<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 2000
REGISTRATION NO. 333-91627
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ORGANIC, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7379 94-3258989
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code No.) Identification No.)
</TABLE>
510 THIRD STREET
SAN FRANCISCO, CALIFORNIA 94107
(415) 365-5500
(Address and telephone number of principal executive offices and principal place
of business)
------------------------
JONATHAN NELSON
CHIEF EXECUTIVE OFFICER
ORGANIC, INC.
510 THIRD STREET
SAN FRANCISCO, CALIFORNIA 94107
(415) 365-5500
(Name, address, and telephone number of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
BRUCE ALAN MANN, ESQ. KENNETH M. SIEGEL, ESQ.
KRISTIAN E. WIGGERT, ESQ. RICHARD S. ARNOLD, JR., ESQ.
VALERIE A. VILLANUEVA, ESQ. ROBERT E. DAWSON, ESQ.
PAMELA TY, ESQ. EFFIE TOSHAV, ESQ.
MORRISON & FOERSTER LLP WILSON SONSINI GOODRICH & ROSATI, P.C.
425 MARKET STREET 650 PAGE MILL ROAD
SAN FRANCISCO, CALIFORNIA 94105 PALO ALTO, CALIFORNIA 94304
</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 check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration 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>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.0001
per share................... 6,325,000 shares $14.00 $88,550,000 $24,428
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 825,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933.
(3) A registration fee of $20,850 was paid on November 24, 1999 for an aggregate
offering amount of $75,000,000 and a registration fee of $3,578 is paid
herewith.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES
IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED JANUARY 11, 2000.
5,500,000 Shares
ORGANIC, INC.
Common Stock
[ORGANIC LOGO]
----------------------
This is an initial public offering of shares of common stock of Organic,
Inc. All of the 5,500,000 shares of common stock are being sold by Organic.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $12.00 and $14.00. Application has been made for quotation
of the common stock on the Nasdaq National Market under the symbol "OGNC".
See "Risk Factors" beginning on page 8 to read about risks you should
consider before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Organic....................... $ $
</TABLE>
To the extent that the underwriters sell more than 5,500,000 shares of
common stock, the underwriters have the option to purchase up to an additional
825,000 shares from Organic at the initial public offering price, less the
underwriting discount.
----------------------
The underwriters expect to deliver the shares on .
GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE
THOMAS WEISEL PARTNERS LLC
----------------------
Prospectus dated
<PAGE> 3
INSIDE FRONT COVER:
ORGANIC LOGO
COPY: Connecting Customers to Businesses
INSIDE GATEFOLD:
ORGANIC LOGO
HEADLINE: Connecting Customers to Businesses
SUB HEAD: Various Services for Online Business Needs
COPY: ORGANIC
SERVICES FOR ONLINE NEEDS
We believe there has been a fundamental shift in the relationship between
businesses and their customers. It is now customers who determine the final
information and products delivered, requiring businesses to provide increasingly
sophisticated choices and interactions. Our services, iBusiness, Media,
Communications and Logistics are focused on solving the various issues that a
business encounters with customers.
- iBusiness: management consulting, creative design and engineering
implementation services through which we develop online business plans
and create Web sites;
- Media: marketing services through which we conceive, design, plan and
manage online marketing campaigns including electronic mail promotions
and affiliate program management;
- Communications: public relations services through which we plan and
manage our clients' press and publication relationships as well as
product and company launches; and
- Logistics: customer service and fulfillment consulting and transaction
management services through which we evaluate and manage product
fulfillment and customer call center facilities.
Through Organic's services, we help our clients build successful online
businesses.
detroit
chicago
london
new york
san francisco
singapore
sao paulo
GLOBAL EXPANSION
THE DIAGRAM
CENTER OF DIAGRAM: Customers (dialog) to Business (dialog)
SECOND AND THIRD TIERS OF DIAGRAM:
(each of the four services shown below are integrated, but responsible for
specific specializations)
SERVICE: Media;
FULFILLS: Awareness, Access
SPECIALIZATIONS WITHIN SERVICE LINE: Consulting Services, Advertising, Media
Planning, Media Buying, Research & Analysis, Development
SERVICE: Communications;
FULFILLS: Publicity, Exposure
SPECIALIZATIONS WITHIN SERVICE LINE: Consulting Services, Public Relations,
Messaging, Launch Services, Analyst Relations, Marketing
SERVICE: iBusiness;
FULFILLS: Business, Product
SPECIALIZATIONS WITHIN SERVICE LINE: Consulting Services, Creative Services,
Engineering Services, Technology Integration, Research & Analysis, Development
SERVICE: Logistics;
FULFILLS: Customer Service, Fulfillment
SPECIALIZATIONS WITHIN SERVICE LINE: Consulting Services, Customer Service,
Fulfillment, Technology Deployment Strategies, Data Management, Supply Chain
Management
CALLOUTS AT BOTTOM OF PAGE SPREAD:
SUBHEAD1: Global Expansion
IMAGE 1: map of Organic office locations
COPY: none
IMAGE 2: photo of Organic employees
SUBHEAD2: Expand Client Engagements
COPY2: Each of our services target new clients separately and together.
IMAGE 3: photo of Organic employees
SUBHEAD 3: Attaction & Retention
COPY3: Organic's culture and values are our core assets.
IMAGE 4: photo of Organic employees
SUBHEAD 4: Understanding & Innovation
COPY4: Through research, analysis, and testing, Organic gains an understanding
of the client to better develop innovative services, such as VOICE.
IMAGE 5: photo of Organic employees
SUBHEAD 5: Knowledge Management
COPY5: Our knowledge management tools allow our teams to effectively communicate
and innovate.
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in the common stock. You should read the entire
prospectus carefully, including "Risk Factors" and our consolidated financial
statements before making an investment decision.
OUR BUSINESS
Organic is a leading international Internet professional services firm. We
provide our clients various services to build and operate successful online
businesses. These services include iBusiness, media, communications and
logistics.
- iBusiness refers to our management consulting, creative design and
engineering implementation services through which we develop online
business plans and create Web sites;
- Media refers to our marketing services through which we conceive,
design, plan and manage online marketing campaigns including electronic
mail promotions and affiliate program management;
- Communications refers to our public relations services through which we
plan and manage our clients' press and publication relationships as
well as product and company launches; and
- Logistics refers to our customer service and fulfillment consulting and
transaction management services through which we evaluate and manage
product fulfillment and customer call center facilities.
We believe that the Internet has shifted the balance of power from
businesses to customers and has created the first truly global marketplace. We
also believe the ultimate customer, whether a business or consumer, is the
central and most influential participant in a commercial relationship. We
believe the key to our success, and what differentiates us, is our complete
focus on our clients' customers -- the customer-to-business market. We designed
our services in recognition of the challenges our clients face due to this
shift.
Founded in 1993 as a sole proprietorship and incorporated in January 1995,
we have a history as an innovator in the Internet professional services
industry. We have designed and developed a number of Web sites that were the
first in their industry category, including AT&T, Club Med and Volvo. We led the
development of the Apache Web server, a computer software program that delivers
Web pages for customers to view. Our employees also initiated the development of
network-based tools for measuring Web site performance which led to the
establishment of Accrue Software (Nasdaq: ACRU), an independent company.
We have performed work for over 250 clients and have gained significant
experience by working with both major offline and emerging Internet companies,
including Barnes & Noble, Blockbuster, Boo.com, CDNOW, Chase Manhattan Bank,
Compaq, DaimlerChrysler, Tommy Hilfiger and Washington Mutual. We have
organically grown our business, creating one of the largest independent Internet
professional services organizations with nearly 700 employees in seven offices
worldwide including Asia, Europe and Latin America.
We have experienced significant losses, with a total loss of $18.7 million
since inception largely due to a cumulative stock compensation charge of $10.5
million. We expect to continue to have operating losses in the future as we
incur capital and operating expenses to create a leadership position in the
highly competitive market in which we operate. In addition, we derive a
significant portion of our revenues from a limited number of clients. For
example, DaimlerChrysler and Blockbuster accounted for approximately 12% and 10%
of our total revenues during the nine months ended September 30, 1999.
3
<PAGE> 5
OUR MARKET OPPORTUNITY
Few businesses have the internal capabilities to address the opportunities
and challenges of the Internet. The complexity of conducting business online,
the rapidly changing technological environment, the need to improve
time-to-market and the limited supply of technically proficient internal
personnel creates significant demand for Internet professional services.
According to a 1998 Dataquest survey, 83% of Fortune 1000 companies currently
purchase, or plan to purchase, Internet professional services solutions such as
those we provide. Furthermore, International Data Corporation estimates the
worldwide market for Internet professional services will grow from $7.8 billion
in 1998 to $78.6 billion in 2003, which represents a compound annual growth rate
of more than 58%.
OUR OFFICES
Our headquarters are located at 510 Third Street, San Francisco, California
94107 and our telephone number is (415) 365-5500. Our Web site is
www.organic.com. This reference to our Web site does not constitute
incorporation by reference of the information contained at our site.
CONTROL OF OUR COMPANY BY INSIDERS
Immediately following the offering, Organic Holdings, Inc. will own 64.9%
of our outstanding common stock, and Omnicom Group will own 24.7% of our
outstanding common stock. Jonathan Nelson, through his ownership in Organic
Holdings, Inc., after the offering will beneficially own 64.9% of our common
stock. If these stockholders choose to act or vote in concert, they will have
the power to influence the election of our directors, the appointment of new
management and the approval of any other action requiring the approval of our
stockholders, including any amendments to our certificate of incorporation and
mergers or sales of any or all of our assets.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Organic................... 5,500,000 shares
Common stock to be outstanding after
this offering................................... 78,857,200 shares
Use of proceeds................................... To expand our corporate infrastructure, reduce
outstanding debt and for general corporate
purposes, including working capital and capital
expenditures.
Proposed Nasdaq National Market symbol............ "OGNC"
</TABLE>
------------------------
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of September 30, 1999 and does
not include the following:
- 15,712,932 shares of common stock issuable upon exercise of stock
options outstanding at a weighted average exercise price of $0.72 per
share granted under our 1997 stock option plan and 5,392,953 shares
available for future issuance under our 1997 stock option plan;
- 10,500,000 shares of common stock reserved for future issuance under
our 1999 long-term stock incentive plan; or
- 10,000,000 shares of common stock reserved for future issuance under
our 2000 employee stock purchase plan.
