<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1999
REGISTRATION NO. 333-84001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MARTHA STEWART LIVING OMNIMEDIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2721 52-2187059
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
11 WEST 42ND STREET
NEW YORK, NY 10036
(212) 827-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GREGORY R. BLATT, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL
MARTHA STEWART LIVING OMNIMEDIA, INC.
11 WEST 42ND STREET
NEW YORK, NY 10036
(212) 827-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ANDREW J. NUSSBAUM, ESQ. JEFFREY SMALL, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ DAVIS POLK & WARDWELL
51 WEST 52ND STREET 450 LEXINGTON AVENUE
NEW YORK, NY 10019 NEW YORK, NY 10017
(212) 403-1000 (212) 450-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If the only securities being delivered pursuant to this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT PRICE(2) FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, par value
$.01 per share................. shares $100,000,000 $27,800(3)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes an aggregate of shares which the Underwriters have the
option to purchase from the Registrant solely to cover over-allotments.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) The amount has previously been paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of shares of Class A common stock. The second prospectus
relates to a concurrent offering outside the United States and Canada of an
aggregate of shares of Class A common stock. The prospectuses for each
of the offerings will be identical with the exception of the alternate front
cover page for the offering outside the United States and Canada. Such alternate
page appears in this Registration Statement immediately following the cover page
for the offering in the United States and Canada.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion)
Issued , 1999
Shares
[MSLO LOGO]
CLASS A COMMON STOCK
------------------------
MARTHA STEWART LIVING OMNIMEDIA, INC. IS OFFERING SHARES OF ITS CLASS A COMMON
STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS
FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE
BETWEEN $ AND $ PER SHARE.
FOLLOWING THIS OFFERING, WE WILL HAVE TWO CLASSES OF AUTHORIZED COMMON STOCK,
CLASS A COMMON STOCK AND CLASS B COMMON STOCK. THE RIGHTS OF THE HOLDERS OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK ARE IDENTICAL, EXCEPT WITH RESPECT
TO VOTING AND CONVERSION. EACH SHARE OF CLASS A COMMON STOCK IS ENTITLED TO ONE
VOTE PER SHARE. EACH SHARE OF CLASS B COMMON STOCK IS ENTITLED TO TEN VOTES PER
SHARE AND IS CONVERTIBLE INTO ONE SHARE OF CLASS A COMMON STOCK.
------------------------
WE EXPECT OUR CLASS A COMMON STOCK TO BE APPROVED FOR LISTING ON THE NEW YORK
STOCK EXCHANGE UNDER THE SYMBOL " ".
------------------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 11.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS THE COMPANY
------------ ------------- ------------
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total......................................... $ $ $
</TABLE>
Martha Stewart Living Omnimedia, Inc. has granted the underwriters the right to
purchase up to an additional shares of our Class A common stock to
cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares of our Class A
common stock to purchasers on , 1999.
Morgan Stanley Dean Witter is acting as sole book-running manager for this
offering, and Morgan Stanley Dean Witter and Merrill Lynch & Co. are acting as
joint lead managers for this offering. Bear, Stearns & Co. Inc. is acting as
co-lead manager for this offering.
------------------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE BANC OF AMERICA SECURITIES LLC
, 1999
<PAGE> 4
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion) [International Cover Page]
Issued , 1999
Shares
[MSLO LOGO]
CLASS A COMMON STOCK
------------------------
MARTHA STEWART LIVING OMNIMEDIA, INC. IS OFFERING SHARES OF ITS CLASS A COMMON
STOCK. THIS IS OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS
FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE
BETWEEN $ AND $ PER SHARE.
FOLLOWING THIS OFFERING, WE WILL HAVE TWO CLASSES OF AUTHORIZED COMMON STOCK,
CLASS A COMMON STOCK AND CLASS B COMMON STOCK. THE RIGHTS OF THE HOLDERS OF
CLASS A COMMON STOCK AND CLASS B COMMON STOCK ARE IDENTICAL, EXCEPT WITH RESPECT
TO VOTING AND CONVERSION. EACH SHARE OF CLASS A COMMON STOCK IS ENTITLED TO ONE
VOTE PER SHARE. EACH SHARE OF CLASS B COMMON STOCK IS ENTITLED TO TEN VOTES PER
SHARE AND IS CONVERTIBLE INTO ONE SHARE OF CLASS A COMMON STOCK.
------------------------
WE EXPECT OUR CLASS A COMMON STOCK TO BE APPROVED FOR LISTING ON THE NEW YORK
STOCK EXCHANGE UNDER THE SYMBOL " ".
------------------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 11.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS THE COMPANY
------------ ------------- ------------
<S> <C> <C> <C>
Per Share..................................... $ $ $
Total......................................... $ $ $
</TABLE>
Martha Stewart Living Omnimedia, Inc. has granted the underwriters the right to
purchase up to an additional shares of our Class A common stock to
cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares of our Class A
common stock to purchasers on , 1999.
Morgan Stanley Dean Witter is acting as sole book-running manager for this
offering, and Morgan Stanley Dean Witter and Merrill Lynch International are
acting as joint lead managers for this offering. Bear, Stearns International
Limited is acting as co-lead manager for this offering.
------------------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH INTERNATIONAL
BEAR, STEARNS INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE BANK OF AMERICA INTERNATIONAL LIMITED
, 1999
<PAGE> 5
[INSIDE COVER GRAPHICS]
2
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 4
Recent Developments--Strategic
Investment.......................... 10
Risk Factors.......................... 11
Special Note With Respect to Forward-
Looking Information................. 20
Reorganization Transactions Occurring
Prior to This Offering.............. 21
Use of Proceeds....................... 22
Dividend Policy....................... 22
Capitalization........................ 23
Dilution.............................. 24
Selected Historical and Pro Forma
Consolidated Financial Data......... 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 27
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.............................. 37
Management............................ 57
Certain Relationships and Related
Transactions........................ 69
Principal Stockholders................ 73
Description of Capital Stock.......... 75
Shares Eligible for Future Sale....... 78
Material U.S. Federal Income Tax
Considerations for Non-U.S.
Holders............................. 79
Underwriters.......................... 82
Legal Matters......................... 84
Experts............................... 84
Additional Information................ 84
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
In making any investment decision relating to our Class A common stock, you
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. We are offering to sell shares of Class A common stock and
seeking offers to buy shares of Class A common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus or other date we include in such
information, regardless of the time of delivery of this prospectus or any sale
of Class A common stock.
------------------------
Until , 1999, all dealers that buy, sell or trade shares of Class A
common stock, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
3
<PAGE> 7
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in our Class A common stock. You should read the entire
prospectus carefully, especially the risks of investing in our Class A common
stock discussed under "Risk Factors."
In this prospectus, the terms "we," "us" and "our" refer to Martha Stewart
Living Omnimedia, Inc. and, unless the context requires otherwise, Martha
Stewart Living Omnimedia LLC, the legal entity that prior to this offering
operated the business we now operate.
MARTHA STEWART LIVING OMNIMEDIA, INC.
We are a leading creator of original "how to" content and related products
for homemakers and other consumers. We leverage the well-known "Martha Stewart"
brand name across a broad range of media and retail outlets, providing consumers
with the "how to" ideas, products and other resources they need to raise the
quality of living in and around their homes.
In each of our seven core content areas--Home, Cooking and Entertaining,
Gardening, Crafts, Holidays, Keeping and Weddings--our creative experts
continually seek to develop new ideas that support the high quality and look
associated with our brand name. Our editors, art directors, designers, cooks,
gardeners and craftspeople have developed an extensive library of "how to"
articles, books, television programs, newspaper columns and radio segments, as
well as products, relating to our seven core content areas. We have two primary
strategic objectives:
-- to provide our original "how to" content and information to as many
consumers as possible
-- to turn our consumers into "doers" by offering them the information
and products they need for do-it-yourself ingenuity the "Martha
Stewart way"
We accomplish this first objective by distributing our "how to" content
over a broad range of different media outlets. These outlets comprise what we
call our "omnimedia" platform, which currently includes:
-- two magazines, Martha Stewart Living(R) and Martha Stewart
Weddings(TM), together reaching an estimated 9.9 million readers per
month
-- the Emmy Award-winning and number-one-rated "how to" domestic arts
television program in the United States, airing six episodes per
week, plus a weekly segment on CBS This Morning
-- 27 books, which together have sold more than 8.5 million copies
-- a weekly askMartha newspaper column, syndicated in 233 newspapers
-- the askMartha(R) radio program, airing on 270 stations throughout the
United States
-- marthastewart.com, our website, with over 925,000 registered users
To accomplish our second business objective, we have created our
"omnimerchandising" platform. Our omnimerchandising platform consists of
products we design or select for production and sale. As of July 1999, our
products included more than 2,800 distinct variations of products, including bed
and bath products, interior paints, craft kits, outdoor furniture and garden
tools. Through this platform, we seek to offer our consumers quality,
convenience and choice across a broad range of retail and direct to consumer
channels. Retail sales of Martha Stewart branded merchandise by Kmart and our
other merchandising partners reached $763 million in 1998, an increase of 96%
over 1997.
We distribute our products through:
-- the mass market discount channel, exclusively through Kmart stores in
the United States and Zellers stores in Canada
4
<PAGE> 8
-- the national department store channel, through Sears stores in the
United States and Canada, and Canadian Tire stores in Canada
-- specialty paint stores and, beginning in September 1999, specialty
craft and fabric stores, across the United States
-- our upscale catalog, Martha by Mail(R)
-- our online Martha by Mail store
Our omnimedia and omnimerchandising platforms support four business
segments: Publishing, Television, Merchandising and Internet/Direct Commerce.
Our Internet/Direct Commerce business provides a unique opportunity for us to
fulfill both of our strategic objectives by leveraging our content and our
merchandising capabilities to create a one-stop online destination for consumers
interested in the domestic arts.
COMPETITIVE STRENGTHS
We intend to maintain and enhance our position as a leading creator of
high-quality content and products and to continue to capitalize on our
competitive strengths, which we believe include:
-- Established, Highly Recognizable Brand Name. Our principal assets
consist of the Martha Stewart brand name and our related trademarks.
We believe the Martha Stewart brands have significant name
recognition and trust among consumers.
-- Leading Authority Across Key Categories of Domestic Arts. We believe
that our depth of knowledge and brand awareness across our seven core
content areas provide us with important advantages over many of our
competitors that produce content in only one or two specific
categories of domestic arts. We believe that satisfied consumers who
are initially only interested in one of our core content areas, may
be drawn to explore content and products from our other core
categories as part of our overall concept of living.
-- Extensive Library of High-Quality Content, Products and Designs. We
have amassed an extensive library of proprietary content and products
that we continually enhance through the creation of new "how to"
ideas, information and products.
-- Extensive Research and Development Process. Our creative staff
thoroughly researches, develops and tests each "how to" idea or
product in our test kitchens, design studios or manufacturers'
laboratories before we release content or product into the market. We
believe this research and development process ensures that we are
regarded as the "source for the source" and that our content and
merchandise continues to consist of innovative and appealing designs,
projects, information and recipes.
-- Highly Experienced Team of Creative and Business Personnel. We have
carefully assembled an experienced team of creative and business
professionals. Many of our creative and business executives have been
with us since 1991, the year we launched Martha Stewart Living
magazine.
-- Organizational Structure that Promotes Creativity and
Efficiency. Our business segments do not operate as separate units.
Instead, we are organized by creative and business skills in a
structure which enables our business and creative experts to render
services across our omnimedia and omnimerchandising platforms.
-- Strong Relationships with Key Distribution, Fulfillment and Marketing
Vendors. Our existing alliances with Kmart Corporation, Hudson's Bay
Company, Eyemark Entertainment, a unit of CBS, Inc., The
Sherwin-Williams Company, P/Kaufmann, Inc. and affiliates of Time
Inc., among others, enable us to widely distribute content and
products across the United States and Canada. These relationships
permit us to reduce our inventory risk and to focus on the design and
creation of our content and products, rather than the logistics of
distribution, fulfillment and manufacturing.
5
<PAGE> 9
STRATEGIES
Our strategies focus on continuing to create new content and products and
leveraging our brands across multiple media and retail channels. Our strategies
are to:
-- Expand Our Merchandising Along Core Content Lines. We seek to create
new branded products throughout our seven core content areas. In the
last two years, we have introduced numerous product lines, largely
focusing on the home category, in multiple distribution channels. Our
Martha Stewart Everyday Baby baby(TM) collection and our Martha
Stewart Home collection of decorative fabrics are scheduled to be
launched in fall 1999, and we plan to introduce our Martha Stewart
Everyday Housewares(TM) collection in 2000.
-- Leverage the Cost of Developing High Quality Content over Media and
Merchandising Platforms. We spread the costs of researching,
investing in and producing content across multiple media and
merchandising platforms to achieve economies of scale and increased
returns on invested capital. This strategy enables us to make
substantial investments in producing higher quality content.
-- Capitalize on Revenue Opportunities Created by the Internet. We
believe that we can effectively participate in the growth of the
Internet by creating a user experience that integrates information,
electronic commerce and community, all rooted in our library of high
quality content and products.
-- Cross-Sell and Cross-Promote Our Brands. We leverage our brands by
cross-promoting them and cross-selling and packaging advertising
across our network of media and merchandising channels. We also use
each media and merchandising platform to refer our listeners,
readers, viewers and consumers to one or more of our other
businesses.
-- Evolve Our Brands through Team-based Content and Reduce Dependence on
Our Founder. We are seeking to further extend the relationship
consumers share with Martha Stewart, the personality, to our brands.
We believe that a reduction in our dependence on Martha Stewart
personally will provide additional brand durability, increased growth
opportunities and a broader recognition of a new generation of Martha
Stewart Living experts.
------------------------
Our principal executive offices are located at 11 West 42nd Street, New
York, New York 10036, and our telephone number is (212) 827-8000. Our address on
the World Wide Web is marthastewart.com. The information and other content
contained on our website are not part of this prospectus.
6
<PAGE> 10
\
THE OFFERING
Unless we specifically state otherwise, the information in this prospectus
does not take into account the possible issuance of up to
additional shares of Class A common stock, which the underwriters have the
option to purchase from us solely to cover over-allotments. If the underwriters
exercise this option in full, there will be shares of Class A
common stock outstanding following this offering.
Class A common stock
offered....................... shares
Common stock to be outstanding
after this offering:
Class A common stock..... shares
Class B common stock..... shares
-----------
Total.......... shares
===========
Voting rights:
Class A common stock..... One vote per share
Class B common stock..... Ten votes per share
Other common stock
provisions.................... With the exception of voting rights and
conversion rights, shares of Class A and Class
B common stock are identical. See "Description
of Capital Stock" for a description of the
material terms of our common stock.
Use of proceeds............... We may use approximately $42.0 million of the
net proceeds from this offering to purchase
shares of Class A common stock held by Time
Publishing Ventures, Inc., a subsidiary of Time
Inc., under the terms of an existing agreement.
We plan to use the remainder of the net
proceeds of this offering for general corporate
purposes, including new business development.
See "Use of Proceeds" for additional
information on our intentions with respect to
the proceeds of this offering.
The number of shares of Class A and Class B common stock to be outstanding
after this offering include shares to be issued to our employees upon
completion of this offering under the Martha Stewart Living Omnimedia Phantom
Performance Unit Plan. These numbers exclude shares of Class A common stock
reserved for issuance under our stock option plans. At the time of this
offering, we expect to issue options to acquire shares of Class A common
stock at an exercise price equal to the initial public offering price. See
"Management -- The Non-Employee Director Stock and Option Compensation Plan" and
"-- The 1999 Stock Incentive Plan" for more information on these issuances.
7
<PAGE> 11
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with summary historical and pro forma
financial information of Martha Stewart Living Omnimedia LLC. The following
consolidated statement of operations data for the years ended December 31, 1997
and 1998 is derived from the audited consolidated financial statements of Martha
Stewart Living Omnimedia LLC included elsewhere in this prospectus. The
following consolidated statement of operations data for the six months ended
June 30, 1998 and 1999 and the consolidated balance sheet data as of June 30,
1999 have been derived from the unaudited financial statements of Martha Stewart
Living Omnimedia LLC which, in the opinion of management, have been prepared on
the same basis as the audited financial statements and reflect all adjustments,
consisting only of normal recurring adjustments, necessary for fair
presentation. Results for the six-month period ended June 30, 1999 are not
necessarily indicative of results that may be expected for the entire year.
In the table below, we also provide you with the following pro forma
information:
-- The statement of operations data for all of the periods presented
includes an adjustment to the income tax provision reflecting the
reorganization of Martha Stewart Living Omnimedia LLC into a C
corporation as though the reorganization had occurred prior to the
start of each period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview" for
further information on this adjustment.
-- The statement of operations data for the six months ended June 30,
1999 does not include a one-time benefit of approximately $2.9
million that will result from the change in the tax status of Martha
Stewart Living Omnimedia LLC at the time it is reorganized into a C
corporation. The benefit actually recognized will be determined on
the effective date of the reorganization.
-- The balance sheet data as of June 30, 1999 is presented on both a pro
forma and pro forma as adjusted basis:
-- The pro forma data gives effect to $16.0 million of distributions to
the members of Martha Stewart Living Omnimedia LLC. This amount is
comprised of one or more distributions of profits which will total
no more than $10.0 million and a $6.0 million distribution for tax
payments. The $6.0 million distribution is based on the taxable
income of Martha Stewart Living Omnimedia LLC as of June 30, 1999.
The amount of the actual tax distribution will change based upon the
actual results of operations of Martha Stewart Living Omnimedia LLC
from June 30, 1999 through the date of the reorganization.
-- The pro forma data gives effect to the sale of 5% of Martha Stewart
Living Omnimedia LLC and a warrant to Kleiner Perkins, in exchange
for $25.0 million, and the retirement of $15.0 million of
indebtedness.
-- The pro forma as adjusted data gives effect to each of the pro forma
adjustments noted above and also gives effect to the issuance of the
shares of Class A common stock offered in this prospectus
and our receipt and use of the estimated net proceeds from the sale
of those shares.
As used in this prospectus, "EBITDA" means income before provision for
interest expense, income taxes and depreciation and amortization. EBITDA is not
intended to represent cash flows from operations and should not be considered as
an alternative to net income, as an indicator of our operating performance or to
cash flows as a measure of liquidity. We believe that EBITDA is widely used by
analysts, investors and other interested parties in the publishing and media
industries; however, EBITDA as presented in this prospectus may not be
comparable to similarly titled measures reported by other companies.
8
<PAGE> 12
The following financial data should be read in conjunction with, and is
qualified by reference to, "Selected Historical and Pro Forma Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the consolidated financial statements of Martha
Stewart Living Omnimedia LLC and the combined financial statements of Martha
Stewart Living and, in each case, the notes to these financial statements,
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------- ------------------
1997 1998 1998 1999
-------- -------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Publishing...................................... $108,694 $127,020 $64,701 $73,314
Television...................................... 12,396 23,351 10,587 12,787
Merchandising................................... 6,919 15,004 6,622 11,509
Internet/Direct Commerce........................ 4,812 14,673 4,343 13,892
-------- -------- ------- -------
Total revenues............................. 132,821 180,048 86,253 111,502
-------- -------- ------- -------
Operating costs and expenses
Production, distribution and editorial.......... 59,148 82,930 36,492 54,710
Selling and promotion........................... 31,973 34,540 17,838 19,994
General and administrative...................... 21,182 29,659 14,005 18,601
Depreciation and amortization................... 3,927 5,534 2,665 2,732
-------- -------- ------- -------
Total operating costs and expenses......... 116,230 152,663 71,000 96,037
-------- -------- ------- -------
Income from operations............................ 16,591 27,385 15,253 15,465
-------- -------- ------- -------
Interest expense, net............................. 2,195 2,243 1,315 597
Income tax provision.............................. 467 1,336 750 702
-------- -------- ------- -------
Net income........................................ 13,929 23,806 13,188 14,166
-------- -------- ------- -------
Pro forma (unaudited)
Adjustment to income tax provision.............. (7,038) (10,817) (6,289) (6,753)
-------- -------- ------- -------
Pro forma net income.............................. $ 6,891 $ 12,989 $ 6,899 $ 7,413
======== ======== ======= =======
Pro forma basic and diluted net income per
share........................................... $
Pro forma weighted average common shares
outstanding.....................................
Other Data:
EBITDA............................................ $ 20,518 $ 32,919 $17,918 $18,197
Capital expenditures.............................. 11,027 2,730 1,954 1,279
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- -------------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash............................................... $ 22,269 $ 16,269 $
Total assets....................................... 123,845 117,845
Long-term debt (including current maturities)...... 15,000 --
Members'/Stockholders' equity...................... 49,559 58,559
</TABLE>
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RECENT DEVELOPMENTS--STRATEGIC INVESTMENT
The following summary description of the material terms of a recent
investment in Martha Stewart Living Omnimedia by Kleiner Perkins Caufield &
Byers is qualified in its entirety by reference to the agreements relating to
this investment, which we have filed as exhibits to the registration statement
of which this prospectus is a part.
On July 27, 1999, we completed a strategic transaction in which an
affiliate of Kleiner Perkins purchased an equity interest in Martha Stewart
Living Omnimedia LLC. In this transaction, a Kleiner Perkins fund acquired a 5%
interest in Martha Stewart Living Omnimedia LLC, as well as a warrant that we
describe below, for $25.0 million in cash. Also, as part of this transaction,
Mr. L. John Doerr, a general partner of Kleiner Perkins, became a member of our
Board of Directors. In the reorganization of Martha Stewart Living Omnimedia
LLC, Kleiner Perkins' interest in our company will be converted into shares of
Martha Stewart Living Omnimedia Class A common stock. See "Reorganization
Transactions Occurring Prior to This Offering" for a description of the
reorganization.
We have agreed with Kleiner Perkins to investigate opportunities to
maximize the value to our stockholders of our Internet and Martha by Mail
business and our company as a whole, including potential strategic transactions
relating to that business. We have no definite plans regarding any strategic
transactions, but instead intend to continue to develop our Internet and Martha
by Mail business and to evaluate potential strategic transactions periodically.
Kleiner Perkins will also assist us in recruiting additional personnel for our
Internet business and in developing compensation structures consistent with our
overall incentive plans and objectives. Any decisions on these matters will be
made by our Board of Directors.
If we complete a strategic transaction relating to our Internet and Martha
by Mail business, Kleiner Perkins may participate in the transaction by
exercising the warrant for $21.0 million. Upon exercise, Kleiner Perkins would
receive 15% of any publicly traded class of stock that we may issue intended to
reflect the performance of that business, or 15% of the net consideration we
receive in connection with a sale of that business. The warrant percentage and
exercise price are subject to adjustment in the event that we sell a portion of
the Internet and Martha by Mail business or contribute an additional business or
asset to that business. The warrant expires ten days after the earlier of the
time it becomes exercisable, the time Kleiner Perkins sells more than 50% of its
original holding of our common stock, or July 27, 2002.
Kleiner Perkins has agreed not to sell shares of our common stock for a
period of one year following this offering. This restriction is subject to
exceptions, including, after six months, distributions by Kleiner Perkins of up
to 50% of the shares it receives in the reorganization to its limited partners.
In addition, in the event that Kleiner Perkins exercises its warrant in exchange
for any Martha Stewart Living Omnimedia securities, it has agreed not to sell or
transfer those securities for one year, subject to exceptions similar to those
described above for our common stock, or, for six months following exercise of
the warrant, to transfer any additional shares of our common stock if that
transfer would bring Kleiner Perkins' ownership of our common stock to less than
50% of its original position. Kleiner Perkins is also receiving registration
rights with respect to its shares of our Class A common stock. See "Certain
Relationships and Related Transactions--Stockholders Agreement and Registration
Rights" for a description of the registration rights we have granted to Kleiner
Perkins.
We believe that the investment in our company by Kleiner Perkins, and the
participation of John Doerr on our Board of Directors, will provide significant
strategic benefits to us as we expand our Internet/Direct Commerce business.
There can be no assurance, however, that we will succeed in this, or any other,
aspect of our strategy.
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RISK FACTORS
You should carefully consider the following risks and the other information
contained in this prospectus before investing in Class A common stock. The
trading price of Class A common stock could decline due to any of these risks,
and you could lose all or part of your investment. You also should refer to the
other information included in this prospectus, including the financial
statements and related notes. In addition, the risks described below are not the
only ones facing us. We have only described the risks we consider to be
material. However, there may be additional risks that we view as not material or
of which we are not presently aware.
If any of the events described below were to occur, our business,
prospects, financial condition, results of operations or cash flow could be
materially adversely affected. When we say below that something could or will
have a material adverse effect on us, we mean that it could or will have one or
more of these effects.
THE LOSS OF THE SERVICES OF MARTHA STEWART OR OTHER KEY EMPLOYEES WOULD
MATERIALLY ADVERSELY AFFECT OUR REVENUES, RESULTS OF OPERATIONS AND PROSPECTS
We are highly dependent upon our founder, Chairman and Chief Executive
Officer, Martha Stewart. Martha Stewart's talents, efforts, personality and
leadership have been, and continue to be, critical to our success. The
diminution or loss of the services of Martha Stewart, and any negative market or
industry perception arising from that diminution or loss, would have a material
adverse effect on our business. While our other key executives have substantial
experience and have made significant contributions to our business, Martha
Stewart remains the personification of our brands as well as our senior
executive and primary creative force. See "Management--Key Executive Insurance"
for a description of key executive life insurance policies we maintain with
respect to Martha Stewart.
While one of our business strategies is to reduce our dependence on Martha
Stewart, we may be unable to do so. If we are unsuccessful in accomplishing this
strategy because, for example, we are unable to develop the public reputation of
our other experts, and Martha Stewart's services become unavailable to us, our
business and prospects will be materially adversely affected.
Effective as of the completion of this offering, we will enter into a
five-year employment agreement with Martha Stewart. This agreement is important
to the future of our business, and if we were to lose our rights under this
agreement for any reason, including as a result of Martha Stewart's voluntary
resignation or retirement, our business would be materially adversely affected.
See "Management--Employment Agreement with Martha Stewart" for a description of
this agreement.
Our continued success also is dependent upon retention of other of our key
management executives, as well as upon a number of key members of our creative
staff, who have been instrumental in our success thus far, and upon our ability
to attract and retain other highly capable and creative individuals. The loss of
some of our senior executives or key members of our creative staff, or an
inability to attract or retain other key individuals, could materially adversely
affect us. Growth in our business is dependent, to a large degree, on our
ability to retain and attract such employees. We seek to compensate and
incentivize our key executives, as well as other employees, through competitive
salaries, stock ownership and bonus plans, but we can make no assurance that
these programs will allow us to retain key employees or hire new employees.
OUR SUCCESS DEPENDS ON THE VALUE OF OUR BRANDS, AND IF THE VALUE OF OUR BRANDS
WERE TO DIMINISH, OUR REVENUES, RESULTS OF OPERATIONS AND PROSPECTS WOULD BE
ADVERSELY AFFECTED
Our success depends on our brands and their value. Our business would be
adversely affected if:
Martha Stewart's public image or reputation were to be tarnished
Martha Stewart, as well as her name, her image and the trademarks and other
intellectual property rights relating to these, are integral to our marketing
efforts and form the core of our brand name. Our continued success and the value
of our brand name therefore depends, to a large degree, on the reputation of
Martha Stewart.
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Our licensees were to diminish the quality of our brands
We have entered into license agreements with a number of partners,
including Kmart Corporation, Hudson's Bay Company, which operates Zellers
stores, and The Sherwin-Williams Company. While we require that our licensees
maintain the quality of our brands through specific contractual provisions, we
cannot be certain that our licensees, or their manufacturers and distributors,
will honor their contractual obligations or that they will not take other
actions that will diminish the value of our brand name.
We were unable to adequately protect our brand name
We are also susceptible to others imitating our products and infringing our
intellectual property rights. We may not be able to successfully protect our
intellectual property rights, upon which we are materially dependent. In
addition, the laws of certain foreign countries do not protect intellectual
property rights to the same extent as the laws of the United States. Imitation
of our products or infringement of our intellectual property rights could
diminish the value of our brands or otherwise adversely affect our revenues.
THE LOSS OF OUR RIGHTS TO USE MARTHA STEWART'S NAME, LIKENESS, IMAGE AND VOICE
WOULD MATERIALLY ADVERSELY AFFECT OUR REVENUES, RESULTS OF OPERATIONS AND
PROSPECTS
Effective as of the completion of this offering, we will receive an
exclusive, perpetual, royalty-free license from Martha Stewart with respect to
her name, likeness, image and voice for use in our businesses. If we were to
terminate Martha Stewart's employment without cause, or if she were to do so for
good reason, the license would cease to be exclusive, we would be limited in our
ability to create new marks containing the Martha Stewart name, Martha Stewart
could compete with us and we would have to pay Martha Stewart a royalty on
revenues relating to her name. If Martha Stewart were to compete with us or if
we lose our rights to use this intellectual property, our business would be
adversely affected. See "Business--Intellectual Property" for a description of
the terms of this license agreement, and "Management--Employment Agreement with
Martha Stewart" for a description of the terms of the employment agreement with
Martha Stewart.
TERMINATION OR IMPAIRMENT OF OUR RELATIONSHIPS WITH A SMALL NUMBER OF KEY
LICENSING AND STRATEGIC PARTNERS COULD ADVERSELY AFFECT OUR REVENUES AND RESULTS
OF OPERATIONS
We have developed relationships with a small number of key strategic
partners in many areas of our business, including magazine printing and
distribution, book publishing, fulfillment, website hosting and licensing of our
brands for merchandising. For example, through our licensing agreements with
Kmart and Hudson's Bay Company, Martha Stewart Everyday Home(TM) and Martha
Stewart Everyday Garden(TM) products are manufactured, advertised and sold at
Kmart and Zellers stores. We derive significant income from our licensing
arrangements with Kmart, Hudson's Bay Company, Sherwin-Williams and P/Kaufmann.
In 1998 we received approximately 70% of our merchandising revenues and 38% of
our total operating income from our licensing agreements with Kmart. We could
also be materially adversely affected if we were to lose our rights under any of
these key contracts or if the counterparty to any of these contracts were to
breach its obligations to us. Our license agreements do not prohibit our
partners from entering into license agreements with our competitors for the same
or similar products offered under other brands. If we were to fail to manage our
existing licensing relationships, this failure could have a material adverse
affect on our financial condition and results of operations. See
"Business -- Omnimedia and Omnimerchandising Platforms -- Merchandising" for
more information on these agreements.
We rely heavily on a limited number of contracts under which third parties
provide us with services vital to our business. These agreements include:
-- our agreements under which we receive distribution and fulfillment
services for our Publishing and Internet/Direct Commerce businesses,
descriptions of which may be found in "Certain Relationships and
Related Transactions -- Ongoing Service Agreements"
-- our agreements with printers under which our magazines and catalogs
are printed
-- our agreements with tier-one hosting services for our website
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If our relationship with any of these third parties were to be interrupted, or
the services provided by any of these third parties were to be delayed or
deteriorate for any reason, our business could be materially adversely affected.
In addition, while we have significant control over licensed products and
advertising, we do not have operational and financial control over our strategic
partners and vendors, including Kmart, Zellers and the third parties that
provide us with support services, and have limited influence with respect to the
manner in which they conduct their businesses. If any of these strategic
partners were to experience a significant downturn in their businesses or were
otherwise unable to honor their obligations to us, our business could be
disrupted and our revenues and results of operations could be materially
adversely affected.
OUR BUSINESS IS CURRENTLY HEAVILY DEPENDENT ON PUBLISHING, AND THE REVENUE AND
INCOME WE DERIVE FROM PUBLISHING COULD DECREASE AS A RESULT OF INDUSTRY
DOWNTURNS AND COST INCREASES
In 1998, publishing revenues, including revenues from magazine circulation,
magazine advertising, book sales, the askMartha newspaper column and the
askMartha radio program, accounted for 71% of our revenues and 75% of our
operating income before corporate expenses. Because our business strategy and
brand name require that our magazines and books be of a high visual quality, we
may be more adversely affected by increased publishing industry costs than some
of our competitors. The publishing industry generally, and the magazine sector
in particular, are subject to various economic factors that could cause a
downturn in industry revenues and profits and a decline in our business. For
example, increases in the cost of paper, printing expenses and mailing costs
could reduce income from Martha Stewart Living, Martha Stewart Weddings and our
special interest publications and books. A decline in magazine popularity
generally could also adversely affect our revenue, results of operations and
financial condition.
IF OUR TELEVISION SHOWS FAIL TO MAINTAIN A SUFFICIENT AUDIENCE, IF ADVERSE
TRENDS DEVELOP IN THE TELEVISION PRODUCTION BUSINESS GENERALLY OR IF MARTHA
STEWART WERE TO CEASE TO BE ABLE TO DEVOTE SUBSTANTIAL TIME TO OUR TELEVISION
BUSINESS, THAT BUSINESS COULD BECOME UNPROFITABLE
Our television production business generates a significant portion of our
revenues, approximately 13% in 1998, and is subject to a number of
uncertainties. Our business and financial condition could be adversely affected
by:
Failure of our television programming to maintain a sufficient audience
Television production is a speculative business because revenues and income
derived from television depend primarily upon the continued acceptance of that
programming by the public, which is difficult to predict. Public acceptance of
particular programming is dependent upon, among other things, the quality of
that programming, the strength of stations on which that programming is
broadcast, promotion of that programming, the quality and acceptance of
competing television programming and other sources of entertainment and
information. The Martha Stewart Living television program has recently
experienced a decline in ratings, from a 2.5 household rating for the 1997-98
season as of May 1998 to a 1.9 household rating for the 1998-99 season as of
August 1999, according to AC Nielsen Corporation. If this ratings decline
continues, it will adversely impact the advertising revenues we derive from
television and may result in the television program being broadcast on fewer
stations. A continued ratings decline could make it economically inefficient to
continue production of the program in the daily one-hour format or otherwise. If
production of the television program were to cease, it could result in a
writedown of our capitalized programming costs. The amount of any writedown
would vary depending on a number of factors, including when production ceased
and the extent to which we continued to generate revenues from the use of our
existing program library.
Adverse trends in the television production business generally
Television revenues and income may also be affected by a number of other
factors, most of which are not within our control. These factors include a
general decline in broadcast television viewers, pricing pressure in
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the television advertising industry, strength of the stations on which our
programming is broadcast, general economic conditions, increases in production
costs, availability of other forms of entertainment and leisure time activities
and other factors. All of these factors may quickly change, and these changes
cannot be predicted with certainty. While we currently benefit from our ability
to sell advertising on our television programs, if these changes occur, we can
make no assurance that we will continue to be able to sell this advertising or
that our advertising rates can be maintained. Our future licensing fees may also
be adversely affected by these changes. Accordingly, if any of these changes
were to occur, the revenues and income we generate from television programming
could decline.
Dependence on Martha Stewart
Martha Stewart's services are currently an essential element of our
television business. The recent expansion of the Martha Stewart Living
television program to one-hour per day, from one-half-hour per day, has required
a larger time commitment from Martha Stewart, which has reduced the amount of
time she has to devote to other aspects of our business.
FAILURE TO DEVELOP NEW OR EXPAND EXISTING RETAIL MERCHANDISING PROGRAMS WILL
IMPAIR OUR ABILITY TO GROW AND ADVERSELY AFFECT OUR PROSPECTS
Our growth depends to a significant degree upon our ability to develop new
or expand existing retail merchandising programs, including our Martha Stewart
Everyday Garden and Martha Stewart Everyday Housewares lines. We have limited
experience in merchandising in these areas. We cannot guarantee when these
programs will be introduced and fully implemented, or if they will be successful
when they are in place. If these and other programs are not successful, our
business, financial condition and prospects could be materially adversely
affected.
OUR REVENUES AND INCOME COULD DECLINE DUE TO GENERAL ECONOMIC TRENDS AND
DECLINES IN CONSUMER SPENDING
The industry segments in which we operate, including publishing, television
and merchandising, are cyclical and our revenues are largely generated by
discretionary consumer spending. Business spending on advertising in our
magazines and on our television programming, and consumer spending on our
products tend to decline during recessionary periods because of the
discretionary nature of this spending and may also decline in other times.
Accordingly, our revenues could decline during any general economic downturn.
FAILURE TO DEVELOP OUR INTERNET/DIRECT COMMERCE BUSINESS WILL IMPAIR OUR ABILITY
TO GROW AND ADVERSELY AFFECT OUR PROSPECTS
Our growth depends to a significant degree upon the development of our
Internet/Direct Commerce business. We have limited experience in the businesses
comprising our Internet/Direct Commerce business and have experienced operating
losses of $5.0 million in 1998 in that segment. In order for our Internet/Direct
Commerce business to succeed, we must, among other things:
-- make significant investments in our Internet/Direct Commerce
business, in both technology and personnel
-- significantly increase our online traffic and sales volume
-- attract and retain a loyal base of frequent visitors to our website
-- expand the products and services we offer over our website
-- respond to competitive developments and maintain a distinct brand
identity
-- form and maintain relationships with strategic partners
-- provide quality customer service
-- continue to develop and upgrade our technologies
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We cannot assure that we will be successful in achieving these and other
necessary objectives or that our Internet/Direct Commerce business will ever be
profitable. If we are not successful in achieving these objectives, our
business, financial condition and prospects would be materially adversely
affected.
Our Internet/Direct Commerce business will require us to keep up with the
rapid technological change that is inherent in electronic commerce. The emerging
nature of electronic commerce will require us to quickly adapt as electronic
commerce evolves. The markets for our Internet/Direct Commerce business are
relatively new and rapidly evolving, and are characterized by a number of
entrants that have introduced or plan to introduce competing services. As a
result, demand for and market acceptance of new services are subject to a high
level of uncertainty, risk and competition. These pressures may force us to
incur significant expenditures to remain competitive in these marketplaces, and,
if we fail to appropriately address these pressures, our business, financial
condition and prospects would be materially adversely affected.
SYSTEM FAILURES COULD IMPAIR OUR REPUTATION, DAMAGE OUR BRANDS AND ADVERSELY
AFFECT OUR PROSPECTS
If our website systems cannot be expanded to satisfy increased demand or
fail to perform, we could experience:
-- unanticipated disruptions in service
-- slower response times
-- decreased customer service and customer satisfaction
-- delays in the introduction of new products and services
any of which could impair our reputation, damage our brands and materially and
adversely affect our prospects.
Our ability to facilitate transactions successfully and provide high
quality customer service also depends on the efficient and uninterrupted
operation of our computer and communications hardware systems. Our systems and
operations also are vulnerable to damage or interruption from human error,
natural disasters, power loss, telecommunication failures, break-ins, sabotage,
computer viruses, intentional acts of vandalism and similar events. Any system
failure that causes an interruption in service or decreases the responsiveness
of our website service could impair our reputation, damage our brand name and
materially adversely affect our prospects.
OUR GROWTH IS DEPENDENT UPON THE CONTINUED ACCEPTANCE AND GROWTH OF THE INTERNET
AND ELECTRONIC COMMERCE, AND IF SUCH GROWTH DOES NOT CONTINUE OUR PROSPECTS
COULD BE MATERIALLY ADVERSELY AFFECTED
Commerce over the Internet is a new and emerging market with many
competitors. Because we are relying on electronic commerce as an important part
of our growth strategy, our growth is dependent upon the widespread acceptance
and use of the Internet and other online services as an effective medium for
commerce. If acceptance and growth of Internet use do not occur, our business
could be materially adversely affected. Rapid growth in the use of and interest
in the Internet and other online services is a recent phenomenon and may not
continue. A sufficiently broad base of consumers may not adopt, or continue to
use, the Internet as a medium of commerce. Demand for and market acceptance of
recently introduced products and services over the Internet are subject to a
high level of uncertainty, and there are few proven products and services.
In addition, commerce over the Internet is subject to a number of potential
adverse developments, including infrastructure failures, failures to maintain
transaction security and privacy, and increased government regulation and
taxation, any or all of which could adversely affect our Internet commerce
strategy and overall business.
WE COMPETE IN HIGHLY COMPETITIVE MARKETS AND ARE VULNERABLE TO LARGER AND MORE
EXPERIENCED COMPETITORS
The markets in which we compete are extremely competitive. Many of our
competitors in these markets have significantly greater resources, broader
market presence and greater experience than we have. These
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advantages allow them to spend considerably more on marketing and may allow them
to use their greater resources more effectively than we can. Accordingly, these
competitors may be better able to take advantage of market opportunities and
withstand market downturns than we can.
There are few barriers to entry into our lines of business. Existing as
well as new companies may launch competitive "how to" and lifestyle magazines,
television programs, books and merchandising programs. Some of these competitors
may be well financed and may gain popularity in the marketplace at our expense.
This could in turn result in a decline in our circulation, advertising revenues
and product sales.
The existing Martha Stewart Living Omnimedia LLC operating agreement
expressly permits Time Publishing Ventures and Kleiner Perkins, each of which is
a stockholder of Martha Stewart Living Omnimedia, and their respective
affiliates, to compete with our business. Accordingly, Time Inc. and Kleiner
Perkins, and their respective affiliates, may compete with us. See "Certain
Relationships and Related Transactions--Transactions with Time Publishing
Ventures and Its Affiliates--Agreements Relating to the 1997 Acquisition."
IF WE ARE UNABLE TO PREDICT, RESPOND TO AND INFLUENCE TRENDS IN WHAT THE PUBLIC
FINDS APPEALING, OUR REVENUES WILL BE ADVERSELY AFFECTED
Our continued success is dependent on our ability to provide creative,
useful and attractive ideas, information, concepts and products, which strongly
appeal to a large number of homemakers and other consumers. In order to
accomplish this, we must be able to quickly and effectively respond to changes
in the tastes of homemakers and other consumers for ideas, information, concepts
and products. The strength of our brand name depends in part on our ability to
influence these tastes. We cannot be sure that our new ideas and content will
have the appeal and garner the acceptance that they have in the past or that we
will be able to quickly respond to changes in the tastes of homemakers and other
consumers. In addition, we can not be sure that our existing ideas and content
will continue to appeal to the public.
SINCE OUR STOCK HAS NOT BEEN PUBLICLY TRADED BEFORE THIS OFFERING, THE PRICE OF
OUR STOCK MAY BE SUBJECT TO WIDE FLUCTUATIONS
Prior to this offering, you could not buy or sell our Class A common stock
publicly. Although we and the underwriters determined the initial public
offering price after extensive negotiation and based on numerous factors, the
market price of our Class A common stock after the offering may vary from the
initial public offering price. The market price of our Class A common stock is
likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as the following, some of which are beyond our control:
-- quarterly variations in our operating results
-- operating results that vary from the expectations of securities
analysts and investors
-- changes in expectations as to our future financial performance,
including financial estimates by securities analysts and investors
-- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments
-- changes in the status of our intellectual property and other
proprietary rights
-- announcements by third parties of significant claims or proceedings
against us
-- future sales of our Class A common stock
-- stock market price and volume fluctuations
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WE HAVE A SHORT OPERATING HISTORY WITH RESPECT TO OUR CURRENT BUSINESSES; WE
HAVE NEVER OPERATED AS A PUBLIC COMPANY, AND THE OBLIGATIONS INCIDENT TO BEING A
PUBLIC COMPANY WILL REQUIRE ADDITIONAL EXPENDITURES
Prior to 1997, substantially all of our current businesses were conducted
as part of Time Publishing Ventures and its affiliates, and the remainder of our
current businesses were operated separately by Martha Stewart. After our
acquisition of Martha Stewart Living from Time Publishing Ventures, we engaged
in our current businesses as an integrated independent entity for the first
time. Since then we have made significant investments, including personnel
additions and organizational changes. Accordingly, with respect to most of our
current businesses, we have only a limited operating history for potential
investors to consider.
Prior to this offering, we have never been a public company, and we expect
that the obligations of being a public company, including substantial public
reporting and investor relations obligations, will require significant
additional expenditures, place additional demands on our management and may
require the hiring of additional personnel. As part of this process, we are
implementing financial reporting systems and other controls which we have not
previously used. We may need to implement additional systems in order to
adequately function as a public company. Such expenditures could adversely
affect our financial condition and results of operations.
IF WE ARE NOT ABLE TO EFFECTIVELY MANAGE OUR GROWTH, OUR FINANCIAL CONDITION,
RESULTS OF OPERATIONS AND PROSPECTS COULD DECLINE
Our rapid growth in recent years has placed significant demands on our
management and other resources. If we continue to experience rapid growth, we
will require significant additional investment in personnel, systems and related
capital expenditures. We may not be able to recruit adequate personnel, or
properly train, integrate or manage our growing employee base, implement new
systems, including those for transaction processing and operational and
financial management, or invest in capital expenditures in a timely and
effective manner. If we fail to effectively manage and continue this growth, our
financial condition, results of operations and prospects could decline.
MARTHA STEWART WILL CONTROL OUR COMPANY AND THIS CONTROL COULD INHIBIT POTENTIAL
CHANGES OF CONTROL
Following this offering, Martha Stewart will control all of our outstanding
shares of Class B common stock, representing approximately % of our voting
power. As a result, Martha Stewart will have the ability to control the outcome
of all matters requiring stockholder approval, including the election and
removal of our entire Board of Directors, any merger, consolidation or sale of
all or substantially all of our assets, and the ability to control our
management and affairs. The Class B common stock has ten votes per share, while
Class A common stock, which is the stock we are offering in this prospectus, has
one vote per share. Because of this dual-class structure, Martha Stewart will
continue to be able to control all matters submitted to our stockholders even if
she comes to own significantly less than 50% of the equity of our company. This
concentrated control could discourage others from initiating any potential
merger, takeover or other change of control transaction that may otherwise be
beneficial to our businesses. As a result, the market price of Class A common
stock could be adversely affected.
IF OUR SYSTEMS OR THOSE OF OUR VENDORS OR PARTNERS ARE NOT YEAR 2000 COMPLIANT,
YEAR 2000 RISKS MAY HARM OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS
The risks posed by the inability of certain computer systems, possibly
including ours and those of our third-party vendors and strategic partners, to
recognize the change of the date to the year 2000 could adversely affect our
business in a number of significant ways. We rely on information technology
supplied by third parties, and our strategic partners are also dependent upon
their own internally developed information technology and third-party systems.
Year 2000 problems affecting either our systems or those of our strategic
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partners, manufacturers and distributors could materially adversely affect our
business. Additionally, the Internet could face serious disruptions arising from
the year 2000 problem.
We are evaluating our information technology and are consulting with our
third-party vendors and strategic partners to ascertain year 2000 status.
However, we cannot guarantee that our systems will be year 2000 compliant in a
timely manner, that the systems of our strategic partners will be year 2000
compliant in a timely manner or that there will not be significant problems
among information technology systems. We also cannot guarantee that consumers
will be able to visit marthastewart.com without serious disruptions arising from
the year 2000 problem. Given the potentially pervasive nature of the year 2000
problem, we cannot guarantee that disruption in other industries and market
segments will not adversely affect our business.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is substantially higher than the net
tangible book value of each outstanding share of our common stock. Purchasers of
Class A common stock in this offering will experience immediate and substantial
dilution. The dilution will be $ per share in net tangible book value of
Class A common stock from the initial public offering price, and $ per share
if the underwriters exercise their option to purchase additional shares. If
outstanding options to purchase shares of Class A common stock are exercised,
there would be further dilution. See "Dilution" and "Management" for information
regarding outstanding stock options and additional stock options which may be
granted.
SUBSTANTIAL SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR CLASS A COMMON STOCK
Sales of a substantial number of shares of our common stock after this
offering could adversely affect the market price of our Class A common stock by
introducing a large number of sellers to the market. Given the potential
volatility in the price of our shares, these sales could cause the market price
of Class A common stock to decline.
After this offering, we will have outstanding shares of Class A
common stock and shares of Class B common stock, and we will have
reserved an additional shares of Class A common stock for issuance
pursuant to outstanding stock options. All of the shares of Class A common stock
to be sold in this offering will be freely tradable without restriction or
further registration under the federal securities laws unless purchased by one
of our "affiliates," as that term is defined in Rule 144 under the Securities
Act of 1933. The remaining shares of outstanding common stock, including both
Class A and Class B, representing approximately % of the outstanding common
stock upon completion of this offering, will be "restricted securities" under
the Securities Act of 1933. These restricted securities will be subject to
restrictions on the timing, manner and volume of sales of restricted shares.
However, under the terms of a stockholders agreement to be entered into
immediately prior to completion of this offering, each of Martha Stewart, Time
Publishing Ventures and Kleiner Perkins, each of whom is a stockholder, will
have rights to require us to register their shares. See "Certain Relationships
and Related Transactions--Stockholders Agreement and Registration Rights" for
more information on these registration rights. If Time Publishing Ventures
accepts our offer to purchase its shares of common stock, which we will deliver
at the time of this offering, upon completion of that transaction, those shares
of common stock will no longer be outstanding for sale in the public markets.
Our directors, executive officers, key employees and all of our current
stockholders have agreed, subject to limited exceptions, that, for a period of
180 days following this offering, they will not, without the prior written
consent of Morgan Stanley, directly or indirectly, offer to sell, sell or
otherwise dispose of any shares of common stock.
We cannot predict if future sales of our common stock or the availability
of our common stock for sale will adversely affect the market price for Class A
common stock or our ability to raise capital by offering equity securities.
18
<PAGE> 22
OUR MANAGEMENT WILL HAVE SUBSTANTIAL DISCRETION OVER THE USE OF THE PROCEEDS
FROM THIS OFFERING
The net proceeds of our sale of shares of Class A common stock in
this offering will be approximately $ million, after deducting underwriting
discounts and commissions and estimated offering expenses. Our management will
retain broad discretion as to the use of those proceeds, except for the $42.0
million that will be used to repurchase Time Publishing Ventures' equity
interest if Time accepts our call offer. We intend to use the net proceeds from
this offering for general corporate purposes, including new business development
and additional investments in personnel, systems and related capital
expenditures, but we do not have any specific plans in this regard. The failure
of our management to apply these funds effectively could have a material adverse
effect on our business, results of operations and financial condition. For more
information, see "Use of Proceeds."
19
<PAGE> 23
SPECIAL NOTE WITH RESPECT TO FORWARD-LOOKING INFORMATION
We have made some statements in this prospectus, including some under
"Prospectus Summary," "Recent Developments--Strategic Investment," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere, which constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any
results, levels of activity, performance or achievements expressed or implied by
any forward-looking statements. These factors include, among other things, those
listed under "Risk Factors" and elsewhere in this prospectus. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "expects," "intends," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of these
terms or other comparable terminology. Although we believe that the expectations
reflected in forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. We are under no
duty to update any of the forward-looking statements after the date of this
prospectus.
20
<PAGE> 24
REORGANIZATION TRANSACTIONS OCCURRING PRIOR TO THIS OFFERING
From December 1996 until , 1999, we operated as a limited
liability company. In connection with this offering and immediately before we
complete this offering, Martha Stewart Living Omnimedia LLC will be reorganized
into a C corporation through a merger with Martha Stewart Living Omnimedia in
which the LLC equity interests will be converted into shares of common stock. We
will issue an aggregate of shares of Class A common stock and
shares of Class B common stock to the LLC members in this
reorganization. The LLC members consist of The Martha Stewart Family Limited
Partnership, an entity controlled by Martha Stewart, Sharon Patrick, our
President and Chief Operating Officer, Time Publishing Ventures, KPCB Holdings,
Inc. and Grubman Indursky & Schindler, P.C., which provides legal services to
us. In addition, in connection with this reorganization:
-- we will reserve an aggregate of shares of Class A common
stock for issuance upon exercise of options previously issued under
the Martha Stewart Living Omnimedia LLC Non-Qualified Class A LLC
Unit/Stock Option Plan
-- at the time of this offering we will issue up to an additional
shares of Class A common stock under the Martha Stewart
Living Omnimedia LLC Phantom Performance Unit Plan
The options to acquire Class A common stock under the Martha Stewart Living
Omnimedia LLC Non-Qualified Class A LLC Unit/Stock Option Plan generally vest in
increments over a five-year period, generally 10% at December 31, 1998, with
additional increments of 10%, 20%, 20% and 40% vesting on each of the four
subsequent anniversaries. There will be no further grants under this plan
following this offering.
Prior to this offering, we will make one or more distributions of profits,
totaling approximately $10.0 million, to the LLC members, other than Kleiner
Perkins, on a pro rata basis in accordance with their relative equity interests.
The $10.0 million will be distributed as follows: approximately $8.7 million to
The Martha Stewart Family Limited Partnership, $0.6 million to Sharon Patrick,
$0.7 million to Time Publishing Ventures and $31,000 to Grubman Indursky &
Schindler. Additionally, at the time of the reorganization we will make a pro
rata distribution to all LLC members to cover their respective tax liabilities
resulting from the income of Martha Stewart Living Omnimedia LLC, which
distribution as of June 30, 1999 is estimated to total $6.0 million. However,
the actual amount of this tax distribution is dependent on the results of
operations of Martha Stewart Living Omnimedia LLC through the time of the
reorganization, which we cannot predict with certainty.
Upon completion of this offering, we will exercise our right under the
existing LLC agreement to offer to purchase the shares of Class A common stock
received by Time Publishing Ventures in the reorganization for an aggregate of
approximately $42.0 million, or $ per share. Time Publishing Ventures must
decide whether to sell its shares to us no later than the 120th day following
the date we notify Time Publishing Ventures of our offer to purchase. See
"Certain Relationships and Related Transactions--LLC Operating Agreement" for
more information on our agreements with Time Publishing Ventures.
21
<PAGE> 25
USE OF PROCEEDS
We estimate the net proceeds to us from the sale of the
shares of Class A common stock offered in this prospectus to be approximately
$ million, after deducting estimated offering expenses of $ .
We plan to use approximately $42.0 million of the net proceeds from this
offering to finance the potential purchase of the shares of Class A common stock
held by Time Publishing Ventures under the terms of an existing agreement, which
we describe under "Certain Relationships and Related Transactions--LLC Operating
Agreement." We intend to use the remainder of the net proceeds, over time, for
general corporate purposes, including new business development and additional
investments in personnel, systems and related capital expenditures. We also
could use a portion of the net proceeds to acquire or invest in businesses,
technologies, products or services, although no specific acquisitions are
planned and no portion of the net proceeds has been allocated for any
acquisition. In the event that Time Publishing Ventures declines to accept our
offer to purchase its shares of Class A common stock, the entire net proceeds
will be used as otherwise described in this paragraph.
As of the date of this prospectus, except for the potential purchase of the
shares held by Time Publishing Ventures, we cannot specify with certainty the
particular uses for the net proceeds we will receive upon completion of this
offering, and there is no business plan with respect to the specific use of
these proceeds. Accordingly, our management will have broad discretion in the
application of the remainder of the net proceeds. Pending these uses, we intend
to invest the remainder of the net proceeds in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We anticipate that we will retain all of our earnings in the foreseeable
future to finance the continued growth and expansion of our businesses, and we
have no current intention to pay cash dividends. Our future dividend policy will
depend on our earnings, capital requirements, requirements of the financing
agreements to which we may be a party, financial condition and other factors
considered relevant by our Board of Directors.
22
<PAGE> 26
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999 on an
actual, pro forma and pro forma as adjusted basis:
-- The pro forma column reflects our capitalization as set forth in the
actual column with the following adjustments as if each had occurred
on June 30, 1999
-- distributions to members of Martha Stewart Living Omnimedia LLC,
totaling $16.0 million, including $6.0 million representing tax
distribution payments based upon taxable income for the six months
ended June 30, 1999; the actual amount of this tax distribution will
change based on the actual results of operations of Martha Stewart
Living Omnimedia LLC from June 30, 1999 through the date of the
reorganization
-- the sale of 5% of Martha Stewart Living Omnimedia LLC and a warrant
to Kleiner Perkins in exchange for $25.0 million, and
-- the retirement of $15.0 million of indebtedness primarily with a
portion of the proceeds from the Kleiner Perkins transaction.
-- The pro forma as adjusted column reflects our capitalization as set
forth in the pro forma column, with adjustments to reflect the
issuance of the shares of Class A common stock offered in
this prospectus and our receipt and use of the estimated net proceeds
from the sale of these shares, as if this offering had been completed
on June 30, 1999.
This table should be read together with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of Martha Stewart Living Omnimedia LLC and related notes included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ---------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Long-term debt (including current maturities).......... $15,000 $ -- $ --
Members' equity........................................ 49,559 -- --
Stockholders' equity:
Class A common stock ($0.01 par value) no shares
authorized actual and pro forma; 350,000,000
shares authorized as adjusted; no shares issued
and outstanding actual and pro forma;
shares issued and outstanding pro forma as
adjusted.......................................... -- --
Class B common stock ($0.01 par value) no shares
authorized actual and pro forma; 150,000,000
shares authorized as adjusted; no shares issued
and outstanding actual and pro forma;
shares issued and outstanding pro forma as
adjusted.......................................... -- --
Preferred stock ($0.01 par value) no shares
authorized actual and pro forma; 150,000,000
shares authorized as adjusted; no shares issued
and outstanding actual, pro forma and pro forma as
adjusted.......................................... -- -- --
Paid-in capital........................................ 58,559
Retained earnings...................................... -- -- --
------- ------- -------
Total stockholders' equity............................. -- 58,559
------- -------
Total capitalization................................... $64,559 $58,559 $
======= ======= =======
</TABLE>
23
<PAGE> 27
DILUTION
Our net tangible book value (deficit) as of June 30, 1999 was approximately
$(2.1) million or $ per share based on an aggregate of shares
of common stock outstanding. Net tangible book value per share is determined by
dividing the number of outstanding shares of common stock into our net tangible
book value, which is the total tangible assets less total liabilities. After
giving effect to
-- the sale of 5% of Martha Stewart Living Omnimedia LLC and the issuance
of a warrant in exchange for $25.0 million, and
-- the sale of the shares of Class A common stock offered in
this prospectus,
before deducting estimated offering expenses and the underwriting discounts and
commissions based on an assumed initial public offering price of $ per share,
our net tangible book value as of June 30, 1999 would have been $
million, or $ per share. This represents an immediate dilution of
$ per share to new investors purchasing shares of Class A common stock
at the initial offering price. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value (deficit) per share as of June 30,
1999................................................... $
Increase in net tangible book value per share attributable
to Kleiner
Perkins................................................
Increase in net tangible book value per share attributable
to new investors.......................................
----
Pro forma net tangible book value per share after the
reorganization and this offering..........................
----
Dilution per share to new investors......................... $
====
</TABLE>
The following table summarizes, as of June 30, 1999 on the pro forma basis
described above, the number of shares of capital stock purchased from us, the
total consideration paid to us and the average price per share paid by existing
stockholders, Kleiner Perkins and by investors purchasing shares of Class A
common stock in this offering at $ , before deducting the underwriting
discounts and commissions and estimated offering expenses:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
------------------ ------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... % $ % $
Kleiner Perkins................
New investors..................
------- ------- ------- -------
Total..................... % $ %
======= ======= ======= =======
</TABLE>
The above discussion and tables exclude:
-- shares of common stock issuable on exercise of options outstanding as
of June 30, 1999, with a weighted average exercise price of
approximately $ per share, and
-- additional shares of common stock reserved for issuance under our
equity-based compensation plans.
The discussion and tables include up to shares of common stock to
be issued upon completion of this offering under the Martha Stewart Living
Omnimedia LLC Phantom Performance Unit Plan.
24
<PAGE> 28
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with selected historical and pro forma
consolidated financial data of Martha Stewart Living Omnimedia LLC. The
following selected consolidated statement of operations data for the years ended
December 31, 1994 and 1995 and the consolidated balance sheet data as of
December 31, 1994, 1995 and 1996 are derived from the financial statements of
Martha Stewart Living Omnimedia LLC that have been audited by Arthur Andersen
LLP, independent public accountants, which are not included in this prospectus.
The acquisition of Martha Stewart Living in 1997 was accounted for as a purchase
and accordingly results of operations for prior periods do not include those
businesses. The following selected consolidated statement of operations data for
the years ended December 31, 1996, 1997 and 1998 and the consolidated balance
sheet data as of December 31, 1997 and 1998 are derived from the consolidated
financial statements of Martha Stewart Living Omnimedia LLC that have been
audited by Arthur Andersen LLP, independent public accountants, and are included
elsewhere in this prospectus. The following consolidated statement of operations
data for the six months ended June 30, 1998 and 1999 and the consolidated
balance sheet data as of June 30, 1999 have been derived from the unaudited
financial statements of Martha Stewart Living Omnimedia LLC which, in the
opinion of management, have been prepared on the same basis as the audited
financial statements and reflect all adjustments, consisting of normal recurring
adjustments, necessary for fair presentation. Results for the six-month period
ended June 30, 1999 are not necessarily indicative of results that may be
expected for the entire year.
In the table below, we also provide you with the following pro forma
information:
-- The statement of operations data for all of the periods presented
includes an adjustment to the income tax provision reflecting the
reorganization of Martha Stewart Living Omnimedia LLC into a C
corporation as though the reorganization had occurred prior to the
start of each period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview" for
further information.
-- The statement of operations data for the six months ended June 30,
1999 does not include a one time benefit of approximately $2.9
million that will result from the change in the tax status of Martha
Stewart Living Omnimedia LLC at the time it is reorganized into a C
corporation. The benefit actually recognized will be determined on
the effective date of the reorganization.
The financial data set forth below should be read in conjunction with, and
are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the consolidated financial
statements of Martha Stewart Living Omnimedia LLC and the combined financial
statements of Martha Stewart Living and, in each case, the related notes
thereto, included elsewhere in this prospectus.
25
<PAGE> 29
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues
Publishing............................... $3,161 $3,647 $3,899 $108,694 $127,020 $64,701 $73,314
Television............................... -- -- -- 12,396 23,351 10,587 12,787
Merchandising............................ -- -- -- 6,919 15,004 6,622 11,509
Internet/Direct Commerce................. -- -- -- 4,812 14,673 4,343 13,892
------ ------ ------ -------- -------- ------- -------
Total revenues....................... 3,161 3,647 3,899 132,821 180,048 86,253 111,502
------ ------ ------ -------- -------- ------- -------
Operating costs and expenses
Production, distribution and editorial... -- -- -- 59,148 82,930 36,492 54,710
Selling and promotion.................... -- -- -- 31,973 34,540 17,838 19,994
General and administrative............... 725 131 99 21,182 29,659 14,005 18,601
Depreciation and amortization............ -- -- -- 3,927 5,534 2,665 2,732
------ ------ ------ -------- -------- ------- -------
Total operating costs and expenses... 725 131 99 116,230 152,663 71,000 96,037
------ ------ ------ -------- -------- ------- -------
Income from operations..................... 2,436 3,516 3,800 16,591 27,385 15,253 15,465
------ ------ ------ -------- -------- ------- -------
Interest expense, net.................... -- 153 165 2,195 2,243 1,315 597
Income tax provision..................... 71 45 -- 467 1,336 750 702
------ ------ ------ -------- -------- ------- -------
Net income................................. 2,365 3,318 3,635 13,929 23,806 13,188 14,166
------ ------ ------ -------- -------- ------- -------
Pro forma (unaudited)
Adjustment to income tax provision....... (976) (1,401) (1,563) (7,038) (10,817) (6,289) (6,753)
------ ------ ------ -------- -------- ------- -------
Pro forma net income....................... $1,389 $1,917 $2,072 $ 6,891 $ 12,989 $ 6,899 $ 7,413
====== ====== ====== ======== ======== ======= =======
Pro forma basic and diluted net income per
share.................................... $ $
Pro forma weighted average common shares
outstanding..............................
BALANCE SHEET DATA (AT PERIOD END):
Cash....................................... $ 46 $ 7 $ 85 $ 9,971 $ 24,578 $22,269
Total assets............................... 1,145 2,786 4,074 105,706 125,732 123,845
Total long-term debt....................... -- -- -- 30,000 27,650 15,000
Members'/Stockholders' Equity (deficit).... 88 (436) 589 13,235 36,815 49,559
OTHER DATA:
EBITDA..................................... $2,436 $3,516 $3,800 $ 20,518 $ 32,919 $17,918 $18,197
Capital expenditures....................... -- -- -- 11,027 2,730 1,954 1,279
</TABLE>
26
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion details the material factors that have affected
our financial condition and results of operations in 1996, 1997, 1998 and the
six months ended June 30, 1998 and 1999. This discussion should be read in
conjunction with "Selected Historical and Pro Forma Consolidated Financial
Data," the consolidated financial statements of Martha Stewart Living Omnimedia
LLC and the combined financial statements of Martha Stewart Living and, in each
case, the notes related to these financial statements, included elsewhere in
this prospectus.
OVERVIEW
The original businesses of Martha Stewart Living Omnimedia began operations
in 1982 with Martha Stewart's publication of the book Entertaining. Through
1996, Martha Stewart Living Omnimedia derived revenue from royalty income on the
sale of books and lecture and appearance fees. In 1997, the character of our
business changed significantly with the acquisition from Time Publishing
Ventures of the assets and liabilities relating to Martha Stewart Living
magazine, Martha Stewart Weddings magazine, the Martha Stewart Living television
program, Martha Stewart Living books, and the Martha by Mail mail order
business, including certain trademarks and copyrights, for approximately $53.3
million, including acquisition costs. The consideration we paid to Time
Publishing Ventures in this transaction consisted of an interest-bearing
promissory note in the principal amount of $30.0 million and approximately 6.3%
of our equity through the creation of a special class of our equity. The
purchase price was calculated taking into consideration the special income
distribution of $18.0 million payable to Time Publishing Ventures under the
operating agreement of Martha Stewart Living Omnimedia LLC. This distribution
was paid in February 1997.
Our businesses have expanded to comprise four segments:
-- Publishing -- magazines, books, newspaper columns and radio programs
-- Television -- daily and weekend nationally syndicated and cable
programming and periodic network specials
-- Merchandising -- the design and licensing of products for sale in
traditional retail stores
-- Internet/Direct Commerce -- online and offline catalog and other
Internet-related businesses
Much of our growth has occurred since 1997, reflecting the 1997 acquisition
of Martha Stewart Living from Time Publishing Ventures, the introduction of new
products and services as well as the expansion of our historical businesses.
Over the last three years, our revenues have grown from $85.9 million in 1996,
on a pro forma basis, to $180.0 million in 1998, and our income from operations
has grown from $9.6 million, on a pro forma basis, to $27.4 million during that
same period. This growth has resulted primarily from continued growth in our
Publishing segment, the switch from a weekly television program to a daily
program in September 1997 as reflected in our Television segment, and the
creation of our Merchandising segment in February 1997 and its subsequent
growth. Additionally, the revenues we derive from the Internet/Direct Commerce
segment have increased as a percentage of total revenues during both 1997 and
1998 as compared to prior periods.
Our revenues are derived primarily from advertising sales, circulation and
book royalties in our Publishing segment, advertising sales and royalties in our
Television segment, licensing fees and royalties in our Merchandising segment
and product sales and advertising in our Internet/Direct Commerce segment.
Our expenses consist primarily of the costs directly associated with
creating, producing and distributing our products and services, such as the cost
of producing our television programs, researching, developing and creating
stories for our Publishing and Television segments and product cost and research
and development expenses relating to our Merchandising and Internet/Direct
Commerce segments. In addition, the recent expansion of our business and
operations has resulted in increased corporate overhead and selling and
promotion expenses, including material increases in the second half of 1998 and
the six-month period ended
27
<PAGE> 31
June 30, 1999, resulting in slower earnings growth than for prior periods. We
expect these expenses to continue to increase through the remainder of 1999.
In connection with our growth strategies, we expect that we will make
significant investments in technology and new product development, as well as
additional investments in infrastructure and facilities related costs. Because
our strategy is to closely control our brands and the quality of products and
services associated with our brands, the introduction of new products, such as a
new category of merchandise, requires substantial investment by us, although a
significant portion of this expense is reimbursed by our licensing partners.
There can be no assurance that, notwithstanding these investments, our growth
strategies will be successful.
From February 1997 until immediately prior to completion of this offering,
we have operated as a limited liability company. Accordingly, our earnings were
included in the taxable income of the members of Martha Stewart Living Omnimedia
LLC for federal and certain state income tax purposes, and we have generally not
been subject to income tax on such earnings, other than certain state and local
franchise and similar taxes. In connection with this offering, pursuant to the
merger of the LLC with and into Martha Stewart Living Omnimedia, Martha Stewart
Living Omnimedia will become subject to such taxes as it is reorganized from a
limited liability company to a C corporation. As a result of the reorganization
into a C corporation, we will record future tax benefits and deferred tax
liabilities and a corresponding tax benefit in our statement of income. Assuming
this reorganization into a C corporation had occurred at June 30, 1999, the net
future tax benefit would have been approximately $2.9 million. In connection
with this offering, Martha Stewart Living Omnimedia LLC will make one or more
distributions to its members of approximately $16.0 million, which includes one
or more distributions of profits totaling no more than $10.0 million to the
members other than Kleiner Perkins and approximately $6.0 million in respect of
tax liabilities of all members for the six months ended June 30, 1999, which
amount will be increased to reflect earnings since that date through the date of
the reorganization.
Assuming the merger had occurred on January 1, 1998, our pro forma
effective tax rate for 1998 would have been 48%. This pro forma effective tax
rate is higher than the federal statutory tax rate of 35% due to state and local
taxes, as well as the effect of the amortization of non-deductible goodwill. The
effect of taxes on our results of operations is not discussed below because the
historic taxation of our operations does not provide a meaningful comparison
with respect to periods following the merger and this offering.
28
<PAGE> 32
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 TO SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, % OF JUNE 30, % OF
1998 REVENUES 1999 REVENUES
---------- ------------- ---------- -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues
Publishing.................... $64,701 75.0% $ 73,314 65.7%
Television.................... 10,587 12.3% 12,787 11.5%
Merchandising................. 6,622 7.7% 11,509 10.3%
Internet/Direct Commerce...... 4,343 5.0% 13,892 12.5%
------- ----- -------- -----
Total revenues........... 86,253 100.0% 111,502 100.0%
------- ----- -------- -----
Operating costs and expenses
Production, distribution and
editorial.................. 36,492 42.3% 54,710 49.1%
Selling and promotion......... 17,838 20.7% 19,994 17.9%
General and administrative.... 14,005 16.2% 18,601 16.7%
Depreciation and
amortization............... 2,665 3.1% 2,732 2.4%
------- ----- -------- -----
Total operating costs and
expenses.............. 71,000 82.3% 96,037 86.1%
------- ----- -------- -----
Income from operations.......... 15,253 17.7% 15,465 13.9%
------- ----- -------- -----
Other expenses
Interest expense, net......... 1,315 1.5% 597 0.5%
Income tax provision.......... 750 0.9% 702 0.6%
------- ----- -------- -----
Net income...................... $13,188 15.3% $ 14,166 12.7%
======= ===== ======== =====
</TABLE>
Revenues. Total revenues increased $25.2 million, or 29%, to $111.5
million for the six months ended June 30, 1999, from $86.3 million for the six
months ended June 30, 1998. Publishing revenues increased $8.6 million, or 13%,
to $73.3 million for the six months ended June 30, 1999 from $64.7 million for
the six months ended June 30, 1998. This increase reflects an increase in
advertising revenues of $7.2 million, primarily due to an increase in
advertising pages sold in Martha Stewart Living magazine of 14% and an increase
in advertising rates of 5%. Television revenues increased $2.2 million, or 21%,
to $12.8 million for the six months ended June 30, 1999 from $10.6 million for
the six months ended June 30, 1998. The increase is due primarily to revenues of
$2.9 million associated with the addition of a second half hour to our
syndicated daily program in a majority of markets in which it is aired,
partially offset by reduced advertising revenues of $1.1 million resulting from
lower ratings for the six months ended June 30, 1999. Merchandising revenues
increased $4.9 million, or 74%, to $11.5 million, for the six months ended June
30, 1999 from $6.6 million for the six months ended June 30, 1998, due primarily
to the addition of our Martha Stewart Everyday line of garden products, sold in
Kmart stores beginning in January 1999, and the sale of merchandise by Zellers
department stores in Canada beginning in June 1998. Sales of our Martha Stewart
Everyday bed and bath products also increased due to offering the full product
line during the six months ended June 30, 1999, whereas the full product line
was not available during the six months ended June 30, 1998. Internet/Direct
Commerce revenues increased $9.5 million, or 220%, to $13.9 million for the six
months ended June 30, 1999 from $4.3 million for the six months ended June 30,
1998, due to higher merchandise sales of $9.1 million resulting from higher
catalog circulation and increased advertising revenues of $0.4 million.
29
<PAGE> 33
Production, distribution and editorial. Production, distribution and
editorial expenses increased $18.2 million, or 50%, to $54.7 million or the six
months ended June 30, 1999 from $36.5 million for the six months ended June 30,
1998. Publishing segment costs increased $5.9 million, as a result of the
increased number of pages printed per issue of 12% resulting from more
advertising pages sold, higher copies printed of 4% as well as higher printing
costs. Television costs increased $0.5 million, primarily as a result of higher
production and distribution costs incurred for the additional half-hour of
programming in 1999. In our Merchandising segment, certain costs are reimbursed
by our licensing partners, and are therefore not reflected in our operating
results. Internet/Direct Commerce costs increased $11.8 million due to higher
volume of catalog circulation and a higher cost of goods sold related to
increased revenues.
Selling and promotion. Selling and promotion expenses increased $2.2
million, or 12%, to $20.0 million for the six months ended June 30, 1999 from
$17.8 million for the six months ended June 30, 1998. This increase primarily
reflects increased Publishing segment costs resulting from increased
subscription acquisition spending of $1.3 million and advertising sales costs of
$0.6 million to support higher advertising revenues.
General and administrative. General and administrative expenses,
consisting primarily of costs relating to the executive office, finance,
professional services, information technology, office services (including rent)
and human resources, increased $4.6 million, or 33%, to $18.6 million for the
six months ended June 30, 1999 from $14.0 million for the six months ended June
30, 1998. The increase is attributable to higher consulting costs, primarily
related to certain human resource and information technology-related projects.
Additionally, we have incurred higher costs with respect to finance and
occupancy as a result of continued infrastructure development and higher
company-wide employment levels over the prior period.
Depreciation and amortization. Depreciation and amortization remained
unchanged at $2.7 million.
Interest expense, net. Interest expense, net, decreased $0.7 million, or
55%, to $0.6 million for the six months ended June 30, 1999 from $1.3 million
for the six months ended June 30, 1998, as a result of lower outstanding
long-term debt, and higher interest income earned on higher invested cash
balances.
Net income increased $1.0 million, or 7%, to $14.2 million for the six
months ended June 30, 1999 from $13.2 million for the six months ended June 30,
1998, primarily as a result of the above mentioned factors.
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<PAGE> 34
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
% OF % OF
1997 REVENUES 1998 REVENUES
-------- ----------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues
Publishing.................................. $108,694 81.8% $127,020 70.5%
Television.................................. 12,396 9.3% 23,351 13.0%
Merchandising............................... 6,919 5.2% 15,004 8.3%
Internet/Direct Commerce.................... 4,812 3.6% 14,673 8.1%
-------- ----- -------- -----
Total revenues......................... 132,821 100.0% 180,048 100.0%
-------- ----- -------- -----
Operating costs and expenses
Production, distribution and editorial...... 59,148 44.5% 82,930 46.1%
Selling and promotion....................... 31,973 24.1% 34,540 19.2%
General and administrative.................. 21,182 15.9% 29,659 16.5%
Depreciation and amortization............... 3,927 3.0% 5,534 3.1%
-------- ----- -------- -----
Total operating costs and expenses..... 116,230 87.5% 152,663 84.8%
-------- ----- -------- -----
Income from operations........................ 16,591 12.5% 27,385 15.2%
-------- ----- -------- -----
Other expenses
Interest expense, net....................... 2,195 1.7% 2,243 1.2%
Income tax provision........................ 467 0.4% 1,336 0.7%
-------- ----- -------- -----
Net income.................................... $ 13,929 10.5% $ 23,806 13.2%
======== ===== ======== =====
</TABLE>
Revenues. Total revenues increased $47.2 million, or 36%, to $180.0
million, for the year ended December 31, 1998 from $132.8 million for the year
ended December 31, 1997. Publishing segment revenues increased $18.3 million, or
17%, to $127.0 million for the year ended December 31, 1998 from $108.7 million
for the year ended December 31, 1997. This increase primarily reflects higher
advertising revenues of $14.9 million due to an increase in advertising pages
sold in Martha Stewart Living magazine of 17% and increased per page advertising
rates, as well as additional advertising revenues of $1.6 million received from
a special issue published in the fourth quarter of 1998. Circulation revenues
increased $4.4 million as a result of generally higher newsstand revenues,
including newsstand revenues recognized on the special issue. Television
revenues increased $11.0 million, or 88%, to $23.4 million for the year ended
December 31, 1998 from $12.4 million for the year ended December 31, 1997 due
primarily to producing and airing a full year of the daily syndicated show in
both the United States and Canada, as opposed to a partial year in 1997, and
revenues of $1.9 million earned from licensing a second half hour of "best of"
shows during the fourth quarter of 1998. These increases were partially offset
by the elimination of revenues of $0.8 million derived from an agreement, under
which reruns of Martha Stewart Living programming were aired on the Lifetime
cable network. In light of Martha Stewart Living programming moving to a daily
format, we elected not to attempt to renew this agreement, which expired during
the third quarter of 1997. Merchandising revenues increased $8.1 million, or
117%, to $15.0 million for the year ended December 31, 1998 from $6.9 million
for the year ended December 31, 1997. This increase resulted from a greater
assortment of Martha Stewart Everyday bed and bath products in 1998, the
introduction of these products at Zellers in Canada in June 1998 and the
distribution of our Martha Stewart Everyday Colors line of paints through Sears
in the United States and Canada in the first half of 1998. Internet/Direct
Commerce revenues increased $9.9 million, or 205%, to $14.7 million for the year
ended December 31, 1998 from $4.8 million for the year ended December 31, 1997.
The increase is primarily due to an increase in catalog merchandise sales
resulting from an increase in both the number of products offered through the
catalog and the number of catalogs mailed, in addition to increased sales on our
website. Internet advertising revenues increased $1.1 million, primarily due to
our website's first full year of operation in 1998, compared with only four
months in 1997.
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<PAGE> 35
Production, distribution and editorial. Production, distribution and
editorial expenses increased $23.8 million, or 40%, to $82.9 million in the year
ended December 31, 1998 from $59.1 million in the year ended December 31, 1997.
Publishing segment costs increased $7.3 million, as a result of an increased
number of pages printed per issue of 17% resulting from the increase in
advertising pages sold, costs associated with the special issue and higher
printing costs. Television costs increased $4.1 million due to higher production
and distribution costs associated with producing and airing a full year of the
daily syndicated show. Internet/Direct Commerce costs increased $12.4 million,
based on higher volume of catalog circulation and a higher cost of goods sold
due to increased product sales.
Selling and promotion. Selling and promotion expenses increased $2.6
million, or 8%, to $34.5 million for the year ended December 31, 1998 from $32.0
million for the year ended December 31, 1997. This increase primarily reflects
increased Publishing segment costs of $1.3 million resulting from increased
subscription acquisition spending and increased Television segment expenses of
$0.9 million associated with the expanded programming schedule.
General and administrative. General and administrative expenses increased
$8.5 million, or 40%, to $29.7 million for the year ended December 31, 1998 from
$21.2 million for the year ended December 31, 1997. The increase is attributable
to higher executive compensation, higher information technology and consulting
costs, the creation of an integrated marketing department, higher costs
associated with increased revenues and the buildup of corporate infrastructure
in the business and higher staffing levels throughout the Company.
Depreciation and amortization. Depreciation and amortization increased
$1.6 million, or 41%, to $5.5 million for the year ended December 31, 1998 from
$3.9 million for the year ended December 31, 1997, as a result of higher levels
of property, plant and equipment in service.
Interest expense, net. Interest expense, net, remained unchanged at $2.2
million.
Net income increased $9.9 million, or 71%, to $23.8 million for the year
ended December 31, 1998 from $13.9 million for the year ended December 31, 1997,
primarily as a result of the above mentioned factors.
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<PAGE> 36
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO PRO FORMA YEAR ENDED DECEMBER
31, 1996
Financial information for 1996 is presented on a pro forma basis to reflect
the acquisition by Martha Stewart Living Omnimedia LLC of Martha Stewart Living
from Time Publishing Ventures in 1997, as if such transaction were completed as
of January 1, 1996. Actual financial information for 1996 is not presented in
this section as it is not material and does not provide a meaningful comparison
with subsequent periods. We present the actual financial information for 1996 in
the consolidated financial statements of Martha Stewart Living Omnimedia LLC
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA % OF % OF
1996 REVENUES 1997 REVENUES
----------- -------- -------- --------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues
Publishing.............................. $74,146 86.4% $108,694 81.8%
Television.............................. 8,420 9.8% 12,396 9.3%
Merchandising........................... -- -- 6,919 5.2%
Internet/Direct Commerce................ 3,292 3.8% 4,812 3.6%
------- ----- -------- -----
Total revenues..................... 85,858 100.0% 132,821 100.0%
------- ----- -------- -----
Operating costs and expenses
Production, distribution and
editorial............................ 40,610 47.3% 59,148 44.5%
Selling and promotion................... 24,484 28.5% 31,973 24.1%
General and administrative.............. 7,812 9.1% 21,182 15.9%
Depreciation and amortization........... 3,371 3.9% 3,927 3.0%
------- ----- -------- -----
Total operating costs and
expenses........................ 76,277 88.8% 116,230 87.5%
------- ----- -------- -----
Income from operations.................... 9,581 11.2% 16,591 12.5%
------- ----- -------- -----
Other expenses
Interest expense, net................... 165 0.2% 2,195 1.7%
Income tax provision.................... -- -- 467 0.4%
------- ----- -------- -----
Net income.............................. $ 9,416 11.0% $ 13,929 10.5%
======= ===== ======== =====
</TABLE>
Revenues. Total revenues increased $47.0 million, or 55%, to $132.8
million for the year ended December 31, 1997 from $85.9 million for the year
ended December 31, 1996 on a pro forma basis. Publishing segment revenues
increased $34.6 million, or 47%, to $108.7 million for the year ended December
31, 1997 from $74.1 million for the year ended December 31, 1996 on a pro forma
basis. This increase primarily reflects higher advertising revenues of $22.2
million due to more advertising pages sold and increased per page advertising
rates, as well as higher circulation revenues of $12.9 million resulting from
both higher subscription revenues of $11.5 million and newsstand revenues of
$1.4 million due to increased copies sold. Television revenues increased $4.0
million, or 47%, to $12.4 million for the year ended December 31, 1997 from $8.4
million for the year ended December 31, 1996 on a pro forma basis. This increase
was primarily due to production and airing of a daily syndicated half-hour show
in both the United States and Canada beginning in September 1997, while prior to
that date the show was aired only weekly. Merchandising revenues in 1997
represent revenues received from our Martha Stewart Everyday bed and bath
products, which were introduced at Kmart in March 1997. Internet/Direct Commerce
revenues increased $1.5 million, or 46%, to $4.8 million for the year ended
December 31, 1997 from $3.3 million for the year ended December 31, 1996 on a
pro forma basis. The increase is primarily due to an increase in product sales
resulting from the promotion of catalog products in Martha Stewart Living
magazine.
Production, distribution and editorial. Production, distribution and
editorial expenses increased $18.5 million, or 46%, to $59.1 million for the
year ended December 31, 1997 from $40.6 million for the year ended December 31,
1996 on a pro forma basis. Publishing segment costs increased $15.0 million,
primarily as a result of a 24% increase in the number of pages printed per issue
due to the increase in advertising pages sold
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<PAGE> 37
and a 22% increase in print order. Television costs increased $2.8 million due
to the increase in programming resulting from the change from a weekly to a
daily show beginning in September 1997. Internet/Direct Commerce costs increased
$0.7 million due to higher sales of catalog merchandise.
Selling and promotion. Selling and promotion expenses increased $7.5
million, or 31%, to $32.0 million for the year ended December 31, 1997 from
$24.5 million for the year ended December 31, 1996 on a pro forma basis. This
increase reflects higher Publishing segment costs resulting from increased
subscription acquisition spending and advertising sales costs to support higher
advertising revenues.
General and administrative. General and administrative expenses increased
$13.4 million, or 172%, to $21.2 million for the year ended December 31, 1997
from $7.8 million for the year ended December 31, 1996 on a pro forma basis. The
increase is attributable to overall costs associated with the staffing and the
development of a corporate infrastructure as a result of the acquisition of
Martha Stewart Living from Time Publishing Ventures, including higher executive
compensation, information technology, finance, consulting and human resource
costs.
Depreciation and amortization. Depreciation and amortization increased
$0.6 million, or 16%, to $3.9 million for the year ended December 31, 1997 from
$3.4 million for the year ended December 31, 1996 on a pro forma basis, as a
result of higher levels of property, plant and equipment placed in service.
Interest expense, net. Interest expense increased $2.0 million to $2.2
million for the year ended December 31, 1997 from $0.2 million for the year
ended December 31, 1996 on a pro forma basis, as a result of the long-term debt
incurred in connection with the acquisition from Time Publishing Ventures.
Net income increased $4.5 million, or 48%, to $13.9 million for the year
ended December 31, 1997 from $9.4 million for the year ended December 31, 1996
on a pro forma basis, primarily as a result of the above mentioned factors.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $22.3 million at June 30, 1999, compared to
$19.7 million at June 30, 1998. Cash and cash equivalents decreased $2.3 million
during the six months ended June 30, 1999, and increased $9.8 million during the
six months ended June 30, 1998, as stated below.
Cash flows from operating activities were $13.0 million during the six
months ended June 30, 1999, compared with $11.7 million for the six months ended
June 30, 1998. The increase in cash flows from operating activities in 1999 was
primarily a result of increased net income.
Cash flows used in investing activities were $1.3 million during the six
months ended June 30, 1999, representing capital expenditures to acquire
property and equipment. Cash flows provided by investing activities were $0.4
million during the six months ended June 30, 1998, representing proceeds
received from a sale/leaseback of $2.4 million, offset by $2.0 million of
capital expenditures to acquire property and equipment.
Cash flows used in financing activities during the six months ended June
30, 1999 were $14.1 million. In March 1999, we prepaid our outstanding long-term
debt to Time Publishing Ventures, totaling $27.7 million plus accrued interest,
with the proceeds of a $15.0 million term loan from Bank of America, N.A.,
formerly known as NationsBank, N.A., and existing cash of $12.7 million plus
accrued interest. The Bank of America term loan bears interest at 2% above the
three-month London Interbank Offered Rate and principal of $0.8 million is
payable quarterly from June 1999 through March 2004. The outstanding amount of
the loan was repaid in July 1999 with the net proceeds of the Kleiner Perkins
equity purchase. We have a line of credit with Bank of America in the amount of
$10.0 million at the prime rate per annum, which is available to us for seasonal
working capital requirements and general corporate purposes. As of June 30,
1999, we had no outstanding borrowings under this facility. The line of credit
is secured by accounts receivable, inventory, intangible assets and certain
contracts and contains customary financial and other covenants relating to our
financial condition and business. Distributions to members were $1.4 million for
the six months ended June 30, 1999.
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<PAGE> 38
Capital expenditures, primarily for information technology, television
studio and other equipment, office furniture and leasehold improvements, were
$11.0 million, $2.7 million, $2.0 million and $1.3 million for the years ended
December 31, 1997 and 1998 and for the six months ended June 30, 1998 and 1999,
respectively. In 1998, we sold certain property and equipment for $2.4 million
and leased back that property and equipment under operating leases. In July
1999, Martha Stewart Living Omnimedia refinanced existing operating leases for
computer and television studio equipment, pursuant to which the new lease will
be recorded as a capital lease. Accordingly, in July 1999, Martha Stewart Living
Omnimedia recorded property, plant and equipment of $4.7 million with a
corresponding liability for capital lease obligations.
While we extend credit to our customers, no one customer accounts for more
than 10% of our outstanding accounts receivable balance at June 30, 1999. We
have credit policies and procedures which we use to manage our credit risk.
We believe that the net proceeds from this offering, together with any cash
generated from operations, the net proceeds to Martha Stewart Living Omnimedia
from the Kleiner Perkins equity purchase in July 1999 and any funds available
under existing credit facilities, will be sufficient to meet our liquidity
requirements through at least 2000. Thereafter, we may require additional funds
to support our working capital requirements or for other purposes and may seek
to raise such funds through public or private equity financings or from other
sources. There can be no assurance that additional financing will be available
at all or that, if available, such financing will be obtainable on terms
favorable to us or that any additional financing will not be dilutive to our
stockholders.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Several of our businesses can experience fluctuations in quarterly
performance. For example, Martha Stewart Living magazine is published ten times
annually; three issues in each of the first and second quarters and two issues
in each of the third and fourth quarters. Martha Stewart Weddings is published
four times annually; one issue in each of the second and third quarters and two
issues in the fourth quarter. In addition, the number of advertising pages per
issue tend to be higher in issues published in the fourth quarter. Revenue and
income from operations for the television segment tend to be higher in the
fourth quarter due to generally higher ratings and, on occasion, the broadcast
of a holiday prime time television special. Internet/Direct Commerce revenues
also tend to be higher in the fourth quarter due to increased consumer spending
during that period. Revenues from the Merchandising segment can vary
significantly from quarter to quarter due to new product launches.
YEAR 2000
Beginning in 1998, and continuing in 1999, we have conducted a review of
our computer systems and software to identify any potential malfunctions due to
misidentification of the year 2000. We have also made inquiries of our important
third-party vendors, service providers, customers and partners, to determine
whether our business relationships with these parties could be adversely
affected by year 2000 issues. We are using both internal and external resources
to identify, test and correct our systems and software for year 2000 readiness.
As of June 1, 1999, we have completed the research and validation of all
infrastructure, hardware and software, including platform, wide-area network and
local-area network components. We are currently testing all systems identified
during the research and validation phase and plan to complete the testing
process by September 1999. Contingency plans will be developed for all systems
found to be non-compliant as of September 1999.
We are currently contacting all significant third-party vendors and service
providers to determine their year 2000 compliance status. This phase is expected
to be completed as of September 1999. We have also made inquiries of our
important customers and partners as to whether their state of year 2000
compliance could have an adverse effect on our relationship with these parties.
As of July 15, 1999, we have not been informed that any of these parties expects
material disruption in their business relationship with us due to year 2000
compliance. However, this process is ongoing, and we cannot independently verify
the state of readiness of these vendors, service providers, partners and
customers.
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<PAGE> 39
We anticipate that by October 1999, all of our internal non-compliant
systems will have been remedied or contingency plans will have been put into
place so that we will not experience any significant disruption or down-time
resulting from year 2000 compliance issues. Excluding internal costs which are
not tracked separately and are therefore not readily determinable, we expect the
costs of these year 2000 remedial actions to be less than $0.3 million,
including the costs to us of external service provider compliance.
We do not believe, based upon our investigations to date, that the year
2000 issue will have a material effect on our operations or those of our
material service providers or our business relationship with our important
partners and customers. However, if we or any of our significant service
providers, partners or customers do experience a year 2000 compliance problem,
this could have a material adverse effect on our profitability and liquidity. In
some cases, these services, partners and customers cannot be easily replaced,
and we may suffer a disruption in our business while we seek to identify a new
service provider, customer or partner. In addition, any material disruption in
the use or accessibility of the Internet due to year 2000 issues could result in
a serious decline in our Internet-related businesses, including advertising
revenues, as well as delay implementation of this portion of our growth
strategy. These contingencies could have a material adverse effect on our
financial condition and results of operations, and we are not aware of any
adequate replacement service for the Internet.
36
<PAGE> 40
BUSINESS
OVERVIEW
We are a leading creator of original "how to" content and related products
for homemakers and other consumers. Our products bear the well-known "Martha
Stewart" brand name, which we leverage across a broad range of media and retail
outlets. We primarily focus on the domestic arts, providing consumers with the
"how to" ideas, information, products and other resources they need to raise the
quality of living in and around their homes. The content and products we create
span seven core areas: Home, Cooking and Entertaining, Gardening, Crafts,
Holidays, Keeping and Weddings.
In each of our core content areas, we have assembled a team of in-house
creative experts. Many of the leaders of these teams have been with us since the
launch of Martha Stewart Living magazine in 1991. Each member of our creative
staff of more than 160 editors, writers, stylists, art directors and designers
is continually challenged to develop new ideas that support and strengthen the
high quality and look associated with our brands. As a result of these efforts,
we have amassed an extensive library of proprietary content, which serves as a
comprehensive resource for the development of new content and branded products.
We have two primary strategic objectives:
-- to provide our original "how to" content and information to as many
consumers as possible
-- to turn our consumers into "doers" by offering them the information
and products that they need for do-it-yourself ingenuity the "Martha
Stewart way"
We accomplish our first objective through a broad range of media outlets,
which we call our "omnimedia" platform. We accomplish our second objective
through our branded products, which we call our "omnimerchandising" platform.
Our Internet/Direct Commerce business provides a unique opportunity to fulfill
both of our objectives by leveraging our content and merchandising capabilities
to create a one-stop online destination for consumers interested in the domestic
arts.
Omnimedia Platform
Our omnimedia platform currently consists of:
-- two magazines, Martha Stewart Living, published ten times a year, and
Martha Stewart Weddings, published quarterly, together reaching an
estimated 9.9 million readers per month
-- the Emmy Award-winning and number-one-rated "how to" domestic arts
television program in the United States, airing six episodes per week
on affiliates of all four major national networks and available in
91% of U.S. homes with television sets, plus a weekly segment on CBS
This Morning
-- 27 books, which together have sold more than 8.5 million copies,
including Martha Stewart's first book, Entertaining, published in
1982, and Martha Stewart's Hors d'Oeuvres Handbook, published in 1999
-- a weekly askMartha newspaper column, syndicated in 233 newspapers in
the United States and Canada that collectively reach an estimated 43
million readers each week
-- the askMartha radio program, airing five days per week on 270
stations throughout the United States and reaching an estimated 1.5
million listeners per weekday
-- beginning in September 1999, From Martha's Kitchen, a daily
television program on the Food Network
-- marthastewart.com, our website, with over 925,000 registered users
and 627,000 different visitors and over ten million page views in
June 1999
In the spring of 1999, our omnimedia platform provided us with an estimated
88 million monthly gross adult impressions, not including the readers of the
askMartha newspaper column. Monthly gross adult
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<PAGE> 41
impressions is the sum of our monthly magazine readership and the number of
times our television programs and website are viewed, and the number of times
people listen to our radio program, during the course of a typical month.
Omnimerchandising Platform
We believe our branded products, or omnimerchandising platform, offers our
consumers quality, convenience and choice across a wide range of retail and
direct to consumer channels. As of July 1999, our omnimerchandising platform
included more than 2,800 distinct product variations called stock keeping units,
or SKUs, which we currently distribute through the following:
-- the mass market discount channel, exclusively through Kmart stores in
the United States and Zellers stores in Canada
-- the national department store channel, through Sears stores in the
United States and Canada, and Canadian Tire stores in Canada
-- the specialty retail channel, such as Janovic Plaza, and, beginning
in September 1999, Calico Corners and Jo-Ann Fabrics and Crafts,
across the United States
-- our upscale catalog, Martha by Mail, offering 400 products per
catalog, with an expected 1999 distribution of 15 million copies in
11 editions
-- our online Martha by Mail store, which offers over 750 products
Retail sales of Martha Stewart branded merchandise by Kmart and our other
merchandising partners reached $763 million in 1998, an increase of 96% over
1997. We believe that the high quality and usefulness of our content and
products, coupled with our expansive reach, have allowed us to influence the way
consumers think about the home as well as the shopping patterns of consumers
across the United States.
Our Internet/Direct Commerce business provides a vehicle through which our
omnimedia and omnimerchandising platforms converge. We plan to accelerate the
expansion of marthastewart.com by, among other things, expanding the seven
linked channels, or subsites, we recently introduced on our website, each of
which is dedicated to one of our core content areas and related products. We
believe that the other elements of our omnimedia and omnimerchandising platforms
provide our Internet/Direct Commerce business with the content and products
necessary to develop a comprehensive, interactive and attractive online
destination for our consumers.
Our overall business has grown in recent years by accessing new product
markets and leveraging our strong brand name across our omnimedia and
omnimerchandising platforms. In 1998, our revenue was $180.0 million and our
operating income was $27.4 million, representing a 36% and 65% increase,
respectively, over 1997 revenue and operating income. Our net income was $23.8
million in 1998, as compared to $13.9 million in 1997. During the six-month
period ended June 30, 1999, our revenue was $111.5 million and our operating
income was $15.5 million, representing a 29% and 1% increase, respectively, over
the six-month period ended June 30, 1998. Our net income for the six-month
period ended June 30, 1999 was $14.2 million, as compared to $13.2 million for
the six-month period ended June 30, 1998.
HISTORY
The Martha Stewart name first gained prominence in 1982 with the
publication of Martha Stewart's first book, Entertaining, which is now in its
30th printing. Martha Stewart Living magazine was then launched by Martha
Stewart and Time Publishing Ventures in 1991. We purchased the magazine and
related businesses from Time Publishing Ventures and consolidated it with other
businesses previously owned by Martha Stewart
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<PAGE> 42
in February 1997. The following is a timeline of significant events in the
development of our brands and our omnimedia and omnimerchandising platforms:
<TABLE>
<CAPTION>
YEAR EVENT
- ---- -----
<S> <C>
1991..... Martha Stewart Living magazine launched as a quarterly
publication
1993..... Martha Stewart Living television program launched as a
weekly half-hour syndicated show
1994..... Martha Stewart Weddings magazine launched as an annual
publication
1995..... Martha by Mail catalog tested as an insert in Martha Stewart
Living magazine
askMartha syndicated newspaper column published in the
United States and Canada
Martha Stewart Living magazine expanded to ten issues per
year
1997..... Martha Stewart Living Omnimedia LLC acquires magazine and
related businesses from Time Publishing Ventures in
February
Branded bed and bath and paint collections launched at Kmart
Martha Stewart Living television program expanded to six
days per week
Weekly television segment on CBS This Morning debuted
Martha Stewart Weddings expanded to semi-annual publication
askMartha radio program launched
marthastewart.com launched in September
1998..... Martha Stewart Living weekday television program expanded to
one hour
Branded bed and bath products launched at Zellers in Canada
Branded kitchen textiles, window treatments and bath
accessories launched at Kmart and Zellers
First special interest publication, Clotheskeeping,
published
Branded paints launched at Sears in the United States and
Canada
1999..... Branded garden products launched at Kmart and Zellers
Martha Stewart Weddings published as a quarterly publication
Seven dedicated subsites launched on marthastewart.com
From Martha's Kitchen television program to air daily on the
Food Network cable channel in September
Branded decorative fabrics to launch in September
Branded baby bedding to launch in October at Kmart
</TABLE>
COMPETITIVE STRENGTHS
We intend to maintain and enhance our position as a leading creator of
high-quality content and products and to continue to capitalize on our
competitive strengths, which include:
ESTABLISHED, HIGHLY RECOGNIZABLE BRAND NAME
Our principal assets consist of the Martha Stewart brand name and our
related trademarks, which include Martha Stewart Living, Martha Stewart
Weddings, Martha Stewart Everyday, Martha Stewart Home, askMartha, Martha by
Mail and marthastewart.com. We believe the Martha Stewart brands have
significant name recognition and trust among consumers. We believe that
consumers associate the brands with the unique look and usefulness of our
content and with the high quality of living represented by our products and
content. The ability to leverage our single, well-known brand identity across
our seven core content areas is a principal strength of our business. Upon
completion of this offering, we will have an exclusive, perpetual royalty-free
license to use Martha Stewart's name, image, likeness, voice and signature, and
we are the registered owner of the related marks under which our content and
products are marketed. In all of our merchandise licensing arrangements, we
retain significant control over product design, quality and advertising in order
to preserve the consistent look and feel of our brands.
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LEADING AUTHORITY ACROSS KEY CATEGORIES OF DOMESTIC ARTS
We have developed expertise in each of our seven core categories of
domestic arts:
-- Home--decorating, restoring, renovating and collecting items for use
and display in the home
-- Cooking and Entertaining--cooking, recipes, indoor and outdoor
entertaining
-- Gardening--gardening, planting, landscape design and maintenance
-- Crafts--craft projects and similar family activities
-- Holidays--celebrating special occasions through food, gifts,
decorating and entertaining ideas
-- Keeping--household maintenance, organization and planning, such as
homekeeping, petkeeping, recordkeeping and clotheskeeping
-- Weddings--all aspects of planning and celebrating a wedding
We believe that our depth of knowledge and strong brand identity across these
core content areas provide us with important advantages over many of our
competitors that produce content in only one or two of these categories. We are
able to reach a broad audience of consumers, ranging from brides to gardeners to
cooks. In addition, satisfied consumers who are initially only interested in one
of our core content areas, whether it be cooking and entertaining, gardening,
crafts or weddings, may be drawn to explore content and products from other core
categories as part of our overall concept of living. By stimulating consumer
interest in other content areas, we believe we are able to expand the size of
our markets.
EXTENSIVE LIBRARY OF HIGH-QUALITY CONTENT, PRODUCTS AND DESIGNS
We have amassed an extensive library of proprietary content, which consists
of our presentations of "how to" ideas and information used by homemakers and
other consumers to raise the quality of living in and around their homes. As of
December 31, 1998, this library included over 10,000 editorial pages, 2,100
television and radio segments, as well as the designs for more than 2,000 SKUs
of original products. We also have the right to use over 160,000 photographs
that have appeared in, or been photographed for, one of our magazines or books.
Additionally, the evergreen nature of our content allows us to repurpose it for
later use at a low incremental cost. The following chart indicates the
approximate mix of our content library, excluding merchandise, as of December
31, 1998:
<TABLE>
<CAPTION>
MARTHA STEWART
LIVING
MARTHA Martha Television,
STEWART Stewart INCLUDING ASKMARTHA ASKMARTHA
LIVING Weddings Prime Time Newspaper Radio
Magazine Magazine Specials Books Column Program
---------- -------------- --------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
HOME................... 24.8% -- 8.4% 11.0% 20.5% 21.6%
COOKING AND
ENTERTAINING......... 36.6% 15.7% 51.2% 38.7% 23.5% 38.5%
GARDENING.............. 13.7% -- 19.6% 13.6% 15.2% 16.1%
CRAFTS................. 2.9% -- 8.9% 4.8% 11.7% 4.1%
HOLIDAYS............... 6.7% -- 3.4% 14.8% 5.3% 3.6%
KEEPING................ 15.1% -- 6.9% -- 19.3% 15.8%
WEDDINGS............... .2% 84.3% 1.6% 17.1% 4.5% .3%
TOTALS............. 5,908 1,329 1,786 2,814 264 366
(pages) (pages) (segments) (pages) (columns) (segments)
</TABLE>
EXTENSIVE RESEARCH AND DEVELOPMENT PROCESS
Our creative staff thoroughly researches, develops and tests each "how to"
idea or product in our test kitchens, design studios or manufacturers'
laboratories before we release any content or merchandise into the market. We
believe this research and development process ensures that we are regarded as
the "source for the
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source," and that our content and merchandise continue to consist of innovative
and appealing designs, projects, information and recipes. In 1998, we created
over 1,000 original recipes in our own research facilities, and we published
over 275 pages of, and broadcast over 50 television and 25 radio segments
devoted to, original craft projects.
HIGHLY EXPERIENCED TEAM OF CREATIVE AND BUSINESS PERSONNEL
We have carefully assembled an experienced team of creative and business
professionals. Our creative staff consists of more than 160 in-house editors,
gardeners, craftspeople, cooks, designers and art, style and editorial
directors, while our experienced business and administrative staff consists of
over 190 individuals. Our creative staff focuses on developing new content and
merchandise to be distributed across our omnimedia and omnimerchandising
platforms and presenting our new and existing content and merchandise to our
customers. Our business staff focuses on bringing our content and merchandise
profitably to market. Many of our creative and business executives have been
with us since 1991, the year we launched the Martha Stewart Living magazine.
ORGANIZATIONAL STRUCTURE THAT PROMOTES CREATIVITY AND EFFICIENCY
We have no stand-alone business groups in our company. We are organized by
creative and business skills in a structure through which our business and
creative experts render services across our omnimedia and omnimerchandising
platforms. For example, our garden editor produces ideas that she and her
creative team turn into long-form "how to" stories for the magazines, in-depth
treatments for books, short-form questions and answers for the newspaper column,
single idea "tips" for radio, video segments for television and product ideas
for merchandising. Our business staff provides services, including advertising
sales, print production and marketing, that are shared by all of our business
segments. For example, the advertising sales group sells advertising for all of
our media businesses, including the Internet. We believe this structure provides
us with operating efficiencies and ensures brand quality and consistency.
STRONG RELATIONSHIPS WITH KEY DISTRIBUTION, FULFILLMENT AND MARKETING VENDORS
Our existing alliances with Kmart, Hudson's Bay Company, which operates
Zellers, Eyemark Entertainment, Sherwin-Williams, P/Kaufmann and affiliates of
Time Publishing Ventures, among others, enable the wide distribution of our
content and products across the United States and Canada. These relationships
permit us to focus on the design and creation of our content and merchandise
rather than the logistics of distribution, fulfillment and manufacturing. These
relationships also reduce our exposure to inventory risk. Virtually all aspects
of the design, quality, advertising and promotion of our licensed merchandise
are our direct responsibility or subject to our prior approval and ongoing
direction. The result is a consistent identity for the Martha Stewart brand name
across all of our categories.
STRATEGIES
Our strategies focus on continuing to create new content and products and
leveraging our brands across multiple media and merchandising outlets. The key
elements of our strategy include:
EXPAND OUR MERCHANDISING ALONG CORE CONTENT LINES
We seek to create new branded merchandise throughout our seven core content
areas. In the last two years, we have introduced numerous product lines, largely
focusing on the home category, in multiple distribution channels. We intend to
launch our Martha Stewart Everyday Baby baby collection and our Martha Stewart
Home collection of decorative fabrics in fall 1999, and our Martha Stewart
Everyday Housewares collection in 2000. Our other content areas provide
significant merchandising opportunities, including gardening, in which our
Martha Stewart Everyday Garden collection will be expanded in 2000 to include
our live plants program.
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LEVERAGE THE COST OF DEVELOPING HIGH QUALITY CONTENT OVER MEDIA AND
MERCHANDISING PLATFORMS
We spread the costs of researching, investing in and producing high quality
content across multiple media and merchandising platforms to achieve economies
of scale and increased returns on invested capital. This strategy of leveraging
the initial costs of developing content also enables us to make substantial
investments in producing higher quality content. By leveraging our content
across multiple media platforms, we can generate additional profit on this
content as it is reused. For example, beginning in September 1999, existing
food-related segments from the Martha Stewart Living television series will be
adapted to air as a twice-daily half-hour series, From Martha's Kitchen, on the
Food Network.
CAPITALIZE ON REVENUE OPPORTUNITIES CREATED BY THE INTERNET
We believe that we can effectively participate in the growth of the
Internet by creating a highly personalized user experience that integrates
information, electronic commerce and community, all rooted in our library of
proprietary content. Our website has already achieved significant consumer
acceptance and brand awareness. As of August 1999, marthastewart.com had over
925,000 registered members. We have recently established seven linked channels,
or subsites, on our website, each dedicated to one of our core content areas,
which we intend to use to drive revenues. We also intend to use the Internet's
electronic commerce capabilities as a medium for expanding our online store
business. We believe that by combining the convenience of the Internet with our
vast library of content and merchandise and our authority in our core content
areas, we will create new opportunities to generate revenue and expand our
customer audience. An affiliate of Kleiner Perkins has recently made a strategic
investment in our business. We believe Kleiner Perkins' experience in the
Internet industry will be advantageous to us as we implement our growth
strategies. See "Recent Developments -- Strategic Investment" for further
information on Kleiner Perkins' investment.
CROSS-SELL AND CROSS-PROMOTE OUR BRANDS
We cross-sell products to our various customer lists and cross-package
advertising among and across our network of media channels. In 1999, we
anticipate that most of our top 50 advertisers will purchase advertising space
in two or more elements of our omnimedia platform. We also use each media and
merchandising platform to cross-promote one or more of our other businesses. For
example,
-- Martha Stewart Living includes a "Where to find Martha" section and
an Omnimedia Guide that promotes upcoming Martha Stewart Living
television programs, the askMartha radio program and the askMartha
newspaper column, as well as a schedule of online question and answer
forums
-- the television program often uses our products during "how to"
segments, indirectly promotes book launches through "theme weeks"
(e.g., Hors d'Oeuvres Week following the release of the book Hors
d'Oeuvres), provides subscription "800 numbers" for the magazines and
provides daily tag lines for our website
-- the newspaper column cross-promotes the television programs, the
website, the radio program, Martha by Mail and new book releases
We see significant growth opportunities for further cross-promotion of our
businesses through our Internet/Direct Commerce business, an effective display
medium for our content, an up-to-the-minute source of information on our
activities, such as the television program schedule, and a promoter of our
products, as well as a further outlet for advertisers seeking association with
our brands.
EVOLVE OUR BRANDS THROUGH TEAM-BASED CONTENT AND REDUCE DEPENDENCE ON OUR
FOUNDER
We are seeking to further extend the trust-based relationship consumers
share with Martha Stewart, the personality, to our brands. We believe that a
reduction in our dependence on Martha Stewart personally and a better balance of
personality and brand will provide additional brand durability, increased growth
opportunities and a broader recognition of a new generation of Martha Stewart
Living experts. We are increasingly focused on team-based content development.
Our accomplished team of creative personnel is gaining prominence as
company-affiliated experts in their respective fields. Our creative
professionals appear on segments of the
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television program with Martha Stewart, lecture around the country, co-author
books with Martha Stewart and write regular columns in the magazines. We have
also significantly reduced our reliance on personal images of Martha Stewart.
For example, Martha Stewart's picture appeared on the cover of nine of the first
ten issues of Martha Stewart Living, as compared to one out of ten covers
published in 1998.
OMNIMEDIA AND OMNIMERCHANDISING PLATFORMS
Our omnimedia and omnimerchandising platforms support four principal
business segments:
-- Publishing
-- Television
-- Merchandising
-- Internet/Direct Commerce
These business segments accounted for the following revenues and operating
income for 1998, and the six-month period ended June 30, 1999:
<TABLE>
<CAPTION>
REVENUES OPERATING INCOME
------------------------------------- -------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
% OF JUNE 30, % OF % OF JUNE 30, % OF
1998 TOTAL 1999 TOTAL 1998 TOTAL 1999 TOTAL
-------- ----- ---------- ----- -------- ----- ---------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Publishing...................... $127,020 70.5% $ 73,314 65.7% $ 42,669 75.0% $ 24,090 72.4%
Television...................... 23,351 13.0 12,787 11.5 3,924 6.9 1,758 5.3
Merchandising................... 15,004 8.3 11,509 10.3 15,305 26.9 11,430 34.4
Internet/Direct Commerce........ $ 14,673 8.2 $ 13,892 12.5 $ (4,998) (8.8) $ (4,011) (12.1)
-------- ----- -------- ----- -------- ----- -------- -----
Total.................. $180,048 100.0% $111,502 100.0% $ 56,900 100.0% $ 33,267 100.0%
======== ===== ======== ===== ===== =====
Corporate Charges............... (29,515) (17,802)
-------- --------
Operating Income................ $ 27,385 $ 15,465
======== ========
</TABLE>
PUBLISHING
Our publishing activities currently form the principal component of our
omnimedia platform and consist of:
-- two magazines, Martha Stewart Living and Martha Stewart Weddings, as
well as special interest publications
-- books
-- the askMartha radio program and newspaper column
Magazines
We regularly publish two magazines, Martha Stewart Living and Martha
Stewart Weddings. Martha Stewart Living appeals primarily to the
college-educated woman between the ages of 25 and 54 who owns her principal
residence, and Martha Stewart Weddings appeals to a younger but similarly
well-educated demographic. Key advertising and circulation data for Martha
Stewart Living, Martha Stewart Weddings and
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special interest publications are as follows, with the ad pages column
reflecting data reported to Publisher's Information Bureau, or, if unreported,
as calculated by the publisher using a similar methodology:
<TABLE>
<CAPTION>
SPECIAL INTEREST
MARTHA STEWART LIVING MARTHA STEWART WEDDINGS PUBLICATIONS
------------------------------- -------------------------------- ------------------------
FREQUENCY AD FREQUENCY AD FREQUENCY
PER YEAR RATE BASE PAGES PER YEAR DISTRIBUTION PAGES PER YEAR DISTRIBUTION
--------- ----------- ----- --------- ------------ ----- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997................. 10 1.9 million 1,069 2 650,000 417 -- --
1998................. 10 2.1 million 1,253 2 650,000 513 1 750,000
</TABLE>
Martha Stewart Living. Martha Stewart Living, our flagship magazine, is
the foundation of our publishing business. Launched in 1991 as a quarterly
publication with a circulation of 250,000, we now publish the magazine ten times
per year and, since the February 1998 issue, guarantee to advertisers a minimum
circulation of 2.1 million. In the event actual circulation for an issue were to
fall below the guaranteed circulation, advertisers in that issue would be
entitled to a credit for the proportionate share of the circulation shortfall.
However, since the launch of the magazine, no shortfall in guaranteed
circulation has occurred. Martha Stewart Living seeks to offer its readers
reference-quality and original "how to" information for the homemaker and other
consumers in a unique upscale editorial and aesthetic environment. The
independently recognized quality of the content in Martha Stewart Living
establishes the tone for all of our brands. The magazine has won numerous
awards, including:
-- Ad Week's annual "Top Ten List" of magazines in 1995, 1996, 1997 and
1998
-- Advertising Age's "Magazine of the Year" for 1995
-- three National Magazine Awards from the American Society of Magazine
Editors: for photography, in 1994 and 1999; and for design, in 1995
-- numerous honors from the Society of Publication Designers every year
since 1991, including three Gold Awards, 11 Silver Awards and 87
Merit Awards
While providing quality editorial content requires significant investment,
these costs are supported by premium subscription rates and cover prices for the
magazine and premium advertising rates from advertisers that seek association
with our brands and the ability to target our audience. The Martha Stewart
Living subscriber lists, as well as our catalog and other mailing lists, are
important Martha Stewart Living Omnimedia assets, permitting us to target our
desired audience with various cross-selling and promotional activities, such as
upcoming book releases, new product announcements and promotional appearances by
Martha Stewart and our other creative and editorial professionals. The editorial
content and appearance are enhanced by high-quality printing, paper and
graphics. Many readers save and collect the magazine for use as a future
reference tool.
Martha Stewart Weddings. We launched Martha Stewart Weddings in 1994 as an
annual publication and extended it to a semi-annual publication in 1997. In
1999, Martha Stewart Weddings became a quarterly publication, and as of the June
1999 issue had a newsstand distribution of approximately 650,000. Martha Stewart
Weddings targets the upscale bride. Martha Stewart Weddings has the same
fundamental goal as Martha Stewart Living--to provide its readers with editorial
content of the greatest informational and aesthetic quality. Additionally,
Martha Stewart Weddings serves as an important vehicle for introducing young
women to our brands.
As with Martha Stewart Living, the editorial and artistic content developed
for Martha Stewart Weddings will be used by our other business groups. We
believe that the Martha Stewart Weddings component will become an increasingly
important element of our content library.
Special Interest Publications. We published our first special interest
publication, Clotheskeeping, in 1998, which had a distribution of approximately
750,000. We generally expect to publish one special interest publication per
year. The purpose of these issues is to provide in-depth advice and ideas around
a particular topic contained in our core content areas, allowing us to draw upon
our brand name to further promote our expertise in our core content areas.
Additionally, in the future we intend to use this format to explore
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additional content areas. Clotheskeeping had a single advertising sponsor, The
Gap, which provided a guaranteed minimum level of revenue regardless of
circulation. We expect to have both single and multiple sponsors for our future
special interest publications.
Production. Our current magazine printing contract expires with the
December 1999 issue of Martha Stewart Living. This contract will be replaced
with a new contract that we expect to result in lower per-unit printing costs in
fiscal 2000 and beyond. Our books and magazines are manufactured by outside
printers.
Magazine Distribution and Fulfillment. Newsstand distribution of the
magazines is conducted by an affiliate of Time Publishing Ventures pursuant to a
long-term agreement that expires with the December 2004 issue, but which we have
the right to cancel effective after the December 2001 issue. Our subscription
fulfillment services are provided by another affiliate of Time Publishing
Ventures under a long-term agreement that expires in 2002, and is renewable for
an additional three-year period at our option. Total expenses incurred for these
services in 1998 were $9.2 million.
Books
In 1982, Clarkson N. Potter, Inc., a division of Random House (Bertelsmann
AG), published Entertaining, Martha Stewart's first book. Entertaining is
currently in its 30th printing. Since 1982, Martha Stewart and Martha Stewart
Living Omnimedia have released a total of 26 additional titles and have sold in
the aggregate more than 8.5 million books as of December 1998. Over one million
of these were sold in 1998. We own all copyrights with respect to these books.
We create two different types of books: Best of Martha Stewart Living
books and Martha Stewart-authored books. We create two Best of Martha Stewart
Living books and one Christmas with Martha Stewart Living book each year. These
books rely both on our extensive library in the seven core content areas and on
original material. To the extent we rely on our content library, development
costs are materially reduced. We sell the hardcover form of each of these titles
through direct marketing methods to consumers, including Martha Stewart Living
readers and regular craft and cookbook buyers, and we sell paperback editions at
retail book stores. We also have a continuity card program, Good Things, which
is a continuity program of periodic card mailings of individual crafts and
homekeeping ideas that our subscribers compile in loose-leaf binders. The
publication of these books and the continuity cards is done by Oxmoor House,
Inc., an affiliate of Time Publishing Ventures, which also handles their
distribution through direct marketing and certain retail channels. The Best of
Martha Stewart Living books also are distributed through certain retail channels
by Clarkson N. Potter under various agreements.
Under two overlapping long-term agreements with Clarkson N. Potter, we have
created one completely original book approximately every other year and are
obligated to write one more such book. We released Martha Stewart's Healthy
Quick Cook in 1997 and Martha Stewart's Hors d'Oeuvres Handbook in 1999. The
original content also can serve as a foundation for material in the magazines,
the television programs and the various other media, enabling us to spread the
cost of the editorial content across these various media. These books are
generally distributed through retail distribution channels.
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The following is a list of all of our books by core content area:
<TABLE>
<CAPTION>
FIRST PUBLISHED
---------------
<S> <C>
COOKING AND ENTERTAINING
Entertaining...................................... 1982
Martha Stewart's Quick Cook....................... 1983
Martha Stewart's Hors d'Oeuvres................... 1984
Martha Stewart's Pies and Tarts................... 1985
Martha Stewart's Quick Cook Menus................. 1988
Martha Stewart's Menus for Entertaining........... 1994
Special Occasions*................................ 1995
The Martha Stewart Cookbook....................... 1995
What To Have For Dinner*.......................... 1996
Martha Stewart's Healthy Quick Cook............... 1997
Great Parties*.................................... 1997
Desserts*......................................... 1998
Martha Stewart's Hors d'Oeuvres Handbook.......... 1999
HOME
Martha Stewart's New Old House.................... 1992
How To Decorate*.................................. 1996
Decorating Details*............................... 1998
GARDENING
Martha Stewart's Gardening........................ 1991
Arranging Flowers*................................ 1999
CRAFTS
Great American Wreaths*........................... 1996
Good Things*...................................... 1997
HOLIDAYS
Martha Stewart's Christmas........................ 1989
Holidays*......................................... 1994
Handmade Christmas*............................... 1995
Christmas With Martha Stewart Living Vol. 1*...... 1997
Christmas With Martha Stewart Living Vol. 2*...... 1998
WEDDINGS
Weddings.......................................... 1987
The Wedding Planner............................... 1988
</TABLE>
- ------------
* Martha Stewart Living book
The askMartha Newspaper Column and Radio Program
Newspaper Column. Our newspaper presence began in 1995 with askMartha, a
weekly syndicated newspaper column that answers specific questions relating to
our core content areas. The askMartha column is syndicated through The New York
Times Syndication Sales Corporation. Originally appearing in 57 U.S. newspapers,
the column now appears weekly in 233 U.S. and Canadian newspapers. The column
generally appears as a one-quarter to one-half page layout that includes at
least one high-quality photograph and provides a complementary forum to the
longer magazine pieces and television segments.
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While the revenues generated by the askMartha column are small, it is an
important part of our omnimedia platform. The newspapers carrying the askMartha
column reach 43 million readers each week, and the column generally includes a
reference to marthastewart.com or to our products or other publications.
We launched a companion column, askMartha Weddings, in the summer of 1999,
which appears in the wedding announcement section of newspapers. In the future,
we may introduce similar columns relating to some or all of our other core
content areas.
Radio Program. In partnership with Westwood One Radio, Inc., we launched
the askMartha program of radio vignettes in September 1997. Each 90-second-long
vignette, which is currently narrated by Martha Stewart, is accompanied by a
60-second commercial or two 30-second commercials that are jointly sold by
Westwood One and us. These vignettes air five days a week, primarily between the
hours of 6 a.m. and 12 p.m., and follow a format similar to the newspaper
column, providing an answer to a specific question. Currently, the askMartha
program airs on 270 radio stations across the United States. These stations
cover approximately 93% of the total U.S. market, including 29 of the top 30,
and 93 out of the top 100 U.S. markets.
The mix of stations on which the askMartha program appears generally is
intended to reach as many consumers in our target demographic as possible. In
view of the variety of radio stations airing these slots, however, we believe we
reach a much broader demographic with the askMartha program than with many of
our other omnimedia outlets. Our radio distribution agreement also provides for
focused two-hour "call-in" programs relating to selected holidays, through which
we intend to introduce other creative experts.
Future Growth
Our plans for the Publishing segment include growing our magazine business
by producing additional special interest publications. We are also beginning to
produce small-size "how to" companion books for sale alongside our merchandising
products. Other opportunities include "askMartha" newspaper columns devoted to a
particular core content area, starting with askMartha Weddings in the summer of
1999. In addition, we are exploring possible international editions of our
magazines, foreign editions of our books and expanding radio coverage to include
the Canadian market.
TELEVISION
Our television business segment seeks to reach the widest possible audience
by covering a variety of time slots and formats as follows:
-- early morning -- a weekly segment on CBS This Morning
-- daytime prime -- Martha Stewart Living weekday, a one-hour syndicated
program airing Monday through Friday
-- evening prime -- From Martha's Kitchen, a daily program on the Food
Network commencing in September 1999 and periodic prime-time network
specials
-- late night -- From Martha's Kitchen, on the Food Network commencing
in September 1999
-- weekend -- Martha Stewart Living weekend, a half-hour syndicated
program airing on Saturday or Sunday and the upcoming daily program
on the Food Network
Martha Stewart Living weekdays and weekend
The Martha Stewart Living program is the cornerstone of our television
business segment and generally seeks to demonstrate our "how to" ideas and to
motivate viewers to pursue those ideas in their own lives. The program is a
syndicated daytime program hosted by Martha Stewart consisting of several
segments, each of which ties into one of our seven core content areas.
Originally launched as a half-hour weekend program in 1993, the program was
expanded to also include a daily half-hour program in 1997 and, in a majority of
markets, a one-hour weekday program in 1999. Eyemark syndicates the program
domestically under a
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distribution agreement that expires after the 2002-03 broadcast season. Your
Channel Television Inc. distributes the program in Canada over its Life Network
cable network.
During the 1998-99 broadcast season, the program could be seen by 91% of
all U.S. television households. As of August 1999, the weekday program was
viewed by an average of approximately 1.9 million U.S. households every weekday.
The weekend program generally consists of excerpts from the weekday program,
and, as of August 1999, was viewed by an average of approximately 1.6 million
U.S. households per week. The combination of the weekday and weekend programs
allows us to reach a broad audience that we believe is particularly suited to
our "how to" programming.
Under the terms of our agreement with Eyemark, we develop, produce and
retain all copyrights in the programs. We produce Martha Stewart Living largely
at our state-of-the-art studio facility in Westport, Connecticut, and segments
are filmed both in the studio and at various other locations. We staff our
studio facility with approximately 70 full-time dedicated television personnel,
as well as with freelance production staff and personnel from our core content
areas who rotate from our New York headquarters.
Our television programs act as both a source from which other business
units may draw content and an outlet for content developed in other business
units. Additionally, the segmented nature of the programs allows us to repackage
segments around a particular core content area and use that repackaged material
in our secondary distribution channels such as cable and international. The
first of these repackaged programs, a food-focused show, will be launched on the
Food Network in September 1999.
