
combination with other matter) which may or
is liable to cause Harm or Damage;
"Holding Company" a Holding Company within the meaning
ascribed to such expression by sections 736
and 736A, CA 85;
"Intellectual Property" Patent Rights, Know How, Copyright, Trade
Marks, Software and IP Materials;
"Intellectual Property
Agreements" agreements or arrangements relating to
Intellectual Property owned, used or
exploited by the Company or any of the
Subsidiaries;
"IP Materials" all documents, records, tapes, discs,
diskettes and any other materials whatsoever
containing Copyright works, Know How or
Software;
"ITA" the Inheritance Tax Act 1984;
"Know How" trade secrets and confidential business
information including customer lists and
pricing policy; sales targets, sales
statistics, market share statistics,
marketing surveys and reports; marketing
research; unpatented technical and other
information including
-5-
<PAGE>
inventions, discoveries, processes and
procedures, ideas, concepts, formulae,
specifications, procedures for experiments
and tests and results of experimentation and
testing; information comprised in Software;
together with all common law or statutory
rights protecting the same including by any
action for breach of confidence and any
similar or analogous rights to any of the
foregoing whether arising or granted under
the law of England or any other
jurisdiction;
"Loan Notes" the (pound)850,000 nominal convertible
secured loan notes issued by the Company as
constituted by a deed dated 21st October
1996;
"Losses" actions, proceedings, losses, damages,
liabilities, claims, costs and expenses
including fines, penalties, clean-up costs,
legal and other professional fees;
"Management Accounts" the management accounts of the Company as
at, and for the nine month period ended on,
30 September 1997, a copy of which has been
signed for identification purposes on behalf
of the Vendors and the Purchaser;
"Nasdaq" the Nasdaq National Market System or the
Nasdaq Small Cap Market in the United
States;
"Offer Price" the price per share, at which shares of
common stock of the Purchaser are sold by
the Company pursuant to the Public Offering;
"Patent Rights" patent applications or patents, author
certificates, inventor certificates, utility
certificates, improvement patents and models
and certificates of addition including any
divisions, renewals, continuations,
refilings, confirmations-in-part,
substitutions, registrations, confirmations,
additions, extensions or reissues thereof
and any similar or analogous rights to any
of the foregoing whether arising or granted
under the law of England or any other
jurisdiction;
"Permits" any and all licences, consents, permits,
authorisations or the like, made or issued
pursuant to or under, or required by,
Environmental Laws in relation to the
carrying on of the Business at the Property;
"Preference Shares" the 'A' preference shares of (pound)1 each
and the 'B' preference shares of (pound)1
each in the capital of the Subsidiary;
"Proceedings" any proceeding, suit or action arising out
of or in connection with this Agreement;
"Properties" the properties of which short particulars
are set out in schedule 3 and the expression
"Property" shall mean,
-6-
<PAGE>
where the context so admits, any one or more
of such properties and any part or parts
thereof;
"Public Offering" the proposed initial public offering by the
Purchaser of shares of its common stock in
the United States
"Purchaser's Group" the Purchaser and its Affiliates;
"Purchaser's Solicitors" Cameron McKenna of Mitre House, 160
Aldersgate Street, London EC1A 4DD;
"Purchaser's Warranties" the warranties set out in clause 8 and
schedule 6;
"Remedial Action" (i) preventing, limiting, removing,
remedying, cleaning-up, abating, containing
or ameliorating the presence or effect of
any Hazardous Matter in the Environment
(including without limitation the
Environment at the Property and/or at the
Further Property) or (ii) carrying out
investigative work and obtaining legal and
other professional advice as is reasonably
required in relation to (i);
"RTPA" Restrictive Trade Practices Act 1976;
"Service Agreements" the service agreements to be entered into by
each of Peter Furlonge, Colin Kirven, John
Ablett and Marie Ridgeon and the Company in
the agreed terms;
"Service Document" a writ, summons, order, judgment or other
process issued out of the courts of England
and Wales in connection with any
Proceedings;
"SEC" the US Securities and Exchange Commission;
"Shares" together the A Ordinary Shares and the B
Ordinary Shares;
"Software" any and all computer programs in both source
and object code form, including all modules,
routines and sub-routines thereof and all
source and other preparatory materials,
relating thereto including user
requirements, functional specifications and
programming specifications, ideas,
principles, programming languages,
algorithms, flow charts, logic, logic
diagrams, orthographic representations, file
structures, coding sheets, coding and
including any manuals or other documentation
relating thereto and computer generated
works;
"SSAP" a statement of standard accounting practice
or financial reporting standard in force at
the date hereof as issued by the Institute
of Chartered Accountants in England and
Wales and adopted by the ASB as an
Accounting Standard;
"Stock Exchange" the London Stock Exchange Limited;
-7-
<PAGE>
"subsidiary" a subsidiary within the meaning ascribed to
such expression by sections 736 and 736A, CA
85;
"Subsidiary" the subsidiary of the Company named in part
2 of schedule 4;
"TA 88" the Income and Corporation Taxes Act 1988;
Taxation" (a) all forms of taxation including and
without any limitation any charge,
tax, duty, levy, impost, withholding
or related liability wherever
chargeable imposed for support of
national, state, federal, municipal
or local government and whether of
the UK or any other jurisdiction; and
(b) any penalty, fine, surcharge,
interest, charges or costs payable in
connection with any taxation within
(a) above;
"Taxation Authority" the Inland Revenue, Customs & Excise,
Department of Social Security and any other,
governmental, or other authority whatsoever
competent to impose any Taxation whether in
the United Kingdom or elsewhere;
"Taxation Statute" any directive, statute, enactment, law or
regulation wheresoever enacted or issued,
coming into force or entered into providing
for or imposing any Taxation and shall
include orders, regulations, instruments,
bye-laws or other subordinate legislation
made under the relevant statute or statutory
provision and any directive, statute,
enactment, law, order, regulation or
provision which amends, extends,
consolidates or replaces the same or which
has been amended, extended, consolidated or
replaced by the same;
"Tax Warranties" the warranties set out in part 2 of schedule
5;
"TCGA" the Taxation of Chargeable Gains Act 1992;
"TMA" the Taxes Management Act 1970;
"Trade Marks" trade or service mark applications or
registered trade or service marks,
registered protected designations of origin,
registered protected geographic origins,
refilings, renewals or reissues thereof,
unregistered trade or service marks, get up
and company names in each case with any and
all associated goodwill and all rights or
forms of protection of a similar or
analogous nature including rights which
protect goodwill whether arising or granted
under the law of England or of any other
jurisdiction;
"Trade Union" as defined in section 1, TULRCA;
-8-
<PAGE>
"TULRCA" the Trade Union and Labour Relations
(Consolidation) Act 1992;
"TUPE" the Transfer of Undertakings (Protection of
Employment) Regulations 1981;
"VAT" value added tax;
"VATA" the Value Added Tax Act 1983;
"Vendor's Accountants" Rothman Pantall of Bank House, 1-7 Sutton
Court Road, Sutton, Surrey;
"Vendors' Solicitors" Mundays of Crown House, Church Road,
Claygate, Esher, Surrey KT10 0LP;
"Vendors' Warranties" the warranties set out in clause 7 and
schedule 5;
"in the agreed terms" in the form agreed between the Vendors'
Solicitors and the Purchaser's Solicitors
and signed for the purposes of
identification by or on behalf of each
party.
1.2 Unless the context otherwise requires words denoting the singular shall
include the plural and vice versa, references to any gender shall include
all other genders and references to persons shall include bodies
corporate, unincorporated associations and partnerships in each case
whether or not having a separate legal personality. References to the
word "include" or "including" are to be construed without limitation.
1.3 References to recitals, schedules and clauses are to recitals and
schedules to and clauses of this Agreement, unless otherwise specified
and references within a schedule to paragraphs are to paragraphs of that
schedule unless otherwise specified.
1.4 References in this Agreement to any statute, statutory provision or EC
Directive include a reference to that statute, statutory provision or EC
Directive as amended, extended, consolidated or replaced from time to
time (whether before or after the date of this Agreement) and include any
order, regulation, instrument or other subordinate legislation made under
the relevant statute, statutory provision or EC Directive.
1.5 References to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or any
legal concept or thing shall in respect of any jurisdiction other than
England be deemed to include that which most approximates in that
jurisdiction to the English legal term.
1.6 Any reference to "writing" or "written" includes faxes and any
non-transitory form of visible reproduction of words.
1.7 References to the Vendors are to each of them severally.
1.8 In schedule 5, (save for paragraph 4.1), references to the Company shall
be deemed to include a corresponding reference to the Subsidiary to the
intent that (save as aforesaid) the Vendors' Warranties are given in
respect of the Subsidiary as well as the Company.
1.9 References to times of the day are to London time and references to a day
are to a period of 24 hours running from midnight to midnight.
-9-
<PAGE>
2. Condition
2.1 Subject to clause 2.3, this Agreement is subject to and conditional
upon:-
2.1.1 the closing of the Public Offering;
2.1.2 either: (a) the grant of a lease of the property situate at 29-33
Choumert Grove, London, SE15, 4RB to a company to be formed by the
Vendors and the grant of an underlease for a term of five years
from Completion to the Company; or (b) the grant to the Company of
a lease of the said property for a term of five years from the
date of Completion, and such underlease or lease as referred to in
sub-clauses (a) and (b) of this clause 2.1.2 shall be in the
agreed terms (subject to such variations as shall be agreed by the
parties hereto), provided that if an underlease is granted to the
Company the Company shall be under no obligation to the superior
landlord of the said property to observe and perform obligations
any more onerous then those contained in the underlease and shall
not be required to enter into any direct covenants with the
superior landlord and the Vendors hereby undertake (if such an
underlease is to be granted) to obtain by Completion the
unqualified consent and licence of the superior landlord to the
grant of such underlease and each of the parties hereto shall use
all reasonable endeavours to obtain by Completion an order of the
relevant County Court authorising the exclusion of the provisions
of sections 24 to 28 inclusive of the Landlord and Tenant Act 1954
in relation to the said lease or underlease;
2.1.3 each of the persons referred to in schedule 10 providing
certificates in the form requested by schedule 10 and a director
of the Company providing the certificates required on each Filing
Date pursuant to clause 7.9 (with the certificate to be provided
on the date of Completion to be in the same form as the
certificate provided on the date on which the Purchaser's
registration statement has declared effective);
2.1.4 the Preference Shares having been acquired by the Company for a
nominal sum and all dividends Disclosed as payable in respect of
such shares having been paid;
2.1.5 the termination of service agreements or consultancy agreements
with Peter Furlonge, Ralph Elman and George Harvey without any
payment of compensation other than payments in accordance with the
terms of such agreements as Disclosed, and each such person having
confirmed that they have no outstanding claims against the
Company;
2.1.6 the repayment to David Boulton (together with all accrued interest
thereon) of all amounts outstanding on the loan notes issued to
him by the Company in October 1996;
2.1.7 the production to the Purchaser of evidence reasonably
satisfactory to the Purchaser that the matters identified in the
report of BPIF dated 8 January 1998 have been corrected at a cost
to the Group not exceeding (pound)5,000.
2.2 If the conditions in clause 2.1 have not been fulfilled or waived by 30
April 1998 (or by such later date as may be agreed in writing between the
Vendors and the Purchaser):
2.2.1 this Agreement (except for clauses 1, 2, 16 and 21) shall
thereupon become null and void; and
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<PAGE>
2.2.2 none of the parties shall have any rights against any other party
hereunder except in respect of any antecedent breach of any of the
provisions of this agreement listed in clause 2.3.
2.3 Notwithstanding clause 2.1, clauses 2, 3, 4.4, 5.1, 5.7, 6, 7, 8, 9, 10,
12, 15, 16, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 and 29 inclusive
shall come into force on the execution and exchange of this agreement and
the remainder of this agreement shall come into force on the fulfilment
and/or waiver of all conditions stated in clause 2.1, provided that the
Vendor shall have no liability in respect of the Vendor's Warranties, and
the Purchaser shall have no liability in respect of the Purchaser's
Warranties, if Completion does not occur.
2.4 The Vendors shall procure that, in fulfilling the conditions set out in
clauses 2.1.2, 2.1.4, 2.1.5, 2.1.6 and 2.1.7, the Company and the
Subsidiary shall incur no cost, expense or liability save as expressly
envisaged therein, any cost, expense or liability not so envisaged
(including any liability to the landlord of 29-33 Choumert Grove, London
SE15 in respect of the period prior to Completion save for rent and other
normal outgoings payable in accordance with the terms of the draft lease
disclosed to the Vendor and payments in respect of dilapidations not
exceeding (pound)12,300) being an "Unanticipated Liability". The Vendors
shall use all reasonable endeavours (without incurring undue expense) to
procure that each of such conditions is satisfied.
3. Sale and purchase
3.1 Subject to the terms of this Agreement, each of the Vendors shall
severally sell with full title guarantee, that number of Shares set
opposite his name in column (2) of schedule 1 and the Purchaser shall
purchase such shares together with all rights attaching thereto as at
Completion.
3.2 The Purchaser shall be entitled to receive all dividends and
distributions declared, paid or made by the Company with effect from
Completion.
3.3 The Purchaser shall not be obliged to complete the purchase of any of the
Shares unless the purchase of all the Shares is completed simultaneously.
4. Consideration
4.1 The consideration for the sale of the Shares shall be the sum of
USD8,147,500 (Eight million one hundred and forty six thousand five
hundred US dollars) to be satisfied:
4.1.1 by the issue to the Vendors of the Consideration Shares (credited
as fully paid); and
4.1.2 as to the balance of the consideration (being the sum of
USD8,147,500 less an amount equal to the Offer Price multiplied by
the number of Consideration Shares), by a payment in cash to the
Vendors.
4.2 The total consideration receivable by each Vendor, and the number of
Consideration Shares to be issued pursuant to clause 4.1.1 to each
Vendor, shall be as set opposite their respective names in columns 3 and
4 of schedule 1. The cash sum payable to each Vendor pursuant to clause
4.1.2 shall be his total consideration as set out in column 3 of schedule
1 less the value, at the Offer Price, of the Consideration Shares to be
issued to him as set out in column 4 of schedule 1.
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<PAGE>
4.3 Any payment made by the Vendors in respect of a breach of any of the
Vendors' Warranties or payment under the Deed of Tax Covenant or
otherwise under clause 11 shall be and shall be deemed to be pro tanto a
reduction in the price paid for the Shares under this Agreement.
4.4 Each of the Vendors hereby waives all rights of pre-emption or other
rights over any of the Shares conferred on him either by the articles of
association of the Company or in any other way.
5. Completion
5.1 Subject as provided in clause 5.4, Completion shall take place at the
offices of the Purchaser's Solicitors (or as otherwise agreed between the
parties) immediately following fulfilment of the Conditions or at such
other place and/or on such other date as may be agreed in writing between
the Purchaser and the Vendors time being of the essence.
5.2 At Completion:-
5.2.1 the Vendors shall deliver to the Purchaser each of the documents
listed in part 1 of schedule 7;
5.2.2 the Vendors shall procure that all necessary steps are taken
properly to effect the matters listed in part 2 of schedule 7 by
resolutions of the Board of Directors of the Company and the
Subsidiary and shall deliver to the Purchaser duly signed written
resolutions or Board Minutes as appropriate.
5.3 Subject to the Vendors complying with their obligations under clause 5.2
the Purchaser shall at Completion:-
5.3.1 pay the cash element of the consideration for the Shares (being
the sum payable pursuant to clause 4.1.2) (less the amounts to be
deducted and paid pursuant to clause 11.1) by way of electronic
transfer for same day value to such account as may be notified to
the Purchaser by the Vendors at least 3 business days prior to
Completion, and payment to such account shall be an effective
discharge of the Purchaser's obligation to pay such sum and the
Purchaser shall not be concerned to see to the application or be
answerable for the loss or misapplication of such sums;
5.3.2 deliver to the Vendors a counterpart Deed of Tax Covenant duly
executed by the Purchaser;
5.3.3 deliver to Peter Furlonge, Colin Kirven, John Ablett and Marie
Ridgeon a counterpart Service Agreement duly executed by the
Company;
5.3.4 cause a board meeting or a meeting of a duly authorised committee
of the Purchaser to be held at which the Consideration Shares
shall be issued to the relevant Vendors, or to such persons as the
Vendors shall direct, in accordance with clause 4, credited as
fully paid up, and the Vendors entered in the register of members
as the holders thereof and the Purchaser shall cause to be
delivered to the Vendors' Solicitors definitive certificates in
respect of the Consideration Shares.
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5.4 If in any respect material to the Purchaser the provisions of clause 5.2
and schedule 7 are not complied with on the date of Completion applicable
under clause 5.1, the Purchaser shall not be obliged to complete this
Agreement and may:-
5.4.1 defer Completion to a date not more than twenty-eight days after
the date set by clause 5.1 (and so that the provisions of this
clause 5.4 shall apply to Completion as so deferred); or
5.4.2 proceed to Completion so far as practicable and without prejudice
to its rights under this Agreement; or
5.4.3 rescind this Agreement without prejudice to its rights and
remedies under this Agreement; or
5.4.4 waive all or any of the requirements contained in clause 5.2 at
its discretion.
5.5 If on or prior to Completion the Purchaser becomes aware that either the
revenues or the post-tax profits (having added back any provision for
taxation relating to the payment of (pound)200,000 to Mr Boulton's
pension scheme in October 1996) of the Company for the five month period
from 1 October 1997 to 28 February 1998 (inclusive) are at least 17.5%
less than the amount projected for revenues or (as the case may be)
post-tax profits for such five month period (as contained in the
Projections in the agreed terms), the Purchaser shall not be obliged to
complete this Agreement and may rescind this Agreement.
5.6 The Vendors shall indemnify the Purchaser and keep the Purchaser
indemnified against any Losses it may suffer or incur as a result of any
document delivered to it pursuant to this clause 5 or schedule 7 being
unauthorised, invalid or for any other reason ineffective for its
purpose.
5.7 The Purchaser shall give to the Vendors as much advance notice of the
date on which the Public Offering is expected to close as is practicable.
A pre-closing meeting shall be held on such date (not being earlier than
7 days prior to the expected closing date) as the Purchaser may request
by not less than 2 business days' notice in order to demonstrate to the
reasonable satisfaction of the Purchaser that the Conditions (other than
the condition relating to the Public Offering) and the obligations at
Completion of the Vendors have been or will at Completion be fulfilled.
6. Conduct of Business pending Completion
6.1 Each of the Vendors hereby undertakes to the Purchaser that in the period
prior to Completion:-
6.1.1 the Business will be carried on as a going concern in the normal
course;
6.1.2 no physical assets of the Company or of the Subsidiary shall be
removed from any of the Properties save in the ordinary course of
normal day to day trading;
6.1.3 they will use their best endeavours to maintain the trade and
trade connections of the Group;
6.1.4 all debts which the Company or the Subsidiary incurs in the normal
course of the business will be settled within the usual periods of
credit normally taken by the Company;
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6.1.5 it shall promptly give to the Purchaser full details of any
material changes in the Business, financial position and/or assets
of the Group;
6.1.6 the Company and the Subsidiary shall maintain in force policies of
insurance with limits of indemnity at least equal to, and
otherwise on terms no less favourable than, those policies of
insurance currently maintained by the Company and the Subsidiary;
6.1.7 neither the Company nor the Subsidiary shall:-
(a) enter into, modify or agree to terminate any contract, lease
or long term commitment (other than in the ordinary course of
business or as envisaged by the Company's existing budget)
which involves expenditure in money or money's worth in excess
of (pound)25,000 on any such individual contract, lease or
long-term commitment;
(b) incur any capital expenditure (other than expenditure
envisaged by the Company's existing budget) in excess of
(pound)25,000 on any individual item;
(c) appoint or employ any new employees at an annual salary or
rate of remuneration in excess of (pound)50,000 or appoint any
new consultants whatsoever or revise any existing arrangements
with consultants already appointed by the Company;
(d) alter materially, or agree to alter materially, the terms and
conditions of employment (including benefits) of any of its
employees, and no Vendor shall induce or endeavour to induce
any of such employees to terminate their employment prior to
Completion;
(e) dispose of any material assets used or required for the
operation of the Business (otherwise than in the ordinary
course of business) or enter into any other transaction
otherwise than in the ordinary course of business;
(f) create any Encumbrance over its assets or undertaking nor,
otherwise than in the ordinary course of the Business, give
any guarantees or indemnities in respect of any third party;
(g) institute, settle or agree to settle any legal proceedings
relating to the Business, save for debt collection in the
ordinary course of business;
(h) pay any fee or other amount to any Vendor, save for salary,
related benefits and other payments made in accordance with
existing contractual agreements which have been Disclosed;
(i) incur any liabilities to any Vendor and no Vendor shall incur
any liabilities to the Company or the Subsidiary, other than
liabilities incurred in the ordinary course of trading
pursuant to existing contractual agreements which have been
Disclosed;
provided that the Vendors and the Group shall be entitled to do
any of the things specified in this clause 6.1 with the prior
written consent of the Purchaser such consent not to be
unreasonably withheld or delayed and provided further that if
within 14 days of being required to give its written consent in
respect of any matters specified in clauses 6.1.7(a) and 6.1.7(b)
the
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Purchaser does not notify the Vendors in writing of its
disagreement to such matters, the Purchaser shall be deemed to
have consented to the Vendors undertaking such matters.
6.2 The Vendors shall:-
6.2.1 procure that in the period prior to Completion the Company and the
Subsidiary shall provide the Purchaser and its representatives
with full access to all records of the Business (and to such other
information and records as the Purchaser may reasonably require in
connection with the Public Offering); and
6.2.2 procure the Vendor's solicitors and the Vendor's Accountants to
co-operate with the Purchaser and to provide such information to
the Purchaser as may be reasonably requested it being acknowledged
that the Purchaser will be required by the rules of the SEC to
incorporate information regarding the Company, the Subsidiary and
the Business in any registration statement(s) or prospectus(es)
filed or published in connection with the Public Offering.
Any costs incurred by the Company in connection with clause 6.2.2 shall
be disregarded for all purposes related to the Vendors' Warranties and
for purposes of the calculations for clause 5.5.
6.3 Each Vendor shall provide the Purchaser with such information as it may
reasonably require from such Vendor to satisfy legal or regulatory
requirements for inclusion in any such registration statement(s) or
prospectus(es) to be filed or published by the Purchaser.
6.4 The Vendors shall appoint, with effect from such date as may be specified
by the Purchaser until Completion or earlier termination of this
Agreement, such person as may be nominated by the Purchaser to act as an
additional accountant of the Company (the "Financial Accountant"). The
Purchaser shall procure that the Financial Accountant shall remain the
employee of the Purchaser during such period, and all reasonable costs
incurred by the Company in connection with the employment of the
Financial Accountant shall be met in full by the Purchaser.
6.5 The Vendors shall procure that the Group shall use all reasonable
endeavours to correct the issues referred to in clause 2.1.7 as soon as
practicable after the date hereof.
7. Vendors' Warranties
7.1 In consideration of the Purchaser agreeing to purchase the Shares on the
terms contained in this Agreement each of the Vendors hereby severally:-
7.1.1 in relation to the Company and the Subsidiary warrants, represents
and undertakes to the Purchaser (contracting for itself and as
trustee for any successor in title to the Shares) in the terms set
out in schedule 5;
7.1.2 undertakes so far as he is able that (save only as may be
necessary to give effect to this Agreement) he shall not, and
shall procure (as far as they can) that the Company and the
Subsidiary shall not, prior to Completion, do any act or thing or
omit to do any act or thing the commission or omission of which
would constitute a breach of any of the Vendors' Warranties if
they were given at Completion or which would make any of the
Vendors' Warranties untrue or inaccurate or misleading if they
were so given on the
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basis that a reference to the actual time of Completion were
substituted for any express or implied reference to the time of
this Agreement, provided that no Vendor shall be required to
prevent any Director of the Company or the Subsidiary from
performing properly his obligations as a Director of such company;
7.1.3 further undertakes to the Purchaser that upon his becoming aware
prior to Completion of the impending or threatened occurrence or
non-occurrence of any matter event or circumstance (including any
omission to act) which would or might reasonably be expected to
cause or constitute a breach (or which would have caused or
constituted a breach had such event occurred or been know to any
of them prior to the date of this Agreement) of any of the
Vendors' Warranties or which would or might make any of the
Vendors' Warranties inaccurate or misleading or which would or
might give rise to a claim under the Deed of Tax Covenant (whether
or not then executed) he will promptly given written notice of
such event to the Purchaser and if so requested by the Purchaser
use his reasonable endeavours promptly to prevent or remedy the
same if:-
(a) the event in question could not reasonably have been avoided
or prevented by the Vendors or any of them; and
(b) the occurrence of the event in question was duly notified in
accordance with the foregoing provisions of this clause 7.1.3.
7.1.4 warrants, represents and undertakes to the Purchaser (contracting
for itself and as trustee for any successor in title to the
Shares) that as at each Filing Date, the factual or historical
information relating to the Company and the Subsidiary as set out
in the Agreed Extracts will be accurate in all material respects
and will not omit to state any material fact necessary in order to
make any of such information not misleading.
7.2 Where any of the Vendors' Warranties are made or given "so far as the
Vendors are aware", the knowledge, information and belief of each of the
Vendors and the knowledge, information and belief of any one of the
Vendors shall be imputed to the remaining Vendors.
7.3 None of the Vendors' Warranties or the Deed of Tax Covenant shall be
deemed in any way modified or discharged by reason of any investigation
or inquiry made or to be made by or on behalf of the Purchaser, and no
information relating to the Company or to the Subsidiary of which the
Purchaser has knowledge (actual or constructive) other than by reason of
its being Disclosed shall prejudice any claim which the Purchaser shall
be entitled to bring or shall operate to reduce any amount recoverable by
the Purchaser under this Agreement. The benefit conferred upon the
Purchaser by the foregoing provisions of this clause shall be deemed to
be also conferred upon the Company and upon the Subsidiary.
7.4 Any information supplied by or on behalf of the Company or on behalf of
the Subsidiary (or by any officer, employee or agent of any of them) to
the Vendors or their advisers in connection with the Vendors' Warranties,
the Deed of Tax Covenant or the information Disclosed in the Disclosure
Documents shall not constitute a warranty, representation or guarantee as
to the accuracy of such information in favour of the Vendors and the
Vendors hereby undertake to the Purchaser to waive any and all claims
which they might otherwise have against the Company or the Subsidiary or
against any officer, employee or agent of any of them in respect of such
claims but so
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that this shall not preclude any Vendor from claiming against any other
Vendor under any right of contribution or indemnity to which he may be
entitled.
7.5 Each of the Vendors' Warranties set out in the separate paragraphs of
schedule 5 shall be separate and independent and save as expressly
otherwise provided shall not be limited by reference to any other such
Warranty.
7.6 The Purchaser has entered into this Agreement upon the basis of and in
reliance upon the Vendors' Warranties and the same together with any
provision of this Agreement or the Deed of Tax Covenant when executed
which shall not have been fully performed at Completion shall remain in
force notwithstanding that Completion shall have taken place.
7.7 If it is found on or prior to Completion that any of the Vendors'
Warranties as given pursuant to clause 7.1.1 (but subject to paragraph
2.1 of schedule 8) are in any material respect untrue, misleading,
incorrect or unfulfilled or if the Purchaser becomes aware of any
material matter or thing which is inconsistent with the same (each, a
"Material Claim") or that the Vendors are in material breach of any other
term of this Agreement which is material in the context of this sale
(including without limitation the provisions of clause 6.1), the
Purchaser shall be entitled by notice in writing to the Vendors to
rescind this Agreement at any time prior to Completion but failure by the
Purchaser to exercise this right shall not constitute a waiver of any
such Material Claim or any other rights of the Purchaser arising by
reason of any breach of any Vendors' Warranty provided that if the amount
of such Material Claim or Claims exceeds (pound)500,000, the Vendors
shall be entitled by notice in writing to the Purchaser to rescind this
Agreement.
7.8 If it is found on or prior to Completion that any of the Vendors'
Warranties, if given on the basis set out in clause 7.1.2, would be in
any material respect untrue, misleading, incorrect or unfulfilled or if
the Purchaser becomes aware of any material matter or thing which would
be inconsistent with the same if given on such basis, and that such
matter or thing does not constitute a Material Claim (a "Subsequent
Claim"), the Purchaser shall be entitled by notice in writing to the
Vendors to rescind this Agreement at any time prior to Completion
provided that failure by the Purchaser to exercise this right shall
constitute a waiver of any other rights of the Purchaser arising by
reason of any such Subsequent Claim.
7.9 For the purposes of clause 7.1.4:
(a) the Purchaser undertakes to provide the directors of the Company
(on behalf of the Vendors) with an appropriate opportunity to
review in draft form those sections of any registration statement
(or any amendment thereto) which contain information relating to
the Company and the Subsidiary, and to make such amendments to
those sections as such directors may reasonably require;
(b) the Vendors undertake to provide comments on such draft sections
promptly after receipt thereof;
(c) for purposes of identification, a director of the Company shall on
each Filing Date deliver a certificate in the agreed terms
attaching such sections (incorporating any such amendments) and
confirming their accuracy, and such sections shall constitute the
"Agreed Extracts".
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<PAGE>
8. Purchaser's Warranties and Undertakings
8.1 As an inducement for the Vendors to enter into this Agreement, the
Purchaser represents, warrants to and undertakes to the Vendors in the
terms set out in schedule 6.
8.2 If it is found on or prior to Completion that any of the Purchaser's
Warranties are in any material respect untrue, misleading, incorrect or
unfulfilled or if the Vendors become aware of any material matter or
thing which is inconsistent with the same or that the Purchaser is in
material breach of any other term of this Agreement which is material in
the context of this sale, the Vendors shall be entitled collectively by
notice in writing to the Purchaser to rescind this Agreement at any time
prior to Completion but failure to exercise this right shall not
constitute a waiver of the Vendors rights in respect thereof or any other
rights of the Vendors arising by reason of any breach of any Purchaser's
Warranty, provided that if the amount of the Vendor's claim in respect of
such matters exceeds (pound)500,000, the Purchaser shall be entitled by
notice in writing to rescind this Agreement.
8.3 If it is found on or prior to Completion that any of the Purchaser's
Warranties, if given as at Completion, would be in any material respect
untrue, misleading, incorrect or unfulfilled or if the Vendors become
aware of any material matter or thing which would be inconsistent with
the same if given on such basis and that such matter or thing does not
fall within Clause 8.2, the Vendors shall be entitled by notice in
writing to the Purchaser to rescind this Agreement at any time prior to
Completion provided that failure by the Vendors to exercise this right
shall constitute a waiver of any other rights of the Vendors arising by
reason of any such matter.
8.4 If any claim is made against any of the Vendors under s.135 Finance Act
1994 or any subsequent amending legislation or otherwise the Purchaser
shall indemnify and keep indemnified the Vendors against any costs claims
demands taxation penalties fines or otherwise in relation to such claim.
8.5 As at the date hereof the Purchaser (for itself and its advisors) hereby
confirms that, after review of the Disclosure Documents, it is not
actually aware of any breach of any of the Vendors' Warranties or of
grounds to make a claim under the Vendors' Warranties.
9. Limitation of Vendors' Liability
9.1 The liability of the Vendors:-
9.1.1 in respect of any claim under the Vendors' Warranties save for the
Tax Warranties shall be limited as provided in parts 1 and 2 of
schedule 8; and
9.1.2 in respect of any claim under the Tax Warranties shall be limited
as provided in parts 1 and 3 of schedule 8.
9.2 Notwithstanding any other provisions of this Agreement, the provisions of
this clause 9 and schedule 8 (other than paragraph 3.1 of schedule 8)
shall not apply to any claim made against the Vendors in the case of any
knowing misstatement, knowing omission, fraud or dishonesty by or on
behalf of all or any of the Vendors provided that each Vendor shall be
solely responsible for his own fraudulent, dishonest acts or omissions or
knowing misstatements or omissions.
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<PAGE>
9.3 The rights of the Purchaser in respect of a breach of any of the Vendors'
Warranties shall not be affected by Completion.
10. Limitation of Purchaser's Liability
10.1 The liability of the Purchaser in respect of any claim under the
Purchaser's Warranties shall be limited as provided in schedule 9;
10.2 Notwithstanding any other provision of this Agreement, the provisions of
this clause 10 and schedule 9 shall not apply to any claim made against the
Purchaser in the case of any fraud, dishonesty, knowing misstatement or
knowing omission by or on behalf of the Purchaser.
10.3 The rights of the Vendors in respect of a breach of any of the
Purchaser's Warranties shall not be affected by Completion.
11. Retention
11.1 Each Vendor undertakes to the Purchaser that the amount specified against
their name in column 6 of schedule 1, being part of the consideration
which he receives pursuant to clause 4, shall be placed in a deposit
account especially established for the purposes of this clause 11.1 in
the joint names of the Purchaser's Solicitors and the Vendor's Solicitors
(the "Retention Account"). The Purchaser shall accordingly deduct from
the consideration otherwise payable by it at Completion such amount in US
dollars as is necessary at then current exchange rates to make such
payment into such Account, and shall deposit it accordingly . The sum so
deposited shall not be withdrawn from the Retention Account or used for
any other purpose until the expiry of the first anniversary of this
Agreement. Upon the first anniversary of this Agreement, each of the
Vendors shall be entitled to receive their Agreed Proportion of the
monies in the Retention Account unless any Retention Claims have been
made by the Purchaser prior to that date in which event an amount not
exceeding the amount of any such Retention Claims shall be retained in
the Retention Account until such Retention Claims are agreed or adjudged
(whether by determination by the Court or agreement by the parties). As
and when the amount of any such Retention Claim is finally agreed or
adjudged, the relevant amount shall be paid to the Purchaser. The balance
of the moneys held in the Retention Account shall be released to the
Vendors in the Agreed Proportions to the extent that the same are not
required in relation to outstanding Retention Claims. Any interest
accruing or monies in the Retention Account shall be apportioned in the
same manner as the principal to which it relates and shall be paid to the
relevant Vendor and/or Purchaser at the time at which it receives such
principal sum from the Retention Account.
11.2 For purposes of this Clause 11:
11.2.1 the "Agreed Proportion" of any Vendor is the proportion which his
initial deposit into the Retention Account bears to the aggregate
of all moneys so deposited; and
11.2.2 a "Retention Claim" means any Claim, any claim under the Deed of
Tax Covenant or any claim under the covenant in clause 11.3 below.
11.3 Each Vendor covenants to pay to the Purchaser on demand an amount equal
to its Agreed Proportion of:
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(a) any liability on the part of the Company or the Subsidiary in respect
of dilapidations in respect of the Railway Arch, 3 Bermondsey Trading
Estate to the extent that such liability exceeds (pound)1,000;
(b) any Unanticipated Liability (as defined in clause 2.4 above);
(c) any liability on the part of the Company or the Subsidiary arising out
of:
(i) the discharge (at any time prior to Completion) of waste water
into surface water or foul water sewage systems to the extent
that such discharge has been made otherwise than in compliance
with applicable Environmental Laws;
(ii) any failure on the part of the Company (at any time prior to
Completion) to comply with the Control of Substances Hazardous to
Health Regulations 1994;
(d) any liability on the part of the Company or the Subsidiary to Dawnay
Day Corporate Finance Limited incurred since 31st December 1996 and up
to Completion;
(e) any liability which has been or may be incurred by the Company in
connection with the occupation by Redex of the Company's premises at
Unit 9, Print Village;
and any reference in this clause 11.3 to a liability shall extend to any
liability, loss or expense (including reasonable legal expenses) provided
that such liability shall be reduced by the amount of any tax credit
arising to the Company or the Subsidiary by reason of such liability.
11.4 At Completion, each of the Vendors and the Purchaser shall enter into the
Escrow Agreement, and use reasonable endeavours to require their
respective solicitors also to enter into it.
12. Protection of goodwill
12.1 As further consideration for the Purchaser agreeing to purchase the
Shares on the terms contained in this Agreement and with the intent of
assuring to the Purchaser the full benefit and value of the goodwill and
connections of the Group each of Peter Furlonge and George Harvey hereby
undertakes (binding himself and each of his Affiliates) to the Purchaser
(contracting for itself and on behalf of the Company and of each of the
Subsidiaries and for any successor in title to the Shares or to part or
all of the Business) that (except as directors or employees of the
Purchaser, the Company or of any of the Subsidiaries or with the written
consent of the Purchaser) neither he nor his Affiliates shall whether on
their own behalf or with or on behalf of any person and whether directly
or indirectly by any or person or business controlled by him or any
Connected Person:-
12.1.1 for a period of three years from Completion carry on or be
employed, engaged, concerned, interested or in any way assist
within the United Kingdom in any business which may in any way be
in competition with the Business provided that nothing in this
clause 12.1.1 shall prevent such Vendors nor any of their
Affiliates or Connected Persons from holding for investment
purposes only any units of an authorised unit trust and/or not
more than three per cent of any class of the issued share or loan
capital of
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any company quoted on a recognised investment exchange (as defined
in the Financial Services Act 1986);
12.1.2 for a period of three years from Completion canvass, solicit or
approach or cause to be canvassed, solicited or approached (in
relation to a business which may in any way compete with the
Business) the custom of any person who at any time during the
twelve months preceding Completion shall have been a client or
customer of the Company or of any of the Subsidiaries;
12.1.3 for a period of three years from Completion interfere or seek to
interfere or take such steps as may interfere with supplies to the
Company and/or any of the Subsidiaries from any suppliers who have
been supplying goods or services to the Company or to any of the
Subsidiaries for use in connection with the Business at any time
during the period of twelve months prior to the date of
Completion;
12.1.4 for a period of three years from Completion offer employment to or
employ or offer to conclude any contract of services with
employees of the Company or of any of the Subsidiaries or procure
or facilitate the making of such an offer by any person, firm or
company or entice or endeavour to entice any employees of the
Company or of any of the Subsidiaries to terminate their
employment with the Company or any of the Subsidiaries;
12.1.5 at any time after Completion use as a trade or business name or
mark or carry on a business under a title containing the word(s)
"Roda" or any other word(s) colourably resembling the same; or
12.1.6 at any time after Completion disclose to any person whatsoever or
use to the detriment of the Company or any Subsidiary or otherwise
make use of, or through any failure to exercise all due care and
diligence cause any unauthorised use of, any Confidential
Information including Know How relating or belonging to the
Company or to any of the Subsidiaries or in respect of which the
Company or any of the Subsidiaries is bound by an obligation of
confidence to a third party save as required by the Stock Exchange
or by law or by any court of competent jurisdiction provided that
such restriction shall not extend to any confidential or secret
information which may come into the public domain otherwise than
through the default of the Vendor.
Each undertaking contained in this clause 12.1 shall be read and
construed independently of the other undertakings herein as an entirely
separate and severable undertaking.
12.2 In respect of Peter Furlonge, the restricted periods contained in clauses
12.1.1 to 12.1.4 shall be substituted by the following restricted
periods:-
12.2.1 in the event that Peter Furlonge's employment under his Service
Agreement (as amended from time to time) is terminated by reason
of the Company serving notice on Peter Furlonge (otherwise than a
notice to terminate in circumstances entitling the Company to
terminate summarily), the restricted period shall be three years
from Completion, and
12.2.2 in all other circumstances, the restricted period shall be five
years from Completion.
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12.3 Notwithstanding the provisions of clause 12.2, Peter Furlonge shall, if
he has ceased to be an employee of the Company in the circumstances set
out in clause 12.2.1 and a period of at least two years has elapsed from
Completion be entitled to seek the written consent of the Purchaser to
carry on or be employed, engaged, concerned, interested or in any way
assist within the United Kingdom in any business which may in any way be
in competition with the Business and such consent shall not be
unreasonably withheld or delayed.
12.4 As further consideration for the Purchaser agreeing to purchase the
Shares on the terms contained in this Agreement and with the intent of
assuring to the Purchaser the full benefit and value of the goodwill and
connections of the Group Ralph Elman hereby undertakes to the Purchaser
(contracting for itself and on behalf of the Company and of each of the
Subsidiaries and for any successor in title to the Shares or to part or
all of the Business) that he will not directly or indirectly:
12.4.1 for the period of twelve months after Completion hold any interest
in any business which is or shall be wholly or partly in
competition with the Business;
12.4.2 for the period of twelve months after Completion seek or accept in
any capacity whatsoever orders for products or services similar to
those provided by the Company or the Subsidiary at any time during
the period of twelve months prior to such termination: or
12.4.3 for the period of twelve months after Completion solicit or seek
to entice away from the Company or the Subsidiary any person who
is at the date of termination employed by the Company or the
Subsidiary as a Director, Manager or Sales Person;
12.4.4 at any time after Completion disclose to any person whatsoever or
use to the detriment of the Company or any Subsidiary or otherwise
make use of, or through any failure to exercise all due care and
diligence cause any unauthorised use of, any Confidential
Information including Know How relating or belonging to the
Company or to any of the Subsidiaries or in respect of which the
Company or any of the Subsidiaries is bound by an obligation of
confidence to a third party save as required by the Stock Exchange
or by law or by any court of competent jurisdiction provided that
such restriction shall not extend to any confidential or secret
information which may come into the public domain otherwise than
through the default of the Vendor.
Each undertaking contained in this clause 12.4 shall be read and
construed independently of the other undertakings herein as an entirely
separate and severable undertaking.
12.5 As further consideration for the Purchaser agreeing to purchase the
Shares on the terms contained in this Agreement and with the intent of
assuring to the Purchaser the full benefit and value of the goodwill and
connections of the Group each of the Vendors (other than Peter Furlonge,
George Harvey and Ralph Elman) hereby undertakes (binding himself and
each of his Affiliates who is a director of the Company) to the Purchaser
(contracting for itself and on behalf of the Company and of each of the
Subsidiaries and for any successor in title to the Shares or to part or
all of the Business) that (except as directors or employees of the
Purchaser, the Company or of any of the Subsidiaries or with the written
consent of the Purchaser) neither he nor such Affiliates (if any) shall:-
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12.5.1 for a period of three years from Completion become a director of,
or undertake any other direct personal involvement in the
management of, any business in the United Kingdom which is in
competition with the Business;
12.5.2 for a period of three years from Completion canvass, solicit or
approach or cause to be canvassed, solicited or approached (in
relation to a business which may in any way compete with the
Business) the custom of any person who at any time during the
twelve months preceding Completion shall have been a client or
customer of the Company or of any of the Subsidiaries;
12.5.3 for a period of three years from Completion interfere or seek to
interfere or take such steps as may interfere with supplies to the
Company and/or any of the Subsidiaries from any suppliers who have
been supplying goods or services to the Company or to any of the
Subsidiaries for use in connection with the Business at any time
during the period of twelve months prior to the date of
Completion;
12.5.4 for a period of three years from Completion offer employment to or
employ or offer to conclude any contract of services with
employees of the Company or of any of the Subsidiaries or procure
or facilitate the making of such an offer by any person, firm or
company or entice or endeavour to entice any employees of the
Company or of any of the Subsidiaries to terminate their
employment with the Company or any of the Subsidiaries;
12.5.5 at any time after Completion use as a trade or business name or
mark or carry on a business under a title containing the word(s)
"Roda" or any other word(s) colourably resembling the same; or
12.5.6 at any time after Completion disclose to any person whatsoever or
use to the detriment of the Company or any Subsidiary or otherwise
make use of, or through any failure to exercise all due care and
diligence cause any unauthorised use of, any Confidential
Information including Know How relating or belonging to the
Company or to any of the Subsidiaries or in respect of which the
Company or any of the Subsidiaries is bound by an obligation of
confidence to a third party save as required by the Stock Exchange
or by law or by any court of competent jurisdiction provided that
such restriction shall not extend to any confidential or secret
information which may come into the public domain otherwise than
through the default of the Vendor.
Each undertaking contained in this clause 12.5 shall be read and
construed independently of the other undertakings herein as an entirely
separate and severable undertaking.
12.6 Whilst the undertakings in this clause 12 are considered by the parties
to be reasonable in all the circumstances, if any one or more should for
any reason be held to be invalid but would have been held to be valid if
part of the wording thereof was deleted or the period thereof reduced or
the range of activities or area covered thereby reduced in scope, the
said undertakings shall apply with such modifications as may be necessary
to make them valid and effective.
13. Loan Notes
13.1 Each of the Vendors hereby undertakes to the Purchaser (to the extent
such Vendor holds Loan Notes) that it shall not in the period prior to
Completion nor in the period
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<PAGE>
following Completion as specified in Clause 13.2 transfer, convert or
redeem its Loan Notes (whether in whole or part); and agrees to waive
(and to the extent received, to repay) any sums paid or payable by way of
default interest in respect of interest on the Loan Notes not paid on the
due date.
13.2 The Purchaser agrees that it shall procure that within 28 days from the
date of Completion the Company shall redeem at par (together with accrued
interest) all the Loan Notes held by the Vendors as set opposite their
respective names in column 5 of schedule 1.
14. Power of Attorney
Each of the Vendors hereby, with effect from Completion, irrevocably and
unconditionally appoint the Purchaser or any director of the Purchaser as
the Purchaser shall direct as the attorney of such Vendor with full
powers of substitution in such Vendor's name and on behalf of such Vendor
(and to the complete exclusion of any rights such Vendor may have in such
regard) lawfully to exercise all voting and other rights and receive all
benefits and entitlements which at any time after Completion attach to
the Shares of which such Vendor is the registered holder and to transfer
and deal with such Shares and such rights, benefits and entitlements and
execute such documents under hand or under seal and do such acts and
things in connection with the foregoing as the Purchaser shall from time
to time fit in all respects as if the Purchaser were the absolute legal
and beneficial owner thereof, provided that such power of attorney shall
terminate upon registration of the shares in the name of the Purchaser or
its nominee and the Purchaser shall use all reasonable endeavours to
effect such registration promptly after Completion.
15. RTPA
15.1 If there is any provision of this Agreement, or of any agreement or
arrangement of which this agreement forms part, which causes or would
cause this Agreement or that agreement or arrangement to be subject to
registration under the RTPA, then that provision shall not take effect
until the day after particulars of this Agreement or of that agreement or
arrangement (as the case may be) have been furnished to the Director
General of Fair Trading pursuant to section 24, RTPA.
15.2 The Purchaser undertakes to furnish such particulars as are referred to
in clause 15.1 as soon as is reasonably practicable after the date of
this Agreement and within the time limits specified in the RTPA.
16. Announcements
16.1 No press conference, announcement or other communication concerning
Confidential Information or the transactions referred to in this
Agreement, or in connection with the Purchaser or otherwise relating to
the financial condition or trading or financial prospects of the
Purchaser, shall be made or despatched by the Vendors or their agents,
employees or advisers to any third party without the prior written
consent of the Purchaser save as may be required by any:-
16.1.1 law;
16.1.2 existing contractual arrangements; or
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<PAGE>
16.1.3 the Stock Exchange or the Panel on Takeovers and Mergers or any
other applicable regulatory authority within England or any other
jurisdiction to which the Vendors or the Purchaser (as the case
may be) are subject where such requirement has the force of law
provided such communication shall be made only after consultation with
the other party. The Purchaser hereby consents to notification of the
sale of the Company to the employees, suppliers and customers of the
Business in the agreed terms
16.2 The restrictions contained in this clause shall continue to apply after
Completion without limit in time.
16.3 Without prejudice to the provisions of clause 6.2, the Purchaser and each
of the Vendors undertake to provide all such information known to him or
it or which on reasonable enquiry ought to be known to him or as may
reasonably be required by the Vendors or the Purchaser for the purpose of
complying with the requirements of law or of any applicable regulatory
authority to which either party is subject where such requirement has the
force of law.
17. Implied covenants for title and further assurance
17.1 The Law of Property (Miscellaneous Provisions) Act 1994 ("LPMPA") applies
to all dispositions of property made under or pursuant to this Agreement.
17.2 In addition to clause 17.1, the Vendors shall, from time to time on being
required to do so by the Purchaser, now or at any time in the future, do
or procure the doing of all such acts and/or execute or procure the
execution of all such documents in a form satisfactory to the Purchaser
as the Purchaser may reasonably consider necessary for giving full effect
to this Agreement and securing to the Purchaser the full benefit of the
rights, powers and remedies conferred upon the Purchaser in this
Agreement at the cost and expense of the Vendors.
18. Assignment
No party may assign the benefit of this Agreement whether absolutely or
by way of security except in the case of an assignment of all or part to
an Affiliate of the Purchaser and provided and so long as it remains an
Affiliate (failing which the benefit of this Agreement shall no longer be
available to such assignee nor to any assignor) save that a party may
assign such benefit absolutely or by way of security to a person other
than an Affiliate of the Purchaser with the prior consent in writing of
the other such consent not to be unreasonably withheld or delayed and any
purported assignment in contravention of this clause shall be
ineffective. Without prejudice to the generality of the foregoing, if a
new company is established as the holding company of the Purchaser with
the intention that the Public Offering be undertaken by such new company
in place of the Purchaser, the Purchaser shall be entitled to assign the
benefit and the burden of this Agreement to such new company whereupon
such company shall thenceforth be treated for all purposes as the
Purchaser hereunder, subject to (i) such new company executing a deed of
adherence undertaking to be bound by this Agreement in place of the
assignor; and (ii) a copy of such deed together with evidence of the
establishment of such new company being given to the Vendors.
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<PAGE>
19. Remedies cumulative: entire agreement
19.1 The rights, powers and remedies provided in this Agreement or expressly
referred to herein are cumulative and do not exclude any rights, powers
or remedies provided by law or by any other document other than this
Agreement.
19.2 This Agreement together with any documents referred to herein constitutes
the whole and only agreement between the parties relating to and
supersedes and extinguishes any prior drafts, previous agreements,
undertakings, representations, warranties and arrangements of any nature
whatsoever, whether or not in writing between the parties, in connection
with the subject matter hereof. In particular, except for paragraph 1.2
of the Vendors' Warranties, any warranties or representations relating to
or connected with any forecasts or projections provided to the Purchaser
by the Vendors of the Group are expressly withdrawn and shall have no
effect.
19.3 Each of the parties acknowledges that in entering into this Agreement on
the terms set out in this Agreement it has not relied on or been induced
to enter into this Agreement by any representation, warranty,
undertaking, promise or assurance made or given by any other party or any
other person, whether or not in writing, at any time prior to the
execution of this Agreement other than those expressly set out in this
Agreement or the Deed of Tax Covenant.
20. Waiver, variation and release
20.1 Save as expressly provided herein, no omission to exercise or delay in
exercising on the part of any party to this Agreement any right, power or
remedy provided by law or under this Agreement shall constitute a waiver
of such right, power or remedy or any other right, power or remedy or
impair such right, power or remedy. No single or partial exercise of any
such right, power or remedy shall preclude or impair any other or further
exercise thereof or the exercise of any other right, power or remedy
provided by law or under this Agreement.
20.2 Any waiver of any right, power or remedy under this Agreement must be in
writing and may be given subject to any conditions thought fit by the
grantor. Unless otherwise expressly stated any waiver shall be effective
only in the instance and only for the purpose for which it is given.
20.3 No variation to this Agreement shall be of any effect unless it is agreed
in writing and signed by or on behalf of each party.
20.4 Any liability to the Purchaser under this Agreement may in whole or in
part be released, compounded or compromised or time or indulgence given
by the Purchaser in its absolute discretion as regards any of the Vendors
under such liability without in any way prejudicing or affecting its
rights against any other or others of the Vendors under the same or like
liability.
21. Costs and expense
Each party shall pay its own costs and expenses in relation to the
negotiation, preparation, execution and carrying into effect of this
Agreement and other agreements forming part of the transaction. For the
avoidance of doubt, the Company shall pay all fees of Mundays properly
payable by the Company in respect of work undertaken for the Company
(excluding work in respect of the matters referred to in Clause 2.1.2
other than the negotiation of the terms of the 5 year lease).
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<PAGE>
22. Payments
All payments to be made under this Agreement shall be made in full
without any set-off or counterclaim and free from any deduction or
withholding save as may be required by law in which event such deduction
or withholding will not exceed the minimum amount which it is required by
law to deduct or withhold and in cases where the payee does not receive a
credit for such deduction the payer will simultaneously pay to the payee
such additional amounts as will result in the receipt by the payee of a
net amount equal to the full amount which would otherwise have been
receivable had no such deduction or withholding been required.
23. Notices
23.1 Any communication to be given in connection with the matters contemplated
by this Agreement shall except where expressly provided otherwise be in
writing and shall either be delivered by hand or sent by first class
pre-paid post. Delivery by courier shall be regarded as delivery by hand.
23.2 Such communication shall be sent to the address of the relevant party
referred to in this Agreement or to such other address as may previously
have been communicated to the other party in accordance with this clause.
Each communication shall be marked for the attention of the relevant
person.
23.3 A communication shall be deemed to have been served:-
23.3.1 if delivered by hand at the address referred to in clause 23.2, at
the time of delivery;
23.3.2 if sent by first class pre-paid post to the address referred to in
clause 23.2, at the expiration of two clear days after the time of
posting.
If a communication would otherwise be deemed to have been delivered
outside of normal business hours (being 9:30 a.m. to 5:30 p.m. on a
Business Day) in the time zone of the territory of the recipient under
the preceding provisions of this clause, it shall be deemed to have been
delivered at the opening of business on the next Business Day.
23.4 In proving service of the communication, it shall be sufficient to show
that delivery by hand was made or that the envelope containing the
communication was properly addressed and posted as a first class pre-paid
letter.
23.5 A party may notify the other parties to this Agreement of a change to its
name, relevant person, or address for the purposes of 23.2 PROVIDED THAT
such notification shall only be effective on:-
23.5.1 the date specified in the notification as the date on which the
change is to take place; or
23.5.2 if no date is specified or the date specified is less than five
clear Business Days after the date on which notice is deemed to
have been served, the date falling five clear Business Days after
notice of any such change is deemed to have been given.
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<PAGE>
23.6 For the avoidance of doubt, the parties agree that the provisions of this
clause shall not apply in relation to the service of Service Documents,
but that any notice given in the manner provided by clause 28 shall be
deemed to be notice to all of the Vendors.
23.7 Any notice to be given by the Vendors shall be sufficiently given on
behalf of them all by at least (but no less than) a majority by numbers
thereof and the rights of the Vendors shall be sufficiently exercised or
waived on behalf of them if exercised or waived by at least (but no less
than) a majority by numbers thereof.
24. Time of the essence
Time shall be of the essence of this Agreement as regards any time, date
or period mentioned herein. If any such time, date or period (or
variation of any of them) is varied in accordance with the provisions of
this Agreement, such varied time, date or period shall be of the essence.
25. Counterparts
25.1 This Agreement may be executed in any number of counterparts and by the
parties on different counterparts.
25.2 Each counterpart shall constitute an original of this Agreement but all
the counterparts shall together constitute one and the same Agreement.
26. Agreement to continue in full force and effect
This Agreement shall, to the extent that it remains to be performed,
continue in full force and effect notwithstanding Completion.
27. Confidentiality
27.1 Each of the Vendors hereby undertakes with the Purchaser that it shall
both during and after the term of this Agreement preserve the
confidentiality of, and not directly or indirectly reveal, report,
publish, disclose or transfer or use for its own or any other purposes
Confidential Information except:-
27.1.1 in the circumstances set out in 27.2 below; or
27.1.2 to the extent otherwise expressly required or permitted by this
Agreement; or
27.1.3 with the prior consent in writing of the party to whose affairs
such Confidential Information relates.
27.2 The circumstances referred to in clause 27.1.1 above are:-
27.2.1 where the Confidential Information, before it is furnished to the
Vendor, is in the public domain; or
27.2.2 where the Confidential Information, after it is furnished to the
Vendor enters the public domain otherwise than as a result of (i)
a breach by the Vendor of its obligations in this clause 27 or
(ii) a breach by the person who disclosed that Confidential
Information of his confidentiality obligation and the Vendor is
aware of such breach; or
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<PAGE>
27.2.3 if and to the extent the Vendor makes disclosure of the
Confidential Information to any person:
(a) in compliance with any requirement of law; or
(b) in response to a requirement of the Stock Exchange or the
Panel on Take-overs and Mergers or any other applicable
regulatory authority to which the Vendor is subject where
such requirement has the force of law; or
(c) in order to obtain tax or other clearances or consents from
the Inland Revenue or other relevant taxing or regulatory
authorities; or
27.2.4 to the employees, directors, agents, consultants and professional
advisers of the Vendor, in each case on the basis that such
disclosee is made fully aware of the obligation of confidence and
that such Vendor is responsible for such disclosee's compliance
with such obligation;
PROVIDED THAT any such information disclosable pursuant to paragraphs (a),
(b) or (c) shall be disclosed to the extent permitted by law and only after
consultation with the other party.
27.3 The restrictions contained in this clause shall continue to apply after
the Completion without limit in time.
28. Agent for service
28.1 Each Vendor irrevocably agrees that any Service Document may be
sufficiently and effectively served on it in connection with Proceedings
in England and Wales by service on the Vendors' Solicitors, if no
replacement agent has been appointed and notified to the Purchaser
pursuant to clause 28.4. or on the replacement agent if one has been
appointed and notified to the Purchaser.
28.2 Any Service Document served pursuant to this clause shall be marked for
the attention of:-
28.2.1 the Vendors' Solicitors at their address specified in this
Agreement or such other address within England and Wales as may be
notified to the Purchaser by the Vendors; or
28.2.2 such other person as is appointed as agent for service pursuant to
clause 28.4 at the address notified pursuant to clause 28.4.
28.3 Any document addressed in accordance with clause 28.2 shall be deemed to
have been duly served if:-
28.3.1 left at the specified address, when it is left; or
28.3.2 sent by first class post, two clear Business Days after the date
of posting.
28.4 If the agent referred to in clause 28.1 (or any replacement agent
appointed pursuant to this clause 28.4) at any time ceases for any reason
to act as such, the applicable Vendor shall appoint a replacement agent
to accept service having an address for service in England and Wales and
shall notify the Purchaser of the name and address of the
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<PAGE>
replacement agent; failing such appointment and notification, the
Purchaser shall be entitled by notice to the Vendor to appoint such a
replacement agent to act on the Vendor's behalf.
28.5 A copy of any Service Document served on an agent pursuant to this clause
shall be sent by post to the Vendor at its address for the time being for
the service of notices and other communications under clause 23, but no
failure or delay in so doing shall prejudice the effectiveness of service
of the Service Document in accordance with the provisions of clause 28.1.
29. Governing law and jurisdiction
29.1 This Agreement shall be governed by and construed in accordance with
English law.
29.2 The parties to this Agreement irrevocably agree that the courts of
England shall have jurisdiction to settle any dispute which may arise out
of or in connection with this Agreement and that accordingly any
Proceedings may be brought in such courts.
29.3 For the avoidance of doubt, the Vendors expressly and specifically agree
and accept the terms of this clause and sign below in recognition of this
fact.
AS WITNESS the hands of the parties or their duly authorised representatives on
the date first appearing at the head of this Agreement.
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<PAGE>
<TABLE>
<CAPTION>
Schedule 1
The Vendors
(1) (2) (3) (4) (5) (6)
Name and Number of Total Number of Par Value of Retention
Address Shares held Consideration Consideration Loan Notes Account
(USD) Shares held ((pound)) ((pound))
'A' Ordinary 'B' Ordinary
<S> <C> <C> <C> <C> <C> <C>
P L Furlonge 180,000 -- 3,910,800 128,323 -- 132,000
Castle Farm
Mountfield
East Sussex
TW32 5JV
R J Elman -- 952 87,292 624 4,048 2946
1 Bickenhall Mansions
Bickenhall Street
London
W1H 3LF
Stelby Holdings Limited -- 30,000 559,896 3,999 127,500 18,898
P.O. Box 641
1 Seaton Place
St. Helier
Jersey
</TABLE>
-31-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Central Investments Limited -- 134,286 2,506,208 17,901 570,714 84,591
La Motte Chambers
La Motte Street
St. Helier
Jersey
The Naggar Family Pension -- 30,000 559,896 3,999 127,500 18,898
Scheme
c/o 15 Grosvenor Gardens
London SW1W 0BD
M L Tagliaferri -- 3,810 71,107 508 16,190 2,400
4 Motcomb Street
London SW1
M D Moriarty ) -- 382 7,130 51 4,048 241
Mrs J Moriarty ) 570 10,638 76 -- 359
both of
11 Carleton Gardens
Brecknock Road
London
N19 5AQ
G Harvey 20,000 ___--__ 434,533 14,258 -- 14,667
George Harvey & Associates
Limited
Mountford House
Britton Street
London EC1M 5NY
TOTAL 200,000 200,000 8,147,500 169,739 850,000 275,000
</TABLE>
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<PAGE>
Schedule 2
Directors of the Company and the Subsidiaries
---------------------------------------------
Company
-------
Names of Directors
------------------
P.L. Furlonge
G. Harvey
G.A. Naggar
R.J. Elman
Roda Print Concepts Limited
---------------------------
Names of Directors
------------------
P.L. Furlonge
G. Harvey
G.A. Naggar
R.J. Elman
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<PAGE>
Schedule 3
The Properties
Part 1
Freeholds
None
Part 2
Leases
1. Property: Unit 9 Print Village Industrial Estate, Peckham
Date of Lease: 24 October 1997
Parties to Lease: (1) Peckham Management Ltd
(2) Roda Print Concepts Ltd
Existing Use: Storage
Rent: (pound)15,000 p.a.
2. Property: 29-33 Choumert Grove, Peckham
Date of Lease: not yet completed
Parties to Lease: (1) Mr. R P. Gould, Mr. D. Boulton and Fairmont Trustee
Services Ltd
(2) Roda Print Concepts Ltd
Existing Use: Printing Works
Rent: (pound)36,000 p.a.
Inferior Lease: 28 October 1960 to The London Electricity Board for 37
years from 21 June 1960
3. Property: Railway Arch 3 Bermondsey Trading Estate, London SE16
Date of Lease: 26 January 1990
Parties to Lease: (1) London & Brighton Estates Ltd
(2) Roda Financial Print Ltd
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<PAGE>
(3) Mr. D. Boulton and Mr. R. P. Gould
Existing Use: Storage
Rent: Not applicable (lease expired)
Part 3
Other
None
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<PAGE>
Schedule 4
Part 1
The Company
Full Name : Roda Limited
Company No: : 03243754
Registered Office: : 29/33 Choumert Grove, London SE15 4RB
Secretary : Marie Ridgeon
Auditors : Ernst & Young
Tax District and Reference : Waterloo 2 District Ref: 019 80190 27930
<TABLE>
<CAPTION>
Part 2
The Subsidiaries
Full Name : Roda Print Concepts Limited
Company No: : 0237 3618
Registered Office: : 29/33 Choumert Grove, London, SE15 4RB
Secretary : Marie Ridgeon
Auditors : Ernst & Young
Authorised Share Capital :
<S> <C> <C>
Issued Share Capital and (pound)20,000 divided into: 10,000 A ordinary shares of (pound)1 each
9,946 B ordinary shares of (pound)1 each
27 A preference shares of (pound)1 each
27 B preference shares of (pound)1 each
Shareholders : Roda Limited 100 A ordinary shares
46 B ordinary shares
Roger Gould 14 A preference shares
14 B preference shares
Jennifer Gould 13 A preference shares
13 B preference shares
Tax District and Reference : Waterloo 2 District Ref: 623 17924 07625
</TABLE>
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<PAGE>
Schedule 5
The Vendors' Warranties
Part 1
1. Preliminary
1.1 The facts set out in the recitals and the schedules and all information
contained in the Disclosure Documents are true and accurate in all
material respects and not misleading and all information which has been
given in writing to the Purchaser or its representatives or professional
advisers by the Vendors or by any Director, officer or other official of
the Company or by their respective professional advisers or other agents
in the course of the negotiations leading to this Agreement was when
given and is now true and accurate in all material respects and not
misleading.
1.2 The forecasts for 1998 in the agreed terms were prepared in good faith
and on the basis of assumptions which were considered with due care by
Peter Furlonge and Ralph Elman at the time the forecasts were made, and
which have been fully disclosed to the Purchaser.
1.3 So far as the Vendors are aware, having made due and careful enquiry,
there is no fact or matter which has not been disclosed which renders any
such information untrue, inaccurate or misleading or the disclosure of
which might reasonably affect the willingness of a willing purchaser to
purchase the Shares on the terms of this Agreement.
1.4 Each Vendor and Covenantor (as defined in the Deed of Tax Covenant) on
his own behalf only confirms that he has full power to enter into and
perform this Agreement and the Deed of Tax Covenant respectively and this
Agreement and the Deed of Tax Covenant constitute binding obligations on
him in accordance with their terms.
2. The Company
2.1 The particulars of the Company and the Subsidiary set out in the recitals
and schedule 4 are true and complete.
2.2 The copy of the memorandum and articles of association of the Company
which is comprised in the Disclosure Documents is true and complete in
all respects and has embodied in it or annexed to it a copy of every such
resolution and agreement as is referred to in section 380(4), CA 85 and
the Company has at all times carried on its business and affairs in all
respects in accordance with its memorandum and articles of association
and all such resolutions and agreements.
2.3 So far as the Vendors are aware, having made due and careful enquiry, the
Company has complied with the provisions of the Companies Acts and all
returns, particulars, resolutions and other documents required to be
filed with or delivered to the Registrar of Companies or to any other
authority whatsoever by the Company have been correctly and properly
prepared and so filed or delivered.
2.4 The Shares constitute the whole of the issued share capital of the
Company. Each Vendor (for himself only) confirms that there is no
Encumbrance or any form of agreement (including conversion rights and
rights of pre-emption) on, over or affecting
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<PAGE>
his Shares or any unissued shares, debentures or other securities of the
Company and there is no agreement or commitment to give or create any of
the foregoing. No claim has been made by any person to be entitled to any
of the foregoing and no person has the right (exercisable now or in the
future and whether contingent or not) to call for the issue of any share
or loan capital of the Company under any of the foregoing. The shares of
the Subsidiary are held and owned as shown in part 2 of schedule 4 free
from all encumbrances.
2.5 The Company has not at any time:-
2.5.1 repaid, redeemed or purchased (or agreed to repay, redeem or
purchase) any of its shares, or otherwise reduced (or agreed to
reduce) its issued share capital or any class of it or capitalised
(or agreed to capitalise) in the form of shares, debentures or
other securities or in paying up any amounts unpaid on any shares,
debentures or other securities, any profits or reserves of any
class or description or passed (or agreed to pass) any resolution
to do so; or
2.5.2 directly or indirectly provided any financial assistance for the
purpose of the acquisition of shares in the Company or any holding
company of the Company or for the purpose of reducing or
discharging any liability incurred in such an acquisition whether
pursuant to sections 155 and 156, CA 85 or otherwise.
2.6 The Company has not stopped payment and is not insolvent nor unable to
pay its debts according to section 123, Insolvency Act 1986. No order has
been made or petition presented or resolution passed for the winding up
of the Company and no distress, execution or other process has been
levied on any of its assets. No administrative or other receiver has been
appointed by any person over the business or assets of the Company or any
part thereof, nor has any order been made or petition presented for the
appointment of an administrator in respect of the Company.
2.7 No order has been made or petition presented or resolution passed for the
winding up of the Company and no distress, execution or other process has
been levied on any of its assets.
2.8 Insofar as the Loan Notes have been issued, the same are owned by and
registered in the name of the Vendors as indicated in column (5) of
schedule 1.
3. Connected Business
3.1 The Company:-
3.1.1 is not and has not agreed to become the holder or other owner of
any class of any shares, debentures or other securities of any
other company (whether incorporated in the United Kingdom or
elsewhere) other than the Subsidiary;
3.1.2 has not agreed to become a subsidiary of any other company or
under the control of any group of companies or consortium;
3.1.3 is not and has not agreed to become a member of any partnership,
joint venture, consortium or other unincorporated association
other than a recognised trade association or agreement or
arrangement for sharing commissions or other income;
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<PAGE>
3.1.4 has no branch, place of business or substantial assets outside
England and Wales or any permanent establishment (as that
expression is defined in any relevant Order in Council made
pursuant to section 788, Taxes Act) in any country outside the
United Kingdom.
4. Accounts
4.1 The Accounts:-
4.1.1 were prepared in accordance with the requirements of all relevant
statutes, with good accounting principles and practices generally
accepted at the date hereof in the United Kingdom (including the
Accounting Standards) for companies carrying on a similar business
to the Business and on a basis consistent with preceding
accounting periods of the Subsidiary and are true and fair in all
material respects;
4.1.2 disclose a true and fair view of the assets, liabilities and state
of affairs of the Subsidiary at the Balance Sheet Date and of its
profits for the financial year ended on such date;
4.1.3 contain full provision or reserve for bad and doubtful debts and
for depreciation on fixed assets, which provision or reserve was
when made and is now adequate;
4.1.4 contain proper and adequate reserves or provision for all
Taxation, including deferred taxation as defined in SSAP 15
(sufficient provision being made in a deferred taxation account
for any corporation tax on chargeable gains and balancing charges
that would arise on the sale of all fixed assets at the values
attributed to them in the Accounts);
4.1.5 disclose, note or provide for all liabilities of the Subsidiary
which were known, actual or contingent (including contingent
liabilities to customers and contingent liabilities for Taxation);
4.1.6 reflect all the fixed and loose plant and machinery, equipment,
furniture, fittings and vehicles used by the relevant company at
the Balance Sheet Date and (apart from depreciation in the
ordinary course of business) their aggregate value is not less
than at the Balance Sheet Date and none has been acquired for any
consideration in excess of its net realisable value at the date of
such acquisition or otherwise than by way of a bargain at arm's
length.
4.2 The basis of valuation for work-in-progress of the Company has remained
in all material respects consistent with that adopted for the purpose of
the audited accounts of the Subsidiary in respect of the beginning and
end of each of the accounting periods of each such company for the last
three financial years.
4.3 The Management Accounts:
4.3.1 have been prepared with due care and on a basis consistent with
the accounting principles and practice used in the preparation of
the Accounts;
4.3.2 fairly reflect the assets and liabilities of the Company at, and
its profits for the nine month period ended on, 30 September 1997.
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4.4 The profits of the Company for the two years ended on the Balance Sheet
Date as shown by the Accounts, the Management Accounts and by the audited
accounts for previous periods delivered to the Purchaser and the trend of
profits shown by them have not (except as Disclosed in them) been
affected to a material extent by inconsistencies of accounting practices,
by the inclusion of non-recurring items of income or expenditure, by
transactions entered into otherwise than on normal commercial terms or by
any other factors rendering such profits for all or any of such periods
exceptionally high or low.
4.5 All accounts, books, ledgers, financial and other necessary records of
whatsoever kind of the Company (including all invoices and other records
required for VAT purposes) have been fully, properly and accurately
maintained, are in the possession of the Company and contain true and
accurate records of all matters including those required to be entered in
them by the Companies Acts and no notice or allegation that any of the
same is incorrect or should be rectified has been received.
5. Post-Balance Sheet Date events
5.1 Since the Balance Sheet Date, the Company:-
5.1.1 has carried on its business in the ordinary and usual course and
nothing has been done which would be likely to prejudice the
interests of the Purchaser as a prospective purchaser of the
Shares;
5.1.2 has not experienced any deterioration in its financial position or
turnover or suffered any material diminution of its assets by the
wrongful act of any person and the Company has not had its
business or profitability adversely affected by the loss of any
important customer or source of supply or by any abnormal factor
not affecting similar businesses to a like extent and there are no
facts which are likely to give rise to any such effects;
5.1.3 has not acquired or disposed of or agreed to acquire or dispose of
any assets or assumed or incurred or agreed to assume or incur any
liabilities (actual or contingent) otherwise than in the ordinary
course of business;
5.1.4 has not declared, made or paid any dividend, bonus or other
distribution of capital or income (whether a qualifying
distribution or otherwise), and (excluding fluctuations in
overdrawn current accounts with bankers) no loan or loan capital
of the Company has been repaid in whole or in part or has become
due or is liable to be declared due by reason of either service of
a notice or lapse of time or otherwise howsoever;
5.1.5 has not made any change to the remuneration, terms of employment,
emoluments or pension benefits of any present or former director,
officer or employee of the Company who on the Balance Sheet Date
was entitled to remuneration in excess of (pound)50,000 per annum,
has not appointed or employed any additional director, officer or
employee entitled as aforesaid and has not appointed any new
consultant or revised the existing arrangements of any consultants
already appointed by the Company;
5.1.6 has received payment in full of all debts owing to the Company
shown in the Accounts (subject to any provision for bad and
doubtful debts made in the Accounts), has not released any debts
in whole or in part and has not written off debts;
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5.1.7 has not entered into contracts involving capital expenditure in an
amount exceeding (pound)25,000 in the aggregate;
5.1.8 has not become aware that any event has occurred which would
entitle any third party to terminate any contract or any benefit
enjoyed by it or call in any money before the normal due date
therefor;
5.1.9 has paid its creditors within the times agreed with such creditors
and does not have any debts outstanding which are overdue for
payment by more than four weeks;
5.1.10 has not borrowed or raised any money or taken any financial
facility (except such short term borrowings from bankers as are
within the amount of any overdraft facility which was available to
the Company at the Balance Sheet Date) or since the Balance Sheet
Date renegotiated or received any notice from any banker that such
banker wishes to renegotiate any overdraft facility available to
the Company at the Balance Sheet Date;
5.1.11 has not made any change to its accounting reference date and no
accounting period of the Company has ended since the Balance Sheet
Date;
5.1.12 has not made a payment or incurred an obligation to make a payment
which will not be deductible in computing trading profits for the
purposes of corporation tax or as a management expense of the
Company.