Please see "Capitalization" for a more complete description regarding the
outstanding shares of our common stock and options to purchase our common stock
and other related matters.
------------------------
Unless otherwise noted, all information in this prospectus assumes that:
- the underwriters will not exercise their option to purchase additional
shares of common stock to cover over-allotments, if any;
- each outstanding share of our preferred stock will convert into three
shares of common stock prior to the closing of this offering;
- our outstanding warrant issued to Omnicom Group for 2,249,076 shares of
common stock at $0.0033 per share, which expires on the closing of this
offering, will be exercised prior to or upon the closing of this
offering;
- we will complete a 3-for-1 split of our common stock before our
preferred stock converts into common stock and before this offering is
completed; and
- the public offering price will be $13.00 per share.
5
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
The following table is a summary of our consolidated statement of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations". The financial results for the nine months ended
September 30, 1998 are unaudited.
<TABLE>
<CAPTION>
JANUARY 31, FOR THE
1995 NINE MONTHS ENDED
(INCEPTION) TO YEARS ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ----------------------------------- -------------------------
1995 1996 1997 1998 1998 1999
-------------- ----------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues..................................... $ 1,895 $ 4,294 $ 6,780 $ 27,734 $ 20,744 $ 51,781
Operating expenses:
Professional services (exclusive of $0, $0,
$0, $183, $57 and $2,803 reported below
of stock-based compensation for the years
ended 1995, 1996, 1997 and 1998 and for
the nine months ended September 30, 1998
and 1999, respectively).................. 530 1,889 4,285 16,801 11,191 29,929
Selling, general and administrative
(exclusive of $14, $53, $87, $511, $234
and $6,845 reported below of stock-based
compensation for the years ended 1995,
1996, 1997 and 1998 and for the nine
months ended September 30, 1998 and 1999,
respectively)............................ 655 2,104 5,473 12,068 7,276 26,018
Stock compensation and other stock-based
charges.................................. 14 53 87 694 291 9,648
Total operating expenses................. 1,199 4,046 9,845 29,563 18,758 65,595
Operating income (loss)...................... 696 248 (3,065) (1,829) 1,986 (13,814)
Net income (loss)............................ $ 412 $ 237 $(1,785) $ (2,766) $ 1,146 $ (13,927)
Net income (loss) per share:(1)
Basic...................................... $ 45,768 $ 26,286 $ (668) $ (10.81) $ 8.41 $ (11.51)
Diluted.................................... $ 0.01 $ 0.00 $ (668) $ (10.81) $ 0.02 $ (11.51)
Weighted average common shares
outstanding:(1)
Basic...................................... 9 9 2,671 255,888 136,259 1,209,591
Diluted.................................... 65,025,009 65,025,009 2,671 255,888 65,424,719 1,209,591
Unaudited pro forma basic and diluted net
loss per share(2).......................... $ (0.04) $ (0.20)
Unaudited pro forma weighted average common
shares outstanding(2)...................... 65,280,888 70,389,036
</TABLE>
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the determination of the number of weighted average shares used in
computing per share data.
(2) Unaudited pro forma net loss per share has been computed by dividing net
loss by the pro forma weighted average number of shares outstanding. The pro
forma weighted average number of common shares outstanding includes the pro
forma effects of the automatic conversion on a weighted average basis of our
preferred stock, and the exercise of a warrant for 2,249,076 shares of
common stock as if such conversion had occurred on January 1, 1998 for the
year ended December 31, 1998 and on January 1, 1999 for the nine months
ended September 30, 1999, or at the date of original issuance, if later.
The following table provides a summary of our consolidated balance sheet as
of September 30, 1999. The pro forma column gives effect to the conversion of
all outstanding preferred stock and the exercise of a warrant for 2,249,076
shares of common stock upon the closing of the offering. The pro forma as
adjusted column reflects the receipt of the net proceeds from the sale in this
offering of 5,500,000 shares of common stock at an assumed initial public
offering price of $13.00 per share, after deducting the
6
<PAGE> 8
estimated underwriting discounts and commissions and estimated offering
expenses. See "Use of Proceeds" and "Capitalization".
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 3,204 $ 3,211 $ 68,642
Working capital............................................. 3,108 3,115 68,546
Total assets................................................ 58,519 58,526 123,957
Long-term obligations, less current portion................. 538 538 538
Total stockholders' equity.................................. 29,784 29,791 95,222
</TABLE>
7
<PAGE> 9
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus,
including our consolidated financial statements and the related notes, before
you purchase any shares of our common stock.
The information in this prospectus includes forward-looking statements
which involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of factors including those set forth under the "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" sections and elsewhere in this prospectus.
RISKS RELATED TO ORGANIC
WE MAY BE UNABLE TO RECRUIT AND RETAIN THE TALENTED PERSONNEL WHO ARE ESSENTIAL
FOR COMPLETING CLIENT PROJECTS, WHICH COULD HARM OUR PERFORMANCE ON EXISTING
PROJECTS AND REDUCE OUR ABILITY TO OBTAIN NEW PROJECTS, AND THEREFORE REDUCE OUR
REVENUES AND PROFITS
Our business is labor intensive, and our success depends on identifying,
hiring, training and retaining professionals. All of our current employees and
senior managers are employed on an at-will basis. If a significant number of our
current employees, contractors or any of our senior managers leave, we may be
unable to complete or retain existing projects or bid for new projects of
similar scope and revenues.
Even if we retain our current employees and contractors, our management
must continually recruit talented professionals for our business to grow.
Competition for these employees is intense, particularly in the Internet and
high technology industries. As a result, we may be unable to successfully
attract, assimilate or retain qualified personnel. As of September 30, 1999, we
had 681 employees. We believe that we need to hire additional personnel to
support our business. The failure to retain or attract the necessary personnel
would reduce our capacity to handle new client engagements and therefore our
revenue growth, which would seriously harm our business, financial condition and
results of operations.
WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR RAPID GROWTH, WHICH COULD RESULT IN
OUR BEING UNABLE TO EFFECTIVELY CONTROL OUR COSTS AND IMPLEMENT OUR BUSINESS
STRATEGIES
We began expanding our operations both in the U.S. and internationally in
the past year. We believe further expansion will be required to address the
anticipated growth in our client base and market opportunities. We also believe
expansion into new geographic areas is important because we believe we can
better serve clients with resources and professionals located near the client.
Our current expansion has placed, and any future expansion may continue to
place, a significant strain on our managerial, operational, financial and other
resources.
If we are unable to manage growth effectively or if we experience
disruptions during our expansion, our expenses could increase more quickly than
revenues or our revenues might be reduced as a result of failure to adequately
service new client engagements, either of which would seriously harm our
business, financial condition and results of operations.
OUR REVENUES COULD BE SIGNIFICANTLY REDUCED BY THE LOSS OF A MAJOR CLIENT
We derive a significant portion of our revenues from a limited number of
clients. The loss of any major client, if not replaced, could dramatically
reduce our revenues. For example, for the nine months ended September 30, 1999,
our five largest clients accounted for 41% of our revenues. During this period,
DaimlerChrysler accounted for approximately 12% of our revenues and Blockbuster
accounted for approximately 10% of our revenues.
8
<PAGE> 10
OUR LACK OF LONG-TERM CONTRACTS WITH OUR CLIENTS REDUCES THE PREDICTABILITY OF
OUR REVENUES
We generally do not have long-term contracts with our clients and are
generally retained on an engagement-by-engagement basis. These engagements vary
in size and scope and cause our revenues to be difficult to predict. In
addition, generally our contract provides for termination by either party after
notice and a transition period of up to 180 days. Our operating expenses are
relatively fixed and cannot be reduced on short notice to compensate for
unanticipated variations in the number or size of engagements in progress.
Because we incur costs based on our expectations of revenue from future
engagements, our failure to predict our revenues accurately may cause the
increase in our expenses to substantially outpace our revenue growth, which
would seriously harm our financial condition and results of operations.
IF WE FAIL TO ACCURATELY PREDICT COSTS RELATED TO OUR FIXED-PRICE PROJECTS, WE
MAY LOSE MONEY
Most of our current projects are on a fixed-price, fixed-timeframe basis,
rather than on a time and materials basis. Often, we fix the price or timeframe
before we finalize the design specifications. If we miscalculate the resources
or time necessary to complete these projects, to meet client expectations about
the services to be performed or to complete projects within budget, we could
have cost overruns and we could lose money on these projects, which could
seriously harm our operating results. The risk of miscalculations in pricing is
high because we work with complex technologies in compressed timeframes, and
therefore it can be difficult to judge the time and resources necessary to
complete a project.
WE MAY HAVE DIFFICULTY IN MANAGING OUR INTERNATIONAL EXPANSION AND OPERATIONS,
WHICH COULD HARM OUR BUSINESS AND FINANCIAL CONDITION
A key element of our strategy is to expand our business into international
markets. In addition to our U.S. operations, we have operations in Sao Paulo,
Brazil which opened in February 1999; London, England which opened in April
1999; and Singapore which opened in September 1999. Our international offices
provide the same or similar services as our U.S. offices, sometimes in
conjunction with our U.S. offices. Our management may have difficulty in
managing our international operations because of distance, as well as language
and cultural differences. Our management cannot assure you that they will be
able to market and deliver our services successfully in foreign markets.
Other risks related to our international operations include:
- success in finding and acquiring suitable strategic acquisition
candidates;
- difficulties arising from staffing and managing foreign operations;
- legal and regulatory requirements of different countries, including
different tax or labor laws;
- difficulties in using equity incentives for employees;
- international currency issues, including fluctuations in currency
exchange rates;
- restrictions on the import and export of sensitive technologies,
including data security and encryption technologies that we may wish to
use in solutions we develop for clients; and
- potential political or economic instability.
If any of these risks should materialize, our international and U.S.
businesses, financial conditions and results of operations could be harmed. Our
revenues derived from international operations were 4.6% of our total revenues
for the nine months ended September 30, 1999.