Under our distribution agreement with Eyemark, we are compensated partially
in cash and partially in airtime. We then sell that airtime to advertisers,
subject to a distribution fee payable to Eyemark. In 1998, we incurred
distribution fees of $4.3 million, and we earned $1.9 million in licensing fees
under this agreement. The airtime we receive from the Eyemark agreement provides
us with a substantial degree of control over our advertising base and allows us
to include television advertising in multimedia sales packages offered to
advertisers. As of June 1999, we sold our television airtime to approximately 60
advertisers, with no one industry accounting for more than 20% of our television
advertising revenue. Our Life Network agreement in Canada compensates us with a
straight license fee.
CBS This Morning
Martha Stewart is a regular lifestyle correspondent for, and generally
appears each Tuesday at 8:30 a.m. on, CBS This Morning. This appearance is seen
by approximately 2.4 million viewers each week. In exchange for this appearance,
we receive airtime in the form of one 30-second spot adjacent to the segment.
Our advertising sales team sells this advertising time using the same methods we
employ with respect to our other programming.
Food Network Cable Channel
Commencing in September 1999, the Food Network cable channel will air a
half-hour Martha Stewart branded program twice a day, seven days a week,
entitled From Martha's Kitchen. This program will consist primarily of
food-related segments repackaged from previous Martha Stewart Living programs.
In exchange for the programming, we will receive airtime during the early
showing and late night showing, as well as royalty revenue from advertising
aired during the late night showing. In addition we have an agreement with the
Food Network to develop a series of original programming, primarily featuring
experts other than Martha Stewart, which is intended to begin airing in early
2000.
Prime Time Specials
Periodically, we produce prime time specials that focus on a particular
holiday. Prior episodes of Martha Stewart Christmas were watched by over 8.5
million U.S. households in each of 1995 and 1996. We are currently working on a
Christmas special that we intend to air in December 1999.
Future Growth
We intend to grow our Television segment by developing new programming
relating to our core content areas that feature experts other than Martha
Stewart. Additionally, we will continue to repackage our existing
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library to create new programming primarily relating to individual core content
areas. Finally, we are exploring on a preliminary basis the licensing of our
programs in new international markets, including Japan and several European
countries.
MERCHANDISING
Our merchandising group translates our core content expertise into branded
products that are distributed to a wide audience through a broad range of retail
channels, from mass market discount to specialty stores. Our retailing strategy
is to provide a high-value product relative to its price through the full range
of retail distribution channels. We seek to provide a broad product assortment,
designed from a single viewpoint, which offers consumers a comprehensive and
coordinated system for decorating, gardening, cooking and other activities
related to our core content areas. Our retail merchandising business began to
grow substantially following the February 1997 acquisition of Martha Stewart
Living from Time Publishing Ventures, and we believe expansion of our current
product lines, as well as development of products relating to other aspects of
our seven core content areas, will provide us with significant growth potential.
Our retail product distribution strategy initially targeted the mass market
discount channel. Through Kmart, we have achieved substantial sales volume and
demonstrated that our products have wide appeal. In 1998, total sales for Martha
Stewart-branded retail merchandise were $763 million, providing substantial
royalty revenues for Martha Stewart Living Omnimedia. From this base, we have
expanded distribution channels above the mass market discount channel, including
national department stores, such as Sears, and specialty stores, such as Janovic
Plaza and, with the September 1999 launch of our Martha Stewart Home collection,
Calico Corners and Jo-Ann Fabrics and Crafts. The following summarizes our
merchandising relationships as of May 1999:
<TABLE>
<CAPTION>
DISTRIBUTION CHANNEL PRODUCT LINE(S) LAUNCH DATE STRATEGIC PARTNER RETAILER
- -------------------- --------------- ----------- ----------------- --------
<S> <C> <C> <C> <C>
Mass Market Martha Stewart Everyday March 1997/ Kmart/Zellers Kmart/Zellers
Discount........... Home June 1998
Martha Stewart Everyday May 1997 Sherwin-Williams Kmart
Colors
Martha Stewart Everyday January 1999 Kmart/Zellers Kmart/Zellers
Garden
Martha Stewart Everyday Fall 1999 Kmart Kmart
Baby baby (anticipated)
Martha Stewart Everyday Fall 2000 Kmart Kmart
Housewares (anticipated)
National Department Martha Stewart Everyday March 1998/ Sherwin-Williams Sears/Canadian Tire
Stores............. Colors May 1999
Specialty Stores..... Martha Stewart Home Fall 1999 P/Kaufmann Specialty fabric
Collection (anticipated) stores
Araucana Colors and March 1995 Fine Paints of Specialty paint
Colors of the Garden Europe, Inc. dealers
fine paint collection
</TABLE>
A key component of our retail merchandising strategy is to closely control
all aesthetic aspects of a product and its sale, by designing the products and
active involvement in the development of packaging, in-store display and print
and television advertisements, all of which are subject to our approval. We
license the right to use our trademarks only in connection with the sale of
merchandise designed or selected by our team of creative professionals. To
preserve a consistent brand image that resonates with the materials displayed
across our omnimedia platform, the same editorial professionals who develop our
"how to" stories write or review all text associated with the sale of a product,
including label descriptions, text on packaging, store displays and advertising
text. Our artistic professionals similarly participate in all visual aspects of
the customer's experience with the product, including product design,
advertising and point-of-sale displays.
We rely on our merchandising partners for manufacturing and distribution.
Our agreements with our merchandising partners generally allow us to retain
rights to the product design in other distribution channels.
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In addition to royalty payments, these agreements generally require our partners
to fund our product development, design and advertising.
Mass Market Discount and National Department Store Channels
Mass market discount and national department stores offer us access to the
widest possible audience, permitting us to offer the basic products and tools
that consumers need to implement our ideas in their own homes. Products offered
in these channels--currently in the Martha Stewart Everyday collections--provide
coordinated essentials that offer easy and affordable results.
Martha Stewart Everyday Collections. The Martha Stewart Everyday
collections currently include Martha Stewart Everyday Home, Martha Stewart
Everyday Garden and Martha Stewart Everyday Colors. These products are sold at
over 2,100 Kmart stores and 800 Sears stores in the United States and over 300
Zellers stores, 100 Sears stores and 300 Canadian Tire Stores in Canada. In
1998, sales of the Martha Stewart Everyday collections comprised the substantial
majority of our product-related royalties.
Each Martha Stewart Everyday collection, other than the Martha Stewart
Everyday Colors collection that is under contract with Sherwin-Williams, is
governed by agreements with Kmart and Zellers. Each of these agreements provides
that we have direct responsibility for all aspects of design, or, for seeds and
live plants, selection, packaging, signage and associated collateral materials.
We retain all rights in the products other than the distribution rights licensed
to Kmart and Zellers, which are exclusive in the United States and Canada at the
mass market discount channel of retail distribution. We are assured sufficient
in-store presence and volume to establish and protect our brands through
guaranteed minimum royalties and through dedicated "store-within-a-store"
selling formats. Martha Stewart Everyday Home products occupy approximately 61%
of the merchandise display space in a typical Kmart home fashion department.
Additionally, Kmart funds a majority of the design and development costs for the
relevant products. These agreements have varying expiration dates ranging from
February 2000 to October 2004, with three-year renewals at Kmart's, and,
provided Kmart renews the Bed and Bath agreement, Zellers' option.
Martha Stewart Everyday Home. The Martha Stewart Everyday Home collection
is a line of sheets, towels, bath accessories, window treatments and kitchen
textiles designed by us and manufactured by a variety of vendors, including
Springs Industries, Inc., Westpoint Stevens Inc., and Pillowtex Corporation. The
collection currently consists of approximately 1,900 SKUs and 27 product lines.
Martha Stewart Everyday Garden, Martha Stewart Everyday Housewares and
Other New Products. Earlier this year, we introduced our Martha Stewart Everyday
Garden program with a line of outdoor furniture and preview assortment of
gardening tools. In 2000, we are scheduled to launch the full gardening product
line, which will include a wide variety of garden tools, fertilizers, planting
pots, bulbs, seeds and live plants. Through the live plants program, we will
bring to the mass market discount channel plants that have previously only been
available in limited quantities and at higher prices at specialty garden
centers.
Commencing in Fall 1999, we are scheduled to launch the Martha Stewart
Everyday Baby baby collection of infant bedding products at Kmart. In September
2000, we are scheduled to launch the Martha Stewart Everyday Housewares
collection at Kmart, which will consist of dinnerware, flatware, beverage ware,
cookware, bakeware, mirrors, picture frames, lamps and certain organizational
products relating to our core content area of keeping, all designed to reflect
the Martha Stewart aesthetic.
Martha Stewart Everyday Colors. Martha Stewart Everyday Colors is a line
of interior latex paints introduced in 1997. The colors are developed by Martha
Stewart Living Omnimedia and the paints are manufactured and distributed by
Sherwin-Williams. As of August 1999, the Martha Stewart Everyday Colors line,
consisting of 256 colors and 69 SKUs, was sold in the United States through
Kmart at mass market discount and, in the national department store channel,
Sears, and in Canada through Sears and Canadian Tire. Our agreement with
Sherwin-Williams expires in December 2000.
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Specialty Store Channel
The higher priced products in the Martha Stewart Home collection and our
fine paints collection, offered through the specialty store channel, are
generally aimed at "do-it-yourself" customers who want to apply our ideas and
suggestions in more individualized ways.
Martha Stewart Home Collection. The Martha Stewart Home collection
consists of decorative fabrics that we design and license to P/Kaufmann for
manufacture and distribution to retailers. Under our agreement with P/Kaufmann,
which runs through December 2000, we receive guaranteed minimum royalties and
reimbursement of certain design costs. Beginning in fall 1999, the Martha
Stewart Home collection will be sold in specialty stores, including in over
1,100 Calico Corners and Jo-Ann Fabrics and Crafts stores. As in our agreements
with Kmart, we retain creative control over, and intellectual property rights
in, the products included in the Martha Stewart Home collection.
Fine Paints Collection. The Araucana Colors and Colors of the Garden fine
paint collections are our oldest licensed merchandise lines, dating back to
1995. These collections include 51 colors of interior oil and acrylic paint sold
through specialty paint dealers, such as Janovic Plaza. As of December 1998,
these paint products were sold by 67 independent paint dealers. In fall 1999, we
anticipate entering into a new agreement that will introduce a collection of 36
new colors. We expect this new agreement to provide for all three paint
collections to be sold under the brand "Martha's Fine Paints."
Future Growth
We intend to grow our merchandising business by core content area and
distribution channel. Accordingly, within each of our seven core content areas
we intend to offer different products at different distribution channels. For
example, we are exploring the development of a product line in our Cooking and
Entertaining category to be offered in national supermarket chains, as well as
food products that would be offered at higher-end gourmet specialty stores.
INTERNET/DIRECT COMMERCE
Our Internet/Direct Commerce business leverages our content and
merchandising capabilities to create a one-stop, user-friendly experience for
our consumers. Our Internet/Direct Commerce business is still in its
introductory phase but has achieved significant online acceptance and
viewership, with over 925,000 registered users as of August 1999. We plan to
accelerate the expansion of our Internet/Direct Commerce business by expanding
the seven linked channels, or subsites, that we recently introduced on our
website, each of which is devoted to one of our core content areas. We believe
this effort will transform marthastewart.com into a leading interactive
destination by providing content, commerce and community for consumers
interested in the domestic arts.
We believe we bring several competitive advantages to the web, including:
-- the strength and identity of our brand name
-- our extensive library of proprietary content
-- our diverse and growing assortment of branded products
-- our core audience of active online members
-- our omnimedia platform through which we promote marthastewart.com
We launched marthastewart.com in September 1997 to complement our existing
omnimedia and omnimerchandising platforms by providing an interactive content
and commerce experience for our viewers, readers and consumers. As of June 1999,
marthastewart.com had 627,000 unique monthly visitors, who on
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average viewed nine pages for 14 minutes (according to Media Metrix). As of
April 1999, our website had more than ten million monthly page views (according
to ABC Interactive). Our website currently includes:
-- Martha Stewart Living television program guide and related content
-- recent transcripts of the askMartha radio program
-- a virtual kitchen tour of our state-of-the-art television studio
facilities in Westport, Connecticut
-- weekly moderated askMartha chat forums with Martha Stewart and/or our
in-house and guest experts, which generated over 30,000 unique
questions over approximately 35 sessions
-- the online Martha by Mail store
Martha by Mail products currently comprise the e-commerce portion of our
website. The Martha by Mail catalog was originally created to provide our
consumers the materials necessary to pursue the "how to" projects presented in
our various media. From those beginnings, it has evolved into our upscale,
direct-to-consumer merchandising business that also includes finished products
such as patio furniture, laundry appliances, bedding and other home furnishings.
Unlike our merchandising business, which exclusively consists of products we
design, we include in Martha by Mail selected products consistent with our brand
image and "how to" philosophy that typically are not offered through any
national retail stores.
Martha by Mail was first launched as a Martha Stewart Living magazine
insert. When marthastewart.com debuted, we began selling our products over the
website and subsequently began stand-alone mailings of our catalog. In 1999, we
expect to distribute 11 editions and 15 million copies of our Martha by Mail
catalogs. Our catalog mailing list includes customers identified through our
omnimedia platform, such as current and past subscribers, gift subscription
recipients, continuity card program subscribers and our website registrants, as
well as third-party customer lists. While each catalog edition includes
approximately 400 product offerings, our online Martha by Mail offerings
comprise the entire collection of more than 750 products. In an effort to evolve
Martha by Mail from offline direct commerce to e-commerce, we have recently
begun providing discounts and incentives to our consumers who purchase products
over the Internet. In recent periods we have experienced significant growth in
our catalog business as well as more rapid growth in online Martha by Mail
sales. As our website expands, we expect that online Martha by Mail revenues
will exceed offline revenues, allowing us to reduce costs associated with
printing and mailing the catalog.
Future Growth
We plan to further expand and upgrade marthastewart.com by focusing on the
following key elements to provide a full-service and personalized domestic arts
website:
-- Content: in each of our content areas, we intend to include an
"askMartha" service, an interactive "ask and answer" service that will
respond to viewer inquiries with relevant audio, video or text and
graphics from our content library
-- Commerce: we intend to expand our online store, which currently
features our Martha by Mail products, to include other "best of its
kind" products (either developed or sourced by us) in all areas of
domestic living
-- Community: we intend to expand each of our web channels to include
fully moderated and integrated bulletin boards, chat rooms and live
online discussions with our experts. We believe these community-
related features will produce valuable data about our consumers'
preferences, providing us with instant feedback about our content
presented on the website and in our other omnimedia platforms.
To help us accelerate the expansion of marthastewart.com, we recently sold
an equity interest in Martha Stewart Living Ominimedia LLC to Kleiner Perkins.
John Doerr, a general partner of Kleiner Perkins, has become a member of our
Board of Directors. See "Recent Developments -- Strategic Investment" for more
information on this transaction. We believe that our established brand name,
large content library, consumer loyalty and other competitive strengths combined
with Kleiner Perkins' experience in the development of
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Internet-related companies provide us with a distinct advantage in growing our
Internet/Direct Commerce business.
BUSINESS SERVICE GROUPS
We are organized so that the services essential to our business segments
can be rendered by the same individuals and leveraged across our omnimedia and
omnimerchandising platforms. Advertising sales, consumer marketing and research,
and print production services act as internal agencies, providing services on a
project by project basis for all of our business endeavors.
ADVERTISING SALES
Advertising sales and advertising marketing services for all of our media
platforms and business segments are controlled by one central advertising sales
and advertising sales marketing services staff. As of August 1999, the
advertising sales and marketing group consisted of 33 staff employees and two
outside advertising sales representative firms, all of whom sell across all our
media platforms. The goal of the advertising sales group is to create an
omnimedia advertising platform that:
-- develops advertising packages integrating one or more of our
media outlets, including our website
-- provides a diversified advertising base so that we are not
dependent on any one advertising category of business
-- delivers quality service to all our core content areas and
business segments
Our advertisers represent a wide range of industries. Therefore, our
advertising revenue base is not dependent upon specific industries and/or
specific advertisers, providing maximum flexibility in achieving revenue goals
and minimizing risk. Our top advertising industries include retail, consumer
goods, toiletries and cosmetics, food, automotive and apparel. Our major
advertisers include Ace Hardware Corporation, Cosmair, Inc., Daimler-Chrysler,
The Estee Lauder Companies, Inc., Hewlett-Packard Co., Kraft Foods, Inc., Polo
Ralph Lauren Corporation, Revlon Consumer Products Corporation and S.C. Johnson
& Son, Inc.
Historically, print-based advertising sales revenues have accounted for the
majority of our advertising sales revenues. In 1998, our net advertising
revenues were $91.7 million, of which 77% was from magazine advertisers, 21% was
from television advertisers and 2% was from other advertisers. In 1999, we
expect approximately 20% of our total advertisers and most of our top 50
advertisers to purchase advertising through two or more components of our
omnimedia platform. For example, we created advertising programs for:
-- Ford, which generates revenues for three Martha Stewart Living
Omnimedia business segments: the program consists of advertising
pages in Martha Stewart Living, commercials during our Martha
Stewart Living television weekday program, including "Good
Things" and "Cookie of the Week" television segment
sponsorships, and sponsorship segments on the askMartha radio
program
-- The Gap, which also includes various media: exclusive
sponsorship of a special interest publication, special event
marketing that ties to the special interest publication, and
magazine, Internet and television advertising
PRINT PRODUCTION SERVICES
Our print production services team is responsible for the manufacturing,
distribution and quality control of all our printed material, including Martha
Stewart Living and Martha Stewart Weddings magazines, the Best of Martha Stewart
Living books, and the Martha by Mail catalogs and product inserts. For the
Merchandising segment, our print production experts work closely with outside
service providers, including strategic partners, to produce product packaging
and in-store signage, billboards, kiosks and other related print advertising and
materials. This team assures that the print reproduction quality of our content
remains consistent across our omnimedia and omnimerchandising platforms and
conforms to the overall quality that our consumers expect from our branded
products.
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Our print production services team is also responsible for the purchasing
of paper, our principal raw material, for our magazines and catalogs. We
currently purchase paper through a transition services agreement with an
affiliate of Time Publishing Ventures, the term of which we have agreed with
Time to extend through the end of 2000 as it relates to paper. The type of paper
we use is generally widely available. We use no other significant raw materials.
As of August 1999, our print production group consisted of 12 employees.
CONSUMER MARKETING AND RESEARCH
Our consumer marketing group is responsible for magazine circulation,
direct commerce, and direct marketing, research and customer service for all of
our businesses. The group also manages fulfillment, inventory control and
sourcing for our direct to consumer businesses. The primary function of the
department is to execute marketing campaigns to promote Martha Stewart Living
Omnimedia products to our customer base and outside lists. The group controls
our customer database, uses various of our media platforms to cross promote
products to our customers, and uses research and testing through direct
marketing to help us develop new products and businesses. The group tracks our
relationship with consumers to ensure that we are delivering the content,
product and value our customers seek. These personnel also analyze industry
research and employ third-party research companies to monitor customer reactions
through surveys, focus groups and mall intercept testing. As of August 1999, our
consumer marketing department comprised 12 employees.
INTELLECTUAL PROPERTY
The principal trademarks we use to distinguish our brands are Martha
Stewart Living, Martha Stewart Everyday, Martha Stewart Home, Martha Stewart
Weddings, askMartha and Martha by Mail. These trademarks are the subject of
registrations and pending applications throughout the world filed by Martha
Stewart Living Omnimedia for use with a variety of products and other content,
and we continue to expand our worldwide usage and registration of related
trademarks. We file copyrights regarding our proprietary designs and editorial
content on a regular basis. We regard our rights in and to our trademarks and
materials as valuable assets in the marketing of our products and vigorously
seek to protect them against infringement or denigration by third parties.
Upon completion of this offering, we will enter into an intellectual
property license and preservation agreement with Martha Stewart that will
replace an existing non-perpetual license agreement entered into in February
1997. Under the terms of this new license agreement, Martha Stewart grants us an
exclusive, worldwide, perpetual royalty-free license to use her name, likeness,
image, voice and signature for our products and services. We are currently the
owner of the primary trademarks employed in our business and, under the new
license agreement, generally have the right to develop and register in our name
trademarks that incorporate "Martha Stewart" (such as Martha Stewart Living) and
to use exclusively these marks in our business. If Martha Stewart were to cease
being Chairman or Chief Executive Officer and no longer control our company, we
will continue to have those rights, including the right to use those marks for
any new business as long as such new business is substantially consistent with
the image, look and goodwill of the licensed marks at the time that Martha
Stewart ceased to be such an officer or to control us.
The term of the license is perpetual, subject to certain exceptions. In the
event that we terminate Martha Stewart's employment without cause or she
terminates her employment for good reason, each as defined in her employment
agreement, the license will cease to be exclusive and we would be limited in our
ability to create new marks incorporating her name, likeness, image, publicity
and signature. In these circumstances, Martha Stewart would receive the right to
use her name in other businesses that could directly compete with us, including
our magazine, television and merchandising businesses. In addition, if Martha
Stewart's employment terminates under these circumstances, Martha Stewart would
receive in perpetuity a royalty of 3% of the revenues we derive from any of our
products or services bearing any of the licensed marks.
The new intellectual property license agreement contains various customary
provisions regarding our obligations to preserve the quality of the licensed
marks and to protect these marks from infringement by third parties.
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COMPETITION
PUBLISHING
Publishing is a highly competitive business. Our magazines, books and
related publishing products compete with other mass media and many other types
of leisure-time activities. Overall competitive factors in this segment include
price, editorial content and editorial and aesthetic quality. Competition for
advertising dollars in magazine operations is primarily based on advertising
rates, editorial and aesthetic quality, the desirability of the magazine's
demographic, reader response to advertisers' products and services and
effectiveness of the advertising sales team. Martha Stewart Living competes for
advertising dollars in the women's service magazine category, including Ladies'
Home Journal, McCall's and Redbook. Martha Stewart Living competes for readers
and advertising with decorating, cooking and lifestyle magazines, such as
Architectural Digest, Metropolitan Home, Bon Appetit, Food & Wine, Gourmet,
Country Living, Better Homes & Gardens, Southern Living and others. Martha
Stewart Weddings competes for readers and advertising dollars primarily in the
wedding service magazine category, which includes Bride's Magazine, Modern
Bride, Bridal Guide and Elegant Bride.
TELEVISION
Television production is also highly competitive. Our television programs
compete directly for viewers and advertising dollars with other "how to"
television programs, as well as with general daytime programming on other
channels. Overall competitive factors in this segment include programming
content, quality and distribution and demographics of the programming. Similar
to publishing, competition for advertising dollars is primarily based on
advertising rates, the demographics of the audience, viewer response to
advertisers' products and services and effectiveness of the advertising sales
team.
MERCHANDISING AND INTERNET/DIRECT COMMERCE
Our retail merchandising and Internet/Direct Commerce businesses compete in
the consumer products and specialty retail businesses as well as the electronic
commerce industry, all of which are highly competitive. The leading competitors
of our merchandising business include Target stores, Wal-Mart Stores, Inc., The
Home Depot, Inc. and other mass market discount stores. Competitors of our
Internet and catalog businesses include Pottery Barn, and other catalogs owned
by Williams Sonoma, Inc., Plow & Hearth, Chef's Catalog, Eddie Bauer Home,
Garnet Hill Company, Crate and Barrel, garden.com, homearts.com, women.com,
weddings.com and theknot.com. We compete on the basis of our content, the
quality, uniqueness, price and assortment of our merchandise, brand name,
service to customers and proprietary customer lists.
PROPERTIES
Certain information concerning our principal facilities, all of which are
leased, is set forth below:
<TABLE>
<CAPTION>
APPROXIMATE AREA
LOCATION USE IN SQUARE FEET
- -------- --- ----------------
<S> <C> <C>
11 West 42nd Street............... Principal executive and
New York, New York administrative offices; design
facilities; and sales offices 71,688
19 Newtown Turnpike............... Executive and administrative
Westport, Connecticut offices for television, including
the television studio facilities;
design facilities; and sales
offices for television 30,523
601 West 26th Street.............. Photography studio, test kitchens,
New York, New York prop storage and Internet
development 75,000
</TABLE>
The leases for these offices and facilities expire between October 1999 and
April 2010, and certain leases are subject to our renewal. We anticipate that we
will be able to extend these leases on terms satisfactory to us or, if
necessary, locate substitute facilities on acceptable terms.
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We also lease the right to use various properties owned by Martha Stewart
for our editorial, creative and product development processes. These "living
laboratories" allow us to experiment with new designs and new products, such as
garden layouts, and help generate ideas for new content available to all of our
media outlets. For a description of the related property rental agreement, we
refer you to "Certain Relationships and Related Transactions--Certain Agreements
with Martha Stewart--Location Rental Agreement."
We believe that our existing facilities are well maintained and in good
operating condition.
EMPLOYEES
As of August 1999, we had approximately 385 employees, all of whom are
located in the United States. Most of our creative and business leaders have
been with us since 1991, the year we launched the Martha Stewart Living
magazine. None of our employees are represented by unions or guilds, other than
Martha Stewart, who is a member of the American Federation of Television and
Radio Artists and the Screen Actors Guild. We consider our relations with our
employees to be satisfactory and have not experienced any job actions or labor
shortages since our inception.
LEGAL PROCEEDINGS
We are, from time to time, involved in various legal proceedings in the
ordinary course of our business. We believe that the resolution of the currently
pending legal proceedings, either individually or taken as a whole, will not
have a material adverse effect on our business, financial condition or results
of operations. In addition, Martha Stewart from time to time is the subject of
legal actions relating to or that could otherwise affect our business, which
actions we intend, when appropriate, to vigorously defend in cooperation with
Martha Stewart.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The persons who will be our directors and executive officers immediately
following this offering, as well as their ages and positions, are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Martha Stewart............ 58 Chairman of the Board of Directors and Chief Executive
Officer
Sharon Patrick............ 56 President and Chief Operating Officer and Director
Charlotte L. Beers........ 64 Director
L. John Doerr............. 48 Director
Dora Braschi Cardinale.... 43 Executive Vice President, Print Production
Stephen Drucker........... 46 Executive Vice President, Editorial Core and Editor-in-
Chief
Peter Mark................ 33 Executive Vice President, Corporate Infrastructure
Development and Television Operations
Suzanne Sobel............. 43 Executive Vice President, Advertising Sales and
Marketing, Publisher
Lauren Stanich............ 37 Executive Vice President, Consumer Marketing
Gael Towey................ 47 Executive Vice President, Art and Style Creative Director
Shelley Lewis Waln........ 46 Executive Vice President, Integrated Marketing
Gregory R. Blatt.......... 31 Senior Vice President, General Counsel
James Follo............... 40 Senior Vice President, Finance and Controller
</TABLE>
Martha Stewart is the founder of our company and the author of 14 books on
the domestic arts, including Entertaining and Martha Stewart's Gardening. Ms.
Stewart has served as Chairman of the Board of Directors and Chief Executive
Officer of Martha Stewart Living Omnimedia LLC since its creation in 1996. Ms.
Stewart is the creator and was Editor-in-Chief and Editorial Director of Martha
Stewart Living from 1990 until 1997. Ms. Stewart is a member of the board of
directors of Revlon, Inc., on the professional advisory board of drugstore.com,
inc. and on the board of trustees of Norwalk Hospital, Norwalk, Connecticut.
Sharon Patrick has served as President, Chief Operating Officer and a
director of Martha Stewart Living Omnimedia LLC since 1997. Prior to that, Ms.
Patrick served as a strategic consultant to Martha Stewart Living from 1994
until 1997. From 1993 until 1997, Ms. Patrick served as President of The Sharon
Patrick Company, a strategic consulting company and Sharon Patrick and
Associates, a new media venture firm. From 1990 until 1993, Ms. Patrick was
President and Chief Operating Officer of Rainbow Programming Holdings, the
programming company of Cablevision Systems Development. Prior to that, Ms.
Patrick was a Principal and Partner in charge of Media and Entertainment at
McKinsey and Company.
Charlotte L. Beers has served as a director of Martha Stewart Living
Omnimedia LLC since March 1998. Ms. Beers has served as Chairman of the Board of
Directors of J. Walter Thompson Worldwide, an advertising agency, since March
1999. Prior to that, she was Chairman Emeritus of Ogilvy & Mather Worldwide,
Inc. from April 1997 to March 1999. She was Chairman of Ogilvy & Mather from
April 1992 to April 1997 and Chief Executive Officer from April 1992 to
September 1996. She is also a director of Gulfstream Aerospace Corporation, J.
Crew Group, Inc. and Women First Healthcare, Inc.
L. John Doerr has served as a director of Martha Stewart Living Omnimedia
LLC since July 1999. Mr. Doerr has been a general partner of Kleiner Perkins
Caufield & Byers, a private venture capital firm, since September 1980. In 1974,
he jointed Intel Corporation and held various engineering, marketing and
management assignments. Mr. Doerr is also a director of Amazon.com, At Home
Corporation, drugstore.com, inc., Healtheon Corporation, Intuit, Inc., Platinum
Software, Inc., and SunMicrosystems, as well as several private companies.
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Dora Braschi Cardinale has served as Executive Vice President, Print
Production since May 1999 and prior to that as Senior Vice President, Print
Production from 1997 until 1999. Prior to that, Ms. Cardinale served as
Production Director of Martha Stewart Living from 1992 until 1997. Ms. Cardinale
has an additional 15 years of experience in the publishing industry, including
positions with Art & Antiques, Geo, Viva and Omni magazines.
Stephen Drucker has served as Editor-in-Chief of Martha Stewart Living
Omnimedia since 1997, as Executive Vice President, Editorial Core since January
1999 and prior to that, as Senior Vice President, Editorial from 1997 to 1999.
Mr. Drucker served as the Editor of Martha Stewart Living from 1996 to 1997. Mr.
Drucker served as a Contributing Editor from 1995 to 1996 to Travel & Leisure
and Architectural Digest, and as the Executive Editor of Travel & Leisure from
1994 to 1995. Mr. Drucker has an additional 16 years of experience in the
publishing industry with The New York Times and The Conde Nast Publications,
Inc.
Peter Mark has served as Executive Vice President, Corporate Infrastructure
Development and Television Operations since April 1999 and prior to that as
Senior Vice President, Television Operations from 1997 to 1999. Prior to that,
Mr. Mark served as Television Development Director from 1994 to 1997, as
Business Development Director from 1993 to 1994 and as Business Manager from
1991 to 1994, for Martha Stewart Living. Mr. Mark has an additional four years
of experience in the publishing and entertainment industries, including with
Time Warner.
Suzanne Sobel has served as Executive Vice President, Advertising Sales and
Publisher of Martha Stewart Living Omnimedia since January 1999. Prior to that,
Ms. Sobel served as Senior Vice President, Advertising Sales & Marketing and
Publisher during 1998 and as Publisher from 1997 until 1998. Ms. Sobel served as
Associate Publisher of Martha Stewart Living from 1996 to 1997, as Advertising
Director from 1995 to 1996, as New York Advertising Sales Manager from 1993 to
1995 and as Advertising Sales Manager from 1991 to 1993. Ms. Sobel has an
additional 14 years of experience in advertising sales, including with Town &
Country magazine, Bob Bernbach & Associates and Ogilvy & Mather.
Lauren Stanich has served as Executive Vice President, Consumer Marketing
of Martha Stewart Living Omnimedia since January 1999. Prior to that, Ms.
Stanich was Senior Vice President, Consumer Marketing from 1997 until 1999. Ms.
Stanich worked as Consumer Marketing Director and Book Publisher from 1995 to
1997, and as Consumer Marketing Director from 1991 to 1995, for Martha Stewart
Living. Ms. Stanich has an additional seven years of experience in marketing and
publishing with Time.
Gael Towey has served as Executive Vice President, Art and Style Creative
Director of Martha Stewart Living Omnimedia since February 1997. Prior to that,
Ms. Towey worked for Martha Stewart Living as the Design Director from 1996 to
1997, and as Art Director from 1990 to 1996. Ms. Towey also has an additional 15
years of experience in the publishing industry, including with House & Garden
magazine, Clarkson N. Potter and Viking Press, Inc.
Shelley Lewis Waln has served as Executive Vice President, Integrated
Marketing of Martha Stewart Living Omnimedia since April 1998. Prior to that,
Ms. Waln was Executive Vice President, Advertising Sales & Marketing from 1997
until 1998. From 1995 to 1997, Ms. Waln was Publisher of Martha Stewart Living,
and from 1994 to 1995 was its Director, Sales & Marketing. Ms. Waln has an
additional 16 years of experience in marketing and publishing, including with
Time Warner Entertainment Marketing, Life magazine, People magazine, Ziff-Davis
Publishing, Inc. and Adweek magazine.
Gregory R. Blatt has served as Senior Vice President, General Counsel of
Martha Stewart Living Omnimedia since May 1999. Prior to that, Mr. Blatt was an
associate with Grubman Indursky & Schindler, P.C., the New York entertainment
and media law firm, from 1997 to May 1999 and an associate at Wachtell, Lipton,
Rosen & Katz, the New York law firm, from 1995 to 1997.
James Follo has served as Senior Vice President, Finance and Controller of
Martha Stewart Living Omnimedia since March 1999 and, prior to that, as Vice
President, Finance and Controller from July 1998. Prior to that, Mr. Follo held
various financial positions at General Media International, Inc., a magazine
publisher, from 1994 to July 1998, most recently as Vice President, Chief
Financial Officer and Treasurer.
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KEY CREATIVE PERSONNEL
In addition to Martha Stewart, Stephen Drucker and Gael Towey, our other
key creative personnel include:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Eric A. Pike............................. 37 Senior Vice President, Design Director
Margaret Roach........................... 45 Senior Vice President, Garden Editor
Susan J. Spungen......................... 39 Senior Vice President, Food Editor
Stephen A. Earle......................... 39 Vice President, Style Director
Frederick Karch.......................... 42 Vice President, Style Director
Darcy S. Miller.......................... 30 Vice President, Weddings Editor
Hannah Carpenter Milman.................. 40 Vice President, Crafts Editor
</TABLE>
Eric A. Pike has served as Senior Vice President, Design Director of Martha
Stewart Living Omnimedia since January 1999. Prior to that, Mr. Pike served as
Vice President, Design Director from 1998 to 1999. Mr. Pike was Art Director
from 1995 to 1998, Deputy Art Director from 1994 to 1995 and Associate Art
Director from 1992 to 1994, of Martha Stewart Living. Mr. Pike has an additional
ten years of experience in art direction and design.
Margaret Roach has served as Senior Vice President, Garden Editor of Martha
Stewart Living Omnimedia since January 1, 1999. Prior to that, Ms. Roach served
as Vice President, Gardening from 1998 until 1999. From 1995 to 1998, Ms. Roach
was Garden Editor of Martha Stewart Living, and a contributing editor for Martha
Stewart Living from 1993 to 1994. Ms. Roach was Fashion and Garden Editor of New
York Newsday from 1985 to 1995, and also has an additional 12 years of
experience in the publishing business, including with The New York Times. Ms.
Roach won the 1998 Best Written Book Of The Year award from the Garden Writers
of America for A Way to Garden.
Susan J. Spungen has served as Senior Vice President, Food Editor of Martha
Stewart Living Omnimedia since March 1999. Prior to that, Ms. Spungen served as
Vice President, Food Editor from 1997 until 1999. From 1991 to 1997, Ms. Spungen
was Food Editor of Martha Stewart Living. Ms. Spungen has an additional 15 years
of experience in the food and restaurant industries.
Stephen A. Earle has served as Vice President, Style Director of Martha
Stewart Living Omnimedia since 1997. Prior to that, Mr. Earle was Style Director
of Martha Stewart Living from 1995 until 1997. From 1992 to 1995, Mr. Earle was
a freelance stylist and contributor to Martha Stewart Living. From 1989 to 1992,
Mr. Earle was Creative Director for Polo Ralph Lauren. Mr. Earle has an
additional ten years of experience in art and style direction, including
positions with Polo Ralph Lauren.
Frederick Karch has served as Vice President, Style Director of Martha
Stewart Living Omnimedia since January 1999. Prior to that, Mr. Karch was Style
Director from 1997 until 1999. From 1992 to 1997, Mr. Karch was a Stylist for
Martha Stewart Living, and also worked during that time as an independent
stylist for clients, such as the Pottery Barn Catalogs, Bergdorf Goodman, Macy's
and Bloomingdale's. Mr. Karch has an additional ten years of experience in art
and style direction.
Darcy S. Miller has served as Vice President, Weddings Editor of Martha
Stewart Living Omnimedia since January 1, 1998. During 1997, Ms. Miller was
Weddings Editor. Prior to that, Ms. Miller was Weddings Editor from July 1996 to
1997, Associate Editor, from 1994 to 1996, Assistant Editor in 1994 and an
Editorial Assistant from 1992 to 1994, for Martha Stewart Living.
Hannah Carpenter Milman has served as Vice President, Crafts Editor of
Martha Stewart Living Omnimedia since February 1999. Prior to that, Ms. Milman
was Style Editor from 1996 until 1997. Ms. Milman was also Senior Editor from
1992 to 1996 and a Contributing Editor from 1991 to 1992 for Martha Stewart
Living. Ms. Milman has an additional ten years experience in style and product
design, working for clients such as Garnet Hill, Barneys New York, Calvin Klein
and Donna Karan.
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BOARD OF DIRECTORS
When this offering is completed, we expect to have a Board of Directors
comprised of six individuals. Our Board of Directors is currently comprised of
four individuals. Our Board of Directors intends to appoint two additional
directors who are neither officers nor employees of Martha Stewart Living
Omnimedia or our affiliates.
Directors who are our employees will receive no compensation for their
service as members of our Board of Directors or its committees. Directors who
are not our employees will receive compensation and stock options under plans we
describe below. We reimburse all directors for expenses incurred in connection
with attendance at meetings. See "--Compensation of Outside Directors" and
"--The Non-Employee Director Stock and Option Compensation Plan."
COMMITTEES OF THE BOARD OF DIRECTORS
Upon completion of this offering, our Board of Directors will establish an
Audit Committee and a Compensation Committee. The functions of the Audit
Committee will be to:
-- recommend annually to our Board of Directors the appointment of our
independent auditors
-- discuss and review in advance the scope and the fees of our annual
audit and review the results thereof with our independent auditors
-- review and approve non-audit services of our independent auditors
-- review compliance with our existing major accounting and financial
reporting policies
-- review the adequacy of major accounting and financial reporting
policies
-- review our management's procedures and policies relating to the
adequacy of our internal accounting controls and compliance with
applicable laws relating to accounting practices
We anticipate the Audit Committee will consist solely of directors who are not
otherwise our employees.
The functions of the Compensation Committee will be to review and approve
annual salaries, bonuses, and grants of stock options under our 1999 Stock
Incentive Plan for all executive officers and key members of our creative teams
and management staff, and to review and approve the terms and conditions of all
employee benefit plans or changes to these plans. We anticipate the Compensation
Committee will consist of directors who are not otherwise our employees.
In addition, our Board of Directors will form an Executive Committee, which
would have the authority to exercise the powers of our Board of Directors (other
than those reserved to the Audit Committee and the Compensation Committee or to
our full Board of Directors) between meetings of our full Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, our Board of Directors does not currently have a
Compensation Committee, but our Board of Directors anticipates establishing one
as described above. Prior to this offering, our principals and senior management
were directly involved in setting compensation for our executives.
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EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid to our Chief
Executive Officer and our other four most highly compensated executive officers
for the fiscal year ended December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
1998 1998
NAME AND SALARY BONUS OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION ($) ($) COMPENSATION ($) COMPENSATION ($)
- ----------------------------------------- ---------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Martha Stewart........................... $2,975,000 $1,695,717 -- --
Chairman and Chief Executive Officer
Sharon Patrick........................... 493,755 518,443 -- --
President and Chief Operating Officer
Gael Towey............................... 300,000 305,000 -- --
Executive Vice President--Art and Style
Creative Director
Stephen Drucker.......................... 265,000 198,750 -- --
Executive Vice President--Editorial
Core and Editor-in-Chief
Suzanne Sobel............................ 239,000 225,855 -- --
Executive Vice President--Advertising
Sales and Marketing, Publisher
</TABLE>
We did not grant any long term compensation to any named executive officer
in 1998. See also "Certain Relationships and Related Transactions -- Certain
Agreements with Martha Stewart -- Pre-Offering Agreements" for additional
amounts paid by us to Martha Stewart in 1998.
OPTION EXERCISES AND HOLDINGS
The following table provides information regarding exercises and holdings
of stock options by our Chief Executive Officer and our other four most highly
compensated executive officers for the fiscal year ended December 31, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
CLASS A OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
COMMON STOCK END AT FISCAL YEAR-END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martha Stewart........ -- -- -- -- --
Sharon Patrick........ -- -- -- 34,563 --
Gael Towey............ -- -- -- 97,709 --
Stephen Drucker....... -- -- -- 8,333 --
Suzanne Sobel......... -- -- -- 16,667 --
</TABLE>
We did not grant any options to, and no options were exercised by, any of
the named executive officers in 1998. The value of unexercised options in the
above table was calculated based on the mid-point of the offering range, $ per
share. Upon completion of this offering, 10% of the options listed in the above
table as unexercisable at the end of our last fiscal year will become
exercisable, except for Gael Towey's options, with respect to which 50% will
become exercisable. These options will be adjusted to reflect the exchange ratio
in the reorganization pursuant to which Martha Stewart Living Omnimedia LLC will
be converted into a C corporation. This ratio has not yet been determined.
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The following summary descriptions of the material terms of our
compensation plans are qualified in their entirety by reference to those plans,
copies of which we have filed as exhibits to the registration statement of which
this prospectus is a part.
EMPLOYMENT AGREEMENT WITH MARTHA STEWART
Prior to completion of the offering, we will enter into an employment
agreement with Martha Stewart. The employment agreement will replace Martha
Stewart's existing employment agreement with Martha Stewart Living Omnimedia.
The employment agreement provides for Martha Stewart's employment as our
Chairman of the Board and Chief Executive Officer, and is for a term of five
years, commencing upon completion of the offering. Under the employment
agreement, Martha Stewart's annual base salary is $900,000, and she will receive
annual bonus payments based upon our performance, with a minimum annual bonus of
$300,000. Our Compensation Committee will determine the performance goals, which
will include targets based on our operating income as well as other performance
measures.
During the employment period, Martha Stewart will receive employee benefits
no less favorable than those provided to the other executive officers of the
Company and will continue to receive perquisites and fringe benefits consistent
with past practice.
The employment agreement provides that if Martha Stewart resigns with "Good
Reason" or if we terminate her employment other than for "Cause" or disability,
then she will be entitled to receive an immediate lump sum cash payment equal to
the sum of:
-- accrued, but unpaid, base salary and vacation through the date of
termination
-- three times her annual base salary
-- the higher of $5,000,000 or three times the highest annual bonus paid
for any fiscal year during the employment period
She will also receive continued welfare benefits and perquisites for three
years. If Martha Stewart's employment is terminated due to disability, or in the
event of death, Martha Stewart (or her estate) will receive continued payments
of the base salary for the remainder of the scheduled term of the employment
agreement. If Martha Stewart's employment is terminated for any other reason,
she will be entitled to receive her accrued, but unpaid, base salary and
vacation through the date of termination.
Under the employment agreement, "Good Reason" generally means the
occurrence of any of the following events without Martha Stewart's written
consent:
-- an assignment of duties or responsibilities, or a change in title or
authority, inconsistent with her position as Chairman and Chief
Executive Officer
-- any failure by the Company to comply with the employment agreement's
compensation provisions
-- a requirement for Martha Stewart to relocate
-- the failure of a successor entity to assume the employment agreement
-- any other material breach of the employment agreement
"Cause," for purposes of the employment agreement, means
-- Martha Stewart's willful and continued failure to perform her duties
after written notice from the Board of Directors specifying the
actions to be performed, unless such failure is due to her good faith
belief that to take such action would be materially harmful to the
Company, or
-- Martha Stewart's conviction of a felony or gross misconduct, which in
either case results in material and demonstrable damage to our
business or reputation
Pursuant to the employment agreement, Martha Stewart cannot compete with
us, or solicit our employees, during her term of employment. In addition, if
Martha Stewart terminates employment without
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Good Reason during the employment period or is terminated by us for Cause, the
noncompetition and nonsolicitation restrictions continue for 12 months after the
termination of employment.
KEY EXECUTIVE INSURANCE
We currently carry key executive life insurance on Martha Stewart with
aggregate coverage of $67.0 million. We also currently carry disability
insurance on Martha Stewart with an aggregate coverage of $55.0 million. We have
pledged a portion of the proceeds from these policies as security for our
existing credit facility, under which there are currently no outstanding
borrowings.
COMPENSATION OF OUTSIDE DIRECTORS
Each of our non-employee directors will receive a single annual retainer
fee of $20,000 for serving on our Board of Directors. These directors each will
also receive a meeting fee of $1,000 for each in-person meeting of our Board of
Directors that they attend and a fee of $500 for each telephonic meeting of our
Board of Directors in which they participate and each meeting of any Board
committee. The chairman of a Board committee will receive an additional annual
retainer of $5,000. Directors who also are our employees or those of any of our
subsidiaries will not receive additional compensation for their service as a
director. Twenty-five percent of directors' fees will be paid in shares of Class
A common stock, and the remaining 75% of such fees may be paid either in shares
of Class A common stock or in cash, at the election of the non-employee
director, pursuant to the Non-Employee Director Stock and Option Plan described
below. All directors will receive reimbursement of expenses incurred in
connection with participation in Board of Directors meetings.
THE NON-EMPLOYEE DIRECTOR STOCK AND OPTION COMPENSATION PLAN
Before this offering, we will adopt and approve the Non-Employee Director
Stock and Option Compensation Plan, which will be effective immediately before
the pricing of this offering. The purpose of this plan is to promote a greater
identity of interests between our non-employee directors and our stockholders
and to attract and retain individuals to serve as directors.
GENERAL
The plan will be administered by our Board of Directors or a committee of
our Board of Directors designated for this purpose.
Our non-employee directors will be eligible to participate in the plan as
of the date of the pricing of this offering. A total of shares of
Class A common stock will be reserved for issuance and available for grants
under the plan.
Our Board of Directors or its designated committee may adjust the awards
under the plan if there is any change in corporate capitalization, such as a
stock split, or a corporate transaction, such as a merger, consolidation,
separation, including a spin-off, or other distribution of our stock or
property, any reorganization or any partial or complete liquidation.
COMMON STOCK
Each non-employee director will receive 25% of his or her annual retainer
and meeting fees in shares of Class A common stock. In addition, non-employee
directors may make an annual irrevocable election to receive shares of Class A
common stock in lieu of all, or a portion, of such director's remaining fees, in
25% increments. The number of shares of Class A common stock granted to a
director will be equal to the appropriate percentage of fees payable to the
director in each calendar quarter, divided by the fair market value of a share
of Class A common stock on the last business day of the calendar quarter. We
will round the number of shares granted to the director down to the nearest
whole share of Class A common stock and pay cash for the value of any fractional
share. Each director may defer the receipt of his or her cash payments into an
interest-bearing cash account and/or his or her elected or mandatory shares of
Class A common stock into a share account which will be credited with additional
shares having a value equal to the dividends that would
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be paid on the shares credited to the share account, if they were outstanding.
When the director leaves our Board of Directors or, if earlier, upon a change of
control, the amount of cash in his or her cash account, plus a number of shares
of Class A common stock equal to the number of shares in his or her share
account will be delivered to the director, with cash being paid in lieu of any
fractional shares.
OPTIONS
On the day of the pricing of this offering, each director will be granted
options for 5,000 shares of Class A common stock with an exercise price per
share equal to the initial public offering price. After each annual meeting of
stockholders, each continuing director will be granted options for 2,000 shares
of Class A common stock. Each new director will be granted options for 5,000
shares of Class A common stock upon being elected or appointed to our Board of
Directors. The exercise price for all options will be 100% of the fair market
value of a share of Class A common stock on the date of the grant of such
option, except that options granted before or upon consummation of this offering
will be granted at the initial public offering price. Each option will become
vested and exercisable on the first anniversary of the date of grant of such
option, if the director remains a member of our Board of Directors at that time.
Each vested option will terminate one year after the director's service on our
Board of Directors ceases for any reason, other than for cause. If a director is
removed for cause, all vested and unvested options will be forfeited. However,
the options will expire no later than the tenth anniversary of the date of
grant. Any unvested options will terminate and be canceled as of the date a
director's service on our Board of Directors ceases for any reason. All options
become fully vested and exercisable upon a change in control.
TRANSFERABILITY
Grants and awards under the plan are nontransferable other than by will or
the laws of descent and distribution, or at the discretion of our Board of
Directors or the designated committee, pursuant to a written beneficiary
designation and, in the case of an option, pursuant to a gift to the director's
immediate family. This gift may be made directly to an immediate family member,
or by means of a trust or partnership or limited liability company. During the
director's lifetime, a director's option may be exercised only by the director,
any such permitted transferee or a guardian, legal representative or
beneficiary.
AMENDMENTS
Our Board of Directors may at any time terminate or amend the plan, except
that no termination or amendment may impair the rights of directors relating to
outstanding options or awards. To the extent required by law or stock exchange
rule, no amendment will be made without the approval of our stockholders.
PHANTOM PERFORMANCE UNIT PLAN
We established a phantom performance unit plan in November 1997, under
which, under certain circumstances, participants would receive shares of common
stock upon an initial public offering. Awards were made under the plan as of
January 1, 1998 and January 1, 1999. No awards will be granted under the plan
following the offering. All employees who had been employed by us for at least
one year at the time of an award received awards.
Our Board of Directors has determined to pay out these awards at certain
levels effective upon completion of this offering. These payments will be made
in shares of Class A common stock. The number of shares of Class A common stock
a participant will receive under the plan will be equal to the number of phantom
units held by the participant, multiplied by the value of a unit upon
consummation of the offering as determined by our Board of Directors, and
divided by the offering price. Approximately 85 employees participate in the
1998 grants, and each participant's interest will be deemed to have a $5,000
value as of the offering. Approximately 157 employees participate in the 1999
grants, and each participant's interest will be deemed to have a $6,000 value as
of the offering. Up to an aggregate shares of Class A common
stock will be delivered to participants upon completion of this offering.
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EMPLOYEE INCENTIVE COMPENSATION PLANS
Our philosophy is to compensate employees based on individual, departmental
and our overall company performance. Two main principles guiding this philosophy
are to pay competitive compensation and to provide long-term employee stock
ownership. We consider equity ownership by employees to be critical to our long-
term success. Following completion of this offering, when calculating total
compensation, we will consider both cash compensation and awards of restricted
stock or options that vest over time based on the achievement of specified
performance goals.
We anticipate that following the completion of this offering, the
Compensation Committee of our Board of Directors will review all plans, policies
and arrangements affecting our employees and will consider what changes are
appropriate, if any, for recommendation to our full Board of Directors.
MARTHA STEWART LIVING OMNIMEDIA LLC NONQUALIFIED CLASS A LLC UNIT/STOCK OPTION
PLAN
We adopted the Nonqualified Class A LLC Unit/Stock Option Plan in November
1997, under which options for 539,564 LLC units were outstanding as of December
31, 1998, based on an assumed 10 million outstanding LLC Units. Pursuant to the
merger, outstanding options for approximately 509,841 LLC units, based upon
option holdings as of December 31, 1998, will be converted into options for
shares of Class A common stock. Options granted under the plan generally
vested 10% on December 31, 1998, and will vest 10%, 20%, 20% and 40% on December
31 of each of the next four years if the optionee continues to be employed by,
or perform services for, Martha Stewart Living Omnimedia. Each option has a
scheduled ten-year term, subject to earlier termination upon termination of
employment. Options granted under the plan are not assignable or transferable by
the optionee, other than by will or the laws of descent and distribution. Upon a
change in control of Martha Stewart Living Omnimedia, each outstanding option
will become immediately and fully exercisable, and will either remain
exercisable under the terms of the plan or be terminated upon no less than 30
days' written notice. This offering is not a change of control under the plan.
No additional options will be granted under this plan.
Martha Stewart has agreed with us that she will return, on a net treasury
basis, to us shares of Class B common stock owned by the Martha Stewart Family
Limited Partnership, or another entity controlled by her, upon each exercise of
options under this plan. Under the net treasury method, we will calculate the
number of shares of Class A common stock issued upon an option exercise, and
subtract from that number the number of shares of our Class A common stock we
could purchase, at the then-current market price, with the option proceeds.
Martha Stewart has agreed to return to us a number of shares of Class B common
stock equal to the result of this calculation. We may or may not use the option
proceeds to repurchase shares of our Class A common stock in the market. If we
do so, the net effect will be no change in the number of shares of Class A
common stock outstanding before and after an exercise of an option under this
plan.
THE 1999 STOCK INCENTIVE PLAN
Before this offering, we intend to adopt and approve our 1999 Stock
Incentive Plan, which will be effective immediately before the pricing of this
offering. This plan is designed to promote our success and enhance our value by
linking the interests of certain of our officers, employees and consultants to
those of our stockholders and by providing participants with an incentive for
outstanding performance. This plan is further intended to provide flexibility in
its ability to motivate, attract and retain employees upon whose judgment,
interest and special efforts our business is largely dependent. Our officers,
employees and consultants, including employees who are members of our Board of
Directors, and officers, employees and consultants of our subsidiaries and
affiliates are eligible to participate in this plan. Non-employee directors are
not eligible to participate in the 1999 plan. This plan is intended to remain in
effect until 2009. The description below summarizes the material terms of this
plan.
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GENERAL
The 1999 plan will be administered by the Compensation Committee of our
Board of Directors, or another committee designated by our Board of Directors,
and provides for the grant of stock options, both non-qualified and incentive
stock options and other types of equity-based awards.
The 1999 plan provides that the maximum number of shares of Class A common
stock available for grant under the 1999 plan is .
The term of options granted under the 1999 plan may not exceed 10 years.
Unless otherwise determined by our Compensation Committee, options will vest
ratably on each of the first four anniversaries after the grant date and will
have an exercise price equal to the fair market value of the Class A common
stock on the date of grant.
A participant exercising an option may pay the exercise price in cash or,
if approved by our Compensation Committee, with previously acquired shares of
Class A common stock or in a combination of cash and stock. Our Compensation
Committee, in its discretion, may allow the cashless exercise of options.
Options are nontransferable other than by will or the laws of descent and
distribution or, at the discretion of our Compensation Committee, pursuant to a
written beneficiary designation and, in the case of a nonqualified option,
pursuant to a gift to members of the holder's immediate family. The gift may be
made directly or indirectly or by means of a trust or partnership or limited
liability company and, during the participant's lifetime, may be exercised only
by the participant, any such permitted transferee or a guardian, legal
representative or beneficiary.
At the time of this offering, we expect to grant options to purchase
shares of Class A common stock under the 1999 plan at an exercise
price equal to the initial public offering price.
OTHER AWARDS
A stock appreciation right, or SAR, permits a participant to receive cash
or shares of Class A common stock, or a combination thereof, as determined by
our Board of Directors or our Compensation Committee. The amount of cash or the
value of the shares is equal to the excess of the fair market value of a share
of Class A common stock on the date of exercise over the SAR exercise price,
multiplied by the number of shares with respect to which the SAR is exercised.
Restricted stock may be granted subject to performance or service-based goals
upon which restrictions will lapse. Performance units or restricted units may be
granted subject to performance goals and/or service-based restrictions, and will
be payable in cash or shares of Class A common stock or a combination as
determined by our Board of Directors or our Compensation Committee. Dividend and
interest equivalents with respect to awards and other awards based on the value
of Class A common stock may also be granted.
CHANGE IN CONTROL
In the event of a change in control, any option or SAR that is not then
exercisable and vested will become fully exercisable and vested, restrictions on
restricted stock will lapse and performance units will be deemed earned. Change
in control generally means
-- the acquisition of an amount of common stock greater than the amount
held by Martha Stewart and representing at least 30% of the
outstanding common stock or voting securities
-- a change in the majority of the members of the Board of Directors,
unless approved by the incumbent directors
-- the consummation of certain mergers involving the Company
-- approval by our stockholders of a liquidation, dissolution or sale of
substantially all of our assets
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AMENDMENTS
Our Board of Directors may at any time amend or terminate the 1999 plan and
may amend the terms of any outstanding option or other award, except that no
termination or amendment may impair the rights of the participants as they
relate to outstanding options or awards. However, no such amendment to the 1999
plan will be made without the approval of our stockholders to the extent such
approval is required by law or stock exchange rule.
THE EMPLOYEE STOCK PURCHASE PLAN
We adopted our Employee Stock Purchase Plan in July 1999. The purpose of
the purchase plan is to further our long-term stability and financial success by
providing a method for employees to increase their ownership of Class A common
stock. Under the purchase plan shares of Class A common stock will be
available for issuance and sale. Unless sooner terminated at the discretion of
our Board of Directors, the purchase plan will terminate on December 31, 2009.
ELIGIBILITY
All of our employees and all of the employees of designated subsidiaries
generally will be eligible to participate in the purchase plan, other than
employees whose customary employment is 20 hours or less per week or is for not
more than five months in a calendar year, or who are ineligible to participate
due to restrictions under the Internal Revenue Code.
GENERAL DESCRIPTION
A participant in the purchase plan may authorize regular salary deductions
of a maximum of 15% and a minimum of 1% of base compensation. The fair market
value of shares which may be purchased by any employee during any calendar year
may not exceed $25,000. The amounts so deducted and contributed will be applied
to the purchase of full shares of Class A common stock pursuant to options to
purchase shares at 85% of the lesser of the fair market value of such shares on
the date of purchase or on the offering date for such offering period. The
offering dates will be January 1 and July 1 of each purchase plan year, and each
offering period shall consist of one six-month purchase period. Any offering
period, however, beginning in 1999 would be commenced after July 1, and would be
for less than a six-month period. Shares will be purchased for participating
employees on the last business days of June and December for each purchase plan
year. Shares purchased under the purchase plan will be held in separate accounts
for each participant and each such participant will have the rights of a Class A
stockholder with respect to such shares.
Participants may decrease their payroll deductions at any time but not more
than once during any offering period. Participants may increase or decrease
their payroll deductions for any subsequent offering period by notifying the
purchase plan administrator no later than 15 days prior to such offering period.
Participants may also withdraw from participation in the purchase plan at any
time on or prior to the 15th day of the last month of the offering period. If a
participant withdraws from the purchase plan, any contributions that have not
been used to purchase shares will be refunded. A participant who has withdrawn
may not participate in the purchase plan again until the next offering period.
In the event of retirement or other termination of employment, any
contributions that have not yet been used to purchase shares will be refunded
and a certificate issued for the full shares in the participant's account.
Alternatively, a participant may elect to have shares sold and the proceeds,
less selling expenses, remitted to him. In the event of a participant's death,
any contributions that have not yet been used to purchase shares and all shares
in such participant's account will be delivered to the participant's beneficiary
designated in writing and filed with us, or, if no beneficiary has been
designated or survives the participant, to the participant's estate.
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AMENDMENTS OR TERMINATION OF THE PURCHASE PLAN
Our Board of Directors may amend the purchase plan in any respect, although
our stockholders must approve any amendment that would increase the number of
securities that may be issued under the purchase plan or would require
stockholder approval under Section 423 of the Internal Revenue Code. Also, no
amendment will adversely affect previously granted options under the purchase
plan. Our Board of Directors may suspend or terminate the purchase plan at any
time, however, in the event of a termination while an offering period is in
progress, the offering period will be shortened by setting a new date of
purchase.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by applicable Delaware law, we have included in our
certificate of incorporation a provision to eliminate the personal liability of
our directors for monetary damages for breach or alleged breach of their
fiduciary duties as directors, subject to certain exceptions. In addition, our
by-laws provide that we are required to indemnify our officers and directors
under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and we are required to advance
expenses to our officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. At present, we are
not aware of any pending or threatened litigation or proceeding involving a
director, officer, employee or agent of ours in which indemnification would be
required or permitted. We believe that these indemnification provisions are
necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be granted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
SEC this indemnification is against public policy as expressed in the Securities
Act of 1933 and is therefore unenforceable.
The employment agreement and the license agreement to be entered into with
Martha Stewart provide that we will indemnify Martha Stewart against all charges
and expenses that Martha Stewart may incur or be compelled to pay for or by
reason of actions of Martha Stewart Living Omnimedia or our officers, employees
or agents in connection with certain matters relating to our business and Martha
Stewart's performance of her obligations under the employment agreement,
including matters relating to our predecessor businesses and sole
proprietorships previously owned by Martha Stewart.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following summary descriptions of the material terms of agreements to
which we are a party are qualified in their entirety by reference to the
agreement to which each summary description relates, each of which we have filed
as an exhibit to the registration statement of which this prospectus is a part.
TRANSACTIONS WITH TIME PUBLISHING VENTURES AND ITS AFFILIATES
AGREEMENTS RELATING TO THE 1997 ACQUISITION
In 1991, Time Publishing Ventures, a subsidiary of Time Warner, Inc., in
cooperation with Martha Stewart, launched the magazine Martha Stewart Living.
Subsequently, Time Publishing Ventures became involved in other Martha
Stewart-related businesses, including television, books and mail-order
merchandising. In February 1997, Time Publishing Ventures agreed to contribute
all of its assets that primarily related to its Martha Stewart-related
businesses to Martha Stewart Living Omnimedia LLC, which was a recently formed
entity controlled by Martha Stewart. The LLC had already been capitalized with
various businesses Martha Stewart conducted personally or through entities
controlled by her. Under the terms of the February 1997 agreement, Martha
Stewart Living Omnimedia LLC also assumed all liabilities from Time Publishing
Ventures relating to the conduct of Time Publishing Ventures' Martha
Stewart-related businesses.
In exchange for its contributions, Time Publishing Ventures received an
interest-bearing four-year promissory note in the principal amount of $30.0
million and a 6.27% equity interest in the LLC. The purchase price was
calculated taking into consideration the special income distribution of $18.0
million payable to Time Publishing Ventures under the LLC operating agreement.
This distribution was paid in February 1997. The LLC operating agreement also
expressly permits Time Publishing Ventures and its affiliates to compete with us
and eliminates any obligation that Time Publishing Ventures offer corporate
opportunities to the LLC.
Incident to its equity interest, Time Publishing Ventures received rights
with respect to our ongoing management, and the right to require us to purchase
its equity interests on the seventh anniversary of the transaction, or in some
circumstances at an earlier date. These rights, other than registration rights,
will terminate upon our purchase of Time Publishing Ventures' shares pursuant to
our offer or Time Publishing Ventures' rejection of that offer. In March 1999,
we prepaid in full the Time Publishing Ventures note. See "--LLC Operating
Agreement" for additional information on Time Publishing Ventures' rights.
ONGOING SERVICE AGREEMENTS
In 1997, Time Publishing Ventures and its affiliates, Time Inc., Time
Customer Service, Inc. and Time Distribution Services, Inc., also entered into
agreements with us to provide us with various services. These agreements
included:
-- newsstand distribution services for our magazines, including
marketing and merchandising services for our magazine
-- fulfillment services for the magazine
-- fulfillment services for Martha by Mail
-- administrative and other services
-- an Oxmoor House agreement for publication of Martha Stewart Living
books
Each of these agreements is currently in effect and will continue in effect
after the offering. We believe the terms of these agreements are at least as
favorable to us as the terms that could have been obtained from another party.
Under our newsstand distribution agreement, Time Distribution Services
provides newsstand distribution services with respect to our magazines. We
compensate our counterparty on the basis of net sales. This agreement expires in
December 2004, but we have the right to terminate effective December 2001 on one
year's notice. In 1998, we incurred fees of $1.4 million under this agreement.
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The fulfillment agreements with Time Customer Service provide for inventory
management, "back-office processing" and processing of mail and phone orders for
our magazines and our Internet/Direct Commerce businesses. The fulfillment
agreement for our magazines expires in December 2002, but will be renewed
automatically for an additional three-year term unless terminated by either
party upon one year's notice. The fulfillment agreement with respect to our
catalog and Internet businesses continues until either party provides one year's
notice of termination to the other. In 1998, we incurred fees of $11.3 million
under these agreements.
Under a transition services agreement with Time, we receive administrative,
editing and sales services, and purchase our paper, from Time. The
administrative, editing and sales services portions of the agreement generally
expire in February 2001 and are automatically renewed for successive six-month
or one-year periods, depending on the service, unless a party terminates that
service prior to expiration of the particular term. The purchasing portion of
this agreement can be cancelled by either party on 180 days prior notice. We
have agreed with Time to extend the paper purchasing portion of the agreement
through the end of 2000. In 1998, we incurred expenses of $26.6 million,
including $26.0 million for paper purchases, under this agreement.
Under our agreement with Oxmoor House, also an affiliate of Time Publishing
Ventures, we granted Oxmoor House an exclusive license to use the mark Martha
Stewart Living in connection with books and continuity card and binder programs
for two Best of Martha Stewart Living books per year and one Christmas with
Martha Stewart Living book each year. Oxmoor House also has the right to publish
other materials bearing the mark Martha Stewart Living as mutually agreed by us
and Oxmoor House. We receive production grants on a per page basis for each of
these publications, an annual payment to cover staff costs and receive 50% of
the net profit. We earned $2.0 million in income under this agreement in 1998.
This agreement terminates in December 2001, and Oxmoor House has the right to
renew the agreement for an additional three-year term.
Since February 1997, Don Logan, President and Chief Executive Officer of
Time, has been a member of our Board of Directors. Following this offering, Mr.
Logan will not be a director of Martha Stewart Living Omnimedia.
LLC OPERATING AGREEMENT
In connection with our acquisition of Time Publishing Ventures' Martha
Stewart-related businesses in February 1997, the members in Martha Stewart
Living Omnimedia LLC, our predecessor company, consisting of The Martha Stewart
Family Limited Partnership, Time Publishing Ventures, Sharon Patrick and Grubman
Indursky & Schindler, P.C. entered into an agreement governing the operation of
the LLC and the rights of its members. Among the various rights that this
agreement afforded the LLC was the right to make an offer to purchase the
membership interests held by Time Publishing Ventures for a target price of
$37.0 million plus 5% interest, compounding semi-annually, from February 3,
1997. The target price will be reduced by any pre-offering distributions to Time
Publishing Ventures, other than for taxes and similar matters. Upon Time
Publishing Ventures' rejection of this offer to purchase or the completion of a
sale to us of Time Publishing Ventures' interests, most of Time Publishing
Ventures' specific rights under this agreement terminate.
The members also agreed that Martha Stewart Living Omnimedia LLC could be
converted into a corporation in the event it desired to effect an initial public
offering of its equity securities if the expected gross proceeds of the offering
exceeded $25.0 million.
At the time of this offering, we will make an irrevocable offer to purchase
Time Publishing Ventures' membership interests at the target price. Time
Publishing Ventures has not indicated whether it will accept or reject our offer
to purchase. Time Publishing Ventures has until 120 days following the date of
our offer, or it will be deemed to have rejected the offer to purchase. If Time
Publishing Ventures rejects our offer, its registration rights will continue.
If Time Publishing Ventures accepts our offer to purchase its shares of
common stock, Time Publishing Ventures will also have the right to receive a
payment from us if
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-- we sell any of our equity or all or substantially all of our assets
within one year of the completion of our purchase of Time Publishing
Ventures' shares, and
-- the per share price received by us for our equity or assets is higher
than that paid to Time Publishing Ventures
Time Publishing Ventures also has the right to receive a payment from Martha
Stewart if she completes any private sales of her equity or sells over 15% of
her equity in the public trading market, in each case, at a higher price per
share during the same period. These payments would be in an amount equal to the
excess of
-- the per share price received by Martha Stewart Living Omnimedia or
Martha Stewart over
-- 100% of the per share price paid to Time Publishing Ventures, which
percentage increases ratably to 140% over the one year term of Time
Publishing Ventures' right
The total amount of Time Publishing Ventures' adjustment cannot be greater than
the product of
-- the total number of shares sold in the subsequent transaction and the
difference between the per share amount we or Martha Stewart received
in the subsequent transaction, and
-- the per share amount Time Publishing Ventures received from us
TAX INDEMNIFICATION
Under the merger agreement providing for the conversion of Martha Stewart
Living Omnimedia LLC into a corporation for purposes of effecting this initial
public offering, the LLC will make distributions in an aggregate amount of $6.0
million, as of June 30, 1999, in respect of taxes paid by the members relating
to the profits of the LLC. We also agree to indemnify the members of the LLC for
any taxes relating to periods during which we were a limited liability company.
See "Reorganization Transactions Occurring Prior to This Offering" for more
information on this tax distribution.
STOCKHOLDERS AGREEMENT AND REGISTRATION RIGHTS
Immediately prior to the merger, we will enter into a stockholders
agreement with the members of the LLC. Under the terms of this agreement, we
have agreed to irrevocably offer to purchase the shares of common stock held by
Time Publishing Ventures. In the event that Time Publishing Ventures accepts our
offer to purchase its shares but we fail to complete that purchase, the
agreement provides that rights of Time Publishing Ventures that terminated upon
completion of the merger would be reinstated. These rights include governance
rights regarding our operations, including the right to approve transactions
between us and Martha Stewart and call and put rights relating to Time
Publishing Ventures' shares in Martha Stewart Living Omnimedia. Because the
proceeds of this offering will significantly exceed the price of purchasing Time
Publishing Ventures' shares, we do not believe there is any material risk that
were Time Publishing Ventures to accept our offer we would not complete that
transaction.
The stockholders agreement also provides that we will be able to continue
to purchase paper from Time through December 2000 in accordance with past
practice. In addition, the stockholders agreement provides Time Publishing
Ventures, which will own an aggregate of shares of Class A common
stock at the time of this offering, Kleiner Perkins, which will own an aggregate
of shares of Class A Common Stock, Martha Stewart, who will
indirectly control an aggregate of shares of Class B common stock
and Sharon Patrick, who will own an aggregate of shares of Class A
Common Stock, with the right to require us to register shares of Class A common
stock owned or controlled by them, subject to certain customary terms and
minimum amounts. None of these entities can require us to register any shares
within 180 days of the date of this prospectus.
Registration of these shares of common stock will result in such shares
becoming freely tradable without restriction under the Securities Act of 1933.
All registration expenses, other than any underwriting discounts, incurred in
connection with the above registrations will be borne by Martha Stewart Living
Omnimedia.
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These registration rights continue as long as these stockholders continue
to hold any of our common stock that they received in the merger of Martha
Stewart Living Omnimedia LLC into a corporation.
CERTAIN AGREEMENTS WITH MARTHA STEWART
LOCATION RENTAL AGREEMENT
In addition to the employment and license agreements we will enter into
with Martha Stewart, we will also enter into a location rental agreement with
Martha Stewart relating to our use of various properties owned by Martha
Stewart. The agreement has a five-year term, provides for annual payments of
$2.0 million to Martha Stewart and permits us to use the properties currently
owned by Martha Stewart for any purpose relating to our businesses. We make
extensive use of these properties for television filming, photography, research
and development of context and products and various other commercial purposes.
This location rental agreement will replace an agreement we have with Martha
Stewart, except that the rental fee will be increased. See "-- Pre-Offering
Agreements" for more information on the prior agreement. The increased fee
reflects the access to additional properties, as well as our significantly
increased usage of these properties since the acquisition from Time Publishing
Ventures in February 1997. We believe this rate is significantly lower than what
we would have to pay to use similar properties owned by a third party. In the
event that Martha Stewart's employment is terminated without cause, or she
terminates employment for good reason, we will be obligated to pay the remaining
amount due under the location rental agreement and we will lose our access to
these properties.
PRE-OFFERING AGREEMENTS
Upon completion of this offering, the current employment, services and
non-competition agreements and separate license and non-competition agreements
we have entered into with Martha Stewart will be terminated, and the new
employment agreement, royalty-free license agreement and location rental
agreement will become effective. See "Business--Intellectual Property" for more
information on the license agreement. The prior employment and services
agreements provided for the payment to Martha Stewart of certain compensation,
benefits and expense reimbursement. Under a 1997 location fee agreement, we paid
Martha Stewart $1.5 million annually for the use of properties owned by her in
connection with operating our business. Martha Stewart did not receive any
compensation with respect to, or payments for, the license and non-competition
agreements.
In addition, as a member of Martha Stewart Living Omnimedia LLC, Martha
Stewart is entitled to certain registration rights, which we describe above. We
will assume these obligations effective as of the completion of this offering.
OTHER RELATIONSHIPS
We periodically use the services of Emery Cuti Brinckerhoff & Abady, a law
firm of which Martha Stewart's son-in-law is a partner. In 1998, we paid
approximately $92,000 in fees and expenses in respect of such services.
Ms. Margaret Christiansen, Martha Stewart's sister-in-law, is a Senior Vice
President, Business Manager of Martha Stewart Living Omnimedia.
Mr. Randy Plimpton, Martha Stewart's brother-in-law, is our property
manager, responsible for property management and support services.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of Class A and Class B common stock, including the percent
of the total voting power, as of 1999, and as adjusted to reflect
completion of this offering, by
-- each of our five most highly compensated officers
-- each director
-- each holder of more than 5% of either class of common stock
-- all current directors and executive officers as a group
Except as indicated in the footnotes to this table, the individuals named
in this table have sole voting and investment power with respect to all shares
of Class A common stock and Class B common stock shown as beneficially owned by
them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
---------------------------- ---------------------------
CLASS A CLASS B % TOTAL CLASS A CLASS B % TOTAL
COMMON COMMON VOTING COMMON COMMON VOTING
STOCK STOCK POWER STOCK STOCK POWER
------------- ------------ ------- ------------ ------------ -------
NAME SHARES % SHARES % SHARES % SHARES %
- ---- ------ ---- ------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Martha Stewart(1)....... -- -- 100% 97.6% -- -- 100%
Time Inc.(2)............ 36.4% -- -- * --
1271 Avenue of the
Americas
New York, New York
10020
Kleiner Perkins Caufield
& Byers(3)............ 29.0 -- -- * -- --
2750 Sand Hill Road
Menlo Park, California
94025
L. John Doerr(3)........ 29.0 -- -- * --
Charlotte Beers(4)...... * -- -- * * -- --
Sharon Patrick(5)....... 32.9 -- -- * -- --
Gael Towey(6)........... * -- -- * * -- --
Stephen Drucker(7)...... * -- -- * * --
Suzanne Sobel(8)........ * -- -- * * --
All directors and
executive officers as
a group (13
persons)(9)........... 98.3% 100% 100% 100%
</TABLE>
- ------------
* The percentage of shares or voting power beneficially owned does not exceed
1% of the class.
(1) Consists of shares held by The Martha Stewart Family Limited
Partnership.
(2) Consists of shares held by Time Publishing Ventures, Inc., a wholly
owned subsidiary of Time Inc.
(3) Consists of shares held by KPCB Holdings, Inc., a California corporation
affiliated with KPCB IX Associates, LLC. L. John Doerr, a general partner of
KPCB IX Associates, LLC, is a director of Martha Stewart Living Omnimedia.
Mr. Doerr disclaims beneficial ownership of shares held by KPCB Holdings,
Inc. except to the extent of his pecuniary interest in those shares through
KPCB IX Associates, LLC.
(4) Does not include unvested options to acquire shares of Class A common
stock.
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(5) Includes vested options to acquire shares of Class A common stock. Does
not include unvested options to acquire shares of Class A common stock.
(6) Includes vested options to acquire shares of Class A common stock. Does
not include unvested options to acquire shares of Class A common stock.
(7) Includes vested options to acquire shares of Class A common stock. Does
not include unvested options to acquire shares of Class A common stock.
(8) Includes vested options to acquire shares of Class A common stock. Does
not include unvested options to acquire shares of Class A common stock.
(9) Includes vested options to acquire shares of Class A common stock. Does
not include unvested options to acquire shares of Class A common stock.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of the material provisions of our
certificate of incorporation and by-laws is qualified in its entirety by
reference to our certificate of incorporation and by-laws, which we have filed
as exhibits to the registration statement of which this prospectus is a part.
Our authorized capital stock consists of 350,000,000 shares of Class A
common stock, par value $0.01 per share, 150,000,000 shares of Class B common
stock, par value $0.01 per share, and 150,000,000 shares of preferred stock, par
value $0.01 per share. As of , 1999, we had shares of Class
A common stock, shares of Class B common stock and no shares of
preferred stock outstanding. After this offering, there will be shares
of Class A common stock outstanding.
COMMON STOCK
Subject to the rights of the holders of any preferred stock that may be
outstanding, holders of Class A common stock are entitled to receive, share for
share with holders of Class B common stock, dividends as may be declared by our
Board of Directors out of funds legally available to pay dividends, and, in the
event of liquidation, to share pro rata with the holders of Class A common stock
in any distribution of our assets after payment or providing for the payment of
liabilities and the liquidation preference of any outstanding preferred stock.
Except as required by Delaware law or except as otherwise provided in our
certificate of incorporation, Class A common stock and Class B common stock will
vote together as a single class on all matters presented to a vote of
stockholders, including the election of directors. Each holder of Class A common
stock is entitled to one vote for each share held of record on the applicable
record date for all of these matters. Holders of Class A common stock have no
cumulative voting rights or preemptive rights to purchase or subscribe for any
stock or other securities, and there are no conversion rights or redemption or
sinking fund provisions with respect to Class A common stock. All outstanding
shares of Class A common stock are, and the shares of Class A common stock
offered hereby will be when issued, fully paid and nonassessable. Additionally,
our certificate of incorporation requires that we reserve and keep available out
of authorized but unissued Class A common stock, solely for effecting conversion
of Class B common stock, sufficient shares to effect conversion of all
outstanding shares of Class B common stock.
Class B common stock is identical in all respects to Class A common stock,
except with respect to voting and conversion rights. Class A common stock and
Class B common stock will vote together as a single class on all matters
presented to a vote of stockholders, including the election of directors. Each
holder of Class B common stock is entitled to ten votes for each share held of
record on the applicable record date for all of these matters. Martha Stewart
will be the only initial holder of shares of Class B common stock.
Each share of Class B common stock will be automatically converted into one
share of Class A common stock upon transfer of any share of Class B common
stock, whether or not for value, by any initial registered holder of that share,
except transfers by that holder to:
-- a nominee of that holder, without any change in beneficial ownership,
within the meaning of Section 13(d) of the Securities Exchange Act of
1934, or
-- another person who, at the time of the transfer, beneficially owns
shares of Class B common stock or a nominee of that person
Further, any transfer by any initial holder without consideration to any of the
following will not result in conversion:
-- any controlled affiliate of that initial holder who remains a
controlled affiliate
-- any active or retired partner of that initial holder
-- the estate of that initial holder or a trust established for the
benefit of the descendants or any relatives or spouse of that initial
holder
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-- a parent corporation or wholly owned subsidiary of that initial
holder or to a wholly owned subsidiary of that parent unless and
until the transferee ceases to be a parent or wholly owned subsidiary
of the initial holder or a wholly owned subsidiary of any parent
-- the spouse of any initial holder
Lastly, any bona fide pledge by an initial holder to a financial
institution in connection with a borrowing will not result in any conversion. If
any transfer does not give rise to automatic conversion under these provisions,
then any subsequent transfer by the holder, other than any transfer by such
holder to a nominee of such holder, without any change in beneficial ownership,
as such term is defined under Section 13(d) of the Securities Exchange Act of
1934, or the pledgor, as the case may be, will be subject to automatic
conversion upon these terms and conditions. In addition, each share of Class B
common stock may be converted at any time into one share of Class A common stock
at the option of the holder. The one-to-one conversion ratio will be equitably
preserved in the event of any stock dividend, stock split or combination or
merger, consolidation or other reorganization of Martha Stewart Living Omnimedia
with another corporation.
PREFERRED STOCK
Our certificate of incorporation authorizes 150,000,000 shares of preferred
stock. Our Board of Directors has the authority to issue shares of preferred
stock in one or more class or series and to fix, by resolution, the powers,
designations, preferences, rights and qualifications, limitations and
restrictions thereof, if any, including the number of shares in each series,
which our Board of Directors may increase or decrease as permitted by Delaware
law, liquidation preferences, dividend rates, conversion rights and redemption
provisions of the shares constituting any class or series, without any further
vote or action by the stockholders. Any shares of preferred stock so issued
would have priority over the common stock with respect to dividend or
liquidation rights or both. As of the time of this offering, we will have no
shares of preferred stock outstanding.
ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BY-LAWS
Our certificate of incorporation and by-laws contain several provisions
that could delay or make more difficult the acquisition of our Company by means
of a hostile tender offer, open market purchases, a proxy contest or otherwise.
We also refer you to "Risk Factors--Martha Stewart will control our company and
this control could inhibit potential changes of control" for information on
other factors which could impact a change of control.
STOCKHOLDERS MEETINGS
Subject to the rights of holders of preferred stock, of whom there are
currently none, only our Chairman of the Board of Directors or a majority of our
Board of Directors may call a special meeting of stockholders.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATION AND PROPOSALS
Our by-laws establish advance notice procedures with regard to stockholder
proposals and the nomination, other than by or at the direction of our Board of
Directors or a committee thereof, of candidates for election as directors.
EFFECT OF DELAWARE ANTI-TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. Section 203 prevents certain Delaware
corporations, including those with securities listed on the New York Stock
Exchange, from engaging under certain circumstances in a business combination
with any interested stockholder for three years following the date that the
stockholder became an interested stockholder. For purposes of Section 203, a
"business combination" includes, among other things, a merger or consolidation
involving Martha Stewart Living Omnimedia and the interested stockholder and a
sale of more than 10% of our assets. In general, the anti-takeover law defines
an "interested stockholder" as any entity or person beneficially owning 15% or
more of our outstanding voting stock and any entity or person affiliated with
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or controlling or controlled by that entity or person. A Delaware corporation
may "opt out" of Section 203 with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or by-laws resulting from amendments approved by holders of at
least a majority of a corporation's outstanding voting shares. We have not
"opted out" of the provisions of Section 203.
ACTION BY WRITTEN CONSENT
Under the Delaware General Corporation Law, unless the certificate of
incorporation expressly prohibits action by the written consent of stockholders,
any action required or permitted to be taken by our stockholders at a duly
called annual or special meeting of stockholders may be taken by a consent in
writing executed by stockholders possessing the requisite votes for the action
to be taken. Our certificate of incorporation does not expressly prohibit action
by the written consent of stockholders. As a result, Martha Stewart, as holder
of % of our total voting power after this offering, will be able to take
any action to be taken by stockholders without the necessity of holding a
stockholder meeting. We intend, however, to hold annual meetings of
stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent for Class A common stock is .
LISTING
We expect our Class A common stock to trade on the New York Stock Exchange
under the symbol " ".
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for either our
Class A common stock or Class B common stock. Future sales of substantial
amounts of our Class A common stock in the public market could adversely affect
prevailing market prices. Upon the closing of this offering, we will have
shares of Class A common stock outstanding, of which the
shares offered hereby will be freely tradable, unless purchased
by our affiliates, as defined in Rule 144 under the Securities Act of 1933. All
other shares, including all shares of Class B common stock
outstanding, will be "restricted shares" for purposes of the Securities Act of
1933 and subject to the volume and other limitations set forth in Rule 144.
In general, under Rule 144, as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned shares for at least one
year, including the holding period of any prior owner, except an affiliate from
whom these shares were purchased, is entitled to sell in "brokers' transactions"
or to market makers, within any three-month period commencing 90 days after the
date of this prospectus, a number of shares that does not exceed the greater of
-- 1% of the then outstanding shares of Class A common stock,
shares immediately after this offering, without giving
effect to the over-allotment option, or
-- the average weekly trading volume of our common stock during the four
calendar weeks preceding the required filing of a Form 144 with
respect to this sale.
Sales under Rule 144 are generally subject to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been
our affiliate at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner other than an affiliate from
whom these shares were purchased), is entitled to sell these shares without
having to comply with the manner of sale, public information, volume limitation
or notice provisions of Rule 144.
Immediately after the offering, Martha Stewart and entities controlled by
her will own shares of Class B common stock, Time Publishing
Ventures will own shares of Class A common stock, and KPCB
Holdings, Inc. will own shares of Class A common stock. We have
granted to these entities the right to demand registration under the Securities
Act of 1933 at our expense of all or a portion of the shares of Class A common
stock they own prior to the offering, or into which Martha Stewart's shares of
Class B common stock are convertible. See "Certain Relationships and Related
Transactions--Stockholders Agreement and Registration Rights" for more
information on these registration rights.
All of our existing stockholders have entered into lock-up agreements with
the Representatives of the underwriters wherein they have agreed not to sell any
of their shares within 180 days after the date of this prospectus without the
prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters. These agreements have exceptions, including the call by Martha
Stewart Living Omnimedia of Time Publishing Ventures' shares. See "Underwriters"
for more information on these lock-up agreements.
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MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a general discussion of the material U.S. federal income
and estate tax considerations with respect to the ownership and disposition of
Class A common stock applicable to Non-U.S. Holders. In general, a "Non-U.S.
Holder" is any holder other than
-- a citizen or resident of the United States
-- a corporation created or organized in the United States or under the
laws of the United States or of any state
-- an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source
-- a trust if
-- a court within the United States is able to exercise primary
supervision over the administration of the trust, and
-- one or more U.S. persons have the authority to control all
substantial decisions of the trust
This discussion is based on current provisions of the Internal Revenue
Code, Treasury Regulations promulgated thereunder, judicial opinions, published
positions of the Internal Revenue Service, and all other applicable authorities,
all of which are subject to change, possibly with retroactive effect. This
discussion does not address all aspects of income and estate taxation or any
aspects of state, local, or non-U.S. taxes, nor does it consider any specific
facts or circumstances that may apply to a particular Non-U.S. Holder that may
be subject to special treatment under the U.S. federal income tax laws, such as
insurance companies, tax-exempt organizations, financial institutions, brokers,
dealers in securities, and certain U.S. expatriates. Accordingly, prospective
investors are urged to consult their tax advisors regarding the U.S. federal,
state, local and non-U.S. income and other tax considerations of acquiring,
holding and disposing of shares of common stock. Holders of Class B common stock
are urged to consult such holders' own tax advisors.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate of the gross amount, or a lower rate prescribed by
an applicable income tax treaty, unless the dividends are effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States. Dividends effectively connected with such a U.S. trade or business
generally will not be subject to U.S. withholding tax if the Non-U.S. Holder
files certain forms, including Internal Revenue Service Form 4224, or any
successor form, with the payor of the dividend, and generally will be subject to
U.S. federal income tax on a net income basis, in the same manner as if the
Non-U.S. Holder were a resident of the United States. A Non-U.S. Holder that is
a corporation may be subject to an additional branch profits tax at a rate of
30%, or such lower rate as may be specified by an applicable income tax treaty,
on the repatriation from the United States of its "effectively connected
earnings and profits," subject to certain adjustments. To determine the
applicability of a tax treaty providing for a lower rate of withholding under
the currently effective Treasury Regulations (the "Current Regulations") and
published Internal Revenue Service positions, dividends paid to an address in a
foreign country are presumed to be paid to a resident of that country absent
knowledge to the contrary. Under Treasury Regulations issued on October 6, 1997
(the "Final Regulations"), and generally effective for payments made after
December 31, 2000, however, a Non-U.S. Holder, including, in certain cases of
Non-U.S. Holders that are entities, the owner or owners of such entities, will
be required to satisfy certain certification requirements in order to claim a
reduced rate of withholding pursuant to an applicable income tax treaty.
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<PAGE> 83
GAIN OR SALE OR OTHER DISPOSITION OF COMMON STOCK
In general, a Non-U.S. Holder will not be subject to U.S. federal income
tax on any gain realized upon the sale or other disposition of the holder's
shares of Class A common stock unless
-- the gain is effectively connected with a trade or business carried on
by the Non-U.S. Holder within the United States, in which case the
branch profits tax discussed above may also apply if the Non-U.S.
Holder is a corporation
-- the Non-U.S. Holder is an individual who holds shares of Class A
common stock as a capital asset and is present in the United States
for 183 days or more in the taxable year of disposition and certain
other tests are met
-- the Non-U.S. Holder is subject to tax pursuant to the provisions of
the Internal Revenue Code regarding the taxation of U.S. expatriates,
or
-- Martha Stewart Living Omnimedia is or has been a U.S. real property
holding corporation for U.S. federal income tax purposes, which Martha
Stewart Living Omnimedia does not believe that it has been, currently
is, or will become, at any time within the shorter of the five-year
period preceding such disposition and such Non-U.S. Holder's holding
period
If Martha Stewart Living Omnimedia were or were to become a U.S. real
property holding corporation at any time during this period, gains realized upon
a disposition of Class A common stock by a Non-U.S. Holder that did not directly
or indirectly own more than 5% of the Class A common stock during this period
generally would not be subject to U.S. federal income tax, provided that Class A
common stock is "regularly traded on an established securities market (within
the meaning of Section 897(c)(3) of the Code)."
ESTATE TAX
Class A common stock owned or treated as owned by an individual who is not
a citizen or resident, as defined for U.S. federal estate tax purposes, of the
United States at the time of death will be includible in the individual's gross
estate for U.S. federal estate tax purposes, unless an applicable estate tax
treaty provided otherwise, and therefore may be subject to U.S. federal estate
tax.
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
We must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of this information also may be made available under the provisions of a
specific treaty or agreement with the tax authorities in the country in which
the Non-U.S Holder resides or is established.
Under the Current Regulations, U.S backup withholding tax, which generally
is imposed at the rate of 31% on certain payments to persons that fail to
furnish the information required under the U.S. information reporting
requirements, and information reporting requirements, other than those discussed
in the previous paragraph, generally will not apply to dividends paid on Class A
common stock to a Non-U.S. Holder at an address outside the United States.
Backup withholding and information reporting generally will apply, however, to
dividends paid on shares of Class A common stock to a Non-U.S. Holder at an
address in the United States if the holder fails to establish an exemption or to
provide certain other information to the payor.
Under the Current Regulations, the payment of proceeds from the disposition
of Class A common stock to or through a U.S. office of a broker will be subject
to information reporting and backup withholding, unless the beneficial owner,
under penalties of perjury, certifies, among other things, its status as a
Non-U.S. Holder or otherwise establishes an exemption. The payment of proceeds
from the disposition of Class A common stock to or through a Non-U.S. office of
a broker generally will not be subject to backup withholding and information
reporting, except as noted below. In the case of proceeds from a disposition of
Class A common stock paid to or though a non-U.S. office of a broker that is
-- a U.S. person
-- a "controlled foreign corporation" for U.S. federal income tax
purposes, or
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<PAGE> 84
-- a foreign person 50% or more of whose gross income from certain
periods is effectively connected with a U.S. trade or business,
information reporting, but not backup withholding, will apply unless
the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and certain other conditions are satisfied, or the
beneficial owner otherwise establishes an exemption, and the broker
has no actual knowledge to the contrary
Under the Final Regulations, generally effective for payments made after
December 31, 2000, the payment of dividends or the payment of proceeds from the
disposition of our Class A common stock to a Non-U.S. Holder may be subject to
information reporting and backup withholding unless the recipient satisfies the
certification requirements of the Final Regulations or otherwise establishes an
exemption.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder can be refunded or
credited against the Non-U.S. Holder's U.S. federal income tax liability, if
any, provided that the required information is furnished to the Internal Revenue
Service in a timely manner.
The foregoing discussion of these U.S. federal income tax considerations is
not tax advice and is not based on an opinion of counsel. Accordingly, each
prospective Non-U.S. Holder of Class A common stock should consult that holder's
own tax adviser with respect to the federal, state, local and foreign tax
consequences of the acquisition, ownership and disposition of common stock.
81
<PAGE> 85
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement, dated the date of this prospectus, the U.S. underwriters named below,
for which Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation and Banc of America Securities LLC are acting as U.S.
representatives, and the international underwriters named below for whom Morgan
Stanley & Co. International Limited, Merrill Lynch International, Bear, Stearns
International Limited, Donaldson, Lufkin & Jenrette International and Bank of
America International Limited are acting as international representatives, have
severally agreed to purchase, and we have agreed to sell to them, the respective
number of shares of Class A common stock set forth opposite the names of these
underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................
Bear, Stearns & Co. Inc...................................
Donaldson, Lufkin & Jenrette Securities Corporation.......
Banc of America Securities LLC............................
-------
Subtotal.............................................
-------
International Underwriters:
Morgan Stanley & Co. International Limited................
Merrill Lynch International...............................
Bear, Stearns International Limited.......................
Donaldson, Lufkin & Jenrette International................
Bank of America International Limited.....................
-------
Subtotal.............................................
-------
Total.............................................
=======
</TABLE>
The U.S. underwriters and the international underwriters, and the U.S.
representatives and the international representatives, are collectively referred
to as the underwriters and the representatives, respectively. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of Class A common stock offered in this
prospectus are subject to the approval of certain legal matters by their counsel
and to other conditions. The underwriters are obligated to take and pay for all
of the shares of Class A common stock offered hereby, except those shares
covered by the U.S. underwriters' over-allotment option described below, if any
shares are taken.
The underwriters initially propose to offer a portion of the shares of
Class A common stock directly to the public at the public offering price set
forth on the cover page of this prospectus and a portion to certain dealers at a
price that represents a concession not in excess of $ per share under the
public offering price. Any underwriter may allow, and these dealers may reallow,
a concession not in excess of $ per share to other underwriters or to
certain other dealers. After the initial offering of the shares of Class A
common stock, the offering price and other selling terms may be varied by the
representatives.
We have granted to the U.S. underwriters an option, exercisable for 30 days
from the date of this prospectus to purchase up to an aggregate of
additional shares at the public offering price set forth on the
cover page of this prospectus, less underwriting discounts and commissions. The
U.S. underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares
offered pursuant to this prospectus. To the extent this option is exercised,
each U.S. underwriter will become obligated, subject to specified conditions, to
purchase about the
82
<PAGE> 86
same percentage of additional shares as the number set forth next to the U.S.
underwriter's name in the preceding table bears to the total number of shares
set forth next to the names of all U.S. underwriters in the preceding table. If
the U.S. underwriters' option is exercised in full, the total price to the
public for this offering would be $ , the total underwriting discounts and
commissions would be $ and the total proceeds to Martha Stewart Living
Omnimedia would be $ .
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed 5% of the total number of shares of Class A
common stock offered by them.
At our request, the underwriters have reserved up to shares
of Class A common stock offered hereby for sale at the initial public offering
price to some of our employees and to other persons and entities that we believe
have contributed to the development and success of our business. The number of
shares available for sale to the general public will be reduced to the extent
that these persons and entities purchase these reserved shares. Any reserved
shares not so purchased will be offered by the underwriters to the general
public on the same basis as the other shares of our Class A common stock offered
hereby.
We expect the Class A common stock to be approved for listing on the New
York Stock Exchange under the symbol " ". The underwriters intend to sell
shares to a minimum of beneficial owners in lots of
or more so as to meet the distribution requirements of this
listing.
Each of Martha Stewart Living Omnimedia and our directors, executive
officers and current stockholders has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, it
will not, during the period ending 180 days after the date of this prospectus:
-- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common
stock
-- enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of
common stock, whether any of these transactions described above is to
be settled by delivery of common stock or any other securities, in
cash or otherwise or
-- file a registration statement (in the case of Martha Stewart Living
Omnimedia) other than a registration statement on Form S-8 covering
shares of common stock subject to outstanding options or options to
be issued under our stock option plans
The restrictions described in the preceding list do not apply to certain
circumstances, including:
-- the sale of the shares of Class A common stock to the underwriters
-- the issuance by us of restricted stock awards under our existing
employee benefit plans or of shares of common stock upon the exercise
of an option or a warrant or the conversion of a security outstanding
on the date of this prospectus
-- the completion of Martha Stewart Living Omnimedia's call of Time
Publishing Ventures' equity interest pursuant to the LLC operating
agreement
-- the exchange of shares of Class B common stock for shares of Class A
common stock pursuant to our certificate of incorporation
-- the grant of options to officers, directors, employees or
consultants, provided that these options are not generally
exercisable prior to the end of the lock-up period or
-- the sale or other transfer of any shares of common stock by certain
of the foregoing persons to any associate, as this term is defined in
Rule 12b-2 under the Securities Exchange Act of 1934, if this person
agrees to be bound by the foregoing provisions
In order to facilitate our offering of Class A common stock, the
underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A common stock. Specifically, the
83
<PAGE> 87
underwriters may over-allot in connection with the offering, creating a short
position in Class A common stock for their own account. In addition, to cover
over-allotments or to stabilize the price of the Class A common stock, the
underwriters may bid for, and purchase, shares of Class A common stock in the
open market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a dealer for distributing Class A common stock in
the offering, if the syndicate repurchases previously distributed Class A common
stock in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of Class A common stock above independent market levels. The
underwriters are not required to engage in these activities, and may end any of
these activities at any time.
Some of the underwriters engage in transactions with, and perform services
for, our company in the ordinary course of business and have engaged and may in
the future engage in commercial banking and investment banking transactions with
us, for which they receive customary compensation. In addition, Bank of America,
the parent of Banc of America Securities LLC, one of the underwriters, is a
lender under our credit facility.
We have agreed with the underwriters to indemnify each other against some
liabilities relating to this offering, including liabilities under the
Securities Act of 1933.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for the Class A
common stock. We will determine the initial public offering price by
negotiations between the U.S. representatives and us. Among the numerous factors
we and the U.S. representatives will consider in determining the initial public
offering price are our future prospects and our industry in general, our sales,
earnings and other financial and operating information in recent periods, and
the price-earnings ratios, price-sales ratios, market prices of securities and
other financial and operating information of companies engaged in activities
similar to ours.
LEGAL MATTERS
Certain legal matters will be passed upon for us by Wachtell, Lipton, Rosen
& Katz, New York, New York and for the underwriters by Davis Polk & Wardwell,
New York, New York. Each of these firms has in the past represented and
continues to represent certain of the underwriters and Martha Stewart Living
Omnimedia on a regular basis and in a variety of matters other than this
offering.
EXPERTS
The audited financial statements and schedule of Martha Stewart Living
Omnimedia LLC included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
Ernst & Young LLP, independent auditors, have audited the combined
financial statements of Martha Stewart Living, a wholly owned operation of Time
Inc., at December 31, 1996 and for the year then ended, as set forth in their
report. We have included the combined financial statements of Martha Stewart
Living in this prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the Class
A common stock offered in this prospectus. This prospectus does not contain all
of the information set forth in the registration statement and the exhibits and
schedules to that registration statement. For further information with respect
to us and the Class A common stock, we refer you to this registration statement
and its exhibits and schedules. Statements contained in this
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<PAGE> 88
prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
that contract or document filed as an exhibit to the registration statement,
each of these statements being qualified in all respects by that reference. The
registration statement, including exhibits to the registration statement, may be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the SEC's Regional Offices located at Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of these materials may be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The SEC also maintains a world wide web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants such as us which file electronically
with the SEC. The registration statement, including all exhibits and amendments
to the registration statement, is available on that website.
Upon completion of this offering, we will be subject to the informational
requirements of the Securities Exchange Act of 1934 and, in accordance with
those requirements, will file reports, proxy and information statements with the
SEC. You may inspect and copy these reports, proxy and information statements
and other information at the addresses set forth above.
We intend to furnish to our stockholders our annual reports containing
consolidated financial statements audited by our independent auditors and
quarterly reports containing unaudited consolidated financial statements for
each of the first three quarters of each fiscal year.
85
<PAGE> 89
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MARTHA STEWART LIVING OMNIMEDIA LLC
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998 and June 30, 1999 (unaudited)..................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 (unaudited)............... F-4
Consolidated Statements of Members' Equity for the years
ended December 31, 1996, 1997 and 1998 and for the six
months ended June 30, 1999 (unaudited)................. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 (unaudited)............... F-6
Notes to Consolidated Financial Statements................ F-7
MARTHA STEWART LIVING
Report of Independent Public Auditors....................... F-15
Combined Balance Sheet as of December 31, 1996............ F-16
Combined Statement of Operations and Accumulated Deficit
for the year ended December 31, 1996................... F-17
Combined Statement of Cash Flows for the year ended
December 31, 1996...................................... F-18
Notes to Combined Financial Statements ................... F-19
MARTHA STEWART LIVING OMNIMEDIA, INC.
</TABLE>
The financial statements of Martha Stewart Living Omnimedia Inc. have not
been included in this prospectus as this company has been formed in connection
with this offering and accordingly has no operating history, assets or
liabilities.
F-1
<PAGE> 90
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Martha Stewart Living Omnimedia LLC:
We have audited the accompanying consolidated balance sheets of Martha
Stewart Living Omnimedia LLC (a Delaware limited liability company) and
subsidiary as of December 31, 1998 and 1997, and the related consolidated
statements of operations, members' equity and cash flows for each of the three
years in the period ended December 31, 1998. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Martha Stewart Living
Omnimedia LLC and subsidiary as of December 31, 1998 and 1997 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
New York, New York
February 15, 1999
F-2
<PAGE> 91
MARTHA STEWART LIVING OMNIMEDIA LLC
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998 AND JUNE 30, 1999 (UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................ $ 9,971 $ 24,578 $ 22,269
Accounts receivable, net................................. 17,947 25,260 24,683
Inventories.............................................. 3,427 6,522 7,977
Deferred television production costs..................... 3,805 3,038 3,190
Other current assets..................................... 606 275 1,329
-------- -------- --------
Total current assets............................. 35,756 59,673 59,448
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, net......................... 13,852 11,468 11,491
-------- -------- --------
INTANGIBLE ASSETS, net..................................... 55,183 53,108 51,633
-------- -------- --------
OTHER NONCURRENT ASSETS.................................... 915 1,123 1,273
-------- -------- --------
Total assets..................................... $105,706 $125,372 $123,845
======== ======== ========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities................. $ 16,650 $ 21,242 $ 22,771
Accrued payroll and related costs........................ 2,056 4,056 3,093
Accrued interest payable................................. 2,581 1,581 265
Current maturities of long term debt..................... -- -- 3,000
Current portion of deferred subscription income.......... 23,444 26,756 26,483
-------- -------- --------
Total current liabilities........................ 44,731 53,635 55,612
-------- -------- --------
DEFERRED ROYALTY INCOME.................................... 13,203 1,782 1,151
-------- -------- --------
DEFERRED SUBSCRIPTION INCOME............................... 4,137 4,722 4,674
-------- -------- --------
LONG TERM DEBT, less current maturities.................... 30,000 27,650 12,000
-------- -------- --------
OTHER NONCURRENT LIABILITIES............................... 400 768 849
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY............................................ 13,235 36,815 49,559
-------- -------- --------
Total liabilities and members' equity............ $105,706 $125,372 $123,845
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 92
MARTHA STEWART LIVING OMNIMEDIA LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 (UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS MONTHS ENDED
ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
------ -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Publishing........................... $3,899 $108,694 $127,020 $64,701 $ 73,314
Television........................... -- 12,396 23,351 10,587 12,787
Merchandising........................ -- 6,919 15,004 6,622 11,509
Internet/Direct Commerce............. -- 4,812 14,673 4,343 13,892
------ -------- -------- ------- --------
Total revenues............... 3,899 132,821 180,048 86,253 111,502
------ -------- -------- ------- --------
Operating costs and expenses
Production, distribution and
editorial......................... -- 59,148 82,930 36,492 54,710
Selling and promotion................ -- 31,973 34,540 17,838 19,994
General and administrative........... 99 21,182 29,659 14,005 18,601
Depreciation and amortization........ -- 3,927 5,534 2,665 2,732
------ -------- -------- ------- --------
Total operating costs and
expenses................... 99 116,230 152,663 71,000 96,037
------ -------- -------- ------- --------
Income from operations................. 3,800 16,591 27,385 15,253 15,465
------ -------- -------- ------- --------
Other expenses
Interest expense, net................ 165 2,195 2,243 1,315 597
Income tax provision................. -- 467 1,336 750 702
------ -------- -------- ------- --------
Total other expenses......... 165 2,662 3,579 2,065 1,299
------ -------- -------- ------- --------
Net income............................. $3,635 $ 13,929 $ 23,806 $13,188 $ 14,166
====== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 93
MARTHA STEWART LIVING OMNIMEDIA LLC
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
(000'S OMITTED)
<TABLE>
<S> <C>
BALANCE, January 1, 1996.................................... $ (436)
Net income................................................ 3,635
Capital distributions, net................................ (2,610)
--------
BALANCE, December 31, 1996.................................. 589
Net income................................................ 13,929
Issuance of equity interest............................... 20,508
Capital distributions..................................... (21,791)
--------
BALANCE, December 31, 1997.................................. 13,235
Net income................................................ 23,806
Capital distributions..................................... (226)
--------
BALANCE, December 31, 1998.................................. 36,815
Net income................................................ 14,166
--------
Capital distributions..................................... (1,422)
BALANCE, June 30, 1999 (unaudited).......................... $ 49,559
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 94
MARTHA STEWART LIVING OMNIMEDIA LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999 (UNAUDITED)
(000'S OMITTED)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEAR MONTHS ENDED
ENDED DECEMBER 31, JUNE 30,
---------------------------- -------------------
1996 1997 1998 1998 1999
------ ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income............................. $3,635 $13,929 $23,806 $13,188 $ 14,166
------ ------- ------- ------- --------
Adjustments to reconcile net income to
net cash provided by operating
activities
Depreciation and amortization....... -- 3,927 5,534 2,665 2,732
Changes in operating assets and
liabilities, net of assets
acquired--
Accounts receivable, net.......... (1,192) 341 (7,314) 765 577
Inventories....................... -- (1,077) (3,561) (1,652) (1,455)
Other current assets.............. -- 4,983 333 (1,140) (1,054)
Deferred television production
costs.......................... -- -- 767 1,714 (152)
Other noncurrent assets........... (18) (838) (209) (34) (150)
Accounts payable and accrued
liabilities.................... 164 12,075 4,942 976 (750)
Deferred royalty income........... 99 12,454 (11,420) (5,414) (631)
Deferred subscription income...... -- (1,621) 4,278 612 (321)
Other noncurrent liabilities...... -- 400 368 -- 80
------ ------- ------- ------- --------
(947) 30,644 (6,282) (1,508) (1,124)
------ ------- ------- ------- --------
Net cash provided by operating
activities................... 2,688 44,573 17,524 11,680 13,042
------ ------- ------- ------- --------
Cash flows from investing activities
Purchase of business--
Working capital, other than cash....... -- (19,645) -- -- --
Property, plant and equipment,
net............................... -- (3,847) -- -- --
Cost in excess of tangible assets of
acquired company.................. -- (58,087) -- -- --
Note payable to Seller.............. -- 30,000 -- -- --
Issuance of equity interest......... -- 20,508 -- -- --
Other noncurrent liabilities........ -- 29,202 -- -- --
Capital expenditures................... -- (11,027) (2,730) (1,954) (1,279)
Proceeds from sale leaseback
transaction......................... -- -- 2,389 2,389 --
------ ------- ------- ------- --------
Net cash used in investing
activities................... -- (12,896) (341) 435 (1,279)
------ ------- ------- ------- --------
Cash flows from financing activities
Principal repayment of long term
debt................................ -- -- (2,350) (2,350) (27,650)
Long term debt borrowings.............. -- -- -- -- 15,000
Distributions to members............... (2,610) (21,791) (226) -- (1,422)
------ ------- ------- ------- --------
Net cash used in financing
activities................... (2,610) (21,791) (2,576) (2,350) (14,072)
------ ------- ------- ------- --------
Net increase (decrease) in
cash......................... 78 9,886 14,607 9,765 (2,309)
Cash and cash equivalents, beginning of
period................................. 7 85 9,971 9,971 24,578
------ ------- ------- ------- --------
Cash and cash equivalents, end of
period................................. $ 85 $ 9,971 $24,578 $19,736 $ 22,269
====== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 95
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE DATA)
1. THE COMPANY
Martha Stewart Living Omnimedia LLC (the "Company") is a leading creator of
original "how to" content and related products for homemakers and other
consumers. The Company's business segments are Publishing, Television,
Merchandising and Internet/Direct Commerce. Magazine operations accounted for
98% of the revenues of the Publishing segment, which also includes book
publishing, newspaper syndication and radio advertising revenue. The Television
segment includes a television program that airs in syndication in the United
States and on cable in Canada as well as weekly segments on the CBS This Morning
program. The Merchandising segment consists of royalty revenues generated by the
sale of Martha Stewart branded products. The Internet/Direct Commerce segment
comprises the sale of Martha by Mail products through the Company's website and
print catalog as well as advertising revenues derived from advertisements on the
website.
The Company was formed in 1996, through the combination of various
interests controlled by Martha Stewart. This transaction has been accounted for
as a combination of companies under common control and accordingly, the
financial statements for prior periods have been retroactively restated.
In 1997, the Company entered into an agreement with Time Publishing
Ventures, Inc. ("Time Publishing Ventures") and purchased Martha Stewart Living
magazine as well as the rights to any Martha Stewart publications (and any
publishing, marketing, or distributing functions that may result), television
programs related to Martha Stewart and Martha by Mail and related liabilities
for approximately $53,276, including related acquisition costs (the "MSL
acquisition"). Time Publishing Ventures received a promissory note for $30,000
and a 6.27% equity interest in the Company. The purchase price was calculated
taking into consideration the special income distribution of $18 million payable
to Time Publishing Ventures pursuant to the limited liability company agreement
of the Company. This distribution was made in February 1997. This transaction,
which was consummated on February 3, 1997, has been accounted for as a purchase
as of January 1, 1997, the effective date on which the assets and liabilities
were transferred. In addition, Time Publishing Ventures and certain of its
affiliates entered into transition and other service agreements with the Company
which are described in Note 8.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company's
wholly-owned subsidiary. All significant intercompany transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and in bank, as well as all
short term securities held for the primary purpose of general liquidity. Such
securities mature within three months from the date of acquisition.
REVENUE RECOGNITION
Advertising revenues are recorded upon release of magazines for sale to
consumers and are stated net of agency commissions and cash and sales discounts.
Allowances for estimated bad debts are provided based upon historical
experience.
A proportionate share of magazine subscription revenue is recognized as
magazines are delivered to subscribers.
F-7
<PAGE> 96
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Newsstand revenues are recognized based on the on-sale dates of magazines
and are recorded based upon estimates of sales. Estimated returns are recorded
based upon historical experience.
Television advertising revenues are recognized when the related commercial
is aired and is recorded net of estimated reserves for television audience under
delivery.
Royalties and television appearance fees are recorded as earned in
accordance with specific terms of each agreement.
TELEVISION PRODUCTION COSTS
Television production costs are capitalized and amortized based on revenue
earned as a percentage of total revenue sold for the applicable television
product. If a total net loss is projected for a particular product, television
production costs are written down to net realizable value.
INTANGIBLE ASSETS
Intangible assets, representing the excess of purchase price over net
assets acquired, include the value assigned to subscriber lists, trade names and
goodwill, and are being amortized over twenty years. Management reassesses
quarterly the appropriateness of both the carrying value and remaining life of
intangible assets, principally based on forecasts of future undiscounted cash
flows.
INVENTORIES
Inventories consisting of paper and catalog products are stated at the
lower of cost or market. Cost is determined using the first-in, first-out (FIFO)
method.
ADVERTISING COSTS
Advertising costs, consisting primarily of direct-response advertising, are
expensed in the year incurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized using the straight-line method over the lease term
or, if shorter, the estimated useful lives of the related assets. The useful
lives are as follows:
<TABLE>
<S> <C>
Studios and studio equipment................... 3-10 years
Furniture, fixtures and equipment.............. 3-5 years
Leasehold improvements......................... Life of lease
</TABLE>
DEFERRED SUBSCRIPTION INCOME
Deferred subscription income results from advance payments for
subscriptions received from subscribers and is amortized on a straight-line
basis over the life of the subscription as issues are served.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. Management
does not expect such differences to have a material effect on the Company's
consolidated financial statements.
F-8
<PAGE> 97
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements of the Company are unaudited
but in the opinion of management reflect all adjustments consisting of normal
recurring accruals, necessary for a fair presentation of the results for the
interim period.
3. ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Advertising.............................................. $15,975 $23,123
Newsstand................................................ 715 1,698
Licensing................................................ 157 2,585
Other.................................................... 3,657 3,859
------- -------
20,504 31,265
Less: reserve for credits and uncollectible accounts..... 2,557 6,005
------- -------
$17,947 $25,260
======= =======
</TABLE>
4. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ ------
<S> <C> <C>
Paper.................................................... $3,061 $4,621
Catalog products......................................... 366 1,901
------ ------
$3,427 $6,522
====== ======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Studios and equipment.................................... $ 6,383 $ 6,971
Furniture, fixtures and equipment........................ 5,276 4,691
Leasehold improvements................................... 3,212 3,362
------- -------
14,871 15,024
Less: accumulated depreciation and amortization.......... 1,019 3,556
------- -------
$13,852 $11,468
======= =======
</TABLE>
Depreciation expense was $0, $1,019, and $2,537 for the years ended
December 31, 1996, 1997 and 1998, respectively.
F-9
<PAGE> 98
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
6. EMPLOYEE BENEFIT PLANS
RETIREMENT PLANS
Martha Stewart Inc., a wholly-owned subsidiary, sponsored a defined benefit
pension plan which was frozen in 1995. As of December 31, 1997 and 1998, the
accumulated benefit obligation was $723 and $781, respectively, and the fair
value of the plan assets was $1,369 and $1,887, respectively. The actuarial
valuation utilized a 7.5% discount rate for 1997 and 1998. A prepaid pension
asset of $54 and $179 is included in other noncurrent assets as of December 31,
1997 and 1998, respectively.
The Company established a 401(k) retirement plan effective July 1, 1997,
available to substantially all employees who have completed one year of service.
An employee can contribute any percentage of compensation to the plan, up to a
maximum of 15% or the maximum allowable contribution by the IRS ($9.5 and $10 in
1997 and 1998, respectively), whichever is less. In 1997, the Company matched
100% of the first 6% of compensation contributed, and, subsequent to 1997, the
Company matched 50% of the first 6% of compensation contributed. Employees vest
in employer matching contributions over a period of four years of service. The
employer matching contributions totaled approximately $207 and $259 for the
years ended December 31, 1997 and 1998, respectively.
The Company does not sponsor any postretirement and/or postemployment
benefits.
EQUITY COMPENSATION PLANS
Effective November 12, 1997, the Company established two equity-based
compensation plans, the Martha Stewart Living Omnimedia LLC Nonqualified Class A
LLC Unit/Stock Option Plan (the "1997 Option Plan") and the Phantom Performance
Unit Plan (the "Phantom Plan"). The Company accounts for these plans pursuant to
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," under which no compensation cost has been recognized for options
to acquire LLC units granted to employees. The 1997 Option Plan provides for the
grant of options to acquire LLC units (or following an initial public offering
("IPO"), shares of common stock) to officers, directors and key employees of,
and consultants to, the Company. Pursuant to the 1997 Option Plan, the Company
granted options to purchase 539,564 units (approximately 5% of the LLC's equity)
(477,811 to employees and 61,753 to outside consultants), with an exercise price
of $2.35 per unit. At December 31, 1997 and 1998, none of the options were
exercisable. At December 31, 1998, 509,841 options were outstanding.
For options granted to outside consultants, the Company, as prescribed by
APB Opinion No. 25, has recognized expense of $37 for the year ended December
31, 1997. No expense is required to be recognized in any subsequent year.
Options granted under the plan generally vested 10% at December 31, 1998
and will generally vest 10%, 20%, 20% and 40% on December 31 of each of the next
four years.
Had compensation cost for the options granted to employees been determined
consistent with Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock Based Compensation," the effect on the Company's net
income would have been immaterial in 1997 and 1998 ($6 and $53, respectively).
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for grants in 1997: risk-free interest rate of 5.78%, expected lives of 5 years,
expected dividend rate of zero, discount rate of 15% and expected volatility of
zero. The weighted average fair value of options granted in 1997 was $0.58 per
option.
The Phantom Plan provides for the grant of performance units to all
employees of the Company with at least one year of service, other than officers,
who have no minimum service period. On January 1, 1998, the
F-10
<PAGE> 99
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Company granted 10,000 performance units to certain officers and employees who
qualified under the terms of the Phantom Plan. These performance units vest at
the earlier of the completion of an IPO or December 31, 2002. The value of a
plan participant's units will be determined based on achieving predetermined
growth targets in Earnings Before Interest, Taxes and Amortization (EBITA) at
the earlier of the IPO or December 31, 2002. If an IPO occurs, the number of
shares of Company stock a participant receives is determined by the number of
units received upon award, multiplied by the value of each unit at the date of
the IPO, divided by the fair market value of a share of the Company's common
stock on the date of the IPO. Alternatively, if an IPO does not occur within the
five-year term of this plan, units will be settled in cash as of December 31,
2002. The Company has recognized compensation expense of $125 for the year ended
December 31, 1998 in connection with the Phantom Plan.
7. INCOME TAXES
Except with respect to the income of Martha Stewart, Inc., no provision has
been made in the accompanying consolidated financial statements for federal
income taxes since, pursuant to provisions of the Internal Revenue Code, the
results of operations are reportable by the members on their individual tax
returns. However, the Company is subject to certain foreign, state and city
income taxes.
The provision for income taxes consists of the following for the years
ended December 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
---- ------
<S> <C> <C>
Current state and foreign income taxes...................... $ 75 $1,069
Deferred federal income taxes............................... (65) --
Deferred state income taxes................................. 457 267
---- ------
$467 $1,336
==== ======
</TABLE>
8. RELATED PARTY TRANSACTIONS
During 1997, the Company entered into a services agreement with Time Inc.
("Time"), an affiliate of Time Publishing Ventures, whereby Time provides
certain administrative, purchasing, editing and sales services to the Company,
including the purchase of paper. The cost of these services amounted to
approximately $16,340 and $26,595 in 1997 and 1998, respectively, including
$15,265 and $26,010 of paper purchases.
The Company also entered into agreements with Time Customer Services, Inc.
("TCS"), an affiliate of Time Publishing Ventures, whereby TCS provides
fulfillment services for Martha by Mail products and the Company's magazine. The
fees for these services amounted to approximately $9,960 and $11,264 in 1997 and
1998, respectively.
The Company also entered into an agreement with Time Distribution Services
Inc. ("TDS"), an affiliate of Time Publishing Ventures, whereby TDS provides
newsstand distribution services for the Company's magazine. The fees for these
services amounted to approximately $1,262 and $1,384 in 1997 and 1998,
respectively.
The aggregate amounts due to Time, TDS and TCS, included in accounts
payable and accrued liabilities, were $4,340 and $5,431 as of December 31, 1997
and 1998, respectively.
Oxmoor House Inc. ("Oxmoor House"), a subsidiary of Southern Progress
Corporation, which is a wholly owned subsidiary of Time Publishing Ventures,
currently publishes all of the Martha Stewart Living series of books. Prior to
February 3, 1997, Martha Stewart received royalty payments directly from Oxmoor
House based on a percentage of cash receipts. As of February 3, 1997, the
Company entered into a contract
F-11
<PAGE> 100
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
directly with Oxmoor House whereby the Company and Oxmoor House split net
profits, as defined in the contract. Income recognized under these agreements
was approximately $958, $2,567 and $1,995, in 1996, 1997 and 1998, respectively.
The Company entered into a location rental agreement with Martha Stewart in
1997, relating to the Company's use of various properties owned by Martha
Stewart. The fees for use of these properties amounted to $1,500 in 1997 and
1998.
The Company used the service of a law firm of which Martha Stewart's
son-in-law is a partner. In 1998, the Company paid an aggregate of approximately
$92 in fees and expenses in respect of such services.
9. NOTE PAYABLE AND LINE OF CREDIT
The Company had a note payable (since repaid -- see Note 13) aggregating
$27,650 to Time Publishing Ventures at December 31, 1998. The note was due on
February 3, 2001 and bore interest at the current prime rate (7.75% at December
31, 1998, 8.5% at December 31, 1997) plus 1%. Interest was payable semiannually
on the last business day of each June and December beginning June 1998. Interest
for the period from February 3, 1997 through February 2, 1998, however, accrued
unpaid and compounded on a semiannual basis until August 3, 1998 when one half
of the accrued amount was payable and February 3, 1999 when the remaining
balance was due in full. The note was secured by certain of the Company's
insurance policies, and all accounts receivable, equipment and inventory. As of
December 31, 1997 and 1998, accrued interest on this note was approximately
$2,581 and $1,581, respectively. The terms of the note required maintenance of
certain nonfinancial covenants.
The Company has an agreement with Bank of America, N.A., formerly known as
NationsBank, N.A., for a line of credit in the amount of $10,000 with an
interest rate equal to the prime rate per annum. The agreement also requires the
Company to pay a commitment fee equal to one-half of 1% per annum of the unused
available borrowings. This agreement also contains certain financial and
nonfinancial covenants, including the maintenance of a minimum debt service
coverage ratio and a quick ratio, and a limitation on capital expenditures and
investments. The Company was in compliance with all such covenants as of
December 31, 1998. As of December 31, 1997 and 1998, the Company did not have
any amounts outstanding under this agreement.
10. COMMITMENTS AND CONTINGENCIES
The Company leases office facilities and equipment for terms extending
through 2010 under operating lease agreements. Total rent expense charged to
operations for all such leases was approximately $0, $3,000 and $4,100 for the
years ended December 31, 1996, 1997 and 1998, respectively.
Future minimum lease payments under these noncancellable operating leases
at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999............................................. $ 4,252
2000............................................. 3,453
2001............................................. 2,973
2002............................................. 2,479
2003............................................. 1,778
Thereafter....................................... 10,411
-------
$25,346
=======
</TABLE>
F-12
<PAGE> 101
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Certain of the leases provide for free rent periods as well as rent
escalations. The rental commitments above represent actual rental payments to be
made. The consolidated financial statements reflect rent expense on a
straight-line basis over the terms of the leases. An obligation, of $400 and
$743, representing accrued pro rata future payments, is included in the
accompanying consolidated balance sheets as of December 31, 1997 and 1998,
respectively.
The Company has an outstanding letter of credit for $473 as security for
certain leases.
In 1998, the Company entered into an agreement for the sale and leaseback
of certain television studio equipment. The book value of the equipment
aggregating $2,389 has been removed from the consolidated balance sheet. No gain
or loss was realized on the sale transaction, as the assets were sold at net
book value. Rentals on this equipment will be $513 annually.
In the ordinary course of business, the Company is involved in various
legal proceedings. The Company believes that the ultimate resolution of these
claims to the extent not covered by insurance will not, individually or in the
aggregate, have a material adverse effect on the Company.
11. OTHER INFORMATION
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable, accrued expenses and long term debt. The
carrying amount of these accounts approximates fair value.
Accumulated amortization of intangible assets was $2,904 and $5,901 at
December 31, 1997 and 1998, respectively. Amortization expense was $0, $2,904
and $2,997 for the years ended December 31, 1996, 1997 and 1998, respectively.
Advertising expense for the years ended December 31, 1996, 1997 and 1998
was $0, $10,440 and $11,654, respectively.
Interest paid was $0, $0, $3,962, $1,144 and $2,197 for the years ended
December 31, 1996, 1997 and 1998, and the six months ended June 30, 1998 and
1999, respectively.
Income taxes paid were $0, $458, $502, $247 and $650 for the years ended
December 31, 1996, 1997 and 1998, and the six months ended June 30, 1998 and
1999, respectively.
F-13
<PAGE> 102
MARTHA STEWART LIVING OMNIMEDIA LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
12. INDUSTRY SEGMENTS
Segment information for the years ended December 31, 1998, 1997 and 1996
was as follows:
<TABLE>
<CAPTION>
INTERNET/DIRECT CORPORATE
PUBLISHING TELEVISION MERCHANDISING COMMERCE CHARGES CONSOLIDATED
---------- ---------- ------------- --------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1998
Revenues................... $127,020 $23,351 $15,004 $14,673 $180,048
Income (loss) from
operations............... 42,669 3,924 15,305 (4,998) (29,515) 27,385
Depreciation and
amortization............. -- 1,234 -- -- 4,300 5,534
Total assets............... 43,903 16,021 2,309 8,223 54,916 125,372
Capital expenditures....... -- 2,313 -- -- 417 2,730
1997
Revenues................... 108,694 12,396 6,919 4,812 -- 132,821
Income (loss) from
operations............... 33,090 320 6,619 (1,223) (22,215) 16,591
Depreciation and
amortization............. -- 430 -- -- 3,497 3,927
Total assets............... 35,290 8,413 1,175 3,849 56,979 105,706
Capital expenditures....... -- 8,530 -- -- 2,497 11,027
1996
Revenues................... 3,899 -- -- -- -- 3,899
Income from operations..... 3,800 -- -- -- -- 3,800
Total assets............... 4,074 -- -- -- -- 4,074
</TABLE>
13. SUBSEQUENT EVENTS (UNAUDITED)
In March 1999, the Company entered into an agreement with Bank of America,
N.A., formerly known as NationsBank, N.A., for a loan in the amount of $15,000.