6. Transactions with the Vendors, Directors and Connected Persons
6.1 There is not outstanding:-
6.1.1 any indebtedness or other liability (actual or contingent) owing
by the Company to any Vendor or Director or any Connected Person
or owing to the Company by any Vendor, or Director or any
Connected Person; or
6.1.2 any guarantee or security for any such indebtedness or liability
as aforesaid.
6.2 There is not outstanding, and there has not at any time during the last
six years been outstanding, any agreement, arrangement or understanding
(whether legally enforceable or not) to which the Company is a party and
in which any Vendor, Director or former director of the Company or any
Connected Person is or has been interested whether directly or
indirectly.
6.3 The Company is not a party to nor has its profits or financial position
during the last six years been affected by any agreement or arrangement
which is not entirely of an arm's length nature.
6.4 No Connected Person of any Vendor, Director or former director of the
Company is entitled to or has claimed entitlement to any remuneration,
compensation or other benefit from the Company.
7. Finance
7.1 Particulars of all money borrowed by the Company have been Disclosed. The
total amount borrowed by the Company from any source does not exceed any
limitation on its borrowing contained in the articles of association of
the Company or in any
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debenture or loan stock trust deed or instrument or any other document
executed by the Company and the amount borrowed by the Company from each
of its bankers does not exceed the overdraft facility agreed with such
banker. The Company has no outstanding loan capital other than the Loan
Notes.
7.2 All debts owing to the Company are collectable in the ordinary course of
business and each such debt will realise in full its face value within
three months of its due date for payment. The debts owing to the
Subsidiary shown in the Accounts (subject to any provision for bad or
doubtful debts made in the Accounts) were paid in full on their due
dates.
7.3 Particulars of the balances on all the Company's bank accounts as at a
date not more than three days before the date of this Agreement have been
Disclosed and the Company has no other bank accounts. Since the date of
such particulars there have been no payments out of any such bank
accounts except for routine payments which have been Disclosed.
7.4 All unpresented cheques drawn by the Company have been Disclosed and
there are no such unpresented cheques drawn otherwise than in the normal
course of business.
7.5 Having regard to its existing banking and other facilities, so far as the
Vendors are aware, the Company has sufficient working capital for the
purpose of continuing to carry on its business in its present form and
for the purposes of executing, carrying out and fulfilling in accordance
with their terms all orders, projects and contractual obligations which
have been placed with or undertaken by the Company.
7.6 The Vendors have Disclosed full details and true and correct copies of
all documents relating to all debentures, acceptance lines, overdrafts,
loans or other financial facilities outstanding or available to the
Company and all Encumbrances to which any asset of the Company is
subject. Neither the Vendors nor the Company has done anything whereby
the continuance of any such facility or Encumbrance in full force and
effect might be affected or prejudiced.
7.7 No grants have been made to the Company in the last six years.
7.8 The Company is not responsible for the indebtedness of any other person
and no person other than the Company or a Subsidiary has given any
guarantee of or security for any overdraft, loan or loan facility granted
to the Company or any Subsidiary.
8. Property
8.1 The Properties comprise all the land and premises owned, controlled, used
or occupied at any time by the Company and/or the Subsidiary and all the
rights or interests vested in the Company and/or the Subsidiary relating
to any land and premises at the date hereof and the particulars set out
in schedule 3 are true and accurate and not misleading.
8.2 The Company has not:-
8.2.1 surrendered any lease, licence or tenancy to the landlord without
first satisfying itself that the landlord had good title to accept
such surrender and without receiving from the landlord an absolute
release from all liability arising under such lease, licence or
tenancy;
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8.2.2 assigned, or otherwise disposed of, any lease, licence or tenancy
without receiving a full and effective indemnity from the assignee
or transferee in respect of its liability under such lease,
licence or tenancy;
8.2.3 been a guarantor of a tenant's liability under any lease, licence
or tenancy;
8.2.4 assigned or otherwise disposed of any leasehold property in such a
way that it retains any other residual liability in respect
thereof.
8.3 The Subsidiary has a good title to each of the Properties and has Legal
and Beneficial Title to the same.
8.4 The Company has in its possession or unconditionally held to its order
all the leases relating to each of the Properties, and there are no
material ancillary documents and papers.
8.5 The Properties, the title deeds and documentation relating thereto, and
all fixtures and fittings and plant, equipment and other chattels on the
Properties, are not to the Vendors' knowledge having made all due
searches and enquiries subject to any Encumbrance or overriding interest
(as defined in section 70, Land Registration Act 1925) nor is there any
person in possession or occupation of or who has or claims any right of
any kind in respect of any of the Properties adversely to the estate,
interest, right or title therein of the Subsidiary ;
8.6 So far as the Vendors are aware having made all due searches and
enquiries there are no rights, interests, covenants, restrictions,
reservations, licences or easements nor any disputes or outstanding
notices (whether given by a landlord, a local authority or any other
person) nor (without prejudice to the generality of the foregoing) any
other matters or things which adversely affect the value of the
Subsidiary's interest in any of the Properties or the proper use and
enjoyment of any of the Properties for the purpose of the business now
being carried on at the Properties by the Company and/or the Subsidiary.
8.7 There has been no dealing with any of the Properties otherwise than at
arm's length and in particular no dealing at an under-value which may
give rise to a claim for improper stamping or setting aside.
8.8 None of the Properties is subject to the payment of any outgoings other
than the usual rates and taxes and all sums due to date in respect
thereof have been paid.
8.9 No proposal relating to the rateable value of any of the Properties has
been determined by the Valuation and Community Charge Tribunal or Land
Tribunal and there is no subsisting proposal to challenge the rateable
value of any of the Properties.
8.10 Each of the Properties:-
8.10.1 enjoys access and egress over roads and footpaths which have been
adopted by the appropriate highway authority and are maintainable
at the public expense;
8.10.2 drains foul sewage and surface water to public sewers, is served
by water, electricity, gas and telephone utilities; and
8.10.3 so far as the Vendors are aware having made all due searches and
enquiries has the benefit of all other easements and rights
necessary for its proper use and enjoyment for the purposes of the
business now being carried on at the
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Properties by the Company and such easements and rights are held
on terms which do not entitle any person to terminate or curtail
the same.
8.11 Where the Company or any predecessor in title has sold off or has agreed
to sell off land adjoining or near to any of the Properties there were or
will be excepted and reserved to the Company all necessary and
appropriate easements and other rights for the benefit of the Properties.
8.12 The Company has not entered into any commitment (whether legally binding
or not) and the Company is not party to any subsisting agreement with any
person or company whereby a fee (including but not limited to an abort
fee) will be paid to such person or company in respect of the management,
use, development, letting or sale of any of the Properties.
8.13 There are no unpaid charges for the construction or adoption of any road
or sewer or other service serving the Property.
8.14 In relation to each of the Properties its existing use is set out in Part
I of schedule 3 ("Existing Use").
8.15 To the Vendors' knowledge having made all due searches and enquiries
there are no lawfully enforceable restrictions or prohibitions which
restrict or prohibit the Existing Use of any of the Properties.
8.16 The Existing Use of each of the Properties is believed by the Vendors
(having made all due searches and enquiries) to be the permitted use
under the Town and Country Planning legislation (which term includes the
Town and Country Planning Act 1990, the Planning (Listed Buildings and
Conservation Areas) Act 1990, the Planning (Hazardous Substances) Act
1990 and the Planning (Consequential Provisions) Act 1990) and not to be
a temporary or personal use.
8.17 Any development (as defined by section 5.5 Town and Country Planning Act
1990) carried out in relation to each of the Properties has been lawful
and all necessary consents and permissions have been obtained for such
development.
8.18 The consents and permissions referred to in paragraph 8.17 are valid,
subsisting and are also either unconditional or subject only to
conditions which have been satisfied so that nothing further remains to
be done thereunder.
8.19 The Company is not aware of any resolution, proposal, order or act made
or contemplated for the compulsory acquisition of any of the Properties
by the local or any other authority nor any outstanding order, notice or
other requirement of any such authority that affects the Existing Use of
any of the Properties or involves expenditure in compliance with it nor
any other circumstances which may result in any such order or notice
being made or served or which may otherwise affect any of the Properties.
8.20 No compensation has been received consequent upon a refusal of any
planning permission affecting any of the Properties or the imposition of
any restrictions in any such planning permission and no such planning
permission is suspended.
8.21 None of the buildings or other structures or erections on any of the
Properties have been listed under section 1, Planning (Listed Buildings
and Conservation Areas) Act 1990 ("PLBCA") nor so far as the Vendors are
aware having made all due searches and enquiries has the relevant local
authority authorised the service of any building preservation notice
under section 3, PLBCA or any repairs notice under section 48, PLBCA in
respect of any of the Properties or any building structure or erection
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thereon nor so far as the Vendors are aware having made all due searches
and enquiries has the relevant local authority made or resolved to make
any noise abatement zone order under section 63, Control of Pollution Act
1974 for any of the areas in which any of the Properties are included.
8.22 To the Vendors' knowledge having made all due searches and enquiries,
none of the Properties is within an area of archaeological importance nor
is any building or erection on any of the Properties a scheduled monument
within the meaning set out in the Ancient Monuments and Archaeological
Areas Act 1979.
8.23 Where any of the Properties is leasehold, particulars of each lease
vested in the Subsidiary are set out in Part 2 of schedule 3 and in
relation to each such lease:-
8.23.1 the Vendors believe that having regard to the title to the
relevant property the landlord and all superior landlords had good
title to grant the lease and any superior leases respectively;
8.23.2 the Vendors believe that having regard to the title to the
relevant property any consent necessary for the grant of the lease
has been obtained;
8.23.3 no rent reviews are or should be currently under negotiation or
the subject of a reference to an expert or arbitrator or the
Courts;
8.23.4 the receipt for the payment of rent which fell due immediately
prior to the date hereof is unqualified;
8.23.5 no notices of any material breaches of any covenants or conditions
contained in the lease have been given or received on the part of
either the landlord or the Subsidiary and the landlord has not
refused to accept rent or made any complaint of breach of
covenant;
8.23.6 no material alterations, improvements or additions have been made
to the Property to which the lease relates since the grant of the
lease or in respect of all such material alterations, improvements
or additions made all necessary consents and approvals have first
been obtained;
8.23.7 sections 24 to 28, Landlord and Tenant Act 1954 have not been
excluded;
8.23.8 no surety has been released either expressly or by implication;
8.23.9 VAT is not chargeable on the rent or any other payment to be made
under the lease and no election has been made by the landlord to
waive exemption from VAT in respect of the lease.
8.24 The Company holds each of the Properties subject to any inferior leases
referred to in paragraph 8.25 but is otherwise in actual occupation of
each of the Properties and no other person is or will be entitled to
occupy or use any part of any of the Properties.
8.25 Particulars of each lease, underlease or licence deriving immediately or
otherwise out of the interest of the Company are set out in Part 2 of
schedule 3 (each such lease, underlease or licence being referred to as
an "Inferior Lease"):-
8.26 No part of any of the Properties which are the subject of an inferior
lease and intended for occupation is vacant.
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8.27 The Company is not aware (having made all due searches and enquiries) of
any material breach or allegation of material breach of the requirements
of:-
the Shops Act 1950 and 1965
the Clean Air Act 1993
the Construction (Design and Management) Regulations 1995
the Radioactive Substances Act 1960
the Factories Act 1961
the Offices Shops and Railway Premises Act 1963
the Fire Precautions Act 1971
the Health and Safety at Work etc Act 1974
the Control of Pollution Act 1974
the Food and Environmental Protection Act 1985
the Planning (Hazardous Substances) Act 1990
the Environmental Protection Act 1990
the Water Resources Act 1991
the Water Industry Act 1991 or
the Public Health Acts
or other legislation concerning health, safety or environmental matters
or any regulations, orders, notices or directions made under any of such
legislation which in any such case affect any of the Properties or any
property in the vicinity thereof or anything due thereon.
8.28 Where required a fire certificate has been issued in respect of each of
the Properties and, so far as the Vendors are aware (having made due
enquiry of appropriate employees of the Group), each of the Properties
complies in all respects with current fire regulations and the current
requirements of the insurers of the Properties.
8.29 So far as the Vendors are aware, there are no latent or patent defects in
the buildings and structures on or comprising Unit 9 Print Village and in
the construction of the buildings and its structures on or comprising
Unit 9 Print Village or any alterations thereto none of the following
materials were used:-
8.29.1 high alumina cement in structural elements;
8.29.2 wood wool slabs in permanent formwork to concrete or in structural
elements;
8.29.3 calcium chloride in admixtures for use in reinforced concrete;
8.29.4 asbestos or asbestos containing products as defined in the
Asbestos Regulations 1969 and 1987;
8.29.5 naturally occurring aggregates for use in reinforced concrete
which do not comply with British Standard Specification 882: 1983
and naturally occurring aggregates for use in concrete which do
not comply with the provisions of British Standard Specification
8110: 1985;
8.29.6 urea formaldehyde foam or materials which may release formaldehyde
in quantities which may be hazardous with reference to the limits
set from time to time by the Health and Safety Executive;
8.29.7 materials which are generally comprised of mineral fibres either
man-made or naturally occurring which have a diameter of 3 microns
or less or which
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contain fibre not sealed or otherwise stabilised to ensure that
fibre migration is prevented; or
8.29.8 any other materials not in accordance with good design standards
and good building practice at the time of construction of any such
buildings.
9. Environmental
9.1 The information contained in the environmental review of the Subsidiary
which has been Disclosed is accurate and not misleading.
9.2 All Permits which have been disclosed to the Purchaser are in full force
and effect and their terms and conditions have been complied with.
9.3 So far as the Vendors are aware, the Company has not during its
occupation of the Properties or of any other properties occupied by it
acted in material breach of Environmental Law and so far as the Vendors
are aware no work, repairs, remedy, construction, or capital expenditure
is required under any Environmental Law or in order to carry on lawfully
the Business at the Property.
9.4 So far as the Vendors are aware, having made due enquiry of relevant
employees of the Company, the Company has not received any notice claim
or other communication alleging any actual or potential Environmental
Liability.
10. Other assets
10.1 The Company has legal and beneficial title to all assets of the Company
which are included in the Accounts or the Management Accounts or have
otherwise been represented as being the property of the Company or which
were at the Balance Sheet Date used or held for the purposes of its
business and (except for assets disposed of or realised by the Company in
the ordinary course of business) the Company retains such title to all
such assets free from any Encumbrance, hire or hire purchase agreement or
leasing agreement or agreement for payment on deferred terms and all such
assets are in the possession and control of the Company and are sited
within the United Kingdom.
10.2 The Company has legal and beneficial title to all assets which have been
acquired by the Company since the Balance Sheet Date and the same are in
the possession and control of the Company and none is the subject of any
Encumbrance nor has the Company created or agreed to create any
Encumbrance or entered into any factoring arrangement, hire-purchase,
conditional sale or credit sale agreement which has not been disclosed
and in respect of any such Encumbrance, arrangement or agreement so
disclosed there has been no default by the Company in the performance or
observance of any of the provisions thereof.
10.3 The plant and machinery (including fixed plant and machinery) and all
vehicles and office and other equipment shown in the Accounts or acquired
since the Balance Sheet Date or otherwise used in connection with the
Business which have not been disposed of in the ordinary course of
business:-
10.3.1 are in good repair and condition and are regularly maintained,
fully serviceable and in satisfactory working order; and
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10.3.2 are each capable of doing the work for which they were designed
and/or purchased and will each be so capable (subject to fair wear
and tear) during the period of time over which the value of such
assets will be written down to nil in the accounts of the Company.
11. Insurance
11.1 All the assets of the Company which are of an insurable nature are and
have at all material times been fully insured to their full replacement
value with a well established and reputable insurer against fire and all
other risks normally insured against by companies carrying on similar
businesses or owning property of a similar nature to those of the Company
and the Company is and has at all material times been adequately covered
against all legal liability and risks normally insured against by such
companies (including liability to employees or third parties for personal
injury or loss or damage to property, product liability and loss of
profit).
11.2 Particulars of all policies of insurance of the Company now in force have
been disclosed and such particulars are true and correct and all premiums
due on such policies have been duly paid and all such policies are valid
and in force. So far as the Vendors are aware there are no circumstances
which might lead to any liability under such insurance being avoided by
the insurers or the premiums being increased. There is no claim
outstanding under any such policies and there are no circumstances likely
to give rise to a claim.
12. Litigation
12.1 The Company is not now engaged in any litigation or arbitration
proceedings and there are no lawsuits or arbitration proceedings
threatened by or against the Company or any person for whose acts or
defaults the Company may be vicariously liable.
12.2 There is no matter or fact in existence known to the Vendors having made
due and careful enquiry of the directors of and senior management of the
Company which might give rise to any legal proceedings or arbitration
involving the Company including any which might form the basis of any
criminal prosecution against the Company.
12.3 The Company has not been notified of any injunction order or judgment
given by any court or governmental agency which is still in force and has
not given any undertaking to any court or to any third party arising out
of any legal proceedings.
13. Licences
13.1 The Company has all necessary licences (including statutory licences),
permits, consents and authorities (public and private) for the proper and
effective carrying on of the Business and in the manner in which the
Business is now carried on and all such licences, permits, consents and
authorities are valid and subsisting and the Vendors know of no reason
why any of them should be suspended, cancelled or revoked whether in
connection with the sale to the Purchaser or otherwise.
13.2 The Company has registered or applied to register all registrable
personal data held by it and all due and requisite fees in respect of the
Company's registrations under the Data Protection Act 1984 have been
paid. The details contained in such registrations or applications to
register are correct, proper and suitable for the purpose(s) for which
the Company holds or uses the personal data which are the subject of such
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registrations or applications to register, and the contents of all such
registrations or applications to register have been made available to the
Purchaser. All personal data held by the Company has been held in
accordance with the data protection principles and there has been no
unauthorised disclosure of personal data held by the Company. There are
no outstanding enforcement, deregistration or transfer prohibition
notices or any other nature of notice under the Data Protection Act 1984
currently outstanding against the Company, nor is there any outstanding
appeal against such notices nor is the Company aware of any circumstances
which may give rise to the giving of any such notices to the Company.
There are no unsatisfied requests to the Company made by data subjects in
respect of personal data held by the Company, nor any outstanding
applications for rectification or erasure of personal data. There are no
outstanding claims for compensation for inaccuracy, loss or unauthorised
disclosure of personal data nor is any personal data held by the Company
inaccurate nor has the Company lost or made any unauthorised disclosure
of any such data. Without prejudice to the specific provisions above, the
Company and its employees have complied in all respects with the
requirements of the Data Protection Act 1984.
14. Trading
14.1 There are in force no powers of attorney given by the Company other than
to the holder of an encumbrance solely to facilitate its enforcement nor
any other authority (express, implied or ostensible) given by the Company
to any person to enter into any contract or commitment or do anything on
its behalf other than any authority of employees to enter into routine
trading contracts in the normal course of their duties.
14.2 The acquisition of the Shares by the Purchaser or compliance with the
terms of this Agreement will not:-
14.2.1 so far as the Vendors are aware cause the Company to lose the
benefit of any right or privilege it presently enjoys or cause any
person who normally does business with the Company not to continue
to do so on the same basis as previously;
14.2.2 relieve any person of any obligation to the Company (whether
contractual or otherwise) or legally entitle any person to
determine any such obligation or any right or benefit enjoyed by
the Company or to exercise any right whether under an agreement
with or otherwise in respect of the Company;
14.2.3 conflict with or result in the breach of or constitute a default
under any of the terms, conditions or provisions of any agreement
or instrument to which the Company is now a party or any loan to
or mortgage created by the Company or of its memorandum or
articles of association;
14.2.4 result in any present or future indebtedness of the Company
becoming due and payable or capable of being declared due and
payable prior to its stated maturity;
14.2.5 so far as the Vendors are aware cause any director, officer or
senior employee of the Company to leave employment;
14.2.6 conflict with, violate or result in a breach of any law,
regulation, order, decree or writ applicable to the Company, or
entitle any person to receive from the Company any finder's fee,
brokerage or other commission;
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and so far as the Vendors are aware the attitude or actions of
clients, customers and suppliers with regard to the Company will
not be prejudicially affected thereby.
14.3 The Company is not and has not been party to or directly or indirectly
concerned in any agreement, arrangement, understanding or practice
(whether or not legally binding) or in the pursuit of any course of
conduct which is:-
14.3.1 registrable under the RTPA or capable of giving rise to an
investigation by the Director-General of Fair Trading or a
reference to the Monopolies and Mergers Commission;
14.3.2 in contravention or breach of The Treaty of Rome 1957, the Fair
Trading Act 1973, the RTPA, the Competition Act 1980, or any
regulations, orders, notices or directions made thereunder; or
14.3.3 is otherwise registrable, unenforceable or void or renders the
Company or any of its officers liable to administrative, civil or
criminal proceedings under any anti-trust, trade regulation or
similar legislation in any jurisdiction where the Company carries
on business.
14.4 The Company is not and has not been a party to any agreement,
arrangement, understanding or practice restricting the freedom of the
Company to provide and take goods and services by such means and from and
to such persons and into or from such place as it may from time to time
think fit.
14.5 All title deeds and agreements to which the Company is a party and all
other documents owned by, or which ought to be in the possession of, or
held unconditionally to the order, of the Company are in the possession
of the Company.
14.6 The Company does not have any of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or
partly dependent on or held by any means (including any electronic,
mechanical or photographic process whether computerised or not) which
(including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
14.7 The Company does not use on its letterhead, books or vehicles or
otherwise carry on the Business under any name other than its corporate
name or a shortened version thereof.
14.8 Neither the Company nor any officer has been prosecuted for any criminal,
illegal or unlawful act connected with the Company.
15. Contracts
15.1 There are no long term contracts (i.e. contracts not terminable by the
Company without penalty on six months' notice or less) or onerous or
unusual or abnormal contracts (i.e. contracts for capital commitments or
contracts differing from those necessitated by the ordinary course of
business) binding upon the Company, nor is the Company a party to any
contract which contains any onerous or other provision material for
disclosure to an intending purchaser of the Shares.
15.2 All contracts to which the Company is a party as are material have been
disclosed and the Company is not a party to or subject to any agreement,
transaction, obligation, commitment, understanding, arrangement or
liability which:-
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15.2.1 is incapable of complete performance in accordance with its terms
within six months after the date on which it was entered into or
undertaken;
15.2.2 is likely to result in a loss to the Company on completion of
performance;
15.2.3 cannot readily be fulfilled or performed by the Company on time
and without undue or unusual expenditure of money and effort;
15.2.4 is a contract for the supply of goods or services (other than
contracts for the supply of electricity or normal office services)
in excess of (pound)25,000 per individual contract;
15.2.5 requires the Company to pay any commission, finder's fee, royalty
or the like; or
15.2.6 is in any way otherwise than in the ordinary and proper course of
the Company's business.
15.3 The terms of all contracts of the Company have been complied with by the
Company and by the other parties to the contracts in all respects and
there are no circumstances likely to give rise to a default by the
Company or (so far as the Vendors' are aware) by the other parties under
any such contract.
15.4 The Company has no knowledge of the invalidity of or grounds for
rescission, avoidance or repudiation of any agreement or other
transaction to which the Company is a party and has received no notice of
any intention to terminate, repudiate or disclaim any such agreement or
other transaction.
15.5 The Company is not a party to any subsisting agency or distributorship
agreement.
16. Employees
16.1 The particulars shown in the schedule of employees comprised in the
disclosure Documents are true and complete and show in respect of each
Director, officer and employee of the Company his date of birth, the date
on which he commenced continuous employment with the Company for the
purposes of the EPCA and all remuneration payable and other benefits
provided or which the Company is bound to provide (whether now or in the
future) to each such person and include full particulars of all
remuneration arrangements (particularly profit sharing, incentive and
bonus arrangements to which the Company is a party whether binding or
not) and each director, officer and employee of the Company is listed
therein.
16.2 There is no contract of service in force between the Company and any of
its directors, officers or employees which is not terminable by the
Company without compensation (other than any compensation payable under
Parts V and VI, EPCA) on one month's notice given at any time or
otherwise in accordance with section 49, EPCA. There are no consultancy
or management services agreements in existence between the Company and
any other person, firm or company.
16.3 There are no amounts owing to present or former directors, officers or
employees of the Company other than not more than one month's arrears of
remuneration accrued or due or for reimbursement of business expenses
incurred within a period of three months preceding the date hereof and no
moneys or benefits other than in respect of remuneration or emoluments of
employment are payable to or for the benefit of any
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present or former director, officer or employee of the Company, nor any
dependant of any present or former director, officer or employee of the
Company.
16.4 Save to the extent (if any) to which provision or allowance has been made
in the Accounts:-
16.4.1 no liability has been incurred or is anticipated by the Company
for breach of any contract of employment or for services or for
severance payments or for redundancy payments or protective awards
or for compensation for unfair dismissal or for failure to comply
with any order for the reinstatement or re-engagement of any
employee or for sex or race discrimination or for any other
liability accruing from the termination or variation of any
contract of employment or for services;
16.4.2 the Company has not made or agreed to make any payment to or
provided or agreed to provide any benefit for any present or
former director, officer or employee of the Company.
16.5 The Company has in relation to each of its employees (and so far as
relevant to each of its former employees) complied with:-
16.5.1 all obligations imposed on it by all relevant statutes,
regulations and codes of conduct and practice affecting its
employment of any persons and all relevant orders and awards made
thereunder and has maintained current, adequate and suitable
records regarding the service, terms and conditions of employment
of each of its employees; and
16.5.2 all collective agreements, recognition agreements and customs and
practices for the time being affecting its employees or their
conditions of service.
16.6 No present director, officer or employee of the Company has given or
received notice terminating his employment except as expressly
contemplated under this Agreement and Completion of this Agreement will
not entitle any employee to terminate his employment and/or trigger any
entitlement to a severance payment or liquidated damages.
16.7 The Company has complied with all recommendations made by the Advisory
Conciliation and Arbitration Service and with all awards and declarations
made by the Central Arbitration Committee in respect of its employees.
16.8 The Company does not have in existence nor is it proposing to introduce,
and none of its directors, officers or employees participate in (whether
or not established by the Company), any employee share trust, share
incentive scheme, share option scheme or profit sharing scheme for the
benefit of all or any of its present or former directors, officers or
employees or any of such persons dependants or any scheme whereunder any
present or former director, officer or employee of the Company is
entitled to a commission or remuneration of any other sort calculated by
reference to the whole or part of the turnover, profits or sales of the
Company or any other person, firm or company including (without
limitation) any profit related pay scheme established under Chapter III,
Part V, Taxes Act.
16.9 The Company has not been a party to any relevant transfer as defined in
TUPE nor has the Company failed to comply with any duty to inform and
consult any Trade Union under the said regulations within the period of
one year preceding the date of this Agreement.
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16.10 The Company is not a party to any agreement or arrangement with or
commitment to any trade unions or staff association nor are any of its
employees members of any trades union or staff association.
17. Pension Schemes
17.1 Other than the Roda Print Concepts Limited Pension Plan (the "Pension
Scheme"), the company is not nor has been a party to any agreement or
arrangement for the provision of pensions, allowances, lump sums or other
like benefits on retirement, death or long term ill health for the
benefit of any current or former employee of the Company (or the
dependants of such persons) nor has the Company provided or promised to
provide any ex-gratia pensions, lump sums or like benefits for any
current or former employee of the Company or their dependants. In
particular, there is no obligation to pay contributions to any personal
pension scheme in respect of any employee.
17.2 Full particulars of the Pension Scheme have been disclosed, such
particulars being true, complete and not misleading in any way. The
particulars include a copy of the trust deed and rules, booklets and any
subsequent announcements to scheme members, details of members including
contributions payable by members and employer, details of current
investments, latest scheme accounts and schedule of contributions
complying with Section 87 of the Pensions Act 1995.
17.3 All contributions to the Pension Scheme which are due have been paid by
the due date for payment. In respect of any employee who is covered for
lump sum death benefits, those benefits are fully insured with an
insurance company of good repute on normal terms and all premiums payable
have been paid.
17.4 The Pension Scheme is approved by the Board of Inland Revenue for the
purposes of Chapter 1 of Part XIV of the Taxes Act and has at all times
and in all respects complied with the provisions of all relevant
statutes, regulations and requirements.
17.5 The Pension Scheme is a money purchase scheme within the meaning of
Section 181 of the Pension Schemes Act 1993.
17.6 There are no claims or actions in progress or pending, nor any reason for
such claims or actions, in respect of any pension arrangement. There are
no unresolved disputes under the Pension Scheme's internal dispute
resolution procedure.
18. Intellectual Property
18.1 The Disclosure Documents contain particulars of all Intellectual Property
owned, used or exploited by the Company. The Company is the sole
beneficial owner of such Intellectual Property.
18.2 The Disclosure Documents contain particulars of all Intellectual Property
Agreements and all Intellectual Property Agreements are valid and binding
and none has been the subject of any breach or default by any party or of
any event which with notice or lapse of time or both would constitute a
default.
18.3 The Company has not infringed and does not infringe any Intellectual
Property of a third party as a result of the Company's use or
exploitation of the Intellectual Property owned, used or exploited by the
Company nor will such use or exploitation give rise to any such dispute
claims or proceedings against the Company.
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18.4 There are and have not been any disputes, claims or proceedings
threatened or in existence in any court of tribunal in respect of any of
the Intellectual Property as such owned, used or exploited by the Company
or in respect of any use or exploitation of the Intellectual Property
owned, used or exploited by the Company. There has been and is no current
or anticipated infringement by any third party of any of the Intellectual
Property owned, used or exploited by the Company.
19. Legislation
The Company is not aware, having made enquiries of its directors and
employees, that it is in material breach of, or that it has received
notice of breach of, or of any allegation of breach of, the requirements
of any legislation which is applicable to it.
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Part 2
20. Taxation
20.1 General
20.1.1 Notices and returns
All notices, returns, computations and registrations of the
Company for the purposes of Taxation have been made punctually on
a proper basis and are correct and none of them is, or is likely
to be, the subject of any dispute with any Taxation Authority.
20.1.2 Payment of Tax due
All Taxation which the Company is liable to pay prior to
Completion has been or will be so paid prior to Completion.
20.1.3 Penalties or interest on Tax
The Company has not within the period of six years ending on the
date of this Agreement paid or since the Balance Sheet Date become
liable to pay any penalty, fine, surcharge or interest charged by
virtue of the provisions of the TMA or any other Taxation Statute.
20.1.4 Compliance with PAYE, national insurance contribution and Tax
collection obligations
(a) All income tax deductible and payable under the PAYE system
and/or any other Taxation Statute has, so far as is
required to be deducted, been deducted from all payments
made or treated as made by the Company and all amounts due
to be paid to the Inland Revenue prior to the date of this
Agreement have been so paid, including all Tax chargeable
on benefits provided for directors, employees or former
employees of the Company or any persons required to be
treated as such.
(b) All deductions and payments required to be made under any
Taxation Statute in respect of national insurance and
social security contributions (including employer's
contributions) have been so made.
(c) All payments by the Company to any person which ought to
have been made under deduction of Tax have been so made and
the Company (if required by law to do so) has accounted to
the Inland Revenue for the Tax so deducted.
(d) Proper records have been maintained in respect of all such
deductions and payments and all applicable regulations have
been complied with.
(e) The Disclosure Documents contain details so far as they
affect the Company of all current dispensations agreed with
the Inland Revenue in relation to PAYE and all
notifications given by the Inland Revenue under section
166, TA 88.
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20.1.5 Investigations
The Company has not been subject to any visit, audit,
investigation, discovery or access order by any Taxation
Authority and that there are no circumstances existing which
make it likely that a visit, audit, investigation, discovery or
access order will be made.
20.1.6 No liability under section 23, TA 88
The Company has not received a notice from the Collector of
Taxes under the provisions of section 23, TA 88 which has not
been complied with.
20.1.7 Tax provision
Full provision or reserve has been made in the Accounts for all
Taxation assessed or liable to be assessed on the Company or for
which it is accountable in respect of income, profits or gains
earned, accrued or received or deemed to be earned, accrued or
received on or before the Balance Sheet Date, including
distributions made down to such date or provided for in the
Accounts.
20.1.8 Concessions and arrangements
The amount of Taxation chargeable on the Company during any
accounting period ending on or within the six years before the
Balance Sheet Date has not depended on any concessions,
agreements or other formal or informal arrangements with any
Taxation Authority.
20.1.9 Anti-avoidance provisions
The Company has not entered into or been a party to any scheme
or arrangement of which the main purpose, or one of the main
purposes, was the avoidance of or the reduction in liability to
Taxation.
20.1.10 Section 765, TA 88
The Company has not without the prior consent of the Treasury
carried out or agreed to carry out any transaction under section
765, TA 88 which would be unlawful in the absence of such
consent and has, where relevant, complied with the requirements
of section 765A(2), TA 88 (supply of information on movement of
capital within the EU) and any regulations made or notice given
thereunder.
20.1.11 Transactions requiring clearance or consent
All particulars furnished to any Taxation Authority in
connection with an application for clearance or consent by the
Company or on its behalf or affecting the Company has been made
and obtained on the basis of full and accurate disclosure to the
relevant Taxation Authority of all relevant material facts and
considerations; and any transaction for which clearance or
consent was obtained, has been carried into effect only in
accordance with the terms of the relevant clearance or consent.
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20.1.12 Calculation of taxation liability
The Company has sufficient records relating to past events to
permit accurate calculation of the Taxation liability or relief
which would arise upon a disposal or realisation on completion
of each asset owned by the Company at the Balance Sheet Date or
acquired by the Company since that date but before Completion.
20.1.13 Claims and disclaimers
The Company has duly submitted all claims and disclaimers the
making of which has been assumed for the purposes of the
Accounts.
20.1.14 Outstanding claims, elections and appeals
The Disclosure Documents contain full particulars of all matters
relating to Taxation in respect of which the Company is or at
Completion will be entitled:
(a) to make any claim, (including a supplementary claim)
disclaimer or election for relief under any Taxation
Statute;
(b) to appeal against any assessment or determination relating
to Taxation;
(c) to apply for a postponement of Taxation.
20.2 Corporation tax, including corporation tax on chargeable gains
20.2.1 Base values and acquisition costs
If each of the capital assets of the Company was disposed of on
the date hereof for a consideration equal to the book value of
that asset in, or adopted for the purposes of, the Accounts or,
in the case of assets acquired since the Balance Sheet Date,
equal to the consideration given upon its acquisition, no
liability to corporation tax on chargeable gains or balancing
charges under the CAA would arise and for the purpose of
determining the liability to corporation tax on chargeable gains
there shall be disregarded any relief and allowances available
to the Company other than amounts falling to be deducted under
section 38, TCGA.
20.2.2 Capital allowances
All expenditure which the Company has incurred or may incur
under any subsisting commitment on the provision of machinery,
plant or buildings has qualified or will qualify (if not
deductible as a trading expense for trade carried on by the
Company) for writing-down allowances or industrial building
allowances (as the case may be) under the CAA and where
appropriate notices have been given to the Inland Revenue under
section 118, Finance Act 1994.
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20.2.3 Leased assets
The Company has not made any claim for capital allowances in
respect of any asset which is leased to or from or hired to or
from the Company and no election affecting the Company has been
made or agreed to be under sections 53 or 55, CAA in respect of
such assets.
20.2.4 Short life assets
The Company has not made any election under section 37, CAA nor
is it taken to have made such an election under section
37(8)(c), CAA.
20.2.5 Industrial buildings
None of the assets of the Company expenditure on which has
qualified for a capital allowance under Part I, CAA has at any
time been used otherwise than as an industrial building or
structure.
20.2.6 Distributions
(a) No distribution within the meaning of sections 209, 210 and
211, TA 88 has been made by the Company after 5th April,
1965 except dividends shown in its audited accounts and the
Company is not bound to make any such distribution.
(b) No elections have been made pursuant to Section 246A, TA 88
in respect of any dividends.
20.2.7 Repayments of share capital
The Company has not any time after 6th April, 1965 repaid,
redeemed or repurchased or agreed to repay, redeem or repurchase
or granted an option under which it may become liable to
purchase any shares of any class of its issued share capital nor
has the Company after that date capitalised or agreed to
capitalise in the form of shares or debentures any profits or
reserves of any class or description or otherwise issued or
agreed to issue any share capital other than for the receipt of
new consideration (within the meaning of Part VI, TA 88) or
passed or agreed to pass any resolution to do so.
20.2.8 Demergers
The Company has not been engaged in nor been a party to any of
the transactions set out in sections 213 to 218 inclusive, TA 88
nor has it made or received a chargeable payment as defined in
section 218(1), TA 88.
20.2.9 Issues of securities
No securities (within the meaning of section 254(1), TA 88)
issued by the Company and remaining in issue at the date of this
Agreement were issued in such circumstances that the interest
payable on than falls to be treated as a distribution under
either sections 209(2)(d), 209(2)(da) or 209(2)(e), TA 88.
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20.2.10 Capital Distributions
The Company has not received any capital distribution to which
the provisions of section 189, TCGA could apply.
20.2.11 Land sold and leased back
The Company has not entered into any transaction to which the
provisions of section 779 or 780, TA 88 have been or could be
applied.
20.2.12 Foreign loan interest
The Company has not since 31st March, 1982 received any foreign
loan interest in respect of which double taxation relief will or
may be restricted under section 798, TA 88.
20.2.13 Non-deductible payments
No rents, interest, annual payments or other sums of an income
nature paid or payable by the Company or which the Company is
under an existing obligation to pay in the future are or may be
wholly or partially disallowable as deductions, management
expenses or charges in computing profits for the purposes of
corporation tax by reason of the provisions of sections 74, 79,
125, 338, 339, 779 to 784 inclusive, 787 or 788, TA 88 or any
other statutory provision or otherwise.
20.2.14 Rent payable to connected persons
No rent is or has been payable by the Company to which the
provisions of sections 33A and 33B, TA 88 will apply or have
applied.
20.2.15 No unremittable income or gains
No claim has been made by the Company under sections 584 or 585,
TA 88 or under section 279, TCGA.
20.2.16 Payments to directors, officers or employees
The Company has not made or agreed to make any payment to or
provided or agreed to provide any benefit for any Director or
former director, officer or employee of the Company, whether as
compensation for loss of office, termination of employment or
otherwise, which is not allowable as a deduction in calculating
the profits of the Company for Taxation purposes whether up to
or after the Balance Sheet Date.
20.2.17 Disallowance of trading losses and advance corporation tax carry
forward
No change of ownership of the Company has taken place in
circumstances such that section 768 (change in ownership of
company: disallowance of trading losses) or section 245, TA 88
(change in ownership of company: calculation and treatment of
advance corporation tax) has or may be applied to deny relief
for a loss or losses incurred by the Company and within the
period of three years ending with the date of this Agreement
there has been no major change in the nature or conduct of any
trade or business (as defined in section 768 and section 245, TA
88) carried on by the Company.
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20.2.18 Transfer pricing
The Company is not a party to any transaction or arrangement
under which it may be required to pay for any asset or any
services or facilities of any kind an amount which is in excess
of the market value of that asset or those services or
facilities nor will the Company receive any payment for an asset
or any services or facilities of any kind that it has supplied
or provided or is liable to supply or provide which is less than
the market value of that asset or those services or facilities.
20.2.19 Transactions not at arm's length
The Company has not disposed of or acquired any asset in
circumstances falling within section 17, TCGA nor given or
agreed to give any consideration to which section 128(1)(2),
TCGA could apply.
20.2.20 Transactions between connected persons
No allowable loss has accrued to the Company to which section
18(3), TCGA will apply.
20.2.21 Chargeable debts
The Company is not owed a debt, other than a debt on a security,
on the disposal or satisfaction of which a liability to
corporation tax on chargeable gains will arise by reason of
section 251, TCGA.
20.2.22 Relief for loans to traders and qualifying corporate bonds
No claim for relief has been allowed to the Company pursuant to
sections 253 and 254, TCGA in respect of any loan and no
chargeable gain has or is likely to arise pursuant to section
253 (5), (6), (7) or (8) or section 254 (9) or (10), TCGA.
20.2.23 Chargeable policies
The Company has not acquired benefits under any policy of
assurance otherwise than as the original holder of legal and
beneficial title.
20.2.24 Transfer of overseas trade
The Company has not transferred a trade carried on by it outside
the United Kingdom through a branch or agency to a company not
resident in the United Kingdom in such circumstances that a
chargeable gain may be deemed to arise at a date after such
transfer under section 140, TCGA.
20.2.25 Depreciatory transactions
(a) No allowable loss which might accrue on the disposal by the
Company of any share in or security of any company is
likely to be reduced by virtue of the provisions of
sections 176 and 177, TCGA.
(b) The Company has not been a party to any scheme or
arrangement whereby the value of an asset has been
materially reduced as set out in sections 30-34, TCGA.
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20.2.26 Restriction of straight-line growth
No asset owned by the Company is subject to a deemed disposal
and re-acquisition under schedule 2, TCGA so as to restrict the
extent to which the gain or loss over the period of ownership
may be apportioned by reference to straight-line growth.
20.2.27 Other claims made by the Company
The Company has made no claim under any of the following:-
(a) section 280, TCGA (tax on chargeable gains payable by
instalments);
(b) section 24(2), TCGA (assets of negligible value); or
(c) section 242(2), TCGA (small part disposals of land).
(d) section 139, Finance Act 1993 (deferral of unrealised
exchange gains).
20.2.28 Gifts
The Company has not received any assets by way of gift as
mentioned in section 282, TCGA and the Company has not held, and
does not hold, shares in a company to which section 125, TCGA
could apply.
20.2.29 Non-resident companies
(a) There has not accrued or arisen any income, profit or gain
in respect of which the Company may be liable to
corporation tax by virtue of the provisions of section 13,
TCGA or Chapter IV of Part XVII, TA 88.
(b) The Company has not been served with a notice in respect of
the unpaid corporation tax liability of any company
pursuant to section 191, TCGA.
20.2.30 Controlled foreign companies
No notice of the making of a direction under section 747, TA 88
has been received by the Company and no circumstances exist
which would entitle the Inland Revenue to make such a direction
or to apportion any profits of a controlled foreign company to
the Company pursuant to section 752, TA 88.
20.2.31 Charges on non-residents
The Company has not been a party to any transaction or
arrangement whereby it is or may hereafter become liable for
Taxation under or by virtue of Part VIII, TMA.
20.2.32 Profit related pay
No scheme registered under Chapter III of Part V, TA 88 applies
to the Company or any of its employees and no application for
registration of a scheme so applying has been made.
20.2.33 Payment from pension funds
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The Company has not received a payment out of funds held for the
purposes of an exempt approved scheme in respect of which an
amount is recoverable by the Inland Revenue under section 601, TA
88.
20.2.34 Claims and elections
(a) The Disclosure Documents contain full particulars of all
claims and elections made (or assumed to be made) under
sections 23, 152-162 or 165, 175, 247, 248, TCGA insofar as
they could affect the chargeable gain or allowable loss
which would arise in the event of a disposal by the Company
of any of its assets, and indicates which assets (if any)
so affected would not on a disposal give rise to relief
under Schedule 4, TCGA.
(b) The Disclosure Documents contain full particulars of
elections made under
(i) Regulation 10 of The Exchange Gains and Losses
(Alternative Method of Calculating of Gain or Loss)
Regulations 1994 and whether or not such elections
have been varied
(ii) Regulation 10 of the Local Currency Elections
Regulations 1994 and such election is still valid.
20.3 Corporation tax - groups of companies
20.3.1 Group relief
The Disclosure Documents contain full particulars of all
arrangements and agreements relating to group relief (as defined
by section 402, TA 88 ) to which the Company is or has been a
party and:-
(a) all claims by the Company for group relief were when made
and are now valid and have been or will be allowed by way
of relief from corporation tax;
(b) the Company has not made nor is liable to make any payment
under any arrangement or agreement save in consideration
for the surrender of group relief allowable to the Company
by way of relief from corporation tax; and
(c) the Company has received all payments due to it under any
arrangement or agreement for any surrender of group relief
made by it and the payments are not liable to be refunded
in whole or in part.
20.3.2 Surrender of advance corporation tax
The Disclosure Documents contain full particulars of all
arrangements and agreements to which the Company is or has been a
party relating to the surrender of advance corporation tax made or
received by the Company under section 240, TA 88 and:-
(a) the Company has not paid nor is liable to pay for the
benefit of any advance corporation tax which is or may
become incapable of set-off against the Company's liability
to corporation tax; and
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(b) the Company has received all payments due to it under any
arrangement or agreement for any surrender of advance
corporation tax made by it and the payments are not liable
to be refunded in whole or in part.
20.3.3 Acquisitions from group members
No tax has been or may be assessed on the Company pursuant to
section 190, TCGA in respect of any chargeable gain accrued prior
to the date of this Agreement and the Company has not at any time
within the period of six years ending with the date of this
Agreement transferred any asset other than trading stock including
without limitation any transfer by way of share exchange within
section 135, TCGA to any company which at the time of disposal was
a member of the same group as defined in section 170, TCGA.
20.3.4 Leaving the group
The execution or completion of this Agreement or any other event
since the Balance Sheet Date will not result in any chargeable
asset being deemed to have been disposed of and re-acquired by the
Company for Taxation purposes pursuant to section 178 or 179, TCGA
or as a result of any other Event since the Balance Sheet Date.
20.3.5 Group income
The Disclosure Documents contain full particulars of all elections
made by the Company under section 247, TA 88 and all such
elections are now in force and the Company has not paid any
dividend without advance corporation tax or made any payment
without deduction of income tax in the circumstances specified in
section 247(6), TA 88 and no assessment has been made on the
Company in respect of advance corporation tax which ought to have
been paid or income tax which ought to have been deducted.
20.3.6 Capital losses
The Company has no capital losses the set-off of which are or may
be restricted by Section 177A, TCGA.
20.4 Close companies
20.4.1 Close company status
The Company has not at any time during the six years ended at the
Balance Sheet Date been a close company within the meaning of
sections 414 and 415, TA 88.
20.4.2 Close investment-holding company status
The Company has not in any accounting period beginning after 31st
March, 1989 been a close investment-holding company as defined in
section 13A, TA 88.
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20.4.3 Distributions
No distribution within section 418, TA 88 has ever been made by
the Company.
20.4.4 Loans to participators
Any loans or advances made or agreed to be made by the Company
within sections 419 and 420 or 422, TA 88 have been disclosed and
the Company has not released or written off or agreed to release
or write off the whole or any part of any such loans or advances.
20.5 Inheritance tax
20.5.1 No transfers of value and associated operations
The Company has made no transfers of value within sections 94 and
202, ITA nor has the Company received a transfer of value such
that liability might arise under section 199, ITA nor has the
Company been party to associated operations in relation to a
transfer of value as defined by section 268, ITA.
20.5.2 Inland Revenue charge
There is no unsatisfied liability to inheritance tax attached to
or attributable to the Shares or any asset of the Company and none
of them are subject to an Inland Revenue charge as mentioned in
section 237 and 238, ITA.
20.5.3 Power of sale, mortgage or charge
No asset owned by the Company nor the Shares are liable to be
subject to any sale, mortgage or charge by virtue of section 212,
ITA.
20.6 VAT
20.6.1 Returns and payments
(a) The Company is a taxable person duly registered for the
purposes of VAT.
(b) The Company has complied with all statutory provisions,
rules, regulations, orders and directions in respect of
VAT, has promptly submitted accurate returns, and the
Company maintains full and accurate VAT records, has never
been subject to any interest, forfeiture, surcharge or
penalty nor been given any notice under sections 59 or 64,
VATA nor been given a warning within section 76(2), VATA
nor has the Company been required to give security under
paragraph 4 of Schedule 11, VATA.
(c) VAT has been duly paid or provision has been made in the
Accounts for all amounts of VAT for which the Company is
liable.
20.6.2 Taxable supplies and input tax credit
All supplies made by the Company are taxable supplies and the
Company has not been and will not be denied full credit for all
input tax by reason of the
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operation of sections 25 and 26, VATA and regulations made
thereunder or for any other reasons and no VAT paid by the Company
is not input tax as defined in section 24, VATA and regulations
made thereunder.
20.6.3 VAT groups
The Company is not and has not been for VAT purposes a member of
any group of companies other than the Group and no act or
transaction has been effected in consequence whereof the Company
is or may be held liable for any VAT arising from supplies made by
another company.
20.6.4 Transactions between connected persons
The Company has not been or agreed to be party to any transaction
or arrangement in relation to which a direction has been or could
be made under paragraph 1 of Schedule 6, VATA or to which
paragraph 2(3A) of Schedule 10, VATA applies.
20.6.5 Charge to VAT as agent or representative
The Company is not and has not agreed to become liable for VAT by
virtue of section 47 and 48, VATA.
20.6.6 VAT and Properties
The Company or its relevant associate for the purposes of
paragraph 3(7) of Schedule 10, VATA has exercised the election to
waive exemption from VAT (pursuant to paragraph 2 of schedule 10,
VATA) only in respect of those Properties listed (as having been
the subject of such an election) in the Disclosure Documents and
neither the Company nor its relevant associate has any intention
or obligation to exercise such an election in respect of any other
of the Properties.
20.6.7 Capital goods scheme
The Company does not own and has not at any time within the period
of ten years preceding the date hereof owned any assets which are
capital items subject to the Capital Goods Scheme under Part XV of
the VAT Regulations 1995.
20.6.8 Bad debt relief
The Company has not made any claim for bad debt relief under
section 36, VATA and details of any claim it could make have been
disclosed.
20.6.9 Self billing
The Company has not entered into any self billing arrangement in
respect of supplies made by any other person nor has it at any
time agreed to allow any such person to make out VAT invoices in
respect of supplies made by the Company.
20.7 Stamp duty
20.7.1 Stamp duty
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All stampable documents wheresoever executed (other than those
which have ceased to have any legal effect) to which the Company
is a party have been duly stamped. Since the Balance Sheet Date
there have been and are no circumstances or transactions to which
the Company is or has been a party such that a liability to stamp
duty or any penalty in respect of such duty will arise on the
Company.
20.7.2 Stamp duty reserve tax
Since the Balance Sheet Date the Company has not incurred any
liability to or been accountable for any stamp duty reserve tax
and there has been no agreement within section 87(1), Finance Act
1986 which could lead to the Company incurring such a liability or
becoming so accountable.
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Schedule 6
The Purchaser's Warranties
1. The balance sheet of the Purchaser and its subsidiaries as at 30 September
1997 and the profit and loss account of the Purchaser for the nine months
ending on such date give a true and fair view of its assets, liabilities,
reserves and profits as at such date and give a true and fair view of the
state of affairs of the Purchaser as at such date there has been no
material adverse change in the Purchaser's financial position since that
date;
2. The Purchaser will at Completion have all necessary power and authority to
allot and issue the Consideration Shares in the manner proposed without any
sanction or consent by the shareholders of the Purchaser or any class
thereof and there will at Completion be no consents for the allotment and
issue of the Consideration Shares which have not been unconditionally
obtained;
3. The Purchaser has full power and has obtained all applicable governmental,
statutory, regulatory, or other consents, licences, waivers or exemptions
required to empower it to enter into and to perform its obligations under
this Agreement and the other documents to be executed by it as contemplated
herein and each such document shall upon execution and delivery be valid
and binding upon the Purchaser;
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Schedule 7
Completion
Part 1
1. Vendors' obligations
On Completion, the Vendors shall deliver to the Purchaser:-
1.1 a resolution in writing signed by all of the holders of the Loan Notes in
the agreed terms (the "Stockholders' Resolution);
1.2 a copy of the minutes of a meeting of the directors of each of the Vendors
that is a body corporate authorising the execution by that Vendor of this
Agreement, the Deed of Tax Covenant and the Stockholders' Resolution (such
copy minutes being certified as correct by the secretary of that Vendor);
1.3 certificates from each of the banks at which the Company and the Subsidiary
maintains an account of the amount standing to the credit or debit of all
such accounts as at the close of business on the last Business Day prior to
Completion;
1.4 the cash book balances of the Company and the Subsidiary as at Completion
with statements reconciling such cash book balances and the relevant cheque
books with the balances on the bank accounts of the Company and each of the
Subsidiaries as shown by the certificates referred to in paragraph 1.3;
1.5 the cheque books relating to all the bank accounts of the Company and the
Subsidiary together with confirmation that no cheques have been written by
the Company or the Subsidiary since preparation of the statements referred
to in paragraph 1.4;
1.6 evidence in the agreed terms that all debts and accounts between any member
of the Group (of the one part) and the Vendors and any Connected Person or
Affiliate of any of the Vendors (of the other part) have been fully paid
and settled;
1.7 the Deed of Tax Covenant duly executed under seal by the Vendors and the
Service Agreements duly executed by Peter Furlonge, Colin Kirven, John
Ablett and Marie Ridgeon;
1.8 a signed copy (appropriate for filing at the Companies Registry) of a
special resolution to adopt new articles of association of the Company in
such form as the Purchaser may require together with a copy (appropriate
for filing) of such articles;
1.9 transfers of the Shares duly executed by the registered holders thereof in
favour of the Purchaser or its nominee(s) together with the relevant share
certificates in the names of such registered holders;
1.10 such waivers, consents or other documents (including any power of attorney
under which any document required to be delivered under Part 1 of this
schedule has been executed) in the agreed terms to enable the Purchaser and
its nominee(s) to be registered as the holders of the Shares;
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1.11 certificates in respect of all issued shares in the capital of the
Subsidiary and duly executed transfers of all shares in the Subsidiary held
by any nominee for the Company in favour of such persons as the Purchaser
shall direct;
1.12 irrevocable powers of attorney in the agreed terms executed by each of the
holders of the Shares in favour of the Purchaser or its nominee(s) to
enable the beneficiary (pending registration of the transfers of the
Shares) to exercise all voting and other rights attaching to the Shares and
to appoint proxies for this purpose;
1.13 the statutory registers and minute books (properly written up to the time
immediately prior to Completion), the common seal, the certificate of
incorporation and (if applicable) any certificate of incorporation on
change of name of the Company and the Subsidiary;
1.14 the documents of title to the Properties;
1.15 the written resignations in the agreed terms of all the Directors (except
Peter Furlonge) of the Company and the Subsidiary from their respective
offices such resignations to take effect from Completion;
1.16 unless the auditors are Ernst & Young, the written resignation of the
auditors of the Company and the Subsidiary in the agreed terms to take
effect from Completion containing the statements referred to in section
394(1), CA 85 that they consider there are no such circumstances as are
mentioned in that section and confirming that they have deposited or shall
deposit that statement in accordance with section 394(2), CA 85 at the
respective registered offices of the Company and each of the Subsidiaries;
1.17 a deed of waiver in a form reasonably acceptable to the Purchaser under
which Peter Furlonge waives payment of an amount of salary equal to the
bonuses payable to John Ablett and Colin Kirven in connection with the sale
of the Company, duly executed by Peter Furlonge.
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Part 2
On Completion, the Vendors shall cause board resolutions of the Company and of
the Subsidiary to be passed so that:
1. in the case of the Company only, the said transfers of the Shares shall be
passed for registration and registered (subject to the same being duly
stamped which shall be at the cost of the Purchaser);
2. in the case of the Company only, the Service Agreements shall be approved
and entered into;
3. the resignations referred to in paragraphs 1.15 of Part 1 shall be tendered
and accepted so as to take effect after the passing of the resolutions;
4. persons nominated by the Purchaser (in the case of directors subject to any
maximum number imposed by the relevant articles of association) shall be
appointed additional directors and appointed secretaries;
5. all existing instructions and authorities to bankers shall be revoked and
shall be replaced with alternative instructions, mandates and authorities
in such form as the Purchaser may require;
6. the registered office shall be changed to such place in England as the
Purchaser may require;
7. Messrs. Ernst & Young shall be appointed auditors if not already so
appointed;
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Schedule 8
Limitation of Vendors' liability
Part 1
General limitations
1. Notwithstanding the provisions of clause 7 the Vendors shall not be liable
in respect of a breach of any of the Vendors' Warranties if and to the
extent that the loss occasioned thereby has been recovered under the Deed
of Tax Covenant.
2. The Vendors shall not be liable under the Vendors' Warranties:-
2.1 to the extent that the facts which might result in a Claim or possible
Claim were fairly disclosed in the Disclosure Documents.
2.2 to the extent that the subject of the Claim is allowed or provided for or
reserved in the Accounts or has been included in calculating creditors or
deducted in calculating debtors in the Accounts and (in the case of
creditors or debtors) is identified in the records of the Company or to the
extent such matter was specifically referred to in the notes to the
Accounts;
2.3 to the extent that a Claim arises or is increased:-
2.3.1 wholly or partly from an act or omission occurring at the request
of or with the written consent of the Purchaser or (on or after
the date hereof) the Company or any of their directors, other
officers, employees or agents or by a change in the accounting
principles, bases, policies and methods adopted by the Company
from those used in the Accounts (save insofar as the change is
required to comply with the Warranties on the assumption that
they applied to the Company or its accounts in the relevant
period);
2.3.2 as a result of any increase in rates of taxation since the
Balance Sheet Date;
2.3.3 wholly or partly as a result of the passing or coming into force
of or any change in any enactment, law, regulation, directive,
requirement or any practice of any government, government
department or agency or regulatory body (including but not
limited to extra-statutory concessions of the Inland Revenue)
after the date hereof whether or not having retrospective effect;
2.4 to the extent that the amount of a Claim is recovered under a policy of
insurance validly in force at the date hereof.
3.1 The liability of each of the Vendors in respect of any Claim or any claim
under the Tax Deed (each, a "Relevant Claim") is several and limited to his
proportionate part of the Claim, save where such Relevant Claim constitutes
a claim against a single Vendor in respect of a Vendor's Warranty which is
given for each Vendor separately. "Proportionate part" means the proportion
of the Claim which is the same as the proportion which the Consideration
shown in Column 3 of Schedule 1 received by each Vendor bears to the total
of such Consideration received by all the Vendors.
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3.2 The liability of each Vendor in respect of Relevant Claims shall be limited
to the aggregate of:
(a) the cash paid to such Vendor at Completion pursuant to clause
4.1.2; and
(b) the lower of the value at the relevant time of the Consideration
Shares then held by such Vendor and their value at the Offer
Price (and, to the extent any Consideration Shares have been sold
since Completion by such Vendor, the cash proceeds realised from
such sale).
3.3 No liability on the part of any Vendor in respect of any Relevant Claim
(other than a claim under clause 2.5 of the Deed of Tax Covenant) shall
arise unless and until the amount shall arise unless and until the amount
of such Relevant Claim when aggregated with the amount of any other such
Relevant Claim made against the Vendors under this Agreement exceeds
(pound)50,000 in which event all of such Relevant Claim or Claims shall be
recoverable, provided that this limitation shall not affect any claim in
respect of the Pension Tax Liability.
Part 2
Limitations under the Warranties
(other than Tax Warranties)
3.4 The liability of each Vendor in respect of claims shall cease two years
after the date hereof, except in respect of matters which have been the
subject of a bona fide written claim which is made before such date by or
on behalf of the Purchaser to the Vendors giving details of the claim
including the Purchaser's bona fide estimate of the amount thereof. Any
such Claim shall (it has not previously been satisfied, settled or
withdrawn) be deemed to have been withdrawn unless legal proceedings in
respect of its have been commenced by both being issued and served within 6
months of such notification to the Vendors.
Part 3
Limitations under the Tax Warranties
4. The liability of the Vendors in respect of any Claim shall cease six years
after the date hereof, except in respect of matters which have been the
subject of a bona fide written claim which is made before the relevant date
by or on behalf of the Purchaser to the Vendors giving sufficient details
of all material aspects of the claim including the Purchaser's bona fide
estimate of the amount thereof. Any such claim shall (if not previously
been satisfied, settled or withdrawn) be deemed to have been withdrawn
unless legal proceedings in respect of it have been commenced by both being
issued and served within 6 months of such notification to the Vendors.
Part 4
Special Limitations
5. In assessing the amount recoverable by the Purchaser for any Claim under
the Warranties there shall be taken in account:
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5.1 any benefit accruing to the Purchaser or the Company as a consequence of
such breach; and
5.2 the amount of any provision made in the Accounts to the extent that payment
or discharge of such matter or liability was taken into account in those
Accounts.
6. To the extent that any breach of Warranty is capable of remedy, the Vendors
shall not be liable under the Vendors' Warranties unless the Vendors are
given written notice of such breach of warranty and such breach of warranty
is not remedied within 30 days following the date of receipt of such
notice.
7. If after the Vendors have paid any sum in respect of a Claim the Purchaser
or the Company becomes entitled or has a claim to recover any sum from any
person in respect of the subject matter of that Claim, the Purchaser shall,
upon receipt of such sums from such person, pay to the Vendors a sum equal
to the lesser of the amount recovered by the Purchaser or the Company (less
any tax, where applicable) from such person and the amount paid by the
Vendors in respect of such Claim.
8. The amount of any liability arising in respect of any Claim for breach of
any of the Warranties or under the Deed of Tax Covenant shall be discharged
by reduction of the consideration for the Shares.
9. If any matter or circumstance which gives rise to a Claim comes to the
attention of the Purchaser, the Purchaser shall take all steps that the
Vendors reasonably request to avoid, dispute, resist, compromise or defend
any matter which may otherwise result in a Claim subject to the Vendors
indemnifying the Purchaser to its reasonable satisfaction against any costs
or liabilities incurred and providing security reasonably satisfactory to
it in respect of such Indemnity.
10. It is acknowledged by the Purchaser that any Claim may entitle the Company
to make a claim under the acquisition agreement dated 21 October 1996.
Accordingly, if any matter or circumstance which may give rise to a Claim
comes to the attention of the Purchaser, it shall as soon as reasonably
practicable give written notice to the Vendors setting out the particulars
known to the Purchaser and shall make or procure to be made available to
the Vendors and their duly authorised agents on reasonable notice during
normal business hours all relevant books of account records and
correspondence for the purpose of enabling the Vendors to ascertain or
extract any information relevant to such Claim.
11. The Vendors shall be entitled in order to mitigate any claim for breach of
any of the Warranties to institute or continue any proceedings against or
negotiations with any third party and to have the conduct of the same at
its own expense but in the name of the Company subject to the Company being
indemnified against all reasonable costs and disbursements of and in
relation to any legal proceedings which may be instituted in respect
thereof and the Purchaser shall not and it shall procure that the Company
shall not accept, pay or compromise any claim which may give rise to a
Claim in respect of the Warranties or under the Deed of Tax Covenant
without giving the Vendors an adequate opportunity to resist such claim
pursuant hereto.
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Schedule 9
Limitation of Purchaser's Liability
1. The Purchaser's shall not be liable under the Purchaser's Warranties:-
1.1 to the extent that the facts which might result in a Claim or possible
Claim were fully, fairly and accurately disclosed;
1.2 to the extent that the subject of the Claim is allowed or provided for or
reserved in the audited accounts of the Purchaser or has been included in
calculating creditors or deducted in calculating debtors in the audited
accounts of the Purchaser and (in the case of creditors or debtors) is
identified in the records of the Company or to the extent such matter was
specifically referred to in the notes to the audited accounts of the
Purchaser;
1.3 to the extent that a Claim arises or is increased:-
1.3.1 wholly or partly from an act or omission occurring at the request
of or with the written consent of any Vendor or (on or after the
date hereof) the Company or any of their directors, other
officers, employees or agents;
1.3.2 wholly or partly from an act or omission compelled by law;
1.3.3 as a result of any increase in rates of taxation since the
balance sheet date of the Purchaser being 30 September 1997;
1.3.4 wholly or partly as a result of the passing or coming into force
of or any change in any enactment, law, regulation, directive,
requirement or any practice of any government, government
department or agency or regulatory body (including but not
limited to extra-statutory concessions of the Inland Revenue)
after the date hereof whether or not having retrospective effect.
2. The liability of the Purchaser in respect of any Claim:-
2.1 shall not arise unless and until the amount of such Claim when
aggregated with the amount of any other such Claim made against the
Purchaser under this Agreement exceeds (pound)50,000 in which event
all of such Claim or Claims shall be recoverable hereunder;
2.2 shall not (when aggregated with the amount of all other Claims) exceed
the value at the Offer Price of the Consideration Shares; and
2.3 shall cease fourteen days after the publication of the first audited
statutory accounts of the Purchaser following Completion, except in
respect of matters which have been the subject of a bona fide written
claim which is made before the relevant date by or on behalf of the
Vendor to the Purchaser giving sufficient details of all material
aspects of the claim including the Vendors' bona fide estimate of the
amount thereof. Any such claim shall (it has not previously been
satisfied, settled or withdrawn) be deemed to have been withdrawn
unless legal proceedings in respect of its have been commenced by both
being issued and served within 6 months of such notification to the
Purchaser.
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Schedule 10
1. Each Vendor receiving Consideration Shares shall deliver a certificate
dated the date of Completion containing the following representations and
warranties, namely that:
1.1 he understands that the Purchaser is relying upon the following statements
in determining whether the Purchaser may issue shares to the Vendor under
applicable securities laws of the United States;
1.2 he understands that neither the offer nor the sale of the Consideration
Shares is being registered under the Securities Act of 1933, as amended
(the "Securities Act"), and that the Consideration Shares are being offered
and sold in reliance on an exemption from the registration requirements
under the Securities Act for a transaction not involving any public
offering;
1.3 he has been afforded the opportunity to ask questions of and receive
answers from, directors and executive officers of the Purchaser concerning
the Purchaser and the terms and conditions of the offering of the
Consideration Shares;
1.4 the Consideration Shares are being acquired by the Vendor for the Vendor's
own account for investment and not for distribution or resale within the
meaning of the Securities Act other than in compliance therewith or in
accordance with an exemption therefrom;
1.5 he acknowledges that the Purchaser and its officers and agents have made no
representations or warranties, whether orally or in writing, or express or
implied, as to the financial condition, assets, operations, business,
prospects or condition of the Purchaser, other than the certificate of the
Purchaser to be delivered pursuant to paragraph 4 below with respect to the
prospectus (the "Prospectus") which forms part of the Purchaser's
registration statement on Form S-1, No. 333- ____, filed with the
Securities and Exchange Commission (the "SEC"), as the same has been
declared effective by the SEC.
2. Each Vendor receiving Consideration Shares shall execute and deliver an
undertaking dated the date of Completion in favour of the underwriters of
the Consideration Shares in the agreed terms.
3. The Purchaser shall deliver to the Vendors a certificate dated the date of
Completion containing a representation and warranty that the Prospectus
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that representation or warranty
is made as to information contained in or omitted from the Prospectus in
relation to the Company and/or the Subsidiary.
SIGNED by P.L. FURLONGE ) P. Furlonge
SIGNED by R.J. ELMAN ) R. Elman
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SIGNED by ) Richard Prosser
for and on behalf of STELBY )
HOLDINGS LIMITED )
SIGNED by ) E. Le Poidevin
for and on behalf of CENTRAL ) Director
INVESTMENTS LIMITED )
SIGNED by ) David Floyd
for and on behalf of THE NAGGAR ) as attorney for G.A. Naggar
FAMILY PENSION SCHEME ) Nigel Sloam
SIGNED by M.L. TAGLIAFERRI ) Mark Tagliaferri
SIGNED by M.D. MORIARTY ) By his attorney David Floyd
SIGNED by J. MORIARTY ) By her attorney David Floyd
SIGNED by G. HARVEY ) W.G.B. Harvey
SIGNED by ) Michael R. Cunningham
for and on behalf of CUNNINGHAM )
GRAPHICS INC. )
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CERTIFICATE OF INCORPORATION
OF
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
Pursuant to the provisions of N.J.S.A. 14A:2-7, the undersigned corporation
hereby executes the following Certificate of Incorporation:
ARTICLE FIRST
The name of the corporation is Cunningham Graphics International, Inc. (the
"Corporation").
ARTICLE SECOND
The purpose of the Corporation is to engage in any activity within the
purposes for which corporations may be organized under the New Jersey Business
Corporation Act.
ARTICLE THIRD
The aggregate number of shares which the Corporation is authorized to issue
is forty million (40,000,000) shares, of which thirty million (30,000,000)
shares shall be Common Stock, without par value, and of which ten million
(10,000,000) shares shall be Preferred Stock, without par value.
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of stock of the Corporation:
I. Undesignated Preferred Stock
Subject to the limitations prescribed by law, the Board of Directors of the
Corporation shall have the authority to cause the issuance of one or more series
of Preferred Stock and with respect to each such series, to fix by resolution or
resolutions providing for the issuance of such series, the number of shares of
such series, the voting powers, full or limited, if any, of the shares of such
series and the designations, preferences and relative, participating, optional
or other special rights and the qualifications, limitations or restrictions
thereof. The Board of Directors shall have all powers and rights with respect to
the Preferred Stock which are not inconsistent with any limitations prescribed
by law or this Article THIRD, including, but not limited to, the determination
or fixing of the following:
(i) The designation and number of shares of such series.
<PAGE>
(ii) The dividend rate of such series, the conditions and dates upon
which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of stock,
and whether such dividends shall be cumulative or noncumulative.
(iii) Whether the shares of such series shall be subject to redemption
by the Corporation and, if made subject to such redemption, the times,
prices and other terms and conditions of such redemption.
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series.
(v) Whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes or of any other
series of any class or classes of stock of the Corporation, and, if
provision be made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or exchange.
(vi) The extent, if any, to which the holders of the shares of such
series shall be entitled to vote with respect to the election of directors
or otherwise.
(vii) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock.
(viii) Notwithstanding any other provision of this Article THIRD, the
rights of the holders of the shares of such series upon the dissolution of,
or upon the distribution of assets of, the Corporation.
Unless and except to the extent otherwise required by law or provided in
the resolution or resolutions of the Board of Directors creating any series of
Preferred Stock, the holders of Preferred Stock shall have no voting power with
respect to any matter whatsoever.
II. Common Stock
The Common Stock shall rank junior to the Preferred Stock with respect to
payment of dividends and distribution on liquidation, dissolution or winding up
of the Corporation.
Except as required by law or as otherwise provided in the resolution or
resolutions of the Board of Directors creating any series of Preferred Stock,
all voting rights shall be vested in the holders of the Common Stock. At each
meeting of stockholders of the Corporation, each holder of Common Stock shall be
entitled to one vote for each share on each matter to come before the meeting.
2
<PAGE>
ARTICLE FOURTH
The address of the Corporation's initial registered office is 629 Grove
Street, Jersey City, New Jersey 07310 and the name of the Corporation's initial
registered agent at such address is Michael R. Cunningham.
ARTICLE FIFTH
A. The business affairs of the Corporation shall be managed by or under the
direction of the Board of Directors consisting of not less than three directors
with the actual number to be fixed from time to time by a vote of the majority
of the directors then in office (such number is hereafter, "the authorized
number").
B. The current total number of directors is three. The names and addresses
of the current directors are as follows:
Name Address
- ---- -------
Michael R. Cunningham c/o Cunningham Graphics International, Inc.
629 Grove Street
Jersey City, New Jersey 07310
Gordon Mays c/o Cunningham Graphics International, Inc.
629 Grove Street
Jersey City, New Jersey 07310
James J. Cunningham c/o Cunningham Graphics International, Inc.
629 Grove Street
Jersey City, New Jersey 07310
C. Effective upon the closing of an initial public offering of the
Corporation's Common Stock (the "Effective Date"), the Board of Directors shall
be divided into three classes: Class A, Class B and Class C. The number of
directors in each class (each of which classes shall have not less than one
director) shall consist as nearly as may be possible, of one-third of the
authorized number of directors.