9
<PAGE> 11
OUR BILLABLE EMPLOYEES MAY BE UNDERUTILIZED IF CLIENTS DO NOT RETAIN OUR
SERVICES, WHICH COULD REDUCE OUR REVENUES AND MARGINS AND DAMAGE OUR POTENTIAL
PROFITABILITY
Many of our current or potential clients that are in the early stages of
development may be unable to continue to retain our services because of
financial constraints. In addition, some of our large clients who utilize our
services for multiple engagements or in stages may choose not to retain our
services for additional stages of a project or may choose to cancel or delay
additionally planned projects. Such cancellations or delays could result from
factors unrelated to our work product or the progress of the project, but could
be related to general business or financial condition of the client. If a client
defers, modifies or cancels an engagement or chooses not to retain our services
for additional phases of a project, we may be unable to rapidly redeploy
billable employees to other engagements, to minimize underutilization of those
employees. This underutilization could reduce our revenues and gross margins and
damage our potential profitability.
For example, if DaimlerChrysler, the sole client of our Detroit, Michigan
office at the present time, chooses not to retain our services, the billable
employees in our Detroit office could be underutilized.
HISTORICALLY WE HAVE GRANTED OPTIONS TO PURCHASE COMMON STOCK AT LOW EXERCISE
PRICES, WHICH WILL RESULT IN ADDITIONAL COMPENSATION EXPENSE IN THE FUTURE AND
REDUCE OUR REPORTED EARNINGS
Historically we have granted employees options to purchase our common stock
at exercise prices less than the offering price. During the nine months ended
September 30, 1999, we granted options to purchase 9,528,150 shares of common
stock to employees and non-employee directors with exercise prices ranging from
$1.1667 to $2.00 per share. We recognized stock-based compensation expense of
$9.2 million for the nine months ended September 30, 1999 relating to the
difference between the exercise price of the options and the offering price of
our common stock. Based on grants made through December 31, 1999, we will
recognize in the aggregate additional stock-based compensation expense of $64.2
million as the options vest over the next four years which will dilute any
future earnings that we may achieve.
WE ARE LIKELY TO EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY OPERATING
RESULTS WHICH MAY MAKE THE PRICE OF OUR COMMON STOCK DIFFICULT TO PREDICT
Our quarterly operating results have varied in the past and we expect that
our revenues and operating results will continue to fluctuate significantly from
quarter to quarter due to a variety of factors, many of which are outside of our
control. Some important factors affecting our revenues and operating results
from quarter to quarter, in order of their relative magnitude are:
- changes in our operating expenses as we expand operations;
- timing and execution of major client engagements;
- the timing and cost of advertising and related media;
- timing of employee hiring and utilization rates;
- increases in the number of independent contractors we must hire to meet
client needs, which would result in increased costs versus an
equivalent number of employees;
- our ability to develop, market and introduce new and significant online
business solutions on a timely basis;
- our success in obtaining suitable locations for expansion;
- client budgetary cycles;
- pricing changes in the industry;
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- demand for our Internet professional services;
- economic conditions in the Internet professional services market; and
- legal or regulatory developments regarding the Internet.
Our quarterly revenues and operating results are volatile and difficult to
predict. Our revenues for the first, second, third and fourth quarters of 1998
were 18.2%, 29.3%, 27.3% and 25.2%, respectively, of our total revenues for the
year ended December 31, 1998. Our revenues for the first, second and third
quarters of 1999 were 19.5%, 33.3% and 47.2%, respectively, of our total
revenues for the nine months ended September 30, 1999. It is likely that in some
future quarter or quarters our operating results will be below the expectations
of public market analysts or investors. In such event, the market price of our
common stock may decline significantly.
THE SEASONALITY OF OUR REVENUES COULD CAUSE OUR QUARTERLY OPERATING RESULTS TO
FALL BELOW THE EXPECTATIONS OF MARKET ANALYSTS AND INVESTORS, WHICH COULD HAVE A
NEGATIVE EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK
In general, our clients concentrate their expenditures on our services in
the second and third quarters of the calendar year. We expect this concentration
of expenditures to result in fluctuations in our revenues between these quarters
and the first and fourth quarters of the calendar year. It is also possible that
in the future our revenues will decline from one quarter to the next as a result
of this concentration. If these fluctuations or declines are greater than market
analysts or investors expect, our stock price could decline.
OUR BUSINESS MODEL IS EVOLVING RAPIDLY AND INCLUDES A HISTORY OF LOSSES AND WE
MAY EXPERIENCE LOSSES IN THE FUTURE, WHICH COULD RESULT IN THE MARKET PRICE OF
OUR COMMON STOCK DECLINING
We were founded in November 1993 and we are still rapidly evolving. Because
of this rapid evolution and growth, we have only a limited operating history on
which to base an evaluation of our current business and prospects. Companies
such as ours with a limited operating history frequently encounter extra risks,
expenses and difficulties as they grow and evolve. These risks and difficulties
apply particularly to us because the Internet professional services market is
also new and rapidly evolving.
Additionally, we have experienced operating losses as well as net losses
during fiscal 1997 and 1998 and the nine months ended September 30, 1999. For
the fiscal years 1997, 1998 and the nine months ended September 30, 1999, our
net losses were $1.8 million, $2.8 million, and $13.9 million, respectively. For
the fiscal years 1997, 1998 and the nine months ended September 30, 1999, our
net losses were 26.3%, 10.0%, and 26.9% of total revenues, respectively. We may
not be able to sustain the revenue growth we have experienced or the levels of
revenues obtained previously. In addition, we intend to continue to invest
heavily in development of our infrastructure and recruiting. As a result, we
will need to generate significant revenues to achieve profitability. We cannot
assure you that we will achieve profitability in the future or, if we achieve
profitability, that we will be able to sustain it. If we do not achieve and
maintain profitability, the market price for our common stock may decline,
perhaps substantially.
WE RELY ON THE SERVICES OF OUR SENIOR MANAGEMENT AND OTHER KEY PERSONNEL, AND
THOSE PERSONS' KNOWLEDGE OF OUR BUSINESS AND TECHNICAL EXPERIENCE WOULD BE
DIFFICULT TO REPLACE
We believe that our success will depend on the continued employment of our
senior management team and other key personnel. Any of our officers or employees
can terminate his or her employment relationship at any time. Currently, our key
executives are Jonathan Nelson, our Chief Executive Officer and Chairman of the
Board, and Michael Hudes, our President. The loss of either of these key
employees or our inability to attract or retain other qualified employees could
harm our business, financial condition and results of operations. While we
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currently maintain a key person life insurance policy for Jonathan Nelson, the
amount of this insurance may be inadequate to compensate us for his loss.
IF WE ARE NOT SUCCESSFUL IN OPENING AND GROWING NEW OFFICES, OUR FINANCIAL
RESULTS MAY SUFFER
An important component of our growth strategy is to open offices in new
geographic locations. Once we select a new location, we typically devote
substantial financial and management resources to properly launch and grow that
office. We cannot assure you that we will select appropriate markets to enter,
open new offices efficiently or manage new offices profitably. Our failure to
accurately assess these issues could negatively affect our business.
IF NEW SERVICES WE DEVELOP ARE NOT SUCCESSFUL, OUR BUSINESS COULD BE HARMED
Clients may not favorably receive any new services that we launch, which
could damage our reputation and brand name. We also cannot be certain that we
will generate satisfactory revenues from any expanded services to offset the
costs we incur to expand those services. Any expansion of our operations also
would require significant additional expenses, and these efforts may strain our
management, financial and operational resources.
WE WILL LIKELY CONTINUE TO FACE INTENSE COMPETITION WHICH COULD HARM OUR
OPERATING RESULTS
The market for Internet professional services is relatively new, intensely
competitive, quickly evolving and subject to rapid technological change. In
addition, our industry is experiencing rapid consolidation. Our current national
and international competitors include the following:
- other providers of Internet professional services, including
AGENCY.COM, iXL, Proxicom, Razorfish, Scient, USWeb/CKS and Viant;
- large information technology consulting services providers, including
Andersen Consulting, Cambridge Technology Partners, Cap Gemini, CSC,
EDS, IBM and Sapient;
- strategic consulting firms, including Bain & Company, Booz Allen &
Hamilton and Boston Consulting Group; and
- internal information technology, marketing and other departments of
current and potential clients.
We also anticipate facing additional competition from new entrants into our
markets due to the low barriers of entry.
Moreover, many of our competitors have longer operating histories, larger
client bases, greater brand recognition, greater financial, marketing, service,
support, technical, intellectual property and other resources than we do. As a
result, our competitors may be able to devote greater resources to marketing
campaigns, adopt more aggressive pricing policies or devote substantially more
resources to client and business development than us. This increased competition
may result in reduced operating margins, loss of market share and a diminished
brand. In addition, we may from time to time make pricing, service or marketing
decisions or acquisitions as a strategic response to changes in the competitive
environment. These actions could reduce our profits and harm our financial
condition and results of operation.
OUR INVESTMENTS IN CLIENT COMPANIES INVOLVE RISK, INCLUDING LOSING SOME OR ALL
OF OUR INVESTMENT, WHICH COULD HARM OUR OPERATING RESULTS
In exchange for our services we have from time to time made investments in
some of our clients. As of September 30, 1999, we have $1.2 million of such
investments accounted for in our balance sheet. We may continue to invest in our
clients as opportunities arise. In general, these equity investments are
structured so our clients pay for all of the costs related to their engagement
in cash and use equity incentives to compensate us for a portion of our profit
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margin. The businesses of the clients in which we invest, however, are generally
unproven and involve substantial risk. If these clients' businesses do not
succeed, we could lose some or all of our investment, which would harm our
operating results and cause our profitability to be lower than it would have
been if we had taken payment for our entire engagement in cash.
OUR BUSINESS OPPORTUNITIES MAY BE RESTRAINED BY CONFLICTS BETWEEN POTENTIAL
CLIENTS, WHICH COULD REDUCE OUR POTENTIAL PROFITABILITY
Conflicts between potential clients are inherent in aspects of our
business. We have in the past, and will likely in the future, be unable to
pursue potential opportunities because they would result in offering similar
services to direct competitors of existing clients. Additionally, we risk
alienating existing clients if we provide services to even indirect competitors.