The loan bears interest at 2% above the London Interbank Offered Rate (LIBOR)
and principal of $750 plus interest is payable quarterly through March 2004. The
agreement contains certain financial and nonfinancial covenants, including the
maintenance of minimum debt service ratio, a quick ratio, and a limitation on
capital expenditures and investments. The covenants in the existing line of
credit agreement were amended to conform to the terms of the loan agreement. The
proceeds from the loan were used, along with existing cash balances, to pay in
full, the note payable to Time Publishing Ventures aggregating $27,650 plus
accrued interest.
On July 27, 1999, Kleiner Perkins, a venture capital firm, acquired 5% of
the Company and was issued a warrant to acquire 15% of any publicly traded class
of stock issued by the Company that is intended to reflect the performance of
the Company's Internet business (as defined in the warrant) in exchange for
$25,000 in cash. The warrant may also become exercisable in the case of a
business combination relating to the Company's Internet business. The warrant,
which has an exercise price of $21,000, expires July 27, 2002, and may expire
earlier in certain circumstances. $14,250 of the proceeds from this transaction
were used to repay the loan from Bank of America, N.A. noted above.
F-14
<PAGE> 103
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Time Inc.
We have audited the accompanying combined balance sheet of Martha Stewart
Living (a wholly owned operation of Time Inc.) as of December 31, 1996 and the
related combined statements of operations and accumulated deficit and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Martha Stewart
Living as of December 31, 1996 and the combined results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New York, New York
August 1, 1997
F-15
<PAGE> 104
MARTHA STEWART LIVING
(A WHOLLY OWNED OPERATION OF TIME INC.)
COMBINED BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Accounts receivable, net.................................. $ 13,532
Paper inventory........................................... 2,350
Television production costs, net.......................... 4,335
Prepaid commission expense................................ 2,999
Other current assets...................................... 1,348
--------
Total current assets.............................. 24,564
Fixed assets, net........................................... 3,847
Noncurrent television production costs, net................. 522
Other assets................................................ 306
--------
Total assets...................................... $ 29,239
========
LIABILITIES AND ACCUMULATED DEFICIT
Current liabilities:
Accounts payable and accrued expenses..................... $ 4,339
Payable to Parent, net.................................... 6,013
Accrued compensation and benefits......................... 1,206
--------
Total current liabilities......................... 11,558
Unearned subscription revenues, net......................... 29,972
Due to affiliated party, net................................ 78
Other liabilities........................................... 1,143
--------
Total liabilities................................. 42,751
Accumulated deficit......................................... (13,512)
--------
Total liabilities and accumulated deficit......... $ 29,239
========
</TABLE>
See accompanying notes to combined financial statements.
F-16
<PAGE> 105
MARTHA STEWART LIVING
(A WHOLLY OWNED OPERATION OF TIME INC.)
COMBINED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Net revenues:
Circulation............................................... $ 34,130
Advertising............................................... 33,858
Television................................................ 8,420
Royalties................................................. 1,308
Direct mail............................................... 3,292
--------
81,008
--------
Costs and expenses:
Production and distribution............................... 20,696
Editorial................................................. 7,638
Circulation............................................... 18,403
Advertising............................................... 6,081
Television................................................ 8,035
Direct mail............................................... 4,241
General and administrative................................ 8,180
--------
73,274
--------
Operating income............................................ 7,734
Other income, net........................................... 951
--------
Net income.................................................. 8,685
Accumulated deficit at beginning of year.................... (22,197)
--------
Accumulated deficit at end of year.......................... $(13,512)
========
</TABLE>
See accompanying notes to combined financial statements.
F-17
<PAGE> 106
MARTHA STEWART LIVING
(A WHOLLY OWNED OPERATION OF TIME INC.)
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 8,685
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 467
Changes in operating assets and liabilities:
Increase in accounts receivable, net................... (4,344)
Increase in paper inventory............................ (1,161)
Increase in television production costs, net........... (778)
Increase in prepaid commission expense................. (2,869)
Decrease in due from affiliated party, net............. 1,063
Increase in other assets............................... (562)
Decrease in accounts payable and accrued expenses...... (2,195)
Increase in accrued compensation and benefits.......... 431
Increase in unearned subscription revenues, net........ 11,733
Increase in due to affiliated party, net............... 78
Increase in other liabilities.......................... 372
-------
Net cash provided by operating activities................... 10,920
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets.................................... (1,714)
Disposal of fixed assets.................................... 85
-------
Net cash used in investing activities....................... (1,629)
CASH FLOWS FROM FINANCING ACTIVITIES
Payable to Parent, net...................................... (9,291)
-------
Net cash used in financing activities....................... (9,291)
-------
Net change in cash.......................................... --
Cash at beginning of year................................... --
-------
Cash at end of year......................................... $ --
=======
</TABLE>
See accompanying notes to combined financial statements.
F-18
<PAGE> 107
MARTHA STEWART LIVING
(A WHOLLY OWNED OPERATION OF TIME INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
A. BASIS OF PRESENTATION AND NATURE OF OPERATIONS
The combined financial statements of Martha Stewart Living (the "Combined
Operations") include the operations of Martha Stewart Living ("MSL"), various
television production entities as they relate to MSL and Martha by Mail, Inc.
MSL was formed in 1991 and is a division of Time Publishing Ventures, Inc.
("Time Publishing Ventures"). Martha by Mail, Inc., a wholly-owned subsidiary of
Time Publishing Ventures, was formed in 1995. Time Publishing Ventures is a
wholly-owned subsidiary of Time Inc. Ventures ("TIV"), which is a wholly-owned
subsidiary of Time Inc. (the "Parent"). The Parent is a wholly owned subsidiary
of Time Warner, Inc. ("Time Warner"). All significant intercompany balances and
transactions have been eliminated in combination.
The Combined Operations publish two magazines which are sold through
newsstands and subscriptions. They also publish books and produce a weekly
television show and network specials. Martha by Mail, Inc. sells Martha Stewart
products through telemarketing and advertisements in MSL's magazine; its
revenues and expenses are reflected in the combined financial statements as
"Direct mail." The Combined Operations' revenue is generated primarily in the
United States and Canada.
The accompanying combined financial statements have been prepared as if the
Combined Operations had operated as an independent, stand-alone entity for all
periods presented. Such combined financial statements have been prepared using
the historical basis of accounting and include all of the assets, liabilities,
revenues and expenses of the Combined Operations previously included in the
Parent's consolidated financial statements, excluding any interest charges
relating to the use of the Parent's capital. In addition, the financial
statements reflect the cost of paper inventory used by the Combined Operations,
which is included in the Parent's consolidated paper inventory balance.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Magazine revenue is recognized on the issue date of the magazine and
television revenue is recognized as aired.
TELEVISION PRODUCTION COSTS
Television production costs are capitalized and expensed as the television
season's revenue is realized. Each season represents the broadcast year from
mid-September through mid-September. If a total net profit is anticipated, this
profit is recognized ratably over the period of total expected revenue. However,
if a total net loss is projected for a particular season, television production
costs are written down to net realizable value. A portion of the television
production costs incurred is not amortized over the season, but remains in the
prepaid balance and is amortized as future revenues are received in accordance
with FASB Statement No. 53, "Financial Reporting by Producers and Distributors
of Motion Picture Films." Future revenues are a result of sales of the series to
cable TV and foreign television stations.
PAPER INVENTORY
Paper inventory is recorded using the FIFO method and is recorded at lower
of cost or market.
F-19
<PAGE> 108
MARTHA STEWART LIVING
(A WHOLLY OWNED OPERATION OF TIME INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FIXED ASSETS
Fixed assets are recorded at cost, net of accumulated depreciation and
amortization. Depreciation is computed on the straight-line method based on the
estimated useful lives of the assets, ranging from 3 to 14 years.
UNEARNED SUBSCRIPTION REVENUES
Sales of subscriptions are deferred over the life of the subscription,
generally 12 months, and are included in revenues based upon the issue date of
the magazine. The receivables relating to these subscriptions are netted against
this liability and amounted to $4,326 as of December 31, 1996. Costs incurred in
connection with the procurement of subscriptions are expensed as incurred.
ADVERTISING COSTS
Advertising costs are expensed as incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, in particular with regard to sales returns, that affect the amounts
reported in the combined financial statements and accompanying notes. Actual
results could differ from those estimates.
INCOME TAXES
Income taxes have been calculated on a separate-company basis consistent
with the liability method prescribed by FASB Statement No. 109, "Accounting for
Income Taxes" ("FAS 109"). Under the liability method, deferred income taxes
reflect tax carryforwards and the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial statement
and income tax purposes, as determined under enacted tax laws and rates.
On an historical basis, the operating results of the Combined Operations
have been included in the consolidated U.S. federal, state and local income tax
returns of Time Warner or subsidiaries of Time Warner. Prior to 1996, all net
operating tax losses generated by the Combined Operations were utilized by Time
Warner or subsidiaries of Time Warner. On a stand-alone basis, the carryforward
of such losses would have fully offset the taxable income of the Combined
Operations generated in 1996. During 1996, no income tax benefit for net
operating loss tax carryforwards and deferred tax assets was recorded in the
accompanying financial statements since the Combined Operations would not have
been able to recognize deferred tax assets for these items on a separate-company
basis under FAS 109.
F-20
<PAGE> 109
MARTHA STEWART LIVING
(A WHOLLY OWNED OPERATION OF TIME INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
C. ACCOUNTS RECEIVABLE
The components of accounts receivable as of December 31, 1996 are as
follows:
<TABLE>
<S> <C>
Advertising........................................... $ 6,623
Newsstand............................................. 4,184
Television............................................ 3,785
Other................................................. 1,785
-------
16,377
Less allowance for doubtful accounts and returns...... (2,845)
-------
$13,532
=======
</TABLE>
D. FIXED ASSETS
The components of fixed assets as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
Furniture, fixtures and equipment...................... $1,997
Leasehold improvements................................. 2,359
Construction in progress............................... 285
------
4,641
Less accumulated depreciation and amortization......... (794)
------
$3,847
======
</TABLE>
E. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses as of December 31,
1996 are as follows:
<TABLE>
<S> <C>
Advertising............................................ $ 337
Production............................................. 1,202
Television............................................. 2,052
Circulation............................................ 748
------
$4,339
======
</TABLE>
F. RELATED PARTY TRANSACTIONS
The amount payable to Parent represents a net amount due to various
entities of the Parent for services provided or expenses paid by the Parent on
behalf of the Combined Operations offset by the net cash generated by the
Combined Operations transferred to the Parent. The average balance due to Parent
was approximately $9,000 during 1996.
Time Warner and several of its subsidiaries provide substantial services to
the Combined Operations, including treasury, tax, financial audit, financial
reporting, legal, payroll, paper purchasing, printing, fulfillment, newsstand
distribution, accounts payable, receivable and credit functions. Time Warner and
its subsidiaries have historically charged the Combined Operations for these
services at amounts which approximate cost. In addition, certain employees of
the Parent work exclusively for the Combined Operations. As a result, the
payroll and related benefits for these employees are rebilled through the
Payable to Parent account.
F-21
<PAGE> 110
MARTHA STEWART LIVING
(A WHOLLY OWNED OPERATION OF TIME INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Management believes that the basis used for allocating these services is
reasonable. However, the terms of these transactions may differ from those that
would result from transactions among unrelated parties.
The Combined Operations have a long-term contract with Martha Stewart to
provide editorial services for the magazine through December 31, 2000, and a
letter agreement to host a television series, unless terminated earlier pursuant
to terms in the contract. Martha Stewart received a signing bonus in 1991 upon
execution of this contract. The Combined Operations pay Martha Stewart a yearly
salary to provide the editorial services, and a fee for each television program
produced, in addition to other expenses outlined in the contract. Martha Stewart
also has profit participation rights and a bonus plan.
G. BOOK ROYALTY AGREEMENT
Oxmoor House, a subsidiary of Southern Progress Corporation, which is a
wholly-owned subsidiary of Time Publishing Ventures, currently publishes all of
the MSL series of books. Previously, the Combined Operations did not record any
of the revenues or expenses for those books sold by Oxmoor House relating to
Martha Stewart. However, Martha Stewart received royalty payments directly from
Oxmoor House based on 5% of cash receipts. In conjunction with the sale of the
Combined Operations as described in Note I, the Combined Operations has entered
into a contract directly with Oxmoor House whereby the Combined Operations and
Oxmoor House will split net profits, as defined in the contact, and the Combined
Operations will then be responsible for remitting royalties to Martha Stewart.
These financial statements reflect net royalty revenues as if this arrangement
had been in place beginning January 1, 1994, which include royalties earned by
Martha Stewart in the amount of $951 in 1996.
H. LEASES
Time Publishing Ventures leases office facilities on behalf of the Combined
Operations for periods up to 15 years under operating lease agreements. These
leases are subject to price escalations for certain costs. Total rent expense
for all such leases was $1,225 for the year ended December 31, 1996. The rent
expense is charged to the Combined Operations through the Payable to Parent
account. Under the sale agreement as described in Note I, these leases have been
assigned to the Combined Operations.
Future minimum lease payments under these noncancellable operating leases
at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997..................................................... $ 1,291
1998..................................................... 1,334
1999..................................................... 1,366
2000..................................................... 1,406
2001..................................................... 1,262
Thereafter............................................... 9,214
-------
$15,873
=======
</TABLE>
I. SUBSEQUENT EVENTS
On February 3, 1997, Martha Stewart Living Omnimedia LLC ("MSLO"),
controlled by Martha Stewart, purchased from Time Publishing Ventures
substantially all of the assets and assumed substantially all of the liabilities
of the Combined Operations. As part of this transaction, Martha Stewart entered
into new agreements with MSLO which superseded the principal agreements that
were in place with Time Publishing Ventures.
F-22
<PAGE> 111
[MSLO LOGO]
<PAGE> 112
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
common stock being registered, all of which will be paid by the Registrant:
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
SEC registration fee........................................ $ 27,800
NASD filing fee............................................. 10,500
New York Stock Exchange listing fee......................... *
Printing expenses........................................... 150,000
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. 2,500
Transfer agent and registrar fees and expenses.............. 25,000
Miscellaneous............................................... *
--------
Total............................................. $ *
========
</TABLE>
- ------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides as follows:
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect to any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
II-1
<PAGE> 113
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
As permitted by the DGCL, the Registrant has included in its certificate of
incorporation a provision to eliminate the personal liability of its directors
for monetary damages for breach of their fiduciary duties as directors, subject
to certain exceptions. In addition, the Registrant's certificate of
incorporation and by-laws provide that the Registrant is required to indemnify
its officers and directors under certain circumstances, including those
circumstances in which indemnification would otherwise be discretionary, and the
Registrant is required to advance expenses to its officers and directors as
incurred in connection with proceedings against them for which they may be
indemnified.
The Underwriting Agreement is expected to provide that the Underwriters are
obligated, under certain circumstances, to indemnify directors, officers and
controlling persons of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933. Reference is made to the form of
Underwriting Agreement to be filed as Exhibit 1.1 hereto.
The Registrant maintains directors and officers liability insurance for the
benefit of its directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of the transactions by the Registrant during the
past three years involving sales of the Registrant's securities that were not
registered under the Securities Act of 1933:
Immediately prior to the offering contemplated hereby, the Registrant will
issue an aggregate of shares of the Registrant's Class A common
stock, par value $.01 per share, and shares of the Registrant's
Class B common stock, par value $.01 per share, in exchange for all of the
outstanding membership interests of Martha Stewart Living Omnimedia LLC, a
Delaware limited liability company ("MSLO LLC"), pursuant to a merger of MSLO
LLC with and into the Registrant. There were no underwriters, brokers or finders
employed in connection with these transactions. The sales of the above
securities were deemed to be exempt from registration under the Securities Act
of 1933 in reliance on Section 4(2) of the Securities Act of 1933, as
transactions by an issuer not involving a public offering. The merger agreement
is filed as an exhibit to this Registration Statement.
In addition, on July 27, 1999 we completed a transaction in which an
affiliate of Kleiner Perkins purchased a 5% equity interest in MSLO LLC and a
warrant to purchase certain additional securities. See "Recent
Developments -- Strategic Investment" for more information on this transaction.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.**
2.1 -- Agreement and Plan of Merger.
2.2 -- LLC Membership Interest Purchase Agreement, dated as of July
27, 1999, by and among Martha Stewart Living Omnimedia LLC,
KPCB Holdings, Inc., as nominee, and KPCB IX Associates,
LLC.
3.1 -- Registrant's Certificate of Incorporation.*
3.2 -- Registrant's By-Laws.*
4.1 -- Form of Specimen Certificate for Registrant's Common
Stock.**
4.2 -- Loan Agreement (line of credit) between NationsBank, N.A.
and Martha Stewart Living Omnimedia LLC, dated as of
February 3, 1997.*
4.3 -- Amendment No. 1, dated as of June 30, 1998, to the Loan
Agreement, dated as of February 3, 1997, between Martha
Stewart Living Omnimedia LLC and NationsBank, N.A.*
</TABLE>
II-2
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <C> <S>
4.4 -- Amendment No. 2, dated as of March 30, 1999, to the Loan
Agreement, dated as of February 3, 1997, between Martha
Stewart Living Omnimedia LLC and NationsBank, N.A.*
4.5 -- Warrant for a Percentage of the Internet Business of Martha
Stewart Living Omnimedia LLC, dated July 27, 1999, issued to
KPCB Holdings, Inc.
5.1 -- Form of Opinion of Wachtell, Lipton, Rosen & Katz.
10.1 -- Form of Stockholders' Agreement.
10.2 -- 1999 Stock Incentive Plan.**
10.3 -- 1999 Non-Employee Director Stock and Option Compensation
Plan.**
10.4 -- 1999 Employee Stock Purchase Plan.**
10.5 -- Martha Stewart Living Omnimedia LLC Phantom Performance Unit
Plan.*
10.6 -- Martha Stewart Living Omnimedia LLC Nonqualified Class A LLC
Unit/Stock Option Plan.*
10.7 -- Employment Agreement, by and between Registrant and Martha
Stewart.**
10.8 -- Intellectual Property License and Preservation Agreement, by
and between Registrant and Martha Stewart.**
10.9 -- Location Rental Agreement, by and between Registrant and
Martha Stewart.**
10.10 -- Lease, dated as of September 24, 1992, between Tishman
Speyer Silverstein Partnership and Time Publishing Ventures,
Inc., as amended by First Amendment of Lease dated as of
September 24, 1994 between 11 West 42 Limited Partnership
and Time Publishing Ventures, Inc.
10.11 -- Lease, dated as of March 31, 1998, between 11 West 42
Limited Partnership and Martha Stewart Living Omnimedia LLC.
10.12 -- Lease, dated August, 1999, between 601 West Associates LLC
and Martha Stewart Living Omnimedia LLC.
10.13 -- Lease, dated as of March 6, 1996, between Newtown Group
Properties Limited Partnership and Time Publishing Ventures,
Inc., with amendments.
10.14 -- Lease, dated as of August 1, 1996, between Newtown Group
Properties Limited Partnership and Martha Stewart Living
Omnimedia LLC.
10.15 -- Lease, dated as of August 14, 1997, between Newtown Group
Properties Limited Partnership and Martha Stewart Living
Omnimedia LLC.
10.16 -- License Agreement, dated January 28, 1997, by and between
Martha Stewart Living Omnimedia LLC and Kmart Corporation.+
11.1 -- Computation of Per Share Earnings.**
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 5.1).
24.1 -- Powers of Attorney.*
27.1 -- Financial Data Schedule.
</TABLE>
- ------------
* Previously filed.
** To be provided by amendment.
+ Portions of Exhibit 10.16 have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities and
Exchange Commission.
II-3
<PAGE> 115
(B) FINANCIAL STATEMENT SCHEDULES
INDEX TO SCHEDULES
MARTHA STEWART LIVING OMNIMEDIA LLC
FINANCIAL STATEMENT SCHEDULE
FOR THE THREE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II -- Valuation and Qualifying Accounts............ S-1
Report of Independent Public Accountants.................... S-2
</TABLE>
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act of 1933, 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 of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 3rd day of September 1999.
MARTHA STEWART LIVING OMNIMEDIA, INC.
By: /s/ MARTHA STEWART
---------------------------------------
Name: Martha Stewart
Title: Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (Principal Executive Officer)
Martha Stewart
* President, Chief Operating Officer and Director
- ---------------------------------------------------
Sharon Patrick
* Senior Vice President, Finance and Controller
- --------------------------------------------------- (Principal Financial and Accounting Officer)
James Follo
* Director
- ---------------------------------------------------
Charlotte Beers
* Director
- ---------------------------------------------------
L. John Doerr
*By: /s/ GREGORY R. BLATT
---------------------------------------------
Gregory R. Blatt
(Attorney-in-Fact)
September 3, 1999
</TABLE>
II-5
<PAGE> 117
MARTHA STEWART LIVING OMNIMEDIA LLC
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(000'S OMITTED)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE, CHARGED TO BALANCE,
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR
----------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Years ended December 31-
1998............................................. $1,123 $ 293 $ 214 $1,202
1997............................................. 500(a) 787 164 1,123
1996............................................. -- -- -- --
Reserve for audience under delivery:
Years ended December 31-
1998............................................. $1,434 $5,724 $2,355 $4,803
1997............................................. 605(a) 1,525 696 1,434
1996............................................. -- -- -- --
</TABLE>
- ---------------
(a) balance at acquisition.
S-1
<PAGE> 118
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Martha Stewart Living Omnimedia LLC:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Martha Stewart Living Omnimedia LLC and
subsidiary included in this registration statement and have issued our report
thereon dated February 15, 1999. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The schedule
listed in the index above is the responsibility of the company's management and
is presented for purposes of complying with the Securities and Exchange
Commission rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
February 15, 1999
S-2
<PAGE> 119
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.**
2.1 -- Agreement and Plan of Merger.
2.2 -- LLC Membership Interest Purchase Agreement, dated as of July
27, 1999, by and among Martha Stewart Living Omnimedia LLC,
KPCB Holdings, Inc., as nominee, and KPCB IX Associates,
LLC.
3.1 -- Registrant's Certificate of Incorporation.*
3.2 -- Registrant's By-Laws.*
4.1 -- Form of Specimen Certificate for Registrant's Common
Stock.**
4.2 -- Loan Agreement (line of credit) between NationsBank, N.A.
and Martha Stewart Living Omnimedia LLC, dated as of
February 3, 1997.*
4.3 -- Amendment No. 1, dated as of June 30, 1998, to the Loan
Agreement, dated as of February 3, 1997, between Martha
Stewart Living Omnimedia LLC and NationsBank, N.A.*
4.4 -- Amendment No. 2, dated as of March 30, 1999, to the Loan
Agreement, dated as of February 3, 1997, between Martha
Stewart Living Omnimedia LLC and NationsBank, N.A.*
4.5 -- Warrant for a Percentage of the Internet Business of Martha
Stewart Living Omnimedia LLC, dated July 27, 1999, issued to
KPCB Holdings, Inc.
5.1 -- Form of Opinion of Wachtell, Lipton, Rosen & Katz.
10.1 -- Form of Stockholders' Agreement.
10.2 -- 1999 Stock Incentive Plan.**
10.3 -- 1999 Non-Employee Director Stock and Option Compensation
Plan.**
10.4 -- 1999 Employee Stock Purchase Plan.**
10.5 -- Martha Stewart Living Omnimedia LLC Phantom Performance Unit
Plan.*
10.6 -- Martha Stewart Living Omnimedia LLC Nonqualified Class A LLC
Unit/Stock Option Plan.*
10.7 -- Employment Agreement, by and between Registrant and Martha
Stewart.**
10.8 -- Intellectual Property License and Preservation Agreement, by
and between Registrant and Martha Stewart.**
10.9 -- Location Rental Agreement, by and between Registrant and
Martha Stewart.**
10.10 -- Lease, dated as of September 24, 1992, between Tishman
Speyer Silverstein Partnership and Time Publishing Ventures,
Inc., as amended by First Amendment of Lease dated as of
September 24, 1994 between 11 West 42 Limited Partnership
and Time Publishing Ventures, Inc.
10.11 -- Lease, dated as of March 31, 1998, between 11 West 42
Limited Partnership and Martha Stewart Living Omnimedia LLC.
10.12 -- Lease, dated August, 1999, between 601 West Associates LLC
and Martha Stewart Living Omnimedia LLC.
10.13 -- Lease, dated as of March 6, 1996, between Newtown Group
Properties Limited Partnership and Time Publishing Ventures,
Inc., with amendments.
10.14 -- Lease, dated as of August 1, 1996, between Newtown Group
Properties Limited Partnership and Martha Stewart Living
Omnimedia LLC.
10.15 -- Lease, dated as of August 14, 1997, between Newtown Group
Properties Limited Partnership and Martha Stewart Living
Omnimedia LLC.
</TABLE>
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
<C> <C> <S>
10.16 -- License Agreement, dated January 28, 1997, by and between
Martha Stewart Living Omnimedia LLC and Kmart Corporation.+
11.1 -- Computation of Per Share Earnings.**
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 5.1).
24.1 -- Powers of Attorney.*
27.1 -- Financial Data Schedule.
</TABLE>
- ------------
* Previously filed.
** To be provided by amendment.
+ Portions of Exhibit 10.16 have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities and
Exchange Commission.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of _____ __,
1999, by and between Martha Stewart Living Omnimedia LLC, a Delaware limited
liability company ("MSLO LLC") and Martha Stewart Living Omnimedia, Inc., a
Delaware corporation (the "Company").
WHEREAS, MLSO LLC owns all the issued and outstanding shares of capital
stock of the Company, and MSLO LLC has outstanding Class A membership interests
("Class A Interests"), Class B membership interests ("Class B Interests"), Class
C membership interests ("Class C Interests") and Class K membership interests
("Class K Interests" and together with the Class A Interests, the Class B
Interests and the Class C Interests, "Interests");
WHEREAS, MSLO LLC and the Company desire to consummate the transactions
contemplated by this Agreement in order to facilitate an initial public offering
and sale by the Company of shares of its common stock (the "IPO") pursuant to a
registration statement filed with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, the Company has engaged Morgan Stanley Dean Witter, Merrill
Lynch & Co., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette and Banc of
America Securities LLC to act as representatives of the underwriters of the IPO
(the "Underwriters") and, in connection therewith, contemplates entering into an
underwriting agreement (the "Underwriting Agreement") with such persons;
WHEREAS, Section 264 of the Delaware General Corporation Law (the
"DGCL") and Section 18-209 of the Delaware Limited Liability Company Act (the
"DLLCA") authorize the merger of a limited liability company organized under the
laws of Delaware with and into a Delaware corporation;
WHEREAS, the Board of Directors of each of MSLO LLC and the Company has
determined that it is in the best interests of MSLO LLC and the Company,
respectively, to consummate the business combination transaction provided for
herein in which MSLO LLC will, subject to the terms and conditions set forth
herein, merge with and into the Company (the "Merger"), with the Company
surviving as the surviving corporation in the Merger; and
WHEREAS, the parties desire to make agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
<PAGE> 2
ARTICLE I
THE MERGER
Section 1. The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the DGCL and the DLLCA, at the Effective Time (as
defined in Section 3 of this Article I), MSLO LLC shall merge with and into the
Company. Upon consummation of the Merger, the separate existence of MSLO LLC
shall terminate, and the Company shall be the surviving corporation under the
laws of the State of Delaware (the "Surviving Corporation").
Section 2. Effects of the Merger. The Merger shall have the effects
specified in the DGCL and the DLLCA.
Section 3. Effective Time. Subject to the terms and conditions of this
Agreement, the parties shall deliver a certificate of merger to the department
of state of the State of Delaware executed in accordance with Section 264 of the
DGCL and Section 18-209 of the DLLCA and shall make any filings or recordings or
take any other lawful actions necessary to cause the Merger to become effective.
Unless the parties agree otherwise, the Merger shall become effective
immediately prior to the consummation of the IPO, or at such later time as the
conditions to be satisfied prior to the Merger are satisfied and a certificate
of merger is duly filed with the department of state of the State of Delaware
(the time the Merger becomes effective, the "Effective Time").
Section 4. Certificate of Incorporation of the Surviving Corporation.
At and after the Effective Time and without any further action on the part of
MSLO LLC or the Company, the Certificate of Incorporation of the Company in
effect as of the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
under applicable law.
Section 5. By-laws of the Surviving Corporation. At and after the
Effective Time and without any further action on the part of MSLO LLC or the
Company, the By-laws of the Company in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or under applicable law.
Section 6. Board of Directors and Officers of the Surviving
Corporation. The directors of the Company immediately prior to the Effective
Time shall be the directors, and the officers of MSLO LLC immediately prior to
the Effective Time shall be the officers, of the Surviving Corporation following
the Merger, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation until their successors
are duly elected or appointed and qualified.
Section 7. Conversion of MSLO LLC Interests. At the Effective Time, by
virtue of the Merger and without any action on the part of MSLO LLC, the Company
or the holder of any of the following securities:
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<PAGE> 3
(a) The Class A Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class A Exchange Ratio") of Class B common stock, par
value $0.01 per share, of the Company (the "Class B Common Stock"), representing
in the aggregate 82.7566% of the outstanding Common Shares of the Company
immediately following the Merger.
(b) The Class B Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class B Exchange Ratio") of Class A common stock, par
value $.01 per share, of the Company ("Common Stock") representing in the
aggregate 6.27% of the outstanding Common Shares of the Company immediately
following the Merger.
(c) The Class C Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class C Exchange Ratio") of Common Stock, representing
in the aggregate 5.9734% of the outstanding Common Shares of the Company
immediately following the Merger.
(d) The Class K Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class K Exchange Ratio") of Common Stock, representing
in the aggregate 5.0% of the outstanding Common Shares of the Company
immediately following the Merger.
(e) All Interests converted into the right to receive shares of Class B
Common Stock or Common Stock pursuant to this Section 7 shall cease to be
outstanding, shall be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Interests shall thereafter cease
to have any rights with respect to such Interests, except the right to receive
for each of the Interests, upon the surrender of such certificate in accordance
with subsection (i) below, the amount of Class B Common Stock or Common Stock,
as the case may be, with respect to such class of Interests specified above.
(f) Each share of Common Stock issued and outstanding immediately prior
to the Effective Time shall be canceled.
(g) Each of the then outstanding options to purchase MSLO LLC Interests
(each, an "Existing Option") issued by MSLO LLC pursuant to the Martha Stewart
Living Omnimedia LLC Nonqualified Class A LLC Unit/Stock Option Plan shall, by
virtue of the Merger, and without any further action on the part of any holder
thereof, be assumed by the Company and converted into an option (a "MSLO
Option") to purchase that number of shares of Common Stock determined by
multiplying the number of MSLO LLC Interests subject to such Existing Option by
the Class A Exchange Ratio, at an exercise price per share of Common Stock equal
to the exercise price per Interest of such Existing Option immediately prior to
the Effective Time divided by the Class A Exchange Ratio, rounded down to the
nearest whole cent. If the foregoing calculation results in an Existing Option
being exercisable for a fraction of a share of Class A Common Stock, then the
number of shares of Class A Common Stock subject to such option shall be rounded
up to the nearest whole number of shares, with no cash being payable for
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<PAGE> 4
such fractional share. The terms and conditions of each MSLO Option shall
otherwise remain as set forth in the Existing Option converted into such MSLO
Option.
(h) The adjustment provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code.
(i) Promptly upon consummation of the Merger, the Company shall make
such arrangements as it deems appropriate to effect the exchange of certificates
that previously evidenced Interests (the "Old Certificates") for certificates
evidencing the shares of Class B Common Stock or Common Stock, as the case may
be ("New Certificates"), which New Certificates such holder is entitled to
receive pursuant to the terms hereof upon proper delivery of the Old
Certificates and documents or evidence of payment of any transfer or other taxes
as the Company and MSLO LLC may reasonably request. From and after the Effective
Time, a holder of an Old Certificate shall have no further rights of any kind as
a member of MSLO LLC other than the right to receive the shares of Class B
Common Stock or Common Stock, as the case may be, described in this Section 7 of
this Article I. In the case of lost, missing or stolen Old Certificates, the
Company may require the posting of a bond or indemnity prior to the issuance of
any New Certificate in respect of such Old Certificate. No fractional shares of
Common Stock or Class B Common Stock shall be issued in the Merger and in lieu
thereof the holders will receive cash based on the initial public offering price
of a share of Common Stock times such fractional share, less applicable
withholding.
ARTICLE II
COVENANTS
Section 1. Distributions. Immediately prior to the Effective Time, MSLO
LLC shall:
(a) distribute pro rata to the holders of the Class A Interests, the
Class B Interests and the Class C Interests, in accordance with their percentage
interests as of July 26, 1999, an aggregate amount of $10.0 million, which sum
represents profits of MSLO LLC, as approved by the Board of Directors of MSLO
LLC on July 26, 1999;
(b) distribute pro rata to the holders of the Interests an aggregate
amount of $___ million in respect of taxes attributable to MSLO LLC prior to the
Effective Time. The amount allocable to taxes in this Section 1(b) of this
Article II was based on an estimate of the income that will be reportable by
MSLO LLC on its tax returns and the assumptions concerning income tax rates
contained in Section 9.2 of the Fourth Amended and Restated Limited Liability
Company Agreement of MSLO LLC (the "LLC Agreement"). In the event that the
distribution allocated to taxes is insufficient, appropriate indemnity payments
will be made by the Company pursuant to Section 1 of Article III.
Section 2. Indemnification of Directors and Officers. From and after
the Effective Time:
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<PAGE> 5
(a) the Company shall, to the fullest extent permitted under Delaware
law, indemnify, defend and hold harmless the present and former officers and
directors of MSLO LLC and any of its subsidiaries, and any person who is or was
serving at the request of MSLO LLC as an officer or director of another person,
against all losses, expenses (including reasonable legal fees), claims, damages
or liabilities arising out of actions or omissions performed or omitted by such
officer or director in good faith on behalf of MSLO LLC at any time prior to the
Effective Time and in a manner reasonably believed to be within the scope of
authority conferred on such person by the LLC Agreement, except that no person
shall be entitled to be indemnified in respect of any loss, expense, claim,
damage or liability incurred by such person by reason of his gross negligence,
fraud or willful misconduct with respect to such acts or omissions.
(b) to the fullest extent permitted by applicable law, reasonable
expenses (including reasonable legal fees) incurred by an officer or director in
defending any claim, demand, action, suit or proceeding that is subject to
indemnification pursuant to Section 2(a) above shall, from time to time, be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or
on behalf of such person to repay such amount if it shall be determined that
such person is not entitled to be indemnified as authorized in Section 2(a)
above.
Section 3. Employee Matters. From and after the Effective Time, the
Company will assume and honor, in accordance with their terms, the employee
plans and benefit arrangements, including employment agreements, relating to
employees of MSLO LLC. The Company shall assume the obligations of MSLO LLC
under the employee plans and benefit arrangements as in effect immediately prior
to the Effective Time.
Section 4. IPO. The Company shall consummate the IPO promptly following
the Effective Time.
ARTICLE III
TAX MATTERS
Section 1. Indemnification. From and after the Effective Time, the
Company shall (without duplication for any payments in respect of taxes made
under Section 4 of this Article III) indemnify, defend and hold harmless each
member of MSLO LLC and their respective directors, officers, employees,
affiliates, agents, successors and assigns (the "Indemnified Members") from and
against any Income Taxes payable or claimed to be payable to a Governmental
Authority and attributable to the income of MSLO LLC for all periods (and
portions thereof) prior to the Effective Time ("Indemnified Taxes"). For all
purposes of this Article III, Indemnified Members shall be deemed to pay Income
Taxes at the highest marginal rates in effect for any Indemnified Member for the
applicable Income Tax for the relevant year or part thereof.
Section 2. Claims. An Indemnified Member seeking indemnification
hereunder shall promptly give the Company written notice of any matter which
such Indemnified Member seeking indemnification has determined did or could give
rise to a right of indemnification under this Agreement, stating the amount of
the Indemnified Tax, if known, and method of
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<PAGE> 6
computation thereof, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed. If the party seeking indemnification shall receive
notice of a claim from any Governmental Authority relating to Indemnified Taxes,
it shall give the Company prompt written notice thereof, and the Company shall
assume and control the defense of such claim by counsel of its own choosing and
at its expense. Notwithstanding the last sentence of this Section 2, if the
Company does not assume and control the defense of the claim, the Indemnified
Member may defend the claim, may settle the Tax claim at any time on any basis
it deems reasonable and seek indemnity hereunder for the resulting Income Tax
and all of its expenses and costs incurred in the defense. Each Indemnified
Member shall cooperate with the Company in such defense, shall provide the
Company with appropriate authorizations to represent MSLO LLC and, if necessary,
the Indemnified Member and make available to the Company, at the Company's
expense, all pertinent records, materials and information in their possession or
under their control relating thereto as is reasonably required by the Company.
Similarly, if the Indemnified Member is conducting the defense against any such
claim, the Company shall cooperate with it in such defense and make available to
it all such records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnified Member. No
such claim may be settled by the Company without the written consent, which
shall not be unreasonably withheld, of the Indemnified Member except where the
settlement thereof involved the payment of money only and the Indemnified Member
is fully indemnified by the Company for such payment, in which case such
member's consent shall not be required. The Indemnified Member shall not,
without the written consent of the Company, settle any claim which is being
defended in good faith by the Company.
Section 3. Definitions. For purposes of this Article III, the following
terms shall have the respective meanings set forth below:
(a) "Governmental Authority" shall mean a local, municipal,
governmental, state, foreign, federation or other body, including agencies and
instrumentalities of the foregoing.
(b) "Income Tax" shall mean any federal, state, local or foreign income
tax, including any interest, penalty or addition thereto imposed by a
Governmental Authority, whether disputed or not.
Section 4. Filing Responsibility. The Company shall prepare and file,
or shall cause to be prepared and filed, all information, income and other
returns (including schedules thereto) with respect to Income Taxes that were not
required to be filed (including extensions ) by MSLO LLC prior to the Effective
Time (the "Post Closing Returns"). The Company agrees that, except to the extent
contrary to law or applicable regulation, it will take no position in the Post
Closing Returns that is inconsistent with that taken in the most recent returns
filed by MSLO LLC. The Company shall pay to each member of MSLO LLC an amount
equal to the excess, if any, of (i) all Income Taxes payable by such member that
are attributable to the income reported on the Post Closing Returns over (ii)
the amount distributed to such member with respect to taxes pursuant to Section
1(b) of Article II. For all purposes of this Section 4 of Article III, members
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<PAGE> 7
shall be deemed to pay Income Taxes at the highest marginal rates in effect for
any member for the applicable Income Tax for the relevant year or part thereof.
ARTICLE IV
CONDITIONS TO THE MERGER
Section 1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the following conditions, which may not be waived:
(a) All necessary filings shall have been made and all necessary
approvals shall have been obtained.
(b) This Agreement shall have been approved and adopted by (i) the vote
of the members of MSLO LLC required by the LLC Agreement and the DLLCA and (ii)
by the vote of the sole shareholder of the Company required by its Certificate
of Incorporation and the DGCL.
(c) All conditions precedent to the consummation of the IPO (other than
effectiveness of the Merger) shall have been satisfied or waived (including the
conditions to the obligations of the parties to the Underwriting Agreement).
(d) The proposed Stockholders' Agreement, to be dated _______, 1999 or
such other date that the Merger becomes effective, the form of which is attached
hereto as Exhibit A, shall have been executed and delivered by the parties
thereto.
ARTICLE V
TERMINATION
Section 1. Amendment and Termination. This Agreement may be amended or
terminated at any time prior to the Effective Time by the mutual consent of the
parties hereto in a written instrument, if the Board of Directors of each so
determines by a vote of a majority of all of its members and, if required by
applicable law, approved by a majority of all members or stockholders of each.
Section 2. Effect of Termination. In the event of termination of this
Agreement by any party hereto as provided in this Article V, this Agreement
shall forthwith become void and have no effect, and no party hereto nor any of
their respective officers or directors or partners shall have any liability of
any nature whatsoever hereunder, or in connection with the transactions
contemplated hereby.
ARTICLE VI
MISCELLANEOUS PROVISIONS
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<PAGE> 8
Section 1. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law principles.
Section 2. Severability; No Third Party Beneficiaries. Any term or
provision of this Agreement that is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable. This Agreement is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 1. Subscription Obligations. By entry into and consummation of this
Merger Agreement, the Company agrees that from and after the Effective Time, it
shall assume and satisfy all of the obligations of MSLO LLC to provide magazines
to subscribers whose subscriptions start before but end after the Effective Time
and to provide refunds to such of those subscribers who cancel their
subscriptions (collectively, the "Subscription Liability") in accordance with
MSLO LLC's policies. In consideration for the assumption of the Subscription
Liability, MSLO LLC shall pay to the Company an amount equal to the amount of
its deferred subscription income as set forth on its books of account, which
payment shall be conveyed to the Company in and as part of the Merger. For all
purposes, the foregoing payment by MSLO LLC to the Company for the assumption of
the Subscription Liability shall be accepted and treated as separate
consideration for the Company's assumption of the Subscription Liability. The
Company agrees that after the Effective Time its obligations to satisfy the
Subscription Liability as provided for in this Section 1 of Article VII may be
enforced by any member of MSLO LLC as constituted immediately prior to the
Effective Time for and on behalf of MSLO LLC and such members.
Section 2. Agent For MSLO LLC. MSLO LLC, if requested by the Company, shall
designate the Company as its agent to act in its name , place and stead to carry
out its obligations under Section 1 of this Article VII.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
MARTHA STEWART LIVING OMNIMEDIA LLC
By:
Name:
Title:
MARTHA STEWART LIVING OMNIMEDIA, INC.
By:
Name:
Title:
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<PAGE> 1
EXHIBIT 2.2
LLC MEMBERSHIP INTEREST PURCHASE AGREEMENT
LLC MEMBERSHIP INTEREST PURCHASE AGREEMENT, dated as of July 27, 1999,
by and among Martha Stewart Living Omnimedia LLC, a limited liability company
organized under the laws of the state of Delaware ("MSLO"), KPCB Holdings, Inc.,
as nominee, a corporation organized under the laws of the state of California
("Buyer") and KPCB IX Associates, LLC, a limited liability company organized
under the laws of California ("KPCB").
WHEREAS, Buyer desires to purchase from MSLO and MSLO desires to sell
to Buyer membership interests representing 5% of the MSLO membership interests
as described in the New LLC Agreement (as defined herein) and a warrant
representing the right to purchase, in certain circumstances, a 15% interest
(subject to adjustment as provided in the warrant) in the Internet Business of
MSLO (as defined in such warrant), on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale of Membership Interests.
1.1 Sale and Purchase. At the Closing, Buyer shall purchase from
MSLO, and MSLO shall sell and issue to Buyer, Class K LLC Membership Interests
in MSLO representing 5.0% of the outstanding MSLO membership interests
immediately after giving effect to consummation of this transaction (the
"Membership Interests") and a warrant representing the right to purchase, in
certain circumstances, an interest in the Internet Business of MSLO in the form
of Exhibit A hereto (the "Warrant"), for an aggregate purchase price of
$25,000,000 (twenty-five million dollars) (the "Purchase Price"), of which
$250,000 shall be allocated to the Warrant, and subject to the terms and
conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements contained herein (the "Sale and Purchase").
1.2 Closing. The Sale and Purchase shall take place on the date
hereof at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street,
New York, New York (which time and place are designated as the "Closing").
1.3 Deliveries at Closing. At the Closing, the parties shall,
respectively, make the following simultaneous deliveries:
(a) MSLO shall deliver to Buyer: (i) a certificate or
certificates representing the Membership Interests, duly executed on behalf of
MSLO, (ii) the Warrant, duly executed on behalf of MSLO, (iii) the Fourth
Amended and Restated Limited Liability Company Agreement of MSLO (the "New LLC
Agreement"), in the form of Exhibit B hereto, duly executed on behalf of MSLO,
The Martha Stewart Family Limited Partnership ("Stewart"), Sharon Lee Patrick
("Patrick"), Time Publishing Ventures, Inc. ("TPV") and Grubman Indursky &
Schindler, P.C. ("Grubman", and together with Stewart, Patrick and TPV, the
"Existing
<PAGE> 2
Members"), and (iv) a cross receipt, duly executed on behalf of MSLO, indicating
receipt of the Purchase Price from Buyer.
(b) Buyer shall deliver to MSLO (i) the Purchase Price, by wire
transfer of immediately available funds to an account or accounts designated by
MSLO, (ii) the New LLC Agreement duly executed on behalf of Buyer, and (iii) a
cross receipt, duly executed on behalf of Buyer, indicating receipt of the
Membership Interests and the Warrant from MSLO.
(c) The parties shall execute and deliver such other documents
as are customary and reasonably necessary to consummate the transactions
contemplated hereby.
2. Representations and Warranties of MSLO. MSLO hereby represents and
warrants as follows:
2.1 Organization and Qualification. MSLO is a limited liability
company duly organized and validly existing under the laws of the State of
Delaware. MSLO has all requisite power and authority to carry on its business as
currently conducted, other than such failures that would not reasonably be
expected to have a material adverse effect on MSLO's business, properties or
financial condition (a "Material Adverse Effect"). MSLO is duly qualified to
transact business in each jurisdiction in which the failure to be so qualified
would reasonably be expected to have a Material Adverse Effect.
2.2 Capitalization. As of the Closing, the outstanding equity of
MSLO will consist of Class A, Class B, Class C and Class K membership interests,
as set forth on Exhibit C hereto. Other than such membership interests, as of
the Closing, options to acquire Class A membership interests equal to
approximately 5% of the outstanding LLC interests are outstanding under the MSLO
Non-qualified Class A LLC Unit Option Plan, the exercise of which options shall
be dilutive, on a net treasury basis, only to the other holders of the Class A
Interests. In addition, upon a Conversion (as defined in the Third Amended and
Restated Limited Liability Company Agreement of MSLO (the "LLC Agreement")) and
a subsequent public offering of the common stock of MSLO's successor
corporation, MSLO intends to issue common stock pursuant to the MSLO Phantom
Performance Unit Plan, a true and correct copy of which has been provided to
Buyer. On or prior to the initial public offering, MSLO may issue additional
options to acquire equity interests in MSLO or the successor public company,
provided that options for no more than an aggregate of 10% of the fully-diluted
equity shall be dilutive to Buyer as of the initial public offering. Except as
set forth above and in the LLC Agreement and the New LLC Agreement, there are no
outstanding rights, options, warrants, preemptive rights, rights of first
refusal or similar rights for the purchase or acquisition from MSLO of any
equity interest in MSLO. Assuming the accuracy of the representations of Buyer
and KPCB contained herein, all outstanding equity interests have been issued in
compliance with state and federal securities laws.
2.3 Subsidiaries. Except for Martha Stewart, Inc., a Connecticut
corporation, MSLO does not presently own or control, directly or indirectly, any
interest in any other
-2-
<PAGE> 3
corporation, association, or other business entity. MSLO is not a participant in
any joint venture, partnership, or similar arrangement.
2.4 Authorization. As of the Closing, all action on the part of
MSLO, its officers, directors and Existing Members necessary for the
authorization, execution and delivery of this Agreement, the New LLC Agreement,
the Warrant and the performance of all obligations of MSLO hereunder and
thereunder shall have been taken, and this Agreement, the New LLC Agreement and
the Warrant, assuming due execution by the parties hereto and thereto, will
constitute valid and legally binding obligations of MSLO, enforceable in
accordance with their respective terms, subject to: (i) judicial principles
limiting the availability of specific performance, injunctive relief, and other
equitable remedies and (ii) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect generally relating to or
affecting creditors' rights.
2.5 Valid Issuance of Membership Interests and the Warrant. The
Membership Interests and the Warrant, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, shall be duly and validly issued and will be free of restrictions on
transfer directly or indirectly created by MSLO other than restrictions on
transfer under this Agreement, the terms of the Warrant, the New LLC Agreement
and under applicable state and federal securities laws.
2.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
MSLO is required in connection with the offer, sale or issuance of the
Membership Interests and the Warrant , except for the following: (i) the filing
of such notices as may be required under the Securities Act of 1933, as amended
(the "Securities Act"); (ii) the filing of a notice of exemption pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended
(the "California Securities Law"), which shall be filed by MSLO following the
Closing; and (iii) the compliance with any other applicable state securities
laws, which compliance will have occurred within the appropriate time periods
therefor.
2.7 Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of MSLO's knowledge, threatened before
any court, administrative agency or other governmental body against MSLO which
questions the validity of this Agreement, the New LLC Agreement or the Warrant,
or the right of MSLO to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which would reasonably be
expected to have a Material Adverse Effect. MSLO is not a party or subject to,
and none of its assets is bound by, the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality which would reasonably be expected to have a Material Adverse
Effect.
2.8 Employees. Except as set forth on Schedule 2.8 hereto, MSLO is
not a party to or bound by any currently effective employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other
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employee compensation agreement or arrangement with any collective bargaining
agent. Except for Martha Stewart, who is a member of the Screen Actors Guild and
the American Federation of Television and Radio Artists, no employee of MSLO is
represented by any labor union or covered by any collective bargaining
agreement. There is no pending or, to the best of MSLO's knowledge, threatened
labor dispute involving MSLO and any group of its employees.
2.9 Intellectual Property. MSLO has sufficient title to and
ownership of, or other rights to use, all trade secrets, and, to its knowledge,
copyrights, information, proprietary rights, trademarks, service marks and trade
names in each case necessary for its business as now conducted without any
material conflict with or infringement of the rights of others, except where
such failures or conflicts would not reasonably be expected to have a Material
Adverse Effect. Except for license agreements entered into in the ordinary
course of business or otherwise as set forth on Schedule 2.9 hereto, there are
no material outstanding options, licenses, or agreements of any kind relating to
the foregoing, nor is MSLO bound by or a party to any material options, licenses
or agreements of any kind with respect to the trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. MSLO has not received any written, or
to its knowledge, oral communications alleging that MSLO has violated or, by
conducting its business as proposed, would violate any of the trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary
rights of any other person or entity, except for such violations as would not
reasonably be expected to have a Material Adverse Effect.
2.10 Compliance with Other Instruments. MSLO is not in violation or
default of any provision of its Certificate of Formation or the LLC Agreement,
each as in effect immediately prior to the Closing, except for such failures as
would not reasonably be expected to have a Material Adverse Effect. MSLO is not
in violation or default of any provision of any material instrument, mortgage,
deed of trust, loan, contract, commitment, judgment, decree, order or obligation
to which it is a party or by which it or any of its properties or assets are
bound which would reasonably be expected to have a Material Adverse Effect. To
the best of its knowledge, MSLO is not in violation or default of any provision
of any federal, state or local statute, rule or governmental regulation which
would reasonably be expected to have a Material Adverse Effect. The execution,
delivery and performance of and compliance with this Agreement, the New LLC
Agreement and the issuance and sale of the Membership Interests and Warrant,
will not result in any such violation, be in conflict with or constitute, with
or without the passage of time or giving of notice, a default under any such
provision, require any consent or waiver under any such provision (other than
any consents or waivers that have been obtained), or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of MSLO pursuant to any such provision.
2.11 Permits. MSLO has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would reasonably be expected to have a
Material Adverse Effect. MSLO is not in default in any material respect under
any of such franchises, permits, licenses, or other similar authority.
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2.12 Environmental and Safety Laws. To the best of its knowledge,
MSLO is not in violation of any applicable statute, law or regulation relating
to the environment or occupational health and safety, except for such violations
as would not reasonably be expected to have a Material Adverse Effect.
2.13 Registration Rights. Except as provided in the New LLC
Agreement and its predecessor agreements, MSLO has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity.
2.14 Title to Property and Assets. Except as set forth on Schedule
2.14, MSLO has good and marketable title to all of properties and assets owned
by it, free and clear of all mortgages, liens and encumbrances, except liens for
current taxes and assessments not yet due and possible minor liens and
encumbrances which do not, in any case, materially detract from the value of the
property subject thereto or materially impair the operations of MSLO. With
respect to the material property and assets it leases, MSLO is in material
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of all liens, claims or encumbrances, except for such
liens, claims or encumbrances which would not materially impair the operations
of MSLO. MSLO's material properties and assets are in good condition and repair,
in all material respects, for the purposes for which they are currently used,
ordinary wear and tear excepted.
2.15 Financial Statements. MSLO has delivered to Buyer (a) an
audited consolidated statement of financial position and statement of operations
of MSLO as of and for the fiscal year ended December 31, 1998, and (b) an
unaudited consolidated statement of financial position and statement of
operations of MSLO as of and for the three-month period ended March 31, 1999
(together with the notes thereto, the "Financial Statements"). The Financial
Statements fairly present, in all material respects, the financial position and
results of operations of MSLO as of the dates and for the periods indicated,
subject in the case of the March 31, 1999 Financial Statements, to normal
year-end adjustments. Except as set forth on Schedule 2.15, MSLO has no material
liabilities or obligations which are not reflected or reserved against in the
December 31, 1998 statement of financial position (the "MSLO Balance Sheet")
which would be required to be reflected thereon if prepared as of the date
hereof in accordance with U.S. generally accepted accounting principles, except
for liabilities or obligations incurred since the date of the MSLO Balance Sheet
in the ordinary course of business or which are not material.
2.16 Agreements; Actions.
(a) Except for agreements described herein and in the New LLC
Agreement, and the employment agreements and other agreements set forth on
Schedule 2.16(a) hereto, there are no agreements, understandings or proposed
transactions between MSLO and any of its officers, directors, affiliates, or any
affiliate thereof.
(b) Other than the LLC Agreement, the Integrated Agreement with
Respect to Employment and Property Services, License and Non-Competition
Matters, by and
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between Martha Stewart and MSLO, dated as of February 3, 1997, the Loan
Agreement for a principal amount of $15.0 million between NationsBank, N.A. and
MSLO, dated as of March 30, 1999, and agreements entered into in the ordinary
course of business consistent with past practice, there are no agreements,
understandings, instruments, contracts, judgments, orders, writs or decrees to
which MSLO is a party or by which it is bound that involve (i) obligations of,
or payments by MSLO in excess of, $5 million, (ii) provisions restricting the
development, manufacture or distribution of MSLO's products or services or (iii)
indemnification by MSLO with respect to infringement of proprietary rights.
(c) Except as reflected in the Financial Statements or set forth
on Schedule 2.16(c), since March 31, 1999, MSLO has not (i) incurred
indebtedness for money borrowed in excess of $3 million individually or $7
million in the aggregate, or (ii) sold, exchanged or otherwise disposed of any
of its assets or rights, other than the sale of its inventory and license
agreements in the ordinary course of business.
2.17 Tax Returns and Audits. Except as would not reasonably be
expected to have a Material Adverse Effect, MSLO (a) is characterized as a
partnership for United States federal income tax purposes, and (b) has prepared
and filed all United States federal, state and local income tax returns required
to be filed by it. To the best of MSLO's knowledge, no deficiency assessment or
proposed adjustment by any taxing authority to MSLO's federal, state, or local
income taxes is pending.
2.18 Draft Prospectus. MSLO has previously provided to KPCB drafts
of the prospectus of Martha Stewart Living Omnimedia, Inc. that MSLO intends to
include as part of such entity's registration statement on Form S-1. The most
recent such draft provided to KPCB has been prepared in good faith by MSLO, and,
in the judgment of MSLO's senior management, accurately and fairly describes in
all material respects the historical businesses of MSLO as they exist on the
date thereof, provided that MSLO makes no representation or warranty herein with
respect to any forward-looking statements contained in such draft.
2.19 No Implied Representations. Except as expressly set forth
herein or in the New LLC Agreement or the Warrant, MSLO makes no representations
or warranties of any kind to Buyer.
2.20 Brokers or Finders. MSLO has not agreed to incur, directly or
indirectly, any liability for brokerage or finders' fees, agents' commissions or
other similar charges in connection with this Agreement or any of the
transactions contemplated hereby.
3. Representations and Warranties of Buyer and KPCB. Buyer and KPCB
hereby jointly and severally represent and warrant that:
3.1 Experience. Buyer and KPCB are experienced in evaluating
companies such as MSLO, are able to fend for themselves in transactions such as
the one contemplated by this Agreement, have such knowledge and experience in
financial and business matters that
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Buyer and KPCB are capable of evaluating the merits and risks of its prospective
investment in MSLO, and have the ability to bear the economic risks of the
investment.
3.2 Investment. Buyer is acquiring the Membership Interests for
investment for its own account and not with the view to, or for resale in
connection with, any distribution thereof. Buyer and KPCB understand that the
Membership Interests have not been registered under the Securities Act or the
California Securities Law, by reason of a specific exemption from the
registration provisions of the Securities Act and the California Securities Law,
respectively, which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein. Buyer and KPCB further represent that
they do not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to any third person with respect
to any of the Membership Interests. Buyer and KPCB understand and acknowledge
that the offering of the Membership Interests pursuant to this Agreement will
not be registered under the Securities Act nor under the state securities laws
on the ground that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt from the registration requirements of the
Securities Act and any applicable state securities laws.
3.3 Rule 144. Buyer and KPCB acknowledge that the Membership
Interests must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or an exemption from
such registration is available and the transfer thereof is otherwise permitted
under the New LLC Agreement. Buyer and KPCB are aware of the provisions of Rule
144 promulgated under the Securities Act that permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions. Buyer and KPCB covenant that, in the absence of an effective
registration statement covering the Membership Interests in question, Buyer will
sell, transfer, distribute or otherwise dispose of (collectively, "Transfer")
the Membership Interests only in a manner consistent with its representations
and covenants set forth in this Section 3 and those set forth in the New LLC
Agreement. In connection therewith, Buyer and KPCB acknowledge that MSLO will
make a notation on its books regarding the restrictions on transfers set forth
in this Section 3 and will transfer Membership Interests on the books of MSLO
only to the extent not inconsistent therewith.
3.4 No Public Market. Buyer and KPCB understand that no public
market now exists for the Membership Interests , and that there may never be a
public market for the Membership Interests.
3.5 Access to Data. Buyer and KPCB have received and reviewed
information about MSLO and have had an opportunity to discuss MSLO's business,
management and financial affairs with its management and to review MSLO's
facilities. Buyer and KPCB understand that such discussions, as well as any
written information provided by MSLO, were intended to describe the aspects of
MSLO's business and prospects which MSLO believes to be material, but were not
necessarily a thorough or exhaustive description, and except as expressly set
forth in this Agreement, MSLO makes no representation or warranty with respect
to the completeness of such information and makes no representation or warranty
of any kind with respect to any information provided by any entity other than
MSLO. Some of such information
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includes projections as to the future performance of MSLO, which projections may
not be realized, are based on assumptions which may not be correct and are
subject to numerous factors beyond MSLO's control.
3.6 Authorization. As of the Closing, all action on the part of
Buyer and KPCB, and their respective officers, directors and partners necessary
for the authorization, execution and delivery of this Agreement and the New LLC
Agreement and the performance of all obligations of Buyer and KPCB hereunder and
thereunder shall have been taken, and this Agreement and the New LLC Agreement,
assuming due execution by the parties hereto and thereto, constitute valid and
legally binding obligations of Buyer and KPCB, enforceable in accordance with
their respective terms, subject to: (i) judicial principles limiting the
availability of specific performance, injunctive relief, and other equitable
remedies and (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights.
3.7 Compliance with Other Instruments. Neither Buyer nor KPCB is in
violation or default of any provision of its certificate of incorporation or
other organizational documents, as applicable, each as in effect immediately
prior to the Closing, except for such failures as would not be reasonably
expected to materially adversely effect the ability of Buyer and KPCB to perform
their respective obligations under this Agreement (a "Buyer Material Adverse
Effect"). Neither Buyer nor KPCB is in violation or default of any provision of
any material instrument, mortgage, deed of trust, loan, contract, commitment,
judgment, decree, order or obligation to which it is a party or by which it or
any of its properties or assets are bound which would reasonably be expected to
have a Buyer Material Adverse Effect. To the best of its knowledge, neither
Buyer nor KPCB is in violation or default of any provision of any federal, state
or local statute, rule or governmental regulation which would reasonably be
expected to have a Buyer Material Adverse Effect. The execution, delivery and
performance of and compliance with this Agreement and the New LLC Agreement will
not result in any such violation, be in conflict with or constitute, with or
without the passage of time or giving of notice, a default under any such
provision, require any consent or waiver under any such provision (other than
any consents or waivers that have been obtained), or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of Buyer or KPCB pursuant to any such provision.
3.8 Accredited Investor. Each of Buyer and KPCB is an "accredited
investor" as defined in Rule 501 of Regulation D as promulgated by the
Securities and Exchange Commission under the Securities Act and shall submit to
MSLO such further assurances of such status as may be reasonably requested by
MSLO. For state securities law purposes, the principal address of both Buyer and
KPCB is 2750 Sand Hill Road, Menlo Park, California 94025.
4. Covenants.
4.1 Confidentiality. MSLO, Buyer and KPCB, and their respective
officers, directors, partners and affiliates, agree to keep the terms and
conditions of this Agreement and the transactions contemplated hereby
confidential, and agree not to disclose to any party not a
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party to this Agreement or the New LLC Agreement any of the terms hereof, except
as may be required by applicable law. Buyer and KPCB expressly acknowledge that
each has received, and will receive in the future, Confidential Materials (as
hereinafter defined), and that disclosure of such Confidential Materials to
parties not a party to this Agreement would cause irreparable harm to MSLO.
Except with the prior written consent of MSLO or as required by law, neither
Buyer nor KPCB, nor their respective officers, directors, partners or
affiliates, shall (i) disclose any Confidential Materials to any party not a
party to this Agreement, or (ii) use any Confidential Materials for any purpose
except in connection with their efforts on behalf of MSLO. Buyer, KPCB and their
respective officers, directors, partners or affiliates shall use their
reasonable best efforts to preserve the confidentiality of all Confidential
Materials. In the event that a party concludes that it is legally obligated to
disclose any provision of this Agreement or any Confidential Materials, such
party shall provide the other party with prompt written notice, and shall seek
to limit the dissemination of such Confidential Materials. In the case of legal
proceedings in which such disclosure is required, the parties shall cooperate to
obtain an appropriate protective order limiting the disclosure of such material.
The parties acknowledge that, in the event of a public offering of securities of
MSLO or any subsidiary, MSLO may be required to disclose certain terms of this
Agreement.
"Confidential Materials" means any information or materials,
whether written or oral, tangible or intangible, (i) concerning MSLO, its
subsidiaries, businesses, markets, products, prospects, finances, principal
shareholders and/or members, and (ii) which Buyer and/or KPCB develops, or with
respect to which Buyer and/or KPCB gains access or knowledge, as a direct result
of MSLO's provision to Buyer and/or KPCB of information and/or materials.
Notwithstanding the foregoing, the Confidential Material shall not include (A)
information that was known to, and material that was in the possession of, Buyer
and/or KPCB prior to the commencement of any negotiations with MSLO, (B)
information that is or becomes generally known to, and materials possessed by,
the public at large or entities involved in the Internet Business (other than as
a result of a breach of this agreement by Buyer and/or KPCB or by disclosure of
any other party which Buyer and/or KPCB knows, or has reason to know, is under
an obligation of confidentiality to MSLO), (C) information or material acquired
by Buyer and/or KPCB independently from a third party (other than a third party
which Buyer and/or KPCB knows, or has reason to know, is under an obligation of
confidentiality to MSLO), and (D) information or material independently
developed by Buyer and/or KPCB and not as a result of the disclosure of
information or provision of materials by MSLO. The Confidential Materials may
include, but are not necessarily limited to, the following: concepts;
techniques; data; documentation; research and development; customer lists;
advertising plans; distribution networks; new product concepts; designs;
patterns; sketches; planned introduction dates; processes; marketing procedures;
"know-how"; marketing techniques and materials; development plans; names and
other information related to strategic partners, suppliers, or vendors; pricing
policies and strategic, business or financial information, including business
plans and financial pro formas.
4.2 Business Development. MSLO, Buyer and KPCB agree to act in good
faith and use their reasonable best efforts in developing the Internet Business
of MSLO and
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maximizing the value to stockholders of such businesses and MSLO as a whole.
Without limiting the foregoing, in the event MSLO determines that the public
markets do not appropriately value its Internet Business as part as MSLO as a
whole, MSLO shall investigate the consummation of a transaction designed to
maximize the value of such businesses to its shareholders, which transaction
could take the form of the creation of a publicly traded tracking (or letter)
stock structured to track the value of such businesses, the transfer of the
assets and liabilities relating to such businesses into a publicly traded
subsidiary of MSLO, or another strategic transaction. Buyer and KPCB shall
assist MSLO in developing the business plans and strategies for MSLO's Internet
Business and provide MSLO with advice regarding the execution of these business
plans and strategies. KPCB shall assist MSLO in attracting and retaining key
personnel for MSLO's Internet Business and shall assist MSLO in developing
equity based compensation strategies relating thereto. MSLO will establish an
equity compensation program or other equity-based or "phantom" plan designed, in
the judgment of the Board of Directors of MSLO, to incentivize management of the
Internet Business to maximize the value of the Internet Business consistent with
the overall goals and objectives of the Board of Directors of MSLO. Any actions
taken with respect to the foregoing covenants shall be subject to the final
decision of MSLO, and, as applicable, the Board of Directors of MSLO.
4.3 Restrictions on Transfer.
(a) Prior to the initial public offering, if any, of MSLO or a
successor entity, Buyer shall not, directly or indirectly, Transfer any
Membership Interests, or any rights with respect thereto, except as permitted by
the New LLC Agreement. Buyer shall not, directly or indirectly, on or prior to
the one-year anniversary of the consummation of such an offering, Transfer any
shares of common stock or other equity interests into which the Membership
Interests are converted or exchanged (collectively, "Shares"), or any rights
with respect thereto, provided, however, that, following the six-month
anniversary of such offering, Buyer may distribute up to 50% of the Shares it
receives in such conversion or exchange to the limited partners or other fund
participants in the relevant Kleiner Perkins Caufield & Byers fund. The
foregoing limitation shall not apply to any Transfer approved by the Board of
Directors of MSLO (or the successor entity), including a Transfer pursuant to a
corporate transaction relating to MSLO (or the successor entity) that is
approved by such Board.
(b) In the event that Buyer, or its permitted transferee,
exercises the Warrant and receives shares of Common Stock (as defined in the
Warrant), for the six-month period following receipt of such shares, Buyer shall
not, directly or indirectly, Transfer any Shares (or rights in such Shares),
except distributions to such entities described in the proviso in the second
sentence of Section 4.3(a) and subject to the 50% limitation set forth therein.
The foregoing limitation shall not apply to any Transfer approved by the Board
of Directors of MSLO (or the successor entity), including a Transfer pursuant to
a corporate transaction relating to MSLO (or the successor entity) approved by
such Board.
(c) Buyer acknowledges and agrees that any certificates
representing Membership Interests or other equity securities or Common Stock
described in this paragraph may contain an appropriate legend reflecting the
limitations described in this paragraph, and that
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MSLO, or its transfer agent, may enter in its stock transfer books an
appropriate stop-transfer order reflecting these provisions.
5. Miscellaneous.
5.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware, without regard to any provisions thereof
relating to conflicts of laws among different jurisdictions.
5.2 Survival. The representations and warranties made herein shall
survive the Closing for a period of one year, whereupon they shall cease and be
of no further force and effect.
5.3 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of Buyer to purchase the Membership Interests
shall not be assignable without the consent of MSLO. This Agreement shall not be
construed so as to confer any right or benefit on any party not a party hereto,
other than their respective successors, assigns, heirs, executors and
administrators.
5.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof
and supersedes all prior agreements and understandings relating thereto. Neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
5.5 Notices, Etc. All notices under this Agreement shall be
sufficiently given for all purposes if made in writing and delivered personally,
sent by documented overnight delivery service or, to the extent receipt is
confirmed, facsimile or other electronic transmission, to following addresses
and numbers. Notices to MSLO shall be addressed to:
Martha Stewart Living Omnimedia LLC
20 West 43rd Street
New York, New York 10036
Telephone: (212) 827-8000
Facsimile: (212) 827-8289
Attn: Gregory R. Blatt, Esq.
Senior Vice President and General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Telephone: (212) 403-1000
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Facsimile: (212) 403-2000
Attn: Andrew J. Nussbaum, Esq.
or at such other address and to the attention to such other person as MSLO may
designate by written notice to Buyer and KPCB. Notices to Buyer and KPCB shall
be addressed to:
Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
Telephone: (650) 233-2750
Facsimile: (650) 233-0300
Attn: John Doerr
with a copy to:
Fenwick & West LLP
2 Palo Alto Square
Palo Alto, CA 94306
Telephone: (650) 494-0600
Facsimile: (650) 494-1417
Attn: Gordon K. Davidson, Esq.
or at such other address and to the attention of such other person as Buyer and
KPCB may designate by written notice to MSLO.
5.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party upon any breach or default of the other
party under this Agreement shall impair any such right, power or remedy of such
first party, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing or as provided in this Agreement.
5.7 Expenses. MSLO, Buyer and KPCB shall each bear the expenses and
legal fees incurred on their own behalf with respect to this Agreement and the
transactions contemplated hereby.
5.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by only one party, which shall be
enforceable against the parties actually executing such counterparts, and all of
which together shall constitute one instrument.
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5.9 Severability; Enforcement. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without such provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party. The parties hereto agree that irreparable damage for which money damages
would not be an adequate remedy would occur in the event that any of the
provision of this Agreement were not performed in accordance with its specific
terms or was otherwise breached. It is accordingly agreed that, in addition to
any other remedies a party may have at law or equity, the parties shall be
entitled to seek an injunction of injunctions to prevent such breached of this
Agreement and to enforce specifically the terms hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
MARTHA STEWART LIVING OMNIMEDIA LLC
By: /s/ Martha Stewart
----------------------------
Name: Martha Stewart
Title: Chairman and Chief
Executive Officer
KPCB HOLDINGS, INC., as nominee
By: /s/ L. John Doerr
----------------------------
Name: L. John Doerr
Title: Senior Vice President
KPCB IX ASSOCIATES, LLC
By: /s/ L. John Doerr
----------------------------
Name: L. John Doerr
Title: Managing Director
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Exhibit 4.5
MARTHA STEWART LIVING OMNIMEDIA LLC
WARRANT FOR A PERCENTAGE OF THE INTERNET BUSINESS
OF MARTHA STEWART LIVING OMNIMEDIA LLC
ISSUE DATE: JULY 27, 1999
THIS WARRANT AND THE SHARES OF COMMON STOCK OR OTHER SECURITIES THAT
MAY BE PURCHASABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED OR DISPOSED OF UNLESS REGISTERED OR QUALIFIED UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH REGISTRATION,
QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH
LAWS. EXCEPT AS OTHERWISE PROVIDED HEREIN, THIS WARRANT IS
NON-TRANSFERABLE.
FOR VALUE RECEIVED, MARTHA STEWART LIVING OMNIMEDIA LLC, a Delaware
limited liability company ("MSLO," and, together with any successor entity, the
"Company"), hereby certifies that KPCB Holdings, Inc., a California corporation
(the "Holder"), is entitled, subject to the provisions of this Warrant, to
purchase from the Company, (i) in the case of a Strategic Transaction, the
Warrant Percentage of the fully paid and non-assessable shares of the then
Outstanding Shares of Common Stock immediately prior to consummation of the
Strategic Transaction but taking into account the exercise of this Warrant, or
(ii) in the case of a Sale Transaction, the Warrant Percentage of the Net
Consideration received by the Company in such Sale Transaction, in each case, at
a purchase price equal to the Exercise Price (each such term as hereinafter
defined).
SECTION 1. DEFINITIONS. (a) The following terms, as used herein, have
the following meanings:
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized by law to close.
"CLOSING PRICE" on any day means (1) if the shares of Common Stock then
are listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the Closing
Price on such day as reported on the NYSE Composite Transactions Tape; (2) if
shares of Common Stock then are not listed and traded on the NYSE, the Closing
Price on such day as reported by the principal
<PAGE> 2
national securities exchange on which the shares of Common Stock are listed and
traded; (3) if the shares of Common Stock then are not listed and traded on any
such securities exchange, the last reported sale price on such day on The Nasdaq
Stock Market ("NASDAQ"); or (4) if the shares of Common Stock then are not
traded on but are quoted by NASDAQ, the average of the highest reported bid and
the lowest reported ask price on such day as reported by NASDAQ.
"COMMON STOCK" means a common stock (or tracking stock, lettered stock
or similar equity security) of the Company or a Subsidiary of the Company that
primarily reflects or is intended to primarily reflect the economic performance
of the Internet Business as it exists as of the date such stock is first issued.
"COMPANY" shall have the meaning set forth in the first paragraph
hereof.
"EXERCISE PRICE" means $21 million ($21,000,000), as adjusted pursuant
to Sections 2(b)(ii) and 3 hereof.
"EXPIRATION DATE" means the earliest of 5:00 p.m. New York City time on
(i) the 3-year anniversary of the date hereof, (ii) the date on which the Holder
sells, transfers, distributes or otherwise disposes, other than pursuant to an
exchange or a conversion of Membership Interests in a merger or similar
transaction involving the Company, of at least 50% of its Membership Interests
(as defined in that certain Purchase Agreement, dated as of the date hereof), or
such equity into which such Membership Interests may be exchangeable or
convertible pursuant to a Conversion (as defined in the LLC Operating Agreement)
(iii) the tenth day following consummation of a Strategic Transaction, and (iv)
the tenth day following consummation of a Sale Transaction that involves all or
substantially all of the Company's interest in the Internet Business as such
business exists as of the date of such Sale Transaction. In the event that the
Warrant is exercised prior to the Expiration Date, any subsequent delay due to
required regulatory approvals shall not affect the validity of such exercise.
"FAIR MARKET VALUE" as of any date of determination means, as to shares
of the Common Stock, if the Common Stock is publicly traded at such time, the
average of the daily Closing Price of a share of Common Stock for the ten (10)
consecutive trading days ending on the most recent trading day prior to the date
of determination. If the shares of Common Stock are not publicly traded at such
time, the Fair Market Value of the Common Stock shall be determined in good
faith by the Board of Directors of the Company.
"FAIR VALUE" as of any date, shall mean (i) in the case of Common
Stock, the Fair Market Value, (ii) in the case of cash, such amount of cash and
(iii) in the case of other property, the fair value as determined by the Board
of Directors of the Company, acting in good faith and based upon the advice of a
nationally recognized investment banking firm.
"HOLDER" shall have the meaning set forth in the first paragraph
hereof.
"INTERNET BUSINESS" means the Martha By Mail business (both online and
offline), the business of selling advertisements on websites owned by MSLO, and
any businesses of the
<PAGE> 3
Company created after the date hereof that derive 50% or more of their revenues
for the Company from transactions occurring via websites owned by MSLO, provided
that any such business that contains both online and offline revenues may be
divided into online and offline portions in the discretion of the Board, with
the Internet Business containing the online portions. The Internet Business
shall also include MSLO's interest in websites controlled by MSLO which are
determined by the Board of Directors as properly included therein which
determination shall be made in good faith and without regard to the existence of
this Warrant. For the avoidance of doubt, the Internet Business shall not
include direct mail and online sales of magazines and books authored or produced
by or on behalf of Martha Stewart and/or MSLO. The Internet Business shall also
include cost-sharing, transfer pricing and other intercompany arrangements with
the remainder of the Company as determined to be reasonable and appropriate by
the Board of Directors.
"LLC OPERATING AGREEMENT" shall mean the Fourth Amended and Restated
Limited Liability Company Agreement of the Company, as amended from time to
time.
"NET CONSIDERATION" shall, with respect to a particular Sale
Transaction, equal the Fair Value of the portion of the consideration received
by the Company in a Sale Transaction which relates to the portion of the
Internet Business (as such business exists as of the date of such Sale
Transaction) involved in such Sale Transaction, net of taxes and transaction
expenses; provided, however, that the Company shall use reasonable efforts to
structure such Sale Transaction in a manner that is tax efficient for the
Company and the Holder, and, to the extent that the Company will not incur tax
on the Net Consideration payable to the Holder, such Net Consideration shall not
be reduced in respect of such taxes. In the event that the Internet Business has
debt at the time of a Sale Transaction, the Board of Directors shall equitably
adjust the Net Consideration to the extent that such debt is not repaid prior to
the Sale Transaction.
"OUTSTANDING SHARES" means, with respect to the Common Stock, the sum
of the outstanding shares and the shares held in treasury or otherwise
representing the interest of the Company and its Subsidiaries in such Common
Stock.
"PERSON" means an individual, partnership, corporation, limited
liability company, trust, joint stock company, association, joint venture, or
any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"SALE TRANSACTION" means a sale, disposition or other transaction
(including by way of merger, share exchange, stock sale, asset divestiture or
otherwise) engaged in by the Company or its Subsidiaries, the primary motive of
which, as determined in good faith by the Board of Directors without taking into
account the existence of this Warrant, is to maximize the value of the Internet
Business as a whole or in part, it being agreed that any such sale, disposition
or other transaction in which 65% or more of the consideration received by the
Company in such sale, disposition or other transaction is in respect of the
Company's interest in the Internet Business shall be deemed to be a "Sale
Transaction;" provided, however, that in no event shall a "Sale Transaction" be
deemed to include a sale of all or substantially all of the Company or its
assets or businesses (including by way of merger, reorganization, consolidation,
asset sale,
<PAGE> 4
share exchange or otherwise). The allocation of consideration between the
Internet Business and other Company businesses shall be as determined by the
Board of Directors, acting in good faith and based upon the advice of a
nationally recognized investment banking firm.
"STRATEGIC TRANSACTION" shall mean the initial issuance of publicly
traded shares of Common Stock.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"WARRANT PERCENTAGE" means 15%, as the same may be adjusted pursuant to
the terms of this Warrant.
"WARRANT SHARES" means the shares of Common Stock deliverable upon
exercise of this Warrant, as adjusted from time to time.
SECTION 2. EXERCISE OF WARRANT.
(a) Strategic Transaction. In the case of a Strategic Transaction, the
Holder is entitled to exercise this Warrant in whole (but not in part) prior to
the Expiration Date or, if such day is not a Business Day, then on the next
succeeding day that shall be a Business Day. To exercise this Warrant, the
Holder shall deliver to the Company this Warrant and a Notice to Exercise form
attached hereto duly executed by the Holder, together with payment of the
Exercise Price. Upon such delivery and payment, the Holder shall be deemed, in
the case of a Strategic Transaction, to be the holder of record of the Warrant
Shares, notwithstanding that the stock transfer books of the Company shall then
be closed or that certificates representing such shares shall not then be
actually delivered to the Holder.
(b) Sale Transaction.
(i) In the case of a Sale Transaction which involves all or
substantially all of the Internet Business (as such business exists at
the time of such Sale Transaction), the Holder is entitled to exercise
this Warrant in whole (but not in part) prior to the Expiration Date
or, if such day is not a Business Day, then on the next succeeding day
that shall be a Business Day. To exercise this Warrant, the Holder
shall deliver to the Company this Warrant and a Notice to Exercise form
attached hereto duly executed by the Holder, together with payment of
the Exercise Price.
(ii) In the case of a Sale Transaction which involves less than all or
substantially all of the Internet Business (as such business exists at
the time of such Sale Transaction), the Holder is entitled to exercise
this Warrant with respect to all (but not less than all) of the Sale
Transaction within ten (10) days of the occurrence of the Sale
Transaction but in no event later than the Expiration Date or, if such
day is not a Business Day, then on the next succeeding day that shall
be a Business Day.
<PAGE> 5
To exercise this Warrant, the Holder shall deliver to the Company this
Warrant and a Notice to Exercise form attached hereto duly executed by
the Holder, together with payment of the Exercise Price as determined
in accordance with the following sentence. The Exercise Price for the
Warrant in connection with the Sale Transaction described in this
paragraph (b)(ii) shall be determined by multiplying the then-current
Exercise Price by a fraction, the numerator of which is the Fair Value
of the portion of the Internet Business (as such business exists at the
time of such Sale Transaction) included in such Sale Transaction, and
the denominator of which is the Fair Value of the Internet Business
immediately prior to such Sale Transaction and without taking the
prospect of such Sale Transaction into account. In the event that
Holder exercises this Warrant in a Sale Transaction pursuant to this
paragraph (ii), the Warrant shall continue in effect with respect to
the Company's remaining interest in the Internet Business (as such
business exists at the time of such Sale Transaction), and immediately
following such exercise (or the Holder's election not to so exercise),
the Exercise Price with respect to the remaining Warrant shall be
reduced by the Exercise Price paid (or that would have been paid) by
the Holder in respect of such Sale Transaction.
(c) At the option of the Holder, the Exercise Price may be paid in cash
(including by wire transfer of immediately available funds), by certified or
official bank check or bank cashier's check payable to the order of the Company,
or, in the event of an exercise following a Strategic Transaction, in fully-paid
and non-assessable shares (or the surrender by the Holder of the right to
receive such number of shares) of Common Stock valued at the initial public
offering price of such Common Stock or by any combination of the foregoing. The
Company shall pay any and all documentary, or similar issue or transfer taxes
payable in respect of the issue or delivery of the Warrant Shares. The Company
shall not be required to pay any transfer tax which may be payable in respect of
any transfer involved in the issue or delivery of Warrant Shares (or other
securities or assets) in a name other than that in which the Warrant so
exercised was registered, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Company the amount of
such transfer tax or has established, to the satisfaction of the Company, that
such transfer tax has been paid.
(d) Upon surrender of this Warrant in conformity with the foregoing
provisions, the Company shall, subject to the expiration of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, transfer to the Holder of this Warrant appropriate evidence of
ownership of the shares of Common Stock or other securities or property
(including any money) to which the Holder is entitled, registered or otherwise
placed in, or payable to the order of, the name or names of the Holder or such
transferee as may be directed in writing by the Holder, and shall deliver such
evidence of ownership and any other securities or property (including any money)
to the Person or Persons entitled to receive the same, together with an amount
in cash in lieu of any fraction of a share as provided in Section 8, subject to
any required withholding.
SECTION 3. ADJUSTMENT TO WARRANT PERCENTAGE OR EXERCISE PRICE. If at
any time after the date hereof, the Company engages in a transaction pursuant to
<PAGE> 6
which it acquires an interest in (whether by acquisition, merger, asset purchase
or otherwise) a business or assets that is intended to, and does, become part of
the Internet Business, Holder shall have the option of either adjusting the
Warrant Percentage or the Exercise Price as follows:
(a) Adjustment of Warrant Percentage. The Warrant Percentage shall be
adjusted by multiplying the then-current Warrant Percentage by a fraction, the
numerator of which is the Fair Value of the Internet Business immediately prior
to such transaction, and the denominator of which is the sum of such Fair Value
plus the Fair Value of the consideration paid or issued (and debt assumed which
is not retained by the Internet Business) by the Company in such transaction.
(b) Adjustment of Exercise Price. The Exercise Price shall be adjusted
by adding to the then-current Exercise Price the product of the Warrant
Percentage at such time and the Fair Value of the consideration paid or issued
(and debt assumed which is not retained by the Internet Business) by the Company
in such transaction.
(c) In the event that a transaction described in this Section 3
includes both a business to be included in the Internet Business and businesses
that will be retained by the Company outside of the Internet Business, the Board
shall apportion the consideration in the transaction on a fair and equitable
basis, acting in good faith and based upon the advice of a nationally recognized
investment banking firm.
Promptly following consummation of a transaction giving rise to an adjustment in
the Warrant Percentage or Exercise Price pursuant to this Section 3, the Company
shall provide the Holder with written notice thereof, which notice shall also
include (i) the revised Warrant Percentage as calculated pursuant to paragraph
(a) above, (ii) the revised Exercise Price as calculated pursuant to paragraph
(b) above, (iii) the basis on which such adjustments were calculated and (iv) a
description of the business acquired and copies of information provided to the
Board of Directors in connection with its approval of the transaction. Holder
shall, within 10 days of receipt of such notice, notify the Company in writing
of its election to adjust either the Warrant Percentage or the Exercise Price.
If the Company has not received written notice of Holder's election within such
10-day period, Holder shall be deemed to have elected to adjust the Warrant
Percentage.
SECTION 4. CERTAIN NON-DILUTION OF WARRANT SHARES. The percentage of
Common Stock owned by Holder upon exercise of this Warrant shall not be diluted
by options on the Common Stock granted prior to the initial public offering of
the Common Stock to (or the exercise thereof by) employees representing a
maximum of 10% of the Common Stock immediately prior to such offering, provided,
that options in excess of that amount shall be dilutive on a pro rata basis.
SECTION 5. ASSUMPTION OF WARRANT BY SUBSIDIARY. The Company and Holder
hereby agree that in the event that the Common Stock issued in a Strategic
Transaction is Common Stock of a Subsidiary of the Company, such Subsidiary
shall assume all of the Company's rights and obligations hereunder.
<PAGE> 7
SECTION 6. REGISTERED SHARES AND RESTRICTIVE LEGEND; REGISTRATION
RIGHTS. (a) Each certificate representing shares of Common Stock issued pursuant
to this Warrant, unless at the time of exercise such shares are registered under
the Securities Act, shall bear a legend substantially in the form of the legend
set forth on the first page of this Warrant. The Company hereby agrees to use
its reasonable best efforts to cause all shares of Common Stock issued pursuant
to this Warrant to be promptly registered under the Securities Act. In the event
that Company is unable to so register such shares of Common Stock, Holder shall
be entitled to customary registration rights with respect to such shares.
(b) In connection with the issuance of shares of Common Stock to the
Holder pursuant to this Warrant, the Company shall provide the Holder with
customary registration rights with respect to such shares, consistent with the
terms of the post-IPO registration rights granted to the Holder in connection
with its investment in MSLO.
SECTION 7. RESERVATION OF SHARES. The Company hereby represents and
agrees that all shares of Common Stock issued pursuant to this Warrant shall be
duly authorized and, when issued upon such exercise, shall be validly issued,
fully paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale imposed by the Company
and free and clear of all preemptive or similar rights, except to the extent
imposed by or as a result of the status, act or omission of, the Holder.
SECTION 8. FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this Warrant
and in lieu of delivery of any such fractional share upon any exercise hereof,
the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the Fair Market Value thereof.
SECTION 9. TRANSFER, EXCHANGE OR ASSIGNMENT OF WARRANT AND SHARES. (a)
The Holder by taking or holding this Warrant, consents and agrees that the
registered holder hereof may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby.
(b) This Warrant is not transferable or assignable (by operation of law
or otherwise) by the Holder without the prior written consent of the Company. In
the event Holder receives shares of Common Stock upon exercise of this Warrant,
Holder shall not, on or prior to the one-year anniversary of the date it
receives such shares, sell, transfer, distribute or otherwise dispose of any
such shares of Common Stock, or any rights with respect thereto (a "Transfer"),
provided, however, that, following the six-month anniversary of such date,
Holder may distribute up to 50% of such shares to the limited partners or other
fund participants in the relevant Kleiner Perkins Caufield & Byers fund. The
foregoing limitation shall not apply to any Transfer approved by the MSLO Board
of Directors, including a Transfer pursuant to a corporate transaction relating
to MSLO approved by the MSLO Board of Directors.
<PAGE> 8
(c) Upon receipt by the Company of evidence satisfactory to it (in the
exercise of its reasonable discretion) of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
indemnification or security reasonably required by the Company, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
(d) The Company shall pay all expenses, taxes (other than transfer
taxes) and other charges payable in connection with the preparation, issuance
and delivery of the Warrant hereunder.
(e) This Warrant shall be binding on any successor or parent entity of
the Company, whether by merger, sale, reorganization or similar transaction.
SECTION 10. NO IMPAIRMENT. So long as this Warrant is outstanding, the
Company will not, by amendment of its LLC Operating Agreement or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 10 and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder against impairment.
SECTION 11. NOTICES. Any notice, demand or delivery authorized by this
Warrant shall be in writing and shall be given to the Holder or to the Company,
as the case may be, at its address (or facsimile number) set forth below, or
such other address (or facsimile number) as shall have been furnished to the
party giving or making such notice, demand or delivery:
If to the Company: Martha Stewart Living Omnimedia LLC
20 West 43rd Street
New York, New York 10036
Attention: General Counsel
Facsimile: (212) 827-8289
with a copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew J. Nussbaum, Esq.
Facsimile: (212) 403-2000
If to the Holder: Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
Attention: John Doerr
Facsimile: (650) 233-0300
<PAGE> 9
with a copy to: Fenwick & West LLP
2 Palo Alto Square
Palo Alto, CA 94306
Attention: Gordon K. Davidson, Esq.
Facsimile: (650) 494-1417
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy, or (ii)
if given by any other means, when received at the address specified herein.
SECTION 12. RIGHTS OF THE HOLDER. Prior to the exercise of this Warrant
for shares of Common Stock, if available, the Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder of the Company, including,
without limitation, the right to vote, to receive dividends or other
distributions, to exercise any preemptive right or to receive any notice of
meetings of shareholders or any notice of any proceedings of the Company except
as may be specifically provided for herein.
SECTION 13. GOVERNING LAW. THIS WARRANT AND ALL RIGHTS ARISING
HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF DELAWARE, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND
ENFORCED IN ACCORDANCE WITH SUCH LAWS.
SECTION 14. AMENDMENTS; WAIVERS. Any provision of this Warrant may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Holder and the Company, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
SECTION 15. INTERPRETATION. When a reference is made in this Warrant to
a Section such reference shall be to a Section of this Warrant unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Warrant, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Warrant shall refer to this Warrant as a whole and not
to any particular provision of this Warrant. The definitions contained in this
Warrant are applicable to the singular as well as the plural forms of such terms
and to the masculine as well as to the feminine and neuter genders of such term.
References to a person are also to its permitted successors and assigns and, in
the case of an individual, to his heirs and estate, as applicable.
<PAGE> 10
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed by its duly authorized officer and to be dated as of the date first above
written.
MARTHA STEWART LIVING
OMNIMEDIA LLC
By: /s/ Martha Stewart
_________________________
Name: Martha Stewart
Title: Chairman and Chief
Executive Officer
ATTEST:
By: /s/ Sharon Lee Patrick
__________________________
Name: Sharon Lee Patrick
Title: President
ACKNOWLEDGED AND AGREED:
KPCB HOLDINGS, INC., AS NOMINEE
By: /s/ L. John Doerr
___________________________
Name: L. John Doerr
Title: Senior Vice President
<PAGE> 11
FORM OF
NOTICE OF EXERCISE
To: MARTHA STEWART LIVING OMNIMEDIA LLC
(1) The undersigned hereby elects to exercise the attached Warrant
pursuant to the terms of the attached Warrant, and has tendered herewith payment
of the purchase price in full.
(2) The undersigned hereby certifies that it has complied with all of
its obligations pursuant to the terms of the attached Warrant.
(3) To the extent shares are being issued in respect of the Warrant,
the undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares, except in compliance
with applicable federal and state securities laws and that the aforesaid shares
are subject, if applicable, to certain provisions of the LLC Operating Agreement
of the Company.
- ------------------ ------------------------------------
Date Signature
<PAGE> 1
Exhibit 5.01
[Wachtell, Lipton, Rosen & Katz Letterhead]
___________ __, 1999
Martha Stewart Living Omnimedia, Inc.
11 West 42nd Street
New York, New York 10036
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-1
(Registration No. 333-84001), as amended, filed with the Securities and Exchange
Commission (the "Registration Statement") in connection with the registration of
shares of Class A common stock, par value $0.01 per share (the "Shares"), of
Martha Stewart Living Omnimedia, Inc. (the "Company") under the Securities Act
of 1933, as amended, to be sold by you in your initial public offering (the
"Offering"). In connection with the Offering, you have requested our opinion
with respect to the following matters.
In connection with the delivery of this opinion, we have
examined originals or copies of the Certificate of Incorporation and the By-Laws
of the Company as set forth as exhibits to the Registration Statement, the
Registration Statement, certain resolutions adopted or to be adopted by the
Board of Directors, the form of stock certificate representing the Shares and
such other records, agreements, instruments, certificates and other documents of
public officials, the Company and its officers and representatives and have made
such inquiries of the Company and its officers and representatives, as we have
deemed necessary or appropriate in connection with the opinions set forth
herein. We are familiar with the proceedings heretofore taken, and with the
additional proceedings proposed to be taken, by the Company in connection with
the authorization, registration, issuance and sale of the Shares. With respect
to certain factual
<PAGE> 2
Martha Stewart Living Omnimedia, Inc.
_______________, 1999
Page 2
matters material to our opinion, we have relied upon representations from, or
certificates of, officers of the Company. In making such examination and
rendering the opinions set forth below, we have assumed without verification the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the authenticity of the originals of such documents submitted to
us as certified copies, the conformity to originals of all documents submitted
to us as copies, the authenticity of the originals of such later documents, and
that all documents submitted to us as certified copies are true and correct
copies of such originals.
Based on such examination and review, and subject to the
foregoing, we are of the opinion that the Shares, upon issuance, delivery and
payment therefor in the manner contemplated by the Registration Statement, will
be validly issued, fully paid and non-assessable.
We are members of the Bar of the State of New York, and we
have not considered, and we express no opinion as to, the laws of any
jurisdiction other than the laws of the United States of America, the State of
New York and the General Corporation Law of the State of Delaware.
We consent to the inclusion of this opinion as an Exhibit to
the Registration Statement and to the reference to our firm in the Prospectus
that is a part of the Registration Statement. In giving such consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
<PAGE> 1
EXHIBIT 10.1
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of _____________, 1999 (the
"Agreement"), by and among Martha Stewart Living Omnimedia LLC, a Delaware
limited liability company (the "Company"), Martha Stewart Living Omnimedia,
Inc., a Delaware corporation and wholly owned subsidiary of the Company (the
"Corporation"), The Martha Stewart Family Limited Partnership, a Connecticut
limited partnership ("Stewart"), Time Publishing Ventures, Inc., a Delaware
corporation ("Time"), KPCB Holdings, Inc., a California limited partnership, as
nominee ("KPCB"), Sharon Patrick ("Patrick") and Grubman Indursky & Schindler,
P.C. (together with Stewart, Time and KPCB, the "Stockholders").
RECITALS:
WHEREAS, the Company and the Stockholders are parties to that certain
Fourth Amended and Restated Limited Liability Company Agreement of the Company,
dated as of July 27, 1999 (the "LLC Agreement");
WHEREAS, the Board of Directors of the Company has approved the terms
of a merger (the "Merger") pursuant to which the Company shall be merged with
and into the Corporation for purposes of effecting an initial public offering
(the "Initial Public Offering") of the surviving corporation in the Merger;
WHEREAS, the parties hereto desire to enter into certain arrangements
relating to the Corporation to be effective immediately upon effectiveness of
the Merger.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
Section 1.1. Definitions. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement, have
the meanings herein specified.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person, and that Person's spouse, estate, personal
representative or lineal descendants or any trust for the benefit of such Person
and/or such Person's spouse and/or such Person's lineal descendants or any
entities controlled by such Person. As used in this definition, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
-1-
<PAGE> 2
"Agreement" means this Stockholders Agreement, as amended, modified,
supplemented or restated from time to time.
"Assign" and "Assignment" have the meanings set forth in Section 2.1
hereof.
"Board" shall mean the Board of Directors of the Corporation.
"Class A Stock" shall mean Class A Common Stock, par value $.01 per
share, of the Corporation.
"Class B Stock" shall mean Class B Common Stock, par value $.01 per
share, of the Corporation.
"Company" shall have the meaning set forth in the preamble hereto.
"Corporation" shall have the meaning set forth in the preamble hereto.
"Delaware Act" shall the Delaware General Corporation Law.
"Directors" means those individuals elected as members of the Board.
"Effective Date" shall have the meaning set forth in Section 5.1
hereof.
"Initial Public Offering" shall have the meaning set forth in the
recitals hereto.
"KPCB" shall have the meaning set forth in the preamble hereto.
"KPCB Demand" shall have the meaning set forth in Section 3.1(b)
hereof.
"LLC Agreement" shall have the meaning set forth in the recitals
hereto.
"LLC Interest Purchase Agreement" shall mean that LLC Membership
Interest Purchase Agreement, dated as of July 27, 1999, by and among the
Company, KPCB and KPCB IX Associates, LLC, a California limited liability
company.
"Merger" shall have the meaning set forth in the recitals hereto.
"Patrick" shall have the meaning set forth in the preamble hereto.
"Patrick Demand" shall have the meaning set forth in Section 3.1(d)
hereof.
"Person" includes any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"Stewart" shall have the meaning set forth in the preamble hereto.
"Stewart Demand" shall have the meaning set forth in Section 3.1(c)
hereof.
"Stock" shall mean the Class A Stock and Class B Stock.
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"Stockholder" shall have the meaning set forth in the preamble hereto,
and includes any Person who acquires Stock pursuant to the provisions of this
Agreement.
"Time" shall have the meaning set forth in the preamble hereto.
"Time Demand" shall have the meaning set forth in Section 3.1(a)
hereof.
"Warrant" shall mean the Warrant for a Percentage of the Internet
Business of Martha Stewart Living Omnimedia LLC, issued on July 27, 1999 to
KPCB.
Section 1.2. Headings. The headings and subheadings in this Agreement
are included for convenience and identification only and are in no way intended
to describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
ARTICLE II
STOCKHOLDER COVENANTS
Section 2.1. Transfers and Assignments of Interests Generally. Prior to
the Initial Public Offering, the Stockholders may not sell, assign, transfer,
pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way
encumber ("Assign," and such act, an "Assignment") all or any part of the shares
of Class A Stock or Class B Stock owned by such Stockholder, except in
compliance with the terms of the LLC Agreement (treating such shares of Stock as
though they were LLC Interests). Following consummation of the Initial Public
Offering, such shares of Stock may be transferred in accordance with applicable
law and further subject, in the case of Time, to the provisions relating to the
call set forth in Section 2.2 hereof and, in the case of KPCB and affiliates, to
the terms of the LLC Interest Purchase Agreement and related Warrant.
Section 2.2. Corporation Call Right. (a) For purposes of this Section
2.2, capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Article XVII of the LLC Agreement. Except as
amended by this Section 2.2, the provisions of Article XVII of the LLC Agreement
shall remain in full force and effect.
(b) Immediately prior to completion of the Initial Public
Offering, the Corporation shall make an irrevocable Target Call Offer to
purchase all of Time's Stock at the Target Value. Time shall have 120 days from
receipt of the Target Call Notice to accept or reject the Target Call Offer. In
the event that Time accepts the Target Call Offer, the Corporation shall pay (or
cause to be paid) to Time the Target Value on or prior to the fifth day
following the Call Acceptance Date. The Target Value shall be determined as of
the date that is the earlier of the date of payment or the date that is the 65th
day following delivery of the Target Call Notice.
(c) In the event that the Call Acceptance Date occurs after
the 60th day following delivery of the Target Call Notice, all references to the
phrase "one year following the consummation of a Call" in Section 17.1(e) of the
LLC Agreement shall be replaced by the phrase "one year from the 65th day
following delivery of a Target Call Notice."
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(d) For purposes of determining the definition of Target Value
in Section 17.1 of the LLC Agreement, there shall not be any reduction for the
one-time pro rata distribution to the members of the Company in the amount of
$1.5 million referred to in the letter agreement dated as of July 26, 1999 or in
respect of interest thereon, but there shall be a reduction for any pro rata
distributions to the members of the Company in excess of such amount, except to
the extent such distributions are made pursuant to Section 9.2 of the LLC
Agreement (relating to tax liability distributions).
(e) In the event that Time timely accepts the Target Call
Offer and the Company does not consummate the call pursuant to this Section and
Article XVII of the LLC Agreement, Time shall be entitled to exercise all its
rights (and shall have the obligations) pursuant to the LLC Agreement, and the
parties hereto shall be subject to the terms of the LLC Agreement as applicable
as though no Target Call Offer had been made, provided, that the sale by Stewart
contemplated by Section 2.5 hereof shall be permitted (but shall result in a
reduction of any other transfer rights that Stewart has pursuant to the LLC
Agreement). The parties hereto shall take all such actions as necessary or
appropriate to preserve Time's rights, and the rights of the other parties,
under the LLC Agreement. Notwithstanding the foregoing, the Company and the
Corporation shall continue to be obligated to effect the call at the Target
Value.
Section 2.3. Rights Termination Date. For purposes of the LLC
Agreement, and provided that the Company consummates the Target Call Offer in
the event that Time timely accepts such offer, the Rights Termination Date (as
defined therein) shall be deemed to occur on the date of delivery by the
Corporation to Time of the irrevocable Target Call Notice.
Section 2.4. Treatment of Existing Incentive Plans. (a) Stewart hereby
agrees that, from time to time, Stewart shall deliver to the Corporation a
sufficient number of shares of Class A Stock or Class B Stock to cover the
shares of Class A Stock issuable upon exercise of options granted prior to the
date hereof under the Martha Stewart Living Omnimedia LLC Nonqualified Class A
LLC Unit/Stock Option Plan as described under "Management - MSLO LLC
Nonqualified Class A LLC Unit/Stock Option Plan" in the Registration Statement
of the Corporation on Form S-1.
(b) The Corporation and the Stockholders hereby agree that the
awards granted under the Martha Stewart Living Omnimedia LLC Phantom Performance
Unit Plan shall be treated as described under "Management - MSLO Phantom
Performance Unit Plan" in the Registration Statement of the Corporation on Form
S-1.
Section 2.5. Over-Allotments. The Stockholders hereby acknowledge and
agree that Martha Stewart shall be entitled to sell shares of Stock in the
over-allotment portion of the Initial Public Offering.
Section 2.6. Time Director. Subject to Section 2.2(e), Time hereby
waives its right pursuant to Section 5.2 of the LLC Agreement to delegate a
director of the Corporation prior to the Rights Termination Date.
Section 2.7. LLC Agreement. From the date of the Merger until
consummation of the Initial Public Offering, except as otherwise provided
herein, the Corporation shall be governed
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in the same manner as provided in the LLC Agreement for the Company. Upon
consummation of the Initial Public Offering, the provisions of the LLC
Agreement, other than Article XVII, shall terminate. Upon consummation of the
Target Call, the provisions of Article XVII, other than under Section 17.1(e)
(as amended by this Agreement), shall terminate. The provisions of Section
17.1(e) shall terminate as described therein and in Section 2.2(c) hereof.
Section 2.8. Rescission of Merger. If for any reason the Initial Public
Offering is not consummated promptly following consummation of the Merger, the
Stockholders agree that the Company and the Corporation shall, as promptly as
practicable, take such actions as necessary or appropriate to rescind the Merger
so that the Merger is of no force and effect, upon which rescission, the LLC
Agreement shall be in full force and effect and this Agreement shall be
terminated.
Section 2.9. Paper Purchasing. Time and the Company hereby agree that
they shall continue the paper purchasing arrangement described in Schedule C to
that certain Services Agreement, dated as of February 3, 1997, as amended, by
and between Time, Inc. and the Company, through December 31, 2000, consistent
with past practice.
ARTICLE III
REGISTRATION RIGHTS
Section 3.1. Demand Registration Rights. (a) At any time following an
Initial Public Offering, Time may request that the Corporation effect a
registration of the shares of Stock owned by Time at such time, provided that no
registration shall be made for fewer than all Time's remaining Stock unless the
expected offering price for such Stock is greater than $10,000,000 (a "Time
Demand"). Upon receipt of a Time Demand, the Corporation shall, within five days
thereof, provide written notice to Stewart, Patrick and KPCB of such request,
and shall, subject to the limitations set forth in Section 3.1(e), use its best
efforts to effect such a registration as soon as practicable and in any event to
file within 75 days of the receipt of such request a registration statement
under the 1933 Act covering all the shares of Stock proposed to be registered by
Time, as well as any shares requested to be included in such registration by
KPCB, Stewart and/or Patrick within 20 days of receipt by each of KPCB, Stewart
and Patrick of the notice described in this sentence, to cause such registration
statement to become effective and to maintain the effectiveness of such
registration statement for no less than 180 days, provided that such 180-day
period may be suspended if, in the good faith judgment of the Board such
registration would require premature disclosure of material information relating
to a pending corporate development, in which case upon announcement of such
material information the Corporation shall reinstate the effectiveness thereof
for the remaining number of days; provided that in the event such effectiveness
is not reinstated within 30 days of its suspension, Time shall have the option
of withdrawing its demand. In the event that the Time Demand contemplates a
distribution by means of an underwriting, Time shall so advise the Corporation
as part of the Time Demand, and the right of KPCB, Stewart and Patrick to
include in such registration any shares of Stock owned by KPCB, Stewart (or any
of its Affiliates) or Patrick, as the case may be, shall be conditioned upon
KPCB's, Stewart's or Patrick's participation in the underwriting.
Notwithstanding the foregoing, if the underwriter advises
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Time and the Corporation in writing that marketing factors require a limitation
of the number of shares to be underwritten, then the number of shares owned by
KPCB, Stewart (or any of its Affiliates) and Patrick to be included will be
reduced, on a pro rata basis, in accordance with the underwriter's notice. Upon
receipt of a Time Demand, the Corporation shall advise Time of any non-public
information that the Corporation believes may be required to be disclosed during
the offering period (whether as part of the registration statement or
otherwise). Subject to Section 3.4, the Corporation shall not be obligated to
effect more than two registrations pursuant to a Time Demand.
(b) At any time following an Initial Public Offering, KPCB may
request that the Corporation effect a registration of the shares of Stock owned
by KPCB at such time, provided that no registration shall be made for fewer than
all KPCB's remaining Stock unless the expected offering price for such Stock is
greater than $10,000,000 (a "KPCB Demand"). Until the first anniversary of the
Initial Public Offering, in the event that KPCB exercises a KPCB Demand (which
shall be subject to Section 4.3 of the LLC Interest Purchase Agreement), the
Corporation shall promptly provide written notice of KPCB's Demand to Time, and
Time shall be entitled to exercise a Time Demand during the pendency of the
registration statement process for the KPCB Demand without regard to the
limitation set forth in Section 3.1(e)(A)(ii). Upon receipt of a KPCB Demand,
the Corporation shall, within five days thereof, provide written notice to Time,
Stewart and Patrick of such request, and shall, subject to the limitations set
forth in Section 3.1(e), use its best efforts to effect such a registration as
soon as practicable and in any event to file within 75 days of the receipt of
such request a registration statement under the 1933 Act covering all the shares
of Stock proposed to be registered by KPCB, as well as any shares requested to
be included in such registration by Time, Stewart or Patrick within 20 days of
receipt by each of Time, Stewart and Patrick of the notice described in this
sentence, to cause such registration statement to become effective and to
maintain the effectiveness of such registration statement for no less than 180
days, provided that such 180-day period may be suspended if, in the good faith
judgment of the Board such registration would require premature disclosure of
material information relating to a pending corporate development, in which case
upon announcement of such material information the Corporation shall reinstate
the effectiveness thereof for the remaining number of days; provided that in the
event such effectiveness is not reinstated within 30 days of its suspension,
KPCB shall have the option of withdrawing its demand. In the event that the KPCB
Demand contemplates a distribution by means of an underwriting, KPCB shall so
advise the Corporation as part of the KPCB Demand, and the right of Time,
Stewart and Patrick to include in such registration any shares of Stock owned by
Time, Stewart (or any of its Affiliates) or Patrick, as the case may be, shall
be conditioned upon Time's, Stewart's or Patrick's participation in the
underwriting. Notwithstanding the foregoing, if the underwriter advises KPCB and
the Corporation in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the number of shares owned by Time,
Stewart (or any of its Affiliates) and Patrick to be included will be reduced,
on a pro rata basis, in accordance with the underwriter's notice. Upon receipt
of a KPCB Demand, the Corporation shall advise KPCB of any non-public
information that the Corporation believes may be required to be disclosed during
the offering period (whether as part of the registration statement or
otherwise). Subject to Section 3.4, the Corporation shall not be obligated to
effect more than two registrations pursuant to a KPCB Demand. KPCB's rights
under this Article shall also be subject to the limitations on transfer set
forth in the LLC Interest Purchase Agreement and related Warrant.
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(c) At any time following an Initial Public Offering, Stewart
may request that the Corporation effect a registration of shares of Stock owned
by it (or any of its Affiliates) at such time, provided that the expected
offering price for such shares of Stock is not less than $10,000,000, provided,
however, that (i) Stewart shall be permitted to demand a registration for a
number of shares equal to 6.27% or more of the number of shares of Stock that
were outstanding immediately prior to the Initial Public Offering if the
expected offering price of such shares is greater than $5,000,000 (a "Stewart
Demand") and (ii) Stewart shall not be permitted to make a Stewart Demand within
90 days of the completion of any offering pursuant to a Time Demand. Upon
receipt of a Stewart Demand, the Corporation shall, within five days thereof,
provide written notice to Time, KPCB and Patrick of such request, and shall,
subject to the limitations set forth in Section 3.1(e), use its best efforts to
effect such a registration as soon as practicable and in any event to file
within 75 days of the receipt of such request a registration statement under the
1933 Act covering all the shares of Stock proposed to be registered by Stewart,
as well as any shares requested to be included in such registration by Time,
KPCB and/or Patrick within 20 days of receipt by each of Time, KPCB and Patrick
of the notice described in this sentence, to cause such registration statement
to become effective and to maintain the effectiveness of such registration
statement for no less than 180 days, provided that such 180-day period may be
suspended if, in the good faith judgment of the Board such registration would
require premature disclosure of material information relating to a pending
corporate development, in which case upon announcement of such material
information, the Corporation shall reinstate the effectiveness thereof for the
remaining number of days, provided that in the event such effectiveness is not
reinstated within 30 days of its suspension, Stewart shall have the option of
withdrawing its demand. In the event that the Stewart Demand contemplates a
distribution by means of an underwriting, Stewart shall so advise the
Corporation as part of the Patrick Demand, and the right of Time, KPCB and
Patrick to include in such registration any shares of Stock owned by Time, KPCB
or Patrick, as the case may be, shall be conditioned upon Time's, KPCB's or
Patrick's participation in the underwriting. Notwithstanding the foregoing, if
the underwriter advises Stewart and the Corporation in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the number of shares owned by Time, KPCB and Patrick to be included will be
reduced, on a pro rata basis, in accordance with the underwriter's notice. Upon
receipt of a Stewart Demand, the Corporation shall advise Stewart of any
non-public information that the Corporation believes may be required to be
disclosed during the offering period (whether as part of the registration
statement or otherwise). Subject to Section 3.4, the Corporation shall not be
obligated to effect more than four registrations pursuant to a Patrick Demand.
(d) At any time following an Initial Public Offering, Patrick
may request that the Corporation effect a registration of shares of Stock owned
by her at such time, provided that no registration shall be made for fewer than
all Patrick's remaining Stock unless the expected offering price for such shares
of Stock is greater than $10,000,000 (a "Patrick Demand"). Upon receipt of a
Patrick Demand, the Corporation shall, within five days thereof, provide written
notice to Time, KPCB and Stewart of such request, and shall, subject to the
limitations set forth in Section 3.1(e), use its best efforts to effect such a
registration as soon as practicable and in any event to file within 75 days of
the receipt of such request a registration statement under the 1933 Act covering
all the shares of Stock proposed to be registered by Patrick, as well as any
shares requested to be included in such registration by Time, KPCB and/or
Stewart within 20 days of receipt by each of Time, KPCB and Stewart of the
notice described
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in this sentence, to cause such registration statement to become effective and
to maintain the effectiveness of such registration statement to become effective
and to maintain the effectiveness of such registration statement for no less
than 180 days, provided that such 180-day period may be suspended if, in the
good faith judgment of the Board such registration would require premature
disclosure of material information relating to a pending corporate development,
in which case upon announcement of such material information, the Corporation
shall reinstate the effectiveness thereof for the remaining number of days,
provided that in the event such effectiveness is not reinstated within 30 days
of its suspension, Patrick shall have the option of withdrawing her demand. In
the event that the Patrick Demand contemplates a distribution by means of an
underwriting, Patrick shall so advise the Corporation as part of the Patrick
Demand, and the right of Time, KPCB and Stewart to include in such registration
any shares of Stock owned by Time, KPCB or Stewart, as the case may be, shall be
conditioned upon Time's, KPCB's or Stewart's participation in the underwriting.
Notwithstanding the foregoing, if the underwriter advises Patrick and the
Corporation in writing that marketing factors require a limitation of the number
of shares to be underwritten, then the number of shares owned by Time, KPCB and
Stewart to be included will be reduced, on a pro rata basis, in accordance with
the underwriter's notice. Upon receipt of a Patrick Demand, the Corporation
shall advise Patrick of any non-public information that the Corporation believes
may be required to be disclosed during the offering period (whether as part of
the registration statement or otherwise). Subject to Section 3.4, the
Corporation shall not be obligated to effect more than two registrations
pursuant to a Patrick Demand.
(e) The Corporation shall not be obligated to effect the
filing of a registration statement pursuant to Section 3.1(a), (b), (c) or (d)
hereof (A) (i) within 180 days following the effective date of a registration
statement pertaining to the underwritten initial public offering of securities
for the account of the Corporation; provided, however, that upon the written
request of Time (which request shall be made no later than 151 days following
completion of the Initial Public Offering), the Corporation shall file a
registration statement pursuant to Section 3.1(a) on the 181st day, or if such
day is not a business day, the next business day thereafter, following
completion of the Initial Public Offering, and (ii) during the 90 days following
the effective date of any registration statement for any underwritten public
offering or an offering with respect to which Time, KPCB, Stewart or Patrick has
piggyback rights; (B) if the Corporation has furnished to Time, KPCB, Stewart or
Patrick, as the case may be, within 30 days after receipt of a Time Demand, a
KPCB Demand, a Stewart Demand or a Patrick Demand an opinion of counsel to the
Corporation (which counsel and opinion are reasonably satisfactory to Time in
the case of a Time Demand) to the effect that Time, KPCB, Stewart or Patrick, as
the case may be, may effect the sale and distribution of its shares of Stock
included in its request and in accordance with such party's intended method of
distribution without the registration of such securities under the 1933 Act; or
(C) if the Corporation has furnished to Time, KPCB, Stewart or Patrick, as the
case may be, within 30 days after receipt of a Time Demand, a KPCB Demand, a
Stewart Demand or a Patrick Demand a certificate signed by an executive officer
of the Corporation stating that, in the good faith judgment of the Board such
registration would require premature disclosure of material information relating
to a pending corporate development or a special audit of the Corporation, in
which event the Corporation shall have the right to defer the obligations
contained in this Section 3.1 for a period of not more than 165 days (including
the 75-day-period for filing the applicable registration statement) after
receipt of the Time Demand, the KPCB Demand, the Stewart Demand or the Pat-
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rick Demand, and provided that the Corporation has not, in any twelve-month
period, utilized the right in this clause (C) more than once.
Section 3.2. Form S-3 Registration. If Form S-3, or any successor form
thereto, is available for such offering, Time, KPCB, Stewart or Patrick may
request in writing that the Corporation effect a registration on Form S-3 and
any related qualification or compliance, and the Corporation shall use its best
efforts to effect, as soon as practicable, such registration, qualification or
compliance as may be so requested and as would permit or facilitate the sale and
distribution of all securities specified in such request and to maintain the
registration on Form S-3 for 180 days following the effectiveness thereof,
provided that such 180-day period may be suspended if, in the good faith
judgment of the Board of Directors, a corporate event requires such suspension,
in which case upon announcement or consummation of such event, the Corporation
shall use its best efforts to reinstate the effectiveness thereof for the
remaining number of days. The Corporation shall notify Time, KPCB, Stewart or
Patrick, as the case may be, of any such request made by the one of the other,
and Time, KPCB, Stewart or Patrick, as the case may be, shall have a right to
participate in such registration by providing written notice to the Corporation
within 20 days after receipt of notice of the Corporation of the shares of Stock
to be included. The Corporation shall not be obligated to effect more than two
registrations on Form S-3 for each of Time, KPCB and Patrick and no more than
four for Stewart, in each case, pursuant to this Section 3.2. In no event shall
the Corporation be obligated to effect more than two registrations on Form S-3
in the aggregate during any twelve-month period. The anticipated net offering
price of the shares of Stock specified in the request for registration pursuant
to this paragraph shall be at least $10,000,000. The foregoing notwithstanding,
the Corporation shall not be obligated to effect any registration on Form S-3 in
the circumstances, and subject to the limitations, specified in Section 3.1(e)
hereof.
Section 3.3. Corporation Registration. (a) If the Corporation proposes
to register (including for this purpose a registration effected by the
Corporation for stockholders other than Time, KPCB, Stewart (or any of its
Affiliates) or Patrick) any of its capital stock or other equity securities
(including any securities convertible into or exchangeable for equity
securities) under the 1933 Act in connection with the public offering of such
securities solely for cash (other than a registration on Form S-8 or any
successor form relating solely to the sale of securities to participants in a
Corporation stock plan, or a registration on Form S-4 or any successor form),
the Corporation shall, at such time, promptly give Time, KPCB, Stewart and
Patrick written notice of such registration. Upon the written request of Time,
KPCB, Stewart or Patrick given within 20 days after the receipt of such notice
by the Corporation, the Corporation shall, subject to the provisions of Section
3.3(b), use its best efforts to cause a registration statement covering all of
the shares of Stock that each of Time, KPCB, Stewart and Patrick has requested
to be registered to become effective under the 1933 Act. The Corporation shall
have no obligation under this Section 3.3 to make any offering of its securities
or to complete any offering of its securities that it proposes to make, and
shall incur no liability to Time, KPCB, Stewart or Patrick for its failure to do
so.
(b) In connection with any offering involving an underwriting
of securities being issued by the Corporation, the Corporation shall not be
required under this Section 3.3 to include any of the securities of the
Corporation owned by Time, KPCB, Stewart (or any of its Affiliates) or Patrick
in such underwriting unless they accept the terms of the underwriting
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as agreed upon between the Corporation and the underwriters selected by it, and
then only in such quantity, if any, as will not, in the reasonable opinion of
the underwriters, jeopardize the success of the offering by the Corporation. If
the managing underwriter for the offering shall advise the Corporation in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Corporation shall so advise Time, KPCB, Stewart and
Patrick, and the number of shares that may be included in the underwriting shall
be allocated in priority as follows: (i) all shares of Stock proposed to be
underwritten on behalf of the Corporation, and then (ii) all shares of Stock
requested to be registered by Time, KPCB, Stewart and Patrick, ratably in
proportion to the number of shares which each of Time, KPCB, Stewart and Patrick
requested to be registered.
(c) Notwithstanding any other provision of this Agreement, the
Corporation may grant customary "piggyback" rights in connection with any
registration by the Corporation pursuant to this Section 3.3 to other
Stockholders, provided that no such rights shall limit or otherwise reduce the
registration rights of Stewart, Time, KPCB or Patrick provided herein. Except as
may be permitted by Stewart, Time, KPCB or Patrick (to the extent such person or
entity is a selling stockholder in the registration at issue), other
stockholders shall not have "piggyback" rights pursuant to the registration
rights set forth in Sections 3.1 and 3.2.
Section 3.4. Expenses of Registration. (a) The Corporation shall bear
and pay all expenses other than underwriting discounts and commissions relating
to shares of Stock incurred in connection with each registration, filing or
qualification pursuant to this Article III, including (without limitation) all
registration, blue sky, securities exchange or listing fees (including Nasdaq,
NASD and similar fees), filing and qualification fees, printing and accounting
fees (including for audits and comfort letters), fees and disbursements of
counsel for the Corporation, and the reasonable fees and disbursements of one
counsel for the selling stockholders and (b) shall sign customary underwriting
documents that include customary indemnifications from the Corporation and shall
cause Stewart (at the expense of the Corporation) to participate in customary
roadshows, as may be reasonably requested by the underwriters; provided,
however, that the Corporation shall not be required to pay for any expenses of
any registration proceeding begun at the request of Time, KPCB, Stewart or
Patrick if the registration request is subsequently withdrawn at any time at the
request of Time, KPCB, Stewart or Patrick, as the case may be, in which case
Time, KPCB, Stewart or Patrick shall bear such expenses (including all
out-of-pocket expenses and fees incurred by the Corporation and the other
selling stockholders), unless Time, KPCB, Stewart or Patrick, as the case may
be, agrees to forfeit one demand registration pursuant to Section 3.1 or one
Form S-3 registration pursuant to Section 3.2, whichever is applicable. If Time,
KPCB, Stewart or Patrick withdraws a registration request after the filing of
the applicable registration statement, Time, KPCB, Stewart or Patrick, as the
case may be, shall reimburse all such expenses and fees and shall also forfeit
such applicable registration right, provided, however, that if such withdrawal
is due primarily to (i) the Corporation's failure to comply in all material
respects with its obligations under Sections 3.1 through 3.5, (ii) the
occurrence of a blackout period under Section 3.1 with respect to sales of Stock
by Time that occurs and is continuing for thirty days or more or (iii) the
failure of the Corporation at a reasonable time, in light of the circumstances,
prior to the filing of such registration statement to advise Time, KPCB, Stewart
or Patrick, as the case may be, of its knowledge of the existence of an event
relating to the Corporation that would reasonably be expected to have a material
effect on the business, financial condition or market valuation of
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the Corporation, such demand right shall not be forfeited. Underwriting
discounts and commissions relating to the shares of Stock included in a
registration pursuant this Article III shall be borne and paid ratably by the
stockholders in proportion to their participation in such registration and, if
it participates, by the Corporation.
Section 3.5. Furnishing of Information. It shall be a condition
precedent to the obligations of the Corporation to take any action pursuant to
this Article III that a selling stockholder shall have furnished to the
Corporation such information as the Corporation shall request regarding such
selling stockholder, the shares of Stock held by such selling stockholder, and
the intended method of disposition of such securities as shall be required to
effect the requested registration, and that such selling stockholder shall have
provided the Corporation with such representations and warranties, covenants and
opinions as are customary for a selling stockholder in connection with the
registration of a selling stockholder's securities. The Corporation shall
promptly provide any selling stockholders with copies of all correspondence with
the Securities and Exchange Commission related to such registration statement.
Section 3.6. Indemnification. In the event that any Stock of a
stockholder is included in a registration statement under this Article III, such
stockholder and the Corporation shall agree to customary indemnification
provisions (which may include indemnification of any underwriter of such
registration) in connection therewith relating to compliance with the 1933 Act,
the 1934 Act, any state securities law or any rule or regulation promulgated
under the 1933 Act, the 1934 Act or any state securities law in connection with
any matter relating to such registration statement.
Section 3.7. Lock-up Agreements. If reasonably requested by the
managing underwriter, the Stockholders shall enter into customary lock-up
agreements pursuant to which they agree, for a period of 180 days following the
effective date of a registration for the Initial Public Offering, not to offer,
sell or otherwise dispose of any shares of Stock except the shares sold pursuant
to such registration statement without the prior consent of the Corporation and
the managing underwriter.
Section 3.8. Additional Registration Rights. In the event that the
Corporation shall grant to Stewart registration rights not contained in this
Agreement and Stewart shall request such registration, the Corporation shall
provide written notice to each of Time, KPCB and Patrick and each of Time, KPCB
and Patrick, at its request, shall be entitled to participate pro rata in such
registration, based on the proportion of shares of Stock held at such time by
each of Time, KPCB, Stewart and Patrick.
ARTICLE IV
ARBITRATION
Section 4.1. Dispute Resolution. To the fullest extent permitted by the
Delaware Act and other applicable law, any controversy or claim arising out of
or relating to this Agreement, or any breach thereof, shall be settled by
arbitration in accordance and to the extent permitted by the Uniform Arbitration
Act (10 Del. C. Sec. 5701, et seq.) and, to the extent not inconsistent
therewith, the then-prevailing Rules for Non-Administered Arbitration of
Business Disputes of the CPR Center for Dispute Resolution. Each party to the
arbitration shall select one (1) arbi-
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<PAGE> 12
trator. The arbitrators' ruling shall be binding and conclusive upon the parties
hereto to the fullest extent permitted by law. Any arbitration shall occur in
Wilmington, Delaware, and judgment upon the award rendered may be entered in any
court having jurisdiction thereof. The arbitrators shall be governed by and
shall apply the substantive law of the State of Delaware in making their award.
The expenses of the arbitration shall be borne equally by the parties to the
arbitration, provided that each party shall pay for and bear the cost of its own
experts, evidence and legal counsel.
ARTICLE V
MISCELLANEOUS
Section 5.1. Effectiveness. This Agreement shall become effective (the
"Effective Date") simultaneously with the effective time of the Merger and shall
terminate without liability or penalty on the part of any party or its
directors, officers, fiduciaries, employees, members, stockholders or general
and limited partners (and the directors, officers, fiduciaries, employees,
members, stockholders or general and limited partners thereof) to any other
party or such other party's Affiliates upon termination of the Merger Agreement
pursuant to the terms thereof. Unless theretofore terminated pursuant to the
preceding sentence, the rights of the Stockholders under this Agreement shall
terminate upon the closing.