D. Class A directors shall be serve until the first annual meeting of
stockholders following the Effective Date, Class B directors shall serve until
the second annual meeting of stockholders following the Effective Date and Class
C directors shall serve until the third annual meeting of stockholders following
the Effective Date. At each succeeding annual meeting of stockholders,
successors to the class of Directors whose term expires at that annual meeting
shall be elected for a three-year term. Notwithstanding the foregoing, in the
event that, as a result of any change in the authorized number of directors, the
number of directors in any class would differ from the
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number allocated to that class immediately prior to such change, the following
rules shall apply:
(1) Each director shall nevertheless continue as a director of the
class of which he is a member until the earlier of the expiration of his
current term or his earlier death, resignation or removal;
(2) At each subsequent election of directors, if the number of
directors in the class whose term of office then expires is less than the
number then allocated to that class, the number of directors then elected
for membership in that class shall not be greater than the number of
directors in that class whose term of office then expires, unless and to
the extent that the aggregate number of directors then elected plus the
number of directors in all classes then duly continuing in office does not
exceed the then authorized number of directors of the Corporation;
(3) At each subsequent election of directors, if the number of
directors in the class whose term of office then expires exceeds the number
then allocated to that class, the Board of Directors shall designate one or
more of the directorships then being elected as directorships of another
class or classes in which the number of directors then serving is less than
the number then allocated to such other class or classes;
(4) In the event of the death, resignation or removal of any director
who is a member of a class in which the number of directors serving
immediately preceding the creation of such vacancy exceeds the number then
allocated to that class, the Board of Directors shall designate the vacancy
thus created as a vacancy in another class in which the number of directors
then serving is less than the number then allocated to such other class;
(5) In the event of any increase in the authorized number of
directors, the new directorships resulting from such increase shall be
apportioned by the Board of Directors to such class or classes as shall, so
far as possible, bring the composition of each of the classes into
conformity with the provisions of Paragraph B of this Article FIFTH, as
such provisions apply to the number of directors authorized immediately
following such increase; and
(6) Designations of directorships or vacancies into other classes and
apportionments of newly created directorships to classes by the Board of
Directors under clauses (3), (4) and (5) of this Paragraph D shall, so far
as possible, be effected so that the class whose term of office is due to
expire next following such designation or apportionment shall contain the
full number of directors then allocated to such class.
E. Notwithstanding the provisions of this Article FIFTH, each director
shall serve until his successor is elected and qualified or until his death,
resignation or removal. No director may be removed at any time prior to his
death or resignation or the expiration of his term of office without the
affirmative vote of the holders of two-thirds (2/3rds) of
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the outstanding shares of the Common Stock of the Corporation entitled to vote
and voting separately as a class.
F. Elections of directors need not be by ballot unless the by-laws of the
Corporation so provide.
ARTICLE SIXTH
The name and address of the incorporator is as follows:
Name Address
- ---- -------
Christopher M. Bartoli, Esq. c/o Gibbons, Del Deo, Dolan, Griffinger &
Vecchione, P.C.
One Riverfront Plaza
Newark, New Jersey 07102
ARTICLE SEVENTH
The Corporation shall have perpetual duration.
ARTICLE EIGHTH
A director or officer of the Corporation shall not be personally liable to
the Corporation or its shareholders for damages for breach of any duty owed to
the Corporation or its shareholders, except that a director or officer shall not
be relieved of any liability under this provision for any breach of duty based
upon an act or omission (a) in breach of such person's duty of loyalty to the
Corporation or its shareholders, (b) not in good faith or involving a knowing
violation of law or (c) resulting in receipt by such person of an improper
personal benefit. Neither the amendment or repeal of this Article EIGHTH, nor
the adoption of any provision of this Certificate of Incorporation inconsistent
with this Article EIGHTH shall eliminate or reduce the protection afforded by
this Article EIGHTH to a director or officer of the Corporation in respect to
any matter which occurred, or any cause of action, suit or claim which but for
this Article EIGHTH would have arisen, prior to such amendment, repeal or
adoption.
ARTICLE NINETH
A. The Corporation shall indemnify, to the fullest extent from time to time
permitted by law, any person made, or threatened to be made, a party to, or a
witness or other participant in, any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative,
legislative, investigative, or of any other kind, by reason of the fact that
such person is or was a corporate agent of the Corporation or any subsidiary of
the Corporation or serves or served any other enterprise
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at the request of the Corporation (including specifically, but not limited to,
service as a fiduciary with respect to any employee benefit plan) against
expenses (including attorneys' fees), judgments, fines, penalties, excise taxes,
and amounts paid in settlement (including amounts paid pursuant to judgments or
settlements in derivative actions), actually and reasonably incurred by such
person in connection with such action, suit, or proceeding, or any appeal
therein. The rights provided by this Article NINETH to any person shall inure to
the benefit of such person's legal representative. Neither amendment or repeal
of this Article NINETH, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article NINETH, shall deprive any person of
rights hereunder arising out of any matter which occurred prior to such
amendment, repeal or adoption. No indemnification pursuant to this Article shall
be required with respect to any settlement or other nonadjudicated disposition
of any threatened or pending action or proceeding unless the Corporation has
given its prior consent to such settlement or other disposition.
B. As used in this Article "corporate agent" means any person who is or was
a director, officer, employee or agent of the Corporation or of any constituent
corporation absorbed by the Corporation in a consolidation or merger and any
person who is or was a director, officer, trustee, employee or agent of any
other enterprise, serving as such at the request of the Corporation, or of any
such constituent corporation, or the legal representative of any such director,
officer, trustee, employee or agent.
C. The Corporation shall have the authority to purchase and maintain
insurance covering its corporate agents against expenses and liabilities
incurred in connection with any action or proceeding in which such persons are a
participant because of their service to the Corporation, any subsidiary of the
Corporation or any other enterprise at the request of the Corporation.
D. To the full extent from time to time permitted by law, expenses incurred
by a person in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action upon
receipt of an undertaking by or on behalf of such person to repay such amount to
the extent the expenses so advanced exceed the indemnification to which it is
ultimately determined that he is entitled.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation as of this 12th day of January, 1998.
-------------------------------
Christopher M. Bartoli, Esq.,
Incorporator
7
BY-LAWS
OF
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
(as of January __, 1998)
ARTICLE I
OFFICES
1.1. Registered Office. The registered office shall be established and
maintained at 629 Grove Street, Jersey City, New Jersey 07310, or at any other
location within the State of New Jersey as the President of the Corporation
shall designate from time to time.
1.2. Other Offices. The Corporation may have other offices, either within
or without the State of New Jersey, at such place or places as the Board of
Directors may from time to time appoint or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
2.1. Place of Stockholders' Meetings. All meetings of the stockholders of
the Corporation shall be held at such place or places, within or outside the
State of New Jersey as may be fixed by the Board of Directors from time to time
or as shall be specified in the respective notices thereof.
2.2. Date and Hour of Annual Meetings of Stockholders. Subject to change by
resolution of the Board of Directors, the annual meeting of the stockholders of
the Corporation shall be held each year on the first day of May, unless said
date is a legal holiday, in which case the meeting shall be held on the next
business day thereafter which is not a legal holiday. The
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meeting may be held at such time and such place within or without the State of
New Jersey as shall be fixed by the Board of Directors and stated in the notice
of the meeting.
2.3. Purposes of Annual Meetings. At each annual meeting, the stockholders
shall elect the members of the Board of Directors for the succeeding year. At
any such annual meeting any further proper business may be transacted.
2.4. Special Meetings of Stockholders. Special meetings of the stockholders
or of any class or series thereof entitled to vote may be called by the Chief
Executive Officer, the President or by the Board of Directors, or at the request
in writing by stockholders of record owning a majority of the issued and
outstanding shares of Common Stock of the Corporation.
2.5. Notice of Meetings of Stockholders. Except as otherwise expressly
required or permitted by law, not less than ten days nor more than sixty days
before the date of every stockholders' meeting the Secretary shall give to each
stockholder of record entitled to vote at such meeting, written notice, (i)
delivered by hand, (ii) sent by telecopier, provided that a copy is mailed by
registered or certified mail, return receipt requested, postage prepaid, (iii)
sent by Express Mail, Federal Express or other express delivery service, receipt
requested, (iv) sent by telegram or (v) mailed by first-class registered or
certified mail, return receipt requested, postage prepaid, stating the place,
date and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Such notice, if mailed, shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address for notices to such stockholder as it
appears on the records of the Corporation.
2.6. Quorum of Stockholders. (a) Unless otherwise provided by the
Certificate of Incorporation or by law, at any meeting of the stockholders, the
presence in person or by proxy of stockholders entitled to cast a majority of
the votes thereat shall constitute a quorum.
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(b) At any meeting of the stockholders at which a quorum shall be present,
a majority of those present in person or by proxy may adjourn the meeting from
time to time without notice other than announcement at the meeting. In the
absence of a quorum, the officer presiding thereat shall have power to adjourn
the meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting, other than announcement at the meeting, shall not be required
to be given, except as provided in paragraph (d) below and except where
expressly required by law.
(c) At any adjourned session at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof, unless a new record date is fixed by the Board of Directors.
(d) If an adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.7. Chairman and Secretary of Meeting. The Chairman of the Board (if there
be one), or in his absence, the Chief Executive Officer or President, or in his
or their absence, a Vice President, shall preside at meetings of the
stockholders. The Secretary or, in his absence, an Assistant Secretary, shall
act as secretary of the meeting, or if neither is present, then the presiding
officer may appoint a person to act as secretary of the meeting.
2.8. Voting by Stockholders. Except as may be otherwise provided by the
Certificate of Incorporation or these by-laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each share of
stock standing in his name on the books of the Corporation
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on the record date for the meeting. All elections and questions shall be decided
by the vote of a majority in interest of the stockholders present in person or
represented by proxy and entitled to vote at the meeting.
2.9. Proxies. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy. Every proxy shall be in
writing, subscribed by the stockholder or his duly authorized attorney-in-fact,
but need not be dated, sealed, witnessed or acknowledged. Unless a proxy is
irrevocable as provided in subsection 14A:5-19(3) of the New Jersey Business
Corporation Act, a proxy shall be revocable at will.
2.10. Inspectors. The Board of Directors may at any time appoint one or
more persons to serve as Inspectors of Election at the next succeeding annual
meeting of stockholders or at any meeting or meetings and the Board of Directors
may at any time fill any vacancy in the office of Inspector. If the Board of
Directors fails to appoint Inspectors, or if any Inspector appointed be absent
or refuse to act, or if his office becomes vacant and be not filled by the Board
of Directors, the Chairman of any meeting of the stockholders may appoint one or
more temporary Inspectors for such meeting. All proxies shall be filed with the
Inspectors of Election at the meeting before being voted upon.
2.11. List of Stockholders. (a) At least ten days before every meeting of
stockholders the Secretary shall prepare and make a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder.
(b) During ordinary business hours, for a period of at least ten days prior
to the meeting, such list shall be open to examination by any stockholder for
any purpose germane to the meeting, either at a place within the city where the
meeting is to be held, which place shall
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be specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
(c) The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and it may be inspected by any
stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section 2.11 or the books of the Corporation, or to vote in person or by proxy
at any meeting of stockholders.
2.12. Action By Consent Without Meeting. Unless otherwise provided by the
Certificate of Incorporation and subject to any limitations prescribed by the
provisions of Section 14A:5-6 of the New Jersey Business Corporation Act and
upon compliance with said provisions, any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE III
DIRECTORS
3.1. Powers of Directors. The property, business and affairs of the
Corporation shall be managed by its Board of Directors which may exercise all
the powers of the Corporation
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except such as are by the law of the State of New Jersey or the Certificate of
Incorporation or these by-laws required to be exercised or done by the
stockholders.
3.2. Number, Method of Election, Terms of Office of Directors,
Qualification.
(a) The number of directors shall be such as the Board of Directors may by
resolution direct consistent with the provisions of the Certificate of
Incorporation of the Corporation. Directors need not be stockholders. Each
director shall hold office for the term for which he is appointed or elected and
until his successor shall have been elected and shall qualify, or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided. Directors need not be elected by ballot, except upon
demand of any stockholder. The Chairman of the Board, if one be elected, shall
be chosen from among the directors.
(b) Any stockholder desiring to nominate a person as a Director of the
Corporation shall cause the proposed nomination to be received at the
Corporation's principal executive offices (i) no later than February 1, 1998, in
the case of a person to be proposed as a nominee for election at the 1998 annual
meeting of stockholders and (ii) no later than 120 days in advance of the
anniversary of the date of the Corporation's proxy statement released to
stockholders in connection with the previous year's annual meeting, in the case
of a person to be proposed as a nominee for election at the 1999 annual meeting
of stockholders and thereafter. Any Director nominee proposal, as a condition
for consideration by the Board of Directors, shall be accompanied by (i) a
statement signed by the proposed nominee that he consents to be nominated and
agrees to serve if elected as a Director and (ii) biographical information about
the proposed nominee that would be required to be disclosed by the Corporation
in filings made with the United States Securities and Exchange Commission in
accordance with the rules and
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regulations under the Securities Exchange Act of 1934, as amended, whether or
not the Corporation is subject to such reporting requirements.
3.3. Vacancies on Board of Directors; Removal.
(a) Any vacancy in the Board of Directors caused by death, resignation,
removal (whether or not by cause), disqualification, an increase in the number
of directors or any other cause may be filled by the majority vote of the
remaining directors of the Corporation at the next annual meeting, any regular
meeting or any special meeting called for that purpose. Each director so elected
shall hold office for the unexpired term or for such lesser term as may be
designated and until his successor shall be duly elected and qualified, or until
his death or until he shall resign or shall have been removed in the manner
herein provided. In case all the directors shall die or resign or be removed or
disqualified, any stockholder having voting powers may call a special meeting of
the stockholders, upon notice given as herein provided for meetings of the
stockholders, at which directors may be elected for the unexpired term.
(b) Removal. Any director may be removed with or without cause at any time
by the affirmative vote of stockholders holding of record in the aggregate at
least a majority of the outstanding shares of stock of the Corporation, given at
a special meeting of the stockholders called for that purpose.
3.4. Meetings of the Board of Directors. (a) The Board of Directors may
hold their meetings, both regular and special, either within or outside the
State of New Jersey.
(b) Regular meetings of the Board of Directors may be held at such time and
place (within or without the State of New Jersey) as shall from time to time be
determined by resolution of the Board of Directors. No notice of such regular
meetings shall be required. If the
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date designated for any regular meeting be a legal holiday, then the meeting
shall be held on the next day which is not a legal holiday.
(c) The first meeting of each newly elected Board of Directors shall be
held immediately following the annual meeting of the stockholders for the
election of officers and the transaction of such other business as may come
before it. If such meeting is held at the place of the stockholders' meeting, no
notice thereof shall be required.
(d) Special meetings of the Board of Directors shall be held whenever
called by direction of the President or at the written request of any one
director.
(e) The Secretary shall give notice to each director of any special meeting
of the Board of Directors by mailing the same at least five days before the
meeting or by telegraphing, telexing, or delivering the same not later than the
day before the meeting. Unless required by law, such notice need not include a
statement of the business to be transacted at, or the purpose of, any such
meeting. Any and all business may be transacted at any meeting of the Board of
Directors. No notice of any adjourned meeting need be given. No notice to or
waiver by any director shall be required with respect to any meeting at which
the director is present.
3.5. Quorum and Action. Unless provided otherwise by law or the Certificate
of Incorporation, a majority of the whole board shall constitute a quorum for
the transaction of business; but if there shall be less than a quorum at any
meeting of the Board, a majority of those present may adjourn the meeting from
time to time. The vote of a majority of the directors present at any meeting at
which a quorum is present shall be necessary to constitute the act of the Board
of Directors, unless the New Jersey Business Corporation Act requires a greater
proportion.
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3.6. Presiding Officer and Secretary of Meeting. The Chairman of the Board
(if there be one), or in his absence, the Chief Executive Officer or President,
or, in his or their absence, any Vice President, or, in their absence a member
of the Board of Directors selected by the members present, shall preside at
meetings of the Board. The Secretary shall act as secretary of the meeting, but
in his absence the presiding officer may appoint a secretary of the meeting.
3.7. Action by Consent Without Meeting. Any action required or permitted to
be taken at any meeting of Board of Directors or of any committee thereof 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 or proceedings of the Board or committee.
3.8. Action by Telephonic Conference. Members of the Board of Directors, or
any committee designated by such board, may participate in a meeting of such
board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such a meeting shall constitute presence in
person at such meeting.
3.9. Committees. (a) The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any such
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
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(b) Any such committee, to the extent provided in the resolution or
resolutions of the Board of Directors, or in these by-laws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power of authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
amending the by-laws of the Corporation, or any authority the delegation of
which is prohibited by Section 14A: 6-9 of the New Jersey Business Corporation
Act; and unless the resolution, these by-laws, or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
3.10. Compensation of Directors. Directors shall receive such reasonable
compensation for their service on the Board of Directors or any committees
thereof, whether in the form of salary or a fixed fee for attendance at
meetings, or both, with expenses, if any, as the Board of Directors may from
time to time determine. Nothing herein contained shall be construed to preclude
any Director from serving in any other capacity and receiving compensation
therefor.
ARTICLE IV
OFFICERS
4.1. Officers, Title, Elections, Terms. (a) The elected officers of the
Corporation shall include a President, a Treasurer and a Secretary, and may
include a Chairman of the Board (or one or more Co-Chairmen of the Board), a
Chief Executive Officer, a Vice Chairman of the
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Board, a Chief Operating Officer, a Chief Financial Officer, one or more Vice
Presidents (or one or more Executive Vice Presidents or Senior Vice Presidents),
one or more Assistant Secretaries and one or more Assistant Treasurers who shall
be elected by the Board of Directors at its annual meeting following the annual
meeting of the stockholders, to serve at the pleasure of the Board or otherwise
as shall be specified by the Board at the time of such election and until their
successors are elected and qualify.
(b) The Board of Directors may elect or appoint at any time, and from time
to time, additional officers or agents with such duties as it may deem necessary
or desirable. Such additional officers shall serve at the pleasure of the Board
or otherwise as shall be specified by the Board at the time of such election or
appointment. Two or more offices may be held by the same person.
(c) Any vacancy in any office may be filled for the unexpired portion of
the term by the Board of Directors.
(d) Any officer may resign his office at any time. Such resignation shall
be made in writing and shall take effect at the time specified therein or, if no
time be specified, at the time of its receipt by the Corporation. The acceptance
of a resignation shall not be necessary to make it effective, unless expressly
so provided in the resignation.
(e) The salaries and other compensation of all officers of the Corporation
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary or other compensation by reason of the
fact that he is also a director.
4.2. Removal of Elected Officers. Any elected officer may be removed at any
time, either with or without cause, by resolution adopted at any regular or
special meeting of the Board of Directors by a majority of the directors then in
office.
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4.3. Duties. (a) Chief Executive Officer. The Board of Directors may
designate a Chief Executive Officer. In the absence of such designation, the
Chairman of the Board (or, if more than one, the Co-Chairmen of the Board in the
order designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall be the Chief Executive
Officer of the Corporation. The Chief Executive Officer shall have general
responsibility for implementation of the policies of the Corporation, as
determined by the Board of Directors, and for the management of the business and
affairs of the Corporation.
(b) Chief Operating Officer. The Board of Directors may designate a Chief
Operating Officer. The Chief Operating Officer shall have the responsibilities
and duties as set forth by the Board of Directors or the Chief Executive
Officer.
(c) Chief Financial Officer. The Board of Directors may designate a Chief
Financial Officer. The Chief Financial Officer shall have the responsibilities
and duties as set forth by the Board of Directors or the Chief Executive
Officer.
(d) Chairman of the Board. The Board of Directors may designate a Chairman
of the Board (or one or more Co-Chairmen of the Board). The Chairman of the
Board shall preside over the meetings of the Board of Directors and of the
stockholders at which he shall be present. If there be more than one, the
Co-Chairmen designated by the Board will perform such duties. The Chairman of
the Board shall perform such other duties as may be assigned to him or them by
the Board of Directors.
(e) President. The President or Chief Executive Officer, as the case may
be, shall be the principal executive officer of the Corporation and, subject to
the control of the Board of Directors, shall supervise and control all the
business and affairs of the Corporation. In the absence of a designation of a
Chief Operating Officer by the Board of Directors, the President
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shall be a Chief Operating Officer. In the absence of the Chairman (or any
Co-Chairmen) of the Board of Directors and the Chief Executive Officer, he
shall, when present, preside at all meetings of the stockholders and of the
Board of Directors. He shall see that all orders and resolutions of the Board of
Directors are carried into effect (unless any such order or resolution shall
provide otherwise), and in general shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Board of
Directors from time to time.
(f) Vice President. Each Vice President, if any, shall have such powers and
perform such duties as the Board of Directors may determine or as may be
assigned to him by the President. In the absence of the President or in the
event of his death, or inability or refusal to act, the Vice President (or in
the event there be more than one Vice President, the Vice Presidents in the
order designated at the time of their election, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President and when so acting, shall have all the powers and be subject to
all the restrictions upon the President. The Board of Directors may designate
one or more Vice Presidents as Executive Vice President or as Vice President or
Executive Vice President for particular areas of responsibility.
(g) Treasurer. The Treasurer shall (1) have charge and custody of and be
responsible for all funds and securities of the Corporation; (2) receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever; (3) deposit all such moneys in the name of the Corporation in such
banks, trust companies, or other depositories as shall be selected by resolution
of the Board of Directors; and (4) in general perform all duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the President or by the Board of Directors. He shall, if required by
the Board of
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Directors, give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine.
(h) Secretary. The Secretary shall (1) keep the minutes of the meetings of
the stockholders, the Board of Directors, the Executive Committee (if
designated), and all other committees, if any, of which a secretary shall not
have been appointed, in one or more books provided for that purpose; (2) see
that all notices are duly given in accordance with the provisions of these
by-laws and as required by law; (3) be custodian of the corporate records and of
the seal of the Corporation and see that the seal of the Corporation is affixed
to all documents, the execution of which on behalf of the Corporation under its
seal, is duly authorized; (4) keep a register of the post office address of each
stockholder which shall be furnished to the Secretary by such stockholder; (5)
have general charge of stock transfer books of the Corporation; and (6) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the President or by the
Board of Directors.
(i) Assistant Secretaries and Assistant Treasurers. At the request of the
Secretary or in his absence or disability, one or more Assistant Secretaries
designated by him or by the Board of Directors shall have all the powers of the
Secretary for such period as he or it may designate or until he or it revokes
such designation. At the request of the Treasurer or in his absence or
disability, one or more Assistant Treasurers designated by him or by the Board
of Directors shall have all the powers of the Treasurer for such period as he or
it may designate or until he or it revokes such designation. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.
-14-
<PAGE>
ARTICLE V
CAPITAL STOCK
5.1. Stock Certificates. (a) Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of, the Corporation
by the Chairman or the President or a Vice President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the
number of shares owned by him.
(b) If such certificate is countersigned by a transfer agent other than the
Corporation or its employee, or by a registrar other than the Corporation or its
employee, the signatures of the officers of the Corporation may be facsimiles,
and, if permitted by law, any other signature may be a facsimile.
(c) In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not inconsistent
with the Certificate of Incorporation as shall be approved by the Board of
Directors. They shall be numbered and registered in the order in which they are
issued. They shall set forth thereon the statements prescribed by Section
14A:7-11, and, where applicable, by Sections 14A:5-21 and 14A:12-5, of the New
Jersey Business Corporation Act.
(e) All certificates surrendered to the Corporation shall be canceled with
the date of cancellation, and shall be retained by the Secretary, together with
the powers of attorney to transfer and the assignments of the shares represented
by such certificates, for such period of time as shall be prescribed from time
to time by resolution of the Board of Directors.
-15-
<PAGE>
5.2. Record Ownership. A record of the name and address of the holder of
each certificate, the number of shares represented thereby and the date of issue
thereof shall be made on the Corporation's books. The Corporation shall be
entitled to treat the holder of any share of stock as the holder in fact
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, except as required by law.
5.3. Transfer of Record Ownership. Transfers of stock shall be made on the
books of the Corporation only by direction of the person named in the
certificate or his attorney, lawfully constituted in writing, and only upon the
surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and transferee request the Corporation to do so.
5.4. Lost, Stolen or Destroyed Certificates. Certificates representing
shares of the stock of the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed in such manner and on
such terms and conditions as the Board of Directors from time to time may
authorize.
5.5. Transfer Agent; Registrar; Rules Respecting Certificates. The
Corporation may maintain one or more transfer offices or agencies where stock of
the Corporation shall be transferable. The Corporation may also maintain one or
more registry offices where such stock shall be registered. The Board of
Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates.
-16-
<PAGE>
5.6. Fixing Record Date for Determination of Stockholders of Record. The
Board of Directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at, any
meeting of the stockholders or any adjournment thereof, or the stockholders
entitled to receive payment of any dividend or other distribution or the
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or to express consent to corporate
action in writing without a meeting, or in order to make a determination of the
stockholders for the purpose of any other lawful action. Such record date in any
case shall be not more than sixty days nor less than ten days before the date of
a meeting of the stockholders, nor more than sixty days prior to any other
action requiring such determination of the stockholders. A determination of
stockholders of record entitled to notice or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
5.7. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the Corporation available
for dividends, such sum or sums as the Board of Directors from time to time in
their discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Corporation.
-17-
<PAGE>
ARTICLE VI
MISCELLANEOUS
6.1. Signatories. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
6.2. Seal. The seal of the Corporation shall be in such form and shall have
such content as the Board of Directors shall from time to time determine.
6.3. Notice and Waiver of Notice. Whenever any notice of the time, place or
purpose of any meeting of the stockholders, directors or a committee is required
to be given under the law of the State of New Jersey, the Certificate of
Incorporation or these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the holding
thereof, or actual attendance at the meeting in person or, in the case of any
stockholder, by his attorney-in-fact, shall be deemed equivalent to the giving
of such notice to such persons.
6.4. Amendment of By-Laws. (a) By Board of Directors. The by-laws of the
Corporation may be altered, amended or repealed or new by-laws may be made or
adopted by the Board of Directors at any regular or special meeting of the
Board.
(b) By Stockholders. The by-laws of the Corporation may also be altered,
amended or repealed or new by-laws may be made or adopted by the vote of a
majority in interest of the stockholders represented and entitled to vote, at
any meeting at which a quorum is present; provided, however, that Sections
6.4(a) and 3.2(b) of these by-laws may only be altered, amended or repealed, if
by action of the stockholders, by the affirmative vote of the holders of 66.67%
of the outstanding shares entitled to vote thereon.
-18-
<PAGE>
6.5. Indemnity. The Corporation shall indemnify its directors and officers
to the fullest extent allowed by law.
6.6. Fiscal Year. The fiscal year of the Corporation shall end on such date
of each year as shall be determined by the Board of Directors.
-19-
CUNNINGHAM GRAPHICS INTERNATIONAL, INC.
DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
The purpose of the Cunningham Graphics International, Inc. Directors' Stock
Option Plan (the "Plan") is to promote the success of Cunningham Graphics
International, Inc. (the "Company") by providing a method whereby members of the
Board of Directors of the Company who are not Employees of the Company or its
Subsidiaries may be encouraged to invest in the Common Stock of the Company in
order to promote long term shareholder value, and increase their personal
interest in the continued success and progress of the Company.
2. DEFINITIONS
Except where the context otherwise requires, as used herein:
2.1 "Board of Directors" shall mean the Board of Directors of the Company.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any Treasury regulations promulgated thereunder.
2.3 "Common Stock" shall mean the common stock, no par value, of the
Company.
2.4 "Director" shall mean a member of the Board of Directors.
2.5 "Employee" shall mean an individual who is on the active salaried
payroll of the Company or any of its Subsidiaries at the time a Nonstatutory
Stock Option is granted under the Plan.
2.6 "Fair Market Value" of the Common Stock means, for all purposes of the
Plan unless otherwise provided (i) the mean between the high and low sales
prices of the Common Stock as reported on the National Market System or Small
Cap Market of the National Association of Securities Dealers, Inc., Automated
Quotation System, or any similar system of automated dissemination of quotations
of securities prices then in common use, if so quoted, or (ii) if not quoted as
described in clause (i), the mean between the high bid and low asked quotations
for the Common Stock as reported by the National Quotation Bureau Incorporated
or such other source as the Board of Directors shall determine, or (iii) if the
Common Stock is listed or admitted for trading on any national securities
exchange, the mean between the high and low sales price, or the closing bid
price if no sale occurred, of the Common Stock on the principal securities
exchange on which the Common Stock is listed. In the event that the method for
determining the Fair Market Value of the Common Stock provided for above shall
either be not applicable or not be practical, in the opinion of the Board of
Directors, then the Fair Market Value shall be determined by such other
reasonable method as the Board of Directors shall, in its discretion, select and
apply.
2.7 "Nonstatutory Stock Option" shall mean an option to purchase Common
Stock granted under Section 5(b) of the Plan that by its terms does not qualify
as an "incentive stock option" under Section 422 of the Code.
2.8 "Optionee" shall mean a person to whom a Nonstatutory Stock Option has
been granted under the Plan.
2.9 "Outside Director" shall mean each Director who is not an Employee.
<PAGE>
2.10 "Subsidiary" shall mean any subsidiary corporation as defined in
Section 424(f) of the Code.
3. ADMINISTRATION
(a) The Board of Directors of the Company shall administer the Plan. The
Board of Directors shall have full power and authority to grant Nonstatutory
Stock Options pursuant to the provisions of the Plan, to interpret the
provisions of the Plan and any agreements reflecting Nonstatutory Stock Options
issued under the Plan, and to supervise the administration of the Plan,
including the adoption of the rules and regulations for the administration of
the Plan. The Board of Directors may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of their
number or the Secretary or any other officer of the Company to execute and
deliver documents on behalf of the Board of Directors.
(b) All decisions of the Board of Directors pursuant to the provisions of
the Plan shall be final, conclusive and binding on all persons, including the
Company, shareholders, employees and Optionees.
(c) No member of the Board of Directors shall be liable for anything done
or omitted to be done by him or any other member of the Board of Directors in
connection with the Plan, except for his own willful misconduct or as expressly
provided by statute.
4. SHARES SUBJECT TO THE PLAN
(a) The shares of Common Stock to be delivered upon exercise of
Nonstatutory Stock Options granted under the Plan may be made available from the
authorized but unissued shares of the Company or treasury shares or from shares
reacquired by the Company, including shares purchased in the open market.
(b) Subject to adjustments made pursuant to the provisions of Section 4(c),
the aggregate number of shares to be delivered upon the exercise of all
Nonstatutory Stock Options which may be granted under the Plan shall not exceed
150,000 shares of Common Stock.
(c) In the event of any change in the outstanding Common Stock of the
Company by reason of any stock split, stock dividend, split-up, split-off,
spin-off, recapitalization, merger, consolidation, rights offering,
reorganization, combination or exchange of shares, a sale by the Company of all
or part of its assets, any distribution to shareholders other than a normal cash
dividend, or other extraordinary or unusual event, the number or kind of shares
that may be issued under the Plan pursuant to Section 4(b) above, the number or
kind of shares subject to, and the Nonstatutory Stock Option price per share
under, all outstanding Nonstatutory Stock Options shall be automatically
adjusted so that the proportionate interest of the Optionee shall be maintained
as before the occurrence of such event; such adjustment in outstanding
Nonstatutory Stock Options shall be made without change in the total
Nonstatutory Stock Option exercise price applicable to the unexercised portion
of such Nonstatutory Stock Options and with a corresponding adjustment in the
Nonstatutory Stock Option exercise price per share, and such adjustment shall be
conclusive and binding for all purposes of the Plan.
(d) If a Nonstatutory Stock Option granted under the Plan shall expire or
terminate for any reason, the shares subject to, but not delivered under, such
Nonstatutory Stock Option shall be
-2-
<PAGE>
available for other Nonstatutory Stock Options to the same member or other
members of the Board of Directors.
5. ELIGIBILITY AND EXTENT OF PARTICIPATION
(a) Only Outside Directors shall be eligible to receive Nonstatutory Stock
Options under the Plan.
(b) Each individual who is an Outside Director at the time of the closing
of the Company's initial public offering of Common Stock and, thereafter, each
individual who becomes an Outside Director shall receive a Nonstatutory Stock
Option for 15,000 shares of Commmon Stock. In addition, each year on the first
business day of the month following the month in which the annual meeting of
shareholders occurs, commencing in 1999, each Outside Director shall
automatically receive a Nonstatutory Stock Option for 4,000 shares of Common
Stock.
(c) The Nonstatutory Stock Option shall not be transferable by the Optionee
otherwise than by will or the laws of descent and distribution, or pursuant to a
"qualified domestic relations order" as defined by the Code and shall be
exercisable during his lifetime only by him.
(d) The Nonstatutory Stock Option shall not be exercisable:
(i) before the expiration of six months from the date it is granted
and after the expiration of ten years from the date it is
granted, and may be exercised at any time during such period;
(ii) unless payment in full is made in United States dollars by cash
or check;
(iii)in the case of a person who ceases to be an Outside Director for
reasons other than death while holding a Nonstatutory Stock
Option that has not expired and has not been fully exercised,
after the third anniversary of the date he ceased to be a member
(but in no event after the Nonstatutory Stock Option has expired
under the provisions of Section 5(d)(i) above); and
(iv) in the case of the executors, administrators, heirs or
distributees, as the case may be, of a person who dies holding a
Nonstatutory Stock Option that has not expired and has not been
fully exercised, after the first anniversary of the date of death
(but in no event after the Nonstatutory Stock Option has expired
under the provisions of Section 5(d)(i) above).
(e) It shall be a condition to the obligation of the Company to issue
shares of Common Stock upon exercise of a Nonstatutory Stock Option, that the
holder (or any beneficiary or person entitled to exercise such Nonstatutory
Stock Option pursuant to the Plan) pay to the Company, upon its demand, such
amount as may be requested by the Company for the purpose of satisfying any
liability to withhold federal, state, or local income or other taxes. If the
amount requested is not paid, the Company may refuse to issue shares of Common
Stock.
6. OPTION AGREEMENTS
Each Nonstatutory Stock Option under the Plan shall be evidenced by an
option agreement which shall be executed by the Optionee and, on behalf of the
Company, by an officer of the Company and shall contain such provisions
consistent with the Plan as may be approved by the Board of Directors and may be
supplemented and amended from time to time as approved by the Board of
Directors.
-3-
<PAGE>
7. OPTION PRICE
The price at which shares of Common Stock may be purchased upon exercise of
a particular Nonstatutory Stock Option shall be 100 percent of the Fair Market
Value of such shares at the time such Nonstatutory Stock Option is granted, but
in no event less than the par value thereof (if any). In the case of the options
granted to persons who are or who become Outside Directors at the time of the
initial public offering of the Common Stock, the exercise price shall be the
initial public offering price.
8. TRANSFERABILITY OF NONSTATUTORY STOCK OPTIONS
A Nonstatutory Stock Option granted under the Plan may not be transferred
except by will or the laws of descent and distribution. During the lifetime of
an Optionee, a Nonstatutory Stock Option may be exercised only by the Optionee,
or by a duly appointed legal guardian in the event of the legal disability of
the Optionee. Except as specifically provided in the Plan, no person shall have
any right to assign, transfer, alienate, pledge, encumber or subject to lien the
benefits to which such person is entitled thereunder, and benefits under the
Plan shall not be subject to adverse legal process of any kind. No prohibited
assignment, transfer, alienation, pledge or encumbrance of benefits or
subjection of benefits to lien or adverse legal process of any kind will be
recognized by the Board of Directors and in such case the Board of Directors may
terminate the right of such person to such benefits and direct that they be held
or applied for the benefit of such person, his spouse, children or other
dependents in such manner and in such proportion as the Board of Directors deems
advisable. If a person to whom benefits are due shall be or become incompetent,
either physically or mentally, in the judgment of the Board of Directors, the
Board of Directors shall have the right to determine to whom such benefits shall
be paid for the benefit of such person.
9. DELIVERY OF SHARES
No shares shall be delivered pursuant to any exercise of a Nonstatutory
Stock Option until the requirements of such laws and regulations as may be
deemed by the Board of Directors to be applicable thereto are satisfied.
10. AMENDMENTS, SUSPENSION OR DISCONTINUANCE
The Board of Directors may amend, suspend, or discontinue the Plan, but
except as permitted by Section 4(c), may not, without the prior approval of the
shareholders of the Company, make any amendment which operates (a) to make any
material change in the persons eligible to receive Nonstatutory Stock Options
under the Plan, (b) to increase the total number of shares which may be
delivered under the Plan except as provided in Section 4(c), (c) to extend the
maximum option period or the period during which Nonstatutory Stock Options may
be granted under the Plan, (d) to decrease the option price, or (e) increase the
number of shares subject to an option granted to a director each year hereunder.
Except with the consent of an Optionee, no amendment, suspension or termination
of the Plan shall impair the right of any recipient of any Nonstatutory Stock
Options granted under the Plan.
11. TERM OF THE PLAN
(a) This Plan shall be effective as of the date of its approval by both the
Board of Directors and shareholders of the Company.
-4-
<PAGE>
(b) No Nonstatutory Stock Option shall be granted under the Plan after
December 31, 2007. Unless otherwise expressly provided in the Plan or in an
applicable option agreement, any Nonstatutory Stock Option granted hereunder
may, and the authority of the Board of Directors to amend, alter, adjust,
suspend, discontinue, or terminate any such Nonstatutory Stock Option shall,
continue after December 31, 2007.
12. MISCELLANEOUS
(a) All expenses and costs in connection with the operation of the Plan
shall be borne by the Company.
(b) Proceeds from the sale of shares pursuant to Nonstatutory Stock Options
granted under this Plan shall constitute general funds of the Company.
(c) Upon any distribution of shares of Common Stock pursuant to any
provision of the Plan, the distributee may be required to represent in writing
that he is acquiring such shares for his own account for investment and not with
a view to, or for sale in connection with, the distribution of any part thereof.
The certificates for shares delivered under the Plan may include any legend
which the Board of Directors or counsel for the Company deems appropriate to
reflect any restrictions on transfers.
(d) Except as expressly provided for in the Plan, no member of the Board of
Directors or other person shall have any claim or right to be granted a
Nonstatutory Stock Option under the Plan. Neither the Plan nor any action taken
hereunder shall be construed as giving any member of the Board of Directors any
right to be retained in the service of the Company.
-5-
Dated 1998
----------------------------------------
(1) RODA LIMITED
- AND -
(2) PETER LIONEL FURLONGE
========================================
SERVICE AGREEMENT
========================================
<PAGE>
THIS AGREEMENT dated 1998 is made BETWEEN:-
(A) The Company: RODA LIMITED, a company registered in England & Wales under
number [ ]; and
(B) You: PETER LIONEL FURLONGE of Castle Farm, Mountfield, East Sussex, TN32
5JU.
1. Employment
1.1 Your employment under this Agreement will commence on ___________ 1997 (the
"Commencement Date") and will continue until terminated by either party
giving to the other not less than six months' prior notice to expire on or
at any time after the date which is eighteen months after the Commencement
Date
1.2 Your period of continuous employment with the Group commenced on 1st March
1986.
1.3 You are employed as a senior executive of the Company and will perform such
duties as may be reasonably assigned to you from time to time by or with
the authority of the Board. At the Commencement Date, your job title is
Managing Director.
1.4 You will (without further remuneration), if and for as long as the Company
requires, during this Agreement:
1.4.1 carry out duties for the benefit of or on behalf of any Group
Company; and/or
1.4.2 hold any office and/or other appointment in or on behalf of the
Group;
1.5 You will, at all times during the period of this Agreement:
1.5.1 devote the whole of your time, attention and ability during your
hours of work (as set out in Clause 1.6) to the duties of your
employment;
1.5.2 faithfully and diligently perform your duties and exercise only such
powers as are consistent with them;
1.5.3 obey all and any lawful and reasonable directions of the Board
1.5.4 act only in accordance with the Memorandum and Articles of
Association of the Company or, where acting pursuant to Clause 1.4,
of the relevant Group Company;
1.5.5 use your best endeavours to promote the interests of the Group; and
1.5.6 keep the Board promptly and fully informed (in writing if so
requested) of your conduct of the business or affairs of the Group
and provide such explanations as they may require.
1.6 Your hours of work are the normal hours of business of the Company together
with such additional hours as may be necessary for you to perform your
duties properly.
1.7 Your normal place of work is the Company's office at 29-33 Choumert Grove,
London, SE15 4RB and/or such other place of business of the Group as the
Board may reasonably require from time to time. You will, if and for as
long as required by the
<PAGE>
Company, make visits in the ordinary course of your duties to such places
anywhere in the world as it may specify save that you will not be required
to make visits outside the United Kingdom for periods in excess of 7 nights
in any one calendar month except with your agreement.
2. Pay
2.1 During your employment, the Company will pay you a salary at the rate of
(pound)100,000 each year (or such higher rate as may be awarded to you
pursuant to Clause 2.2) which will accrue from day to day and be payable in
equal monthly instalments in arrears on or about the last working day of
each month (the "Salary"). The Salary is inclusive of all and any fees
receivable by you as the holder of offices or appointments within the Group
or on behalf of the Company or any Group Company.
2.2 On or about 30th January in each year (starting in January 1999), your
Salary will be reviewed by the Board and the rate of Salary then payable
will be increased by the Company with effect from that date by not less
than the percentage increase in the figure for that month published in the
All-Items Index of Retail Prices (or any Index which is substituted instead
by that date) over the figure published for the previous January.
2.3 Subject to and in accordance with rules of the bonus or incentive
compensation plan of the Company or Cunningham Graphics, Inc. ("CGI") for
the time being in force, you will be eligible to receive a bonus each year,
payable within 90 days after the end of the relevant fiscal year of the
Company, of such amount, if any, as the Compensation Committee of CGI
determines in its absolute discretion to be an appropriate bonus for the
Managing Director of the Company, having regard to your and the Company's
achievement of performance goals set annually in advance by the
Compensation Committee in consultation with you.
2.4 In the event that any person (or group of persons acting in concert)
acquires shares conferring more than 75% of the votes in the Company or any
holding company of the Company (except in the case of an acquisition of
shares by a subsidiary of the Company's ultimate holding company), (a
"Change of Control"), you will be entitled to be paid (net of any
withholding's or deductions required by law) a sum equal to twice your then
annual salary pursuant to clauses 2.1 and 2.2, on condition that such sum
shall be payable only:
2.4.1 upon your completing 18 months' service under this agreement (or, if
later, upon your completing 6 months' service under this agreement
following the Change of Control); or
2.4.2 if earlier, upon the Company terminating your employment pursuant to
clause 1.1.
3. Fringe Benefits
3.1 You are entitled to be and remain a member of the Company's pension scheme
(the "Scheme") subject to the terms of its Deed and Rules from time to
time. The Company is entitled at any time to terminate the Scheme or your
membership of it subject to procuring membership for you of another pension
scheme (the "New Scheme") providing you with benefits which are not, in
aggregate, less favourable than the benefits provided to you under the
Scheme and subject to procuring that you are fully credited in the New
Scheme for your past pensionable service under the Scheme.
-2-
<PAGE>
3.2 The Company will, subject to Inland Revenue limits for the time being,
contribute (in monthly instalments in arrears) to the Scheme for each year
of your employment an amount equal to 7 1/2% of your Salary at the rate
then payable (or, if less, 7 1/2% of (pound)80,000).
3.3 The Company will provide you with life assurance cover of four times your
Salary payable in the event of your death in service.
3.4 You, your spouse and your children (if any) who are less than 18 years old
are entitled to participate in any permanent health and medical expenses
insurance schemes maintained by the Company from time to time for the
benefit of its senior executives, subject always to the rules of such
schemes, including without limitation, each of you, your spouse and
children undertaking a medical for the purposes of such insurance schemes.
3.5 The Company will pay you a (non-pensionable) car allowance of (pound)12,000
per annum payable in equal monthly instalments at the same time and in the
same manner as your Salary instalments. You agree to provide a suitable
(having regard to the image of the Company and to your status within the
Company) car for use on Company business and to ensure that it is
appropriately maintained, repaired, cleaned, taxed and insured for such
use.
3.6 You must comply with all Group regulations relating to Company cars, notify
the Company immediately of any accident involving your car while being used
on Company business and of any charge brought against you for a motoring
offence.
4. Expenses
4.1 The Company will reimburse you with your reasonable travelling, telephone,
hotel, entertainment and other business expenses incurred in the course of
your duties provided that you comply with Group regulations from time to
time in this respect and provide the Company with receipts or other proof
of payment as the Company may reasonably require.
4.2 You must make available for business use your home telephone . The Company
will reimburse you with the cost of bills for your home telephone provided
you use any supplier or system designated by the Company and provided you
disclose to the Company any overseas telephone calls not for the purposes
of the business, in respect of which the Company reserves the right not to
reimburse you.
5. Holiday
5.1 In addition to public holidays, you are entitled to 25 working days'
holiday without loss of pay in each holiday year (which runs from January
to December) to be taken at such time or times as may be authorised in
advance by the Board. You may not, except with prior permission from the
Board, carry forward any unused part of your holiday entitlement to a
subsequent holiday year.
5.2 In the first holiday year and in the holiday year in which you leave, your
entitlement to holiday will be calculated at the rate of 2.08 working days'
holiday for each complete calendar month of your employment by the Company
during that holiday year. Unless you are dismissed pursuant to Clause 8.2,
you will be entitled on termination to pay in lieu of any unused holiday
entitlement. If you have taken holiday in excess of your accrued
entitlement, you will be required to repay any excess Salary you have
received for such holiday. The basis for payment and repayment is 1/260th
of your Salary for each day.
-3-
<PAGE>
6. Incapacity
6.1 If you are absent from work because of illness, mental disorder or injury
("Incapacity"), you must report that fact immediately to the Company
Secretary and, after seven continuous days' absence, provide medical
practitioners' certificate(s) of your Incapacity and its cause for
Statutory Sick Pay purposes covering the whole period of your absence. For
Statutory Sick Pay purposes, your qualifying days are your normal working
days.
6.2 If you are absent from work due to Incapacity and have complied with the
provisions of Clause 6.1, you will continue to be paid your Salary for up
to 90 working days' absence in any period of 12 consecutive months and,
thereafter, such part of your Salary, if any, as the Board, in its absolute
discretion, determines from time to time provided that any such payment
will not be less than and will be deemed to include all and any Statutory
Sick Pay to which you are entitled and any Social Security Sickness Benefit
or other state benefits recoverable by you (whether or not recovered) may
be deducted from such payment. If your absence exceeds 30 consecutive days,
the Company will be entitled to appoint a temporary replacement to cover
your absence.
6.3 You will, whenever requested by the Board, submit to examination by a
medical practitioner selected and paid for by the Company. You hereby
authorise such medical practitioner to disclose to and discuss with the
Board any matters which, in his opinion, might hinder or prevent you (if
during a period of Incapacity) from returning to work for any period or (in
other circumstances) from properly performing your duties at any time.
7. Confidentiality and Integrity
7.1 During your employment under this Agreement, you will not:-
7.1.1 directly or indirectly receive or obtain any discount, rebate,
commission or other inducement (whether in cash or in kind) which is
not authorised by regulations or guidelines from time to time
governing dealings by executives on behalf of the Company, or, if
you do, you will account immediately to the Company for the amount
so received.
7.1.2 directly or indirectly disclose or make use of any Confidential
Information for any purpose other than a legitimate purpose of the
Company;
7.1.3 (except in the proper course of your duties under this Agreement)
remove from Company premises or copy or allow others to copy the
contents of any document, computer disk, tape or other tangible item
which contains any Confidential Information or which belongs to the
Company;
7.1.4 at any time make any untrue or misleading statement relating to the
Group.
8. Termination of agreement
8.1 This Agreement will automatically terminate:
8.1.1 when you reach your 65th birthday; or
8.1.2 if you are prohibited by law from being a director;
8.2 The Company will be entitled, by giving notice, to terminate this Agreement
with immediate effect if you:
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<PAGE>
8.2.1 commit any act of gross misconduct or repeat or continue any other
breach of your obligations under this Agreement; or
8.2.2 engage in any conduct which, in the reasonable opinion of the Board,
is likely to cause your continued employment to be detrimental to
the interests of the Group and fail, within 60 days of receiving
written notice from the Company, to cure the matter; or
8.2.3 are convicted of any criminal offence which is punishable with 6
months or more imprisonment (save for any motoring offence for which
you are not sentenced to a term of immediate or suspended
imprisonment); or
8.2.4 commit any act of dishonesty, whether or not relating to your
employment; or
8.2.5 become bankrupt or make any arrangement or composition with your
creditors generally; or
8.2.6 resign or vacate your office as a director of the Company or any
Group Company; or
8.2.7 are, in the reasonable opinion of the Board, incompetent in the
performance of your duties having failed within 60 days of written
notice from the Company, to remedy the position.
8.3 The Company will be entitled to terminate this Agreement notwithstanding
Clause 6.2 or your entitlement at that time to sick pay or benefits under
the Company's permanent health insurance scheme, by notice which is not
less than your then entitlement to statutory minimum notice plus a week
given at any time when you have been absent from work due to Incapacity for
a period or periods aggregating 60 days in the preceding 12 months provided
that the Company will withdraw any such notice if, before it expires, you
resume your duties full time and provide medical evidence satisfactory to
the Board that you are fully recovered and that no recurrence of your
Incapacity can reasonably be anticipated.
8.4 On serving or receiving notice to terminate this Agreement or at any time
thereafter during the currency of such notice the Company is, at its
discretion, entitled to pay you your Salary (at the rate then payable under
Clause 2.1 hereof) together with monetary compensation for loss of all
fringe benefits and reimbursement of expenses in lieu of notice.
8.5 At any time after notice (including summary notice) to terminate this
Agreement has been served or received by the Company, the Company may:-
8.5.1 require you to resign (without any claim for compensation) from any
offices and/or appointments which you hold as a director, nominee or
representative of the Company or any Group Company; and/or
8.5.2 require you to transfer, without payment, to the Company (or as the
Company may direct) any qualifying shares or nominee shareholdings
provided to you by or held by you in or on behalf of any Group
Company; and/or
8.5.3 require you to return to the Company on request any documents,
computer disks and tapes and other tangible items in your possession
or under your control which belong to the Company or which contain
or refer to any Confidential Information; and/or
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<PAGE>
8.5.4 require you to delete all Confidential Information from any computer
disks, tapes or other re-usable material in your possession or under
your control and destroy all other documents and tangible items in
your possession or under your control which contain or refer to any
Confidential Information; and/or
8.5.5 suspend you from the performance of all or any of your duties under
this Agreement provided that the period of any such suspension may
not exceed 6 months; and/or
8.5.6 appoint a replacement to hold the same or similar job title as you
and/or to carry out all or any of your duties instead of you; and/or
8.5.7 exclude you from all or any premises of the Group; and/or
8.5.8 require you not, without the prior consent of the Board, to engage
in any contact (whether or not at your own instance) with any
customer, supplier, employee, director, officer or agent of any
company in the Group which touches and concerns any of the business
affairs of the Group.
8.6 If you fail to comply with Clauses 8.5.1 and/or 8.5.2 within seven days of
being so required, the Company is hereby irrevocably authorised to appoint
some person in your name and on your behalf to sign any document or do any
thing necessary or requisite to effect such resignation(s) and/or
transfer(s) (without prejudice to any claims which you may have against the
Company arising out of this Agreement or its termination).
9. Intellectual Property
9.1 In relation to each and every improvement, invention or discovery which
relates either directly or indirectly to the business of the Company which
you (jointly or alone) make at any time during your employment, you will:-
9.1.1 promptly disclose full details, including any drawings and models,
of it to enable the Company to determine whether or not, applying
the provisions of s.39 of the Patents Act 1977, it is the property
of the Company (a "Company Invention");
9.1.2 hold any Company Invention in trust for the Company and, at its
request and expense, do all things necessary or desirable to enable
the Company or its nominee to exploit the Company Invention for
commercial purposes and to secure patent or other appropriate forms
of protection for it anywhere the world. Decisions as to the
patenting and exploitation of any Company Invention are at the sole
discretion of the Company;
9.2 In relation to each and every copyright work or design which relates either
directly or indirectly to the business of the Company (a "Company Work")
which you (jointly or alone) originate, conceive, write or make at any time
during the period your employment:-
9.2.1 you will promptly disclose such Company Work to the Company. Company
Works made wholly outside your normal working hours which are wholly
unconnected with your employment are excluded from the ambit of
Clause 9.2;
9.2.2 you hereby assign to the Company by way of future assignment all
copyright, design right and other proprietary rights (if any)
throughout the world in such Company Work;
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<PAGE>
9.2.3 you hereby irrevocably and unconditionally waive in favour of the
Company any and all moral rights conferred on you by Chapter W of
Part I of the Copyright Designs and Patents Act 1988 in relation to
any such Company Works;
9.2.4 you acknowledge that, for the purposes of the proviso to Section
2(1) of the Registered Designs Act 1949 (as amended by the Copyright
Designs and Patents Act 1988), the covenants on the part of you and
the Company will be treated as good consideration and, for the
purposes of that Act, the Company will be the proprietor of any
design which forms part of the Company Works.
9.3 You agree that (at the request and expense of the Company) you will do all
things necessary or desirable to substantiate the rights of the Company to
each and every Company Invention or Company Work and that you will permit
the Company (whom you hereby irrevocably appoint as your attorney for this
purpose) to execute documents, to use your name and to do all things which
may be necessary or desirable for the Company to obtain for itself or its
nominee the full benefit of each and every Company Invention or Company
Work. A certificate in writing signed by any Director or the Secretary of
the Company that any instrument or act falls within the authority hereby
conferred will be conclusive evidence to that effect so far as any third
party is concerned.
10. Restrictive Covenants
10.1 For the period of 12 months after the termination of your employment under
this Agreement, you will not directly or indirectly:-
10.1.1 be engaged or concerned or interested in any business carried on
within the Restricted Area wholly or partly in competition with any
Restricted Business (save for the holding as a passive investor only
of not more than 5% of the issued ordinary shares of any company of
a class which are listed or traded on the London Stock Exchange, any
other recognised stock exchange or NASDAQ).
10.1.2 seek or accept, in any capacity whatsoever, any business, orders or
custom which is wholly or partly in competition with any Restricted
Business from any Customer.
10.1.3 induce or attempt to persuade any Employee to leave employment or
engagement by the Company or any Group Company or offer employment
or engagement to any Employee.
10.2 You will not at any time after the termination of your employment under
this Agreement, directly or indirectly:-
10.2.1 induce or seek to induce, by any means involving the disclosure or
use of Confidential Information, any Customer to cease dealing with
the Company or any Group Company or to restrict or vary the terms
upon which it deals with the Company or any Group Company;
10.2.2 disclose or make use of any Confidential Information; or
10.2.3 represent yourself or permit yourself to be held out as having any
connection with or interest in the Company or any Group Company.
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<PAGE>
10.3 Each restriction in Clause 10 (whether drafted separately or together with
another) is independent and severable from the other restrictions and
enforceable accordingly. If any restriction is unenforceable for any reason
but would be enforceable if part of the wording were deleted, it will apply
with such deletions as may be necessary to make it
10.4 The Company may transfer or assign its rights under this Clause 10 to its
successors in title. You may not transfer or assign any rights or
obligations under this Clause 10.
11. Interpretation
11.1 The headings to the clauses are for convenience only and shall not affect
the construction or interpretation of this Agreement.
11.2 Any reference in this Agreement to any Act or delegated legislation shall
include any statutory modification or re-enactment of it or of the
provision referred to.
11.3 In this Agreement:
"Board" means the board of directors of the Company and includes any
committee of such board duly authorised to act on its behalf.
"Confidential Information" means all and any information (whether or not
recorded in documentary form or on computer disk or tape) of the Company,
any Group Company or any of its or their customers, suppliers or agents
which the Company or the relevant Group Company regards as confidential or
in respect of which it owes an obligation of confidentiality to a third
party which is not part of your own stock in trade and which is not readily
ascertainable to persons not connected with the Company either at all or
without a significant expenditure of labour, skill or money.
"Customer" means any person with whom you or anyone working under your
supervision or control deals personally who, at the termination of your
employment, is negotiating with the Company or any Group Company for
Restricted Business or with whom the Company or any Group Company has
conducted any Restricted Business at any time during the final two years of
your employment with the Group.
"Employee" means any person who is and was, at any time during the period
of two years prior to the termination of your employment, employed or
engaged by the Company or any Group Company in a senior management, senior
technical or senior sales position and who, by reason of such position,
possesses any Confidential Information or is likely to be able to solicit
the custom of any Customer or to induce any Customer to cease dealing with
the Company or any Group Company, were he to accept employment or
engagement in a business which is similar to or in competition with any
Restricted Business.
"Group Company" means any group undertaking (as defined in section 259(5)
of the Companies Act 1985) or associated undertaking (as defined in
Schedule 4A of the Companies Act 1985) of the Company or any joint venture
to which the Company or any such group undertaking is a party.
"Group" means the Company and each Group Company.
"Restricted Area" means England, Scotland, Wales and Northern Ireland and
any other country in which the Company or any Group Company carries on or
intends to carry on any Restricted Business as at the termination of your
employment.
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<PAGE>
"Restricted Business" means time-sensitive financial printing and all or
any other commercial activities carried on or to be carried on by the
Company or any Group Company in which you worked or about which you knew
Confidential Information to a material extent at any time during the final
two years of your employment with the Group.
12. General
12.1 You are not subject to any particular disciplinary rules or procedures but
should conduct yourself in a thoroughly professional manner at all times.
In order to investigate a complaint of breach of contract or misconduct
against you, the Company is entitled to suspend you on full pay for so long
as the Board considers appropriate in all the circumstances to carry out a
disciplinary investigation and/or hearing.
12.2 If you have a grievance relating to your employment (other than one
relating to a disciplinary decision), you should refer that grievance to
the Board whose decision will be final and binding on you.
12.3 This Agreement is in substitution for any representations and warranties
made by or on behalf of the Company and any previous contracts of
employment or for services between you and the Company or any Group Company
(which are deemed to have been terminated by mutual consent).
12.4 The termination of this Agreement will not affect such of the provisions of
this Agreement as are expressed to operate or to have effect after
termination and will be without prejudice to any accrued rights or remedies
of the parties.
12.5 The validity, construction and performance of this Agreement is governed by
English law.
12.6 All disputes, claims or proceedings between the parties relating to the
validity, construction or performance of this Agreement are subject to the
exclusive jurisdiction of the High Court of Justice in England and Wales
(the "High Court") to which the parties irrevocably submit. Each party
irrevocably consents to the award or grant of any relief in any such
proceedings before the High Court and either party is entitled to take
proceedings in any other jurisdiction to enforce a judgment or order of the
High Court.
12.7 Any notice to be given by a party under this Agreement must be in writing
in the English language and must be delivered by hand or sent by first
class post or equivalent postal service, telex, facsimile transmission or
other means of telecommunication in permanent written form (provided that
the addressee has his or its own facilities for receiving such
transmissions) to the last known postal address or appropriate
telecommunication number of the other party. Where notice is given by any
of the prescribed means, it is deemed to be received when, in the ordinary
court of that means of transmission, it would be received by the addressee.
To prove the giving of a notice, it is sufficient to show that it has been
despatched. A notice has effect from the sooner of its actual or deemed
receipt by the addressee.
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<PAGE>
IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS DOCUMENT AS A DEED ON THE DATE
FIRST BEFORE WRITTEN:-
________________________________________________________________________________
Executed by ___________________________ (Director) ) ____________
and ___________________ (Director/secretary) )
for and on behalf of RODA LIMITED ) ____________
________________________________________________________________________________
________________________________________________________________________________
Executed by PETER LIONEL FURLONGE ) ____________
in the presence of: _____________ )
________________________________________________________________________________
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LOAN AND SECURITY AGREEMENT, dated
December 15, 1997, by and between SUMMIT
BANK, having an office at 210 Main
Street, Hackensack, New Jersey,
hereinafter called "Bank", and
CUNNINGHAM GRAPHICS, INC., with its
principal place of business at 629 Grove
Street, Jersey City, New Jersey,
hereinafter called "Borrower".
This Loan and Security Agreement ("Agreement") specifies the terms of a
Line of Credit in fluctuating amounts not to exceed the sum of Two Million and
00/100 ($2,000,000.00) Dollars, and a Term Loan in the amount of One Million and
00/100 ($1,000,000.00) Dollars, and further specifies the terms by which said
loans are to be secured by certain property and assets, real and personal,
tangible and intangible, of Borrower.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto agree as follows:
I
DEFINITIONS
1.1 "ACCOUNT" or "ACCOUNTS RECEIVABLE" means, in addition to the definition
of account as contained in the Uniform Commercial Code, the right of the
Borrower to receive payment for goods sold or leased or for services rendered
which are not evidenced by an instrument or chattel paper, whether or not it has
been earned by performance.
1.2 "ADVANCE" or "ADVANCES" shall mean loans, Standby Letters of Credit and
Letters of Credit, at any time made by Bank under the Agreement.
1.3 "AFFILIATE" means any Person which, directly or indirectly, owns or
controls, on an aggregate basis, including all beneficial ownership and
ownership or control as a trustee, guardian or other fiduciary, at least ten
(10%) percent of the
<PAGE>
outstanding capital stock, having ordinary voting power to elect a majority of
the board of directors (irrespective of whether, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) of Borrower or any Subsidiary or is
controlled by or is under common control with Borrower, any stockholders of
Borrower or any Subsidiary. For the purpose of this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of management and policies, whether through the ownership of voting
securities, by contract or otherwise.
1.4 "BASE RATE" means the rate of interest established by Bank from time to
time as its base rate, but which may not necessarily be the rate actually
charged by Bank to its most credit worthy customers.
1.5 "BORROWER" means CUNNINGHAM GRAPHICS, INC.
1.6 "CHATTEL PAPER" means, in addition to the definition of chattel paper
as contained in the Uniform Commercial Code, a writing or writings which
evidence both a money obligation and a security interest in, or a lease of,
specific Goods. When a transaction is evidenced both by such a security
agreement or a lease and by an Instrument or series of Instruments, the group of
writings taken together constitutes Chattel Paper.
1.7 "COLLATERAL" means all of those present or future assets, real or
personal, of Borrower in which a security interest in or lien on is granted to
Bank hereunder or contemplated hereby, or under any other present or future
agreement by Borrower in favor of Bank as more particularly set forth in Article
III hereof.
1.8 "DEBT" shall mean the indebtedness of Borrower inclusive of all items
which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of the balance sheet as at the date
indebtedness is determined.
1.9 "DEFAULT" means an event of the nature specified in Article VII hereof
and which upon the occurrence of same would constitute an Event of Default.
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<PAGE>
1.10 "DOCUMENT(S)" shall have the meaning set forth in the Uniform
Commercial Code for such term.
1.11 "EQUIPMENT" means, in addition to the definition of equipment
contained in the Uniform Commercial Code, machinery and equipment of every kind,
nature and description, as well as trucks, vehicles of every nature and
description, including but not limited to trailers and the like, handling and
delivery equipment, cranes and hoisting equipment, fixtures, office machines and
furniture, whether affixed to realty or not.
1.12 "ERISA" means the Employee Retirement Income Securities Act of 1986 as
amended from time to time.
1.13 "EVENT OF DEFAULT" means an event of the nature specified in Article
VII hereof.
1.14 "GAAP" means generally accepted accounting principles, as consistently
applied.
1.15 "GENERAL INTANGIBLES" means all rights of the Borrower as defined in
the Uniform Commercial Code including but not limited to all rights to property,
choses in action and other rights of Borrower not otherwise specifically
included elsewhere in this Agreement, further including but not limited to all
present and future trademarks, trade names, service marks, copyrights and
patents, and all rights under license agreements for the use of same.
1.16 "GOODS" means, in addition to the definition of goods as contained in
the Uniform Commercial Code, all articles of tangible personal property, sold,
supplied, leased or otherwise disposed of, represented by an Account.
1.17 "INVENTORY" means, in addition to the definition of inventory as
contained in the Uniform Commercial Code, all Goods held by the Borrower for
resale or lease or furnished or to be furnished under contracts of service, and
shall include raw materials, goods and work in process and finished goods, and
all goods returned by or reclaimed from customers.
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<PAGE>
1.18 "INSTRUMENT" means, in addition to the definition of instrument as
contained in the Uniform Commercial Code, a negotiable instrument or a security,
or any other writing which evidences a right to the payment of money and is not
itself a security agreement or lease and is of the type which is, in the
ordinary course of business, transferred by delivery with any necessary
endorsement or assignment.
1.19 "LIABILITY" or "LIABILITIES" shall mean any Advances made by Bank
prior to, on and after the date of this Agreement to, or on the account of
Borrower, and any and all interest, commissions, obligations, liabilities,
indebtedness, charges and expenses direct or indirect, primary, secondary,
contingent, joint or several which are due or to become due or that may
hereafter be contracted or acquired by the Borrower to the Bank, no matter how
or when arising and whether under any present or future agreement or instrument
between Borrower and Bank, or otherwise, and the amount due upon any notes or
other obligations given to, or received by, Bank or on account of any of the
foregoing and the performance and fulfillment by Borrower of all the terms,
conditions, promises, covenants and provisions contained in the Loan Documents,
or in any future agreement or instrument between Borrower and Bank.
1.20 "LINE OF CREDIT" shall mean the Line of Credit as more particularly
set forth in Paragraph 2.1 hereof.
1.21 "LINE OF CREDIT NOTE" shall mean the note evidencing the Line of
Credit, a copy of which is annexed hereto as Exhibit 1.21.
1.22 "LOAN DOCUMENTS" means this Agreement, all notes, mortgages or other
documents executed and delivered by Borrower or any Obligor hereunder, and any
amendments, renewals, modifications or supplements thereto, or substitutions
therefor.
1.23 "OBLIGOR" means the Borrower and Guarantor hereunder, including all
individuals executing this Agreement as parties hereto, all sureties and
guarantors and, if any debt due to Bank hereunder is evidenced by a note or
other instrument, the makers and endorser thereof.
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<PAGE>
1.24 "PERMITTED ENCUMBRANCES" shall mean (i) liens for taxes, assessments
or governmental charges or levies on property of the Borrower if the same shall
not at the time be delinquent or thereafter can be paid without penalty, or are
being diligently contested in good faith and by appropriate proceedings and
against which Borrower has established adequate reserves, (ii) liens imposed by
law, such as carriers, warehousemen and mechanics liens, liens incurred in
connection with construction or other similar liens arising in the ordinary
course of business provided same are not at the time due and payable, (iii)
liens arising out of pledge or deposits under workmen's compensation law,
unemployment insurances, old age pension or other social security or retirement
benefit or similar legislation, (iv) liens arising from judgments or awards with
respect to which the Borrower shall be diligently and in good faith prosecuting
an appeal or proceedings for review and shall have secured a stay of execution
pending such appeal or review, (v) liens in favor of Bank and (vi) purchase
money security interests in equipment.
1.25 "PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (whether national, federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
1.26 "PLAN" means an employee benefit plan or other plan maintained for
employees of Borrower and covered by Title IV of ERISA.
1.27 "REPORTABLE EVENT" has the meaning assigned to such term in Title IV
of ERISA, or regulations issued thereunder other than a Reportable Event not
subject to the provision for a thirty (30) day notice to the Pension Benefit
Guaranty Corporation under such regulations.
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<PAGE>
1.28 "SENIOR DEBT" shall mean (a) the indebtedness of Borrower other than
Subordinated Debt or (b) the indebtedness of Borrower. The term indebtedness
shall mean all items, which, in accordance GAAP would be included in determining
total liabilities as shown on the liability side of the balance sheet as at the
date indebtedness is determined.
1.29 "SUBSIDIARY" means any corporation of which more than fifty (50%)
percent of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether,
at the time, stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned by Borrower or one or more of its
Subsidiaries.
1.30 "TANGIBLE NET WORTH" shall mean shareholders' equity less (i)
intangible assets and (ii) indebtedness owing to the Borrower from any
shareholder, employee, Subsidiary or other Affiliate. Shareholders' equity and
intangible assets shall be determined in accordance with GAAP.
1.31 "TERM LOAN" means the term loan granted to Borrower as more
particularly described in Paragraph 2.2 hereof.
1.32 "TERM LOAN NOTE" shall mean the note evidencing the Term Loan, a copy
of which is annexed hereto as Exhibit 1.32.
1.33 "UCC" means the Uniform Commercial Code as adopted and in effect under
the laws of the State of New Jersey.
1.34 "RULES OF INTERPRETATION" (a) Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the meaning
customarily given such term in accordance with GAAP and all financial
computations hereunder shall be computed, unless otherwise specifically provided
herein, in accordance with GAAP consistently applied. That certain terms or
computations are explicitly modified in the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing.
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<PAGE>
(b) All other undefined terms contained in this Agreement shall, unless the
context indicated otherwise, have the meanings provided for by the UCC to the
extent the same are used and defined herein.
(c) The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole, including the Exhibits and Schedules
hereto, as the same may from time to time be amended, modified or supplemented
and not to any particular section, subsection or clause contained in this
Agreement.
(d) Each reference to a Section, Schedule or Exhibit is to a Section,
Schedule or Exhibit, respectively, of or to this Agreement, unless otherwise
specified or the context otherwise requires.
(e) Wherever from the context it appears appropriate each term stated in
either the singular or plural shall include the singular or plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter.
II
LOANS
2.1 LINE OF CREDIT The Bank hereby grants to Borrower under this Agreement
subject to the terms and conditions hereafter set forth a Line of Credit not to
exceed the aggregate outstanding principal sum of Two Million and 00/100
($2,000,000.00) Dollars. Provided that no Default nor Event of Default exists,
the Bank will, under this Paragraph 2.1 from time to time through May 30, 1998,
or such later date as the Bank agrees to in writing, loan to Borrower no later
than two (2) business days after Borrower's request, sums not to exceed the
aggregate outstanding amount of Two Million and 00/100 ($2,000,000.00) Dollars,
which sums shall be repayable in full together with all interest due thereon on
the expiration date of this Line of Credit. The Borrower shall, beginning on the
first day of the first month hereafter and on the
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<PAGE>
same date of each month thereafter, pay the Bank interest, computed on the basis
of a 360 day year on the unpaid daily balance of loans under this Paragraph 2.1
at the Bank's Base Rate of interest or at the Libor Rate plus two hundred
twenty-five (225) basis points as more particularly set forth in Paragraph 2.2
hereof. The loans under said Line of Credit shall be evidenced by a Master
Advance Note in substantially the form annexed hereto as Exhibit "2.1".
2.2 INTEREST For all loans set forth in Paragraphs 2.1 hereof, in the event
that Borrower chooses the Bank's Base Rate, interest shall be paid based upon
the Bank's Base Rate. In the event there should be a change in the Bank's Base
Rate which would result in a change in the rate of interest on any loan, then,
in that event, the rate of interest on any loan shall be changed accordingly as
of the date of the change in the Bank's Base Rate, without notice to the
Borrower. If the rate of interest is calculated on the basis of the Bank's Base
Rate, then Borrower shall give not less than three (3) business days prior
written notice to the Bank in order to have the rate changed for a rate based
upon the Libor Rate and shall be effective on the specific date set forth in the
notice. If the Libor Rate is utilized it must be selected for a period of thirty
(30), sixty (60) or ninety (90) days. If the Borrower elects to go back to a
rate based upon the Base Rate, the Borrower shall give not less than one (1)
business day prior written notice to the Bank before the expiration of the
selected thirty (30), sixty (60) or ninety (90) day period. If any loan is
prepaid during any period when the Libor Rate is in effect, the Borrower, at the
Bank's discretion, shall pay such additional sums as shall be necessary in order
to enable the Bank to receive a rate of interest that would equal the rate of
interest which would have been earned until termination of the declared period
of time chosen for the Libor Rate. In the event that Eurodollar loans cannot be
legally made by the Bank or cannot be obtained, then the interest rate shall be
based upon the Base Rate.