Because these potential conflicts may jeopardize revenues generated from
existing clients and preclude access to business prospects, these conflicts
could cause our operating results to suffer. Furthermore, in limited
circumstances, we have agreed not to reuse some software code developed by us
for a client for competitors of the client and, in the case of DaimlerChrysler,
not to perform work for some competitors. These agreements reduce the number of
our prospective clients and the number of potential sources of revenues. In
addition, these agreements increase the significance of our client selection
process because many of our clients compete in markets where only a limited
number of players gain meaningful market share. If we agree not to perform
services for a particular client's competitors and our client fails to capture a
significant portion of its market, we are unlikely to receive future revenues in
that particular market.
WE FACE POTENTIAL LIABILITY FOR DEFECTS OR ERRORS IN THE SOLUTIONS WE DEVELOP,
THE OCCURRENCE OF WHICH COULD REDUCE OUR REVENUES
Many of the solutions we develop are critical to the operations of our
clients' businesses. Any defects or errors in these solutions could result in:
- delayed or lost client revenues;
- adverse client reaction to us;
- negative publicity;
- additional expenditures to correct the problem; or
- claims against us for negligence in performing our services or errors
in the software code provided by us.
Our standard contracts limit our damages arising from our negligent conduct
and for other potential liabilities in rendering our services. However, these
contractual provisions may not protect us from liability for damages. In
addition, large claims may not be adequately covered by insurance and may raise
our insurance costs.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY, OUR
REPUTATION COULD BE DAMAGED AND OUR COMPETITIVE POSITION COULD BE HARMED
We believe our trademarks, trade secrets and other proprietary rights in
our intellectual property, including our trademark name, Organic, software code
and Internet business processes we have developed, are important to our success
and competitive position. In particular, our trademarks help establish our brand
identity and, we believe, enhance the marketability of our services. Our trade
secrets, including the Internet business processes we have developed, are a
significant aspect of the services we provide. If we are unable to protect our
trademarks, trade secrets and other intellectual property against unauthorized
use by others, our reputation among existing and potential clients could be
damaged and our competitive position could be harmed. We generally enter into
confidentiality or license agreements with our employees and consultants,
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and generally control access to and distribution of our documentation and other
proprietary intellectual property. Despite these precautions, our management
cannot ensure that these strategies will be adequate to deter misappropriation
of our proprietary intellectual property.
Despite efforts to protect our intellectual property, we also face the
following risks:
- non-recognition or inadequate protection of proprietary rights;
- undetected misappropriation of proprietary intellectual property or
materials;
- development of similar technologies by competitors;
- unenforceability of non-competition agreements entered into by our
employees; and
- infringement claims, even if not meritorious, against us.
If any of these risks materialize, we could be required to pay significant
amounts to defend our rights and in some cases to indemnify our customers and as
a result the time of our senior management could be diverted.
OUR BUSINESS COULD BE HARMED IF WE FAIL TO MAINTAIN A GOOD REPUTATION OR BRAND
RECOGNITION
We believe that establishing and maintaining a good reputation and brand
recognition is critical to attract and expand our targeted client base and that
the importance of reputation and brand recognition will increase as the number
of Internet professional service providers grows. Promotion and enhancement of
our brand will depend largely on our success in continuing to provide high
quality Internet services and solutions, which cannot be assured. In certain
instances we have received new business referrals from our existing clients
based on our reputation and past work experience. If clients do not perceive our
Internet professional services to be effective or of high quality, our brand
name and reputation could be harmed. This could reduce our potential for
attracting or keeping clients, thus reducing future revenues.
Additionally, although we intend to advertise and promote our brand, we
cannot assure you that our strategies to do so will be successful. If we are
unable to design and implement effective marketing campaigns or otherwise fail
to promote and maintain our brand, our sales could decline. Our business also
may suffer if we incur excessive expenses in an attempt to promote and maintain
our brand without a corresponding increase in revenues.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS AND MAY REQUIRE
ADDITIONAL FINANCINGS
Our future liquidity and capital requirements will depend on numerous
factors, including:
- timing and amount of funds required for, or generated by, operations;
- success and duration of our expansion program, both domestically and
internationally; and
- unanticipated opportunities or difficulties.
We anticipate that the net proceeds of this proposed initial public
offering, together with our existing resources and expected cash flow from
operations, will be sufficient to meet our present growth strategies and capital
expenditure requirements for at least the next 12 months. Thereafter, we may
seek to raise additional funds through public or private financings, strategic
relationships or other arrangements. This additional funding may not be
available on terms acceptable to us, or at all. We may have to sell stock at
prices lower than those paid by existing stockholders, which would result in
dilution, or we may have to sell stock or bonds with rights superior to rights
of holders of common stock. Also, any debt financing might involve restrictive
covenants that would limit our operating flexibility. Moreover, strategic
arrangements may require us to relinquish our rights to certain of our
intellectual property. Finally, if adequate funds are not
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available on acceptable terms, we may be unable to develop or enhance our
services, take advantage of future opportunities or respond to competitive
pressures.
RISKS RELATED TO OUR INDUSTRY
OUR SUCCESS DEPENDS ON OUR CLIENTS' WILLINGNESS TO ADOPT AN INTERNET BUSINESS
MODEL AND OUTSOURCE THEIR INTERNET NEEDS TO INTERNET PROFESSIONAL SERVICE
PROVIDERS
The market for our services will depend upon the adoption of Internet
professional services by companies. Critical issues concerning the use of the
Internet remain unresolved and may affect the use of these technologies to solve
business problems. Critical issues which influence a client to adopt an Internet
business model or expand its business on the Internet include:
- security of Internet technologies and client information;
- reliability of the technology and services;
- cost of development of an electronic business Web site; and
- administration and bandwidth of the Internet itself.
The process of implementing or expanding a business on the Internet can be
difficult. The difficulty expected or experienced by clients in utilizing the
Internet and the expected costs of outsourcing compared to the expected costs of
internal development will affect their decisions on hiring and retaining
Internet professional services providers. Many entities may choose not to
outsource their Internet needs.
Additionally, some entities would have to make significant changes in their
current business practice to adapt to the Internet. Thus, even if the above
listed issues were resolved, businesses may choose not to adopt an Internet
business model.
IF WE ARE UNABLE TO KEEP UP WITH RAPID TECHNOLOGICAL AND OTHER CHANGES IN THE
INTERNET AND THE ELECTRONIC COMMERCE INDUSTRY, OUR BUSINESS WILL BE HARMED
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online business solutions. The
Internet and the electronic commerce industry are characterized by rapid
technological change, changes in user and client requirements and preferences,
frequent new product and service introductions embodying new technologies, and
the emergence of new industry standards and practices. The evolving nature of
the Internet could render our existing proprietary technology, as well as the
skills of our employees, obsolete. Our success will depend, in part, on our
ability to:
- effectively use leading technologies critical to our business;
- enhance our existing solutions;
- continue to develop new solutions and technology that address the
increasingly sophisticated and varied needs of our current and
prospective clients and their customers; and
- influence and respond to technological advances, emerging industry and
regulatory standards and practices and competitive service offerings.
Our ability to remain technologically competitive may require substantial
expenditures and lead-time. If we are unable to adapt in a timely manner to
changing market conditions or customer requirements, our business, financial
condition and results of operations could be seriously harmed.
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OUR REVENUES COULD BE HARMED IF GROWTH IN THE USE OF THE INTERNET OR GROWTH OF
ELECTRONIC COMMERCE DOES NOT OCCUR
Our future success is substantially dependent upon continued growth in the
use of the Internet, particularly growth in commerce over the Internet. However,
consumer use of the Internet for commerce may not grow as quickly as projected.
If the number of users on the Internet does not increase or commerce over the
Internet does not become more accepted and widespread, demand for our services
may decrease and, as a result, our revenues would decline. Capacity constraints
caused by growth in Internet usage may, unless resolved, impede further growth
in Internet use. Other factors that may affect Internet usage or electronic
commerce adoption include:
- actual or perceived lack of security of information;
- lack of access and ease of use;
- congestion of Internet traffic;
- inconsistent quality or availability of Internet or customer service;
- possible outages due to difficulties or other damage to the Internet;
- excessive governmental regulation;
- uncertainty regarding intellectual property ownership;
- costs associated with the obsolescence of existing infrastructure; and
- level of consumer satisfaction with electronic commerce experiences.
Further, the adoption of the Internet for commerce and communications,
particularly by those individuals and companies that have historically relied
upon alternative means of commerce and communications, generally requires the
understanding and acceptance of a new way of conducting business and exchanging
information. In particular, companies that have already invested substantial
resources in other means of conducting commerce and exchanging information may
be particularly reluctant or slow to adopt a new Internet-based strategy that
may make their existing personnel and infrastructure obsolete. If the necessary
infrastructure, products, services or facilities are not developed, or if the
Internet does not become a viable commercial medium, our business, results of
operations and financial condition could be harmed.
THE APPLICATION OR ADOPTION OF GOVERNMENT REGULATIONS AND THE EXISTENCE OF LEGAL
UNCERTAINTIES MAY HARM OUR BUSINESS
We, and our clients, are subject to regulations applicable to businesses
generally, and laws and regulations directly applicable to electronic commerce.
However, laws and regulations may be modified or adopted with respect to the
Internet relating to user privacy, pricing, content, copyrights, distribution
and characteristics and quality of products and services. The modification or
adoption of any additional laws or regulations may decrease the expansion of the
Internet, which could increase our cost of doing business or decrease demand for
our online business solutions.
In addition, the applicability of existing laws to the Internet remains
uncertain with regard to many issues including property ownership, export of
encryption technology, sales tax, libel and personal privacy. Any new
legislation or regulation in these areas could seriously harm our business,
financial condition and results of operations.
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Finally, the application of laws and regulations of jurisdictions where we
plan to offer our Internet services could also harm our business. Other states
or foreign countries may:
- require us to qualify to do business as a foreign corporation in each
state or foreign country, or otherwise subject us to taxes and
penalties;
- attempt to regulate our Internet solutions;
- prosecute us for unintentional violations of their laws; or
- modify or enact new laws in the near future.
YEAR 2000 RISKS MAY HARM OUR BUSINESS BECAUSE OF DAMAGE TO OUR INTERNAL SYSTEMS
OR LIABILITY ARISING FROM NON-YEAR 2000 COMPLIANT SOLUTIONS THAT WE PROVIDE
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. As a result, many of
these systems could fail or malfunction because they may not be able to
distinguish between 20th century dates and 21st century dates. Accordingly, many
companies, including our clients, potential customers, vendors and strategic
partners, may need to upgrade their systems or change their software to comply
with applicable year 2000 requirements. We currently rely on the following
computer systems to conduct our business:
- programming software;
- graphics design software;
- accounting and billing software;
- word processing, spreadsheet, project management and presentation
software;
- communications software; and
- network, server and personal computing hardware.