Section 5.2. Notices. All notices provided for in this Agreement shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, or mailed by registered or certified mail, as follows:
(a) if given to the Company or the Corporation, at
the following address:
Martha Stewart Living Omnimedia, Inc.
20 West 43rd Street
New York, New York 10036
Attention: General Counsel
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew J. Nussbaum, Esq.
(b) if given to a Stockholder, at the address on file with the Company,
or at such other address as such Stockholder may hereafter designate by written
notice to the Company.
All such notices shall be deemed to have been given when received.
Section 5.3. Amendments. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against any Stockholder unless such modification, amendment or waiver
is approved in writing by each party
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<PAGE> 13
hereto; provided that with respect to any provision containing an agreement
between the Corporation and a Stockholder, such provision may be modified or
waived by approval in writing by the Company and such Stockholder without the
consent of the other Stockholders unless such modification or waiver adversely
affects the rights of such other Stockholder or Stockholders as provided under
this Agreement. The failure of any party to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
Section 5.4. Failure to Pursue Remedies. The failure of any party to
seek redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
Section 5.5. Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party fails to perform any of
its obligations hereunder, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement. Any remedy under this Section 5.5 is subject to certain equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
Section 5.6. Cumulative Remedies. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
Section 5.7. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and assigns. If any
Stockholder or any Affiliate thereof shall acquire any shares of Stock, in any
manner, whether by operation of law or otherwise, such shares of Stock shall be
held subject to all of the terms of this Agreement.
Section 5.8. Interpretation. Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. All references herein to "Articles," "Sections"
and "Paragraphs" shall refer to corresponding provisions of this Agreement.
Section 5.9. Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
Section 5.10. Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto had signed
the same document. All counterparts shall be construed together and shall
constitute one instrument.
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<PAGE> 14
Section 5.11. Integration. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and,
except as otherwise provided herein, supersedes all prior agreements and
understandings pertaining thereto.
Section 5.12. Governing Law. This Agreement and the rights of the
parties hereunder shall be interpreted in accordance with the laws of the State
of Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
Section 5.13. Confidentiality. Each Stockholder expressly acknowledges
that prior to the Merger such Stockholder has received confidential and
proprietary information relating to the Company, including, without limitation,
information relating to the Company's financial condition and business plans,
and that the disclosure of such confidential information to a third party would
cause irreparable injury to the Company. Except with the prior written consent
of the Company or as required by law (subject to the notice requirement in the
preceding sentence), no Stockholder shall disclose any such information to a
third party, and each Stockholder shall use reasonable efforts to preserve the
confidentiality of such information.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above stated.
STOCKHOLDERS:
THE MARTHA STEWART FAMILY LIMITED PARTNERSHIP
By:
----------------------------------------
Name:
Title:
TIME PUBLISHING VENTURES, INC.
By:
----------------------------------------
Name:
Title:
----------------------------------------
Sharon Patrick
KPCB HOLDINGS, INC., as nominee,
an affiliate of KPCB IX Associates, LLC
By:
----------------------------------------
Name:
Title:
GRUBMAN INDURSKY & SCHINDLER, P.C.
By:
----------------------------------------
Name:
Title:
MARTHA STEWART LIVING OMNIMEDIA LLC
By:
----------------------------------------
Name:
Title:
MARTHA STEWART LIVING OMNIMEDIA, INC.
By:
----------------------------------------
Name:
Title:
-15-
<PAGE> 1
EXHIBIT 10.10
AGREEMENT OF LEASE, made as of this 24th day of November, 1992, between TISMAN
SPEYER SILVERSTEIN PARTNERSHIP, a New York limited partnership, having an office
at 520 Madison Avenue, New York, New York.
party of the first part, hereinafter referred to as OWNER, or LANDLORD, and TIME
PUBLISHING VENTURES, INC., a Delaware corporation qualified to transact business
in New York State, having an address at 1271 Avenue of the Americas, New York,
New York.
party of the second part, hereinafter referred to as TENANT,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner
that portion of the twenty-fourth (24th) as shown by diagonal markings on the
rental plan attached hereto as Exhibit A and made a part hereof (the "demised
premises")
in the building known as 11 West 42nd Street (the "building") in the Borough of
Manhattan, City of New York, for the term of ELEVEN (11) YEARS
(or until such term shall sooner cease and expire as
hereinafter provided) to commence on the 1st day of December nineteen
hundred and ninety-two, and to end on the 30th day of November two
thousand and three
both dates inclusive, at an annual rental rate of THREE HUNDRED THIRTY-THREE
THOUSAND NINE HUNDRED EIGHTY-FOUR AND 00/100 ($333,984.00) DOLLARS per annum for
the period commencing December 1, 1992 and ending November 30, 1998; and THREE
HUNDRED SIXTY-ONE THOUSAND TWO HUNDRED FORTY-EIGHT AND 00/100 ($361,248.00)
DOLLARS per annum for the balance of the term hereof.
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 an 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.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
RENT OCCUPANCY:
1. Tenant shall pay the rent as above and as hereinafter provided.
2. Tenant shall use and occupy demised premises for Executive and
administrative offices in connection with Tenant's business [1] and consistent
with a first-class office building, and for no other purpose.
TENANT ALTERATIONS:
3. [1a] Tenant shall make no changes in or to the demised premises of
any nature without Owner's prior written consent. Tenant shall, before making
any alterations, additions, installations or improvements, at its expense,
obtain all permits, approvals and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits, approvals and
certificates to Owner and Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. 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 not done pursuant to this article, the same shall
be discharged by Tenant within thirty days thereafter, at Tenant's expense, by
filing the bond required by law. All fixtures and all paneling, partitions,
railings and like installations, installed in the premises at any time, either
by Tenant or by Owner in Tenant's behalf, shall, upon installation, become the
property of Owner and shall remain upon and be surrendered with the demised
premises unless Owner, by notice to Tenant no later than twenty days prior to
the date fixed as the termination of this lease, elects to relinquish Owner's
right thereto and to have them removed by Tenant, in which event the same shall
be removed from the premises by Tenant prior to the expiration of the lease, at
Tenant's expense. [2] Nothing in this article shall be construed to give Owner
title to or to prevent Tenant's removal of trade fixtures, moveable office
furniture and equipment, but upon removal of any such from the premises or upon
removal of other installations as may be required by Owner, Tenant shall
immediately and at its expense repair any damage in the demised premises or the
building due to such removal. All property permitted or required to be removed,
by Tenant at the end of the term remaining in the premises after Tenant's
removal shall be deemed abandoned and may, at the election of Owner, either be
retained as Owner's property or may be removed from the premises by Owner, at
Tenant's expense. (see Article 42)
MAINTENANCE AND REPAIRS:
4. Tenant shall, throughout the term of this lease, take good care of
the demised premises and the fixtures and appurtenances therein. Tenant shall be
responsible for all damage or injury to the demised premises or any other part
of the building and the systems and equipment thereof, whether requiring
structural or nonstructural repairs caused by or resulting from carelessness,
omission, neglect or improper conduct of Tenant, Tenant's subtenants, agents,
employees, invitees or licensees, or which arise out of any work, labor, service
or equipment done for or supplied to Tenant or any subtenant or arising out of
the installation, use or operation of the property or equipment of Tenant or any
subtenant. Tenant shall also repair all damage to the building and the demised
premises caused by the moving of Tenant's fixtures, furniture and equipment.
Tenant shall promptly make, at Tenant's expense, all repairs in and to the
demised premises for which Tenant is responsible, using only [3]. Any other
repairs in or to the building or the facilities and systems thereof for which
Tenant is responsible shall be performed by Owner at the Tenant's expense. Owner
shall maintain in good working order and repair the exterior and the structural
portions of the building, including the structural portions of its demised
premises, and the public portions of the building interior and the building
plumbing, electrical, heating and ventilating systems serving the demised
premises. Tenant agrees to give prompt notice of any defective condition in the
premises for which Owner may be responsible hereunder. There shall be no
allowance to Tenant for diminution of rental value and no liability on the part
of Owner by reason of inconvenience, annoyance or injury to business arising
from
<PAGE> 2
Owner or others making repairs, alterations, additions or improvements in or in
any portion of the building or the demised premises or in and to the fixtures,
appurtenances or equipment thereof. It is specifically agreed that Tenant shall
not be entitled to any setoff or reduction of rent by reason of any failure of
Owner to comply with the covenants of this or any other article of this Lease.
Tenant agrees that Tenant's sole remedy at law in such instance will be by way
of an action for damages for breach of contract. The provisions of this Article
4 shall not apply in the case of fire or other casualty which are dealt with in
Article 9 hereof. [4]
WINDOW CLEANING:
5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside in violation of
Section 202 of the Labor Law or any other applicable law or of the Rules of the
Board of Standards and Appeals, or of any other Board or body having or
asserting jurisdiction. [5]
REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOADS:
6. Prior to the commencement of the lease term, if Tenant is then in
possession, and at all times thereafter, Tenant, at Tenant's sole cost and
expense, shall promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, rules and regulations of the New York Board of Fire
Underwriters, Insurance Services Office, or any similar body which shall impose
any violation, order or duty upon Owner or Tenant with respect to the demised
premises, whether or not arising out of Tenant's use or manner of use thereof,
(including Tenant's permitted use) or, with respect to the building 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 Owner to Owner's satisfaction against all damages,
interest, penalties and expenses, including, but not limited to, reasonable
attorney's fees, by cash deposit or by surety bond in an amount and in a company
satisfactory to Owner, contest and appeal any such laws, ordinances, orders,
rules, regulations or requirements provided same is done with all reasonable
promptness and provided such appeal shall not subject Owner to prosecution for a
criminal offense or constitute a default under any lease or mortgage under which
Owner may be obligated, or cause the demised premises or any part thereof to be
condemned or vacated. Tenant shall not do or permit any act or thing to be done
in or to the demised premises which is contrary to law, or which will invalidate
or be in conflict with public liability, fire or other policies of insurance at
any time carried by or for the benefit of Owner with respect to the demised
premises or the building of which the demised premises form a part, or which
shall or might subject Owner to any liability or responsibility to any person or
for property damage. Tenant shall not keep anything in the demised premises
except as now or hereafter permitted by the Fire Department, Board of Fire
Underwriters, Fire Insurance Rating Organization or other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or
damages, which may be imposed upon Owner by reason of Tenant's failure to comply
with the provisions of this article and if by reason of such failure the fire
insurance rate shall, at the beginning of this lease or at any time thereafter,
be higher than it otherwise would be, then Tenant shall reimburse Owner, as
additional rent hereunder, for that portion of all fire insurance premiums
thereafter paid by Owner which shall have been charged because of such failure
by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a
schedule or "make-up" of rate for the building or demised premises issued by the
New York Fire Insurance Exchange, or other body making fire insurance rates
applicable to said premises. Tenant shall not place a load upon any floor of the
demised premises exceeding the floor load per square foot area which it was
designed to carry and which is allowed by law. Owner reserves the right to
prescribe the weight and position of all safes, business machines and mechanical
equipment. Such installments shall be placed and maintained by Tenant, at
Tenant's expense, in settings sufficient, in Owner's judgment, to absorb and
prevent vibration, noise and annoyance. (See Article 47)
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 of 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 other others entrusted to employees of the building, nor for loss
of or damage to any property of Tenant by theft or otherwise, nor for any injury
or damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees. Owner or its agents will not be liable for any such damage caused by
other tenants or persons in, upon or about said building or caused by operations
in construction of any private, public or quasi public work. If at any time any
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor abatement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable attorneys
fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's
agents, contractors, employees, invitees, or licensees, of any covenant or
condition of this lease, or the carelessness, negligence or improper conduct of
the Tenant, Tenant's agents, contractors, employees, invitees or licensees.
Tenant's liability under the 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 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 right to elect not to restore
the same as hereinafter 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 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 Landlord's rights and remedies against Tenant
under the lease provisions in effect prior to such termination, and any rent
owing shall be paid up to such date and any payments of rent made by Tenant
which were on account of any period subsequent to such date shall be returned to
Tenant. Unless Owner shall serve a termination notice as provided for herein,
Owner shall make the repairs and restorations under the conditions of (b) and
(c) hereof, with all reasonable expedition, subject to delays due to adjustment
of insurance claims, labor troubles and causes beyond Owner's
<PAGE> 3
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 extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery 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 benefitting 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 and assigns to Owner, Tenant's
entire interest in any such award.
ASSIGNMENT, MORTGAGE, ETC.:
11. 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 Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to any
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
(See Article 41)
ELECTRIC CURRENT:
12. Rates and conditions in respect to submetering or rent inclusion,
as the case may be, to be added in RIDER attached hereto. Tenant covenants and
agrees that at all times its use of electric current shall not exceed the
capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain. (See Article 46)
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 [6] to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to the demised premises or to any other portion of the building or
which Owner may elect to perform. Tenant shall permit Owner to use and maintain
and replace pipes and conduits in and through the demised premises and to erect
new pipes and conduits therein provided they are concealed within [7] walls,
floor, or ceiling. Owner may, during the progress of any work in the demised
premises, take all necessary materials and equipment into said premises without
the same constituting an eviction nor shall the Tenant be entitled to any
abatement of rent while such work is in progress nor to any damages by reason of
loss or interruption of business or otherwise. Throughout the term hereof Owner
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 terms for the purpose of showing
the same to prospective tenants. 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 [8] 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. If during the last month of the
term Tenant shall have removed all or substantially all of Tenant's property
therefrom, Owner may immediately enter, alter, renovate or redecorate the
demised premises without limitation or abatement of rent, or incurring liability
to Tenant for any compensation and such act shall have no effect on this lease
or Tenant's obligations hereunder.
VAULT, VAULT SPACE, AREA:
14. No Vaults, vault space or area, whether or not enclosed or covered,
not within the property line of the building is leased hereunder, anything
contained in or indicated on any sketch, blue print or plan, or anything
contained elsewhere in this lease to the contrary notwithstanding, Owner makes
no representation as to the location of the property line of the building. All
vaults and vault space and all such areas not within the property line of the
building, which Tenant may be permitted to use and/or occupy, is to be used
and/or occupied under a revocable license, and if any such license be revoked,
or if the amount of such space or area by diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability nor shall Tenant be entitled to any compensation or diminution or
abatement of rent, nor shall such revocation, diminution or requisition be
deemed constructive or actual eviction. Any tax, fee or charge of municipal
authorities for such vault or area shall be paid by Tenant.
OCCUPANCY:
15. Tenant will not at any time use or occupy the demised premises in
violation of the certificate of occupancy issued for the building of which the
demised premises are a part. [9] 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. [10]
BANKRUPTCY:
16 (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by the sending or 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 by
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 rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be relet by the Owner for the unexpired term of said lease, or any
part thereof, before presentation of proof of such liquidated damages
<PAGE> 4
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 relet during the term of the reletting.
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.
(See Article 55)
DEFAULT:
17. (1) If Tenant defaults in fulfilling any of the covenants of this
lease other than the covenants for the payment of rent or additional rent; or if
the demised premises become [11]; or if any execution or attachment shall be
issued against Tenant or any of Tenant's property whereupon the demised premises
shall be taken or occupied by someone other than Tenant; or if this lease be
rejected under Section 235 of Title 11 of the U.S. Code (bankruptcy code); or if
Tenant shall be in default under any other lease for space in the building,
then, in any one or more of such events, upon Owner serving a written 15 days
notice upon Tenant specifying the nature of said default and upon the expiration
of said 15 days, if Tenant shall have failed to comply with or remedy such
default, or if the said default or omission complained of shall be of a nature
that the same cannot be completely cured or remedied within said 15 day period,
and if Tenant shall not have diligently commenced during such default within
such 15 day period, and shall not thereafter with reasonable diligence and in
good faith, proceed to remedy or cure such default, then Owner may serve a
written 5 days notice of cancellation of this lease upon Tenant, and upon the
expiration of said 5 days this lease and the term thereunder shall end and
expire as fully and completely as if the expiration of such 5 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
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made. If Tenant shall made 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 [12] re-entry, expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent shall become due
thereupon and be paid up to the time of such re-entry, dispossess and/or
expiration, (b) Owner may re-let the premises or any part or parts thereof,
either in the name of Owner or otherwise, for a term or terms, which may at
Owner's option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or
free rent or charge a higher rental than that in this lease, and/or (c) Tenant
or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the lease or leases of the demised premises for each month of the
period which would otherwise have constituted the balance of the term-of-this
lease. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant's liability for damages. In computing such
liquidated damages there shall be added to the said deficiency such expenses as
Owner may incur in connection with re-letting, such as legal expenses,
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, in 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 waivers any and all rights of redemption granted by or under any
present or future laws in the event of Tenant being evicted or dispossessed for
any cause, or in the event of Owner obtaining possession of demised premises, by
reason of the violation by Tenant of any of the covenants and conditions of this
lease, or otherwise.
FEES AND EXPENSES
19. If Tenant shall default [13] in the observance or performance of
any term or covenant on Tenant's part to be observed or performed under or by
virtue or 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
proceeding, then Tenant will reimburse Owner for such sums so paid or
obligations incurred with interest and costs. The foregoing expenses incurred by
reason of Tenant's default shall be deemed to be additional rent hereunder and
shall be paid by Tenant to Owner within 15 days of rendition of any bill or
statement to Tenant therefor. If Tenant's lease term shall have expired at the
time of making of such expenditures or incurring of such obligations, such sums
shall be recoverable by Owner as damages.
BUILDING ALTERATIONS AND MANAGEMENT:
20. Owner shall have the right at any time without the same
constituting an eviction and without incurring liability to Tenant therefor to
change the arrangement and/or location of public entrances, passageways, doors,
doorways, corridors, elevators, stairs, toilets or other public parts of the
building and to change the name, number or designation by which the building may
be known. There shall be no allowance to Tenant for diminution of rental value
and no liability on the part of Owner by reason of inconvenience, annoyance or
injury to business arising from Owner or other Tenants making any repairs in the
building or any such alterations, additions and improvements. Furthermore,
Tenant shall not have any claim against Owner by reason of Owner's imposition of
such controls of the manner of access to the building by Tenant's social or
business visitors as the Owner may [13a] deemed 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 premises
except as herein expressly set forth and no rights, easements or licenses are
required 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 [14] 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.
All understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party
<PAGE> 5
against whom enforcement of the change, modification, discharge or abandonment
is sought.
END OF TERM:
22. Upon the expiration or other termination of the term of this lease,
Tenant shall quit and surrender to Owner the demised premises, broom clean, in
good order and condition, ordinary wear and damages which Tenant is not required
to repair as provided elsewhere in this lease excepted, and Tenant shall remove
all its property. Tenant's obligation to observe or perform this covenant shall
survive the expiration or other termination of this lease. If the last day of
the term of this lease or any renewal thereof, falls on Sunday, this lease shall
expire at noon on the preceding Saturday unless it be a legal holiday in which
case it shall expire at noon on the preceding business day.
QUIET ENJOYMENT:
23. Owner covenants and agrees with Tenant that upon Tenant paying the
rent and additional rent and observing and performing all the terms, covenants
and conditions, on Tenant's part to be observed and performed, Tenant may
peaceably and quietly enjoy the premises hereby demised, subject, nevertheless,
to the terms and conditions of this lease including, but not limited to, Article
31 hereof and to the ground leases, underlying leases and mortgages hereinbefore
mentioned.
FAILURE TO GIVE POSSESSION:
24. If Owner is unable to give possession of the demised premises on
the date of the commencement of the term hereof, because of the holding-over or
retention of possession of any tenant, undertenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or for any other reason, Owner shall not be subject to any liability
for failure to give possession on said date and the validity of the lease shall
not be impaired under such circumstances, nor shall the same be construed in any
wise to extend the term of this lease, but the rent payable hereunder shall be
abated (provided Tenant is not responsible for Owner's inability to obtain
possession) until after Owner 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.
NO WAIVER:
25. The failure of Owner to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this lease or of
any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall
not prevent a subsequent act which would have originally constituted a violation
from having all the force and effect of an original violation. The receipt by
Owner of rent with knowledge of the breach of any covenant of this lease shall
not be deemed a waiver of such breach and no provision of this lease shall be
deemed to have been waived by Owner unless such waiver be in writing signed by
Owner. No payment by Tenant or receipt by Owner of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement of any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Owner may accept such check or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this lease provided. No act or thing done by Owner or Owner's
agents during the term hereby demised shall be deemed an acceptance of a
surrender of said premises, and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys of said premises prior to the
termination of the lease and the delivery of keys in 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 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 or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed 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 including a counterclaim
under Article 4.
INABILITY TO PERFORM:
27. This Lease and the obligation of Tenant it pay rent hereunder and
perform all of the other covenants and agreements hereunder on part of Tenant to
be performed shall in any 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 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 if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant at
the building of which the demised premises form a part or at the last known
residence address or business address of Tenant 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 observed by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
SERVICES PROVIDED BY OWNERS:
29. As long as Tenant is not in default under any of the covenants of
this lease, Owner shall provide: (a) necessary elevator facilities on business
days from 8 a.m. to 6 p.m. and have one elevator subject to call at all times;
(b) heat to the demised premises when and as required by law, on business days
from 8 a.m. to 6 p.m.; (c) water for ordinary purposes, but if Tenant uses or
consumes water for any other purposes or in unusual quantities (of which fact
Owner shall be the sole judge), Owner may install a water meter at Tenant's
expense which Tenant shall thereafter maintain at Tenant's expense in good
working order and repair to register such water consumption and Tenant shall pay
for water consumed as shown on said meter as additional rent as and when bills
are rendered; (d) cleaning service for the demised premises on business days at
Owner's expense provided that the same are kept in order by Tenant. [14a] If,
however, said premises are to kept clean by Tenant, it shall be done at Tenant's
sole expense, in a manner satisfactory to Owner and no one other than persons
approved by Owner shall be permitted to enter said premises or the building of
which they are a part for such purpose. Tenant shall pay Owner the cost of
removal of any of Tenant's refuse and rubbish from the building; (e) if the
demised premises are serviced by Owner's air conditioning/cooling and
ventilating system, air conditioning/cooling will be furnished to Tenant from
May 15th through September 30th on business days (Mondays through Fridays,
holidays excepted) from 8:00 a.m. to 6:00 p.m., and ventilation will be
furnished on business days during the aforesaid hours except when air
conditioning/cooling is being furnished as aforesaid. If Tenant requires air
conditioning/cooling or ventilation for more extended hours or on Saturdays,
Sundays or on holidays, as defined under Owner's contract with Operating
Engineers Local 94-94A, Owner will furnish the same at Tenant's expense. RIDER
to be added in respect to rates and conditions for such additional service; [15]
(f) Owner reserves the right to stop services of the heating, elevators,
plumbing, air-conditioning, power systems or cleaning or other services, if any,
when necessary by reason of accident or for repairs, alterations, replacements
or improvements necessary or desirable in the judgment of Owner for as long as
may be reasonably required by reason thereof. If the building of which the
demised premises are a part supplies manually-operated elevator service, Owner
at any time may substitute automatic-control elevator service and upon ten days'
written notice to Tenant, proceed with alterations necessary
<PAGE> 6
therefor without in any wise affecting this lease or the obligation of Tenant
hereunder. The same shall be done with a minimum of inconvenience to Tenant and
Owner shall pursue the alteration with due diligence.
CAPTIONS:
30. The Captions are inserted only as a matter of convenience and for
reference and no way define, limit or describe the scope of this lease nor the
intent of any provisions thereof.
DEFINITIONS:
31. The term "office", or "offices", wherever used in this lease, shall
not be construed to mean premises used as a store or stores, for the sale or
display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing. The term "Owner" means a landlord or
lessor, and as used in this lease means only the owner, or the mortgagee in
possession, for the time being of the land and building (or the owner of a lease
of the building or of the land and building) of which the demised 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 in their technical legal
meaning. The term "business days" as used in this case shall exclude Saturdays,
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:
32. 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 in cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations without
any claim for damages or indemnity against Owner, or diminution or abatement of
rent.
RULES AND REGULATIONS:
33. Tenant and Tenant's servants, employees, agents, visitors, and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations and such other and further reasonable Rules and Regulations as Owner
or Owner's agents may from time to time adopt. Notice of any additional rules or
regulations shall be given in such manner as Owner may elect. In case Tenant
disputes the reasonableness of any additional Rule or Regulation hereafter made
or adopted by Owner or Owner's agents, the parties hereto agree to submit the
question of the reasonableness of such Rule or Regulation for decision to the
New York office of the American Arbitration Association, whose determination
shall be final and conclusive upon the parties hereto. The right to dispute the
reasonableness of any additional Rule or Regulation upon Tenant's part shall be
deemed waived unless the same shall be asserted by service of a notice, in
writing upon Owner with 30 days after the giving of notice thereof. Nothing in
these 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. [16]
SECURITY:
34. Tenant has deposited with Owner the sum of $57,936.00 as security
for the faithful performance and observance by Tenant of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease, including,
but not limited to, the payment of rent and additional rent, Owner may use,
apply or retain the whole or any part of the security so deposited to the extent
required for the payment of any rent and additional rent or any other sum as to
which Tenant is in default or for any sum which Owner may expend or may be
required to expend by reason of Tenant's default in respect of any of the terms,
covenants and conditions of this lease, including but not limited to, any
damages or deficiency in the re-letting of the premises, whether such damages or
deficiency accrued before or after summary proceedings or other re-entry by
Owner. In the event that Tenant shall fully and faithfully comply with all of
the terms, provisions, covenants and conditions of this lease, the security
shall be returned to Tenant after the date fixed as the end of the Lease and
after delivery of entire possession of the demised premises to Owner. In the
event of a sale of the land and building or leasing of the building, of which
the demised premises for a part, Owner shall have the right to transfer the
security to the vendee or lessee and Owner shall thereupon be released by Tenant
from all liability for the return of such security; and Tenant agrees to look to
the new Owner solely for the return of said security, and it is agreed that the
provisions hereof shall apply to every transfer or assignment made of the
security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
ESTOPPEL CERTIFICATE:
35. (See Article 43)
SUCCESSORS AND ASSIGNS:
36. The covenants, conditions and agreements contained in this lease
shall bind and inure to the benefit of Owner and Tenant and their respective
heirs, distributors, executors, administrators, successors, and except as
otherwise provided in this lease, their assigns.
<PAGE> 7
SEE RIDER PAGES ANNEXED HERETO AND MADE A PART
HEREOF CONTAINING ARTICLES 37-59
In Witness Whereof, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
Witness for Owner:
/s/
- ------------------------------------------------
Witness for Tenant:
/s/
- ------------------------------------------------
ACKNOWLEDGMENTS
CORPORATE OWNER
STATE OF NEW YORK, ss.
County of
On this day of , 19 before me personally 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 OWNER 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, ant that he signed his name
thereto by like order.
INDIVIDUAL OWNER
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 OWNER,
executed the foregoing instrument and acknowledged to me that
he executed the same.
TISHMAN SPEYER SILVERSTEIN PARTNERSHIP, Owner
By: TISHMAN SPEYER 42ND ST. ASSOCIATES, General
Partner
By: /s/
- ------------------------------------------------
a General Partner
By: 11 West Associates, a General Partner
By: /s/
- ------------------------------------------------
a General Partner
TIME PUBLISHING VENTURES, INC., Tenant
By: /s/ Joseph A. Ripp
--------------------------------------------
Name: Joseph A. Ripp
Title: Vice President
CORPORATE TENANT
STATE OF NEW YORK, ss.
County of New York
On this 8th day of September, 1992, before me personally came Joseph A. Ripp, to
me known, who being by me duly sworn, did depose and say that he resides in
Wilton, Ct.; that he is the Vice President of Time Publishing Ventures, Inc.,
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.
/s/ Betty Perlish [seal of notary]
- --------------------------------------------------
Notary Public
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.
<PAGE> 8
INSERTS TO LEASE
DATED DECEMBER 24, 1992 BETWEEN
TISHMAN SPEYER SILVERSTEIN PARTNERSHIP, AS OWNER,
AND TIME PUBLISHING VENTURES, INC., AS TENANT
1. (and/or any permitted occupant's business)
la. Subject to the provisions of Article 42 herein,
2. In no event shall Tenant be required to remove any installation (and
restore the demised premises with respect thereto) unless Owner shall
have reserved the right to require Tenant to remove same at the time
Owner granted its consent thereto.
3. contractors approved by Owner for the performance of Tenant's Changes
in accordance with Article 42 hereof.
4. In making any repairs or alterations in or to the demised premises
pursuant to the provisions of this Article or elsewhere in this lease,
Owner shall use reasonable efforts to minimize interference with the
conduct of Tenant's business in the demised premises; provided,
however, that in no event shall Owner be required to employ labor on an
overtime or premium pay basis.
5. Owner shall cause the windows of the demised premises to be cleaned not
less frequently than three (3) times per year.
6. , upon reasonable prior notice,
7. then existing
8. (in case of emergency)
9. Annexed hereto as Exhibit "B" is a copy of the current Certificate of
Occupancy for the building.
10. ; provided, however, that Tenant shall not be responsible for any
violations of record against the demised premises as of the
Commencement Date (except to the extent same would customarily be cured
and removed in connection with the initial build-out of space in the
building for occupancy by a tenant)
11. abandoned;
12. beyond any applicable notice and cure period,
13. beyond (except in the case of an emergency) any applicable notice and
cure period
13a. reasonably
14. , except as expressly provided otherwise in this lease,
14a. A copy of the current building cleaning specifications is annexed
hereto as Exhibit "C".
<PAGE> 9
15. Subject to Articles 27 and 29 hereof, Owner shall furnish Tenant, at no
expense to Tenant, with year round condenser water during business
hours for the operation of Tenant's supplemental air-conditioning
system, if any, serving the demised premises; provided, however, that
the cost of making any connections into the building condenser water
system shall be borne by Tenant. In addition, Landlord shall furnish
Tenant, as and when required by Tenant, at the then building standard
charges therefor, with (i) after-hours condenser water required by
Tenant for the operation of Tenant's supplemental air-conditioning
system, if any, and/or (ii) after-hours chilled water, during the
building cooling season, for the operation of the building
air-conditioning system servicing the demised premises. Landlord's
charges for such after-hours condenser water and/or chilled water
requested by Tenant shall. be paid for by Tenant to Landlord within ten
(10) days after demand therefor.
16. Owner shall not discriminate against Tenant in the promulgation or
enforcement of any Rules and Regulations.
-2-
<PAGE> 10
RIDER ANNEXED TO LEASE DATED AS OF DECEMBER 24, 1991 BETWEEN TISHMAN SPEYER
SILVERSTEIN PARTNERSHIP, AS LANDLORD, AND TIME PUBLISHING VENTURES, INC., AS
TENANT
37. RIDER PROVISIONS PREVAIL:
If and to the extent that any of the provisions of this Rider conflict
or are otherwise inconsistent with any of the preceding printed provisions of
this lease, or of the Rules and Regulations attached to this lease, whether or
not such inconsistency is expressly noted in this Rider, the provisions of this
Rider shall prevail, and in case of inconsistency with said Rules and
Regulations, shall be deemed a waiver of such Rules and Regulations with respect
to Tenant to the extent of such inconsistency.
38. ADDITIONAL DEFINITIONS:
For the purposes of this lease and all agreements supplemental to this
lease, and all communications with respect thereto, unless the context otherwise
requires:
1. The term "fixed rent" shall mean rent at the annual rental rate
or rates provided for in the granting clause appearing at the beginning of this
lease.
2. The term "additional rent" shall mean all sums of money, other
than fixed rent, and which become due and payable from Tenant to Landlord
hereunder, and Landlord shall have the same remedies therefor as for a default
in payment of fixed rent.
3. The term "rent" and "rents" shall mean and include fixed rent
and/or additional rent hereunder.
4. The terms "Commencement Date" and "Expiration Date" shall mean
the dates fixed in this lease, or to be determined pursuant to the provisions of
this lease, respectively, as the beginning and the end of the term for which the
demised premises are hereby leased.
5. The terms "include", "including" and "such as" shall each be
construed as if followed by the phrase "without being limited to".
6. The term "obligations of this lease", and words of like import,
shall mean the covenants to pay rent and additional rent under this lease and
all of the other covenants and conditions contained in this lease. Any provision
in this lease that one party or the other or both shall do or not do or shall
cause or permit or not cause or permit a particular act, condition, or
circumstance shall be deemed to mean that such party so covenants or both
parties so covenant, as the case may be.
7. The term "Tenant's obligations hereunder", and words of like
import, and the term "Landlord's obligations hereunder", and words of like
import, shall mean the obligations of this lease which are to be performed or
observed by Tenant, or by Landlord, as the case may be. Reference to
"performance" of either party's obligations under this lease shall be construed
as "performance and observance".
8. Reference to Tenant being or not being "in default hereunder",
or words of like import, shall mean that Tenant is in default beyond any
applicable notice and cure period in the performance of one or more of Tenant's
obligations hereunder, or that Tenant is not in default beyond any applicable
notice and cure period in the performance of any of Tenant's obligations
hereunder, or that a condition of the character described in Article 16(a) has
occurred and continues or has not occurred or does not continue, as the case may
be.
9. References to Landlord as having "no liability to Tenant" or
being "without liability to Tenant", shall mean that Tenant is not entitled to
terminate this lease, or to claim actual or constructive eviction, partial or
total, or to receive any abatement or diminution of rent, or to be relieved in
any manner of any of its other obligations hereunder, or to be compensated for
loss or injury suffered or to enforce any other kind of liability whatsoever
against Landlord under or with respect to this lease or with respect to Tenant's
use or occupancy
<PAGE> 11
of the demised premises. Nothing contained herein shall be deemed to relieve
Landlord of its liability at law for its own negligence.
10. The term "laws and/or requirements of public authorities" and
words of like import shall mean laws and ordinances of any or all of the
Federal, state, city, county and borough governments and rules, regulations,
orders and/or directives of any or all departments, subdivisions, bureaus,
agencies or offices thereof, or of any other governmental, public or
quasi-public authorities, having jurisdiction in the premises, and/or the
direction of any public officer pursuant to law.
11. The term "requirements of insurance bodies" and words of like
import shall mean rules, regulations, orders and other requirements of the New
York Board of Fire Underwriters and/or the New York Fire Insurance Rating
Organization and/or any other similar body performing the sane or similar
functions and having jurisdiction or cognizance of the building and/or the
demised premises.
12. The term "repair" shall be deemed to include restoration and
replacement as may be necessary to achieve and/or maintain good working order
and conditions.
13. Reference to "termination of this lease" includes expiration or
earlier termination of the term of this lease or cancellation of this lease
pursuant to any of the provisions of this lease or to law. Upon a termination of
this lease, the term and estate granted by this lease shall end at noon of the
date of termination as if such date were the date of expiration of the term of
this lease and neither party shall have any further obligation or liability to
the other after such termination (i) except as shall be expressly provided for
in this lease, or (ii) except for such obligation as by its nature or under the
circumstances can only be, or by the provisions of this lease, may be, performed
after such termination, and, in any event, unless expressly otherwise provided
in this lease, any liability for a payment which shall have accrued to or with
respect to any period ending at the time of termination shall survive the
termination of this lease.
14. The term "in full force and effect" when herein used in
reference to this lease as a condition to the existence or exercise of a right
on the part of Tenant shall be construed in each instance as including the
further condition that at the time in question no default on the part of Tenant
exists, and no event has occurred which has continued to exist for such period
of time (after the notice, if any, required by this lease), as would entitle
Landlord to terminate this lease or to dispossess Tenant.
15. The term "Tenant" shall mean Tenant herein named or any
assignee or other successor in interest (immediate or remote) of Tenant herein
named, while such Tenant or such assignee or other successor in interest, as the
case may be, is in possession of the demised premises as owner of the Tenant's
estate and interest granted by this lease and also, if Tenant is not an
individual or a corporation, all of the persons, firms and corporations then
comprising Tenant.
16. Words and phrases used in the singular shall be deemed to
include the plural and vice versa, and nouns and pronouns used in any particular
gender shall be deemed to include any other gender. The terms "person" and
"persons" as used in this lease, shall be deemed to include natural persons,
firms, corporations, associations and any other private or public entities.
17. The rule of "ejusdem generis" shall not be applicable to limit
a general statement following or referable to an enumeration of specific matters
to matters similar to the matters specifically mentioned.
18. All references in this lease to numbered Articles, lettered
Paragraphs, Sections, Subdivisions and lettered Exhibits are references to
Articles, Paragraphs, Sections and Subdivisions of this lease, and Exhibits
annexed to (and thereby made part of) this lease, as the case may be, unless
expressly otherwise designated in the context.
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<PAGE> 12
39. ESCALATION FOR INCREASE IN REAL ESTATE TAXES:
A. As used herein:
1. "Taxes" shall mean all real estate taxes, assessments, sewer and
water rents, governmental levies, municipal taxes, 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, levied or imposed upon all or any part of the land, the building and
the sidewalks, plazas or streets in front of or adjacent thereto, including any
tax, excise or fee measured by or payable with respect to any rent, and levied
against Landlord and/or the land and building, under the laws of the United
States, the State of New York, or any political subdivision thereof, or by the
City of New York, or any political subdivision thereof. If, due to a future
change in the method of taxation or in the taxing authority, a new or additional
real estate tax, or a franchise, income, transit, profit or other tax or
governmental imposition, however designated, shall be levied against Landlord,
and/or the land and building, in addition to, or in substitution in whole or in
part for any tax which would constitute "Taxes", or in lieu of additional Taxes,
such tax or imposition shall be deemed for the purposes hereof to be included
within the term "Taxes".
2. "Tax Year" shall mean each period of twelve (12) months,
commencing on the first day of July of each such period, in which occurs any
part of the term of this lease or such other period of twelve (12) months
occurring during the term of this lease as hereafter may be duly adopted as the
fiscal year for real estate tax purposes of the City of New York.
3. "Base Tax" shall mean the Taxes for the twelve month period
ending June 30, 1993 (the "Base Tax Year").
4. "Tenant's Proportionate Share" shall mean 1.67%.
B. If the Taxes for any Tax Year shall be greater than the Base Tax,
Tenant shall pay as additional rent for such Tax Year a sum equal to Tenant's
Proportionate Share of the amount by which the Taxes for such Tax Year are
greater than the Base Tax (which amount is hereinafter called the "Tax
Payment"). Should this lease commence or terminate prior to the expiration of a
Tax Year, such Tax Payment shall be prorated to, and shall be payable on, or as
and when ascertained after, the Commencement Date or the Expiration Date as the
case may be. Tenant's obligation to pay such additional rent and Landlord's
obligation to refund pursuant to Paragraph C below, as the case may be, shall
survive the termination of this lease. If the Taxes for any Tax Year subsequent
to the Base Tax Year, or an installment thereof, shall be reduced before such
Taxes, or such installment, shall be paid, the amount of Landlord's reasonable
costs and expenses of obtaining such reduction (but not exceeding the amount of
such reduction) shall be added to and be deemed part of the Taxes for such Tax
Year. Payment of additional rent for any Tax Payment due from Tenant shall be
made as and subject to the conditions hereinafter provided in this Article.
C. Only Landlord shall be eligible to institute proceedings to contest
the Taxes or reduce the assessed valuation of the land and building. Landlord
shall be under no obligation to contest the Taxes or the assessed valuation of
the land and the building for any Tax Year or to refrain from contesting the
same, and may settle any such contest on such terms as Landlord in its sole
judgment considers proper. If Landlord shall receive a refund for any Tax Year
for which a Tax Payment shall have been made by Tenant pursuant to Paragraph B
above, Landlord shall repay to Tenant, with reasonable promptness, Tenant's
Proportionate Share of such refund after deducting from such refund the
reasonable costs and expenses (including exports' and attorneys' fees) of
obtaining such refund. If the assessment for the Base Tax Year shall be reduced
from the amount originally imposed after Landlord shall have rendered a
comparative statement (as provided in Paragraph D below) to Tenant with respect
to a Tax Year, the amount of the Tax Payment shall be adjusted in accordance
with such change and Tenant, on Landlord's demand, shall pay any increase in
additional rent resulting from such adjustment.
D. Tenant's Tax Payment for each Tax Year shall be due and payable in
two equal semi-annual installments, in advance on the first day of each June and
December during each Tax Year, based upon the written comparative statement
furnished by Landlord prior to the
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commencement of such Tax Year, until such time as a new written statement for a
subsequent Tax Year shall become effective. If any such statement is furnished
to Tenant after the commencement of a Tax Year in respect of which such
statement is rendered, Tenant shall, within twenty (20) days thereafter, pay to
Landlord an amount equal to the amount of any underpayment of Tenant's Tax
Payment with respect to such Tax Year and, in the event of an overpayment,
Landlord will credit Tenant the amount of Tenant's overpayment against
subsequent payments under this Article. If there shall be any increase in Taxes
for any Tax Year, whether during or after such Tax Year, Landlord shall furnish
a revised statement for such Tax Year, and Tenant's Tax Payment for such Tax
Year shall be adjusted and paid substantially in the same manner as provided in
the preceding sentence. If during the term of this lease, Taxes are required to
be paid to the appropriate taxing authorities on any other date or dates than as
presently required, then at Landlord's option, Tenant's Tax Payments shall be
correspondingly accelerated or revised so that said Tenant's Tax Payments are
due at least 30 days prior to the date payments are due to the taxing
authorities or the superior mortgagee. The benefit of any discount for any early
payment or prepayment of Taxes shall accrue solely to the benefit of Landlord
and such discount shall not be subtracted from Taxes. Whenever so requested, but
not more often than once a year, Landlord will furnish Tenant with a reproduced
copy of the bill (or receipted bill) for Taxes for the current or next preceding
Tax Year.
E. Landlord's failure during the lease term to prepare and deliver any
tax statements or bills, or Landlord's failure to make a demand under this
Article or under any other provision of this lease shall not in any way be
deemed to be a waiver of, or cause Landlord to forfeit or surrender, its rights
to collect any items of additional rent which may have become due pursuant to
this Article during the term of this lease. Tenant's liability for the
additional rent due under this Article shall survive the expiration or sooner
termination of this lease; provided, however, Tenant shall not have any
liability for any Tax Payment not billed to Tenant within two (2) years after
the Expiration Date of this lease.
F. In no event shall any adjustment of Tax Payments hereunder result in
a decrease in the fixed rent or additional rent payable pursuant to any other
provision of this lease, it being agreed that the payment of additional rent
under this Article is an obligation supplemental to Tenant's obligation to pay
fixed rent.
40. ESCALATION FOR OPERATING EXPENSES:
A. For the purposes of this lease:
1. The term "Escalation Year" shall mean each calendar year which
shall include any part of the term of this lease.
2. The term "Tenant's Proportionate Share" shall be deemed to mean
1.67%.
3. "The term "Base Year" shall mean the twelve month period ending
December 31, 1992.
4. The term "Operating Expenses" shall mean all costs and expenses
(and taxes thereon, if any) paid or incurred by Landlord or on behalf of
Landlord with respect to the operation, cleaning, repair, safety, management,
security and maintenance of the land and the building, building equipment,
sidewalks, curbs and other areas immediately adjacent to the building, and with
respect to the services provided tenants, including: (i) salaries, wages and
bonuses paid to, and the cost of any hospitalization, medical, surgical, union
and general welfare benefits (including group life insurance), any pension,
retirement or life insurance plan and other benefit or similar expense
(collectively "Wages") relating to employees of Landlord or employees whose
wages are chargeable to Landlord engaged in the operation, cleaning, repair,
safety, management, security or maintenance of the building and the building
equipment or in providing building maintenance services to tenants; (ii) social
security, unemployment and other payroll taxes, the cost of providing disability
and worker's compensation coverage imposed by any legal requirements, union
contract or otherwise with respect to said employees; (iii) the cost of
electricity, gas, steam, water, air conditioning and other fuel and utilities;
(iv) the cost of casualty, rent, liability, fidelity, plate glass and any other
insurance; (v) the cost of repairs, maintenance and painting; (vi) the cost or
rental of all building and cleaning supplies, tools,
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<PAGE> 14
materials and equipment; (vii) the cost of uniforms, work clothes and dry
cleaning; (viii) window cleaning, concierge, guard, watchman or other security
personnel or service, if any; (ix) management fees or, if no managing agent is
employed by Landlord, a sum in lieu thereof not in excess of then prevailing
rates for management fees payable in the Borough of Manhattan, City of New York
for first-class office buildings; (x) charges of independent contractors
performing work included within this definition of Operating Expenses; (xi)
telephone and stationary; (xii) holiday and other decorations customarily found
in first-class Manhattan office buildings; (xiii) association fees and dues; and
(xvii) exterior and interior landscaping.
Provided, however, that the foregoing costs and expenses shall exclude
or have deducted from them, as the case may be:
(a) executives' salaries above the grade of building manager;
(b) expenditures for capital improvements, other than those which
under generally applied real estate practice are expenses or regarded as
deferred expenses and other than capital expenditures made by reason of
mandatory legal or insurance requirements first effective (or first requiring
such improvements to be made) after the date hereof, or which actually reduce
energy consumption, in any of which cases the cost thereof shall be included in
Operating Expenses for the Escalation Year in which the costs are incurred and
subsequent Escalation Years, on a straight-line basis, to the extent that such
items are amortized over the useful life thereof (as determined in accordance
with generally accepted accounting principles, consistently applied), with an
interest factor equal to two (2) percentage points above the prime commercial
lending rate of Citibank, N.A., charged to its customers of highest credit
standing for ninety (90) day unsecured loans ("Expense Interest Rate), at the
time of Landlord's having made said expenditure;
(c) amounts received by Landlord through proceeds of insurance to
the extent they are compensation for sums previously included in Operating
Expenses hereunder;
(d) costs of repairs or replacements incurred by reason of fire or
other casualty or condemnation to the extent Landlord is compensated therefor;
(e) advertising and promotional expenditures;
(f) costs incurred in performing work or furnishing services for
any tenant (including Tenant), whether at such tenant's or Landlord's expense,
to the extent that such work or service is in excess of any work or service that
Landlord is obligated to furnish to Tenant at Landlord's expense;
(g) depreciation or amortization, except as provided above;
(h) brokerage commissions;
(i) Tenant's Proportionate Share of Taxes plus Taxes allocated to
other space leased to tenants as reasonably estimated by Landlord;
(j) refinancing costs and mortgage interest and amortization
payments;
(k) the cost of electricity furnished by Landlord to space leased
by tenants (including Tenant) of the building; and the cost of installing any
meters or performing electrical surveys in any such space;
(l) legal and other professional fees and expenses incurred in
connection with the leasing of space in the building and disputes with tenants
of the building;
(m) franchise, estate, succession, inheritance, profit, use,
occupancy, gross receipts, rental, capital gains, capital stock, transfer and
income taxes upon Landlord or the land and building;
(n) interest or penalties for late payment by Landlord;
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<PAGE> 15
(o) the cost (including, without limitation, attorneys' fees and
disbursements) of any judgment, settlement or arbitration award resulting from
any tort liability;
(p) the cost of installing, operating and maintaining any specialty
service such as an observatory, broadcasting facilities, luncheon club, athletic
or recreational club;
(q) the cost (including increased Taxes and Operating Expenses) of
any addition of rentable square footage to the building after the original
construction;
(r) lease payments for rented equipment, the cost of which
equipment would constitute a capital expenditure if the equipment were purchased
(except, with respect to equipment falling within the scope of clause (b) or
which reduces energy consumption (as provided herein);
(s) the cost of furnishing and installing replacement light bulbs
and ballasts in tenanted areas of the building;
(t) any fee for the management of the building other than the fees
specified in clause (x) in this Paragraph A.4;
(u) arbitration expenses unrelated to the maintenance, operation
and security of the building and any other arbitration expenses incurred in
applying for any reduction of Taxes or in connection with the leasing of space
in the building or with prosecuting default or eviction proceedings against
tenants or relating in any other way to tenant disputes;
(v) legal and auditing fees, other than those reasonably incurred
in connection with the maintenance and operation of the land and building or
with prosecuting default or eviction proceedings against tenants or relating in
any other way to tenant disputes;
(w) any rent, additional rent or other charge under any lease or
sublease to or assumed, directly or indirectly, by Landlord;
(x) expenditures on account of Landlord's acquisition or air
rights;
(y) the cost of repairs or replacements incurred by reason of fire
or other casualty or caused by the exercise of the right of eminent domain to
the extent Landlord is compensated therefor by insurance proceeds or a
condemnation award;
(z) there shall be deducted from Operating Expenses an amount equal
to all amounts received by Landlord through proceeds of insurance to the extent
the proceeds are compensation for expenses which (i) previously were included in
Operating Expenses hereunder, (ii) are included in Operation Expenses for the
Escalation Year in which the insurance proceeds are received, or (iii) will be
included as Operating Expenses in a subsequent Escalation Year;
(aa) costs and expenses of governmental licenses and permits, or
renewals thereof, unless the same are for governmental licenses or permits
normal to the operation or maintenance of the land and building; and
(bb) the cost of any work or service performed for any facility or
property other than the land and building.
If Landlord shall purchase any item of capital equipment or make any
capital expenditure which has the effect of reducing the expenses which would
otherwise be included in Operating Expenses, then the costs of such capital
equipment or capital expenditure are to be included in Operating Expenses for
the Escalation Year in which the costs are incurred and subsequent Escalation
Years (but not in excess of the savings actually realized in each such year), on
a straight-line basis, to the extent that such items are amortized over such
period of time as Landlord reasonably estimates such savings or reductions in
Operating Expenses are expected to equal Landlord's costs for such capital
equipment or capital expenditure, with an interest factor equal to the Expense
Interest Rate at the time of Landlord's having made said expenditure. If
Landlord shall lease any items of capital equipment designed to result in
savings or reductions in expenses which would otherwise be included in Operating
Expenses, then the rentals and other
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<PAGE> 16
costs paid pursuant to such leasing shall be included in Operating Expenses for
the Escalation Year in which they were incurred.
If during all or part of the Base Year and/or any Escalation Year,
Landlord shall not furnish any particular item(s) of work or service (which
would otherwise constitute an Operating Expense hereunder) to portions of the
building due to the fact that (i) such portions are not occupied or leased, (ii)
such item of work or service is not required or desired by the tenant of such
portion, (iii) such tenant is itself obtaining and providing such item of work
or service or (iv) for other reasons, then, for the purposes of computing
Operating Expenses, the amount for such item and for such period shall be deemed
to be increased by an amount equal to the additional costs and expenses (as
reasonably estimated by Landlord) which would reasonably have been incurred
during such period by Landlord if it had at its own expense furnished such item
of work or services to such portion of the building or to such tenant.
B. 1. For each Escalation Year commencing during the term of this
lease, Tenant shall pay ("Tenant's Operating Payment") to Landlord, as
additional rent, a sum equal to Tenant's Proportionate Share of the amount by
which Operating Expenses for such Escalation Year exceeds the Operating Expenses
for the Base Year.
2. Landlord shall furnish to Tenant, prior to the commencement of
each Escalation Year, a written statement setting forth Landlord's estimate of
Tenant's Operating Payment for such Escalation Year, and the method of
calculation of Tenant's Operating Payment for such Escalation Year. Tenant shall
pay to Landlord on the first day of each month during such Escalation Year an
amount equal to one-twelfth (1/12th) of Landlord's estimate of Tenant's
Operating Payment for such Escalation Year. If, however, Landlord shall furnish
any such estimate for an Escalation Year subsequent to the commencement thereof,
then (a) until the first day of the month following the month in which such
estimate is furnished to Tenant, Tenant shall pay to Landlord on the first day
of each month an amount equal to the monthly sum payable by Tenant to Landlord
under this Paragraph B in respect of the last month of the preceding Escalation
Year; (b) promptly after such estimate is furnished to Tenant or together
therewith, Landlord shall give notice to Tenant stating whether the installments
of Tenant's Operating Payment previously made for such Escalation Year were
greater or less than the installments of the Tenant's Operating Payment to be
made for such Escalation Year in accordance with such estimate, and (i) if there
shall be a deficiency, Tenant shall pay the amount thereof within twenty (20)
days after demand therefor, or (ii) if there shall have been an overpayment,
Landlord shall either refund to Tenant the amount thereof or permit Tenant to
credit the amount thereof against subsequent payments under this Section; and
(c) on the first day of the month following the month in which such estimate is
furnished to Tenant, and monthly thereafter throughout the remainder of such
Escalation Year, Tenant shall pay to Landlord an amount equal to one-twelfth
(1/12th) of Tenant's Operating Payment shown on such estimate. Landlord may at
any time or from time to time (but not more than twice with respect to any
Escalation Year) furnish to Tenant a revised statement of Landlord's estimate of
Tenant's Operating Payment for such Escalation Year, and in such case, Tenant's
Operating Payment for such Escalation Year shall be adjusted and paid or
refunded, as the case may be, substantially in the same manner as provided in
the preceding sentence.
3. After the end of each Escalation Year Landlord shall furnish to
Tenant a Landlord's Statement for such Escalation Year. Each such year-end
Landlord's Statement shall be accompanied by a computation of Operating Expenses
for the building prepared by a certified public accountant or managing agent
designated by Landlord from which Landlord shall make the computation of
Operating Expenses hereunder. If the Landlord's Statement shall show that the
sums paid by Tenant under this Section exceeded Tenant's Operating Payment paid
by Tenant for such Escalation Year, Landlord shall either refund to Tenant the
amount of such excess or permit Tenant to credit the amount of such excess
against subsequent payments under this Section; and if the Landlord's Statement
for such Escalation Year shall show that the sums so paid by Tenant were less
than Tenant's Operating Payment paid by Tenant for such Escalation Year, Tenant
shall pay the amount of such deficiency within ten (10) days after demand
therefore.
4. If the Commencement Date or the Expiration Date shall occur on a
date other than January 1 or December 31, respectively, any additional rent
under this Article for the
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Escalation Year in which such Commencement Date or Expiration Date shall occur
shall be apportioned in that percentage which the number of days in the period
from the Commencement Date to December 31 or from January I to the Expiration
Date, as the case may be, both inclusive, shall bear to the total number of days
in such Escalation Year. In the event of a termination of this lease, any
additional rent under this Article shall be paid or adjusted within thirty (30)
days after submission of a Landlord's Statement. In no event shall fixed rent
ever be reduced by operation of this Article and the rights and obligations of
Landlord and Tenant under the provisions of this Article with respect to any
additional rent shall survive the termination of this lease.
C. 1. Landlord's failure to render Landlord's Statements with
respect to any Escalation Year shall not prejudice Landlord's right to
thereafter render a Landlord's Statement with respect thereto or with respect to
any subsequent Escalation Year. Nothing herein contained shall restrict Landlord
from issuing Landlord's Statements at any time there is an increase in Operating
Expenses during any Escalation Year or any time thereafter.
2. Each Landlord's Statement shall be conclusive and binding upon
Tenant unless within sixty (60) days after receipt of such Landlord's Statement
Tenant shall notify Landlord that it disputes the correctness of Landlord's
Statement, specifying the particular respects in which Landlord's Statement is
claimed to be incorrect. Tenant shall have the right, for a period of thirty
(30) days after Tenant gives Landlord timely notice that it disputes Landlord's
Statement, to inspect the books and records of Landlord solely to the extent
necessary to verify Landlord's computation of the disputed item(s) of Operating
Expenses. Such inspection shall take place during business hours at a location
designated by Landlord, upon reasonable prior notice by Tenant to Landlord. If
Tenant shall dispute the correctness of Landlord's Statement as aforesaid, and
the parties shall not be able to resolve such dispute within ninety (90) days
after the giving of such Landlord's Statement, then the parties shall refer the
matter or matters in dispute to certified public accountants mutually acceptable
to Landlord and Tenant, and the decision of such accountants shall be conclusive
and binding upon the parties. Pending settlement of such dispute, Tenant shall
pay Tenant's Operating Payment as determined by Landlord and, in the event such
dispute is resolved in favor of Tenant, Landlord shall promptly reimburse Tenant
for any overpayment(s). The fees and expenses of said accountants in determining
such matter or matters shall be borne by the unsuccessful party (and if both
parties are partially unsuccessful, the accountant shall apportion the fees and
disbursements between the parties based upon the degree of success of each
party).
41. AMENDING ARTICLE 11:
Notwithstanding the provisions of Article 11, and in modification and
amplification thereof:
A. If Tenant's interest in this lease is assigned, whether or not in
violation of the Provisions of this lease, Landlord may collect rent from the
assignee; if the demised premises or any part thereof are sublet to, or occupied
by, or used by, any person other than Tenant, whether or not in violation of
this lease, Landlord, after default by Tenant under this lease and expiration of
Tenant's time, if any, to cure such default, may collect rent from the
subtenant, user or occupant. In either case, Landlord shall apply the net amount
collected to the rents reserved in this lease, but neither any such assignment,
subletting, occupancy, nor use, nor any such collection or application shall be
deemed a waiver of any terms, covenant or condition of this lease or the
acceptance by Landlord of such assignee, subtenant, occupant or user as a
tenant. The consent by Landlord to any assignment, subletting, occupancy or use
shall not relieve Tenant from its obligation to obtain the express prior written
consent of Landlord to any further assignment, subletting, occupancy or use. The
listing of any name other than Tenant's on any door of the demised premises, or
on any directory, or on any elevator in the building, or otherwise, shall not
operate to vest in the party so named, any right or interest in this lease or in
the demised premises, or be deemed to constitute, or serve as a substitute for,
any prior written consent of Landlord required under this Article, and it is
understood that any such listing shall constitute a privilege extended by
Landlord which shall be revocable at Landlord's will by notice to Tenant. Tenant
agrees to pay to Landlord any reasonable counsel fees incurred by Landlord in
connection with any proposed assignment of Tenant's interest in this lease or
any proposed subletting of the demised premises or any part thereof. Neither any
assignment of Tenant's
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<PAGE> 18
interest in this lease nor any subletting, occupancy or use of the demised
premises or any part thereof by any person other than Tenant, nor any collection
of rent by Landlord from any person other than Tenant as provided in this
Paragraph A, nor any application of any such rent as aforementioned as provided
in this Paragraph A, shall in any circumstances relieve Tenant of Tenant's
obligations fully to observe and perform the terms, covenants and conditions of
this lease on Tenant's part to be observed and performed.
B. If Tenant shall desire to assign this lease or to sublet the demised
premises, then Tenant shall submit to Landlord a written notice ("Recapture
Notice") specifying (i) in the case of a proposed assignment, the effective date
thereof; and (ii) in the case of a proposed subletting, the commencement date
and term thereof and the space to be sublet by Tenant. Landlord shall then have
the following options, to be exercised by notice ("Exercise Notice") given to
Tenant within ten (10) business days after receipt of Tenant's Recapture Notice:
1. Landlord may require Tenant to surrender the demised premises to
Landlord and to accept a termination of this lease as of a date (the
"Termination Date") to be designated by Landlord in the Exercise Notice, which
date shall be the day immediately preceding the effective date of the proposed
assignment or the commencement date of the proposed subletting, whichever is
applicable, but not less than sixty (60) days following the date of Landlord's
Exercise Notice; or
2. Landlord may require Tenant to assign this lease to Landlord
without merger of Landlord's estates effective as of the day preceding the
proposed assignment or sublease, whereupon Tenant shall be released from all
liability and obligation first accruing under this lease from and after such
effective date.
If Landlord shall elect to require Tenant to surrender the demised
premises and accept a termination of this lease, then this lease shall expire on
the Termination Date as if that date had been originally fixed as the Expiration
Date. Regardless of which option Landlord exercises under this Paragraph B,
whether to terminate this lease or to take an assignment thereof, Landlord shall
be free to, and shall have no liability to Tenant if Landlord shall, lease the
demised premises to Tenant's prospective assignee or subtenant, if any.
C. If Landlord shall not exercise either of its options under Paragraph
B above within the time period therein provided, and Tenant shall thereafter
procure a proposed subtenant or assignee and shall desire to enter into a
proposed sublease or assignment as specified in Tenant Recapture Notice, then
Tenant shall submit to Landlord a written request for Landlord's consent to such
assignment or subletting ("Tenant's Request"), which request shall contain or be
accompanied by the following information; (i) the name and address of the
proposed assignee or subtenant; (ii) the material terms and conditions of the
proposed assignment or subletting; (iii) the nature and character of the
business of the proposed assignee or subtenant and its proposed use of the
demised premises; and (iv) banking, financial and other credit information with
respect to the proposed assignee or subtenant reasonably sufficient to enable
Landlord to determine the financial responsibility of the proposed assignee or
subtenant. If Tenant shall have submitted Tenant's Request to Landlord within
four (4) months after the date of Landlord's receipt of the Recapture Notice to
which same relates, then Landlord shall not unreasonably withhold consent to
such proposed assignment or subletting of the entire demised premises, provided
that Tenant is not then in default under this lease beyond any applicable notice
and grace period, and further provided that the following further conditions
shall be fulfilled:
1. The proposed subtenant or assignee shall not be a school of any
kind, or an employment or placement agency or governmental or quasi governmental
agency, or a real estate brokerage office or medical office or executive
recruitment office;
2. The subletting or assignment shall be to a tenant whose
occupancy will be in keeping with the dignity and character of the then use and
occupancy of the building;
3. No space shall be advertised or openly promoted to the general
public;
4. The proposed sublessee or assignee shall not be a tenant,
subtenant, occupant or assignee of any premises in the building; or a party who
negotiated with Landlord or
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<PAGE> 19
Landlord's agent (directly or through a broker) with respect to space in the
building during the six (6) months immediately preceding Tenant's request for
Landlord's consent;
5. Except in connection with an assignment of this lease or
subletting made pursuant to Paragraph B above, Tenant shall reimburse Landlord,
within ten (10) days after demand accompanied by invoices therefor, for any
costs that may be incurred in connection with any assignment or sublease,
including, without limitation, the reasonable costs of making investigations as
to the acceptability of the proposed assignee or subtenant, and reasonable
out-of-pocket legal costs incurred in connection with the granting of any
requested consent;
6. In case of a subletting, it shall be expressly subject to all of
the obligations of Tenant under this lease and the further condition and
restriction that the sublease shall not be assigned, encumbered or otherwise
transferred or the subleased premises further sublet by the sublessee in whole
or in part, or any part thereof suffered or permitted by the sublessee to be
used or occupied by others, without the prior written consent of Landlord in
each instance; and
7. Tenant shall deliver to Landlord, at least ten (10) days prior
to the effective date of such assignment or sublease, a fully-executed
counterpart thereof; and (i) if the terms of the executed assignment or sublease
shall materially vary in any respect from those set forth in Tenant's Request or
(ii) if such assignment or sublease shall not be executed and delivered to
Landlord within six (6) months following the date of Tenant's Request, then
Tenant shall again comply with all of the provisions of Paragraphs B and C
hereof.
* * * *
If Landlord shall decline to give its consent to any proposed
assignment or subletting pursuant to this Paragraph C, Landlord shall furnish
Tenant with an explanation, in reasonable detail, of the basis for such denial.
* * * *
D. 1. Tenant may, without Landlord's prior written consent, but upon
not less than fifteen (15) days' prior written notice to Landlord, permit any
corporations or other business entities which control, are controlled by, or are
under common control with Tenant (herein referred to as a "related corporation")
to sublet all or part of the demised premises for any of the purposes permitted
to Tenant, subject however to compliance with Tenant obligations under this
lease provided that (i) Tenant shall not be in default in the performance of any
of its obligations under this lease, (ii) prior to such subletting Tenant
furnishes Landlord with the name of any such related corporation, together with
a certification of Tenant, and such other proof as Landlord may reasonably
request, that such subtenant is a related corporation of Tenant and continues to
remain such during the term hereof, and (iii) in the reasonable judgment of
Landlord the proposed subtenant is of a character such as is in keeping with the
standards of Landlord for the building. In connection with the information to be
provided to Landlord pursuant to this Paragraph D.1, Tenant shall furnish
Landlord, upon request from time to time, with reasonable evidence that such
subtenant remains a related corporation of Tenant. Such subletting shall not be
deemed to vest in any such related corporation any right or interest in this
lease or the demised premises nor shall it relieve, release, impair or discharge
any of Tenant's obligations hereunder. For the purposes hereof, "control" shall
be deemed to mean ownership of not less than fifty (50%) percent of all of the
voting stock of such corporation or not less than fifty (50%) percent of all of
the legal and equitable interest in any other business entities.
2. Tenant may, without Landlord's prior written consent, but upon
not less than fifteen (15) days' prior written notice to Landlord, assign or
transfer its entire interest in this lease and the leasehold estate hereby
created to a successor corporation of Tenant (as hereinafter defined); provided,
however, that (i) Tenant shall not be in default in any of the terms of this
lease, (ii) the proposed occupancy shall not materially increase the office
cleaning requirements (if any) or impose an extra burden upon the building
equipment or building services and (iii) the proposed assignee shall not be
entitled, directly or indirectly, to diplomatic or sovereign immunity and shall
be subject to the service of process in, and the jurisdiction of the courts of
New York State. A "successor corporation", as used in this Paragraph shall mean
(a) a corporation into which or with which Tenant, its corporate successors or
assigns, is merged or
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<PAGE> 20
consolidated, in accordance with applicable statutory provisions for the merger
or consolidation of corporations, provided that by operation of law or by
effective provisions contained in the instruments of merger or consolidation,
the liabilities of the corporations participating in such merger or
consolidation are assumed by the corporation surviving such merger or
consolidation, or (b) a corporation acquiring this lease and the term hereof and
the estate hereby granted, the goodwill and all or substantially all of the
other property and assets (other than capital stock of such acquiring
corporation) of Tenant, its corporate successors or assigns, and assuming all or
substantially all of the liabilities of Tenant, its corporate successors and
assigns, or (c) any corporate successor to a successor corporation becoming such
by either of the methods described in subdivisions (a) and (b) above; provided
that (x) such merger or consolidation, or such acquisition and assumption, as
the case may be, is for a good business purpose and not principally for the
purpose of transferring the leasehold estate created hereby, and (y) immediately
after giving effect to any such merger or consolidation, or such acquisition and
assumption, as the case may be, the corporation surviving such merger or created
by such consolidation or acquiring such assets and assuming such liabilities, as
the case may be, shall have assets, capitalization and a net worth (as
determined in accordance with generally accepted accounting principles, and
certified to Landlord by an independent certified public accountant), which, in
Landlord's sole reasonable judgment, is sufficient to fully perform the monetary
and other obligations of Tenant under this lease given any other outstanding
obligations of such corporation. The acquisition by Tenant, its corporate
successors or assigns, of all or substantially all of the assets, together with
the assumption of all or substantially all of the obligations and liabilities of
any corporation, shall be deemed to be a merger for the purposes of this
Article.
E. No permitted or consented to assignment or subletting shall be
effective or valid for any purpose whatsoever unless and until a counterpart of
the assignment or a counterpart or reproduced copy of the sublease shall have
been first delivered to the Landlord, and, in the event of an assignment, the
Tenant shall deliver to Landlord a written agreement executed and acknowledged
by the Tenant and such assignee in recordable form wherein such assignee shall
assume jointly and severally with Tenant the due performance of this lease on
Tenant's part to be performed to the full and of the term of this lease
notwithstanding any other or further assignment.
F. Any transfer by operation of law or otherwise, of Tenant's interest
in this lease or of a fifty (50%) percent or greater interest in Tenant (whether
stock, partnership interest or otherwise) shall be deemed an assignment of this
lease for purposes of this Article, except that the transfer of the outstanding
capital stock of any corporate tenant shall be deemed not to include the sale of
such stock by persons or parties through the "over-the-counter-market" or
through any recognized stock exchange, other than those deemed "insiders" within
the meaning of the Securities Exchange Act of 1934, as amended. The foregoing
provisions of this Paragraph F shall not be deemed to obligate Tenant to obtain
Landlord's consent with respect to any assignment of this lease made pursuant to
Paragraph D.2 above.
G. Neither any assignment of Tenant's interest in this lease nor any
subletting, occupancy or use of the demised premises or any part thereof by any
person other than Tenant, nor any collection of rent by Landlord from any person
other than Tenant as provided in Article 11 hereof, nor any application of any
such rent as provided in said Article 11 shall, in any circumstances, relieve
Tenant of its obligations fully to observe and perform the terms, covenants and
conditions of this lease on Tenant's part to be observed and performed.
H. 1. Notwithstanding anything to the contrary contained herein, if
Landlord shall consent to any assignment or subletting and Tenant shall either
(i) receive any consideration from its assignee in connection with the
assignment of this lease, Tenant shall pay over to Landlord a sum equal to fifty
(50.0%) percent of any of such consideration (including, without limitation,
sums designated by the assignee as paid for the purchase of Tenant's property in
the demised premises, less the then fair market value thereof) as shall exceed
the Deductible Expenses (as defined herein) incurred by Tenant for such
assignment or (ii) sublet the demised premises or any portion thereof to anyone
for rents, additional charges or other consideration (including, without
limitation, sums designated by the subtenant as paid for the purchase of
Tenant's property in the demised premises, less the then fair market value
thereof) which for any period shall exceed the rents payable for the subleased
space under this lease for the same period, Tenant shall pay Landlord, as
additional rent, a sum equal to fifty (50.0%) percent of any such excess
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<PAGE> 21
consideration as shall exceed the Deductible Expenses (as defined herein)
incurred by Tenant for such subletting. All sums payable to Landlord pursuant to
subdivision (i) of this Paragraph shall be paid on the effective date of such
assignment and all sums payable to Landlord pursuant to subdivision (ii) of this
Paragraph shall be paid on the date or dates such sums are payable to Tenant by
the subtenant.
2. For purposes of this Paragraph, the term "Deductible Expenses"
shall mean (i) the reasonable brokerage commissions, advertising costs and
attorneys' fees incurred by Tenant with respect to the instant transaction, plus
(ii) the reasonable cost incurred by Tenant of leasehold improvements made to
prepare the demised premises for occupancy by the assignee or subtenant, plus
(iii) any other reasonable, out-of-pocket costs and expenses incurred by Tenant
which are directly attributable to the instant transaction. For purposes of
computing any payments to be made by Tenant to Landlord pursuant to this
Paragraph with respect to a proposed subletting, the Deductible Expenses shall
be amortized over the entire term of the proposed subletting.
I. Without being subject to Landlord's options contained in Paragraph B
of this Article, Tenant shall have the right, with Landlord's prior written
consent (which consent shall not be unreasonably withheld subject to Tenant's
compliance with Paragraph C hereof) to sublet up to one-third (1/3) of the
rentable area of the demised premises to one (1) subtenant at any one time.
42. SUPPLEMENTING ARTICLE 3:
Landlord's consent shall not be required for minor decorative changes
to the demised premises such as painting and installation of cabinets and
shelves, floorcoverings and wallcoverings; provided, however, that same are not
visible from, and do not physically affect any part of the building, outside the
demised premises, and do not require any filings to be made with applicable
governmental bodies. All other renovations, decorations, additions,
installations, improvements and/or alterations of any kind or nature in the
demised premises (herein "Tenant's Changes") shall require the prior written
consent of Landlord thereto which, in the case of non-structural interior
Tenant's Changes, Landlord agrees not to unreasonably withhold, provided that
Tenant's Changes are performed only by Landlord's designated contractors and do
not affect the building (i) electric generating and distribution equipment,
including the building (a) fuel, storage and transfer systems, (b) electric
generation, including engine cooling and air intake and exhaust and the electric
collection, switching and load shedding systems and (c) service, distribution,
circuit protective and branch circuit systems, each up to the final utilization
device, receptacle, appliance and fixture equipment, or (ii) steam and hot water
generating equipment, including the building (w) fuel, storage and transfer
systems, (x) fuel combustion systems including waste heat boilers, (y) steam and
hot water collection systems, and (z) ancillary systems for steam and hot water
and accessories thereto, each up to and including the steam and hot water
metering equipment (all of such electric generating and distribution equipment
and steam and hot water generating equipment hereinafter collectively called the
"Electrical Systems"). Landlord may impose such conditions with respect to
Tenant's Changes (as to guarantee of completion, payment, restoration and
otherwise including, the requirement of Tenant to post a bond to insure the
completion of Tenant's Changes) as Landlord may reasonably require. In no event
shall Landlord be required to consent to any Tenant's Change which would
physically affect any part of the building outside of the demised premises or
would adversely affect the proper functioning of the mechanical, electrical,
sanitary or other service systems of the building. At the time Tenant requests
Landlord's written consent to any Tenant's Changes, Tenant shall deliver to
Landlord detailed plans and specifications therefor. Tenant shall pay to
Landlord any reasonable, actual fees or expenses incurred by Landlord in
connection with Landlord's submitting such plans and specifications, if it so
chooses, to an architect or engineer selected by Landlord for review or
examination and/or for supervision during performance of Tenant's Changes.
Tenant shall also pay to Landlord as additional rent, for services to be
performed by Landlord in connection with Tenant's Changes, a fee equal to five
(5%) percent of the total cost of Tenant's Changes; provided that no such fee
shall be payable with respect to Tenant's Changes made to prepare the demised
premises for Tenant's initial occupancy. There shall be excluded from such
computation the cost of painting, furniture, furnishings, draperies, office
equipment, carpeting, cabinetry, items of special decoration, telephone
installation and items of similar character. Landlord's approval of any plans or
specifications does not relieve
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<PAGE> 22
Tenant from the responsibility for the legal sufficiency and technical
competency thereof. Before commencement of any Tenant's Changes, Tenant, at its
expense, shall obtain the necessary consents, authorizations and licenses from
all federal, state and/or municipal authorities having jurisdiction over such
work. In addition, Tenant at its expense, shall obtain all necessary
asbestos-certifications and comply with the New York City Asbestos Control Law
(Local Law 76 of 1985), as same may be amended. Notwithstanding the foregoing,
Landlord, at its sole cost and expense, shall remove and/or encapsulate, if and
to the extent required by law, any asbestos-containing materials determined to
be present in the demised premises during the term hereof and obtain all
governmental sign-offs required in connection therewith; except that Tenant, at
its sole cost and expense, shall remove and restore any of Tenant's Changes
which Landlord shall request that Tenant remove in order for Landlord to gain
access to such asbestos-containing materials.
Tenant agrees to indemnify and save Landlord harmless from and against
any and all bills for labor performed and equipment, fixtures and materials
furnished to Tenant and applicable sales taxes thereon as required by New York
law and from and against any and all liens, bills or claims therefor or against
the demised premises or the building and from and against all losses, damages,
costs, expenses, suits and claims whatsoever in connection with Tenant's
Changes. The cost of Tenant's Changes shall be paid for in cash or otherwise, so
that the demised premises and the building shall at all times be free of liens
for labor and materials supplied or claimed to have been supplied.
Tenant, at its expense, shall cause any Tenant's Changes consented to
by Landlord to be performed in compliance with all applicable requirements of
law and insurance bodies having jurisdiction and in such manner as not to
interfere with, delay or impose any additional expense upon the Landlord in the
maintenance or operation of the building and so as to maintain harmonious labor
relations in the building.
Notwithstanding the provisions of Article 3, Tenant shall not be
required to restore the demised premises to its condition prior to the making of
any Tenant's Changes except if and to the extent that such restoration is made
an express condition of Landlord's consent to such Tenant's Changes.
If the performance of Tenant's Changes shall unreasonably interfere
with the comfort and/or convenience of other tenants in the building or shall
cause damage to or otherwise interfere with the occupancy of adjacent buildings,
Tenant shall, upon Landlord's demand, take all reasonable steps necessary to
remedy or remove the condition or conditions complained of. Tenant further
covenants and agrees to indemnify and save Landlord harmless from and against
any and all claims, losses, damages, costs, expenses, suits and demands
whatsoever made or asserted against Landlord by reason of the foregoing.
Tenant agrees to utilize only contractors and subcontractors first
approved by Landlord (which approval shall not be unreasonably withheld or
delayed) for the performance of Tenant's Changes.
Tenant shall keep detailed records of Tenant's Changes estimated to
cost more than $5,000.00 and of the cost thereof. Tenant shall furnish copies of
such records to Landlord within thirty (30) days after completion of any such
Tenant's Changes. In addition, promptly after the completion of any Tenant's
Changes, Tenant shall furnish to Landlord a complete set of "as-built" plans and
specifications.
43. CERTIFICATES BY TENANT:
At any time and from time to time, Tenant, for the benefit of Landlord
and/or any other person, firm or corporation specified by Landlord, on at least
five (5) business days prior written request by Landlord, will deliver to
Landlord a duly acknowledged statement, certifying that this lease is not
modified and is in full force and effect (or if there shall have been
modifications that same is in full force and effect as modified, and stating the
modifications); the Commencement and Expiration Dates hereof; the dates to which
the fixed rent, additional rent and other charges have been paid; whether or
not, to the best knowledge of the signer of such statement, there are any then
existing defaults on the part of either Landlord or Tenant in the performance of
the
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<PAGE> 23
terms, covenants and conditions of this lease, and if so, specifying the default
of which the signer of such statement has knowledge; and such other information
as Landlord may reasonably request with respect to this lease. At any time and
from time to time (but not more frequently than one (1) time in any 12-month
period), Landlord, for the benefit of Tenant, on at least five (5) business
days' prior written request by Tenant, shall deliver to Tenant a duly
acknowledged statement in the aforementioned form.
44. LIMITATION OF LIABILITY:
Tenant agrees that the liability of Landlord under this lease and all
matters pertaining to or arising out of the tenancy and the use and occupancy of
the demised premises, shall be limited to Landlord's interest in the building
and in no event shall Tenant make any claim against or seek to impose any
personal liability upon any direct or indirect general or limited partner,
shareholder, employee or director of Landlord, or any principal of any firm or
corporation that may hereafter be or become the Landlord.
45. INDEMNIFICATION AND INSURANCE:
A. Except to the extent attributable to the negligence of Landlord or
its agents, Tenant shall indemnify and save harmless Landlord and its agents
against and from (i) any and all claims (a) arising from (x) the conduct or
management of the demised premises or of any business therein, or (y) any work
or thing whatsoever done, or any condition created in or about the demised
premises during the term hereof or during the period of time, if any, prior to
the Commencement Date that Tenant may have been given access to the demised
premises, or (b) arising from any negligent or otherwise wrongful act or
omission of Tenant or any of its subtenants or licensees or its or their
employees, agents visitors, invitees or contractors or subcontractors of any
tier, and (ii) all costs, expenses and liabilities incurred in or in connection
with each such claim or action or proceeding brought thereon. In case any action
or proceeding be brought against Landlord by reason of any such claim (except to
the extent attributable to the negligence of Landlord or its agents), Tenant,
upon notice from Landlord, shall resist and defend such action or proceeding at
Tenant's expense by counsel reasonably satisfactory to Landlord. Landlord hereby
approves counsel retained by Tenant's insurance company defending any such
claim.
B. Tenant shall secure and keep in full force and effect throughout the
term hereof, at Tenant's sole cost and expense (i) Comprehensive General
Liability Insurance, written on an occurrence basis, to afford protection in
such amount as Landlord may determine and in no event less than $3,000,000
combined single limit for personal and bodily injury and death arising therefrom
and Broad Form property damage arising out of any one occurrence in, upon,
adjacent to or in connection with the demised premises or any part thereof,
which insurance shall include coverage for contractual liability (including the
matters set forth in Paragraph A above), owner's protective liability,
independent contractor's liability and completed operations liability; (ii)
during the course of construction of any Tenant's Changes and until completion
thereof, Builder's Risk insurance or equivalent on an "all risk" basis
(including collapse) on a completed value (non-reporting) form for full
replacement value covering the interests of Landlord and Tenant (and their
respective contractors and subcontractors) in all work incorporated in the
building and all materials and equipment in or about the demised premises; (iii)
Workers' Compensation Insurance, as required by law and (iv) such other
insurance in such amounts as Landlord may require from time to time. All such
insurance shall contain only such "deductibles" as Landlord shall reasonably
approve. The minimum amounts of insurance required under this Paragraph shall
not be construed to limit the extent of Tenant's liability under this lease. In
addition, prior to any entry upon the demised premises by Tenant or any of
Tenant's employees, agents or contractors, Tenant shall deliver or cause to be
delivered to Landlord certificates evidencing that all insurance required
hereunder is in full force and effect. Tenant shall have the right to insure and
maintain the insurance coverages set forth in this Paragraph under blanket
insurance policies covering other premises occupied by Tenant so long as such
blanket policies comply as to terms and amounts with the insurance provisions
set forth in this lease.
C. All such insurance shall be written in form and substance reasonably
satisfactory to Landlord by an insurance company in a financial size category of
not less than XI and with
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<PAGE> 24
general policy holders' ratings of not less than A-, as rated in the most
current available "Best's" insurance reports, or the then equivalent thereof,
and licensed to do business in New York State and authorized to issue such
policies. All policies of insurance procured by Tenant shall contain
endorsements providing that (a) such policies may not be reduced or canceled
(including for non-payment of premium) or allowed to lapse with respect to
Landlord or materially changed or amended except after 30 days' prior notice
from the insurance company to Landlord, sent by certified mail, return receipt
requested; and (b) Tenant shall be solely responsible for the payment of
premiums therefor notwithstanding that Landlord is or may be named as an
additional insured. Duly executed certificates of insurance (including
endorsements and evidence of the waivers of subrogation required pursuant to
Paragraph E herein), together with reasonably satisfactory evidence of payment
of the premiums therefor, shall be delivered to Landlord, on or before the
Commencement Date. Each certificate of insurance evidencing renewal or
replacement of a policy shall be so deposited at least 30 days prior to the
expiration of such policy.
D. All insurance procured by Tenant under this Article shall be issued
in the names and for the benefit of Landlord (and each member thereof in the
event Landlord is a partnership or joint venture), Landlord's managing agent and
Tenant, as their respective interests may appear, and shall contain an
endorsement that Landlord, although named as an additional insured, nevertheless
shall be entitled to recover under said policies for any loss or damages
occasioned to it, its agents, employees, contractors, directors, shareholders,
partners and principals (disclosed or undisclosed) by reason of the negligence
or tortious acts of Tenant, its servants, agents, employees and contractors.
E. Each party shall include in each of its insurance policies covering
loss, damage or destruction by fire or other casualty (insuring the building and
Landlord's property therein and the rental value thereof, in the case of
Landlord, and insuring Tenant's personal property and fixtures and business
interruption insurance, in the case of Tenant) a waiver of the insurer's right
of subrogation against the other party or, if such waiver should be unobtainable
or unenforceable, (i) an express agreement that such policy shall not be
invalidated if the insured waives before the casualty the right of recovery
against any party responsible for a casualty covered by such policies, or (ii)
any other form of permission for the release of the other party. If such waiver,
agreement or permission shall cease to be obtainable without additional charge,
then if the other party shall so elect and shall pay the insurer's additional
charge therefor, such waiver, agreement or permission shall be included in the
policy, or the other party shall be named as an additional insured in the
policy, provided, however, that Tenant shall at no time be named a loss payee
under any of Landlord's insurance policies. Notwithstanding the foregoing, any
failure by Tenant as an additional insured promptly to endorse to the order of
Landlord any instrument for the payment of money under a policy of which
Landlord is the owner or original or primary insured shall be a default under
this lease.
F. Each party hereby releases the other party with respect to any claim
(including a claim for negligence) which it might otherwise have against the
other party for loss, damage or destruction with respect to its property
(including rental value or business interruption) occurring during the term
hereof and with respect and to the extent to which it is insured under a policy
or policies containing a waiver of subrogation or permission to release
liability or naming the other party as an additional insured, as provided in
Paragraph E above. If, notwithstanding the recovery of insurance proceeds by
either party for loss, damage or destruction of its property (or rental value or
business interruption), the other party is liable to the first party with
respect thereto or is obligated under this lease to make replacement, repair or
restoration or payment, then provided the first party's right of full recovery
under its insurance policies is not thereby prejudiced or otherwise adversely
affected, the amount of the net proceeds of the first party's insurance against
such loss, damage or destruction shall be offset against the second party's
liability to the first party therefor, or shall be made available to the second
party to pay for replacement, repair or restoration, as the case may be.
G. The waiver of subrogation or permission for release referred to in
Paragraph E above shall extend to the agents of each party and its and their
employees. The releases provided for in Paragraph F above shall likewise extend
to such agents and employees, if and to the extent that such waiver or
permission is effective as to them. Nothing contained in Paragraphs E or F above
shall be deemed to impose upon either party any duty to procure or maintain any
of the kinds of insurance referred to therein except as otherwise required in
this Article. If either party
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<PAGE> 25
shall fail to maintain insurance in effect as required in this Article, the
release by each party set forth in Paragraph F above shall be in full force and
effect to the same extent as if such required insurance (containing a waiver of
subrogation) were in effect.
46. ELECTRIC CURRENT:
A. Definitions
For purposes of this Article 46, the following terms shall have the
following meanings:
1. The term "Landlord's Cost", shall mean, the average cost per
kilowatt hour to Landlord which Landlord would incur if
Landlord were purchasing electricity for the building pursuant
to service classification No. 4 (or any successor
classification reflecting similar service) from the public
utility company (the "Utility") servicing the area in which
the building is located, including, without limitation, fuel
adjustment charges (as determined for each month of the
relevant period and not averaged), demand charges, rate
adjustment charges, sales tax, and/or any other factors which
would be used by the Utility in computing its charges to
Landlord applied to the kilowatt hours of energy which
Landlord would have purchased from the Utility during a given
period, and further including transmission and transformer
losses (to be reasonably determined by Landlord if such losses
are not measured by the Submeter, as defined herein); and
2. The term "Landlord's Statement", shall mean an instrument
containing a computation (or estimate thereof), of Landlord's
Cost (hereinabove defined), or any other computation to be
made by Landlord pursuant to the provisions of this Article
46.
B. Method of Furnishing Electric Current to the demised premises
Subject to the provisions of subdivision 4 of paragraph C hereof,
Tenant agrees that Landlord may furnish electricity to Tenant on a "rent
inclusion" basis or on a "submetering" basis. On the Commencement Date,
electricity will be furnished pursuant to subdivision 1.
1. Submetering: Landlord shall, at Tenant's sole cost and
expense install a meter or meters (collectively, the "Submeter"), at a location
designated by Landlord, connections from the risers and/or circuits servicing
the demised premises to the Submeter and perform all other work necessary for
the furnishing of electric current by Landlord to the demised premises in the
manner provided for in this subdivision 1. If and so long as electric current is
supplied by Landlord to the demised premises to service Tenant's office
equipment and the machinery and mechanical equipment for the air conditioning
units utilized by Tenant, if any, Tenant will pay Landlord or Landlord's
designated agent, as additional rent for such service, the amounts, as
determined by the Submeter, for the purpose of measuring Tenant's consumption.
The additional rent payable by Tenant pursuant to this subdivision 1, shall be
computed in the same manner as that for computation of Landlord Cost, as applied
to the demised premises, plus a fee (the "Overhead Charge") equal to six (6%)
percent of such charge to Landlord, representing administrative/overhead costs
to Landlord. The amounts computed from the Submeter together with the Overhead
Charge, are herein collectively called the "Electricity Additional Rent", and
such amounts computed from the Submeter shall be binding and conclusive on
Tenant. If the Submeter should fail to properly register or operate at any time
during the term of this lease for any reason whatsoever, Landlord may estimate
the Electricity Additional Rent, and when the Submeter is again properly
operative, an appropriate reconciliation shall be made, by Tenant paying any
deficiency to Landlord within ten (10) days after demand therefor, or by
Landlord crediting Tenant with the amount of any overpayment, as the case may
be. The periods to be used for the aforesaid computation shall be as Landlord,
in its sole discretion, may from time to time elect. Where more than one meter
measures the electric service to Tenant (including such electric energy as is
consumed in connection with the operation of the ventilation and air
conditioning equipment servicing the demised premises), the electric service
rendered through each meter may be computed and billed at Landlord option,
separately as above set forth, or cumulatively. Bills for the Electricity
Additional Rent (the "Bills") shall be rendered to Tenant as such time as
Landlord may elect.
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Landlord and Tenant agree, that the Submeter might be installed
subsequent to the date (the "Initial Occupancy Date") that Tenant, or anyone
(including, without limitation, any contractors or other workmen) claiming under
or through Tenant first enters the demised premises. In such event, Landlord, at
Landlord's sole option, may either (x) reasonably estimate the Electricity
Additional Rent payable by Tenant for the period commencing on the Initial
Occupancy Date and ending on the Occupancy Reading Date (hereinafter defined),
and Tenant shall pay to Landlord, within ten (10) days after demand therefor,
the amount set forth on Landlord's estimate and, after rendition of a subsequent
Landlord's Statement, an appropriate reconciliation shall be made for any
deficiency owed by Tenant, or any overage paid by Tenant or (y) render a
Landlord's Statement to Tenant, after a reading of the installed Submeter is
made (said date upon which the Submeter is read, being herein called the
"Occupancy Reading Date") on or about the date upon which Tenant shall have
completed Tenant's Changes, if any, in accordance with the provisions of Article
42 hereof and commenced normal business operations in the demised premises, and
the amount calculated from the Submeter on the Occupancy Reading Date shall be
determined on a per diem basis and then multiplied by the number of days from
the Initial Occupancy Date through the Occupancy Reading Date to arrive at the
amount due for said period, and Tenant shall pay the Electricity Additional Rent
on the basis of such Submeter reading within ten (10) days after rendition of
Landlord's Statement detailing such computation.
If any tax (in the nature of a sales tax) is imposed upon Landlord's
receipts from the sale or resale of electric current to Tenant by any Federal,
state or municipal authority, Tenant agrees that, unless prohibited by law,
Tenant's Proportionate Share (as said term is defined in Article 39 hereof) of
such taxes shall be passed on to, and included in the bill of, and paid by
Tenant to Landlord as additional rent.
2. Rent Inclusion
Tenant acknowledges and agrees that if electric current is furnished to
the demised premises on a rent-inclusion basis, then (i) the fixed rent set
forth in this lease shall be increased by the "Electricity Rent Inclusion
Factor" (hereinafter defined and sometimes called the "ERIF") to compensate
Landlord for the electrical wiring and other installations necessary for, and
for its obtaining and making available to Tenant the redistribution of electric
current to the demised premises as additional service, and (ii) the ERIF shall
be subject to periodic adjustments as hereinafter provided. The "Electricity
Rent Inclusion Factor" shall mean (x) the amount determined by multiplying
Landlord's Cost by Tenant's average kilowatt hour usage (determined by the most
recent survey under this subdivision 2) or (y) if no such survey has yet been
made, the average on a per rentable square foot basis of the charges for
electric current to the demised premises pursuant to subdivision 1 of this
Article 46 (exclusive of the Overhead Charge) for the twelve (12) full calendar
months preceding the month in which the provisions of this subdivision 2 shall
become effective, multiplied by 13,632 plus six (6%) percent of the resulting
total. If the provisions of this subdivision 2 shall be effective prior to the
expiration of a period of twelve (12) full consecutive months during which
Tenant is paying for electric energy to the demised premises pursuant to said
subdivision 1 of this Article 46 (and no survey has yet been made under this
subdivision 2), so that the ERIF cannot be determined in the manner described in
the preceding sentence, then the "Electricity Rent Inclusion Factor" shall mean
the amount determined by multiplying Landlord's Cost by Tenant's average
kilowatt hour usage determined by the estimate of an electrical consultant
selected by Landlord, plus six (6%) percent of the resulting total. When a
survey has been made by the electrical consultant selected by Landlord (the
"Consultant"), the parties shall make adjustment for any deficiency owed by
Tenant or any overage paid by Tenant. If after the first day of any relevant
period for which either of the aforesaid computations is made there is an
increase or decrease in Landlord's Cost then, the ERIF for such relevant period
shall be recomputed, effective on and after the change in Landlord's Cost, by
applying such changed rate and/or charges to the aforedescribed consumption and
demand.
The parties agree that the Consultant shall determine (i) the ERIF in
accordance with the provisions of this subdivision 2 and (ii) the changes in the
ERIF due to changes in Landlord's Cost. The Consultant may from time to time
make surveys in the demised premises of the electrical equipment and fixtures
and use of current therein, and the ERIF, effective as of the date
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of the survey, shall be redetermined by the Consultant in accordance with the
survey results and the provisions of this subdivision 2.
The determination by the Consultant shall be binding and conclusive on
Landlord and Tenant from and after the delivery of copies of such determinations
to Landlord and Tenant, unless within fifteen (15) days after the delivery of
such copies, Tenant disputes such determinations by having an independent
reputable electrical consultant selected and paid for by Tenant, consult with
Landlord or its consultant as to said determinations. If they shall both agree
upon the same, their said agreement shall be binding upon the parties, or if the
difference between them is ten (10%) percent or less of the determinations made
by the Consultant, then the determinations made by the Consultant shall be
binding upon the parties. If Landlord or the Consultant and Tenant's consultant
can not agree within the said ten (10%) percent of each other, they shall
jointly select a third duly qualified independent, reputable electrical
consultant who shall determine the matter and whose decision shall be binding
upon both parties with the same force and effect as if a non-appealable judgment
had been entered by a court of competent jurisdiction. If Landlord or the
Consultant and Tenant's consultant can not agree upon such a third electrical
consultant, the matter shall be submitted to the American Arbitration
Association in New York City to be determined in accordance with its rules and
regulations and the decision of the arbitrators shall be binding upon the
parties with the same force and effect as if a non-appealable judgment had been
entered by a court of competent jurisdiction. Any charges of such third
consultant or of the American Arbitration Association and all costs and expenses
of either shall be borne equally by both parties. When the amount of such
increase has been determined, the parties shall execute an agreement
supplementary hereto to reflect such adjustment in the amount of fixed rent
effective from the date determined by such electrical consultant as aforesaid.
Notwithstanding the foregoing, until such final determination, Tenant shall pay
fixed rent to Landlord in accordance with the determinations made by the
Consultant. After such final determinations, the parties shall make adjustment
for any deficiency owed by Tenant or any overage paid by Tenant.
C. General Conditions
1. Except to the extent attributable to the negligence of
Landlord or its agents, Landlord shall not be liable to Tenant for any loss or
damage or expense which Tenant may sustain or incur if either the quantity or
character of electric service is changed or is no longer available or suitable
for Tenant's requirements.
2. Tenant understands and agrees that the Utility shall
service the building directly with electric energy for receptacles for office
appliances, elevators and minimal emergency lighting and that Landlord shall
service the remainder of the building directly with electric energy. Tenant
covenants and agrees that at all times its use of electric current shall never
exceed the capacity of existing feeders to Tenant's floor(s) or space (if less
than an entire floor) or the capacity of the risers or wiring installation in
the building. Tenant agrees not to connect any additional electrical equipment
to the building electric distribution system, other than lamps, typewriters and
other small office machines which consume comparable amounts of electricity,
without Landlord's prior written consent. Any riser or risers to supply Tenant's
electrical requirements, upon written request of Tenant but subject to the prior
written approval of Landlord in each instance, will be installed by Landlord, at
Tenant's sole cost and expense, if, the same are necessary and will not cause
permanent damage or injury to the building or demised premises or cause or
create a dangerous or hazardous condition or entail excessive or unreasonable
alterations, repairs or expense or interfere with or disturb other tenants or
occupants.
3. The parties acknowledge that they understand that it is
anticipated that electric rates, charges, etc. may be changed by virtue of
time-of-day rates or other methods of billing, and that the references in the
foregoing subdivisions to changes in methods of or rules on billing are intended
to include any such changes.
4. Landlord reserves the right at any time, and from time to
time, during the term of this lease, upon thirty (30) days prior written notice
to Tenant, to change the furnishing of electricity to Tenant from a rent
inclusion basis to a submetering basis, or visa versa, if required to do so by
reason of requirements of law, the Utility or any other reason beyond
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Landlord's reasonable control. In addition, if Landlord shall elect to terminate
furnishing electricity to a majority of the tenants in the building then
receiving electricity from Landlord, Landlord shall have the right to terminate
the furnishing of electricity to the demised premises on a rent-inclusion,
submetering, or any other basis at any time. Such electricity may thereafter be
furnished to Tenant by means of the then existing Electrical Systems to the
extent that the same are available, suitable and safe for such purposes. Any
meters, risers or other equipment or connections necessary to enable Tenant to
obtain electric current of substantially the same quantity, quality and
character shall be installed by Landlord (i) at Tenant's sole cost and expense,
if such discontinuance was due to the acts of Tenant (ii) at the cost of
Landlord and Tenant, borne equally, if such discontinuance was due to
requirements of law, the Utility or any other reason beyond Landlord's
reasonable control (except to the extent applicable law shall require Landlord
or Tenant to pay the cost thereof) or (iii) at Landlord's sole cost, if such
discontinuance was without cause. Rigid conduit only will be allowed. Landlord,
upon the expiration of the aforesaid thirty (30) days' written notice to the
Tenant may discontinue furnishing the electric current but this lease shall
otherwise remain in full force and effect. For so long as Landlord shall elect
not to furnish electricity to Tenant as aforesaid, the fixed rent payable under
this lease shall be reduced where electricity rent inclusion is discontinued, by
a sum equal to what the ERIF portion of the fixed rent was at the time of such
discontinuance (the parties acknowledge that in the case of termination of
redistribution by submetering, the fixed rent payable under this lease would not
be affected thereby).
5. In the event that pursuant to any of the provisions of this
Article, any initial determinations, statements or estimates are made by or on
behalf of Landlord (whether such initial determinations, statements or estimates
are subject to dispute or not pursuant to the provisions of this Article),
Tenant shall pay to Landlord the amount(s) set forth on such initial
determinations, statements or estimates, as the case may be, until subsequent
determinations, statements or estimates are rendered, at which time, the parties
shall make adjustment for any deficiency owed by Tenant, or any overage paid by
Tenant.
6. Notwithstanding any provisions of this Article 46 and
regardless of the manner of service of electric current to the demised premises
(whether by rent inclusion or submetering), in no event shall the cost to Tenant
for electric energy to the demised premises be less than (or more than) one
hundred six (106%) percent of Landlord's Cost.
7. In addition to all other sums payable by Tenant for
electricity pursuant to this Article, Tenant acknowledges and agrees that the
electric current furnished to the building HVAC equipment system, including the
fan room(s), servicing the demised premises will be measured, at Landlord's
option, by either (i) a survey to be performed by an electrical consultant
selected by Landlord or (ii) a meter to be installed by Landlord and the amount
determined by such consultant or meter shall be billed and payable by Tenant as
additional rent hereunder, from time to time, within ten (10) days after
rendition of a Landlord's Statement therefor, which amount shall be equitably
pro-rated in the event that such HVAC system services portions of the building
other than the demised premises. If Landlord shall elect to survey the electric
current furnished to the building HVAC equipment system, then Tenant shall have
the right to dispute Landlord's determination of the charges payable by Tenant
in the manner provided in the third unnumbered subparagraph of Paragraph B.2
hereinabove.
8. Subject to the provisions of Articles 27 and 29 hereof,
Landlord shall make available to the demised premises, throughout the term
hereof as and when required by Tenant, up to six (6) watts (metered demand)
electric power per rentable square foot (excluding electricity required for the
operation of the building air-conditioning system serving the demised premises).
47. ADDENDA TO ARTICLE 6 - REQUIREMENTS OF LAW:
Notwithstanding any provision of Article 6 to the contrary, Landlord
shall have the right (but not the obligation), upon reasonable prior notice to
Tenant, to perform any of Tenant's obligations which may arise under Article 6
during the term hereof, the reasonable cost of which shall be paid by Tenant to
Landlord, as additional rent hereunder, within ten (10) days after demand
therefor (it being agreed that there shall not be imposed any 10% fee, pursuant
to Article 42, imposed upon such costs to be reimbursed by Tenant).
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48. BROKER:
A. Tenant represents and warrants that it neither consulted nor
negotiated with any broker or finder with regard to the rental of the demised
premises from Landlord other than Cushman & Wakefield, Inc. ("Broker"). Tenant
agrees to indemnify and hold Landlord harmless from any damages, costs and
expenses suffered by Landlord by reason of any breach of the foregoing
representation.
B. Any commission or other compensation due Broker in connection with
the leasing by Tenant of the premises initially demised under this lease shall
be paid by Tenant directly to Broker.
C. Any commission payable to Broker in connection with the leasing by Tenant of
Additional Space (pursuant to Article 57), if any, shall be paid by Landlord to
Broker pursuant to separate written agreement.
49. BINDING EFFECT:
It is specifically understood and agreed that this lease is offered to
Tenant for signature by the managing agent of the building solely in its
capacity as such agent and subject to Landlord's acceptance and approval, and
that Tenant shall have affixed its signature hereto with the understanding that
such act shall not, in any way, bind Tenant and/or Landlord or their respective
agents until such time as this lease shall have been approved and executed by
Landlord and delivered to Tenant.
50. LANDLORD'S CONTRIBUTION:
A. Except as provided otherwise in Paragraph E herein, Tenant shall, at
Tenant's expense, and as part of Tenant's Changes (as defined in Article 42),
perform all of the work in the entire demised premises necessary for Tenant's
occupancy thereof, subject to the provisions of this lease. Tenant agrees with
respect to its activities and work that it will conform to all of Landlord's
labor regulations and shall not do or permit anything to be done that might
create any work stoppage, picketing or other labor disruption or dispute. Tenant
agrees that it will, prior to the commencement of any work in the demised
premises, deliver to Landlord all policies of insurance required to be supplied
to Landlord by Tenant pursuant to the terms of this lease.
B. In consideration of Tenant performing all of the work necessary for
its occupancy of the demised premises (except for Landlord's Work as provided in
Paragraph D herein) and for Tenant completing such work in the entire demised
premises, Landlord agrees that if Tenant, within a period of six (6) months from
the commencement of the term of this lease shall have submitted to Landlord (a)
a detailed itemization of the building standard leasehold improvements installed
by Tenant in the entire demised premises, (b) together with receipted paid bills
therefor, (c) an opinion of counsel or other evidence satisfactory to Landlord
to the effect that there has not been filed with respect to the building and/or
the demised premises or any part thereof or upon Tenant's leasehold interest
therein any vendor's, mechanic's, laborer's, materialman's or other lien which
has not been discharged of record and (d) Tenant's Changes shall have been
uniformly performed in the entire demised premises, Landlord shall reimburse or
cause to be reimbursed to Tenant an amount equal to the lesser of (i) the actual
cost of the building standard leasehold improvements performed by Tenant in the
entire demised premises or (ii) TWO HUNDRED SEVENTY-TWO THOUSAND SIX HUNDRED
FORTY AND 00/100 ($272,640.00) Dollars, representing "Landlord's Contribution"
to such work, it being understood and agreed that Landlord's Contribution shall
not exceed the sum of TWO HUNDRED SEVENTY-TWO THOUSAND SIX HUNDRED FORTY AND
00/100 ($272,640.00) DOLLARS, and that all costs and expenses in excess of said
sum shall be borne solely by Tenant.
C. Upon Tenant's request (but not more frequently than monthly),
Landlord's Contribution as provided in Paragraph B hereof shall be paid out from
time to time (in contradistinction to completion and receipt by Landlord of paid
bills) as Tenant's Changes progress, which request by Tenant shall be
accompanied by the following:
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(a) A certificate signed by Tenant or Tenant's architect, dated not
more than ten (10) days prior to such request, setting forth the following:
(i) that the sum then requested is justly due to persons who
have rendered services or furnished materials for the work therein specified,
and giving a brief description of such services and materials and the several
amounts due to each of said persons in respect thereof, and stating that no part
of such expenditure is being made the basis, in any previous or then pending
prior request, for the receipt of Landlord's Contribution or has been made out
of the proceeds of Landlord's Contribution received by Tenant, and that the sum
then requested does not exceed the value of the services and materials described
in the certificate;
(ii) that except for the amount, if any, stated pursuant to
the foregoing subdivision (a) (i) in such certificate to be due for services or
materials, there is no outstanding indebtedness (except for withholding of ten
(10%) percent of such amount) known to the persons signing such certificate,
which is then due for labor, wages, materials, supplies or services in
connection with such work which, if unpaid, might immediately become the basis
of a vendor's, mechanic's, laborer's or material man's statutory or similar lien
upon such work or upon the land and building or any part thereof or upon
Tenant's leasehold interest.
(b) an opinion of counsel or other evidence, reasonably
satisfactory to Landlord to the effect that there has not been filed with
respect to the land and building or any part thereof any lien which has not been
discharged of record.
Subject to the provisions of Paragraph B hereof, upon compliance with
the foregoing provisions of this Paragraph C, Landlord shall pay or cause to be
paid to Tenant or the persons named (pursuant to subdivision (a)(i) of this
Paragraph) in such certificate, the respective amounts stated therein to be due
to them provided, however, that (i) each installment of Landlord's Contribution
shall be in a sum equal to forty (40.0%) percent of the amounts stated in each
such certificate (it being agreed and understood by Tenant that it shall pay
sixty (60.0%) percent of the amounts stated in each such certificate out of
Tenant's own funds); and (ii) Landlord's Contribution shall not exceed the sum
of TWO HUNDRED SEVENTY-TWO THOUSAND SIX HUNDRED FORTY AND 00/100 ($272,640.00)
DOLLARS and that all costs and expenses in excess of said sum shall be borne
solely by Tenant.
D. As an additional Landlord's Contribution, Landlord shall pay to
Tenant the sum of ONE HUNDRED SIX THOUSAND TWO HUNDRED FIVE AND 67/100
($106,205.67) DOLLARS, as follows: (i) the sum of Seventy Thousand and 00/100
($70,000.00) Dollars shall be paid by Landlord to Tenant within ten (10) days
after the date of execution and unconditional delivery of this lease by Landlord
and Tenant (including Landlord obtaining any non-disturbance agreement required
pursuant to Paragraph J of Article 52 herein); and (ii) provided Tenant is not
then in default under this lease, the sum of Thirty-Six Thousand Two Hundred
Five and 67/100 ($36,205.67) Dollars shall be paid by Landlord to Tenant within
thirty (30) days after the date on which Tenant commences payment of regular
monthly installments of fixed rent under this lease after the expiration of any
free fixed rent period (excluding any installments of fixed rent paid upon
execution of this lease). Such additional Landlord's Contribution may be applied
by Tenant toward the cost of Initial Tenant's Changes and/or any brokerage
commissions, attorney's fees, moving expenses and/or other costs and expenses
incurred by Tenant in connection with its leasing of, and move into, the demised
premises.
E. In coordination with the performance of Tenant's Changes made to
prepare the demised premises for initial occupancy by Tenant ("Initial Tenant's
Changes"), Landlord, at its sole expense, shall perform the following work
(collectively, "Landlord's Work"): (i) construct all building standard demising
walls necessary to physically separate the demised premises from the balance of
the space on the twenty-fourth (24th) floor of the building; (ii) remove or
encapsulate, if and to the extent required by law, any asbestos-containing
materials determined to be present in the demised premises during the
performance of Initial Tenant's Changes; and (iii) finish the common areas of
the twenty-fourth (24th) floor in the building to building standards with
reasonable diligence after the Commencement Date. In addition to the foregoing,
and as part of Landlord's Work, Landlord, at Tenant's expense (up to a maximum
sum of $15,000.00), payable by Tenant to Landlord within twenty (20) days after
demand therefor, shall furnish and install one (1) gas riser (together with a
gas meter) running to a point at the perimeter of the
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demised premises for use by Tenant in connection with its kitchen facility.
Tenant, at its sole cost and expense, shall maintain and repair the aforesaid
gas meter installed by Landlord. The cost of gas utilized by Tenant shall be
paid for by Tenant directly to the public utility furnishing same. Tenant shall
not be required to remove any item of Landlord's Work at the expiration or
sooner termination of the term of this lease.
F. As part of Initial Tenant's Changes, Tenant shall have the right to
install a kitchen exhaust for the kitchen facility to be installed by Tenant in
the demised premises. The location, dimensions, finish and manner of
installation of such vent and louvre shall be subject to Landlord's prior
written approval, which approval shall not be unreasonably withheld.
51. FREE RENT:
Provided Tenant is not in default under the terms, covenant and
conditions of this lease, Tenant shall have the right to use and occupy the
demised premises free of fixed rent for the period commencing on the
Commencement Date and ending on April 3, 1995. Except for the free fixed rent
allowance as herein provided, Tenant shall use and occupy the demised premises
pursuant to all of the other terms, covenants and conditions of this lease,
including, without limitation, Tenant's obligation to (i) pay to Landlord
additional rent accruing during such period pursuant to Articles 39 and 40
hereof; and (ii) reimburse Landlord, in accordance with Article 46 hereof, for
electricity furnished to the demised premises during said period.
52. MISCELLANEOUS:
A. Without incurring any liability to Tenant,, Landlord may permit
access to the demised premises and open the same, whether or not Tenant shall be
present, upon demand of any receiver, trustee, assignee for the benefit of
creditors, sheriff, marshall or court officer entitled to, or reasonably
purporting to be entitled to, such access for the purpose of taking possession
of, or removing, Tenant property or for any other lawful purpose (but this
provision and any action by Landlord hereunder shall not be deemed a recognition
by Landlord that the person or official making such demand has any right or
interest in or to this lease, or in or to the premises), or upon demand of any
representative of the fire, police, building, sanitation or other Department of
the city, state or federal governments.
B. No receipt of monies by Landlord from Tenant, after any reentry or
after the cancellation or termination of this lease in any lawful manner, shall
reinstate the lease; and after the service of notice to terminate this lease, or
after the commencement of any action, proceeding or other remedy, Landlord may
demand, receive and collect any monies due, and apply them on account of Tenant
obligations under this lease but without in any respect affecting such notice,
action, proceeding or remedy, except that if a money judgment is being sought in
any such action or proceeding, the amount of such judgment shall be reduced by
such payment.
C. If Tenant is in arrears, beyond any applicable notice and cure
period, in the payment of fixed rent or additional rent, Tenant waives its
right, if any, to designate the items in arrears against which any payments made
by Tenant are to be credited and Landlord may apply any of such payments to any
such items in arrears as Landlord, in its sole discretion, shall determine,
irrespective of any designation or request by Tenant as to the items against
which any such payments shall be credited.
D. No payment by Tenant nor receipt by Landlord of a lesser amount
than may be required to be paid hereunder shall be deemed to be other than on
account of any such Payment, nor shall any endorsement or statement on any check
or any letter accompanying any check tendered as payment be deemed an accord and
satisfaction and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such payment due or pursue any other
remedy in this lease provided.
E. If in this lease it is provided that Landlord's consent or approval
as to any matter will not be unreasonably withheld, and it is established by a
court or body having final jurisdiction thereover that Landlord has been
unreasonable, the only effect of such finding shall be that Landlord shall be
deemed to have given its consent or approval; but Landlord shall not be liable
to Tenant in any respect for money damages by reason of withholding its consent,
unless it shall be judicially determined that Landlord acted in bad faith or
maliciously in withholding its
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consent or approval. Notwithstanding the foregoing, whenever solely under
Article 41 hereof a provision shall expressly provide or require that a consent
or approval or the exercise of a judgment by Landlord shall not be unreasonably
withheld or delayed and a dispute or disagreement shall arise between Landlord
and Tenant as to whether or not the withholding of the consent or approval in
question is unreasonable or as to whether or not the exercise of any such
judgment is unreasonable, Tenant shall have the right to send a notice to
Landlord specifying the consent or approval which it alleges has been
unreasonably withheld or delayed or the judgment which it alleges has been
unreasonably exercised and electing to have the dispute submitted for
determination to the American Arbitration Association in the City of New York in
accordance with its rules then obtaining for expedited arbitration by a single
arbitrator, and the decision of the arbitrator appointed pursuant thereto shall
be final and conclusive on the parties. Landlord hereby agrees to cooperate with
Tenant, and to promptly execute all documents required by the American
Arbitration Association, in connection with said proceeding. The fees and
expenses charged by the American Arbitration Association shall be borne by the
losing party; however, each party shall bear its own counsel and expert witness
fees. Notwithstanding anything contained to the contrary in this Paragraph, if
it shall be determined by the arbitrator in said proceeding that Landlord has
been unreasonable, the only effect of such finding or determination shall be
that Landlord shall be deemed to have given its consent or approval; but
Landlord shall not be liable to Tenant in any respect for any damages by reason
thereof.
F. In every case in which Tenant is required by the terms of this lease
to pay to Landlord a sum of money and payment is not made within five (5) days
after notice that same is past due, interest shall be payable on such sum or so
much thereof as shall be unpaid from the date it becomes due until it is paid.
Such interest shall be at an annual rate which shall be two (2) percentage
points above the prime commercial lending rate of Citibank, N.A., charged to its
customers of highest credit standing for ninety (90) day unsecured loans, in
effect from time to time, but in no event more than the highest rate of interest
which at such time shall be permitted under the laws of the State of New York.
G. Notwithstanding anything contained in this lease to the contrary,
Tenant covenants and agrees that Tenant will not use the demised premises or any
part thereof, or permit the demised premises or any part thereof to be used, (i)
for a banking, trust company, or safe deposit business, (ii) as a savings bank,
or as a savings and loan association, or as a loan company, (iii) for the sale
of travelers checks and/or foreign exchange, (iv) as a stock brokerage office or
for stock brokerage purposes or for the underwriting of securities, (v) as a
news and cigar stand, as such, or (vi) as a restaurant and/or bar and/or for the
sale of confectionery and/or sale and/or beverages and/or sandwiches and/or ice
cream and/or baked goods or (except for use by Tenant's employees) for the
preparation, dispensing or consumption of food or beverages in any manner
whatsoever.
H. Supplementing the provisions of Article 34 hereof, Landlord will
deposit said security in an interest bearing account and unless paid or applied
for the use or rental of the demised premises upon default of Tenant as
hereinabove provided, Landlord will deliver or cause to be delivered to Tenant,
such interest as is allowed on said account at the end of the term, less one
(1%) percent per annum administration expense allowed by law.
I. Tenant hereby agrees to pay, as additional rent, all reasonable
attorneys' fees and disbursements (and all other court costs or expenses of
legal proceedings) which Landlord may incur or pay out by reason of, or in
connection with:
(a) any action or proceeding by Landlord to terminate this
lease;
(b) any other action or proceeding by Landlord against Tenant
(including, but not limited to, any arbitration proceeding);
(c) any default by Tenant beyond any applicable notice and
cure period in the observance or performance of any obligation under this lease
(including, but not limited to, matters involving: payment of rent and
additional rent; computation of escalations; alterations or other Tenant's work;
and subletting or assignment) whether or not Landlord commences any action or
proceeding against Tenant;
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(d) any action or proceeding brought by Tenant against
Landlord (or any officer, partner, or employee of Landlord) in which Tenant
fails to secure a final unappealable judgment against Landlord; and
(e) any other appearance by Landlord (or any officer, partner
or employee of Landlord) as a witness or otherwise in any action or proceeding
whatsoever involving or affecting Landlord, Tenant or this lease;
Tenant's obligations under this Paragraph shall survive the expiration
of the term hereof or any other termination of this lease. This Paragraph is
intended to supplement (and not to limit) other provisions of this lease
pertaining to indemnities and/or attorneys' fees.
J. 1. In amplification of Article 7 hereof, this lease, and all rights
of Tenant hereunder, are and shall be, subject and subordinate, in all respects
to all mortgages (collectively the "Mortgage") now or hereafter made covering
the building and the lien created thereby and to each and every advance made or
hereafter to be made under the Mortgage, and to all renewals, modifications,
spreaders, consolidations, replacements and extensions thereof, including any
increase in the principal sum secured thereby, and any increase in the rate of
interest provided therein, and to each and all of the rights of the respective
mortgagee thereunder. This Paragraph shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver any certificate that
any such mortgagee may reasonably request. To the extent not so provided by
applicable law, in the event of the enforcement by such mortgagee of the
remedies provided for by law or by the Mortgage, if such mortgagee or any
successors or assigns of such mortgagee shall, at its or their sole option,
succeed to the interest of Landlord under this lease whether through possesory
or foreclosure action or a deed in lieu of foreclosure and this lease shall not
be terminated or affected by such foreclosure or any such proceedings, Tenant
shall attorn to and recognize such mortgagee (or its successors or assigns) as
its landlord upon the terms, covenants, conditions and agreements contained in
this lease to the same extent and in the same manner as if this lease was a
direct lease between such mortgagee (or its successors or assigns) and Tenant,
except that such mortgagee (or its successors or assigns), whether or not it
shall have succeeded to the interest of Landlord under this lease, shall not (a)
have any liability for refusal or failure to perform or complete any work
required to be performed by Landlord under this lease or any workletter annexed
hereto, to prepare the demised premises for occupancy in accordance with the
provisions of this lease, (b) be liable for any act, omission or default of any
prior landlord under this lease, (c) be subject to any offsets, claims or
defenses which shall have heretofore accrued to Tenant against any prior
landlord under this lease, (d) be bound by any rent or additional rent which
Tenant might have paid to any prior landlord for more than one (1) month in
advance except as otherwise provided in the Mortgage, and/or (e) be bound by any
cancellation, abridgement, surrender, modification or amendment of this lease,
without the prior written consent of such mortgagee, except as and if permitted
by the provisions of the Mortgage.
2. Landlord agrees that it shall request from the holder(s) of the
existing mortgage(s) and any mortgages hereafter made covering the real property
of which the demised premises form a part, a subordination, non-disturbance and
attornment agreement in form customarily adopted by such holder(s) (the "SNDA
Agreement(s)"). Except as provided in Paragraph J.3 herein, the failure of
Landlord to obtain any such agreement shall not be deemed a default on
Landlord's part of its obligations hereunder, or impose any claim in favor of
Tenant against Landlord by reason thereof, or affect the validity of this lease.
Tenant agrees to (i) execute and deliver to such holder(s) a SNDA Agreement in
form and substance customarily adopted by such holder(s) and (ii) reimburse
Landlord for all reasonable expenses incurred by Landlord in connection
therewith, including legal expenses.
3. In the event that Landlord shall fail to obtain a SNDA Agreement
pursuant to Paragraph J.2 above from the existing mortgagee, Citibank, N.A.,
within sixty (60) days after the date of Tenant's execution and delivery of this
lease to Landlord (provided that Tenant shall have duly executed at least two
(2) counterparts of the Citibank, N.A. form of SNDA Agreement and returned same
to Landlord for counter-execution by Citibank, N.A. within five (5) days after
Tenant's receipt thereof), then Tenant, as its sole remedy, shall have the right
to terminate this lease by written notice given to Landlord within ten (10) days
after the expiration of said sixty
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(60) day period, whereupon Landlord and Tenant shall each be released from all
further liability and obligation under this lease.
K. Tenant shall not cause or permit any Hazardous Materials
(hereinafter defined) to be used, stored, transported, released, handled,
produced or installed in, on or from the demised premises or the building.
"Hazardous Materials", as used herein, shall mean any flammables, explosives,
radioactive materials, hazardous wastes, hazardous and toxic substances or
related materials, asbestos or any material containing asbestos, or any other
substance or material included in the definition of "hazardous substances",
"hazardous wastes", "hazard materials", "toxic substances", "contaminants" or
any other pollutant, or otherwise regulated by any Federal, state or local
environmental law, ordinance, rule or regulation including, without limitation,
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, and in the regulations adopted and
publications promulgated pursuant to each of the foregoing. In the event of a
violation of any of the foregoing provisions of this Paragraph, Landlord may,
without notice and without regard to any grace period contained herein, take all
remedial action deemed necessary by Landlord to correct such condition and
Tenant shall reimburse Landlord for the cost thereof, upon demand, as additional
rent. Nothing contained herein shall be deemed to obligate Tenant to remove or
encapsulate any asbestos-containing materials determined to be present in the
demised premises during the term hereof (unless same are installed therein by
Tenant or any party acting on behalf of, or claiming through, Tenant).
L. Only Landlord or one or more persons approved by Landlord (which
approval shall not be unreasonably withhold) will be permitted to furnish
laundry, linen, towels, bootblacking, barbering and other similar supplies and
services to tenants. Landlord may fix the hours during which and the regulations
under which such supplies and services are to be furnished. Landlord expressly
reserves the right to exclude from the building any person attempting to furnish
any of said supplies or services but not so approved by Landlord. However,
Tenant, its regular office employees, or invitees may personally bring (or,
subject to Landlord's building security regulations, have delivered) food or
beverages into the building for consumption within the demised premises solely
by Tenant, its regular office employees or invitees. In all events, all food and
beverages shall be carried in closed containers.
M. Only Landlord or one or more persons approved by Landlord shall be
permitted to act as maintenance contractor for all waxing, polishing, cleaning
and maintenance work in the demised premises, provided that the quality thereof
and the charges therefor are reasonably comparable to that of other contractors.
Nothing herein contained shall prohibit Tenant from performing such work for
itself by use of its own regular employees. Landlord may fix the hours during
which and regulations under which such services are to be furnished. Landlord
expressly reserves the right to act as or to designate, at any time and from
time to time, an exclusive contractor for all or any one or more of said
services, provided that the quality thereof and the charges therefor are
comparable to that of other contractors; and Landlord furthermore expressly
reserves the right to exclude from the building any person attempting to furnish
any of said services but not so designated by Landlord.
N. Landlord will not be required to furnish any services except as
otherwise expressly provided in this lease.
O. If the Expiration Date or the date of sooner termination of this
lease shall fall on a day which is not a business day, then Tenant's obligations
under Articles 3 and 22 hereof shall be performed on or prior to the immediately
preceding business day. Tenant expressly waives, for itself and for any person
claiming through or under Tenant, any rights which Tenant or any such person may
have under the provisions of Section 2201 of the New York Civil Practice Law and
Rules and of any similar or successor law of same import then in force, in
connection with any holdover proceedings which Landlord may institute to enforce
the provisions of this lease. In the event Tenant remains in possession of the
demised premises after the termination of this lease without the execution of ii
new lease, Tenant, at the option of Landlord, shall be deemed to be occupying
the demised premises as a tenant from month to month, at a monthly rental equal
to one and one quarter (1-1/4) times the fixed rent and additional rent payable
during the last month of the term, subject to all of the other terms of this
lease insofar as the same are applicable to a
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month-to-month tenancy. Nothing contained hereinabove shall be deemed to limit
Landlord's right, at law or in equity, against Tenant to seek reimbursement for
damages, costs and expenses incurred by Landlord by reason of any delay by
Tenant in so surrendering the demised premises. Tenant obligations under this
Paragraph shall survive the termination of this lease.
P. This lease contains the entire agreement between the parties and all
prior negotiations and agreements are merged into this lease. This lease may not
be changed, modified, terminated or discharged, in whole or in part, nor any of
its provisions waived except by a written instrument which (i) expressly refers
to this lease, (ii) is executed by the party against whom enforcement of the
change, modification, termination, discharge or waiver is sought and (iii) is
permissible under all mortgages affecting the real property of which the demised
premises are a part and any underlying leases.
Q. Tenant expressly acknowledges that neither Landlord nor Landlord's
agents has made or is making, and Tenant, in executing and delivering this
lease, is not relying upon, any warranties, representations, promises or
statements, except to the extent that the same are expressly set forth in this
lease, and no rights, easements or licenses are or shall be acquired by Tenant
by implication or otherwise unless expressly set forth in this lease.
R. Any apportionments or prorations of rent to be made under this lease
shall be computed on the basis of a 360 day year, with 12 months of 30 days
each.
S. This lease shall be governed in all respects by the laws of the
State of New York. Tenant hereby specifically consents to jurisdiction in the
State of New York in any action or proceeding arising out of this lease and/or
the use and occupation of the demised premises. If Tenant at any time after date
of execution hereof or during the term hereof shall not be a New York
partnership or a New York corporation or a foreign corporation qualified to do
business in New York State, Tenant shall designate in writing, an agent in New
York County for service under the laws of the State of New York for the entry of
a personal judgment against Tenant. Tenant by notice to Landlord shall have the
right to change such agent provided that at all times there shall be an agent in
New York County for service. In the event of any revocation by Tenant of such
agency, such revocation shall be void and have no force and effect unless and
until a new agent has been designated for service and Landlord notified to such
effect. If any such agency designation shall require a filing in the office of
the Clerk of the County of New York, same shall be promptly accomplished by
Tenant, at its expense and a certified copy transmitted to Landlord.
T. Intentionally Omitted.
U. If Tenant is a partnership (or is comprised of 2 or more persons,
individually, or as joint venturers or as copartners of a partnership) or if
Tenant's interest in this lease shall be assigned to a partnership (or to 2 or
more persons, individually, or as joint venturers or as copartners of a
partnership) pursuant to Articles 11 and 41 (any such partnership and such
persons are referred to in this Paragraph as "Partnership Tenant"), the
following provisions of this Paragraph shall apply to such Partnership Tenant;
(i) the liability of each of the parties comprising Partnership Tenant shall be
joint and several, and (ii) each of the parties comprising Partnership Tenant
hereby consents in advance to, and agrees to be bound by, any modifications,
termination, discharge or surrender of this lease which may hereafter be made
and by any notices, demands, requests or other communications which may
hereafter be given, by Partnership Tenant or by any of the parties comprising
Partnership Tenant, and (iii) any bills, statements, notices, demands, requests
or other communications given or rendered to Partnership Tenant or to any of the
parties comprising Partnership Tenant shall be deemed given or rendered to
Partnership Tenant and to all such parties and shall be binding upon Partnership
Tenant and all parties, and (iv) if Partnership Tenant shall admit new partners,
all such new partners shall, by their admission to Partnership Tenant, be deemed
to have assumed performance of all of the terms, covenants and conditions of
this lease on Tenant's part to be observed and performed, and (v) Partnership
Tenant shall give prompt notice to Landlord of the admission of any such new
partners, and upon demand of Landlord, shall cause each such new partner to
execute and deliver to Landlord an agreement in form satisfactory to Landlord,
wherein each such new partner shall assume performance of all of the terms,
covenants and conditions of this lease on Tenant's part to be observed and
performed (but neither Landlord's failure to request any such agreement nor
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the failure of any such new partner to execute or deliver any such agreement to
Landlord shall vitiate the provisions of subdivision (iv) of this Paragraph).