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<PAGE>
2.2 TERM LOAN The Bank will, under this Agreement and approximately
simultaneously with the execution hereof, loan to the Borrower the sum of One
Million and 00/100 ($1,000,000.00) Dollars, repayable in thirty-six (36)
consecutive monthly installments of Twenty-Seven Thousand Seven Hundred
Seventy-Seven and 77/100 ($27,777.77) Dollars each, commencing on January 1,
1999 and a final payment of Twenty-Seven Thousand Seven Hundred Seventy-Eight
and 05/100 ($27,778.05) Dollars and all interest due thereon, due and payable on
December 1, 2001. From the date hereof until January 1, 1999, the Borrower shall
pay interest only, computed on the basis of a 360 day year at the Bank's Base
Rate of interest or at the Libor Rate plus two hundred twenty-five (225) basis
points. Commencing on February 1, 1999, the Borrower shall, concurrently with
the payments of principal, pay the Bank monthly interest commencing on January
1, 1999, computed on the basis of a 360 day year, for the actual number of days
elapsed, on the unpaid balance at the time of each monthly payment, at the
Bank's Base Rate or the three year Treasury Bill Index (as published in the Wall
Street Journal on the Tuesday immediately preceding the draw down on the Term
Loan) plus 225 basis points. In the event there should be a change in the Bank's
Base Rate which would result in a change in the rate of interest on this loan,
then, in that event, the rate of interest on this loan shall be changed
accordingly as of the date of the change in the Bank's Base Rate, without notice
to the Borrower. Bank shall have the right in its sole discretion to charge said
payments of principal and/or interest to any checking account of Borrower or to
apply any proceeds received by it against payment of same. Borrower authorizes
Bank to make such charge. Said loan shall be evidenced by a Term Note in
substantially the form annexed hereto as Exhibit "2.3".
2.3 EXCESS LOANS In the event the Bank shall advance an amount in excess of
the aggregate amount of all loans set forth in this Agreement or if the Borrower
should directly or indirectly become indebted to the Bank in an amount which,
together with all
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Advances made pursuant to this Agreement, is in excess of the aggregate amount
set forth in this Agreement, such Advances or such indebtedness shall
nevertheless be covered by the terms of this Agreement.
III
COLLATERAL
3.1 CROSS COLLATERAL All of the Collateral heretofore, herein or hereafter
given or assigned to Bank hereunder shall secure payment of all Liabilities, as
defined herein, of the Borrower to Bank.
3.2 ACCOUNTS RECEIVABLE Borrower hereby creates in favor of Bank and hereby
grants to Bank a security interest in all of the Borrower's Accounts, as defined
herein, presently owned by Borrower or hereafter arising.
3.3 EQUIPMENT Borrower hereby creates in favor of Bank and hereby grants to
Bank, a security interest in all of the Borrower's Equipment, as defined herein,
whether presently owned by Borrower or hereafter acquired, and wherever located.
3.4 INVENTORY Borrower hereby creates in favor of Bank and hereby grants to
Bank a security interest in all of the Borrower's Inventory, as defined herein,
whether presently owned by Borrower or hereafter acquired and wherever located.
3.5 GENERAL INTANGIBLES Borrower hereby creates in favor of Bank and hereby
grants to Bank a security interest in all of Borrower's General Intangibles, as
herein defined, whether presently owned by Borrower or hereafter acquired.
3.6 DEPOSIT ACCOUNTS Borrower hereby creates in favor of Bank, hereby
assigns to Bank and hereby grants to Bank a security interest in the balance of
every deposit account, now or hereafter existing, of the Borrower with Bank, and
all money, Instruments, securities, documents, Chattel Paper, credits, claims
and other property of Borrower now or hereafter in the possession or custody of
Bank or any of its agents.
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3.7 CHATTEL PAPER Borrower hereby creates in favor of Bank and hereby
grants to Bank a security interest in all of the Borrower's Chattel Paper, as
defined herein, whether presently owned by Borrower or hereafter left in the
possession of Bank for any purpose, further including but not limited to, for
collection.
3.8 INSTRUMENTS Borrower hereby creates in favor of Bank and hereby grants
to Bank a security interest in all of the Borrower's Instruments, as defined
herein, whether presently owned by Borrower or hereafter acquired, including but
not limited to all such Instruments now or hereafter left in the possession of
Bank for any purpose, further including but not limited to, for collection.
3.9 DOCUMENTS Borrower hereby creates in favor of Bank and hereby grants to
Bank a security interest in all of Borrower's Documents, as defined herein,
whether presently owned by Borrower or hereafter acquired, including but not
limited to all such Documents now or hereafter left in the possession of Bank
for any purpose.
3.10 PROCEEDS Borrower hereby creates in favor of Bank and hereby grants to
Bank a security interest in all of the products and proceeds of all of the
foregoing Collateral (including all proceeds of insurance policies covering the
Collateral); as well as all accessions, additions, substitutions, replacements
and increments thereto.
3.11 RECORDS Borrower hereby creates in favor of bank and hereby grants to
Bank a security interest in all books and records, including, without
limitation, customer lists, credit files, computer programs, print-outs, and
other computer materials and records of Borrower pertaining to any of the
foregoing.
3.12 CONTINUING PERFECTION Borrower will perform any and all steps
requested by Bank to create and maintain in Bank's favor the lien positions
called for hereunder and a security interest in the Collateral or pledges of
Collateral, including, without limitation, the execution, delivery, filing and
recording of financing statements and continuation statements, supplemental
security agreements, notes and any other documents necessary, in the opinion
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of Bank, to protect its interest in the Collateral. Bank and its designated
officer are hereby appointed Borrower's attorney-in-fact to do all acts and
things which Bank may deem necessary to perfect and to continue the perfected
security interests and liens provided for in this Agreement, including, but not
limited to, executing financing statements on behalf of the Borrower.
IV
CONDITIONS TO FUNDING OF THE AGREEMENT
The obligation of the Bank to make Advances provided for under this
Agreement shall be subject to the satisfaction of or waiver by Bank, prior or
concurrently therewith of each of the following conditions precedent:
4.1 EXECUTION OF LOAN DOCUMENTS All of the Loan Documents shall have been
duly authorized, executed and delivered by the parties hereto and shall be in
full force and effect on and of the date of execution of the Agreement.
4.2 REPRESENTATIONS AND WARRANTIES Each of the representations and
warranties made by or on behalf of the Borrower to the Bank in this Agreement or
in the Loan Documents shall be true and correct in all material respects on and
of the date of the execution of this Agreement.
4.3 CERTIFIED COPIES OF CHARTER DOCUMENTS The Bank shall have received from
Borrower, certified by a duly authorized officer to be true and complete on and
of the date of the execution of the Loan Documents, a copy of the certificate of
incorporation of the Borrower in effect as of the date of the closing of the
Loan Documents and a copy of the by-laws of the Borrower in effect on such date.
4.4 PROOF OF CORPORATE ACTION The Bank shall have received from the
Borrower an original Corporate Resolution and Incumbency Certificate authorizing
the officers of Borrower to enter into this Agreement.
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4.5 COLLATERAL As a result of the perfection of the Security Interest
contemplated in Article II hereof, Bank shall have obtained a first perfected
security interest in the Collateral.
4.6 PAYMENT OF FEES Borrower shall have paid to Bank all fees assessed by
Bank in the approval process and closing of this Agreement, plus all costs of
Bank for attorneys fees and/or expenses incurred by Bank in the closing of this
Agreement.
V
CONDITIONS TO MAKING EACH SUBSEQUENT EXTENSION OF CREDIT
The obligations of the Bank to make additional Advances of credit to the
Borrower subsequent to the date of the execution of the Loan Documents shall be
subject to the satisfaction or waiver by the Bank, prior thereto or concurrently
therewith, of each of the following conditions precedent:
5.1 APPLICATION AND COMPLIANCE The request for a takedown under any loan
facility provided for in this Agreement shall have been made in compliance with
the terms of this Agreement.
5.2 REPRESENTATIONS AND WARRANTIES Each of the representations and
warranties made by or on behalf of the Borrower to the Bank in the Loan
Documents shall have been true and correct in all material respects when made,
shall, for the purposes of this Agreement, be deemed to be repeated on and as of
the date of each takedown and shall be true and correct in all material respects
on and as of each such date.
5.3 PERFORMANCE The Borrower shall have duly and properly performed,
complied with and observed each of the covenants, agreements, and obligations
contained in this Agreement, and shall have duly and properly performed,
complied with and observed in all material respects its covenants, agreements,
and obligations in all other articles of this Agreement and the Loan Documents
to which it is a party or by which it is bound. No event shall have occurred
which constitutes an Event of Default or which with notice or the passage of
time, or both, would constitute an Event of Default under the Agreement or any
of the Loan Documents.
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VI
REPRESENTATIONS, COVENANTS AND WARRANTIES
To induce Bank to enter into this Agreement and to make Advances hereunder,
Borrower represents, covenants and warrants to Bank that:
6.1 GOOD STANDING Exhibit "A" sets forth:
(a) the jurisdiction of incorporation of Borrower and in which it is
in good standing;
(b) all other jurisdictions in which Borrower is authorized to
transact business;
(c) any prior changes in the structure of Borrower, such as mergers,
consolidations and the like;
(d) any prior name changes of Borrower;
(e) all trade names or trade styles under which Borrower conducts
business or issue invoices.
6.2 CORPORATE AUTHORITY Borrower has the corporate power to execute,
deliver and carry out this Agreement and all other Loan Documents and its Board
of Directors has duly authorized and approved the terms of the Agreement
described herein and the taking of any and all action contemplated herein by
Borrower, and this Agreement and all other Loan Documents executed and delivered
by Borrower to Bank constitute the valid and binding obligations of Borrower,
enforceable in accordance with their terms.
6.3 COMPLIANCE WITH LAW The execution of this Agreement, or any other Loan
Documents and the performance by Borrower of its obligations hereunder and
thereunder, does not, at the date of execution hereof, violate any existing law
or regulation or any writ or decree of any court or governmental agency or the
charter or by-laws of Borrower or any agreement or undertaking to which it is a
party or by which it is bound.
6.4 NO LITIGATION There are no judgments against Borrower as of the date of
this Agreement and no material litigation or administrative proceeding before
any governmental body is presently
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pending now, or to the knowledge of Borrower, threatened, against Borrower or
any of its property except as previously disclosed to Bank in writing.
6.5 NO FINANCIAL CHANGE There has been no substantial and material adverse
change in the condition of Borrower, financial or otherwise, since the last
financial statements and reports furnished by Borrower to Bank and the
information contained in said statements and reports is true and correctly
reflects the financial condition of Borrower as of the dates of the statements
and reports.
6.6 TAX COMPLIANCE Borrower has filed, or caused to be filed, all tax
returns required to be filed and has paid all taxes shown to be due and payable
on said return or on any assessment made against it including but not limited to
income taxes, sales taxes, payroll and withholding taxes.
6.7 GOOD TITLE On the date of the Agreement Borrower has good and
marketable title to all of its properties and assets, real, personal and mixed,
and none of said properties or assets is subject to any mortgage, pledge, lien,
security interest, encumbrance, charge or title retention or other security
agreement or arrangement of any character whatsoever except for Permitted
Encumbrances. Borrower shall notify Bank in writing of the granting of any
purchase money security interest in equipment.
6.8 PLACE OF RECORDS, CHIEF EXECUTIVE OFFICE, INVENTORY AND EQUIPMENT
(A) Borrower represents that its chief executive office, and the office
where it keeps its records concerning its Accounts, and all locations of its
Inventory and Equipment, and all other business locations of Borrower are
presently at the locations set forth on Exhibit "A". Borrower will notify Bank
in writing prior to any change in location of or addition to the places referred
to in this paragraph. (B) Except as set forth on Exhibit "A", within four (4)
months prior to the date of this Agreement, none of Borrower's assets have been
moved from any jurisdiction or other locations than the present locations of
assets set forth on Exhibit
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"A" under item 7.8 (A)(v). (C) Borrower represents and covenants that as of the
date hereof, and at all times hereafter while any of the Liabilities are
outstanding, that no Inventory is now, except as set forth on Exhibit "A", and
shall not at any time or times hereafter be stored with a bailee, warehouseman
or similar party without Bank's prior written consent and, if Bank gives such
consent, Borrower will concurrently therewith cause any such bailee,
warehouseman, or similar party to issue and deliver to Bank, in form and
substance acceptable to Bank, warehouse receipts therefor in Bank's name. (D) As
of the date of this Agreement, Borrower does not, and will not while any of the
Liabilities are outstanding, hold any Goods belonging to third parties or in
which other parties have an interest, including any Goods sold on a bill and
hold basis, except as set forth on Exhibit "A". (E) Borrower does not presently
and will not while any of the Liabilities are outstanding, purchase or otherwise
hold Goods on a consignment basis except as set forth on Exhibit "A". (F) Except
as set forth on Exhibit "A" none of Borrower's Inventory is, and while any of
the Liabilities are outstanding none of said Inventory will be, of a nature that
contains any labels, trademarks, trade names, or other identifying
characteristics which are the properties of third parties, and the use of which
by Borrower is in violation of the rights of such third parties or under
license, royalty or similar agreements with any third parties. (G) Except as set
forth on Exhibit "A" no persons hold any Inventory of the Borrower. Borrower
will not allow any Inventory to be so held in the future without the prior
written consent of Bank. (H) Except as set forth on Exhibit "A", Borrower has
not purchased any Inventory or equipment except in the ordinary course of
business for value and from persons customarily in the business of selling such
Inventory or Equipment. Except upon prior written notice to Bank, Borrower will
not in the future purchase any Inventory or Equipment except
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in the ordinary course of business from Persons customarily in the business of
selling such Inventory or Equipment. (I) Except as set forth on Exhibit "A",
Borrower does not hold any Instrument or Chattel Paper connected with any
Account.
6.9 COLLATERAL REQUIREMENTS The Borrower will (A) not, without prior
written consent of Bank, give a security interest in Accounts or Inventory or
Equipment or General Intangibles or Chattel Paper or Instruments or any other
assets to anyone other than Bank except for Permitted Encumbrances; (B) keep its
Inventory, Accounts, Chattel Paper, Instruments, General Intangibles and
Equipment and other assets free from all security interests, liens, encumbrances
and taxes, except those provided for herein and except for Permitted
Encumbrances; (C) collect its Accounts and sell its Inventory, only in the
ordinary course of business for value to buyers in the ordinary course of
business; (D) following a Default, and subsequent to receipt of written notice
by Bank, Borrower will not sell or transfer any of its Inventory; (E) keep
accurate and complete records of its Accounts and Inventory; (F) pay and
discharge when due all taxes, levies and other charges on its property; (G) not,
without prior written consent of Bank, remove the Collateral from its present
location, except for the removal of Inventory in the ordinary course of
business; (H) not sell or transfer any Inventory to any Affiliate or Subsidiary;
(I) not sell or transfer any of its Equipment without the prior written consent
of Bank.
6.10 REPORTING REQUIREMENTS Borrower agrees to deliver financial
information and documents as follows:
(a) within ninety (90) days of the close of each fiscal year it will
furnish Bank with annual audited financial statements prepared by an
independent certified public accountant satisfactory to Bank.
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(b) within ninety (90) days of the close of each fiscal quarter it
will furnish Bank with internally prepared quarterly financial statements
prepared on a review basis by an independent certified public accountant
satisfactory to Bank. Borrower shall cause its President to execute and
deliver to Bank a Statement Attestation Form verifying the accuracy of the
financial statements.
(c) within fifteen (15) days of the close of each calendar quarter,
Borrower shall supply Bank with Accounts Receivable agings and listings as
of the last business day of the previous quarter.
(d) within fifteen (15) days of the close of each calendar quarter,
Borrower shall supply Bank with an inventory report covering all locations,
as of the last business day of the previous quarter.
(e) within fifteen (15) days of the close of each calendar quarter,
Borrower shall supply Bank with an accounts payable aging, as of the last
business day of the previous quarter.
(f) Borrower shall permit Bank to conduct audits of the books and
records of the Borrower at Bank's discretion during normal business hours.
6.11 INSURANCE Borrower agrees to keep all of the tangible Collateral
assigned hereunder insured, at its own cost and expense, for the benefit of
Bank, and in such amounts, in such companies, and against such risks as may be
acceptable to the Bank, and deliver the policies evidencing such insurance to
the Bank. All policies of insurance on the Collateral shall be in form and with
insurers recognized as adequate by prudent business persons and all such
policies shall be in such amounts as may be satisfactory to Bank prior to
closing. Borrower shall deliver to Bank the original (or certified copy) of each
policy of insurance and evidence of payment of all premiums therefor. Such
policies of insurance shall contain an endorsement, in form and substance
satisfactory to Bank, showing loss payee/ additional insured to Bank. Such
endorsement or an independent instrument furnished to Bank, shall provide that
the insurance companies will give Bank at least thirty (30) days
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prior written notice before any such policy or policies of insurance shall be
altered or canceled and that no act or default of Borrower or any other person
shall affect the right of Bank to recover under such policy or policies of
insurance in case of loss or damage. Borrower hereby directs all insurers under
such policies of insurance to pay all proceeds payable thereunder directly to
Bank. Borrower irrevocably makes, constitutes and appoints Bank (and all
officers, employees or agents designated by Bank) as Borrower's true and lawful
attorney (and agent-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance (provided that until an Event of Default
exists, Bank shall consult with Borrower prior to finally making, settling or
adjusting claims under such policies of insurance), endorsing the name of
Borrower on any check, draft, instrument or other item of payment for the
proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. In the event Borrower, at
any time or times hereafter, shall fail to obtain or maintain any of the
policies of insurance required above or to pay any premium in whole or in part
relating thereto, then Bank, without waiving or releasing any obligation or
default by Borrower hereunder, may (but shall be under no obligation to do so)
at any time or times thereafter obtain and maintain such policies of insurance
and pay such premium and take any other action with respect thereto which Bank
deems advisable. All sums so disbursed by Bank, including reasonable attorneys'
fees, court costs, expenses and other charges related thereto, shall by payable,
on demand, by Borrower to Bank and shall be additional Liabilities hereunder
secured by the Collateral.
6.12 PAYMENT OF EXPENSES Borrower shall pay any and all expenses, including
reasonable counsel fees and disbursements, filing and recording fees, and all
other charges and expenses which may be required in connection with the loans
and advances made under this Agreement.
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6.13 LIFE INSURANCE Borrower agrees to maintain a life insurance policy on
the life of MICHAEL R. CUNNINGHAM in the amount of Five Hundred Thousand and
00/100 ($500,000.00) Dollars. Borrower is to keep said policy in full force and
effect, and pay all premiums as they fall due.
6.14 LIMITATION ON INDEBTEDNESS Borrower will not, without the prior
written consent of Bank, borrow from anyone other than Bank, or assume,
guarantee or endorse any debt or obligation of any person, firm or corporation,
except for the endorsement of instruments for deposit.
6.15 DISCHARGE OF TAXES AND LIENS Bank may, at its option, discharge any
taxes, liens, security interests or other encumbrances at any time levied or
placed on the Collateral and may pay for the maintenance of the Collateral and
Borrower will reimburse Bank on demand for any payment made or any expense
incurred by Bank pursuant to the foregoing authority, with interest at the
highest rate provided for in this Agreement.
6.17 GOOD WORKING CONDITION Borrower shall maintain all of its property in
good working condition.
6.18 MAINTAIN CORPORATE EXISTENCE (A) Borrower shall maintain in good
standing its corporate existence and will not, without the prior written consent
of Bank, dissolve nor liquidate, nor merge nor consolidate with nor acquire nor
affiliate itself with any other business entity nor form any subsidiary.
(B) Borrower will not change its name without furnishing to Bank at least
ten (10) days prior written notice thereof.
(C) Borrower will notify Bank in writing prior to utilizing any trade name
not set forth on Exhibit "A".
6.19 DIVIDENDS Borrower shall not, without the prior written consent of
Bank, pay or declare any cash or property dividends, nor otherwise make a
distribution of capital, nor redeem, retire or repurchase any stock of Borrower
except for dividends to pay taxes on Borrower's income under an S corporation
status.
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6.20 LOANS AND ADVANCES Borrower shall not, without prior written consent
of Bank, make any loans or advances to any third parties in excess of
Seventy-Five Thousand and 00/100 ($75,000.00) Dollars.
6.21 PROTECTION OF COLLATERAL Borrower shall comply with any and all laws,
legislation, rules and regulations in effect as of the date hereof and
subsequent hereto, including but not limited to all state and federal laws,
legislation, rules and regulations relating to the environment, employee pension
and benefit funds, the payment of taxes, assessments, and other governmental
charges, zoning, and the use, occupancy, transfer or encumbrancing of the
Collateral. Borrower agrees to comply with all reasonable conditions required by
Bank designed to protect Bank and the Collateral from the effect of the Spill
Compensation and Control Act (N.J.S.A. 58:10-23.11 et seq.), the Environmental
Cleanup Responsibility Act as amended by the Industrial Site Recovery Act
(N.J.S.A. 13:IK-6 et seq.), the Employee Retirement Income Security Act (Public
Law 94-306, as amended), and such other laws, legislation, rules and regulations
as are in, or may come into, effect and apply to the Borrower, the Bank, the
transactions contemplated hereby or the Collateral or any occupants or users
thereof, whether as lessees, tenants, licensees or otherwise. Borrower agrees to
pay any costs required with any of the above conditions.
6.22 INSPECTION Bank (by any of its officers, employees and agents) shall
have the right, at any time or times during Borrower's usual business hours, to
inspect the Collateral, all records related thereto (and to make extracts from
such records) and the premises upon which any of the Collateral is located, to
discuss Borrower's affairs and finances with any person and to verify in any
manner the Bank deems advisable, the amount, quality, quantity, value and
condition of, or any other matter relating to, the Collateral.
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6.33 ERISA (A) Borrower represents that no Reportable Event or failure of
compliance with the Internal Revenue Code of 1986, as amended, has occurred and
is continuing with respect to any Plan; (B) Borrower will comply with the
provisions of ERISA and the Internal Revenue Code of 1986, as amended, with
respect to each Plan.
6.34 MAINTENANCE OF ACCOUNTS During the length of this Agreement, Borrower
shall maintain all of its business and operating accounts at Bank.
6.35 TANGIBLE NET WORTH Borrower shall, as of December 31, 1997, have
attained a Tangible Net Worth of at least Two Million Three Hundred Thousand and
00/100 ($2,300,000.00) Dollars.
6.36 DEBT TO WORTH RATIOS Borrower shall during the length of this
Agreement maintain a ratio of Senior Debt to Tangible Net Worth not to exceed
3.25 to 1.0.
VII
EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an Event of
Default:
7.1 NON-PERFORMANCE Failure on the part of any Obligor to perform any term,
covenant or condition contained in any Loan Document or any other agreement now
existing or hereafter entered into with Bank, or in any document executed in
connection with any agreements, including, but not limited to, the payment of
any Liability when due.
7.2 MISREPRESENTATION Any representation, covenant or warranty made by any
Obligor in this Agreement, or any Loan Document, or in connection with any
instrument of guaranty or security furnished to Bank shall have proved to have
been inaccurate in any substantial or material respect as of the date or dates
with respect to which it is deemed to have been made.
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7.3 OTHER SECURITY INTEREST Borrower shall have caused or permitted a
security interest, perfected or otherwise, other than the security interest
specifically provided for or permitted hereunder, to be created in any
Collateral provided for hereby, or shall have failed to take any action
requested by Bank to perfect or protect the security interest provided for
herein or Borrower shall not have notified Bank of any changes to applicable law
affecting either the Bank's security interest in the Collateral or its priority
to same.
7.4 INSOLVENCY Any Obligor shall have applied for or consented to the
appointment of a custodian, receiver, trustee or liquidator of all or a
substantial part of its assets; a custodian shall have been appointed with or
without consent of any Obligor; any Obligor is generally not paying its debts as
they become due; has made a general assignment for the benefit of creditors; has
been adjudicated insolvent; or has filed a voluntary petition in bankruptcy, or
a petition or an answer seeking reorganization or an arrangement with creditors
or to take advantage of any insolvency law, or an answer admitting the material
allegations of a petition in any bankruptcy, reorganization or insolvency
proceeding; or taken corporate action for the purpose of effecting any of the
foregoing; or an order, judgement or decree shall have been entered, without the
application, approval or consent of any Obligor by any court of competent
jurisdiction approving a petition seeking reorganization of any Obligor, or
appointing a receiver, trustee, custodian or liquidator of any Obligor, or a
substantial part of its assets and such order, judgment or degree shall have
continued unstayed and in effect for any period of forty-five (45) consecutive
days; or a petition in bankruptcy shall have been filed against any Obligor and
shall not have been dismissed for a period of thirty (30) consecutive days, or
if an Order for Relief has been entered under the Bankruptcy Code, or if any
Obligor shall have suspended the transaction of its usual business.
7.5 DEATH The death of MICHAEL R. CUNNINGHAM
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7.6 CHANGE IN MANAGEMENT A substantial change in the present management of
Borrower which shall mean the departure of MICHAEL R. CUNNINGHAM from control
over the day to day operations of Borrower.
7.7 JUDGMENT OR LIEN Entry of a judgment, issuance of any garnishment,
attachment or distraint, the filing of any lien or of any governmental
attachment against any property of the Borrower which entry, issuance,
attachment or filing shall have continued unstayed and in effect for a period of
thirty (30) consecutive days.
7.8 NONCOMPLIANCE WITH LEASES OR LAWS Failure of Borrower to comply with
the terms and conditions of any lease covering the premises where the Collateral
is located and any orders, ordinances, laws or statutes of any city, state or
other governmental department having jurisdiction with respect to such premises
or the conduct of business thereon.
7.9 IMPAIRMENT OF RESPONSIBILITY Occurrence of any event which, in the
opinion of Bank, impairs the business condition, financial or otherwise, of any
Obligor.
7.10 ADVERSE CHANGE The determination by Bank that a material adverse
change has occurred in the financial condition of any Obligor.
7.11 MISREPRESENTATION OF FACT The determination by Bank that a material
misrepresentation of fact has been made by any Obligor in any writing
supplementary or ancillary hereto.
7.12 TRANSFER OF OWNERSHIP The sale or transfer, without the prior written
consent of Bank, of any of the capital stock of Borrower or without the prior
written consent of Bank, the issuance of any additional capital stock of
Borrower.
7.13 ERISA If (A) any Reportable Event occurs and shall be continuing for
thirty (30) days, or (B) any Plan shall be terminated, or (C) the Plan
administrator of any Plan shall file with the Pension Benefit Guaranty
Corporation ("PBG C") a notice of intention to terminate such Plan, or (D) the
PBG C shall institute proceedings to terminate any Plan or appoint a trustee to
administer any Plan, and, if in any of the cases set forth in (A)
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through (D) above, the Bank reasonably determines in good faith that any Plan
will be terminated and that the amount of the unfunded guaranteed benefits
(within the meaning of Title IV of ERISA) resulting upon termination of such
Plan would have a material adverse effect on the financial condition and
properties or operation of Borrower if a lien against the assets of Borrower
were to result under ERISA.
VIII
CONSEQUENCE OF EVENT OF DEFAULT
In case any Event of Default shall have occurred, then and in every such
Event of Default, Bank may take any or all of the following actions, at the same
time or at different times:
8.1 ACCELERATION Declare all Advances, sums and Liabilities owing Bank from
Borrower under this Agreement or any other agreement or loan between Bank and
Borrower to be forthwith due and payable, whereupon all such sums shall
forthwith become due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by Borrower.
8.2 POSSESSION Proceed with or without judicial process to take possession
of all or any part of the Collateral provided for herein not already in the
possession of Bank and the Borrower agrees that upon receipt of notice of Bank's
intention to take possession of all or any part of said Collateral, the Borrower
will do everything reasonably necessary to assemble the Collateral and make same
available to Bank at a place to be designated by Bank. Borrower hereby waives
any and all rights it may have, by statute, constitution or otherwise to notice
or a hearing to determine the probable cause of Bank to obtain possession, by
Court proceedings or otherwise, of the Collateral provided for in this or in any
other agreement with Bank.
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<PAGE>
8.3 METHODS OF SALE So long as Bank acts in a commercially reasonable
manner, the Bank may assign, transfer and deliver at any time or from time to
time the whole or any portion of the Collateral or any rights or interest
therein in accordance with the Uniform Commercial Code, and without limiting the
scope of Bank's rights thereunder, Bank may sell the Collateral at public or
private sale, or in any other manner, at such price or prices as Bank may deem
best, and either for cash or credit, or for future delivery, at the option of
Bank, in bulk or in parcels and with or without having the Collateral at the
sale or other disposition. Bank shall have the right to be the purchaser at any
public sale. Bank shall have the right to conduct such sales on Borrower's
premises or elsewhere and shall have the right to use Borrower's premises
without charge for such sales for such time or times as the Bank may see fit.
Bank is hereby granted license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in advertising for sale and selling any
Collateral and Borrower's rights under all licenses and franchise agreements
shall inure to Bank's benefit. Borrower agrees that a reasonable means of
disposition of Accounts shall be for Bank to hold and liquidate any and all
Accounts. In the event of a sale of the Collateral, or any other disposition
thereof, Bank shall apply all proceeds first to all costs and expenses of
disposition, including attorneys' fees, and then to the Liabilities of Borrower
to Bank.
8.4 RETENTION OF COLLATERAL Elect to retain the Collateral or any part
thereof in satisfaction of any or all Liabilities due from Borrower to Bank upon
notice of such proposed election to Borrower and any other party as may be
required by the Uniform Commercial Code.
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<PAGE>
8.5 SET-OFF Bank or its affiliates immediately, and without notice or other
action to set-off against any of the Obligor's Liabilities to Bank any sum owed
by Bank in any capacity to any Obligor whether due or not, and Bank shall be
deemed to have exercised such right of set-off and to have made a charge against
any such sum immediately upon the occurrence of such Event of Default, even
though the actual book entries may be made at some time subsequent thereto.
8.6 ATTORNEYS' FEES AND EXPENSES Add to the Liabilities of Borrower, Bank's
reasonable expenses to obtain or enforce payment of any Liabilities hereunder
and the enforcement or liquidation of any debt hereunder shall include
reasonable attorneys' fees plus other legal expenses incurred by Bank.
8.7 INCREASE IN INTEREST Increase the rate of interest under any
Liabilities to a rate of three (3%) percent in excess of the interest rates
otherwise provided for in this Agreement. Unless otherwise agreed by Bank, this
increase in interest rates shall be retroactive to the date of the first
occurrence of an Event of Default.
8.8 OTHER REMEDIES Exercise any other remedies under the Uniform Commercial
Code or other applicable law, or any other Loan Document.
IX
MISCELLANEOUS
9.1 NO WAIVER Borrower agrees that no delay on the part of Bank in
exercising any power or right hereunder or any other Loan Document shall operate
as a waiver of any such power or right, preclude other or further exercise
thereof, or the exercise of any other power or right. No waiver whatsoever shall
be valid unless in writing signed by Bank and then only to the extent set forth
therein.
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<PAGE>
9.2 WAIVER OF NOTICE Borrower waives presentment, dishonor and notice of
dishonor, protest and notice of protest of all commercial papers at any time
held by Bank on which the Borrower is any way liable.
9.3 ONE INSTRUMENT The provisions of this Agreement shall be in addition to
those of any notes or other evidence of Liability held by Bank relating to this
particular transaction, all of which shall be construed as one instrument.
9.4 LAW OF NEW JERSEY This Agreement and the rights of the parties hereto
shall be governed by the laws of the State of New Jersey.
9.5 JURISDICTION Borrower hereby irrevocably consents to the nonexclusive
jurisdiction of the Courts of the State of New Jersey or any Federal Court in
such State in connection with any action or proceeding arising out of or related
to this Agreement or any other Loan Document. In any such litigation, Borrower
waives personal service of any summons, complaint or other process and agrees
that service of any summons, complaint or other process may be made by certified
or registered mail to it, at the address provided herein. BORROWER WAIVES TRIAL
BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT.
9.6 SUCCESSORS OR ASSIGNS This Agreement and all other Loan Documents shall
be binding upon and shall inure to the benefit of the parties hereto, their
respective successors and assigns.
9.7 RIGHTS CUMULATIVE The rights and remedies herein expressed or in any
other Loan Document to be vested in or conferred upon Bank shall be cumulative
and shall be in addition to and not in substitution for or in derogation of the
rights and remedies conferred upon secured creditors by the Uniform Commercial
Code or any other applicable law.
9.8 NOTIFICATION OF DISPOSITION OF COLLATERAL Any notification of a sale or
other disposition of the Collateral or of any other action by Bank required to
be given by Bank to the Borrower will be sufficient if given personally or
mailed to Borrower, by certified mail, at its chief executive office set
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<PAGE>
forth on Exhibit "A" not less than five (5) days prior to the day on which such
sales or other disposition will be made, and such notification shall be deemed
reasonable notice.
9.9 ADDRESS OF NOTICE Any written notice required to be given hereunder
shall be sufficient if mailed to Borrower at the addresses set forth on the face
page of this Agreement and to the Bank c/o Rick Debel- V.P. 250 Moore Street,
Hackensack, New Jersey
9.10 TITLES The titles and headings indicated herein are inserted for
convenience only and shall not be considered a part of this Agreement or in any
way limit the construction or interpretation of this Agreement.
9.11 DISCLOSURE Bank is hereby authorized to disclose any financial or
other information it may have about Borrower to any present or future
participant, any regulatory body or agency having jurisdiction over Bank, or to
any Person.
9.12 CAPITAL ADEQUACY If after the date of this Agreement, Bank shall
determine that the adoption of any applicable law, rule or regulation regarding
capital requirements for banks, or bank holding companies, or any change
therein, or any change in the interpretation or administration thereof by
governmental authority, central bank or comparable agency charged with the
interpretation, or administration thereof, or compliance by the Bank with any
request or directive of such entity regarding capital adequacy (whether or not
having the force of law), has the effect of reducing the return on the Bank's
capital to a level below that which Bank could have achieved (taking into
consideration Bank's policies with respect to capital adequacy immediately
before such adoption, change or compliance and assuming that each Bank's capital
was fully utilized prior to such adoption, change or compliance) but for such
adoption, change or compliance as a consequence of its commitment to make or the
making or maintenance of the Advances referenced herein, by an amount deemed by
the Bank to be material, Borrower shall pay to the Bank as an additional fee
from time to time, on demand, such amount as the bank shall have reasonably
determined to be necessary to compensate it for such
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<PAGE>
reduction, with interest on each such amount from the date demanded until paid
in full at the highest rate provided for with respect to the Advances referenced
herein. Any amount not paid upon demand shall be added to and become part of the
Liabilities. The determination by the Bank of such amount, if done on the basis
of any reasonable averaging and attribution methods, shall, in the absence of
manifest error be conclusive. At the Borrower's request, the Bank shall
demonstrate the basis of any such determination. Failure on the part of the Bank
to demand compensation for such increased costs or reduction in amounts received
or receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of the Bank's right to demand compensation with respect
to such period or any other period.
9.13 INDEMNIFICATION Each of the Obligors agree to pay, reimburse,
indemnify and hold harmless, the Bank, its directors, officers, employees,
agents and representatives from and against any and all actions, costs, damages,
disbursements, expenses (including attorneys fees) judgments, liabilities,
losses, obligations, penalties and suits of any kind or nature whatsoever with
respect to:
(a) the development, negotiation, preparation, execution, enforcement,
amendment or modification of any of the Loan Documents;
(b) the exercise of any right or remedy granted in any of the Loan
Documents, the collection or enforcement of any of the Liabilities and the
proof or allowability of any claim arising out of any of the Loan
Documents, whether in any bankruptcy or receivership proceeding or
otherwise;
(c) any claim of third parties and the prosecution or defense thereof,
arising out of or in any way connected with any of the Loan Documents; and
(d) any and all recording fees and taxes, and any and all liabilities
with respect thereto or resulting from any delay in paying stamp and other
taxes, if any, which may be payable or determined to be payable in
connection with the Loan Documents.
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<PAGE>
Notwithstanding the foregoing, Bank shall not be entitled to any
indemnification with respect to either its own gross negligence or willful
misconduct.
9.14 NO THIRD PARTY BENEFICIARY Nothing contained in this Agreement or in
the conduct of any party hereto shall be deemed to vest in any third party any
rights or privileges pertaining to or under this Agreement.
9.15 COUNTERPARTS This Agreement or any of the Loan Documents associated
herewith may be signed in counterparts and shall constitute an original copy
thereof.
9.16 TERM This Agreement shall with respect to Paragraph 2.2 hereof have a
term through May 30, 1998. Notwithstanding the foregoing, and in absence of an
Event of Default, Bank may at any time terminate this Agreement upon ninety (90)
days prior written notice at any time. The Advances provided for in Paragraph
2.1 hereof shall be due and payable in full upon expiration of the term as set
forth herein. Notwithstanding the giving of any notice of termination, the
rights of Bank hereunder and the obligations of Borrower hereunder, including
but not limited to the grant of security interests in the Collateral as set
forth in Article III hereof, shall remain in full force and effect until all of
the Liabilities of Borrower to Bank are paid in full.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
SUMMIT BANK
BY:
-------------------------------
RICK DEBEL-V.P.
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<PAGE>
CUNNINGHAM GRAPHICS, INC.
BY: /s/ Michael R. Cunningham
-------------------------------
MICHAEL R. CUNNINGHAM-PRES.
ATTEST: /s/ Timothy Mays
----------------------------
TIMOTHY MAYS-Secretary
EXHIBIT "A"
REPRESENTATIONS OF BORROWER
7.1 (A) Jurisdiction of incorporation of Borrower and in which it is in good
standing:
New Jersey
(B) Jurisdiction(s) Borrower is authorized to transact business:
New Jersey
(C) Prior changes in structure (mergers, consolidations, etc.):
(D) Prior changes in name of Borrower:
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<PAGE>
(E) Trade names used by Borrower or under which it issues invoices:
7.8 (A) (i) Borrower's chief executive office:
629 Grove Street, Jersey City, New Jersey
(ii) Change in location of foregoing within past four (4) months:
(iii) Location of Books and Records:
629 Grove Street, Jersey City, New Jersey
(iv) Change in location of foregoing within past four (4) months:
(v) Present location(s) of Inventory and Equipment:
629 Grove Street, Jersey City, New Jersey
(B) Location from which assets have been moved or other location of assets
within past four (4) months:
(C) (i) Name and address of warehouses, bailees or similar parties where
any Inventory of Borrower is located:
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<PAGE>
Exhibit "A" continued:
(ii) if any: warehouse receipts are/are not issued:
(iii) If warehouse receipts issued: they are negotiable/non-negotiable:
(D) Goods held by Borrower in which other parties have any interests,
including Goods sold on a bill and hold basis:
(E) Goods held by Borrower on a consignment basis:
(F) Inventory with trademarks, trade names, and the like which are the
property of others.
(G) Names and addresses of persons holding Goods belonging to Borrower and
location of Goods:
(H) Purchases of Inventory or Equipment not in the ordinary course of
business or from persons not customarily in the business of selling
such Goods:
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<PAGE>
Exhibit "A" continued:
(I) Instruments or Chattel Paper held by Borrower relating to Accounts:
- 35 -
PRINTING SERVICES AGREEMENT
This Agreement ("Agreement") is made as of July 12, 1996 between Cunningham
Graphics, Inc., ("Cunningham") a New Jersey corporation, with its principal
place of business at 629 Grove Street, Jersey City, New Jersey, 07306, and
Goldman, Sachs & Co. ("Goldman Sachs") a New York limited partnership with its
principal place of business at 85 Broad Street, New York, New York 10004.
WHEREAS, Goldman Sachs wishes to appoint Cunningham to supply the services
described herein and further listed in Schedule A, and any other services added
thereto by agreement between the parties (the "Services"); and
WHEREAS, Cunningham is willing and able to supply the Services on the terms
and conditions set out below.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. DEFINITIONS
1.1 In this Agreement, the following words and expressions shall have the
meanings set out below:
1.1.1 "Affiliates" shall mean all entities which are controlling,
controlled by or under common control with Goldman, Sachs & Co.,
wheresoever in the world located.
1.1.2 "Commencement Date" shall mean July 15, 1996.
1.1.3 "Confidential Information"
(a) shall mean, with respect to Goldman Sachs information, any
trade secrets or other proprietary, confidential or
non-public information of Goldman Sachs or its clients or
third parties to whom Goldman Sachs owes a duty of
confidentiality and any other information which Cunningham
knows or ought reasonably to know to be proprietary or
confidential; in addition to the foregoing, all materials
provided to Cunningham by any means for copying or
fulfillment services shall be deemed Confidential
Information; and
(b) shall mean, with respect to Cunningham information, the
terms of this Agreement and all non-public information
regarding Cunningham's business and which Cunningham has
marked as
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confidential.
1.1.4 "Confirms or Client Statements" shall mean those documents
printed by Cunningham which include account and trade information
for clients of Goldman Sachs, which information is transmitted to
Cunningham via connections to Goldman Sachs' mainframe computers.
1.1.5 "Material Breach" shall mean, with respect to Cunningham,
documented material inconsistences in performance, including
failure to meet the Service Criteria, as well as material failure
to comply with any material term of this Agreement; and shall
mean, with respect to Goldman Sachs, material failure to comply
with any material term of this Agreement.
1.1.6 "Minimum Commitments" shall mean the level of printing services
obtained from Cunningham as further described in Schedule A.
1.1.7 "Operating Hours" shall mean the hours specified in Schedule A.
1.1.8 "Personnel" shall mean those individuals assigned by Cunningham
to perform Services related to Confirms or Client Statements at
the Print Shop, as further described in Schedule B.
1.1.9 "Print Shop" shall mean a section of the 8th floor, 111 8th
Avenue, New York, N.Y. as detailed in the Sublease.
1.1.10 "Service Credits" shall mean the adjustments made to the fees
otherwise due to Cunningham in the amounts stated and upon the
occurrence of the events described in Schedule A.
1.1.11 "Service Criteria" shall mean the detailed specifications
included in Schedule A.
1.1.12 "Sales Agreement" shall mean the Asset Sales Agreement executed
by the parties contemporaneously with this Agreement, and
addressing the sale of certain materials by Goldman Sachs to
Cunningham.
1.1.13 "Sublease" shall mean the Agreement of Sublease executed by the
parties contemporaneosously with this Agreement, relating to the
Print Shop.
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<PAGE>
1.1.14 "Term" shall mean the period from and including the Commencement
Date to and including and will continue
thereafter on a year to year basis; provided, that Cunningham
shall have given Goldman Sachs a minimum of 90 days notice of
impending renewal together with the proposed charges for the
renewal period and Goldman Sachs shall have 60 days from receipt
of such notice to give Cunningham notice of termination.
Section 2. TERMS OF AGREEMENT
2.1 Goldman Sachs hereby appoints Cunningham, with effect from the Commencement
Date, to supply the Services to Goldman Sachs, and Cunningham hereby accepts
such appointment on the terms and conditions set forth below.
2.2 The terms and conditions set forth below are the sole terms on which Goldman
Sachs shall purchase the Services from Cunningham and shall operate and prevail
to the entire exclusion of any terms set out on any documentation used or
presented by Cunningham or otherwise existing. No other express terms, written
or oral, shall be incorporated into the Agreement.
2.3 No alterations to any of the requirements indicated in Schedule A shall be
made except by agreement in writing between the parties and provided that in the
event that any alteration involves either an increase or a decrease in the level
of Services required by Goldman Sachs, Cunningham and Goldman Sachs shall agree
on any corresponding change in the pricing information contained in Schedule D.
Section 3. CUNNINGHAM'S OBLIGATIONS
3.1 Cunningham shall from the Commencement Date and throughout the Term provide
the Services in accordance with this Agreement and the Service Criteria.
3.2 Cunningham shall perform the Services at the location and with the resources
of its choosing. Notwithstanding the foregoing, in the absence of written
approval to the contrary by Goldman Sachs, Confirms or Client Statements may
only be printed at the Print Shop, and Cunningham shall not use the Print Shop
for purposes of printing similar materials of any other party without the
express written approval of Goldman Sachs.
3.3 Cunningham shall be responsible for providing any and all supplies required
to perform the Services, with the exception of those listed in Schedule C.
3.4 Cunningham shall insure the necessary level of staffing to provide the
Services in accordance with the Service Criteria.
Confidential treatment requested-portions filed separately with the Commission.
3
<PAGE>
3.5 Cunningham shall conduct a background check of all Personnel at its own
expense, and shall ensure that all Personnel have appropriate backgrounds. The
background check shall include an interview, check of identification papers, and
telephone calls to the individual's last residence and last place of employment
to verify same. Such verification may be established by "Equifax" or another
equivalent security firm acceptable to Goldman Sachs.
3.6 Cunningham shall obtain Goldman Sachs' prior approval before assigning any
individual to perform the Services assigned to the Personnel. Thereafter,
Cunningham shall act promptly to replace any of the Personnel deemed by Goldman
Sachs to be unsuitable for any reason. A list of the Personnel shall be attached
hereto as Schedule B, and revisions to the list as may be required to keep it
current shall be provided by Cunningham.
Section 4. GOLDMAN SACHS' OBLIGATIONS
4.1 Goldman Sachs shall provide Cunningham with material to be printed,
fulfilled, or otherwise produced in a timely manner. Such material shall be
delivered in hard copy, electronic format, on disk, or as otherwise agreed by
the parties. Goldman Sachs shall also provide the paper to be used for printing
of Confirms or Client Statements.
4.2 Goldman Sachs shall, at its election and in addition to the check conducted
by Cunningham, conduct a background check of the Personnel, including a court
inquiry credit check and fingerprinting, drug screen or other checking or
testing in connection with the performance of Services under this Agreement.
Cunningham agrees to indemnify Goldman Sachs, its partners, employees and agents
against all liability, damage, loss, claims, demands and actions arising from
such checking or testing and the use and reporting of the results thereof.
4.3 Goldman Sachs shall provide the telecommunications services described in
Schedule C which shall enable electronic communications between Goldman Sachs
and Cunningham.
4.4 Goldman Sachs shall provide the printing supplies specified in Schedule C.
Section 5. CHARGES
The Services shall be provided by Cunningham to Goldman Sachs at the prices set
forth in Schedule D, and, except as provided therein, such prices shall be fixed
for the Term.
Section 6. PAYMENT
6.1 Cunningham will submit weekly invoices in arrears
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<PAGE>
throughout the Term in accordance with the prices contained in Schedule D, and
in the format required by Goldman Sachs, the first such invoice to be issued in
respect of the calendar month which includes the Commencement Date. All
non-disputed monies shall be paid within ten (10) days of receipt of the
relevant invoice. The parties will use their best efforts to resolve any
disputed invoices within thirty (30) days. Goldman Sachs shall pre-pay postage
as invoiced by Cunningham.
6.2 Any sales, retailer's, occupation, service occupation, value added, use or
other similar tax imposed on the transactions contemplated by this Agreement,
excluding taxes based on the net income of Cunningham, will be paid by Goldman
Sachs. A charge for any such taxes will be included on Cunningham's invoices.
Cunningham shall cooperate with Goldman Sachs' lawful efforts to minimize its
sales tax liability.
6.3 Goldman Sachs shall off-set against payment owed to Cunningham the amounts
owed to Goldman Sachs by Cunningham in relation to the Sales Agreement and the
Sublease, as well as the amount due Goldman Sachs from Cunningham as a result of
the Service Credits. The amount of the monthly off-set shall be , with
regard to the Sales Agreement. The amount of the monthly off-set with regard to
the Sublease is for base rent, porter wage and sprinkler, and
for monthly utility fees, inclusive of electric, steam and water.
Notwithstanding the foregoing, these off-sets may be adjusted to reflect the
fees owed in relation to the Sale Agreement and the Sublease, the terms of which
govern the parties' obligation thereunder.
6.4 Payment obligations of Goldman Sachs shall also be reduced by the amount of
Service Credits owed by Cunningham as described in Schedule A.
Section 7. INSURANCE AND INDEMNITIES
7.1 During the Term of this Agreement, Cunningham and Goldman Sachs each will
carry and maintain the following insurance coverage (a) with respect to their
respective employees: (i) Workers Compensation Insurance as prescribed by the
law of the state or other jurisdiction in which work is to be performed, (ii)
Employers Liability Insurance with limits of at least $500,000 per occurrence;
and (b) Comprehensive General Liability Insurance, including contractual
liability, and Comprehensive Automobile Liability Insurance, if the use of motor
vehicles is required, each with combined single limits of at least $1,000,000
per occurrence for bodily injury and property damage, and each of Cunningham and
Goldman Sachs will also carry fire, sprinkler leakage and extended coverage
insurance, subject to the usual exclusions, limitations and conditions of such
policies on all of its property located on the other party's
Confidential treatment requested- portions filed separately with the Commission.
5
<PAGE>
premises. Each such policy will include provisions generally considered standard
for the type of insurance involved, including the loss payable and waiver of
subrogation clauses and deductible amounts. Each of Cunningham and Goldman Sachs
agree to waive rights of subrogation in advance of the loss against each other.
7.2 Each party will, upon request, furnish the other with a certificate of
insurance showing coverage in such amounts with a minimum thirty (30) days
notification clause to the other in the event the policies are to be cancelled,
renewed or changed. Failure to comply with this Section 7.2 shall be deemed a
Material Breach.
7.3 Cunningham agrees to defend, indemnify and hold Goldman Sachs harmless from
and against any and all liabilities, damages, costs, losses and expenses,
including court costs and reasonable attorneys' fees (collectively "Losses"),
which arise out of: (a) the acts or omissions during the Term of this Agreement
of Cunningham's employees, resulting in injury or death to persons (including
invitees) or damage to or theft of property of Goldman Sachs, and property of
third parties located on the premises of Goldman Sachs; and (b) the performance
of the Services.
7.4 Goldman Sachs agrees to defend, indemnify and hold Cunningham harmless from
and against any and all Losses to the extent arising out of: (a) the acts or
omissions during the Term of this Agreement of Goldman Sachs' employees,
resulting in injury or death to persons (including invitees) or damage to or
theft of property of Cunningham, and property of third parties located on the
premises of Cunningham; and (b) the content of material reproduced or otherwise
handled by Cunningham at the request of and in accordance with the instructions
of Goldman Sachs or its employees, including libel, defamation, invasion of
privacy, copyright, trademark or other proprietary rights infringement or unfair
competition.
7.5 Cunningham and Goldman Sachs agree to notify the other promptly of any
claims or demands for which the other party may be responsible hereunder.
Section 8. CONFIDENTIALITY
8.1 Except as provided in Section 8.2 below, neither party shall use, divulge,
communicate or allow to be divulged to any person, without the other party's
prior written consent, any Confidential Information which such party may in the
performance of this Agreement, and in whatever capacity, have received or
obtained.
8.2 Each party shall limit the use of and access to the Confidential Information
to those of its employees, servants or agents whose use thereof or access
thereto is necessary to effect
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the performance of its obligations under this Agreement.
8.3 Each party shall use all reasonable endeavors to protect the confidentiality
of the Confidential Information and to assist the other party in identifying and
preventing any unauthorized use or disclosure of any of that Confidential
Information.
8.4 Without limitation of the foregoing, each party shall advise the other
immediately in the event that it learns or has reason to believe that any person
who has had access to the Confidential Information has violated or intends to
violate the terms of this Agreement or any related non-disclosure agreement and
such party will co-operate with the other in seeking injunctive or other
equitable relief in the name of the other party or itself against any such
person.
8.5 Upon the termination of this Agreement (or earlier if requested by either
party) each party shall at its own cost return to the other all copies of
documents, papers or other material which may contain or be derived from the
Confidential Information (excluding for purposes of this Section 8.5, this
Agreement) which are in its possession or control, together, if requested by
such party, with a certificate signed by such party in form and substance
satisfactory to the other party, to the effect that all the Confidential
Information has been returned.
8.6 Confidential Information shall not include information which is:
8.6.1 in or becomes part of the public domain other than by disclosure
by Cunningham or Goldman Sachs, as appropriate, in violation of
this Agreement;
8.6.2 demonstrably known to Cunningham or Goldman Sachs, as
appropriate, previously, without a duty of confidentiality;
8.6.3 independently developed by Cunningham or Goldman Sachs, as
appropriate, outside of this Agreement;
8.6.4 rightfully obtained by Cunningham or Goldman Sachs, as
appropriate, from third parties without a duty of
confidentiality; or
8.6.5 which is required to be disclosed by law, statute or regulation.
8.7 Cunningham hereby irrevocably assigns to Goldman Sachs, its successors and
assigns, and Goldman Sachs shall have, exclusive ownership rights, including,
without limitation, all patent, copyright and trade secret rights, with respect
to any
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<PAGE>
work including, but not limited to, any invention, discoveries, concepts, ideas
or information conceived by Cunningham in the course of rendering Services to
Goldman Sachs in response to a specific assignment of work, and all documents,
data and other information of any kind including, incorporating, based upon or
derived from the foregoing, including reports and notes prepared by Cunningham,
customized work produced by Cunningham in the course of performing the Services,
and such works shall be Confidential Information. Cunningham will cooperate
fully with Goldman Sachs to establish, protect or confirm Goldman Sachs'
exclusive rights in such work or to enable it to transfer legal title together
with any patents that may be issued. A certificate evidencing compliance with
this provision shall, if requested, be provided to Goldman Sachs.
8.8 Cunningham will procure that the Personnel will enter into the
Non-Disclosure agreement in the form attached as Schedule E.
8.9 Cunningham shall undertake the establishment and maintenance of security
procedures to assure that any Confidential Information in its possession shall
not be improperly disclosed. Such procedures shall be subject to review by
Goldman Sachs upon request.
8.10 It is understood and agreed that in the event of a breach of this Section
8, damages may not be an adequate remedy and each Cunningham and Goldman Sachs,
as appropriate, shall be entitled to injunctive relief to restrain any such
breach, threatened or actual.
Section 9. NO PROMOTION
9.1 Cunningham agrees that it will not, without the prior written consent of
Goldman Sachs in each instance,
9.1.1 use in advertising, publicity, or otherwise the name of Goldman
Sachs, or any Affiliate or any partner or employee of Goldman
Sachs, nor any trade name, trademark, trade device, service mark,
symbol or any abbreviation, contraction or simulation thereof
owned by Goldman Sachs or its affiliates; or
9.1.2 publish alone or in conjunction with any other person any
article, photograph or other illustration relating to Goldman
Sachs or to the Offices or any part thereof; or
9.1.3 represent, directly or indirectly, that any product or any
service provided by Cunningham has been approved or endorsed by
Goldman Sachs. This
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provision shall survive termination of the Agreement.
Section 10. WARRANTIES
10.1 Cunningham represents and warrants that:
10.1.1 it will perform the Services in accordance with the terms and
conditions contained herein, including, without limitation, in
accordance with the Service Criteria;
10.1.2 it will perform the obligations undertaken by Cunningham under
this Agreement in accordance with applicable laws and
regulations;
10.1.3 it will perform the Services in a timely, diligent and
professional manner, by appropriately skilled and qualified
personnel, having due regard to Goldman Sachs' business
operations;
10.1.4 it has all necessary rights, authorizations and/or licenses to
provide the Services to Goldman Sachs under this Agreement;
10.1.5 it is generally aware of the provisions of the copyright laws and
in connection therewith it shall, as soon as is reasonably
practicable, alert the Goldman Sachs Legal Department where it
suspects that any requests, for the copying or production of
works may result in copyright infringement and shall obtain the
permission of appropriate Goldman Sachs management personnel
prior to making any copies or productions of such works.
10.1.6 is shall insure that the Services related to Client Statements and
Confirms are only provided by the Personnel.
10.2 EXCEPT AS SET FORTH IN SECTION 10.1 ABOVE, Cunningham MAKES NO OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 11. FORCE MAJEURE
11.1 Neither party will be in breach of this Agreement by reason of any delay in
the performance or non-performance on its part of its obligations hereunder (and
shall not be liable for any costs or damage caused thereby) where the same is
occasioned by any circumstance whatsoever beyond its reasonable control.
9
<PAGE>
11.2 If either party claims that any delay or non-performance is occasioned by
such circumstance as is described in Clause 11.1 that party shall:-
11.2.1 as soon as practicable give notice to the other of the occurrence
of the circumstance, such notice to include as much information
as possible;
11.2.2 consult with the other as to the effects of such delay or
non-performance and the best way of mitigating such effects; and
11.2.3 proceed with diligence and at its own expense to take such steps
as would be taken by a reasonable and prudent person to end the
delay or non-performance as soon as possible.
11.3 If any such circumstance as is described in Clause 11.1 prevents either
party from performing all of its obligations hereunder for a period in excess of
thirty (30) days, either party may terminate this Agreement by notice in
writing.
Section 12. TERM, TERMINATION AND PERFORMANCE REVIEW
12.1 Subject to Sections 11 above and this Section 12, this Agreement shall
commence on the Commencement Date and shall continue in force for the Term.
12.2 Without prejudice to any other rights or remedies which it may have, either
party shall be entitled to terminate this Agreement forthwith by notice if:
12.2.1 the other party shall be in Material Breach of any provision
of this Agreement on its part to be observed or performed
and either such Material Breach is incapable of remedy or
the Material Breach shall continue for thirty (30) days
after notice specifying the Material Breach and requiring
the same to be remedied has been given to such party by the
party not in Material Breach; or
12.2.2 if a party shall be in Material Breach, whether or not such
Material Breach has been cured, if such Material Breach has
occurred within thirty (30) days of any other Material
Breach or if there has been more than two (2) Material
Breaches in any six (6) month period; or
12.2.3 if Cunningham has availed itself of, or been subjected to by
any third party, a proceeding in bankruptcy in which
Cunningham is the named
10
<PAGE>
debtor, an assignment by Cunningham for the benefit of its
creditors, the appointment of a receiver for Cunningham, or
any other proceeding involving insolvency or the protection
of, or from, creditors, and appointment of a receiver for
Cunningham, or any other proceeding involving insolvency or
the protection of, or from creditors, and same has not been
discharged or terminated without any prejudice to
Cunningham's rights or interests under this Agreement within
sixty (60) days;
12.3 Failure to meet the Minimum Commitment shall be considered a
Material Breach of this Agreement.
12.4 Goldman Sachs reserves the right to conduct a performance review three (3)
months after the Commencement Date, and regularly at the discretion of Goldman
Sachs thereafter, recommending improvements as necessary. Non-compliance with
any clearly documented recommended improvements with respect to performance and
compliance issues will entitle Goldman Sachs to terminate this Agreement
pursuant to Section 12.2.1.
12.5 Notwithstanding the foregoing, Goldman Sachs reserves the right to
terminate this Agreement on ninety (90) days notice, without cause. In the event
of such termination, Goldman Sachs' liability shall be limited to the following:
12.5.1 If the termination occurs within the first 12 months following
the Commencement Date, Goldman Sachs shall pay Cunningham
as compensation for costs incurred in preparing the
Print Shop for use by Cunningham, moving expenses, and other
miscellaneous costs incurred; if the termination occurs after the
twelfth month following the Commencement Date, Goldman Sachs
shall pay Cunningham an amount equal to for each month
remaining in the term, measured from the date the termination
becomes effective until .
12.5.2 The remedies available to Cunningham arising in relation to a termination
as described in this Section 12.5 shall be limited to those specified in section
12.5.1. Goldman Sachs shall have no further liability for any damages arising
from such termination, whether direct, indirect, consequential or otherwise.
Damages arising from such termination in respect to the Sales Agreement and the
Sublease are addressed in each of those agreements.
12.6 In the event the landlord of the premises on which the Print Shop is
located denies the request to sublet the Print Shop
Confidential treatment requested-portions filed separately with the Commission.
11
<PAGE>
premises to Cunningham, either party may elect to terminate this Agreement
within 30 days of receipt of notice of such denial. The exercise of such right
by either party shall not be considered either a material breach or a
termination without cause, but shall instead have the same impact as though this
Agreement had been completed at the end of the Term, and the rights and
obligations of the parties shall be defined accordingly.
Section 13. CONSEQUENCES OF TERMINATION
13.1 Following service of a notice pursuant to Section 11, or 12 terminating
this Agreement, each party shall continue to abide by the terms and conditions
of this Agreement and comply fully with its obligations hereunder and it shall
not in any way hinder or interrupt the performance of this Agreement during any
period between the date of service of a termination notice pursuant to Section
11 or 12 and the date of actual termination.
13.2 On termination of this Agreement for whatever reason:
13.2.1 Cunningham shall be entitled to render an invoice in respect
of any Services performed since the date of the last invoice
issued; and
13.2.2 Goldman Sachs will make payment in settlement of such
invoice in accordance with Section 6 subject to offset to
reflect any liability of Cunningham.
13.3 Termination shall be without prejudice to any rights or remedies either
party may have against the other in respect of any antecedent breach of the
terms of this Agreement; PROVIDED THAT, in no event shall Goldman Sachs be
liable for any claim for loss of profit or loss of contract in respect of any
unexpired residue of the Term.
Section 14. INSPECTION OF BOOKS
14.1 Cunningham shall keep detailed accounts and records of all activities
carried out, and all costs and expenses incurred, in the performance of its
obligations under this Agreement and will on request, and subject to the
restrictions on Confidential Information set forth in Section 8, allow
inspection of such accounts and records as may be required in connection with
activities related to and costs and expenses incurred under this Agreement by
Goldman Sachs or its authorized representative, upon reasonable notice. If any
such inspection reveals that any invoice or payment shall not have been rendered
or made in accordance with the terms of this Agreement, or that any statement
rendered or payment made by Cunningham is inaccurate, then Cunningham shall pay
the reasonable cost of such inspection without prejudice to any other remedies
or claims of Goldman
12
<PAGE>
Sachs.
14.2 Goldman Sachs shall keep detailed accounts and records of those activities
related to the Minimum Commitments described herein, and will on request, and
subject to the restrictions on Confidential Information set forth in Section 8,
allow inspection of such accounts and records as may be required in connection
with such activities. If any such inspection reveals that the Minimum
Commitments level has not been maintined, then Goldman Sachs shall pay the
reasonable cost of such inspection without prejudice to any other remedies or
claims of Cunningham.
Section 15. INDEPENDENT CONTRACTOR
15.1 Cunningham is, and shall at all time be, an independent contractor
hereunder and not an agent of Goldman Sachs; and neither any thing contained in
this Agreement nor any actions taken by or arrangements entered into between the
parties to this Agreement in accordance with the provisions hereof shall be
construed as or deemed to create as to such parties any partnership or joint
venture. It is further agreed that Cunningham shall not have authority to commit
Goldman Sachs contractually or otherwise to any obligations whatsoever to third
parties.
15.2 The individuals supplied by Cunningham to provide the Services described
herein, including the Personnel, are not Goldman Sachs employees or agents, and
Cunningham assumes full responsibility for their acts. Cunninham shall be solely
responsible for the payment of compensation of such persons, each of whom shall
be informed that they are not entitled to the provision of any Goldman Sachs
employment benefits. Goldman Sachs shall not be responsible for payment of
workman's compensation insurance, disability benefits, unemployment insurance,
or for withholding any payment or employment taxes for such persons, but such
responsibilty shall be solely that of Cunningham.
Section 16. NOTICES
Any notice required or permitted to be given under this Agreement shall be given
in writing and shall be effective from the date sent by registered or certified
mail, by hand, facsimile or overnight courier to the addresses set forth on the
first page of this Agreement with a copy sent to the General Counsel of Goldman
Sachs, also at the address appearing above. Notice to Cunningham shall be sent
in duplicate to Robert Margulies, Margulies, Wind, Herrington & Knopf 15
Exchange Place, Suite 510, Jersey City, New Jersey 07302-3912.
Section 17. LIMITATION OF LIABILITY
13
<PAGE>
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT WILL CUNNINGHAM OR GOLDMAN SACHS BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOST
BUSINESS OR PROFITS. DIRECT DAMAGES SUFFERED BY THE AFFILIATES SHALL NOT BE
CONSIDERED CONSEQUENTIAL DAMAGES BUT ARE DIRECT DAMAGES FOR PURPOSES OF THIS
PROVISION.
Section 18. MICROFICHE SERVICES
18.1 Cunningham has agreed to provide Goldman Sachs with the right to use a
portion of the Print Shop for purposes of operating certain equipment (the
"Microfiche Equipment"), currently located at that site, subject to the terms of
a separate agreement.
18.2 The Microfiche Equipment will not be operated by Cunningham, but will be
operated, maintained and supported by Goldman Sachs. Goldman Sachs shall be
responsible for obtaining any licenses, permits, or other approvals required to
operate the Microfiche Equipment.
18.3 Cunningham shall perform the Services and otherwise use the Print Shop in
such a way as to avoid any interruption or interference with Goldman Sachs' use
of the Microfiche Equipment.
Section 19. USE OF SUBCONTRACTORS
Cunningham may delegate or subcontract its responsibilities under this Agreement
without the express written consent of Goldman Sachs, provided, however, that it
may not subcontract or otherwise cause to be performed by third parties, any
printing or fulfillment services related to Confirms or Client Statements. Such
approval shall not release Cunningham from responsibility for the work of its
subcontractors. Without limitation, Cunningham shall assume liability for any
delay, default, or breach caused by its subcontractors, and failure of such
subcontractors to comply with the terms of this Agreement, including those terms
addressing confidentiality.
Section 20. ACKNOWLEDGEMENT AS TO AFFILIATES
Cunningham and Goldman Sachs hereby specifically acknowledge and agree that it
is their intention i) that all of the products and/or Services contemplated by
this Agreement be made available to the Affiliates, ii) that the Affiliates be
entitled to enforce this Agreement, and iii) that the Affiliates be third party
beneficiaries of this Agreement.
Section 21. GENERAL
21.1 This Agreement and the attached Schedules supersede all
14
<PAGE>
prior agreements and understanding between the parties for performance of the
Services, and constitute the complete agreement and understanding between the
parties unless modified in a writing, signed by both parties.
21.2 This Agreement is not assignable in whole or in part by either party
without the prior written consent of the other party, which consent shall not be
unreasonably withheld, and any attempt to make such assignment shall be void.
Notwithstanding the foregoing, (i) Goldman Sachs may assign this Agreement to
any entity which controls, is controlled by or under common control with Goldman
Sachs or (ii) to any entity which succeeds to all or substantially all of
Goldman Sachs' assets or business.
21.3 If any provision of this Agreement (or any portion thereof) is determined
to be invalid or unenforceable the remaining provisions of this Agreement shall
not be affected thereby and shall be binding upon Goldman Sachs and Cunningham
and shall be enforceable as though said invalid or unenforceable provision (or
portion thereto) were not contained in this Agreement.
21.4 The failure by either Goldman Sachs or Cunningham to insist upon strict
performance of any of the provisions contained in this Agreement shall in no way
constitute a waiver of its rights as set forth in this Agreement, at law or in
equity, or a waiver of any other provisions or subsequent default by the other
party in the performance or compliance with any of the terms and conditions set
forth in this Agreement.
21.5 The following Sections shall survive termination of this Agreement: 4.2, 7,
8, 9, 13, 14, 16, 17, 20, and 21.7.
21.6 The headings and captions used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
All references in this Agreement to Sections or Schedules shall, unless
otherwise provided, refer to Sections hereof or Schedule attached hereto, all of
which are incorporated herein by this reference.
21.7 This Agreement is deemed entered into in New York, New York and shall be
governed and construed in all respects by the laws of the State of New York
without giving effect to principles of conflict of laws. The parties consent to
personal jurisdiction of and venue in the state and federal courts within that
county.
IN WITNESS WHEREOF, the parties hereto, each acting under due and proper
authority, have executed this Agreement as of the date written above.
15
<PAGE>
CUNNINGHAM GRAPHICS, INC. GOLDMAN, SACHS & CO.
on behalf of itself and the
Affiliates
By: /s/ Michael R. Cunningham By:
--------------------------- -------------------------------
Name: Michael R. Cunningham Name:
-------------------------- -----------------------------
Title: Pres Title:
------------------------- ----------------------------
16
<PAGE>
Schedule A
I. Description Of Services:
The Services shall include the items listed below:
A. Offset printing services including non-heat set web printing and multi-color
sheet fed printing related to the production of research reports and
miscellaneous printing.
B. On Demand network printing services related to the production of documents
with short run lengths.
C. Mainframe printing and fulfillment services related to the production of
Goldman Sachs Daily and Monthly Client Statements, in a timely manner to satisfy
the Schedules described herein.
D. Dedicated Customer Service Representatives to facilitate Goldman Sachs user
requests for assistance through different phases of the document production
process including: job estimating and scheduling and quality assurance.
E. Labeling and addressing capabilities for distribution of documents to
destinations worldwide as designated by Goldman Sachs.
F. General fulfillment services including automated and manual inserting,
folding, saddle stitching, perfect binding and in-line glue binding, three hole
punching, shrink wrapping and package assembly.
G. Comprehensive job tracking systems with direct, read-only accessibility by
key Goldman Sachs users. Systems will have the capacity to extract and print out
various metrics and production reports (specified in Schedule A, Section II.D.),
on a regular and ad hoc basis.
H. Quality assurance programs designed to monitor the production process and
easily and quickly confirm compliance with customer specifications, service
requirements, performance standards, and the Service Criteria set by Goldman
Sachs.
I. Ongoing user study programs and reporting systems.
J. Pick-up and delivery service at designated times specified by Goldman Sachs
between 85 Broad Street, 1 NY Plaza, and the Print Shop and Cunningham's
17 <PAGE>
other locations.
K. At the request of Goldman Sachs, Cunningham will attend review meetings to
monitor and review performance by Cunningham of the Services.
L. To deal with obligation to meet mail stream deadlines consistent with
established pick-up times of Goldman Sachs selected mail stream service
providers.
II. Service Criteria:
Cunningham shall meet the following Service Criteria in its performance of
the Services:
A. Operating Hours for the Print Shop:
Monday - Saturday 24 hours (Monday 5:00 am -
Saturday 8:00 am)
All other hours scheduled as needed to satisfy the requirments contained herein.
(During the production process of Monthly Client Statements, designated
statement teams will work in consecutive shifts until statements are completed.
In the event that statement production must occur over a weekend or holiday,
Cunningham is required to provide hours of operation beyond those stated above
at no additional cost to Goldman Sachs in order to prepare materials for pick-up
by 8:00 am on the next business day).
B. Turnaround Time:*
1. Web Printing:
Saddle Stitched Books:
- - Priority Plus Within (1)
- - Priority Within
- - Standard Within
Perfect Bound Books:
- - Priority Plus Within
- - Priority Within
- - Standard Within
*Turnaround Times for reports are from point of receipt of files and include
pre-press preparations, printing and binding. Inserting, labeling (if required)
and preparations for delivery, all of which must be completed within the times
specified, or as needed to meet overnight delivery in the United States and
Europe and two day delivery for Asia and Australia.
- -------------
(1) Up to 32 pages of text, self covered.
Confidential treatment requested-portions filed separately with the Commission.
18
<PAGE>
To the extent specified completion times would result in job completion prior to
the earliest scheduled delivery for the next day's delivery of finished reports,
the completion time will be extended to the first regularly scheduled delivery
time, unless Goldman Sachs specifically requests earlier delivery. Cunningham is
not responsible for delays due to third party courier services or otherwise
covered by the Agreement's Force Majeure provisions.
The following reports occur weekly with pre-existing delivery schedules:
<TABLE>
<CAPTION>
Report Day To Print Day Clients Must Receive*
<S> <C> <C>
Asian Weekly Analyst
Japan Research Viewpoint
Weekly Analyst
US Research Viewpoint
Japan Economics Analyst
UK Weekly Analyst
US Economics Analyst
Fixed Income Weekly
Mortgage Weekly
</TABLE>
The following reports occur biweekly and on the same day with pre-existing
delivery schedules:
<TABLE>
<CAPTION>
Report Day To Print Day Clients Must Receive*
<S> <C> <C>
Latin America Viewpoint
Asia Viewpoint
Emerging Debt Markets
</TABLE>
The following reports occur monthly with pre-existing delivery schedules:
<TABLE>
<CAPTION>
Report Day To Print Day Clients Must Receive*
<S> <C> <C>
Int'l Economics Analyst
UK Economics Analyst
Monthly Fund Update(MFU)
Bank Fund Update(BFU)
TCU
</TABLE>
* To US. Domestic Locations
2. Mainframe Printing:
The following documents occur daily with pre existing delivery schedules:
Confidential treatment requested-portions filed separately with the Commission.