Because we and our clients are extremely dependent upon the proper
functioning of our and their computer systems, a failure of our or their systems
to correctly recognize dates beyond December 31, 1999 could materially disrupt
our operations, which could harm our business, financial condition and results
of operations.
We monitored our internal systems and the work that we have done for
clients during December 1999 and through the first days of January 2000. The few
issues noted were dealt with at the time they arose. We believe there were no
significant disruptions of either client or internal operations. We continue to
monitor both our internal systems and client work.
We have warranted in the past, and expect to continue to warrant, to
clients that our work will be year 2000 compliant. In these cases, we do not
warrant the compliance of third party software; rather, we warrant only that
software created by us will be year 2000 compliant. However, even absent a
specific year 2000 warranty, there is a risk that clients for whom we have
created or implemented software will attempt to hold us liable for any damages
that result in connection with year 2000 problems. Furthermore, if the clients
change or update their software, then their change or upgrade may not interact
properly with our previously established services.
Additionally, our failure to make our online business solutions year 2000
compliant could result in a decrease in sales of our services, or an increase in
the allocation of resources to address year 2000 problems of our clients without
additional revenue for such invested resources. Also, year 2000 issues may
affect purchasing patterns of our clients or potential clients as they may
expend significant resources to correct their current systems. These
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expenditures may result in reduced funds available to use our services, which
could harm our business, operating results and financial condition.
RISKS RELATED TO THIS OFFERING
BECAUSE THERE IS NO PRIOR MARKET FOR OUR COMMON STOCK, THE PRICE OF OUR COMMON
STOCK MAY BE VOLATILE, WHICH MAY LEAD TO LOSSES BY INVESTORS AND SECURITIES
LITIGATION
There is currently no public market for our common stock. The initial
public offering price of our stock will be determined through negotiations
between us and representatives of the underwriters, and may not be
representative of the price that will prevail in the open market. You may not be
able to resell your shares at or above the initial public offering price. See
"Underwriting" for a description of factors evaluated in determining the initial
public offering price and of the arrangement between us and the underwriters.
We have filed an application for the quotation of the common stock on the
Nasdaq National Market. We do not know the extent to which investor interest
will lead to the development of a trading market or how liquid it may be. The
market price for the common stock could be highly volatile and could be subject
to wide fluctuations in response to the following factors:
- quarterly variations in our operating results;
- investor perception about us and the Internet professional services
market in general;
- announcements of technological innovations that affect the demand for
our services;
- announcements of new products or services by us or our competitors; and
- changes in financial estimates for us or our industry by securities
analysts.
The common stock of many Internet professional services companies has
experienced significant fluctuations in trading price and volume. It is possible
that our common stock will experience similar fluctuations. Often these
fluctuations have been unrelated to operating performance. In the past,
following periods of market volatility, security holders of these companies have
instituted class action litigation. If we were involved in such litigation, we
could incur substantial costs and diversion of management's attention, which
could harm our business, results of operations and financial condition. Declines
in the trading price of our common stock could also harm employee morale and
retention, our access to capital and other aspects of our business.
ORGANIC HOLDINGS AND OMNICOM GROUP OWN ENOUGH OF OUR SHARES TO CONTROL US WHICH
WILL LIMIT YOUR ABILITY TO INFLUENCE CORPORATE MATTERS, AND COULD PREVENT
MERGERS OR OTHER BUSINESS COMBINATIONS THAT YOU MAY BELIEVE ARE DESIRABLE
Immediately following the offering, the stockholders set forth below
collectively will own approximately 89.6% of the outstanding shares of our
common stock and will own individually the percentage set forth opposite their
respective names:
<TABLE>
<S> <C>
Organic Holdings, Inc. ..................................... 64.9%
Omnicom Group Inc. ......................................... 24.7%
</TABLE>
Jonathan Nelson, through his ownership in Organic Holdings, Inc., after the
offering will beneficially own 64.9% of our common stock.
If the stockholders listed above choose to act or vote in concert, they
will have the power to influence the election of our directors, the appointment
of new management and the approval of any other action requiring the approval of
our stockholders, including any amendments to our certificate of incorporation
and mergers or sales of any or all of our assets. In addition, without
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the consent of these stockholders, we could be prevented from entering into
transactions that could be beneficial to us. Conversely, third parties could be
discouraged from making a tender offer or bid to acquire us at a price per share
that is above the price at which the common stock will trade on the Nasdaq
National Market.
THE SUBSTANTIAL NUMBER OF SHARES THAT WILL BE ELIGIBLE FOR SALE IN THE NEAR
FUTURE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK
Sales of a substantial number of shares of common stock in the public
market following this offering could cause the market price for our common stock
to decline. Upon completion of the offering, there will be 78,857,200
outstanding shares of common stock, of which 5,500,000 shares sold in the
offering plus any shares issued upon exercise of the underwriters' over-
allotment option, if any, will be immediately available for sale. In addition,
the remaining 73,357,200 shares will be available for sale 180 days after the
date of this prospectus subject to restrictions set forth in Rules 144 and 701
under the Securities Act of 1933.
OUR RECENT INCREASE IN THE NUMBER OF EMPLOYEES MAY DECREASE FUTURE EARNINGS
For the nine months ended September 30, 1999, we paid to our employees a
significant amount of compensation, which included stock-based compensation
expense of $9.2 million. This increase in employee compensation resulted from
our efforts to rapidly expand our operations. Based on grants made through
December 31, 1999, we will recognize in aggregate additional stock-based
compensation expense of $64.2 million as the options vest over the next four
years. This substantial investment in our employees will dilute any future
earnings that we may achieve.
WE HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS OF THIS OFFERING AND WE MAY
NOT USE THE PROCEEDS EFFECTIVELY
Our management could spend most of the proceeds from this offering in ways
with which you may not agree or that do not yield a favorable return. Our
primary purpose in conducting this offering is to create a public market for our
common stock. As of the date of this prospectus, we intend to use a majority of
the proceeds from this offering for working capital and general corporate
purposes. Because of the number and variability of factors that determine our
use of the net proceeds from this offering, we cannot assure you that you will
agree with our use of the proceeds. Pending their use, we intend to invest the
net proceeds of this offering in short-term, investment-grade, interest-bearing
investments or accounts.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE DILUTION AND DISPARITY IN STOCK
PURCHASE PRICE
The initial public offering price is expected to be substantially higher
than the pro forma net tangible book value per share of the outstanding common
stock immediately after the offering. Accordingly, purchasers of common stock in
this offering will experience immediate and substantial dilution of
approximately $12.00 in net tangible book value per share, or approximately
92.3% of the assumed offering price of $13.00 per share. In contrast,
stockholders as of September 30, 1999 paid an average price of $0.28 per share.
Investors will incur additional dilution upon the exercise of outstanding stock
options. Furthermore, any additional equity financing may be dilutive to
stockholders and debt financing, if available, may involve restrictive
covenants, which may limit our operating flexibility with respect to business
matters. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our stockholders will be reduced.
Stockholders may experience additional dilution in net book value per share and
newly-issued equity securities may have rights, preferences and privileges
senior to those of the holders of our common stock.
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PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND SOME OF OUR CONTRACTS
COULD DETER POTENTIAL ACQUISITION BIDS THAT A STOCKHOLDER MAY BELIEVE ARE
DESIRABLE, AND THE MARKET PRICE OF OUR COMMON STOCK MAY BE LOWER AS A RESULT
Upon completion of this offering, our board of directors will have the
authority to issue up to 25,000,000 shares of preferred stock. The board of
directors can fix the price, rights, preferences, privileges and restrictions of
the preferred stock without any further vote or action by our stockholders. The
issuance of shares of preferred stock may delay or prevent a change in control
transaction. As a result, the market price of our common stock and the voting
and other rights of our stockholders may be adversely affected. The issuance of
preferred stock may result in the loss of voting control to other stockholders.
We have no current plans to issue any shares of preferred stock.
Other provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable. These provisions include:
- authorizing our board of directors to issue additional preferred stock;
- limiting the persons who can call special meetings of stockholders;
- prohibiting stockholder actions by written consent;
- creating a classified board of directors under which our directors will
serve staggered three-year terms;
- establishing advance notice requirements for nominations for election
to the board of directors or for proposing matters that can be acted on
by stockholders at stockholder meetings;
- limiting the ability of stockholders to remove directors without cause;
and
- adopting a stockholder rights plan, which would cause substantial
dilution to any person or group that attempts to acquire our company on
terms not approved in advance by our board of directors.
Further, some of our existing contracts may require a notice of assignment.
Since our contracts generally provide for termination by either party after
notice and a transition period of up to 180 days, a client may choose to
terminate our contract if the client does not like the assignment.
DELAWARE LAW MAY INHIBIT POTENTIAL ACQUISITION BIDS; THIS MAY ADVERSELY AFFECT
THE MARKET PRICE OF OUR COMMON STOCK, DISCOURAGE MERGER OFFERS AND PREVENT
CHANGES IN OUR MANAGEMENT
Section 203 of the Delaware General Corporation Law may inhibit potential
acquisition bids for our company. Upon completion of this offering, we will be
subject to the antitakeover provision of the Delaware General Corporation Law,
which regulates corporate acquisitions. See "Description of Capital Stock" for a
discussion of how Section 203 operates. Under Delaware law, a corporation may
opt out of the antitakeover provisions. We do not intend to opt out of the
antitakeover provisions of Delaware Law.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to a
number of risks and uncertainties, many of which are beyond our control, which
may include statements about our:
- plans for and ability to hire additional personnel;
- business strategy;
- expectations for future expansion both in the U.S. and internationally;
- anticipated growth in revenue from our various service offerings;
- uncertainty regarding our future operating results;
- anticipated sources of funds, including the proceeds from this
offering, to fund our operations for the 12 months following the date
of this prospectus; and
- plans, objectives, expectations and intentions contained in this
prospectus that are not historical facts.