V. Except for the inside surfaces of all walls, windows and doors
bounding the demised premises, all of the building including exterior building
walls, terraces, core corridor walls and doors and any core corridor entrance
and any space in or adjacent to the demised premises used for shafts, stacks,
pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other
building facilities, and the use thereof, as well as access thereto through the
demised premises for the purpose of operation, maintenance, decoration and
repair, are reserved to Landlord; provided, however, that Tenant, at its sole
cost and expense, shall be responsible for maintaining and repairing the gas
riser and kitchen exhaust referenced in Paragraphs E and F of Article ___
hereof. Notwithstanding the foregoing, any maintenance and/or repair of said gas
riser and/or kitchen exhaust required by Tenant shall, at Landlord's option, be
performed by Landlord on Tenant's behalf, and Tenant shall reimburse Landlord
for its reasonable charges in connection therewith within ten (10) days after
demand therefor.
W. Notices, statements, demands or other communications may be given,
rendered or made on behalf of Landlord by its leasing or managing agent.
X. If the building or the demised premises shall be so damaged by fire
or other casualty so as to interfere substantially with the use of the demised
premises by Tenant, and it shall have been mutually determined by Landlord and
Tenant, no later than thirty (30) days from the occurrence of the event, that
such damage can not be repaired within nine (9) months from the date of the
occurrence of the event (subject to reasonable delays for insurance adjustment),
then Tenant shall have the right, by giving written notice to Landlord to such
effect within fifteen (15) days after it has been determined that the damage can
not be restored or repaired within the aforesaid period, to terminate this lease
and its obligations hereunder, in which event the fixed rent and additional rent
shall be prorated to the date of the occurrence of such damage. If Tenant shall
fail to serve such notice as aforesaid, then this lease shall continue in full
force and effect subject, however, to Landlord's right of termination as set
forth in Article 9. If there be any dispute between Landlord and Tenant with
respect to the foregoing, the issue shall be expeditiously submitted to the
American Arbitration Association in New York City for determination in
accordance with its rules then obtaining and the decision of the arbitrators
appointed pursuant thereto shall be binding upon the parties, and may be entered
as a judgment in any court having jurisdiction thereover. The arbitration fees
shall be borne equally by the parties.
Y. Landlord, at Tenant's expense payable within ten (10) days after
demand therefor, shall furnish and install (i) one (1) building standard
identifying sign adjacent to the entry door to the demised premises bearing the
name and/or logo of Tenant and (ii) one (1) single line listing of the name of
Tenant on a plaque listing the names of tenants on the twenty-fourth (24th)
floor (which plaque shall also contain a directional marking indicating the
location of the entrance to the demised premises), such plaque to be located at
or about the twenty-fourth (24th) floor elevator lobby (in a location to be
designated by Landlord and visible from said elevator lobby).
53. RULES AND REGULATIONS ATTACHED TO AND MADE PART OF THIS LEASE IN
ACCORDANCE WITH ARTICLE 33:
1. The sidewalks, driveways, entrances, passages, courts,
lobby, esplanade areas, plazas, elevators, vestibules, stairways, corridors or
halls shall not be obstructed or encumbered by any tenant or used for any
purpose other than ingress and egress to and from the demised premises and
Tenant shall not permit any of its employees, agents or invitees to congregate
in any of said areas. No doormat of any kind whatsoever shall be placed or left
in any public hall or outside any entry door of the demised premises.
2. No awnings or other projections shall be attached to the
outside walls of the building. No curtains, blinds, shades or screens shall be
attached to or hung in, or used in connection with, any window or door of the
demised premises, without the prior written consent of Landlord. Such curtains,
blinds, shades or screens must be of a quality, type, design and color, and
attached in the manner, approved by Landlord.
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3. No sign, insignia, advertisement, object, notice or other
lettering shall be exhibited, inscribed, painted or affixed by any tenant on any
part of the outside or so as to be visible from the outside of the demised
premises or the building. In the event of the violation of the foregoing by any
tenant, Landlord may remove the same without any liability, and may charge the
expenses incurred in such removal to the tenant or tenants violating this rule.
Lettering on entry doors shall, if and when approved by Landlord (which approval
shall not be unreasonably withheld), be inscribed, painted or affixed for each
tenant by Landlord (or, at Landlord's option, by Tenant) at the expense of such
tenant, and shall be of a size, color and style reasonably acceptable to
Landlord.
4. The sashes, sash doors, skylights, windows, and doors that
reflect or admit light and air into the halls, passageways or other public
places in the building shall not be covered or obstructed by Tenant, nor shall
any bottles, parcels, or other articles be placed on the window sills.
5. No showcases or other articles shall be put in front of or
affixed to any part of the exterior of the building, nor placed in the halls,
corridors or vestibules. If the demised premises shall be an entire floor, the
elevator lobby in the demised premises shall be kept neat, orderly and fresh in
appearance to Landlord's satisfaction.
6. The water and wash closets and other 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 thrown or deposited therein. All damages resulting from any misuse of the
fixtures shall be repaired at the expense of the tenant who, or whose servants,
employees, agents, visitors or licensees shall have caused the same.
7. 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.
8. No bicycles, vehicles, animals, fish or birds of any kind
shall be brought into or kept in or about the premises.
9. No noise, including, but not limited to, music or the
playing of musical instruments, recordings, radio or television which, in the
judgment of Landlord, might disturb other tenants in the building, shall be made
or permitted by any tenant. Nothing shall be done or permitted in the demised
premises by Tenant which would impair or interfere with the use or enjoyment by
any other tenant of any other space in the building. No tenant shall throw
anything out of the doors, windows or skylights or down the passageways.
10. Tenant, its servants, employees, agents, visitors or
licensees, shall not at any time bring or keep upon the demised premises any
explosive fluid, chemical or substance, nor any inflammable or combustible
objects or materials.
11. Except in those areas designated by Tenant as "security
areas", additional locks or bolts of any kind which shall not be operable by the
Grand Master Key for the building shall not be placed upon any of the doors or
windows by any tenant, nor shall any changes be made in locks or the mechanism
thereof which shall make such locks inoperable by said Grand Master Key. Each
tenant shall, upon the termination of its tenancy, turn over 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 furnished by
Landlord, such tenant shall pay to Landlord the cost thereof.
12. All removals, or the carrying in or out of any safes,
freight, furniture, packages, boxes, crates or any other object or matter of any
description must take place during such hours and in such elevators as Landlord
or its Agent may determine from time to time for the building. Landlord reserves
the right to inspect all objects and matter to be brought into the building and
to exclude from the building all objects and matter which violate any of these
Rules and Regulations or the lease of which these Rules and Regulations are a
part. Landlord may require any person leaving the building with any package or
other object or matter to submit a
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pass, listing such package or object or matter, from the tenant from whose
premises the package or object or matter is being removed, but the establishment
and enforcement of such requirement shall not impose any responsibility on
Landlord for the protection of any tenant against the removal of property from
the premises of such tenant. Landlord shall, in no way, be liable to Tenant for
damages or loss arising from the admission, exclusion or ejection of any person
to or from the demised premises or the building under the provisions of this
Rule 12 or of Rule 15 hereof.
13. Tenant shall not occupy or permit any portion of the
demised premises to be occupied as an office for a public stenographer or public
typist, or for the possession, storage, manufacture, or sale of beer, wine or
liquor, narcotics, dope, tobacco in any form, or as a barber, beauty or manicure
shop, or as an employment bureau. Tenant shall not engage or pay any employees
on the demised premises, except those actually working for Tenant on the demised
premises, nor advertise for laborers giving an address at the demised premises.
Tenant shall not use the demised promises or any part thereof, or permit the
demised premises or any part thereof to be used, for manufacturing, or for the
sale at auction of merchandise, goods or property of any kind.
14. Landlord shall have the right to prohibit any advertising
or display of any identifying sign by any tenant which in Landlord's judgment,
exercised in good faith, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Landlord,
such tenant shall refrain from or discontinue such advertising, or identifying
Sign.
15. Landlord reserves the right to exclude from the building
during hours other than business hours (as defined in the forgoing lease) all
persons who do not present a pass to the building signed by Landlord. All
persons entering and/or leaving the building during hours other than business
hours may be required to sign a register. Landlord will furnish passes to
persons for whom any tenant requests same in writing. Each tenant shall be
responsible for all persons for whom such tenant requests such pass and shall be
liable to Landlord for all acts or omissions of such persons.
16. Tenant, before closing and leaving the demised premises at
any time, shall see that all lights are turned out. All entrance doors in the
demised premises shall be left locked by Tenant when the demised premises are
not in use. Entrance doors shall not be left open at any time.
17. Unless Landlord shall furnish electrical energy hereunder
as a service included in the rent, Tenant shall, at Tenant's expense, provide
artificial light and electrical energy for the employees of Landlord and/or
Landlord's contractors while doing janitor service or other cleaning in the
demised premises and while making repairs or alterations in the demised
premises.
18. The demised premises shall not be used for lodging or
sleeping or for any immoral or illegal purposes.
19. The requirements of tenants will be attended to only upon
application at the office of the building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
20. Canvassing, soliciting and peddling in the building are
prohibited and each tenant shall cooperate to prevent the same.
21. There shall not be used in any space, or in the public
halls of the building, either by any tenant or by jobbers or any others, in the
moving or delivery or receipt of safes, freight, furniture, packages, boxes,
crates, paper, office material, or any other matter or thing, any hand trucks
except those equipped with rubber tires, side guards and such other safeguards
as Landlord shall require. No hand trucks shall be used in passenger elevators,
and no such passenger elevators shall be used for the moving, delivery or
receipt of the aforementioned articles.
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22. Tenant shall not cause or permit any odors of cooking or
other processes or any unusual or objectionable odors to emanate from the
demised premises which would annoy other tenants or create a public or private
nuisance. No cooking shall be done in the demised premises except in that
portion of the demised premises, if any, utilized as a kitchen facility.
23. Tenant shall cooperate with Landlord in obtaining maximum
effectiveness of the cooling system by lowering and closing venetian blinds
and/or drapes and curtains when the sun's rays fall directly on the windows of
the demised premises.
24. Notwithstanding anything contained in this lease to the
contrary, any entrance door or doors leading from the demised premises into the
public corridor shall be repaired and/or maintained by Tenant, at Tenant's sole
cost and expense, including, without limitation, repair and maintenance of the
enframement and mechanisms of said door(s) whether such repair or maintenance is
caused by any damage by Tenant, its employees, workmen or contractors, by
ordinary wear and tear or otherwise.
25. Landlord reserves the right, upon prior notice to Tenant,
to rescind, alter or waive any rule or regulation at any time prescribed for the
building when, in its reasonable judgment, it deems it necessary or desirable
for the reputation, safety, care of appearance of the building, or the
preservation of good order therein, or the operation or maintenance of the
building or the equipment thereof, or the comfort of tenants or others in the
building. No rescission, alteration or waiver of any rule or regulation in favor
of one Tenant shall operate as a rescission, alteration or waiver in favor of
any other tenant.
54. RENT RESTRICTIONS:
If the fixed rent or any additional rent shall be or become
uncollectible by virtue of any law, governmental order or regulation, or
direction of any public officer or body, Tenant shall enter into such agreement
or agreements and take such other action (without additional expense to Tenant)
as Landlord may request, as may be legally permissible, to permit Landlord to
collect the maximum fixed rent and additional rent which may, from time to time
during the continuance of such legal rent restriction be legally permissible,
but not in excess of the amounts of fixed rent or additional rent payable under
this lease. Upon the termination of such legal rent restriction, (a) the fixed
rent and additional rent, after such termination, shall become payable under
this lease in the amount of the fixed rent and additional rent set forth in this
lease for the period following such termination, and (b) Tenant shall pay to
Landlord, if legally permissible, an amount equal to (i) the fixed rent and
additional rent which would have been paid pursuant to this lease, but for such
rent restriction, less (ii) the fixed rent and additional rent paid by Tenant to
Landlord during the period that such rent restriction was in effect.
55. ADDENDUM TO ARTICLE 16 - BANKRUPTCY:
A. If Tenant assumes this lease and proposes to assign the same
pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. / 101 et seq. (the
"Bankruptcy Code") to any person or entity who shall have made a bona fide offer
to accept an assignment of this lease on terms acceptable to Tenant, then notice
of such proposed assignment, setting forth (i) the name and address of such
person, (ii) all of the terms and conditions of such offer, and (iii) the
adequate assurance to be provided Landlord to assure such person's future
performance under the lease, including, without limitation, the assurance
referred to in section 365 (b) (3) of the Bankruptcy Code, shall be given to
Landlord by Tenant not later than twenty (20) days after receipt by Tenant but
in no event later than ten (l0) days prior to the date that Tenant shall make
application to a court of competent jurisdiction for authority and approval to
enter into such assignment and assumption, and Landlord shall thereupon have the
prior right and option, to be exercised by notice to Tenant given at any time
prior to the effective date of such proposed assignment, to accept an assignment
of this lease upon the same terms and conditions and for the same consideration,
if any, as the bona fide offer made by such person, less any brokerage
commissions which may be payable out of the consideration to be paid by such
person for the assignment of this lease.
B. If this lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other considerations
payable or otherwise delivered in
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<PAGE> 40
connection with such assignment shall be paid or delivered to Landlord, shall be
and remain the exclusive property of Landlord and shall not constitute property
of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code.
Any and all monies or other considerations constituting Landlord's Property
under the preceding sentence not paid or delivered to Landlord shall be held in
trust for the benefit of Landlord and shall be promptly paid to Landlord.
C. Any person or entity to which this lease is assigned pursuant to the
provisions of the Bankruptcy Code, shall be deemed without further act or deed
to have assumed all of the obligations arising under this lease on and after the
date of such assignment. Any such assignee shall upon demand execute and deliver
to Landlord an instrument confirming such assumption.
D. Nothing contained in this Article shall, in any way, constitute a
waiver of the provisions of this lease relating to assignment. Tenant shall not,
by virtue of this Article, have any further rights relating to assignment other
than those granted in the Bankruptcy Code.
E. Notwithstanding anything in this lease to the contrary, all amounts
payable by Tenant to or on behalf of Landlord under this lease, whether or not
expressly denominated as rent, shall constitute rent for the purposes of Section
502(b)(7) of the Bankruptcy Code.
F. The term "Tenant" as used in this Article includes any trustee,
debtor in possession, receiver, custodian or other similar officer.
56. OPTIONS TO TERMINATE:
A. Provided Tenant is not in default under the terms, covenants and
conditions of the within lease, Tenant shall have the one-time option to
terminate this lease, solely as to the premises initially demised to Tenant
under this lease, effective as of __________ 30, 1998, provided (a) Tenant
notifies Landlord in writing of its election to terminate by registered or
certified mail, return receipt requested, at least twelve (12) months prior to
such termination date and (b) said notice be accompanied by a check payable to
Landlord in the amount of Six Hundred Thirteen Thousand Four Hundred Forty and
00/100 ($613,440.00) Dollars as fixed and liquidated damages resulting from the
exercise of the right of termination. In such event, this lease shall be deemed
terminated as of such termination date and Tenant shall be released of all
liability for the performance of Tenant's obligations under this lease accruing
subsequent to the effective date of such termination. Any sum paid as liquidated
damages as provided above shall be in addition to all rentals due hereunder.
B. Provided Tenant is not in default under the terms, covenants and
conditions of the within lease, Tenant shall have the one-time option to
terminate this lease, solely as to the Additional Space, effective as of
November 30, 1998, provided (i) Tenant notifies Landlord in writing of its
election to terminate by registered or certified mail, return receipt requested,
at least twelve (12) months prior to such termination date and (ii) said notice
be accompanied by a check payable to Landlord in the applicable amount set forth
in Exhibit "D" annexed hereto, as fixed and liquidated damages resulting from
the exercise of the right of termination. In such event, this lease shall be
deemed terminated as of such termination date and Tenant shall be released of
all liability for the performance of Tenant's obligations under this lease
accruing subsequent to the effective date of such termination. Any sum paid as
liquidated damages as provided above shall be in addition to all rentals due
hereunder.
C. It is understood and agreed by the parties that Tenant shall have
the right to exercise either one or both of the termination options set forth
above; provided, however, that if Tenant shall have leased Additional Space
pursuant to Article 57 herein and shall elect to exercise one (but not both) of
the termination options set forth above, then Landlord, at Tenant's expense
payable within twenty (20) days after demand therefor, shall erect any building
standard demising walls deemed necessary by Landlord.
57. LIMITED RIGHT TO LEASE ADDITIONAL SPACE:
A. 1. Provided Tenant is not then in default under this lease and is in
occupancy of substantially the entire demised premises, then Tenant shall have
the option (the "Option"), exercisable solely by giving Landlord written notice
of such election (the "Option Exercise Notice") no later than March 5, to lease
any one of (i) the balance of the rentable space on the
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<PAGE> 41
twenty-fourth (24th) floor of the building (the "Entire Rentable Balance"); (ii)
a portion of the Entire Rentable Balance, designated as Unit A on Exhibit A-2
annexed hereto; or (iii) a portion of the Entire Rentable Balance, designated as
Unit B on Exhibit A-3 annexed hereto (the space leased by Tenant pursuant to
this Article as hereinafter called the "Additional Space"). If Tenant shall
elect to lease either Unit A or Unit B (but not both of them) as the Additional
Space, then Landlord, at Tenant's expense payable to Landlord within twenty (20)
days after demand therefor, shall erect any building standard demising walls
deemed necessary by Landlord to separate said Units.
2. (a) Notwithstanding the foregoing, if, at any time on or
before __________, Tenant shall not have exercised the Option; however, Landlord
shall have received a bona-fide offer (the "Offer") in writing for the leasing
of the Entire Rentable Balance or, any part thereof and shall desire to execute
and deliver a lease for such space, on or before ____________, pursuant to the
Offer, Landlord shall notify Tenant in writing ("Landlord's Notice") that it has
received an Offer. If the Offer shall be for the Entire Rentable Balance or
shall be for space which is situate in each of Unit A and Unit B as shown on
Exhibits A-2 and A-3 annexed hereto (but does not cover such entire area), then
the term "Additional Space" shall mean the Entire Rentable Balance. If the Offer
shall be for space which is situate solely in either Unit A or Unit B (but not
both of such Units), then the term "Additional Space" shall mean the Unit in
which such space is situate unless Tenant shall elect, in Tenant's Notice (as
defined hereon) to lease the Entire Rentable Balance, in which case the term
"Additional Space" shall mean the Entire Rentable Balance.
(b) If Tenant shall desire to lease the Additional Space
described in Landlord's Notice, Tenant may exercise such right solely by giving
Landlord written notice thereof ("Tenant's Notice") on or before the earlier to
occur of (i) March 15, 1996 or (ii) the date which is fifteen (15) days after
Tenant's receipt of Landlord's Notice. If Tenant shall fail or decline to elect
to lease such Additional Space as herein provided, then Tenant shall not have
any right to exercise its Option as to the Additional Space (or part thereof)
described in Landlord's Notice so long as Landlord, in Landlord's sole
determination, shall continue to conduct negotiations for such space with the
prospective tenant for which Landlord received the Offer.
B. If Tenant shall timely give Landlord the Option Exercise Notice or
Tenant's Notice, whichever is applicable, then Tenant shall lease the Additional
Space for a term (the "Additional Space Term") commencing on the date (the
"Additional Space Commencement Date") on which Landlord receives the Option
Exercise Notice or Tenant's Notice, whichever is applicable, and ending an the
date which is the last day of the calendar month in which occurs the ten (10)
year and four (4) month anniversary of the day immediately preceding the
Additional Space Commencement Date, it being understood and agreed by the
parties that the Additional Space Term may expire prior to, on or after the
Expiration Date of this lease with respect to the premises initially demised
hereunder. If Tenant shall exercise the Option solely as to Unit A or Unit B,
but not both of said Units, then Tenant shall have no further option or right to
lease the other Unit pursuant to this Article. Effective as of the Additional
Space Commencement Date:
(i) The Additional Space shall be added to and deemed a part
of the demised premises for all purposes of this lease except as expressly
provided otherwise herein;
(ii) The fixed rent payable by Tenant with respect to the
Additional Space, (a) for the period commencing on the Additional Space
Commencement Date and ending on the last day (the "1st Rental Rate Expiration
Date") of the calendar month in which occurs the five (5) year and four (4)
month anniversary of the day immediately preceding the Additional Space
Commencement Date, shall be at the rate of (x) Two Hundred Forty-one Thousand
Nine Hundred Seventy-Nine and 50/l00 ($241,979.50) Dollars per annum (if the
Additional Space shall be comprised of the Entire Rentable Balance); (y) One
Hundred Twenty Thousand Nine Hundred Seventy-Eight and 00/100 ($120,978.00)
Dollars per annum (if the Additional Space shall be comprised by Unit A); or One
Hundred Twenty-One Thousand One and 50/100 ($121,001.50), Dollars per annum (if
the Additional Space shall be comprised of Unit B); and (b) for the balance of
the term hereof, shall be at the rate of (x) Two Hundred Sixty-Two Thousand Five
Hundred Seventy-Three and 50/100 ($262,573.50) Dollars per annum (if the
Additional Space shall be comprised of the Entire Rentable Balance); (y) One
Hundred Thirty-One Thousand Two Hundred Seventy-Four and 00/100 ($131,274.00)
Dollars per annum (if the
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<PAGE> 42
Additional Space shall be comprised of Unit A) ; or (z) One Hundred Thirty-One
Thousand Two Hundred Ninety-Nine and 50/100 ($131,299.50) Dollars per annum (if
the Additional Space shall be comprised of Unit B);
(iii) The percentage "1.67%" set forth in Paragraph A.4 of
Article 39 hereof and Paragraph A.2 of Article 40 hereof shall be increased by
the percentage (x) 1.23% (if the Additional Space shall be comprised of the
Entire Rentable Balance; (y) .64% (if the Additional Space shall be comprised of
Unit A); or (z) .64% (if the Additional Space shall comprised of Unit B); with
the same base years set forth in said Articles 39 and 40;
(iv) The figure "13,632" set forth in Paragraph B.2 of Article
46 hereof shall be increased by (x) 10, 297 (if the Additional Space shall be
comprised of the Entire Rentable Balance); (y) 5,148 (if the Additional Space
shall be comprised of Unit A); or (z) 5,149 (if the Additional Space shall be
comprised of Unit B);
(v) The provisions of Article 50 of this lease shall apply to
the Additional Space and shall be amended as follows: (a) the amount of
Landlord's Contribution shall be (x) Two Hundred Nine Thousand Nine Hundred
Forty and 00/100 ($205,940.00) Dollars if the Additional Space shall be
comprised of the Entire Rentable Balance); (y) One Hundred Two Thousand Nine
Hundred Sixty and 00/100 ($102,960.00) Dollars (if the Additional Space shall be
comprised of Unit A); or (z) One Hundred Two Thousand Nine Hundred Eighty and
00/100 ($102,980.00) Dollars (if the Additional Space shall be comprised of Unit
B);
(vi) The provisions of Article 51 shall not be applicable to
the Additional Space; provided, however, that if Tenant is not in default beyond
any applicable notice and grace period under the terms, covenants and conditions
of this lease, Tenant shall have the right to use and occupy the Additional
Space free of fixed rent for the first thirty-two (32) months following the
Availability Date. Except for the free fixed rent allowance as herein provided,
Tenant shall use and occupy the Additional Space pursuant to all of the other
terms, covenants and conditions of this lease, including, without limitation,
Tenant's obligation to reimburse Landlord, in accordance with Article 46 hereof,
for electricity furnished to the Additional Space during said period; and
(vii) Article 34 of this lease shall be amended by increasing
the sum of "57,936.00" set forth therein by (x) $42,046.00 (if the Additional
Space shall be comprised of the Entire Rentable Balance); (y) $21,021.00 (if the
Additional Space shall be comprised of Unit A) ; or (z) $21,025.00 (if the
Additional Space shall be comprised of Unit B); and Tenant shall deliver to
Landlord a check in the applicable sum to Landlord together with the delivery of
Tenant's Notice.
C. If Tenant shall lease any additional space in the building pursuant
to this Article, then promptly after the Additional Space Commencement Date
shall occur, the parties shall mutually execute and deliver a written
instrument, in form reasonably satisfactory to Landlord, confirming Tenant's
exercise of its right(s) under this Article, the date on which the Additional
Space Commencement Date occurred, and such other information with respect to the
lease as Landlord may reasonably request. The parties' failure to execute such
instrument shall not vitiate the foregoing provisions of this Article.
D. If Landlord shall be unable to deliver any Additional Space on the
Additional Space Commencement Date due to the holding-over or retention of such
space by any tenant or occupant thereof or for any other reason beyond
Landlord's reasonable control, Landlord shall not be subject to any liability
for failure to give possession on said date and Tenant's obligations under this
Article shall in no wise be affected except that the Availability Date shall be
deemed to be the date which is fifteen (15) days after Landlord shall give
Tenant notice that the Additional Space is in fact available for occupancy by
Tenant. The provisions of this Paragraph are intended to constitute "an express
provision to the contrary" within the meaning of Section 223-a of the New York
Real Property Law.
58. ODORS:
Tenant shall not permit any unusual or obnoxious odors to emanate from
the demised premises. Tenant will, within five (5) days after written notice
from Landlord, install at its own
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<PAGE> 43
cost and expense, reasonable control devices or procedures to eliminate such
odors, if any. In the event such condition is not remedied within such five (5)
day period, Landlord may, at its reasonable discretion, either (a) cure such
condition and thereafter add the cost and expense incurred by Landlord therefor
to the next monthly rental to become due and Tenant shall pay said amount as
additional rent; or (b) treat such failure on the part of Tenant to eliminate
such obnoxious odors as a material default hereunder entitling Landlord to any
of its remedies pursuant to the terms of this lease. Landlord shall have the
right to enter the demised premises, in accordance with Article 13, to inspect
the same and ascertain whether they are clean and free of odors.
In the event Landlord requires Tenant to install reasonable control
devices or procedures to eliminate such odors, the material size, and location
of such installations shall be subject to Landlord's prior written approval,
which approval shall not be unreasonably withheld. Such work shall not be
commenced until plans and specifications therefor have been submitted to and
approved by Landlord.
59. PRIOR POSSESSION:
Commencing upon the date of execution and unconditional delivery of
this lease by Landlord and Tenant to and including the day immediately preceding
the Commencement Date, Landlord shall make the demised premises available to
Tenant solely for the performance of work permitted to be done by Tenant
pursuant to the terms of this lease. Tenant agrees with respect to its
activities and work during such period that it will (i) not damage, delay or
interfere with the prosecution or completion of any work to be performed by
Landlord in any other portion of the building, (ii) comply with any procedures
and regulations prescribed by Landlord from time to time for coordination of
such work and activities with any work being performed by landlord or any other
construction in the building; and (iii) conform to all of Landlord's labor
regulations and shall not do or permit anything to be done that might create any
work stoppage, picketing or other labor disruption or dispute which will
interfere with the construction or operation of any work or activities being
conducted anywhere by Landlord. If Tenant fails or refuses to comply with any of
the foregoing obligations, in addition to all other rights and remedies had
hereunder, Landlord may require tenant to cease the performance of such work and
activities until the commencement date hereof. Tenant agrees that it will, prior
to the commencement of any work in the demised premises, deliver to Landlord all
policies of insurance required to be supplied to Landlord by Tenant pursuant to
the terms of this lease. Tenant's use of the demised premises during such period
shall be subject to all of the terms, covenants and conditions of this lease
(including Tenant's obligation to reimburse Landlord, pursuant to Article 46
hereof, for electricity furnished to the demised premises during such period),
excluding, however, Tenant's obligation to pay fixed rent and/or additional rent
pursuant to Articles 39 and 40 hereof.
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<PAGE> 44
EXHIBIT A
[Floor Plan]
<PAGE> 45
EXHIBIT A-1
[Floor Plan]
<PAGE> 46
EXHIBIT A-2
[Floor Plan]
<PAGE> 47
EXHIBIT A-3
[Floor Plan]
<PAGE> 48
EXHIBIT B
[Certificate of Occupancy]
<PAGE> 49
[Certificate of Occupancy]
<PAGE> 50
[Certificate of Occupancy]
<PAGE> 51
EXHIBIT C
CLEANING SPECIFICATIONS
GENERAL CLEANING
Nightly:
General offices including conference rooms:
1. All hardsurfaced flooring to be swept.
2. Carpet sweep all carpets, moving only light furniture (desks,
file cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and window
sills.
4. Empty and clean all ash trays and screen all sand urns.
5. Empty and clean all waste receptacles and remove wastepaper.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
8. Sweep all private stairways.
Building Standard Toilets;
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled
surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill toilet tissue holders.
8. Empty and clean disposal receptacles.
Periodic - as reasonably required:
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvres and other ventilating louvres within a
person's reach.
3. Dust all baseboards.
4. Remove all finger marks from vinyl or painted surfaces near
light switches, entrance doors, etc.
5. Wash all windows.
6. High dust premises completely including the following:
a. Dust all pictures, frames, charts, graphs and similar
wall hangings not reached in nightly cleaning.
<PAGE> 52
b. Dust clean all vertical surfaces, such as walls,
partitions, doors, bucks and other surfaces not
reached in nightly cleaning.
c. Dust all venetian blinds.
-2-
<PAGE> 53
EXHIBIT D
Additional Space Termination Payment
<TABLE>
<CAPTION>
Entire Rentable Balance Unit A Unit B
Additional Space Amount PSF Amount PSF Amount PSF
------ --- ------ --- ------ ---
Commencement Date
-----------------
<S> <C> <C> <C> <C> <C> <C>
March 15, 1994 $566,335.00 $55.00 $283,140.00 $55.00 $283,195.00 $55.00
February 15, 1994 $559,436.01 $54.33 $279,690.84 $54.33 $279,745.17 $54.33
January 15, 1994 $552,742.96 $53.68 $276,344.64 $53.68 $276,398.32 $53.68
December 15, 1993 $545,946.94 $53.02 $272,946.96 $53.02 $272,999.98 $53.02
November 15, 1993 $539,047.95 $52.35 $269,497.80 $52.35 $269,550.15 $52.35
October 15, 1993 $532,148.96 $51.68 $266,048.64 $51.68 $266,100.32 $51.68
September 15, 1993 $525,147.00 $51.00 $262,548.00 $51.00 $262,599.00 $51.00
August 15, 1993 $518,145.04 $50.32 $259,047.36 $50.32 $259,097.68 $50.32
July 15, 1993 $511,040.11 $49.63 $255,495.24 $49.63 $255,544.87 $49.63
June 15, 1993 $503,935.18 $48.94 $251,943.12 $48.94 $251,992.06 $48.94
May 15, 1993 $496,727.28 $48.24 $248,339.52 $48.24 $248,387.76 $48.24
April 15, 1993 $489,416.41 $47.53 $244,684.44 $47.53 $244,731.97 $47.53
March 15, 1993 $482,105.54 $46.82 $241,029.36 $46.82 $241,076.18 $46.82
February 15, 1993 $474,691.70 $46.10 $237,322.80 $46.10 $237,368.90 $46.10
January 15, 1993 $467,277.86 $45.38 $233,616.24 $45.38 $233,661.62 $45.38
December 15, 1992 $459,761.05 $44.65 $229,858.20 $44.65 $229,902.85 $44.65
November 15, 1992 $452,141.27 $43.91 $226,048.68 $43.91 $226,092.59 $43.91
October 15, 1992 $444,521.49 $43.17 $222,239.16 $43.17 $222,282.33 $43.17
September 15, 1992 $436,798.74 $42.42 $218,378.16 $42.42 $218,420.58 $42.42
</TABLE>
<PAGE> 54
FIRST AMENDMENT OF LEASE
AGREEMENT, dated as of the 28th day of September, 1994, by and between
11 WEST 42 LIMITED PARTNERSHIP (hereinafter referred to as "LANDLORD") , a New
York limited partnership, having an office at 520 Madison Avenue, New York, New
York 10022, and TIME PUBLISHING VENTURES, INC. (hereinafter referred to as
"TENANT"), a Delaware corporation qualified to transact business in New York
State, having an address at 11 West 42nd Street, New York, New York.
STATEMENT OF FACTS
By the Agreement of lease (the "LEASE") dated as of September 24, 1992,
by and between Landlord's predecessor-in-interest, Tishman Speyer Silverstein
Partnership ("TSSP") as landlord, and Tenant, as tenant, TSSP leased to Tenant
and Tenant hired from TSSP certain premises in the building (the "BUILDING")
known as 11 West 42nd Street, New York, New York, consisting of that certain
portion of the twenty-fourth (24th) floor (the "ORIGINAL PREMISES") of the
Building as more specifically indicated on Exhibit A of the Lease. The Lease and
all amendments, assignments and modifications thereof are hereinafter
collectively referred to as the "LEASE".
Landlord and Tenant now desire to amend the Lease upon the terms
hereinafter contained.
NOW, THEREFORE, in consideration of the Lease and the mutual covenants
herein contained, Landlord and Tenant hereby agree as follows:
1. DEFINED TERMS:
Unless the context otherwise clearly indicates a contrary intent or
unless specifically otherwise provided herein, each term used in this Agreement
which is defined in the Lease shall be deemed to have the meaning set forth in
the Lease.
2. EXTENSION OF LEASE TERM:
The term of the Lease is hereby extended for a period of six (6) years
and five (5) months, commencing on DECEMBER 1, 2003 (the "EXTENSION TERM
COMMENCEMENT DATE") and expiring on APRIL 30, 2010 (the "EXPIRATION Date"), or
on such earlier date upon which said term may expire or be cancelled or
terminated pursuant to any of the conditions or covenants of the Lease as hereby
amended or pursuant to law.
3. ADDITIONAL PREMISES:
A. For the purposes of this Agreement, the "ADDITIONAL PREMISES" shall mean the
entire rentable area of the twenty-fifth (25th) floor of the Building.
B. Effective throughout the period (the "ADDITIONAL PREMISES TERM") commencing
on JANUARY 1, 1995, subject to adjustment pursuant to Paragraph F of Article 13
hereof (the "ADDITIONAL PREMISES COMMENCEMENT DATE") and ending on the
Expiration Date, both dates inclusive:
i. the "demised premises" as said term is defined in the
Lease, shall mean collectively the Original Premises together with the
Additional Premises; and
ii. Tenant shall use and occupy the Additional Premises under
the same terms, covenants and conditions provided in the Lease
(including, without limitation, Articles 39, 40 and 46 of the Lease),
except as otherwise herein amended.
4. FIXED RENT:
A. Effective throughout the period commencing on the Extension Term
Commencement Date and ending on the Expiration Date, both dates inclusive, the
annual fixed rent payable pursuant to the Lease in connection with the Original
Premises, subject to
<PAGE> 55
adjustment as provided in the Lease and increase in connection with the addition
of the Additional Premises as hereinafter provided, shall be as follows:
i. the annual fixed rent for the Original Premises shall be
the sum of THREE HUNDRED EIGHTY-ONE THOUSAND SIX HUNDRED NINETY-SIX AND
00/100 ($381,696.00) DOLLARS per annum ($31,808.00 per month) for the
period commencing on the Extension Term Commencement Date and ending
November 30, 2004, both dates inclusive; and
ii. the annual fixed rent for the Original Premises shall be
the sum of FOUR HUNDRED EIGHT THOUSAND NINE HUNDRED SIXTY AND 00/100
($408,960.00) DOLLARS per annum ($34,080.00 per month) for the period
commencing on December 1, 2004 and ending on the Expiration Date, both
dates inclusive.
B. Effective throughout the period commencing on the Additional
Premises Commencement Date and ending on the Expiration Date, both dates
inclusive, the annual fixed rent payable pursuant to the Lease, as modified
pursuant to Paragraph A of this Article 4 and subject to adjustment as provided
in the Lease, shall be increased in respect of the addition of the Additional
Premises as follows (which increases shall herein be referred to as the "FIXED
A/P RENT"):
i. the annual fixed rent shall be increased by the amount of
SIX HUNDRED TWENTY-ONE THOUSAND FOUR HUNDRED AND 00/100 ($621,400.00)
DOLLARS per annum ($51,783.33 per month) for the period commencing on
the Additional Premises Commencement Date and ending on April 30, 2000,
both dates inclusive;
ii. the annual fixed rent shall be increased by the amount of
SIX HUNDRED SIXTY-NINE THOUSAND TWO HUNDRED AND 00/100 ($669,200.00)
DOLLARS per annum ($55,766.67 per month) for the period commencing on
May 1, 2000 and ending on April 30, 2005, both dates inclusive; and
iii. the annual fixed rent shall be increased by the amount of
SEVEN HUNDRED SEVENTEEN THOUSAND AND 00/100 ($717,000.00) DOLLARS per
annum ($59,750.00 per month) for the period commencing May 1, 2005 and
ending on the Expiration Date.
5. FREE FIXED A/P RENT PERIOD:
A. Effective as of the date of this Agreement, the provisions of
Article 51 of the Lease (which is captioned "Free Rent") shall apply solely to
the fixed rent payable by Tenant under the Lease for the Original Premises, and
the free fixed rent period set forth in Article 51 of the Lease shall not apply
to the Fixed A/P Rent payable by Tenant under Paragraph 4 of this Agreement.
B. Effective as of the Additional Premises Commencement Date and
provided Tenant is not then in default under the terms, covenants and conditions
of this Agreement or the Lease, which default shall be greater than a minor
technical default thereunder, Tenant is herewith granted a fixed rent concession
solely in connection with the Fixed A/P Rent payable as set forth in Paragraph 4
of this Agreement for the Additional Premises and solely for the period (the
"FREE FIXED A/P RENT PERIOD") of twelve (12) months immediately following the
Additional Premises Commencement Date; provided, however, Tenant shall
nevertheless be obligated to pay to Landlord all additional rents and other
charges payable under the terms of the Lease and this Agreement (including
electricity charges under Article 46 of the Lease as modified by this Agreement)
during the Free Fixed A/P Rent Period, and provided further that Tenant shall
pay to Landlord the fixed rent and all additional rents and other charges
payable under the Lease and any other amendments thereto during the Free Fixed
A/P Rent Period. Except for the Fixed A/P Rent concession as herein provided,
Tenant shall use and occupy the demised premises pursuant to all of the other
terms, covenants and conditions of the Lease.
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6. SECURITY DEPOSIT:
A. As of the date of this Agreement, Tenant has deposited with Landlord
the sum of ONE HUNDRED ELEVEN THOUSAND FIVE HUNDRED THIRTY-THREE AND 00/100
($111,533.00) DOLLARS (the "ADDITIONAL SECURITY") by check, subject to
collection, as additional security for the full and punctual performance by
Tenant of all of the terms of the Lease (including this Agreement).
B. Effective as of the date of this Agreement, Article 34 of the Lease
(which is captioned "Security") is hereby amended by the deletion of all
references therein to the amount "$57,936.00", and the substitution of the
amount "$169,469.34" in lieu thereof in each instance.
7. ESCALATION FOR INCREASE IN REAL ESTATE TAXES:
Effective as of the Additional Premises Commencement Date and ending on
the Expiration Date, and solely for purposes of calculating the additional rent
payable by Tenant with respect to the Additional Premises, Article 39 of the
Lease (which is captioned "Escalation for Increase in Real Estate Taxes") shall
be amended as follows:
A. Paragraph 39.A.3. shall be amended so as to modify the definition of
"Base Tax Year" solely with respect to the Additional Premises by deleting the
date "June 30, 1993" and inserting the date "June 30, 1996" in lieu thereof; and
B. Paragraph 39.A.4. shall be amended so as to modify the definition of
"Tenant's Proportionate Share" solely with respect to the Additional Premises by
deleting the percentage "1.67%" and inserting the percentage "2.93%" in lieu
thereof, and the aggregate "Tenant's Proportionate Share" with respect to the
entire demised premises shall be "4.6%".
8. ESCALATION FOR INCREASE IN OPERATING EXPENSES:
Effective as of the Additional Premises Commencement Date and ending on
the Expiration Date, and solely for purposes of calculating the additional rent
payable by Tenant with respect to the Additional Premises, Article 40 of the
Lease (which is captioned "Escalation for Operating Expenses") shall be amended
as follows:
A. Paragraph 40.A.2. shall be amended so as to modify the definition of
"Tenant's Proportionate Share" solely with respect to the Additional Premises by
deleting the percentage "1.67%" and inserting the percentage "2.93%" in lieu
thereof, and the aggregate "Tenant's Proportionate Share" with respect to the
entire demised premises shall be "4.6%"; and
B. Paragraph 40.A.3. shall be amended so as to modify the definition of
"Base Year" solely with respect to the Additional Premises by deleting the date
"December 31, 1992" and inserting the date "December 31, 1995" in lieu thereof.
C. Landlord and Tenant agree that solely for purposes of calculating
Tenant's Proportionate Share with respect to the Additional Premises the square
foot area of the Additional Premises is deemed to be "23,900" and the square
foot area of the Building is deemed to be "816,287".
9. NON-DISTURBANCE AGREEMENT:
Landlord agrees that it shall use reasonable efforts (at no cost or
expense to Landlord) to obtain and deliver to Tenant, as to the existing
superior mortgage covering the real property of which the Additional Premises
form a part, a non-disturbance agreement, or an amendment to the non-disturbance
agreement delivered in connection with the Lease (the "SND Agreement") stating
substantially that, subject to the express condition that so long as this
Agreement and the Lease shall be in full force and effect (a) Tenant shall not
be named or joined in any action or proceeding to foreclose any such mortgage,
(b) such action or proceeding shall not result in a cancellation or termination
of the term of this Agreement and (c) if the holder of any such mortgage shall
succeed to the interest of Landlord in the building as the result of any action
or proceeding to foreclose such mortgage, this Agreement shall continue in full
force and effect subject to the provisions of Paragraph J.1 of Article 52 of the
Lease. The inability of Landlord to
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obtain the SND Agreement shall not be deemed a default on Landlord's part of its
obligations under this Agreement or the Lease, or impose any claim in favor of
Tenant against Landlord by reason thereof, or affect the validity of the this
Agreement or the Lease. Tenant agrees to (i) execute and deliver to such
mortgagee a non-disturbance and attornment agreement in form and substance
customarily adopted by such mortgagee and (ii) reimburse Landlord for all
expenses incurred by Landlord in connection with obtaining and delivering the
SND Agreement, including reasonable legal expenses.
10. ELECTRIC CURRENT:
A. Effective as of the Additional Premises Commencement Date and ending
on the Expiration Date, the provisions of Article 46 of the Lease (which is
captioned "Electric Current") shall be amended by the deletion of the number
"13,632" set forth in Paragraph 46.B.2. and the insertion of the number "37,532"
in lieu thereof.
B. The provisions of Paragraph 46.C.8. of the Lease shall apply to the
Additional Premises throughout the Additional Premises Term.
C. Landlord shall, at Tenant's sole cost and expense, install a meter
or meters (collectively, the "Submeter") , at a location designated by Landlord,
connections from the risers and/or circuits servicing the Additional Premises to
the Submeter and perform all other work necessary for the furnishing of electric
current by Landlord to the Additional Premises in the manner provided for in
subdivision 1 of Article 46 of the Lease.
11. LANDLORD'S CONTRIBUTION/LANDLORD'S WORK:
Effective as of the date of this Agreement, the provisions of Article
50 of the Lease (which is captioned "Landlord's Contribution") shall apply
solely to the Original Premises and shall not apply to the Additional Premises.
Accordingly, Tenant acknowledges that, unless otherwise specifically provided
herein, there shall be no "Landlord's Contribution" (as such term is defined in
Paragraph 50.B. of the Lease) payable with respect to all or any portion of the
Additional Premises, and Landlord shall have no obligation to perform any of the
"Landlord's Work" (as such term is defined in Paragraph 50.E. of the Lease) in
the Additional Premises.
12. LANDLORD'S A/P WORK:
A. The provisions of this Paragraph 12 shall apply solely to the Additional
Premises and shall not apply to the Original Premises. B. Landlord shall, at
Landlord's expense, cause its designated contractor to perform the following
work (collectively, the "LANDLORD'S A/P WORK") in connection with the
performance of "Tenant's Initial Work" (as such term is hereinafter defined in
Paragraph 13 of this Agreement):
i. install in demised premises no more than two (2) building
standard handicap accessible bathrooms (or one (1) unisex bathroom), to
the extent required by the provisions of the Americans with
Disabilities Act of 1990 in effect and as applied as of the date
hereof;
ii. provide one (1) main HVAC Trunk Loop servicing the
Additional Premises;
iii. install main sprinkler loop on the twenty-fifth floor;
iv. Building standard demolition of existing installations in
the Additional Premises; and
v. encapsulate or remove, if and to the extent required to
comply with laws in effect as of the date hereof, any
asbestos-containing materials detected in the Additional Premises
during the performance of Tenant's Initial Work.
C. The Landlord's A/P Work shall be of materials, manufacture, design,
capacity and finish equal to that determined by Landlord as then Building
standard. The Landlord's A/P
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Work shall constitute a single, non-recurring obligation on the part of Landlord
and there shall be no credits for unused items.
D. Landlord has made and makes no representation of the date on which
it will complete the Landlord's A/P Work, and Landlord shall be under no penalty
or liability, to Tenant whatsoever by reason of any delay in such performance
and the Lease shall not be affected thereby. Landlord agrees that it will use
reasonable efforts to obtain contracts for the performance of the Landlord's A/P
Work and to arrange to have all such work commenced and prosecuted without
unnecessary interruption until completed.
E. For purposes of this Agreement, the term "Building standard" shall
mean the work materials and equipment furnished or installed to prepare the
Additional Premises for occupancy which is of a quality and type of installation
at least equal to that customarily furnished or installed as standard to prepare
similar space in comparable office buildings in the Borough of Manhattan for
occupancy.
13. LAYOUT AND FINISH/TENANT'S INITIAL WORK:
A. The provisions of this Paragraph 13 shall apply solely to the
Additional Premises and shall not apply to the Original Premises.
B.1. Tenant, at Tenant's expense shall prepare a final plan or final
set of plans (which said final plan or final set of plans, as the case may be,
is hereinafter called the "PLANS") which shall contain complete information
(including engineering required) and dimensions necessary and sufficient for the
construction and finishing of the Additional Premises. The Plans shall be
submitted by Tenant to Landlord on or before January 31, 1995. Any revisions to
the Plans required by Landlord shall be performed by Tenant within five (5) days
after demand by Landlord; provided, however, that if the demolition performed by
Landlord in the Additional Premises is completed subsequent to January 15, 1995
and such demolition shall reveal construction in the Additional Premises
substantially different than anticipated in the Plans, and as a result a
material modification to the Plans is reasonably required by Landlord or Tenant,
then once and only once, the five (5) day period provided herein for Tenant's
performance of required revisions to the Plans shall be extended to fifteen (15)
days from the date Landlord notifies Tenant of such required material
modification of the Plans.
B.2. In accordance with the Plans, Landlord, at Landlord's expense
(excluding any costs resulting from Tenant Delays), subject to the "Cap" (as
such term is hereinafter defined in Paragraph K of this Article) and except as
otherwise expressly specified in this Agreement, will cause its designated
contractor to make and complete in and to the Additional Premises the work and
installations (hereinafter called "TENANT'S INITIAL Work") specified in the
Plans; provided that the charges of Landlord's designated contractor shall be
reasonably competitive with those of other reputable contractors performing work
in first-class Manhattan office buildings. Landlord agrees to accept competitive
bids from at least three (3) subcontractors for each trade, except fire safety
specialists for which trade Landlord shall designate the subcontractor; provided
that the charges of such designated subcontractor shall be reasonably comparable
with those of other reputable contractors for said trade performing work in
first class office buildings in Manhattan. If Tenant shall not utilize the
services of Landlord's designated architect in connection with the preparation
of the Plans, Landlord may submit the Plans (and any revisions thereof) to
Landlord's designated architect for review and Tenant shall pay to Landlord,
upon demand as additional rent hereunder, the reasonable fees charged by said
architect for such review.
B.3. Notwithstanding any provision of the Lease or this Agreement to
the contrary, any requests for revisions to the Plans or other notices to be
given to Tenant by Landlord pursuant to this Article may be given to Tenant,
Attention: David Steward, either (i) delivered personally or (ii) sent by
certified mail, return receipt requested, or overnight courier, with receipt
acknowledged.
C. The term "WORK COST" as used in this Article shall mean the actual
cost (including the cost of engineering, if any, and the cost of applicable
insurance premiums
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allocable to Tenant's Initial Work in accordance with generally accepted
accounting principles consistently applied) to Landlord of furnishing and
installing Tenant's Initial Work.
D. In all instances where Tenant is required to supply information or
authorizations with regard to Tenant's Initial Work, Tenant shall supply the
same within five (5) days after written request therefor by Landlord.
E. Except as provided in this Article and Article 12 hereof, Landlord
shall not be required to spend any money or to do any work to prepare the
Additional Premises for Tenant's occupancy. Tenant's Initial Work and Landlord's
A/P Work shall constitute a single, non-recurring obligation on the part of
Landlord and there shall be no credits for unused items. The specification of
Tenant's Initial Work and Landlord's A/P Work represent the limit of Landlord's
responsibilities in connection with the preparation of the Additional Premises
and, except as so provided, Tenant shall take the Additional Premises "as-is".
Any other improvements, alterations or additions shall be performed by Tenant,
but subject to all of the terms, conditions and covenants of the Lease
(including this Agreement).
F. Landlord has made and makes no representation of the date on which
it will complete Tenant's Initial Work, and Landlord shall be under no penalty
or liability to Tenant whatsoever by reason of any delay in such performance and
the Lease (including this Agreement) shall not be affected thereby. If, for any
reason whatsoever, Tenant's Initial Work is not substantially completed by the
Additional Premises Commencement Date, Landlord shall be given any additional
time necessary to complete same and the Additional Premises Term shall commence
and the Additional Premises Commencement Date shall be deemed to occur on the
date which shall be five (5) days after notice is given to Tenant of the
substantial completion of Tenant's Initial Work. If Tenant shall dispute whether
Tenant's Initial Work has been substantially completed, then, pending the
resolution of such dispute, the Additional Premises Commencement Date shall
nevertheless be deemed to have occurred five (5) days after Landlord's notice of
substantial completion of Tenant's Initial Work and Tenant shall be obligated to
pay fixed rent and additional rent as and when provided in the Lease (including
this Agreement) . In no event shall the Expiration Date be postponed beyond
April 30, 2010. Landlord agrees that it will use reasonable efforts to obtain
contracts for the performance of the work required to be performed by it and to
arrange to have all such work commenced without delay and prosecuted without
unnecessary interruption until completion.
G. Tenant may be permitted to enter into the Additional Premises for
installation of its machinery, equipment and fixtures and performance of its
work, all as permitted by this lease prior to the Commencement Date at its sole
risk, provided that such entry and work do not interfere in any way with
Landlord's performance of the work to be done by Landlord. At any time during
such period of prior entry, if Landlord notifies Tenant that Tenant's entry or
work is interfering with or delaying Landlord's performance of Tenant's Initial
Work, Tenant shall forthwith discontinue any further work and shall remove from
the Additional Premises and shall cause its workmen or contractors to remove
therefrom, any equipment, materials or installations which are the subject of
Landlord's notice.
H. Subject to the provisions of Article 3 of the Lease, all work
performed by Landlord, including the building air conditioning installation,
shall, upon installation, become Landlord's property and shall be surrendered at
the expiration or sooner termination of the term of this lease, in good
condition, reasonable wear and tear excepted.
I. For the purposes of this Article, Tenant's Initial Work shall be
deemed to be substantially completed when all construction, other than punchlist
items, is completed (or when all construction, other than punchlist items, would
have been completed but for delays caused by Tenant as provided in this
Paragraph I, Paragraph J or otherwise) although minor items and/or Additional
Work (hereinafter defined) are not substantially completed. Such unfinished work
shall include, but not be limited to, any uncompleted construction or
improvements which do not materially interfere with Tenant's use and occupancy
of the Additional Premises. Promptly after the substantial completion of
Tenant's Initial Work, Tenant shall submit to Landlord a "punch-list" of such
minor unfinished work which punch-list items, after approval by Landlord, will
be diligently completed by Landlord. Tenant shall periodically inspect Tenant's
Initial Work and
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make any objections thereto, if called for, without delay, so as to mitigate
changes, delays and costs.
J.1. For purposes of this Article, the term "TENANT DELAYS" shall mean
any and all delays which are occasioned by the acts or omissions of Tenant or
its employees, agents, contractors, subcontractors or licensees, including,
without limitation, the items hereinafter set forth in subdivisions (i) through
(ix) of Paragraph 12.J.2. Landlord shall endeavor in good faith to advise Tenant
of any Tenant Delays of which Landlord shall have knowledge, provided that
Landlord's failure to do so shall not be construed as a waiver or be deemed to
toll the commencement of any Tenant Delay.
J.2. Tenant specifically acknowledges and agrees that there will be
delay in completion of Tenant's Initial Work by reason of (i) Tenant's failure
to submit the Plans to Landlord in the time and manner provided in this Article;
(ii) Tenant's failure or unreasonable delay to consult with Landlord to enable
Landlord to prepare plans or specifications; (iii) unreasonable delay or failure
by Tenant in supplying information, approving estimates or giving
authorizations; (iv) Tenant's making changes or additions in the plans or
specifications or materials originally approved; (v) interference by Tenant or
Tenant's contractors with the performance of Tenant's Initial Work; (vi) delay
or failure of any special or additional new materials selected by Tenant which
is not the result of "force majeure" causes; (vii) Additional Work (without
regard to any time periods granted to Tenant hereunder for the approval of
estimates and/or revisions of Tenant's Plans); (viii) any resubmissions or
revisions of Tenant's Plans (without regard to any time periods granted to
Tenant hereunder for making such resubmissions or revisions); or (ix) work,
materials, components and other items specified by Tenant which are not building
standard, and are not readily available to Landlord or Landlord's designated
contractor, or require special manufacturing, fabrication or installation, or
require additional time to obtain or install thereby delaying the date that
Tenant's Initial Work would otherwise be substantially completed, including but
not limited to, special wallcoverings, light fixtures, entrance doors, woodwork,
glass, stairways, door hardware, floor coverings and security and communications
devices.
J.3. Landlord shall not be responsible for any Tenant Delays or any
costs resulting from Tenant Delays, and, at Landlord's option, the Additional
Premises Term shall commence five (5) days after the date on which Tenant's
Initial Work would have been substantially completed if not for the occurrence
of any such delays.
K. Notwithstanding anything contained to the contrary in the Lease
(including this Agreement), the total cost of Tenant's Initial Work which
Landlord shall provide Tenant without charge and for standard building
installations performed prior to the Additional Premises Commencement Date shall
be ONE MILLION SEVENTY-FIVE THOUSAND FIVE HUNDRED AND 00/100 ($1,075,500.00)
DOLLARS plus FORTY THOUSAND AND 00/100 ($40,000.00) DOLLARS for the installation
of one (1) staircase connecting the Additional Premises to the Original Premises
as a portion of Tenant's Initial Work (collectively, the "CAP"). If Landlord
shall at any time notify Tenant that Landlord's estimate of the Work Cost
exceeds the Cap, Tenant may accept Landlord's estimate of such excess cost only
by countersigning and delivering same to Landlord, together with a sum equal to
twenty (20%) percent thereof, within five (5) days after Landlord's rendition of
such estimate. At Landlord's option, such payment by Tenant shall be made from
time to time during the performance of Tenant's Initial Work and in no event
shall ninety (90%) percent of the balance be paid later than the completion of
Tenant's Initial Work, and in no event shall the final balance be paid later
than ten (10) days after the substantial completion of Tenant's Initial Work.
L.l. In the event Landlord has agreed to perform any work over and
above Tenant Is Initial Work (the "ADDITIONAL WORK"), then, prior to commencing
such Additional Work, Landlord or Landlord I s contractor shall advise Tenant
(the "Estimate") of the cost of the Additional Work to be performed. Within five
(5) days after Landlord's submission of the Estimate, Tenant shall, in writing,
either accept or reject the Estimate. Tenant's failure either to accept or
reject the Estimate within said five (5) day period shall be deemed rejection
thereof. Tenant may only accept the Estimate by countersigning a copy thereof
and returning same to Landlord together with a sum equal to twenty (20%) percent
of the Estimate. Thereafter, Tenant shall pay to Landlord, as additional rent,
the balance of the cost of the Additional Work at such
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time or times as agreed to, but in no event shall ninety (90%) percent of the
balance be paid later than the completion of the Additional Work, upon rendition
of a reasonably detailed invoice therefor, and in no event shall the final
balance be paid later than ten (10) days after the substantial completion of the
Additional Work.
L.2. In the event Tenant rejects the Estimate or the Estimate is deemed
rejected, Tenant shall within five (5) days after such rejection furnish
Landlord with necessary revisions of Tenant's Plans, so as to enable Landlord to
proceed as though no such Additional Work had been requested. Should Tenant fail
to submit such necessary revisions of Tenant's Plans within said five (5) day
period, Landlord, in its sole reasonable discretion, may either discontinue the
performance of Tenant's Initial Work and/or Additional Work, or proceed or
continue to complete Tenant's Initial Work in accordance with Tenant's Plans
already submitted, with such variations as in Landlord's sole reasonable
discretion may be necessary so as to eliminate the Additional Work set forth on
Tenant's Plans and any delay resulting therefrom shall be deemed a Tenant Delay.
M. If Tenant shall fail to make timely payment of any sums payable to
Landlord pursuant this Article, then, in addition to all other rights and
remedies afforded Landlord in the event of such non-payment, Landlord may,
following two (2) business days' notice to Tenant, discontinue the performance
of Tenant's Initial Work and/or Additional Work (or any items thereof) until
such time as Tenant makes payment to Landlord of all such past due sums and
provides Landlord with adequate assurance of the timely payment of all
additional sums which may or shall be payable by Tenant pursuant to this
Article. Any delay resulting from the discontinuance of Tenant's Initial Work
and/or Additional Work pursuant to this Paragraph shall be deemed a delay caused
by Tenant.
N. In the event that Landlord fails to commence construction of
Tenant's Initial Work on or prior to the date (the "TARGET DATE") which is the
six (6) month anniversary of the date upon which Tenant shall have delivered to
Landlord final Plans, Tenant shall have the right to terminate this Agreement by
giving notice thereof received by Landlord on or before the date which is ten
(10) days following the Target Date; provided, however, that (i) no delays have
been caused, directly or indirectly, by Tenant, Tenant's agents or employees,
and (ii) Tenant is not in default under the terms of the Lease or this
Agreement, which default shall be greater than a minor technical default
thereunder. Upon receipt of such notice by Landlord, all liability between the
parties hereto under this Agreement shall be extinguished, except that the
Landlord shall return to Tenant any monies deposited with Landlord pursuant to
this Agreement, and the Lease shall continue in full force and effect,
unaffected by this Agreement or the termination hereof. The foregoing right of
termination shall be Tenant's exclusive remedy with respect to the failure to
deliver possession, provided, however, that if it shall be judicially determined
that Landlord shall have acted maliciously or in bad faith in delaying the
commencement of construction of Tenant's Initial Work and Tenant shall have
exercised its termination right hereunder, Landlord shall reimburse Tenant for
its reasonable out-of-pocket expenses incurred in connection with the
preparation of the Plans, following delivery to Landlord of cancelled checks and
receipted paid bills evidencing payment by Tenant of such costs. Notwithstanding
the foregoing, in the event Landlord fails to commence construction of Tenant's
Initial Work because of delay due to fire, casualty, or inability to obtain
materials, due to any event enumerated in Article 27 of the Lease, due to
failure of Tenant to perform its obligations under this Agreement or due to any
cause beyond Landlord's control, the period of such delay shall be added to the
aforesaid period during which Landlord may commence such construction and Tenant
may not terminate this Agreement until the expiration of such period and any
period added to it by reason of such delay.
14. HVAC SPECIFICATIONS:
Effective from and after the Additional Premises Commencement Date,
Article 29 of the Lease, captioned "Services Provided by Owner" shall be
modified such that the following phrase shall be inserted at the conclusion of
subparagraph (e) of said Article 29:
"in accordance with Landlord's HVAC specifications for the building."
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The current HVAC specifications for the building are annexed hereto as Exhibit
"C" and made a part hereof.
15. DELIVERY OF POSSESSION:
If Landlord is unable to give possession of the Additional Premises to
Tenant on the Additional Premises Commencement Date because of the holding-over
or retention of possession of any tenant, undertenant or occupants, or for any
other reason beyond Landlord's reasonable control, but provided Landlord has
used reasonable efforts, Landlord shall not be subject to any liability for
failure to give possession on said date and the validity of this Agreement and
the Lease shall not be impaired under such circumstances, nor shall the same be
construed in any way to extend the Additional Premises Term or the term of the
Lease, but the Additional Premises Commencement Date shall be deemed extended
until the date on which Landlord shall have delivered possession thereof to
Tenant (provided Tenant is not responsible for the inability to obtain
possession). The provisions of this Paragraph are intended to constitute "an
express provision to the contrary" within the meaning of Section 223-a of the
New York Real Property Law.
16. IDENTIFYING SIGNS:
The provisions of Paragraph 52.Y. of the Lease shall not apply to the
Additional Premises.
17. OPTIONS TO TERMINATE:
Effective as of the date of this Agreement, Article 56 of the Lease
(which is captioned "Options to Terminate") shall be deleted in its entirety,
and Tenant's Options thereunder shall cease and terminate and be of no force or
effect.
18. ADDITIONAL SPACE OPTION:
Effective as of the date of this Agreement, Article 57 of the Lease
(which is captioned "Limited Right to Lease Additional Space") is hereby deleted
in its entirety, and Tenant's option thereunder shall cease and terminate and be
of no force or effect, and Tenant shall have no option under the Lease with
regard to leasing additional space in the Building except as specifically
provided in Article 21 of this Agreement.
19. PRIOR POSSESSION:
Effective as of the date of this Agreement, Article 59 of the Lease
(which is captioned "Prior Possession") is hereby deleted in its entirety.
20. BROKER:
Tenant represents and warrants that it neither consulted nor negotiated
with any broker or finder with regard to the rental of the Demised Premises from
Landlord other than Cushman & Wakefield, Inc. (the "A/P Broker") . Tenant agrees
to indemnify and hold Landlord harmless from any damages, costs and expenses
suffered by Landlord by reason of any breach of the foregoing representation.
The commission, if any, due to the A/P Broker in connection with this First
Amendment of Lease shall be paid by Landlord pursuant to a separate agreement.
21. RIGHT OF FIRST OFFERING:
A. From and after the first (lst) anniversary of the Additional
Premises Commencement Date, Tenant shall have the following option for the
demise of (i) the entirety of that certain portion of the twenty-third (23rd)
floor ("R/O PORTION 23") of the building, as delineated on the rental plan
annexed hereto as Exhibit "All and made a part hereof, and (ii) the entirety of
that certain portion of the twenty-fourth (24th) floor ("R/O PORTION 24") of the
Building, as delineated on the rental plan annexed hereto as Exhibit "B" and
made a part hereof (the R/O Portion 23 and the R/O Portion 24 shall hereinafter
be referred to collectively and individually as the "R/O PREMISES").
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Provided that (1) any lease that is executed for the R/O Premises
expires or terminates prior to the date occurring three (3) years prior to the
Expiration Date, and (2) Tenant is not then in default under the terms of the
Lease or this Agreement which default shall be greater than a minor technical
default thereunder; then Landlord agrees that if the R/O Premises shall be or
become available for leasing to Tenant at any time following the first (lst)
anniversary of the Additional Premises Commencement Date, Landlord shall, prior
to leasing the R/O Premises to any party excluding any existing tenant thereof",
offer to include such R/O Premises within the demised premises upon the terms
and subject to the conditions of the Lease as modified by this Agreement and
subject to such other terms and conditions as may be determined by Landlord and
set forth in the Landlord's Notice (hereinafter defined) , including, without
limitation, those terms and conditions set forth in Section C of this Article
21. Any such offer shall be effected by written notice (hereinafter called
"LANDLORD'S NOTICE") from Landlord to Tenant, and Tenant shall have the option
to accept the offer contained in Landlord's Notice by written notice to Landlord
given at any time within fifteen (15) days after the date Landlord's Notice is
given, as to which fifteen (15) day period time shall be of the essence.
B. In the event that Landlord shall make the offer contemplated by
Paragraph A hereof and Tenant shall accept such offer in the manner provided
therein, the R/O Premises to which such offer and acceptance relates, shall be
added to and included in the demised premises effective upon the later of (1)
the date the R/O Premises becomes available for Tenant's occupancy, or (2) the
date Tenant's notice accepting such offer of R/O Premises is given. (The
effective date of the inclusion of the R/O Premises in the demised premises
pursuant to this Article 21 is hereinafter referred to as the "INCLUSION DATE").
Promptly after the inclusion of the R/O Premises in the demised premises,
Landlord and Tenant shall enter into a recordable supplementary agreement with
respect thereto.
C. Effective as of the Inclusion Date:
1. the fixed annual rent payable hereunder shall be increased
by the product obtained by multiplying the square foot area of R/O Portion 23 as
reasonably determined by Landlord (the "R/O PORTION AREA") in the case of R/O
Portion 23, and 7,656, in the case of R/O Portion 24, by the higher of (a) an
amount equal to twelve (12) times the monthly installment of fixed annual rent
for the month preceding the month in which the Inclusion Date occurs determined
on a per rentable square foot basis (including the value of electric service
pursuant to Article 46 of the Lease), or (b) the amount on a per rentable square
foot basis as determined in accordance with Paragraph C of Article 22 hereof,
except the term "Determination Date" shall be the date of receipt by Tenant of
Landlord's Notice; the term "R/O Premises" shall be inserted in lieu of the term
"demised premises", the phrase "from and after the Inclusion Date" shall be
inserted in lieu of the phrase "for the Additional Extension Term"; and the term
"Inclusion Date" shall be inserted in lieu of the term "Expiration Date" and the
phrase "Commencement Date of the Additional Extension Term". Landlord's Notice
shall specify the fixed annual rent payable with respect to the R/O Premises
pursuant to either clause (a) or (b) of the immediately preceding sentence.
2. The percentile set forth as "Tenant's Proportionate Share"
in Articles 39 and 40 of the Lease as may be modified by this Agreement shall be
increased by adding to it the percentage derived by dividing the R/O Portion 23
Area by the square foot area of the Building as reasonably determined by
Landlord, in the case of R/O Portion 23, and .94%, in the case of R/O Portion
24.
3. The security deposited pursuant to Article 34 of the Lease,
as same may have been increased pursuant to the terms of this Agreement, shall
be further increased by an amount to be determined by Landlord.
4. The number set forth in Paragraph 46.B.2 of the Lease, as
increased by this Agreement, shall be further increased by an amount equal to
the R/O Portion 23 Area, in the case of R/O Portion 23, and 7,656 in the case of
R/O Portion 24.
D. If Tenant does not accept the offer made by Landlord pursuant to the
provisions of this Article 21, Landlord shall be under no further obligation to
offer to Tenant the portion of the R/O Premises which was the subject of the
Landlord's Notice by reason of this Article 21, and
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<PAGE> 64
Tenant shall have forever waived and relinquished its right to such portion of
the R/O Premises, and Landlord shall at any and all times thereafter be entitled
to lease such portion of the R/O Premises to others at such rental and upon such
terms and conditions as Landlord in its sole discretion may desire.
22. EXTENSION OF TERM:
A. Subject to the provisions of Paragraph E hereof, Tenant shall have
the right to extend the term of the Lease as modified by this Agreement, for one
(1) additional term of five (5) years commencing on the day following the
Expiration Date (hereinafter called the "COMMENCEMENT DATE OF THE ADDITIONAL
EXTENSION TERM") (such additional term is hereinafter called the "ADDITIONAL
EXTENSION TERM") provided that:
1. Tenant shall give Landlord notice (hereinafter called the
"EXTENSION NOTICE") of its election to extend the term of this lease at least
twelve (12) months, but not more than twenty-four (24) months, prior to the
Expiration Date;
2. Tenant is not in default under the Lease, which default
shall be greater than a minor technical default thereunder, as of the time of
the giving of the Extension Notice and the Commencement Date of the Additional
Extension Term; and
3. Tenant shall not have defaulted in the payment of fixed
rent, following the expiration of any applicable notice and cure periods, on
three (3) or more occasions during the Additional Premises Term.
B. The fixed annual rent payable by Tenant to Landlord during the
Additional Extension Term shall be a sum equal to the fair market rent for the
demised premises (including the Original Premises, the Additional Premises and
any other space which may be added thereto) as determined as of the date
occurring nine (9) months prior to the Commencement Date of the Additional
Extension Term (such date is hereinafter called the "DETERMINATION DATE") and
which determination shall be made within a reasonable period of time after the
occurrence of the Determination Date pursuant to the provisions of Paragraph C
hereof, but such fixed annual rent shall in no event be less than the then
escalated fixed annual rent in effect under the Lease, as modified by this
Agreement, for the month immediately preceding the Expiration Date (without
giving effect to any temporary abatement of fixed annual rent under any other
Article of the Lease and specifically including the Fixed A/P Rent and the
rental for any other additional space). In determining the fair market rent, the
provisions of Articles 39 and 40 of the Lease as modified by the terms of this
Agreement shall remain in effect during the Additional Extension Term with the
same base periods as set forth therein and modified hereby, and such base
periods shall be recognized in making such determination of fair market value.
C. 1. Landlord and Tenant shall endeavor to agree as to the amount of
the fair market rent for the demised premises pursuant to the provisions of
Paragraph B hereof, during the thirty (30) day period following the
Determination Date. In the event that Landlord and Tenant can not agree as to
the amount. of the fair market rent within such thirty (30) day period following
the Determination Date, then Landlord or Tenant may initiate the appraisal
process provided for herein by giving notice to that effect to the other, and
the party so initiating the appraisal process (such party hereinafter called the
"INITIATING PARTY") shall specify in such notice the name and address of the
person designated to act as an arbitrator on its behalf. Within thirty (30) days
after the designation of such arbitrator, the other party (hereinafter called
the "OTHER PARTY") shall give notice to the Initiating Party specifying the name
and address of the person designated to act as an arbitrator on its behalf. If
the Other Party fails to notify the Initiating Party of the appointment of its
arbitrator within the time above specified, then the appointment of the second
arbitrator shall be made in the same manner as hereinafter provided for the
appointment of a third arbitrator in a case where the two arbitrators appointed
hereunder and the parties are unable to agree upon such appointment. The two
arbitrators so chosen shall meet within ten (10) days after the second
arbitrator is appointed and if, within sixty (60) days after the second
arbitrator is appointed, the two arbitrators shall not agree, they shall
together appoint a third arbitrator; provided, however, that if the difference
between the determinations of the two (2) arbitrators is less than five (5%)
percent of the higher determination then the average of the two determinations
shall be the fair market rent of the demised premises and there shall be
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<PAGE> 65
no appointment of a third arbitrator. In the event of their being unable to
agree upon such appointment within eighty (80) days after the appointment of the
second arbitrator, the third arbitrator shall be selected by the parties
themselves if they can agree thereon within a further period of fifteen (15)
days. If the parties do not so agree, then either party, on behalf of both and
on notice to the other, may request such appointment by the American Arbitration
Association (or organization successor thereto) in New York City in accordance
with its rules then prevailing.
2. Each party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such party, and the fees and
expenses of the third arbitrator and all other expenses (not including the
attorneys fees, witness fees and similar expenses of the parties which shall be
borne separately by each of the parties) of the arbitration shall be borne by
the parties equally.
3. The majority of the arbitrators shall determine the fair
market rent of the demised premises and render a written certified report of
their determination to both Landlord and Tenant within sixty (60) days of the
appointment of the first two arbitrators or sixty (60) days from the appointment
of the third arbitrator if such third arbitrator is appointed pursuant to this
Paragraph; and the fair market rent, so determined, shall be applied to
determine the fixed annual rent pursuant to Paragraph B hereof.
4. Each of the arbitrators selected as herein provided shall
have at least ten (10) years experience in the leasing and renting of office
space in first class office buildings in Midtown Manhattan.
5. If Landlord notifies Tenant that the fixed annual rent for
the Additional Extension Term shall be equal to the then escalated fixed annual
rent in effect under the Lease for the month immediately preceding the
Expiration Date (without giving effect to any temporary abatement thereof), then
the provisions of Subsection 1 of this Paragraph C shall be inapplicable and
have no force or effect.
6. In the event Landlord or Tenant initiates the appraisal
process and as of the Commencement Date of the Additional Extension Term the
amount of the fair market rent has not been determined, Tenant shall continue to
pay the then escalated fixed rent in effect under the Lease for the month
immediately preceding the Expiration Date and when such determination has been
made, an appropriate retroactive adjustment shall be made as of the Commencement
Date of the Additional Extension Term.
D. Except as provided in Paragraphs A and B hereof, Tenant's occupancy
of the demised premises during the Additional Extension Term shall be on the
same terms and conditions as are in effect immediately prior to the Expiration
Date, provided, however, Tenant shall have no further right to extend the term
of this lease pursuant to this Article 22.
E. If Tenant does not send the Extension Notice pursuant to the
provisions of Paragraph A hereof, this Article 22 shall have no force or effect
and shall be deemed deleted from this Agreement.
F. If the Lease is renewed for the Additional Extension Term, then
Landlord can request Tenant to execute an instrument in form for recording
setting forth the exercise of Tenant's right to extend the term of the Lease and
the last day of the Additional Extension Term.
G. If Tenant exercises its right to extend the term of the Lease for
the Additional Extension Term pursuant to this Article 22, the phrases "the term
of this lease" or "the term hereof" as used in the Lease, shall be construed to
include, when practicable, the Additional Extension Term.
23. MISCELLANEOUS:
A. Except as expressly set forth in this Agreement, all of the terms,
provisions, covenants and conditions of the Lease shall remain and continue
unmodified and in full force and effect and are hereby ratified and confirmed in
all respects.
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<PAGE> 66
B. This Agreement shall not be changed, modified or cancelled orally.
This Agreement shall be binding upon the parties hereto, their respective heirs,
administrators, successors and, as permitted, assigns.
C. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in that State.
D. This Agreement is being tendered to Tenant without obligation on
Landlord's part and in no event shall it be deemed to be binding upon Landlord
or give Tenant any rights unless and until Landlord shall have executed the same
and delivered a copy to Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
First Amendment of Lease as of the day and year first above written.
11 WEST 42 LIMITED PARTNERSHIP, Landlord
By: WEST 42 ASSOCIATES, L.P., General Partner
By: 11 West 42 Realty I Corp., General Partner
/s/
-------------------------------------
By: Jerry I. Speyer, President
By: 11 WEST ASSOCIATES, L.P., General Partner
By: 11 West 42nd Street Inc.,
General Partner
/s/
-------------------------------------
By: Larry A. Silverstein, President
TIME PUBLISHING VENTURES, INC., Tenant
By: /s/ Joseph A. Ripp
-----------------------------------------
Name: Joseph A. Ripp
Title: Vice President
Tenant's Federal Employee I.D. Number 13-3353266
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<PAGE> 67
STATE OF NEW YORK)
SS.:
COUNTY OF NEW YORK)
on the day of came , 1994 before me personally, to me known
who, being by me duly sworn, did depose and say that he resides at ; that
he is the of TIME PUBLISHING VENTURES, INC., the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
----------------------------------------
NOTARY PUBLIC
<PAGE> 68
EXHIBIT "A"
R/O PORTION 23
(follows immediately)
A-1
<PAGE> 69
EXHIBIT "A"
[Floor Plan]
A-2
<PAGE> 70
EXHIBIT "B"
R/O PORTION 24
(follows immediately)
B-1
<PAGE> 71
EXHIBIT "B"
[Floor Plan]
B-2
<PAGE> 72
EXHIBIT "C"
BUILDING HVAC SPECIFICATIONS
(follows immediately)
C-1
<PAGE> 73
EXHIBIT "C"
HVAC SPECIFICATIONS
The Building HVAC System serving the Premises is designed to maintain average
temperatures within the Premises during the hours of 8:00 am to 6:00 p.m. on
Business Days of (i) not less than 68 degrees F. during the heating season when
the outdoor temperature is 5 degrees F.; and (ii) not more than and 74 degrees
F. and 50% humidity + 5% during the cooling season, when the outdoor
temperatures are at 89 degrees F. dry bulb and 73 degrees F. wet bulb, with a
population load per floor of not more than one person per 100 square feet of
useable area, other than in dining and other special use areas and a total
electric load of not more than 4.5 watts per square foot of useable area per
floor for all purposes, including lighting and power, and to provide at least
.15 CFM of outside ventilation per square foot of rentable area. Use of the
Premises, or any part thereof, in a manner exceeding the foregoing design
conditions or rearrangement of partitioning after the initial preparation of the
Premises which interferes with normal operation of the air-conditioning service
in the Premises may require changes in the air-conditioning system serving the
Premises.
C-2
<PAGE> 1
Exhibit 10.11
================================================================================
11 WEST 42 LIMITED PARTNERSHIP,
Landlord
And
MARTHA STEWART LIVING OMNIMEDIA, LLC,
Tenant
--------------------------
AMENDED AND RESTATED LEASE
------------------------
Premises: A Portion of the Eighth and Twenty-Fourth
Floors of 11 West 42nd Street
New York, New York
Dated: March 31st, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Article 1 Basic Lease Provisions........................................... 1
Article 2 Premises, Term, Rent............................................ 5
Article 3 Use And Occupancy................................................ 6
Article 4 Condition of the Premises....................................... 7
Article 5 Alterations..................................................... 8
Article 6 Floor Load...................................................... 11
Article 7 Repairs.......................................................... 11
Article 8 Increases In Taxes And Operating Expenses....................... 13
Article 9 Requirements of Law............................................. 18
Article 10 Subordination................................................... 20
Article 11 Services........................................................ 21
Article 12 Insurance, Property Loss Or Damage; Reimbursement................ 24
Article 13 Destruction - Fire Or Other Cause............................... 26
Article 14 Eminent Domain................................................. 28
Article 15 Assignment, Subletting, Mortgage, Etc........................... 29
Article 16 Electricity..................................................... 37
Article 17 Access To Premises.............................................. 38
Article 18 Default......................................................... 40
Article 19 Remedies And Damages............................................ 41
Article 20 Fees And Expenses............................................... 44
Article 21 No Representations By Landlord, Landlord's Approval............. 44
Article 22 End Of Term..................................................... 45
Article 23 Quiet Enjoyment................................................ 46
<PAGE> 3
-i-
<PAGE> 4
Article 24 No Waiver; No Counterclaim...................................... 46
Article 25 Waiver Of Trial By Jury......................................... 47
Article 26 Inability To Perform............................................ 47
Article 27 Notices......................................................... 47
Article 28 Rules And Regulations........................................... 48
Article 29 Partnership Tenant.............................................. 48
Article 30 Vault Space.................................................... 50
Article 31 Broker.......................................................... 50
Article 32 Indemnity....................................................... 51
Article 33 Adjacent Excavation; Shoring................................... 52
Article 34 Miscellaneous................................................... 52
Article 35 Tax Status Of Beneficial Owners................................. 55
Article 36 Security Deposit................................................ 55
Article 37 Right Of First Offer............................................ 57
-ii-
<PAGE> 5
EXHIBITS
A - Floor Plans
B - Definitions
C - Description of Landlord's Work
D - Heating, Ventilation and Air Conditioning
Specifications
E - Cleaning Specifications
F - Rules and Regulations
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<PAGE> 6
AMENDED AND RESTATED LEASE
AMENDED AND RESTATED LEASE, made as of the 31st day of March, 1998
between 11 WEST 42 LIMITED PARTNERSHIP (the "Landlord"), a New York limited
partnership, having an office c/o Tishman Speyer Properties, L.P., 520 Madison
Avenue, New York, New York 10022, and MARTHA STEWART LIVING OMNIMEDIA, LLC, a
New York limited liability company (the "Tenant"), having an office at 11 West
42nd Street, New York, New York.
Landlord and Tenant hereby covenant and agree as follows:
ARTICLE 1
BASIC LEASE PROVISIONS
PREMISES A portion of the eighth (8th) floor of the Building (the
"8th Floor Premises"), a portion of the twenty-fourth
(24th) floor of the Building (the "24th Floor Premises")
and another portion of the twenty-fourth (24th) floor of
the Building (the "Storage Space"), as particularly shown
on Exhibits A-1 and A-2.
BUILDING The building, fixtures, equipment and other improvements
and appurtenances now located or hereafter erected,
located or placed upon the land known as 11 West 42nd
Street in the City of New York, County of New York and
State of New York.
REAL PROPERTY The Building, together with the plot of land upon which it
stands.
COMMENCEMENT DATE (a) As to the 8th Floor premises:
April 21, 1997.
(b) As to the 24th Floor Premises and the Storage Space:
2/1/99
The date Landlord delivers possession of the 24th Floor
Premises and the Storage Space to Tenant.
RENT COMMENCEMENT (a) As to the 8th Floor Premises:
DATE
January 1, 1998.
<PAGE> 7
(b) As to the 24th Floor Premises and the Storage Space:
182 days after the Commencement Date in respect of the
24th Floor Premises and the Storage Space.
EXPIRATION DATE April 30, 2010.
TERM The period commencing on the Commencement Date in respect
of the 8th Floor Premises and ending on the Expiration
Date.
PERMITTED USES (a) As to the 8th Floor Premises and the 24th Floor
Premises:
Executive and general offices for the transaction of
Tenant's business.
(b) The Storage Space:
Dead storage.
BASE TAX YEAR (a) As to the 8th Floor Premises:
The real estate tax fiscal year commencing on July 1, 1996
and ending on June 30, 1997.
(b) As to the 24th Floor Premises:
The real estate tax fiscal year commencing July 1, 1998
and ending on June 30, 1999.
BASE EXPENSE YEAR (a) As to the 8th Floor Premises:
Calendar year 1997.
(b) As to the 24th Floor Premises:
Calendar year 1998.
TENANT'S
PROPORTIONATE (a) As to the 8th Floor Space
SHARE
2.56 percent.
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<PAGE> 8
(b) As to the 24th Floor Premises:
.911 percent in respect of Taxes
1.0018 percent in respect of Operating Expenses
AGREED AREA OF
BUILDING 840,049 rentable square feet.
AGREED AREA OF
PREMISES (a) As to the 8th Floor Premises:
21,500 rentable square feet.
(b) As to the 24th Floor Premises:
7,656 rentable square feet.
(c) As to the Storage Space:
760 rentable square feet.
FIXED RENT (a) As to the 8th Floor Premises:
(i) $473,000 per annum ($39,416.67 per month) for the
period commencing on the Rent Commencement Date and ending
on the day preceding the fifth anniversary of the Rent
Commencement Date, both dates inclusive; (ii) $516,000 per
annum ($43,000 per month) for the period commencing on the
fifth anniversary of the Rent Commencement Date and ending
on the day preceding the tenth anniversary of the Rent
Commencement Date, both dates inclusive; (iii) $559,000
per annum ($46,583.33 per month) for the period commencing
on the tenth anniversary of the Rent Commencement Date and
ending on the Expiration Date, both dates inclusive.
(b) As to the 24th Floor Premises:
(i) $290,928 per annum ($24,244 per month) for the period
commencing on the Rent Commencement Date and ending on the
day preceding the fifth anniversary of the Rent
Commencement Date, both dates inclusive; (ii) $321,552 per
annum ($26,796 per month) for the period commencing on the
fifth anniversary of the Rent Commencement Date and ending
on the day preceding
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<PAGE> 9
the tenth anniversary of the Rent Commencement Date, both
dates inclusive; (iii) 352,176 per annum ($29,348 per
month) for the period commencing on the tenth anniversary
of the Rent Commencement Date and ending on the Expiration
Date, both dates inclusive.
(c) As to the Storage Space:
$11,400 per annum ($950 per month) for the period
commencing on the Commencement Date and ending on the
Expiration Date, both dates inclusive.
ADDITIONAL RENT All sums other than Fixed Rent payable by Tenant to
Landlord under this Lease, including Tenant's Tax Payment,
Tenant's Operating Payment, late charges, overtime or
excess service charges and other costs related to Tenant's
failure to perform any of its obligations under this
Lease.
RENT Fixed Rent and Additional Rent, collectively.
INTEREST RATE The lesser of (i) four percent per annum above the then
current Base Rate charged by Citibank, N.A. or its
successor, or (ii) the maximum rate permitted by
applicable law.
SECURITY DEPOSIT (i) $473,000 for the period commencing on the Commencement
Date and ending on the day preceding the fifth anniversary
of the Commencement Date; (ii) $402,050 for the period
commencing on the sixth anniversary of the Commencement
Date and ending on the day preceding the eighth
anniversary of the Commencement Date; (iii) $331,100 for
the period commencing on the eighth anniversary of the
Commencement Date and ending on the day preceding the
ninth anniversary of the Commencement Date; (iv) $260,150
for the period commencing on the ninth anniversary of the
Commencement Date and ending on the day preceding the
tenth anniversary of the Commencement Date; and (v)
$189,200 for the period commencing on the tenth
anniversary of the Commencement Date and thereafter.
BROKER Cushman & Wakefield, Inc.
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<PAGE> 10
LANDLORD'S AGENT Tishman Speyer Properties, L.P. or any other person
designated at any time and from time to time by Landlord
and their successors and assigns.
LANDLORD'S $15,312.
CONTRIBUTION:
ALL CAPITALIZED TERMS USED IN THE LEASE TEXT WITHOUT DEFINITION ARE DEFINED IN
EXHIBIT B.
ARTICLE 2
PREMISES, TERM, RENT
SECTION 2.1 LEASE OF PREMISES. Subject to the terms of this Lease,
Landlord leases to Tenant and Tenant leases from Landlord the Premises for the
Term. In addition, Landlord grants to Tenant the right to use, on a
non-exclusive basis and in common with other tenants, the lobby area and other
Building common elements and common facilities.
SECTION 2.2 PAYMENT OF RENT. Tenant shall pay to Landlord, without
notice or demand, and without any set-off, counterclaim, abatement or deduction
whatsoever, except as may be expressly set forth in this Lease, in lawful money
of the United States by wire transfer of funds to Landlord's account, as
designated by Landlord, or by check drawn upon a bank approved by Landlord, (i)
Fixed Rent in equal monthly installments, in advance, on the first (1st) day of
each calendar month during the Term, commencing on the applicable Rent
Commencement Date, and (ii) Additional Rent, at the times and in the manner set
forth in this Lease.
SECTION 2.3 CREDIT. Notwithstanding anything to the contrary contained
in Section 2.2, in lieu of Landlord painting a portion of the 8th Floor
Premises, Tenant shall be entitled to a credit against the Fixed Rent payable
thereunder in respect of the 8th Floor Premises, provided that no Event of
Default has occurred hereunder, of Twenty-Nine Thousand Three Hundred and
Sixty-Two and 50/100 Dollars ($29,362.50) to be applied against the first
monthly installment of Rent accruing hereunder in respect of the 8th Floor
Premises commencing on the Rent Commencement Date in respect thereof.
SECTION 2.4 FIRST MONTH'S RENT. If a Rent Commencement Date in respect
of a portion of the Premises shall occur on a date other than the first day of
any calendar month, Tenant shall pay to Landlord, on such Rent Commencement
Date, a sum equal to the Fixed Rent applicable to such portion of the Premises
for such month multiplied by a fraction, the numerator of which shall be the
number of calendar days in the period from such Rent Commencement Date to the
last day of the month in which such Rent Commencement Date shall occur, both
dates inclusive, and the denominator of which shall be the number of calendar
days in such month.
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<PAGE> 11
SECTION 2.5 INTEREST. If Tenant shall fail to pay any installment or
other payment of Rent when due, interest shall accrue on such installment or
payment as a late charge, from the date such installment or payment became due,
at a rate equal to the Interest Rate.
SECTION 2.6 PRIOR LEASE. This Lease amends, restates and replaces in
its entirety the Lease made as of February 6, 1997, and any amendments or
modifications thereof, and any consents or approvals made by Landlord with
respect thereto (the "Prior Lease"), between Landlord and Tenant from and after
the date of execution and delivery of this Lease, whereupon, after such date,
all of the rights and obligations of Landlord and Tenant with respect to the 8th
Floor Premises, the 24th Floor Premises and the Storage Space shall be governed
and controlled by the provisions of this Lease, except that nothing herein
contained shall be deemed to constitute a release or discharge of Tenant with
respect to any obligation or liability accrued or incurred under the Prior
Lease, and outstanding and unsatisfied on the date of execution and delivery of
this Lease.
ARTICLE 3
USE AND OCCUPANCY
SECTION 3.1 (a) PERMITTED USES. Tenant (together with its wholly owned
subsidiaries and affiliates provided such use is incidental to Tenant's
business) shall use and occupy the Premises for the Permitted Uses and for no
other purpose. Tenant shall not use or occupy or permit the use or occupancy of
any part of the Premises in a manner constituting a Prohibited Use. If Tenant
utilizes the Premises for a purpose which constitutes a Prohibited Use or
violates any Requirement, or which causes the Building to be in violation of any
Requirement, then Tenant shall promptly discontinue such use upon notice of such
violation. Tenant's failure to promptly (and, in all events, within 10 days)
discontinue such use shall be a material default hereunder and Landlord shall
have the right, without Tenant having any further period in which to cure, (i)
to terminate this Lease immediately, and (ii) to exercise any and all rights and
remedies available to Landlord at law or in equity.
(B) LICENSES AND PERMITS. Tenant, at its expense, shall
procure and at all times maintain and comply with the terms and conditions of
all licenses and permits required for the lawful conduct of the Permitted Uses
in the Premises. Landlord represents that the Certificate of Occupancy issued
for the Building permits the use of the Premises (other than the Storage Space)
as offices.
SECTION 3.2 DELIVERY OF PREMISES. Tenant currently occupies the 8th
Floor Premises on the date hereof. Landlord shall not be liable for failure to
give possession of the remainder of the Premises on the Commencement Date
applicable thereto and such failure shall not impair the validity of this Lease
or extend the Term. 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 or any successor law or ordinance.
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<PAGE> 12
ARTICLE 4
CONDITION OF THE PREMISES
SECTION 4.1 CONDITION. Tenant currently occupies the 8th Floor Premises
on the date hereof. Tenant has inspected the Premises and agrees (i) to accept
possession of each portion of the Premises in the condition existing on the
Commencement Date in respect thereof "as is", (ii) that neither Landlord nor
Landlord's agents have made any representations or warranties with respect to
the Premises or the Building except as expressly set forth herein, and (iii)
except as expressly set forth in Section 5.9 in respect of Landlord's Work,
Landlord has no obligation to perform any work, supply any materials, incur any
expense or make any alterations or improvements to the Premises to prepare the
Premises for Tenant's occupancy. Any work to be performed in connection with
Tenant's initial occupancy shall be referred to hereinafter as the "Initial
Installations". Tenant's occupancy of any part of the Premises shall be
conclusive evidence, as against Tenant, that Tenant accepts possession of such
part of the Premises in its then current condition and at the time such
possession was taken, the Premises and the Building are in a good and
satisfactory condition as required by this Lease.
SECTION 4.2 LANDLORD'S CONTRIBUTION. (a) Landlord agrees to pay to
Tenant an amount not to exceed Landlord's Contribution toward the cost of the
Initial Installations in respect of the 24th Floor Premises, provided that as of
the date on which Landlord is required to make payment thereof pursuant to
Section 4.2(b): (i) this Lease is in full force and effect, and (ii) no Event of
Default then exists. Tenant shall pay all costs of the Initial Installations in
excess of Landlord's Contribution. Landlord's Contribution shall be payable
solely on account of labor directly related to such Initial Installations and
materials delivered to the 24th Floor Premises in connection with such Initial
Installations, except that Tenant may apply up to 5% of Landlord's Contribution
to pay "soft costs", architectural, consulting, engineering and legal fees, and
furniture and equipment (exclusive of computer equipment) acquired for use in
the 24th Floor Premises, incurred in connection with such Initial Installations.
Tenant shall not be entitled to receive any portion of Landlord's Contribution
not actually expended by Tenant in the performance of such Initial Installations
in accordance with this Section 4.2, nor shall Tenant have any right to apply
any unexpended portion of Landlord's Contribution as a credit against Rent or
any other obligation of Tenant hereunder. Upon the completion of such Initial
Installations and satisfaction of the conditions set forth in Section 4.2, or
upon the occurrence of the date which is twelve months after the Commencement
Date in respect of the 24th Floor Premises, whichever first occurs, any amount
of Landlord's Contribution which has not been previously disbursed shall be
retained by Landlord.
(b) Landlord shall pay Landlord's Contribution in respect of
the 24th Floor Premises to Tenant following commencement of Tenant's business
operations at the 24th Floor Premises and the final completion of the Initial
Installation in respect of the 24th Floor Premises, within 30 days after
submission by Tenant to Landlord of a written requisition therefor, signed by
the chief financial officer of tenant and accompanied by (i) copies of paid
invoices covering all of such Initial Installations, (ii) a written
certification from Tenant's architect stating that (A) such Initial
Installations described on such invoices have been
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completed in accordance with the plans and specifications approved by Landlord,
(B) such work has been paid in full by Tenant and (C) all contractors,
subcontractors and material suppliers have delivered to Tenant waivers of lien
with respect to such work (copies of which shall be included with such
architect's certification), (iii) proof of the satisfactory completion of all
required inspections and the issuance of any required approvals and sign-offs by
Governmental Authorities with respect thereto, (iv) final "as built" plans and
specifications for such Initial Installations as required pursuant to Section
5.1(c) and (v) such other documents and information as Landlord may reasonably
request, including in connection with title drawdowns and endorsements. The
right to receive Landlord's Contribution is for the exclusive benefit of Tenant,
and in no event shall such right be assigned to or be enforceable by or for the
benefit of any third party, including any contractor, subcontractor,
materialman, laborer, architect, engineer, attorney or any other Person.
ARTICLE 5
ALTERATIONS
SECTION 5.1 TENANT'S ALTERATIONS. (a) Tenant shall not make any
alterations, additions or other physical changes in or about the Premises
(collectively, "Alterations") (other than decorative Alterations such as
painting, wall coverings and floor coverings) without Landlord's prior written
consent, which may be withheld in Landlord's sole discretion. Landlord shall not
unreasonably withhold its consent to Alterations so long as the Alterations (i)
are non-structural and do not affect the Building Systems, (ii) are performed
only by contractors or mechanics approved by Landlord to perform such
Alterations, (iii) affect only the Premises, (iv) do not affect the certificate
of occupancy issued for the Building or the Premises, and (v) do not adversely
affect any service required to be furnished by Landlord to Tenant or to any
other tenant of the Building.
(b) Prior to making any Alterations, Tenant, at its expense,
shall (i) submit to Landlord for its written approval, detailed plans and
specifications (including layout, architectural, mechanical and structural
drawings) of each proposed Alteration, and with respect to any Alteration
affecting any Building System, Tenant shall submit proof that the Alteration has
been designed by, or reviewed and approved by, Landlord's engineer for the
relevant Building System, (ii) obtain all permits, approvals and certificates
required by any Governmental Authorities, (iii) furnish to Landlord duplicate
original policies or certificates of worker's compensation (covering all persons
to be employed by Tenant, and Tenant's contractors and subcontractors in
connection with such Alteration) and comprehensive public liability (including
property damage coverage) insurance and Builder's Risk coverage (issued on a
completed value basis) all in such form, with such companies, for such periods
and in such amounts as Landlord may reasonably require, naming Landlord,
Landlord's managing agent, and their respective employees and agents, any Lessor
and any Mortgagee as additional insureds and (iv) furnish to Landlord such other
evidence of Tenant's ability to complete and to fully pay for such Alterations
as is reasonably satisfactory to Landlord. Upon Tenant's request, Landlord shall
reasonably cooperate with Tenant in obtaining any permits, approvals or
certificates required to
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be obtained by Tenant in connection with any permitted Alteration (if the
provisions of the applicable Requirement require that Landlord join in such
application), provided Landlord shall incur no cost, expense or liability in
connection therewith.
(c) Upon completion of any Alterations, Tenant, at its
expense, shall promptly obtain certificates of final approval of such
Alterations required by any Governmental Authority and shall furnish Landlord
with copies thereof, together with "as built" plans and specifications for such
Alterations.
SECTION 5.2 MANNER AND QUALITY OF ALTERATIONS. All Alterations shall be
performed (i) in a good and workmanlike manner and free from defects, (ii) in
accordance with the plans and specifications, and by contractors approved by
Landlord, (iii) under the supervision of a licensed architect reasonably
satisfactory to Landlord, and (iv) in compliance with all Requirements, the
terms of this Lease, all procedures and regulations then prescribed by Landlord
for coordinating all work performed in the Building and the Rules and
Regulations. All materials and equipment to be used in the Premises shall be
first quality at least equal to the standards for the Building then established
by Landlord, and no such materials or equipment (other than Tenant's Property)
shall be subject to any lien or other encumbrance.
SECTION 5.3 TENANT'S PROPERTY. Tenant's Property shall be and remain
the property of Tenant and Tenant may, at any time on or before the Expiration
Date, remove the same. On or prior to the Expiration Date, Tenant shall, unless
otherwise directed by Landlord, at Tenant's expense, remove any Specialty
Alterations. Tenant shall repair and restore, in a good and workmanlike manner,
any damage to the Premises or the Building caused by Tenant's removal of any
Specialty Alterations and/or Tenant's Property, and upon default thereof, Tenant
shall reimburse Landlord, on demand, for Landlord's cost of repairing such
damage. Any Specialty Alterations or Tenant's Property not so removed shall be
deemed abandoned and Landlord may remove and dispose of same, and repair any
damage caused thereby, at Tenant's cost and without accountability to Tenant.
This Section 5.3 shall survive the expiration or earlier termination of this
Lease. Notwithstanding the foregoing, Tenant shall not be required to remove any
Alterations (other than Specialty Alterations) approved by Landlord unless
Landlord conditions its approval on the removal of same.
SECTION 5.4 MECHANIC'S LIENS. Tenant, at its expense, shall discharge
any lien or charge filed against the Premises or the Real Property for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant, within 10 days after Tenant's receipt of notice thereof by payment,
filing the bond required by law or otherwise in accordance with law.
SECTION 5.5 LABOR RELATIONS. Tenant shall not employ, or permit the
employment of, any contractor, mechanic or laborer, or permit any materials to
be delivered to or used in the Building, if, in Landlord's sole judgment, such
employment, delivery or use will interfere or cause any conflict with other
contractors, mechanics or laborers engaged in the construction, maintenance or
operation of the Building by Landlord, Tenant or others, or the use and
enjoyment of other Building tenants or occupants. In the event of such
interference or conflict,
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upon Landlord's request, Tenant shall cause all contractors, mechanics or
laborers causing such interference or conflict to leave the Building
immediately.
SECTION 5.6 TENANT'S COSTS. Tenant shall pay promptly to Landlord, upon
demand, all costs actually incurred by Landlord in connection with Tenant's
Alterations (including the Initial Installations), such as costs incurred in
connection with (i) Landlord's review of the Alterations (including review of
requests therefor) and (ii) the provision of Building trade personnel required
by trade union policy or otherwise, to operate elevators or other equipment,
during the performance of any Alterations.
SECTION 5.7 TENANT'S EQUIPMENT. Tenant shall not move any heavy
machinery, heavy equipment, freight, bulky matter or fixtures (collectively,
"Equipment") into or out of the Building without Landlord's prior consent and
payment to Landlord of any costs incurred by Landlord in connection therewith.
If such Equipment requires special handling, Tenant agrees (i) to employ only
persons holding a Master Rigger's License to perform such work, (ii) all work
performed in connection therewith shall comply with all applicable Requirements
and (iii) such work shall be done only during hours designated by Landlord.
Tenant shall indemnify and hold Landlord harmless from and against all damages
sustained by persons or property and all monies paid out by Landlord in
settlement of any claims or judgments (including all expenses and attorneys'
fees incurred in connection therewith) and all costs incurred in repairing any
damage to the Building or appurtenances. The agreements set forth in this
Section 5.7 shall survive the expiration or earlier termination of this Lease.
SECTION 5.8 LEGAL COMPLIANCE. The approval of plans or specifications
or consent by Landlord to the making of any Alterations does not constitute
Landlord's agreement or representation that such plans and specifications or any
Alterations comply with any Requirements and/or with the certificate of
occupancy issued for the Building. Landlord shall have no liability to Tenant or
any other party in connection with Landlord's approval of any plans and
specifications or consent to the making of any Alterations.
SECTION 5.9 LANDLORD'S WORK. (a) Landlord shall perform the work
described in Exhibit C hereto in respect of the 8th Floor Premises
(collectively, "Landlord's Work").
(b) Tenant agrees to provide Landlord and its agents,
contractors, subcontractors and employees access to the Premises at all times to
perform Landlord's Work and Tenant and Landlord agree to cooperate and cause
their agents, contractors and subcontractors to cooperate so as to minimize to
the extent practicable any interference with the performance of Landlord's Work
and Tenant's Alterations.
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ARTICLE 6
FLOOR LOAD
SECTION 6.1 FLOOR LOAD. Tenant shall not place a load upon any floor of
the Premises that exceeds 50 pounds per square foot "live load". Landlord
reserves the right to reasonably prescribe the weight and position of all
Equipment which Tenant wishes to place within the Premises.
ARTICLE 7
REPAIRS
SECTION 7.1 LANDLORD'S REPAIR AND MAINTENANCE. Landlord shall operate,
maintain and, except as provided in Section 7.2 hereof, make all necessary
repairs (both structural and nonstructural) to (i) the Building Systems up to
the point of connection to the Premises, and (ii) the public portions of the
Building, both exterior and interior, in conformance with standards applicable
to first-class renovated office buildings of comparable age and quality in the
vicinity of the Building.
SECTION 7.2 TENANT'S REPAIR AND MAINTENANCE. Tenant shall promptly, at
its expense and in compliance with Article 5 of this Lease, (i) make all
nonstructural repairs to the Premises and the fixtures, equipment and
appurtenances therein as and when needed to preserve the Premises in good
working order and condition, except for reasonable wear and tear and damage for
which Tenant is not responsible, and (ii) replace scratched or damaged doors,
signs and glass (other than exterior windows) in and about the Premises. Without
limiting the foregoing, all damage to the Premises or to any other part of the
Building, or to any fixtures, equipment, sprinkler system and/or appurtenances
thereof, whether requiring structural or nonstructural repairs, caused by or
resulting from any act, omission, neglect or improper conduct of, or Alterations
made by, or the moving of Tenant's fixtures, furniture or equipment into or out
of the Premises by Tenant, Tenant's agents, employees, invitees or licensees,
and all damage to any portion of the Building's Systems existing in the
Premises, shall be repaired at Tenant's expense. Such repairs shall be made by
(a) Tenant, if the required repairs are nonstructural in nature and do not
affect any Building System and/or if any damaged portion of the sprinkler system
is contained within the Premises, or (b) Landlord, if the required repairs are
structural in nature, involve exterior window glass or affect any Building
System or any portion of the sprinkler system not contained within the Premises.
All Tenant repairs shall be of a quality at least equal to the original work or
construction but utilizing new construction materials and shall be made in
accordance with this Lease. Tenant shall give Landlord prompt notice of any
defective condition of which Tenant is aware in any Building System located in,
servicing or passing through the Premises. If Tenant fails after 10 days' notice
(or such shorter period as may be required in an emergency) to proceed with due
diligence to make any repairs required to be made by Tenant, Landlord may make
such repairs and all expenses incurred by Landlord on account thereof, plus
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interest thereon at the Interest Rate, shall be paid by Tenant within 10 days
after Landlord delivers to Tenant an invoice therefor.
SECTION 7.3 VERMIN. Tenant shall, at its expense, cause the Premises to
be exterminated, from time to time as Landlord may reasonably direct or whenever
there is evidence of infestation to Landlord's reasonable satisfaction, by
licensed exterminators approved by Landlord.
SECTION 7.4 INTERRUPTIONS DUE TO REPAIRS. Landlord reserves the right
to make all changes, alterations, additions, improvements, repairs or
replacements to the Building, including the Building Systems which provide
services to Tenant, as Landlord deems necessary or desirable, provided that in
no event shall the level of any building service decrease in any material
respect from the level required of Landlord in this Lease as a result thereof
(other than temporary changes in the level of such services during the
performance of any such work by Landlord). Landlord shall use reasonable efforts
to minimize interference with Tenant's use and occupancy of the Premises in the
making of any repairs, alterations, additions or improvements, provided that
Landlord shall have no obligation to employ contractors or labor at "overtime"
or other premium pay rates or to incur any other "overtime" costs or additional
expenses whatsoever. There shall be no allowance to Tenant for a diminution of
rental value, no constructive eviction of Tenant and no liability on the part of
Landlord by reason of inconvenience, annoyance or injury to business arising
from Landlord, Tenant or others making, or failing to make, any repairs,
alterations, additions or improvements in or to any portion of the Building or
the Premises, or in or to fixtures, appurtenances or equipment therein.
ARTICLE 8
INCREASES IN TAXES AND OPERATING EXPENSES
SECTION 8.1 DEFINITIONS. For the purposes of this Article 8, the
following terms shall have the meanings set forth below:
(a) "TAXES" shall mean (i) all real estate taxes, assessments,
sewer and water rents, rates and charges and other governmental levies,
impositions or charges, whether general, special, ordinary, extraordinary,
foreseen or unforeseen, which may be assessed, levied or imposed upon all or any
part of the Real Property, and (ii) all expenses (including reasonable
attorneys' fees and disbursements and experts' and other witnesses' fees)
incurred in contesting any of the foregoing or the Assessed Valuation of all or
any part of the Real Property. Taxes shall not include (x) interest or penalties
incurred by Landlord as a result of Landlord's late payment of Taxes, except for
interest payable in connection with the installment payment of assessments
pursuant to the next sentence or (y) franchise or net income taxes imposed upon
Landlord. If Landlord elects to pay any assessment in annual installments, then
for the purposes of this Article 8, (i) such assessment shall be deemed to have
been so divided and to be payable in the maximum number of installments
permitted by law, and (ii) there shall be deemed included in Taxes for each
Comparison Year the installments of such assessment becoming
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payable during such Comparison Year, together with interest payable during such
Comparison Year on such installments and on all installments thereafter becoming
due as provided by law, all as if such assessment had been so divided. If at any
time the methods of taxation prevailing on the date hereof shall be altered so
that in lieu of or as an addition to the whole or any part of Taxes, there shall
be assessed, levied or imposed (1) a tax, assessment, levy, imposition or charge
based on the income or rents received from the Real Property whether or not
wholly or partially as a capital levy or otherwise, (2) a tax, assessment, levy,
imposition or charge measured by or based in whole or in part upon all or any
part of the Real Property and imposed upon Landlord, (3) a license fee measured
by the rents, or (4) any other tax, assessment, levy, imposition, charge or
license fee however described or imposed, then all such taxes, assessments,
levies, impositions, charges or license fees or the part thereof so measured or
based shall be deemed to be Taxes, provided that any tax, assessment, levy,
imposition or charge imposed on income from the Real Property shall be
calculated as if the Real Property were the only asset of Landlord.
(b) "ASSESSED VALUATION" shall mean the amount for which the
Real Property is assessed pursuant to applicable provisions of the City Charter
and of the Administrative Code of the City of New York for the purpose of
imposition of Taxes.
(c) "TAX YEAR" shall mean the twelve month period from July 1
through June 30 (or such other period as hereinafter may be duly adopted by the
City of New York as its fiscal year for real estate lax purposes).
(d) "BASE TAXES" shall mean an amount equal to the Taxes
payable on account of the Base Tax Year in respect of (x) the 8th Floor
Premises, (y) the 24th Floor Premises, and (z) the Storage Space, as the case
may be.
(e) "TENANT'S PROJECTED SHARE OF TAXES" shall mean Tenant's
Tax Payment, if any, for the prior Comparison Year, plus an amount equal to
Landlord's estimate of the amount of increase in Tenant's Tax Payment projected
for the current Comparison Year, divided by 12 and payable monthly as Additional
Rent.
(f) "COMPARISON YEAR" shall mean (a) with respect to Taxes,
any Tax Year commencing subsequent to the first day of a Base Tax Year, and (b)
with respect to Operating Expenses, any calendar year commencing subsequent to
the first day of a Base Expense Year.
(g) "OPERATING EXPENSES" shall mean the aggregate of all costs
and expenses (and taxes, if any, thereon) paid or incurred by or on behalf of
Landlord (whether directly or through independent contractors) in connection
with the ownership, operation, repair and maintenance of the Building and the
Real Property, such as: (i) insurance premiums, (ii) the cost of electricity,
gas, oil, steam, water, air conditioning and other fuel and utilities, (iii)
attorneys' fees and disbursements and auditing, management and other
professional fees and expenses, and (iv) any capital improvement as described in
items (1) or (2) below which shall be installed by Landlord in the Building.
Such improvements shall be amortized on a straight-line basis over such period
as Landlord shall reasonably determine (with interest accruing on the
unamortized portion thereof at the Base Rate in effect at the time such
improvements are substantially completed per annum), and the amount included in
Operating Expenses in any Comparison Year
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(until such improvement has been fully amortized) shall be equal to the annual
amortized amount. A capital improvement shall be included in Operating Expenses
only if it either (1) results in a reduction in Operating Expenses (as for
example, a labor-saving improvement), provided, the amount included in Operating
Expenses in any Comparison Year shall not exceed an amount equal to the savings
resulting from the installation and operation of such improvement, and/or (2) is
made during any Comparison Year in compliance with Requirements. Operating
Expenses shall not include any Excluded Expenses. If during all or part of any
Base Expense Year or any Comparison Year, Landlord shall not furnish any
particular item(s) of work or service (which would otherwise constitute an
Operating Expense) to any leasable portions of the Building for any reason,
then, for purposes of computing Operating Expenses for any Base Expense Year or
any Comparison Year, as the case may be, the amount included in Operating
Expenses for such period shall be increased by an amount equal to the costs and
expenses that would have been reasonably incurred by Landlord during such period
if Landlord had furnished such item(s) of work or service to such portion of the
Building. in determining the amount of Operating Expenses for any Base Expense
Year or any Comparison Year, if less than 95 percent of the Building rentable
area shall have been occupied by tenant(s) at any time during any such Base
Expense Year or Comparison Year, Operating Expenses shall be determined for such
Base Expense Year or Comparison Year to be an amount equal to the like expenses
which would normally be expected to be incurred had such occupancy been 95
percent throughout such Base Expense Year or Comparison Year.
(h) "BASE OPERATING EXPENSES" shall mean the Operating
Expenses for the Base Expense Year in respect of (x) the 8th Floor Premises and
(y) the 24th Floor Premises, as the case may be.
(i) "STATEMENT" shall mean a statement containing a comparison
of (1) the Taxes payable for the Base Tax Year for each portion of the Premises
and the Taxes payable for any Comparison Year, or (2) the Base Operating
Expenses for each portion of the Premises and the Operating Expenses payable for
any Comparison Year.
SECTION 8.2 (a) TENANT'S TAX PAYMENT. If the Taxes payable for any
Comparison Year exceed the Base Taxes applicable to any portion of the Premises,
Tenant shall pay to Landlord Tenant's Proportionate Share in respect of such
portion of the Premises of such excess ("Tenant's Tax Payment"). On or about the
start of each Comparison Year, Landlord shall furnish to Tenant a Statement of
the Taxes. Tenant shall pay Tenant's Tax Payment to Landlord, in monthly
installments, on the first day of each month during each Comparison Year, an
amount equal to one twelfth of Tenant's Tax Payment due for each Comparison
Year. If there is any increase or decrease in Taxes payable for any Comparison
Year, whether levied during or after such Comparison Year, Landlord may furnish
a revised Statement for such Comparison Year, Tenant's Tax Payment for such
Comparison Year shall be adjusted and, within 15 business days after Tenant's
receipt of such revised Statement (a) with respect to any increase in Taxes
payable for such Comparison Year, Tenant shall pay such increase in Tenant's Tax
Payment to Landlord, or (b) with respect to any decrease in Taxes payable for
such Comparison Year, Landlord shall credit such decrease in Tenant's Tax
Payment against the next installment of Rent payable by Tenant. If, during the
Term, Landlord elects to collect Tenant's Tax Payments, in full or in
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installments on any date or dates other than as presently required, then
following Landlord's notice to Tenant, Tenant's Tax Payments shall be
correspondingly revised.
(b) If the applicable real estate tax fiscal year is changed,
Taxes for such fiscal year shall be apportioned on the basis of the number of
days in such fiscal year included in the particular Comparison Year for the
purpose of making the computations under this Section.
(c) Only Landlord shall be eligible to institute proceedings
to reduce the Assessed Valuation of the Real Property and the filings of any
such proceeding by Tenant without Landlord's prior written consent shall
constitute an Event of Default. If the Taxes payable for a Base Tax Year are
reduced, the applicable Base Taxes shall be correspondingly revised, the
Additional Rent previously paid or payable on account of Tenant's Tax Payment
hereunder for all Comparison Years shall be recomputed on the basis of such
reduction, and Tenant shall pay to Landlord within 15 business days after being
billed therefor, any deficiency between the amount of such Additional Rent
previously computed and paid by Tenant to Landlord, and the amount due as a
result of such recomputations. If the Taxes payable for a Base Tax Year are
increased then Landlord shall either pay to Tenant, or at Landlord's election,
credit against subsequent payments of Rent due, the amount by which such
Additional Rent previously paid on account of Tenant's Tax Payment exceeds the
amount actually due as a result of such recomputations. If Landlord receives a
refund of Taxes for any Comparison Year, Landlord shall, at its election, either
pay to Tenant, or credit against subsequent payments of Rent due hereunder, an
amount equal to Tenant's Proportionate Share of the refund, net of any expenses
incurred by Landlord in achieving such refund, which amount shall not exceed
Tenant's Tax Payment paid for such Comparison Year. Landlord shall not be
obligated to file any application or institute any proceeding seeking a
reduction in Taxes or the Assessed Valuation.
(d) Tenant shall be obligated to make Tenant's Tax Payment
regardless of whether Tenant may be exempt from the payment of any taxes by
reason of Tenant's diplomatic or other tax exempt status.
(e) If the Expiration Date shall occur on a date other than
June 30, any Additional Rent payable by Tenant to Landlord under this Section
8.2 for the Comparison Year in which such Expiration Date occurs shall be
apportioned on the basis of the number of days in the period from June 30 to the
Expiration Date shall bear to the total number of days in such Comparison Year.
In the event of the expiration or earlier termination of this Lease, any
Additional Rent under this Section 8.2 shall be paid or adjusted within 30 days
after submission of the Statement. In no event shall Fixed Rent ever be reduced
by operation of this Section 8.2 and the rights and obligations of Landlord and
Tenant under the provisions of this Section 8.2 with respect to any Additional
Rent shall survive the expiration or earlier termination of this Lease.
(f) Tenant shall be responsible for any applicable occupancy
or rent tax now in effect or hereafter enacted and, if payable by Landlord,
Tenant shall promptly pay such amounts to Landlord, upon Landlord's demand, as
Additional Rent.
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SECTION 8.3 TENANT'S OPERATING PAYMENT. (a) If the Operating Expenses
payable for any Comparison Year exceed the Base Operating Expenses applicable to
any portion of the Premises, Tenant shall pay to Landlord Tenant's Proportionate
Share in respect of such portion of the Premises of such excess ("Tenant's
Operating Payment"). For each Comparison Year, Landlord shall furnish to Tenant
a written statement setting forth Landlord's good faith reasonable estimate of
Tenant's Operating Payment for such Comparison Year, based upon such year's
budget. Tenant shall pay to Landlord on the first day of each month during such
Comparison Year an amount equal to one-twelfth of Landlord's estimate of
Tenant's Operating Payment for such Comparison Year. If, however, Landlord shall
furnish any such estimate for a Comparison Year subsequent to the commencement
thereof, then (a) until the first day of the month following the month in which
such estimate is furnished to Tenant, Tenant shall pay to Landlord on the first
day of each month an amount equal to the monthly sum payable by Tenant to
Landlord under this Section 8.3 during the last month of the preceding
Comparison Year, (b) promptly after such estimate is furnished to Tenant or
together therewith, Landlord shall give notice to Tenant stating whether the
installments of Tenant's Operating Payment previously made for such Comparison
Year were greater or less than the installments of Tenant's Operating Payment to
be made for such Comparison Year in accordance with such estimate, and (i) if
there shall be a deficiency, Tenant shall pay the amount thereof within 15
business days after demand therefor, or (ii) if there shall have been an
overpayment, Landlord shall credit the amount thereof against subsequent
payments of Rent due hereunder, and (c) on the first day of the month following
the month in which such estimate is furnished to Tenant, and on the first day of
each month thereafter throughout the remainder of such Comparison Year, Tenant
shall pay to Landlord an amount equal to one-twelfth of Tenant's Operating
Payment shown on such estimate.
(b) On or before May 1st of each Comparison Year, Landlord
shall furnish to Tenant a Statement for the immediately preceding Comparison
Year. Each such Statement shall be accompanied by a computation of Operating
Expenses for the Building prepared by Landlord's managing agent. If the
Statement shall show that the sums paid by Tenant under Section 8.3(a) exceeded
the actual amount of Tenant's Operating Payment for such Comparison Year,
Landlord shall credit the amount of such excess against subsequent payments of
Rent due hereunder. If the Statement for such Comparison Year shall show that
the sums so paid by Tenant were less than Tenant's Operating Payment for such
Comparison Year, Tenant shall pay the amount of such deficiency within 15
business days after Tenant's receipt of the Statement.
(c) If the Expiration Date shall occur on a date other than
December 31, any Additional Rent under this Section 8.3 for the Comparison Year
in which such Expiration Date shall occur shall be apportioned on the basis of
the number of days in the period from January 1 to the Expiration Date. Upon the
expiration or earlier termination of this Lease, any Additional Rent under this
Article 8 shall be paid or adjusted within 30 days after submission of the
Statement. In no event shall Fixed Rent ever be reduced by operation of this
Section 8.3 and the rights and obligations of Landlord and Tenant under the
provisions of this Section 8.3 with respect to any Additional Rent shall survive
the expiration or earlier termination of this Lease.
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SECTION 8.4 FORMULA. The computations of Additional Rent under this
Article 8 are intended to constitute a formula for an agreed rental adjustment
and may or may not constitute an actual reimbursement to Landlord for Taxes,
costs and expenses paid by Landlord with respect to the Building.
SECTION 8.5 NON-WAIVER; DISPUTES. (a) Landlord's failure to render any
Statement on a timely basis with respect to any Comparison Year shall not
prejudice Landlord's right to thereafter render a Statement with respect to such
Comparison Year or any subsequent Comparison Year, nor shall the rendering of a
Statement prejudice Landlord's right to thereafter render a corrected Statement
for that Comparison Year.
(b) Each Statement sent to Tenant shall be conclusively
binding upon Tenant unless Tenant shall (i) within 30 days after such Statement
is sent, pay to Landlord the amount set forth in such Statement, without
prejudice to Tenant's right to dispute such Statement, and (ii) within 90 days
after such Statement is sent, send a written notice to Landlord objecting to
such Statement and specifying the reasons that such Statement is claimed to be
incorrect. If the parties are unable to resolve any dispute as to the
correctness of such Statement within 30 days following such notice of objection,
either party may refer the issues raised to an independent firm of certified
public accountants selected by Landlord and reasonably acceptable to Tenant, and
the decision of such accountants shall be conclusively binding upon Landlord and
Tenant. In connection therewith, Tenant and such accountants shall execute and
deliver to Landlord a confidentiality agreement, in form and substance
reasonably satisfactory to Landlord, whereby such parties agree not to disclose
to any third party any of the information obtained in connection with such
review. The fees and expenses relating to such procedure shall be borne by the
unsuccessful party (and if both parties are partially unsuccessful, the
accountants shall apportion the fees and expenses between the parties based on
the degree of success of each party).
ARTICLE 9
REQUIREMENTS OF LAW
SECTION 9.1 (a) TENANT'S COMPLIANCE. Tenant, at its expense and in
accordance with Article 5 of this Lease, shall comply (or cause to be complied
with) all Requirements applicable to the Premises, regardless of whether imposed
by their terms upon Landlord or Tenant. Tenant shall make all repairs and
alterations, whether structural or nonstructural, ordinary or extraordinary,
arising as a result of (i) the specific manner and nature of use or occupancy by
Tenant, or (ii) Alterations made by Tenant in the Premises. If Tenant obtains
knowledge of any failure to comply with any Requirements applicable to the
Premises, Tenant shall give Landlord prompt written notice thereof.
(b) HAZARDOUS MATERIALS. Tenant shall be responsible, at its
expense, for all matters directly or indirectly based on, or arising or
resulting from the actual or alleged presence of Hazardous Materials on the
Premises or in the Building which is caused or permitted by Tenant. Tenant shall
provide to Landlord copies of all communications received by Tenant with
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respect to any Requirements relating to Hazardous Materials, and/or any claims
made in connection therewith. Landlord or its agents may perform environmental
inspections of the Premises at any time.
(c) LANDLORD'S COMPLIANCE. Landlord shall comply with (or
cause to be complied with) all Requirements applicable to the Building which are
not the obligation of Tenant, to the extent that non-compliance would materially
impair Tenant's use and occupancy of the Premises and Tenant's ability to
conduct its business in the Premises for office use; and the Cost thereof shall
be included in Operating Expenses pursuant to Section 8.1(g) of this Lease.
(d) LANDLORD'S INSURANCE. Tenant shall not cause or permit any
action or condition that would (i) invalidate or conflict with Landlord's
insurance policies, (ii) violate applicable rules, regulations and guidelines of
the Fire Department, Fire Insurance Rating Organization or any other authority
having jurisdiction over the Building, or (iii) cause an increase in the rate of
fire insurance then on the Building over that in similar type buildings. If the
fire insurance rates increase as a result of Tenant's failure to comply with the
provisions of this Article, Tenant shall promptly cure such failure and shall
reimburse Landlord, as Additional Rent, for the increased fire insurance
premiums paid by Landlord because of such failure by Tenant. In any action or
proceeding which Landlord and Tenant are parties, a schedule or "make up" of
rates for the Building or the Premises issued by the appropriate Fire Insurance
Rating Organization, or other body fixing such fire insurance rates, shall be
conclusive evidence of the fire insurance rates then applicable to the Building.
SECTION 9.2 FIRE ALARM SYSTEM; SPRINKLERS. Tenant shall install a
fire-alarm and life-safety system in the Premises in accordance with this Lease,
the Rules and Regulations and all Requirements, if and to the extent such system
has not been installed in any portion of the Premises prior to the Commencement
Date in respect thereof. If the Fire Insurance Rating Organization or any
Governmental Authority or any of Landlord's insurers requires or recommends any
modifications and/or Alterations be made or any additional equipment be supplied
in connection with the sprinkler system or fire alarm and life-safety system
serving the Building or the Premises by reason of Tenant's business, or the
location of the partitions, trade fixtures, or other contents of the Premises,
Landlord (to the extent outside of the Premises) or Tenant (to the extent within
the Premises) shall make such modifications and/or Alterations, and supply such
additional equipment, in either case at Tenant's expense.
SECTION 9.3 LIMITATIONS ON RENT. If at any time during the Term by
reason of any Requirement, the Rent is not fully collectible, Tenant shall take
such other steps (without additional expense to Tenant) as Landlord may request,
and as may be legally permissible, to permit Landlord to collect the maximum
rents which may during the continuance of such restriction be legally
permissible (but not in excess of the Rent reserved under this Lease). Upon the
termination of such restriction during the Term, Tenant shall pay to Landlord,
in addition to the Rent for the period following such termination of the
restriction, if legally permissible, the portion of Rent which would have been
paid pursuant to this Lease but for such legal restriction less the Rent paid by
Tenant to Landlord while such restriction was in effect, together with interest
thereon at the Base Rate.