19
<PAGE>
<TABLE>
<CAPTION>
Document Schedule
<S> <C>
GS&Co. and GSI Confirms of Trade Printing begins late pm each business day Monday - Friday; inserted,
metered and ready for pick-up by appropriate delivery services
by
Chicagos, Futures, Micros and Prime Printed after GS&Co. and GSI Confirms and inserted
Broker Statements
</TABLE>
The following documents occur biweekly with pre existing delivery schedules:
<TABLE>
<CAPTION>
Document Schedule
<S> <C>
T&E's To be agreed upon by the parties
</TABLE>
The following documents occur monthly with pre existing delivery schedules:
<TABLE>
<CAPTION>
Document Schedule
<S> <C>
Month End Client Statements Printed, inserted, labeled (if required), metered and made ready
for pick-up by appropriate delivery services within of
receipt of GS "check-out"
Chicagos, Futures, Micros, Prime Brokers,
Dividend Checks, and PCS Statements Printed, inserted, labeled (if required), metered and made ready for
pick-up by appropriate delivery services following Client Statements
</TABLE>
The following documents occur quarterly with pre existing delivery schedules:
<TABLE>
<CAPTION>
Document Schedule
<S> <C>
J. Arons To be agreed upon by the parties
</TABLE>
The following documents occur annually with pre existing delivery schedules:
<TABLE>
<CAPTION>
Document Schedule
<S> <C>
1099's and 1040's To be agreed upon by the parties
</TABLE>
3. Sheetfed Printing:
Document Schedule
Krome Kote Covers Within
(Quantities up to 200, 1 - 4 colors,
single side)
Invitations Within
(Quantities up to 200, 1 - 4 colors,
single side and standard GS&Co.
return address envelopes)
Confidential treatment requested-portions filed separately with the Commission.
20
<PAGE>
All other sheetfed printing services will be provided as needed on an individual
basis.
4. Miscellaneous Printing:
Document Schedule
Tip-Ons/FYI Cards
(Quantities up to 500,
1 color, single sided)
Buck Slip Note pads
(Quantities of 40 pads/order,
1 color, single sided)
NCR Forms (2-5 parts)
(Quantities of 500 to 2500.
1 color, one side.)
5. Delivery Services
Regular delivery service by truck or van is required between Goldman Sachs
locations (85 Broad Street and One New York Plaza) and Cunningham premises (111
Eighth Avenue and Jersey City, NJ). The following schedule is to be maintained
each business day, Monday - Friday (Saturday upon request at an additional
charge in an amount no greater than the cost incurred by Cunningham in relation
to such services), at a minimum:
Arrives at 85 Broad St/1 NY Plaza: Departs 85 Broad St/1 NY Plaza:
9:30 am
11:30 am
2:30 pm
4:30 pm
6:30 pm
Supplemental pick - ups and deliveries will be made available upon request.
D. Comprehensive Job Tracking System
Cunningham is required to provide a management information system (MIS) with
data collection, job tracking, management reporting and inventory functions.
Within 60 days of the Commencement Date, Goldman Sachs user requirements,
invoice formats and management reporting procedures will be agreed upon by
Goldman Sachs and Cunningham.
Cunningham must provide Goldman Sachs with various management reports which are
specified below. All reports are to be submitted to the Goldman Sachs Contract
Administrator and/or Goldman Sachs designated user interface by the specific
time and day mutually agreed upon by Goldman Sachs and Cunningham. All reports
must be available in a PC-readable electronic format. Additionally, Cunningham
is to provide read only access to its MIS system, updated every quarter hour
during regular business hours and periodically thereafter, for the purpose of
key Goldman Sachs users viewing projects in various stages of the production
process. For billing purposes, Goldman Sachs may require the integration of the
vendor's management information system with Goldman Sachs' Accounts Payable
System and will specify data items to be captured as well as data formats and
network protocols.
1. Reports to be Submitted to the Goldman Sachs Contract Administrator and or
Purchasing
Confidential treatment requested-portions filed separately with the Commission.
21
<PAGE>
Department:
Late/Error Job Report - Daily
This report details those jobs that were delivered outside of the
user's specifications, a brief description as to why the lateness or
error occurred and Cunningham's recommendations or actions to prevent
further occurrences. This report is submitted to the Contract
Administrator.
Goldman Sachs Supplied Inventory Report - Monthly
This report lists the Goldman Sachs consumables and supplies held in
stock by Cunningham and a list of all Goldman Sachs purchase order
requests submitted during the period. The report is printed on or
about the first of every month and submitted to the Goldman Sachs
Purchasing department.
Chargeback Report - Weekly
This report details all production expenses generated off of pre-set
pricing grids as stated in Schedule C. This report is contingent to
the billing invoice for the same period and provides greater detail
for chargebacks to the user departments based on actual production.
This report is submitted weekly to the Contract Administrator and
Purchasing department for auditing purposes.
Summary Chargeback Report - Monthly
This report is a summary of the weekly Chargeback Reports and is
submitted to the Contract Administrator and Purchasing department
along with the month-end invoice.
The Internal Mailing List Activity Report - As Needed
This report details all lists that are currently archived and have
been active within the last year, the number of times each list had
been utilized and date of last update. Access to this report is
restricted to the Contract Administrator, Department Heads and
Administrators and is printed at their request.
2. Reports to be Submitted to Key User Groups:
Active Job Report - AM and PM Daily
Lists all active jobs, their priority and status in the production
cycle. The list is generated twice each business day: at the start of
first shift (@ 8:00 am), and at the start of second shift (@ 4:00 pm).
The lists are made available to the key users by the stated times via
direct access.
Late/Error Job Report - Daily
This report details those jobs that were delivered outside of the
user's specifications, a brief description as to why the lateness or
error occurred and the vendor's recommendations or actions to prevent
further occurrences. This report is specific to key user
department/division and is submitted to the designated contact within
that area.
Various Production and Cost Reports - As Needed
Detail to Come
E. Quality Assurance Programs and Document Specifications
Web Printing
The following is a list of report titles and corresponding colors designated for
use on report covers, (samples attached).
22
<PAGE>
Title Bar
Ink Color *
Bell Grey 430
Commodity Research Pantone Purple
Convertible Research Green 326
Corporate Bond Research Orange 021
Credit Department Research Red 193
Economic Research Green 356
Emerging Debt Markets Research Green 356
Energy Futures And Options Custom Red
Equity Derivatives Red 485
Fixed Income Research Custom Red
FT- Actuaries World Indices Green 326
Fund Group Black
Fund Group Purple 260
Fund Group Blue 300
Insurance Research Group Red 200
INTL Equities Strategies Gold 871
INV Mgmt Resource Group Brown 159
Investment Research Process Blue
Mortgage Securities Research Custom Red
Municipal Market Research Custom Red
Portfolio Strategy Process Blue
Quantitative Strategy Yellow 108
Real Estate Research Red 193
Research Brief Process Blue
Strategy Brief Process Blue
Goldman Sachs reserves the right to change the color of printed items, as may be
specified in writing, and to the extent such changes are made, Cunningham shall
modify the related printing accordingly.
* All colors for use with uncoated paper stocks unless specifically instructed
to print on coated stocks.
F. Minimum Commitment levels
For the period commencing as of the Commencement Date and continuing to and
including , Goldman Sachs shall meet the following Minimum
Commitments with respect to the printing of United States Equity and Fixed
Income Research reports (the "Reports"), to the extent such printing is not
performed by entities which are Affiliates of Goldman Sachs:
(i)
(ii)
The volume of printing shall be based on the number of Reports printed and not
on the actual page volume of the Report.
Confidential treatment requested-portions filed separately with the Commission.
23
<PAGE>
III. Service Credits
A. In the event that printing services are not completed as scheduled,
Cunningham shall provide for the delivery of the printed materials by means
capable of reaching the intended recipients in accordance with the schedule that
would have been met had the printing been completed on time. If such arrangement
cannot be made, Cunningham shall provide Goldman Sachs with a refund of
percent of the cost of the printing and fulfillment services performed by
Cunningham in relation to that portion of the assignment that was not delivered
on time.
B. Cunningham shall reprint any materials that do not meet required
specifications for printed materials at no additional cost to Goldman Sachs. If
the delivery of the printed materials is delayed due to problems with the
quality of the printed material, Cunningham shall provide Goldman Sachs with a
refund of percent of the cost of the printing and fulfillment services
performed by Cunningham in relation to the delayed delivery.
C. If an assignment for the performance of printing services is deemed unfit
for distribution by Goldman Sachs due to deficiencies in the Services provided
by Cunningham, there shall be no fee owed to Cunningham for the related
Services. Additionally, Goldman Sachs shall be entitled to a credit equal to
percent of the value of such Services.
D. Cunningham shall keep a record of the Service Credits accumulated during
the Term. The Service Credits shall be off-set against the invoices submitted to
Goldman Sachs on a monthly basis.
Confidential treatment requested-portions filed separately with the Commission.
24
<PAGE>
Schedule B
The Personnel shall include the following:
Name Date of Birth
25
<PAGE>
Schedule C
Goldman Sachs Obligations
Provide adequate supply of paper and related envelopes, for support of
Confirms or Client Statements.
Provide telecommunications links to interface with Goldman Sachs from both
the Print Shop and a second location designated by Cunningham.
26
<PAGE>
Schedule D
PRICING
In addition to the pricing proposal materials included with Cunningham's
proposal dated January 8, 1996, pricing for the Services shall be as follows:
Price increases may not exceed to reflect increased costs to Cunningham for
expenses other than paper. As relates to , the only available increase
relates to the .
Volume Discounts
Based on the information in the RFP dated October 1995 we estimate the annual
research report web impressions to be approximately impressions.
This includes all the current work that is being out-sourced.
We propose the following on an annual basis during the life of the contract:
The discounts for the period of time from the Commencement Date to the end
of the first calendar year of the Term shall be applied on a pro rata basis. The
stated discounts are not cumulative but apply to that volume of printing beyond
the stated threshold.
Paper Pricing
for 1st six months then above average weighted cost for prior
for every thereafter during the life of the contract.
Confidential treatment requested-portions filed separately with the Commission.
27
<PAGE>
Schedule E
NON-DISCLOSURE AGREEMENT
I. Non-Disclosure
In connection with services now or in the future performed by the
undersigned for Goldman, Sachs & Co. or for any subsidiary or affiliate of
Goldman, Sachs & Co. (collectively called "Goldman Sachs"), the undersigned
may have access to non-public information or materials describing or
relating to Goldman Sachs or its clients, or third parties to whom Goldman
Sachs has a duty of confidentiality, including materials describing or
relating to the business affairs, policies or procedures of Goldman Sachs
or its clients or such third parties; formulas; strategies; methods;
processes; computer materials including source or object codes, data files,
computer listings, computer programs, and other computer materials
(regardless of the medium in which they are stored); or other information
("Confidential Information"). With respect to such Confidential
Information, the undersigned acknowledges and agrees as follows:
1. The undersigned will hold Confidential Information in strict confidence
and will not, nor will it permit any agent, servant or employee to, copy,
reproduce, sell, assign, license, market, transfer or otherwise dispose of, give
or disclose Confidential Information to any person, firm or corporation
including any partner or employee of Goldman Sachs who does not have a need to
know the Confidential Information.
2. Upon the termination of the services to be performed by the undersigned
(or earlier if requested by Goldman Sachs), the undersigned shall return to
Goldman Sachs all copies of documents, papers or other material relating to
Goldman Sachs or obtained or developed in the course of performing services for
Goldman Sachs, or containing or derived from Confidential Information which are
in the undersigned's possession, together, if requested by Goldman Sachs, with a
certificate signed by the undersigned, in form and substance satisfactory to
Goldman Sachs, to the effect that all such Confidential Information has been
returned.
II. Non-Promotion
The undersigned agrees that the undersigned will not, without the prior
written consent of Goldman Sachs in each instance: (a) use in advertising,
publicity or otherwise the name of Goldman Sachs or any trade name,
trademark, trade device, servicemark, symbol or any abbreviation,
contraction or simulation thereof owned by Goldman Sachs; or (b) represent,
directly or indirectly, that any product or any service provided by the
undersigned has been approved or endorsed by Goldman Sachs.
28
<PAGE>
III. Non-Employment
The undersigned affirms that the undersigned is not an employee of Goldman
Sachs for any purpose and that the undersigned is not entitled to exercise
any rights, or seek any benefit, accruing to the regular employees of
Goldman Sachs by virtue of the services rendered by the undersigned to
Goldman Sachs or otherwise. The undersigned agrees to provide any
assistance necessary to Goldman Sachs in investigating any illegal or
fraudulent activities, security breaches or similar situations.
IV. Background Check and Testing
The undersigned agrees that in connection with performing the services
contemplated by this Agreement, he or she may be subject to a background
check, including employers, education, credit, criminal public record, drug
screen or other checking or testing, and the undersigned consents to the
foregoing. The undersigned hereby releases Goldman Sachs, its employees and
agents from any and all liability or claims arising from such checking and
testing and the use and reporting of the results thereof except for those
arising due to the negligence of Goldman Sachs.
The obligations created by this Agreement shall survive the termination of
the services of the undersigned. The undersigned acknowledges that any
violation, breach or other failure on the undersigned's part to strictly comply
with this Agreement could materially adversely affect Goldman Sachs and its
business, thus giving rise to suit for monetary damages and/or injunctive relief
for such violation, breach or other failure.
/s/ Michael R. Cunningham
-----------------------------------
(Signature)
Michael R. Cunningham
-----------------------------------
(Print Name)
-----------------------------------
(Date)
29
<PAGE>
ADDENDUM NO. 1
<TABLE>
<CAPTION>
Reference is made to the Printing Services Agreement dated as of July 12,
1996 (the "Agreement") between CUNNINGHAM GRAPHICS, INC. ("Cunningham") and
GOLDMAN, SACHS & CO. ("Goldman Sachs"), to which this Addendum No. 1 is attached
and of which it is made a part, which Agreement is hereby amended and
supplemented as follows:
1. Defined Terms. All terms defined in the Agreement, except as otherwise
defined herein, shall have the same meanings where used herein.
2. Charges. The Agreement is amended to reflect the following charges:
8 1/2" x 11" per side on 20# white DP or equivalent stock
uncollated
corner stitched
saddle stitch
tape bind
<S> <C>
9 x 12 insertion charges and the additional insert charges for Goldman
Sachs Research Print Jobs (excluding per bound books). /M
All other Goldman Sachs jobs to be inserted into 9 x 12 envelopes /M
3. General.
(a) The Agreement together with the Exhibits and this Addendum replaces
and supersedes all other agreements, written or oral with respect to
its subject matter.
(b) Except as expressly amended and supplemented hereby, the Agreement
remains in full force and effect.
(c) In the event of any conflict between the terms of this Addendum and
the terms of the Agreement, the terms of this Addendum shall prevail.
</TABLE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum No. 1 to be
signed as of ______________________________________________, 1996
CUNNINGHAM GRAPHICS, INC. GOLDMAN, SACHS & CO.
By: /s/ Michael R. Cunningham By:
__________________________________ __________________________________
President
______________________________________ _____________________________________
Name and Title Name and Title
Confidential treatment requested-portions filed separately with the Commission.
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
Mr. Michael Cunningham, President
Cunningham Graphics, Inc.
629 Grove Street
Jersey City, N.J. 07310
RE: Lease dated April 18, 1989 and all related amendments, between Lackawanna
Warehouse Corporation of New Jersey, Lessor and Cunningham Graphics, Inc.,
lessee for approximately 94,443 square feet of space located as follows: (41,993
square feet on the seventh floor; 11,750 square feet on the fifth floor and
40,700 square feet on the third floor). In addition they will be leasing 22,000
square feet parking area.
- --------------------------------------------------------------------------------
Gentlemen:
By your signature in the space provided below, the above captioned lease shall
be amended as follows:
1. LEASE TERMINATION DATE: Lease shall be renewed for a period of three (3)
years to commence on March 1, 1997 and to terminate on February 29, 2000.
2. RENTAL FOR RENEWAL PERIOD: March 1, 1997 to February 29, 2000 shall be
$3.50 per square foot, for building space, therefore annual rental to be THREE
HUNDRED THIRTY THOUSAND FIVE HUNDRED FIFTY DOLLARS AND FIFTY CENTS ($330,550.50)
payable at a monthly rate of TWENTY SEVEN THOUSAND FIVE HUNDRED FORTY FIVE
DOLLARS AND EIGHTY SEVEN CENTS ($27,545.87) in advance on the first day of each
and every month.
3. PARKING AREA: Rental for 22,000 square feet of parking area shall be at
the annual rate of NINE THOUSAND DOLLARS AND NO CENTS ($9,000.00) payable at the
monthly rate of SEVEN HUNDRED FIFTY DOLLARS AND NO CENTS ($750.00) in advance on
the first day of each and every month. Parking Area is rented with gate, "AS
IS", tenant is responsible for cleaning and maintaining area.
4. SIGNAGE: Frontal signage (not to exceed 6' x 10') and parking signage,
to be installed at Tenant's own cost, subject to landlord's prior approval of
location and specifications.
<PAGE>
5. FREIGHT ELEVATOR DOORS: Freight elevators # 13 and 15, 1st floor doors
only brought up to par prior to renewal
6. FOSTER CARROLL SPACE: 5,875 square feet on the third floor shall be
leased to Cunningham Graphics, Inc., providing Foster Carroll, the current
tenant, gives its consent.
7. 1ST OPTION ON ADDITIONAL SPACE: First option on any vacant space, on
3rd, 5th and 7th floors, at market rate rental to be taken "AS IS".
8. CLAUSE #53: Escalation tax shall be amended to base tax year of 1997 and
9.4% of any and all increases in real estate taxes.
9. CREDIT: Tenant shall be given a one-time credit of TEN THOUSAND DOLLARS
AND NO CENTS ($10,000.00) against the first month's rent, March 1997.
10. SECURITY/PRE-PAID RENT: The amount of $23,220.16 shall be transferred
over to lease renewal.
The parties hereto agree to be bound by the same terms, conditions, provisions,
rules and regulations embodied at length in said lease dated April 18, 1989,
except as specifically modified herein. The said lease and addendum shall form a
part of as though included fully at length herein and forms a part hereof by
reference thereto, except as specifically mentioned in the renewal agreement.
LANDLORD: TENANT:
LACKAWANNA WAREHOUSE CORPORATION CUNNINGHAM GRAPHICS
OF NEW JERSEY
BY: /s/ Louisa Little BY: /s/ Michael Cunningham
----------------------------- -----------------------------
Louisa Little, Agent Michael Cunningham, President
DATE: 10/15/96 DATE: 10/8/96
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
April 17, 1997
Cunningham Graphics, Inc.
629 Grove Street
Jersey City, N.J. 07310
RE: Lease Dated: 1/9/97
Leased Area: 2nd Floor
Square Footage: 12,200 SF
By your signature in the space provided below this lease shall be amended as
follows:
1. Term of lease will begin June 1, 1997 and terminate on February 29, 2000.
(Present month to month lease dated 1/9/97 is, as of June 1, 1997, a two
year, nine (9) month lease).
2. Rental shall be at the monthly rate of $4.25 per annum per square foot
which equals to the annual rate of FIFTY ONE THOUSAND EIGHT HUNDRED FIFTY
DOLLARS AND NO CENTS ($51,850.00) payable at the monthly rate of FOUR
THOUSAND THREE HUNDRED TWENTY DOLLARS AND EIGHTY THREE CENTS ($4,320,83)
payable in advance of the first day of each and every month.
3. Clause 53: Escalation tax shall have a base year of 1997 and a rate of 1.2%
of any and all increases in real estate taxes.
4. Tenant is given approval to drill a hole approximately 16" between the 2nd
and 3rd floors, to install scrap paper removal system, any alterations must
be repaired at end of lease.
5. Tenant is given permission to install and have access to the overhang off
the 3rd floor as to install air conditioning and heating unit for new
office space on the third floor.
6. Landlord will provide an independent 200 AMP service so you will be billed
directly by the utility company.
7. Landlord will connect existing gas service to tenant's meter so you will be
billed directly by the utility company.
8. Upon signing this lease, tenant will deposit with landlord check in the
amount of EIGHT THOUSAND SIX HUNDRED FORTY ONE DOLLARS AND SIXTY SIX CENTS
($8,641.66) which will represent pre-paid rent for the final two months of
this lease.
All terms and conditions of "the lease" dated January 9, 1997, shall remain the
same except as herein provided for the coverage of said space.
AGREED & ACCEPTED AGREED & ACCEPTED
LANDLORD: TENANT:
Lackawanna Warehouse Corp. of New Jersey Cunningham Graphics, Inc.
By: /s/ Louisa Little By: /s/ Robert Needle
- -------------------------- --------------------------
Louisa Little, Agent Robert Needle
Co-Chief Operating Officer
<PAGE>
[SECOND FLOOR DIAGRAM]
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
o Cunningham Graphics, Inc. Please refer to
o 629 Grove Street Date 2/18/93 INVOICE No. LT 2/68
o Jersey City, N.J. 07310 when remitting
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TAX ESCALATION FOR PERIOD 1/1/92 - 12/31/92 AMOUNT TOTAL
- ------------------------------------------- ------ -----
<S> <C> <C> <C>
1/1/92 - 2/28/92: Final two months of term
1992 REAL ESTATE TAXES PAID $ 953,493.68
1988 REAL ESTATE TAX BASE YEAR 477,152.73
-------------
476,340.95
Difference
as per clause #53 4.2%
(PRO-RATE) 20,006.32
-------------
div. 12/times two mos. occup. 3,334.38 $3,334.38 $3,334.38
RENEWAL: 3/1/92 - 12/31/92
1992 REAL ESTATE TAXES PAID $ 953,493.68
1991 TAX BASE YEAR 899,923.87
------------
DIFFERENCE 53,569.81
AS PER CLAUSE # 53 4.2%
-------------
2,249.93
(PRO-RATE)
-------------
div. 12 x 10 mos. occupancy = 1,874.90 1,874.90 1,874.90
--------- --------
TOTAL DUE: 1992 $5,209.28 $5,209.28
</TABLE>
MAILING COPY
<PAGE>
--------------------------------------------
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
(C)Copyright 1982. All Rights Reserved.
Reproduction in whole or in part prohibited.
--------------------------------------------
Agreement of Lease, made as of this 18th day of April 1989, between Lackawanna
Warehouse Corp. of New Jersey, A New Jersey Corporation having it's office
located at 629 Grove Street, Jersey City, New Jersey 07310
party of the first part, hereinafter referred to as OWNER, and Cunningham
Graphics, Inc, 629 Grove Street Jersey City, N.J. 07310 party of the second
part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
approximately 12,900 square feet of space located on the 7th floor as shown in
red on the attached floor plan in the building known as 629 Grove Street, in the
City of Jersey City, State of New Jersey, for the term of TWO (2) YEARS & TEN
(10) MONTHS (or until such term shall sooner cease and expire as hereinafter
provided) to commence on the 1st day of May nineteen hundred and eighty-nine,
and to end on the 28th day of February nineteen hundred and ninety-two both
dates inclusive, at an annual rental rate of FORTY-ONE THOUSAND NINE-HUNDRED AND
TWENTY-FIVE DOLLARS ($41,925.00) payable at the monthly rate of THREE-THOUSAND
FOUR-HUNDRED NINETY-THREE DOLLARS AND SEVENTY-FIVE CENTS ($3,493.75) in advance
on the first day of each and every month which Tenant agrees to pay in lawful
money of the United States which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment, in equal monthly
installments in advance on the first day of each month during said term, at the
office of Owner or such other place as Owner may designate, without any set off
or deduction whatsoever, except that Tenant shall pay the first ____ monthly
installment(s) on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the payment of rent to Owner pursuant
to the terms of another lease with Owner or with Owner's predecessor in
interest, Owner may at Owner's option and without notice to Tenant add the
amount of such arrears to any monthly installment of rent payable hereunder and
the same shall be payable to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby convenant
as follows:
Occupancy: 1. Tenant shall pay the rent as above and as hereinafter provided.
Use: 2. Tenant shall use and occupy demised premises for printing and
related matter provided such use is in accordance with the
Certificate of Occupany for the building, if any, and for no other
purpose. The landlord states that tenants use of the premises is
in conformance with the Certificate of Occupancy.
Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
Owner, and to the provisions of this article, Tenant at Tenant's expense, may
make alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises using
contractors or mechanics first approved by Owner. Tenant shall, at its expense,
before making any alterations, additions, installations or improvements obtain
all permits, approval and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner. Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within thirty days after notice thereof, at
Tenant's expense, by filing the bond required by law or otherwise. All fixtures
and all paneling, partitions, railings and like installations, installed in the
premises at any time, either by Tenant or by Owner on Tenant's behalf, shall,
upon installation, become the property of Owner and shall remain upon and be
surrendered with the demised premises, unless
Repairs:
4. Owner shall maintain and repair the exterior of and the public portions
of the building and make all repairs to the heating and plumbing systems not
caused by Tenant's neglect or misconduct. Tenant shall, throughout the term of
this lease, take good care of the demised premises including the bathrooms and
lavatory facilities (if the demised premises encompass the entire floor of the
building) and the windows and window frames and, the fixtures and appurtenances
therein and at Tenant's sole cost and expense promptly make all repairs thereto
and to the building, whether structural or non-structural in nature, caused by
or resulting from the carelessness, omission, neglect or improper conduct of
Tenant, Tenant's servants, employees, invitees, or licensees, and whether or not
arising from such Tenant conduct or omission, when required by other provisions
of this lease, including Article 6. Tenant shall also repair all damage to the
building and the demised premises caused by the moving of Tenant's fixtures,
furniture or equipment. All the aforesaid repairs shall be of quality or class
equal to the original work or construction. If Tenant fails, after ten days
notice, to proceed with due diligence to make repairs required to be made by
Tenant, the same may be made by the Owner at the expense of Tenant, and the
expenses thereof incurred by Owner shall be collectible, as additional rent,
after rendition of a bill or statement therefor. If the demised premises be or
become infested with vermin, Tenant shall, at its expense, cause the same to be
exterminated. Tenant shall give Owner prompt notice of any defective condition
in any plumbing, heating system or electrical lines located in the demised
premises and following such notice, Owner shall remedy the condition with due
diligence, but at the expense of Tenant, if repairs are necessitated by damage
or injury attributable to Tenant, Tenant's servants, agents, employees, invitees
or licensees as aforesaid. Except as specifically provided in Article 9 or
elsewhere in this lease, there shall be no allowance to the Tenant for a
diminution of rental value and no liability on the part of Owner by reason of
inconvenience, annoyance or injury to business arising from Owner, Tenant or
others making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. The provisions of this
Article 4 with respect to the making of repairs shall not apply in the case of
fire or other casualty with regard to which Article 9 hereof shall apply.
Window Cleaning:
5. [PARAGRAPH DELETED]
Requirements of Law, Fire Insurance, Floor Loads:
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant shall, at Tenant's sole cost and
expense, promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, or the Insurance Services Office, or any similar body which shall
impose any violation, order or duty upon Owner or Tenant with respect to the
demised premises, whether or not arising out of Tenant's use or manner of use
thereof, or, with respect to the building, if arising out of Tenant's use or
manner of use of the demised premises or the building (including the use
permitted under the
<PAGE>
lease). Except as provided in Article 30 hereof, nothing herein shall require
Tenant to make structural repairs or alterations unless Tenant has, by its
manner of use of the demised premises or method of operation therein, violated
any such laws, ordinances, orders, rules, regulations or requirements with
respect thereto. Tenant shall not do or permit any act or thing to be done in or
to the demised premises which is contrary to law, or which will invalidate or be
in conflict with public liability, fire of other policies of insurance at any
time carried by or for the benefit of Owner. Tenant shall not keep anything in
the demised premises except as now or hereafter permitted by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization and
other authority having jurisdiction, and then only in such manner and such
quantity so as not to increase the insurance rate for fire insurance applicable
to the building, nor use the premises in a manner which will increase the
insurance rate for the building or any property located therein over that in
effect prior to the commencement of Tenant's occupancy. If by reason of failure
to comply with the foregoing the fire insurance rate shall, at the beginning of
this lease or at any time thereafter, be higher than it otherwise would be, then
Tenant shall reimburse Owner, as additional rent hereunder, for that portion of
all fire insurance premiums thereafter paid by Owner which shall have been
charged because of such failure by Tenant. In any action or proceeding wherein
Owner and Tenant are parties, a schedule or "make-up" or rate for the building
or demised premises issued by a body making fire insurance rates applicable to
said premises shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which it was designated
to carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Owner's judgement, to absorb and prevent
vibration, noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases
and to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Owner may request.
Property--Loss, Damage, Reimbursement, Indemnity:
8. Owner or its agents shall not be liable for any damage to property of
Tenant or of others entrusted to employees of the building, nor for loss of or
damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence or willful misconduct of Owner, its
agents, servants or employees; Owner or its agents shall not be liable for any
damage caused by other tenants or persons in, upon or about said building or
caused by operations in connection of any private, public or quasi public work.
If at any time any windows of the demised premises are temporarily closed,
darkened or bricked up (or permanently closed, darkened or bricked up, if
required by law) for any reason whatsoever including, but not limited to Owner's
own acts, Owner shall not be liable for any damage Tenant may sustain thereby
and Tenant shall not be entitled to any compensation therefor nor abatement or
diminution of rent nor shall the same release Tenant from its obligations
hereunder nor constitute an eviction. Tenant shall indemnify and save harmless
Owner against and from all liabilities, obligations, damages, penalties, claims,
costs and expenses for which Owner shall not be reimbursed by insurance,
including reasonable attorney's fees, paid, suffered or incurred as a result of
any breach by Tenant, Tenant's agents, contractors, employees, invitees, or
licensees, of any covenant or condition of this lease, or the carelessness,
negligence or improper conduct of the Tenant, Tenant's agents, contractors,
employees, invitees or licensees. Tenant's liability under this lease extends to
the acts and omissions of any sub-tenant, and any agent, contractor, employee,
invitee or licensee of any sub-tenant. In case any action or proceeding is
brought against Owner by reason of any such claim, Tenant, upon written notice
from Owner, will, at Tenant's expense, resist or defend such action or
proceeding by counsel approved by Owner in writing, such approval not to be
unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged by fire
or other casualty, Tenant shall give immediate notice thereof to Owner and this
lease shall continue in full force and effect except as hereinafter set forth.
(b) If the demised premises are partially damaged or rendered partially unusable
or access is denied by fire or other casualty, the damages thereto shall be
repaired by and at the expense of Owner and the rent, until such repair shall be
substantially completed, shall be apportioned from the day following the
casualty according to the part of the premises which is usable. (c) If the
demised premises are totally damaged or rendered wholly unusable by fire or
other casualty, then the rent shall be proportionately paid up to the time of
the casualty and thenceforth shall cease until the date when the premises shall
have been repaired and restored by Owner, subject to Owner's or tenant right to
elect not to restore the same as herein after provided. (d) If the demised
premises are rendered wholly unusable or (whether or not the demised premises
are damaged in whole or in part) if the building shall be so damaged that Owner
or tenant shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to Tenant,
given within 90 days after such fire or casualty, specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Owner's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant. Unless Owner shall serve a termination
notice as provided for herein, Owner shall make the repairs and restorations
under the conditions of (b) and (c) hereof, with all reasonable expedition,
subject to delays due to adjustment of insurance claims, labor troubles and
causes beyond Owner's control. After any such casualty, Tenant shall cooperate
with Owner's restoration by removing from the premises as promptly as reasonably
possible, all of Tenant's salvageable inventory and movable equipment, furniture
and other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability
that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extend that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery against the
other or any one claiming through or under each of them by way of subrogation or
otherwise. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefiting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease.
Assignment, Mortgage, Etc.:
11. [PARAGRAPH DELETED]
Electric Current:
12. Rates and conditions in respect to submetering or rent inclusion, as
the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing leeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
Access to Premises:
13. Owner or Owner's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, upon reasonable notice to examine the same and to make
such repairs, replacements and improvements as Owner may deem necessary and
reasonably desirable to any portion of the building or which Owner may elect to
perform in the premises after Tenant's failure to make repairs or perform any
work which Tenant is obligated to perform under this lease, or for the purpose
of complying with laws, regulations and other directions of governmental
authorities. Tenant shall permit Owner to use and maintain and replace pipes and
conduits in and through the demised premises and to erect new pipes and conduits
therein provided, wherever possible, they are within walls or otherwise
concealed. Owner may, during the progress of any work in the demised premises,
take all necessary materials and equipment into said premises without the same
constituting an eviction nor shall the Tenant be entitled to any abatement of
rent while such work is in progress nor to any damages by reason of loss or
interruption of business or otherwise. Throughout the term hereof Owner shall
have the right to enter the demised premises at reasonable hours upon reasonable
notice for the purpose of showing the same to prospective purchasers or
mortgagees of the building, and during the last six months of the term for the
purpose of showing the same to prospective tenants and may, during said six
months period, place upon the premises the usual notices "To Let" and "For Sale"
which notices Tenant shall permit to remain thereon without molestation. In the
event of an emergency, if Tenant is not present to open and permit an entry into
the premises, Owner or Owner's agents may enter the same whenever such entry may
be necessary or permissible by master key or forcibly and provided reasonable
care is exercised to safeguard Tenant's property, such entry shall not render
Owner or its agents liable therefor, nor in any event shall the obligations of
Tenant hereunder be affected, Upon Tenant's consent if during the last month of
the term Tenant shall have removed all or substantially all of Tenant's property
therefrom, Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring liability
to Tenant for any compensation and such act shall have no effect on this lease
or Tenant's obligations hereunder.
<PAGE>
Vault, Vault Space, Area:
14. No Vaults, vault space or area, whether or not enclosed or covered, not
within the property line of the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding. Owner makes no
representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant, if used by Tenant,
whether or not specifically leased hereunder.
Occupancy:
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. Tenant has inspected the premises and accepts them
as is, subject to the riders annexed hereto with respect to Owner's work, if
any. In any event, Owner makes no representation as to the condition of the
premises and Tenant agrees to accept the same subject to violations, whether or
not of record. If any governmental license or permit shall be required for the
proper and lawful conduct of Tenant's business, Tenant shall be responsible for
and shall procure and maintain such license or permit.
Bankruptcy:
16. (a) Anything elsewhere in this lease to the contrary notwithstanding,
this lease may be cancelled by Owner by sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or any other arrangement for the benefit of creditors under any state statute.
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of this
Article 16 shall be applicable only to the party then owning Tenant's interest
in this lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rental reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages to any
court, commission or tribunal, the amount of rent reserved upon such reletting
shall be deemed to be the fair and reasonable rental value for the part or the
whole of the premises so re-let during the term of the re-letting. Nothing
herein contained shall limit or prejudice the right of the Owner to prove for
and obtain as liquidated damages by reason of such termination, an amount equal
to the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
Default:
17. (1) If Tenant defaults beyond any applicable grace periods in
fulfilling any of the covenants of this lease other than the covenants for the
payment of rent or additional rent; or if the demised premises becomes vacant or
deserted "or if this lease be rejected under ss. 235 of Title 11 of the U.S.
Code (bankruptcy code);" or if any execution or attachment shall be issued
against Tenant or any of Tenant's property whereupon the demised premises shall
be taken or occupied by someone other than Tenant; or if Tenant shall make
default with respect to any other lease between Owner and Tenant; or if Tenant
shall have failed, after five (5) days written notice, to redeposit with Owner
any portion of the security deposited hereunder which Owner has applied to the
payment of any rent and additional rent due and payable hereunder or failed to
move into or take possession of the premises within fifteen (15) days after the
commencement of the term of this lease, of which fact Owner shall be the sole
judge; then in any one or more of such events, upon Owner serving a written
fifteen (15) days notice upon Tenant specifying the nature of said default and
upon the expiration of said five (5) days, if Tenant shall have failed to comply
with or remedy such default, or if the said default or omission complained of
shall be of a nature that the same cannot be completely cured or remedied within
said 15-day period and if Tenant shall not have diligently commenced during such
default within such five (5) day period, and shall not thereafter with
reasonable diligence and in good faith, proceed to remedy or cure such default,
then Owner may serve a written three (3) days' notice of cancellation of this
lease upon Tenant, and upon the expiration of said three (3) days this lease and
the term thereunder shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Tenant shall then
quit and surrender the demised premises to Owner but Tenant shall remain liable
as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given, and
the term shall expire as aforesaid: or if Tenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required:
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceeding or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this lease, Owner may cancel and terminate such
renewal or extension agreement by written notice.
Remedies of Owner and Waiver of Redemption:
18. In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent, and additional rent, shall
become due thereupon and be paid up to the time of such re-entry, dispossess
and/or expiration, (b) Owner may re-let the premises or any part or parts
thereof, either in the name of Owner or otherwise, for a term or terms, which
may at Owner's option be less than or exceed the period which would otherwise
have constituted the balance of the term of this lease and may grant concessions
or free rent or charge a higher rental than that in this lease, (c) Tenant or
the legal representatives of Tenant shall also pay Owner as liquidated damages
for the failure of Tenant to observe and perform said Tenant's convenants herein
contained, any deficiency between the rent hereby reserved and or covenanted to
be paid and the net amount, if any, of the rents collected on account of the
subsequent lease or leases of the demised premises for each month of the period
which would otherwise have constituted the balance of the term of this lease.
The failure of Owner to re-let the premises or any part or parts thereof shall
not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with re-letting, such as legal expenses,
attorneys' fees, brokerage, advertising and for keeping the demised premises in
good order or for preparing the same for re-letting. Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent day specified in
this lease and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Owner to collect the
deficiency for any subsequent month by a similar proceeding. Owner, in putting
the demised premises in good order or preparing the same for re-rental may, at
Owner's option make such alterations, repairs, replacements, and / or
decorations in the demised premises as Owner, in Owner's sole judgment,
considers advisable and necessary for the purpose of re-letting the demised
premises, and the making of such alterations, repairs, replacements, and / or
decorations shall not operate or be construed to release Tenant from liability
hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever
for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such
re-letting, and in no event shall Tenant be entitled to receive any excess, if
any, of such net rents collected over the sums payable by Tenant to Owner
hereunder. In the event of a breach or threatened breach by Tenant of any of the
covenants or provisions hereof, Owner shall have the right of injunction and the
right to invoke any remedy allowed at law or in equity as if re-entry, summary
proceedings and other remedies were not herein provided for. Mention in this
lease of any particular remedy, shall not preclude Owner from any other remedy,
in law or in equity. Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws.
Fees and Expenses:
19. If Tenant shall default beyond any applicable grace periods in the
observance or performance of any term or covenant on Tenant's part to be
observed or performed under or by virtue of any of the terms or provisions in
any article of this lease, then, unless otherwise provided elsewhere in this
lease, Owner may immediately or at any time thereafter and without notice
perform the obligation of Tenant thereunder. If Owner, in connection with the
foregoing or in connection with any default by Tenant in the covenant to pay
rent hereunder, makes any expenditures or incurs any obligations for the payment
of money, including but not limited to attorney's fees, in instituting,
prosecuting or defending any action or proceedings, then Tenant will reimburse
Owner for such sums so paid or obligations incurred with interest and costs. The
foregoing expenses incurred by reason of Tenant's default shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Owner within five (5)
days of rendition of any bill or statement to Tenant therefor. If Tenant's lease
term shall have expired at the time of making of such expenditures or incurring
of such obligations, such sums shall be recoverable by Owner as damages.
Building Alterations & Management:
20. Owner shall have the right at any time without the same constituting an
eviction and without incurring liability to Tenant therefor to change the
arrangement and or location of public entrances, passageways, doors, doorways,
corridors, elevators, stairs, toilets or other public parts of the building and
to change the name, number or designation by which the building may be known.
There shall be no allowance to Tenant for diminution of rental value and no
liability on the part of Owner by reason of inconvenience, annoyance or injury
to business arising from Owner or other Tenant making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of owner's imposition of
any controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may deem necessary for the security of the
building and its occupants.
NO REPRESENTATIONS BY OWNER:
21. Neither Owner nor Owner's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which it is erected or the demised premises, the rents, leases, expenses of
operation or any other matter or thing affecting or related to the demised
premises or the building except as herein expressly set forth and no rights,
easements or licenses are acquired by Tenant by implication or otherwise except
as expressly set forth in the provisions of this lease. Tenant has inspected the
building and the demised premises and is thoroughly acquainted with their
condition and agrees to take the same "as is" on the date possession is tendered
and acknowledges that the taking of possession of the demised premises by Tenant
shall be conclusive evidence that the said premises and the building of which
the same form a part were in good and satisfactory condition at the time such
possession was so taken, except as to latent defects. All understandings and
agreements heretofore made between the parties hereto are merged in this
contract, which alone fully and completely expresses the agreement between Owner
and Tenant and any executory agreement hereafter made shall be ineffective to
<PAGE>
change, modify, discharge or effect an abandonment of it in whole or in part,
unless such executory agreement is in writing and signed by the party against
whom enforcement of the change, modification, discharge or abandonment is
sought.
End of Term:
22. Upon the expiration or other termination of the term of this lease,
Tenant shall quit and surrender to Owner the demised premises, broom clean, in
good order and condition, ordinary wear and damages which Tenant is not required
to repair as provided elsewhere in this lease excepted, and Tenant shall remove
all its property from the demised premises. Tenant's obligation to observe or
perform this covenant shall survive the expiration or other termination of this
lease. If the last day of the term of this Lease or any renewal thereof, falls
on Sunday, this lease shall expire at noon on the preceding Saturday unless it
be legal holiday in which case it shall expire at noon on the preceding business
day.
Quiet Enjoyment:
23. Owner covenants and agrees with Tenant that upon Tenant paying the rent
and additional rent and observing and performing all the terms, covenants, and
conditions , on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy the premises hereby demised, subject nevertheless, to the
terms and conditions of this lease including, but not limited to, Article 34
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
Failure to Give Possession:
24. If Owner is unable to give possession of the demised premises on the
date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or if Owner has not completed any work required to be performed by
Owner, or for any other reason, Owner shall not be subject to any liability for
failure to give possession on said date and the validity of the lease shall not
be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession or complete any work required) until after Owner shall have given
Tenant notice that the premises are substantially ready for Tenant's occupancy.
If permission is given to Tenant to enter into the possession of the demised
premises or to occupy premises other than the demised premises prior to the date
specified as the commencement of the term of this lease. Tenant covenants and
agrees that such occupancy shall be deemed to be under all the terms, covenants,
conditions and provisions of this lease, except as to the covenant to pay rent.
The provisions of this article are intended to constitute "an express provision
to the contrary" within the meaning of Section 223-a of the New York Real
Property Law.
No Waiver:
25. The failure of Owner to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this lease or any of
the Rules or Regulations, set forth or hereafter adopted by Owner, shall not
prevent a subsequent act which would have originally constituted a violation
from having all the force and effect of an original violation. The receipt by
Owner of rent with knowledge of the breach of any covenant of this lease shall
not be deemed a waiver of such breach and no provision of this lease shall be
deemed to have been waived by Owner unless such waiver be in writing signed by
Owner. No payment by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement of any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. All checks tendered to Owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an attornment to Owner by the payor of such rent or as a consent by
Owner to an assignment or subletting by Tenant of the demised premises to such
payor, or as a modification of the provisions of this lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or Owner's agent shall have any power to accept the keys of said premises prior
to the termination of the lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the lease or a surrender of the
premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the event Owner commences any summary proceeding for
possession of the premises, Tenant will not interpose any counterclaim of
whatever nature or description in any such proceeding.
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Owner is prevented or delayed from so doing by reason of strike or
labor troubles or any cause whatsoever beyond Owner's sole control including,
but not limited to, government preemption in connection with a National
Emergency or by reason of any rule, order or regulation of any department or
subdivision thereof of any government agency or by reason of the conditions of
supply and demand which have been or are affected by war or other emergency.
Bills and Notices:
28. Except as otherwise in this lease provided, a bill, statement, notice
or communication which Owner may desire or be required to give to Tenant, shall
be deemed sufficiently given or rendered it, in writing, delivered to Tenant
personally or sent by registered or certified mail addressed to Tenant at the
building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such address as Owner shall designate by written notice.
Water Charges:
29. If Tenant requires, uses or consumes water for any purpose in addition
to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the
sole judge) Owner may install a water meter and thereby measure Tenant's water
consumption for all purposes. Tenant shall pay Owner for the cost of the meter
and the cost of the installation, thereof and throughout the duration of
Tenant's occupancy Tenant shall keep said meter and installation equipment in
good working order and repair at Tenant's own cost and expense in default of
which Owner may cause such meter and equipment to be replaced or repaired and
collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay
for water consumed, as shown on said meter as and when bills are rendered, and
on default in making such payment Owner may pay such charges and collect the
same from Tenant, as additional rent. Tenant covenants and agrees to pay, as
additional rent, the sewer rent, charge or any other tax, rent, levy or charge
which now or hereafter is assessed, imposed or a lien upon the demised premises
or the realty of which they are part pursuant to law, order or regulation made
or issued in connection with the use, consumption, maintenance or supply of
water, water system or sewage or sewage connection or system. Independently of
and in addition to any of the remedies reserved to Owner hereinabove or
elsewhere in this lease, Owner may sue for and collect any monies to be paid by
Tenant or paid by Owner for any of the reasons or purposes hereinabove set
forth.
Sprinklers:
30. Anything elsewhere in this lease to the contrary notwithstanding, if
the New York Board of Fire Underwriters or the New York Fire Insurance Exchange
or any bureau, department or official of the federal, state or city government
recommend or require the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, or for any other reason, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other
such equipment, become necessary to prevent the imposition of a penalty or
charge against the full allowance for a sprinkler system in the fire insurance
rate set by any said Exchange or by any fire insurance company, Tenant shall, at
Tenant's expense, promptly make such sprinkler system installations, changes,
modifications, alterations, and supply additional sprinkler heads or other
equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of $________________________, on the first day of each month during the term of
this lease as Tenant's portion of the contract price for sprinkler supervisory
service.
Elevators, Heat, Cleaning:
31. As long as Tenant is not in default under any of the convenants of this
lease Owner shall: (a) provide necessary passenger elevator facilities on
business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (b)
if freight elevator service is provided, same shall be provided only on regular
business days Monday through Friday inclusive, and on those days only between
the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c) furnish heat,
water and other services supplied by Owner to the demised premises, when and as
required by law, on business days from 8 a.m. to 6 p.m. and on Saturdays from 8
a.m. to 1 p.m.; (d) clean the public halls and public portions of the building
which are used in common by all tenants. Tenant shall, at Tenant's expense, keep
the demised premises, including the windows, clean and in order, to the
satisfaction of Owner, and for that purpose shall employ the person or persons,
or corporation approved by Owner. Tenant shall pay to Owner the cost of removal
of any of Tenant's refuse and rubbish from the building. Bills for the same
shall be rendered by Owner to Tenant at such time as Owner may elect and shall
be due and payable hereunder, and the amount of such bills shall be deemed to
be, and be paid as, additional rent. Tenant shall, however, have the option of
independently contracting for the removal of such rubbish and refuse in the
event that Tenant does not wish to have same done by employees of Owner. Under
such circumstances, however, the removal of such refuse and rubbish by others
shall be subject to such rules and regulations as, in the judgment of Owner, are
necessary for the proper operation of the building. Owner reserves the right to
stop service of the heating, elevator, plumbing and electric systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Owner desirable or necessary to
be made, until said repairs, alterations, replacements or improvements shall
have been completed. If the building of which the demised premises are a part
supplies manually operated elevator service, Owner may proceed with alterations
necessary to substitute automatic control elevator service upon ten (10) day
written notice to Tenant without in any way affecting the obligations of Tenant
hereunder, provided that the same shall be done with the minimum amount of
inconvenience to Tenant, and Owner pursues with due diligence the completion of
the alterations.
<PAGE>
Security:
32. [PARAGRAPH DELETED]
Captions:
33. The Captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this lease nor
the intent of any provision thereof.
Definitions:
34. The term "Owner" as used in this lease means only the owner of the fee
or of the leasehold of the building, or the mortgagee in possession, for the
time being of the land and building (or the owner of a lease of the building or
of the land and building) of which the demised premises form a part, so that in
the event of any sale or sales of said land and building or of said lease, or in
the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term "rent"
includes the annual rental rate whether so-expressed or expressed in monthly
installments, and "additional rent." "Additional rent" means all sums which
shall be due to new Owner from Tenant under this lease, in addition to the
annual rental rate. The term "business days" as used in this lease, shall
exclude Saturdays (except such portion thereof as is covered by specific hours
in Article 31 hereof), Sundays and all days observed by the State or Federal
Government as legal holidays and those designated as holidays by the applicable
building service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
Adjacent Excavation--Shoring:
35. If an excavation shall be made upon land adjacent to the demised
premises, or shall be authorized to be made, Tenant shall afford to the person
causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.
Rules and Regulations:
36. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations annexed hereto and such other and further reasonable Rules and
Regulations as Owner or Owner's agents may from time to time adopt. Notice of
any additional rules or regulations shall be given in such manner as Owner may
elect. In case Tenant disputes the reasonableness of any additional agents, the
parties hereto agree to submit the question of the reasonableness of such Rule
or Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within ten (10) days
after the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
Glass:
37. Owner shall replace, at the expense of the Tenant, any and all plate
and other glass damaged or broken from any cause whatsoever in and about the
demised premises. Owner may insure, and keep insured, at Tenant's expense, all
plate and other glass in the demised premises for and in the name of Owner. Bill
for the premiums therefor shall be rendered by Owner to Tenant at such times as
Owner may elect, and shall be due from, and payable by, Tenant, when rendered,
and the amount thereof shall be deemed to be, and be paid, as additional rent.
Estoppel Certificate:
38. Tenant, at any time, and from time to time, upon at least 10 days'
prior notice by Owner, shall execute, acknowledge and deliver to Owner, and / or
to any other person, firm or corporation specified by Owner, a statement
certifying that this Lease is unmodified in full force and effect (or, if there
have been modifications, that the same is in full force and effect as modified
and stating the modifications), stating the dates to which the rent and
additional rent have been paid, and stating whether or not here exists any
default by Owner under this Lease, and, if so, specifying each such default.
Directory Board Listing:
39. If, at the request of and as accommodation to Tenant, Owner shall place
upon the directory board in the lobby of the building, one or more names of
persons other than Tenant, such directory board listing shall not be construed
as the consent by Owner to an assignment or subletting by Tenant to such person
or persons.
Successors and Assigns:
40. The covenants, conditions and agreements contained in this lease shall
bind and inure to the benefit of Owner and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns.
In Witness Whereof, Owner and Tenant have respectively signed and sealed
this lease as of the day and year first above written.
Addendum to lease clause #41 to 66
Witness for Owner: LACKAWANNA WAREHOUSE CORP. OF NJ
/s/ [illegible] BY: /s/ Frank Ryan, V.P. [L.S.]
- -------------------------------- -------------------------------------------
Frank Ryan, Vice President (date)
Witness for Tenant: CUNNINGHAM GRAPHICS, INC.
/s/ [illegible] BY:/s/ Michael Cunningham, Pres. 5/5/89 [L.S.]
- -------------------------------- ---------------------------------------
( ) (date)
<PAGE>
ACKNOWLEDGMENTS
CORPORATE TENANT
STATE OF NEW YORK, ss:
County of ____________________
On this ___ day of _______________ , 19__, before me personaly came
____________________ to me known, who being by me duly sworn, did depose and say
that he resides in ______________________________ that he is the
_______________________ of __________________________ the corporation described
in and which executed the foregoing instrument, as TENANT: that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation, and that he signed his name thereto by like order.
INDIVIDUAL TENANT
STATE OF NEW YORK, ss:
County of ____________________
On this day of ____, _____________ 19__, before me personally came
____________________ to me known and known to me to be the individual described
in and who, as TENANT, executed the foregoing instrument and acknowledged to me
that _________________ he executed the same.
IMPORTANT--PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 36
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any animals or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior sign on doors
and directory tablet shall be inscribed, painted or affixed for each Tenant by
Owner at the expense of such Tenant, and shall be of a size, color and style
acceptable to Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Owner, and
at hours under regulations fixed by Owner. Canvassing, soliciting and peddling
in the building is prohibited and each Tenant shall cooperate to prevent the
same.
10. Owner reserves the right to exclude from the building between the hours
of 6 p.m. and 8 a.m. on business days, after 1 p.m. on Saturdays, and at all
hours on Sundays and legal holidays all persons who do not present a pass to the
building signed by Owner. Owner will furnish passes to persons for whom any
Tenant requests same in writing. Each Tenant shall be responsible for all
persons for whom he requests such pass and shall be liable to Owner for all acts
of such persons. Notwithstanding the foregoing, Owner shall not be required to
allow Tenant or any person to enter or remain in the building, except on
business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to
1:00 p.m.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a loft building, and upon written notice from Owner, Tenant
shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs or
interferes with other Tenants in the beneficial use of their premises.
Address
Premises
================================================================================
TO
================================================================================
[SEAL] STANDARD FORM OF [SEAL]
LOFT LEASE
The Real Estate Board of New York, Inc.
(C)Copyright 1982. All rights Reserved.
Reproduction in whole or in part prohibited.
================================================================================
Dated 19
Rent per Year
Rent per Month
Term
From
To
Drawn by ____________________________________ Checked by _____________________
Entered by___________________________________ Approved by ____________________
================================================================================
<PAGE>
Addendum to lease dated April 18th, 1989, between, Lackawanna Warehouse Corp. of
NJ; as Landlord and, Cunningham Graphics, Inc.; as tenant
- --------------------------------------------------------------------------------
41. It is understood and agreed that in the event of a conflict between the
printed form and the attached rider, then, in that event, the language of the
rider shall prevail as to the intent of the parties.
42. The tenant has examined and agrees to accept the demised premises in
their existing condition and state of repair, and understands that there is to
be no work performed by the landlord.
43. It is understood and agreed that at the termination of this lease, the
tenant may remove any and all installation improvements made to the premises by
them provided that the tenant repairs any damage caused by said removal.
44. The landlord herein represents that the floor load of the demised
premises is 250 pounds per square foot, and the tenant herein agrees that it
shall not exceed said floor load.
45. The tenant hereby agrees not to interpose any counterclaim or set-off
of whatever nature or description, in any action or summary proceeding, by the
landlord against the tenant, for non-payment of rent, damages or deficiency
whether such action or summary proceeding be brought under this lease or any
renewal, extension, holdover or modification thereof. Nothing herein contained
however, shall be construed as a waiver of the tenant's right to commence a
separate action on a bona fide claim against the landlord.
46. This lease may not be changed orally.
47. The tenant covenants and agrees to provide the landlord within ten (10)
day's from the commencement date hereof and for the duration of the term of this
lease, with a comprehensive policy of general liability insurance in which the
owner/owners agent, Lackawanna Warehouse Corp. of NJ are the named additional
insureds, for any and all claims arising during the term of this lease for
damage or injuries to goods, wares, merchandise and property and/or for any
personal injury or loss of life in, upon or about the demised premises;
protecting the owner/owners agent, Lackawanna Warehouse Corp. of NJ and the
tenant against any liability whatsoever occasioned by accidents on or about the
demised premises, entrance lobbies, elevators and stairway's or any
appurtenances thereto. Such policy is to be written by a good and solvent
insurance company satisfactory to landlord in the amount of $500,000.00-----in
respect to any one person,------------------ in the amount of $1,000,000.00---in
respect to any one accident and------------- in the amount of $1,000,000.00---in
respect to property damages. Such insurance may be carried under a blanket
policy covering the demised premises and other locations of tenant, if any.
Tenant agrees to deliver to landlord either a duplicate original of the
aforesaid policy or a certificate evidencing such insurance provided said
certificate contains an endorsement that such insurance may not be cancelled
except upon ten (10) days notice to landlord together with evidence of payment
for the policy. Tenant's failure to provide and keep in force the aforementioned
insurance shall be regarded as a material default hereunder entitling landlord
to exercise any or all of the remedies as provided in this lease in the event of
tenant's default.
48. Anything herein to the contrary notwithstanding, this lease may not be
assigned or sub-leased without the landlord's prior written approval, which
approval shall not be unreasonable withheld or delayed, provided proposed
sub-lessee is in the same type of business for similar type of business as
stated in the use and occupancy clause of this lease. Provided that any use of
the premises by affiliates, parent company, or subsidiaries of tenant shall not
be considered an assignment or sub-lease hereunder.
49. It is understood and agreed that where any reference is made to the
City of New York or the State of New York same shall be deemed to mean the City
of Jersey City or the State of New Jersey.
50. Tenant shall secure written approval from landlord for any flush wall
plaques the tenant shall desire to install. Landlord shall not unreasonably
withhold it's permission to install such flush wall plaques in and around the
subject premises and loading docks and landlord will insert the name of tenant
on the building directory.
<PAGE>
Addendum to lease dated April 18, 1989, between, Lackawanna Warehouse Corp. of
NJ; as Landlord, and, Cunningham Graphics, Inc.; as Tenant
- --------------------------------------------------------------------------------
51. "Tenant shall, at Tenant's own expense, comply with the Environmental
Cleanup responsibility Act, N.J.S.A. 13:1K-6 et seq. and the regulations
promulgated thereunder ("ECRA"). Tenant shall, at Tenant's own expense, make all
submissions to, provide all information to, and comply with all requirements of,
the Bureau of Industrial Site Evaluation (the "Bureau") of the New Jersey
Department of Enviornmental protection ("NJDEP"). Tenant's obligations under
this paragraph shall arise if there is any closing, terminating or transferring
of operations of an industrial extablishment at the premises pursuant to ECRA.
At no expense to Landlord, Tenant shall promptly provide all information
requested by Landlord for preparation of non-applicability affidavits and shall
promptly sign such affidavits when requested by landlord. Tenant shall
indemnify, defend and save harmless Landlord from all fines, suits, procedures,
claims and actions of any kind arising out of or in any way connected with any
spills or discharges of hazardous substances or wastes at the premises which
occur during the term of this lease if such spills and discharges were caused by
Tenant or resulted from Tenant's operation; and from all fines, suits,
procedures, claims and actions of any kind arising out of Tenant's failure to
provide all information, make all submissions and take all actions required by
the ECRA Bureau or any other division of NJDEP. Tenant's duties hereunder shall
be limited to the Tenant's use and/or operation of and at the premises."
52. Tenant will have access to the building, the passenger elevator, and
freight elevator #16 twenty-four hours a day, seven (7) day's a week.
54. It is agreed and understood that in addition to the rental as set forth
on the face of this lease, the tenant shall pay as an additional rental 1.2%
[notation unclear] of any and all increases in real estate taxes (including
assessments for publis betterments) covering the land and the building of which
the premises are a part, known as BLOCK #292.A. Said increase shall be the
amount charged by the City of Jersey City above the charge for the tax year
ending December 31, 1988. Payment of such additional rental shall be made as
billed by the landlord for each year of the term of the lease. And, such billing
must be rendered no later than (90) day's after payment by landlord for each
year of the term of this lease.
54. It is understood and agreed that the tenant shall pay for all utilities
consumed by him in the leased premises, such as electricity, gas, fuel for
heating and water and sewer, but not water & sewer used in bathrooms for
sanitary; with such utilities being monitored by tenant's own meter.
The tenant may, if he so elects, and at his own cost and expense, install
air-conditioning provided that such installation complies with all rules and
regulations of all governmental bodies having jurisdiction thereof.
55. It is understood and agreed that the basic rent will be paid by the
first of the month to the landlord without notice. Landlord shall be entitled to
a late charge of three percent (3%) of the monthly rental if rent remains unpaid
after the tenth (10th) day of any month and provided landlord has given tenant
at least (5) days written notice thereof and tenant has failed to cure same
within such period.
In the event that tenant's late payment of non-payment of rent causes
landlord to issue six such notices during the term of this lease, then upon
issuance of a (7th) seventh notice, the tenant will have deemed to have
irrevocably defaulted under the term of this lease. The landlord shall have the
absolute right, at his option to terminate this lease and regain possession of
the demised premises, by giving written notice to tenant to vacate premises
within twenty (20) days from date of notice.
56. It is further understood and agreed that if the tenant is in default in
payment of the basic rent for more than thirty (30) days, the landlord shall
have the absolute right at its option to terminate this lease and the landlord
may re-enter and regain possession of the demised premises provided the five (5)
day notice set forth in paragraph #55 has been given and such default has not
been cured within such period, and further provide that landlord has given
written notice to tenant to vacate premises within twenty (20) days from date of
notice, notice to be issued not less than thirty (30) days after basic rent is
due.
57. Landlord shall be responsible for providing normal maintenance on the
gas fired heating system providing however, that any repair necessitated by
tenant's negligence or misuse of the demised premises shall be the sole
responsibility of the tenant.
58. The tenant shall be solely responsible for the cleaning, maintenance
and repair to bathrooms and any other sanitary facilities within the demised
premises.
<PAGE>
Addendum to lease dated April 18, 1989, between, Lackawanna Warehouse Corp. of
NJ; as Landlord, and, Cunningham Graphics, Inc.; as tenant
- --------------------------------------------------------------------------------
59. It is understood and agreed that the "within lease" is contingent on
the execution of agreement dated April 18, 1989 between Lackawanna Warehouse
Corp. of New Jersey; Landlord and Gibson Graphics, Inc., tenant; and to the
performance of said agreement to vacate said premises under the terms and
conditions therein.
60. Tenant agrees to accept said space "AS IS" and any work to be performed
to suit tenant's needs will be the sole responsibility of tenant at his own cost
and expense.
61. PREPAID RENT:
Tenant agrees to deposit with landlord a check in the amount of
SIX-THOUSAND NINE-HUNDRED EIGHTY-SEVEN DOLLARS AND FIFTY-CENTS ($6,987.50) on or
before September 1, 1989 which will represent prepaid rent for the final two
months of lease.
62. "Lessor hereby indemnifies and shall protect and hold Lessee harmless,
from and against all fines, penalties, damages, costs, losses, claims and
liabilities (including all foreseeable and unforseeable consequential damages,
the cost of any remedial, removal, response, abatement, clean-up, investigative
and monitoring costs and expenses, and reasonable attorneys' fees and
disbursements) directly or indirectly and in whole or in part, arising out of or
attributable to environmental conditions beneath, above or on the surface of the
Demised Premises (regardless of the source thereof) whether existing before or
arising after the commencement date of this lease, except to the extent arising
out of or in connection with the Lessee's use of the Demised Premises.
63. RENEWAL OPTION: Exercised.
Tenant has the option to renew this lease for an additional five year
period, March 1, 1992 through February 28, 1997 by giving landlord six (6)
months prior written notice. Rental for period of March 1, 1992 through February
28, 1997 will be determined by the rate being charged by the landlord for
comparable space, non-ground level, six months prior to the termination date of
February 28, 1992.
64. Both Tenant and Landlord represent to each other that there is no Real
Estate Broker involved in this lease.
65. Tenant will have for his use #16 freight elevator which he will share
with another floor. Landlord will bill tenant his proportionate share of the
Full Elevator Maintenance Contract policy and annual city registration and
inspections.
66. The landlord agrees that Gibson Graphics, Inc., shall pay all basic
rent due herein for the first four months of the term of this lease, and failure
of Gibson Graphics, Inc., to make the rent payment shall not constitute a
default by tenant under the terms of this lease.
- -------------
* Rider to be added if necessary.
<PAGE>
TYPICAL FLOOR
[FLOOR PLAN]
(Graphic Omitted)
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
January 16, 1995
A. Under lease dated April 18, 1989 and all related amendments, LACKAWANNA
WAREHOUSE CORP. OF N.J. AS Landlord and CUNNINGHAM GRAPHICS, INC. as Tenant
entered into a lease of premises at 629 Grove St., Jersey City, N.J. 07310.
B. The parties are desirous of amending said lease in the respects hereinafter
provided.
NOW, THEREFORE, the parties mutually agree:
FIRST: Effective January 16, 1995 (the "Possession Date"), 11,750 Sq. Ft.,
the space designated as the East End of the 5th floor, (the
"Additional Space"), shall be added to the Demised Premises rented
under the Lease, for a term commencing April 1, 1995, and expiring
conterminously with the "Lease" (February 28, 1997).
SECOND: The base rent for the Additional Space for the term shall be Forty One
Thousand One Hundred Twenty Five Dollars ($41,125.00) per annum
($3,427.08/mo.).
THIRD: In addition to the base rent, the Tenant shall pay the proportionate
share of real estate taxes attributable to the Additional Space in
excess of the real estate taxes attributable to such space for the tax
year July 1, 1994 through June 30, 1995, upon the same terms and
conditions as are set forth in Paragraph 53 of the Lease, except that
the "proportionate share" for the added space shall be one point two
percent (1.2%) (the "Real Estate Tax Escalation").
FOURTH: Except as herein modified the lease, the term thereof and all
provisions and conditions thereof, shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this lease this 22nd day of Feb.
1995.
AGREED AND ACCEPTED TO: Sincerely yours,
CUNNINGHAM GRAPHICS, INC. LACKAWANNA WAREHOUSE CORP. OF N.J.
/s/ Michael Cunningham, Pres. /s/ Louisa Little
- ------------------------------ ----------------------------------
Michael Cunningham, Pres. As Agent
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
October 1, 1993
Cunningham Graphics, Inc.
629 Grove Street
Jersey City, N.J. 07310
Re: Amendment of lease dated April 18, 1989 between Lackawanna Warehouse Corp.
of New Jersey, lessor and Cunningham Graphics, Inc., lessee
Gentlemen:
By your signature in the space provided below, the lease shall be amended as
follows:
1. By increasing the square footage upward by 28,200 square feet of space
located on the third floor, in the building known as 629 Grove Street, Jersey
City, New Jersey, to bring the aggregate total of square footage leased from
47,868 to 76,068 square feet as follows:
Floor Square Feet
------ -----------
3 5,875
3 28,200 ("new area")
7 41,993
------ ------
Total 76,068
2. Additional Rent. Effective October 1, 1993 to February 28, 1997, rent
for the additional space added by this agreement shall be NINETY EIGHT THOUSAND
SEVEN HUNDRED DOLLARS ($98,700.00) per annum, such rent shall be payable monthly
in advance at the rate of EIGHT THOUSAND TWO HUNDRED TWENTY FIVE DOLLARS
($8,225.00), with the result that the aggregate monthly rent for the demised
premises shall be TWENTY TWO THOUSAND SEVEN HUNDRED EIGHTY ONE DOLLARS AND FIFTY
FOUR CENTS ($22,781.54).
3. Tenant to take space "as is" and any and all work to be performed shall
be at the tenants own cost and expense.
4. Freight Elevator. Tenant shall have for his exclusive use #13 freight
elevator which it will operate and maintain at its own cost and expense,
including annual city and state registration fees. Tenant will observe and keep
in force a full elevator service contract with a qualified elevator maintenance
company.
(Note: Tenants use of #13 elevator, as added by this agreement, shall not be
misconstrued with tenants existing use of #16, #15 freight elevators).
continued:
Landlord copy: 1 of 2
<PAGE>
Cunningham Graphics, Inc. -2- October 1, 1993
(amendment to lease dated
April 18, 1989)
5. Clause #53. Percentage in clause #53 shall be increased by 2.8%,
effective January 1, 1994. New area (2.8%) shall have a tax base year of 1994.
6. Landlord represents that there is a 200 amp. 3 phase 4 wire elecric
service presently installed so that tenant will be billed by the utility
company, gas service is also metered so that tenant will be billed directly by
the utility company.
All other terms and conditions of "the lease", dated April 18, 1989, shall
remain the same for the coverage of said space.
Very truly yours, AGREED & ACCEPTED:
LANDLORD: TENANT:
LACKAWANNA WAREHOUSE CORP. OF NJ CUNNINGHAM GRAPHICS, INC.
By: /s/ Louisa Little By: /s/ Michael Cunningham
----------------------------------- -------------------------------
As Agent Michael Cunningham, President
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
February 9, 1993
Mr. Michael Cunningham, President
629 Grove Street
Jersey City, N.J. 07310
Re: Amendment of lease dated April 18, 1989 between Lackawanna Warehouse Corp.
of New Jersey, Lessor and Cunningham Graphics, Inc., lessee
Dear Mr. Cunningham:
By your signature in the space provided below, the lease shall be amended as
follows:
1. By increasing the square footage upward by 5,875 square feet of space
located on the third floor, (which represents an equal portion of the 11,750
square foot area) to bring the aggregate total of square footage leased from
41,993 square feet to 47,868 square feet as follows:
Floor Square feet
------- -----------
3 5,875 "new area"
7 41,993
------- -----------
Total 47,868
2. Additional Rent. Effective March 1, 1993 to February 28, 1997. Rent for
the additional space added by this agreement shall be TWENTY-THOUSAND
FIVE-HUNDRED SIXTY-TWO-DOLLARS AND FIFTY-CENTS ($20,562.50) per annum, such rent
shall be payable monthly in advance at the rate of ONE-THOUSAND SEVEN-HUNDRED
THIRTEEN-DOLLARS AND FIFTY-FOUR-CENTS ($1,713.54), with the result that the
aggregate monthly rent for the demised premises (as amended hereby) shall be
FOURTEEN-THOUSAND FIVE-HUNDRED FIFTY-SIX DOLLARS AND FIFTY-FOUR-CENTS
($14,556.54).
3. Clause #53. Percentage in clause #53 shall be increased by .5875%,
effective March 1, 1993. New area .5875% shall have a tax base year of 1993.
4. Freight Elevator. Tenant shall have for his use #16 freight elevator
which he will share with another tenant, presently located on the 5th floor.
Landlord will bill Cunningham his proportionate share of the Full Elevator
Service Contract, Annual City, State registration and inspection fees.
continued,
<PAGE>
Mr. Michael Cunningham, President -2- Letter of Agreement
CUNNINGHAM GRAPHICS, INC. February 9, 1993
5. It is understood and agreed that the "within agreement" is contingent on
the execution and performance of the lease dated, February 9, 1993 between
Lackawanna Warehouse Corp. of NJ, lessor and Foster-Carroll Graphics, Inc.,
lessee.
It is further acknowledged that a separate agreement dated February 9, 1993
has been created to acknowledge the intention of all parties involved with this
letter of agreement., for the coverage of said space.
All other terms and conditions of lease dated April 18, 1989 shall remain
the same, except as herein provided., for the coverage of said space.
Very truly yours, AGREED & ACCEPTED:
LACKAWANNA WAREHOUSE CORP. CUNNINGHAM GRAPHICS, INC.
OF NEW JERSEY: LANDLORD
By:/s/ Lawrence Lang By: /s/ Michael Cunningham
--------------------- ----------------------------------
Lawrence Lang, Agent Michael Cunningham, President
dc
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
February 18, 1992 Revised
Mr. Michael Cunningham, President
Cunningham Graphics, Inc.
629 Grove Street
Jersey City, N.J. 07310
Re: Lease dated April 18, 1989
` Renewal Option---Clause #63
Leased Area------: 7th Floor
Square Footage---: 41,993
Dear Mr. Cunningham:
By your signature in the space provided below, the lease shall be amended
as follows:
1. Amended Rent. Rental for the renewal period of March 1, 1992 through
February 28, 1997 shall be One-Hundred Fifty-Four Thousand One-Hundred-Fourteen
Dollars ($154,114.00) payable at the monthly rate of TWELVE-THOUSAND
EIGHT-HUNDRED FORTY-THREE DOLLARS ($12,843.00) in advance on the first day of
each and every month.
2. Amendment to Clause #53. Effective March 1, 1992, the Tax Year Ending,
December 31, 1988 shall be amended to Tax Year Ending, December 31, 1991.
All other terms and conditions for the coverage of said space shall remain
the same for the option renewal period, as provided in the lease dated April,
1989.
Very truly yours,
LACKAWANNA WAREHOUSE CORP. AGREED & ACCEPTED:
OF NEW JERSEY: LANDLORD CUNNINGHAM GRAPHICS, INC.: TENANT
By: /s/ Frank Ryan By: /s/ Michael Cunningham
- ---------------------------------- -------------------------------------
Frank Ryan, Vice President Michael Cunningham, President
*****LANDLORD OFFICE COPY******
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
November 30, 1991
Cunningham Graphics, Inc.
629 Grove Street
Jersey City, N.J. 07310
Re: Amendment to lease date April 18, 1989 between Lackawanna Warehouse Corp.
of New Jersey; Lessor and Cunningham Graphics, Inc.; Lessee
Gentlemen:
By your signature in the space provided below, we agree to amend the above
lease as follows:
1. Reduction of Square Footage Leased. Reduce the total square footage
leased by 875 square feet, as cross hatched on the attached floor plan. (Area
outside of #12 elevator).