All statements, other than statements of historical facts included in this
prospectus, regarding our strategy, future operations, financial position,
estimated revenues or losses, projected costs, prospects, plans and objectives
of management are forward-looking statements. When used in this prospectus, the
words "will", "believe", "anticipate", "intend", "estimate", "expect", "project"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such identifying words. All
forward-looking statements speak only as of the date of this prospectus. You
should not place undue reliance on these forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in or suggested by
the forward-looking statements we make in this prospectus are reasonable, we can
give no assurance that these plans, intentions or expectations will be achieved.
We disclose important factors that could cause our actual results to differ
materially from our expectations under "Risk Factors" and elsewhere in this
prospectus. These cautionary statements qualify all forward-looking statements
attributable to us or persons acting on our behalf.
21
<PAGE> 23
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $65.4
million from the sale of the shares of common stock in this offering
(approximately $75.4 million if the underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $13.00 per
share and after deducting the estimated underwriting discounts and offering
expenses.
While we cannot predict with certainty how the proceeds of this offering
will be used, we currently intend to use them as follows:
- to expand our corporate infrastructure;
- to repay $4.0 million of outstanding debt as of September 30, 1999
under our revolving credit facility with Omnicom Group; and
- for general corporate purposes, including capital expenditures and
working capital.
We may also use a portion of the net proceeds to acquire or invest in
complementary businesses or obtain the right to use complementary technologies.
However, we have no current commitments or agreements with respect to any of
these types of investments. Pending these uses, the net proceeds of this
offering will be invested in short-term, investment-grade, interest-bearing
investments or accounts.
Our revolving credit facility with Omnicom Group bears interest at a rate
equal to the lender's commercial paper rate, based on the published 30 day
commercial lending rate in The Wall Street Journal at the last day of the month,
plus 3.0% on borrowings up to $30.0 million until the closing of this offering.
After the offering, we may borrow up to $15.0 million at the lender's commercial
paper rate plus 1.25% through September 30, 2002. The interest rate on our
borrowings under this facility as of September 30, 1999 was 6.4%.
The amounts we actually spend for the above purposes may vary significantly
and will depend on a number of factors, including our future revenues and cash
generated by operations and the other factors described under "Risk Factors".
Therefore, we will have broad discretion in the way we use the net proceeds. See
"Risk Factors -- We have broad discretion in how we use the proceeds of this
offering and we may not use the proceeds effectively" for more information.
DIVIDEND POLICY
We have never declared or paid any cash dividends on shares of our common
stock. We intend to retain any future earnings for future growth and do not
anticipate paying any cash dividends in the foreseeable future.
22
<PAGE> 24
CAPITALIZATION
The following table sets forth our:
- actual capitalization at September 30, 1999;
- pro forma capitalization after giving effect to the conversion of all
outstanding shares of preferred stock into 69,489,000 shares of common
stock and the exercise of a warrant for 2,249,076 shares of common
stock immediately prior to the completion of this offering; and
- pro forma as adjusted capitalization, which gives effect to the sale in
this offering of 5,500,000 shares of common stock at an assumed initial
public offering price of $13.00 per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term obligations, less current
portion................................... $ 538 $ 538 $ 538
-------- -------- --------
Stockholders' equity:
Convertible Preferred stock, $.0001 par
value; 25,000,000 shares authorized,
23,163,000 shares issued and outstanding,
actual; no shares issued or outstanding,
pro forma and pro forma as adjusted....... 1 -- --
Common stock, $.0001 par value; 200,000,000
shares authorized, 1,619,124 shares issued
and outstanding, actual; 73,357,200 shares
issued and outstanding, pro forma;
78,857,200 shares issued and outstanding,
pro forma as adjusted..................... -- 1 2
Additional paid-in capital.................. 81,488 81,495 146,925
Deferred compensation....................... (33,032) (33,032) (33,032)
Accumulated deficit......................... (18,659) (18,659) (18,659)
Accumulated other comprehensive income...... (14) (14) (14)
-------- -------- --------
Total stockholders' equity............. 29,784 29,791 95,222
-------- -------- --------
Total capitalization................. $ 30,322 $ 30,329 $ 95,760
======== ======== ========
</TABLE>
This table excludes the following shares:
- 15,712,932 shares of common stock issuable upon exercise of stock
options outstanding as of September 30, 1999 at a weighted average
exercise price of $0.72 per share;
- 5,392,953 shares of common stock available for future grant or issuance
under our 1997 stock option plan as of September 30, 1999;
- 10,500,000 shares of common stock available for future grant or
issuance under our 1999 long-term stock incentive plan; and
- 10,000,000 shares of common stock available for future issuance under
our 2000 employee stock purchase plan.
23
<PAGE> 25
DILUTION
Our pro forma net tangible book value as of September 30, 1999, giving
effect to the conversion of all shares of preferred stock outstanding as of
September 30, 1999 into common stock and the exercise of a warrant for 2,249,076
shares of common stock upon completion of this offering, was approximately $13.7
million, or approximately $0.19 per share of common stock. Pro forma net
tangible book value per share represents the amount of tangible assets less
total liabilities, divided by 73,357,200 shares of common stock.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of shares of our common stock in
this offering and the pro forma net tangible book value per share of our common
stock immediately after the offering. After giving effect to our sale of
5,500,000 shares of common stock in this offering at an assumed initial public
offering price of $13.00 per share and after deduction of the estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, our pro forma net tangible book value as of September 30, 1999 would have
been approximately $79.1 million, or $1.00 per share. This represents an
immediate increase in pro forma net tangible book value of $0.81 per share to
existing stockholders and an immediate dilution in pro forma net tangible book
value of $12.00 per share to purchasers of common stock in this offering.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Pro forma net tangible book value per share before
offering............................................... $0.19
Increase per share attributable to new investors.......... 0.81
-----
Pro forma net tangible book value per share after the
offering.................................................. 1.00
------
Net tangible book value dilution per share to new
investors................................................. $12.00
======
</TABLE>
The following table sets forth on a pro forma basis as of September 30,
1999, after giving effect to the conversion of all outstanding shares of
preferred stock into common stock and the exercise of a warrant for 2,249,076
shares of common stock upon completion of this offering, the total consideration
paid and the average price per share paid by our existing stockholders and by
new investors, before deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us, at an assumed initial public
offering price of $13.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 73,357,200 93.0% $20,849,281 22.6% $ 0.28
New investors...................... 5,500,000 7.0 $71,500,000 77.4 13.00
---------- ----- ----------- -----
Total.................... 78,857,200 100.0% $92,349,281 100.0%
========== ===== =========== =====
</TABLE>
This table assumes that no options were exercised after September 30, 1999.
As of September 30, 1999, there were outstanding options to purchase a total of
15,712,932 shares of common stock at a weighted average exercise price of
approximately $0.72 per share; 5,392,953 shares of common stock reserved for
issuance under our 1997 stock option plan; 10,500,000 shares of common stock
available for issuance under our 1999 long-term stock incentive plan; and
10,000,000 shares of common stock available for issuance under our 2000 employee
stock purchase plan.
24
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes to the consolidated financial statements, appearing elsewhere in this
prospectus. The selected balance sheet data as of December 31, 1997 and 1998 and
September 30, 1999 and the statement of operations data for the years ended
December 31, 1996, 1997 and 1998 and for the nine months ended September 30,
1999 are derived from our consolidated financial statements included elsewhere
in this prospectus, which have been audited by PricewaterhouseCoopers LLP,
independent accountants. The selected balance sheet data as of December 31, 1995
and 1996 and the statement of operations data for the period ended December 31,
1995 are derived from our consolidated financial statements that are not
included in this prospectus, which have been audited by PricewaterhouseCoopers
LLP. The statement of operations data for the nine months ended September 30,
1998 are derived from our unaudited consolidated financial statements included
elsewhere in this prospectus, which, in the opinion of our management, include
all adjustments necessary to fairly present the results of our operations for
such interim period. The historical results presented below are not necessarily
indicative of future results.
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 31, 1995 FOR THE NINE MONTHS
(INCEPTION) YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
THROUGH ----------------------------------- -------------------------
DECEMBER 31, 1995 1996 1997 1998 1998 1999
----------------- ----------- ------- ----------- ----------- -----------
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................... $ 1,895 $ 4,294 $ 6,780 $ 27,734 $ 20,744 $ 51,781
Operating expenses:
Professional services (exclusive of
$0, $0, $0, $183, $57, and $2,803
reported below of stock-based
compensation for the years ended
1995, 1996, 1997, 1998 and for the
nine months ended September 30,
1998 and 1999, respectively)....... 530 1,889 4,285 16,801 11,191 29,929
Selling, general and administrative
(exclusive of $14, $53, $87, $511,
$234, and $6,845 reported below of
stock-based compensation for the
years ended 1995, 1996, 1997, 1998
and for the nine months ended
September 30, 1998 and 1999,
respectively)...................... 655 2,104 5,473 12,068 7,276 26,018
Stock compensation and other stock-
based charges...................... 14 53 87 694 291 9,648
----------- ----------- ------- ----------- ----------- -----------
Total operating expenses........... 1,199 4,046 9,845 29,563 18,758 65,595
----------- ----------- ------- ----------- ----------- -----------
Operating income (loss)................ 696 248 (3,065) (1,829) 1,986 (13,814)
Minority interest in operations of
consolidated subsidiary.............. -- (106) -- -- -- (38)
Interest and other income, net......... -- 4 283 73 73 (11)
----------- ----------- ------- ----------- ----------- -----------
Net income (loss) before taxes..... 696 146 (2,782) (1,756) 2,059 (13,863)
Income tax expense (benefit)........... 284 (91) (997) 1,010 913 64
----------- ----------- ------- ----------- ----------- -----------
Net income (loss).................. $ 412 $ 237 $(1,785) $ (2,766) $ 1,146 $ (13,927)
=========== =========== ======= =========== =========== ===========
Net income (loss) per share:
Basic................................ $ 45,768 $ 26,286 $ (668) $ (10.81) $ 8.41 $ (11.51)
=========== =========== ======= =========== =========== ===========
Diluted.............................. $ 0.01 $ 0.00 $ (668) $ (10.81) $ 0.02 $ (11.51)
=========== =========== ======= =========== =========== ===========
Weighted average common shares
outstanding:
Basic................................ 9 9 2,671 255,888 136,259 1,209,591
=========== =========== ======= =========== =========== ===========
Diluted.............................. 65,025,009 65,025,009 2,671 255,888 65,424,719 1,209,591
=========== =========== ======= =========== =========== ===========
Unaudited pro forma basic and diluted
net loss per share................... $ (0.04) $ (0.20)
=========== ===========
Weighted average common shares
outstanding -- unaudited pro forma
basic and diluted.................... 65,280,888 70,389,036
=========== ===========
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------ SEPTEMBER 30,
1995 1996 1997 1998 1999
---- ------ ------- ------- -------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 66 $ 243 $ 6,135 $ 2,067 $ 3,204
Working capital............................................. 36 307 8,290 339 3,108
Total assets................................................ 979 1,677 11,426 17,605 58,519
Long-term obligations, less current portion................. -- -- 604 661 538
Total stockholders' equity.................................. 338 923 9,225 7,190 29,784
</TABLE>
Unaudited pro forma basic and diluted net loss per share for the year ended
December 31, 1998 and nine months ended September 30, 1999 has been computed
using the weighted average number of common shares outstanding, adjusted to
include the pro forma effects of the conversion of Series A and Series B
convertible preferred stock and the exercise of a warrant for shares of common
stock as if such conversion had occurred on January 1, 1998 for the year ended
December 31, 1998 and on January 1, 1999 for the nine months ended September 30,
1999, or at the date of original issuance, if later.