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ARTICLE 10
SUBORDINATION
SECTION 10.1 SUBORDINATION AND ATTORNMENT. (a) This Lease is subject
and subordinate to all Mortgages and Superior Leases, and, at the request of any
Mortgagee or Lessor, Tenant shall attorn to such Mortgagee or Lessor, its
successors in interest or any purchaser in a foreclosure sale.
(b) If a Lessor or Mortgagee or any other person or entity
shall succeed to the rights of Landlord under this Lease, whether through
possession or foreclosure action or delivery of a new lease or deed, then at the
request of the party succeeding to Landlord's rights and upon such successor
landlord's written agreement to accept Tenant's attornment and to recognize
Tenant's interest under this Lease, Tenant shall be deemed to have attorned to
and recognized such successor landlord as the Landlord under this Lease. The
provisions of this Article are self-operative requiring no further instruments
to give effect thereto; provided, however, that Tenant shall promptly execute
and deliver any instrument that such successor landlord may reasonably request
(i) evidencing such attornment, (ii) setting forth the terms and conditions of
Tenant's tenancy, and (iii) containing such other terms and conditions as may be
required by such Mortgagee or Lessor, provided such terms and conditions do not
materially increase Tenant's obligations or materially and adversely affect the
rights of Tenant under this Lease. Upon such attornment this Lease shall
continue in full force and effect as a direct lease between such successor
landlord and Tenant upon all of the terms, conditions and covenants set forth in
this Lease except that such successor landlord shall not:
(i) be liable for any act or omission of Landlord
(except to the extent such act or omission continues beyond the date when such
successor landlord succeeds to Landlord's interest and Tenant gives notice of
such act or omission);
(ii) be subject to any defense, counterclaim, set-off
or offsets which Tenant may have against Landlord;
(iii) be bound by any prepayment of more than one
month's Rent to any prior landlord;
(iv) be bound by any obligation to make any payment
to Tenant which was required to be made prior to the time such successor
landlord succeeded to Landlord's interest;
(v) be bound by any obligation to perform any work or
to make improvements to the Premises except for (x) repairs and maintenance
pursuant to the provisions of this Lease, and (y) repairs to the Premises as a
result of damage by fire or other casualty or a partial condemnation pursuant to
the provisions of this Lease, but only to the extent that such repairs can
reasonably be made from the net proceeds of any insurance or awards,
respectively, actually made available to such successor landlord; or
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(vi) be bound by any modification, amendment or
renewal of this Lease made without successor landlord's consent.
SECTION 10.2 MORTGAGE AND/OR SUPERIOR LEASE DEFAULTS. Tenant shall not
cause a default under any Superior Lease or Mortgage, or omit to do anything
that Tenant is obligated to do under the terms of this Lease so as to cause
Landlord to be in default thereunder. Any Mortgagee may elect that this Lease
shall have priority over the Mortgage that it holds and, upon notification to
Tenant by such Mortgagee, this Lease shall be deemed to have priority over such
Mortgage, regardless of the date of this Lease. In connection with the financing
of the Real Property, the Building or the interest of the lessee under any
Superior Lease, Tenant shall consent to any reasonable modifications of this
Lease requested by any lending institution provided such modifications do not
materially increase the obligations, or materially and adversely affect the
rights, of Tenant under this Lease.
SECTION 10.3 TENANT'S TERMINATION RIGHT. As long as any Superior Lease
or Mortgage shall exist, Tenant shall not seek to terminate this Lease by reason
of any act or omission of Landlord (i) until Tenant shall have given written
notice of such act or omission to all Lessors and/or Mortgagees, and (ii) until
a reasonable period of time shall have elapsed following the giving of notice of
such default and the expiration of any applicable notice or grace periods,
during which period such Lessors and/or Mortgagees shall have the right, but not
the obligation, to remedy such act or omission and thereafter diligently proceed
to so remedy such act or obligation. If any Lessor or Mortgagee elects to remedy
such act or omission of Landlord, Tenant shall not seek to terminate this Lease
so long as such Lessor or Mortgagee is proceeding with reasonable diligence to
effect such remedy.
SECTION 10.4 PROVISIONS. The provisions of this Article shall (i) inure
to the benefit of Landlord, any future owner of the Building or the Real
Property, Lessor or Mortgagee and any sublessor thereof and (ii) apply
notwithstanding that, as a matter of law, this Lease may terminate upon the
termination of any such Superior Lease or Mortgage.
SECTION 10.5 NON-DISTURBANCE AGREEMENTS. Landlord hereby agrees to use
reasonable efforts to obtain for Tenant a subordination, non-disturbance and
attornment agreement (a "SNDA") from all existing Mortgagees and Lessors, in the
standard form customarily employed by such Mortgagee and/or Lessor in respect of
the 24th Floor Premises. Landlord represents that, as of the date hereof, there
are no existing Superior Leases and the only existing Mortgagee is Citicorp Real
Estate, Inc.
ARTICLE 11
SERVICES
SECTION 11.1 ELEVATORS. Landlord, at its expense, shall provide
passenger elevator service to the Premises at all times, and at least one
freight elevator serving the Premises available upon Tenant's prior request, on
a non-exclusive "first come, first served" basis with
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other Building tenants, on all Business Days from 8:00 a.m. to 11:45 a.m. and
from 1:00 p.m. to 4:45 p.m.
SECTION 11.2 HEATING, VENTILATION AND AIR CONDITIONING. (a) Landlord
shall furnish to the Premises heating, ventilation and air-conditioning ("HVAC")
for the comfortable occupancy of the Premises, in accordance with the standards
set forth in Exhibit D on all Business Days from 8:00 a.m. to 6:00 p.m.
Landlord, at its expense, shall repair and maintain the HVAC System in good
working order, provided repairs required as a result of the negligence or
willful misconduct of Tenant, its agents or employees, shall be performed at
Tenant's expense. Landlord shall have free access to all air-cooling, fan,
ventilating and machine rooms and electrical closets and all other mechanical
installations of Landlord (collectively, "Electrical Installations"), and Tenant
shall not construct partitions or other obstructions which may interfere with
Landlord's access thereto or the moving of Landlord's equipment to and from the
Electrical Installations. Neither Tenant, nor its agents, employees or
contractors shall at any time enter the Electrical Installations or tamper with,
adjust, or otherwise affect such Electrical Installations.
(b) Landlord shall not be responsible if the normal operation
of the Building system providing HVAC to the Premises (the "HVAC System") shall
fail to provide cooled or heated air, as the case may be, at reasonable
temperatures, pressures, degrees of humidity, volumes or velocities to any parts
of the Premises (i) by reason of any machinery or equipment installed by or on
behalf of Tenant or any person claiming through or under Tenant, which shall
have an electrical load in excess of the average electrical load and human
occupancy factors for the HVAC System as designed, as the case may be, or (ii)
because of any rearrangement of partitioning or other Alterations (including the
Initial Installations) made or performed by or on behalf of Tenant or any person
claiming through or under Tenant. Tenant shall cause to be kept closed all of
the operable windows in the Premises and shall lower the blinds when necessary
because of the sun's position whenever the HVAC System is in operation or when
and as reasonably required by any Requirement or any applicable Governmental
Authority. Tenant at all times shall cooperate fully with Landlord and shall
abide by the rules and regulations which Landlord may reasonably prescribe for
the proper functioning and protection of the HVAC System.
SECTION 11.3 OVERTIME FREIGHT ELEVATORS AND HVAC. The Rent does not
reflect or include any charge to Tenant for the furnishing of any elevator
service (other than the one passenger elevator to be available at all times) or
HVAC to the Premises during any periods other than for the hours and days set
forth in Section 11.2 hereof ("Overtime Periods"). Landlord shall not be
required to furnish any such services during Overtime Periods unless Landlord
has received notice from Tenant requesting such services prior to 2:00 p.m. on
the day upon which such services are requested, or by 2:00 p.m. on the last
preceding Business Day, if such Overtime Periods are to occur on a day other
than a Business Day, but Landlord shall use reasonable efforts (without
obligation to incur any additional cost) to arrange such service on such shorter
notice as Tenant shall provide. If Landlord furnishes freight elevator service
to the Premises during Overtime Periods, Tenant shall pay to Landlord Landlord's
then established rates for such service in the Building. If Landlord shall
furnish HVAC to the Premises during Overtime
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Periods, Tenant shall pay to Landlord Landlord's then established rates for such
service in the Building.
SECTION 11.4 CLEANING. Landlord shall cause the Premises (excluding any
portions thereof used for the storage, preparation, service or consumption of
food or beverages) to be cleaned, substantially in accordance with the standards
set forth in Exhibit E. Any areas of the Premises requiring additional cleaning
such as areas used for preparation or consumption of food, shall be done, at
Tenant's expense, by Landlord's contractor whose rates shall be competitive with
rates of other such contractors in the vicinity of the Building. Landlord and
its cleaning contractor and their respective employees shall have access to the
Premises at all times except between 8:00 A.M. and 5:30 P.M. on Business Days.
SECTION 11.5 WATER. Landlord, at Landlord's expense, shall provide to
the Premises hot and cold water for drinking, cleaning and lavatory purposes. If
Tenant requires or uses water for any additional purposes, Landlord may install
a water meter. Tenant shall pay for the cost of such installation, maintenance,
repairs and replacements thereto, and for water consumed as shown on the meter.
Tenant shall also pay a reasonable charge for any required pumping or heating
thereof, and any sewer rent, tax and/or charge now or hereafter assessed or
imposed upon the Premises or the Real Property pursuant to any Requirement.
SECTION 11.6 SERVICE INTERRUPTIONS. Landlord reserves the right to
suspend any service when necessary, by reason of Unavoidable Delays, accidents
or emergencies, or for repairs, alterations or improvements which, in Landlord's
reasonable judgment, are desirable or necessary to be made, until such
Unavoidable Delay, accident or emergency shall cease or such repairs,
alterations or improvements are completed. Landlord shall not be liable for any
such interruption, curtailment or failure to supply services provided Landlord
shall use reasonable efforts to restore such service, remedy such situation and
minimize any interference with Tenant's business. The exercise of any such right
or the occurrence of any such failure by Landlord shall not constitute an actual
or constructive eviction, in whole or in part, entitle Tenant to any
compensation, abatement or diminution of Rent, relieve Tenant from any of its
obligations under this Lease, or impose any liability upon Landlord or its
agents by reason of inconvenience to Tenant, or interruption of Tenant's
business, or otherwise.
SECTION 11.7 REFUSE AND RUBBISH REMOVAL. Landlord shall provide refuse
and rubbish removal services at the Premises for ordinary office refuse and
rubbish pursuant to regulations reasonably established by Landlord. Tenant shall
pay to Landlord, within 10 business days of receipt of an invoice therefor, the
cost of such removal to the extent that the same exceeds the refuse and rubbish
customarily generated by executive and general office tenants. In addition, if
Tenant shall dispose of its refuse and rubbish in the public areas of the
Building, Tenant shall be liable for the cost of such removal. Tenant shall
cause its employees, agents, contractors and business visitors to observe such
additional rules and regulations regarding rubbish removal and/or recycling as
Landlord may, from time to time, reasonably impose.
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ARTICLE 12
INSURANCE, PROPERTY LOSS OR DAMAGE; REIMBURSEMENT
SECTION 12.1 TENANT'S INSURANCE. (a) Tenant, at its expense, shall
obtain and keep in full force and effect during the Term:
(i) a policy of commercial general liability
insurance on an occurrence basis against claims for personal injury, death
and/or property damage occurring in or about the Premises or the Building, under
which Tenant is named as the insured and Landlord, Landlord's managing agent and
any Lessors and any Mortgagees whose names shall have been furnished to Tenant
are named as additional insureds, which insurance shall provide primary coverage
without contribution from any other insurance carried by or for the benefit of
Landlord, Landlord's managing agent or any Lessors or Mortgagees named as
additional insureds, and Tenant agrees to obtain blanket broad-form contractual
liability coverage to insure its indemnity obligations set forth in Article 35
hereof. The minimum limits of liability shall be a combined single limit with
respect to each occurrence in an amount of not less than $5,000,000 per
location, provided, however, that Landlord shall retain the right to require
Tenant to increase such coverage to that amount of insurance which in Landlord's
reasonable judgment is then being customarily required by landlords for similar
office space in first-class renovated buildings in the City of New York. The
deductible or self insured retention for such policy shall in no event exceed
$10,000 at any time. If the aggregate limit applying to the Premises is reduced
by the payment of a claim or establishment of a reserve, Tenant shall
immediately arrange to have the aggregate limit restored by endorsement to the
existing policy or the purchase of an additional insurance policy unless, in
Landlord's reasonable judgment, Tenant maintains sufficient excess liability
insurance to satisfy the liability requirements of this Lease without the
reinstatement of the aggregate limit;
(ii) insurance against loss or damage by fire, and
such other risks and hazards as are insurable under then available standard
forms of "all risk" insurance policies with extended coverage, insuring Tenant's
Property, and all Specialty Alterations for the full insurable value thereof or
replacement cost value thereof, having a deductible amount, if any, as
reasonably determined by Landlord;
(iii) during the performance of any Alteration, until
completion thereof, Builder's risk insurance on an "all risk" basis and on a
completed value form including a Permission to Complete and Occupy endorsement,
for full replacement value covering the interest of Landlord and Tenant (and
their respective contractors and subcontractors), any Mortgagee and any Lessor
in all work incorporated in the Building and all materials and equipment in or
about the Premises;
(iv) workers' Compensation Insurance, as required by
law;
(v) disability Benefits Policy Insurance;
(vi) business Interruption Insurance; and
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(vii) such other insurance in such amounts as
Landlord, any Mortgagee and/or any Lessor may reasonably require from time to
time.
(b) All insurance required to be carried by Tenant pursuant to
the terms of this Lease (i) shall contain a provision that (x) no act or
omission of Tenant shall affect or limit the obligation of the insurance company
to pay the amount of any loss sustained, (y) the policy shall be noncancellable
and/or no material change in coverage shall be made thereto unless Landlord,
Lessors and Mortgagees shall have received 30 days' prior written notice of the
same, and (z) Tenant shall be solely responsible for the payment of all premiums
under such policies and Landlord, Lessors and Mortgagees shall have no
obligation for the payment thereof, and (ii) shall be effected under valid and
enforceable policies issued by reputable and independent insurers permitted to
do business in the state in which the Building is located, and rated in Best's
Insurance Guide, or any successor thereto (or if there be none, an organization
having a national reputation) as having a "Best's Rating" of "A" and a
"Financial Size Category" of at least "VIII" or, if such ratings are not then in
effect, the equivalent thereof.
(c) On or prior to the date hereof, Tenant shall deliver to
Landlord appropriate policies of insurance, including evidence of waivers of
subrogation required to be carried by each party pursuant to this Article 12.
Evidence of each renewal or replacement of a policy shall be delivered by Tenant
to Landlord at least 5 days prior to the expiration of such policy. In lieu of
the policy of insurance required to be delivered to Landlord pursuant to this
Article (the "Policy"), Tenant may deliver to Landlord a certification from
Tenant's insurance company (in the form currently designated "Acord 27" or the
equivalent rather than on the form currently designated "Acord 25-S" or the
equivalent) which shall be binding on Tenant's insurance company, and which
shall expressly provide that such certification (i) conveys to Landlord and any
other named insured and/or additional insureds thereunder (the "Insured
Parties") all the rights and privileges afforded under the Policy, (ii) contains
an unconditional obligation of the insurance company to give all Insured Parties
advance notice of termination of the Policy, and (iii) contains an unconditional
obligation of the insurance company to advise all Insured Parties at least 30
days in advance of any change to the Policy that would affect the interest of
any of the Insured Parties.
SECTION 12.2 WAIVER OF SUBROGATION. Landlord and Tenant shall each
procure an appropriate clause or endorsement in any fire or extended coverage
insurance covering the Premises, the Building and personal property, fixtures
and equipment located therein, wherein the insurance companies shall waive
subrogation or consent to a waiver of right of recovery and agree not to make
any claim against or seek to recover from, the other for any loss or damage to
its property or the property of others resulting from fire or other hazards
covered by such fire and extended coverage insurance. If either party shall be
unable to obtain the inclusion of such clause even with the payment of an
additional premium, then such party shall attempt to name the other party as a
loss payee under the policy. If the payment of an additional premium is required
for either (i) the inclusion of, or consent to, a waiver of subrogation, or (ii)
for naming any party a loss payee, each party shall advise the other, in
writing, of the amount of any such additional premiums and the other party may
pay such additional premium. If such other party shall not elect to pay such
additional premium or if it shall not be possible to have the other party
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named as a loss payee, even with the payment of an additional premium, then the
first party shall not be required to obtain such waiver of subrogation or
consent to waiver provision and such party shall so notify the first party and
the first party's agreement to name the other party as an additional insured
shall be satisfied. Tenant acknowledges that Landlord shall not carry insurance
on, and shall not be responsible for, (i) damage to any Specialty Alterations,
(ii) Tenant's Property, and (iii) any loss suffered by Tenant due to
interruption of Tenant's business.
ARTICLE 13
DESTRUCTION - FIRE OR OTHER CAUSE
SECTION 13.1 RESTORATION. If the Premises are damaged by fire or other
casualty, or if the Building is damaged such that Tenant is deprived of
reasonable access to the Premises, Tenant shall give prompt notice to Landlord,
and the damage shall be repaired by Landlord, at its expense, to substantially
the condition of the Premises prior to the damage, but Landlord shall have no
obligation to repair or restore (i) Tenant's Property or (ii) any Specialty
Alterations. Until such time as the restoration of the Premises is substantially
completed, Rent shall be reduced in the proportion by which the area of the part
of the Premises which is neither usable (or accessible) nor used by Tenant bears
to the total area of the Premises.
SECTION 13.2 LANDLORD'S TERMINATION RIGHT. Notwithstanding anything to
the contrary contained in Section 13.1, if the Premises are totally damaged or
are rendered wholly untenantable, or if the Building shall be so damaged that,
in Landlord's opinion, substantial alteration, demolition, or reconstruction of
the Building shall be required (whether or not the Premises shall have been
damaged or rendered untenantable), then in either of such events, Landlord may,
not later than 60 days following the date of the damage, give Tenant a written
notice terminating this Lease. If this Lease is so terminated, (i) the Term
shall expire upon the 10th day after such notice is given, (ii) Tenant shall
vacate the Premises and surrender the same to Landlord, (iii) Tenant's liability
for Rent shall cease as of the date of the damage, and (iv) any prepaid Rent for
any period after the date of the damage shall be refunded by Landlord to Tenant.
SECTION 13.3 TENANT'S TERMINATION RIGHT. If the Premises are totally
damaged and are rendered wholly untenantable thereby, or if the Building shall
be so damaged that Tenant is deprived of reasonable access to the Premises, and
if Landlord elects to restore the Premises, Landlord shall, within 60 days
following the date of the damage, cause a contractor or architect selected by
Landlord to give notice ("Restoration Notice") to Tenant of the date by which
such contractor or architect estimates the restoration of the Premises shall be
substantially completed. If the Restoration Notice estimates that the
restoration shall not be substantially completed on or before a date
("Landlord's Restoration Date") which shall be 18 months following the date of
such damage, then Tenant shall have the right to terminate this Lease by giving
written notice ("Termination Notice") to Landlord not later than 10 days
following Tenant's receipt of the Restoration Notice. If Tenant delivers to
Landlord a Termination Notice, this Lease shall be deemed to have terminated as
of the date of the giving of the Termination Notice as if such date were the
Expiration Date, and Rent shall be apportioned and shall be paid or refunded, as
the
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case may be, up to and including the date of such damage. If Tenant shall not
have given the Termination Notice pursuant to this Section l3.3, and Landlord
shall fail to substantially complete the restoration of the Premises on or
before Landlord's Restoration Date, subject to Unavoidable Delays (which may not
exceed an additional three months in the aggregate), then Tenant shall have the
right to terminate this Lease by delivery to Landlord of a Termination Notice
not later than 10 days following such date.
SECTION 13.4 FINAL 18 MONTHS. Notwithstanding anything set forth to the
contrary in this Article 13, in the event that any damage rendering the Premises
wholly untenantable occurs during the final 18 months of the Term, either
Landlord or Tenant may terminate this Lease by notice to the other party within
30 days after the occurrence of such damage and this Lease shall expire on the
30th day after the date of such notice. For purposes of this Section 13.4, the
Premises shall be deemed wholly untenantable if due to such damage, Tenant shall
be precluded from using more than 50 percent of the Premises for the conduct of
its business and Tenant's inability to so use the Premises is reasonably
expected to continue until at least the earlier of the (i) Expiration Date and
(ii) the 90th day after the date when such damage occurs.
SECTION 13.5 WAIVER OF REAL PROPERTY LAW SECTION 227. This Article 13
constitutes an express agreement governing any case of damage or destruction of
the Premises or the Building by fire or other casualty, and Section 227 of the
Real Property Law of the State of New York, which provides for such contingency
in the absence of an express agreement, and any other law of like nature and
purpose now or hereafter in force, shall have no application in any such case.
SECTION 13.6 LANDLORD'S LIABILITY. Any Building employee to whom any
property shall be entrusted by or on behalf of Tenant shall be deemed to be
acting as Tenant's agent with respect to such property and neither Landlord nor
its agents shall be liable for any damage to property of Tenant or of others
entrusted to employees of the Building, or for the loss of or damage to any
property of Tenant by theft or otherwise. None of Landlord, its agents, any
Mortgagee or Lessor shall be liable for any injury or damage to persons or
property or interruption of Tenant's business resulting from fire or other
casualty, any damage caused by other tenants or persons in the Building or by
construction of any private, public or quasi-public work, or any latent defect
in the Premises or in the Building (except that Landlord shall be required to
repair the same to the extent provided in Article 5). No penalty shall accrue
for delays which may arise by reason of adjustment of fire insurance on the part
of Landlord or Tenant, or for delay on account of "labor troubles" or any other
cause beyond Landlord's control arising from any repair or restoration of any
portion of the Premises or of the Building provided that Landlord shall perform
any such repair or restoration expeditiously and in a manner as to minimize
unreasonable interference with Tenant's business. None of the foregoing shall
affect any right of Landlord to the indemnity from Tenant to which Landlord may
be entitled under Article 32 in order to recoup for payments made to compensate
for losses of third parties.
SECTION 13.7 WINDOWS. If at any time any windows of the Premises are
temporarily closed, darkened or covered over by reason of repairs, maintenance,
alterations or improvements to the Building, or any of such windows are
permanently closed, darkened or covered over due to any Requirement, Landlord
shall not be liable for any damage Tenant may sustain and Tenant
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shall not be entitled to any compensation or abatement of any Rent, nor shall
the same release Tenant from its obligations hereunder or constitute an actual
or constructive eviction.
ARTICLE 14
EMINENT DOMAIN
SECTION 14.1 (a) TOTAL TAKING. If all or substantially all of the Real
Property, the Building or the Premises shall be acquired or condemned for any
public or quasi-public purpose, this Lease shall terminate and the Term shall
end as of the date of the vesting of title, with the same effect as if such date
were the Expiration Date, and Rent shall be prorated and adjusted as of such
date.
(b) PARTIAL TAKING. If only a part of the Real Property, the
Building or the Premises shall be acquired or condemned then, except as
hereinafter provided in this Article, this Lease and the Term shall continue in
full force and effect, provided that from and after the date of the vesting of
title, the Rent and Tenant's Proportionate Share shall be modified to reflect
the reduction of the Premises and/or the Building as a result of such
acquisition or condemnation.
(c) LANDLORD'S TERMINATION RIGHT. Whether or not the Premises
are affected, Landlord may give to Tenant a notice of termination of this Lease
within 60 days following the date upon which Landlord receives notice that (i)
all or a portion of the Real Property or the Building (provided that Landlord
elects to terminate leases (including this Lease) affecting at least 25% of the
rentable area of the Building) or (ii) all or a portion of the Premises has been
acquired or condemned.
(d) TENANT'S TERMINATION RIGHT. If the part of the Real
Property so acquired or condemned contains more than 15 percent of the total
area of the Premises immediately prior to such acquisition or condemnation, or
if, by reason of such acquisition or condemnation, Tenant no longer has
reasonable means of access to the Premises, Tenant may terminate this Lease by
notice to Landlord given within 30 days following the date upon which Tenant
received notice of such acquisition or condemnation. If Tenant so notifies
Landlord, this Lease shall terminate and the Term shall end and expire upon date
set forth in the notice, which date shall not be more than 30 days following the
giving of such notice. If a part of the Premises shall be so acquired or
condemned and this Lease and the Term shall not be terminated in accordance with
this Section 14.1, Landlord, at Landlord's expense, shall restore that part of
the Premises not so acquired or condemned to a self-contained rental unit
substantially equivalent (with respect to character, quality, appearance and
services) to that which existed immediately prior to such acquisition or
condemnation, excluding Tenant's Property and/or Specialty Alterations.
(e) APPORTIONMENT OF RENT. Upon any termination of this Lease
pursuant to the provisions of this Article 14, Rent shall be apportioned as of,
and shall be paid or refunded up to and including, the date of such termination.
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SECTION 14.2 AWARDS. Upon any acquisition or condemnation of all or any
part of the Real Property, Landlord shall receive the entire award for any such
acquisition or condemnation, and Tenant shall have no claim against Landlord or
the condemning authority for the value of any unexpired portion of the Term,
Tenant's Alterations or improvements; and Tenant hereby assigns to Landlord all
of its right in and to such award. Nothing contained in this Article 14 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the then value of any Tenant's Property or Specialty Alteration
included in such taking and for any moving expenses, provided any such award is
in addition to, and does not result in a reduction of, the award made to
Landlord.
SECTION 14.3 TEMPORARY TAKING. If the whole or any part of the Premises
is acquired or condemned temporarily during the Term for any public or
quasi-public use or purpose, Tenant shall give prompt notice to Landlord and the
Term shall not be reduced or affected in any way and Tenant shall continue to
pay all Rent payable by Tenant without reduction or abatement, and Tenant shall
be entitled to receive any award or payment for such use, which shall be
received, held and applied by Tenant as a trust fund for payment of the Rent
falling due.
ARTICLE 15
ASSIGNMENT, SUBLETTING, MORTGAGE, ETC.
SECTION 15.1 (a) NO ASSIGNMENT OR SUBLETTING. Except as expressly set
forth herein, Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, shall not assign,
mortgage, pledge, encumber, or otherwise transfer this Lease, whether by
operation of law or otherwise, and shall not sublet (or underlet), or permit, or
suffer the Premises or any part thereof to be used or occupied by others
(whether for desk space, mailing privileges or otherwise), without Landlord's
prior written consent in each instance. Any assignment, sublease, mortgage,
pledge, encumbrance or transfer in contravention of the provisions of this
Article 15 shall be void.
(b) COLLECTION OF RENT. If, without Landlord's consent, this
Lease is assigned, or any part of the Premises is sublet or occupied by anybody
other than Tenant or this Lease or the Premises or Tenant's Property is
encumbered (by operation of law or otherwise), Landlord may, after default by
Tenant, collect rent from the assignee, subtenant or occupant, and apply the net
amount collected to the Rent herein reserved. No assignment, subletting,
occupancy or collection shall be deemed a waiver of the provisions of this
Article 15, the acceptance of the assignee, subtenant or occupant as tenant, or
the release of Tenant from the performance of Tenant's covenants hereunder.
Tenant shall remain fully liable for the obligations under this Lease.
(c) FURTHER ASSIGNMENT/SUBLETTING. Landlord's consent to any
assignment or subletting shall not relieve Tenant from obtaining Landlord's
express written consent to any further assignment or subletting. In no event
shall any permitted subtenant assign or encumber its sublease or further sublet
any portion of its sublet space, or otherwise suffer or permit any
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portion of the sublet space to be used or occupied by others, without Landlord's
prior written consent in each instance.
SECTION 15.2 TENANT'S NOTICE. If Tenant desires to assign this Lease or
sublet all or any portion of the Premises, Tenant shall give notice thereof to
Landlord, which shall be accompanied by (a) with respect to an assignment of
this Lease, the date Tenant desires the assignment to be effective, and (b) with
respect to a sublet of all or a part of the Premises, (i) the material business
terms on which Tenant would sublet such premises, and (ii) a description of the
portion of the Premises to be sublet. Such notice shall be deemed an offer from
Tenant to Landlord whereby Landlord (or Landlord's designee) shall be granted
the right, at Landlord's option, (1) to terminate this Lease with respect to
such space as Tenant proposes to sublease (the "Partial Space"), upon the terms
and conditions hereinafter set forth, or (2) if the proposed transaction is an
assignment of this Lease or a subletting of 50% or more of the rentable square
footage of the Premises, to terminate this Lease with respect to the entire
Premises. Such option may be exercised by notice from Landlord to Tenant within
45 days after Landlord's receipt of Tenant's notice.
SECTION 15.3 LANDLORD'S TERMINATION. If Landlord exercises its option
to terminate all or a portion of this Lease pursuant to Section 15.2, (i) this
Lease shall end and expire with respect to all or a portion of the Premises, as
the case may be, on the date that such assignment or sublease was to commence,
(ii) Tenant's Rent shall be apportioned, paid or refunded as of such date, (iii)
Tenant, upon Landlord's request, shall enter into an amendment of this Lease
ratifying and confirming such total or partial termination, and setting forth
any appropriate modifications to the terms and provisions hereof, and (iv)
Landlord shall be free to lease the Premises (or any part thereof) to Tenant's
prospective assignee or subtenant.
SECTION 15.4 (a) LANDLORD'S LEASEBACK. If Landlord receives a notice
from Tenant as described in Section 15.2, Landlord or its designee may, at its
option, in lieu of exercising the options described in 15.2, sublease from
Tenant the space described in Tenant's notice (or, if the space described in
Tenant's notice constitutes 50 percent or more of the rentable square footage
contained in the Premises, Landlord may sublease from Tenant the entire
Premises) (such space being hereafter referred to as the "Leaseback Space"). If
Landlord exercises its option to sublet the Leaseback Space, such sublease to
Landlord or its designee (as subtenant) shall be at a rental rate equal to the
product of the lesser of (A) the rent per rentable square foot (including Fixed
Rent and Additional Rent) then payable pursuant to this Lease, and (B) the rent
per rentable square foot set forth in the proposed sublease, multiplied by the
rentable square foot area of the Leaseback Space; shall be for the same term as
that of the proposed subletting; and shall:
(i) be expressly subject to all of the covenants,
terms and conditions of this Lease except such as are irrelevant or
inapplicable, and except as expressly set forth in this Article 15 to
the contrary;
(ii) be upon the same terms and conditions as those
contained in the proposed sublease, except such as are irrelevant or
inapplicable and except as expressly set forth in this Article 15 to
the contrary;
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(iii) give the subtenant the unqualified and
unrestricted right, without Tenant's consent, to assign such sublease
or any interest therein and/or to sublet all or any portion of the
space covered by such sublease and to make alterations and improvements
in the space covered by such sublease, and if the proposed sublease
will result in all or substantially all of the Premises being sublet,
grant Landlord or its designee the option to extend the term of such
sublease for the balance of the Term of this Lease less one day;
(iv) provide that any assignee or further subtenant
of Landlord or its designee, may, at Landlord's option, be permitted to
make alterations and decorations in such space and that any or all of
such alterations, decorations and installations may be removed by such
assignee or subtenant, at its option, prior to or upon the expiration
or other termination of such sublease, provided that such assignee or
subtenant shall, at its expense, repair any damage caused by such
removal; and
(v) provide that (A) the parties to such sublease
expressly negate any intention that the sublease estate be merged with
any other estate held by either of such parties, (B) any assignment or
sublease by Landlord or its designee (as the subtenant) may be for any
purpose or purposes that Landlord, in its sole discretion, shall deem
appropriate, (C) Tenant shall, at its sole cost and expense, at all
times provide and permit reasonably appropriate means of ingress to and
egress from such space so sublet by Tenant to Landlord or its designee,
(D) Landlord may, at Tenant's expense, make such alterations as may be
required or deemed necessary by Landlord to physically separate the
Leaseback Space from the balance of the Premises and to comply with any
Requirements or insurance requirements relating to such separation, and
(E) that at the expiration of the term of such sublease. Tenant will
accept the Leaseback Space in its then existing condition, subject to
the obligations of the subtenant to make such repairs as may be
necessary to preserve such premises in good order and condition.
(b) OBLIGATIONS RE: LEASEBACK SPACE. If Landlord exercises its
option to sublet the Leaseback Space:
(i) Landlord shall indemnify, defend and hold
harmless Tenant from all obligations under this Lease as to the
Leaseback Space during the period it is so sublet to Landlord, except
as to any obligation arising out of or resulting from the negligence or
willful misconduct of Tenant, or any of its agents, contractors or
employees;
(ii) Performance by Landlord, or its designee, under
a sublease of the Leaseback Space shall be deemed performance by Tenant
of any similar obligation under this Lease and Tenant shall not be
liable for any default under this Lease or deemed to be in default
hereunder if such default is occasioned by or arises from any act or
omission of the subtenant pursuant to such sublease; or
(iii) Tenant shall have no obligation, at the
expiration or earlier termination of the Term, to remove any
alteration, installation or improvement made in the Leaseback Space by
Landlord (or Landlord's designee); and
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(iv) Any consent required of Tenant, as Landlord
under the sublease, shall be deemed granted if consent with respect
thereto is granted by Landlord under this Lease, and any failure of
Landlord (or its designee) to comply with the provisions of the
sublease other than with respect to the payment of Rent shall not
constitute a default thereunder or hereunder if Landlord shall have
consented to such non-compliance.
SECTION 15.5 CONSENT BY LANDLORD. If Landlord does not exercise any of
Landlord's options provided under Section 15.2, and provided that no Event of
Default then exists, Landlord's consent to the proposed assignment or sublease
shall not be unreasonably withheld or delayed. Such consent shall be granted or
declined, as the case may be, within 30 days after Landlord's receipt of (a) a
true and complete statement reasonably detailing the identity of the proposed
assignee or subtenant, the nature of its business and its proposed use of the
Premises, (b) current financial information with respect to the proposed
assignee or subtenant, including its most recent financial statements, and (c)
any other information Landlord may reasonably request, provided that:
(i) in Landlord's reasonable judgment, the proposed
assignee or subtenant is engaged in a business or activity, and the
Premises will be used in a manner, which (a) is in keeping with the
then standards of the Building, (b) limits the use of the Premises to
general and executive offices, and (c) does not violate any
restrictions set forth in this Lease, and/or any negative covenant as
to use of the Premises required by any other lease in the Building of
which Tenant has been advised;
(ii) the proposed assignee or subtenant is a
reputable person or entity of good character with sufficient financial
means to perform all of its obligations under the Lease or sublease, as
the case may be, and Landlord has been furnished with reasonable proof
thereof;
(iii) if Landlord has, or reasonably expects to have
within six months thereafter, comparable space available in the
Building, neither the proposed assignee or subtenant nor any person
which, directly or indirectly, controls, is controlled by, or is under
common control with, the proposed assignee or subtenant is then an
occupant of the Building;
(iv) the proposed assignee or subtenant is not a
person or entity (or affiliate of a person or entity) with whom
Landlord or Landlord's agent is then or has been within the prior six
months negotiating in connection with the rental of space in the
Building;
(v) the form of the proposed sublease or instrument
of assignment shall be reasonably satisfactory to Landlord and shall
comply with the provisions of this Article 15;
(vi) there shall be not more than two subtenants of
the Premises;
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(vii) The amount of the aggregate rent to be paid by
the proposed subtenant is not less than the then current market rent
per rentable square foot for the Premises determined as though the
Premises were vacant (taking into account that the proposed transaction
is a sublease, the length of the proposed term of sublease, any rent
concessions granted to sublessee, and the cost of any alterations being
performed for the sublessee), and the rental and other terms and
conditions of the sublease are the same as those contained in the
proposed sublease furnished to Landlord pursuant to Section 15.2;
(viii) Tenant shall, upon demand, reimburse Landlord
for all expenses incurred by Landlord in connection with such
assignment or sublease, including any investigations as to the
acceptability of the proposed assignee or subtenant, reviewing any
plans and specifications for Alterations proposed to be made in
connection therewith, and all legal costs reasonably incurred in
connection with the granting of any requested consent;
(ix) Tenant shall not (A) publicize the availability
of the Premises without Landlord's prior approval, or (B) list the
Premises to be sublet or assigned with a broker, agent or otherwise at
a rental rate less than the fixed rent and additional rent at which
Landlord is then offering to lease other space in the Building; and
(x) the proposed subtenant or assignee shall not be
entitled, directly or indirectly, to diplomatic or sovereign immunity,
regardless of whether the proposed assignee or subtenant agrees to
waive such diplomatic or sovereign immunity, and shall be subject to
the service of process in, and the jurisdiction of the courts of, the
City and State of New York.
SECTION 15.6 BINDING ON TENANT; INDEMNIFICATION OF LANDLORD. Each
sublease pursuant to this Article 15 shall be subject to all of the covenants,
terms and conditions of this Lease. Notwithstanding any such sublease to any
subtenant and/or acceptance of Rent by Landlord from any subtenant, Tenant shall
remain fully liable for the payment of all Rent due and to become due hereunder
and for the performance of all the covenants, terms and conditions contained in
this Lease on Tenant's part to be observed and performed; and all acts and
omissions of any licensee or subtenant or anyone claiming under or through any
subtenant which shall violate any obligations of this Lease shall be deemed to
be a violation by Tenant. Tenant shall indemnify, defend, protect and hold
harmless Landlord from and against any and all losses, liabilities, damages and
expenses (including reasonable attorneys' fees and disbursements) resulting from
any claims that may be made against Landlord by the proposed assignee or
subtenant or by any brokers or other persons claiming a commission or similar
compensation in connection with the proposed assignment or sublease irrespective
of whether Landlord shall give or decline to give its consent to any proposed
assignment or sublease, or if Landlord shall exercise any of its options under
this Article 15.
SECTION 15.7 TENANT'S FAILURE TO COMPLETE. If Landlord consents to a
proposed assignment or sublease and Tenant fails to execute and deliver to
Landlord such assignment or sublease within 90 days after the giving of such
consent, then Tenant shall again comply with all
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of the provisions and conditions of Section 15.2 and 15.4 hereof before
assigning this Lease or subletting all or part of the Premises.
SECTION 15.8 SUBLEASE RESTRICTIONS. With respect to each and every
sublease and/or assignment authorized by Landlord under the provisions of this
Lease, it is further agreed that:
(i) the form of the proposed assignment or sublease
shall be reasonably satisfactory to Landlord and shall comply with the
provisions of this Article;
(ii) no sublease shall be delivered, and no subtenant
shall take possession of any part of the Premises, until an executed
counterpart of such sublease has been delivered to Landlord and
approved in writing by landlord (or deemed approved pursuant to Section
15.5 hereof);
(iii) no sublease shall be delivered, and no
subtenant shall take possession of any part of the Premises, until an
executed counterpart of such sublease has been delivered to Landlord
and approved in writing by Landlord (or deemed approved pursuant to
Section 15.5 hereof);
(iv) if an Event of Default shall occur at any time
prior to the effective date of such assignment or subletting, then
Landlord's consent thereto, if previously granted, shall be immediately
deemed revoked without further notice to Tenant, and if such assignment
or subletting would have been permitted without Landlord's consent
pursuant to Section 15.10, such permission shall be void and without
force and effect, and in either case, any such assignment or subletting
shall constitute a further Event of Default hereunder; and
(v) each sublease shall be subject and subordinate to
this Lease and to the matters to which this Lease is or shall be
subordinate, it being the intention of Landlord and Tenant that Tenant
shall assume and be liable to Landlord for any and all acts and
omissions of all subtenants and anyone claiming under or through any
subtenants which, if performed or omitted by Tenant, would be a default
under this Lease; and Tenant and each subtenant shall be deemed to have
agreed that upon the occurrence and during the continuation of an Event
of Default hereunder, Tenant has hereby assigned to Landlord, and
Landlord may, at its option, accept such assignment of, all right,
title in interest of Tenant as sublandlord under such sublease,
together with all modifications, extensions and renewal thereof then in
effect and such subtenant shall, at Landlord's option, attorn to
Landlord pursuant to the then executory provisions of such sublease,
except that Landlord shall not be (A) liable for any previous act or
omission of Tenant under such sublease, (B) subject to any
counterclaim, offset or defense not expressly provided in such
sublease, which theretofore accrued to such subtenant against Tenant,
(C) bound by any previous modification of such sublease or by any
prepayment of more than one month's Rent, (D) bound to return such
subtenant's security deposit, if any, except to the extent such deposit
shall come into Landlord's actual possession and such subtenant shall
be entitled to such return under the terms of such sublease, or (E)
obligated to make any payment to or on behalf of such subtenant or to
perform any work
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in the subleased space or the Building or in any way to prepare the
sublease space for occupancy beyond Landlord's obligations under this
Lease. The provisions of this Article 15 shall be self-operative and no
further instrument shall be required to give effect to this provision.
The subtenant shall execute and deliver to Landlord any instruments
Landlord may reasonably request to evidence and confirm such
subordination and attornment.
SECTION 15.9 PROFITS. If Tenant shall enter into any assignment or
sublease permitted and/or consented to by Landlord, Tenant shall, within 60 days
of Landlord's consent to such assignment or sublease, deliver to Landlord a
complete list of Tenant's reasonable third-party brokerage fees, legal fees and
architectural fees paid or to be paid in connection with such transaction,
together with a list of all of Tenant's Property to be transferred to such
assignee or sublessee. Tenant shall deliver to Landlord evidence of the payment
of such fees promptly after the same are paid. In consideration of such
assignment or subletting Tenant shall pay to Landlord:
(a) In the case of an assignment, on the effective
date of the assignment, an amount equal to 50 percent of all sums and other
considerations paid to Tenant by the assignee for or by reason of such
assignment (including sums paid for Tenant's Property, less, in the case of a
sale thereof, the then fair market value thereof, as reasonably determined by
Landlord) after first deducting Tenant's reasonable third-party brokerage fees,
legal fees and architectural fees in connection with such transaction; or
(b) in the case of a sublease, 50 percent of any
consideration payable under the sublease to Tenant by the subtenant which
exceeds on a per square foot basis the Fixed Rent and Additional Rent accruing
during the term of the sublease in respect of the subleased space (together with
any sums paid for the sale or rental of Tenant's property, less, in the case of
the sale thereof, the then fair market value thereof, as reasonably determined
by Landlord) after first deducting Tenant's reasonable third-party brokerage
fees, legal fees and architectural fees in connection with such transaction. The
sums payable under this clause shall be paid by Tenant to Landlord as and when
paid by the subtenant to Tenant.
SECTION 15.10 (a) TRANSFERS. If Tenant is a corporation, the transfer
(by one or more transfers) of a majority of the stock of Tenant shall be deemed
a voluntary assignment of this Lease; provided, however, the provisions of this
Article 15 shall not apply to the transfer of shares of stock of Tenant if and
so long as Tenant is publicly traded on a nationally recognized stock exchange.
For purposes of this Section 15.10 the term "transfers" shall be deemed to
include the issuance of new stock which results in a majority of the stock of
Tenant being held by a person or entity which does not hold a majority of the
stock of Tenant on the date hereof. If Tenant is a limited liability company,
trust, or any other legal entity, the transfer (by one or more transfers) of a
majority of the beneficial ownership interests in such entity, however
characterized, shall be deemed a voluntary assignment of this Lease. The
provisions of Section 15.1 shall not apply to transactions with a corporation
into or with which Tenant is merged or consolidated or to which substantially
all of Tenant's assets are transferred so long as (i) such transfer was made for
a legitimate independent business purpose and not for the principal
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purpose of transferring this Lease, (ii) the successor to Tenant has a net worth
computed in accordance with generally accepted accounting principles at least
equal to the greater of (1) the net worth of Tenant immediately prior to such
merger, consolidation or transfer, and (2) the net worth of the original Tenant
on the date of this Lease, and (iii) proof satisfactory to Landlord of such net
worth is delivered to Landlord at least 10 days prior to the effective date of
any such transaction. Tenant may also, upon prior notice to but without the
consent of Landlord, permit any corporation or other business entity which
controls, is controlled by, or is under common control with the original Tenant
(a "Related Corporation") to sublet all or part of the Premises for any
Permitted Use. Such sublease shall not be deemed to vest in any such Related
Corporation any right or interest in this Lease or the Premises nor shall it
relieve, release, impair or discharge any of Tenant's obligations hereunder. For
the purposes hereof, "control" shall be deemed to mean ownership of not less
than 50 percent of all of the voting stock of such corporation or not less than
50 percent of all of the legal and equitable interest in any other business
entity if Tenant is not a corporation. Notwithstanding the foregoing, Tenant
shall have no right to make an assignment of this Lease or sublease all or any
portion of the Premises without Landlord's consent pursuant to this Section
15.10 if Tenant is not the initial Tenant herein named or a person or entity who
acquired Tenant's interest in this Lease in a transaction approved by Landlord.
(b) MISCELLANEOUS. The limitations set forth in this
Section 15.9 shall apply to subtenant(s), assignee(s) and guarantors of this
Lease, if any, and any transfer by any such entity in violation of this Section
15.9 shall be a transfer in violation of Section 15.1.
(c) MODIFICATIONS, ETC. Any modification, amendment
or extension of a sublease and/or any other agreement by which a landlord of a
building other than the Building agrees to assume the obligations of Tenant
under this Lease shall be deemed a sublease for the purposes of Section 15.1
hereof.
SECTION 15.11 ASSUMPTION OF OBLIGATIONS. Any assignment or transfer,
whether made with Landlord's consent or without Landlord's consent, if and to
the extent permitted hereunder, shall not be effective unless and until the
assignee executes, acknowledges and delivers to Landlord an agreement in form
and substance satisfactory to Landlord whereby the assignee (i) assumes Tenant's
obligations under this Lease and (ii) agrees that, notwithstanding such
assignment or transfer, the provisions of Section 15.1 hereof shall be binding
upon it in respect of all future assignments and transfers.
SECTION 15.12 TENANT'S LIABILITY. The joint and several liability of
Tenant and any successors-in-interest of Tenant and the due performance of
Tenant's obligations under this Lease shall not be discharged, released or
impaired by any agreement or stipulation made by Landlord, or any grantee or
assignee of Landlord, extending the time, or modifying any of the terms and
provisions of this Lease, or by any waiver or failure of Landlord, or any
grantee or assignee of Landlord, to enforce any of the terms and provisions of
this Lease.
SECTION 15.13 LISTINGS. The listing of any name other than that of
Tenant, on the doors of the Premises, the Building directory, or otherwise,
shall not vest any right or interest in this Lease or in the Premises, nor shall
it be deemed to constitute Landlord's consent to any
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assignment or transfer of this Lease or to any sublease of Premises or to the
use or occupancy thereof by others. Any such listing shall constitute a
privilege revocable in Landlord's discretion by notice to Tenant.
SECTION 15.14 LEASE DISAFFIRMANCE OR REJECTION. If at any time after an
assignment by Tenant named herein, this Lease is disaffirmed or rejected in any
proceeding of the types described in Section 18.1(vii) hereof or any similar
proceeding, or upon a termination of this Lease due to any such proceeding,
Tenant named herein, upon request of Landlord given after such disaffirmance,
rejection or termination (and actual notice thereof to Landlord in the event of
a disaffirmance or rejection or in the event of termination other than by act of
Landlord), shall (a) pay to Landlord all Rent and other charges due and owing by
the assignee to Landlord under this Lease to and including the date of such
disaffirmance, rejection or termination, and (b) as "tenant," enter into a new
lease of the Premises with Landlord for a term commencing on the effective date
of such disaffirmance, rejection or termination and ending on the Expiration
Date, unless sooner terminated in accordance therewith, at the same Rent and
upon the then executory terms, covenants and conditions contained in this Lease,
except that (i) the rights of Tenant named herein under the new lease shall be
subject to the possessory rights of the assignee under this Lease and the
possessory rights of any persons claiming through or under such assignee or by
virtue of any statute or of any order of any court, (ii) such new lease shall
require all defaults existing under this Lease to be cured by Tenant named
herein with due diligence, and (iii) such new lease shall require Tenant named
herein to pay all Rent which, had this Lease not been so disaffirmed, rejected
or terminated, would have become due under the provisions of this Lease after
the date of such disaffirmance, rejection or termination with respect to any
period prior thereto. If Tenant named herein defaults in its obligations to
enter into such new lease for a period of 10 days after Landlord's request,
then, in addition to all other rights and remedies by reason of default, either
at law or in equity, Landlord shall have the same rights and remedies against
Tenant named herein as if it had entered into such new lease and such new lease
had thereafter been terminated as of the commencement date thereof by reason of
Tenant's default thereunder.
SECTION 15.15 ARBITRATION. Notwithstanding any of the foregoing to the
contrary, Tenant may dispute the reasonableness of the withholding by Landlord
of its consent to a proposed assignment or sublease by arbitration of the issue
in the City in which the Building is located in accordance with the rules and
regulations for commercial matters then prevailing of the American Arbitration
Association or its successor (the "AAA") pursuant to a submission effected
within 10 Business Days after written notice of the withholding of consent has
been given by Landlord to Tenant. Provided the rules and regulations of the AAA
so permit, (a) the AAA shall, within two Business Days after such submission or
application, select a single arbitrator having at least 10 years' experience in
leasing of commercial properties similar to the Building, (b) the arbitration
shall commence two Business Days thereafter and shall be limited to a total of
seven hours on the date of commencement until completion, with each party having
no more than a total of two hours to present its case and to cross-examine or
interrogate persons supplying information or documentation on behalf of the
other party, and (c) the arbitrator shall make a determination within three
Business Days after the conclusion of the presentation of Landlord's and
Tenant's cases, which determination shall be limited to a decision upon whether
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Landlord's withholding of its consent was reasonable. The arbitrator's
determination shall be final and binding upon the parties, whether or not a
judgment shall be entered in any court. All actions necessary to implement such
decision shall be undertaken as soon as possible, but in no event later than 10
Business Days after the rendering of such decision. The arbitrator's
determination may be entered in any court having jurisdiction thereof. All fees
payable to the AAA for services rendered in connection with the resolution of
the dispute shall be paid by the unsuccessful party.
ARTICLE 16
ELECTRICITY
SECTION 16.1 SUBMETERED ELECTRICITY. Landlord shall redistribute or
furnish electricity to or for the use of Tenant in the Premises for the
operation of the lighting fixtures and the electrical receptacles installed in
the Premises. Tenant shall pay to Landlord, on demand, from time to time, but no
more frequently than monthly, for its consumption of electricity at the
Premises, based upon Landlord's then applicable rate for submetered electricity,
plus Landlord's charge in an amount equal to five (5%) percent of such amount
for Landlord's costs of maintaining, repairing and reading such meter or
submeter. Where more than one meter measures the electricity to Tenant, the
electricity rendered through each meter shall be computed and billed separately
in accordance with the provisions set forth above. Bills for such amounts shall
be rendered to Tenant at such times as Landlord may elect. The rate to be paid
by Tenant for submetered electricity shall include any taxes or other charges in
connection therewith. If any tax is imposed upon Landlord's receipts from the
sale or resale of electricity to Tenant, Tenant's pro rata share of such tax
shall be paid by Tenant if and to the extent permitted by law.
SECTION 16.2 EXCESS ELECTRICITY. Tenant shall at all times comply with
the rules and regulations of the utility supplying electricity to the Building.
Tenant shall not use any electrical equipment which, in Landlord's judgment,
would exceed the capacity of the electrical equipment serving the Premises or
interfere with the electrical service to other Building tenants. If Landlord
determines that Tenant's electrical requirements necessitate installation of any
additional equipment, or if Tenant requests that such additional equipment be
installed, Landlord shall, at Tenant's expense, install such additional
equipment provided that Landlord, in its judgment, considering the potential
needs of present and future Building tenants and of the Building itself,
determines that (i) such installation is practicable, (ii) such additional
feeders or risers are necessary and permissible under applicable laws and
insurance regulations, and (iii) the installation of such feeders of risers will
not cause permanent damage or injury to the Building or the Premises, cause or
create a dangerous or hazardous condition, entail excessive or unreasonable
alterations, interfere with or disturb or limit electrical usage by other
tenants or occupants of the Building or exceed the limits of the switchgear. Any
costs incurred by Landlord in connection therewith shall be paid by Tenant
within 10 days after the rendition of a bill therefor. Tenant shall not make or
perform, or permit the making or performance of, any Alterations to wiring
installations or other electrical facilities in or serving the Premises or any
additions to the office equipment or other appliances in the Premises which
utilize electrical
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energy (other than ordinary small office equipment) without the prior consent of
Landlord, in each instance, and in compliance with this Lease.
SECTION 16.3 SERVICE DISRUPTION. Landlord shall not be liable in any
way to Tenant for any failure, defect or interruption of, or change in the
supply, character and/or quantity of electric service furnished to the Premises
for any reason except if attributable to the gross negligence or willful
misconduct of Landlord, nor shall such failure, defect, interruption or change
constitute an actual or constructive eviction, in whole or part, or entitle
Tenant to any abatement or diminution in rent, or relieve Tenant from any of its
Lease obligations, whether electricity is provided by public or private utility
or by any electricity generation system owned and operated by Landlord.
SECTION 16.4 DISCONTINUANCE OF SERVICE. Landlord reserves the right to
discontinue furnishing electricity to Tenant in the Premises. If Landlord
exercises such right, or is compelled to discontinue furnishing electricity to
Tenant, this Lease shall continue in full force and effect and shall be
unaffected thereby. If Landlord so discontinues furnishing electricity, Tenant
shall arrange to obtain electricity directly from any utility company serving
the Premises to the extent that the same is available, suitable and safe for
such purposes. All equipment which may be required to obtain electricity of
substantially the same quantity, quality and character shall be installed by
Landlord at the sole cost and expense of (i) Landlord, if Landlord voluntarily
discontinues such service, and (ii) Tenant, if Landlord is compelled to
discontinue such service by the public utility or pursuant to governmental
regulation or law or if such discontinuance arises out of the acts of omissions
or Tenant. Landlord shall not voluntarily discontinue furnishing electricity to
Tenant until Tenant is able to receive electricity directly from the public
utility or other company servicing the Building unless the public utility or
other company is not prepared to furnish electricity to the Premises on the date
required as a result of Tenant's delay or negligence in arranging for service or
Tenant's refusal to provide the utility company with a deposit or other security
requested by the utility company or Tenant's refusal to take other actions
requested by the utility company.
ARTICLE 17
ACCESS TO PREMISES
SECTION 17.1 LANDLORD'S ACCESS. (a) Tenant shall permit Landlord,
Landlord's agents and public utility service providers servicing the Building to
erect, use and maintain concealed ducts, pipes and conduits in and through the
Premises provided such use does not cause the usable area of the Premises to be
reduced beyond a de minimis amount. All work performed under this Section 17.1
shall be performed with reasonable diligence and in a manner so as to minimize
disturbance of Tenant's business and otherwise in accordance with Section 7.4 of
this Lease. Landlord shall promptly repair any damage to the Premises or
Tenant's Property caused by any work performed pursuant to this Article.
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(b) Landlord and Landlord's agents shall have the right to
enter the Premises at all reasonable times, upon reasonable notice (which notice
may be oral) except in the case of emergency, to examine the Premises, to show
it to prospective purchasers, Mortgagees, Lessors or lessees of the Building and
their respective agents and representatives or to others, and to make such
repairs, alterations or additions to the Premises or the Building (i) as
Landlord may deem necessary or desirable, (ii) which Landlord may elect to
perform following Tenant's failure to perform, or (iii) to comply with any
Requirements, and Landlord shall be allowed to take all material into the
Premises that may be required for the performance of such work without the same
constituting an actual or constructive eviction of Tenant in whole or in part
and without any abatement of Rent.
(c) All parts (except surfaces facing the interior of the
Premises) of all walls, windows and doors bounding the Premises (including
exterior Building walls, exterior core corridor walls, and doors and entrances
other than doors and entrances solely connecting areas within the Premises), all
balconies, terraces and roofs adjacent to the Premises, all space in or adjacent
to the Premises used for shafts, stacks, stairways, mail chutes, conduits and
other mechanical facilities, Building Systems and Building facilities are not
part of the Premises, and Landlord shall have the use thereof and access thereto
through the Premises for the purposes of Building operation, maintenance,
alteration and repair.
SECTION 17.2 FINAL 12 MONTHS. If, during the last 12 months of the
Term, Tenant removes all or substantially all of Tenant's Property from the
Premises, Landlord may, upon prior notice (which notice may be oral) and at
reasonable hours, renovate and/or redecorate the Premises, without abatement of
any Rent or incurring any liability to Tenant. Such acts shall not be deemed an
actual or constructive eviction and shall have no effect upon this Lease.
SECTION 17.3 ALTERATIONS TO BUILDING. Landlord has the right to (i)
change the name, number or designation by which the Building is commonly known,
and (ii) alter the Building to change the arrangement or location of entrances
or passageways, doors and doorways, and corridors, elevators, stairs, toilets,
or other public parts of the Building without any such acts constituting an
actual or constructive eviction and without incurring any liability to Tenant,
so long as such changes do not deprive Tenant of access to the Premises. All
parts (except surfaces facing the interior of the Premises) of all walls,
windows and doors bounding the Premises (including exterior Building walls,
exterior core corridor walls, exterior doors and entrances other than doors and
entrances solely servicing the Premises), all terraces and roofs adjacent to the
Premises, all space in or adjacent to the Premises used for shafts, stacks,
stairways and other mechanical facilities, Building Systems and Building
facilities are not part of the Premises, and Landlord shall have the use thereof
and access thereto through the Premises for the purposes of Building operation,
maintenance, alteration and repair.
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ARTICLE 18
DEFAULT
SECTION 18.1 TENANT'S DEFAULTS. Each of the following events shall be
an "Event of Default" hereunder:
(i) Failure by Tenant to pay when due any installment
of Fixed Rent; or
(ii) Failure by Tenant to observe or perform any
other term, covenant or condition of this Lease to be observed or
performed by Tenant and if such failure continues for more than 10 days
after notice by Landlord to Tenant of such default, or if such default
is of such a nature that it cannot be completely remedied within 10
days, failure by Tenant to commence to remedy such failure within said
10 days, and thereafter diligently prosecute to completion all steps
necessary to remedy such default; or
(iii) Tenant defaults in the observance or
performance of any term, covenant or condition on Tenant's part to be
observed or performed under any other lease with Landlord or Landlord's
predecessor-in-interest for space in the Building and such default
shall continue beyond any grace period set forth in such other lease
for the remedying of such default; or
(iv) Tenant's interest in this Lease shall devolve
upon or pass to any person, whether by operation of law or otherwise,
except as expressly permitted under Article 15 hereof, or
(v) Tenant generally does not, or is unable to, or
admits in writing its inability to, pay its debts as they become due;
or
(vi) Tenant files a voluntary petition in bankruptcy
or insolvency, or is adjudicated a bankrupt or insolvent, or files any
petition or answer seeking any reorganization, liquidation, dissolution
or similar relief under any present or future federal bankruptcy act or
any other present or future applicable federal, state or other statute
or law, or makes an assignment for the benefit of creditors or seeks or
consents to or acquiesces in the appointment of any trustee, receiver,
liquidator or other similar official for Tenant or for all or any part
of Tenant's property; or
(vii) if, within 60 days after the commencement of
any proceeding against Tenant, whether by the filing of a petition or
otherwise, seeking bankruptcy, insolvency, reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under the present or any future federal bankruptcy act or any other
present or future applicable federal, state or other statute or law,
such proceeding shall not have been dismissed, or if, within 60 days
after the appointment of any trustee, receiver, liquidator or other
similar official for Tenant or for all or any part of Tenant's
property, without the consent or acquiescence of Tenant, as the case
may be, such appointment shall not have been vacated or otherwise
discharged, or if any lien,
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execution or attachment or other similar filing shall be made or issued
against Tenant or any of Tenant's property pursuant to which the
Premises shall be taken or occupied or attempted to be taken or
occupied by someone other than Tenant.
Upon the occurrence of any one or more of such Events of Default, Landlord may,
at its sole option, give to Tenant three days' notice of cancellation of this
Lease, in which event this Lease and the Term shall come to an end and expire
(whether or not the Term shall have commenced) upon the expiration of such three
day period with the same force and effect as if the date of expiration of such
three days were the Expiration Date stated herein; and Tenant shall then quit
and surrender the Premises to Landlord, but Tenant shall remain liable for
damages as provided in Article 19 hereof.
SECTION 18.2 TENANT'S LIABILITY. If, at any time, (a) Tenant shall be
comprised of two or more persons, (b) Tenant's obligations under this Lease
shall have been guaranteed by any person other than Tenant, or (c) Tenant's
interest in this Lease shall have been assigned, the word "Tenant," as used in
Section 18.1 (v), (vi) and (vii), shall be deemed to mean any one or more of the
persons primarily or secondarily liable for Tenant's obligations under this
Lease. Any monies received by Landlord from or on behalf of Tenant during the
pendency of any proceeding of the types referred to in this Article shall be
deemed paid as compensation for the use and occupancy of the Premises and the
acceptance of any such compensation by Landlord shall not be deemed an
acceptance of Rent or a waiver on the part of Landlord of any rights under this
Lease.
ARTICLE 19
REMEDIES AND DAMAGES
SECTION 19.1 (a) LANDLORD'S REMEDIES. If any Event of Default occurs,
and this Lease and the Term expire and come to an end as provided in Article 18:
(i) SURRENDER OF POSSESSION. Tenant shall quit and
surrender the Premises to Landlord, and Landlord and its agents may immediately,
or at any time after such Event of Default, re-enter the Premises or any part
thereof, without notice, either by summary proceedings, or by any other
applicable action or proceeding, or by force or otherwise in accordance with
applicable legal proceedings (without being liable to indictment, prosecution or
damages therefor), and may repossess the Premises and dispossess Tenant and any
other persons from the Premises and remove any and all of their property and
effects from the Premises.
(ii) LANDLORD'S RELETTING. Landlord, at Landlord's
option, may relet all or any part of the Premises from time to time, either in
the name of Landlord or otherwise, to such tenant or tenants, for any term
ending before, on or after the Expiration Date, at such rental and upon such
other conditions (which may include concessions and free rent periods) as
Landlord, in its sole discretion, may determine. Landlord shall have no
obligation to and shall not be liable for refusal or failure to relet or, in the
event of any such reletting, for refusal or failure to collect any rent due upon
any such reletting; and no such refusal or
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failure shall relieve Tenant of, or otherwise affect, any liability under this
Lease. Landlord, at Landlord's option, may make such alterations, decorations
and other physical changes in and to the Premises as Landlord, in its sole
discretion, considers advisable or necessary in connection with such reletting
or proposed reletting, without relieving Tenant of any liability under this
Lease or otherwise affecting any such liability.
(b) TENANT'S WAIVER. Tenant, on its own behalf and on
behalf of all persons claiming through or under Tenant, including all creditors,
hereby waives all rights which Tenant and all such persons might otherwise have
under any Requirement (i) to the service of any notice of intention to re-enter
or to institute legal proceedings, (ii) to redeem, or to re-enter or repossess
the Premises, or (iii) to restore the operation of this Lease, after (A) Tenant
shall have been dispossessed by judgment or by warrant of any court or judge,
(B) any re-entry by Landlord, or (C) any expiration or early termination of the
term of this Lease, whether such dispossess, re-entry, expiration or termination
shall be by operation of law or pursuant to the provisions of this Lease. The
words "re-enter," "re-entry" and "re-entered" as used in this Lease shall not be
deemed to be restricted to their technical legal meanings.
(c) TENANT'S BREACH. Upon the breach or threatened
breach by Tenant, or any persons claiming through or under Tenant, of any term,
covenant or condition of this Lease, Landlord shall have the right to enjoin
such breach and to invoke any other remedy allowed by law or in equity as if
re-entry, summary proceedings and other special remedies were not provided in
this Lease for such breach. The rights to invoke the remedies set forth above
are cumulative and shall not preclude Landlord from invoking any other remedy
allowed at law or in equity.
SECTION 19.2 (a) LANDLORD'S DAMAGES. If this Lease and the Term expire
and come to an end as provided in Article 18, or by or under any summary
proceeding or any other action or proceeding, or if Landlord shall re-enter the
Premises as provided in Section 19.1, then, in any of such events:
(i) Tenant shall pay to Landlord all Fixed Rent, all
sums payable pursuant to Article 8 of this Lease (including Tenant's Tax Payment
and Tenant's Operating Payment) and all other items of Rent payable under this
Lease by Tenant to Landlord up to the Expiration Date or to the date of re-entry
upon the Premises by Landlord, as the case may be;
(ii) Landlord shall be entitled to retain all monies,
if any, paid by Tenant to Landlord, whether as advance Rent, Security Deposit or
otherwise, which monies, to the extent not otherwise applied to amounts due and
owing to Landlord, shall be credited by Landlord against any damages payable by
Tenant to Landlord;
(iii) Tenant shall pay to Landlord, in monthly
installments, on the days specified in this Lease for payment of installments of
Fixed Rent, any Deficiency; it being understood that Landlord shall be entitled
to recover from Tenant each month, the Deficiency as the same shall arise, and
no suit to collect the amount of the Deficiency for any month shall
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prejudice Landlord's right to collect the Deficiency for any subsequent month by
a similar proceeding; and
(iv) whether or not Landlord shall have collected any
monthly Deficiency, Tenant shall pay to Landlord, on demand, in lieu of any
further Deficiency and as liquidated and agreed final damages, a sum equal to
the amount by which the Rent for the period which otherwise would have
constituted the unexpired portion of the Term (assuming the Additional Rent
during such period to be the same as was payable for the year immediately
preceding such termination or re-entry), increased in each succeeding year by
four percent (on a compounded basis) exceeds the then fair and reasonable rental
value of the Premises, for the same period (with both amounts being discounted
to present value at a rate of interest equal to two percent below the then Base
Rate) less the aggregate amount of Deficiencies theretofore collected by
Landlord pursuant to the provisions of Section 19.2(a)(iii) for the same period.
If, before presentation of proof of such liquidated damages to any court,
commission or tribunal, the Premises, or any part thereof, shall have been relet
by Landlord for the period which otherwise would have constituted the unexpired
portion of the Term, or any part thereof, the amount of rent reserved upon such
reletting shall be deemed, prima facie, to be the fair and reasonable rental
value for the part or the whole of the Premises so relet during the term of the
reletting.
(b) RELETTING. If the Premises, or any part thereof, shall be
relet together with other space in the Building, the rents collected or reserved
under any such reletting and the expenses of any such reletting shall be
suitably apportioned for the purposes of this Section 19.2. Tenant shall not be
entitled to any rents collected or payable under any reletting, whether or not
such rents exceed the Fixed Rent reserved in this Lease. Nothing contained in
Articles 18 or 19 shall be deemed to limit or preclude the recovery by Landlord
from Tenant of the maximum amount allowed to be obtained as damages by any
Requirement, or of any sums or damages to which Landlord may be entitled in
addition to the damages set forth in this Section 19.2.
SECTION 19.3 DEFAULT INTEREST; OTHER RIGHTS OF LANDLORD. Any Rent or
damages payable under this Lease and not paid when due shall bear interest at
the Interest Rate from the due date until paid, and the interest shall be deemed
Additional Rent. If Tenant fails to pay any Additional Rent when due, Landlord,
in addition to any other right or remedy, shall have the same rights and
remedies as in the case of a default by Tenant in the payment of Fixed Rent. If
Tenant is in arrears in the payment of Rent, Tenant waives Tenant's rights, if
any, to designate the items against which any payments made by Tenant are to be
credited, and Landlord may apply any payments made by Tenant to any items
Landlord sees fit, regardless of any request by Tenant. Landlord reserves the
right, without liability to Tenant and without constituting any claim of
constructive eviction, to suspend furnishing or rendering to Tenant any
property, material, labor, utility or other service, whenever Landlord is
obligated to furnish or render the same at the expense of Tenant, in the event
that (but only for so long as) Tenant is in arrears in paying Landlord for such
items for more than five (5) days after notice from Landlord to Tenant demanding
the payment of such arrears.
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ARTICLE 20
FEES AND EXPENSES
If (a) Tenant (i) defaults under this Lease, or (ii) does or
permits to be done anything which would cause Landlord to be in default under
any Superior Lease or Mortgage, or (iii) fails to comply with its obligations
under this Lease and in the judgment of Landlord such default or failure would
affect the preservation of property or the safety of any tenant, occupant or
other person is threatened, Landlord may perform such obligation for the account
of Tenant and make any expenditure and incur any expense for the account of
Tenant to remedy such condition. All amounts expended or incurred by Landlord in
connection with the foregoing with interest thereon at the Interest Rate,
including reasonable attorneys' fees and disbursements incurred in instituting,
prosecuting or defending any action or proceeding or recovering possession shall
be paid by Tenant to Landlord within 10 days after rendition of a bill herefor
to Tenant.
ARTICLE 21
NO REPRESENTATIONS BY LANDLORD; LANDLORD'S APPROVAL
SECTION 21.1 NO REPRESENTATIONS. Except as expressly set forth herein,
Landlord and Landlord's agents have made no warranties, representations,
statements or promises with respect to the Building, the Real Property or the
Premises and no rights, easements or licenses are acquired by Tenant by
implication or otherwise. This Lease contains the entire agreement between the
parties and all understandings and agreements previously made between Landlord
and Tenant are merged in this Lease, which alone fully and completely expresses
their agreement. Landlord and Tenant enter into this Lease after full
investigation, with neither party relying upon any statement or representation
made by the other not embodied in this Lease.
SECTION 21.2 WRITTEN APPROVAL. All references in this Lease to the
consent or approval of Landlord mean the written consent or approval of
Landlord, duly executed by Landlord.
SECTION 21.3 NO MONEY DAMAGES. Wherever in this Lease Landlord's
consent or approval is required, if Landlord refuses to grant such consent or
approval, whether or not Landlord expressly agreed that such consent or approval
would not be unreasonably withheld, Tenant shall not make, and Tenant hereby
waives, any claim for money damages (including any claim by way of set-off,
counterclaim or defense) based upon Tenant's claim or assertion that Landlord
unreasonably withheld or delayed its consent or approval. Tenant's sole remedy
shall be an action or proceeding to enforce such provision, by specific
performance, injunction or declaratory judgment.
SECTION 21.4 VIBRATIONS. Tenant recognizes and acknowledges that the
operation of the Building equipment may cause vibration or noise which may be
transmitted throughout the
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Premises. Landlord shall have no obligation to endeavor to reduce such vibration
or noise beyond that which is prevalent in the Building.
ARTICLE 22
END OF TERM
SECTION 22.1 EXPIRATION. Upon the expiration or other termination of
this Lease, Tenant shall quit and surrender to Landlord the Premises, vacant,
broom clean and in good order and condition, ordinary wear and tear and damage
for which Tenant is not responsible under the terms of this Lease excepted, and
Tenant shall remove all of Tenant's Property and Tenant's Alterations as may be
required pursuant to Article 5 of this Lease. The foregoing obligation shall
survive the expiration or sooner termination of the Term. If the last day of the
Term or any renewal thereof falls on Saturday or Sunday, this Lease shall expire
on the immediately preceding Business Day.
SECTION 22.2 HOLDOVER RENT. Landlord and Tenant recognize that the
damage to Landlord resulting from any failure by Tenant to timely surrender
possession of the Premises may be substantial, may exceed the amount of the Rent
theretofore payable hereunder, and will be impossible to accurately measure.
Tenant therefore agrees that if possession of the Premises is not surrendered to
Landlord within 24 hours after the Expiration Date or sooner termination of the
Term, in addition to any other rights or remedies Landlord may have hereunder or
at law, Tenant shall pay to Landlord for each month (or any portion thereof)
during which Tenant holds over in the Premises after the Expiration Date or
sooner termination of this Lease, a sum equal to two times the Rent payable
under this Lease for the last full calendar month of the Term. Nothing herein
contained shall be deemed to permit Tenant to retain possession of the Premises
after the Expiration Date or sooner termination of this Lease and no acceptance
by Landlord of payments from Tenant after the Expiration Date or sooner
termination of the Term shall be deemed to be other than on account of the
amount to be paid by Tenant in accordance with the provisions of this Article
22. Tenant's obligations under this Article shall survive the expiration or
earlier termination of this Lease.
SECTION 22.3 WAIVER OF STAY. Tenant expressly waives, for itself and
for any person claiming through or under Tenant, any rights which Tenant or any
such person may have under the provisions of Section 2201 of the New York Civil
Practice Law and Rules and of any successor law of like import then in force, in
connection with any holdover summary proceedings which Landlord may institute to
enforce the foregoing provisions of this Article 22.
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ARTICLE 23
QUIET ENJOYMENT
Provided this Lease is in full force and effect and no Event
of Default then exists, Tenant may peaceably and quietly enjoy the Premises
without hindrance by Landlord or any person lawfully claiming through or under
Landlord, subject to the terms and conditions of this Lease and to all Superior
Leases and Mortgages.
ARTICLE 24
NO WAIVER; NO COUNTERCLAIM
SECTION 24.1 NO MODIFICATIONS OR RELEASE. No act or thing done by
Landlord or Landlord's agents or employees during the Term shall be deemed an
acceptance of a surrender of the Premises, and no provision of this Lease shall
be deemed to have been waived by Landlord, unless such waiver is in writing and
is signed by Landlord, and any such waiver shall be effective only for the
specific purpose and in the specific instance in which given. If Tenant at any
time desires to have Landlord sublet the Premises for Tenant's account, Landlord
or Landlord's agents are authorized to receive Tenant's keys to the Premises for
such purpose without releasing Tenant from any of the obligations under this
Lease, and Tenant hereby relieves Landlord of any liability for loss of or
damage to any of Tenant's effects in connection with such subletting.
SECTION 24.2 NO WAIVER. The failure of either party to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease, or any of the Rules and Regulations, shall not be
construed as a waiver or relinquishment for the future performance of such
obligations of the Lease or the Rules and Regulations, or of the right to
exercise such election but the same shall continue and remain in full force and
effect with respect to any subsequent breach, act or omission. The receipt by
Landlord of any Rent payable pursuant to this Lease or any other sums with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly Fixed Rent or Additional Rent herein stipulated shall be
deemed to be other than a payment on account of the earliest stipulated Fixed
Rent or Additional Rent, or as Landlord may elect to apply same, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as Fixed Rent or Additional 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 Fixed Rent or Additional Rent or pursue any
other remedy provided in this Lease. The existence of a right of renewal or
extension of this Lease, or the exercise of such right, shall not limit
Landlord's right to terminate this Lease in accordance with the terms hereof, or
create any option for further extension or renewal of this Lease.
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ARTICLE 25
WAIVER OF TRIAL BY JURY
LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER ON ANY
MATTERS IN ANY WAY ARISING OUT OF OR CONNECTED WITH THIS LEASE, THE RELATIONSHIP
OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, OR THE
ENFORCEMENT OF ANY REMEDY UNDER ANY STATUTE, EMERGENCY OR OTHERWISE. If Landlord
commences any summary proceeding against Tenant, Tenant will not interpose any
counterclaim of whatever nature or description in any such proceeding (unless
failure to impose such counterclaim would preclude Tenant from asserting in a
separate action the claim which is the subject of such counterclaim), and will
not seek to consolidate such proceeding with any other action which may have
been or will be brought in any other court by Tenant.
ARTICLE 26
INABILITY TO PERFORM
This Lease and the obligation of Tenant to pay Rent and to
perform all of the other covenants and agreements of Tenant hereunder shall not
be affected, impaired or excused by any Unavoidable Delays. Landlord shall use
diligent efforts to promptly notify Tenant of any Unavoidable Delay which
prevents Landlord from fulfilling any of its obligations under this Lease.
ARTICLE 27
NOTICES
Except as otherwise expressly provided in this Lease,
consents, notices, demands, requests or other communications given under this
Lease shall be in writing and shall be deemed sufficiently given or rendered if
delivered by hand (provided a signed receipt is obtained) or if sent by
registered or certified mail (return receipt requested) or by a nationally
recognized overnight delivery service making receipted deliveries, addressed as
follows:
if to Tenant, (a) at Tenant's address set forth on the first
page of this Lease, Attn: David Steward, or (c) at any place where
Tenant or any agent or employee of Tenant may be found if mailed
subsequent to Tenant's vacating, deserting, abandoning or surrendering
the Premises, or
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if to Landlord, at Landlord's address set forth on the first
page of this Lease, Attn: Chief Financial Officer, and with copies to
(v) Tishman Speyer Properties L.P., 11 West 42nd Street, New York, New
York 10036, Attn: Property Manager - 11 West 42nd Street/520 Madison
Avenue, (w) Tishman Speyer Properties L.P., 520 Madison Avenue, New
York, New York 10022, Attn: General Counsel, and (x) any Mortgagee or
Lessor which shall have requested copies of notices, by notice given to
Tenant in accordance with the provisions of this Article 27 at the
address designated by such Mortgagee or Lessor, or to such other
address(es) as either Landlord or Tenant or any Mortgagee or Lessor may
designate as its new address(es) for such purpose by notice given to
the other in accordance with the provisions of this Article 27.
Any such consent, notice, demand, request or other communication shall be deemed
to have been given on the date of receipted delivery or refusal to accept
delivery or three Business Days after it shall have been mailed as provided in
this Article 27.
ARTICLE 28
RULES AND REGULATIONS
Tenant and Tenant's contractors, employees, agents, visitors
and licensees shall observe and comply with the Rules and Regulations, as
supplemented or amended from time to time, provided, that in case of any
conflict or inconsistency between the provisions of this Lease and any of the
Rules and Regulations as originally promulgated or as supplemented or amended
from time to time, the provisions of this Lease shall control. Landlord reserves
the right, from time to time, to adopt additional Rules and Regulations and to
amend the Rules and Regulations then in effect. If Tenant disputes the
reasonableness of any Rule or Regulation hereafter adopted by Landlord, the
dispute shall be resolved by arbitration in accordance with the provisions of
Section 15.15 hereof, provided, however, that during the pendency of any such
arbitration, Tenant shall comply with such Rule or Regulation. Tenant's right to
dispute the reasonableness of any additional Rule or Regulation shall be deemed
waived unless Tenant shall notify Landlord of such dispute within five days
after delivery to Tenant of a notice of the adoption of any such additional Rule
or Regulation. Nothing contained in this Lease shall impose upon Landlord any
obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease against any other Building tenant, and Landlord
shall not be liable to Tenant for violation of the same by any other tenant, its
employees, agents, visitors or licensees, except that Landlord shall not enforce
any Rule or Regulation against Tenant in a discriminatory fashion.
ARTICLE 29
PARTNERSHIP TENANT
SECTION 29.1 PARTNERSHIP TENANT. If Tenant, or a permitted assignee of
this Lease pursuant to Article 15 hereof, is a partnership, or is comprised of
two or more persons,
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individually or as co-partners of a partnership (any such partnership and such
persons are referred to in this Article as "Partnership Tenant"), the following
shall apply: (a) the liability of each of the general partners comprising
Partnership Tenant shall be joint and several; (b) each of the parties
comprising Partnership Tenant hereby consents in advance to, and agrees to be
bound by, any written instrument which may hereafter be executed by Partnership
Tenant or any of the parties comprising Partnership Tenant, which shall modify,
extend or discharge this Lease, in whole or in part, or surrender all or any
part of the Premises to Landlord; (c) any bills, statements, notices, demands,
requests or other communications given or rendered to Partnership Tenant or to
any of such parties shall be binding upon Partnership Tenant and all such
parties; (d) if Partnership Tenant shall admit new general partners, all of such
new general partners shall, by their admission to Partnership Tenant, be deemed
to have assumed joint and several liability for the performance of all of the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed; (e) Partnership Tenant shall give prompt notice to Landlord of
the admission of any such new general partners, and upon demand of Landlord,
shall cause each such new partner to execute and deliver to Landlord an
agreement in form and substance satisfactory to Landlord, wherein each such new
partner shall assume joint and several liability for the performance of all the
terms, covenants and conditions of this Lease on Tenant's part to be observed
and performed (but neither Landlord's failure to request any such agreement nor
the failure of any such new partner to execute or deliver any such agreement to
Landlord shall vitiate the provisions of Section 29.1(d)); and (f) no change in
the partners of Partnership Tenant resulting from the admission of a new
partner, or the death, retirement or withdrawal of a partner shall release
Partnership Tenant or any partner or former partner from their obligations under
this Lease.
SECTION 29.2 CHANGE OF PARTNERS. If Tenant is a partnership, (i) the
admission of new partners, the withdrawal (in the ordinary course of business),
retirement, death, incompetency or bankruptcy of any partner, or the
reallocation of partnership interests among the general partners of Tenant (the
"Partners") shall not constitute an assignment of this Lease provided that
Partners holding in the aggregate not less than 80% of the partnership interests
in Tenant remain as Partners during any consecutive 12-month period (i.e., the
transfer, by any of the foregoing means, of more than 20% of the partnership
interests in Tenant in any consecutive 12-month period shall constitute an
assignment of this Lease subject to the provisions of Article 15), and (ii) the
reorganization of Tenant into a professional corporation or the reorganization
of Tenant from a professional corporation into a partnership, shall not
constitute an assignment of this Lease, provided that immediately following such
reorganization the partners or shareholders, as the case may be, of Tenant shall
be the same as those existing immediately prior to such reorganization and
subject to the provisions of the remainder of this Section. If Tenant shall
become a professional corporation, each individual shareholder,
shareholder-employee, new individual shareholder and new shareholder-employee of
any professional corporation which is a shareholder in Tenant shall have the
same personal liability (if any) as such individual or shareholder-employee
would have under this Lease if Tenant were a partnership and such individual or
shareholder-employee were a Partner or admitted as a new Partner. If any
individual Partner in Tenant is or becomes a shareholder-employee of a
professional corporation, such individual shall have the same personal liability
under this Lease as such individual would have if he and not the professional
corporation were a Partner of Tenant.
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ARTICLE 30
VAULT SPACE
Notwithstanding anything contained in this Lease or indicated
on any sketch, blueprint or plan, no vaults, vault space or other space outside
the boundaries of the Real Property are included in the Premises. Landlord makes
no representation as to the location of the boundaries of the Real Property. All
vaults and vault space and all other space outside the boundaries of the Real
Property which Tenant may be permitted to use or occupy are to be used or
occupied under a revocable license. If any such license shall be revoked, or if
the amount of such space shall be diminished as required by any Governmental
Authority or by any public utility company, such revocation, diminution or
requisition shall not (i) constitute an actual or constructive eviction, in
whole or in part, (ii) entitle Tenant to any abatement or diminution of Rent,
(iii) relieve Tenant from any of its obligations under this Lease, or (iv)
impose any liability upon Landlord. Any fee, tax or charge imposed by any
Governmental Authority for any such vaults, vault space or other space occupied
by Tenant shall be paid by Tenant.
ARTICLE 31
BROKER
SECTION 31.1 BROKER REPRESENTATIONS. Landlord has retained Landlord's
Agent as leasing agent in connection with this Lease and Landlord will be solely
responsible for any fee that may be payable to Landlord's Agent. Landlord agrees
to pay a commission to Broker pursuant to a separate agreement. Each of Landlord
and Tenant represents and warrants to the other that it has not dealt with any
broker in connection with this Lease other than the Broker and that to the best
of its knowledge and belief, no other broker, finder or like entity procured or
negotiated this Lease or is entitled to any fee or commission in connection
herewith. The execution and delivery of this Lease by each party shall be
conclusive evidence that each party has relied upon the foregoing
representations and warranties.
SECTION 31.2 BROKER INDEMNITY. Each of Landlord and Tenant shall
indemnify, defend and hold the other party harmless from and against any and all
costs expenses, claims and liabilities (including reasonable attorneys' fees and
disbursements) which the indemnified party may incur by reason of any claim of
or liability to any broker, finder or like agent (other than Broker) arising out
of any dealings claimed to have occurred between the indemnifying party and the
claimant in connection with this Lease, and/or the above representation being
false. The provisions of this Article 31 shall survive the expiration or earlier
termination of this Lease.
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ARTICLE 32
INDEMNITY
SECTION 32.1 (a) TENANT'S INDEMNITY. Tenant shall not do or permit to
be done any act or thing upon the Premises which may subject Landlord to any
liability or responsibility for injury, damage to persons or property or to any
liability by reason of any violation of law or of any Requirement, and shall
exercise such control over the Premises as to fully protect Landlord against any
such liability. Tenant shall indemnify, defend, protect and hold harmless each
and all of the Indemnitees from and against any and all Losses (as defined in
subsection (c) hereof), resulting from any claims (i) against Indemnitees
arising from any act, omission or negligence of (A) Tenant, its contractors,
licensees, agents, servants, employees, invitees or visitors or (B) both
Landlord and Tenant, provided, however, that Tenant's liability hereunder with
respect to matters finally determined to have arisen out of the negligence of
Landlord shall be limited to the amount of insurance coverage carried by Tenant
pursuant to Article 12 of this Lease, (ii) against the Indemnitees arising from
any accident, injury or damage whatsoever caused to any person or to the
property of any person and occurring during or (if Tenant shall continue to use
and occupy the Premises) after the expiration of the Term, in or about the
Premises, and (iii) against the Indemnitees resulting from any breach, violation
or nonperformance of any covenant, condition or agreement of this Lease on the
part of Tenant to be fulfilled, kept, observed and performed.
(b) LANDLORD'S INDEMNITY. Landlord shall indemnify, defend and
hold harmless Tenant from and against all claims against Tenant arising from any
accident, injury or damage whatsoever caused to any person or the property of
any person in or about the common or public areas of the Building (specifically
excluding the Premises).
(c) INDEMNITY INCLUSIONS. For purposes of this Article 32, the
term "Losses" means any and all losses, liabilities, damages, fines, suits,
demands, costs and expenses of any kind or nature (including reasonable
attorneys' fees and disbursements) incurred in connection with any claim or
proceeding to which a particular indemnity and hold harmless agreement applies
and the defense thereof.
SECTION 32.2 DEFENSE AND SETTLEMENT. If any claim, action or proceeding
is made or brought against any Indemnitee, then upon demand by Indemnitee,
Tenant, at its sole cost and expense, shall resist or defend such claim, action
or proceeding in the Indemnitee's name (if necessary), by attorneys approved by
the Indemnitee, which approval shall not be unreasonably withheld. Attorneys for
Tenant's insurer shall hereby be deemed approved for purposes of this Section
32.2. Notwithstanding the foregoing, an Indemnitee may retain its own attorneys
to participate or assist in defending any claim, action or proceeding involving
potential liability of $5,000,000 or more, provided that Tenant shall control
the defense and Tenant shall pay the reasonable fees and disbursements of such
attorneys. Notwithstanding anything herein contained to the contrary, Tenant may
direct the Indemnitee to settle any claim, suit or other proceeding provided
that (i) such settlement shall involve no obligation on the part of the
Indemnitee other than the payment of money, (ii) any payments to be made
pursuant to such settlement shall be paid in full exclusively by Tenant at the
time such settlement is reached, (iii) such settlement
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shall not require the Indemnitee to admit any liability, and (iv) the Indemnitee
shall have received an unconditional release from the other parties to such
claim, suit or other proceeding. The provisions of this Article 32 shall survive
the expiration or earlier termination of this Lease.
ARTICLE 33
ADJACENT EXCAVATION; SHORING
If an excavation shall be made, or shall be authorized to be
made, upon land adjacent to the Real Property, Tenant shall, upon notice, afford
to the person causing or authorized to cause such excavation license to enter
upon the Premises for the purpose of doing such work as such person shall deem
necessary to preserve the wall or the Building from injury or damage and to
support the same by proper foundations. In connection with such license, Tenant
shall have no right to claim any damages or indemnity against Landlord, or
diminution or abatement of Rent provided that Tenant shall continue to have
access to the Premises.
ARTICLE 34
MISCELLANEOUS
SECTION 34.1 DELIVERY. This Lease shall not be binding upon Landlord or
Tenant unless and until Landlord and Tenant shall have executed and delivered a
fully executed copy of this Lease to each other.
SECTION 34.2 TRANSFER OF REAL PROPERTY. Landlord's obligations under
this Lease shall not be binding upon the Landlord named herein after the sale,
conveyance, assignment or transfer (collectively a "Transfer") by such Landlord
(or upon any subsequent landlord after the Transfer by such subsequent landlord)
of its interest in the Building or the Real Property, as the case may be, and in
the event of any such Transfer, Landlord (and any such subsequent Landlord)
shall be entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and the transferee of Landlord's interest (or that of such
subsequent Landlord) in the Building or the Real Property, as the case may be,
shall be deemed to have assumed all obligations under this Lease.
SECTION 34.3 LIMITATION ON LIABILITY. The liability of Landlord for
Landlord's obligations under this Lease shall be limited to Landlord's interest
in the Real Property and Tenant shall not took to any other property or assets
of Landlord or the property or assets of any partner, shareholder, director,
officer, principal, employee or agent, directly and indirectly, of Landlord
(collectively, the "Parties") in seeking either to enforce Landlord's
obligations under this Lease or to satisfy a judgment for Landlord's failure to
perform such obligations; and none of the Parties shall be personally liable for
the performance of Landlord's obligations under this Lease.
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SECTION 34.4 RENT. Notwithstanding anything to the contrary contained
in this Lease, all amounts payable by Tenant to or on behalf of Landlord under
this Lease, whether or not expressly denominated Fixed Rent, Tenant's Tax
Payment, Tenant's Operating Payment, Additional Rent or Rent, shall constitute
rent for the purposes of Section 502(b)(6) of the United States Bankruptcy Code.
SECTION 34.5 ENTIRE DOCUMENT. This Lease (including any Schedules and
Exhibits referred to herein and all supplementary agreements provided for
herein) contains the entire agreement between the parties and all prior
negotiations and agreements are merged into this Lease. All of the Schedules and
Exhibits attached hereto are incorporated in and made a part of this Lease,
provided that in the event of any inconsistency between the terms and provisions
of this Lease and the terms and provisions of the Schedules and Exhibits hereto,
the terms and provisions of this Lease shall control. Wherever appropriate in
this Lease, personal pronouns shall be deemed to include the other genders and
the singular to include the plural. All Article and Section references set forth
herein shall, unless the context otherwise requires, be deemed references to the
Articles and Sections of this Lease.
SECTION 34.6 GOVERNING LAW. This Lease shall be governed in all
respects by the laws of the State of New York.
SECTION 34.7 UNENFORCEABILITY. If any provision of this Lease, or its
application to any person or circumstance, shall ever be held to be invalid or
unenforceable, then in each such event the remainder of this Lease or the
application of such provision to any other person or any other circumstance
(other than those as to which it shall be invalid or unenforceable) shall not be
thereby affected, and each provision hereof shall remain valid and enforceable
to the fullest extent permitted by law.
SECTION 34.8 (a) LEASE DISPUTES. Except as expressly provided to the
contrary in this Lease, Tenant agrees that all disputes arising, directly or
indirectly, out of or relating to this Lease, and all actions to enforce this
Lease, shall be dealt with and adjudicated in the state courts of the State of
New York or the federal courts sitting in New York City and for that purpose
hereby expressly and irrevocably submits itself to the jurisdiction of such
courts. Tenant agrees that so far as is permitted under applicable law, this
consent to personal jurisdiction shall be self-operative and no further
instrument or action, other than service of process in one of the manners
specified in this Lease, or as otherwise permitted by law, shall be necessary in
order to confer jurisdiction upon it in any such court.
(b) To the extent that Tenant has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
Tenant hereby irrevocably waives such immunity in respect of its obligations
under this Lease. Tenant represents that it is not entitled to any such immunity
on the date hereof.
SECTION 34.9 LANDLORD'S AGENT. Unless Landlord shall render written
notice to Tenant to the contrary, Tishman Speyer Properties, L.P. is authorized
to act as Landlord's agent in connection with the performance of this Lease, and
Tenant shall direct all correspondence and
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requests to, and shall be entitled to rely upon correspondence received from,
Tishman Speyer Properties, L.P., as agent for the Landlord in accordance with
Article 27. Tenant acknowledges that Tishman Speyer Properties, L.P. is acting
solely as agent for Landlord in connection with the foregoing; and neither
Tishman Speyer Properties, L.P. nor any of its direct or indirect partners,
officers, shareholders, directors, employees, principals, agents or
representatives shall have any liability to Tenant in connection with the
performance of this Lease, and Tenant waives any and all claims against any and
all of such parties arising out of, or in any way connected with, this Lease,
the Building or the Real Property.
SECTION 34.10 ESTOPPEL. Within seven days following request from
Landlord, any Mortgagee or any Lessor, Tenant shall deliver to Landlord a
written statement executed and acknowledged by Tenant, in form satisfactory to
Landlord, (i) stating that this Lease is then in full force and effect and has
not been modified (or if modified, setting forth all modifications), (ii)
setting forth the date to which the Fixed Rent and any Additional Rent have been
paid, together with the amount of monthly Fixed Rent then payable, (iii) stating
whether or not, to the best of Tenant's knowledge, Landlord is in default under
this Lease, and, if Landlord is in default, setting forth the specific nature of
all such defaults, (iv) stating the amount of the security deposit, if any,
under this Lease, (v) stating whether there are any subleases affecting the
Premises, (vi) stating the address of Tenant to which all notices and
communication under the Lease shall be sent, the Commencement Date and the
Expiration Date, and (vii) responding to any other matters reasonably requested
by Landlord, such Mortgagee or such Lessor. Tenant acknowledges that any
statement delivered pursuant to this Section 34.10 may be relied upon by any
purchaser or owner of the Real Property or the Building, or all or any portion
of Landlord's interest in the Real Property or the Building or any Superior
Lease, or by any Mortgagee, or assignee thereof of any Mortgagee of a Mortgage,
or by any Lessor, or assignor thereof.
SECTION 34.11 CERTAIN INTERPRETATIONAL RULES. For purposes of this
Lease, the phrase "including" shall mean "including without limitation" and,
whenever the circumstances or the context requires, the singular shall be
construed as the plural, the masculine shall be construed as the feminine and/or
the neuter and vice versa. This Lease shall be interpreted and enforced without
the aid of any canon, custom or rule of law requiring or suggesting construction
against the party drafting or causing the drafting of the provision in question.
SECTION 34.12 CAPTIONS. The captions in this Lease are inserted only as
a matter of convenience and for reference and in no way define, limit or
describe the scope of this Lease or the intent of any provision thereof.
SECTION 34.13 PARTIES BOUND. The terms, covenants, conditions and
agreements contained in this Lease shall bind and inure to the benefit of
Landlord and Tenant and, except as otherwise provided in this Lease, to their
respective legal representatives, successors, and assigns.
SECTION 34.14 DIRECTORY. The lobby shall contain a computerized
directory wherein the Building's tenants shall be listed with a capacity for up
to 50 listings per floor for Tenant and others permitted to occupy the Premises
hereunder, provided Tenant shall be entitled to such
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proportion of such listings as Tenant's Area is to the rentable square foot area
of such floor. From time to time, but not more frequently than once every three
(3) months, Landlord shall reprogram the computerized directory to reflect such
changes in the listings therein as Tenant shall request.
SECTION 34.15 COUNTERPARTS. This Lease may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument.
ARTICLE 35
TAX STATUS OF BENEFICIAL OWNERS
Tenant recognizes and acknowledges that Landlord and/or
certain beneficial owners of Landlord may from time to time qualify as real
estate investment trusts pursuant to Sections 856 et seq. of the Code or as
entities described in Section 511(a)(2) of the Code, and that avoiding the loss
of such status, the receipt of any income derived under any provision of this
Lease that does not constitute "rents from real property" (in the case of real
estate investment trusts) or that constitutes "unrelated business taxable
income" (in the case of entities described in Section 511 (a)(2) of the Code),
and the imposition of penalty or similar taxes (each an "Adverse Event") is of
material concern to Landlord and/or such beneficial owners. In the event that
this Lease or any document contemplated hereby could, in the opinion of counsel
to Landlord, result in or cause an Adverse Event, Tenant agrees to cooperate
with Landlord in negotiating an amendment or modification thereof and shall at
the request of Landlord execute and deliver such documents reasonably required
to effect such amendment or modification. Any amendment or modification pursuant
to this Article 35 shall be structured so that the economic results to Landlord
and Tenant shall be substantially similar to those set forth in this Lease
without regard to such amendment or modification. Landlord shall have the right
to waive receipt of any amount payable to Landlord hereunder and such waiver
shall constitute an amendment or modification of this Lease with respect to such
payment.
ARTICLE 36
SECURITY DEPOSIT
SECTION 36.1 SECURITY DEPOSIT. Tenant shall deposit with Landlord upon
the execution of this Lease the Security Deposit in cash as security for the
faithful performance and observance by Tenant of the terms, covenants and
conditions of this Lease, including the surrender of possession of the Premises
to Landlord as herein provided.
SECTION 36.2 LETTER OF CREDIT. In lieu of a cash deposit, Tenant may
deliver to Landlord a clean, irrevocable, non-documentary and unconditional
letter of credit (the "Letter of Credit") issued by and drawable upon any
commercial bank which is a member of the New York
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Clearing House Association or other bank satisfactory to Landlord (hereinafter
referred to as the ("Issuing Bank") with offices for banking purposes in the
City of New York, which shall have outstanding unsecured, uninsured and
unguaranteed indebtedness, or shall have issued a letter of credit or other
credit facility that constitutes the primary security for any outstanding
indebtedness (which is otherwise uninsured and unguaranteed), that is then
rated, without regard to qualification of such rating by symbols such as "+" or
"-" or numerical notation, "Aa" or better by Moody's Investors Service and "AA"
or better by Standard & Poor's Rating Service, and has combined capital, surplus
and undivided profits of not less than $500,000,000, which Letter of Credit
shall name Landlord as beneficiary, be in the amount of the Security Deposit,
have a term of not less than one year, permit multiple drawings, be fully
transferable by Landlord without the payment of any fees or charges by Landlord,
and otherwise be in form and content satisfactory to Landlord. If upon any
transfer, any fees or charges shall be so imposed, then such fees or charges
shall be payable solely by Tenant and the Letter of Credit shall so specify. The
Letter of Credit shall provide that it shall be deemed automatically renewed,
without amendment, for consecutive periods of one year each thereafter during
the term of this Lease, unless the Issuing Bank sends notice (the "Non-Renewal
Notice") to Landlord by certified mail, return receipt requested, not less than
45 days next preceding the then expiration date of the Letter of Credit that it
elects not to have such Letter of Credit renewed. Landlord shall have the right,
exercisable within 45 days of its receipt of the Non-Renewal Notice, to draw the
full amount of the Letter of Credit, by sight draft on the Issuing Bank, and
shall hold the proceeds of the Letter of Credit pursuant to the terms of this
Article as a cash security pursuant to this Article 36.
SECTION 36.3 APPLICATION OF SECURITY. If Tenant defaults in respect of
any of the terms, covenants or conditions of this Lease, including, the payment
of Rent, Landlord may apply or retain the whole or any part of the cash security
so deposited or may notify the Issuing Bank and thereupon receive all or a
portion of the monies represented by the Letter of Credit and use, apply, or
retain the whole or any part of such proceeds, as the case may be, to the extent
required for the payment of any Fixed Rent or any other sum as to which Tenant
is in default including (i) any sum which Landlord may expend or may be required
to expend by reason of Tenant's default, and/or (ii) any damages or deficiency
in the relenting of the Premises, whether such damages or deficiency accrue or
accrues before or after summary proceedings or other reentry by Landlord. If
Landlord applies or retains any part of the cash security or proceeds of the
Letter of Credit, as the case may be, Tenant, upon demand, shall deposit with
Landlord the amount so applied or retained so that Landlord shall have the full
Security Deposit on hand at all times during the Term. If Tenant shall fully and
faithfully comply with all of the terms, covenants and conditions of this Lease,
the cash security or Letter of Credit, as the case may be, shall be returned to
Tenant after the Expiration Date and after delivery of possession of the
Premises to Landlord in the manner required by this Lease. Tenant expressly
agrees that Tenant shall have no right to apply any portion of the Security
Deposit against any of Tenant's obligations to pay Rent hereunder and, if Tenant
shall seek to so apply such Security Deposit, Tenant shall pay liquidated
damages to Landlord in a sum equal to two times the amount of any such unpaid
Rent.
SECTION 36.4 TRANSFER. Upon a sale of the Real Property or the Building
or a leasing of the Building, or any financing of Landlord's interest therein,
Landlord shall have the right to
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transfer the cash security to the vendee, lessee or lender and with respect to
the Letter of Credit, and within five days after notice of such sale, leasing or
financing, Tenant, at its sole cost, shall arrange for the transfer of the
Letter of Credit to the new landlord or the lender, as designated by Landlord in
the foregoing notice or have the Letter of Credit reissued in the name of the
new landlord or the lender and Landlord shall thereupon be released by Tenant
from all liability for the return of such security. Tenant shall look solely to
the new landlord or lender for the return of such cash security or Letter of
Credit and the provisions hereof shall apply to every transfer or assignment
made of the security to a new landlord. Tenant shall not assign or encumber or
attempt to assign or encumber the monies or Letter of Credit deposited on as
security and that neither Landlord nor its successors or assigns shall be bound
by any such assignment, encumbrance, attempted assignment or attempted
encumbrance.
ARTICLE 37
RIGHT OF FIRST OFFER
SECTION 37.1 OFFERED SPACE. Tenant shall have the one-time right (with
respect to each available space), at its sole option, to lease the entirety (but
not any portion) of the remaining space on the eighth (8th) floor of the
Building (the "Offered Space"), if such space shall become vacant and available
for lease during the Term, on the terms and conditions hereinafter set forth;
provided that no Event of Default exists on the date of the giving of the
Acceptance Notice or on the Offered Space Commencement Date (as hereinafter
defined).
SECTION 37.2 NOTICE. Whenever Landlord anticipates that the Offered
Space is to become vacant and available for Lease, Landlord shall notify Tenant
(the "Availability Notice") of such future availability, which Availability
Notice shall set forth the Interim Rent (as hereinafter defined) and the
approximate date on which Landlord anticipates that the Offered Space shall
become vacant and available for lease. Tenant shall exercise the right of first
offer by written notice (the "Acceptance Notice") given to Landlord not more
than twenty (20) days following the giving of the Availability Notice. Time is
of the essence for the giving of the Acceptance Notice. If Tenant fails to give
the Acceptance Notice on or before such date, Tenant's option to lease the
Offered Space contained in the Availability Notice shall terminate and Landlord
shall be free to lease the Offered Space or any part thereof to any third party
at any rental rate and upon any terms determined by Landlord and Landlord shall
be under no further obligation to offer to Tenant the Offered Space contained in
the Availability Notice to Tenant.
SECTION 37.3 COMMENCEMENT. If Tenant shall timely give Landlord the
Acceptance Notice as required under this Article 37 to exercise Tenant's right
to lease the Offered Space, the leasing of such Offered Space shall commence on
the date set forth in the Availability Notice (the "Offered Space Commencement
Date") and shall expire on the Expiration Date (as defined in this Lease).
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SECTION 37.4 RENT. Effective upon the Offered Space Commencement Date,
(i) the Premises shall be deemed to include the Offered Space and (ii) this
Lease shall be deemed amended as follows:
(a) the Rent payable pursuant to Article 2 hereof shall be
increased by the annual fair market rental value of the Offered Space. Any
dispute between the parties as to the annual fair market rental value shall be
resolved by arbitration in the manner provided in Section 37.8 hereof. If the
additional Rent payable has not been determined prior to the Offered Space
Commencement Date, Tenant shall pay additional Rent in an amount equal to the
annual fair market rental value for the Offered Space as reasonably determined
by Landlord (the "Interim Rent"). Upon final determination of the additional
Rent for the Offered Space, Tenant shall commence paying such additional Rent as
so determined, and within ten days after such determination Tenant shall pay any
deficiency in prior payments of additional Rent or, if the additional Rent as so
determined shall be less than the Interim Rent, Tenant shall be entitled to a
credit against the next succeeding installments of Rent in an amount equal to
the difference between each installment of Interim Rent and the additional Rent
as so determined which should have been paid for such installment until the
total amount of the over payment has been recouped.
(b) the number 21,500 as used in the definition of Tenant's
Proportionate Share in Article 1 shall be increased to account for the Offered
Space using the same methods and standards of measurement used in determining
the above number and the percentages with respect to Tenant's Tax Payment and
with respect to Tenant's Operating Payment contained in the definition of
Tenant's Proportionate Share in Article 1 hereof shall be appropriately
recalculated and increased.
SECTION 37.5 CONDITION OF OFFERED SPACE. The Offered Space shall be
leased to Tenant "as-is", in the condition in which the same shall be on the
Offered Space Commencement Date and Tenant shall not be entitled to any
abatement, reduction of rent, or construction allowance by reason of such
condition. Landlord shall not be obligated to do any work or alteration for
Tenant in the Offered Space in order to prepare the same for Tenant's occupancy.
SECTION 37.6 EXISTING TENANT. Nothing contained in this Article 37
shall prevent Landlord from permitting the tenant or its successors or assigns
currently in occupancy of the Offered Space or its successors or assigns (the
"Existing Tenant") to remain in occupancy of the Offered Space or any portion
thereof, pursuant to either (i) the exercise of any extension or renewal option
contained in any of the existing leases covering the Offered Space, (ii) any
extension or renewal of the existing leases covering the Offered Space, or any
portion thereof, which may hereafter be negotiated and agreed to by and between
Landlord and the Existing Tenant, or (iii) the terms of any agreement of lease
hereafter entered into between Landlord and the Existing Tenant. Notwithstanding
anything to the contrary contained in this Article 37, Landlord shall be under
no obligation to offer any of the Offered Space to Tenant if Landlord intends to
sell any of the Offered Space, as a condominium or otherwise.
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SECTION 37.7 POSSESSION. If Landlord is unable to give possession of
any of the Offered Space contained in the Acceptance Notice, or any portion
thereof, on the Offered Space Commencement Date because of the holding over or
retention of possession of any tenant, undertenant or occupant, Landlord shall
not be subject to any liability for failure to give possession on said date and
the validity of this Lease shall not be impaired under such circumstances, nor
shall the same be construed in any way to extend the term of this Lease or the
leasing of such Offered Space, but the rent payable in respect of the Offered
Space shall be abated until Landlord shall have given Tenant notice that such
space is available for Tenant's occupancy. The provisions of this Section 37.7
are intended to constitute "an express provision to the contrary" within the
meaning of Section 223-a of the New York Real Property Law. In the event, Tenant
does not receive vacant possession of the Offered Space on or prior to the
second anniversary of the Acceptance Notice, Tenant shall have the right to
revoke such acceptance. Time is of the essence in making any such revocation.
SECTION 37.8 ARBITRATION. If Tenant shall dispute Landlord's
determination of the annual fair market value pursuant to Section 37.4 of this
Lease, Tenant shall give notice to Landlord of such dispute within 10 days of
Tenant's receipt of Landlord's determination of the Interim Rent, and such
dispute shall be determined by a single arbitrator appointed in accordance with
the American Arbitration Association Real Estate Valuation Arbitration
Proceeding Rules. The arbitrator shall be impartial and shall have not less than
10 years' experience in the County of New York in a calling related to the
leasing of commercial office space in office buildings comparable to the
Building, and the fees of the arbitrator shall be shared by Landlord and Tenant.
Within 15 days following the appointment of the arbitrator, Landlord and Tenant
shall attend a hearing before the arbitrator at which each party shall submit a
report setting forth its determination of the fair market value of the Offered
Space, together with such information on comparable rentals and such other
evidence as such party shall deem relevant. The arbitrator shall, within 5 days
following such hearing and submission of evidence, render his or her decision by
selecting the determination of fair market value submitted by either Landlord or
Tenant which, in the judgment of the arbitrator, most nearly reflects the fair
market value of the Premises for the Renewal Term. The arbitrator shall have no
power or authority to select any fair market value other than a fair market
value submitted by Landlord or Tenant, and the decision of the arbitrator shall
be final and binding upon Landlord and Tenant.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this
Amended and Restated Lease as of the day and year first above written.
11 WEST 42 LIMITED PARTNERSHIP,
Landlord
By: WHTS COMPANY, INC., a general partner
By: /s/
---------------------------------------
Name:
Title: Vice President
By: WEST 42 ASSOCIATES, L.P.,
a general partner
By: 11 West 42nd Realty I Corp.,
a general partner
By: /s/
---------------------------------------
Name:
Title:
By: 11 WEST 42nd Realty II Corp.,
a general partner
By: /s/
---------------------------------------
Name:
Title:
MARTHA STEWART LIVING OMNIMEDIA, LLC,
Tenant
By: /s/ Barry Pincus
---------------------------------------
Name: Barry Pincus
Title: Chief Financial Officer
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<PAGE> 66
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 31st day of March, 1998 before me personally came Barry
Pincus to me known to be the individual who executed the foregoing instrument
and, who, being duly sworn by me, did depose and say that he is the Chief
Financial Officer of Martha Stewart Living Omnimedia, LLC, and that he executed
the foregoing instrument in the name of Martha Stewart Living Omnimedia, LLC,
and that he was authorized to do so by said company.
Selene Maugeri
NOTARY PUBLIC OF NEW JERSEY
My Commission Expires Jan. 12, 2000
-----------------------------------
Notary Public
/s/ Selene Maugeri
-----------------------------------
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<PAGE> 67
EXHIBIT A-1
[Floor Plan]
<PAGE> 68
EXHIBIT A-2
[Floor Plan]
<PAGE> 69
EXHIBIT B
DEFINITIONS
BASE RATE: The annual rate of interest publicly announced from time to
time by Citibank, N.A., or its successor, in New York, New York as its "base
rate" (or such other term as may be used by Citibank, N.A., from time to time,
for the rate presently referred to as its "base rate").
BUILDING SYSTEM: The mechanical, electrical, plumbing, sanitary,
sprinkler, heating, ventilation and air conditioning, security, life-safety,
elevator and other service systems or facilities of the Building up to the point
of localized distribution to the Premises (excluding, however, supplemental
HVAC. systems of tenants (including Tenant), sprinklers and the horizontal
distribution systems within and servicing the Premises and by which mechanical,
electrical, plumbing, sanitary, heating, ventilating and air conditioning,
security, life-safety and other service systems are distributed from the base
Building risers, feeders, panelboards, etc. for provision of such services to
the Premises).
BUSINESS DAYS: All days, excluding Saturdays, Sundays and all days
observed by either the State in which the Building is located, the Federal
Government or the labor unions servicing the Building as legal holidays.
CODE: The Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
DEFICIENCY: The difference between (a) the Rent for the period which
otherwise would have constituted the unexpired portion of the Term (assuming the
Additional Rent for each year thereof to be the same as was payable for the year
immediately preceding such termination or re-entry), and (b) the net amount, if
any, of rents collected under any reletting effected pursuant to the provisions
of the Lease for any part of such period (after first deducting from such rents
all expenses incurred by Landlord in connection with the termination of this
Lease, Landlord's re-entry upon the Premises and such reletting, including
repossession costs, brokerage commissions, attorneys' fees and disbursements,
and alteration costs).
EXCLUDED EXPENSES: (a) Taxes; (b) franchise or income taxes imposed
upon Landlord; (c) mortgage amortization and interest; (d) leasing commissions;
(e) the cost of tenant installations and decorations incurred in connection with
preparing space for any Building tenant, including workletters and concessions;
(f) ground rent, if any; (g) management fees equal to the greater of (A) 3% of
the gross rentals collected for the Building and (B) fees charged by Landlord or
related entities for the management by any of them of other first class
properties; (h) wages, salaries and benefits paid to any persons above the grade
of Building Manager; (i) legal and accounting fees relating to (A) disputes with
tenants, prospective tenants or other occupants of the Building, (B) disputes
with purchasers, prospective purchasers, mortgagees or prospective mortgagees of
the Building or the Real Property or any part of either, or (C) negotiations of
leases, contracts of sale or mortgages; (j) costs of services provided to other
tenants of the Building on a "rent inclusion" basis which are not provided to
Tenant on such basis; (k) costs
<PAGE> 70
that are reimbursed out of insurance, warranty or condemnation proceeds, or
which are reimbursable by Tenant or other tenants other than pursuant to an
expense escalation clause; (1) costs in the nature of penalties or fines; (m)
costs for services, supplies or repairs paid to any related entity in excess of
costs that would be payable in an "arm's length" or unrelated situation; (n)
allowances, concessions or other costs and expenses of improving or decorating
any demised or demisable space in the Building; (o) appraisal, advertising and
promotional expenses in connection with leasing of the Building; (p) the costs
of installing, operating and maintaining a specialty improvement, including a
cafeteria, lodging or private dining facility, or an athletic, luncheon or
recreational club; (q) any costs or expenses (including fines, interest,
penalties and legal fees) arising out of Landlord's failure to timely pay
Operating Expenses or Taxes; (r) costs incurred in connection with the removal,
encapsulation or other treatment of asbestos or any other Hazardous Materials
existing in the Premises as of the date hereof, and (s) the cost of capital
improvements other than those expressly included in Operating Expenses pursuant
to Section 8.1 of this Lease.
GOVERNMENTAL AUTHORITY (AUTHORITIES): The United States of America, the
State and City of New York, any political subdivision and any agency,
department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, having jurisdiction over the Real
Property or any portion thereof or the curbs, sidewalks, and areas adjacent
thereto.
HAZARDOUS MATERIALS: Any substances, materials or wastes currently
deemed or defined as "hazardous substances", "toxic substances", "contaminants",
"pollutants" or words of similar import.
HVAC SYSTEMS: The Building System[s] designed to provide heating,
ventilation and air conditioning.
INDEMNITIES: Landlord, and any direct or indirect partner, shareholder,
director, officer, principal, employee, agent or representative.
LESSOR: A lessor under a Superior Lease.
MORTGAGE(S): Any mortgage, trust, indenture or other financing document
which may now or hereafter affect the Premises, the Real Property, the Building
or any Superior Lease and the leasehold interest created thereby, and all
renewals, extensions, supplements, amendments, modifications, consolidations and
replacements thereof or thereto, substitutions therefor, and advances made
thereunder.
MORTGAGEE(S): Any mortgagee, trustee or other holder of a Mortgage.
PROHIBITED USE: Any use or occupancy of the Premises that in Landlord's
reasonable judgment would: (a) cause damage to the Building, the Premises or any
equipment, facilities or other systems therein; (b) impair the appearance of the
Premises or the Building; (c) interfere with the efficient and economical
maintenance, operation and repair of the Premises or the Building or the
equipment, facilities or systems thereof; (d) adversely affect any service
provided
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<PAGE> 71
to, and/or the use and occupancy by, any Building tenant or occupants; or (e)
violate the certificate of occupancy issued for the Premises or the Building.
Prohibited Use also includes the use of any part of the Premises for: (i) a
restaurant or bar; (ii) the preparation, consumption, storage, manufacture or
sale of food, beverages, liquor, tobacco or drugs (except in connection with
vending machines and/or warming kitchens installed for the use of Tenant's
employees only); (iii) the business of photocopying, multilith or offset
printing (except photocopying in connection with Tenant's own business); (iv) a
typing or stenography business; (v) a school or classroom; (vi) lodging or
sleeping; (vii) the operation of retail (meaning a business whose primary
patronage arises from the generalized solicitation of the general public to
visit Tenant's offices in person without a prior appointment) facilities of a
savings and loan association or retail facilities of any financial, lending,
securities brokerage or investment activity; (viii) a payroll office; (ix) a
barber, beauty or manicure shop; (x) an employment agency, executive search firm
or similar enterprise; (xi) offices of any Governmental Authority, any foreign
government, the United Nations, or any agency or department of the foregoing;
(xii) subject to Section 3.3, the manufacture, retail sale, storage of
merchandise or auction of merchandise, goods or property of any kind to the
general public which could reasonably be expected to create a volume of
pedestrian traffic substantially in excess of that normally encountered in the
Premises; (xiii) the rendition of medical, dental or other therapeutic or
diagnostic services; or (xiv) any illegal purposes.
REQUIREMENTS: All present and future laws, rules, orders, ordinances,
regulations, statutes, requirements, codes and executive orders, extraordinary
and ordinary of all Governmental Authorities, including the Americans With
Disabilities Act, 42 U.S.C. Section 12,101 (et seq.), New York City Local Law 58
of 1987, and any law of like import, and all rules, regulations and government
orders with respect thereto, and any of the foregoing relating to Hazardous
Materials environmental matters, public health and safety matters, and of any
applicable fire rating bureau or other body exercising similar functions,
affecting the Real Property or the maintenance, use or occupation thereof, or
any street, avenue or sidewalk comprising a part of or in front thereof or any
vault in or under the same.
RULES AND REGULATIONS: The rules and regulations annexed to and made a
part of this Lease as Exhibit F, as they may be modified from time to time by
Landlord.
SPECIALTY ALTERATIONS: Alterations consisting of kitchens, pantries,
executive bathrooms, raised computer floors, computer installations, safe
deposit boxes, vaults, libraries or file rooms requiring reinforcement of
floors, internal staircases, conveyors, dumbwaiters, and other Alterations of a
similar character.
SUPERIOR LEASE(S): Any ground or underlying lease of the Real Property
or any part thereof heretofore or hereafter made by Landlord and all renewals,
extensions, supplements, amendments, modifications, consolidations, and
replacements thereof.
TENANT'S PROPERTY: Tenant's movable fixtures and movable partitions,
telephone and other equipment, computer systems, trade fixtures, furniture,
furnishings, and other items of personal property which are removable without
material damage to the Premises or Building.
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<PAGE> 72
UNAVOIDABLE DELAYS: Landlord's inability to fulfill or delay in
fulfilling any of its obligations under this Lease expressly or impliedly to be
performed by Landlord or Landlord's inability to make or delay in making any
repairs, additions, alterations, improvements or decorations or Landlord's
inability to supply or delay in supplying any equipment or fixtures, if
Landlord's inability or delay is due to or arises by reason of strikes, labor
troubles or by accident, or by any cause whatsoever reasonably beyond Landlord's
control, including laws, governmental preemption in connection with a national
emergency, Requirements or shortages, or unavailability of labor, fuel, steam,
water, electricity or materials, or delays caused by Tenant or other tenants,
mechanical breakdown, acts of God, enemy action, civil commotion, fire or other
casualty.
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<PAGE> 73
EXHIBIT C
LANDLORD'S WORK
Landlord shall be responsible, at its cost, for the following base
building work in respect to the 8th Floor Premises:
1. Demolish the portion of the 8th Floor Premises currently
licensed to the Phillips Janson Group Architects which is approximately 8,291
rentable square feet (see attached plan).
2. Repair damaged convector covers and replace all convector
grills.
3. Windows will be weatherproofed, made operable and broken
glass will be replaced.
4. Deliver ACP-5 certificate.
5. Premises shall be delivered with electric capacity of at
least six (6) watts per square foot, exclusive of HVAC, complete with service
and distribution panel boards, transformers and the appropriate submeters.
<PAGE> 74
EXHIBIT D
HVAC SPECIFICATIONS
The Building HVAC System serving the Premises is designed to
maintain average temperatures within the Premises during the hours of 8:00 a.m.
to 6:00 p.m. on Business Days of (i) not less than 68 degrees F. during the
heating season when the outdoor temperature is 5 degree F. or more and (ii) not
more than 78 degrees F. and 50% humidity + 5% during the cooling season, when
the outdoor temperatures are at 89 degrees F. dry bulb and 73 degrees F. wet
bulb, with, in the case of clauses (i) and (ii), a population load per floor of
not more than one person per 100 square feet of useable area, other than in
dining and other special use areas per floor for all purposes, and shades fully
drawn and closed, including lighting and power, and to provide at least .15 CFM
of outside ventilation per square foot of rentable area. Use of the Premises, or
any part thereof, in a manner exceeding the foregoing design conditions or
rearrangement of partitioning after the initial preparation of the Premises
which interferes with normal operation of the air-conditioning service in the
Premises may require changes in the air-conditioning system serving the
Premises.
<PAGE> 75
EXHIBIT E
CLEANING SPECIFICATIONS
GENERAL CLEANING
NIGHTLY
GENERAL OFFICES:
1. All hard surfaced flooring to be swept using approved
dustdown preparation.
2. Carpet sweep all carpets, moving only light furniture
(desks, file cabinets, etc. not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and
window sills.
4. Empty all waste receptacles and remove wastepaper.
5. Wash clean all Building water fountains and coolers.
6. Sweep all private stairways.
LAVATORIES:
1. Sweep and wash all floors, using proper
disinfectants.
2. Wash and polish all mirrors, shelves, bright work and
enameled surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats.
5. Hand dust and clean all partitions, tile walls,
dispensers and receptacles in lavatories and
restrooms.
6. Empty paper receptacles, fill receptacles from tenant
supply and remove wastepaper.
7. Fill toilet tissue holders from tenant supply.
8. Empty and clean sanitary disposal receptacles.
WEEKLY
1. Vacuum all carpeting and rugs.
<PAGE> 76
2. Dust all door louvers and other ventilating louvers
within a person's normal reach.
3. Wipe clean all brass and other bright work.
QUARTERLY
High dust premises complete including the following:
1. Dust all pictures, frames, charts, graphs and similar
wall hangings not reached in nightly cleaning.
2 Dust all vertical surfaces, such as walls,
partitions, doors, bucks and other surfaces not
reached in nightly cleaning.
3. Dust all venetian blinds.
4. Wash all windows.
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EXHIBIT F
RULES AND REGULATIONS
1. No awnings or other projections shall be attached to the
outside walls of the Building. No curtains, blinds, shades, screens or other
obstructions shall be attached to or hung in or used in connection with any
exterior window or entry door of the Premises, without the prior written consent
of Landlord.
2. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed to any part of the outside of the
Premises or Building or on the inside of the Premises if the same can be seen
from the outside of the Premises without the prior written consent of Landlord.
Lettering on doors, if and when approved by Landlord, shall be inscribed,
painted or affixed for Tenant in a size, color and style acceptable to Landlord.
3. The grills, louvers, skylights, windows and doors that
reflect or admit light and/or air into the Premises, halls, passageways or other
public places in the Building shall not be covered or obstructed by Tenant, nor
shall any bottles, parcels or other article be placed on the window sills,
radiators or convectors.
4. Landlord shall have the right to prohibit any advertising
by 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.
5. The sidewalks, entrances, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by Tenant or used for any purpose other than ingress or egress to and from the
Premises and for delivery of merchandise, equipment and other personal property
in prompt and efficient manner, using elevators and passageways designated for
such delivery by Landlord.
6. Except in those areas designated by Tenant as "security
areas", all locks or bolts of any kind shall be operable by the Grand Master
Key. No locks shall be placed upon any of the doors or windows by Tenant, nor
shall any changes be made in locks or the mechanism thereof which shall make
such locks inoperable by said Grand Master Key. Tenant shall, upon the
termination of its tenancy, turn over to Landlord all keys of stores, offices
and toilet rooms, either furnished to or otherwise procured by Tenant and in the
event of the loss of any keys furnished by Landlord, Tenant shall pay to
Landlord the cost thereof.
7. Tenant shall keep the entrance door to the Premises closed
at all times.
8. All removals or the carrying in or out of any freight,
furniture, packages, boxes, crates or any other object or matter of any
description must take place during Building standard hours. Landlord reserves
the right to inspect all objects and matter to be brought into the Building and
to exclude from the Building all objects and matter which violates any of these
Rules and Regulations or the lease of which these Rules and Regulations are a
part. Landlord
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may require that any person leaving the public areas of the Building with any
package, object or matter submit a pass, listing each package, object or matter
being removed, but the establishment and enforcement of such requirement shall
not impose any responsibility on Landlord for the protection of Tenant against
the removal of property from the Premises.
9. There shall not be used in any space or in the public halls
of the Building, either by Tenant or by jobbers or any others in the moving or
delivery or receipt of safes, freight, furniture, packages, boxes, crates,
paper, office material or any other matter or thing, any hand trucks except
those equipped with rubber tires, side guards and such other safeguards as
Landlord requires.
10. None of Tenant's employees, visitors or contractors shall
be permitted to have access to the Building's roof, mechanical, electrical or
telephone rooms without permission from Landlord.
11. Tenant shall not make or permit to be made, any unseemly
or disturbing noises or disturb or interfere with occupants of this or
neighboring Buildings or premises or those having business with them.
12. Tenant shall not lay floor tile, or other similar floor
covering so that the same shall come in direct contact with the floor of the
Premises and, if such 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.
13. Neither Tenant nor any of Tenant's servants, employees,
agents, visitors or licensees shall at any time bring or keep upon the Premises
any hazardous material, inflammable, combustible or explosive fluid, chemical or
substance except such minimal quantities as are incidental to normal office
occupancy.
14. Tenant shall not use or keep, or permit to be used or
kept, any hazardous or toxic materials or any foul or noxious gas or substance
in the Premises, permit or suffer the Premises to be occupied or used in a
manner offensive or objectionable to Landlord or other occupants of the Building
by reason of noise, odors, vibrations or interfere in any way with other tenants
or those having business therein.