2. New Rental. Rental to be reduced from ONE HUNDRED THIRTY NINE THOUSAND
THREE HUNDRED TWENTY ONE DOLLARS ($139,321.00) PER ANNUM TO ONE HUNDRED THIRTY
SIX THOUSAND FOUR HUNDRED SEVENTY SEVEN DOLLARS AND TWENTY FIVE CENTS
($136,477.25) payable at the monthly rate of ELEVEN THOUSAND THREE HUNDRED
SEVENTY THREE DOLLARS AND TEN CENTS ($11,373.10), in advance on the first day of
each and every month.
3. Commencement. Effective December 1, 1991 through February 28, 1992.
All other terms and conditions to remain the same.
Very truly yours,
LACKAWANNA WAREHOUSE CORP. Agreed & Accepted:
OF NEW JERSEY; Landlord CUNNINGHAM GRAPHICS, INC.
Tenant
By: /s/ Frank Ryan By: /s/ Michael Cunningham
- ---------------------------------- -------------------------------------
Frank Ryan, Vice President Michael Cunningham, President
<PAGE>
TYPICAL FLOOR
[FLOOR PLAN]
(Graphic Omitted)
<PAGE>
Office Copy
Lackawanna Warehouse Corporation of New Jersey 629
GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
July 30, 1990
Mr. Michael Cunningham
CUNNINGHAM GRAPHICS, INC.
629 Grove Street
Jersey City, N.J. 07310
Re: Lease dated April 18, 1989 between Lackawanna Warehouse Corp. of NJ,
Landlord; and Cunningham Graphics, Inc., Tenant
- --------------------------------------------------------------------------------
Gentlemen:
Please accept this letter as our agreement to amend the above lease as follows:
1. Increase leased area by 29,968 square feet of space on the seventh floor
as shown in red on the attached plan, changing the total square feet leased from
12,900 to 42,868 sq. ft., which includes 300 sq. ft. of common area.
2. Rental figure to change from FORTY-ONE THOUSAND NINE-HUNDRED AND
TWENTY-FIVE-DOLLARS ($41,925.00) per annum to ONE-HUNDRED THIRTY-NINE-THOUSAND
THREE-HUNDRED AND TWENTY-ONE-DOLLARS ($139,321.00) per annum payable at the
monthly rate of ELEVEN-THOUSAND SIX-HUNDRED TEN-DOLLARS AND EIGHT-CENTS
($11,610.08) in advance on the first day of each and every month.
3. Percentage in clause #53 of addendum to lease dated April 18, 1989 to be
changed from 1.2% to 4.2%.
4. Term of this agreement to commence August 1, 1990 and terminate on
February 28, 1992, all other terms and conditions of lease dated April 18, 1989
to remain the same.
5. Cunningham Graphics, Inc., agrees to increase prepaid rent deposit
(clause #61 of addendum) to an amount of $23,220.16, which will represent
prepaid rent for the final two months of this lease.
Landlord represents that he currently has on account for Cunningham Graphics,
Inc., $6,987.50, and understands that the balance due of $16,232.66 will become
due and payable upon execution of this agreement.
continued,
<PAGE>
Mr. Michael Cunningham
Cunningham Graphics, Inc. -2- July 30, 1990
6. Cunningham Graphics, Inc., will now have for their use, #15 Freight
Elevator, and will assume and keep in full effect, the present Full Elevator
Maintenance Contract on said elevator, at tenants own cost and expense,
including annual registration and inspection fees.
Tenant will no longer have the use of #16 Freight Elevator, or responsibility
for the costs of maintaining #16 Elevator.
7. This agreement will become effective upon Landlord (Lackawanna Warehouse
Corp. of NJ) getting possession of the 29,968 square feet of space from Gibson
Graphics, Inc., Trustees.
8. Cunningham Graphics, Inc., acknowledges that he has examined the 29,968
sq. ft. of space and accepts the area "AS IS" and understands there is no work
to be performed by the landlord.
All other terms and conditions of lease dated April 18, 1989 to remain in
effect.
Kindly indicate your acceptance and understanding of this agreement by signing
in the space provided below and it shall be deemed a binding agreement between
us.
Very truly yours,
LACKAWANNA WAREHOUSE CORP. AGREED & ACCEPTED:
OF NEW JERSEY CUNNINGHAM GRAPHICS, INC.
By: /s/ Frank Ryan By: /s/ Michael Cunningham
- ---------------------------------- -------------------------------------
Frank Ryan, Vice President Michael Cunningham, President
FR:dc
<PAGE>
CHECK #2525 dated 8/1/90 -- in the amount of $16,232.66 rec'd from Cunningham
Graphics, Inc. to be held on account for Prepaid Rent for final two months of
lease dated 4/18/98, clause #61 as required by Agreement dated 7/30/90 -- Item
#5 -- Paid upon execution of same.
AS OF AUGUST 1, 1990 TOTAL HELD ON ACCOUNT BY LANDLORD FOR ABOVE LEASE:
$23,220.16, no interest
[COPY OF THREE-PART CHECK]
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
February 18, 1992 Revised
Mr. M. Cunningham, President
CUNNINGHAM GRAPHICS, INC.
629 Grove Street
Jersey City, NJ 07310
Re: Lease dated April 18, 1989
Renewal Option---Clause #63
Leased Area------: 7th Floor
Square Footage---: 41,993
Dear Mr. Cunningham:
By your signature in the space provided below, the lease shall be amended
as follows:
1. Amended Rent. Rental for the renewal period of March 1, 1992 through
February 28, 1997 shall be One-Hundred Fifty-Four Thousand One-Hundred-Fourteen
Dollars ($154,114.00) payable at the monthly rate of TWELVE-THOUSAND
EIGHT-HUNDRED FORTY-THREE DOLLARS ($12,843.00) in advance on the first day of
each and every month.
2. Amendment to Clause #53. Effective March 1, 1992, the Tax Year Ending,
December 31, 1988 shall be amended to Tax Year Ending, December 31, 1991.
All other terms and conditions for the coverage of said space shall remain
the same for the option renewal period, as provided in the lease dated April,
1989.
Very truly yours,
LACKAWANNA WAREHOUSE CORP. AGREED & ACCEPTED:
OF NEW JERSEY: LANDLORD CUNNINGHAM GRAPHICS, INC.: TENANT
By: /s/ Frank Ryan By: /s/ Michael Cunningham
--------------------------------- ---------------------------------
Frank Ryan, Vice President Michael Cunningham, President
****LANDLORD OFFICE COPY****
<PAGE>
Lackawanna Warehouse Corporation of New Jersey
629 GROVE STREET o JERSEY CITY, NEW JERSEY 07310
N.J. (201) 653-3360-1 o (212) 732-2345
August 1, 1990
Michael Cunningham
Cunningham Graphics, Inc.
629 Grove Street
Jersey City, NJ 07310
Re: Prepaid Rent held on account -- Clause #61 of Lease Dated April 18, 1989
Dear Mr. Cunningham:
Accept this letter as our confirmation that as of August 1, 1990 the
Lanlord holds an amount on account of Cunningham Graphics, Inc. $23,220.16 paid
by Cunningham Graphics, Inc. as follows:
Date Deposit Received Check No. Amount
--------------------- --------- ------
May 8, 1989 1671 $6,987.50
August 1, 1990 2525 16,232.66
---------
Total Held per clause #61 $23,220.16
Very truly,
Lackawanna Warehouse Corp.
Of New Jersey
/s/ Donna Caple
- ----------------------
Donna Caple, Secretary
AGREEMENT OF SUBLEASE
between
GOLDMAN, SACHS & CO.,
Sublandlord
and
CUNNINGHAM GRAPHICS, INC, Subtenant
Premises:
A portion of
111 8th Avenue
New York, New York
<PAGE>
1. Sublease of Initial Premises; Right to
Sublease Retained Premises .......................................... 1
2. Term; Permitted Use ................................................... 3
3. Rents ................................................................. 4
4. Condition of the Premises ............................................. 6
5. Subordination to and Incorporation of the Lease ....................... 6
6. Hazardous Substances .................................................. 9
7. Covenant of Quiet Enjoyment ........................................... 12
8. Security Deposit ...................................................... 12
9. Roof Top Equipment .................................................... 12
10. Alterations; Removal at End of Term ................................... 12
11. Indemnity ............................................................. 13
12. Notices ............................................................... 13
13. Miscellaneous ......................................................... 14
i
<PAGE>
AGREEMENT OF SUBLEASE (this "Sublease"), made as of the 15th day of July,
1996, between GOLDMAN, SACHS & CO., a New York limited partnership having an
office address at 85 Broad Street, New York, New York 10004 ("Sublandlord"), and
CUNNINGHAM GRAPHICS, INC., a New Jersey corporation having an office address at
629 Grove Street, Jersey City, New Jersey 07306 ("Subtenant").
WITNESSETH:
WHEREAS P.A. Building Company is the landlord and Sublandlord is the tenant
under that certain lease dated September 14, 1989 as supplemented by three
letter agreements dated September 14, 1989 (as so supplemented and as hereafter
amended, the "Overlease") demising Rooms 815-825 (the "Overlease Premises") of
the building known as 111 8th Avenue, New York, New York (the "Building");
WHEREAS Sublandlord desires (i) initially to sublease to Subtenant all of
the Overlease Premises other than the Retained Premises (as hereinafter defined)
(all of the Overlease Premises other than the Retained Premises being herein
called the "Initial Premises"), and (ii) to have the option to sublease to
Subtenant the portion of the Overlease Premises designated Retained Premises on
Exhibit A hereto (the "Retained Premises");
WHEREAS Subtenant desires to enter into a sublease on the terms described
above;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is mutually agreed as follows:
1. Sublease of Initial Premises; Right to Sublease Retained Premises
1.1 As used in this Sublease, the term "Premises" shall initially mean the
Initial Premises; provided, however, that if Sublandlord shall exercise the Put
(as defined in Section 1.3 below), then the term "Premises" shall thereafter
mean the Overlease Premises. Sublandlord hereby subleases to Subtenant, and
Subtenant hereby hires from Sublandlord, the Premises upon and subject to the
terms and conditions hereinafter set forth.
1.2 As used herein the term "Subtenant's Proportionate Share" shall mean
ninety percent; provided, however, that if Sublandlord shall exercise the Put,
then the term "Subtenant's Proportionate Share" shall thereafter mean one
hundred percent.
1.3 Sublandlord shall have the option (the "Put"), exercisable by notice to
Subtenant given at any time, to lease to Subtenant the Retained Premises. If
Sublandlord shall exercise such option the date of such notice shall be deemed
to be the "Put Date."
1.4 Unless and until Sublandlord shall exercise the Put the following
provisions of this Section 1.4 shall apply.
<PAGE>
(a) Sublandlord shall have the right, in common with Subtenant, to use
the portion of the Initial Premises designated as Common Space on Exhibit A
hereto (the "Common Space"), and all equipment and facilities now installed
or located therein; none of such equipment or facilities shall be removed
from the Common Space; and Subtenant shall repair and maintain such
equipment and facilities in good working order and condition. The Common
Space is a part of the Initial Premises.
(b) Sublandlord shall have the right to enter and pass through the
Initial Premises in order to access the Retained Premises and the Common
Space; Sublandlord shall be entitled to use all entrances to the Initial
Premises; Sublandlord (and each of its employees working at the Retained
Premises) shall be entitled to retain keys to all entrances to the Initial
Premises, and Subtenant shall not change the locks on or add any new or
additional lock to any such entrance unless Subtenant furnishes Sublandlord
(and each of its employees working at the Retained Premises) with keys
thereto; and no barriers shall be erected which would prevent or hinder
Sublandlord from exercising any of its rights under Section 1.4.
(c) Subtenant shall not enter the Retained Premises, except as
required to service any of Subtenant's equipment which passes through the
ceiling of the Retained Premises and then only with Sublandlord's prior
written approval and subject to such rules and requirements as Sublandlord
may impose; provided, however, that (i) such consent shall not be
unreasonably withheld, and (ii) no such consent shall be required in case
of an emergency.
(d) Subject to the performance by Overlandlord (as hereinafter
defined) of its obligations to furnish electricity, Subtenant shall cause
the Overlease Premises to be illuminated and furnished with HVAC, in
accordance with Sublandlord's past practices, at all times other that the
47 hour period each week beginning 8 am Saturday and ending 7 am Monday
(the "Excluded Period"); and Subtenant shall maintain and repair all
equipment and facilities providing the services referred to in this Section
1.4(d) and not required by the Overlease to be maintained and repaired by
Overlandlord at its expense. If during all or any portion of the Excluded
Period Sublandlord shall desire the Overlease Premises to be illuminated,
Sublandlord shall have the right to turn-on (and turn-off) the lights of
the Overlease Premises. If during all or any portion of the Excluded Period
Sublandlord shall desire the Overlease Premises to be furnished with HVAC,
Sublandlord shall have the right to turn-on and operate (and turn-off) the
HVAC equipment of the Overlease Premises. If Sublandlord so turns on such
HVAC equipment then Sublandlord shall reimburse Subtenant for the
additional utility costs incurred by reason of the operation of such
equipment (as reasonably estimated by Sublandlord) from the time it is
turned on by Sublandlord until it is
2
<PAGE>
turned off, or the Excluded Period shall end, or Subtenant shall indicate
that it too desires HVAC to be furnished to Premises, whichever shall first
occur.
(e) Subtenant shall not hinder or impede the provision by Overlandlord
to the Retained Premises of the Common Space of electricity, heat, cleaning
or any other building service.
(f) Subtenant shall be entitled to a credit against the rent otherwise
payable under this Sublease in the amount of $1600 per month for each month
in the period commencing on the Commencement Date and ending on the Put
Date, prorated for any partial month.
All of Sublandlord's rights under this Section 1.4 are reserved for and may be
exercised by Sublandlord or any of its agents, employees, or contractors
authorized by Sublandlord to do so.
1.5 Sublandlord shall indemnify, defend and save harmless Subtenant from
and against any claim asserted against Subtenant arising out the negligence or
intentional misconduct of Sublandlord or its shareholders, officers, directors,
employees, partners, agents, or visitors in or about the Retained Premises after
the date hereof and prior to the Put Date. If any such claim is asserted against
Subtenant it shall promptly notify Sublandlord who shall have the right to
resist the same with counsel chosen by it, subject to Subtenant's approval not
to be unreasonably withheld. Sublandlord's liability under this Section 1.5 with
respect to negligence or intentional misconduct occurring after the date hereof
and prior to the Put Date shall survive the Put Date and the expiration or
termination of this Sublease.
2. Term: Permitted Use.
2.1 The term of this Sublease shall commence on the date on which
Overlandlord shall consent hereto (such date being herein called the
"Commencement Date"), and shall end on December 30, 1999 (the "Expiration Date")
or on such earlier date upon which such term shall expire or be terminated
pursuant to any of the conditions or covenants of this Sublease or pursuant to
law.
2.2 Sublandlord and Subtenant are also entering into a Printing Services
Agreement of even date (the "Printing Service Agreement"). Section 12.5 of the
Printing Services Agreement permits Sublandlord to terminate the Printing
Services Agreement without cause, by giving notice of such termination to
Subtenant (the day on which such notice is given being herein called the "PSA
Termination Without Cause Notice Date"). If, pursuant to Section 12.5 of the
Printing Services Agreement, Sublandlord shall terminate the Printing Services
Agreement Without cause then Subtenant shall have the right, by notice given to
and received by Sublandlord no later than the 30th day after the PSA Termination
Without Cause Notice Date (time being of the essence), to terminate this
Sublease as of the 60th day after the PSA Termination Without Cause Notice Date.
If Subtenant timely shall terminate this Sublease pursuant to the preceding
3
<PAGE>
sentence then this Sublease shall terminate on and as of the 60th day after the
PSA Termination Without Cause Notice Date with the same force and effect as if
such 60th day were the day originally provided herein for the expiration hereof.
2.3 Subtenant shall use the Premises only for general offices and printing,
subject to and in accordance with all applicable provisions of the Overlease.
3. Rents.
3.1 Subtenant shall pay to Sublandlord, as fixed rent, Subtenant's
Proportionate Share of the fixed rent payable by Sublandlord under the
Overlease, payable in equal monthly installments on the Commencement Date and on
the first day of each month thereafter; provided, however, that (a) if the
Commencement Date is other than the first day of a month the fixed rent for the
period from the Commencement Date through the end of the month in which the
Commencement Date shall occur shall be computed on a pro-rata basis and shall be
due on the Commencement Date, and (b) if the Put Date is other than the first
day of a month the increase in fixed rent for the period from the Put Date
through the end of the month in which the Put Date shall occur shall be computed
on a pro-rata basis and shall be due on the Put Date.
3.2 In addition to the fixed rent, commencing on the Commencement Date and
continuing for the entire term of this Sublease, Subtenant shall reimburse
Sublandlord, as additional rent, for all amounts payable by Sublandlord under
the Overlease; provided, however, that
(a) Subtenant shall not be obligated so to reimburse Sublandlord with
respect to amounts accrued, due and owing as of the Commencement Date, and
(b) Subtenant's obligations under this Section 3.2 with respect to
amounts payable under Articles 39 and 40 of the Overlease (porter wage and
real estate taxes) shall be limited to Subtenant's Proportionate Share of
such amounts.
Subtenant's payments under this Section 3.2 shall be due on the dates on which
Sublandlord's payments under the Overlease are due to the landlord under the
Overlease (the "Overlandlord"); provided, however, that
(a) except for continuing equal monthly payments under Articles 39 and
40 of the Overlease no payment shall be due under this Section 3.2 until
five days after Sublandlord shall have furnished Subtenant with notice
thereof, together with copies of all related notices, bills and supporting
documentation issued by Overlandlord, and
(b) Subtenant's liability under this Section 3.2 in respect of amounts
payable under
4
<PAGE>
(i) the second sentence of Article 38(a) of the Overlease
(electricity),
(ii) Articles 39 and 40 of the Overlease (porter wage and real
estate taxes),
(iii) the fourth sentence of Article 71 of the Overlease (water),
and
(iv) the third sentence of Article 74(a) of the Overlease (steam)
shall be apportioned and adjusted as of the Commencement Date, i.e. (x) if
Sublandlord shall have heretofore been required to make any payment under
any of the provisions listed above wholly or partially in respect of any
period after the Commencement Date, then Subtenant shall promptly reimburse
Sublandlord for so much of such payment as shall be applicable to any
period after the Commencement Date (or, in the case of payments under
Article 39 or 40 of the Overlease, for Subtenant's Proportionate Share of
so much thereof), and (y) if Sublandlord shall hereafter be required to
make any payment under any of the provisions listed above wholly or
partially in respect of any period prior to the Commencement Date, then
subtenant's liability in respect thereof under this Section 3.2 shall be
limited to so much of such payment, if any, as shall be applicable to any
period after the Commencement Date (or, in the case of payments under
Article 39 or 40 of the Overlease, to Subtenant's Proportionate Share of so
much thereof).
3.3 Miscellaneous (a) As used herein the term "additional rent" shall refer
to all sums of money which shall become due from and payable by Subtenant to
Sublandlord hereunder (whether as reimbursement or otherwise), other than fixed
rent, and the term "rents" shall refer to fixed rent and additional rent. All
rents shall be payable in lawful money of the United States at such place and to
such person as Sublandlord shall from time to time designate.
(b) Subtenant shall promptly pay all rents as and when the same shall
become due and payable without set-off, offset or deduction of any kind
whatsoever and, in the event of Subtenant's failure to pay any additional rent
when due, Sublandlord shall have all of the rights and remedies provided for
herein or at law or in equity in the case of non-payment of fixed rent.
(c) Sublandlord's failure during the term of this Sublease to prepare and
deliver any statements or bills required or permitted to be delivered to
Subtenant hereunder, or Sublandlord's failure to make a demand under this
Sublease, shall not in any way be deemed to be a waiver of, or cause Sublandlord
to forfeit or surrender, its rights to collect any rents which may have become
due pursuant to this Sublease during the term hereof. Subtenant's liability for
rents accruing during the term of this Sublease shall survive the expiration or
sooner termination of this Sublease.
5
<PAGE>
4. Condition of the Premises.
Subtenant represents that it has examined (or waived examination of) the
Initial Premises and the Retained Premises. Sublandlord has not made and does
not make any representations or warranties as to the physical condition of the
Initial Premises or the Retained Premises (including any latent defects), the
uses to which the same may be put, or any other matter or thing affecting or
relating thereto. Subtenant agrees to accept the Initial Premises and the
Retained Premises in their respective "as is" condition as of the date hereof,
as the same may be affected by reasonable wear and tear and fire or other
casualty after the date hereof, and Sublandlord shall have no obligation
whatsoever to alter, improve, decorate or otherwise prepare the Initial Premises
or the Retained Premises for Subtenant's occupancy.
5. Subordination to and Incorporation of the Lease.
5.1 This Sublease is subordinate to the Overlease, and to all leases,
mortgages and other instruments, documents, rights and encumbrances to which the
Overlease is now or shall hereafter be subordinate. This provision shall be
self-operative but Subtenant shall within ten (10) days of Sublandlord's request
execute any instrument requested by Sublandlord or Overlandlord to evidence or
confirm the same. Sublandlord represents that a true and complete copy of the
Overlease as in effect on the date hereof is attached hereto as Exhibit D.
Sublandlord shall not voluntarily surrender the Overlease (unless the
Overlandlord agrees to recognize and continue this Sublease in full force and
effect as a direct lease without change in terms) or amend the same in a manner
adverse to Subtenant (unless and to extent Sublandlord is required by Article 45
of the Overlease to do so); provided, however, that whenever Sublandlord shall
have any right to terminate the Overlease pursuant to any provision therein
contained Sublandlord may exercise the same or refrain from exercising the same,
as Sublandlord shall elect. If the Overlease shall terminate for any reason then
this Sublease and the term hereof shall also terminate without liability on
Sublandlord's part on account thereof; provided, however, that if such
termination of the Overlease shall have arisen out of
(a) any default by Sublandlord as tenant thereunder not arising out of
any default by Subtenant as subtenant hereunder, or
(b) a voluntary surrender by Sublandlord in violation of the
preceding sentence,
then such termination shall be deemed to be a violation of Section 6 hereof and
Sublandlord shall be liable to Subtenant to the extent provided by applicable
law on account thereof. This Sublease is subject to all of the terms, covenants
and conditions of the Overlease.
5.2 Except as otherwise expressly provided in, or otherwise inconsistent
with, this Sublease, and except to the extent not applicable to the Premises,
the provisions of the Overlease listed below (the "Incorporated Provision") are
hereby incorporated into this Sublease by
6
<PAGE>
reference with the same force and effect as if set forth at length herein,
except that, unless the context requires otherwise:
(i) references in such provisions to "Landlord" or to "Tenant" shall
be deemed to refer to Sublandlord or to Subtenant, as the case may be,
(ii) references in such provisions to "this Lease" shall be deemed to
refer to this Sublease,
(iii) references in such provisions to other Incorporated Provisions
shall be deemed to refer to such Incorporated Provisions as incorporated
herein,
(iv) references in such provisions to leases, mortgages, instruments,
documents, rights or encumbrances to which the Lease is subordinate shall
be deemed to refer to leases, mortgages, instruments, documents, rights and
encumbrances to which the Overlease is subordinate,
(v) references in such provisions to subleases, sublettings or
subtenants shall be deemed to refer to undersubleases, undersublettings or
undersubtenants,
(vi) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant is required to furnish insurance,
indemnification or other similar protection to or for Sublandlord, or to
name Sublandlord on any insurance, or to take any act as designated or
directed by Sublandlord or to the satisfaction of Sublandlord, Subtenant
shall be required to furnish such insurance, indemnification or other
similar protection to or for Overlandlord and Sublandlord, or to name
Overlandlord and Sublandlord, or to take such act as designated or directed
by Overlandlord or Sublandlord or to the satisfaction of Overlandlord and
Sublandlord,
(vii) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant is required to obtain the consent or
approval of Sublandlord to or with respect to any act, omission or thing
(e.g. to any undersublease, assignment or alteration), Subtenant shall be
required to obtain the consent or approval of Overlandlord and Sublandlord
to or with respect to such act, omission or thing,
(viii) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant grants any release, waiver or similar thing
to Sublandlord, Subtenant shall be deemed to have granted such release,
waiver or similar thing to Overlandlord and Sublandlord,
(ix) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant grants Sublandlord (or Sublandlord reserves)
any
7
<PAGE>
right to enter, access or use the Premises, or any right to exhibit the
Premises, or any right to perform maintenance therein or thereto or make
repairs, alterations, improvements or additions therein or thereto, or any
right to perform any other act therein or thereto, Subtenant shall be
deemed to have granted such right to Overlandlord and Sublandlord (or such
right shall be deemed to have been reserved by Overlandlord and
Sublandlord),
(x) whenever any of the Incorporated Provisions as incorporated herein
afford Subtenant the right by legal action, arbitration, or other
proceeding to challenge, question or dispute any determination or other
action by Sublandlord, Subtenant shall be deemed to have waived such right
so long as the such determination or other action by Sublandlord is
consistent with the corresponding determination or other action by
Overlandlord, and
(xi) time periods provided for in the Incorporated Provisions as
incorporated herein shall be deemed shortened of lengthened, as the case
may be, as necessary as determined by Sublandlord, so that actions or
omissions relating thereto may be coordinated with the corresponding
actions or omissions under the Overlease or performed within the time
required by the Overlease.
The incorporated Provisions of the Overlease are all of the provisions thereof
except for (i) the opening paragraph thereof (i.e. the portion of the first page
of the printed form prior to Article 1 thereof), Article 1, Article 2, insert 1
to Article 7, insert 1 to Article 9, Article 17 (which is hereby replaced with
Article 17 as set forth on Exhibit B hereto), insert 1 to Article 20, Article
27, Article 39, Article 40, Article 41(i), the insert at the end of the second
paragraph of Article 61, Article 63, Article 72, Article 75, and Article 75A,
and (ii) the letter agreement dated September 14, 1989 regarding certain work to
be performed by Overlandlord and the letter agreement dated September 14, 1989
regarding the commencement of the term of the Overlease.
5.3 Notwithstanding anything to the contrary contained in this Sublease
(including any of the Incorporated Provisions as herein incorporated),
Sublandlord shall not be deemed to have made any representation or warranty made
by Overlandlord in any of the Incorporated Provisions, and Sublandlord shall not
be obligated
(a) to provide any of the services that Overlandlord has agreed in the
Overlease to provide or is required by law to provide, or
(b) to make any of the repairs or restorations that Overlandlord has
agreed in the Overlease to make or is required by law to make, or
(c) to comply with any laws or requirements of public authorities with
which Overlandlord has agreed in the Overlease to comply, or
8
<PAGE>
(d) to take or to refrain from taking any other action that
Overlandlord has agreed in the Overlease to take or to refrain from taking
or is required by law to take or to refrain from taking (including, in
either case, any obligations with respect to giving consents, approvals,
etc.), or
(e) to perform any obligation that Overlandlord has agreed in the
Overlease to perform,
and Sublandlord shall have no liability to Subtenant on account of any failure
of Overlandlord (or Sublandlord) to provide, make, comply with, take, refrain
from taking, or perform any of the foregoing, nor shall such failure constitute
an eviction of Subtenant or entitle Subtenant to any abatement of rents
hereunder.
5.4 Whenever Subtenant desires to do any act or thing which requires the
consent or approval of Sublandlord under any of the Incorporated Provisions as
incorporated herein:
(a) Subtenant shall not do such act or thing without first having
obtained the consent or approval of Overlandlord and Sublandlord;
(b) Sublandlord's right to withhold consent or approval shall be
independent of Overlandlord's right; provided, however, that if, in any
instance, Overlandlord shall (i) be required by the Overlease not to
unreasonably withhold consent or approval, and (ii) shall have granted
consent or approval, then Sublandlord shall not unreasonably withhold
consent or approval; and
(c) without limiting Sublandlord's right to withhold consent or
approval in any instance and notwithstanding any Incorporated Provision or
provision of law requiring Sublandlord to act reasonably, Sublandlord shall
be entitled, without liability to Subtenant on account thereof, to withhold
consent or approval whenever and for so long as Overlandlord shall withhold
its consent or approval, regardless of whether or not Overlandlord is
entitled to withhold such consent or approval and regardless of whether
Overlandlord may have liability to Sublandlord or Subtenant on account
thereof; and
(d) Subtenant shall not request Overlandlord's consent or approval
directly; unless Sublandlord shall have determined to withhold its consent
or approval, the provisions of Section 5.3 above shall be applicable to the
obtaining of Overlandlord's consent or approval; neither Sublandlord's
forwarding Subtenant's request to Overlandlord nor Sublandlord's other
efforts to obtain Overlandlord's consent or approval shall constitute
Sublandlord's consent or approval, and the same shall be without prejudice
to Sublandlord' right to withhold consent or approval;
provided, however, that, notwithstanding the foregoing provisions of this
Section 5.4 or any of the Incorporated Provisions as incorporated herein,
Sublandlord shall have the right to withhold
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<PAGE>
consent to any assignment of this Sublease or to any undersublease of all or any
portion of the Premises in its sole discretion.
5.5. If and to the extent that the Overlandlord shall
(i) fail to provide cleaning, electricity, water, steam or heat to the
Premises as and to the extent required by the Overlease,
(ii) fail to maintain or make repairs or replacements in or to the
Premises or the Building as and to the extent required by the Overlease, or
(iii) fail to grant any consent or approval as and to the extent
required by the Overlease,
Sublandlord shall, upon Subtenant's request, use reasonable efforts, at
Subtenant's expense, to (x) compel Overlandlord to do so, or (y) recover damages
on account of Overlandlord's failure to do so, including within such reasonable
efforts the commencement and prosecution, at Subtenant's expense, of an action
at law or in equity. Subtenant shall pay, defend, indemnify and hold harmless
Sublandlord from and against any and all loss, cost, claim, damage or expense,
including attorneys fees, incurred by Sublandlord under or in connection with
any such efforts and/or any such action, proceeding, or arbitration pursuant to
the preceding sentence. Prior to taking or continuing to take any action under
this Section 5.5, Sublandlord, from time to time, may require Subtenant to
increase the amount of the security deposit under Section 8 by such amount as
Sublandlord shall determine in order to secure the faithful performance by
Subtenant of its obligations under this Section 5.5.
5.6 Notwithstanding any other provision of this Sublease, Subtenant shall,
with respect to the Premises and/or its use and occupancy thereof and/or its
acts or omissions and/or those of its agents, employees or contractors in or
about the Premises, (i) observe and perform all of the terms, covenants and
conditions of the Overlease to be performed and observed by Sublandlord as
tenant thereunder, and (ii) not do, or suffer or permit to be done, any act or
thing which would violate or could give rise to any breach, default or violation
of any of such terms, covenants or conditions.
5.7 Notwithstanding any other provision of this Sublease, Subtenant shall
perform all of its obligations hereunder at such times, by such dates or within
such periods as shall be required to avoid any default under the Overlease from
continuing beyond the period for notice and grace provided for in Article 17 of
the Overlease; provided, however, that in no event shall this Section 5.7 extend
the time, date or period by or within which Subtenant is required to perform;
6. Hazardous Substances Subtenant
a) shall not cause, suffer or permit the presence, storage, handling
or use of any hazardous substance in, on or about the Premises or in the
vicinity of the
10
<PAGE>
Premises, other than reasonable quantities of such hazardous substances as
are commonly used by persons engaged in the business of financial printing;
b) shall cause all hazardous substances referred to above to be used,
handled and stored in accordance with the best practices and procedures of
the printing industry, to be kept securely sealed and stored except when in
use, and to be promptly and regularly disposed of in accordance with all
applicable laws (as hereinafter defined);
c) shall not cause, suffer or permit the presence, storage, handling
or use of any hazardous substances in, on or about the Premises or in the
vicinity of the Premises in any manner or way contrary to or violative of
any presently-existing or hereafter-adopted federal, state or local laws,
regulations or guidelines ("laws"); and
d) shall not cause, suffer or permit the escape, disposal or release
of any hazardous substances in, on or about the vicinity of the Premises,
or into the regular Building refuse, or into any of the water or waste
lines of the Premises or the Building;
provided, however, that Subtenant shall not be responsible under this Section 6
for any release of hazardous substances in, on or about the Premises caused by
the actions after the date hereof and prior to the Put Date of Sublandlord or
any of its agents or employees provided that (i) such hazardous substances were
permitted by clause (a) above, and (ii) Subtenant shall have caused such
hazardous substances to be used, handled and stored in accordance with clauses
(b) and (c) above.
"Hazardous substances" are (i) any "hazardous wastes" as defined by the
Resource, Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et
seq.), as amended, and regulations promulgated thereunder; (ii) any "hazardous,
toxic or dangerous waste, substance or material" defined as such in (or for
purposes of) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended, and
regulations promulgated thereunder; and (iii) any hazardous, toxic or dangerous
chemical, biological or other waste, substance or material as defined in any
so-called "superfund" or "superlien" law or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning such waste,
substance or material, including, without limiting the generality of the
foregoing, asbestos, radon, urea formaldehyde, polychlorinated biphenyls, and
petroleum products including gasoline, fuel oil, crude oil and various
constituents of such products.
Sublandlord represents to Subtenant that, to the best of Sublandlord's
knowledge, Sublandlord has not heretofore spilled or otherwise released in the
Overlease Premises any material amounts of hazardous substances in violation of
any applicable law, other than any such
11
<PAGE>
spills or releases which, to the best of Sublandlord's knowledge, have been
remedied to the extent required by applicable law.
7. Covenant of Quiet Enjoyment. Sublandlord covenants and agrees with
Subtenant that upon Subtenant paying the rent and additional rent and observing
and performing all the terms, covenants and conditions on Subtenant's part to be
observed and performed, Subtenant may peaceably and quietly enjoy the Premises,
subject nevertheless to the terms and conditions of this Sublease, including but
not limited to Section 5.1 and the Incorporated Provisions, and to the Overlease
and the other leases, mortgages and other rights and encumbrances referred to in
Section 5.1.
8. Security Deposit. As security for the faithful performance of its
obligations hereunder, Subtenant has deposited with Sublandlord the sum of
$40,000. Sublandlord shall deposit the aforesaid security deposit in a separate
account and any interest earned thereon, less any fee charged by the depositary,
shall be paid to Subtenant. Upon any failure by Subtenant timely to perform any
of its obligations hereunder, Sublandlord may apply all or any portion of the
sum deposited to the obligation which Sublandlord has failed timely to perform,
or any other obligations of Subtenant under this Sublease. In case of any such
application, Subtenant shall, immediately upon demand of Sublandlord, deposit
additional funds with Sublandlord to restore the sum on deposit to the amount
required by the first sentence of this Section 8 (or as the same may have been
increased pursuant to Section 5.5 or 10.1). After the termination of this
Sublease, if Subtenant shall have duly and faithfully performed each and every
one of its obligations hereunder, Sublandlord shall return the sum on deposit to
Subtenant, with interest as aforesaid. Sublandlord's right of application with
respect to amounts deposited pursuant to Section 5.5 or 10.1 shall not be
limited to the obligations with respect to which such deposit was made.
9. Roof Top Equipment. Sublandlord has heretofore placed or installed
certain equipment on one of the set-back roofs of the Building pursuant to
Article 73 of the Overlease. Throughout the term of this Sublease, Subtenant
shall operate, maintain and repair such equipment, and perform and discharge all
of the obligations of Sublandlord with respect thereto or with respect to the
set-back roof on which the space is placed or installed. Such set-back roof is
not a portion of the Premises, but its usage by Subtenant shall be governed by
the terms of this Sublease as if it were a portion of the Premises.
10. Alterations: Removal at End of Term.
10.1 Subtenant shall not commence or prosecute any alterations,
installation, addition or improvements in, to or upon the Premises unless, in
addition to having complied with all other provisions of this Sublease and the
Incorporated Provisions as incorporated herein, Subtenant shall have furnished
to Sublandlord (a) a fixed price general contract covering the same, (b) payment
and performance bonds in favor of Sublandlord guaranteeing lien free completion
of the work in form, amount and issued by a surety satisfactory to Sublandlord
in its reasonable judgement, and (c) an increase in the security deposit under
Section 8 in an amount equal to the cost, as
12
<PAGE>
estimated by Sublandlord, of such removal or restoration as Subtenant may be
required by Section 10.2 to perform with respect to such alterations,
installation, addition or improvements.
10.2 Subtenant specifically agrees to perform all removal and restorations
obligations under the Overlease, including any thereof with respect to any
alterations, installation, additions and improvements installed by, or any
equipment, fixtures or property owned or placed or installed by, Sublandlord.
10.3 Sublandlord represents to Subtenant that Sublandlord has not received
any written notice from Overlandlord asserting that Sublandlord has made any
alterations, installations, additions or improvements in, to or upon the
Overlease Premises in violation of the Overlease or damaged the Overlease
Premises in violation of the Overlease, other than any such notices relative to
violations which, to the best of Sublandlord's knowledge, it has cured.
11. Indemnity Subtenant shall indemnify, defend and save harmless
Sublandlord and its shareholders, officers, directors, employees, partners and
agents (the "Indemnified Persons") from and against any loss, cost, damage,
claim or expense (including amounts payable under the Overlease) arising out of
or related to or alleged to arise out of or to relate to (i) any act, omission,
or negligence of Subtenant or its shareholders, officers, directors, employees,
partners, agents, contractors, subcontractors, guests, invitees or visitors in
or about the Premises, the Retained Premises or the Building, (ii) any breach or
default by Subtenant under this Sublease or any failure by Subtenant timely to
observe and perform any of the terms and provisions of this Sublease, including
the Incorporated Provisions as incorporated herein, (iii) any hazardous
substance in, on or about the Premises or in the vicinity thereof, (iv) any
accident, injury, or damage, howsoever and by whomsoever caused, to any person
or property, occurring within the Premises on or after the Commencement Date or
any earlier date upon which Subtenant is permitted to enter the Premises, or (v)
any accident, injury or damage to any person or property resulting from any
alterations, installation, or improvements made or performed by Subtenant;
including any action or proceeding brought upon any such claim and any
liability, loss, cost or expense resulting from such claim, action or
proceeding, including reasonable attorneys fees incurred by any of the
Indemnified Persons in connection therewith. Subtenant's liability under this
Section 11 shall survive the expiration or termination of this Sublease.
12. Notices. Any notice, statement, demand, consent, approval, advice or
other communication required or permitted to be given, rendered or made by
either party to the other, pursuant to this Sublease or pursuant to any
applicable law or requirement of public authority (collectively, "Notice") shall
be in writing and shall be deemed to have been properly given, rendered or made
only if sent by personal delivery, receipted by the party to whom addressed, or
by registered or certified mail, return receipt requested, posted in a United
States post office station or depositary in the continental United States,
addressed
(a) to Subtenant (i) prior to the Commencement Date, at its address
first above written, Attention: President, or (ii) on or after the
Commencement Date, at the Premises, Attention: President, or
13
<PAGE>
(b) to Sublandlord, 85 Broad Street, New York, New York 10004
Attention: General Services with a copy to Sublandlord, 85 Broad Street,
New York, New York 10004, Attention: General Counsel.
Either party may, by Notice actually received, designate (i) a different address
in the United States for Notices intended for it, and (ii) require the other
party to provide a copy of any Notices to any other person at any other address
in the United States. Any Notice served upon or given to one of the two entities
constituting Sublandlord shall be deemed to have been served upon or given to
both such entities.
13. Miscellaneous.
13.1 Sublandlord's Liability. The liability of Sublandlord under this
Sublease shall be limited to Sublandlord's leasehold estate in the Overlease
Premises. Moreover, in case of any transfer of such leasehold estate the
transferor shall be deemed released from all liability with respect to the
performance of all of the obligations of Sublandlord thereafter to be performed,
and liability with respect to the performance of such obligations shall be
deemed to be assumed by the transferee, subject to the provisions of this
Section 13.1.
13.2 Remedies for Withholding of Consent Sublandlord shall have no
liability to Subtenant on account of any failure or refusal by Overlandlord to
grant any approval or consent. Moreover, Sublandlord shall have no liability to
Subtenant on account of any failure or refusal by Sublandlord to grant any
approval or consent. In any instance in which Sublandlord is required by any
provision of this Sublease (including any of the Incorporated Provisions as
incorporated herein) or applicable law to not unreasonably withhold consent or
approval, Subtenant's sole remedy shall be an action for specific performance or
injunction requiring Sublandlord to grant such consent or approval, all other
remedies which would otherwise be available being hereby waived by Subtenant. In
any such action, the winning party shall be entitled to reimbursement of its
legal fees from the losing party.
13.3 Broker, Agent or Finder. Subtenant represents and warrants to
Sublandlord that Subtenant has dealt with no broker, agent or finder in
connection with this Sublease other than Kelly, Legan & Gerard (the "Recognized
Broker"). Subtenant hereby agrees to pay any fee or commission due to the
Recognized Broker and to indemnify Sublandlord against any claim for commission
or other compensation in connection with this Sublease made against Sublandlord
by the Recognized Broker or by any other broker, agent or finder with whom
Subtenant has dealt, including attorneys fees incurred by Sublandlord in the
defense of any such claim.
13.4 Entire Agreement, etc. This Sublease contains the entire agreement
between the parties and all prior negotiations and agreements are merged in this
Sublease. Any agreement hereafter made shall be ineffective to change, modify or
discharge this Sublease in whole or in part unless such agreement is in writing
and signed by the parties hereto. No provision of this Sublease shall be deemed
to have been waived by Sublandlord or Subtenant unless such waiver Sublease
shall be deemed to have been waived by Sublandlord or Subtenant unless such
waiver be in writing and signed by Sublandlord or Subtenant, as the case may be.
The covenants and
14
<PAGE>
agreement contained in this Sublease shall bind and inure to the benefit of
Sublandlord and Subtenant and their respective permitted successors and assigns.
13.5 Invalidity of Provisions In the event that any provision of this
Sublease shall be held to be invalid or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions of this
Sublease shall be unaffected thereby.
13.6 No Offer The submission of this document by Sublandlord to Subtenant
shall not constitute an offer by Sublandlord and Sublandlord shall not be bound
in any way unless and until this Sublease is executed and delivered by both
parties.
13.7 Benefit of Non-Subordination and/or Non-Disturbance If, upon any
foreclosure of any mortgage or any termination of any ground or underlying
lease, the Overlease shall continue in effect or Sublandlord shall not be
disturbed, this Sublease shall remain in effect between Sublandlord or
Subtenant.
13.8 Overlandlord's Consent and Approval This Sublease is subject to the
execution and delivery by Overlandlord of an instrument in the form of Exhibit C
hereto (or another instrument satisfactory to the parties) providing for
Overlandlord's consent hereto. Sublandlord shall request such an instrument, but
shall not be obligated to make any payment or incur any obligation to obtain the
same. If such an instrument is not received within 30 days of the full execution
and delivery hereof, either party by notice to the other given prior the receipt
of such an instrument, may cancel this Lease whereupon the Subtenant's security
deposit shall be returned.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement of
Sublease as of the day and year first above written.
SUBLANDLORD:
GOLDMAN, SACHS & CO.
By:
---------------------------------
SUBTENANT:
CUNNINGHAM GRAPHICS, INC.
By: /s/ ILLEGIBLE
---------------------------------
16
<PAGE>
Exhibit A
Drawing of the Overlease Premises
<PAGE>
[FLOOR PLAN]
[GRAPHIC OMITTED]
<PAGE>
Exhibit B
Replacement for Article 17 of the Overlease
as incorporated herein
Default: 17.(1) If Subtenant defaults in fulfilling any of the covenants of this
lease including the covenants for the payment of rent or additional rent; or if
the demised premises become vacant or deserted; or if the demised premises are
damaged by reason of negligence or intentional misconduct of Subtenant or any of
its shareholders, officers, directors, employees, partners, agents, contractors,
subcontractors, guests, invitees or visitors; or if any execution or attachment
shall be issued against Subtenant or any of Subtenant's property whereupon the
demised premises shall be taken or occupied by someone other than Subtenant; or
if this lease be rejected under Section 365 of Title 11 of the U.S. Code
(Bankruptcy Code); or if Subtenant shall fail to move into or take possession of
the premises within fifteen (15) days after the commencement of the term of this
lease: then, in any one or more of such events, upon Sublandlord serving a
written ten (10) days notice upon Subtenant specifying the nature of said
default and upon the expiration of said ten (10) days, if Subtenant shall have
failed to comply with or remedy such default, or if the said default or omission
complained of shall be of a nature that the same cannot be completely cured or
remedied within said ten (10) day period, and if Subtenant shall not have
diligently commenced curing such default within such ten (10) day period, and
shall not thereafter with reasonable diligence and in good faith proceed to
remedy or cure such default [it being agreed that in the case of any failure to
pay rent or additional rent (i) the aforesaid period shall be five (5) days
rather than ten (10) days, and (ii) such five (5) day period shall not be
subject to extension pursuant to the foregoing provision of Section 17(1)], then
Sublandlord may serve a written three (3) day notice of cancellation of this
lease upon Subtenant, and upon the expiration of said three (3) days, this lease
and the term thereunder shall end and expire as fully and completely as if the
expiration of such three (3) day period were the day herein definitely fixed for
the end and expiration of this lease and the term thereof and Subtenant shall
then quit and surrender the demised premises to Sublandlord but Subtenant shall
remain liable as hereunder provided.
(2) If the notice provided for in (1) hereof shall have been given, and the
term shall expire as aforesaid; or if Subtenant shall make default in the
payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required,
then and in any of such events Sublandlord may without notice, re-enter the
demised premises either by force or otherwise, and dispossess Subtenant by
summary proceedings or otherwise, and the legal representative of Subtenant or
other occupant of demised premises and remove their effects and hold the
premises as if this lease had not been made, and Subtenant hereby waives the
service of notice of intention to re-enter or to institute legal proceedings to
that end.
<PAGE>
Exhibit C
Form of Overlandlord's Consent
CONSENT TO SUBLEASE
By this consent (this "Consent") dated as of July ___, 1996, P.A. BUILDING
COMPANY, a New York partnership, having an office c/o Sylvan Lawrence Company,
Inc., 100 William Street, New York, New York 10038 (the "Landlord"), landlord
under a certain agreement of lease (the "Lease") dated September 14, 1989
between Landlord and GOLDMAN, SACHS & CO., a New York limited partnership (the
"Tenant"), having an address at 85 Broad Street, New York, New York 10004
covering premises (the "Demised Premises") known as Rooms 815-825 located in the
building (the "Building") known as 111 Eighth Avenue, New York, New York, hereby
conditionally consents to the subletting of a portion (the "Space") of the
Demised Premises (substantially as shown on the plan attached hereto as Exhibit
"A") under the agreement of sublease (the "Sublease") dated July 15, 1996
between Tenant and CUNNINGHAM GRAPHICS, INC. (the "Subtenant"), having an
address at 629 Grove Street, Jersey City, New Jersey 07306 for a term expiring
on before December 30, 1999 expressly subject to the following terms and
conditions:
1. Neither the giving of this Consent nor anything contained in the
Sublease shall (a) modify the lease, (b) increase the obligations or diminish
the rights of Landlord under the Lease, (c) diminish the obligations or increase
the rights of Tenant under the Lease, (d) in any way be construed as giving
Subtenant any greater rights under the Sublease than Tenant way be construed as
giving Subtenant any greater rights under the Sublease than Tenant would be
entitled to under the Lease, or (e) bind Landlord to any of the terms or
conditions of the Sublease, it being the express intention of Landlord by
executing this Consent to approve only the named Subtenant and the initial term
of the Sublease. Tenant and Subtenant agree that the demised Premises and/or the
Space shall not be used for any purpose which is not specifically permitted
under the Lease. Anything contained in the Sublease which is inconsistent with
the terms and conditions of the Lease or this Content shall be deemed of no
force or effect, and the terms and conditions of the Lease and this Consent
shall prevail.
2. Except as provided in Section 8 below, the giving of this Consent shall
not serve to waive, and is given subject to, the requirement of obtaining
Landlord's consent, which Landlord's consent Landlord may withhold in each
instance in Landlord's sole discretion and judgment (expect as otherwise
specifically provided for in the Lease), to (a) any further subletting of all or
a portion of either the Demised Premises or the Space, or (b) any assignment of
the Lease, or (c) any renewal, extension, or assignment of the Sublease, or (d)
any sub-letting of all or a portion of either the Demised Premises or the Space.
3. The giving of this Consent shall not be deemed or serve to release the
named Tenant under the Lease or any successor-in-interest to the named Tenant
from any liability or obligation which such Tenant or any successor-in-interest
may have.
<PAGE>
4. In the event Landlord collects any basic rent and/or additional rent due
under the Lease directly from Subtenant for any reason whatsoever, Subtenant
shall be deemed to to make such payment of basic rent and/or additional rent
solely as agent of and on behalf of Tenant, and Landlord shall credit any such
sums collected to the account of Tenant, and the collection of such basic rent
and/or additional rent shall not be deemed to be an acceptance of Subtenant as a
tenant under the Lease nor shall it be deemed to release Tenant from any and all
of the terms, covenants and conditions under the Lease.
5. Landlord makes no representations whatsoever nor takes any
responsibility regarding the provisions contained in the Sublease. The giving of
this Consent shall not be (a) construed as granting Subtenant any rights under
the Lease or (b) deemed to be a consent by Landlord to the terms and provisions
of the Sublease. Nothing contained in this Consent shall be deemed to bestow
upon or grant to Subtenant third party beneficiary rights under the Lease. It is
expressly acknowledged, accepted and agreed that (a) this Consent is for the
express purpose of permitting the Sublease pursuant to the terms contained in
this Consent and (b) Subtenant has no privity of contract with nor enforceable
rights against Landlord.
6. The granting of this consent by Landlord is subject to Tenant's being
free from any default under the terms and provisions of the Lease as of the date
of the granting of this Consent and as of the commencement date of the Sublease.
7. It is expressly understood and agreed that submission by Landlord of
this consent for review shall confer no rights nor impose any obligations on any
party unless and until Landlord, Tenant and Subtenant shall have executed this
consent and duplicate originals of this Consent shall have been delivered to the
respective parties to this Consent.
8. The Sublease contains an option, on the part of Tenant as sublandlord
thereunder, to sublease the balance of the Demised Premises to Subtenant; such
option is exercisable at any time during the term of the Sublease. No further
consent shall be required upon the exercise of said option, and this Consent
shall be fully applicable thereto. Upon the exercise of said option, the term
"Space" as used herein shall mean the entire Demised Premises.
2
<PAGE>
P.A. BUILDING COMPANY (Landlord)
By: Sylvan Lawrence Company, Inc., Agent
By:
-------------------------------------------
Title
ACKNOWLEDGED, ACCEPTED AND AGREED TO:
GOLDMAN, SACHS & CO. (Tenant)
BY:
-----------------------------------------
Title
CUNNINGHAM GRAPHICS, INC. (Subtenant)
BY: /s/ ILLEGIBLE Pres
-----------------------------------------
Title
3
<PAGE>
ACKNOWLEDGEMENTS
PARTNERSHIP TENANT
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On this _____ day of __________, 1996 before me personally came ___________
_______________________________________________, to me known, who, being duly
sworn, did depose and say that he/she is a member of the partnership GOLDMAN,
SACHS & CO., the partnership described in and which executed the above
instrument; that he/she executed said instrument on behalf of said partnership,
and that he/she had authority to so execute said instrument as the act and deed
of said partnership.
-------------------------------------
CORPORATION (WITH CORPORATE SEAL)
STATE OF NEW JERSEY )
)ss:
COUNTY OF HUDSON )
On this 17 day of July , 1996 before me personally came ____________
_____________________________________________, to me known, who, being duly
sworn, did depose and say that he/she resides at ____________________________;
that he/she is the _________________________ of CUNNINGHAM GRAPHICS, INC., the
corporation described in and which executed the above instrument; that he/she
executed said instrument on behalf of said corporation; that the seal affixed to
said instrument is such corporate seal; that said seal was so affixed by order
of the Board of Directors of said corporation, and he/she signed his/her name to
said instrument by order of the Board of Directors of said corporation.
/s/ ILLEGIBLE
-------------------------------------
/s/ Carmen A. Ocello
CARMEN A. OCELLO
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires May 16, 1998
4
<PAGE>
Exhibit D
The Overlease
5
<PAGE>
================================================================================
Modified FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
================================================================================
Agreement of Lease, made as of this 14 day of September 1989, between
P.A. BUILDING COMPANY, a New York partnership, having an office c/o Sylvan
Lawrence Company, Inc., 100 Williams Street, New York, New York 10038 party
of the first part, hereinafter referred to as LANDLORD, and
GOLDMAN SACHS & CO., a NEW YORK LIMITED PARTNERSHIP, HAVING AN OFFICE AT 85
BROAD STREET, NEW YORK, NEW YORK 10004
party of the second part, hereinafter referred to as TENANT
Witnesseth: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord
Rooms 815-825
(Substantially as indicated on the Plan attached as Exhibit "A") in the
building known as 111 8th Avenue (sometimes hereinafter called the "Building")
in the Borough of Manhattan, City of New York, for the terms of ten (10) years,
Four (4) Months (or until such term shall sooner cease and expire as hereinafter
provided) to commence on the
1st day of September nineteen hundred and eighty-nine, and to end on the
31st day of December nineteen hundred and ninety-nine
both dates inclusive, at an annual rental rate of TWO HUNDRED FIFTY EIGHT
THOUSAND FIVE HUNDRED FORTY DOLLARS ($258,540) PER ANNUM FROM 9/1/89 TO AND
INCLUDING 8/31/94; TWO HUNDRED EIGHTY THOUSAND AND EIGHTY FIVE DOLLARS
($280,085) PER ANNUM FROM 9/1/94 TO AND INCLUDING 12/31/99
which Tenant agrees to pay in lawful money of the United States which shall be
legal tender in payment of all debts and dues public and private, at the time of
payment, in equal monthly installments in advance on the first day of each month
during said term, at the office of Landlord or such other place as Landlord may
designate, without any set off or deduction whatsoever except that Tenant shall
pay the first monthly installment(s) on the execution hereof (unless this lease
be a renewal).
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successor and assigns, hereby covenant
as follows:
1. RENT
Tenant shall pay the rent as above and as hereinafter provided.
2. OCCUPANCY
Tenant shall use and occupy demised premises in connection with Tenant's
financial services business for general offices and printing and for no other
purpose.
3. ALTERATIONS:
Tenant shall make no changes in or to the demised premises of any nature
without Landlord's prior written consent. Subject to the prior written consent
of Landlord (REF 1) and to the provisions of this article, Tenant at Tenant's
expense may make alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines (REF 1A) in or to the interior of the demised premises by using
contractors or mechanics first (REF 1B) approved by Landlord. All fixtures and
all paneling partitions, railings and like installations, installed in the
premises at any time either by Tenant or by Landlord in Tenant's behalf (REF 2)
shall, upon installation, become the property of Landlord and shall remain upon
and be surrendered with the demised premises unless Landlord, by notice to
Tenant no later than (REF 3) days prior to the date fixed as the termination of
this lease, elects to relinquish Landlord's right thereto and to have them
removed by Tenant, in which event, the same shall be removed from the premises
by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in
this article shall be construed to give Landlord title to or to prevent Tenant's
removal of trade fixtures, moveable office furniture and equipment, but upon
removal of any such from the premises or upon removal of other installations as
may be required by Landlord. Tenant shall immediately and at its expense, repair
and restore the premises to the condition existing prior to installation and
repair any damage to the demised premises or the building due to such removal.
All property permitted or required to be removed by Tenant at the end of the
term remaining in the premises after Tenant's removal shall be deemed abandoned
and may, at the election of Landlord, either be retained as Landlord's property
or may be removed from the premises by Landlord at Tenant's expense. Tenant
shall before making any alterations, additions, installations, or improvements,
at its expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
merchants, approvals and certificates to Landlord; and (REF 3A) (Tenant agrees
to carry and will cause Tenant's contractors and sub-contractors to carry such
workman's compensation, several liability personal and property damage
insurance, as Landlord may (REF 4) require. (REF 5)
4. REPAIRS:
Landlord shall maintain and repair the public portions of the building,
both exterior and interior. (REF 1) Tenant shall, throughout the term of this
lease, take good care of the demised premises and the fixtures and appurtenances
therein and at Tenant's sole cost and expense, make all non-structural repairs
thereto as and when needed to preserve them in good working order and condition,
reasonable wear and tear, obsolesence and damage from the elements, fire or
other casualty, excepted. Notwithstanding the foregoing, all damage or injury to
the demised premises or to any other part of the building, or to the structures,
equipment and appurtenances, whether requiring structural or non-structural
repairs, caused by or resulting from carelessness, omission, neglect or improper
conduct of Tenant. Tenant's servants, employees, invitees or licensees, shall be
repaired promptly by Tenant at its sole cost and expense, to the satisfaction of
Landlord reasonably exercised. Tenant shall also repair all damage to the
building and the demised premises caused by the moving of Tenant's fixtures,
furniture or equipment. All the aforesaid repairs shall be of quality or class
equal to the original work or construction. If Tenant fails after (REF 2) to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by the Landlord at the expense of Tenant and the (REF 3)
expenses thereof incurred by Landlord shall be collectible as additional rent
after rendition of bill or statement therefor. If the demised premises be or
become infested with vermin, Tenant shall at Tenant's expense, cause the same to
be exterminated from time to time to the satisfaction of Landlord. Tenant shall
give Landlord prompt notice of any defective condition in an plumbing, heating
system or electrical lines located in, servicing or passing through the demised
premises and following such notice, Landlord shall remedy the condition with due
diligence but at the expense of Tenant if repairs are necessitated by damage or
injury attributed to Tenant, Tenant's servants, agents, employees, invitees or
licensees as aforesaid. Except as specifically provided in Article 9 or
elsewhere in this lease, there shall be no allowance to the Tenant for a
declaration of rental value and no liability on the part of Landlord by reason
of inconvenience, annoyance or injury to business arising from Landlord, Tenant
or other making or failing to make any repairs, alterations, additions or
improvements in or to any portion of the building or the demised premises or in
and to the fixtures, appurtenances or equipment thereof. The provision of this
Article 4 with respect to the making of repairs shall not apply in the case of
fire or other casualty which are dealt with in Article 9 hereto.
5. WINDOW CLEANING:
Tenant will not clean nor require any windows in the demised premises to be
cleaned from the outside in violation of Section 202 of the New York State Labor
Law or any other applicable law or of the Rules of the Board of Standards and
Appeals, or of any other Board or body having or asserting jurisdiction.
6. REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS:
Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations, all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to it
PLEASE INITIAL
/s/ ILLEGIBLE
<PAGE>
and all orders, rules and regulations of the New York Board of Fire Underwriters
or any similar body which shall impose any violation, order or duty upon
Landlord or Tenant with respect to the demised premises whether or not arising
out of Tenant's use or manner of use thereof, or with respect to the building if
arising out of Tenant's use or manner of use of the premises or the building
(including the use permitted under the lease). Nothing herein shall require
Tenant to make structural repairs or alterations unless Tenant has by its manner
of use of the demised premises or method of operation therein, violated any such
laws, ordinances, orders, rules, regulations or requirements with respect
thereto. Tenant may, after securing Landlord to Landlord's satisfaction against
all damages, interest, penalties and expenses, including, but not limited to,
reasonable attorneys' fees, by cash deposit or by surety bond in an amount and
in a company satisfactory to Landlord, contest and appeal any such laws,
ordinances, orders, rules, regulations or requirements provided same is done
with all reasonable promptness and provided such appeal shall not subject
Landlord to prosecution for a criminal offense or constitute a default under any
lease or mortgage under which Landlord may be obligated, or cause the demised
premises or any part thereof to be condemned or vacated. Tenant shall not do or
permit any act or thing to be done in or to the demised premises which is
contrary to law, or which will invalidate or be in conflict with public
liability, fire or other policies of insurance at any time carried by or for the
benefit of Landlord with respect to the demised premises or the building of
which the demised premises form a part, or which shall or might subject Landlord
to any liability or responsibility to any person or for property damage, nor
shall Tenant keep anything in the demised premises except as now or hereafter
permitted by the Fire Department Board of Fire Underwriters, Fire Insurance
Rating Organization or other authority having jurisdiction, and then only in
such manner and such quantity so as to not increase the rate for fire insurance
applicable to the building, nor use the premises in a manner which will increase
the insurance rate for the building or any property located therein over that
(REF 1) in effect. Tenant shall pay all costs, expenses, fines, penalties or
damages, which may be imposed upon Landlord by reason of Tenant's failure to
comply with the provisions of this article and if by reason of such failure the
fire insurance rate shall, at the beginning of this lease or at any time
thereafter, be higher than it otherwise would be, then Tenant shall reimburse
Landlord as additional rent hereunder, for that portion of all fire insurance
premiums thereafter paid by Landlord which shall have been charged because of
such failure by Tenant, and shall make such reimbursement upon the first day of
the month following such outlay by Landlord. In any action or proceeding wherein
Landlord and Tenant are parties a schedule or "make-up" of rate for the building
or demised premises issued by the New York Fire Insurance Exchange, or other
body making fire insurance rates applicable to said premises shall be conclusive
evidence of the facts therein stated and of the several items and charges in the
fire insurance rate then applicable to said premises. (REF 2) Tenant shall not
place a load upon any floor of the demised premises exceeding the floor load per
square foot area which it was designed to carry and which is allowed by law.
Landlord reserves the right to prescribe the weight and position of all safes.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Landlord's judgment, to absorb and prevent
vibration, noise and annoyance.
7. SUBORDINATION:
This lease is subject and subordinate to all ground or underlying leases
and all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument of subordination shall be required by any ground or
underlying leasee or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall execute promptly any certificate that Landlord may request. (REF 1)
8. PROPERTY - LOSS, DAMAGE, REIMBURSEMENT, INDEMNITY:
Landlord or its agents shall not be liable for any damage to property of
Tenant or of others entrusted to employees of the building, nor for loss of or
damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Landlord, its agents, servants or
employees; nor shall Landlord or its agents be liable for any such damage caused
by other tenants or persons in, upon or about said building or caused by
operations in construction of any private, public or quasi public work. If at
any time any windows of the demised premises are temporarily closed, darkened or
bricked up (or permanently closed, darkened or bricked up, if required by law)
for any reason whatsoever including, but not limited to Landlord's own acts,
Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor nor abatement or
diminution of rent nor shall the same release Tenant from its obligations
hereunder nor constitute an eviction. Tenant shall not move any safe, heavy
machinery, heavy equipment, bulky matter, or fixtures into or out of the
building without Landlord's prior written consent (REF 1) if such safe,
machinery, equipment, bulky matter or fixtures requires special handling, all
work in connection therewith shall comply with the Administration Code of the
City of New York and all other laws and regulations applicable thereto and shall
be done during such hours as Landlord may designate. Tenant shall indemnify and
save harmless Landlord against and from all liabilities, obligations, damages,
penalties, claims, costs and expenses for which Landlord shall not be reimbursed
by insurance, including reasonable attorneys fees, paid, suffered or incurred as
a result of any breach by Tenant, Tenant's agents, contractors, employees,
invitees, or licensees, of any covenant or condition of this lease, or the
carelessness, negligence or improper conduct of the Tenant, Tenant's agents,
contractors, employees, invitees or licensees. Tenant's liability under this
lease extends to the acts and omissions of any subtenant, and any agent,
contractor, employee, invitee or licensee of any sub-tenant. In case any action
or proceeding is brought against Landlord by reason of any such claim, Tenant,
upon written notice from Landlord, will, at Tenant's expense, resist or defend
such action or proceeding by counsel approved by Landlord in writing, such
approval not to be unreasonably withheld.
9. DESTRUCTION, FIRE AND OTHER CASUALTY:
(a) If the demised premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give immediate notice thereof to Landlord and this
lease shall continue in full force and effect except as hereinafter set forth.
(b) If the demised premises are partially damaged or rendered partially unusable
by fire or other casualty, the damages thereto shall be repaired by and at the
expense of Landlord and the rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent shall be proportionately paid up to the time of the casualty and
thenceforth shall cease until the date when the premises shall have been
repaired and restored by Landlord, subject to Landlord's right to elect not to
restore the same as hereinafter provided. (d) (whether or not the demised
premises are damaged in whole or in part) if the building shall be so damaged
that Landlord shall decide to demolish it or to rebuild it, then, in any of such
events, Landlord may elect to terminate this lease by written notice to Tenant
given within 90 days after such fire or casualty specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however to Landlord's
rights and remedies against Tenant under the lease provisions in effect prior to
such termination, and any rent owing shall be paid up to such date and any
payments of rent made by Tenant which were on account of any period subsequent
to such date shall be returned to Tenant. Unless Landlord shall serve a
termination notice as provided for herein, Landlord shall make the repairs and
restorations under the conditions of (b) and (c) hereof, with all reasonable
expedition subject to delays due to adjustment of insurance claims, labor
troubles and causes beyond Landlord's control. After any such casualty, Tenant
shall cooperate with Landlord's restoration by removing from the premises as
promptly as reasonably possible, all of Tenant's salvageable inventory and
movable equipment, furniture, and other property. (REF 1) Tenant's liability for
rent shall resume five (5) days after written notice from Landlord that the
premises are substantially ready for Tenant's occupancy. (e) Nothing contained
hereinabove shall relieve Tenant from liability that may exist as a result of
damage from fire or other casualty. Notwithstanding the foregoing, each party
shall look first to any insurance in its favor before making any claim against
the other party for recovery for loss or damage resulting from fire or other
casualty, and to the extent that such insurance is in force and collectible and
to the extent permitted by law, Landlord and Tenant each hereby releases and
waives all right of recovery against the other or any one claiming through or
under each of them by way of subrogation or otherwise. The foregoing release and
waiver shall be in force only if both releasors' insurance policies contain a
clause providing that such a release or waiver shall not invalidate the
insurance, and also, provided that such a policy can be obtained without
additional premiums. Tenant acknowledges that Landlord will not carry insurance
on Tenant's furniture and/or furnishing or any fixtures or equipment,
improvements, or appurtenances removable by Tenant and agrees that Landlord will
not be obligated to repair any damage thereto or replace the same. (f) Tenant
hereby waives the provisions of Section 227 of the Real Property Law and agrees
that the provisions of this article shall govern and control in lieu thereof.
10. EMINENT DOMAIN:
If the whole or any part of the demised premise shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease.
11. ASSIGNMENT, MORTGAGE, ETC.:
Tenant, for itself, its heirs, distributees, executors, administrators,
legal representatives, successors and assigns, expressly covenants that it shall
not assign, mortgage, or encumber this agreement, nor underlet, or suffer or
permit the demised premises or any part thereof to be used by others, without
the prior written consent of Landlord in each instance. (REF 1) If this lease be
assigned or if the demised premises or any part thereof be underlet or occupied
by anybody other than Tenant, Landlord may, after default by Tenant, collect
rent from the assignee, under-tenant or occupant, and apply the net amount
collected to the rent herein reserved, but no such assignment, underletting
occupancy or collection shall be deemed a waiver of this covenant, or the
acceptance of the assignee, under-tenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of covenants on the part of Tenant
herein contained. The consent by Landlord to an assignment or underletting shall
not in any wise be construed to relieve Tenant from obtaining the express
consent in writing of Landlord to any further assignment or underletting.
12. ELECTRIC CURRENT+:
Rates and conditions in respect to submetering or rent inclusion, as the
case may be, to be added in RIDER attached hereto. Tenant covenants and agrees
that at any times its use of electric current shall not exceed the capacity of
existing feeders to the building or the risers or wiring installation and Tenant
may not use any electrical equipment which, in Landlord's opinion, reasonably
exercised, will overload such installations or interfere with the use thereof by
other tenants of the building. The change at any time of the character of
electric service shall in no wise make Landlord liable or responsible to Tenant,
for any loss, damages or expenses which Tenant may sustain.
13. ACCESS TO PREMISES:
Landlord or Landlord's agents shall have the right (but shall not be
obligated) to enter the demised premises in any emergency at any time, and, at
other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Landlord may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Landlord may elect to perform following Tenant's failure to make repairs
or perform any work which Tenant is obligated to perform under the lease, or for
the purpose of complying with laws, regulations and other directions of
governmental authorities. Tenant shall permit Landlord use and maintain and
replace pipes and conduits in and through the demised premises and to erect new
pipes and conduits therein. Landlord may, during the progress of any work in the
demised premises, take any necessary materials and equipment into said premises
without the same constituting an eviction nor shall the Tenant be entitled to
any abate-
- -----------------
+ Rider to be added if necessary.
PLEASE INITIAL
/s/ ILLEGIBLE
<PAGE>
ment of rent while such work is in progress nor to any damages by reason of loss
or interruption of business or otherwise. Throughout the terms hereof Landlord
shall have the right to enter the demised premises at reasonable hours for the
purpose of showing the same to prospective purchasers or mortgagees of the
building and during the last six months of the term for the purpose of showing
the same to prospective tenants and may during said six months period, place
upon the premises the usual notices "To Let" and "For Sale" which notices Tenant
shall permit to remain thereon without molestation. If Tenant is not present to
open and permit an entry into the premises, Landlord or Landlord's agents may
enter the same whenever such entry may be necessary or permissible by master key
or forcibly and provided reasonable care is exercised to safeguard Tenant's
property and such entry shall not render Landlord or its agents liable therefor,
nor in any event shall the obligations of Tenant hereunder be affected. If
during the last month of the term Tenant shall have removed all or substantially
all of Tenant's property therefrom, Landlord may immediately enter, alter,
renovate or redecorate the demised premises without limitation or abatement of
rent, or incurring liability to Tenant for any compensation and such act shall
have no effect on this lease or Tenant's obligations hereunder. Landlord shall
have the right at any time, without the same constituting an eviction and
without incurring liability to Tenant therefor to change the arrangement and/or
location of public entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets, or other public parts of the building and to change
the name, number or designation by which the building may be known. (REF 1)
14. VAULT, VAULT SPACE, AREA:
No Vaults, vault space or area, whether or not enclosed or covered, not
within the property line of the building is leased hereunder, anything contained
in or indicated on any sketch, blue print or plan, or anything contained
elsewhere in this lease to the contrary notwithstanding Landlord makes no
representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used and
or occupied under a revocable license, and if any such license be revoked, or if
the amount of such space or area be diminished or required by any federal, state
or municipal authority or public utility, Landlord shall not be subject to any
liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant.
15. OCCUPANCY:
Tenant will not at any time use or occupy the demised premises in violation
of the certificate of occupancy issued for the building of which the demised
premises are a part. Tenant has inspected the premises and accepts them as is,
subject to the riders annexed hereto with respect to Landlord's work, if any. In
any event, Landlord makes no representation as to the condition of the premises
and Tenant agrees to accept the same subject to violations whether or not of
record.
16. BANKRUPTCY:
(a) If at the date fixed as the commencement of the term of this lease or
if at any time during the term hereby demised there shall be filed by or against
Tenant in any court pursuant to any statute either of the United States or of
any state, a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within 60 days thereof, Tenant fails to secure a dismissal
thereof, or if Tenant makes an assignment for the benefit of creditors or
petition for or enter into an arrangement, this lease, at the option of
Landlord, exercised within a reasonable time after notice of the happening of
any one or more of such events, may be cancelled and terminated by written
notice to the Tenant (but if any of such events occur prior to the commencement
date, this lease shall be ipso facto cancelled and terminated) and whether such
cancellation and termination occur prior to or during the term, neither Tenant
nor any person claiming through or under Tenant by virtue of any statute or of
any order of any court, shall be entitled to possession or to remain in
possession of the premises demised but shall forthwith quit and surrender the
premises, and Landlord, in addition to the other rights and remedies Landlord
has by virtue of any other provision herein or elsewhere in this lease contained
or by virtue of any statute or rule of law, may retain as liquidated damages,
any rent, security deposit or moneys received by him from Tenant or others in
behalf of Tenant. If this lease shall be assigned in accordance with its terms,
the provisions of this Article 16 shall be applicable only to the party then
owning Tenant's interest in this lease.
(b) It is stipulated and agreed that in the event of the termination of
this lease pursuant to (a) hereof, Landlord shall forthwith, notwithstanding any
other provisions of this lease to the contrary, be entitled to recover from
Tenant as and for liquidated damages an amount equal to the difference between
the rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any instalment
of rent becoming due hereunder after the date of termination and the fair and
reasonable rental value of the demised premises for the period for which such
instalment was payable shall be discounted to the date of termination at the
rate of four per cent (4%) per annum. If such premises or any part thereof be
re-let by the Landlord for the unexpired term of said lease, or any part
thereof, before presentation of proof of such liquidated damages to any court,
commission or tribunal, the amount of rent reserved upon such re-letting shall
be deemed to be the fair and reasonable rental value for the part or the whole
of the premises so re-let during the term of the re-letting. Nothing herein
contained shall limit or prejudice the right of the Landlord to prove for and
obtain as liquidated damages by reason of such termination, an amount equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved, whether
or not such amount be greater, equal to, or less than the amount of the
difference referred to above.