26
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our consolidated
financial position and the results of our operations in conjunction with
"Selected Consolidated Financial Data" and our consolidated financial statements
and the notes to those financial statements appearing elsewhere in this
prospectus. This discussion and analysis contains forward-looking statements
that involve risks, uncertainties and assumptions. Our actual results may differ
materially from those anticipated in these forward-looking statements as a
result of factors including, but not limited to, those set forth under "Risk
Factors" and elsewhere in this prospectus.
OVERVIEW
Since our founding in 1993 as a sole proprietorship and incorporation in
January 1995, we have been an innovator and leader in the Internet professional
services industry. We focus on providing services to our clients including
management consulting, creative design and engineering implementation services;
marketing services; public relations services; and customer service and
fulfillment consulting and transaction management services. These services
provide our clients with various opportunities to manage and grow their customer
and business relationships as the Internet continues to evolve. We have
performed work for over 250 major offline and online companies to establish or
enhance brands and have introduced several new service lines to serve particular
client needs.
We expect that our revenues will be driven primarily by the number, size
and scope of our client engagements and by our professional services headcount,
all of which have been increasing. For the nine months ended September 30, 1999,
five clients accounted for approximately 41% of our revenues, with
DaimlerChrysler and Blockbuster accounting for approximately 12% and 10%,
respectively, of our revenues. Revenues from any given client will vary from
period to period; however, we expect that significant customer concentration
will continue for the foreseeable future as we have had customer concentration
in the past. To the extent that any significant client reduces its use of our
services or terminates its relationship with us, our revenues could decline
substantially. As a result, the loss of any significant client could negatively
impact our business and results of operations.
Substantially all of our revenues are derived from providing professional
services on a fixed-fee, retainer or time and materials basis. Marketing and
public relations services are typically provided under long-term relationships.
Customer service and fulfillment consulting and transaction management services
are typically provided under contracts that range from a few months to over a
year. We generally enter into a service agreement with our clients, which
establishes the legal and general business terms of our relationship. Our
engagements vary depending on what type of services we provide and they range
from a few months to more than a year. Generally our client relationships span
several years. Revenues from fixed-fee contracts are generally recognized as
services are rendered using the percentage-of-completion method of accounting in
accordance with Statement of Position ("SOP") 81-1 based on the percentage of
costs incurred to date to total estimated project costs. We periodically
evaluate the actual status of each project to ensure that the estimated cost to
complete each contract and provisions for estimated losses, if necessary, are
made in the period in which such losses are determined. To date, such losses
have not been significant. Revenues pursuant to retainer contracts are generally
recognized over the life of the contract on a straight-line basis. Revenues
pursuant to time and materials contracts are generally recognized as services
are provided. Revenues exclude reimbursable expenses charged to clients.
Our professional services expenses include the direct costs associated with
employees and contractors in billable departments. These expenses include
salaries, bonuses, benefits, vacation,
27
<PAGE> 29
travel and entertainment expenses. Historically our professional services
expenses have increased and we expect these expenses to continue to increase in
the foreseeable future.
Our selling, general and administrative expenses primarily consist of our
investment in our corporate support services, our employee recruitment, training
and retention programs and our research and development and knowledge management
initiatives. Our selling, general and administrative expenses also include the
direct costs associated with employees and contractors in non-billable
departments, real estate costs and other investments in our corporate support
services.
Our net losses primarily consist of the increase in operating expenses
mostly due to stock compensation and other stock-based charges.
Our clients tend to spend proportionally more during the second and third
quarters. We expect this seasonality to continue in the near term future.
Therefore, our financial results may fluctuate from quarter to quarter.
Fluctuations also can result from such factors as the number, size and scope of
our engagements, the efficiency with which we utilize our employees and the
ability to complete our projects within the estimated timeframe.
We are rapidly growing to accommodate the increasing need for Internet
professional service offerings and to better serve our existing clients in their
various domestic and international locations. For the nine months ended
September 30, 1999, we opened permanent offices in Detroit, Sao Paulo, London
and Singapore. Our international operations collectively accounted for 4.6% of
total revenues for the nine months ended September 30, 1999. Our headcount
increased from 278 as of December 31, 1998 to 681 as of September 30, 1999. We
intend to open additional offices in the U.S. and internationally during 2000
and accordingly, we expect associated headcount and infrastructure costs to
continue to increase. Personnel-related compensation represents a high
percentage of our operating expenses and accordingly, if revenues do not
increase at a rate proportionally equal to expenses, our business, consolidated
financial position or results of operations could be harmed.
On January 29, 1997, Organic Online, Inc. was renamed Organic Holdings,
Inc. and we were formed as a subsidiary under the name Organic Online, Inc. We
exchanged 18,323,712 shares of Series A convertible preferred stock and nine
shares of common stock for substantially all of the assets and liabilities of
Organic Holdings, Inc. Certain non-operating assets and liabilities
(approximately $0.3 million, net) were retained by Organic Holdings, Inc. and
have been excluded from the accompanying financial statements. Because this
reorganization did not result in a change in control, there was no change in the
basis of accounting at the time of the reorganization. We changed our name from
Organic Online, Inc. to Organic, Inc. on January 28, 1999.
28
<PAGE> 30
RESULTS OF OPERATIONS
The following table presents our consolidated statement of operations as a
percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------
1996 1997 1998 1998 1999
----- ----- ----- ----------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Professional services.................... 44.0 63.2 60.6 53.9 57.8
Selling, general and administrative...... 49.0 80.7 43.5 35.1 50.3
Stock compensation and other stock-based
charges............................... 1.2 1.3 2.5 1.4 18.6
----- ----- ----- ----- -----
Total operating expenses.............. 94.2 145.2 106.6 90.4 126.7
----- ----- ----- ----- -----
Operating income (loss).................... 5.8 (45.2) (6.6) 9.6 (26.7)
Minority interest in operations of
consolidated subsidiary.................. (2.5) 0.0 0.0 0.0 (0.1)
Interest and other income, net............. 0.1 4.2 0.3 0.3 0.0
----- ----- ----- ----- -----
Net income (loss) before taxes........ 3.4 (41.0) (6.3) 9.9 (26.8)
Income tax expense (benefit)............... (2.1) (14.7) 3.7 4.4 0.1
----- ----- ----- ----- -----
Net income (loss)..................... 5.5% (26.3)% (10.0)% 5.5% (26.9)%
===== ===== ===== ===== =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
REVENUES
Our revenues were $20.7 million for the nine months ended September 30,
1998, compared to $51.8 million for the nine months ended September 30, 1999.
This increase of 150% was primarily due to increases in the number of clients
and size of our engagements. Our increased sales and marketing efforts resulted
in the addition of several large accounts such as DaimlerChrysler and
Blockbuster, which represented 12% and 10% of our total revenues, respectively,
for the nine months ended September 30, 1999. Our revenues from international
operations for the nine months ended September 30, 1999 was 4.6% of total
revenues. To a lesser extent, existing clients also increased the breadth and
scope of their engagements with us, attributable, in part, to the additions of
marketing and public relations services and customer service and fulfillment
consulting and transaction management services to our service offerings.
PROFESSIONAL SERVICES
Our professional services expenses were $11.2 million for the nine months
ended September 30, 1998, compared to $29.9 million for the nine months ended
September 30, 1999. This increase of 167% was primarily attributable to an
increase of 324 in professional services personnel, increased costs associated
with contractors and employee-related benefit accruals in 1999. The increase in
professional services headcount resulted from opening new offices in Detroit,
London, Sao Paulo and Singapore and continued growth in our San Francisco,
Chicago and New York offices and an increase in the size and number of our
projects. As a percentage of revenues, professional services expenses were 54%
and 58% for the nine months ended September 30, 1998 and 1999, respectively.
This increase was primarily due to increased costs in San Francisco engineering
contractors.
29
<PAGE> 31
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $7.3 million for the nine
months ended September 30, 1998, compared to $26.0 million for the nine months
ended September 30, 1999. This increase of 258% was primarily due to the
increase of 116 in non-billable personnel to support our growth, increased costs
associated with the addition of new offices and improvements in our office
infrastructure and increased consulting fees associated with several internal
software implementations. As a percentage of revenues, selling, general and
administrative expenses were 35% and 50% for the nine months ended September 30,
1998 and 1999, respectively. This increase reflects costs associated with hiring
of executive management and personnel to fill open positions within the
corporate services departments. We anticipate significant additional investment
throughout 2000.
STOCK COMPENSATION AND OTHER STOCK-BASED CHARGES
Stock compensation and other stock-based charges consist of non-cash
compensation expenses arising from stock option grants and the issuance of
detachable warrants to Omnicom Group. For the nine months ended September 30,
1998 and 1999, we recorded aggregate deferred stock-based compensation of $1.1
million and $42.0 million, respectively. This increase was primarily due to an
increase in the number of option grants associated with increased hiring of
personnel. Additional deferred stock-based compensation will be recorded for
future grants made prior to our initial public offering. Stock-based
compensation expense is being amortized over the vesting period of the related
options, generally four years, and is expected to be significant through 2004.