15. Tenant shall not cause or permit any odors of cooking or
other processes or any unusual or objectionable odors to emanate from the
Premises which would annoy other tenants or create a public or private nuisance.
16. Except as specifically provided in the Lease, Tenant shall
not do any cooking or conduct any restaurant, luncheonette or cafeteria for the
sale or service of food or beverages to its employees or to others.
17. Tenant may, at its sole cost and expense and subject to
compliance with all applicable requirements of the Lease, install and maintain
vending machines for the exclusive
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<PAGE> 79
use by Tenant, its officers, employees and business guests, provided that each
machine, where necessary, shall have a waterproof pan thereunder and be
connected to a drain. Tenant shall not permit the delivery of any food or
beverage to the Premises, except by persons approved by Landlord, which approval
shall not be unreasonably withheld or delayed.
18. Tenant shall not employ any person or persons other than
the janitor of Landlord for the purpose of cleaning the Premises, unless
otherwise agreed to by Landlord in writing. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness.
19. Tenant shall store all its trash, garbage and recyclable
within its Premises. No material shall be disposed of which may result in a
violation of any law or ordinance governing such disposal. All garbage and
refuse disposal shall be made only through entry ways and elevators provided for
such purposes and at such times as Landlord shall designate. Tenant shall use
Building's hauler.
20. Tenant shall, at its expense, provide artificial light for
the employees of Landlord while doing janitor service or other cleaning, and in
making repairs or alterations in the Premises.
21. Tenant shall not mark, paint, drill into or in any way
deface any part of the Premises or the Building, except with the prior written
consent of Landlord in the case of the Premises, which consent shall not be
unreasonably withheld. No boring, cutting or stringing or wires shall be
permitted, except with prior written consent of Landlord, and as Landlord may
direct.
22. The water and wash closets and other plumbing fixtures
shall not be used for any purposes other than those for which they were
constructed and no sweepings, rubbish, rags, acids or other substances shall be
deposited therein. All damages resulting from any misuse of the fixtures shall
be borne by Tenant who or whose servants, employees, agents, visitors or
licensees shall have caused the same.
23. Tenant, before closing and leaving the Premises at any
time, shall see that all lights, water, faucets, etc. are turned off. All
entrance doors in the Premises shall be left locked by Tenant when the Premises
are not in use.
24. No bicycles, in-line roller skates, vehicles or animals of
any kind (except for seeing eye dogs) shall be brought into or kept by Tenant in
or about the Premises or the Building.
25. Canvassing, soliciting and peddling in the Building is
prohibited and Tenant shall cooperate to prevent the same.
26. The Premises shall not be used for lodging or sleeping or
for an immoral or illegal purposes.
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27. The Premises shall not be used for manufacturing, for the
storage of merchandise, or for the sale of merchandise, goods or property of any
kind at auction or otherwise, except as specifically permitted by the Lease.
28. Tenant shall not occupy or permit any portion of the
Premises as an office for a public stenographer or public typist or for the
possession, storage, manufacture of sale of narcotics, dope or tobacco in any
form or as a barber or manicure shop or as an employment bureau. Tenant shall
not engage or pay any employees on the Premises, except those actually working
for Tenant on the Premises, nor advertise for labor giving an address at the
Premises.
29. Tenant shall not accept barbering or bootblacking services
in the Premises, from any company or persons not approved by Landlord, which
approval shall not be unreasonably withheld, and at hours and under regulations
other than as reasonably fixed by Landlord.
30. The requirements of Tenant will be attended to only upon
written application at the office of the building, except in the event of any
emergency condition. Employees of Landlord or Landlord's agents shall not
perform any work or do anything outside of the regular duties, unless under
special instructions from of office of Landlord or in response to an emergency
condition.
31. Tenant shall be responsible for the delivery and pick up
of all mail from the United States Post office.
32. 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 Saturdays, Sundays
and legal holidays all persons who do not present a pass to the Building signed
or approved by Landlord, which approval shall not be unreasonably withheld.
Tenant shall be responsible for all persons for whom a pass shall be issued at
the request of Tenant and shall be liable to Landlord for all acts of such
persons.
33. In accordance with the alteration section of the Lease,
Landlord is entitled to review and approve architectural and engineering
drawings. The review/alteration of Tenant drawings and/or specifications by
Tishman Speyer Properties and any of its representative is not intended to
verify Tenant's engineering or design requirements and/or solutions. The
review/alteration is performed to determine compatibility with the Building
Systems and lease conditions.
34. Tenant renovations are to: be performed by those
contractors and subcontractors on the Landlord's approved contractor's list,
adhere to the Building's applicable Standard Operating Procedures, be compatible
with Building Class E System and other common systems, etc.
35. Landlord may waive any one or more of these Rules and
Regulations for the benefit of any particular tenant or tenants, but no such
waiver by Landlord shall be construed as a waiver of such Rules and Regulations
in favor or any other tenant or tenants, nor prevent
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Landlord from thereafter enforcing any such Rules and Regulations against any or
all of the tenants of the Building.
36. Landlord shall not be responsible to Tenant or to any
other person for the non- observance or violation of these Rules and Regulations
by any other tenant or other person. Tenant shall be deemed to have read the
Rules and Regulations and to have agreed to abide by them as a condition to its
occupancy of the Premises.
37. These Rules and Regulations are in addition to, and shall
not be constructed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of the Lease.
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<PAGE> 1
2/94
Exhibit 10.12
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this day of AUGUST, 1999, between 601
WEST ASSOCIATES LLC, HAVING AN ADDRESS AT 601 WEST 26th STREET, 9th FLOOR, NEW
YORK, NEW YORK 10001, party of the first part, hereinafter referred to as OWNER,
and MARTHA STEWART LIVING OMNIMEDIA LLC, HAVING AN ADDRESS AT
party of the second part, hereinafter referred to as TENANT,
WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner
PART OF THE NINTH FLOOR (WEST) KNOWN AS
AS MORE PARTICULARLY DESCRIBED ON EXHIBIT A HERETO,
in the building known as 601 WEST 26th STREET in the Borough of MANHATTAN, City
of New York, for the term of TEN (10) YEARS (or until such term shall sooner
cease and expire as hereinafter provided) to commence on the day of
nineteen hundred and COMMENCEMENT DATE* , and to end on the day of
and both dates inclusive, at an annual rental rate of
*AS DEFINED IN THE
SET FORTH IN ARTICLE 43 OF THE ATTACHED RIDER ATTACHED RIDER
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 an 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
covenant as follows:
RENT: 1. Tenant shall pay the rent as above and as hereinafter
provided.
OCCUPANCY: 2. Tenant shall use and occupy demised premises for
PHOTOGRAPHY STUDIO, TEST KITCHEN, INTERNET WEB DESIGN 1. LAWFUL PURPOSE IN
KEEPING WITH THE CHARACTER OF THE BUILDING AND ITS USES UNDER LEASES EXECUTED
AFTER JANUARY 1999.
provided such use is in accordance with the certificate of occupancy for the
building, if any, and for no other purpose.
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 nonstructural 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 in each instance 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 2. require. If any mechanic's lien is filed against the
<PAGE> 2
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 not
done pursuant to this article, the same shall be discharged by Tenant within
thirty days thereafter, at Tenant's expense, by payment or filing the bond
required by law 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 Owner, by notice to Tenant no later than twenty days prior to
the date fixed as the termination of this lease, elects to relinquish Owner's
right thereto and to have them removed by Tenant, in which event the same shall
be removed from the demised premises by Tenant prior to the expiration of the
lease, at Tenant's expense. Nothing in this Article shall be construed to give
Owner title to or to prevent Tenant's removal of trade fixtures, moveable office
furniture and equipment, but upon removal of any such from the premises or upon
removal of other installations as may be required by Owner, Tenant shall
immediately and at its expense repair and restore the premises to the condition
existing prior to installation and repair any damage to the demised premises or
the building due to such removal. All property permitted or required to be
removed by Tenant at the end of the term remaining in the premises after
Tenant's removal shall be deemed abandoned and may, at the election of Owner,
either be retained as Owner's property or removed from the premises by Owner, at
Tenant's expense.
REPAIRS: 4. Owner shall maintain and repair the exterior of and the
public portions of the building. 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. It is specifically
agreed that Tenant shall not be entitled to any set off or reduction of rent by
reason of any failure of Owner to comply with the covenants of this or any other
article of this lease. Tenant agrees that Tenant's sole remedy at law in such
instance will be by way of any action for damages for breach of contract. 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 shall
apply.
WINDOW CLEANING: 5. Tenant will not clean nor require, permit, suffer
or allow any window in the demised premises to be cleaned from the outside in
violation of Section 202 of the Labor Law or any other applicable law or of the
Rules of the Board of Standards and Appeals, or of any other Board or body
having or asserting jurisdiction.
REQUIREMENTS OF LAW, FIRE INSURANCE: 6. Prior to the commencement of
the lease term, if Tenant is then in possession, and at all times thereafter,
Tenant, at Tenant's sole cost and expense, 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
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<PAGE> 3
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, 3. or any similar body which shall impose any violation, order
or duty upon Owner or Tenant with respect to the demised premises, 4. 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 of the
building (including the use permitted under the lease). Except as provided in
Article 30 hereof, nothing herein shall require Tenant to make structural
repairs or alterations unless 5. 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 or 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 or other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. 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" of 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 designed to carry and which is
allowed by law. Owner reserves the right to prescribe the weight and position of
all safes, business machines and mechanical equipment. Such installations shall
be placed and maintained by Tenant, at Tenant's expense, in settings sufficient,
in Owner's 6. judgment, 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 from time to time execute promptly any certificate that Owner may
request.
TENANT'S LIABILITY INSURANCE PROPERTY - LOSS, DAMAGE, REIMBURSEMENT,
INDEMNITY: 8. Owner or its agents shall not be liable for any damage to property
of Tenant or other others entrusted to employees of the building, nor for loss
of or damage to any property of Tenant by theft or otherwise, nor for any injury
or damage to persons or property resulting from any cause of whatsoever nature,
unless caused by or due to the negligence of Owner, its agents, servants or
employees; Owner or its agents will not be liable for any such damage caused by
other tenants or persons in, upon or about said building or caused by operations
in 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 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 the 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
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<PAGE> 4
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 by fire or other casualty, the
damages 7. thereto shall be repaired by and at the expense of Owner and the rent
and other items of additional rent, until such repair shall be substantially
completed, shall be apportioned from the day following the casualty according to
the part of the premises which is usable. (c) If the demised premises are
totally damaged or rendered wholly unusable by fire or other casualty, then the
rent and other items of additional rent as hereinafter expressly provided shall
be proportionately paid up to the time of the casualty and thenceforth shall
cease until the date when the premises 8. shall have been repaired and restored
by Owner (or sooner reoccupied in part by Tenant then rent shall be apportioned
as provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. 9. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to rebuild it, then, in any of such events, Owner may elect to
terminate this lease by written notice to Tenant, given within 90 days after
such fire or casualty, or 30 days after adjustment of the insurance claim for
such fire or casualty whichever is sooner, specifying a date for the expiration
of the lease, which date shall not be more than 60 days after the giving of such
notice, and upon the date specified in such notice the term of this lease shall
expire as fully and completely as if such date were the date set forth above for
the termination of this lease and Tenant shall forthwith quit, surrender and
vacate the premises without prejudice however, to 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, including Owner's obligation to restore under
subparagraph (b) above, each party shall look first to any insurance in its
favor before making any claim against the other party for recovery for loss or
damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each hereby releases and waives all right of recovery with respect to
subparagraphs (b), (d) and (e) above, against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The release
and waiver herein referred to shall be deemed to include any loss or damage to
the demised premises and/or to any personal property, equipment, trade fixtures,
goods and merchandise located therein. The foregoing release and waiver shall be
in force only if both releasors' insurance policies contain a clause providing
that such a release 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 benefitting 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.
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<PAGE> 5
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. Tenant shall
have the right to make an independent claim to the condemning authority for the
value of Tenant's moving expenses and personal property, trade fixtures and
equipment, provided Tenant is entitled pursuant to the terms of the lease to
remove such property, trade fixtures and equipment at the end of the term and
provided further such claim does not reduce Owner's award.
ASSIGNMENT, MORTGAGE, ETC.: 11. Tenant, for itself, its heirs,
distributees, executors, administrators, legal 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 Owner in each
instance. Transfer of the majority of the stock of a corporate Tenant or the
majority partnership interest of a partnership Tenant shall be deemed an
assignment. If this lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Owner may, after
default by Tenant, collect rent from the assignee, under-tenant or occupant, and
apply the net amount collected to the rent herein reserved, but no such
assignment, underletting, occupancy or collection shall be deemed a waiver of
this covenant, or the acceptance of assignee, under-tenant or occupant as
tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Owner to any
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Owner to any further assignment
or underletting.
ELECTRIC CURRENT: 12. Rates and conditions in respect to submetering or
rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other tenants of the building. The change at any time of
the character of electric service shall in no wise make Owner liable or
responsible to Tenant, for any loss, damages or expenses which Tenant may
sustain.
ACCESS TO PREMISES: 13. Owner or Owner's agents shall have the right
(but shall not be obligated) to enter the demised premises in any emergency at
any time, and, at other reasonable times, 10. 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 the 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. 11. Throughout the term hereof Owner
shall have the right to enter the demised premises at reasonable hours 10. for
the purpose of showing the same to prospective purchasers or mortgagees of the
building, and during the last six months of the terms for the purpose of showing
the same to prospective tenants. If Tenant is not present to open and permit an
entry into the demised premises, Owner or Owner's agents may enter the same
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.
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
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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 12.
whether or not of record. 13. 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 the sending or 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 by
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 rent reserved hereunder for the unexpired portion of the term demised and
the fair and reasonable rental value of the demised premises for the same
period. In the computation of such damages the difference between any
installment of rent becoming due hereunder after the date of termination and the
fair and reasonable rental value of the demised premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of four percent (4%) per annum. If such premises or any
part thereof be 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: 14. 17. (1) If Tenant defaults in fulfilling any of the
covenants of this lease other than the covenants for the payment of rent or
additional rent; or if the demised premises 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 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; then in any one or more of such events, upon Owner serving
a written fifteen (15) days notice upon Tenant specifying the nature of said
default and upon the expiration of said fifteen (15) days, if Tenant shall have
failed to comply with or remedy such default, or if the said default or omission
complained of shall be of a nature that the same cannot be completely cured or
remedied within said fifteen (15) day period, and if Tenant shall not have
diligently commenced during such default within such (15) day period, and shall
not thereafter
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<PAGE> 7
with reasonable diligence and in good faith, proceed to remedy or cure such
default, then Owner may serve a written five (5) days' notice of cancellation of
this lease upon Tenant, and upon the expiration of said five (5) days this lease
and the term thereunder shall end and expire as fully and completely as if the
expiration of such 5 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
15. then and in any of such events Owner may without notice, re-enter the
demised premises either by force or otherwise, and dispossess Tenant by summary
proceedings or otherwise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder 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 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 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. 16. In
computing such liquidated damages there shall be added to the said deficiency
such 6. expenses as Owner may incur in connection with re-letting, such as legal
expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the
demised premises in good order or for preparing the same for re-letting. Any
such liquidated damages shall be paid in monthly installments by Tenant on the
rent day specified in this lease and any suit brought to collect the amount of
the deficiency for any month shall not prejudice in any way the rights of Owner
to collect the deficiency for any subsequent month by a similar proceeding.
Owner, in putting the demised premises in good order or preparing the same for
re-rental may, at Owner's option, make such alterations, repairs, replacements,
and/or decorations in the demised premises as Owner, in Owner's 6. 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, in
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 in the observance or
performance of any term or covenant on Tenant's part to be observed or performed
under or by virtue or any of the terms or provisions in any article of this
lease, after notice if required and upon expiration of any applicable 17. period
if any (except in an emergency), then, unless otherwise provided elsewhere in
this lease, Owner may immediately or at any time thereafter and without notice
perform the obligation of Tenant thereunder. If Owner, in connection with the
foregoing or in connection with any default by Tenant in the covenant to pay
rent hereunder, makes any expenditures or
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<PAGE> 8
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, and prevails in any such action or proceeding then Tenant will
reimburse Owner for such sums so paid or obligations incurred with interest and
costs. The foregoing expenses incurred by reason of Tenant's default shall be
deemed to be additional rent hereunder and shall be paid by Tenant to Owner
within ten (10) days of rendition of any bill or statement to Tenant therefor.
If Tenant's lease term shall have expired at the time of making of such
expenditures or incurring of such obligations, such sums shall be recoverable by
Owner as damages.
BUILDING ALTERATIONS AND MANAGEMENT: 20. Owner shall have the right at
any time without the same constituting an eviction and without incurring
liability to Tenant therefor 18. 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. 18. 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 6. 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 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. All understandings and agreements heretofore
made between the parties hereto are merged in this contract, which alone fully
and completely expresses the agreement between Owner and Tenant and any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in part, unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
END OF TERM: 22. Upon the expiration or other termination of the term
of this lease, Tenant shall quit and surrender to Owner the demised premises,
broom clean, in good order and condition, ordinary wear and damages which Tenant
is not required to repair as provided elsewhere in this lease excepted, and
Tenant shall remove all its property from the demised premises. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of this lease.
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,
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<PAGE> 9
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 Owner is able to
deliver possession in the condition required by this lease. 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 possession and/or occupancy shall be deemed to be under all the terms,
covenants, conditions and provisions of this lease, except the obligation to pay
the fixed annual rent set forth in page one of the lease. 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 19. to seek redress for violation of, or
to insist upon the strict performance of any covenant or condition of this lease
or of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent 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 in 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 or occupancy of said
premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed in the event Owner commences any proceeding or action
for possession including a summary proceeding for possession of the premises,
Tenant will not interpose any counterclaim of whatever nature or description in
any such proceeding including a counterclaim under Article 4 except for
statutory mandatory counterclaims.
INABILITY TO PERFORM: 27. 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 any wise be affected,
impaired or excused because Owner is unable to fulfill any of its obligations
under this lease or to supply or is delayed in supplying any service expressly
or impliedly to be supplied or is unable to make, or is delayed in making any
repair, additions, alterations or decorations or is unable to supply or is
delayed in supplying any equipment, fixtures or other materials if Owner is
prevented or delayed from so doing by reason of strike or labor troubles or any
cause whatsoever beyond Owner's sole control including, but not limited to,
government preemption or restrictions or by reason of any rule, order or
regulation of any department or subdivision thereof of any government agency or
by reason of the conditions of supply and demand which have been or are
affected, either directly or indirectly, by war or other emergency.
BILLS AND NOTICES: 28. Except as otherwise in this lease provided, a
bill statement, notice or communication which Owner may desire or be required to
give to Tenant, shall be deemed sufficiently given or rendered if, in writing,
delivered to Tenant personally or sent by registered
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<PAGE> 10
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 other 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. If the building or the demised premises or any part thereof is supplied
with water through a meter through which water is also supplied to other
premises Tenant shall pay to Owner, as additional rent, on the first day of each
month, % ($ ) of the total meter charges as Tenant's portion. 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 of the
contract price for sprinkler supervisory service.
ELEVATORS, HEAT, CLEANING: 31. 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 sued in common by all
tenants. Tenant shall, at Tenant's expense, keep the demised premises, including
the windows, clean and in order, to the reasonable 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,
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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 diligently with
alterations necessary to substitute automatic control elevator service without
in any affecting the obligations of Tenant hereunder.
SECURITY: 32. Tenant has deposited with Owner the sum of $895,932.00 as
security for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
lease, including, but not limited to, the payment of rent and additional rent,
Owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or any other sum as to which Tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect of
any of the terms, covenants and conditions of this lease, including but not
limited to, any damages or deficiency in the reletting of the premises, whether
such damages or deficiency accrued before or after summary proceedings or other
re-entry by Owner. In the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this lease, the
security shall be returned to Tenant after the date fixed as the end of the
Lease and after delivery of entire possession of the demised premises to Owner.
In the event of a sale of the land and building or leasing of the building, of
which the demised premises form a part, Owner shall have the right to transfer
the security to the vendee or lessee and Owner shall thereupon be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look to the new Owner solely for the return of said security, and it is agreed
that the provisions hereof shall apply to every transfer or assignment made of
the security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
CAPTIONS: 33. The Captions are inserted only as a matter of convenience
and for reference and no way define, limit or describe the scope of this lease
nor the intent of any provisions 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 in 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 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, 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. Wherever
it is expressly provided in this lease that content shall not be unreasonably
withheld, such consent shall not be unreasonably delayed.
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 in cause such excavation,
license to enter upon the demised
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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 Rule or Regulation hereafter made or adopted by Owner or Owner's
agents, the parties hereto agree to submit the question of the reasonableness of
such Rule or Regulation for decision to the New York office of the American
Arbitration Association, whose determination shall be final and conclusive upon
the parties hereto. The right to dispute the reasonableness of any additional
Rule or Regulation upon Tenant's part shall be deemed waived unless the same
shall be asserted by service of a notice, in writing upon Owner within 20. days
after the giving of notice thereof. 21.
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. Bills 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 there
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. Tenant shall look
only to Owner's estate and interest in the land and building for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) against Owner in the event of any default by Owner hereunder,
and no other property or assets of such Owner (or any partner, member, officer
or director thereof, disclosed or undisclosed), shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this lease, the relationship of Owner and
Tenant hereunder, or Tenant's use and occupancy of the demised premises.
- --------------------------------
Space to be filed in or deleted.
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SEE RIDERS ATTACHED HERETO AND MADE A PART HEREOF.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this
lease as of the day and year first above written.
601 WEST ASSOCIATES LLC
Witness for Owner: BY: SLB MANAGER LLC
BY: /s/ Mark Karasick [L.S.]
- ----------------------------------- -------------------------------
NAME: Mark Karasick
TITLE: Member
MARTHA STEWART LIVING
Witness for Tenant: OMNIMEDIA LLC
BY: /s/ Peter Mack [L.S.]
- ----------------------------------- -------------------------------
NAME: Peter Mack
TITLE: Exec Vice President
ACKNOWLEDGEMENTS
CORPORATE TENANT
STATE OF NEW YORK, ss.:
County of
On this day of , 19 , before me personally 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 be 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.
- -------------------------------------
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Address
Premises
TO
STANDARD FORM OF
Loft
Lease
The Real Estate Board of New York, Inc.
(C) Copyright 1994. 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 ......................
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<PAGE> 15
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.
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 of 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. Smoking or carrying
lighted cigars or cigarettes in the elevators of the building in 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 signs on doors and directory tablet shall be inscribed, painted or
affixed for each Tenant by Owner at the expense of such Tenant, and shall be of
a size, color and style acceptable to Owner.
6. No Tenant shall 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. 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 an of these Rules and Regulations of the
lease of which these Rules and Regulations are a part.
8. 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 and under regulations fixed by Owner. Canvassing, soliciting
and peddling is prohibited and each Tenant shall cooperate to prevent the same.
9. Owner reserves the right to exclude from the building all persons
who do not present a pass to the building signed by Owner. Owner will furnish
passes to persons for whom any Tenant requests same in writing. Each Tenant
shall be responsible for all persons for whom he requests such pass and shall be
liable to Owner for all acts of such persons. Tenant shall not
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have a claim against Owner by reason of Owner excluding from the building any
person who does not present such pass.
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INSERTS TO THE FORM LEASE
BETWEEN
601 WEST ASSOCIATES LLC, AS LANDLORD,
AND
MARTHA STEWART LIVING OMNIMEDIA LLC, AS TENANT
1. as well as any other
2. reasonably
3. ("Laws")
4. if same arise out of the Americans With Disabilities Act or out of current
or future Laws regarding fire or life and safety systems or
5. same arise out of the Americans With Disabilities Act or out of current or
future Laws regarding fire or life and safety systems or
6. reasonable
7. to the structure of the Premises and any of Landlord's Work
8. and any of Landlord's Work
9. If there is a fire or other casualty which causes damage or destruction to
the Building, in whole or in part, whereby Tenant is unable to occupy or
gain access to all of the Premises, Tenant may, in writing delivered to
Landlord within sixty (60) days after the damage or destruction, terminate
the Lease as of the date of the damage or destruction, provided that in
Landlord's reasonable estimate, given in writing by Landlord to Tenant
within fifty (50) days, the repair, replacement, restoration or renewal
would likely require more than nine (9) months to substantially complete
or if the damage or destruction occurs within the final twenty-four (24)
months of the lease term. If Tenant does not give the notice within said
sixty (60) day period, or if in Landlord's reasonable estimate the repair,
replacement, restoration or renewal will not likely require more than nine
(9) months to substantially complete, this Lease shall not terminate; but
if the repairs and restoration are not substantially complete within nine
(9) months after the damage or destruction occurred, Tenant shall have
thirty (30) days after the end of such nine (9) month period to give
notice to Landlord that will terminate the Lease upon its receipt;
provided, however, that if the repairs and restorations are substantially
completed within the said sixty (60) day notice period, the termination of
this Lease shall be void ab initio, and this Lease shall continue in full
force and effect.
10. , on reasonable notice,
11. Landlord agrees to make reasonable efforts to minimize interference with
the operation of Tenant's business during the performance of such work.
12. against the Building
13. Landlord shall repair the condition giving rise to any violation placed
against the Premises (but not the Building) prior to the Commencement
Date.
14. In Article 17 (1), all references to "fifteen (15) days" are changed to
"twenty (20) days."
15. after five (5) business days' written notice to Tenant specifying the
nature of such default and upon the expiration of said five (5) business
days, if Tenant shall have failed to remedy such default,
16. Owner shall use reasonable efforts to re-let the Premises.
17. cure
<PAGE> 18
18. Provided that Tenant shall have reasonable access to the Premises through
the lobby at all times,
19. either Owner or Tenant
20. ninety (90) days
21. Landlord agrees to enforce the Rules and Regulations in a
non-discriminatory manner.
2
<PAGE> 1
EXHIBIT 10.13
THIS LEASE, dated as of the 6th day of March, 1996, between NEWTOWN GROUP
PROPERTIES LIMITED PARTNERSHIP, a Connecticut limited partnership, hereinafter
referred to as the Landlord, and TIME PUBLISHING VENTURES INC., a Delaware
corporation, hereinafter referred to as the Tenant.
WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the
Tenant hereby hires and takes from the Landlord, the demised premises described
below on the following terms and conditions.
1. Demised Premises:
The Landlord hereby demises and leases unto the Tenant, and the Tenant
hereby hires and takes from the Landlord, a portion of the building ("building")
situated on the land ("land") described in "Exhibit A" attached hereto and
located at 19 Newtown Turnpike, Norwalk and Westport, Connecticut. Said portion
of said building is shown on "Exhibit B" attached hereto as outlined in bold on
"Exhibit B" attached hereto and is referred to hereinafter as "premises",
Premises", "demised premises" or "Demised Premises". Landlord and Tenant agree
that it shall conclusively be deemed that there are 16,472 rentable square feet
attributable to the demised premises, irrespective of the results of any
calculation and/or measurement hereafter. In addition, Tenant and Tenant's
employees shall use no more than forty-three (43) parking spaces of the parking
lots on the land; the use of all such parking spaces shall be in common with
others and on a non-exclusive, first come/first served basis. Landlord
represents to Tenant that there shall be a total of at least ninety-nine (99)
parking spaces on the land.
2. Term:
The term of this Lease shall a) commence when Landlord shall have
obtained the building permit referred to in Article 6. and CMS Video ("CMS")
shall have vacated the demised premises ("Commencement Date") and b) end five
(5) years thereafter ("initial term").
In the event, but only in the event, that a) Tenant complies
with all provisions of this entire Article as and when required, and b) at the
time of the expiration of the then current term, 1) Tenant, at all times prior
thereto, shall have fully and faithfully complied with and performed all terms
and/or provisions of this Lease, as and when required pursuant to this entire
Lease, and 2) this Lease shall then be in full force and effect, Tenant shall
have three (3) options to extend the term of this Lease for one additional term
("option term"), each such option term being for five (5) years and commencing
at midnight on the date on which the then current term terminates. Said option
as to the immediately following option term shall, at all times hereafter,
automatically, conclusively, absolutely and forever be deemed not to have been
exercised by Tenant, all unless Tenant shall notify Landlord by giving Landlord
written notice ("Notice to Landlord") received by Landlord at least nine (9)
months prior to expiration of the then current term (time being of the essence)
that Tenant elects to exercise said option. Such extension shall be on the same
terms, covenants and conditions as the initial term except for the amount of
Base Rent and further except that there shall be absolutely no option whatsoever
to extend the term of this Lease beyond the third such option term. The Base
Rent due and payable for each Lease Year of each such option term shall be the
greater of 1) the amount recalculated for each Lease Year of each such option
term pursuant to 3.b) of this Lease or 2) the fair market rental for demised
premises determined by Landlord and Tenant at least ninety (90) days prior to
inception of such option term. In the event Landlord and Tenant do not agree as
to said fair market rental at least ninety (90) days prior to the inception of
such option term, said fair market rental shall be determined pursuant to the
Article of this Lease entitled "Disputes". In the event that, prior to inception
of such option term, said agreement is not reached and/or said determination is
not made as to the amount of fair market rental for such option term, Tenant
shall pay Landlord: 1) on the first day of each month of such option term, until
said agreement is reached or said determination is made, the amount of Base Rent
due pursuant to 1) of the fourth sentence of this paragraph, same to be applied
to the amount of Base Rent ultimately determined to be due for such option term,
2) immediately upon the reaching of said agreement or making of said
determination, the difference, if any, between said Base Rent ultimately
determined to be due for such option term and the amount paid pursuant to 1) of
this sentence, and 3) at all times after the reaching of said agreement or
making of said determination, on the first day of each month of such option term
the amount of Base Rent ultimately determined to be due for such option term.
<PAGE> 2
Notwithstanding any of the foregoing, in the event 1) the Landlord
delivers written notice to Tenant that Landlord or Popshots, Inc. elects to
utilize demised premises during the second and/or third of said option terms,
and 2) said notice is delivered to Tenant at least nine (9) months prior to the
inception of the first of said second and/or third option terms so elected to be
utilized, then in such event Tenant shall have no further rights thereafter
relative to such of said second and/or third option terms so elected to be
utilized.
"Lease Year" as used throughout this entire Lease shall mean each
twelve (12) month period, with the first Lease Year commencing on Commencement
Date.
3. Base Rent:
The Base Rent ("Base Rent" or "rent") for the term shall be the
following which shall be paid in advance on the Commencement Date and on the
same day of each calendar month (or closest day as to any month in which there
is no such same day) thereafter:
a) Said first Lease Year (i.e. from and including Commencement Date
through and including twelve (12) months thereafter): twelve (12) monthly
payments, each in the monthly amount of $15,789.00; and
b) Each Lease Year thereafter: twelve (12) monthly payments, each in
the monthly amount of the greater of (i) the monthly amount of Base Rent which
shall have been due for the immediately preceding Lease Year (which for the sole
purpose of computing Base Rent for the second Lease Year shall be deemed to have
been $26,081.00) multiplied by 1.02, or (ii) $26,081.00 multiplied by a fraction
the numerator of which shall be the CPI for the month which is three (3) months
immediately preceding the inception of the subject Lease Year and the
denominator of which shall be the CPI for the month which is three (3) months
immediately preceding the inception of the first Lease Year.
"CPI" shall mean the CPI-U Indexes ("CPI-U Indexes") of Table 2.
Consumer Price Index for All Urban Consumers (CPI-U) and Consumer Price Index
for Urban Wage Earners and Clerical Workers (CPI-W): Selected areas, all items
index (1982-84=100, unless otherwise noted), for Selected local areas,
N.Y.-Northern N.J.-Long Island, NY-NJ-CT, published by the Bureau of Labor
Statistics of the United States Department of Labor (or in the event, but only
in the event, that CPI-U Indexes shall cease to be so published, the CPI-W
Indexes of said Table, for N.Y.-Northern N.J.-Long Island, NY-NJ-CT, published
by said Bureau of said Department). In the event the CPI shall hereafter be a)
converted to a different standard reference Base or otherwise revised, or b)
cease to be published, the determination of the annual rent for each such Lease
Year of such option term shall be made with the use of such conversion factor,
formula, table or method for converting the CPI as may be published by the
Bureau of Labor Statistics, or, failing such latter publication, the use of such
conversion factor, formula, table or method as may be published by Prentice
Hall, Inc., or, failing such latter publication, then with the use of conversion
factor, formula, table or method as may be published or used by any other
nationally recognized publisher selected solely by Landlord or similar
statistical information selected solely by Landlord.
4. Payment of Base Rent, etc.:
Said Base Rent (and all other sums due pursuant to this Lease) shall be
paid without abatement, setoff, deduction, demand, and/or any notice whatsoever,
monthly in advance, in installments as set forth above, (and/or as otherwise set
forth in this Lease) at P.O. Box 707, Westport, Connecticut 06881 or as may be
otherwise directed by the Landlord in writing.
5. Peaceful Possession:
The Landlord covenants that the Tenant, on paying said Base Rent and
all other sums due pursuant to this Lease and performing the covenants and
conditions in this Lease contained, shall and may peaceably and quietly have,
hold and enjoy the demised premises for the term aforesaid.
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<PAGE> 3
6. Purpose:
The Tenant shall use the demised premises only for offices, kitchen and
a television studio and for no other use whatsoever. Within a reasonable time
after Landlord shall have received from Tenant all plans, calculations,
approvals and all other documents and items required relative to the filing
referred to in this sentence, Landlord shall file with the Building Department
of the City of Norwalk an application and all other documents required to obtain
a building permit for Tenant to construct improvements on demised premises all
as Tenant and Landlord shall have previously and expressly approved in writing.
In the event that a) offices, kitchen and a television studio are not uses
permitted in the building by the applicable zoning authorities without any
further approval of said authorities, and b) any such approval is required in
order to obtain such building permit as Landlord shall apply for:
A. Within a reasonable time after a) and/or b), in the immediately
preceding paragraph, are determined, Landlord shall file and submit to all
applicable authorities all documents required to obtain said building permit and
all approvals required as a condition precedent thereto. Landlord shall, at all
times thereafter, diligently pursue obtaining 1) all of said building permit and
approvals and 2) resolution to Tenant's and Landlord's reasonable satisfaction
of all appeals from any of foregoing;
B. Each party shall pay its own legal fees and other costs relative to
Landlord's obtaining said building permit, approvals and resolution (except that
Landlord shall pay the fee required by the City of Norwalk to obtain said
building permit); and
C. If said building permit, approvals and/or resolution are not
obtained prior to July 1, 1996, either Tenant or Landlord may, forthwith, at any
time thereafter, terminate, absolutely and forever, all of its respective rights
and obligations pursuant to this entire Lease, all provided that, prior to the
obtaining of said building permit, approvals and/or resolution, the other party
shall have received written notice from the terminating party of the terminating
party's election to so terminate pursuant to Article 40. of this Lease. All
dates and time periods referred to in the immediately preceding sentence shall
be on a time is of the essence basis.
Each party shall fully cooperate with the other relative to foregoing
in all reasonable ways.
7. Re-entry, etc.:
The Tenant shall, without any previous demand therefor, pay to the
Landlord, or its agent, said Base Rent and all other sums due pursuant to this
Lease, and perform all terms of this Lease, at the times and in the manner
provided. In the event of the a) non-payment of said Base Rent, and/or any
installment thereof, and/or any other sums due pursuant to this Lease within
five (5) days after the dates when due, b) failure to perform all terms of this
Lease, at the times and in the manner provided, and if said failure shall not
have been cured within fifteen (15) days after notice to Tenant (said b)
collectively referred to hereafter as "failure regarding other terms") and/or c)
deserting and/or vacating of the demised premises, the Landlord or its agents
shall have the right to and may enter said demised premises as the agent of the
Tenant, without being liable therefor, and may relet the demised premises, and
receive said Base Rent therefor, and all other sums due pursuant to this Lease,
upon such terms as shall be satisfactory to the Landlord, and all rights of the
Tenant to repossess the demised premises under this Lease shall be forfeited.
Such re-entry by the Landlord shall not operate to release the Tenant from any
of said Base Rent and all other sums due pursuant to this Lease and/or from any
covenants to be performed hereunder during the full term of this Lease. For the
purpose of reletting, the Landlord shall be authorized to make such repairs or
alterations in or to the demised premises as may be necessary to place the same
in good order and condition. The Tenant shall be liable to the Landlord for the
cost of such repairs or alterations, provided such repairs or alterations are
reasonable, and all expenses of such reletting. If the sum realized or to be
realized from the reletting is insufficient to satisfy said Base Rent and all
other sums due pursuant to this Lease, the Tenant shall forthwith pay such
entire deficiency. The Tenant shall not be entitled to any surplus accruing as a
result of the reletting. Each party to this Lease shall pay, as additional rent,
all reasonable attorney's fees and other expenses incurred by the other party in
enforcing any of the obligations under this Lease provided said other party
shall prevail in said enforcement. Notwithstanding the provisions of
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<PAGE> 4
the second sentence of this paragraph, in the event, but only in the event, that
any such "failure regarding other terms" 1) can not be cured within fifteen (15)
days after notice to Tenant and 2) does not or will not result in any a) harm,
damage and/or liability to the land, building, demised premises, Landlord and/or
Tenant and/or any other party and/or property, b) default and/or breach of any
other lease, c) default and/or acceleration of any note, mortgage, assignment of
leases or other loan document relating to the land and/or building, c)
violation, cancellation and/or termination of, and/or increase in premiums
relative to, any insurance policy existing presently and/or hereafter and/or d)
violation of, non-compliance with and/or action pursuant to any governmental
law, ordinance, and/or regulation, then in the event of 1) and 2), but only in
the event of 1) and 2), Landlord shall not have any of the rights set forth in
the second sentence of this paragraph provided Tenant commences to cure said
"failure regarding other terms" within fifteen (15) days after notice to Tenant
and Tenant diligently pursues said cure at all times thereafter until said
failure regarding other terms has been fully cured.
8. Sub-letting and Assignment:
The Tenant shall not sub-let the demised premises or any portion
thereof, nor assign or encumber this Lease or any portion thereof, without the
prior express written consent of the Landlord (which consent shall not be
unreasonably withheld and the decision relative to any such consent shall not be
delayed more than thirty (30) days from the date Landlord receives all items to
which Landlord is entitled pursuant to this entire paragraph). Said consent may
be withheld, in the sole reasonable discretion of the Landlord and/or any
present and/or future holder of any present and/or future mortgage on the land
and/or building, for reasons which shall include, but not be limited to, the
determination as to any proposed sublessee, assignee and/or encumbrance holder
(collectively, "transferee") whether alone and/or in comparison with Tenant,
relative to any business, financial, personal and/or other issue and/or
consideration, including, but not limited to, (i) previous business experience,
(ii) proposed business, (iii) previous, present and/or projected income, assets,
liabilities and net worth, (iv) financial history, (v) character and/or (vi)
other matters. In order to assist the determination of any request for such
consent, Tenant shall deliver to Landlord the following: a) simultaneously with
said request, written (i) description by transferee of the previous business
experience of, and business proposed by, transferee, (ii) references from two
other parties ("other parties") describing transferee's character, previous
business experience, financial history and present financial status, (iii)
consent of, and authorization from, transferee to a) Landlord for Landlord to
contact said other parties and/or any other company and/or agency which is
hereafter in the business of providing and/or reporting credit, financial and/or
other business documents and/or information (collectively, "credit companies")
and to obtain from said other parties and/or credit companies such further
documents and/or other information as to transferee as Landlord may thereafter
request from said other parties and/or credit companies, and b) said other
parties and/or credit companies for said other parties and/or credit companies
to provide Landlord with all of said further documents and/or other information,
and (iv) financial statements (including balance sheets and income statements)
and all tax returns of transferee and Tenant for the two immediately preceding
years, b) thereafter, any further documents and/or information Landlord may
reasonably request, and c) each time Tenant delivers any of foregoing to
Landlord, the consent of, and authorization from, Tenant, transferee said other
parties and said credit companies to Landlord to provide all of foregoing to all
of said present and/or future holders of said present and/or future mortgages.
Notwithstanding the foregoing, on one (1) occasion only, Tenant may so sub-let
or assign to any one (1) of the following, provided that, at the time of the
"one-time transaction" referred to hereafter, the party to whom or which,
pursuant to any such "one-time transaction", the demised premises are sub-let or
this Lease is assigned, then has a net worth satisfactory to all parties which,
at the time of said "one-time transaction", hold a loan secured by a mortgage on
the land and/or building ("holders"), all of foregoing being subject to the sole
discretion of all of said holders: 1) an entity, the majority of interests in
which is then owned by a) Martha Stewart Living TV, Inc., a Connecticut
corporation, or b) Martha Stewart, an individual of Westport, Connecticut, or 2)
said Martha Stewart, individually, which one (1) sub-letting or assignment shall
hereafter be referred to as ("one-time transaction"). Further notwithstanding
the foregoing, Tenant may permit the demised premises to be occupied, pursuant
to all terms of this Lease, by any other entity owned entirely by a) Time Warner
Inc. ("TWI"), a publicly-owned, traded and held company, the stock for which is
presently traded on the New York Stock Exchange, or b)
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<PAGE> 5
any entity owned entirely by TWI (any such occupancy referred to in this
sentence hereafter referred to as "TWI-related occupancy").
In addition to any and all other amounts due from Tenant to Landlord,
rights and/or remedies of Landlord and/or obligations and or liabilities of
Tenant, all whether or not same accrue and/or are due prior to, upon and/or
after any such consent, sub-letting, assignment or encumbering, Tenant shall pay
Landlord the following within seven (7) days of Landlord's demand for same (said
seven (7) day period being on a time is of the essence basis wherever said seven
(7) day period is referred to in this entire Article): a) whether or not said
consent is given and/or one-time transaction is made and/or said TWI-related
occupancy is so permitted by Tenant, all reasonable expenses incurred by
Landlord relative to and/or resulting from said request, determination, consent,
subletting, assignment, encumbering, one-time transaction and/or TWI-related
occupancy, and/or any modification of this Lease, and/or review of any of
foregoing, including, but not limited to, attorneys' fees, accountants' fees,
consultants' fees, credit and/or financial report and/or search fees and/or the
like, but in no event more than Five Thousand and 00/100 ($5,000.00) Dollars,
and b) if said consent is given, the further sum of the difference, if any,
between Five Thousand and 00/100 ($5,000.00) Dollars and the amount paid by
Tenant to Landlord pursuant to a) of this sentence.
In the event said a) consent is given and/or b) TWI-related occupancy
is permitted by Tenant, the Tenant shall be and remain jointly and severally
liable with transferee and/or occupant for any and all obligations and
liabilities pursuant to this entire Lease, all whether or not same accrue and/or
are due prior to, upon and/or after, and notwithstanding, any such consent,
TWI-related occupancy, subletting, assignment and/or encumbering; none of said
obligations and liabilities shall be merged in any such consent, TWI-related
occupancy, subletting, assignment or encumbering but shall survive same. Within
five (5) business days of Landlord's demand for same (said five (5) business day
period being on a time is of the essence basis wherever said five (5) business
day period is referred to in this entire Article), Tenant shall deliver to
Landlord Tenant's written confirmation ("confirmation") of all contents of the
immediately preceding sentence.
Any such consent, one-time transaction, TWI-related occupancy,
subletting, assignment and/or encumbering shall be deemed to be expressly a)
conditioned upon Landlord's receipt of (i) all amounts referred to in the second
paragraph of this Article 8. within the seven (7) day period referred to in said
second paragraph and (ii) the confirmation referred to in the third paragraph of
this Article 8. within the five (5) business day period referred to in said
third paragraph, and b) null, void and of no effect whatsoever if Landlord does
not receive all of said amounts and confirmation within said seven (7) day
period and five (5) business day period, respectively.
9. Condition of Premises, Repairs/Alterations and Improvements/
Sanitation, Inflammable Materials/Sidewalks:
The Tenant shall quit and surrender the demised premises at the end of
the demised term in as good condition as the reasonable use thereof will permit.
Tenant's obligations pursuant to the immediately preceding sentence shall
include, but not be limited to, Tenant's providing, and paying all costs of,
reasonable cleaning of, and waste removal from, demised premises. The Tenant
shall not make any alterations, additions, or improvements to the demised
premises without the Landlord's 1) prior express written initial consent of same
(except that Landlord hereby consents to all items referred to in "Exhibit C"
subject to Landlord's prior express written initial consent to plans and
specifications for same) and 2) final express written approval of all of same
as-built, which consent and approval, inter alia, need not violate any mortgage
now or hereafter affecting demised premises and shall require that Tenant
complies with all governmental regulations relative to all of foregoing. Tenant
shall pay, as and when due, all costs of all such alterations, additions and
improvements. The Tenant shall pay all costs of all repairs, replacements,
renovations, alterations, additions, improvements and/or maintenance required to
or for demised premises reasonably determined by Landlord to be required due to
the use of the demised premises by and/or on behalf of Tenant and/or its agents,
servants and/or invitees (except repairs which are so required to a) structural
elements and/or b) systems, of the demised premises and/or building; however,
Tenant shall pay all costs of all repairs which are so
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<PAGE> 6
required to a) structural elements and/or b) systems, of the demised premises
and/or building, if said repairs result from the act and/or failure to act of
and/or on behalf of Tenant, its agents, servants and/or invitees). The Tenant
shall wash the inside and the outside of all windows of demised premises at
least once every three (3) months. All erections, alterations, additions and
improvements, whether temporary or permanent in character, which may be made
upon the demised premises either by the Landlord or the Tenant, except
furniture, studio equipment, or moveable trade fixtures installed at the expense
of the Tenant and which are removed by Tenant at its cost and without damage to
the land, building or premises, shall be the property of the Landlord and shall
remain upon and be surrendered with the demised premises as a part thereof at
the termination of this Lease, without compensation to the Tenant. The Tenant
has reviewed the demised premises and accepts same in the "as is" condition. At
least ten (10) days prior to expiration or termination of this Lease, Tenant, at
the option of the Landlord, shall, at Tenant's sole cost, restore the Premises
to the condition they were in at the inception of the initial term prior to any
erections, alterations, additions and/or improvements (except those expressly
agreed to by Landlord without the condition of Tenant's restoration of the
Premises).
10. Liens:
In the event that any lien is filed against the demised premises as a
result of any act and/or omission by and/or on behalf of Tenant and/or Tenant's
agents, servants, employees, contractors and/or invitees, after thirty (30)
days' notice to the Tenant (unless any present or future mortgagee of the
demised premises shall require a shorter notice period or no notice period, in
which event said shorter notice period or no notice period shall apply) the
Tenant shall have said lien released and discharged at Tenant's sole cost, and
if said lien is not so released and discharged within said period, the Landlord,
at its option, may terminate this Lease and/or pay said lien, without inquiring
into the validity thereof, and the Tenant shall forthwith reimburse the Landlord
the total expense incurred by the Landlord in releasing and/or discharging said
lien, as additional rent hereunder.
11. Liability of Landlord:
The Landlord shall not be responsible for the loss of or damage to
property or injury to persons occurring at the demised premises, by reason of
any existing or future condition, defect, matter or thing at the demised
premises or the property of which the demised premises are a part, or for the
acts, omissions or negligence of other persons or entities at the demised
premises. The Tenant agrees to, shall, and does hereby, indemnify and save the
Landlord harmless from all claims and liability for losses of or damage to
property, or injuries to persons occurring at the demised premises.
12. Services, Utilities and Other Expenses:
Utilities furnished to the demised premises for the benefit of the
Tenant shall be provided by Landlord. In addition to all Base Rent and all other
sums due pursuant to this Lease, utilities, services and other costs shall be
paid for as set forth in "Schedule 1" attached hereto. The Landlord shall not be
liable for any interruption or delay in any of the above services for any reason
whatsoever.
13. Right to Inspect and Exhibit:
The Landlord, or its agents shall have the right to enter the demised
premises at reasonable hours provided reasonable advance notice is given to the
Tenant, to examine the same, or to run telephone or other wires, or to make such
repairs, additions or alterations as it shall reasonably deem necessary for the
safety, preservation or restoration of the building and improvements, or for the
safety or convenience of the occupants or users thereof, or to exhibit the same
to prospective purchasers, lenders and/or agents, and put upon the premises a
suitable sign. In the event Tenant shall not have validly exercised all of the
options herein provided, for six (6) months prior to the expiration of the
initial term and all option terms immediately preceding any option terms not so
validly exercised, the Landlord, or its agents, may similarly exhibit the
premises to prospective tenants and/or agents, and may place the usual "To Let"
signs thereon.
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<PAGE> 7
14. Damage by Fire, Explosion, The Elements or Otherwise:
In the event of the 1) total destruction of the demised premises or the
building by fire, explosion, the elements or otherwise during the term hereby
created, or previous thereto, or 2) such partial destruction thereof as to
render the demised premises a) wholly untenantable and unfit for occupancy, or
b) not repairable within one hundred eighty (180) days from the happening of
such injury, then and in such case, all sums due relative to any period
thereafter shall equitably abate, and, at the option of Tenant or Landlord, the
term hereby created shall cease and become null and void from the date of such
damage or destruction and the Tenant shall immediately surrender said demised
premises and all the Tenant's interest therein to the Landlord, and shall pay
Base Rent and all other sums due pursuant to this Lease as may have been so
equitably abated, only to the time of such surrender, in which event the
Landlord may re-enter and re-possess the demised premises thus discharged from
the Lease and may remove all parties therefrom. Should the demised premises be
partially destroyed and rendered partially untenantable and unfit for occupancy,
but yet be repairable within ninety days from the happening of said injury, the
Landlord shall and may enter and repair the same, shall commence repairs as soon
as practical and proceed diligently to complete said repairs, and the Base Rent
and all other sums due pursuant to this Lease shall be equitably abated from the
date of said injury until said repairs are completed, and shall recommence in
full immediately after said repairs shall be completed. Should the demised
premises not be rendered untenantable and unfit for occupancy, then the Landlord
shall and may enter demised premises and repair the same with reasonable
promptness and in that case the Base Rent and all other sums due pursuant to
this Lease accrued and accruing shall not cease or be reduced. The Tenant shall
immediately notify the Landlord in case of fire or other damage in the demised
premises of which Tenant has notice.
15. Observation of Laws, Ordinances, Rules and Regulations:
Subject to the provisions expressly appearing in parenthesis in the
fifth sentence of Article 9. of this Lease, the Tenant shall observe and comply
with all laws, ordinances, rules and regulations of the Federal, State, County
and Municipal authorities applicable to the business to be conducted by the
Tenant in the demised premises. The Tenant agrees not to do or permit anything
to be done in the demised premises, or keep anything therein, which will
increase the rate of fire insurance premiums on the improvements or any part
thereof, or on property kept therein, or which will obstruct or interfere with
the rights of other tenants, or conflict with the regulations of the Fire
Department or with any insurance policy upon the building, the land on which the
building is located and/or any other improvements on said land. In the event of
any increase in insurance premiums resulting from the Tenant's occupancy of the
demised premises, or from any act or omission on the part of the Tenant, the
Tenant agrees to pay said increase in insurance premiums on the improvements or
contents thereof as additional rent. Landlord represents to Tenant that the
current insurance rating and annual premiums relative to the building and
present fire and extended coverage insurance policies are Protection Class 04
651 21 Office: NOC and $l,852.00, respectively.
16. Signs:
No sign, advertisement, or notice (collectively, "sign") shall be
affixed to or placed upon any part of the demised premises by the Tenant, except
in such manner, and of such size, design and color as shall be expressly
approved in advance in writing by the Landlord (said approval not to be
unreasonably withheld). Landlord shall attend to the obtaining and placing of
all signs approved by Landlord, and Tenant shall forthwith pay Landlord for all
of same.
17. Subordination to Mortgages and Deeds of Trust, etc.:
This Lease is subject and subordinate, and is hereby subjected and
subordinated, to all present and/or future mortgages, deeds of trust and other
encumbrance affecting the demised premises, land or building. The Tenant,
forthwith upon demand of Landlord, shall execute and deliver to Landlord, at no
expense to Landlord, all instruments which may reasonably be deemed necessary or
desirable by the Landlord to further effect, and/or to confirm, the subjection
and subordination of this Lease to any such present and/or future mortgage, deed
of trust or encumbrance. The Tenant further, forthwith upon demand of Landlord,
shall execute and deliver to Landlord, at no expense to Landlord, all estoppel
certificates and ratification and attornment
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agreements as requested by Landlord relative to any proposed refinancing and/or
sale of the land and/or building. Within fifteen (15) days after Tenant's
execution and delivery to Landlord of this Lease and the security deposit
required hereunder, Landlord shall deliver to Tenant a Subordination,
Non-Disturbance and Attornment Agreement in substantially the same form and
content as "Exhibit D" attached hereto executed by the present mortgagee of the
land. Landlord shall use its best efforts to deliver to Tenant an agreement in
substantially the same form and content as said "Exhibit D" executed by all
future mortgagees of the land.
18. Non-Payment and/or Failure to Comply with Covenants, Forfeiture of
Lease, Non-Waiver of Breach, Attorneys' Fees etc.:
In case Tenant a) does not pay any sum due pursuant to this Lease as
and when due, including, but not limited to, Base Rent and/or net costs, within
five (5) business days after the dates when due, and/or b) fails to fully comply
with any of the other covenants, agreements and conditions of this Lease as and
when due, and, as to (b) fails to discontinue such failure to comply referred to
in b) within 15 business days after notice thereof given to the Tenant (said b)
collectively referred to hereafter as "failure regarding other terms"), this
Lease shall thenceforth, at the option of the Landlord, become null and void. In
such case, all Base Rent and all other sums due pursuant to this Lease
theretofore, and/or which would have become due thereafter (discounted to the
then present value, using a discount rate of 8% per annum), shall forthwith
become due and payable, and the Tenant shall be liable for all loss or damage
resulting from such violation as aforesaid. No waiver by the Landlord of any
violation or breach of condition by the Tenant shall constitute or be construed
as a waiver of any other violation or breach of condition, nor shall lapse of
time after breach of condition by the Tenant before the Landlord shall exercise
its option under this paragraph operate to defeat the right of the Landlord to
declare this Lease null and void and to re-enter upon the demised premises after
the said breach or violation. In any of said events Tenant shall pay Landlord
all costs reasonably incurred by Landlord as a result of said nonpayment and/or
failure to comply, including, but not limited to, all reasonable attorneys'
fees, experts' fees and court costs. Notwithstanding the provisions of the first
sentence of this paragraph, in the event, but only in the event, that any such
"failure regarding other terms" 1) can not be cured within fifteen (15) days
after notice to Tenant and 2) does not or will not result in any a) harm, damage
and/or liability to the land, building, demised premises, Landlord and/or Tenant
and/or any other party and/or property, b) default and/or breach of any other
lease, c) default and/or acceleration of any note, mortgage, assignment of
leases or other loan document relating to the land and/or building, c)
violation, cancellation and/or termination of, and/or increase in premiums
relative to, any insurance policy existing presently and/or hereafter and/or d)
violation of, non-compliance with and/or action pursuant to any governmental
law, ordinance, and/or regulation, then in the event of 1) and 2), but only in
the event of 1) and 2), Landlord shall not have any of the rights set forth in
the first sentence of this paragraph provided Tenant commences to cure said
"failure regarding other terms" within fifteen (15) days after notice to Tenant
and Tenant diligently pursues said cure at all times thereafter until said
failure regarding other terms has been fully cured.
In addition to all of, and not in lieu of any of, Landlord's other
rights and/or remedies and/or Tenants' other obligations, forthwith upon any
failure of Tenant to fully and faithfully comply with all provisions of this
entire Lease, including, but not limited to, paying all Base Rent, additional
rent, rent, net costs, and all other sums due pursuant to this entire Lease,
Tenant shall pay Landlord five (5%) percent of all amounts Tenant fails to pay
as and when required by this Lease, for each month said failure of Tenant to so
fully and faithfully comply with all provisions of this entire Lease continues.
Said five (5%) percent shall conclusively a) represent the estimate of the
Landlord and Tenant of one (1) of Landlord's costs relative to said failure of
Tenant, and b) not be deemed to constitute a penalty.
Landlord shall have the obligation to use reasonable efforts to
mitigate its damages.
19. Notices:
All notices and demands, legal or otherwise, incidental to this Lease,
or the occupation of the demised premises, shall be in writing. If either party
or its agent desires to give or serve upon the other party any notice or demand,
it shall be sufficient to send a copy thereof by Certified Mail, Return Receipt
Requested, addressed to said other party at the address set forth in the
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immediately following sentence with a copy to a) David Steward at Time
Publishing Ventures Inc., 20 West 43rd St., NY, NY 10036, and Walter Censor,
Time Inc., 1271 6th Ave., NY, NY 10020.* Notices from the Landlord to the Tenant
shall be to the demised premises and from the Tenant to the Landlord shall be to
the place hereinbefore designated for the payment of rent. Landlord or Tenant
may from time to time designate in writing a change of the place to which notice
shall be given to said designating party.
20. Bankruptcy, Insolvency, Assignment for Benefit of Creditors:
It is further agreed that if at any time during the term of this Lease
the Tenant shall make any assignment for the benefit of creditors, or be decreed
insolvent or bankrupt according to law, or if a receiver shall be appointed for
the Tenant, then the Landlord may, at its option, terminate this Lease, exercise
of such option to be evidenced by notice to that effect served upon the
assignee, receiver, trustee or other person in charge of the liquidation of the
property of the Tenant or the Tenant's estate, but such termination shall not
release or discharge any payment of Base Rent and/or any other sums due
theretofore and/or thereafter pursuant to this Lease, or any liability by reason
of any agreement or covenant herein contained on the part of the Tenant.
21. Holding Over by Tenant:
In the event that the Tenant shall remain in the demised premises after
the expiration of the term of this Lease without Landlord's and Tenant's having
executed a new written lease, such holding over shall not constitute a renewal
or extension of this Lease. The Landlord may, at its option, elect to treat the
Tenant as one who has not removed at the end of his term, and thereupon be
entitled to all the remedies against the Tenant provided by law in that
situation, or the Landlord may elect, at its option, to construe such holding
over as a tenancy from month to month, subject to all the terms and conditions
of this Lease, except as to duration thereof, and in that event the Tenant shall
pay monthly rent in advance at the rate of 200% of the Base Rent due for the
last mouth of the demised term plus all other sums due pursuant to this Lease.
22. Eminent Domain, Condemnation:
If the property or any part thereof wherein the demised premises are
located shall be taken by public or quasi-public authority under any power of
eminent domain or condemnation, this Lease at the option of the Landlord shall
forthwith terminate and the Tenant shall have no claim or interest in or to any
award of damages for such taking.
Notwithstanding the foregoing, Tenant shall have the right separately
to pursue against the condemning authority an award in respect of the loss, if
any, to leasehold improvements paid for by Tenant without any credit or
allowance from Landlord and in respect to the loss of Tenant's leasehold
interest.
23. Disputes:
Any dispute arising under this Lease shall be settled by arbitration.
The Landlord and Tenant shall each choose an arbitrator, and the two arbitrators
thus chosen shall select a third arbitrator. The findings and award of the three
arbitrators thus chosen shall be final and binding on the parties hereto.
For disputes hereunder that are not resolved by the parties within ten
(10) days after either party gives notice to the other of its desire to
arbitrate the dispute, the dispute shall be settled by binding arbitration by
the American Arbitration Association in accordance with its then-prevailing
rules at the office of the American Arbitration Association nearest the demised
premises. Judgment upon the arbitration award may be entered in any court having
jurisdiction. The arbitrators shall have no power to change the lease
provisions. The arbitration panel shall consist of three arbitrators, each of
whom must be a commercial real estate broker then actively engaged in the
practice of commercial real estate brokerage in Fairfield County for at least
the immediately preceding five (5) years. Both parties shall continue performing
their lease obligations pending the award in the arbitration proceeding.
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* , if to Tenant and b) Peter Van Witt at c/o Popshots, Inc., P.O. Box 707,
Westport, CT 06881 and Henry A. Perles, Esq. at Kleban & Samor, P.C., 2425 Post
Road, Southport, CT 06490, if to Landlord(11)
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<PAGE> 10
24. Delivery of Lease:
No rights shall be conferred upon the Landlord and/or Tenant until this
Lease has been signed by the Landlord and Tenant, and an executed copy of this
Lease has been delivered to the Landlord and Tenant.
25. Lease Provisions Not Exclusive:
The foregoing rights and remedies are not intended to be exclusive but
as additional to all rights and remedies the Landlord would otherwise have by
law.
26. Lease Binding on Heirs, Successors, Etc.:
All of the terms, covenants and conditions of this Lease shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties hereto.
This Lease and all obligations of Tenant to pay Base Rent and all other
sums due pursuant to this Lease and perform all of the other covenants and
agreements hereunder on part of Tenant to be performed shall not be modified,
reduced, altered and/or affected in any manner and/or to any extent whatsoever,
if Landlord is unable 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
repairs, 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 governmental preemption in connection with
the National Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department or subdivision
thereof of any governmental agency, or by reason of the conditions of supply and
demand, or by reason of strike, or by reason of any other cause beyond
Landlord's control.
27. Security:
The Tenant has this day deposited with Landlord $50,000.00 as security
for the full and faithful performance by the Tenant of all the terms, covenants
and conditions of this Lease upon the Tenant's part to be performed, which said
sum shall be returned to the Tenant, with interest at the passbook rate paid
from time to time by banks reasonably chosen by Landlord (although Landlord
shall have no obligation to deposit any or all of said security) after the time
fixed as the expiration of the term herein, provided Tenant has vacated demised
premises, removed all personalty therefrom and has fully and faithfully carried
out all of said terms, covenants and conditions on Tenant's part to be
performed. In the event of a bona fide sale, the Landlord shall have the right
to transfer the security to the vendee for the benefit of the Tenant and the
Landlord shall be considered released by the Tenant from all liability for the
return of such security; and the Tenant agrees to look to the vendee solely for
the return of the said security, and it is agreed that this shall apply to every
transfer or assignment made of the security to a vendee. The security deposited
under this lease shall not be mortgaged, assigned or encumbered by the Tenant
without the written consent of the Landlord. In the event any or all of said
security is utilized by Landlord, the entire amount so utilized shall be
replenished by Tenant's depositing with Landlord a further sum in the amount so
utilized forthwith upon Landlord's notification to Tenant of said utilization.
28. Confidentiality:
All terms of this entire Lease ("terms") shall be held by Landlord and
Tenant is strict and absolute confidence and not revealed to any other party
whatsoever except for the sole purpose of enabling 1) Landlord or Tenant to
obtain financing and/or appropriately communicate with its attorneys and/or
accountants and/or with companies owning and/or owned by Landlord or Tenant
and/or 2) Landlord to sell the land and/or building. Notwithstanding anything
contained in this entire Lease, and in addition to all of its other rights and
remedies, Landlord and Tenant shall be entitled to any or all of the following
in the event the other party does not fully and faithfully comply with all
provisions of this paragraph and/or it appears that Tenant will not so fully and
faithfully comply: a) injunctive relief for the reason that a monetary award
would not constitute an adequate remedy for any such failure to so fully and
faithfully comply, and/or b) an increase in the Base Rent for the entire initial
term from its inception and option term from its inception,
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so that the annual Base Rent during the entire initial term from its inception
and option term from its inception shall be the amount computed and re-computed
from time to time by Landlord as a) the highest per square foot rent to which
Landlord is entitled presently and/or hereafter, pursuant to any other lease
which is or may be in effect presently and/or hereafter and relates to any other
portion of the building, b) multiplied by the rentable square footage of the
demised premises. All provisions of this entire paragraph shall survive the
termination of this Lease, and shall not be merged in same.
29. Brokerage:
Tenant and Landlord warrant and represent they have not dealt with any
realtor, broker and/or agent, in connection with this Lease, including, but not
limited to, the negotiation, entering into, execution and/or delivery of this
Lease, other than William Raveis Real Estate. Tenant and Landlord shall pay, and
shall, and do hereby, hold harmless and indemnify the other from and against,
any and all costs, expenses, damages and/or liabilities (including, but not
limited to, all compensation, commissions, fees, costs of suit, witnesses' fees,
experts' fees and/or attorneys' fees) with respect to the indemnitor's dealing
with any other broker in connection with this Lease, including, but not limited
to, the negotiation, entering into, execution and/or delivery of this Lease.
30. Sale or Assignment by Landlord, Etc.:
Without any further act, agreement, consent and/or the like whatsoever
of the Landlord, Tenant, any other person, entity and/or party and/or their
respective heirs, successors and/or assigns: a) The Landlord shall have the
right to sell, assign and/or transfer all or any part of the land, building,
other buildings, Demised Premises, this Lease and/or any benefits pursuant to
this Lease, and b) forthwith upon any such sale, assignment, and/or transfer,
absolutely and forever, the seller, assignor and/or transferor pursuant to such
sale, assignment and/or transfer shall be entirely relieved of all of Landlord's
obligations under this Lease which are required to be performed and/or complied
with after such sale, assignment and/or transfer, provided a) the purchaser,
assignee and/or transferee pursuant to such sale, assignment and/or transfer
shall have assumed and agreed to be obligated and responsible for all of said
obligations and/or b) any such sale, assignment and/or transfer shall be subject
to all provisions of this Lease.
The term "Landlord" as used in this Lease shall mean the Landlord
and/or the owner for the time being of the Demised Premises.
31. Landlord's Rights to Perform Tenant's Covenants:
If Tenant shall at any time fail to perform, and/or cause to be
performed, any obligation of Tenant pursuant to the provisions of this Lease,
then, after the expiration of any notice and cure period expressly provided in
this Lease, Landlord shall have the right, but not the obligation, after ten
(10) days' notice to Tenant (but without notice in the event of an emergency)
and without waiving, and/or releasing Tenant from, any obligation of Tenant in
this Lease contained, to perform same, in such manner and to such extent as
Landlord shall, in its sole reasonable discretion decide, and in exercising any
such rights, pay and incur necessary and incidental costs and expenses,
including, but not limited to, reasonable attorneys' fees. Forthwith upon
Landlord's demand therefor, Tenant shall reimburse Landlord for all sums paid by
Landlord pursuant to this entire Lease, including, but not limited to, this
Article, with interest at the rate of 8% per annum, and Landlord shall have the
same rights and remedies in the event of the nonpayment thereof by Tenant as in
the case of default by Tenant in the payment of the rent.
32. No Representations by Landlord:
Neither Landlord nor anyone on behalf of Landlord has made any
representations, promises and/or the like with respect to the Demised Premises,
building, land and/or other buildings (including, but not limited to, any
representations, promises and/or the like relative to condition, square footage
and/or permitted zoning uses of Demised Premises, building, land and/or other
buildings) on which Tenant has relied, except as expressly herein set forth.
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Landlord hereby represents the following to Tenant:
1. During the spring of 1995, Landlord removed the following from
the land:
(a) Two (2) underground fuel storage tanks and the
contents thereof (which contents were believed by
Landlord to be fuel);
(b) Two (2) underground waste storage tanks and the
contents thereof (which contents were believed by
Landlord to include cleaning solvents); and
(c) Approximately two hundred (200) tons of soil;
2. During January of 1996, Landlord removed the contents of one
(1) septic tank from the land (which contents were believed by
Landlord to include cleaning solvents), and, when weather and
ground conditions permit, shall remove said septic tank from
the land. Said septic tank is a secondary one, and the primary
septic tank is, to the best of Landlord's knowledge,
sufficient to service the building;
3. All removal to date referred to in 1. and 2., above, has been,
to the best of Landlord's knowledge, as requested by and
supervised by, the Department of Environmental Protection of
the State of Connecticut;
4. To the best of Landlord's knowledge, there presently exist
none of the following on the land and/or in the building: a)
hazardous materials in violation of environmental laws or b)
other violations of environmental laws; and
5. Landlord shall, and does hereby, indemnify and hold harmless
Tenant of and from all costs resulting from Landlord's acts
and/or failures to act relative to violations of environmental
laws, unless said violations were caused by the act, failure
to act and/or use of the land and/or building by and/or on
behalf of Tenant and/or its agents, servants and/or invitees.
33. Right of Mortgagee to Cure Defaults of Landlord:
Tenant shall give to Landlord's mortgagee whose name and address have
been supplied to Tenant a copy of any notice of default served upon and/or sent
to Landlord. If Landlord shall have failed to cure such default within the time
provided for in this Lease then Landlord's mortgagee shall have a) an additional
period, of the greater of the cure period provided in any applicable mortgage or
thirty (30) days, within which to cure such default, or b) if such default
cannot be cured within said period, then such additional time as may be
necessary if within said period the Landlord's mortgagee has commenced and is
diligently pursuing the curing of such default. This Lease shall not be
terminated if said default is cured within said period, or if such cure is being
so diligently pursued, as the case may be. Tenant shall accept performance by
any such Landlord's mortgagee.
34. Entire Agreement, Etc.:
It is expressly understood and agreed by and between the parties hereto
that this Lease sets forth all the covenants, promises, agreements, conditions
and/or understandings, either oral and/or written, between them with respect to
the land, building and/or demised premises and/or this Lease, and there are no
others except as are expressly herein set forth. It is further understood and
agreed that no subsequent alteration, amendment, change and/or addition to this
Lease shall by binding upon Landlord or Tenant unless reduced to writing and
signed by them.
The article and/or paragraph headings contained in this Lease are for
convenience only and shall not be considered in the construction and/or
interpretation of any provision of this Lease.
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35. Invalidity of Particular Provisions:
If any term or provision of this Lease or the application thereof to
any person or circumstance shall to any extent be invalid, non-binding and/or
unenforceable, the remainder of this Lease, or the application of such term
and/or provision to persons and/or circumstances other than those as to which it
is invalid, non-binding and/or unenforceable, shall not be affected thereby, and
each term of this Lease shall be valid, binding and enforceable and be enforced
to the fullest extent permitted by law.
36. Social Security Numbers, etc.:
Tenant represents that the following is the tax identification number
of Tenant: 13-3353266.
37. No Smoking in Building:
None of Tenant's employees, customers, contractors, agents, servants,
or invitees shall smoke in any portion of the building, including, but not
limited to, any portion of the demised premises.
38. Right of Expansion:
In the event, but only in the event, that a) at the time of Tenant's
exercise of its rights pursuant to this Article 1) this Lease shall then be in
full force and effect and 2) Tenant, at all times prior thereto, shall have
fully and faithfully complied with and performed all terms and/or provisions of
this Lease, as and when required pursuant to this entire Lease, and b) Tenant
complies with all provisions of this entire Article as and when required, Tenant
shall have the right to lease ("expansion right") all, but no less than all,
space cross-hatched on said "Exhibit B" ("Expansion Space"), upon the same terms
and conditions set forth in this Lease (including, but not limited to, a)
expiration date of initial term and, if any of said three (3) options to extend
the term are validly exercised, expiration date of the last option term validly
exercised, b) per square foot Base Rent, c) additional rents, d) net costs, and
e) amounts due pursuant to Schedule 1) all except as follows:
1) Effective expansion commencement date referred to in 2), below, the
Base Rent shall be increased annually, by a) 5,628 multiplied by b) the per
square foot Base Rent charge in effect from time to time for the demised
premises outlined in bold in said "Exhibit B" (which per square foot Base Rent
charge in effect from time to time for the demised premises outlined in bold on
said "Exhibit B" shall be the annual Base Rent in effect from time to time for
the demised premises outlined in bold on said "Exhibit B" divided by 16,472);
2) Commencement date ("expansion commencement date") of all rights and
obligations relative to Expansion Space shall be the following, provided Tenant
has executed and delivered to Landlord all expansion documents referred to
below: five (5) days after date of Landlord's delivery to Tenant of
fully-executed "expansion documents" referred to hereafter in this Article;
3) Effective expansion commencement date, the term "demised premises"
shall he increased by the Expansion Space;
4) Effective expansion commencement date, Tenant's pro rata share
referred to in Schedule 1 shall be increased by adding to same 21.02% to result
in said share's being 81.48% (except as to heating oil, Tenant's pro rata share
for which referred to in Schedule 1 shall be increased by adding to same 25.47%
to result in said share's being 100% of all heating oil consumed from the 2,000
gallon tank on the northerly side of the building or any substitute therefor);
and
5) Effective expansion commencement date, the number of parking spaces
referred to in the fourth sentence of Article 1. of this Lease is increased by
adding to same 15 spaces to result in said parking spaces' being 58.
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Landlord and Tenant agree that it shall conclusively be deemed that
there are 5,628 rentable square feet attributable to the Expansion Space,
irrespective of the results of any calculation and/or measurement hereafter.
In the event Tenant wishes to elect to exercise said expansion right,
it shall do so by giving Landlord written notice ("expansion notice") of
Tenant's said election to exercise said expansion right, said expansion notice
to be received by Landlord a) no earlier than March 1, 1998 and no later than
May 1, 1998, if CMS has commenced to occupy all of the Expansion Space before
July 1, 1996 and b) on or before August 31, 1996, if CMS has not commenced to
occupy all of the Expansion Space before July 1, 1996. In the event Tenant
delivers to Landlord said expansion notice as and when set forth above, Tenant
shall execute and deliver to Landlord a written lease and all other ancillary
documents (said written lease and all other ancillary documents collectively
"expansion documents") requested by Landlord, all as same shall have been
prepared and/or requested by Landlord, relative to said Expansion Space, said
executed and delivered expansion documents to be received by Landlord within
five (5) days of Landlord's sending Tenant said expansion documents ("5 day
period"). If Landlord does not receive said expansion notice as and when set
forth above, all provisions of this entire Article shall forthwith cease and be
null, void and of no effect whatsoever, absolutely and forever, as if this
entire Article did not exist (so that Landlord may, at any time thereafter, in
addition to all other rights and/or remedies, enter into any lease with any
party whatsoever, and on any terms whatsoever, relative to any or all of said
Expansion Space). If Landlord does receive said expansion notice as and when set
forth above, but does not receive the executed expansion documents within the 5
day period, all provisions of this entire Article shall, forthwith upon
expiration of said 5 day period, cease and be null, void and of no effect
whatsoever, absolutely and forever, as if this entire Article did not exist (so
that Landlord may, at any time thereafter, in addition to all other rights
and/or remedies, enter into any lease with any party whatsoever, and on any
terms whatsoever, relative to any or all of said Expansion Space) except that
Tenant shall be liable for payment of all amounts and performance of all
obligations to the same extent as if Landlord received the executed expansion
documents within the 5 day period, and Tenant had thereafter breached and been
in default of said expansion documents so as to terminate all of Tenant's rights
and/or the like and/or Landlord's liabilities, obligations and/or the like
pursuant to said expansion documents but not so as to terminate Tenant's
liabilities, obligations and/or the like and/or Landlord's rights and/or the
like pursuant to said expansion documents.
All dates and/or time periods referred to in this entire Article shall
be on a time is of the essence basis.
39. Landlord's Improvements:
Landlord shall, in a manner and to the extent reasonably selected by
Landlord, perform all matters set forth in "Exhibit E" by the dates set forth
therein. Landlord shall pay all costs for all of said matters, except as set
forth in the immediately following sentence. Within five (5) days of Landlord's
request therefor, Tenant shall pay all costs incurred for those matters referred
to in 4. of said "Exhibit E", except the lesser a) $10,000.00 or b) 50% of said
costs.
40. Contingency:
All of Landlord's and Tenant's rights and obligations pursuant to this
entire Lease are expressly contingent upon the occurrence of the Commencement
Date prior to July 1, 1996. In the event the Commencement Date does not occur
prior to July 1, 1996, and either party ("electing party") wishes to elect to
terminate all of Landlord's and Tenant's rights and obligations pursuant to this
entire Lease, electing party shall do so by giving the other party written
notice of electing party's said election to so terminate, provided said written
notice shall be received by the other party on or before the occurrence of the
Commencement Date. Landlord shall use all reasonable efforts to effect the
Stipulation, a copy of which is attached hereto as "Exhibit F".
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<PAGE> 15
All dates and/or time periods referred to in this entire article shall
be on a time is of the essence basis.
IN WITNESS WHEREOF, the said Parties have hereunto set their hands and
seals the day and year first above written.
Witness: NEWTOWN GROUP PROPERTIES
LIMITED PARTNERSHIP
By Saugatuck Group Property
Management, Inc.,
Its General Partner,
Hereunto Duly Authorized
/s/ By /s/ Peter Van Witt
---------------------------------- -------------------------
Peter Van Witt,
Its President,
/s/ Hereunto Duly Authorized
----------------------------------
TIME PUBLISHING VENTURES INC.
/s/ By /s/-------------------------
---------------------------------- Its Vice President,
Hereunto Duly Authorized
/s/
----------------------------------
-15-
<PAGE> 16
STATE OF CONNECTICUT )
) ss: Fairfield March 8, 1996
COUNTY OF FAIRFIELD )
Personally appeared Peter Van Witt, President hereunto duly authorized
of Saugatuck Group Property Management, Inc., general partner hereunto duly
authorized of NEWTOWN GROUP PROPERTIES LIMITED PARTNERSHIP, signer and sealer of
the foregoing instrument, who acknowledged the same to be his free act and deed
as such President hereunto duly authorized, the free act and deed of said
Saugatuck Group Property Management, Inc. as such general partner hereunto duly
authorized, and the free act and deed of said NEWTOWN GROUP PROPERTIES LIMITED
PARTNERSHIP, before me.
/s/__________________________________
Commissioner of the Superior Court
STATE OF NEW YORK )
) ss: New York City March 7, 1996
COUNTY OF NEW YORK )
Personally appeared Joseph A. Ripp, Vice President hereunto duly
authorized of TIME PUBLISHING VENTURES INC., signer and sealer of the foregoing
instrument, who acknowledged the same to be his/her free act and deed as such
Vice President hereunto duly authorized, and the free act and deed of said TIME
PUBLISHING VENTURES INC., before me.
/s/ Betty H. Perlish
_______________________
Notary Public
My Commission Expires: 10/31/97
[Notary Stamp]
Attachments to Lease
"Exhibit A" - Description of "land".
"Exhibit B" - Outline of "premises".
"Exhibit C" - Items consented to by Landlord subject to Landlord's a)
prior express written initial consent to plans and
specifications for same and b) final express written
approval of all of same as-built.
"Exhibit D" - Subordination, Non-Disturbance and Attornment Agreement.
"Exhibit E" - Landlord's Improvements.
"Schedule 1" - Net Costs.
-16-
<PAGE> 17
"Schedule 1"
1. Tenant shall further pay all of the following ("net costs") to the
extent same relate to any period commencing on or after Commencement Date: a)
all charges for all utilities used and/or consumed at demised premises, b) all
charges for removal from land of waste and/or other items relating to demised
premises which are in excess of standard office waste, c) Tenant's pro rata
share of all charges for electricity, heating oil, water and sewer relative to
the land and/or building (excluding therefrom all those payable by Tenant and/or
other tenants of the building), plus d) Tenant's pro rata share of all increases
over and above the amounts in parentheses hereafter relative to all of the
following items relative to the land and/or the building:
a) Real Estate Taxes ($48,266.00);
b) Insurance ($4,500.00);
c) Maintenance and Landscaping ($3,000.00)
d) Management Fees ($15,000.00);
e) Snow Removal ($3,000.00);
f) Waste Removal ($2,200.00); and
g) Fire Alarm and Security System in common areas ($1,200.00).
Tenant's pro rata share of said net costs shall be paid by Tenant to
Landlord without any abatement, deduction and/or setoff for any reason
whatsoever.
Tenant shall pay to Landlord, in advance, on Commencement Date, and on
the same day of each month thereafter as Base Rent shall be due pursuant to
Article 3. of this Lease, one-twelfth (1/12), of the product of the annual
amount estimated by Landlord, in all reasonable probability, as the amounts
which shall be net costs payable by Tenant and attributable to the 12 months
immediately following Commencement Date and each 12 months thereafter
(collectively "12 months"), or for said 12 months if said estimate is received
by Tenant after said 12 months has commenced, which estimated annual amount
shall be shown on a notice hereinafter called "Notice for Current 12 Months."
All payments made by Tenant to Landlord pursuant to said Notice for Current 12
Months shall be credited to the payments ultimately determined to be due for
said 12 months. In the event said 12 months has commenced prior to delivery of
any such Notice of Current 12 Months, Tenant shall pay to Landlord, in addition,
within thirty (30) days of delivery of such Notice for Current 12 Months, for
each month in said 12 months that commenced prior to Tenant's receipt of such
Notice for Current 12 Months, an amount equal to one-twelfth (1/12) of the
annual amount shown on such Notice for Current 12 Months multiplied by the
number of months of said 12 months that have theretofore commenced.
As soon as practical after the end of each 12 months, Landlord shall
prepare and deliver to Tenant a Notice of net costs for the immediately
preceding 12 months, which Notice is hereinafter called "Notice for Past 12
Months", advising Tenant of a) the amounts, due from Tenant to Landlord as net
costs for the immediately preceding 12 months, less b) the amounts paid pursuant
to the immediately preceding paragraph. Within thirty (30) days of the delivery
of such Notice for Past 12 Months, Tenant shall pay Landlord the amount shown
thereon, if any, as due, or Landlord shall credit Tenant the amount shown
thereon, if any, as an over payment, all as the case may be.
The amount of charges for utilities used and/or consumed at demised
premises shall be the amount (i) indicated by any separate meter for demised
premises for such periods as utility charges for demised premises are indicated
by a separate meter for demised premises, and/or (ii) reasonably estimated by
Landlord for all other periods.
2. As used throughout this entire Lease, the term "Tenant's pro rata
share" shall mean 60.46% (except as to heating oil for which Tenant's pro rata
share shall mean 74.53% of all heating oil consumed from the 2,000 gallon tank
on the northerly side of the building or any substitute therefor).
3. In no event shall any of the provisions of this entire Schedule 1
result in a negative calculation.
-17-
<PAGE> 18
4. All sums due and payable by Tenant pursuant to this Schedule 1 shall
be due and payable to Landlord and/or any provider, as Landlord shall direct,
within ten (10) days of Landlord's demand therefor.
5. Tenant shall have the right to reasonably audit all of said net
costs, but said right and audit shall not entitle Tenant to delay making the
payments referred to above to the extent referred to above.
-18-
<PAGE> 19
"Exhibit A"
ALL that certain parcel or tract of land, with the buildings thereon, situated
partly in the Town of Norwalk and partly in the Town of Westport, in the County
of Fairfield and State of Connecticut, containing in area 6.84 acres, and
bounded:
NORTHERLY: 229.87 feet by land now or formerly of L.W. Lissberger;
EASTERLY: 1104.89 feet by land now or formerly of Frederick and Minnie
M. Berman;
SOUTHERLY: 24.70 feet by Newtown Avenue;
AGAIN SOUTHERLY: 277.55 feet by land now or formerly of L.W. Lissberger;
WESTERLY: 320.64 feet by land now or formerly of L.W. Lissberger; and
AGAIN WESTERLY: 795.36 feet by land now or formerly of L.W. Lissberger;
Said premises are shown on "Map Showing Property to be Conveyed to the Liberty
Research Laboratories, Inc. by L. Walter Lissberger, Westport, Conn., Scale
1":50 ft., 1927, The Samuel W. Hoyt, Jr., Co., Inc., Engineers & Surveyors, S.
Norwalk, Conn." which map is on file in the Office of the Town Clerk of said
Norwalk and Westport. Reference to said map is hereby made and had for a more
particular description and location of said premises.
<PAGE> 20
"Exhibit B"
[Blueprint of 19 Newtown Turnpike, Westport, CT]
<PAGE> 21
"Exhibit C"
[Blueprint]
<PAGE> 22
"Exhibit D"
Commercial Mortgage Loan - CT
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
DATE: January ____, 1996
MORTGAGEE: FIRST UNION BANK OF CONNECTICUT
5 Research Drive, Shelton, Connecticut 06484
Attention: Commercial Real Estate Department Head
MORTGAGOR:
TENANT: _________________________________________________________
Mailing Address:_________________________________________
_________________________________________________________
MORTGAGED PREMISES: Street Address:
Municipality of: Darien
County of: Fairfield, State of Connecticut
Tax Map Designation: Lot No. 14, 15 and 16 Map No. 38
DATE OF LEASE: ________________________________________________________
Notice of which is recorded on the Land Records of
the Town of Darien, Connecticut, at Volume
______________, Page ___________.
BACKGROUND
A. As security for a loan made by Mortgagee to Mortgagor, Mortgagor has
given to Mortgagee an Open-End Mortgage and Security Agreement dated January
____, 1996, which is about to be recorded in the land records for the Town of
Darien, Connecticut (said Open-End Mortgage and Security Agreement, together
with any and all increases, renewals, modifications, extensions, substitutions,
replacements and/or consolidations thereof, the "Mortgage"), and constitutes a
first lien against the land and improvements now or hereafter erected thereon
identified above as the Mortgaged Premises and more particularly described on
Schedule "A" attached hereto (the "Mortgaged Premises").
B. Tenant has entered into the Lease identified above and covering all
or a portion of the Mortgaged Premises (the "Leased Premises").
C. As a condition of making the loan, Mortgagee has required that the
Lease be subordinated to the Mortgage and that Tenant agree to attorn to the
purchaser of the Mortgaged Premises at foreclosure of the Mortgage in the event
of such foreclosure, or to Mortgagee prior to foreclosure in the event Mortgagee
elects to collect the rents and other sums due and becoming due under the Lease,
and Tenant is willing to so attorn if Mortgagee will recognize Tenant's rights
under the Lease to the extent hereinafter provided.
1
<PAGE> 23
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants herein contained, and intending to be legally bound hereby,
agree as follows:
1. SUBORDINATION OF LEASE.
The Lease is and shall be subject and subordinate to the provisions and
lien of the Mortgage and to all renewals, modifications, consolidations,
replacements and extensions thereof, to the full extent of the principal amount
and other sums secured thereby and interest thereon, as if the Lease had been
executed and delivered after the execution, delivery and recording of the
Mortgage.
2. ATTORNMENT.
Tenant agrees that it will attorn to and recognize: (i) Mortgagee,
whether as mortgagee in possession or otherwise; (ii) any purchaser at a
foreclosure sale under the Mortgage; (iii) any transferee who acquires
possession of or title to the Mortgaged Premises, whether by deed in lieu of
foreclosure or other means; and (iv) the successors and assigns of such
purchasers and/or transferees (each of the foregoing parties, a "Successor"), as
its landlord for the unexpired balance (and any extensions, if exercised) of the
term of the Lease upon the same terms and conditions as set forth in the Lease.
Such attornment shall be effective and self-operative without the execution of
any further instruments by any party hereto; provided, however, that Tenant
will, upon request by Mortgagee or any Successor, execute a written agreement
attorning to Mortgagee or such Successor, affirming Tenant's obligations under
the Lease, and agreeing to pay all rent and other sums due or to become due to
Mortgagee or such Successor.
3. NON-DISTURBANCE.
So long as Tenant complies with Tenant's obligations under this
Agreement and is not in default under any of the terms, convenants or conditions
of the Lease, Mortgagee will not disturb Tenant's use, possession and enjoyment
of the Leased Premises nor will the leasehold estate of Tenant be affected or
Tenant's rights under the Lease be impaired (except to the extent that Tenant's
right to setoff any sums owed or to receive any obligations to be performed by
Mortgagor shall not be enforceable thereafter against Mortgagee or any
Successor), in any foreclosure action, sale under a power of sale, transfer in
lieu of the foregoing, or the exercise of any other remedy pursuant to the
Mortgage.
4. ASSIGNMENT OF LEASES.
Tenant acknowledges notice of and consents to that certain Assignment
of Leases and Rents from Mortgagor to Mortgagee dated January ___, 1996 (the
"Assignment"). Tenant agrees that if Mortgagee, pursuant to the Assignment, and
whether or not it becomes a mortgagee in possession, shall give notice to Tenant
that Mortgagee has elected to require Tenant to pay to Mortgagee the rent and
other charges payable by Tenant under the Lease. Tenant shall, until Mortgagee
shall have cancelled such election, be similarly bound to Mortgagee and shall
similarly attorn to Mortgagee and shall thereafter pay to Mortgagee all rent and
other sums payable under the Lease. Any such payment shall be made
notwithstanding any right of setoff, defense or counterclaim which Tenant may
have against Mortgagor, or any right to terminate the Lease.
5. LIMITATION OF LIABILITY.
5.1. In the event that Mortgagee succeeds to the interest of Mortgagor
under the Lease, or title to the Mortgaged Premises, then Mortgagee and any
Successor shall assume and be bound by the obligations of Landlord under the
Lease which accrue from and after such party's succession to Mortgagor's
interest in the Leased Premises, but Mortgagee and such Successor shall not be:
(i) liable for any act or omission of any prior landlord (including Mortgagor);
(ii) liable for the intention, application or return of any security deposit to
the extent not paid over to Mortgagee; (iii) subject to any offsets or defenses
which Tenant might have
2
<PAGE> 24
against any prior landlord (including Mortgagor); (iv) bound by any rent or
additional rent which Tenant might have paid for more than the current month to
any prior landlord (including Mortgagor); (v) bound by any amendment or
modification of the Lease made without Mortgagee's or such Successor's prior
written consent; or (vi) obligated to cure any defaults of any prior landlord
under the Lease which occurred prior to the date on which Mortgagee or such
Successor succeeded to Mortgagor's interest under the Lease. Nothing in this
section shall be deemed to waive any of Tenant's rights and remedies against any
prior landlord.
5.2. Tenant agrees that any person or entity which at any time
hereafter becomes the landlord under the Lease, including without limitation,
Mortgagee or any Successor, shall be liable only for the performance of the
obligations of the landlord under the Lease which arise during the period of its
or their ownership of the Leased Premises and shall not be liable for any
obligations of the landlord under the Lease which arise prior to or subsequent
to such ownership. Tenant further agrees that any such liability shall be
limited to the interest of Mortgagee or such Successor in the Mortgaged
Premises, and Tenant shall not be able to enforce any such liability against any
other assets of Mortgagee or such Successor.
6. RIGHT TO CURE DEFAULTS.
Tenant agrees to give notice to Mortgagee of any default by Mortgagor
under the Lease, specifying the nature of such default, and thereupon Mortgagee
shall have the right (but not the obligation) to cure such default, and Tenant
shall not terminate the Lease or abate the rent payable thereunder by reason of
such default unless and until it has afforded Mortgagee thirty (30) days after
Mortgagee's receipt of such notice to cure such default and a reasonable period
of time in addition thereto (i) if the circumstances are such that said default
cannot reasonably be cured within said thirty (30) day period and Mortgagee has
commenced and is diligently pursuing such cure, or (ii) during and after any
litigation action including a foreclosure, bankruptcy, possessory action or a
combination thereof. It is specifically agreed that Tenant shall not require
Mortgagee to cure any default which is not susceptible of cure by Mortgagee.
7. TENANT'S AGREEMENTS.
Tenant hereby covenants and agrees that: (i) Tenant shall not pay any
rent or addtional rent under the Lease more than one month in advance; (ii)
Tenant shall have no right to appear in any foreclosure action under the
Mortgage; (iii) Tenant shall not amend, modify, cancel or terminate the Lease
without Mortgagee's prior written consent, and any attempted amendment,
modification, cancellation or termination of the Lease without such consent
shall be of no force or effect as to Mortgagee; (iv) Tenant shall not
voluntarily subordinate the Lease to any lien or encumbrance (other than the
Mortgage) without Mortgagee's prior written consent; (v) Tenant shall not assign
the Lease or sublet all or any portion of the Leased Premises (except as
permitted by the terms of the Lease) without Mortgagee's prior written consent;
(vi) this Agreement satisfies any requirement in the Lease relating to the
granting of a non-disturbance agreement; and (vii) Tenant shall deliver to
Mortgagee, from time to time and within ten (10) days from the date of request,
a written statement in form and substance satisfactory to Mortgagee certifying
to certain matters relating to the Lease.
8. MISCELLANEOUS.
8.1. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns. Nothing contained in this
Agreement shall in any way affect or impair the lien created by the Mortgage,
except as specifically set forth herein.
8.2. Modifications. This Agreement may not be supplemented, amended or
modified without the prior written consent of Mortgagee.
8.3. Notices. All notices and communications under this Agreement shall
be in writing and shall be given by either (a) hand delivery, (b) first class
mail (postage prepaid), or (c) reliable overnight commercial courier (charges
prepaid) to the addresses listed in this Agreement. Notice shall be deemed to
have been given and received: (i) if by hand
3
<PAGE> 25
delivery, upon delivery; (ii) if by mail, three (3) calendar days after the date
first deposited in the United States mail; and (iii) if by overnight courier, on
the date scheduled for delivery. A party may change its address by giving
written notice to the other party as specified herein.
8.4. Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of Connecticut without
reference to conflict of laws principles.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have duly executed and delivered this Subordination, Non-Disturbance and
Attornment Agreement as of the day and year first above written.
TENANT:
WITNESSES:
- ------------------------------ -------------------------------------------
Name: Name: (Individual)
- ------------------------------ -------------------------------------------
Name:
WITNESSES:
-------------------------------------------
(Corporation or Partnership)
By:
- ------------------------------ -------------------------------------------
Name: Name:
Title: Title:
- ------------------------------
Name:
Title:
MORTGAGEE:
WITNESSES: FIRST UNION BANK OF CONNECTICUT
By:
- ------------------------------ -------------------------------------------
Name: Name:
Title: Title:
- ------------------------------
Name:
Title:
4
<PAGE> 26
SCHEDULE A
DESCRIPTION OF MORTGAGED PREMISES
5
<PAGE> 27
INDIVIDUAL ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF________________________, SS.:
On this the ________ day of January, 1996 before me,
___________________________ _______________________________________, the
undersigned officer, personally appeared ___________________, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the within
instrument and acknowledged that he/she executed the same for the purposes
therein contained, and as his/her free act and deed.
In witness whereof I hereunto set my hand.
Commissioner of the Superior Court
Notary Public
My Commission Expires:
CORPORATE ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF________________________, SS.:
On this the ________ day of January, 1996 before me,
___________________________ _______________________________________, the
undersigned officer, personally appeared
_______________________________________, who acknowledged him/herself to be the
_____________________________of __________________________________________, a
corporation, and that he/she as such ___________________________, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by him/herself as such
___________________________and as his/her and its free act and deed.
In witness whereof I hereunto set my hand.
Commissioner of the Superior Court
Notary Public
My Commission Expires:
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF________________________, SS.:
On this the ________ day of January, 1996 before me,
___________________________ _______________________________________, the
undersigned officer, personally appeared
_______________________________________, who acknowledged him/herself to be the
Partner of __________________________________________, a partnership, and that
he/she, as such Partner, executed the foregoing instrument for the purposes
therein contained and as his/her free act and deed and the free act and deed of
the partnership.
In witness whereof I hereunto set my hand.
Commissioner of the Superior Court
Notary Public
My Commission Expires:
6
<PAGE> 28
MORTGAGEE ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF FAIRFIELD, SS.:
On this the ________ day of January, 1996 before me,
___________________________ _______________________________________, the
undersigned officer, personally appeared
_______________________________________, who acknowledged him/herself to be the
_______________________________of FIRST UNION BANK OF CONNECTICUT, a Connecticut
banking corporation, and that he/she as such ___________________________, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by him/herself as such
_____________________and as his/her and its free act and deed.
In witness whereof I hereunto set my hand.
Commissioner of the Superior Court
Notary Public
My Commission Expires:
7
<PAGE> 29
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
- -to-
FIRST UNION BANK OF CONNECTICUT
Dated:
RECORD AND RETURN TO:
FIRST UNION BANK OF CONNECTICUT
5 Research Drive
Shelton, Connecticut 06484
ATTN: Commercial Real Estate Department Head
8
<PAGE> 30
"Exhibit E"
1. Within two (2) months after Tenant has completed all alterations
approved by Landlord, as to front and/or entrance of demised premises:
a) Remove wood facade, fence and railing;
b) Repair and/or replace slab and stairs;
c) Repair and paint building facade and loading dock facade; and
d) Provide hand railings as required by applicable building
codes;
2. Within two (2) months after Tenant has completed all alterations
approved by Landlord, provide a) incoming gas line from
municipal-supplied gas line if available presently or b) slab and
equipment (except tank) for liquid propane gas if permitted by all
applicable codes and regulations. Said incoming gas line shall
terminate at a single point outside demised premises;
3. With two (2) months after Tenant has completed all alterations approved
by Landlord, provide gravel or Grasscrete block access to studio at
rear of demised premises if permitted by all applicable codes and
regulations. Said access may be from either the present southern or
northern parking lot as selected by Landlord; and
4. Within ten (10) days after Tenant has completed all alterations
approved by Landlord, relocate those air conditioning units over
demised premises so as to reasonably soundproof the studio portion of
the demised premises for use as a television studio.
<PAGE> 31
FIRST AMENDMENT
to Lease dated as of the 6th day of March, 1996
This FIRST AMENDMENT ("FIRST AMENDMENT") entered into as of the 14TH day of May,
1996, to Lease dated as of the 6th day of March, 1996, between NEWTOWN GROUP
PROPERTIES LIMITED PARTNERSHIP, a Connecticut limited partnership, hereinafter
referred to as the Landlord, and TIME PUBLISHING VENTURES INC., a Delaware
corporation, hereinafter referred to as the Tenant.
WHEREAS, the Landlord has demised and leased unto the Tenant, and the Tenant has
hired and taken from the Landlord, certain demised premises pursuant to a Lease
dated as of the 6th day of March, 1996 by and between the Landlord and the
Tenant ("Lease"); and
WHEREAS, the Landlord and the Tenant wish to amend the Lease, to the extent, but
only to the extent, as expressly provided in this First Amendment, except as
otherwise expressly provided in this First Amendment all of the terms and
provisions of the Lease shall remain in full force and effect and shall continue
to be binding upon the Landlord and the Tenant in all respects as if this First
Amendment did not exist.
NOW THEREFORE, in consideration of the mutual promises, terms and provisions
contained in this First Amendment and other good, valuable and sufficient
consideration received by the Landlord and the Tenant, the Landlord and the
Tenant do hereby amend the Lease as follows:
1. The first paragraph of Article 2. of the Lease is deleted in its entirety,
and the following is substituted therefor:
"The initial term ("initial term") of this Lease shall a) commence July
1, 1996 ("Commencement Date") and b) end June 30, 2001."
2. The following shall be added after the word "aforesaid" appearing in Article
5. of the Lease:
"except for all or any portion of the first ninety (90) days after
Landlord has obtained both building permits referred to in Article 6. of this
Lease, during all or any portion of which first ninety (90) days CMS Video may
occupy all or any portion of demised premises".
3. Article 6. of the Lease is deleted in its entirety, and the following is
substituted therefor:
"6. Purpose:
The Tenant shall use the demised premises only for offices, kitchen and
a television studio and for no other use whatsoever. Within a reasonable time
after its execution of this First Amendment, Tenant shall deliver to Landlord
all plans, calculations, approvals and all other documents and items required
for Landlord to obtain building permits relative to alterations in accordance
with plans and specifications to be previously expressly approved in writing by
Landlord of the a) demised premises and b) Expansion Space referred to in
Article 38. of this Lease for use by CMS Video. Within a reasonable time after
Landlord shall have received from Tenant all of said plans, calculations,
approvals and all other documents and items referred to in the immediately
preceding sentence, Landlord shall file with the Building Department of the City
of Norwalk an application and all other documents required to obtain a building
permit for a) Tenant to construct improvements on demised premises all as Tenant
and Landlord shall have previously and expressly approved in writing and b)
Landlord, CMS Video and/or any other party to construct improvements on said
Expansion Space provided Landlord and Tenant have previously and expressly
approved in writing said improvements on said Expansion Space. Nothing contained
in this entire Lease, including, but not limited to, the immediately preceding
two (2) sentences shall obligate Landlord, CMS Video and/or any other party to
construct any improvements whatsoever on said Expansion Space and/or to occupy
said Expansion Space.
The Landlord and the Tenant shall fully cooperate with the other in all
reasonable ways relative to the second and third sentences of the immediately
preceding paragraph. The Landlord and Tenant shall pay its own legal fees and
other costs relative to Landlord's obtaining said
1
<PAGE> 32
building permits, except that Landlord shall pay the fees required by the City
of Norwalk to obtain said building permits."
4. Wherever they appear in Article 38. of the Lease, the following dates shall
be changed as follows:
a) "July 1, 1996" shall be changed to "the expiration of ninety (90)
days after Landlord has obtained said building permit for the demised premises";
and
b) "August 31, 1996" shall be changed to "the expiration of thirty (30)
days after the expiration of ninety (90) days after Landlord has obtained said
building permit for the demised premises".
5. Article 40. of the Lease is deleted in its entirety.
6. The following is added at the end of "Exhibit E" to the Lease:
"5. At or prior to the time Tenant has completed all alterations
approved by Landlord, Landlord shall increase the size of the septic tank
servicing the land and building to 2,500 gallons."
7. Except as otherwise expressly provided in this First Amendment, all of the
terms and provisions of the Lease shall remain in full force and effect and
shall continue to be binding upon the Landlord and the Tenant in all respects as
if this First Amendment did not exist.
IN WITNESS WHEREOF, the said Parties have hereunto set their hands and
seals the day and year first above written.
Witness: NEWTOWN GROUP PROPERTIES LIMITED PARTNERSHIP
By Saugatuck Group Property Management, Inc.,
Its General Partner,
Hereunto Duly Authorized
By /s/ Peter Van Witt
------------------------------------
Peter Van Witt,
Its President,
Hereunto Duly Authorized
- -------------------------------
TIME PUBLISHING VENTURES INC.
By /s/
- ------------------------------- -----------------------------------
Its Vice President,
Hereunto Duly Authorized
- -------------------------------
2
<PAGE> 33
STATE OF CONNECTICUT )
) ss: Norwalk May 14, 1996
COUNTY OF FAIRFIELD )
Personally appeared Peter Van Witt, President hereunto duty authorized
of Saugatuck Group Property Management, Inc., general partner hereunto duly
authorized of NEWTOWN GROUP PROPERTIES LIMITED PARTNERSHIP, signer and sealer of
the foregoing instrument, who acknowledged the same to be his free act and deed
as such President hereunto duly authorized, the free act and deed of said
Saugatuck Group Property Management, Inc. as such general partner hereunto duly
authorized, and the free act and deed of said NEWTOWN GROUP PROPERTIES LIMITED
PARTNERSHIP, before me.
DONNA M. GAGE /s/ Donna M. Gage
--------------------------
NOTARY PUBLIC Notary Public
My Commission Expires July 31, 1999 My Commission Expires:
STATE OF NEW YORK )
) ss: New York City May 14, 1996
COUNTY OF NEW YORK )
Personally appeared Joseph A. Ripp, __________________________ hereunto
duly authorized of TIME PUBLISHING VENTURES INC., signer and sealer of the
foregoing instrument, who acknowledged the same to be his free act and deed as
such signer hereunto duly authorized, and the free act and deed of said TIME
PUBLISHING VENTURES INC., before me.
/s/ Walter S. Censor
------------------------------------
Notary Public
My Commission Expires:
WALTER S. CENSOR
Notary Public, State of New York
No 31-5658275
Qualified in New York County
Commission Expires Feb. 28, 1997.
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<PAGE> 34
SECOND AMENDMENT
to LEASE dated as of the 6th day of March, 1996
This SECOND AMENDMENT ("SECOND AMENDMENT") entered into as of the 6th day of
March, 1996, to LEASE dated as of the 6th day of March, 1996, between NEWTOWN
GROUP PROPERTIES LIMITED PARTNERSHIP, a Connecticut limited partnership,
hereinafter referred to as the Landlord, and MARTHA STEWART LIVING OMNIMEDIA
LLC, a Delaware limited liability company, hereinafter referred to as the Tenant
(as assignee of Time Publishing Ventures Inc., a Delaware corporation,
hereinafter referred to as Time).
WHEREAS, the Landlord has demised and leased unto Time, and Time has hired and
taken from the Landlord, certain demised premises pursuant to a LEASE dated as
of the 6th day of March, 1996 by and between the Landlord and Time and a FIRST
AMENDMENT entered into as of the 14th day of May, 1996 to said LEASE (said LEASE
and FIRST AMENDMENT, collectively, "Lease"); and
WHEREAS, pursuant to an Assignment and Assumption of Lease executed by Time and
Tenant, Time has assigned to Tenant and Tenant has accepted from Time all of
Time's interest in and to the Lease and Time has delegated to Tenant and Tenant
has assumed from Time all of Time's obligations pursuant to the Lease; and
WHEREAS, the Landlord and the Tenant wish to amend the Lease, to the extent, but
only to the extent, as expressly provided in this Second Amendment, and except
as otherwise expressly provided in this Second Amendment all of the terms and
provisions of the Lease shall remain in full force and effect and shall continue
to be binding upon the Landlord and the Tenant in all respects as if this Second
Amendment did not exist.
NOW THEREFORE, in consideration of the mutual promises, terms and provisions
contained in this Second Amendment and other good, valuable and sufficient
consideration received by the Landlord and the Tenant, the Landlord and the
Tenant do hereby amend the Lease as follows:
1. By deleting all references to the "TWI-related occupancy" and all provisions
relative thereto in Article 8. of the Lease.
2. By deleting "Walter Censor. . .10020" from Article 19. of the Lease and
substituting in lieu thereof "Larry H. Schatz, Esq., at c/o Grubman, Indursky,
Schindler & Goldstein, P.C., Carnegie Hall Tower, 152 West 57th Street, New
York, New York 10019-3301".
3. By substituting the following in lieu of the first two (2) paragraphs of
Schedule 1 of the Lease:
"1. Tenant shall further pay all of the following ("net costs") to the
extent same relate to any period commencing on or after Commencement Date: a)
all charges for all utilities used and/or consumed at demised premises, b) all
charges for removal from land of waste and/or other items relating to demised
premises which are in excess of standard office waste, c) all real estate and/or
personal property taxes and/or other governmental assessments resulting from any
alterations, additions, improvements, erections, repairs, replacements,
renovations and/or maintenance made, and/or labor, services, materials and/or
other items provided, to the demised premises, d) Tenant's pro rata share of all
charges for electricity, heating oil, water and sewer relative to the land
and/or building (excluding therefrom all those payable by Tenant and/or other
tenants of the building), plus e) Tenant's pro rata share of all increases over
and above the amounts in parentheses hereafter relative to all of the following
items relative to the land and/or the building:
1) Real Estate Taxes, excluding the real estate taxes referred to
in c), above ($48,266.00);
2) Insurance ($4,500.00);
3) Maintenance and Landscaping ($3,000.00)
4) Management Fees ($15,000.00);
5) Snow Removal ($3,000.00);
6) Waste Removal ($2,200.00); and
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7) Fire Alarm and Security System in common areas ($1,200.00) .
Said net costs shall be paid by Tenant to Landlord without any
abatement, deduction and/or set-off for any reason whatsoever.".
4. By deleting "at c/o Popshots, Inc.," from Article 19. of the Lease.
5. Except as otherwise expressly provided in this Second Amendment, all of the
terms and provisions of the Lease shall remain in full force and effect and
shall continue to be binding upon the Landlord and the Tenant in all respects as
if this Second Amendment did not exist.
IN WITNESS WHEREOF, the said Parties have hereunto set their hands and
seals the day and year first above written.
Witness: NEWTOWN GROUP PROPERTIES LIMITED PARTNERSHIP
By Saugatuck Group Property
Management, Inc.,
Its General Partner,
Hereunto Duly Authorized
/s/ By /s/ Peter Van Witt
- ----------------------------- -----------------------------------
Peter Van Witt,
Its President,
/s/ Hereunto Duly Authorized
- -----------------------------
MARTHA STEWART LIVING OMNIMEDIA LLC
/s/ By /s/ Sharon Patrick
- ----------------------------- -----------------------------------
Its CEO,
Hereunto Duly Authorized
/s/
- -----------------------------
STATE OF NEW YORK )
) ss: New York City March 10, 1997
COUNTY OF NEW YORK )
Personally appeared Peter van Witt, President hereunto duly authorized
of Saugatuck Group Property Management, Inc., general partner hereunto duly
authorized of NEWTOWN GROUP PROPERTIES LIMITED PARTNERSHIP, signer and sealer of
the foregoing instrument, who acknowledged the same to be his free act and deed
as such President hereunto duly authorized, the free act and deed of said
Saugatuck Group Property Management, Inc. as such general partner hereunto duly
authorized, and the free act and deed of said NEWTOWN GROUP PROPERTIES LIMITED
PARTNERSHIP, before me.
Notary Public
My Commission Expires:
LARRY H. SCHATZ
Notary Public, State of New York
No. 31-4970606
Qualified in New York County
Commission Expires August 13, 1998
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<PAGE> 36
STATE OF NEW YORK )
) ss: New York City 2/11, 1997
COUNTY OF NEW YORK )
Personally appeared Sharon Patrick, CEO hereunto duly authorized of
MARTHA STEWART LIVING OMNIMEDIA LLC, signer and sealer of the foregoing
instrument, who acknowledged the same to be his/her free act and deed as such
CEO hereunto duly authorized, and the free act and deed of said MARTHA STEWART
LIVING OMNIMEDIA LLC, before me.
/s/ Larry H. Schatz
Notary Public
My Commission Expires:
LARRY H. SCHATZ
Notary Public, State of New York
No. 31-4970606
Qualified in New York County
Commission Expires August 13, 1998
3
<PAGE> 1
EXHIBIT 10.14
THIS LEASE, dated as of the 1st day of August, 1996, between NEWTOWN GROUP
PROPERTIES LIMITED PARTNERSHIP, a Connecticut limited partnership, hereinafter
referred to as the Landlord, and MARTHA STEWART LIVING OMNIMEDIA LLC, a Delaware
limited liability company, hereinafter referred to as the Tenant.
WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the
Tenant hereby hires and takes from the Landlord, the demised premises described
below on the following terms and conditions.
1. Demised Premises:
The Landlord hereby demises and leases unto the Tenant, and the Tenant
hereby hires and takes from the Landlord, a portion of the building ("building")
situated on the land ("land") described in "Exhibit A" attached hereto and
located at 19 Newtown Turnpike, Norwalk and Westport, Connecticut. Said portion
of said building is crosshatched on "Exhibit B" attached hereto and is referred
to hereinafter as "premises", "Premises", "demised premises" or "Demised
Premises". Landlord and Tenant agree that it shall conclusively be deemed that
there are 5,628 rentable square feet attributable to the demised premises,
irrespective of the results of any calculation and/or measurement hereafter. In
addition, Tenant and Tenant's employees shall use no more than fifteen (15)
parking spaces of the parking lots on the land; the use of all such parking
spaces shall be in common with others and on a non-exclusive, first come/first
served basis. Landlord represents to Tenant that there shall be a total of at
least ninety-nine (99) parking spaces on the land.
2. Term:
The initial term ("initial term") of this Lease shall a) commence
August 1, 1996 ("Commencement Date") and b) end June 30, 2001.
In the event, but only in the event, that a) Tenant complies with all
provisions of this entire Article as and when required, and b) at the time of
the expiration of the then current term, 1) Tenant, at all times prior thereto,
shall have fully and faithfully complied with and performed all terms and/or
provisions of this Lease, as and when required pursuant to this entire Lease,
and 2) this Lease shall then be in full force and effect, Tenant shall have
three (3) options to extend the term of this Lease for one additional term
("option term"), each such option term being for five (5) years and commencing
at midnight on the date on which the then current term terminates. Said option
as to the immediately following option term shall, at all times hereafter,
automatically, conclusively, absolutely and forever be deemed not to have been
exercised by Tenant, all unless Tenant shall notify Landlord by giving Landlord
written notice ("Notice to Landlord") received by Landlord at least nine (9)
months prior to expiration of the then current term (time being of the essence)
that Tenant elects to exercise said option. Such extension shall be on the same
terms, covenants and conditions as the initial term except for the amount of
Base Rent and further except that there shall be absolutely no option whatsoever
to extend the term of this Lease beyond the third such option term. The Base
Rent due and payable for each Lease Year of each such option term shall be the
greater of 1) the amount recalculated for each Lease Year of each such option
term pursuant to 3.b) of this Lease or 2) the fair market rental for demised
premises determined by Landlord and Tenant at least ninety (90) days prior to
inception of such option term. In the event Landlord and Tenant do not agree as
to said fair market rental at least ninety (90) days prior to the inception of
such option term, said fair market rental shall be determined pursuant to the
Article of this Lease entitled "Disputes". In the event that, prior to inception
of such option term, said agreement is not reached and/or said determination is
not made as to the amount of fair market rental for such option term, Tenant
shall pay Landlord: 1) on the first day of each month of such option term, until
said agreement is reached or said determination is made, the amount of Base Rent
due pursuant to 1) of the fourth sentence of this paragraph, same to be applied
to the amount of Base Rent ultimately determined to be due for such option term,
2) immediately upon the reaching of said agreement or making of said
determination, the difference, if any, between said Base Rent ultimately
determined to be due for such option term and the amount paid pursuant to 1) of
this sentence, and 3) at all times after the reaching of said agreement or
making of said determination, on the first day of each month of such option term
the amount of Base Rent ultimately determined to be due for such option term.
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Notwithstanding any of the foregoing, in the event 1) the Landlord
delivers written notice to Tenant that Landlord or Popshots, Inc. elects to
utilize demised premises during the second and/or third of said option terms,
and 2) said notice is delivered to Tenant at least nine (9) months prior to the
inception of the first of said second and/or third option terms so elected to be
utilized, then in such event Tenant shall have no further rights thereafter
relative to such of said second and/or third option terms so elected to be
utilized.
"Lease Year" as used throughout this entire Lease shall mean each
twelve (12) month period, with the first Lease Year commencing on July 1, 1997.
3. Base Rent:
The Base Rent ("Base Rent" or "rent") for the term shall be the
following which shall be paid in advance on the Commencement Date and on the
same day of each calendar month (or closest day as to any month in which there
is no such same day) thereafter:
a) The first eleven (11) months of the initial term (i.e. from and
including Commencement Date through and including June 30, 1997: eleven (11)
monthly payments, each in the monthly amount of $5,393.50, except that, provided
Tenant fully and faithfully complies with all provisions of this entire Lease as
and when required by this entire Lease, there shall be no such monthly payments
for the months commencing August 1, September 1, October 1 and November 1, 1996.
b) Each Lease Year thereafter: twelve (12) monthly payments, each in
the monthly amount of the greater of (i) the monthly amount of Base Rent which
shall have been due for the month immediately preceding the inception of the
Lease Year for which the computation is made (which for the sole purpose of
computing Base Rent for the second Lease Year shall be deemed to have been
$8,911.00) multiplied by 1.02, or (ii) $8,911.00 multiplied by a fraction the
numerator of which shall be the CPI for the month which is three (3) months
immediately preceding the inception of the Lease Year for which the computation
is made and the denominator of which shall be the CPI for April 1, 1996.
"CPI" shall mean the CPI-U Indexes ("CPI-U Indexes") of Table 2.
Consumer Price Index for All Urban Consumers (CPI-U) and Consumer Price Index
for Urban Wage Earners and Clerical Workers (CPI-W): Selected areas, all items
index (1982-84=100, unless otherwise noted), for Selected local areas,
N.Y.-Northern N.J.-Long Island, NY-NJ-CT, published by the Bureau of Labor
Statistics of the United States Department of Labor (or in the event, but only
in the event, that CPI-U Indexes shall cease to be so published, the CPI-W
Indexes of said Table, for N.Y.-Northern N.J.-Long Island, NY-NJ-CT, published
by said Bureau of said Department). In the event the CPI shall hereafter be a)
converted to a different standard reference Base or otherwise revised, or b)
cease to be published, the determination of the annual rent for each such Lease
Year of such option term shall be made with the use of such conversion factor,
formula, table or method for converting the CPI as may be published by the
Bureau of Labor Statistics, or, failing such latter publication, the use of such
conversion factor, formula, table or method as may be published by Prentice
Hall, Inc., or, failing such latter publication, then with the use of conversion
factor, formula, table or method as may be published or used by any other
nationally recognized publisher selected solely by Landlord or similar
statistical information selected solely by Landlord.
4. Payment of Base Rent etc.:
Said Base Rents (and all other sums due pursuant to this Lease) shall
be paid without abatement, setoff, deduction, demand, and/or any notice
whatsoever, monthly in advance, in installments as set forth above, (and/or as
otherwise set forth in this Lease) at P.O. Box 707, Westport, Connecticut 06881
or as may be otherwise directed by the Landlord in writing.
5. Peaceful Possession:
The Landlord covenants that the Tenant, on paying said Base Rent and
all other sums due pursuant to this Lease and performing the covenants and
conditions in this Lease contained, shall and may peaceably and quietly have,
hold and enjoy the demised premises for the term aforesaid.
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6. Purpose:
The Tenant shall use the demised premises only for offices, kitchen and
a television studio and for no other use whatsoever.
Within a reasonable time after its execution of this Lease, Tenant.
shall deliver to Landlord all plans, calculations approvals and all other
documents and items required for Landlord to obtain building permits relative to
alterations in accordance with plans and specifications to be previously
expressly approved in writing by Landlord of the demised premises. Within a
reasonable time after Landlord shall have received from Tenant all of said
plans, calculations, approvals and all other documents and items referred to in
the immediately preceding sentence, Landlord shall file with the Building
Department of the City of Norwalk an application and all other documents
required to obtain a building permit for Tenant to construct improvements on
demised premises all as Tenant and Landlord shall have previously and expressly
approved in writing. Nothing contained in this entire paragraph shall obligate
Landlord to construct any improvements whatsoever.
The Landlord and the Tenant shall fully cooperate with the other in all
reasonable ways relative to the second and third sentences of the immediately
preceding paragraph. The Landlord and Tenant shall pay its own legal fees and
other costs relative to Landlord's obtaining said building permits, except that
Landlord shall pay the fees required by the City of Norwalk to obtain said
building permits.
7. Re-entry, etc.:
The Tenant shall, without any previous demand therefor, pay to the
Landlord, or its agent, said Base Rent and all other sums due pursuant to this
Lease, and perform all terms of this Lease, at the times and in the manner
provided. In the event of the a) non-payment of said Base Rent, and/or any
installment thereof, and/or any other sums due pursuant to this Lease within
five (5) days after the dates when due, b) failure to perform all terms of this
Lease, at the times and in the manner provided, and if said failure shall not
have been cured within fifteen (15) days after notice to Tenant (said b)
collectively referred to hereafter as "failure regarding other terms") and/or c)
deserting and/or vacating of the demised premises, the Landlord or its agents
shall have the right to and may enter said demised premises as the agent of the
Tenant, without being liable therefor, and may relet the demised premises, and
receive said Base Rent therefor, and all other sums due pursuant to this Lease,
upon such terms as shall be satisfactory to the Landlord, and all rights of the
Tenant to repossess the demised premises under this Lease shall be forfeited.
Such re-entry by the Landlord shall not operate to release the Tenant from any
of said Base Rent and all other sums due pursuant to this Lease and/or from any
covenants to be performed hereunder during the full term of this Lease. For the
purpose of reletting, the Landlord shall be authorized to make such repairs or
alterations in or to the demised premises as may be necessary to place the same
in good order and condition. The Tenant shall be liable to the Landlord for the
cost of such repairs or alterations, provided such repairs or alterations are
reasonable, and all expenses of such reletting. If the sum realized or to be
realized from the reletting is insufficient to satisfy said Base Rent and all
other sums due pursuant to this Lease, the Tenant shall forthwith pay such
entire deficiency. The Tenant shall not be entitled to any surplus accruing as a
result of the reletting. Each party to this Lease shall pay, as additional rent,
all reasonable attorney's fees and other expenses incurred by the other party in
enforcing any of the obligations under this Lease provided said other party
shall prevail in said enforcement. Notwithstanding the provisions of the second
sentence of this paragraph, in the event, but only in the event, that any such
"failure regarding other terms" 1) can not be cured within fifteen (15) days
after notice to Tenant and 2) does not or will not result in any a) harm, damage
and/or liability to the land, building, demised premises, Landlord and/or Tenant
and/or any other party and/or property, b) default and/or breach of any other
lease, c) default and/or acceleration of any note, mortgage, assignment of
leases or other loan document relating to the land and/or building, c)
violation, cancellation and/or termination of, and/or increase in premiums
relative to, any insurance policy existing presently and/or hereafter and/or d)
violation of, non-compliance with and/or action pursuant to any governmental
law, ordinance, and/or regulation, then in the event of 1) and 2), but only in
the event of 1) and 2), Landlord shall not have any of the rights set forth in
the second sentence of this paragraph provided Tenant commences to cure said
"failure regarding other terms" within
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fifteen (15) days after notice to Tenant and Tenant diligently pursues said cure
at all times thereafter until said failure regarding other terms has been fully
cured.
8. Sub-letting and Assignment:
The Tenant shall not sub-let the demised premises or any portion
thereof, nor assign or encumber this Lease or any portion thereof, without the
prior express written consent of the Landlord (which consent shall not be
unreasonably withheld and the decision relative to any such consent shall not be
delayed more than thirty (30) days from the date Landlord received all items to
which Landlord is entitled pursuant to this entire paragraph). Said consent may
be withheld, in the sole reasonable discretion of the Landlord and/or any
present and/or future holder of any present and/or future mortgage on the land
and/or building, for reasons which shall include, but not be limited to, the
determination as to any proposed sublessee, assignee and/or encumbrance holder
(collectively, "transferee") whether alone and/or in comparison with Tenant,
relative to any business, financial, personal and/or other issue and/or
consideration, including, but not limited to, (i) previous business experience,
(ii) proposed business, (iii) previous, present and/or projected income, assets,
liabilities and net worth, (iv) financial history, (v) character and/or (vi)
other matters. In order to assist the determination of any request for such
consent, Tenant shall deliver to Landlord the following: a) simultaneously with
said request, written (i) description by transferee of the previous business
experience of, and business proposed by, transferee, (ii) references from two
other parties ("other parties") describing transferee's character, previous
business experience, financial history and present financial status, (iii)
consent of, and authorization from, transferee to a) Landlord for Landlord to
contact said other parties and/or any other company and/or agency which is
hereafter in the business of providing and/or reporting credit, financial and/or
other business documents and/or information (collectively, "credit companies")
and to obtain from said other parties and/or credit companies such further
documents and/or other information as to transferee as Landlord may thereafter
request from said other parties and/or credit companies, and b) said other
parties and/or credit companies for said other parties and/or credit companies
to provide Landlord with all of said further documents and/or other information,
and (iv) financial statements (including balance sheets and income statements)
and all tax returns of transferee and Tenant for the two immediately preceding
years, b) thereafter, any further documents and/or information Landlord may
reasonably request, and c) each time Tenant delivers any of foregoing to
Landlord, the consent of, and authorization from, Tenant, transferee, said other
parties and said credit companies to Landlord to provide all of foregoing to all
of said present and/or future holders of said present and/or future mortgages.
In addition to any and all other amounts due from Tenant to Landlord,
rights and/or remedies of Landlord and/or obligations and/or liabilities of
Tenant, all whether or not same accrue and/or are due prior to, upon and/or
after any such consent, subletting, assignment or encumbering, Tenant shall pay
Landlord the following within seven (7) days of Landlord's demand for same (said
seven (7) day period being on a time is of the essence basis wherever said seven
(7) day period is referred to in this entire Article): a) whether or not said
consent is given, all reasonable expenses incurred by Landlord relative to
and/or resulting from said request, determination, consent, subletting,
assignment, encumbering and/or any modification of this Lease, and/or review of
any of foregoing, including, but not limited to, attorneys' fees, accountants'
fees, consultants' fees, credit and/or financial report and/or search fees
and/or the like, but in no event more than Five Thousand and 00/100 ($5,000.00)
Dollars, and b) if said consent is given, the further sum of the difference, if
any, between Five Thousand and 00/100 ($5,000.00) Dollars and the amount paid by
Tenant to Landlord pursuant to a) of this sentence.
In the event said consent is given, the Tenant shall be and remain
jointly and severally liable with transferee for any and all obligations and
liabilities pursuant to this entire Lease, all whether or not same accrue
and/or are due prior to, upon and/or after, and notwithstanding, any such
consent, subletting, assignment and/or encumbering; none of said obligations
and liabilities shall be merged in any such consent, subletting, assignment or
encumbering but shall survive same. Within five (5) business days of Landlord's
demand for same (said five (5) business day period being on a time is of the
essence basis wherever said five (5) business day period is referred to in this
entire Article), Tenant shall deliver to Landlord Tenant's written confirmation
("confirmation") of all contents of the immediately preceding sentence.
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Any such consent, subletting, assignment and/or encumbering shall be
deemed to be expressly a) conditioned upon Landlord's receipt of (i) all amounts
referred to in the second paragraph of this Article 8. within the seven (7) day
period referred to in said second paragraph and (ii) the confirmation referred
to in the third paragraph of this Article 8. within the five (5) business day
period referred to in said third paragraph, and b) null, void and of no effect
whatsoever if Landlord does not receive all of said amounts and confirmation
within said seven (7) day period and five (5) business day period, respectively.