17. DEFAULT:
(1) If Tenant defaults in fulfilling any of the covenants of this lease,
including the covenants for the payment of rent or additional rent, or if any
execution or attachment shall be issued against Tenant or any of Tenant's
property whereupon the demised premises shall be taken or occupied by someone
other than Tenant or if Tenant shall make default with respect to any other
lease between Landlord and Tenant, then, in any one or more of such events, upon
Landlord serving a written (REF 1) days notice upon Tenant specifying the nature
of said default and upon the expiration of said (REF 1) days, if Tenant shall
have failed to comply with or remedy such a default, or if the said default or
omission complained of shall be of nature that the same cannot be completely
cured or remedied with said (REF 1) day period, and if Tenant shall not have
diligently commenced curing such default within such day period, and has not
thereafter with reasonable diligence and in good faith proceed to remedy or cure
such default, then Landlord may serve a written three (3) days notice of
cancellation of this lease upon Tenant, and upon the expiration of said three
(3) days, this lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such three (3) day period were the day herein
definitely fixed for the end and expiration of this lease and the term thereof
and Tenant shall then quit and surrender the demised premises to Landlord but
Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been given and the
term shall expire as aforesaid: Landlord may, without notice, re-enter the
demised premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant or demised premises and remove their effects and hold the premises if
this lease had not been made, and Tenant hereby waives the service of notice of
intention to re-enter or to institute legal proceedings to that end. If Tenant
shall make default hereunder prior to the date fixed as the commencement of any
renewal or extension of this lease, Landlord may cancel and terminate such
renewal or extension agreement by written notice. (REF 2)
18. REMEDIES OF LANDLORD AND WAIVER OF REDEMPTION:
In case of any such default, re-entry, expiration and/or dispossess by
summary proceedings or otherwise, (a) the rent shall become due thereupon and be
paid up to the time of such re-entry, dispossess and/or expiration, together
with such expenses as Landlord may incur for legal expenses, attorneys' fees,
brokerage, and/or putting the demised premises in good order, or for preparing
the same for re-rental; (b) Landlord may re-let the premises or any part or
parts thereof, either in the name of Landlord or otherwise, for a term or terms,
which may at Landlord's option be less than or exceed the period which would
otherwise have constituted the balance of the term of this lease and may grant
concessions or free rent or charge a higher rental than that in this lease,
and/or (c) Tenant or the legal representatives of Tenant shall also pay Landlord
as liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between the rent hereby
reserved and/or covenanted to be paid and the net amount, if any of the rents
collected on account of the lease or leases of the demised premises for each
month of the period which would otherwise have constituted the balance of the
term of this lease. The failure of Landlord to re-let the premises or any part
or parts thereof shall not release or affect Tenant's liability for damages. In
computing such liquidated damages there shall be added to the said deficiency
such expenses as Landlord may incur in connection with re-letting, such as legal
expenses, attorneys' fees, brokerage, advertising and for keeping the demised
premises in good order or for preparing the same for re-letting. Any such
liquidated damages shall be paid in monthly installments by Tenant on the rent
day specified in this lease and any suit brought to collect the amount of the
deficiency for any month shall not prejudice in any way the rights of Landlord
to collect the deficiency for any subsequent month by a similar proceeding.
Landlord, in putting the demised premises in good order or preparing the same
for re-rental may, at Landlord's option, make such alterations, repairs,
replacements, and/or decorations of the demised premises as Landlord, in
Landlord's sole judgment, considers advisable and necessary for the purpose of
re-letting the demised premises, or the making of such alterations, repairs,
replacements, and/or decorations, shall not operate or be construed to release
Tenant from liability hereunder, aforesaid Landlord shall in no event be liable
in any way whatsoever for failure to re-let the demised premises, or in the
event that the demised premises are re-let, for failure to collect the rent
thereof under such re-letting, and in no event shall Tenant be entitled to
receive any excess, if any, of such net rents collected over the sums payable by
Tenant to Landlord hereunder. In the event of a breach or threatened breach the
Tenant of any of the covenants or provisions hereof, Landlord shall have the
right of injunction and the right to invoke any remedy allowed at labor or in
equity as if re-entry, summary proceedings and other remedies were not herein
provided for. Mention in this lease of any particular remedy shall not preclude
Landlord from any other remedy, in law or in equity. Tenant hereby expressly
waives any and all rights of redemption granted by or under any present or
future laws in the event of Tenant being evicted or dispossessed for any cause,
or in the event of Landlord obtaining possession of demised premises, by reason
of the violation by Tenant of any of the covenants and conditions of this lease,
or otherwise.
19. FEES AND EXPENSES:
If tenant shall default in the observance or performance of any term or
covenant on tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, then, unless otherwise
provided elsewhere in this lease, landlord may immediately or at any time
thereafter and without notice perform the obligation of tenant thereunder, and
if landlord, in connection therewith or in connection with any default by tenant
in the covenant to pay rent hereunder, makes any expenditures or incurs any
obligations for the payment of money, including but not limited to attorneys'
fees, in instituting, prosecuting or defending any action or proceeding, such
sums so paid or obligations incurred with interest and costs shall be deemed to
be additional rent hereunder and shall be paid by tenant to landlord within five
(5) days of rendition of any bill or statement to tenant therefor, and tenant's
lease term shall have expired at the time of making of such expenditures or
incurring of such obligations, such sums shall be recoverable to landlord as
damages.
20. NO REPRESENTATIONS BY LANDLORD:
Neither Landlord nor Landlord's agents have made any representations or
promises with respect to the physical condition of the building, the land upon
which is erected or the demised premises, the rents, leases, ex-
PLEASE INITIAL
/s/ ILLEGIBLE
<PAGE>
penses of operation or any other matter or thing affecting or related to the
premises except as herein expressly set forth and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the provisions of this lease. Tenant has inspected the building and
the demised premises and is thoroughly acquainted with their condition, and
agrees to take the same "as is" and acknowledges that the taking of possession
of the demised premises by Tenant shall be conclusive evidence that the said
premises and the building of which the same form a part were in good and
satisfactory condition at the time such possession was so taken, except as to
latent defects. (REF 1) All understandings and agreements heretofore made
between the parties hereto are merged in this contract, which alone fully and
completely expresses the agreement between Landlord and Tenant and any executory
agreement hereafter made shall be ineffective to change, modify, discharge or
effect an abandonment of it in whole or in part, unless such executory agreement
is in writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
21. END OF TERM:
Upon the expiration or other termination of the term of this lease, Tenant
shall quit and surrender to Landlord the demised premises, broom clean, in good
order and condition, ordinary wear excepted, and Tenant shall remove all its
property. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of this lease. If the last day of the term
of this lease or any renewal thereof, falls on Sunday, this lease shall expire
at noon on the preceding Saturday unless it be a legal holiday in which case it
shall expire noon on the preceding business day.
22. QUIET ENJOYMENT:
Landlord covenants and agrees with Tenant that upon Tenant paying the rent
and additional rent and observing and performing all the terms, covenants and
conditions, on Tenant's part to be observed and performed, Tenant may peaceably
and quietly enjoy the premises hereby demised, subject, nevertheless, to the
terms and conditions of this lease including, but not limited to, Article 33
hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
23. FAILURE TO GIVE POSSESSION:
If Landlord is unable to give possession of the demised premises on the
date of the commencement of the term hereof, because of the holding-over or
retention of the possession of any tenant, undertenant or occupants, or if the
premises are located in a building being constructed, because such building has
not been sufficiently completed to make the premises ready for occupancy or
because of the fact that a certificate of occupancy has not been procured or for
any other reason, Landlord shall not be subject to any liability for failure to
give possession on said date and the validity of the lease shall not be impaired
under such circumstances, nor shall the same be construed in any wise to extend
the term of this lease, but the rent payable hereunder shall be abated (provided
Tenant is not responsible for the inability to obtain possession) until after
Landlord shall have given Tenant written notice that the premises are
substantially ready for Tenant's occupancy. If permission is given to Tenant to
enter into the possession of the demised premises or to occupy premises other
than the demised premises prior to the date specified as the commencement of the
term of this lease, Tenant covenants and agrees that such occupancy shall be
deemed to be under all the terms, covenants, conditions and provisions of this
lease, except as to the covenant to pay rent. The provisions of this article are
intended to constitute "an express provision to the contrary" within the meaning
of Section 223-a of the New York Real Property Law.
24. NO WAIVER:
The failure of Landlord to seek redress for violation of, or to insist upon
the strict performance of any covenant or condition of this lease or of any of
the Rules or Regulations set forth or hereafter adopted by Landlord, shall not
prevent a subsequent act which would have originally constituted a violation
from having all the force and effect of an original violation. The receipt by
Landlord of rent with knowledge of the breach of any covenant of this lease
shall not be deemed a waiver of such breach and no provision of this lease shall
be deemed to have been waived by Landlord unless such waiver be in writing
signed by Landlord. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly rent herein stipulated shall be deemed to be other than
on account of the earliest stipulated rent, nor shall any endorsement or
statement of any check or any letter accompanying any check or payment as rent
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy in this lease provided. No act or thing done by
Landlord or Landlord's agents during the term hereby demised shall be deemed an
acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Landlord. No employee of
Landlord or Landlord's agent shall have any power to accept the keys of said
premises prior to the termination of the lease and the delivery of keys to any
such agent or employee shall not operate as a termination of the lease or a
surrender of the premises.
25. WAIVER OF TRIAL BY JURY:
It is mutually agreed by and between Landlord and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding, or counterclaim brought by either of the parties hereto
against the other (except for personal injury or property damage) on any matters
whatsoever arising out of or in any way connected with this lease, the
relationship of Landlord and Tenant, Tenant's use of or occupancy of said
premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Landlord commences any summary
proceeding for possession of the premises, Tenant will not interpose any
counterclaim of whatever nature or description in any such proceeding.
26. INABILITY TO PERFORM:
This lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of Tenant to be
performed shall in no wise be affected, impaired or excused because Landlord is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of strike
or labor troubles or any cause whatsoever including, but not limited to,
government preemption in connection with a National Emergency or by reason of
any rule, order or regulation of any department or subdivision thereof of any
government agency or by reason of the conditions of supply and demand which have
been or are affected by war or other emergency.
27. BILLS AND NOTICES:
Except as otherwise in this lease provided, a bill, statement, notice or
communication which Landlord may desire or be required to give to Tenant, shall
be deemed sufficiently given or rendered if, in writing. (REF 1) Any notice by
Tenant to Landlord must be served by registered or certified mail addressed to
Landlord at the address first hereinabove given or at such other address as
Landlord shall designate by written notice.
29. SPRINKLERS:
Anything elsewhere in this lease to the contrary notwithstanding, if the
New York Board of Fire Underwriters or the New York Fire Insurance Exchange or
any bureau, department or official of the federal, state or city government
require or recommend the installation of a sprinkler system or that any changes,
modifications, alterations, or additional sprinkler heads or other equipment be
made or supplied in an existing sprinkler system by reason of Tenant's business,
or the location of partitions, trade fixtures, or other contents of the demised
premises, Tenant shall, at Tenant's expense promptly make such sprinkler system
installations, changes, modification, alterations, and supply additional
sprinkler heads or other equipment as required whether the work involved shall
be structural or non-structural in nature. Tenant shall pay to Landlord as
additional rent the (++) sum of $200.00 on the first day of each month during
the term of this lease, as Tenant's portion of the contract price for sprinkler
supervisory services.
30. ELEVATORS, HEAT, CLEANING:
As long as Tenant is not in default under any of the covenants of this
lease Landlord shall: (a) provide necessary elevator facilities on business days
*from 8 a.m. to 6 p.m. (b) furnish heat to the demised premises, where and as
required by law, on business days *from 8 a.m. to 6 p.m.** (c) at Landlord's
expense cause to be kept clean the public halls and public portions of the
building, which are used in common by all tenants; (REF 1A) Tenant shall at
Tenant's expense, keep the demised premises clean and in order, to the
satisfaction of Landlord, and for that purpose shall employ the person or
persons, or corporation approved by Landlord. Tenant shall pay to Landlord the
cost of removal of any of Tenant's refuse and rubbish from the building. Bills
for the same shall be rendered by Landlord to Tenant at such time as Landlord
may elect and shall be due and payable when rendered, and the amount of such
bills shall be deemed to be, and be paid as, additional rent. Tenant shall,
however, have the option of independently contracting for the removal of such
rubbish and refuse in the event that Tenant does not wish to have same done by
employees of Landlord. Under such circumstances, however, the removal of such
refuse and rubbish by others shall be subject to such rules and regulations as,
in the judgment of Landlord, are necessary for the proper operation of the
building. Landlord reserves the right to stop service of the heating, elevator,
plumbing and electric systems, when necessary, by reason of accident, or
emergency, or for repairs, alterations, replacements or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations, replacements or improvements shall
- ----------
(++) Space to be filled in or deleted.
* (i.e., Mondays through Fridays, Federal, State, City and Building union
holidays excepted)
** and freight elevator service on business days from 8 a.m. to 7 p.m.
PLEASE INITIAL
/s/ ILLEGIBLE
<PAGE>
have been completed and Landlord shall have no responsibility or liability for
failure to supply heat, elevator, plumbing and electric service, during said
period or when prevented from so doing by strikes, accidents or by any cause
beyond Landlord's control, or by laws, orders or regulations of any Federal,
State or Municipal Authority, or failure of coal, oil or other suitable fuel
supply, or inability by exercise of reasonable diligence to obtain coal, oil or
other suitable fuel. If the building of which the demised premises are a part
supplies manually operated elevator service, Landlord may proceed with
alterations necessary to substitute automatic control elevator service upon ten
(10) days written notice to Tenant without in any way affecting the obligations
of Tenant hereunder, provided that the same shall be done with the minimum
amount of inconvenience to Tenant, and Landlord pursues with due diligence the
completion of the alterations.
If Tenant, requires or uses (REF 1) elevator facilities for more extended
hours or on Saturdays, Sundays or on Federal, State, City and Building union
holidays, Landlord (REF 2) furnish the same at Tenant's expense (REF 3) Landlord
shall have no responsibility or liability for (REF 4) to supply the services
described herein. (REF 5)
32. CAPTIONS:
The Captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this lease nor the intent
of any provision thereof.
33. DEFINITIONS:
The term "Landlord" as used in this lease means only the owner, or the
mortgagee in possession, for the time being of the land and building (or the
owner of a lease of the building or of the land and building) of which the
demised premises form a part, so that in the event of any sale or sales of said
land and building or of said lease, or in the event of a lease of said building,
or of the land and building, the said Landlord shall be and hereby is entirely
freed and relieved of all covenants and obligations of Landlord hereunder, and
it shall be deemed an construed without further agreement between the parties or
their successors in interest, or between the parties and the purchaser, at any
such sale, or the said lease of the building, or of the land and building, that
the purchaser or the leasee of the building, or of the land and building, that
the purchaser or the leasee of the building has assumed and agreed to carry out
any and all covenants and obligations of Landlord hereunder. The words
"re-enter" and "re-entry" as used in this lease are not restricted to their
technical legal meaning. The term "business days" as used in this lease shall
exclude Saturdays (except such portion thereof as is covered by specific hours
in Article 30 hereof), Sundays and all days observed by the State or Federal
Government as legal holidays and those designated as holidays by the applicable
building service union employees service contract or by the applicable Operating
Engineers contract with respect to HVAC service.
34. ADJACENT EXCAVATION SHORING:
If an excavation shall be made upon land adjacent to the demised premises,
or shall be authorized to be made, Tenant shall afford to the person causing or
authorized to cause such excavation, license to enter upon the demised premises
for the purpose of doing, such work as said person shall deem necessary to
preserve the wall or the building of which demised premises form a part from
injury or damage and to support the same by proper foundations without any claim
for damages or indemnity against Landlord, or diminution or abatement of rent.
35. RULES AND REGULATIONS:
Tenant and Tenant's servants, employees, agents, visitors, and licensees
shall observe faithfully, and comply strictly with, the Rules and Regulations
and such other and further reasonable Rules and Regulations as Landlord or
Landlord's agents may from time to time adopt. In case Tenant disputes the
reasonableness of any additional Rule or Regulation hereafter made or adopted by
Landlord or Landlord's agent, the parties hereto agree to submit the question of
the reasonableness of such Rule or Regulation for decision to the New York
office of the American Arbitration Association, whose determination shall be
final and conclusive upon the parties hereto. The right to dispute the
reasonableness of any additional Rule or Regulations upon Tenant's part shall be
deemed waived unless the same shall be asserted by service of a notice, in
writing upon Landlord within ten (10) days after the giving of notice thereof.
Nothing in this lease contained shall be construed to impose upon Landlord any
duty or obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, as against any other tenant and Landlord shall
not be liable to Tenant for violation of the same by any other tenant, its
servants, employees, agents, visitors or licensees. (REF 1)
36. GLASS:
Landlord shall replace, at the expense of Tenant, any and all plate and
other glass damaged or broken from any cause whatsoever in and about the demised
premises. Landlord may insure, and keep insured, at Tenant's expense, all plate
and other glass in the demised premises for and in the name of Landlord. Bills
for the premiums therefor, shall be rendered by Landlord to Tenant at such times
as Landlord may elect, and shall be due from, and payable by, Tenant when
rendered, and the amount thereof shall be deemed to be, and be paid as,
additional rent.
37. SUCCESSORS AND ASSIGNS:
The covenants conditions and agreements contained in this lease shall bind
and inure to the benefit of Landlord and Tenant and their respective heirs,
distributees, executors, administrators, successors, and except as otherwise
provided in this lease, their assigns.
RIDERS CONTAINING ARTICLES "38" THROUGH "77" INCLUSIVE ARE ANNEXED HERETO
AND MADE A PART HEREOF.
In Witness Whereof, Landlord and Tenant have respectively signed and
sealed this lease as of the day and year first above written.
P.A. Building Company
By: Sylvan Lawrence Company, Inc., Agent
Witness for Landlord: ____________________________________
By: /s/ ILLEGIBLE [L.S.]
- -------------------------------- --------------------------------
Title
Witness for Tenant: GOLDMAN SACHS & COMPANY [L.S.]
/s/ Lynn Holly Fodor By: /s/ David A. George
- -------------------------------- --------------------------------
________________________________ FEDERAL I.D. #______________________
Address of Whitness
LYNN HOLLY FODOR
Notary Public, State of New York
No. 43-01FO4876815
Qualified in Richmond County
Certificate Filed in New York County
Commission Expires November 10, 1990
<PAGE>
*equal per annum to the lesser of (i) 105% of Landlord's (REF 1) or (ii) 100% of
Landlord's (REF 1) plus $6,463.50 and sales taxes. (REF 2)
**Landlord's
38. ELECTRICITY
(a) Tenant agrees to purchase from Landlord or from a meter company
designated by Landlord, all electric current consumed, used or to be used in the
demised premises. Tenant shall pay the Landlord for any given bill period for
such electric current at the rate. The amount to be paid by Tenant for current
consumed shall be determined by meter or meters on the premises or installed by
Landlord at ** sole cost and expense and billed according to each meter. Bills
for current consumed by Tenant and for Tenant's proportionate share of common
halls and common lavatories on the floor containing the demised premises which
Tenant hereby agrees to pay, shall be rendered by Landlord, or the meter
company, to Tenant at such time as Landlord may elect, and shall be deemed to
be, and be paid as additional rent within (REF 3) days' rendition of any such
bill. Landlord shall have the right, in the event of any non-payment by the
Tenant of any such bills within said (REF 3) days' period after rendition of any
such bill to discontinue and cut off the use of electric current to Tenant
without further notice, without releasing Tenant from any liability under this
lease, and without Landlord or the said meter company incurring any liability
for any damage caused by such discontinuance of service. Tenant's proportionate
share (REF 4) of the current consumed in the common halls and common lavatories
on the floor containing the demised premises shall be fixed by apportioning the
total current consumed in such halls and lavatories on the floor containing the
demised premises, it being understood that if Tenant occupies the entire floor,
Tenant shall pay for all the current consumed in all the halls and lavatories on
the said floor. Tenant further agrees, on demand by Landlord or the meter
company, (REF 5) to deposit with Landlord or with the meter company designated
by Landlord a cash deposit sufficient in Landlord's reasonable opinion to secure
payment of the electric consumed by Tenant in the demised premises. No current
shall be furnished until the equipment of Tenant has been approved (REF 6)by the
proper public authorities, the New York Board of Fire Underwriters and the New
York Fire Insurance Exchange or similar organization having jurisdiction, and no
changes shall be made in such equipment without the consent of (REF 7) Landlord.
Tenant shall make no changes and/or additions to the electrical equipment,
wiring and/or appliances in the demised premises, without the written consent of
Landlord (REF 7) first had and obtained. Rigid conduit only will be allowed by
Landlord for exposed work. If, in Landlord's sole opinion, Tenant's installation
overloads any riser or risers, and/or switch or switches, in the building of
which the demised premises are a part, Tenant will, at Tenant's sole cost and
expense, promptly provide and install in conformity with law and all applicable
provisions of this lease (including, but not limited to, Articles 3 and 6
hereof) an additional riser or risers, and/or any or all switch or switches,
that may be necessary; but no riser or risers, and/or switch or switches may be
installed without Tenant first obtaining the prior written consent of Landlord.
Any tax now in effect or hereinafter imposed upon Landlord's receipts from the
sale or resale of electrical energy to Tenant by any Municipal, State or Federal
agency shall be passed on to Tenant and included in the bill of and paid by
Tenant to Landlord or meter company designated by Landlord.
In the event that the "submetering" of electric current in the building
containing the demised premises is hereafter prohibited by any law hereinafter
enacted, or by any order or ruling of the Public Service Commission of the State
of New York, or by any judicial decision of any appropriate court, or if for any
other reason Landlord, in its sole and arbitrary decision, elects to terminate
the practice of submetering the (REF 8), Tenant will, at the request of
Landlord, apply within (REF 9) days to the appropriate public service
corporation servicing the building containing the demised premises for electric
service, and comply with all rules and regulations of such Public Service
Corporation pertinent thereto and Landlord and/or the meter company therefore
designated by Landlord shall be relieved of any further obligation to furnish
electric current to Tenant pursuant to this paragraph. (REF 10) The Landlord
may, however, if it so elects, furnish unmetered electric current to Tenant, and
Tenant shall pay therefor (and for electric current consumed in the common halls
and common lavatories all to the extent as hereinbefore provided) to Landlord or
Landlord's designated agent on the first day of the month next following such
furnishing of unmetered current, and monthly thereafter during the term of this
lease, so long as unmetered electric current is furnished to the Tenant, a sum
equal to one-twelfth of the bills paid by the Tenant for electric current
consumed in the demised premises for the twelve month period immediately
preceding the month in which the furnishing of unmetered electric current to the
Tenant is commenced by the Landlord, and/or as estimated from time to time by
the Landlord's utility consultant, as herein provided, and automatically on the
first day of the month following such furnishing of unmetered current, the
annual rent payable by Tenant shall be deemed and be increased by an amount
equal to twelve (12) times such monthly sum (subject to future increases in the
event that there is any increase in any of the electric rate schedules;) it
being understood that Tenant will not install or use any electrically operated
equipment, machinery or appliances which were not in use in the demised premises
during the said prior twelve month period, nor shall Tenant make any changes in
the wiring in the demised premises without the written consent of Landlord first
obtained. (REF 11)
In the event (REF 12) any additional electrically operated equipment is
installed in the demised premises by Tenant, or if Tenant shall increase its
hours of operation, or if the rate or charges by the utility company supplying
electric current to Landlord are increased after the date thereof, then and in
any of such events the rent shall be increased accordingly on account of such
additional electric current consumed by such newly installed electrically
operated equipment and/or increase in Tenant's hours of operation, and/or
account of such increased rates or charges to Landlord for electricity supplied
by the utility company. The amount of such rent increase shall be determined
solely by Landlord's utility consultant. Tenant shall pay the amount of such
rent increase or increases retroactively to the date of the installation of all
newly installed electrically operated equipment and/or to the date when the
increased rate or charges to Landlord from the utility company becomes effective
and/or to the date of any increase in Tenant's hours of operation, as the case
may be, such amount to be paid promptly upon billing therefore by Landlord. (REF
13)
In the event permission is granted to Tenant by the landlord for direct
service from the utility company, (REF 14) sole cost and expense in compliance
with all law (REF 14a) furnish and install all risers, service wiring, switches
meter equipment and meters that may be necessary for such installation, and (REF
14) cost and expense (REF 14a) maintain and keep in good repair all such riser,
risers, wiring and/or switch or switches, meter equipment and/or meter or
meters.
(c) Anything to the contrary notwithstanding, if at any time the Landlord
elects to sell electricity from any source whatsoever to the Tenant, then, in
such event, Tenant agrees to (REF 15) discontinue the purchase of electric
service within 10 days from the Public Service Company servicing the part of the
city where the building is located, or from any other source and to sign any
release, or necessary papers required by said utility company for the
discontinuance of electric service, and Tenant agrees to purchase from Landlord
or from a meter company designated by Landlord, all electric current consumed in
the demised premises at the rate and upon the same terms and conditions set
forth in the first paragraph of this clause, and to comply otherwise in all
respects with the terms and covenants of all applicable provisions of this
Article. (REF 16)
(d) Wherever reference is made in this Article to rate(s) or charge(s) (of
the public utility supplying electricity to the Building) or to increases in
such rates or charges, the words rates or charges shall be deemed to include
without limitation, any and all (including any new or additional): (i) kilowatt
hours of energy charge; (ii) kilowatts of demand charge; (iii) fuel adjustment
charge; (iv) transfer adjustment charge; (v) utility tax; (vi) sales tax; (vii)
any time of day rate changes or other methods of billing as may be instituted by
the utility company; and (viii) any and all other charges and taxes required to
be paid by Landlord to the utility company.
(e) In no event shall the additional rent charge made to Tenant pursuant to
this article for electricity supplied to the demised premises be less than
Landlord's actual cost therefor.
(REF 17)
PLEASE INITIAL
/s/ ILLEGIBLE
<PAGE>
39. OPERATING EXPENSE ESCALATION INDEX
The basic annual rent reserved in the within lease shall be adjusted from
time to time in the manner provided by the within Article, as follows:
(a) The term "Wage Rate" and the term "Base Wage Rate," as used in this
Article are hereby respectively defined, as follows:
"Wage Rate shall mean the minimum regular hourly wage rate plus all
other sums required to be paid to or for the benefit of (REF 1) engaged in
the general maintenance and operation of Class A office building (whether
or not porters are employed in the Building and irrespective of whether or
not the Building is a Class A office building) pursuant to a collective
bargaining agreement between the Realty Advisory Board on Labor Relations,
Inc. (or any successor thereto) and Local 32B of the Building Service
Employees International Union AFL-CIO (or any successor thereto). The Wage
Rate shall include but not be limited to sums paid for pensions, welfare
fund, vacations, bonuses, social security, unemployment, disability
benefits, health, life, accident and other types of insurance or benefits.
The Wage Rate is intended to be a substitute comparative index of increased
economic costs and is not intended to reflect the actual costs of wages and
other expenses for the Building. If any such agreement is not entered into,
or such parties or their successors shall cease to bargain collectively or
if the Class A category, as defined by said union agreement, is eliminated
and not replaced by a corresponding designation then the Wage Rate shall be
the minimum regular hourly wage rate and other sums as aforesaid payable to
or for the benefit of porters engaged in the maintenance and operation of
the Building and payable by either Landlord or the contractor furnishing
such services, but not in excess of (or in the event there are no such
porters engaged in the maintenance and operation of the Building, then such
Wage Rate shall be) the generally accepted hourly minimum rate of wages and
other sums as aforesaid payable to or for the benefit of porters engaged in
the general maintenance and operation of the first class office buildings
in the Borough of Manhattan, City of New York.
The term "Base Wage Rate" shall mean the Wage Rate aforesaid in effect (REF
2) on December 31, 1990.
(b) If the Wage Rate shall be changed at any time after (REF 3) and shall
be greater than the Base Wage Rate, then, effective from the date of such (REF
3A) the Wage Rate, the basic annual rent payable under this Lease shall be
increased (REF 4) by an amount equal to the product of the number of percentage
points (including any fraction of a percentage point) by which the Wage Rate
shall exceed (REF 5) the Base Wage Rate, multiplied by the factor .005,
multiplied by the basic annual rent in effect immediately prior to such increase
(REF 6) in the Wage Rate. (REF 7)
As an illustration of the foregoing: assuming that the Wage Rate was
increased by 4.5% over the Base Wage Rate and assuming (for purposes of this
illustration) that the basic annual rent in effect immediately prior to the date
of such increase was $1,000.00 per annum, then such basic annual rent would be
increased, effective as of the date of such increase in the Wage Rate, by an
amount computed as follows:
4.5 X .005 = .0225 x $1,000.00 = $22.50
(c) Landlord shall notify Tenant whether or not an adjustment in the basic
annual rent pursuant to this article is due and, if so, the amount thereof and
the details of the computation thereof. The statement thus furnished to Tenant
shall constitute a final determination as between Landlord and Tenant as to the
Operating Expense Escalation for the periods represented thereby unless Tenant
within twenty (20) days after they are furnished shall give a written notice to
Landlord that it disputes their accuracy or their appropriateness, which notice
shall specify the particular respects in which the statement is inaccurate or
inappropriate. Such adjustment to basic annual rent shall commence as of the
effective date of such (REF 8) in the Wage Rate, and all monthly installments of
such shall reflect one-twelfth of the annual amount of such adjustment until a
new adjustment becomes effective pursuant to the terms of this Article. In the
event notification of such (REF 8) is given to Tenant subsequent to the
effective date of such (REF 8) Tenant shall pay to Landlord the amount of any
such monthly increases (within (REF 8A) days after being billed therefor) which
would have been payable prior to such billing. If notification and billing had
occurred prior to the effective date of such increase adjustment to basic annual
rent. (REF 9) Any such adjustment for less than a year or for less than a month
shall be prorated and in the event any change in the Wage Rate shall be made
retroactive, (REF 10) Tenant shall pay Landlord the amount of such retroactive
adjustment within (REF 11) days after being billed therefor.
40. REAL ESTATE TAX ESCALATION
In addition to the basic annual rent hereinbefore reserved, Tenant
covenants and agrees to pay to landlord as additional rent, sums computed in
accordance with the following provisions:
(a) "Taxes" shall mean all real estate taxes, assessments, governmental
levies, county taxes or any other governmental charge, general or special,
ordinary or extraordinary, unforeseen as well as foreseen, of any kind or nature
whatsoever, which are or may be assessed or imposed upon the building in which
the demised premises are located, the land underlying same and the sidewalks,
plazas, streets and alleys in front of or adjacent thereto, including any tax,
excise or fee measured by or payable with respect to any rent or mortgage and
levied against Landlord and/or the land and/or building and/or against the
holder of any mortgage affecting said land or building (REF 1) under the laws of
the United States, the State of New York or any political subdivision thereof or
by the City of New York, as a substitute or addition in whole or in part for
taxes presently or hereafter imposed on the land and building or resulting from
or due to any change in the method of taxation provided that any such substitute
tax on rent shall be considered as if the rent were the only income of Landlord
but excluding (REF 2) any income, franchise, corporate, estate, inheritance,
succession, capital stock or transfer tax levied on Landlord or the holder of
any such mortgage.
(b) "Tax Year" shall mean every twelve-month consecutive period commencing
(REF 3) each July 1 during the term of this Lease.
(c) "Tenant's Proportionate Share" shall be deemed to be .94%.
(d) "Basic Tax" shall mean the real estate taxes imposed on the Building
containing the demised premises and on the land on which the Building is located
for the fiscal year July 1, 1989 to June 30, 1990. If the Basic Tax shall
subsequently be adjusted, corrected or reduced, whether as the result of
protest, by means of agreement or as the result of legal proceedings, the Basic
Tax for the purpose of computing any additional rent payable pursuant to this
Article shall be the Basic Tax as so adjusted, corrected or reduced. Until the
Basic Tax is so adjusted, corrected or reduced, if ever, Tenant shall pay
additional rent hereunder based upon unadjusted, uncorrected or unreduced Basic
Tax and upon such adjustment, correction or reduction occurring, and additional
rent paid by Tenant prior to the date of such occurrence shall be recomputed and
Tenant shall pay to Landlord any additional rent found due by such recomputation
within ten (10) days after being billed thereof (which bill shall set forth in
reasonable detail the pertinent date causing and comprising such recomputation).
The statement thus furnished to Tenant shall constitute a final determination as
between Landlord and Tenant as to the Real Estate Tax Escalation for the periods
represented thereby unless Tenant within twenty (20) days after they are
furnished shall give a written notice to Landlord that it disputes their
accuracy or their appropriateness, which notice shall specify the particular
respects in which the statement is inaccurate or inappropriate.
(e) If the Taxes for any Tax Year shall be greater than the Basic Tax, then
Tenant shall pay to Landlord as additional rent an amount equal to Tenant's
Proportionate Share of the increase over the Basic Tax. If the commencement date
of this Lease shall occur during any Tax Year, or if the term of this Lease
shall expire or be terminated during any Tax Year, such amount shall be
pro-rated. Landlord shall bill Tenant for any additional rent payable by Tenant
pursuant to this Article, such bill to set forth in reasonable detail the
computation of additional rent hereunder which shall be payable by the Tenant to
the Landlord in installments in the same manner that such Taxes are payable by
the Landlord to the City of New York pursuant to law, commencing with July 1,
1990.
(f) If the Taxes for any Tax Year for which Tenant shall have paid
additional rent pursuant to this Article shall be adjusted, corrected or reduced
whether as the result of protest of any tentative assessment, or by means of
agreement, or as the result of legal proceedings, the additional rent becoming
due in said Tax Year pursuant to this Article shall be determined on the basis
of said corrected, adjusted or reduced Taxes. If Tenant shall have paid any
additional rent pursuant to this Article for such Tax Year prior to any said
adjustment, Landlord shall credit or refund to Tenant any excess amount thus
paid as reflected by said adjusted Taxes, less Tenant's pro rata share of any
cost, expense or fees (including experts' and attorneys' fees) incurred by
Landlord in obtaining said tax adjustment. If said tax adjustment shall occur
prior to Tenant's payment of any said Taxes due hereunder as additional rent,
Tenant shall pay, as further additional rent, a proportionate share of any cost,
expenses or fees (including experts' and attorneys' fees) incurred by Landlord
in obtaining said tax adjustment. Any payments, credits or refunds due hereunder
for any period of less than a full Tax Year at the commencement or end of the
term of this Lease, or because of any change in the area of the demised premises
shall be equitably prorated to reflect such event.
(g) If the fiscal tax year or the method of tax payment shall hereafter be
changed, appropriate adjustment of the foregoing provisions shall be made
accordingly to reflect any such changes.
(h) Tenant shall pay to Landlord any occupancy tax, rent tax and any other
tax of similar nature or intent now in effect or hereafter enacted (REF 4) if
the taxing authority shall enact law making same payable by Landlord in the
first instance. Such tax shall be paid to Landlord as additional rent upon
demand.
PLEASE INITIAL:
|_| |_|
Landlord Tenant
9/87
<PAGE>
41. ASSIGNMENT, SUBLETTING, MORTGAGING
(a) Tenant will not by operation of law or otherwise, assign, mortgage or
encumber this Lease, nor sublet or permit the demised premises or any part
thereof to be used by others, without Landlord's prior express written consent
in each instance. The consent by Landlord to any assignment or subletting shall
not in any manner be construed to relieve Tenant from obtaining Landlord's
express written consent to any other or further assignment or subletting nor
shall any such consent by Landlord serve to relieve or release Tenant from its
obligations to fully and faithfully observe and perform all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed.
(b) If Tenant shall desire to assign or to sublet all or any portion of the
demised premises, Tenant shall give notice thereof to Landlord and in said
notice shall set forth. (REF 1) After receipt of such notice from Tenant,
Landlord shall have the following options to be exercised within (REF 1A) days
from the receipt of Tenant's notice.
(i) In the event Tenant's notice is of Tenant's desire to make an
assignment or a subletting of all or substantially all of the demised
premises Landlord shall have the option to cancel and terminate this Lease
which option shall be exercised (REF 1B) within the aforesaid (REF 1A) day
period and (REF 1C) the term of this Lease shall cease and expire with the
same force and effect as if such date were originally provided herein as
the expiration of the term hereof.
(ii) In the event Tenant's notice is of Tenant's desire to make a
subletting for less than all or substantially all of the demised premises,
Landlord shall have the option, to be exercised within said (REF 1A) day
period, of canceling and terminating this Lease only as to such portion of
the demised premises. (REF 1D) In the event Landlord exercises its option
under this subparagraph (ii) the rent and all other charges payable
hereunder shall be equitably adjusted and apportioned. (REF 2)
If Landlord shall not exercise its foregoing option within the time set
forth (REF 3) its consent to any such proposed assignment or subletting shall
not be unreasonably withheld or unduly delayed, provided, however, that Landlord
may withhold consent thereto if in the exercise of its sole judgment it
determines that:
(i) The financial condition and general reputation of the proposed
assignee or subtenant are not consistent with the extent of the obligation
undertaken by the proposed assignment or sublease.
(ii) The proposed use of the demised premises is not appropriate for
the Building or in keeping with the character of the existing tenancies or
permitted by Tenant's Lease. (REF 3A)
(iii) The nature of the occupancy of the proposed assignee or
subtenant will cause an excessive density of employees or traffic or make
excessive demands on the Building's services or facilities or in any other
way lessen the character of the Building.
(iv) The Tenant proposes to assign or sublet to one who at the time is
a tenant or occupant of premises in the Building of which the demised
premises are a part (or to a subsidiary or related entity of such a tenant
or occupant) or to one with whom Landlord or its agent are actively
negotiating for space in the Building.
(v) The Tenant has advertised that Tenant is willing to assign or
sublet all or a portion of the demised premises at a rental rate less than
the rental rate Landlord is then asking for other space in the Building or
less then market rental rate.
In the event Landlord should withhold or delay its consent to any proposed
assignment or sublease, the sole remedy of Tenant shall be to institute action
for specific performance if Tenant believes that such withholding or delaying of
consent was unreasonable and Tenant hereby expressly waives any claim for
monetary damages by reason of such withholding or delaying of consent by
Landlord.
(d) Further, and as a condition of Landlord's consent to any assignment or
subletting:
1. Tenant at the time of requesting Landlord's consent shall not be in
default in the payment of any rent, additional rent, or other sums or
charges provided to be paid by Tenant hereunder and further that Tenant is
not then in material default otherwise under this Lease;
2. That each assignee of this Lease shall assume in writing all of the
terms, covenants and conditions of this Lease on the part of Tenant
hereunder to be performed and observed.
3. That an original or duplicate original of the instrument of
assignment and assumption or the sublease agreement shall be delivered to
Landlord within five (5) days following the making thereof; and
4. That any instrument of sublease shall specifically state that each
sublease is subject to all of the terms, covenants and conditions of this
Lease.
If Tenant shall duly comply with all of the foregoing then, as aforesaid,
Landlord shall not unreasonably withhold or unduly delay its consent to such
assignment or subletting, provided further, however, and on condition that at
the time or requesting Landlord's consent Tenant shall pay to Sylvan Lawrence
Company, Inc. the sum of $250 as a processing fee for each assignment and/or
subletting.
(e) It is agreed that if Landlord shall not exercise any of its foregoing
options and shall consent to such assignment or subletting, and Tenant shall
thereupon assign this Lease or sublet all or any portion of the demised
premises, then and in that event Tenant shall pay to Landlord, as additional
rent, (i) in the event of an assignment, 50% of the amount of monies, if any,
which the assignee has agreed to and does pay to Tenant in consideration of the
making of such assignment less however all out of pocket costs actually incurred
by Tenant in connection with the making of such assignment, including but not
limited to any (REF 4) brokerage fees, advertising and alteration costs: and
(ii) in the event of a subletting, 50% of (x) the amount, if any, by which the
fixed basic rent and additional rent payable by the sublessee to Tenant shall
exceed the fixed basic rent plus additional rent allocable to that part of the
demised premises affected by such sublease pursuant to the provisions of this
Lease, plus (y)the amounts, if any, payable by such sublessee to Tenant pursuant
to any side agreement as consideration (partial or otherwise) for Tenant making
such subletting. (REF 5) Such additional rent payments shall be made monthly
within (REF 6) days after receipt of the same by Tenant or within (REF 6) days
after Tenant is credited with the same by the assignee or sublessee. (REF 7) At
the time of submitting the proposed assignment or sublease to Landlord, Tenant
shall certify to Landlord in writing whether or not the assignee or sublessee
has agreed to pay any monies to Tenant in consideration of the making of the
assignment or sublease other than as specified and set forth in such
instruments, and if so Tenant shall certify the amounts and time of payment
thereof in reasonable detail.
(f) If this Lease shall be assigned, or if the demised premises or any part
thereof be sublet or occupied by any person or persons other than Tenant,
Landlord may, after default by Tenant, collect rent from the assignee, subtenant
or occupant and apply the net amount collected (which may be treated by Landlord
as rent or as use and occupancy) to the rent herein reserved but no such
assignment, subletting, occupancy or collection of rent shall be deemed a waiver
of the covenants in this Article, nor shall it be deemed acceptance of the
assignee, subtenant or occupant as a tenant, or a release of Tenant from the
full performance by Tenant of all the terms, conditions and covenants of this
Lease.
(g) Each permitted assignee or transferee shall assume and be deemed to
have assumed this lease and shall be and remain liable jointly and severally
with Tenant for the payment of the rent, additional rent and adjustment of rent,
and for the due performance of all the terms, covenants, conditions and
agreements herein contained on Tenant's part to be performed for the term of
this Lease and any
PLEASE INITIAL: |_| Landlord |_| Tenant
<PAGE>
41. ASSIGNMENT, SUBLETTING, MORTGAGING (continued)
renewals and modifications hereof. No assignment shall be binding on Landlord
unless, as hereinbefore provided, such assignee or Tenant shall deliver to
Landlord a duplicate original of the instrument of assignment which contains a
covenant of assumption by the assignee of all of the obligations aforesaid and
shall obtain from Landlord the aforesaid written consent prior thereto. Any
assignment, sublease or agreement permitting the use and occupancy of the
premises to which Landlord shall not have expressly consented in writing shall
be deemed null and void and of no force and effect.
(h) Any sale, transfer or assignment of a majority of the issued and
outstanding stock of a corporate tenant shall be deemed an assignment of this
lease. (REF 8)
(i) Notwithstanding anything to the contrary contained in this Article,
Tenant, without (REF 9), shall have the right to assign this Lease to any (REF
10) (REF 11) to enter into a sublease of all or part of the demised premises to
any such (REF 12) subject however to Tenant's compliance with all of the
provisions of subparagraph (d) hereof, upon which occurring (REF 13) such
assignment or subletting and provided further (REF 14) that any such assignee or
sublessee shall continue to use the demised premises for the purposes set forth
in Article 2 only, for the remainder of the term of this Lease. (REF 15)
(j) Notwithstanding anything to the contrary contained in this Article,
Tenant's right to assign this lease or sublet all or a portion of the demised
premises, and the enforceability against Landlord of Landlord's consent to any
such assignment or subletting, shall be subject to Tenant's delivering to
Landlord, simultaneously with the execution of any such assignment or sublease,
(REF 16) a release of liens against the Building (REF 17) executed by any
broker(s) (i) with whom Tenant shall have worked in connection with any such
assignment or sublease or (ii) who are or who claim to be, in whole or in part,
responsible for any such assignment or sublease (REF 18). Tenant further agrees
to promptly effect and timely pay for all costs of the removal of any broker's
liens which are placed on the Building at any time in connection with any such
assignment or subletting (or promptly make reimbursement to Landlord in the
event Landlord chooses to directly effect such removal). The provisions
contained in this subparagraph (j) shall survive the expiration or sooner
termination of this Lease. Tenant's failure to comply with the provisions
contained in this subparagraph (j) shall be deemed to be a material default
under this Lease, entitling Landlord to all of the remedies provided for under
this Lease for default, including but not limited to Landlord's right to
terminate this Lease in the event thereof.
PLEASE INITIAL: |_| Landlord |_| Tenant
10/83
<PAGE>
42. INSURANCE
Tenant, throughout the term hereof, shall maintain in full force and effect
for the benefit of and naming Landlord, Landlord's agent and Tenant as parties
insured therein (REF 1) general public liability insurance, including without
limitation, umbrella liability coverage against claims for personal injury,
death or damage to property occurring in, on, or about the demised premises,
with limits of not less than $1,000,000 for personal injury or death of one
person and $3,000,000 arising out of one occurrence, and $100,000 for property
damage or such other insurance as Landlord may reasonably require.
The insurance required hereunder shall be issued by an insurance company
licensed to do business in the State of New York prior to any entry by Tenant
into the demised premises, and thereafter, not less than ten (10) days prior to
the expiration of any expiring policy Tenant shall furnish renewals thereof,
together with proof of payment of the premiums therefor. If such insurance is
carried under a blanket policy, Tenant may deliver a certificate in lieu of the
original policy. Each policy or renewal shall contain a provision for notice to
Landlord at least ten (10) days prior to the cancellation thereof.
Tenant shall indemnify Landlord against and save Landlord harmless to the
extent of $3,000,000 which may be provided by umbrella policy, for any one
occurrence from any liability or claim by or in behalf of any person, firm,
governmental authority, for injury, death, or damage arising from the use by
Tenant of the demised premises, or from any work or thing whatsoever done or
omitted to be done by Tenant, its agents, contractors, servants, employees,
licensees, invitees, or customers, and from any breach or default by Tenant
under any of the terms or provisions of this Lease. If any action or proceeding
shall be brought against Landlord in connection with any such claims, Tenant
shall defend such action or proceeding, at Tenant's expense, by counsel
reasonably satisfactory to Landlord. Tenant's insurance carrier's counsel shall
be deemed satisfactory.
43. ADDITIONAL RENT
All costs, charges and expenses which Tenant assumes, agrees or is
obligated to pay pursuant to this Lease shall be deemed additional rent, and in
the event of non-payment, Landlord shall have all of the rights and remedies
with respect thereto as is herein provided for the case of non-payment of rent.
44. MERCHANDISE, REFUSE, ETC.
Tenant shall at no time leave any merchandise, supplies, materials or
refuse in the hallways or other common portions of the Building or in any other
area of the Building other than the demised premises. Tenant covenants that all
garbage and refuse shall be kept in proper containers, securely covered, until
removed from the Building so as to prevent the escape of objectionable fumes and
odors and the spread of vermin, and Tenant further covenants that no refuse
and/or garbage shall be (REF 1) on the sidewalks adjacent to the Building.
45. ATTORNMENT
Tenant agrees that neither the cancellation nor termination of any ground
or underlying lease to which this Lease is now or may hereafter become subject
or subordinate, nor any foreclosure of a mortgage affecting said premises, nor
the institution of any suit, action, summary or other proceeding against the
Landlord herein or any successor landlord, or any foreclosure proceedings
brought by the holder of any such mortgage to recover possession of such
property, shall by operation of law or otherwise result in cancellation or
termination of this Lease or the obligations of the Tenant hereunder, and upon
the request of any such Landlord, successor landlord, or the holder of such
mortgage. Tenant covenants and agrees to attorn to the Landlord or to any
successor to the Landlord's interest in the demised premises, or to such holder
of such mortgage or to the purchaser of the mortgaged premises in foreclosure.
If in connection with obtaining financing for the Building, a bank, insurance
company or other lending institution shall request reasonable modification in
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not adversely affect the leasehold interest hereby created. (REF 1)
46. WAIVER OF SUBROGATION
Landlord and Tenant respectively, hereby waive the right to recover from
each other any damage or loss occasioned by hazards compensated by insurance
(excluding liability insurance), regardless of whether said damage or loss
resulted from the negligence of either party, their officers, employees, agents
or otherwise and said parties do hereby waive the right to subrogate any
insurance carrier or other party to their respective rights of recovery against
each other in any event.
47. MERCHANICS LIENS
Notwithstanding anything to the contrary contained in this Lease, Tenant
hereunder for itself, its successors and designees, warrant and guarantee to
Landlord named in the within Lease, its successors and assigns, that if any
mechanic's lien shall be filed against the building of which the demised
premises forms a part, for work claimed to have been done for, or materials
furnished to Tenant, the same shall be discharged by Tenant, by either payment
or by bond, at the sole cost of Tenant within twenty (20) days following (REF 1)
of such mechanic's lien.
In the event such mechanic's lien is not discharged timely as aforesaid,
Landlord, on (10) days prior notice to Tenant, may discharge same for the
account of and at the expense of Tenant and Tenant shall promptly reimburse
Landlord as additional rent for all costs, disbursements, fees and expenses,
including without limitation, reasonable legal fees incurred in connection with
so discharging said mechanic's lien.
48. AIR CONDITIONING PERMITS
Anything contained herein to the contrary notwithstanding, it is expressly
agreed that Tenant shall pay the cost of any and all permits required by any
branch or department of the borough, county, city, state or federal government
in connection with any air conditioning presently or hereinafter installed in
the demised premises by either Landlord or Tenant.
49. LIMITATION OF LANDLORD'S LIABILITY
If Landlord or any successor-in-interest of Landlord be an individual,
joint venture, tenancy-in-common, co-partnership, unincorporated association, or
other unincorporated aggregate of individuals, then, anything elsewhere in this
Lease to the contrary notwithstanding, Tenant shall look solely to the estate
and property of such unincorporated Landlord in the land and Building and, where
expressly so provided in this Lease, to offset against the rents payable under
this Lease, for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord
in the event of any default by Landlord hereunder, and no other property or
assets of such unincorporated Landlord shall be subject to levy, execution or
other enforcement procedure for the satisfaction of Tenant's remedies.
50. ESTOPPEL CERTIFICATE
Tenant agrees, at any time, and from time to time, upon not less than (REF
1) days prior written notice from Landlord, to execute, acknowledge, and deliver
to Landlord, a statement in writing addressed to Landlord certifying that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that the same is in full force and effect as modified and stating
the modification), stating the dates to which rent, additional rent, and other
charges have been paid, and stating whether or not (REF 2) there exists any
default by Landlord or Tenant in the performance of any covenant, agreement,
term, provision or condition contained in this Lease, and, if so, specifying the
nature of each such default and stating such other information as Landlord may
(REF 3) require (REF 4) it being intended that any such statement delivered
pursuant hereto may be relied upon by Landlord, and by any mortgagee or
prospective mortgagee under any mortgage affecting the Building or the Building
and the land, and by any landlord under a ground or underlying lease affecting
the land or Building or both and by any purchaser, prospective purchaser, net
lessee or prospective net lessee of the Building. Time shall be deemed of the
essence with regard to Tenant's material obligations set forth in this Article
and Tenant's failure to timely fulfill the requirements contained in this
Article shall be deemed a material default under the Lease giving rise to all of
Landlord's rights, including but not limited to Landlord's right to terminate
the Lease, and in addition Tenant shall be liable for all damages (including but
not limited to consequential damages which may be substantial) sustained by
Landlord due, in whole or in part, to Tenant's failure to timely provide
Landlord with the above-described estoppel certificate.
PLEASE INITIAL:
|_| |_|
Landlord Tenant
7/88
<PAGE>
51. LATE PAYMENTS
If Tenant shall fail to pay any installment of basic annual rent or
additional rent when first due hereunder (irrespective of any grace period as
may be applicable thereto) and such failure to pay shall continue for more than
(REF 1) days after such payment was first due, (REF 2) then interest at the
maximum legal interest rate that then may be charged to parties of the same
legal capacity as Tenant shall accrue from and after the date on which any such
sum was first due and payable hereunder and such interest shall be deemed to
accrue as additional rent hereunder and shall be paid to Landlord (REF 3) demand
made from time to time, but in any event no later than the time of payment of
the delinquent sum.
52. HOLDOVER
If Tenant shall hold possession of the demised premises after the
expiration of the term of this Lease or the prior termination of this Lease, and
the Lease is not renewed or a new lease is not entered into between the parties,
the parties hereby agree that Tenant's occupancy of the demised premises after
the expiration of the term or prior termination of this Lease shall be deemed
that of a (REF 1A) commencing on the first day after the expiration of the term
or prior termination of this Lease. Notwithstanding the fact that Tenant shall
be deemed to be a (REF 1A), after the expiration of the term or prior
termination of this Lease, Tenant shall continue to be fully responsible for the
faithful performance by Tenant of all of the terms set forth in this Lease,
except Tenant shall pay on the first day of each month after the expiration or
sooner termination of this Lease for use and occupancy of the demised premises
an amount equal to the higher of (i) an amount equal to (REF 1) times the sum of
(a) the monthly installment of basic annual rent payable by Tenant during the
last year of the original term of this Lease (i.e., the year immediately prior
to the holdover period) and (b) all monthly installments of additional rent
payable by Tenant pursuant to the terms of this Lease that would have been
billable monthly by Landlord had the term of the Lease not expired; or (ii) an
amount equal to the then market rental value of the demised premises.
Tenant shall occupy the demised premises during the holdover period in its
"as is" condition as of the expiration of the term or prior termination of this
Lease and Landlord shall not be required to perform any work, furnish any
materials or make any repairs within the demised premises during the holdover
period. Nothing contained in this lease shall be construed as a consent by
Landlord to the possession by Tenant of the demised premises beyond the
expiration of the term or prior termination of this Lease, and Landlord, upon
said expiration of the term or prior termination of this Lease shall be entitled
to the benefits of all legal remedies that may now be in force or may hereafter
be enacted relating to immediate repossession of the demised premises by
Landlord and in addition Landlord shall be entitled to recover any and all
damages, direct and/or consequential, sustained by Landlord (including but not
limited to special damages) as a result of Tenant's holdover, which recovery of
damages shall be distinguished from and not be offset by any payment made by
Tenant for the use and occupancy of the demised premises.
53. NO EMPLOYMENT AGENCY, MESSENGER SERVICE, RETAIL OR RESIDENTIAL USE
OF DEMISED PREMISES
It is an express condition of this Lease that the demised premises be used
for commercial purposes only in accordance with the provisions herein contained.
In no event may the demised premises be used for Employment Agency, Messenger
Service, Retail or Residential purposes and Tenant covenants and agrees to use
the demised premises only for the commercial purposes specified in Article 2
hereof. Accordingly, it is expressly agreed that any violation by Tenant of its
agreements, representations and obligations pursuant to this Article shall
constitute a material default by Tenant under the terms of this Lease entitling
Landlord to exercise any and all rights granted Landlord pursuant to Articles 17
and 18 of this Lease, including without limitation, the right to terminate this
Lease and recover possession of the demised premises by reason of Tenant's
default.
54. WAIVER OF COUNTERCLAIM
Tenant shall and hereby does waive its right and agrees not to interpose
any counterclaim or offset of whatever nature or description in any proceeding
or action which may be instituted by Landlord against Tenant to recover
possession of the demised premises, for the collection of rent, additional rent,
other charges, or for damages, or in connection with any matters or claims,
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, or Tenant's use or occupancy of said
premises. This clause, as well as the "waiver of jury trial" provision of this
Lease, shall survive the termination or any cancellation of this Lease, or the
term hereof (nothing, however, contained in this clause shall preclude Tenant
from instituting a separate action against Landlord with respect to any claim
that Tenant may have against Landlord or from moving to consolidate such action
with any action or proceeding which may have been instituted by Landlord; it
being understood, however, that Landlord may oppose any motion of
consolidation.)
55. ATTORNEY'S FEES
In case it shall be necessary for Landlord to institute any action or
proceeding against Tenant for the non-payment of rent (REF 1) Landlord shall be
successful in such action or proceeding, Tenant shall be obligated to pay to
Landlord reasonable attorneys' fees, costs and disbursements incurred for the
institution and prosecution of any such action (REF 2) proceeding.
PLEASE INITIAL:
|_| |_|
Landlord Tenant
2/86
<PAGE>
57. SUPERVISION OF TENANT'S INVITEES, EMPLOYEES, ETC.
Tenant acknowledges and agrees that the Building of which the demised
premises forms a part is a first-class loft building. Tenant further
acknowledges that as an inducement to Landlord to enter into this Lease with
Tenant, Tenant has and does represent, covenant and agree that Tenant will take
all necessary measures and institute all procedures as may be found necessary to
insure that Tenant's clients, invitees, and personnel do not loiter or
congregate in the public area of the Building (including but not limited to the
corridors, elevators, lobbies, lavatories, etc.) and that such clients, invitees
and personnel will at all times conduct themselves in a proper business-like
manner when passing through such public areas of the Building for purposes of
access and egress to and from the demised premises. Accordingly, it is expressly
agreed that any violation by Tenant of its agreements, representations and
obligations pursuant to this article shall constitute a material default by
Tenant under the terms of this Lease entitling Landlord to exercise any and all
rights granted Landlord pursuant to Articles 17 and 18 of this Lease including
without limitation the right to terminate this Lease and recover possession of
the demised premises by reason of Tenant's default.
PLEASE INITIAL:
|_| |_|
Landlord Tenant
9/86
<PAGE>
59. COMPLIANCE WITH LAWS INCLUDING BUT NOT LIMITED TO LOCAL LAW NOS. 5/73,
10/80, 10/81, 16/84 AND 76/85
Tenant acknowledges and agrees that it shall be Tenant's responsibility and
obligation to comply with all requirements and controls imposed by Local Laws
5/73, 10/80, 10/81, 16/84 and 76/85 of the City of New York, as well as with any
and all other now or hereafter existing laws, rules and regulations, as the same
now or hereafter exist or hereafter may be amended, of the City of New York or
of any governmental or quasi-governmental agency or department having
jurisdiction over the Building, with respect to the demised premises or (REF 1)
any portion of the Building, including but not limited to the partitioning,
layout, exit signs, telephone communications, fire extinguishers, sprinklers,
pressurization, HVAC systems, electrical systems, wiring, public address
systems, conduits, emergency lighting, all systems -- mechanical or otherwise,
elevators, exterior of the Building, toilets and all public areas. (REF 2)
Tenant further acknowledges and agrees that if Landlord shall perform Tenant's
installation or alteration work for Tenant pursuant to any work letter agreement
or pursuant to Tenant's request, Landlord's sole responsibility with respect
thereto shall be limited to the workmanlike manner of such installation or
alteration and Tenant shall be responsible for the legality of any such
installation or alteration, i.e., the drawing of plans in compliance with law
and the obtaining of all permits relating thereto, including but not limited to
all necessary approvals and signoffs, and compliance, by work or otherwise, with
all laws, requirements and controls in accordance with this Article. Any
modification(s) of any such installation or alteration made within the demised
premises or alteration of the Building required as a result of such installation
or alteration shall be solely the responsibility of Tenant, at Tenant's sole
cost and expense, and Landlord shall have no obligation or duty with respect
thereto.
With respect to any work to be performed under this Article, Landlord shall
have the option to perform such work on Tenant's behalf at Tenant's sole cost
and expense subject to Article 61 hereof, and with respect to work to be
performed to any portion of the Building other than the demised premises the
actual expenditure on Tenant's behalf shall be deemed to be the total cost
expended to complete said work multiplied by Tenant's Proportionate Share
defined in the Real Estate Tax Escalation provision of this Lease (in the event
this Lease does not provide for a Tenant's Proportionate Share, in lieu thereof
the multiplier shall be the percentage of the rentable square feet in the
Building which are located in the demised premises) subject to Article 61
hereof.
60. CESSATION OF SERVICES AFTER TERMINATION OF LEASE
Tenant expressly covenants and agrees that if Tenant shall default in the
payment of rent or additional rent hereunder or otherwise materially default
under this Lease and Landlord shall in accordance with the applicable provisions
of this Lease elect to terminate this Lease on account of any such default,
whether such termination be affected by notice given to Tenant pursuant to
Article 17 hereof or whether Landlord elects, in its sole discretion, to
terminate the Lease by instituting appropriate legal action against Tenant or if
Tenant shall vacate the demised premises, Landlord from and after the date of
termination of this Lease or the date of Tenant's vacating the demised premises
shall have the right to cease furnishing any services, including without
limitation the cessation of the furnishing of electric current to the demised
premises if Landlord is required to furnish electricity pursuant to another
provision of this Lease, without said cessation of the furnishing of any such
services constituting an actual or constructive, partial or total, eviction and
Landlord shall be entitled to recover from Tenant use and occupancy for any
period that Tenant shall holdover in the demised premises subsequent to any
above-described termination of this Lease in an amount equal to the full basic
annual rent and additional rent payable by Tenant hereunder pursuant to the
holdover provisions of this Lease, or in the case of Tenant's having vacated the
demised premises, Tenant shall be required to pay full rent and additional rent
hereunder as provided in this Lease, irrespective of the fact that Landlord may
have ceased furnishing any services to the demised premises.
61. LANDLORD'S OVERHEAD, SUPERVISION AND APPROVAL CHARGES
Whenever Landlord or its agent shall install a water meter pursuant to
Article 28 hereof, or shall perform work or furnish services at Tenant's request
or on behalf of Tenant (REF 1) which are not otherwise specifically billable to
Tenant as additional rent pursuant to any other Lease provision or separate
agreement or shall perform work which Tenant should have performed but failed to
perform prior to the expiration of any applicable grace period with respect
thereto, or any contractor or vendor performs constitution or furnishes labor,
material or services or alteration work on behalf of Tenant (REF 2) in addition
to all other charges as may be required to be paid by Tenant as elsewhere
provided in this Lease, Tenant shall pay to Sylvan Lawrence Company, Inc.
("SLC") upon rendition of SLC's bill therefor, an amount equal to 21% (REF 2A)
of the amount actually expended by Landlord and/or Tenant in connection with the
performance of such work or installation of such meter, (representing a charge
of 10% of such cost for SLC's overhead and thereafter 10% for supervision).
In addition, if pursuant to this Lease or any work letter or other
agreement entered into between Landlord and Tenant, Tenant shall submit to
Landlord's agent, SLC, plans or specification for approval, Tenant shall pay to
SLC upon being billed therefor the sum of $500.00 (REF 3). Said sum shall be
payable irrespective of whether or not approval of such plans and specifications
is granted or such plans and specifications are returned to Tenant with
objections thereto.*
If any plan or specification submitted to SLC shall, in SLC's sole opinion,
require the expert opinion of an architect, engineer or other professional
service in order for SLC to determine whether or not to approve or withhold
consent thereto, SLC may retain an architect, engineer or other professional
service for such purpose and Tenant agrees to pay to SLC an amount equal to the
reasonable fee of such architect, engineer or other professional service
actually paid by SLC for reviewing such plan or specification.
PLEASE INITIAL:
|_| |_|
Landlord Tenant
*The terms of this second
paragraph of this Article
61 shall not apply during
the first six (6) months of this
Lease.
9/87
<PAGE>
63. BROKER
Tenant covenants and represents that it has dealt with no broker in
connection with the within Lease transaction or the demised premises other than
of Sylvan Lawrence Company, Inc. and Gronich & Company and Tenant agrees to hold
Landlord harmless from any claims for commission or other fees made by any other
broker claiming to have dealt with Tenant in connection with this Lease
transaction or the demised premises. Tenant shall have no obligation to make
payment to aforesaid broker(s) on account of such commission or fees unless
Tenant by separate agreement has undertaken to do so.
64. RIDER PORTIONS PREVAIL
The rider portions of this Lease shall be read in conjunction with the
printed standard form of lease annexed hereto. If there should be any
inconsistency or ambiguity between the terms of the rider portions of this Lease
and the standard form of lease, then the rider portions of this Lease shall
prevail.
65. NO OTHER REPRESENTATIONS, CONSTRUCTION, GOVERNING LAW
Tenant expressly acknowledges and agrees that Landlord and its agents have
not made and are not making, and Tenant, in executing and delivering this Lease,
is not relying upon, any warranties, representation promises or statements,
except to the extent that the same are expressly set forth in this Lease or in
any other written agreement which may be made between the parties concurrently
with the execution and delivery of this Lease and expressly refers to this
Lease.
This Lease shall be governed in all respects by the laws of the State of
New York.
67. PROVISIONS SEVERABLE
If any term of provision of this Lease or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Lease shall be valid and be enforced to the fullest extent permitted by law.
68. EXECUTION AND DELIVERY OF LEASE
Submission by Landlord of the within Lease for review and execution by
Tenant shall confer no rights nor impose any obligations on either party unless
and until both Landlord and Tenant shall have executed this Lease and
duplicated originals thereof shall have been delivered to the respective parties
hereto.
69. UNCOLLECTABLE CHECKS
It is hereby understood and agreed by Tenant that in the event Landlord
receives a check from Tenant for the payment of basic annual rent, additional
rent and/or any other charge(s) due under this Lease, and such check is
uncollectable by Landlord due to insufficient funds in Tenant's account or for
any other reason, Tenant shall pay the Sylvan Lawrence Company, Inc. ("SLC") a
service charge in the sum of $100, for Landlord's expense in processing such
uncollectable check, as additional rent under this Lease together with Tenant's
next monthly rent installment due under this Lease. It is further understood and
agreed that in the event Landlord accepts Tenant's checks in payment of any
basic annual rent or additional rent due under this Lease, Tenant's checks must
be drawn on a member bank of the New York Clearing House Association. The
provisions of this Article shall not be deemed to limit Landlord from enforcing
any other rights Landlord may have under this Lease in the event of Landlord's
receipt of any such uncollectable check and SLC's right herein to collect a
service charge, as provided above, shall be in addition to all other rights of
Landlord contained in this Lease.
PLEASE INITIAL:
|_| |_|
Landlord Tenant
9/86
<PAGE>
70. EFFECT OF GOVERNMENTAL LIMITATION ON RENTS AND OTHER CHARGES
If any law, decision, order, rule or regulation (collectively called
"Limiting Law") of any governmental authority shall have the effect of limiting
for any period of time the amount of basic annual rent and/or additional rent or
other amounts payable by Tenant to any amount less than the amount required by
this Lease, then:
following provisions shall apply:
(a) Throughout the period of limitation, Tenant shall remain liable for the
maximum amount of basic annual rent and/or additional rent and other amounts
which are legally payable; and
(b) When the period of limitation ends, or if the Limiting Law is repealed,
or following any order or ruling that substantially restrains or prohibits
enforcement of the Limiting Law, Tenant shall pay to Landlord, (REF 1) demand
(to the extent that payment of such amounts is not prohibited by law), all
amounts that would have been due from Tenant to Landlord during the period of
limitation but which were not paid because of the Limiting Law; and thereafter,
Tenant shall pay to Landlord basic annual rent and/or additional rent and all
other amounts due pursuant to this Lease, all calculated as though there had
been no intervening period of limitation.
PLEASE INITIAL
<PAGE>
71. SUPPLEMENT TO ARTICLE 28 -- WATER METER
(REF 1) Tenant shall pay, as additional rent, for all hot and cold water
consumed in the demised premises. To the foregoing end, (REF 2) shall promptly
install a water meter for (REF 3) hot and cold water (REF 3A) in the demised
premises and Tenant shall keep said (REF 4) and (REF 4A) equipment in good order
and repair throughout the term of this Lease. Tenant shall pay for said water
consumed as shown on said (REF 4), together with appropriate sewer tax charges
thereon, (REF 5) when bills are rendered by Landlord, as items of (REF 6) rent.
More specifically, Tenant (REF 7) shall pay Landlord an amount equal to 107.5%
of Landlord's cost to purchase and provide said water including all taxes (REF
7A). (REF 8)
PLEASE INITIAL
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72. LIABILITY FOR ASBESTOS
It is hereby understood and agreed that Landlord prior to the commencement
date of this Lease shall remove from the demised premises only any
asbestos-containing material (as defined in federal, state and local
regulations), located in the demised premises (REF 1) in accordance with current
applicable Federal, state and local laws and regulations by employing a
contractor licensed under federal, state and local laws and regulations to
remove asbestos-containing material, which removal shall be performed in
accordance with the current Federal, state and New York City requirements for
the removal of asbestos-containing materials from premises such as the demised
premises. Upon the completion of the removal of asbestos-containing material
from the demised premises as described above, Landlord shall provide copies of
the following items (the "Documents") as evidence of removal of the
asbestos-containing material as defined by present New York City statute: (1)
Copy of the testing laboratory report indicating removal of asbestos-containing
materials from the demised premises in accordance with the above described
manner; (2) Copy of the shipping manifest indicating that the
asbestos-containing material had been removed from the demised premises and
deposited in an approved landfill as currently required by the above described
governmental authorities; (3) Copies of the asbestos abatement contractors bill
for the services rendered in removing the asbestos-containing material from the
demised premises. (4) Copy of a written report by a licensed Asbestos Inspector
certifying that the demised premises are free of any friable Asbestos containing
material. (REF 2)
73. EQUIPMENT ON ROOF
Tenant shall have the right, subject to Landlord's (REF 1A) approval of
specifications and methods of work, to place air-cooled air conditioning
equipment (the "Equipment") (but no other item) on (REF 1) the set-back roof
directly outside Tenant's demised premises in a location (REF 2). Tenant must
maintain said area and Equipment in good condition, including but not limited to
all repairs and replacements, at Tenant's sole cost and expense, to Landlord's
specifications (REF 2A). Tenant shall be responsible for all damage to the
Building (REF 3) caused by the Equipment (REF 3A) placing the Equipment on the
set-back roof or removing the Equipment from the set-back roof. (REF 4)
PLEASE INITIAL
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74. STEAM CONNECTION
(a) Tenant shall have the right, in compliance with all applicable rules
and regulations of law, as well as with the applicable provisions of Articles 3,
6 and (REF 1) of this lease, and at Tenant's sole cost and expense, to make a
connection to the existing constant pressure steam riser within the demised
premises, at such point as Landlord shall reasonably approve, and to install
such steam piping and any other equipment as may be required in connection
therewith. (REF 2) a steam submeter which shall measure Tenant's consumption of
steam. Tenant shall pay to Landlord as additional rent hereunder "Landlord's
Charges" for steam consumed by Tenant as measured by such submeter(s) which
charges shall be computed by: (i) dividing the gross cost of steam used for the
entire Building (including all taxes and charges) for each particular month of
the term hereof as billed to Landlord by the Consolidated Edison Company of New
York by the total M/LBS (thousand pounds) of steam used by the entire Building
as indicated on said bill with the quotient thus obtained being the actual cost
to the Building per thousand pounds of steam (the "Quotient"); (ii) multiplying
the Quotient by 115% to obtain the agreed upon rate (the "Rate") applicable to
Tenant's consumption of steam (i.e. M/LBS - each thousand pounds) as measured by
Tenant's submeter for the same monthly period ("Tenant's Monthly Consumption")
covered by the particular Consolidated Edison Company bill for which the
computation is being made to arrive at the Quotient; (iii) multiplying the
Tenant's Monthly Consumption by the rate with the resulting product being the
Landlord's Charges for steam furnished to Tenant during the particular month for
which the computation is made.
(b) Landlord agrees to furnish Tenant at the time of billing Tenant for
steam charges pursuant to the provisions of this Article with a copy of the
particular Consolidated Edison Company steam bill utilized in computing the
charge to Tenant.
(c) If for any reason any meter fails to record the consumption of steam
the consumption during the period the meter is out of service will be considered
to be the same as consumption for a like period either immediately before or
immediately after the interruption, as reasonably selected by the Landlord,
taking into account the season of the year.
(d) The landlord shall not be charged with any liability by the Tenant or
become liable to it for any injury or damage to the Tenant or to its property
arising out of or in connection with any delay, interruption, failure or partial
failure in supplying of steam hereunder, or out of or in connection with any
variation in the characteristics of the steam furnished except as resulting from
the negligence of the Landlord.
(e) Landlord shall be afforded access from time to time throughout the term
of this Lease as and when Landlord may desire, so long as Tenant's business is
not unreasonably interfered with, for the purposes of reading said submeter and
billing Tenant in accordance therewith. All additional rent payable pursuant to
this Article shall be paid by Tenant within (REF 3) days after submission of a
bill for steam consumed by Tenant together with a copy of the pertinent
Consolidated Edison monthly steam bill.
(f) In the event that the Tenant desires that the furnishing of the steam
hereunder shall be discontinued, the Tenant shall so inform the Landlord by
written notice not less than thirty (30) days before the date upon which the
Tenant desires such discontinuance to take effect. Such notice shall state the
day and hour which the supply of steam is to be discontinued and Tenant shall
arrange and pay for the capping-off of such steam connection. If the Tenant
fails to give Landlord such notice and cap-off said steam connection, the
Landlord will continue to bill the Tenant for all charges accruing in accordance
with the provisions of the preceding paragraphs of this Article.