9. Condition of Premises, Repairs/Alterations and Improvements/Sanitation,
Inflammable Materials/Sidewalks:
The Tenant shall quit and surrender the demised premises at the end of
the demised term in as good condition as the reasonable use thereof will permit.
Tenant's obligations pursuant to the immediately preceding sentence shall
include, but not be limited to, Tenant's providing, and paying all costs of,
reasonable cleaning of, and waste removal from, demised premises. The Tenant
shall not make any alterations, additions, or improvements to the demised
premises without the Landlord's 1) prior express written initial consent of same
(except that Landlord hereby consents to all items referred to in "Exhibit C"
subject to Landlord's prior express written initial consent to plans and
specifications for same) and 2) final express written approval of all of same
as-built, which consent and approval, inter alia, need not violate any mortgage
now or hereafter affecting demised premises and shall require that Tenant
complies with all governmental regulations relative to all of foregoing. Tenant
shall pay, as and when due, all costs of all such alterations, additions and
improvements. The Tenant shall pay all costs of all repairs, replacements,
renovations, alterations, additions, improvements and/or maintenance required to
or for demised premises reasonably determined by Landlord to be required due to
the use of the demised premises by and/or on behalf of Tenant and/or its agents,
servants and/or invitees (except repairs which are so required to a) structural
elements and/or b) systems, of the demised premises and/or building; however,
Tenant shall pay all costs of all repairs which are so required to a) structural
elements and/or b) systems, of the demised premises and/or building, if said
repairs result from the act and/or failure to act of and/or on behalf of Tenant,
its agents, servants and/or invitees). The Tenant shall wash the inside and the
outside of all windows of demised premises at least once every three (3) months.
All erections, alterations, additions and improvements, whether temporary or
permanent in character, which may be made upon the demised premises either by
the Landlord or the Tenant, except furniture, studio equipment, or moveable
trade fixtures installed at the expense of the Tenant and which are removed by
Tenant at its cost and without damage to the land, building or premises, shall
be the property of the Landlord and shall remain upon and be surrendered with
the demised premises as a part thereof at the termination of this Lease, without
compensation to the Tenant. The Tenant has reviewed the demised premises and
accepts same in the "as is" condition. At least ten (10) days prior to
expiration or termination of this Lease, Tenant, at the option of the Landlord,
shall, at Tenant's sole cost, restore the Premises to the condition they were in
at the inception of the initial term prior to any erections, alterations,
additions and/or improvements (except those expressly agreed to by Landlord
without the condition of Tenant's restoration of the Premises).
10. Liens:
In the event that any lien is filed against the demised premises as a
result of any act and/or omission by and/or on behalf of Tenant and/or Tenant's
agents, servants, employees, contractors and/or invitees, after thirty (30)
days' notice to the Tenant (unless any present or future mortgagee of the
demised premises shall require a shorter notice period or no notice period, in
which event said shorter notice period or no notice period shall apply) the
Tenant shall have said lien released and discharged at Tenant's sole cost, and
if said lien is not so released and discharged within said period, the Landlord,
at its option, may terminate this Lease and/or pay said lien, without inquiring
into the validity thereof, and the Tenant shall forthwith reimburse the Landlord
the total expense incurred by the Landlord in releasing and/or discharging said
lien, as additional rent hereunder.
11. Liability of Landlord:
The Landlord shall not be responsible for the loss of or damage to
property or injury to persons occurring at the demised premises, by reason of
any existing or future condition, defect,
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matter or thing at the demised premises or the property of which the demised
premises are a part, or for the acts, omissions or negligence of other persons
or entities at the demised premises. The Tenant agrees to, shall, and does
hereby, indemnify and save the Landlord harmless from all claims and liability
for losses of or damage to property, or injuries to persons occurring at the
demised premises.
12. Services, Utilities and Other Expenses:
Utilities furnished to the demised premises for the benefit of the
Tenant shall be provided by Landlord. In addition to all Base Rent and all other
sums due pursuant to this Lease, utilities, services and other costs shall be
paid for as set forth in "Schedule 1" attached hereto. The Landlord shall not be
liable for any interruption or delay in any of the above services for any reason
whatsoever.
13. Flight to Inspect and Exhibit:
The Landlord, or its agents shall have the right to enter the demised
premises at reasonable hours provided reasonable advance notice is given to the
Tenant, to examine the same, or to run telephone or other wires, or to make such
repairs, additions or alterations as it shall reasonably deem necessary for the
safety, preservation or restoration of the building and improvements, or for the
safety or convenience of the occupants or users thereof, or to exhibit the same
to prospective purchasers, lenders and/or agents, and put upon the premises a
suitable sign. In the event Tenant shall not have validly exercised all of the
options herein provided, for six (6) months prior to the expiration of the
initial term and all option terms immediately preceding any option terms not so
validly exercised, the Landlord, or its agents, may similarly exhibit the
premises to prospective tenants and/or agents, and may place the usual "To Let"
signs thereon.
14. Damage by Fire, Explosion, The Elements or Otherwise:
In the event of the 1) total destruction of the demised premises or the
building by fire, explosion, the elements or otherwise during the term hereby
created, or previous thereto, or 2) such partial destruction thereof as to
render the demised premises a) wholly untenantable and unfit for occupancy, or
b) not repairable within one hundred eighty (180) days from the happening of
such injury, then and in such case, all sums due relative to any period
thereafter shall equitably abate, and, at the option of Tenant or Landlord, the
term hereby created shall cease and become null and void from the date of such
damage or destruction and the Tenant shall immediately surrender said demised
premises and all the Tenant's interest therein to the Landlord, and shall pay
Base Rent and all other sums due pursuant to this Lease as may have been so
equitably abated, only to the time of such surrender, in which event the
Landlord may re-enter and re-possess the demised premises thus discharged from
the Lease, and may remove all parties therefrom. Should the demised premises be
partially destroyed and rendered partially untenantable and unfit for occupancy,
but yet be repairable within ninety days from the happening of said injury, the
Landlord shall and may enter and repair the same, shall commence repairs as soon
as practical and proceed diligently to complete said repairs, and the Base Rent
and all other sums due pursuant to this Lease shall be equitably abated from the
date of said injury until said repairs are completed, and shall recommence in
full immediately after said repairs shall be completed. Should the demised
premises not be rendered untenantable and unfit for occupancy, then the Landlord
shall and may enter demised premises and repair the same with reasonable
promptness and in that case the Base Rent and all other sums due pursuant to
this Lease accrued and accruing shall not cease or be reduced. The Tenant shall
immediately notify the Landlord in case of fire or other damage in the demised
premises of which Tenant has notice.
15. Observation of Laws, Ordinances, Rules and Regulations:
Subject to the provisions expressly appearing in parenthesis in the
fifth sentence of Article 9. of this Lease, the Tenant shall observe and comply
with all laws, ordinances, rules and regulations of the Federal, State, County
and Municipal authorities applicable to the business to be conducted by the
Tenant in the demised premises. The Tenant agrees not to do or permit anything
to be done in the demised premises, or keep anything therein, which will
increase the rate of fire insurance premiums on the improvements or any part
thereof, or on property kept therein, or which will obstruct or interfere with
the rights of other tenants, or conflict with the
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regulations of the Fire Department or with any insurance policy upon the
building, the land on which the building is located and/or any other
improvements on said land. In the event of any increase in insurance premiums
resulting from the Tenant's occupancy of the demised premises, or from any act
or omission on the part of the Tenant, the Tenant agrees to pay said increase in
insurance premiums on the improvements or contents thereof as additional rent.
Landlord represents to Tenant that the current insurance rating and annual
premiums relative to the building and present fire and extended coverage
insurance policies are Protection Class 04 651 21 Office: NOC and $1,852.00,
respectively.
16. Signs:
No sign, advertisement, or notice (collectively, "sign") shall be
affixed to or placed upon any part of the demised premises by the Tenant, except
in such manner, and of such size, design and color as shall be expressly
approved in advance in writing by the Landlord (said approval not to be
unreasonably withheld). Landlord shall attend to the obtaining and placing of
all signs approved by Landlord, and Tenant shall forthwith pay Landlord for all
of same.
17. Subordination to Mortgages and Deeds of Trust, etc.:
This Lease is subject and subordinate, and is hereby subjected and
subordinated, to all present and/or future mortgages, deeds of trust and other
encumbrances affecting the demised premises, land or building. The Tenant,
forthwith upon demand of Landlord, shall execute and deliver to Landlord, at no
expense to Landlord, all instruments which may reasonably be deemed necessary or
desirable by the Landlord to further effect, and/or to confirm, the subjection
and subordination of this Lease to any such present and/or future mortgage, deed
of trust or encumbrance. The Tenant further, forthwith upon demand of Landlord,
shall execute and deliver to Landlord, at no expense to Landlord, all estoppel
certificates and ratification and attornment agreements as requested by Landlord
relative to any proposed refinancing and/or sale of the land and/or building.
Within fifteen (15) days after Tenant's execution and delivery to Landlord of
this Lease and the security deposit required hereunder, Landlord shall deliver
to Tenant a Subordination, Non-Disturbance and Attornment Agreement in
substantially the same form and content as "Exhibit D" attached hereto executed
by the present mortgagee of the land. Landlord shall use its best efforts to
deliver to Tenant an agreement in substantially the same form and content as
said "Exhibit D" executed by all future mortgagees of the land.
18. Non-Payment and/or Failure to Comply with Covenants, Forfeiture of
Lease, Non-Waiver of Breach, Attorneys' Fees etc.:
In case Tenant a) does not pay any sum due pursuant to this Lease as
and when due, including, but not limited to, Base Rent and/or net costs, within
five (5) business days after the dates when due, and/or b) fails to fully comply
with any of the other covenants, agreements and conditions of this Lease as and
when due, and, as to b) fails to discontinue such failure to comply referred to
in b) within 15 business days after notice thereof given to the Tenant (said b)
collectively referred to hereafter as "failure regarding other terms"), this
Lease shall thenceforth, at the option of the Landlord, become null and void. In
such case, all Base Rent and all other sums due pursuant to this Lease
theretofore, and/or which would have become due thereafter (discounted to the
then present value, using a discount rate of 8% per annum), shall forthwith
become due and payable, and the Tenant shall be liable for all loss or damage
resulting from such violation as aforesaid. No waiver by the Landlord of any
violation or breach of condition by the Tenant shall constitute or be construed
as a waiver of any other violation or breach of condition, nor shall lapse of
time after breach of condition by the Tenant before the Landlord shall exercise
its option under this paragraph operate to defeat the right of the Landlord to
declare this Lease null and void and to re-enter upon the demised premises after
the said breach or violation. In any of said events Tenant shall pay Landlord
all costs reasonably incurred by Landlord as a result of said nonpayment and/or
failure to comply, including, but not limited to, all reasonable attorneys'
fees, experts' fees and court costs. Notwithstanding the provisions of the first
sentence of this paragraph, in the event, but only in the event, that any such
"failure regarding other terms" 1) can not be cured within fifteen (15) days
after notice to Tenant and 2) does not or will not result in any a) harm, damage
and/or liability to the land, building, demised premises, Landlord and/or Tenant
and/or any other party and/or property, b) default and/or breach of any other
lease, c) default and/or acceleration of any note, mortgage, assignment of
leases or other loan document
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<PAGE> 8
relating to the land and/or building, c) violation, cancellation and/or
termination of, and/or increase in premiums relative to, any insurance policy
existing presently and/or hereafter and/or d) violation of, non-compliance with
and/or action pursuant to any governmental law, ordinance, and/or regulation,
then in the event of 1) and 2), but only in the event of 1) and 2), Landlord
shall not have any of the rights set forth in the first sentence of this
paragraph provided Tenant commences to cure said "failure regarding other terms"
within fifteen (15) days after notice to Tenant and Tenant diligently pursues
said cure at all times thereafter until said failure regarding other terms has
been fully cured.
In addition to all of, and not in lieu of any of, Landlord's other
rights and/or remedies and/or Tenants' other obligations, forthwith upon any
failure of Tenant to fully and faithfully comply with all provisions of this
entire Lease, including, but not limited to, paying all Base Rent, additional
rent, rent, net costs, and all other sums due pursuant to this entire Lease,
Tenant shall pay Landlord five (5%) percent of all amounts Tenant fails to pay
as and when required by this Lease, for each month said failure of Tenant to so
fully and faithfully comply with all provisions of this entire Lease continues.
Said five (5%) percent shall conclusively a) represent the estimate of the
Landlord and Tenant of one (1) of Landlord's costs relative to said failure of
Tenant, and b) not be deemed to constitute a penalty.
Landlord shall have the obligation to use reasonable efforts to
mitigate its damages.
19. Notices:
All notices and demands, legal or otherwise, incidental to this Lease,
or the occupation of the demised premises, shall be in writing. If either party
or its agent desires to give or serve upon the other party any notice or demand,
it shall be sufficient to send a copy thereof by Certified Mail, Return Receipt
Requested, addressed to said other party at the address set forth in the
immediately following sentence with a copy to a) David Steward at Time
Publishing Ventures Inc., 20 West 43rd Street, New York, New York 10036 and
Larry H. Schatz, Esq., at c/o Grubman, Indursky, Schindler & Goldstein, P.C.,
Carnegie Hall Tower, 152 West 57th Street, New York, New York 10019-3301, if to
Tenant, and b) Peter vanWitt, P.O. Box 707, Westport, Connecticut 06881 and
Henry A. Perles, Esq., at c/o Kleban & Samor, P.C., 2425 Post Road, Southport,
Connecticut 06490, if to Landlord. Notices from the Landlord to the Tenant shall
be to the demised premises and from the Tenant to the Landlord shall be to the
place hereinbefore designated for the payment of rent. Landlord or Tenant may
from time to time designate in writing a change of the place to which notice
shall be given to said designating party.
20. Bankruptcy, Insolvency, Assignment for Benefit of Creditors:
It is further agreed that if at any time during the term of this Lease
the Tenant shall make any assignment for the benefit of creditors, or be decreed
insolvent or bankrupt according to law, or if a receiver shall be appointed for
the Tenant, then the Landlord may, at its option, terminate this Lease, exercise
of such option to be evidenced by notice to that effect served upon the
assignee, receiver, trustee or other person in charge of liquidation of the
property of the Tenant or the Tenant's estate, but such termination shall not
release or discharge any payment of Base Rent and/or any other sums due
theretofore and/or thereafter pursuant to this Lease, or any liability by reason
of any agreement or covenant herein contained on the part of the Tenant.
21. Holding Over by Tenant:
In the event that the Tenant shall remain in the demised premises after
the expiration of the term of this Lease without Landlord's and Tenant's having
executed a new written lease, such holding over shall not constitute a renewal
or extension of this Lease. The Landlord may, at its option, elect to treat the
Tenant as one who has not removed at the end of his term, and thereupon be
entitled to all the remedies against the Tenant provided by law in that
situation, or the Landlord may elect, at its option, to construe such holding
over as a tenancy from month to month, subject to all the terms and conditions
of this Lease, except as to duration thereof, and in that event the Tenant shall
pay monthly rent in advance at the rate of 200% of the Base Rent due for the
last month of the demised term plus all other sums due pursuant to this Lease.
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<PAGE> 9
22. Eminent Domain, Condemnation:
If the property or any part thereof wherein the demised premises are
located shall be taken by public or quasi-public authority under any power of
eminent domain or condemnation, this Lease at the option of the Landlord shall
forthwith terminate and the Tenant shall have no claim or interest in or to any
award of damages for such taking.
Notwithstanding the foregoing, Tenant shall have the right separately
to pursue against the condemning authority an award in respect of the loss, if
any, to leasehold improvements paid for by Tenant without any credit or
allowance from Landlord and in respect to the loss of Tenant's leasehold
interest.
23. Disputes:
Any dispute arising under this Lease shall be settled by arbitration.
The Landlord and Tenant shall each choose an arbitrator, and the two arbitrators
thus chosen shall select a third arbitrator. The findings and award of the three
arbitrators thus chosen shall be final and binding on the parties hereto.
For disputes hereunder that are not resolved by the parties within ten
10 days after either party gives notice to the other of its desire to arbitrate
the dispute, the dispute shall be settled by binding arbitration by the American
Arbitration Association in accordance with its then-prevailing rules at the
office of the American Arbitration Association nearest the demised premises.
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The arbitrators shall have no power to change the lease
provisions. The arbitration panel shall consist of three arbitrators, each of
whom must be a commercial real estate broker then actively engaged in the
practice of commercial real estate brokerage in Fairfield County for at least
the immediately preceding five (5) years. Both parties shall continue performing
their lease obligations pending the award in the arbitration proceeding.
24. Delivery of Lease:
No rights shall be conferred upon the Landlord and/or Tenant until this
Lease has been signed by the Landlord and Tenant, and an executed copy of this
Lease has been delivered to the Landlord and Tenant.
25. Lease Provisions Not Exclusive:
The foregoing rights and remedies are not intended to be exclusive but
as additional to all rights and remedies the Landlord would otherwise have by
law.
26. Lease Binding on Heirs, Successors, Etc.:
All of the terms, covenants and conditions of this Lease shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties hereto.
This Lease and all obligations of Tenant to pay Base Rent and all other
sums due pursuant to this Lease and perform all of the other covenants and
agreements hereunder on part of Tenant to be performed shall not be modified,
reduced, altered and/or affected in any manner and/or to any extent whatsoever,
if Landlord is unable 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
repairs, 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 governmental preemption in connection with
the National Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department or subdivision
thereof of any governmental agency, or by reason of the conditions of supply and
demand, or by reason of strike, or by reason of any other cause beyond
Landlord's control.
27. Security:
The Tenant has this day deposited with Landlord $17,000.00 as security
for the full and faithful performance by the Tenant of all the terms, covenants
and conditions of this Lease upon
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<PAGE> 10
the Tenant's part to be performed, which said sum shall be returned to the
Tenant, with interest at the passbook rate paid from time to time by banks
reasonably chosen by Landlord (although Landlord shall have no obligation to
deposit any or all of said security) after the time fixed as the expiration of
the term herein, provided Tenant has vacated demised premises, removed all
personalty therefrom and has fully and faithfully carried out all of said terms,
covenants and conditions on Tenant's part to be performed. In the event of a
bona fide sale, the Landlord shall have the right to transfer the security to
the vendee for the benefit of the Tenant and the Landlord shall be considered
released by the Tenant from all liability for the return of such security; and
the Tenant agrees to look to the vendee solely for the return of the said
security, and it is agreed that this shall apply to every transfer or assignment
made of the security to a vendee. The security deposited under this lease shall
not be mortgaged, assigned or encumbered by the Tenant without the written
consent of the Landlord. In the event any or all of said security is utilized by
Landlord, the entire amount so utilized shall be replenished by Tenant's
depositing with Landlord a further sum in the amount so utilized forthwith upon
Landlord's notification to Tenant of said utilization.
28. Confidentiality:
All terms of this entire Lease ("terms") shall be held by Landlord and
Tenant in strict and absolute confidence and not revealed to any other party
whatsoever except for the sole purpose of enabling 1) Landlord or Tenant to
obtain financing and/or appropriately communicate with its attorneys and/or
accountants and/or with companies owning and/or owned by Landlord or Tenant
and/or 2) Landlord to sell the land and/or building. Notwithstanding anything
contained in this entire Lease, and in addition to all of its other rights and
remedies, Landlord and Tenant shall be entitled to any or all of the following
in the event the other party does not fully and faithfully comply with all
provisions of this paragraph and/or it appears that Tenant will not so fully and
faithfully comply: a) injunctive relief for the reason that a monetary award
would not constitute an adequate remedy for any such failure to so fully and
faithfully comply, and/or b) an increase in the Base Rent for the entire initial
term from its inception and option term from its inception, so that the annual
Base Rent during the entire initial term from its inception and option term from
its inception shall be the amount computed and re-computed from time to time by
Landlord as a) the highest per square foot rent to which Landlord is entitled
presently and/or hereafter, pursuant to any other lease which is or may be in
effect presently and/or hereafter and relates to any other portion of the
building, b) multiplied by the rentable square footage of the demised premises.
All provisions of this entire paragraph shall survive the termination of this
Lease, and shall not be merged in same.
29. Brokerage:
Tenant and Landlord warrant and represent they have not dealt with any
realtor, broker and/or agent, in connection with this Lease, including, but not
limited to, the negotiation, entering into, execution and/or delivery of this
Lease. Tenant and Landlord shall pay, and shall, and do hereby, hold harmless
and indemnify the other from and against, any and all costs, expenses, damages
and/or liabilities (including, but not limited to, all compensation,
commissions, fees, costs of suit, witnesses' fees, experts' fees and/or
attorneys' fees) with respect to the indemnitor's dealing with any broker in
connection with this Lease, including, but not limited to, the negotiation,
entering into, execution and/or delivery of this Lease.
30. Sale or Assignment by Landlord, Etc.:
Without any further act, agreement, consent and/or the like whatsoever
of the Landlord, Tenant, any other person, entity and/or party and/or their
respective heirs, successors and/or assigns: a) The Landlord shall have the
right to sell, assign and/or transfer all or any part of the land, building,
other buildings, Demised Premises, this Lease and/or any benefits pursuant to
this Lease, and b) forthwith upon any such sale, assignment, and/or transfer,
absolutely and forever, the seller, assignor and/or transferor pursuant to such
sale, assignment and/or transfer shall be entirely relieved of all of Landlord's
obligations under this Lease which are required to be performed and/or complied
with after such sale, assignment and/or transfer, provided a) the purchaser,
assignee and/or transferee pursuant to such sale, assignment and/or transfer
shall have assumed and agreed to be obligated and responsible for all of said
obligations and/or b) any such sale, assignment and/or transfer shall be subject
to all provisions of this Lease.
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<PAGE> 11
The term "Landlord" as used in this Lease shall mean the Landlord
and/or the owner for the time being of the Demised Premises.
31. Landlord's Rights to Perform Tenant's Covenants:
If Tenant shall at any time fail to perform, and/or cause to be
performed, any obligation of Tenant pursuant to the provisions of this Lease,
then, after the expiration of any notice and cure period expressly provided in
this Lease, Landlord shall have the right, but not the obligation, after ten
(10) days' notice to Tenant (but without notice in the event of an emergency)
and without waiving, and/or releasing Tenant from, any obligation of Tenant in
this Lease contained, to perform same, in such manner and to such extent as
Landlord shall, in its sole reasonable discretion decide, and in exercising any
such rights, pay and incur necessary and incidental costs and expenses,
including, but not limited to, reasonable attorneys' fees. Forthwith upon
Landlord's demand therefor, Tenant shall reimburse Landlord for all sums paid by
Landlord pursuant to this entire Lease, including, but not limited to, this
Article, with interest at the rate of 8% per annum, and Landlord shall have the
same rights and remedies in the event of the nonpayment thereof by Tenant as in
the case of default by Tenant in the payment of the rent.
32. No Representations by Landlord:
Neither Landlord nor anyone on behalf of Landlord has made any
representations, promises and/or the like with respect to the Demised Premises,
building, land and/or other buildings (including, but not limited to, any
representations, promises and/or the like relative to condition, square footage
and/or permitted zoning uses of Demised Premises, building, land and/or other
buildings) on which Tenant has relied, except as expressly herein set forth.
Landlord hereby represents the following to Tenant:
1. During the spring of 1995, Landlord removed the following from
the land:
(a) Two (2) underground fuel storage tanks and the
contents thereof (which contents were believed by
Landlord to be fuel);
(b) Two (2) underground waste storage tanks and the
contents thereof (which contents were believed by
Landlord to include cleaning solvents); and
(c) Approximately two hundred (200) tons of soil;
2. During January of 1996, Landlord removed from the land the
contents of one (1) tank referred to in 32.2. of the Lease
dated as of March 6, 1996 between Landlord and Tenant and
which tank previously was believed by Landlord to be a septic
tank and which contents were believed by Landlord to include
cleaning solvents. During December of 1996, Landlord removed
from the land said tank. The septic tank servicing the
building is, to the best of Landlord's knowledge, sufficient
to service the building;
3. All removal to date referred to in 1. and 2., above, has been,
to the best of Landlord's knowledge, as requested by the
Department of Environmental Protection of the State of
Connecticut;
4. To the best of Landlord's knowledge, there presently exist
none of the following on the land and/or in the building: a)
hazardous materials in violation of environmental laws or b)
other violations of environmental laws; and
5. Landlord shall, and does hereby, indemnify and hold harmless
Tenant of and from all costs resulting from Landlord's acts
and/or failures to act relative to violations of environmental
laws, unless said violations were caused by the act, failure
to act and/or use of the land and/or building by and/or on
behalf of Tenant and/or its agents, servants and/or invitees.
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<PAGE> 12
33. Right of Mortgagee To Cure Defaults of Landlord:
Tenant shall give to Landlord's mortgagee whose name and address have
been supplied to Tenant a copy of any notice of default served upon and/or sent
to Landlord. If Landlord shall have failed to cure such default within the time
provided for in this Lease then Landlord's mortgagee shall have a) an additional
period, of the greater of the cure period provided in any applicable mortgage or
thirty (30) days, within which to cure such default, or b) if such default
cannot be cured within said period, then such additional time as may be
necessary if within said period the Landlord's mortgagee has commenced and is
diligently pursuing the curing of such default. This Lease shall not be
terminated if said default is cured within said period, or if such cure is being
so diligently pursued, as the case may be. Tenant shall accept performance by
any such Landlord's mortgagee.
34. Entire Agreement, Etc.:
It is expressly understood and agreed by and between the parties hereto
that this Lease sets forth all the covenants, promises, agreements, conditions
and/or understandings, either oral and/or written, between them with respect to
the land, building and/or demised premises and/or this Lease, and there are no
others except as are expressly herein set forth. It is further understood and
agreed that no subsequent alteration, amendment, change and/or addition to this
Lease shall by binding upon Landlord or Tenant unless reduced to writing and
signed by them.
The article and/or paragraph headings contained in this Lease are for
convenience only and shall not be considered in the construction and/or
interpretation of any provision of this Lease.
35. Invalidity of Particular Provisions:
If any term or provision of this Lease or the application thereof to
any person or circumstance shall to any extent be invalid, non-binding and/or
unenforceable, the remainder of this Lease, or the application of such term
and/or provision to persons and/or circumstances other than those as to which it
is invalid, non-binding and/or unenforceable, shall not be affected thereby, and
each term of this Lease shall be valid, binding and enforceable and be enforced
to the fullest extent permitted by law.
36. Social Security Numbers, etc.:
Tenant represents that the following is the tax identification number
of Tenant: 13-3891274.
37. No Smoking in Building:
None of Tenant's employees, customers, contractors, agents, servants,
or invitees shall smoke in any portion of the building, including, but not
limited to, any portion of the demised premises.
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<PAGE> 13
IN WITNESS WHEREOF, the said Parties have hereunto set their hands and
seals the day and year first above written.
Witness: NEWTOWN GROUP PROPERTIES
LIMITED PARTNERSHIP
By Saugatuck Group Property
Management, Inc.,
Its General Partner,
Hereunto Duly Authorized
/s/ By /s/ Peter Van Witt
- -------------------------------- -----------------------------
Peter Van Witt,
Its President,
/s/ Hereunto Duly Authorized
- --------------------------------
MARTHA STEWART LIVING
OMNIMEDIA LLC
/s/ By /s/
- -------------------------------- -----------------------------
Its CEO,
/s/ Hereunto Duly Authorized
- --------------------------------
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<PAGE> 14
STATE OF NEW YORK )
) ss: New York City March 10, 1997
COUNTY OF NEW YORK )
Personally appeared Peter Van Witt, President hereunto duly authorized
of Saugatuck Group Property Management, Inc., general partner hereunto duly
authorized of NEWTOWN GROUP PROPERTIES LIMITED PARTNERSHIP, signer and sealer of
the foregoing instrument, who acknowledged the same to be his free act and deed
as such President hereunto duly authorized, the free act and deed of said
Saugatuck Group Property Management, Inc. as such general partner hereunto duly
authorized, and the free act and deed of said NEWTOWN GROUP PROPERTIES LIMITED
PARTNERSHIP, before me.
_________________________________________
Notary Public
My Commission Expires:
STATE OF NEW YORK )
) ss: New York City February 11, 1997
COUNTY OF NEW YORK )
Personally appeared SHARON PATRICK, CEO hereunto duly authorized of
MARTHA STEWART LIVING OMNIMEDIA LLC, signer and sealer of the foregoing
instrument, who acknowledged the same to be his/her free act and deed as such
CEO hereunto duly authorized, and the free act and deed of said MARTHA STEWART
LIVING OMNIMEDIA LLC, before me.
_________________________________________
Notary Public
My Commission Expires:
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<PAGE> 15
Attachments to Lease
"Exhibit A" - Description of "land".
"Exhibit B" - Outline of "premises".
"Exhibit C" - Items consented to by Landlord subject to Landlord's a)
prior express written initial consent to plans and
specifications for same and b) final express written
approval of all of same as-built.
"Exhibit D" - Subordination, Non-Disturbance and Attornment Agreement.
"Schedule 1" - Net Costs.
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<PAGE> 16
"Schedule 1"
1. Tenant shall further pay all of the following ("net costs") to the
extent same relate to any period commencing on or after Commencement Date: a)
all charges for all utilities used and/or consumed at demised premises, b) all
charges for removal from land of waste and/or other items relating to demised
premises which are in excess of standard office waste, c) all real estate and/or
personal property taxes and/or other governmental assessments resulting from any
alterations, additions, improvements, erections, repairs, replacements,
renovations and/or maintenance made, and/or labor, services, materials and/or
other items provided, to the demised premises, d) Tenant's pro rata share of all
charges for electricity, heating oil, water and sewer relative to the land
and/or building (excluding therefrom all those payable by Tenant and/or other
tenants of the building), plus e) Tenant's pro rata share of all increases over
and above the amounts in parentheses hereafter relative to all of the following
items relative to the land and/or the building:
1) Real Estate Taxes, excluding the real estate taxes referred to
in c), above ($48,266.00);
2) Insurance ($4,500.00);
3) Maintenance and Landscaping ($3,000.00)
4) Management Fees ($15,000.00);
5) Snow Removal ($3,000.00);
6) Waste Removal ($2,200.00); and
7) Fire Alarm and Security System in common areas ($1,200.00).
Said net costs shall be paid by Tenant to Landlord without any
abatement, deduction and/or set-off for any reason whatsoever.
Tenant shall pay to Landlord, in advance, on Commencement Date, and on
the same day of each month thereafter as Base Rent shall be due pursuant to
Article 3. of this Lease, one-twelfth (1/12), of the product of the annual
amount estimated by Landlord, in all reasonable probability, as the amounts
which shall be net costs payable by Tenant and attributable to the 11 months
immediately following Commencement Date and each 12 months thereafter (said 11
or 12 month period, collectively, "applicable period"), or for the applicable
period if said estimate is received by Tenant after the applicable period has
commenced, which estimated annual amount shall be shown on a notice hereinafter
called "Current Notice". All payments made by Tenant to Landlord pursuant to
said Current Notice shall be credited to the payments ultimately determined to
be due for the applicable period. In the event said applicable period has
commenced prior to delivery of any such Current Notice, Tenant shall pay to
Landlord, in addition, within thirty (30) days of delivery of such Current
Notice, for each month in said applicable period that commenced prior to
Tenant's receipt of such Current Notice, an amount equal to one-twelfth(1/12) of
the annual amount shown on such Current Notice multiplied by the number of
months of said applicable period that have theretofore commenced.
As soon as practical after the end of each applicable period, Landlord
shall prepare and deliver to Tenant a Notice of net costs for the immediately
preceding applicable period, which Notice is hereinafter called "Past Notice",
advising Tenant of a) the amounts, due from Tenant to Landlord as net costs for
the immediately preceding applicable period, less b) the amounts paid pursuant
to the immediately preceding paragraph. Within thirty (30) days of the delivery
of such Past Notice, Tenant shall pay Landlord the amount shown thereon, if any,
as due, or Landlord shall credit Tenant the amount shown thereon, if any, as an
over payment, all as the case may be.
The amount of charges for utilities used and/or consumed at demised
premises shall be the amount (i) indicated by any separate meter for demised
premises for such periods as utility charges for demised premises are indicated
by a separate meter for demised premises, and/or (ii) reasonably estimated by
Landlord for all other periods.
2. As used throughout this entire Lease, the term "Tenant's pro rata
share" shall mean 21.02% (except as to heating oil for which Tenant's pro rata
share shall mean 25.47% of all heating oil consumed from the 2,000 gallon tank
on the northerly side of the building or any substitute therefor).
-16-
<PAGE> 17
3. In no event shall any of the provisions of this entire Schedule 1
result in a negative calculation.
4. All sums due and payable by Tenant pursuant to this Schedule 1 shall
be due and payable to Landlord and/or any provider, as Landlord shall direct,
within ten (10) days of Landlord's demand therefor.
5. Tenant shall have the right to reasonably audit all of said net
costs, but said right and audit shall not entitle Tenant to delay making the
payments referred to above to the extent referred to above.
-17-
<PAGE> 18
"Exhibit A"
ALL that certain parcel or tract of land, with the buildings thereon, situated
partly in the Town of Norwalk and partly in the Town of Westport, in the County
of Fairfield and State of Connecticut, containing in area 6.84 acres, and
bounded:
NORTHERLY: 229.67 feet by land now or formerly of L.W. Lissberger;
EASTERLY: 1104.89 feet by land now or formerly of Frederick and Minni
M. Berman;
SOUTHERLY: 24.70 feet by Newtown Avenue;
AGAIN SOUTHERLY: 277.55 feet by land now or formerly of L.W. Lissberger;
WESTERLY: 320.64 feet by land now or formerly of L.W. Lissberger; and
AGAIN WESTERLY: 795.36 feet by land now or formerly of L.W. Lissberger;
Said premises are shown on "Map Showing Property to be Conveyed to the Liberty
Research Laboratories, Inc. by L. Walter Lissberger, Westport, Conn., Scale 1" x
50 ft., 1927, The Samuel W. Hoyt, Jr., Co., Inc., Engineers & Surveyors, S.
Norwalk, Conn.", which map is on file in the Office of the Town Clerk of said
Norwalk and Westport. Reference to said map is hereby made and had for a more
particular description and location of said premises.
<PAGE> 19
"Exhibit B"
[Blueprint of 19 Newtown Turnpike, Westport, CT]
<PAGE> 20
"Exhibit C"
None
<PAGE> 21
"Exhibit D"
Commercial Mortgage Loan - CT
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
DATE: January ____, 1996
MORTGAGEE: FIRST UNION BANK OF CONNECTICUT
5 Research Drive, Shelton, Connecticut 06484
Attention: Commercial Real Estate Department Head
MORTGAGOR:
TENANT: ______________________________________________________
Mailing Address:______________________________________
______________________________________________________
MORTGAGED PREMISES: Street Address:
Municipality of: Darien
County of: Fairfield, State of Connecticut
Tax Map Designation: Lot No. 14, 15 and 16 Map No. 38
DATE OF LEASE: ______________________________________________________
Notice of which is recorded on the Land Records of
the Town of Darien, Connecticut, at Volume
______________, Page ___________.
BACKGROUND
A. As security for a loan made by Mortgagee to Mortgagor, Mortgagor has
given to Mortgagee an Open-End Mortgage and Security Agreement dated January
____, 1996, which is about to be recorded in the land records for the Town of
Darien, Connecticut (said Open-End Mortgage and Security Agreement, together
with any and all increases, renewals, modifications, extensions, substitutions,
replacements and/or consolidations thereof, the "Mortgage"), and constitutes a
first lien against the land and improvements now or hereafter erected thereon
identified above as the Mortgaged Premises and more particularly described on
Schedule "A" attached hereto (the "Mortgaged Premises").
B. Tenant has entered into the Lease identified above and covering all
or a portion of the Mortgaged Premises (the "Leased Premises").
C. As a condition of making the loan, Mortgagee has required that the
Lease be subordinated to the Mortgage and that Tenant agree to attorn to the
purchaser of the Mortgaged Premises at foreclosure of the Mortgage in the event
of such foreclosure, or to Mortgagee prior to foreclosure in the event Mortgagee
elects to collect the rents and other sums due and becoming due under the Lease,
and Tenant is willing to so attorn if Mortgagee will recognize Tenant's rights
under the Lease to the extent hereinafter provided.
1
<PAGE> 22
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants herein contained, and intending to be legally bound hereby,
agree as follows:
1. SUBORDINATION OF LEASE.
The Lease is and shall be subject and subordinate to
the provisions and lien of the Mortgage and to all renewals, modifications,
consolidations, replacements and extensions thereof, to the full extent of the
principal amount and other sums secured thereby and interest thereon, as if the
Lease had been executed and delivered after the execution, delivery and
recording of the Mortgage.
2. ATTORNMENT.
Tenant agrees that it will attorn to and recognize:
(i) Mortgagee, whether as mortgagee in possession or otherwise; (ii) any
purchaser at a foreclosure sale under the Mortgage; (iii) any transferee who
acquires possession of or title to the Mortgaged Premises, whether by deed in
lieu of foreclosure or other means; and (iv) the successors and assigns of such
purchasers and/or transferees (each of the foregoing parties, a "Successor"), as
its landlord for the unexpired balance (and any extensions, if exercised) of the
term of the Lease upon the same terms and conditions as set forth in the Lease.
Such attornment shall be effective and self-operative without the execution of
any further instruments by any party hereto; provided, however, that Tenant
will, upon request by Mortgagee or any Successor, execute a written agreement
attorning to Mortgagee or such Successor, affirming Tenant's obligations under
the Lease, and agreeing to pay all rent and other sums due or to become due to
Mortgagee or such Successor.
3. NON-DISTURBANCE.
So long as Tenant complies with Tenant's obligations
under this Agreement and is not in default under any of the terms, convenants or
conditions of the Lease, Mortgagee will not disturb Tenant's use, possession and
enjoyment of the Leased Premises nor will the leasehold estate of Tenant be
affected or Tenant's rights under the Lease be impaired (except to the extent
that Tenant's right to setoff any sums owed or to receive any obligations to be
performed by Mortgagor shall not be enforceable thereafter against Mortgagee or
any Successor), in any foreclosure action, sale under a power of sale, transfer
in lieu of the foregoing, or the exercise of any other remedy pursuant to the
Mortgage.
4. ASSIGNMENT OF LEASES.
Tenant acknowledges notice of and consents to that
certain Assignment of Leases and Rents from Mortgagor to Mortgagee dated January
___, 1996 (the "Assignment"). Tenant agrees that if Mortgagee, pursuant to the
Assignment, and whether or not it becomes a mortgagee in possession, shall give
notice to Tenant that Mortgagee has elected to require Tenant to pay to
Mortgagee the rent and other charges payable by Tenant under the Lease. Tenant
shall, until Mortgagee shall have cancelled such election, be similarly bound to
Mortgagee and shall similarly attorn to Mortgagee and shall thereafter pay to
Mortgagee all rent and other sums payable under the Lease. Any such payment
shall be made notwithstanding any right of setoff, defense or counterclaim which
Tenant may have against Mortgagor, or any right to terminate the Lease.
5. LIMITATION OF LIABILITY.
5.1. In the event that Mortgagee succeeds to the
interest of Mortgagor under the Lease, or title to the Mortgaged Premises, then
Mortgagee and any Successor shall assume and be bound by the obligations of
Landlord under the Lease which accrue from and after such party's succession to
Mortgagor's interest in the Leased Premises, but Mortgagee and such Successor
shall not be: (i) liable for any act or omission of any prior landlord
(including Mortgagor); (ii) liable for the intention, application or return of
any security deposit to the extent not paid over to Mortgagee; (iii) subject to
any offsets or defenses which Tenant might have
2
<PAGE> 23
against any prior landlord (including Mortgagor); (iv) bound by any rent or
additional rent which Tenant might have paid for more than the current month to
any prior landlord ((including Mortgagor); (v) bound by any amendment or
modification of the Lease made without Mortgagee's or such Successor's prior
written consent; or (vi) obligated to cure any defaults of any prior landlord
under the Lease which occurred prior to the date on which Mortgagee or such
Successor succeeded to Mortgagor's interest under the Lease. Nothing in this
section shall be deemed to waive any of Tenant's rights and remedies against any
prior landlord.
5.2. Tenant agrees that any person or entity which at
any time hereafter becomes the landlord under the Lease, including without
limitation, Mortgagee or any Successor, shall be liable only for the performance
of the obligations of the landlord under the Lease which arise during the period
of its or their ownership of the Leased Premises and shall not be liable for any
obligations of the landlord under the Lease which arise prior to or subsequent
to such ownership. Tenant further agrees that any such liability shall be
limited to the interest of Mortgagee or such Successor in the Mortgaged
Premises, and Tenant shall not be able to enforce any such liability against any
other assets of Mortgagee or such Successor.
6. RIGHT TO CURE DEFAULTS.
Tenant agrees to give notice to Mortgagee of any
default by Mortgagor under the Lease, specifying the nature of such default, and
thereupon Mortgagee shall have the right (but not the obligation) to cure such
default, and Tenant shall not terminate the Lease or abate the rent payable
thereunder by reason of such default unless and until it has afforded Mortgagee
thirty (30) days after Mortgagee's receipt of such notice to cure such default
and a reasonable period of time in addition thereto (i) if the circumstances are
such that said default cannot reasonably be cured within said thirty (30) day
period and Mortgagee has commenced and is diligently pursuing such cure, or (ii)
during and after any litigation action including a foreclosure, bankruptcy,
possessory action or a combination thereof. It is specifically agreed that
Tenant shall not require Mortgagee to cure any default which is not susceptible
of cure by Mortgagee.
7. TENANT'S AGREEMENTS.
Tenant hereby covenants and agrees that: (i) Tenant
shall not pay any rent or additional rent under the Lease more than one month in
advance; (ii) Tenant shall have no right to appear in any foreclosure action
under the Mortgage; (iii) Tenant shall not amend, modify, cancel or terminate
the Lease without Mortgagee's prior written consent, and any attempted
amendment, modification, cancellation or termination of the Lease without such
consent shall be of no force or effect as to Mortgagee; (iv) Tenant shall not
voluntarily subordinate the Lease to any lien or encumbrance (other than the
Mortgage) without Mortgagee's prior written consent; (v) Tenant shall not assign
the Lease or sublet all or any portion of the Leased Premises (except as
permitted by the terms of the Lease) without Mortgagee's prior written consent;
(vi) this Agreement satisfies any requirement in the Lease relating to the
granting of a non-disturbance agreement; and (vii) Tenant shall deliver to
Mortgagee, from time to time and within ten (10) days from the date of request,
a written statement in form and substance satisfactory to Mortgagee certifying
to certain matters relating to the Lease.
8. MISCELLANEOUS.
8.1. Binding Effect. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns. Nothing contained in
this Agreement shall in any way affect or impair the lien created by the
Mortgage, except as specifically set forth herein.
8.2. Modifications. This Agreement may not be
supplemented, amended or modified without the prior written consent of
Mortgagee.
8.3. Notices. All notices and communications under
this Agreement shall be in writing and shall be given by either (a) hand
delivery, (b) first class mail (postage prepaid), or (c) reliable overnight
commercial courier (charges prepaid) to the addresses listed in this Agreement.
Notice shall be deemed to have been given and received: (i) if by hand delivery,
3
<PAGE> 24
upon delivery; (ii) if by mail, three (3) calendar days after the date first
deposited in the United States mail; and (iii) if by overnight courier, on the
date scheduled for delivery. A party may change its address by giving written
notice to the other party as specified herein.
8.4. Governing Law. This Agreement shall be governed
by and construed in accordance with the substantive laws of the State of
Connecticut without reference to conflict of laws principles.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have duly executed and delivered this Subordination,
Non-Disturbance and Attornment Agreement as of the day and year first above
written.
TENANT:
WITNESSES:
________________________________ ___________________________________________
Name: Name: (Individual)
________________________________
Name:
WITNESSES: ___________________________________________
(Corporation or Partnership)
________________________________ By: _______________________________________
Name: Name:
Title: Title:
________________________________
Name:
Title:
WITNESSES: MORTGAGEE:
FIRST UNION BANK OF CONNECTICUT
________________________________ By: _______________________________________
Name: Name:
Title: Title:
________________________________
Name:
Title:
4
<PAGE> 25
SCHEDULE A
DESCRIPTION OF MORTGAGED PREMISES
5
<PAGE> 26
INDIVIDUAL ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF _____________________, SS.:
On this the ________ day of January, 1996 before me, __________________
___________________________ _______________________________________, the
undersigned officer, personally appeared ___________________, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the written
instrument and acknowledged that he/she executed the same for the purposes
therein contained, and as his/her free act and deed.
In witness whereof I hereunto set my hand.
__________________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
CORPORATE ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF _____________________, SS.:
On this the ________ day of January, 1996 before me, ___________________________
_______________________________________, the undersigned officer, personally
appeared _______________________________________, who acknowledged him/herself
to be the _____________________________of _____________________________________,
a corporation, and that he/she as such ___________________________, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by him/herself as such
___________________________and as his/her and its free act and deed.
In witness whereof I hereunto set my hand.
__________________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
PARTNERSHIP ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF _____________________, SS.:
On this the ________ day of January, 1996 before me, ___________________________
_______________________________________, the undersigned officer, personally
appeared _______________________________________, who acknowledged him/herself
to be the Partner of __________________________________________, a partnership,
and that he/she, as such Partner, executed the foregoing instrument for the
purposes therein contained and as his/her free act and deed and the free act and
deed of the partnership.
In witness whereof I hereunto set my hand.
__________________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
6
<PAGE> 27
MORTGAGEE ACKNOWLEDGEMENT
STATE OF CONNECTICUT, COUNTY OF FAIRFIELD, SS.:
On this the ________ day of January, 1996 before me, __________________
___________________________ _______________________________________, the
undersigned officer, personally appeared
_______________________________________, who acknowledged him/herself to be the
_______________________________of FIRST UNION BANK OF CONNECTICUT, a Connecticut
banking corporation, and that he/she as such ___________________________, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by him/herself as such
_____________________and as his/her and its free act and deed.
In witness whereof I hereunto set my hand.
__________________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
7
<PAGE> 28
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
_________________________________________________
- -to-
FIRST UNION BANK OF CONNECTICUT
Dated:
RECORD AND RETURN TO:
FIRST UNION BANK OF CONNECTICUT
5 Research Drive
Shelton, Connecticut 06484
ATTN: Commercial Real Estate Department Head
8
<PAGE> 1
EXHIBIT 10.15
THIS LEASE, dated as of the 14th day of August, 1997, between NEWTOWN GROUP
PROPERTIES LIMITED PARTNERSHIP, a Connecticut limited partnership, hereinafter
referred to as the Landlord, and MARTHA STEWART LIVING OMNIMEDIA LLC, a Delaware
limited liability company, hereinafter referred to as the Tenant.
WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the
Tenant hereby hires and takes from the Landlord, the demised premises described
below on the following terms and conditions.
1. Demised Premises:
The Landlord hereby demises and leases unto the Tenant, and the Tenant
hereby hires and takes from the Landlord, a portion of the building ("building")
situated on the land ("land") described in "Exhibit A" attached hereto and
located at 19 Newtown Turnpike, Norwalk and Westport, Connecticut. Said portion
of said building is crosshatched on "Exhibit B" attached hereto and is referred
to hereinafter as "premises", "Premises", "demised premises" or "Demised
Premises". The said "Premises" represents the balance of the building, portions
of which have already been leased to the Tenant herein under Leases dated March
6, 1996 and amended May 14, 1996 and Lease dated August 1st, 1996. Landlord and
Tenant agree that it shall conclusively be deemed that there are 8,423 rentable
square feet attributable to the demised premises, irrespective of the results of
any calculation and/or measurement hereafter. In addition, Tenant and Tenant's
employees may use any of the parking spaces of the parking lots on the land; the
use of all such parking spaces shall be in common with others and on a
non-exclusive, first come/first served basis. Landlord represents to Tenant that
there shall be a total of at least ninety-nine (99) parking spaces on the land.
2. Term:
The initial term ("initial term") of this Lease shall a) commence
October 1, 1997 ("Commencement Date") and b) end June 30, 2001.
In the event, but only in the event, that a) Tenant complies
with all provisions of this entire Article as and when required, and b) at the
time of the expiration of the then current term, 1) Tenant, at all times prior
thereto, shall have fully and faithfully complied with and performed all terms
and/or provisions of this Lease, as and when required pursuant to this entire
Lease, and 2) this Lease shall then be in full force and effect, Tenant shall
have three (3) options to extend the term of this Lease for one additional term
("option term"), each such option term being for five (5) years and commencing
at midnight on the date on which the then current term terminates. Said option
as to the immediately following option term shall, at all times hereafter,
automatically, conclusively, absolutely and forever be deemed not to have been
exercised by Tenant, all unless Tenant shall notify Landlord by giving Landlord
written notice ("Notice to Landlord") received by Landlord at least nine (9)
months prior to expiration of the then current term (time being of the essence)
that Tenant elects to exercise said option. At such time Landlord and Tenant
shall execute a new Lease agreement embodying the terms and conditions set forth
herein for the period of the renewal terms and consolidating all three (3)
existing Lease agreements for the total building leased by the Landlord to the
Tenant into one (1) inclusive Lease. Such extension shall be on the same terms,
covenants and conditions as the initial term except for the amount of Base Rent
and further except that there shall be absolutely no option whatsoever to extend
the term of this Lease beyond the third such option term. The Base Rent due and
payable for each Lease Year of each such option term shall be the greater of 1)
the amount recalculated for each Lease Year of each such option term pursuant to
3.b) of this Lease or 2) the fair market rental for demised premises determined
by Landlord and Tenant at least ninety (90) days prior to inception of such
option term. In the event Landlord and Tenant do not agree as to said fair
market rental at least ninety (90) days prior to the inception of such option
term, said fair market rental shall be determined pursuant to the Article of
this Lease entitled "Disputes". In the event that, prior to inception of such
option term, said agreement is not reached and/or said determination is not made
as to the amount of fair market rental for such option term, Tenant shall pay
Landlord: 1) on the first day of each month of such option term, until said
agreement is reached or said determination is made, the amount of Base Rent due
pursuant to 1) of the fourth sentence of this paragraph, same to be applied to
the amount of Base
1
<PAGE> 2
Rent ultimately determined to be due for such option term, 2) immediately upon
the reaching of said agreement or making of said determination, the difference,
if any, between said Base Rent ultimately determined to be due for such option
term and the amount paid pursuant to 1) of this sentence, and 3) at all times
after the reaching of said agreement or making of said determination, on the
first day of each month of such option term the amount of Base Rent ultimately
determined to be due for such option term.
Notwithstanding any of the foregoing, in the event 1) the Landlord
delivers written notice to Tenant that Landlord or Popshots, Inc. elects to
utilize demised premises during the second and/or third of said option terms,
and 2) said notice is delivered to Tenant at least nine (9) months prior to the
inception of the first of said second and/or third option terms so elected to be
utilized, then in such event Tenant shall have no further rights thereafter
relative to such of said second and/or third option terms so elected to be
utilized.
"Lease Year" as used throughout this entire Lease shall mean each
twelve (12) month period, with the first Lease Year commencing on October 1,
1997.
3. Base Rent:
The Base Rent ("Base Rent" or "rent") for the term shall be the
following which shall be paid in advance on the Commencement Date and on the
same day of each calendar month (or closest day as to any month in which there
is no such same day) thereafter:
a) The first nine (9) months of the initial term (i.e. from and
including Commencement Date through and including October 1, 1997: eleven (11)
monthly payments, each in the monthly amount of $9,595.00, except that, provided
Tenant fully and faithfully complies with all provisions of this entire Lease as
and when required by this entire Lease.
b) Each Lease Year thereafter: twelve (12) monthly, i.e. July 1, 1998
and the next eleven monthly payments, each in the monthly amount of $15,150.00;
thereafter (i) the monthly amount of Base Rent which shall have been due for the
month immediately preceding the inception of the Lease Year for which the
computation is made (which for the sole purpose of computing Base Rent for the
second Lease Year shall be deemed to have been $15,150.00) multiplied by 1.02,
or (ii) $15,150.00 multiplied by a fraction the numerator of which shall be the
CPI for the month which is three (3) months immediately preceding the inception
of the Lease Year for which the computation is made and the denominator of which
shall be the CPI for October 1, 1997.
"CPI" shall mean the CPI-U Indexes ("CPI-U Indexes") of Table
2. Consumer Price Index for All Urban Consumers (CPI-U) and Consumer Price Index
for Urban Wage Earners and Clerical Workers (CPI-W): Selected areas, all items
index (1982-84=100, unless otherwise noted), for Selected local areas,
N.Y.-Northern N.J.-Long Island, NY-NJ-CT, published by the Bureau of Labor
Statistics of the United States Department of Labor (or in the event, but only
in the event, that CPI-U Indexes shall cease to be so published, the CPI-W
Indexes of said Table, for N.Y.-Northern N.J.-Long Island, NY-NJ-CT, published
by said Bureau of said Department). In the event the CPI shall hereafter be a)
converted to a different standard reference Base or otherwise revised, or b)
cease to be published, the determination of the annual rent for each such Lease
Year of such option term shall be made with the use of such conversion factor,
formula, table or method for converting the CPI as may be published by the
Bureau of Labor Statistics, or, failing such latter publication, the use of such
conversion factor, formula, table or method as may be published by Prentice
Hall, Inc., or, failing such latter publication, then with the use of conversion
factor, formula, table or method as may be published or used by any other
nationally recognized publisher selected solely by Landlord or similar
statistical information selected solely by Landlord.
4. Payment of Base Rent etc.:
Said Base Rent (and all other sums due pursuant to this Lease) shall be
paid without abatement, setoff, deduction, demand, and/or any notice whatsoever,
monthly in advance, in installments as set forth above, (and/or as otherwise set
forth in this Lease) at P.O. Box 707, Westport, Connecticut 06881 or as may be
otherwise directed by the Landlord in writing.
2
<PAGE> 3
5. Peaceful Possession:
The Landlord covenants that the Tenant, on paying said Base Rent and
all other sums due pursuant to this Lease and performing the covenants and
conditions in this Lease contained, shall and may peaceably and quietly have,
hold and enjoy the demised premises for the term aforesaid.
6. Purpose:
The Tenant shall use the demised premises only for offices, kitchen and
a television studio and for no other use whatsoever.
Within a reasonable time after its execution of this Lease, Tenant
shall deliver to Landlord all plans, calculations, approvals and all other
documents and items required for Landlord to obtain building permits relative to
alterations in accordance with plans and specifications to be previously
expressly approved in writing by Landlord of the demised premises. Within a
reasonable time after Landlord shall have received from Tenant all of said
plans, calculations, approvals and all other documents and items referred to in
the immediately preceding sentence, Landlord shall file with the Building
Department of the City of Norwalk an application and all other documents
required to obtain a building permit for Tenant to construct improvements on
demised premises all as Tenant and Landlord shall have previously and expressly
approved in writing. Nothing contained in this entire paragraph shall obligate
Landlord to construct any improvements whatsoever.
The Landlord and the Tenant shall fully cooperate with the other in all
reasonable ways relative to the second and third sentences of the immediately
preceding paragraph. The Landlord and Tenant shall pay its own legal fees and
other costs relative to Landlord's obtaining said building permits, except that
Landlord shall pay the fees required by the City of Norwalk to obtain said
building permits.
7. Re-entry, etc.:
The Tenant shall, without any previous demand therefor, pay to the
Landlord, or its agent, said Base Rent and all other sums due pursuant to this
Lease, and perform all terms of this Lease, at the times and in the manner
provided. In the event of the a) non-payment of said Base Rent, and/or any
installment thereof, and/or any other sums due pursuant to this Lease within
five (5) days after the dates when due, b) failure to perform all terms of this
Lease, at the times and in the manner provided, and if said failure shall not
have been cured within fifteen (15) days after notice to Tenant (said b)
collectively referred to hereafter as "failure regarding other terms") and/or c)
deserting and/or vacating of the demised premises, the Landlord or its agents
shall have the right to and may enter said demised premises as the agent of the
Tenant, without being liable therefor, and may relet the demised premises, and
receive said Base Rent therefor, and all other sums due pursuant to this Lease,
upon such terms as shall be satisfactory to the Landlord, and all rights of the
Tenant to repossess the demised premises under this Lease shall be forfeited.
Such re-entry by the Landlord shall not operate to release the Tenant from any
of said Base Rent and all other sums due pursuant to this Lease and/or from any
covenants to be performed hereunder during the full term of this Lease. For the
purpose of reletting, the Landlord shall be authorized to make such repairs or
alterations in or to the demised premises as may be necessary to place the same
in good order and condition. The Tenant shall be liable to the Landlord for the
cost of such repairs or alterations, provided such repairs or alterations are
reasonable, and all expenses of such reletting. If the sum realized or to be
realized from the reletting is insufficient to satisfy said Base Rent and all
other sums due pursuant to this Lease, the Tenant shall forthwith pay such
entire deficiency. The Tenant shall not be entitled to any surplus accruing as a
result of the reletting. Each party to this Lease shall pay, as additional rent,
all reasonable attorney's fees and other expenses incurred by the other party in
enforcing any of the obligations under this Lease provided said other party
shall prevail in said enforcement. Notwithstanding the provisions of the second
sentence of this paragraph, in the event, but only in the event, that any such
"failure regarding other terms" 1) can not be cured within fifteen (15) days
after notice to Tenant and 2) does not or will not result in any a) harm, damage
and/or liability to the land, building, demised premises, Landlord and/or Tenant
and/or any other party and/or property, b) default and/or breach of any other
lease, c) default and/or acceleration of any note, mortgage, assignment of
leases or other loan document relating to the land and/or building, c)
violation, cancellation
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and/or termination of, and/or increase in premiums relative to, any insurance
policy existing presently and/or hereafter and/or d) violation of,
non-compliance with and/or action pursuant to any governmental law, ordinance,
and/or regulation, then in the event of 1) and 2), but only in the event of 1)
and 2), Landlord shall not have any of the rights set forth in the second
sentence of this paragraph provided Tenant commences to cure said "failure
regarding other terms" within fifteen (15) days after notice to Tenant and
Tenant diligently pursues said cure at all times thereafter until said failure
regarding other terms has been fully cured.
8. Sub-letting and Assignment:
The Tenant shall not sub-let the demised premises or any portion
thereof, nor assign or encumber this Lease or any portion thereof, without the
prior express written consent of the Landlord (which consent shall not be
unreasonably withheld and the decision relative to any such consent shall not be
delayed more than thirty (30) days from the date Landlord receives all items to
which Landlord is entitled pursuant to this entire paragraph). Said consent may
be withheld, in the sole reasonable discretion of the Landlord and/or any
present and/or future holder of any present and/or future mortgage on the land
and/or building, for reasons which shall include, but not be limited to, the
determination as to any proposed sublessee, assignee and/or encumbrance holder
(collectively, "transferee") whether alone and/or in comparison with Tenant,
relative to any business, financial, personal and/or other issue and/or
consideration, including, but not limited to, (i) previous business experience,
(ii) proposed business, (iii) previous, present and/or projected income, assets,
liabilities and net worth, (iv) financial history, (v) character and/or (vi)
other matters. In order to assist the determination of any request for such
consent, Tenant shall deliver to Landlord the following: a) simultaneously with
said request, written (i) description by transferee of the previous business
experience of, and business proposed by, transferee, (ii) references from two
other parties ("other parties") describing transferee's character, previous
business experience, financial history and present financial status, (iii)
consent of, and authorization from, transferee to a) Landlord for Landlord to
contact said other parties and/or any other company and/or agency which is
hereafter in the business of providing and/or reporting credit, financial and/or
other business documents and/or information (collectively, "credit companies")
and to obtain from said other parties and/or credit companies such further
documents and/or other information as to transferee as Landlord may thereafter
request from said other parties and/or credit companies, and b) said other
parties and/or credit companies for said other parties and/or credit companies
to provide Landlord with all of said further documents and/or other information,
and (iv) financial statements (including balance sheets and income statements)
and all tax returns of transferee and Tenant for the two immediately preceding
years, b) thereafter, any further documents and/or information Landlord may
reasonably request, and c) each time Tenant delivers any of foregoing to
Landlord, the consent of, and authorization from, Tenant, transferee, said other
parties and said credit companies to Landlord to provide all of foregoing to all
of said present and/or future holders of said present and/or future mortgages.
In addition to any and all other amounts due from Tenant to Landlord,
rights and/or remedies of Landlord and/or obligations and/or liabilities of
Tenant, all whether or not same accrue and/or are due prior to, upon and/or
after any such consent, subletting, assignment or encumbering, Tenant shall pay
Landlord the following within seven (7) days of Landlord's demand for same (said
seven (7) day period being on a time is of the essence basis wherever said seven
(7) day period is referred to in this entire Article): a) whether or not said
consent is given, all reasonable expenses incurred by Landlord relative to
and/or resulting from said request, determination, consent, subletting,
assignment, encumbering and/or any modification of this Lease, and/or review of
any of foregoing, including, but not limited to, attorneys' fees, accountants'
fees, consultants' fees, credit and/or financial report and/or search fees
and/or the like, but in no event more than Five Thousand and 00/100 ($5,000.00)
Dollars, and b) if said consent is given, the further sum of the difference, if
any, between Five Thousand and 00/100 ($5,000.00) Dollars and the amount paid by
Tenant to Landlord pursuant to a) of this sentence.
In the event said consent is given, the Tenant shall be and remain
jointly and severally liable with transferee for any and all obligations and
liabilities pursuant to this entire Lease, all whether or not same accrue and/or
are due prior to, upon and/or after, and notwithstanding, any such consent,
subletting, assignment and/or encumbering; none of said obligations and
liabilities shall be merged in any such consent, subletting, assignment or
encumbering but shall survive
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same. Within five (5) business days of Landlord's demand for same (said five (5)
business day period being on a time is of the essence basis wherever said five
(5) business day period is referred to in this entire Article), Tenant shall
deliver to Landlord Tenant's written confirmation ("confirmation") of all
contents of the immediately preceding sentence.
Any such consent, subletting, assignment and/or encumbering shall be
deemed to be expressly a) conditioned upon Landlord's receipt of (i) all amounts
referred to in the second paragraph of this Article 8. within the seven (7) day
period referred to in said second paragraph and (ii) the confirmation referred
to in the third paragraph of this Article 8. within the five (5) business day
period referred to in said third paragraph, and b) null, void and of no effect
whatsoever if Landlord does not receive all of said amounts and confirmation
within said seven (7) day period and five (5) business day period, respectively.
9. Condition of Premises, Repairs/Alterations and Improvements/Sanitation,
Inflammable Materials/Sidewalks:
The Tenant shall quit and surrender the demised premises at the end of
the demised term in as good condition as the reasonable use thereof will permit.
Tenant's obligations pursuant to the immediately preceding sentence shall
include, but not be limited to, Tenant's providing, and paying all costs of,
reasonable cleaning of, and waste removal from, demised premises. The Tenant
shall not make any alterations, additions, or improvements to the demised
premises without the Landlord's 1) prior express written initial consent of same
(except that Landlord hereby consents to all items referred to in "Exhibit C"
subject to Landlord's prior express written initial consent to plans and
specifications for same) and 2) final express written approval of all of same
as-built, which consent and approval, inter alia, need not violate any mortgage
now or hereafter affecting demised premises and shall require that Tenant
complies with all governmental regulations relative to all of foregoing. Tenant
shall pay, as and when due, all costs of all such alterations, additions and
improvements. The Tenant shall pay all costs of all repairs, replacements,
renovations, alterations, additions, improvements and/or maintenance required to
or for demised premises reasonably determined by Landlord to be required due to
the use of the demised premises by and/or on behalf of Tenant and/or its agents,
servants and/or invitees (except repairs which are so required to a) structural
elements and/or b) systems, of the demised premises and/or building; however,
Tenant shall pay all costs of all repairs which are so required to a) structural
elements and/or b) systems, of the demised premises and/or building, if said
repairs result from the act and/or failure to act of and/or on behalf of Tenant,
its agents, servants and/or invitees). The Tenant shall wash the inside and the
outside of all windows of demised premises at least once every three (3) months.
All erections, alterations, additions and improvements, whether temporary or
permanent in character, which may be made upon the demised premises either by
the Landlord or the Tenant, except furniture, studio equipment, or moveable
trade fixtures installed at the expense of the Tenant and which are removed by
Tenant at its cost and without damage to the land, building or premises, shall
be the property of the Landlord and shall remain upon and be surrendered with
the demised premises as a part thereof at the termination of this Lease, without
compensation to the Tenant. The Tenant has reviewed the demised premises and
accepts same in the "as is" condition. At least ten (10) days prior to
expiration or termination of this Lease, Tenant, at the option of the Landlord,
shall, at Tenant's sole cost, restore the Premises to the condition they were in
at the inception of the initial term prior to any erections, alterations,
additions and/or improvements (except those expressly agreed to by Landlord
without the condition of Tenant's restoration of the Premises).
10. Liens:
In the event that any lien is filed against the demised premises as a
result of any act and/or omission by and/or on behalf of Tenant and/or Tenant's
agents, servants, employees, contractors and/or invitees, after thirty (30)
days' notice to the Tenant (unless any present or future mortgagee of the
demised premises shall require a shorter notice period or no notice period, in
which event said shorter notice period or no notice period shall apply) the
Tenant shall have said lien released and discharged at Tenant's sole cost, and
if said lien is not so released and discharged within said period, the Landlord,
at its option, may terminate this Lease and/or pay said lien, without inquiring
into the validity thereof, and the Tenant shall forthwith reimburse the
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Landlord the total expense incurred by the Landlord in releasing and/or
discharging said lien, as additional rent hereunder.
11. Liability of Landlord:
The Landlord shall not be responsible for the loss of or damage to
property or injury to persons occurring at the demised premises, by reason of
any existing or future condition, defect, matter or thing at the demised
premises or the property of which the demised premises are a part, or for the
acts, omissions or negligence of other persons or entities at the demised
premises. The Tenant agrees to, shall, and does hereby, indemnify and save the
Landlord harmless from all claims and liability for losses of or damage to
property, or injuries to persons occurring at the demised premises.
12. Services, Utilities and Other Expenses:
Utilities furnished to the demised premises for the benefit of the
Tenant shall be provided by Landlord. In addition to all Base Rent and all other
sums due pursuant to this Lease, utilities, services and other costs shall be
paid for as set forth in "Schedule 1" attached hereto. The Landlord shall not be
liable for any interruption or delay in any of the above services for any reason
whatsoever.
13. Right to Inspect and Exhibit:
The Landlord, or its agents shall have the right to enter the demised
premises at reasonable hours provided reasonable advance notice is given to the
Tenant, to examine the same, or to run telephone or other wires, or to make such
repairs, additions or alterations as it shall reasonably deem necessary for the
safety, preservation or restoration of the building and improvements, or for the
safety or convenience of the occupants or users thereof, or to exhibit the same
to prospective purchasers, lenders and/or agents, and put upon the premises a
suitable sign. In the event Tenant shall not have validly exercised all of the
options herein provided, for six (6) months prior to the expiration of the
initial term and all option terms immediately preceding any option terms not so
validly exercised, the Landlord, or its agents, may similarly exhibit the
premises to prospective tenants and/or agents, and may place the usual "To Let"
signs thereon.
14. Damage by Fire, Explosion, The Elements or Otherwise:
In the event of the 1) total destruction of the demised premises or the
building by fire, explosion, the elements or otherwise during the term hereby
created, or previous thereto, or 2) such partial destruction thereof as to
render the demised premises a) wholly untenantable and unfit for occupancy, or
b) not repairable within one hundred eighty (180) days from the happening of
such injury, then and in such case, all sums due relative to any period
thereafter shall equitably abate, and, at the option of Tenant or Landlord, the
term hereby created shall cease and become null and void from the date of such
damage or destruction and the Tenant shall immediately surrender said demised
premises and all the Tenant's interest therein to the Landlord, and shall pay
Base Rent and all other sums due pursuant to this Lease as may have been so
equitably abated, only to the time of such surrender, in which event the
Landlord may re-enter and re-possess the demised premises thus discharged from
the Lease and may remove all parties therefrom. Should the demised premises be
partially destroyed and rendered partially untenantable and unfit for occupancy,
but yet be repairable within ninety days from the happening of said injury, the
Landlord shall and may enter and repair the same, shall commence repairs as soon
as practical and proceed diligently to complete said repairs, and the Base Rent
and all other sums due pursuant to this Lease shall be equitably abated from the
date of said injury until said repairs are completed, and shall recommence in
full immediately after said repairs shall be completed. Should the demised
premises not be rendered untenantable and unfit for occupancy, then the Landlord
shall and may enter demised premises and repair the same with reasonable
promptness and in that case the Base Rent and all other sums due pursuant to
this Lease accrued and accruing shall not cease or be reduced. The Tenant shall
immediately notify the Landlord in case of fire or other damage in the demised
premises of which Tenant has notice.
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15. Observation of Laws, Ordinances, Rules and Regulations:
Subject to the provisions expressly appearing in parenthesis in the
fifth sentence of Article 9. of this Lease, the Tenant shall observe and comply
with all laws, ordinances, rules and regulations of the Federal, State, County
and Municipal authorities applicable to the business to be conducted by the
Tenant in the demised premises. The Tenant agrees not to do or permit anything
to be done in the demised premises, or keep anything therein, which will
increase the rate of fire insurance premiums on the improvements or any part
thereof, or on property kept therein, or which will obstruct or interfere with
the rights of other tenants, or conflict with the regulations of the Fire
Department or with any insurance policy upon the building, the land on which the
building is located and/or any other improvements on said land. In the event of
any increase in insurance premiums resulting from the Tenant's occupancy of the
demised premises, or from any act or omission on the part of the Tenant, the
Tenant agrees to pay said increase in insurance premiums on the improvements or
contents thereof as additional rent. Landlord represents to Tenant that the
current insurance rating and annual premiums relative to the building and
present fire and extended coverage insurance policies are Protection Class 04
651 21 Office: NOC and $1,852.00, respectively.
16. Signs:
No sign, advertisement, or notice (collectively, "sign") shall be
affixed to or placed upon any part of the demised premises by the Tenant, except
in such manner, and of such size, design and color as shall be expressly
approved in advance in writing by the Landlord (said approval not to be
unreasonably withheld). Landlord shall attend to the obtaining and placing of
all signs approved by Landlord, and Tenant shall forthwith pay Landlord for all
of same.
17. Subordination to Mortgages and Deeds of Trust, etc.:
This Lease is subject and subordinate, and is hereby subjected and
subordinated, to all present and/or future mortgages, deeds of trust and other
encumbrances affecting the demised premises, land or building. The Tenant,
forthwith upon demand of Landlord, shall execute and deliver to Landlord, at no
expense to Landlord, all instruments which may reasonably be deemed necessary or
desirable by the Landlord to further effect, and/or to confirm, the subjection
and subordination of this Lease to any such present and/or future mortgage, deed
of trust or encumbrance. The Tenant further, forthwith upon demand of Landlord,
shall execute and deliver to Landlord, at no expense to Landlord, all estoppel
certificates and ratification and attornment agreements as requested by Landlord
relative to any proposed refinancing and/or sale of the land and/or building.
Within fifteen (15) days after Tenant's execution and delivery to Landlord of
this Lease and the security deposit required hereunder, Landlord shall deliver
to Tenant a Subordination, Non-Disturbance and Attornment Agreement in
substantially the same form and content as "Exhibit D" attached hereto executed
by the present mortgagee of the land. Landlord shall use its best efforts to
deliver to Tenant an agreement in substantially the same form and content as
said "Exhibit D" executed by all future mortgagees of the land.
18. Non-Payment and/or Failure to Comply with Covenants, Forfeiture of
Lease, Non-Waiver of Breach, Attorneys' Fees etc.:
In case Tenant a) does not pay any sum due pursuant to this Lease as
and when due, including, but not limited to, Base Rent and/or net costs, within
five (5) business days after the dates when due, and/or b) fails to fully comply
with any of the other covenants, agreements and conditions of this Lease as and
when due, and, as to b) fails to discontinue such failure to comply referred to
in b) within 15 business days after notice thereof given to the Tenant (said b)
collectively referred to hereafter as "failure regarding other terms"), this
Lease shall thenceforth, at the option of the Landlord, become null and void. In
such case, all Base Rent and all other sums due pursuant to this Lease
theretofore, and/or which would have become due thereafter (discounted to the
then present value, using a discount rate of 8% per annum), shall forthwith
become due and payable, and the Tenant shall be liable for all loss or damage
resulting from such violation as aforesaid. No waiver by the Landlord of any
violation or breach of condition by the Tenant shall constitute or be construed
as a waiver of any other violation or breach of condition, nor shall lapse of
time after breach of condition by the Tenant before the Landlord shall exercise
its option under this paragraph operate to defeat the right of the Landlord to
declare this Lease
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null and void and to re-enter upon the demised premises after the said breach or
violation. In any of said events Tenant shall pay Landlord all costs reasonably
incurred by Landlord as a result of said nonpayment and/or failure to comply,
including, but not limited to, all reasonable attorneys' fees, experts' fees and
court costs. Notwithstanding the provisions of the first sentence of this
paragraph, in the event, but only in the event, that any such "failure regarding
other terms" 1) can not be cured within fifteen (15) days after notice to Tenant
and 2) does not or will not result in any a) harm, damage and/or liability to
the land, building, demised premises, Landlord and/or Tenant and/or any other
party and/or property, b) default and/or breach of any other lease, c) default
and/or acceleration of any note, mortgage, assignment of leases or other loan
document relating to the land and/or building, c) violation, cancellation and/or
termination of, and/or increase in premiums relative to, any insurance policy
existing presently and/or hereafter and/or d) violation of, non-compliance with
and/or action pursuant to any governmental law, ordinance, and/or regulation,
then in the event of 1) and 2), but only in the event of 1) and 2), Landlord
shall not have any of the rights set forth in the first sentence of this
paragraph provided Tenant commences to cure said "failure regarding other terms"
within fifteen (15) days after notice to Tenant and Tenant diligently pursues
said cure at all times thereafter until said failure regarding other terms has
been fully cured.
In addition to all of, and not in lieu of any of, Landlord's other
rights and/or remedies and/or Tenants' other obligations, forthwith upon any
failure of Tenant to fully and faithfully comply with all provisions of this
entire Lease, including, but not limited to, paying all Base Rent, additional
rent, rent, net costs, and all other sums due pursuant to this entire Lease,
Tenant shall pay Landlord five (5%) percent of all amounts Tenant fails to pay
as and when required by this Lease, for each month said failure of Tenant to so
fully and faithfully comply with all provisions of this entire Lease continues.
Said five (5%) percent shall conclusively a) represent the estimate of the
Landlord and Tenant of one (1) of Landlord's costs relative to said failure of
Tenant, and b) not be deemed to constitute a penalty.
Landlord shall have the obligation to use reasonable efforts to
mitigate its damages.
19. Notices:
All notices and demands, legal or otherwise, incidental to this Lease,
or the occupation of the demised premises, shall be in writing. If either party
or its agent desires to give or serve upon the other party any notice or demand,
it shall be sufficient to send a copy thereof by Certified Mail, Return Receipt
Requested, addressed to said other party at the address set forth in the
immediately following sentence with a copy to a) David Steward at Time
Publishing Ventures Inc., 20 West 43rd Street, New York, New York 10036 and
Larry H. Schatz, Esq., at c/o Grubman, Indursky, & Schindler, P.C., Carnegie
Hall Tower, 152 West 57th Street, New York, New York 10019-3301, if to Tenant,
and b) Peter vanWitt, P.O. Box 707, Westport, Connecticut 06881 and Henry A.
Perles, Esq., at c/o Kleban & Samor, P.C., 2425 Post Road, Southport,
Connecticut 06490, if to Landlord. Notices from the Landlord to the Tenant shall
be to the demised premises and from the Tenant to the Landlord shall be to the
place hereinbefore designated for the payment of rent. Landlord or Tenant may
from time to time designate in writing a change of the place to which notice
shall be given to said designating party.
20. Bankruptcy, Insolvency, Assignment for Benefit of Creditors:
It is further agreed that if at any time during the term of this Lease
the Tenant shall make any assignment for the benefit of creditors, or be decreed
insolvent or bankrupt according to law, or if a receiver shall be appointed for
the Tenant, then the Landlord may, at its option, terminate this Lease, exercise
of such option to be evidenced by notice to that effect served upon the
assignee, receiver, trustee or other person in charge of the liquidation of the
property of the Tenant or the Tenant's estate, but such termination shall not
release or discharge any payment of Base Rent and/or any other sums due
theretofore and/or thereafter pursuant to this Lease, or any liability by reason
of any agreement or covenant herein contained on the part of the Tenant.
21. Holding Over by Tenant:
In the event that the Tenant shall remain in the demised premises after
the expiration of the term of this Lease without Landlord's and Tenant's having
executed a new written lease,
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such holding over shall not constitute a renewal or extension of this Lease. The
Landlord may, at its option, elect to treat the Tenant as one who has not
removed at the end of his term, and thereupon be entitled to all the remedies
against the Tenant provided by law in that situation, or the Landlord may elect,
at its option, to construe such holding over as a tenancy from month to month,
subject to all the terms and conditions of this Lease, except as to duration
thereof, and in that event the Tenant shall pay monthly rent in advance at the
rate of 200% of the Base Rent due for the last month of the demised term plus
all other sums due pursuant to this Lease.
22. Eminent Domain, Condemnation:
If the property or any part thereof wherein the demised premises are
located shall be taken by public or quasi-public authority under any power of
eminent domain or condemnation, this Lease at the option of the Landlord shall
forthwith terminate and the Tenant shall have no claim or interest in or to any
award of damages for such taking.
Notwithstanding the foregoing, Tenant shall have the right separately
to pursue against the condemning authority an award in respect of the loss, if
any, to leasehold improvements paid for by Tenant without any credit or
allowance from Landlord and in respect to the loss of Tenant's leasehold
interest.
23. Disputes:
Any dispute arising under this Lease shall be settled by arbitration.
The Landlord and Tenant shall each choose an arbitrator, and the two arbitrators
thus chosen shall select a third arbitrator. The findings and award of the three
arbitrators thus chosen shall be final and binding on the parties hereto.
For disputes hereunder that are not resolved by the parties
within ten (10) days after either party gives notice to the other of its desire
to arbitrate the dispute, the dispute shall be settled by binding arbitration by
the American Arbitration Association in accordance with its then-prevailing
rules at the office of the American Arbitration Association nearest the demised
premises. Judgment upon the arbitration award may be entered in any court having
jurisdiction. The arbitrators shall have no power to change the lease
provisions. The arbitration panel shall consist of three arbitrators, each of
whom must be a commercial real estate broker then actively engaged in the
practice of commercial real estate brokerage in Fairfield County for at least
the immediately preceding five (5) years. Both parties shall continue performing
their lease obligations pending the award in the arbitration proceeding.
24. Delivery of Lease:
No rights shall be conferred upon the Landlord and/or Tenant until this
Lease has been signed by the Landlord and Tenant, and an executed copy of this
Lease has been delivered to the Landlord and Tenant.
25. Lease Provisions Not Exclusive:
The foregoing rights and remedies are not intended to be exclusive but
as additional to all rights and remedies the Landlord would otherwise have by
law.
26. Lease Binding on Heirs, Successors, Etc.:
All of the terms, covenants and conditions of this Lease shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties hereto.
This Lease and all obligations of Tenant to pay Base Rent and all other
sums due pursuant to this Lease and perform all of the other covenants and
agreements hereunder on part of Tenant to be performed shall not be modified,
reduced, altered and/or affected in any manner and/or to any extent whatsoever,
if Landlord is unable 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
repairs, 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 governmental preemption in connection with
the National Emergency declared by the President
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of the United States or in connection with any rule, order or regulation of any
department or subdivision thereof of any governmental agency, or by reason of
the conditions of supply and demand, or by reason of strike, or by reason of any
other cause beyond Landlord's control.
27. Security:
The Tenant has this day deposited with Landlord $30,000.00 as security
for the full and faithful performance by the Tenant of all the terms, covenants
and conditions of this Lease upon the Tenant's part to be performed, which said
sum shall be returned to the Tenant, with interest at the passbook rate paid
from time to time by banks reasonably chosen by Landlord (although Landlord
shall have no obligation to deposit any or all of said security) after the time
fixed as the expiration of the term herein, provided Tenant has vacated demised
premises, removed all personalty therefrom and has fully and faithfully carried
out all of said terms, covenants and conditions on Tenant's part to be
performed. In the event of a bona fide sale, the Landlord shall have the right
to transfer the security to the vendee for the benefit of the Tenant and the
Landlord shall be considered released by the Tenant from all liability for the
return of such security; and the Tenant agrees to look to the vendee solely for
the return of the said security, and it is agreed that this shall apply to every
transfer or assignment made of the security to a vendee. The security deposited
under this lease shall not be mortgaged, assigned or encumbered by the Tenant
without the written consent of the Landlord. In the event any or all of said
security is utilized by Landlord, the entire amount so utilized shall be
replenished by Tenant's depositing with Landlord a further sum in the amount so
utilized forthwith upon Landlord's notification to Tenant of said utilization.
28. Confidentiality:
All terms of this entire Lease ("terms") shall be held by Landlord and
Tenant in strict and absolute confidence and not revealed to any other party
whatsoever except for the sole purpose of enabling 1) Landlord or Tenant to
obtain financing and/or appropriately communicate with its attorneys and/or
accountants and/or with companies owning and/or owned by Landlord or Tenant
and/or 2) Landlord to sell the land and/or building. Notwithstanding anything
contained in this entire Lease, and in addition to all of its other rights and
remedies, Landlord and Tenant shall be entitled to any or all of the following
in the event the other party does not fully and faithfully comply with all
provisions of this paragraph and/or it appears that Tenant will not so fully and
faithfully comply: a) injunctive relief for the reason that a monetary award
would not constitute an adequate remedy for any such failure to so fully and
faithfully comply, and/or b) an increase in the Base Rent for the entire initial
term from its inception and option term from its inception, so that the annual
Base Rent during the entire initial term from its inception and option term from
its inception shall be the amount computed and re-computed from time to time by
Landlord as a) the highest per square foot rent to which Landlord is entitled
presently and/or hereafter, pursuant to any other lease which is or may be in
effect presently and/or hereafter and relates to any other portion of the
building, b) multiplied by the rentable square footage of the demised premises.
All provisions of this entire paragraph shall survive the termination of this
Lease, and shall not be merged in same.
29. Brokerage:
Tenant and Landlord warrant and represent they have not dealt with any
realtor, broker and/or agent, in connection with this Lease, including, but not
limited to, the negotiation, entering into, execution and/or delivery of this
Lease. Tenant and Landlord shall pay, and shall, and do hereby, hold harmless
and indemnify the other from and against, any and all costs, expenses, damages
and/or liabilities (including, but not limited to, all compensation,
commissions, fees, costs of suit, witnesses' fees, experts' fees and/or
attorneys' fees) with respect to the indemnitor's dealing with any broker in
connection with this Lease, including, but not limited to, the negotiation,
entering into, execution and/or delivery of this Lease.
30. Sale or Assignment by Landlord, Etc.:
Without any further act, agreement, consent and/or the like whatsoever
of the Landlord, Tenant, any other person, entity and/or party and/or their
respective heirs, successors and/or assigns: a) The Landlord shall have the
right to sell, assign and/or transfer all or any part of the
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<PAGE> 11
land, building, other buildings, Demised Premises, this Lease and/or any
benefits pursuant to this Lease, and b) forthwith upon any such sale,
assignment, and/or transfer, absolutely and forever, the seller, assignor and/or
transferor pursuant to such sale, assignment and/or transfer shall be entirely
relieved of all of Landlord's obligations under this Lease which are required to
be performed and/or complied with after such sale, assignment and/or transfer,
provided a) the purchaser, assignee and/or transferee pursuant to such sale,
assignment and/or transfer shall have assumed and agreed to be obligated and
responsible for all of said obligations and/or b) any such sale, assignment
and/or transfer shall be subject to all provisions of this Lease.
The term "Landlord" as used in this Lease shall mean the Landlord
and/or the owner for the time being of the Demised Premises.
31. Landlord's Rights to Perform Tenant's Covenants:
If Tenant shall at any time fail to perform, and/or cause to be
performed, any obligation of Tenant pursuant to the provisions of this Lease,
then, after the expiration of any notice and cure period expressly provided in
this Lease, Landlord shall have the right, but not the obligation, after ten
(10) days' notice to Tenant (but without notice in the event of an emergency)
and without waiving, and/or releasing Tenant from, any obligation of Tenant in
this Lease contained, to perform same, in such manner and to such extent as
Landlord shall, in its sole reasonable discretion decide, and in exercising any
such rights, pay and incur necessary and incidental costs and expenses,
including, but not limited to, reasonable attorneys' fees. Forthwith upon
Landlord's demand therefor, Tenant shall reimburse Landlord for all sums paid by
Landlord pursuant to this entire Lease, including, but not limited to, this
Article, with interest at the rate of 8% per annum, and Landlord shall have the
same rights and remedies in the event of the nonpayment thereof by Tenant as in
the case of default by Tenant in the payment of the rent.
32. No Representations by Landlord:
Neither Landlord nor anyone on behalf of Landlord has made any
representations, promises and/or the like with respect to the Demised Premises,
building, land and/or other buildings (including, but not limited to, any
representations, promises and/or the like relative to condition, square footage
and/or permitted zoning uses of Demised Premises, building, land and/or other
buildings) on which Tenant has relied, except as expressly herein set forth.
Landlord hereby represents the following to Tenant:
1. During the spring of 1995, Landlord removed the following from
the land:
(a) Two (2) underground fuel storage tanks and the
contents thereof (which contents were believed by
Landlord to be fuel);
(b) Two (2) underground waste storage tanks and the
contents thereof (which contents were believed by
Landlord to include cleaning solvents); and
(c) Approximately two hundred (200) tons of soil;
2. During January of 1996, Landlord removed from the land the
contents of one (1) tank referred to in 32.2. of the Lease
dated as of March 6, 1996 between Landlord and Tenant and
which tank previously was believed by Landlord to be a septic
tank and which contents were believed by Landlord to include
cleaning solvents. During December of 1996, Landlord removed
from the land said tank. The septic tank servicing the
building is, to the best of Landlord's knowledge, sufficient
to service the building;
3. All removal to date referred to in 1. and 2., above, has been,
to the best of Landlord's knowledge, as requested by the
Department of Environmental Protection of the State of
Connecticut;
4. To the best of Landlord's knowledge, there presently exist
none of the following on the land and/or in the building: a)
hazardous materials in violation of environmental laws or b)
other violations of environmental laws; and
11
<PAGE> 12
5. Landlord shall, and does hereby, indemnify and hold harmless
Tenant of and from all costs resulting from Landlord's acts
and/or failures to act relative to violations of environmental
laws, unless said violations were caused by the act, failure
to act and/or use of the land and/or building by and/or on
behalf of Tenant and/or its agents, servants and/or invitees.
33. Right of Mortgagee To Cure Defaults of Landlord:
Tenant shall give to Landlord's mortgagee whose name and address have
been supplied to Tenant a copy of any notice of default served upon and/or sent
to Landlord. If Landlord shall have failed to cure such default within the time
provided for in this Lease then Landlord's mortgagee shall have a) an additional
period, of the greater of the cure period provided in any applicable mortgage or
thirty (30) days, within which to cure such default, or b) if such default
cannot be cured within said period, then such additional time as may be
necessary if within said period the Landlord's mortgagee has commenced and is
diligently pursuing the curing of such default. This Lease shall not be
terminated if said default is cured within said period, or if such cure is being
so diligently pursued, as the case may be. Tenant shall accept performance by
any such Landlord's mortgagee.
34. Entire Agreement, Etc.:
It is expressly understood and agreed by and between the parties hereto
that this Lease sets forth all the covenants, promises, agreements, conditions
and/or understandings, either oral and/or written, between them with respect to
the land, building and/or demised premises and/or this Lease, and there are no
others except as are expressly herein set forth. It is further understood and
agreed that no subsequent alteration, amendment, change and/or addition to this
Lease shall by binding upon Landlord or Tenant unless reduced to writing and
signed by them.
The article and/or paragraph headings contained in this Lease are for
convenience only and shall not be considered in the construction and/or
interpretation of any provision of this Lease.
35. Invalidity of Particular Provisions:
If any term or provision of this Lease or the application thereof to
any person or circumstance shall to any extent be invalid, non-binding and/or
unenforceable, the remainder of this Lease, or the application of such term
and/or provision to persons and/or circumstances other than those as to which it
is invalid, non-binding and/or unenforceable, shall not be affected thereby, and
each term of this Lease shall be valid, binding and enforceable and be enforced
to the fullest extent permitted by law.
36. Social Security Numbers, etc.:
Tenant represents that the following is the tax identification number
of Tenant: 13-3891274.
37. No Smoking in Building:
None of Tenant's employees, customers, contractors, agents, servants,
or invitees shall smoke in any portion of the building, including, but not
limited to, any portion of the demised premises.
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<PAGE> 13
IN WITNESS WHEREOF, the said Parties have hereunto set their hands and
seals the day and year first above written.
Witness: NEWTOWN GROUP PROPERTIES
LIMITED PARTNERSHIP
By Saugatuck Group Property
Management, Inc.,
Its General Partner,
Hereunto Duly Authorized
_______________________________ By _________________________________________
Peter Van Witt,
Its President,
Hereunto Duly Authorized
_______________________________
MARTHA STEWART LIVING
OMNIMEDIA LLC
_______________________________ By _________________________________________
,
Its ___________________________,
Hereunto Duly Authorized
_______________________________
STATE OF CONNECTICUT)
) ss: _______________, 1997
COUNTY OF FAIRFIELD )
Personally appeared Peter Van Witt, President hereunto duly authorized
of Saugatuck Group Property Management, Inc., general partner hereunto duly
authorized of NEWTOWN GROUP PROPERTIES LIMITED PARTNERSHIP, signer and sealer of
the foregoing instrument, who acknowledged the same to be his free act and deed
as such President hereunto duly authorized, the free act and deed of said
Saugatuck Group Property Management, Inc. as such general partner
hereunto duly authorized, and the free act and deed of said NEWTOWN GROUP
PROPERTIES LIMITED PARTNERSHIP, before me.
______________________________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
STATE OF NEW YORK )
) ss: New York City ________________, 1997
COUNTY OF NEW YORK)
Personally appeared ________________________________, _________________
hereunto duly authorized of MARTHA STEWART LIVING
OMNIMEDIA LLC, signer and sealer of the foregoing instrument, who acknowledged
the same to be his/her free act and deed as such __________ hereunto duly
authorized, and the free act and deed of said MARTHA STEWART LIVING OMNIMEDIA
LLC, before me.
______________________________________________
Notary Public
My Commission Expires:
13
<PAGE> 14
Attachments to Lease
"Exhibit A" - Description of "land".
"Exhibit B" - Outline of "premises".
"Exhibit C" - Items consented to by Landlord subject to Landlord's a) prior
express written initial consent to plans and specifications for
same and b) final express written approval of all of same
as-built.
"Exhibit D" - Subordination, Non-Disturbance and Attornment Agreement.
"Schedule 1" - Net Costs.
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<PAGE> 15
"Schedule 1"
1. Tenant shall further pay all of the following ("net costs") to the
extent same relate to any period commencing on or after Commencement Date: a)
all charges for all utilities used and/or consumed at demised premises, b) all
charges for removal from land of waste and/or other items relating to demised
premises which are in excess of standard office waste, c) all real estate and/or
personal property taxes and/or other governmental assessments resulting from any
alterations, additions, improvements, erections, repairs, replacements,
renovations and/or maintenance made, and/or labor, services, materials and/or
other items provided, to the demised premises, d) Tenant's pro rata share of all
charges for electricity, heating oil, water and sewer relative to the land
and/or building (excluding therefrom all those payable by Tenant and/or other
tenants of the building), plus e) Tenant's pro rata share of all increases over
and above the amounts in parentheses hereafter relative to all of the following
items relative to the land and/or the building:
1) Real Estate Taxes, excluding the real estate taxes referred to
in c), above ($48,266.00);
2) Insurance ($4,500.00);
3) Management Fees ($15,000.00);
All expenses related to grounds maintenance, landscaping, snow and
waste removal shall be borne directly by the Tenant as the Tenant for the entire
building of which the Premises forms a part. Said net costs shall be paid by
Tenant to Landlord without any abatement, deduction and/or set-off for any
reason whatsoever.
Tenant shall pay to Landlord, in advance, on Commencement Date, and on
the same day of each month thereafter as Base Rent shall be due pursuant to
Article 3. of this Lease, one-twelfth (1/12), of the product of the annual
amount estimated by Landlord, in all reasonable probability, as the amounts
which shall be net costs payable by Tenant and attributable to the 11 months
immediately following Commencement Date and each 12 months thereafter (said 11
or 12 month period, collectively, "applicable period"), or for the applicable
period if said estimate is received by Tenant after the applicable period has
commenced, which estimated annual amount shall be shown on a notice hereinafter
called "Current Notice". All payments made by Tenant to Landlord pursuant to
said Current Notice shall be credited to the payments ultimately determined to
be due for the applicable period. In the event said applicable period has
commenced prior to delivery of any such Current Notice, Tenant shall pay to
Landlord, in addition, within thirty (30) days of delivery of such Current
Notice, for each month in said applicable period that commenced prior to
Tenant's receipt of such Current Notice, an amount equal to one-twelfth (1/12)
of the annual amount shown on such Current Notice multiplied by the number of
months of said applicable period that have theretofore commenced.
As soon as practical after the end of each applicable period, Landlord
shall prepare and deliver to Tenant a Notice of net costs for the immediately
preceding applicable period, which Notice is hereinafter called "Past Notice",
advising Tenant of a) the amounts, due from Tenant to Landlord as net costs for
the immediately preceding applicable period, less b) the amounts paid pursuant
to the immediately preceding paragraph. Within thirty (30) days of the delivery
of such Past Notice, Tenant shall pay Landlord the amount shown thereon, if any,
as due, or Landlord shall credit Tenant the amount shown thereon, if any, as an
over payment, all as the case may be.
The amount of charges for utilities used and/or consumed at demised
premises shall be the amount (i) indicated by any separate meter for demised
premises for such periods as utility charges for demised premises are indicated
by a separate meter for demised premises, and/or (ii) reasonably estimated by
Landlord for all other periods.
2. As used throughout this entire Lease, the term "Tenant's pro rata
share" shall mean 18.52% as same applies to real estate taxes (except as to
heating oil for which Tenant's pro rata share shall mean 100% of all heating oil
consumed from the 500 gallon tank on the southerly side of the building or any
substitute therefor).
3. In no event shall any of the provisions of this entire Schedule 1
result in a negative calculation.
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<PAGE> 16
4. All sums due and payable by Tenant pursuant to this Schedule 1 shall
be due and payable to Landlord and/or any provider, as Landlord shall direct,
within ten (10) days of Landlord's demand therefor.
5. Tenant shall have the right to reasonably audit all of said net
costs, but said right and audit shall not entitle Tenant to delay making the
payments referred to above to the extent referred to above.
16
<PAGE> 1
EXHIBIT 10.16
[Conformed Copy]
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION. SUCH PORTIONS ARE DESIGNATED [* * *].
AGREEMENT
---------
THIS AGREEMENT made as of this 28th day of January, 1997 by and between
MARTHA STEWART LIVING OMNIMEDIA LLC, a Delaware limited liability company, 20 W.
43rd St. New York, New York 10036 ("MSLO") and KMART CORPORATION, a Michigan
corporation, 3100 West Big Beaver Road, Troy, Michigan 48084 ("Kmart").
WHEREAS, MSLO and Kmart desire to enter into an agreement whereby MSLO
shall grant to Kmart, subject to the terms and conditions herein, the right to
utilize Martha Stewart's name, likeness, voice and signature in connection with
certain retail services and merchandise hereinafter described which Kmart will
procure from sources of its own choosing as provided herein;
WHEREAS, MSLO and Time Publishing Ventures, Inc., a Delaware
corporation ("Time"), currently intend to enter into a transaction pursuant to
which Time will sell to MSLO certain assets, and contribute to MSLO certain
assets and certain liabilities, of Time relating to the magazine entitled Martha
Stewart Living and other related businesses and pursuant to which Time will
become a member of MSLO (such transactions, the "Sale and Contribution");
WHEREAS, Kmart has required that the transactions contemplated hereby
only be consummated in the event the Sale and Contribution have been
consummated; and
WHEREAS, Kmart and MSLO agree that, upon due execution of this
Agreement by Kmart and MSLO, the only condition remaining to the effectiveness
of this Agreement is the consummation of the Sale and Contribution;
NOW, THEREFORE, the parties agree as follows:
I. Grant. Subject to the terms and conditions of this Agreement, MSLO
grants to Kmart the limited exclusive right, in the United States of America and
territories including, Puerto Rico, Guam, and the U.S. Virgin Islands (the
"Territory"), to utilize the trademark MARTHA STEWART(TM) and approved
variations and stylized forms thereof, together with the name, likeness, voice
and signature of Martha Stewart (the "Licensed Property"), all of which shall be
approved in the manner herein, in connection with the promotion, advertising,
manufacture, distribution and sale of products and promotional products
merchandised by Kmart's Home Fashions Division enumerated in Exhibit A which
Kmart will procure from factory sources of its own choosing (the "Licensed
Products"). Kmart shall further have the nonexclusive right to utilize the
Licensed Property in connection with the Licensed Products in any other country
in which Kmart may operate
<PAGE> 2
stores in the future during the Term hereof. MSLO represents and warrants that
it has the right to enter into this Agreement and grant the rights stated
herein.
II. Exclusivity. (1) MSLO warrants and agrees that the grant herein is
exclusive to Kmart, during the Term, in the Territory in connection with the
promotion, advertising, manufacture, distribution and sale of any products which
are Licensed Products in the family department or discount store channel of
distribution which includes only the following retailers: Wal-Mart, Sam's Club,
Target, J.C. Penney, Sears, Montgomery Ward, Venture, Bradlees, Caldor, Kohl's,
Mervyn's, Meijer, Fred Meyer, Shopko, Hill's or similar national or regional
retail family department or discount stores which are not in business as of the
date hereof but which may come into existence in the future during the Term and
upon written notice to MSLO within 60 days of the initial opening of any such
store (collectively "Discount Stores").
(2) MSLO may use or permit others to use the Licensed Property on
products which are of the same product type as Licensed Products and which are
of a higher quality and intended by MSLO to be sold at a higher price point than
the Licensed Products sold by Kmart provided, however, that such products are
sold by such licensee other than through Discount Stores.
(3) It is understood that Kmart is desirous of extending the license
granted herein to include additional products set forth on Exhibit B. MSLO
agrees that at any time during the Term hereof should MSLO desire to utilize or
permit others to utilize the Licensed Property on such additional products
("Additional Licensed Products") in the Discount Stores, and provided Kmart's
purchases of Licensed Products up to such time equal or exceed 75% of the
projected purchases of Licensed Products as projected on Exhibit C, through such
time, such Additional Licensed Products shall, at Kmart's option and by separate
amendment(s) to this Agreement, upon written notice by MSLO of such desire and
upon written notice by Kmart to MSLO within ninety (90) days after receipt of
such notice from MSLO, be included as Licensed Products and shall be exclusive
to Kmart in Discount Stores. If MSLO does not receive such written notice within
the time period specified above or if Kmart's purchases of Licensed Products
through such time does not equal or exceed 75% of the projected purchases of
Licensed Products as set forth on Exhibit C, then MSLO shall be free to license
the Additional Licensed Products to any third party without further obligation
to Kmart. For purposes of this subparagraph only, the definition of Discount
Stores shall not include Sears and J.C. Penney. The royalties payable to MSLO
for such Additional Licensed Products shall be [* * *], as defined in paragraph
IV below, of any such Additional Licensed Products. The minimum royalty payable
to MSLO for any such Additional Licensed Products shall be based on the minimum
royalty payable hereunder for the Licensed Products, in the proportion of the
dollar volume of the projected purchases of such Additional Licensed Products
relative to the dollar volume of projected purchases for the Initial Term as set
forth on Exhibit C prorated over the
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<PAGE> 3
remainder of the Term hereof. The minimum royalty for such Additional Licensed
Products shall be paid in equal quarterly installments according to the schedule
set forth in Paragraph V below and shall be credited against any royalties which
may accrue on account of such Additional Licensed Products during the Term.
III. Restrictions on Use. Kmart agrees that all use of the Licensed
Property by Kmart shall be in the form and manner as is approved by MSLO, which
approval shall not be unreasonably withheld or delayed, and there will appear on
all Licensed Products and their tags, labels, containers, packaging and the
like, such legends, markings and notices as may be reasonably necessary for
trademark, copyright or other purposes as may be required by applicable laws.
IV. Royalties. In consideration for the rights granted by MSLO and for
the services to be rendered by MSLO and Martha Stewart under this Agreement,
there shall be due and owing, and Kmart shall pay to MSLO in the manner provided
below, royalties in the amount of [* * *], of any Licensed Products covered by
this Agreement. [* * *] The minimum nonrefundable advance against royalties for
the Initial Term shall be [* * *] (hereinafter, the "Minimum Royalty") payable
as follows: (1) in the event that by no later than 10:00 a.m. on a business day,
Kmart receives notice from MSLO certifying that the Sale and Contribution has
been consummated, the Minimum Royalty shall be paid pursuant to the terms hereof
by not later than 3:00 p.m. on such day and (2) in the event that Kmart receives
such notice after 10:00 a.m. on any business day, or on a day that is not a
business day, the Minimum Royalty shall be paid pursuant to the terms hereof by
not later than 12:00 (noon) on the next business day following the day such
notice was received. MSLO hereby instruct Kmart, and Kmart hereby agrees to pay
the Minimum Royalty by wire transfer of immediately available funds in U.S.
dollars to a bank account designated in writing by MSLO. The Minimum Royalty
payable hereunder shall be credited against any royalties which may accrue
during the Initial Term hereof.
V. Payments. (1) Kmart shall deliver royalty reports to MSLO within
thirty (30) days following the beginning of each Kmart fiscal quarter. Each
report shall be certified as accurate by an authorized Kmart officer and shall
set forth Kmart's [* * *] of each Licensed Product and the total amount of the
gross purchases thereof, the amount of all authorized deductions therefrom and
the royalties due and owing for shipments of Licensed Products received by Kmart
during the previous three month period.
(2) When Kmart delivers the above royalty reports to MSLO, Kmart shall
also pay to MSLO the royalties due and owing for the previous three month
period.
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<PAGE> 4
(3) Kmart shall maintain complete and accurate records of its purchases
of Licensed Products, royalty computations and royalty reports and shall, upon
reasonable request, make such records and all other documents and material in
the possession or control of Kmart to the extent relevant to this Agreement and
reasonably required to verify the amount of royalties payable hereunder,
available to MSLO or its duly authorized representatives, during usual business
hours at Kmart International Headquarters in Troy, Michigan, for the duration of
this Agreement and for one year thereafter, and to make extracts therefrom at
its sole expense. All such records and documents shall be kept strictly
confidential by MSLO and such representatives.
VI. Quality Control. (1) Kmart agrees to maintain the quality of the
Licensed Products sold by it pursuant to this Agreement commensurate with the
terms hereof and with the average of similar products being sold by Kmart.
Specifically, the quality of the Licensed Products shall be at least as
specified in Exhibit D attached hereto. In addition a strike sample approved by
MSLO of each Licensed Product shall be included as Exhibit E hereto. MSLO may
not withhold approval as to quality of any Licensed Product which meets or
exceeds the quality of such corresponding approved strike sample. In order to
assure that ongoing quality of Licensed Products is maintained, Kmart shall,
upon request, review such quality with MSLO and, if necessary, samples of the
Licensed Products shall be made available to MSLO to enable MSLO to check the
quality thereof.
VII. Licensed Product Design, Consultation and Approvals. The parties
recognize the name Martha Stewart has valuable goodwill with the consuming
public, and that Martha Stewart is recognized as an authority on quality and
style in the area of home decor. It is an object of this Agreement that MSLO,
Kmart, and Kmart's vendors of Licensed Products establish a broad spectrum of
Licensed Products with respect to quality and design consistent with Martha
Stewart's image and Kmart's pricing philosophy. The parties agree that as an
integral part of this Agreement, MSLO shall direct Kmart and Kmart's vendors of
Licensed Products to establish the Strategic Direction of the initial line and
subsequent evolutionary lines (and all changes therein) of merchandise
comprising the Licensed Products. As used herein the "Strategic Direction" shall
include all aspects of the Licensed Products and the promotion thereof
including, without limitation, concepts, designs, patterns, colors, packaging,
signage, associated collateral materials and marketing support. There shall be
no additional compensation for such consultation other than the royalties
payable hereunder. MSLO may designate a designer or designers who shall act as
liaison between Kmart, Kmart's vendors and MSLO and may act as MSLO's
designee(s) with respect to the design and approval of Licensed Products in
order to meet the anticipated mutually agreed upon time schedules. Kmart shall
reimburse MSLO in an amount equal to [ * * * ] and documented expenses of such
designee(s) which amount paid by Kmart shall not exceed [ * * * ] annually.
Further, Kmart and MSLO shall work together with respect to the design and
approval of Licensed Products in accordance with the following procedures:
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<PAGE> 5
a) Approximately twelve months prior to the store implementation of
each of the Spring and Fall transitions or at such time as may be mutually
agreed upon, MSLO and Kmart shall meet to discuss and identify the products
and/or product categories Kmart intends to have manufactured as Licensed
Products for the respective season.
b) Approximately eleven months prior to the store implementation of
each of the Spring and Fall transitions or at such other time as may be
mutually agreed upon, MSLO and Kmart shall meet to discuss and to determine
the calendar of critical dates pertaining to the Strategic Direction of the
Licensed Products.
c) Kmart shall submit to MSLO artist renderings, sample packaging, and
sample strike offs representative of the Licensed Products which Kmart
intends to have manufactured. MSLO shall have five business days after
receipt of each such submission to indicate its approval or disapproval
thereof. If MSLO does not deliver notice of its approval or disapproval
within such period, the same shall be deemed an approval. With respect to
any submission to which MSLO disapproves, MSLO shall state the reasons for
disapproval and, where possible, shall provide instructions necessary to
correct or otherwise modify such sample to place the same in condition for
approval. With regard to approved samples, Kmart shall cause all Licensed
Products manufactured hereunder to strictly comply in all respects with
such approved samples.
d) Upon receipt of a notice from MSLO pursuant to this Agreement
setting forth the quality deficiencies prohibited by this Agreement, Kmart
and/or Kmart's vendors of such Licensed Products shall remedy such
deficiencies in the product from which such samples were taken prior to its
sale or, at their option, dispose of such off-quality merchandise through
other outlets. Whenever such merchandise is sold as aforesaid, no use of or
reference to the name Martha Stewart or any Licensed Property shall be used
in connection with any advertising, publicity, labeling, wrapping or
packaging with respect to any such sales. Also, in accordance with the
practice in the trade, Kmart's vendors of Licensed Products shall notify
their customers to assure compliance by them with the requirements of the
preceding sentence. Kmart and its vendors of Licensed Products shall be
deemed to have met this obligation by the removal of all labels, tags and
marks which would identify the goods as Martha Stewart merchandise and by
placing the following legend on all purchaser's invoices for such goods:
"Purchaser agrees that it will not use the name 'Martha
Stewart' or the legend 'designed by Martha Stewart' or any
other phrase or statement using the name 'Martha Stewart' on
-5-
<PAGE> 6
any advertising, publicity, labeling, wrapping or packaging
with respect to the merchandise listed hereon."
e) MSLO agrees to exercise all rights of approval hereunder in a
reasonable and timely manner, consistent with any agreed upon time
schedules and the established Strategic Direction and such approvals shall
not be unreasonably withheld. MSLO's right of approval may be exercised by
Martha Stewart or by such representative as MSLO may from time to time
designate.
f) Subject to Kmart's approval of such expenses, in advance, Kmart
shall reimburse MSLO for reasonable expenses incurred by MSLO in connection
with services provided hereunder.
VIII. Term. This Agreement shall commence at the Effective Time and
continue in force and effect until February 28, 2000 (the "Initial Term"). At
Kmart's option, Kmart may renew this Agreement commencing March 1, 2000 for an
additional three (3) years (the "Renewal Term") by providing written notice to
MSLO not less than ninety (90) days prior to the expiration of the Initial Term.
The Minimum Royalty payable to MSLO for the Renewal Term shall be [* * *]
payable in twelve equal quarterly installments commencing on the first day of
the Renewal Term and shall be credited against any royalties earned and accrued
during such Renewal Term. No portion of the Minimum Royalty paid to MSLO during
the Initial Term shall be credited against any royalties payable to MSLO during
the Renewal Term. The "Effective Time" shall mean the time at which the Sale and
Contribution are consummated. Kmart and MSLO hereby acknowledge and agree that
the only condition to the effectiveness of this Agreement and the obligations of
Kmart and MSLO hereunder (including the obligation to pay the Minimum Royalty)
is the consummation of the Sale and Contribution.
IX. Promotional and Marketing Services. (1) MSLO shall cause Martha
Stewart to render her services in a professional manner consistent with the
intent of this Agreement and to use her reasonable good faith efforts to
participate in the promotion and imaging of the Licensed Products including
without limitation, through television, radio and print advertising, in-store
videos, appearances and other media presentations or programs and shall use
reasonable and appropriate opportunities, in her reasonable discretion, to
promote Kmart and the Licensed Products including but not limited to interviews,
editorials, press conferences, press releases and television appearances. Upon
Kmart's reasonable prior request, MSLO shall cause Martha Stewart to render her
services at such places, on such dates, at such times and in such manner as
shall be reasonably requested. If because of a conflicting professional
engagement, Martha Stewart is unable to render services on a date or time at
such a location as Kmart may request, MSLO shall inform Kmart of the next date
upon which Martha Stewart shall be able to render such services., MSLO shall
cause Martha Stewart to be available for up to 25 days annually, inclusive of
travel time, for the purposes
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<PAGE> 7
set forth in this paragraph. Kmart shall pay all costs and expenses in
connection with such services including, without limitation, costs of first
class travel and lodging consistent with Kmart's policies governing the
reimbursement of expenses for its senior executive employees. Any significant
expenses anticipated by MSLO in excess of Kmart's policy shall be first
submitted to Kmart for approval.
(2) With respect to television commercials produced hereunder, the
gross compensation which may become due to MSLO or Martha Stewart by reason of
Kmart's use and reuse of such commercials shall be [* * *] which amount shall
be credited against and not paid in addition to the royalties payable hereunder.
Kmart shall pay or cause to be paid any and all pension, health and/or welfare
fund payments required by reason of Martha Stewart's services hereunder pursuant
to any applicable union, guild or collective bargaining agreement.
(3) In addition to but as an integral part of this Agreement, MSLO
shall consult with and advise Kmart with respect to physical lay out,
presentation and philosophy of, and product selection and offering of the
Licensed Products and shall work with Kmart to develop, in addition to Licensed
Products, such packages, labels, hang tags, signage, advertising and promotional
materials ("Materials") as may be necessary consistent with the agreed upon time
schedules. In so doing MSLO shall use its good faith efforts and shall devote
such reasonable time as necessary to assist Kmart in these areas. MSLO shall
have the right to approve all such Materials in the same manner as set forth in
Article VII.
X. Property Retention. (1) All right, title and interest in the
Licensed Property including, without limitation, all copyrights, trademarks and
other rights therein (and all renewals and extensions thereof) shall be owned
exclusively by MSLO. Subject to the terms of this Agreement, MSLO shall have the
sole unrestricted right to exploit the Licensed Property in its sole discretion
in any manner in perpetuity in any and all media throughout the world whether
now known or hereafter devised with no further obligation whatsoever to Kmart or
any third party. Any use which Kmart may be permitted to make of the Licensed
Property pursuant to this Agreement shall be subject to MSLO's prior approval as
specified herein.
(2) Kmart confirms the sole ownership by MSLO of the Licensed Property
and agrees that all use by Kmart of the Licensed Property shall inure solely to
the benefit of MSLO and, as such, Kmart shall not at any time acquire any rights
in the Licensed Property or otherwise by virtue of any use or exploitation Kmart
may make thereof.
(3) All rights in the Licensed Property other than those specifically
granted herein are reserved by MSLO for its sole use and benefit and
exploitation in its sole discretion. Upon the expiration or termination of this
Agreement for any reason whatsoever, all rights in the Licensed Property shall
automatically revert to MSLO for its sole use and
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<PAGE> 8
disposition with no further obligation whatsoever to Kmart or any third party,
provided, however, Kmart shall have six months from the date of termination, or
three months from expiration, whichever the case may be, to sell all units of
Licensed Products purchased or ordered before expiration or termination of this
Agreement and to use the associated packages, labels, hang tags, signage,
advertising and promotional materials approved pursuant to this Agreement prior
to such expiration or termination to accomplish such sell-off.
(4) Kmart agrees to promptly inform MSLO of any use by any person or
entity of a trademark, servicemark or design similar to the Licensed Property
which comes to the attention of Kmart. MSLO shall have the sole right to
determine whether or not any action shall be taken on account of any
infringement and Kmart shall join in such action at MSLO's expense if MSLO so
requests. Kmart shall have no right to take any action with respect to the
Licensed Property without prior written approval from MSLO which approval shall
not be unreasonably withheld. MSLO and Kmart shall share any award of damages
net of costs including, without limitation, attorneys' fees and disbursements,
as a result of such actions, in proportion to their respective damages suffered
by such infringement.
(5) All designs, concepts, patterns, names and other intellectual
property developed by MSLO shall be owned solely by MSLO. All designs, concepts,
patterns, names and other intellectual property developed by Kmart shall be
owned solely by Kmart. Subject to all other provisions of this Agreement, the
physical elements of all Materials produced hereunder will be and remain the
property of Kmart.
(6) Nothing contained herein shall be construed as an assignment or
grant to Kmart of any right, title or interest in or to the Licensed Property,
it being understood that all rights thereto are reserved exclusively by MSLO,
except for the license granted hereunder as specifically described herein.
XI. Indemnification. (1) Kmart agrees to defend, indemnify and hold
harmless (including, without limitation, attorneys' fees and disbursements)
MSLO, its officers, directors, members, shareholders, employees and
representatives, at Kmart's sole expense, against any claims, demands and
lawsuits arising directly out of the manufacture, purchase, promotion,
advertising, distribution, use or sale of or in connection with Licensed
Products. MSLO shall notify Kmart within a reasonable time after it receives any
notice of claim, demand or lawsuit and Kmart shall promptly assume MSLO's
defense either directly or through counsel for Kmart's vendor and Kmart shall
defend, indemnify and hold harmless MSLO, its officers, directors, shareholders,
employees and representatives from any and all judgments, liabilities, costs,
damages or expenses, including, without limitation, attorneys' fees and
disbursements, in connection therewith. MSLO and Martha Stewart shall have the
right to participate in the defense of any such claims, demands and lawsuits,
with counsel of their choosing and at MSLO's expense. Any settlement which
affects the Licensed Property
-8-
<PAGE> 9
must be approved in writing in advance by MSLO. Kmart shall maintain in full
force and effect general and product liability insurance covering all Licensed
Products sold by it as well as any liability on its part or the part of MSLO in
the amount of at least $5,000,000 in excess of $2,000,000 self insured
retention.
(2) MSLO agrees to defend, indemnify and hold harmless (including,
without limitation, attorneys' fees and disbursements) Kmart, its officers,
directors, shareholders, employees and representatives, at MSLO's sole expense,
against any claims, demands and lawsuits for copyright, trade dress, and
trademark infringement or unfair trade practice arising directly out of Kmart's
authorized use of the Licensed Property and directly out of any Licensed Product
designed by MSLO if such claim, demand or lawsuit relates directly to such
design. Kmart shall notify MSLO within a reasonable time after it receives
notice of any such claim, demand or lawsuit and MSLO shall promptly assume
Kmart's defense and MSLO shall defend, indemnify and hold harmless Kmart, its
officers, directors, shareholders, employees and representatives from any and
all judgments, liabilities, costs, damages or expenses, including, without
limitation, attorneys' fees in connection therewith. Kmart shall have the right
to participate in the defense of any such claims, demands and lawsuits, with
counsel of their choosing and at Kmart's expense.
XII. Termination. (1) Subject to subparagraph (2) below, this Agreement
may be immediately terminated by either party in the event of a material breach
hereof and such material breach continues uncured for a period of 30 days after
written notice thereof, provided, however, such cure period shall be 15 days
with respect to payments due hereunder.
(2) If MSLO should fail to fulfill its material obligations in any
material respect and after 60 days written notice to MSLO such failure has not
been cured, due to illness, injury or accident, or in the event of Martha
Stewart's death during the Term hereof, Kmart may, in its discretion, terminate
this Agreement.
(3) In the event of termination or expiration of this Agreement, all
rights granted hereunder shall terminate and revert to MSLO f or its sole use
and disposition without any further obligation to Kmart.
XIII. Uniqueness of Services. The services to be performed by MSLO and
the rights and privileges granted to Kmart hereunder are special, unique and
incapable of replacement, the loss of which may not be reasonably or adequately
compensated in an action at law and that MSLO's failure or refusal to perform
the obligations hereunder may cause irreparable harm or damage. In the event of
a material breach by MSLO, Kmart shall be entitled, in addition to any other
remedies available to it, to seek injunctive or other equitable relief against
it to prevent the continuance of such failure or refusal or to prevent it from
performing services or granting rights to others in violation of this Agreement
and to seek
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<PAGE> 10
recovery of any unearned portion of any Minimum Royalty paid to MSLO hereunder.
Kmart may purchase insurance covering the unique services provided by MSLO and
MSLO agrees to cooperate with the reasonable requirements of such insurance but
shall not be obligated to incur any costs in connection therewith.
XIV. Service. MSLO assumes no liability whatsoever for service, defects
or breach of warranty or any type of product liability claim whatsoever
regarding Licensed Products which are sold by Kmart and not furnished by MSLO.
In the event that an ultimate purchaser of such a Licensed Product claims it to
be defective, in breach of warranty or in need of service, Kmart or its vendor
shall assume all obligations, liability, cost and expense relating in any manner
to such Licensed Product including, without limitation, any claimed defect,
breach of warranty or service need. In the event any such Licensed Product is
returned to MSLO on account of any claimed defect, breach of warranty or service
need, MSLO shall promptly notify Kmart regarding such Licensed Product and claim
and shall forward the same within a reasonable time to a reasonable destination
designated by Kmart for handling of the returned Licensed Product by Kmart or
its vendor. Kmart agrees to reimburse MSLO for all reasonable costs incurred in
connection with such returns.
XV. No Assignment. No party may assign any right or obligation under
this Agreement, other than the right to receive money, to any person or entity
other than its parent or subsidiary companies or a purchaser of all or
substantially all of the assets of a party, without the express written consent
of the other party, provided that MSLO shall have the right to assign its
interests under this Agreement to any entity in which Martha Stewart owns a
majority of the equity, and which at or about the time of such assignment
acquires all or substantially all of the rights to the Licensed Property
previously possessed by MSLO.
XVI. Choice of Law. This Agreement shall be construed and enforced in
accordance with laws of the State of Michigan.
XVII. No Joint Venture. Neither party shall be or be deemed to be an
agent, employee, partner or joint venturer of or for the other party.
XVIII. Confidentiality. The parties agree that the terms and conditions
of this Agreement shall be confidential. This obligation will not extend to any
information which is in the public domain provided that such information does
not come into the public domain as a result of the disclosure by the receiving
party or which a party is obligated to produce under court or governmental order
provided notice is given to the other party prior to the disclosure and provided
reasonable efforts are used to secure confidential protection of such
information.
XIX. Notice. All notices under this Agreement shall be in writing and
shall be given by either party by certified mail, guaranteed express mail or
facsimile (confirmation of delivery received) as follows:
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<PAGE> 11
If to MSLO:
Martha Stewart Living Omnimedia LLC
20 W. 43rd St.
New York, NY 10036
Attention: Martha Stewart
Facsimile No. (212) 522-0117
with a copy to:
Grubman Indursky Schindler & Goldstein, P.C.
152 West 57th Street
New York, NY 10019
Attention: Lawrence Shire
Facsimile No. (212) 554-0444
If to Kmart:
Kmart Corporation
3100 West Big Beaver Road
Troy, MI 48084
Attention: General Counsel
Facsimile No. (810) 643-1054
with a copy to:
Kmart Properties, Inc.
Suite 226
3250 West Big Beaver Road
Troy, MI 48084
Attention: Intellectual Property Attorney
Facsimile No. (810) 637-3057
XX. Compliance with Human Rights and Labor Standards. Kmart
warrants and represents that purchase order terms and conditions for the
purchase of all Licensed Products requires that such merchandise conforms in all
respects with all applicable federal, state and local laws, orders and
regulations. Kmart will require all manufacturers of Licensed Products hereunder
to sign a Certification of Compliance substantially similar to the form attached
hereto as Exhibit F. Upon written request of MSLO, Kmart shall supply MSLO
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<PAGE> 12
with the identification of all manufacturers of Licensed Products. Upon
reasonable prior written notice of MSLO and at MSLO's sole expense, MSLO shall
have the right to inspect the physical facilities of any manufacturer of
Licensed Products for the purpose of assuring that such manufacturer is in
satisfactory compliance with legal and ethical human rights and labor standards
and shall have the right to refuse approval of any Licensed Product manufactured
by any such manufacturer which after such inspection may be reasonably found not
to be in substantial compliance with such standards.
XXI. Bankruptcy. Kmart and MSLO shall each, in addition to its
other rights, have the right, on written notice to the other, to terminate this
Agreement if the other party files a petition in bankruptcy, or is adjudicated a
bankrupt, or if a petition in bankruptcy is filed against it and is not
dismissed within (60) days thereafter, or if it becomes insolvent, or makes an
assignment for the benefit of creditors, or files a petition or otherwise seeks
relief under or pursuant to any federal or state bankruptcy, insolvency or
reorganization statute or procedure, or if a custodian, receiver or trustee is
appointed for it or a substantial portion of its business or assets (and such
receivership is not discharged within sixty (60) days thereafter).
XXII. Integration. This Agreement shall be the final and
complete agreement between Kmart and MSLO with respect to the subject matter
hereof. This Agreement supersedes in its entirety the Agreement between Kmart
and Martha Stewart dated July 6, 1987 which Agreement is hereby terminated as of
the effective date hereof. No representations, inducements, promises or
understandings exist in relation to the subject matter hereof, whether oral or
written, except as expressly set forth herein, and this Agreement shall
supersede all prior understandings, agreements, contracts or arrangements
between the parties, whether oral or written, unless otherwise expressly
incorporated herein. No agreement or other understanding purporting to add to or
to modify the terms and conditions hereof shall be binding unless agreed to by
the parties in writing. Any terms or conditions in any forms of the parties used
in the performance of this Agreement which are in conflict with the terms and
conditions hereof shall be void.
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
KMART CORPORATION MARTHA STEWART LIVING OMNIMEDIA LLC
By: /s/ Warren Flick By: /s/ Martha Stewart
---------------------------- -------------------------------
By signing below I hereby acknowledge that I have read the foregoing Agreement
between Kmart and MSLO and in the event that MSLO should refuse or be unable to
deliver my services to Kmart, I hereby agree to be bound by the terms thereof as
such terms relate to me. I also agree to look to MSLO for all compensation
thereunder subject only to Kmart making all required payments thereunder to
MSLO.
/s/ Martha Stewart
- ----------------------
Martha Stewart
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
New York, New York
September 2, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated August 1, 1997, with respect to the financial statements
of Martha Stewart Living (a wholly owned operation of Time Inc.) as of December
31, 1996 and for the year then ended included in the Amendment No. 1 to the
Registration Statement (Form S-1 No. 333-84001) and related Prospectus of Martha
Stewart Living Omnimedia, Inc. for the registration of Class A common stock.
ERNST & YOUNG LLP
New York, New York
September 2, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1998 AND JUNE 30, 1999 CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND
IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 24,578 22,269
<SECURITIES> 0 0
<RECEIVABLES> 25,260 24,683
<ALLOWANCES> 0 0
<INVENTORY> 6,522 7,977
<CURRENT-ASSETS> 59,673 59,448
<PP&E> 11,468 11,491
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 125,372 123,845
<CURRENT-LIABILITIES> 53,635 55,612
<BONDS> 27,650 12,000
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 36,815 49,559
<TOTAL-LIABILITY-AND-EQUITY> 125,372 123,845
<SALES> 0 0
<TOTAL-REVENUES> 180,048 111,502
<CGS> 0 0
<TOTAL-COSTS> 152,663 96,037
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,243 597
<INCOME-PRETAX> 25,142 14,868
<INCOME-TAX> 1,336 702
<INCOME-CONTINUING> 23,806 14,166
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 23,806 14,166
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