(g) In no event shall the additional rent charge made to Tenant pursuant to
this Article for sub-metered steam supplied to the demised premises be less than
Landlord's actual cost therefor.
(h) Tenant shall maintain, in good order and condition, at Tenant's sole
cost and expense, (Ref. 4).
PLEASE INITIAL
<PAGE>
75. FIRST REFUSAL OPTION
(a) On condition that this Lease at the times hereinafter mentioned is then
in effect and Tenant is not in default in the payment of rent, additional rent
or any other sums or charges provided to be paid by Tenant hereunder and that
Tenant is not otherwise in default under the terms of this Lease beyond any
applicable grace period, Landlord agrees with respect to space ("Contiguous
Space") on the eight floor of the Building contiguous to the demised premises
covered by this Lease that Tenant shall be afforded a "First Refusal Option"
described in (b) below with respect to leasing such Contiguous Space provided
the Contiguous Space shall become vacant and untenanted during the term of this
Lease.
(b) In the event Landlord shall receive during the term of this Lease
[except the final two (2) years of the term of this Lease during which period
said First Refusal Option shall not be in effect] a bonafide offer acceptable to
Landlord from a third party, including but not limited to an existing tenant, to
lease the Contiguous Space, Landlord will notify Tenant of such offer including
the basic annual rental rate, additional rent, the term, the security and the
other material terms of the offer (hereinafter collectively referred to as the
"Option Terms"), and Tenant shall have the option exercisable within, but in no
event later than, (REF 1) days after the giving of such notice by Landlord to
Tenant to elect by notice (as to the giving of such notice, time shall be deemed
of the essence) given to Landlord within said five (5) business day period to
lease the Contiguous Space upon the Option Terms set forth in Landlord's notice
to Tenant, and otherwise upon the applicable terms and conditions as contained
in this Lease as amended hereby except Landlord shall not be required to perform
any work or furnish any materials to prepare the Contiguous Space for Tenant's
occupancy. In the event the Option Terms cover space in addition to the
Contiguous Space, Tenant's First Refusal Option shall cover such other space in
addition to the Contiguous Space and Tenant's right to exercise said First
Refusal Option is subject to Tenant's leasing the entirety of the Contiguous
Space and such other space on all Option Terms. Landlord and Tenant shall
execute a new lease to cover Tenant's exercise of the First Refusal Option, but
such execution of a new lease is not necessary to bind Landlord and Tenant.
75A. LIMITATION ON TENANT'S LIABILITY.
(REF 1)
PLEASE INITIAL
<PAGE>
76. TENANT'S WORK
Anything to the contrary contained in this Lease notwithstanding, Tenant
acknowledges and warrants that no representation has been or is made by Landlord
that the demised premises may be used for the purposes set forth in Article 2 of
this Lease pursuant to the existing certificate of occupancy, if any, or laws,
rules or regulations, and delivery of possession of the demised premises to
Tenant shall not be subject to compliance with or existence of any certificate
of occupancy, laws, rules or regulations. Tenant, at Tenant's sole cost and
expense, agrees to do all that is necessary, in a manner satisfactory to
Landlord, to conform the existing certificate of occupancy, if any, or to obtain
a new certificate of occupancy, if necessary, so that the demised premises may
be legally used for the purposes set forth in Article 2 of this Lease and Tenant
agrees not to use the demised premises at any time for any purposes (whether set
forth in Article 3 or otherwise) which do not comply with the certificate of
occupancy for the Building or relevant laws, rules or regulations. (Landlord, at
Landlord's election, may perform all that is necessary to so conform the
existing certificate of occupancy, if any, or obtain a new certificate of
occupancy for the aforesaid reasons, if necessary, or to cause compliance with
relevant laws, rules and regulations, at Tenant's sole cost and expense, which
expense shall be promptly paid by Tenant to Landlord as additional rent under
this Lease when billed).
All of the work, alterations, installations, etc., to be performed by
Tenant herein referred to as "Tenant's Work"). To the foregoing end, Tenant
shall be permitted to perform Tenant's Work subject, however, to the following
terms and conditions:
(i) That all such Tenant's Work shall comply with all applicable
provisions of this Lease, including, but not limited to, Articles 3 and 6
hereof, and all applicable governmental rules and regulations and the rules
and regulations of any Board of Fire Underwriters or similar agency having
jurisdiction;
(ii) That Tenant shall first submit to Landlord for its approval plans
and specifications covering said Tenant's Work. Landlord agrees not to
unreasonably withhold or delay its consent to such plans and specifications
and to any subsequent changes therein; (REF 1)
(iii) That Tenant and its contractors shall employ only labor in the
performance of such Tenant's Work, which shall be compatible with the other
labor in the Building; Tenant agrees to employ only first class workmanlike
contractors and labor as approved by Landlord (REF 1A);
(iv) That Tenant and any contractor or contractors employed by the
Tenant to render services and furnish labor to the demised premises, shall
be covered by Worker's Compensation Insurance and a certificate thereof
shall be furnished to the Landlord before commencement of any work by any
contractor, subcontractor, their agents, servants or employees;
(v) That promptly following the completion of all of said Tenant's
Work, and as soon as reasonably feasible, the Tenant shall obtain and
furnish to Landlord all appropriate certifications from all authorities
having jurisdiction to the effect that all such Tenant's work has been
performed and completed in accordance with the filed plans, if any, and
with all laws, rules, regulations and orders of said authorities having
jurisdiction;
(vi) That Tenant, at its expense, shall procure each and every permit,
license, franchise, or other authorization required for the performance of
such Tenant's Work.
(vii) That Tenant shall furnish to Landlord a list of all Tenant's
contractors, subcontractors, material suppliers and laborers (collectively
referred to as "Tenant's Personnel"). Tenant shall be responsible for
Tenant's Personnel furnishing to Landlord a final release of lien (REF 1B)
final payment by Tenant to Tenant's Personnel for any labor performed or
materials furnished.
(viii) In the event a proposed alteration or improvement is estimated
to cost in excess of (REF 2) Tenant agrees that Tenant shall either: (b)
issue to Landlord a hold harmless and indemnification relative to such
proposed work; or (c) issue the guaranty of Tenant hereunder, which
guaranty shall place the entire burden of payment for such alteration on
(REF 2A) as well as hold Landlord harmless from and against any and all
claims directly arising out of the work to be done in the demised premises.
(ix) Anything to the contrary contained in this Article 76 and Article
3 of this Lease notwithstanding, Landlord shall not unreasonably withhold
or delay Landlord's consent to Tenant's making (REF 2B) alterations,
additions, installation, improvements, repairs or removals to or from the
demised premises provided the same do not (REF 3) any building system(s).
PLEASE INITIAL
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77. RELOCATION
(a) Notwithstanding anything to the contrary contained in this Lease,
Landlord, upon not less than (REF 1) days prior written notice to Tenant, shall
have the right to substitute, other space (REF 1A) in the Building of which the
demised premises forms a part as of the Effective Date (REF 1B) as the demised
premises hereunder in lieu of the space then constituting the demised premises
hereunder immediately prior to the giving of such notice (the "Prior Space").
(REF 1C)
(b) Substitute Space shall (REF 2) the Prior Space and, further, Landlord
shall reimburse Tenant for the cost of transferring its telephone service to the
Substitute Space.
(c) Automatically on the Effective Date, the Substitute Space shall
constitute the demised premises hereunder and all of the terms of this Lease
shall apply thereto, and the Prior Space shall automatically be deleted from the
coverage of this Lease and the term of the Lease insofar as the Prior Space only
is concerned shall be deemed to have ceased and expired with the same force and
effect as if the Effective Date were originally provided in the Lease as the
expiration date thereof (but the Lease shall continue in full force and effect
for the full term thereof with respect to the Substitute Space).
(d) Tenant covenants and agrees to quit and surrender vacant full
possession of the Prior Space to Landlord on the Effective Date free and clear
of any leases, tenancies and rights of occupancy of anyone claiming by or
through Tenant. In the event Tenant shall fail to refuse to surrender such
vacant full possession of the Prior Space to Landlord on or before the Effective
Date (for any reason other than Landlord's failure to furnish moving labor to
Tenant), then and in such event Tenant shall pay to Landlord for each day or
fraction thereof that Tenant shall fail to surrender such vacant full possession
of the Prior Space to Landlord (in addition to all rent and additional rent
provided to be paid under this Lease which is applicable from and after the
Effective Date to the Substitute Space) an agreed-upon sum equal to three times
the quotient obtained by dividing (i) the sum of the monthly installment of
basic annual rent then payable under this Lease plus one-twelfth of all
additional rent then payable under this Lease; by (ii) 30; (the "Daily Rate" for
the Prior Space). Such Daily Rate for the Prior Space is in the nature of
liquidated damages to Landlord for Tenant's failure to surrender such vacant
full possession of the Prior Space to Landlord on or before the Effective Date.
The foregoing provision for payment by Tenant for the Daily Rate for the Prior
Space shall be without prejudice to Landlord's instituting Summary or such other
proceedings as Landlord may desire in order to obtain as promptly as possible
vacant full possession of the Prior Space.
(REF 3) PLEASE INITIAL:
|_| |_|
Landlord Tenant
5/85
<PAGE>
Lease Between
P.A. Building Company and Goldman, Sachs & Co.
The language set forth in this Footnote Insert is to be incorporated into
and made a part of this Lease. Each Footnote corresponds to the identical
Footnote number set forth in the designated Article in the body of this Lease.
Article 3.
1. which consent shall not be unreasonably withheld or delayed
1A. in Landlord's reasonable opinion of any portion of the Building other
than the demised premises, all which must be performed
1B. reasonably
2. (except Landlord's work performed under the letter agreement between
Landlord and Tenant of even date herewith shall not be subject to the terms of
this sentence as such work shall become the property of Landlord and be
surrendered with the demised premises without being subject to Landlord's option
set forth below in this sentence),
3. forty-five
3A. Landlord, upon request by Tenant, shall cooperate, at no cost and
expense to Landlord, with Tenant's efforts to obtain any of the aforesaid
permits approvals and certificates and Landlord shall promptly execute and
deliver to Tenant any consents, certificates or documents required in connection
therewith, provided (i) Landlord has no reasonable objection to the item (the
"Item") requested of Landlord or the information to be contained in the Item,
(ii) the Item is complete and accurate, and (iii) Tenant has the right under
this Lease to proceed with the action relating to the Item.
4. reasonably
5. See Article 47 of this Lease.
Article 4.
1. , including the structure of the Building, the common areas of the
Building and the electrical, plumbing and other mechanical systems of the
Building (except Tenant shall be responsible for maintaining the portion of the
roof more particularly discussed in Article 73 of this Lease).
2. thirty days notice (except Tenant shall be required to act immediately
in the case of an emergency)
3. reasonable
Article 6.
1. which would otherwise be
2. Landlord represents that the floor load capacity of the demised premises
is at least 200 pounds live load. (Landlord makes no representation regarding
the floor load capacity of the roof set-back described in Article 73 of this
Lease.)
Article 7.
1. Notwithstanding the foregoing provisions of this Article 7, this Lease
shall not be subordinate to any such mortgage or lease unless the mortgagee or
lessor shall deliver to Tenant an
PLEASE INITIAL
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agreement providing that so long as Tenant is not in default beyond any
applicable notice and grace period Tenant's possession shall not be disturbed
and Tenant's rights shall not be affected by any foreclosure of such mortgage or
termination of such lease and that upon such foreclosure or termination, this
Lease shall continue as a direct lease between the purchaser in foreclosure or
such lessor, as landlord, and Tenant, as tenant. Landlord represents that it is
the owner in fee of the Building and the underlying land and that as of the date
hereof (i) there are no existing ground or underlying leases affecting the
Building or the underlying land or any part of either, and (ii) there are no
existing mortgages that affect the Building or the underlying land or any part
of either. Anything to the contrary contained in this Footnote 1 to Article 7
notwithstanding, the terms of this Footnote 1 shall only apply to Goldman, Sachs
& Co. and not to any successor or assign of Goldman, Sachs & Co. or any other
party or entity.
Article 8.
1. , which consent shall not be unreasonably withheld or delayed. Landlord
represents that Tenant shall be permitted, subject to the terms of this Article
8, to bring heavy machinery into the Building during normal business hours
provided such moving does not adversely affect the Building's general operation
or materially and adversely affect other tenants of the Building.
Article 9.
1. Anything to the contrary contained in this Article 9 notwithstanding, in
the event the demised premises shall be damaged by fire or other casualty and
Landlord has not substantially completed the repair of such damage by the
earlier of a date which will be (i) six months after the date on which the
Landlord has adjusted the insurance loss (which Landlord agrees to try to
accomplish with reasonable diligence after the occurrence of the fire or
casualty) or (ii) one year after the date of the subject fire or other casualty,
then Tenant, by notice given to Landlord within thirty (30) days after the
expiration of said subject period, may elect to terminate this Lease as of a
date not more than ten (10) days after the giving of such notice (the
"Termination Date"). If Tenant shall duly give such notice, then the term of
this Lease shall cease and expire on the Termination Date with the same force
and effect as if such date were originally provided herein as the expiration
date of the term hereof. (However, Tenant shall be entitled to any and all
abatements afforded to Tenant pursuant to Article 9 hereof from the date of the
fire or other casualty.)
Article 11.
1. , subject, however, to the provisions of Article 41 of this Lease.
Article 13.
1. All of Landlord's aforesaid rights of entry (except for its right of
entry in cases of emergency) shall be exercised by Landlord only after
reasonable notice to Tenant. Whenever present in the demised premises, Landlord
(or its agents) shall use reasonable efforts to safeguard Tenant's property
therein and to minimize interference with the conduct of Tenant's business
(subject to the constraints of any state of emergency). If Tenant so requests in
writing within three (3) days of Landlord's notice to Tenant, and provided it is
reasonably practical and possible to comply with Tenant's request, Landlord
shall do all work required to be done in the demised premises after business
hours, provided that Tenant, when making such request, agrees to pay the
resulting overtime premium (if any) and any other costs relating to such after
hours work (if any).
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Article 17.
1. twenty (20) [except with regard to the payment of rent and additional
rent for which the notice period shall be ten (10) business days (but this 10
business day period shall be reduced to a 5 day period in the event 3 times
during any 12 month period Landlord has previously given Tenant notice for
non-payment of rent or additional rent)]
2. Whenever in this lease reference is made to a "default" by Tenant
hereunder, such reference shall be deemed to refer to a default by Tenant beyond
the applicable notice and cure period provided for in this Article 17.
Article 20.
1. and defects in Landlord's work provided for in a letter agreement
between Landlord and Tenant of even date to this Lease and any uncompleted
portions thereof.
Article 27.
1. served by registered or certified mail, return receipt requested, to:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: General Services
or to such other address as Tenant shall have specified by notice.
Article 30.
1A. (d) allow Tenant access to the demised premises twenty four hours a
day, seven days a week, three hundred sixty five days a year with one passenger
elevator available at all times (subject to elevator unavailability due to force
majuere).
1. freight
2. shall, in Landlord's discretion, which discretion shall be consistently
applied to Tenant as generally applied to other tenants of the Building,
3. subject to Tenant's requesting the subject service in writing delivered
to Landlord during normal business hours no later than 10 a.m. of the day on
which the service is to be used, except for weekend or holiday service the
written request must be received by Landlord on the last previous business day
during normal business hours and not less than twenty-four hours prior to the
time when the use of the service is to commence.
4. Landlord's inability
5. Landlord agrees not to discriminate against Tenant by charging Tenant a
greater sum than is generally charged tenants for overtime freight elevator
service, but Landlord shall have the right to charge any other tenant a lower
sum (or no sum) than is generally charged tenants for freight overtime service.
Article 35.
1. In the event of any conflict or inconsistency between the provisions of
the Rules and Regulations and the other provisions of this Lease, the other
provisions of this Lease shall govern.
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Article 38.
1. Average Cost
2. Landlord shall bill Tenant monthly for electric current at 105% of
Landlord's Average Cost. At the end of a Lease year if payments for such billing
shall be greater than $6,463.50 above Landlord's Average Cost for the subject
Lease year, such excess above $6,463.50 above Landlord's Average Cost shall be
credited to the Tenant's next monthly bill. Landlord's Average Cost for any
period shall mean an amount computed by multiplying the kilowatt hours consumed
in the demised premises during said period as measured by the submeter, by the
average cost per kilowatt hour for all electricity purchased by Landlord for use
within the Building for use for common areas, service areas and tenantable
areas, which average cost shall be equal to the quotient of Landlord's total
electric bill for the Consolidated Edison billing cycle month in question
divided by the total number of kilowatt hours consumed by the Building for said
billing cycle month for use for common areas, service areas and tenantable
areas. Landlord's Average Cost will include any surcharge which Landlord is
charged for Landlord's purchase of electric current (even if such charge is not
reflected in Landlord's electric bill). Landlord shall arrange (or cause the
meter company to arrange) to be billed by Con Ed exclusive of sales tax with
respect to the portion of electricity purchased by Landlord (or the meter
company) and resold. Landlord shall bill Tenant for sales tax on the amount paid
by Tenant to Landlord for electricity pursuant to clause (i) or (ii) above, and
Tenant shall pay such sales tax to Landlord and Landlord shall remit the same to
the appropriate tax authority.
3. twenty (20)
4. (as reasonably determined by Landlord)
5. provided Tenant has first failed to pay its bill for additional rent
relating to electric current within twenty (20) days' rendition of the subject
bill,
6. , as applicable,
7. , which consent shall not be unreasonably withheld or delayed,
8. Building,
9. thirty (30)
10. In the event Landlord chooses to cease supplying electric current by
submetering to the Building, Landlord shall at its expense and before ceasing to
supply electric current to the demised premises install all risers, feeders,
switches, meters and other equipment necessary for Tenant to become a direct
customer of the utility company; but if such submetering is discontinued due to
law, judicial decision or governmental or quasi-governmental order, then such
cost and expenses shall be borne by Tenant solely with respect to the demised
premises.
11. , which consent shall not be unreasonably withheld or delayed,
12. that during any period while Landlord is supplying unmetered electric
current pursuant to the preceding paragraph
13. Anything to the contrary contained in this paragraph notwithstanding,
if Tenant disagrees with any of the estimates or determinations regarding the
supply of unmetered electric current, Tenant may hire its own electric
consultant to determine the correct amount of Tenant's electric charge. If,
within twenty (20) days of Tenant's submission to Landlord of a copy of such
determination, Landlord and Tenant have not agreed upon
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Tenant's electric charge, Tenant and Landlord shall within a new twenty
(20) day period choose a third electric consultant whose determination (working
in conjunction with Tenant and Landlord's electric consultants) shall be final.
[In the event Landlord and Tenant fail to choose the third electric consultant
within the twenty (20) day period designated above for their choice of a third
electric consultant, the President of the Real Estate Board of New York, Inc.
shall designate the third electric consultant]. In the event such final
determination determines that Landlord had been overcharging Tenant by more than
15%, Landlord shall pay for the cost of the third electric consultant and the
charge for electric current shall be modified to provide for such correction;
however, if the final determination determines that any overcharge by Landlord
of Tenant was 15% incorrect or less, Tenant shall pay for the cost of the third
electric consultant and the charge for electric current will not be modified.
Pending the outcome of the determination, Tenant shall pay in accordance with
the estimate or determination of Landlord's consultant, but in the event the
determination results in a change in the amount Tenant is to be billed by
Landlord for electric current, the change in the charge for electric current
shall be applied retroactively to the date of the determination by the third
electric consultant.
14. Landlord at Tenant's
14A. shall
15. send the appropriate notices so as to commence to
16. Any damages caused to the electric system due to the change provided
for under this clause (c) shall be the responsibility of Landlord.
17. (f) In the event Tenant is at any time provided electric current by any
method other than submetering, including but not limited to Landlord's survey
method or direct supply from the utility company, Tenant shall pay Landlord as
additional rent on a monthly basis a sum equal to five percent (5%) of Tenant's
cost per month for electric current. [However, if at the end of any Lease year
Tenant has paid Landlord a total sum under this clause (f) greater than
$6,463.50 for said Lease year, Landlord shall credit the excess to Tenant's next
monthly bill under this clause (f)].
Article 39.
1. an individual hypothetical porter deemed to be continuously employed
throughout the term of this Lease as a porter at a Class A office building, and
deemed to have been so employed for one year as of the date of this Lease,
2. immediately prior to any change (increase or decrease), if any, for the
period after
3. December 31, 1990
3A. change in
4. or decreased
5. or be less than
6. or decrease
7. Anything to the contrary contained in this clause (b) notwithstanding,
in no event shall the basic annual rent be adjusted downward in accordance with
the calculations under this Article 39 below the amount provided for in the
opening sentence of this Lease. As of the effective date of the subject increase
in basic annual rent, the last adjustment for basic annual rent computed under
this Article 39 shall be recomputed to provide for
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the increase in basic annual rent to occur (i) on 9/1/94 set forth on page 1 of
this Lease or (ii) in the event of a modification of this Lease providing for an
increase in the basic annual rent (for additional space or otherwise).
8. change
8A. fifteen (15)
9. However, in the event of a decrease, Landlord, with the above stated
notice, shall, at Landlord's option, refund or credit Tenant the amount of any
such monthly decrease from the effective date of the Wage Rate decrease.
10. and Landlord shall promptly refund or credit, at Landlord's option, to
Tenant the amount of such retroactive adjustment, or in the event of an
increase.
11. Fifteen (15)
Article 40.
1. succeeding to the position of owner of the land and Building
2. penalties for late payment in respect of Taxes,
3. July 1, 1990 and ending June 30, 1991 and each succeeding twelve month
period commencing,
4. Relating to Tenant's occupancy or tenancy (or Tenant shall pay Tenant's
proportionate share of any such tax affecting the Building generally),
Article 41
1. (i) whether Tenant desires to assign the Lease or sublet all or a
portion of the demised premises, and (ii) in the case of a proposed sublease,
the portion of the demised premises that Tenant desires to sublet.
1A. ninety (90)
1B. by Landlord's written notice to Tenant sent
1C. Landlord's written notice to Tenant shall set forth and determine the
date on which the subject termination of this Lease shall occur which date shall
be no earlier than thirty (30) days after the date of Landlord's written notice
to Tenant and no later than ninety (90) days after the date of Landlord's
written notice to Tenant and on the subject date of termination of this Lease.
1D. Landlord's written notice to Tenant shall set forth and determine the
date on which the subject termination of this Lease (only as to such portion of
the demised premises) shall occur which date shall be no earlier than thirty
(30) days after the date of Landlord's written notice to Tenant and no later
than ninety (90) days after the date of Landlord's written notice to Tenant and
on the subject date of termination of this Lease.
2. and Landlord, at Tenant's sole cost and expense, shall promptly after
the termination date physically separate the portion of the demised premises
with respect to which the Lease was terminated, such work to be done in
accordance with all legal requirements and Landlord's insurance requirements.
3. then said Landlord's option shall not be exercisable by Landlord for a
period of six months from the end of the aforesaid ninety (90) day period and
Tenant, within such six month period, shall be free to find a prospective
assignee with respect to this Lease or one or more prospective subtenants with
respect to the
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portion of the demised premises proposed by it to be sublet (subject to all the
other terms and conditions of this Article 41), and at the end of such first six
month period and each succeeding six month period (described below) if Tenant
continues to desire to sublet or assign Tenant must (i) notify Landlord in
writing before the end of the then current six month period of such Tenant's
continued desire to sublet or assign and (ii) offer Landlord for a fifteen day
period immediately subsequent to the subject six month period the options
initially offered to Landlord in the aforesaid ninety (90) day period and if
Landlord does not exercise its foregoing option a new six month period as
described above shall occur within which Tenant may assign or sublease (subject
to all the other terms and conditions of this Article 41), and Landlord agrees
that
3A. Tenant acknowledges that a certain use which presently exists in the
Building may not be appropriate for the Building at the time of the intended
assignment or sublease presented by Tenant to Landlord. Use for a government
agency or a use which is open to the public or for retail sales, shall be deemed
to be inappropriate for the Building. No use shall be permitted which results in
the production of odors, waste or noise (other than office odors, waste and
noise) or the use of chemicals (other than office type use of chemicals). Tenant
acknowledges that the type of use of the demised premises and choice of
occupants of the demised premises are of paramount importance to Landlord.
Landlord acknowledges that the use to be permitted in the demised premises in
the event of an assignment of this Lease or in the event of a sublease of the
demised premises (for that portion of the demised premises affected by the
subject sublease) shall not be required to be the same as the use set forth in
Article 2 of this Lease provided any such new use of the demised premises is in
accordance with the requirements of this Article 41.
4. reasonable, customary and necessary legal fees,
5. ,less reasonable and necessary out-of-pocket costs actually incurred by
Tenant in connection with such subletting, including but not limited to any
reasonable, customary and necessary legal fees, brokerage fees, advertising and
alteration costs.
6. fifteen (15)
7. In the calculation of the amount Landlord is to be paid under this
clause (e) , Tenant's reasonable, customary and necessary out-of-pocket costs
(as enumerated above) actually incurred in connection with the subject
assignment or subletting shall be included in said calculation as and when
actually paid out by Tenant.
8. This clause (h) shall not apply to Goldman, Sachs & Co. or a successor
thereto (the term "successor" is defined below).
9. obtaining Landlord's consent,
10. successor or affiliate (the term "affiliate" is defined below)
11. Footnote 11 is purposefully omitted.
12. successor or affiliate
13. ("which" being the entering into an assignment or sublease) tenant
shall give Landlord prior or simultaneous written notice of
14. ,anything to the contrary contained above in this Article 41
notwithstanding,
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15. The term "affiliate" shall mean an entity controlled by, controlling,
or under common control with Tenant; the term control for such purposes shall
mean ownership of 50% or more of the equity interest in any such entity. The
term "successor" shall mean (i) any successor to Tenant by merger, consolidation
or other operation of law or (ii) any entity to which all or substantially all
of the assets of Tenant are transferred; provided however that no such entity
shall be considered a successor unless subsequent to the merger, consolidation
or asset transfer in question said successor has a net worth certified by a
certified public accountant of not less than $100 million as determined in
accordance with generally accepted accounting principles (excluding good will).
16. Either (1)
17. with respect to such assignment or sublease
18. or (2) an agreement by Tenant to indemnify Landlord against any claims
and all costs including but not limited to reasonable legal fees made by any
brokers with respect to such assignment or sublease.
Article 42.
1. commercial
Article 44.
1. placed by Tenant, its partners, employees and/or invitees
Article 45.
1. or any of Tenant's rights under this Lease. Tenant agrees to execute an
attornment agreement to memorialize the terms of this Article 45 within twenty
(20) days of Landlord's written request for each subject attornment agreement.
Landlord's obligations under Footnote 1 to Article 7 of this Lease are subject
to Tenant's fulfilling its obligations under this Article 45.
Article 47.
1. notice of Tenant's actual knowledge
Article 50.
1. twenty (20)
2. Footnote 2 is purposefully omitted.
3. reasonably
4. relating to this Lease and/or Tenant's tenancy or occupancy;
Article 51
1. fifteen (15) [except this fifteen (15) day period shall permanently be
reduced to a ten (10) day period in the event three (3) times during any twelve
(12) month period such a failure to pay within fifteen (15) days shall occur]
2. interest at the prime rate of The Chase Manhattan Bank, N.A. plus one
percent may be charged to Tenant upon the sum due, and if such failure should
continue for thirty days (30) after such payment was first due,
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3. promptly after
Article 52.
1A. holdover
1. two and one-half (2 1/2)
Article 55.
1. or additional rent
2. or
Article 59.
1. ,if it relates to Tenant's use or manner of use of the demised premises,
2. Anything to the contrary contained in the immediately preceding sentence
notwithstanding, Tenant shall not be responsible under this Article 59 for (i)
structural alterations or (ii) changes to or work performed on the mechanical or
electrical systems of the Building to the point of the connection of Tenant's
lines and risers to such systems, unless such alteration, change or work is
required due to Tenant's manner of use of the demised premises.
Article 61.
1. under the terms of this Lease
2. for work which affects the structure of the Building or is directly
performed on the Building's systems,
2A. (except with regard to Landlord's performance of work on behalf of
Tenant under Articles 59 of this Lease the percentage shall be 15% and not 21%)
3. provided the reasonable estimate of the cost of the subject job totals
$5,000.00 or more.
Article 70.
1. within thirty (30) days after
Article 71.
1. (1) Tenant shall have the right to connect to and draw from the
Building's hot and cold water systems. (2) Landlord shall perform the necessary
work at Tenant's cost and expense. (3) Landlord shall maintain (except
maintenance required due to Tenant's acts of negligence, misuse, commission or
omission for which Tenant shall be responsible and which maintenance Landlord
shall perform at Tenant's cost and expenses) the Building's water risers which
lead to the pipes connecting into the demised premises and the waste lines which
leave from the demised premises (but Landlord shall not maintain the connecting
pipes, valves and taps into the demised premises which Tenant shall be
responsible to maintain).
2. Landlord at Tenant's expense
3. each of Tenant's
3A. connections
4. meters
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4A. related
5. within fifteen (15) days of
6. additional
7. for any period during the term of this Lease or Tenant's occupancy
7A. and fees including but not limited to any surcharges.
8. Tenant acknowledges that Tenant's right to obtain hot water is limited
by and subject to the then present condition of hot water as then available in
the Building when and if hot water is at any given time provided to tenants of
the Building by Landlord in Landlord's sole discretion. Tenant shall have the
right to install a hot water heater in the demised premises subject to the terms
of Article 76 of this Lease.
Article 72.
1. including the demising walls
2. Landlord's obligations under this Article 72 shall survive until the
termination of this Lease with respect to asbestos-containing material existing
in the demised premises which existed in the demised premises prior to Tenant's
occupation thereof.
Article 73.
1A. reasonable
1. the portion of
2. identified on Exhibit "A" to this Lease as A.C. Locations on Roof
815-817 S.
2A. Tenant shall promptly notify Landlord in writing of any repairs to the
portion of the set-back roof covered by this Article 73 which are required and
Landlord shall have the right to choose to perform any such repair at Tenant's
cost and expense.
3. (structural or non-structural) or the Building's occupants
3A. and the maintenance of the Equipment,
4. The terms of this Article 73 shall be deemed to be a license granted by
Landlord to Tenant which shall be irrevocable during the term of this Lease
provided Tenant complies with the terms of this Article 73. The set-back roof
which is the subject of this Article 73 is not a portion of the demised
premises, but its usage by Tenant shall be governed by the terms of this Lease
as if it were a portion of the demised premises.
Article 74.
1. 76
2. Landlord, at Tenant's expense, shall install
3. fifteen (15)
4. the tap connecting into the steam riser, the piping from the steam riser
to the demised premises and the steam submeter. Landlord, at Tenant's sole cost
and expense, shall connect the demised premises to the riser providing constant
24 hour steam. Subsequent to the initial connection to the 24 hours steamline
made on Tenant's behalf as described in the immediately preceding sentence, in
the event Landlord, in Landlord's sole judgement,
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elects to switch to a different steam pressure line with regard to providing
steam pressure to the demised premises, Landlord, at Landlord's cost, shall
switch Tenant's steam connection to the then active steam pressure line (this
switch will be performed by Landlord, at Tenant's cost, in the event the switch
is required by law, judicial decision, governmental or quasi-governmental order,
utility company action or decision). Landlord shall maintain the Building's
steam system including risers but not including any piping or connections or
taps the purpose of which are to connect individual premises to the Building's
steam system.
Article 75.
1. seven (7)
Article 75A
1. The following Article is to be added as Article 75A:
Limitation on Tenant's Liability.
Landlord acknowledges that the Tenant named herein is a partnership and
Landlord agrees that, in all events, Landlord's recourse against Tenant under
this Lease shall be limited solely to the partnership assets of Tenant and,
accordingly, in no event shall Landlord make any claim against or seek to impose
any liability upon any partner of Tenant.
Article 76.
1. Footnote 1 is purposefully omitted.
1A. which approval shall not be unreasonably withheld;
1B. within thirty days of
2. Ten thousand dollars ($10,000),
2A. Tenant,
2B. non-structural
3. Materially or adversely affect
Article 77.
1. ninety (90)
1A. (the "Substitute Space")
1B. (defined below)
1C. The Effective Date shall be the later of (i) the date ninety (90) days
subsequent to the date of Landlord's notice ("Landlord's Initial Notice") to
Tenant informing Tenant that Landlord intends to substitute the Substitute Space
for the Prior Space or (ii) either (a) in the case where Tenant elects to
perform Tenant's Moving Work (defined below) the date thirty (30) days after
Landlord has substantially completed preparing the Substitute Space for Tenant's
occupancy in accordance with the terms of this Article 77 of which date of
substantial completion Landlord shall have given tenant not less than ten (10)
days notice, or (b) in the case where Tenant elects to have Landlord perform
Tenant's Moving Work, the date on which Landlord has substantially completed
Tenant's Moving Work.
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2. have no less total usuable area than
3. (e) Anything to the contrary contained in this Article 77
notwithstanding, in addition to Landlord's obligation set forth above in this
Article 77 Landlord shall, at Landlord's cost and expense, perform the
following:
1) Landlord shall build-out the Substitute Space to be substantially
equivalent to the Prior Space as it exists at the time of the relocation. In
this respect Landlord shall provide space which is newly decorated, layed out
and partitioned in the same manner as the Prior Space.
2) The Substitute Space shall be substantially in the same shape as the
Prior Space; the length (east/west) shall be the same plus or minus ten percent
(10%), and the width (north/south) shall be a minimum of the width of the Prior
Space on the Commencement Date of this Lease.
3) Landlord shall provide Tenant space on a roof functionally equivalent
(with respect to the Equipment) to the space on the set-back roof designated as
A.C. Locations on Roof 815-817 S on Exhibit "A" of this Lease or functionally
equivalent (with respect to the Equipment) additional floor area for which
Tenant shall receive an irrevocable license equivalent to the irrevocable
license covering such subject roof space described in Article 73 of this
Lease.
4) Landlord shall furnish Tenant with plans and specifications for the
subject relocation including drawings, mechanicals, and scheduling information.
f) Anything to the contrary contained in this Article 77 notwithstanding,
Tenant within ten (10) days after receipt of Landlord's Initial Notice, may
elect to (i) perform Tenant's Moving Work at Landlord's sole reasonable cost and
expense, or (ii) have Landlord perform Tenant's Moving Work at Landlord's sole
expense. Tenant's Moving Work shall mean the moving of Tenant's complete
operation from the Prior Space to the Substitute Space, including the moving and
reinstallation of all Tenant's furniture and equipment including the Equipment
(as defined in Article 73) to the appropriate roof space or additional floor
area.
If Tenant elects to have Landlord perform Tenant's Moving Work, then:
1) At Tenant's request, Landlord shall perform the subject relocation in a
continuous fashion (on consecutive eight hour days); Tenant may further request
that the subject relocation be made in phases (which are reasonable) which phase
schedule must be reasonably acceptable to Tenant and Landlord.
2) At Tenant's request, the subject relocation will be made over a week-end
through to 7 a.m. Tuesday [plus additional day(s) to correspond to any holiday
during the relocation].
If Tenant elects to perform Tenant's Moving Work itself, then:
1) Tenant, from and after the date of the Landlord's buildout of the
Substitute Space being substantially completed, shall have the right to perform
Tenant's Moving Work. Landlord shall provide Tenant for the period of such
performance priority use of the Building's freight elevators to facilitate
Tenant's Moving Work and otherwise cooperate with Tenant's efforts in connection
therewith.
2) Tenant, after Tenant's Moving Work is complete, shall furnish Landlord
with a statement including but not limited to cancelled checks and receipts
setting forth and verifying Tenant's reasonable expenses which shall have been
actually,
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directly and solely incurred in connection with Tenant's Moving Work, and within
thirty (30) days after the receipt of such statement, Landlord shall pay Tenant
the amount set forth thereon or give Tenant written notice of Landlord's
objections to Tenant's statement.
3) If Tenant has not completed Tenant's Moving Work by the Effective Date,
then Landlord may give Tenant a notice informing Tenant that if Tenant's Moving
Work is not completed (10) days after the date of such notice, Landlord will
have the right at any time thereafter to prosecute Tenant's Moving Work at
Tenant's sole cost and expense.
g) All of Landlord's obligations set forth in this Article 77 are subject
to Tenant's providing Landlord with Tenant's full cooperation including but not
limited to Tenant's providing personnel to assist Landlord.
h) Landlord's build-out of the Substitute Space shall be considered
"substantially completed" when such work is completed other than insubstantial
details of mechanical and decorative adjustment that won't interfere with
Tenant's business operations ("Punch List Items"). Landlord shall cure all Punch
List Items within thirty (30) days of Tenant's notice to Landlord setting forth
actual Punch List Items.
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ADDITIONAL RULES AND REGULATIONS
111 EIGHTH AVENUE
The Rules and Regulations are established to safeguard the interest of the
Tenant, the Landlord, and others, lawfully engaged in and about the Demised
Premises and the Building.
Such Rules and Regulations are to be observed and enforced at all times in
accordance with the provisions of the within Lease.
1. Trucks using the Tenant Shipping Platforms on the ground floor of the
building, and the upper Floor Truck Lobbies will load and discharge at the place
or places thereat and therein as indicated by the duly authorized representative
of Landlord in charge of such operation.
2. Elevators for Freight Handling Service will be operated during usual
business hours of usual business days, unless special arrangement is made with
Landlord for operation at other times.
3. The use of the private right of way and the truck elevators will be
subject to and under the sole direction and control of the duly authorized
representative of the Landlord in charge of such operation. When in the interest
of continuity of service and/or in the interest of the common service, Tenant's
freight departing from or arriving at the building by truck may at the direction
of Landlord be handled over and through Tenant's Shipping Platforms on the
ground floor and the freight elevators. Landlord reserves the right to direct
such handling in lieu of truck elevator service, provided the exercise of such
right by Landlord to direct such alternate handling of freight is not
unreasonably employed.
4. In the interest of preserving the continuity of freight elevator
service, freight will not be floored upon the freight elevator, but will at all
times be handled and moved upon suitable vehicles of the indoor industrial
wheeler type permitting such freight to be economically and expeditiously
wheeled on and off the freight elevators. Freight which cannot be handled upon
such equipment will be handled in such other manner as may be approved by
Landlord.
5. Tenant Shipping Platform located on first or ground floor of the
Building are designed to accomplish the immediate transfer and/or movements of
merchandise between the freight elevators and trucks. The use of such facility
by Tenant, its agents, servants, employees, representatives and/or contractors
will be confined to such purpose, under the reasonable direction and control of
the duly authorized representative of Landlord in charge of such operation.
No storage or holding of merchandise on such Tenant Shipping Platforms
awaiting the arrival of trucks, or awaiting transfer by Tenant from such Tenant
Shipping Platforms to the demised premises will be permitted. No automobiles of
Tenant, its employees, servants, licensees, contractors, customers, visitors or
agents may enter on or be stored in any portion of the building, except in areas
designed by Landlord and provided Tenant pays for such parking at rates
designated by Landlord, its agents or parking lessees.
Any violation of this rule or disregard of directions issued by Landlord
will give the Landlord the right to handle, transfer, remove and/or store such
freight in or to other premises in the building. When such handling, transfer,
removal and/or storage is performed by Landlord, and when it shall be deemed
necessary by Landlord to preserve the continuity of common service provided by
this facility, any and all expense will be for the account of Tenant and at his
expense. Landlord will not be responsible for any loss or damage which the
merchandise may suffer by such handling, removing and/or storing unless
resulting from negligence on the part of Landlord, its agents, servants and/or
employees.
6. Agents, servants, employees of Tenant will in no case, and under no
condition, be permitted to operate any freight, passenger or truck elevator.
7. The Building is equipped with scuppers for carrying off water which may
result from sprinkler operation or other causes. Tenant shall not, under any
circumstances, deposit or permit to be deposited sweepings, and/or any other
rubbish in the said scuppers, and Tenant will keep the scuppers within the
demised premises at all times free of any and all rubbish, sweepings, and/or
other obstructions of any nature whatsoever.
8. Tenant shall not, under any circumstances, permit the collection of
sweepings and/or any other rubbish in the expansion joints of the Building, or
in any other portions of the Building outside of the demised premises. All such
sweeping and/or rubbish so contained within the demised premises shall be
removed daily by Tenant in such manner as Landlord shall direct. Tenant will
keep the said expansion joints free of any and all rubbish, sweepings and/or any
other obstruction of any nature whatsoever. Tenant will not place machinery
and/or equipment in such a position that the said machinery and/or equipment
straddles an expansion joint, or erect a partition which intersects an expansion
joint, unless one end of such machinery, equipment and/or partition is free to
permit the expansion and/or contraction of the Building.
PLEASE INITIAL
[____] [____]
LANDLORD TENANT
<PAGE>
[Exhibit A - Floor Plan]
(Graphic Omitted)
<PAGE>
ACKNOWLEDGEMENTS
AGENT FOR LANDLORD
STATE OF NEW YORK )
COUNTY OF NEW YORK )
On this day of September, 1989, before me personally came ______________ , who
executed the foregoing instrument and who, being duly sworn by me, did depose
and say that he is the ____________ of Sylvan Lawrence Company, Inc., the
corporation which executed the foregoing instrument as agent-for P.A. BUILDING
COMPANY that he knows the seal of said corporation; that the seal affixed to
said instrument is such coporate seal; that it was so affixed by order of the
Board of Directors of said coporation; and that he signed his name thereto by
like order.
INDIVIDUAL TENANT )
STATE OF NEW YORK ) ss.1
County of
On this 6 day of September, 1989 before me personally came DAVID A GEORGE,
to me known, who being by me duly sworn, did depose and say that he resides in
________________________ that he is the PARTNER of GOLDMAN SACHS & CO. described
in and which executed the foregoing instrument as TENANT.
/s/ Lynn Holly Fodor
--------------------
INDIVIDUAL TENANT LYNN HOLLY FODOR
STATE OF NEW YORK ) Notary Public, State of New York
County of ) No. 43-01FO4876815
Qualified in Richmond County
Commission Expires November 10, 1990
On this day personally came to me known and known to me to be the
individual described in and who, as TENANT, executed the foregoing instrument
and acknowledged to me that he executed the same.
-----------------------
IMPORTANT -- PLEASE READ
RULES AND REGULATIONS ATTACHED TO
AND MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 35.
1. The sidewalk, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress to and egress from
the demised premises and for delivery of merchandise and equipment in a prompt
and efficient manner using elevators and passageways designated for such
delivery by Landlord. There shall not be used in any space, or in the public
hall of the building, either by any Tenant or by jobbers or others in the
delivery or receipt of merchandise, any hand trucks, except those equipped with
rubber tires and sideguards. If said premises are situate on the ground floor of
the building Tenant thereof shall further, at Tenant's expense, keep the
sidewalks and curb in front of said premises clean and free from ice, snow, dirt
and rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purpose other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the building and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors or halls, elevators, or out of the doors or windows or stairways of
the building, and Tenant shall not use, keep or permit to be used or kept any
foul or noxious gas or substance in the demised premises or permit or suffer the
demised premises to be occupied or used in a manner offensive or objectionable
to Landlord or other occupants of the building by reason of noise, odors and/or
vibrations..or interfere in any way, with other Tenants or those having business
therein, nor shall any animals or birds be kept in or about the building.
Smoking or carrying lighted cigars or cigarettes in the elevators of the
building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Landlord.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of premises without the prior written consent
of the Landlord, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violations of the foregoing by any Tenant,
Landlord may remove same without any liability, and may charge the expense
incurred by such removal to Tenant or Tenants violating this rule. Interior
signs on doors and directory tablet, shall be inscribed, painted or affixed for
each Tenant by Landlord at the expense of such Tenant, and shall be of a size,
color and style acceptable to Landlord.
6. No tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Landlord, and as Landlord may direct. No Tenant shall lay linoleum,
or other similar floor covering so that the same shall come in direct contact
with the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each tenant must, upon the termination of his Tenancy,
restore to Landlord all keys of stores, offices and toilet rooms, either
furnished to, or otherwise procured by, such Tenant, and in the event of the
loss of any keys, so furnished, such Tenant shall pay to Landlord the cost
thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only as the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Landlord. Landlord reserves the right
to inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations or the
lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon these demised premises ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Landlord,
and at hours and under regulations fixed by Landlord. Canvassing, soliciting and
peddling in the building is prohibited and each Tenant shall co-operate to
prevent the same.
10. Landlord reserves the right to exclude from the building between the
hours of 6 P.M. and 8 A.M. and at all hours on Sundays, and legal holidays all
persons who do not present a pass to the building signed by Landlord. Landlord
will furnish names to persons from whom any Tenant requests name in writing.
Each Tenant shall be responsible for all persons for whom he requests such pass
and shall be liable to Landlord for all acts of such persons.
11. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the building or
its desirability as a building for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
[_] [_]
PLEASE INITIAL
Address: 111 Eighth Avenue
Premises: Room 815 - 825
P.A. Building Company
TO
GOLDMAN SACHS, & CO.
================================================================================
[SEAL] MODIFIED FORM OF [SEAL]
LOFT
LEASE
The Real Estate Board of New York, Inc.
(C)Copyright 1973. All Rights Reserved.
Reproduction in whole or in part prohibited.
================================================================================
Dated September 14 1989
Rent per Year $258,540 9/1/89 - 8/31/94
$280,085 9/1/94 - 12/31/99
Rent Per Month
Term Ten (10) Years, Four (4) Months
From September 1, 1989
To December 31, 1999
Drawn by _____TDG:______ Checked by ____________
Entered by _____________ Approved by ____________
================================================================================
<PAGE>
The Office of the Undersigned
100 William Street
New York, NY 10038
(212) 344-0044
September 14, 1989
Goldman Sachs & Co.
85 Broad Street
New York, New York 10004
Re: Room 815-825, 111 8th Avenue, New York, NY
Gentlemen:
You, as Tenant, and the undersigned, P.A BUILDING COMPANY, as Landlord have
entered into a certain agreement of lease of even date herewith covering the
subject demised premises, in consideration of which the undersigned agrees, at
its sole cost and expense (except as otherwise provided for hereinbelow), to
initially perform the following work in and to the above-mentioned demised
premises:
1. Make available the capacity for Tenant to consume a total of 1500
Amps of 208 Volt 3 Phase electric current to pull box or boxes located in
premises (assuming voltage drop of no more than 2.5%, unless caused by Con
Edison or any other reason beyond Landlord's control). Tenant shall pay
Landlord $75,000 simultaneously with the Tenant's execution of the Lease
and $70,000 simultaneously with Landlord's making available the capacity
for Tenant to consume such 1500 amps regarding this number 1.
2. Demolish all interior non-load bearing walls and remove all
obsolete and extraneous equipment, piping, etc. as per Tenant's subject
demolition plan (as approved by Landlord as of the date hereof) delivering
demised premises in broom clean condition.
3. At Tenant's request, Landlord will, at Tenant's cost and expense,
provide and install window louvres in accordance with Landlord's
specifications sized by Tenant.
PLEASE INITIAL
[____] [____]
<PAGE>
4. Landlord shall tap into an existing steam riser (work to include
but not be limited to installation of valve and meter) in order to provide
Tenant with steam per Tenant's specifications, all at Tenant's cost.
In the event Tenant requests to use a waste drain line within the demised
premises and Landlord requires Tenant to use a waste drain line outside of the
demised premises (at Landlord's choice and not due to Tenant's needs), Landlord
will pay the additional plumbing charge resulting directly from Landlord so
requiring Tenant to use a waste drain line outside of the demised premises.
Tenant shall maintain such connection to the waste drain line outside of the
demised premises in good order and condition at Tenant's sole cost and expense.
During the initial installation of the demised premises only, there shall
be (i) no extra charges for non-exclusive freight elevator service for Tenant or
its contractors during normal business hours and (ii) no charges to Tenant for
Landlord's overhead and supervision costs regarding general conditions at the
demised premises but such charges shall be in effect for special needs such as
sprinkler shut-downs, outside engineering services, work required by Landlord or
circumstances to be undertaken after normal business hours and the like.
It is understood and agreed that the demised premises have been leased to
you and you accept the same in their "as is" condition in all other respects.
Landlord's work described in this letter shall be done in compliance with
law; Landlord shall promptly prosecute the same subject to Tenant's not
hindering or delaying said work.
This letter agreement shall be deemed to be an amendment to the Lease. For
the purposes of the Lease, this letter shall be referred to as the "Work
Letter".
Very truly yours,
P.A. BUILDING COMPANY
BY: SYLVAN LAWRENCE COMPANY, INC.
AGENT
AGREED TO AND ACCEPTED:
GOLDMAN SACHS & CO.
By /s/ [illegible]
------------------------------------
Title
By /s/ David A. Geoge
- -------------------------------------
Partner Title
PLEASE INITIAL
[____] [____]
<PAGE>
The Office of the Undersigned
100 William Street
New York, NY 10038
(212) 344-0044
September 14, 1989
Goldman Sachs & Co.
85 Broad Street
New York, New York 10004
Re: Room 815-825 111 8th Avenue
New York, New York
Gentlemen:
The undersigned, P. A. BUILDING COMPANY (the "Landlord"), as Landlord, and
Goldman Sachs & Co. (the "Tenant"), as Tenant, have entered into a certain
agreement of lease (the "Lease") of even date herewith covering the
above-mentioned demised premises.
This letter agreement shall be deemed to be an amendment to the Lease.
Anything to the contrary contained in that letter agreement amendment to
the Lease of even date which defines the term Commencement Date notwithstanding,
this letter agreement amendment to the Lease serves to officially confirm that
the Commencement Date (of the term of the Lease) does officially occur on the
date of this letter agreement amendment to the Lease.
Anything to the contrary contained in the Lease notwithstanding, this
letter agreement amendment to the Lease serves to amend the Footnote Insert to
the Lease as follows:
1. The second line of Footnote 3A to Article 3 of the Lease shall be
amended to add the words "or potential for liability" between the
words "expense" and "to" so that said second line shall read "...no
cost and expense or potential for liability to Landlord, with Tenant's
efforts to obtain...".
2. The following language shall be added to the end of Footnote 1 to
Article 7 of the Lease: "Anything to the contrary contained in this
Footnote 1 to Article 7 notwithstanding, the effectiveness of the
first sentence of this Footnote 1 to Article 7 is subject to Tenant's
execution of any documents reasonably requested by the subject lender
or lessor in conjunction with the granting of non-disturbance
protection for the benefit of Tenant."
PLEASE INITIAL
[____] [____]
<PAGE>
Sylvan Lawrence Company, Inc.
3. The following language shall be added to the end of Footnote 1 to
Article 41 of the Lease: "The Tenant's notice to Landlord describing
the portion of the demised premises that Tenant desires to sublet must
be accompanied by a floor plan delineating the space Tenant desires to
sublet."
Anything to the contrary contained in Article 41 of the Lease
notwithstanding, in the event Tenant notifies Landlord that Tenant desires to
(i) sublet all or substantially all of the demised premises or (ii) sublet less
than all or substantially all of the demised premises, Landlord shall have the
right to cancel and terminate the Lease (by Landlord's written notice to Tenant
more particularly described in Article 41) with regard to all of the space that
Tenant shall have described in Tenant's above-mentioned notice to Landlord, or,
in Landlord's sole discretion, Landlord shall have the right to cancel and
terminate the Lease with respect to less than the entire space described in
Tenant's above-mentioned notice (which space shall be chosen and delineated by
Landlord subject to the proviso set forth immediately below), provided that
Landlord may only cancel and terminate the Lease with respect to less than the
entire space described in Tenant's above-mentioned notice if the space remaining
as the demised premises under the Lease after such cancellation and termination
shall (i) include access to the public portion of the floor of the Building (by
corridor or otherwise) and (ii) be large enough independently to be what is
reasonably deemed to be rentable space.
Tenant agrees that all waste discharged from the demised premises shall
meet all relevant Environmental Protection Agency's (or any governmental or
quasi-governmental successor thereto) acceptability standards as may presently
or hereafter exist.
The Lease cannot be modified or amended except in writing executed by both
Landlord and Tenant. The provisions hereof shall be binding upon and inure to
the benefit of Landlord and Tenant and their respective permitted successors and
assigns.
Very truly yours,
AGREED TO AND ACCEPTED: P. A. BUILDING COMPANY
By Sylvan Lawrence Company, Inc.,
Agent
GOLDMAN SACHS & CO.
By /s/ [illegible]
------------------------------------
Title
By /s/ David A. Geoge
- -------------------------------------
Partner Title
<PAGE>
The Office of the Undersigned
100 William Street
New York, NY 10038
(212) 344-0044
September 14, 1989
Goldman Sachs & Co.
85 Broad Street
New York, New York 10004
Re: Room 815 - 825, 111 8th Avenue, New York, NY
Gentlemen:
The undersigned, P. A. BUILDING COMPANY ("The Landlord"), as Landlord, and
you ("Tenant"), as Tenant, have entered into a certain agreement of lease (the
"Lease") of even date herewith covering the above-mentioned demised premises for
a term intended to commence on September 1, 1989 in accordance with the terms of
the Lease.
Anything to the contrary contained in the Lease notwithstanding, the
commencement date (the "Commencement Date") of the term of the Lease shall be
the date as determined below under the terms of this letter agreement amendment
to the Lease.
Landlord and Tenant agree that the Lease shall commence on the Commencement
Date which Commencement Date shall occur upon each of the following conditions
having been satisfied:
(i) Landlord shall have completed all of the work set forth in item number
2 of the Work Letter (said Work Letter being another letter agreement
amendment to the Lease of even date herewith); and
(ii) Landlord shall have delivered to Tenant a Certification ACP-5 for the
demised premises.
Notwithstanding the fact that Commencement Date may be a date other than
September 1, 1989 (in accordance with the terms of this letter agreement
amendment), the expiration date of the Lease shall remain December 31, 1999 and
the term of the Lease may be less than ten (10) years, four (4) months to the
extent the Lease commences on a date after September 1, 1989. If the
Commencement Date does not occur by the date sixty (60) days after the date of
the Lease, then Tenant, at any time thereafter prior to the Commencement Date
occuring, may, at Tenant's option, cancel the Lease by written notice given to
Landlord.
PLEASE INITIAL
[____] [____]
<PAGE>
In consideration of Tenant so entering into the Lease, the Landlord hereby
agrees that Tenant may enter into possession of the demised premises on the
Commencement Date of the Lease, subject, however, to all of the terms, covenants
and conditions of the Lease, and provide Tenant is not then in default (as
defined in the Lease) under any terms and provisions of the Lease, Landlord
agrees to waive the installments of basic annual rent becoming due under the
Lease from the Commencement Date for a period through and including December 31,
1989 (to the extent of $708.33 per day). It is understood that no waiver is
intended with respect to any increases to the basic annual rent on account of
electricity, operating expense escalation or real estate tax escalation nor with
respect to any additional rent or other charges which may be due or payable
under the Lease.
In accordance with the terms of the immediately preceding paragraph of this
letter agreement amendment, the payment of basic annual rent under the Lease is
intended to commence on January 1, 1990. However, (1) to the extent the
Commencement Date does not occur (in accordance with the terms of this letter
Lease agreement amendment) by the date five (5) business days after the date of
the Lease (the Lease shall be dated on the date of full execution and delivery
of the Lease), then each day within the period commencing on the day immediately
after the above mentioned five (5) business day period and ending on the day the
Commencement Date occurs, all days inclusive, shall be deemed to be a "Landlord
Late Day"; and (2) if Landlord does not complete the work set forth in item
number (1) of the Work Letter by the later of (a) the date which is twenty-five
(25) days after the Commencement Date, or (b) the date thirty (30) days after
the date of the Lease, then each day in the period commencing on the day
immediately after such twenty five (25) day period or thirty (30) day period (as
the case may be) and ending on the day Landlord completes the work set forth in
item number (1) of the Work Letter, all days inclusive, shall be deemed to be a
"Landlord Late Day". For each Landlord Late Day the waiver period for the
payment of basic annual rent under the Lease shall be continued for one day from
January 1, 1990 [so that if there are a total of three (3) Landlord Late Days,
the date for commencement of payment of basic annual rent shall be January 4,
1990].
The provisions hereof shall be binding upon and inure to the benefit of
Landlord and Tenant under the Lease and their respective heirs, successors and
permitted assigns.
PLEASE INITIAL
[____] [____]
<PAGE>
This letter agreement shall be deemed to be an amendment to the Lease.
Very truly yours,
AGREED TO AND ACCEPTED: P. A. BUILDING COMPANY
By Sylvan Lawrence Company, Inc.,
Agent
GOLDMAN SACHS & CO.
By /s/ [illegible]
------------------------------------
Title
By /s/ David A. Geoge
- -------------------------------------
Partner Title
<PAGE>
CONSENT TO SUBLEASE
By this consent (this "Consent") dated as of July______, 1996, P.A.
BUILDING COMPANY, a New York partnership, having an office c/o Sylvan Lawrence
Company, Inc., 100 William Street, New York, New York 10038 (the "Landlord"),
landlord under a certain agreement of lease (the "Lease") dated September 14,
1989 between Landlord and GOLDMAN, SACHS & CO., a New York limited partnership
(the "Tenant"), having an address at 85 Broad Street, New York, New York 10004
covering premises (the "Demised Premises") known as Rooms 815-825 located in the
building (the "Building") known as 111 Eighth Avenue, New York, New York, hereby
conditionally consents to the subletting of a portion (the "Space") of the
Demised Premises (i.e. all of the Demised Premises other than the portion
thereof designated Retained Premises on the plan attached hereto as Exhibit "A")
under the agreement of sublease (the "Sublease") dated as of July 15, 1996
between Tenant and CUNNINGHAM GRAPHICS, INC. (the "Subtenant"), having an
address at 629 Grove Street, Jersey City, New Jersey 07306 for a term expiring
on before December 30, 1999 expressly subject to the following terms and
conditions:
1. Neither the giving of this Consent nor anything contained in the
Sublease shall (a) modify the Lease, (b) increase the obligations or diminish
the rights of Landlord under the Lease, (c) diminish the obligations or increase
the rights of Tenant under the Lease, (d) in any way be construed as giving
Subtenant any greater rights under the Sublease than Tenant would be entitled to
under the Lease, or (e) bind Landlord to any of the terms or conditions of the
Sublease, it being the express intention of Landlord by executing this Consent
to approve only the named Subtenant and the initial term of the Sublease. Tenant
and Subtenant agree that the Demised Premises and/or the Space shall not be used
for any purpose which is not specifically permitted under the Lease. Anything
contained in the Sublease which is inconsistent with the terms and conditions of
the Lease or this Consent shall be deemed of no force or effect, and the terms
and conditions of the Lease and this Consent shall prevail.
2. Except as provided in Section 8 below, the giving of this Consent shall
not serve to waive, and is given subject to, the requirement of obtaining
Landlord's consent, which Landlord's consent Landlord may withhold in each
instance in Landlord's sole discretion and judgment (except as otherwise
specifically provided for in the Lease and except that Landlord shall not
unreasonably withhold its consent to any modification of the Sublease), to (a)
any further subletting of all or a portion of either the Demised Premises or the
Space, or (b) any assignment of the Lease, or (c) any modification, renewal,
extension, or assignment of the Sublease, or (d) any sub-letting of all or a
portion of either the Demised Premises or the Space.
3. The giving of this Consent shall not be deemed or serve
1
<PAGE>
to release the named Tenant under the Lease or any successor-in-interest to the
named Tenant from any liability or obligation which such Tenant or any
successor-in-interest may have.
4. In the event Landlord collects any basic rent and/or additional rent due
under the Lease directly from Subtenant for any reason whatsoever, Subtenant
shall be deemed to make such payment of basic rent and/or additional rent solely
as agent of and on behalf of Tenant, and Landlord shall credit any such sums
collected to the account of Tenant, and the collection of such basic rent and/or
additional rent shall not be deemed to be an acceptance of Subtenant as a tenant
under the Lease nor shall it be deemed to release Tenant from any or all of the
terms, covenants and conditions under the Lease.
5. Landlord makes no representations whatsoever nor takes any
responsibility regarding the provisions contained in the Sublease. The giving of
this Consent shall not be (a) construed as granting Subtenant any rights under
the Lease or (b) deemed to be a consent by Landlord to the terms and provisions
of the Sublease. Nothing contained in this Consent shall be deemed to bestow
upon or grant to Subtenant third party beneficiary rights under the Lease. It is
expressly acknowledged, accepted and agreed that (a) his Consent is for the
express purpose of permitting the Sublease pursuant to the terms contained in
this Consent and (b) Subtenant has no privity of contract with nor enforceable
rights against Landlord.
6. The granting of this consent by Landlord is subject to Tenant's being
free from any default under the terms and provisions of the Lease as of the date
of the granting of this Consent and as of the commencement date of the Sublease.
7. It is expressly understood and agreed that submission by Landlord of
this consent for review shall confer no rights nor impose any obligations on any
party unless and until Landlord, Tenant and Subtenant shall have executed this
Consent and duplicate originals of this Consent shall have been delivered to the
respective parties to this Consent.
8. The Sublease contains an option, on the part of Tenant as sublandlord
thereunder, to sublease the balance of the Demised Premises to Subtenant; such
option is exercisable at any time during the term of the Sublease. No further
consent shall be required upon the exercise of said option, and this Consent
shall be fully applicable thereto. Upon the exercise of said option, the term
"Space" as used herein shall mean the entire Demised Premises. Tenant shall give
Landlord prompt written notice of the exercise of said option.
2
<PAGE>
P.A. BUILDING COMPANY (Landlord)
By: Sylvan Lawrence Company, Inc., Agent
By:
------------------------------------
Title
ACKNOWLEDGED, ACCEPTED AND AGREED TO:
GOLDMAN, SACHS & CO. (Tenant)
By:
---------------------------------------
Title
CUNNINGHAM GRAPHICS, INC. (Subtenant)
By:/s/ Michael Cunningham
- --------------------------------------------
Title
3
<PAGE>
ACKNOWLEDGEMENTS
PARTNERSHIP TENANT
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this _______ day of ___________, 1996 before me personally came
___________________________________________________, to me known, who, being
duly sworn, did depose and say that he/she is a member of the partnership
GOLDMAN, SACHS & CO., the partnership described in and which executed the above
instrument; that he/she executed said instrument on behalf of said partnership,
and that he/she had authority to so execute said instrument as the act and deed
of said partnership.
------------------------------------
CORPORATION (WITH CORPORATE SEAL)
STATE OF NEW YORK ) /s/ CARMEN A. OCELLO
) ss: CARMEN A. OCELLO
COUNTY OF NEW YORK ) NOTARY PUBLIC OF NEW JERSEY
My Commission Expires May 16, 1998
On this 23 day of July, 1996 before me personally came
_______________________________ , to me known, who, being duly sworn, did depose
and say that he/she resides at ________________________ ; that he/she is the
_______________________________ of CUNNINGHAM GRAPHICS, INC., the corporation
described in and which executed the above instrument; that he/she executed said
instrument on behalf of said corporation; that the seal affixed to said
instrument is such corporate seal; that said seal was so affixed by order of the
Board of Directors of said corporation, and he/she signed his/her name to said
instrument by order of the Board of Directors of said corporation.
/s/ Michael Cunningham
------------------------------------
4
<PAGE>
[FLOOR PLAN -- Exhibit A]
(Graphic Omitted)
<PAGE>
<TABLE>
<CAPTION>
CERTIFICATE OF INSURANCE 07/15/96 Cunhglpr
==============================================================================================================================
<S> <C>
Producer This certificate is issued as a matter of information only and confers
no rights upon the certificate holder. This certificate does not amend,
Genatt Associates, Inc. extend or alter the coverage afforded by the policies below.
3333 New Hyde Park Road ----------------------------------------------------------------------------------------------------
New Hyde Park, NY 11042 COMPANIES AFFORDING COVERAGE
- ------------------------- Company Letter A Graphic Arts Mutual Inc. Co.
Insured Company Letter B
Company Letter C
Cunningham Graphics, Inc. Company Letter D
629 Grove Street Company Letter E
Jersey City, NJ 07310
==============================================================================================================================
COVERAGES
This is to certify that policies of insurance listed below have been issued to the insured
named above for the policy period indicated, notwithstanding any requirement, term or condition
of any contract or other document with respect to which this certificate may be issued or may
pertain, the insurance afforded by the policies described herein is subject to all the TERMS,
CLAUSES, EXCLUSIONS, LIMITS AND CONDITIONS OF SUCH POLICIES.
- ------------------------------------------------------------------------------------------------------------------------------
Co Type of Insurance Policy Number Policy Eff Policy Exp. Limits
Ltr Date Date
- ------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY CPP1769154 6/30/96 6/30/97 General Aggregate $ 2,000,000
(x) Commercial G.L. Prod-Comp/Ops Agg $ 1,000,000
( ) Claims (x) Occ. Personal & Adv. Injury $ 1,000,000
( ) Owners, Cont. Prot. Each Occurrence $ 1,000,000
( ) Broad Form Vendors Fire Damage (any one fire) $ 50,000
( ) Medical Expense (one Per) $ 5,000
AUTOMOBILE LIABILITY
( ) Any Auto CSL $
( ) All Owned Autos Bodily Injury
( ) Scheduled Autos (per person) $
( ) Hired Autos Bodily Injury
( ) Non-owned Autos (per accident) $
( ) Garage Liability Property
Damage $
A EXCESS LIABILITY CULP1789795 6/30/96 6/30/97 Each Occurrence Aggregate
(x) Umbrella $10,000,000 $10,000,000
( ) Other Than Umbrella
Statutory
WORKER'S COMPENSATION $ (Each Accident)
And $ (Disease-Policy Limit)
EMPLOYERS LIABILITY $ (Disease-Each Employee)
==============================================================================================================================
DESCRIPTION OF OPERATIONS:
Certificate Holder is included as Additional Insured Sublandlord as respects Location:
111 8th Avenue, New York, New York.
==============================================================================================================================
Certificate Holder: Should any of the above described policies be cancelled before the expiration
Goldman Sachs & Co., date thereof, the issuing company will endeavor to mail 30 days written
a New York Limited Partnership, notice to the certificate holder named to the left, but failure to mail such
85 Broad Street notice shall impose no obligation or liability of any kind upon the company,
its agents or representatives.
---------------------------------------------------------------------------------------
New York NY 10004 Authorized Representative: /s/ Leslie R. Geudtt
==============================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CERTIFICATE OF INSURANCE 07/15/96 Cunhglpr
==============================================================================================================================
<S> <C>
Producer This certificate is issued as a matter of information only and confers
no rights upon the certificate holder. This certificate does not amend,
Genatt Associates, Inc. extend or alter the coverage afforded by the policies below.
3333 New Hyde Park Road ----------------------------------------------------------------------------------------------------
New Hyde Park, NY 11042 COMPANIES AFFORDING COVERAGE
- ------------------------- Company Letter A Graphic Arts Mutual Inc. Co.
Insured Company Letter B
Company Letter C
Cunningham Graphics, Inc. Company Letter D
629 Grove Street Company Letter E
Jersey City, NJ 07310
==============================================================================================================================
COVERAGES
This is to certify that policies of insurance listed below have been issued to the insured
named above for the policy period indicated, notwithstanding any requirement, term or condition
of any contract or other document with respect to which this certificate may be issued or may
pertain, the insurance afforded by the policies described herein is subject to all the TERMS,
CLAUSES, EXCLUSIONS, LIMITS AND CONDITIONS OF SUCH POLICIES.
- ------------------------------------------------------------------------------------------------------------------------------
Co Type of Insurance Policy Number Policy Eff Policy Exp. Limits
Ltr Date Date
- ------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY CPP1769154 6/30/96 6/30/97 General Aggregate $ 2,000,000
(x) Commercial G.L. Prod-Comp/Ops Agg $ 1,000,000
( ) Claims (x) Occ. Personal & Adv. Injury $ 1,000,000
( ) Owners, Cont. Prot. Each Occurrence $ 1,000,000
( ) Broad Form Vendors Fire Damage (any one fire) $ 50,000
( ) Medical Expense (one Per) $ 5,000
AUTOMOBILE LIABILITY
( ) Any Auto CSL $
( ) All Owned Autos Bodily Injury
( ) Scheduled Autos (per person) $
( ) Hired Autos Bodily Injury
( ) Non-owned Autos (per accident) $
( ) Garage Liability Property
Damage $
A EXCESS LIABILITY CULP1789795 6/30/96 6/30/97 Each Occurrence Aggregate
(x) Umbrella $10,000,000 $10,000,000
( ) Other Than Umbrella
Statutory
WORKER'S COMPENSATION $ (Each Accident)
And $ (Disease-Policy Limit)
EMPLOYERS LIABILITY $ (Disease-Each Employee)
==============================================================================================================================
DESCRIPTION OF OPERATIONS:
Certificate Holder is included as Additional Insured Landlord as respects Location:
111 8th Avenue, New York, New York.
==============================================================================================================================
Certificate Holder: Should any of the above described policies be cancelled before the expiration
P.A. Building Company, date thereof, the issuing company will endeavor to mail 30 days written
a New York Partnership, notice to the certificate holder named to the left, but failure to mail such
c/c Sylvan Lawrence Company, Inc. notice shall impose no obligation or liability of any kind upon the company,
100 Williams Street its agents or representatives.
---------------------------------------------------------------------------------------
New York NY 10038 Authorized Representative: /s/ Leslie R. Geudtt
==============================================================================================================================
</TABLE>
Exhibit 21.1
------------
List of all subsidiaries of the Company
---------------------------------------
Effective upon completion of the Reorganization of the Company described in
the Registration Statement to which this Item is an Exhibit, Cunningham
Graphics, Inc., a New Jersey corporation, will be a wholly-owned subsidiary of
the Registrant.
Effective upon the closing of the Acquisition described in the Registration
Statement to which this Item is an Exhibit, Roda Limited, a corporation
organized under the laws of England, will be a wholly-owned subsidiary of the
Registrant. Roda Print Concepts Limited, a corporation organized under the laws
of England, is a wholly-owned subsidiary of Roda Limited.
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated January 16, 1998, in the Registration Statement (Form
S-1 No. 333-000) and related Prospectus of Cunningham Graphics International,
Inc. for the registration of 2,415,000 shares of its common stock.
Princeton, New Jersey
February 19, 1998
/s/Ernst & Young LLP
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-1) and related Prospectus of Cunningham Graphics
International, Inc. for the registration of 2,415,000 shares of its common stock
and to the inclusion therein of our report dated 11 February 1998 with respect
to the consolidated financial statements of Roda Limited and the financial
statements of Roda Print Concepts Limited (Predecessor).
/s/ ERNST & YOUNG
Chartered Accountants
London, England
19 February 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Registrant's predecessor financial statements for each of the three years in
the period ended December 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 67,000
<SECURITIES> 0
<RECEIVABLES> 5,673,000
<ALLOWANCES> 0
<INVENTORY> 940,000
<CURRENT-ASSETS> 6,941,000
<PP&E> 3,579,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,938,000
<CURRENT-LIABILITIES> 6,213,000
<BONDS> 0
0
0
<COMMON> 6,000
<OTHER-SE> 3,145,000
<TOTAL-LIABILITY-AND-EQUITY> 10,938,000
<SALES> 35,744,000
<TOTAL-REVENUES> 35,744,000
<CGS> 26,894,000
<TOTAL-COSTS> 33,382,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 250,000
<INCOME-PRETAX> 2,147,000
<INCOME-TAX> 129,000
<INCOME-CONTINUING> 2,018,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,018,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
To: Cunningham Graphics International, Inc.
629 Grove Street
Jersey City, New Jersey 07310
The undersigned hereby consents to being identified in the Registration
Statement on Form S-1 to be filed by Cunningham Graphics International, Inc.
("CGII") with the Securities and Exchange Commission as a person designated to
be a director of CGII following the effective date of the Registration
Statement.
/s/ Arnold Spinner
------------------
Arnold Spinner
To: Cunningham Graphics International, Inc.
629 Grove Street
Jersey City, New Jersey 07310
The undersigned hereby consents to being identified in the Registration
Statement on Form S-1 to be filed by Cunningham Graphics International, Inc.
("CGII") with the Securities and Exchange Commission as a person designated to
be a director of CGII following the effective date of the Registration
Statement.
/s/ Norman R. Malo
------------------------
Norman R. Malo