For the nine months ended September 30, 1998 and 1999, we recognized stock-based
compensation expense of $0.3 million and $9.2 million, respectively. See Note 7
of Notes to Financial Statements.
In connection with the $30.0 million revolving credit facility obtained on
August 27, 1999, we issued a warrant that entitles Omnicom Group to purchase
2,249,076 shares of common stock, and recorded a deferred bank facility charge
of approximately $16.5 million. This amount is being amortized on a
straight-line basis over 36 months, the term of the credit facility. For the
nine months ended September 30, 1999, we recognized bank facility expense of
$0.5 million. We expect to terminate the revolving credit facility in the first
quarter of year 2000, which will result in the recognition of a one-time bank
facility expense charge of $14.7 million.
INCOME TAX EXPENSE
Income tax expense for the nine months ended September 30, 1998 reflects
the establishment of a valuation allowance against our net deferred tax asset
recorded in the year ended December 31, 1997.
NET INCOME (LOSS)
Net income was $1.1 million for the nine months ended September 30, 1998,
compared to the net loss of $13.9 million for the nine months ended September
30, 1999. The decrease of $15.1 million was primarily due to the increase in
operating expenses of $46.8 million from the 1998 period to the 1999 period. In
particular, stock compensation and other stock-based charges increased $9.4
million during this period.
COMPARISON OF FISCAL YEARS 1996, 1997 AND 1998
REVENUES
Our revenues increased 58% from $4.3 million for the year ended December
31, 1996 to $6.8 million for the year ended December 31, 1997. This increase was
primarily due to increases in the number of new clients in New York. Our
revenues increased 309% from $6.8 million for the
30
<PAGE> 32
year ended December 31, 1997 to $27.7 million for the year ended December 31,
1998. This increase was primarily due to increases in the number of clients and
the average size of our engagements as a result of increased sales and marketing
efforts. This increase also was attributable, in part, to additional revenues
generated from our new office in Chicago and from our new marketing and public
relations service lines.
PROFESSIONAL SERVICES
Our professional services expenses increased 127% from $1.9 million for the
year ended December 31, 1996 to $4.3 million for the year ended December 31,
1997. As a percentage of revenues, professional services expenses were 44%, 63%
and 61% for the years ended December 31, 1996, 1997 and 1998, respectively. The
increase from 1996 to 1997 was attributable to an increase of 36 in professional
services personnel resulting from opening our New York office and continued
growth in our San Francisco office to accommodate revenue growth. Our
professional services expenses increased 292% from $4.3 million for the year
ended December 31, 1997 to $16.8 million for the year ended December 31, 1998,
primarily due to an increase of 132 in our professional services personnel
resulting from opening our Chicago office and continued growth in our San
Francisco and New York locations in order to accommodate the increase in the
volume of our projects.
SELLING, GENERAL AND ADMINISTRATIVE
Our selling, general and administrative expenses increased 160% from $2.1
million for the year ended December 31, 1996 to $5.5 million for the year ended
December 31, 1997. As a percentage of revenues, selling, general and
administrative expenses were 49%, 81% and 44% for the years ended December 31,
1996, 1997 and 1998, respectively. This increase from 1996 to 1997 reflected an
increase of 15 in non-billable personnel and increased costs associated with
opening our New York office and improving our office infrastructure to
accommodate growth. Our selling, general and administrative expenses increased
121% from $5.5 million for the year ended December 31, 1997 to $12.1 million for
the year ended December 31, 1998. This increase reflected the increase of 39 in
non-billable personnel, costs associated with opening our Chicago office and
improving our office infrastructure to accommodate growth, and consulting fees
associated with several internal software implementations.
STOCK COMPENSATION AND OTHER STOCK-BASED CHARGES
Stock compensation and other stock-based charges consist of non-cash
compensation expenses arising from stock option grants. For the years ended
December 31, 1996, 1997 and 1998, we recorded aggregate deferred stock-based
compensation of $0.4 million, $0, and $2.3 million, respectively. This increase
was primarily due to an increase in the number of option grants associated with
increased hiring of personnel. During the years ended December 31, 1996, 1997
and 1998, we recognized stock-based compensation expense of $0.1 million, $0.1
million and $0.7 million, respectively.
NET INCOME (LOSS)
Net income was $0.2 million for the year ended December 31, 1996, compared
to the net loss of $1.8 million for the year ended December 31, 1997. The
decrease of $2.0 million was due to a $5.8 million increase in operating
expenses, partially offset by a $2.5 million increase in revenues and the
establishment of a valuation allowance in 1997 against our deferred tax asset.
Our net loss increased from $1.8 million for the year ended December 31, 1997 to
$2.8 million for the year ended December 31, 1998. The increase in the net loss
of $1.0 million from 1997 to 1998 is primarily due to the establishment of a
valuation allowance against our net deferred tax asset recorded in 1997.
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QUARTERLY RESULTS OF OPERATIONS
The following table sets forth a summary of our unaudited quarterly
financial information for the periods indicated. We derived this data from our
unaudited interim financial statements and, in our opinion, included all
adjustments necessary to fairly present the results of operations for the
periods shown. These unaudited quarterly results should be read in conjunction
with our consolidated financial statements and notes to those financial
statements included elsewhere in this prospectus. The operating results in any
quarter are not necessarily indicative of the results that may be expected for
any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
---------- ---------- --------- -------- --------- -------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 5,051 $ 8,114 $ 7,579 $ 6,990 $10,087 $17,267 $ 24,427
Operating expenses:
Professional services(1)............ 2,172 3,562 5,457 5,610 5,568 8,263 16,098
Selling, general and
administrative(1)................. 1,677 2,688 2,911 4,792 4,649 8,325 13,044
Stock compensation and other stock-
based charges..................... 16 79 196 403 473 1,738 7,437
---------- ---------- ------- ------- ------- ------- --------
Total operating expenses.......... 3,865 6,329 8,564 10,805 10,690 18,326 36,579
---------- ---------- ------- ------- ------- ------- --------
Operating income (loss)............... 1,186 1,785 (985) (3,815) (603) (1,059) (12,152)
Minority interest in operations of
consolidated subsidiary............. -- -- -- -- 23 4 (65)
Other income (expense), net........... 44 35 (6) -- (21) 36 (26)
---------- ---------- ------- ------- ------- ------- --------
Net income (loss) before taxes.... 1,230 1,820 (991) (3,815) (601) (1,019) (12,243)
Income tax expense (benefit).......... 12 100 801 97 15 23 26
---------- ---------- ------- ------- ------- ------- --------
Net income (loss)................. $ 1,218 $ 1,720 $(1,792) $(3,912) $ (616) $(1,042) $(12,269)
========== ========== ======= ======= ======= ======= ========
</TABLE>
- -------------------------
(1) Amounts are exclusive of reported below stock-based compensation for the
quarters ended:
<TABLE>
<CAPTION>
PROFESSIONAL SELLING, GENERAL AND
SERVICES ADMINISTRATIVE
------------ --------------------
<S> <C> <C>
March 31, 1998.............................................. $ 8 $ 8
June 30, 1998............................................... 19 60
Sept. 30, 1998.............................................. 30 166
Dec. 31, 1998............................................... 126 277
March 31, 1999.............................................. 218 255
June 30, 1999............................................... 632 1,106
Sept. 30, 1999.............................................. 1,953 5,484
</TABLE>
COMPARISON OF QUARTERS ENDED JUNE 30, 1998, SEPTEMBER 30, 1998 AND DECEMBER
31, 1998
Revenues decreased 7% from $8.1 million in the second quarter of 1998 to
$7.6 million in the third quarter of 1998 due to a $1.3 million decrease in
revenues from our San Francisco office related to reduced work on Formica, Nike
and Nortel. This decrease was partially offset by an increase in revenues from
our New York office during the third quarter. Revenues decreased 8% from $7.6
million in the third quarter of 1998 to $7.0 million in the fourth quarter of
1998 due to most projects in the San Francisco office being completed by early
fourth quarter that was partially offset by continued revenue growth from our
New York office during the fourth quarter.
Selling, general and administrative expenses increased 8% from $2.7 million
in the second quarter of 1998 to $2.9 million in the third quarter of 1998 due
to the opening of our Chicago office and increased infrastructure costs incurred
to support our New York office. Selling, general and administrative expenses
increased 65% from $2.9 million in the third quarter of 1998 to $4.8 million in
the fourth quarter of 1998 due to hiring of non-billable personnel, especially
middle level managers, to support our growth.
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COMPARISON OF QUARTERS ENDED MARCH 31, 1999, JUNE 30, 1999 AND SEPTEMBER 30,
1999
Revenues increased 71% from $10.1 million in the first quarter of 1999 to
$17.3 million in the second quarter of 1999 due to the addition of the
DaimlerChrysler account and the opening of our Detroit office. In addition, we
recognized revenues from several of our large clients, including Blockbuster,
Global Sports Interactive and Tommy Hilfiger. Revenues increased 41% from $17.3
million in the second quarter of 1999 to $24.4 million in the third quarter of
1999 as a result of the addition of our London office as well as the seasonality
of our business.
Selling, general and administrative expenses increased 79% from $4.6
million in the first quarter of 1999 to $8.3 million in the second quarter of
1999 due to continued hiring of corporate support services personnel and the
hiring of our Chief Information Officer and the promotion of our Chief
Technology Officer. Selling, general and administrative expenses increased 57%
from $8.3 million in the second quarter of 1999 to $13.0 million in the third
quarter of 1999 as we hired a Chief Financial Officer, Chief Legal and
Administrative Officer, Chief Operating Officer and Vice President of Human
Resources. We hired additional corporate personnel for a number of our support
services including human resources, finance, information services and legal.
INCOME TAX EXPENSE
Income tax expense in the year ended December 31, 1998 reflect the
establishment of a valuation allowance against our net deferred tax asset
recorded in the year ended December 31, 1997 due to projections that the Company
would incur a net operating loss for 1998 and the foreseeable future. In 1999,
taxes reflect actual payments made for state, local and foreign taxes.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through
operating cash flows, the issuance of Series A and Series B convertible
preferred stock and bank borrowings.
OPERATING CASH FLOWS
Cash and cash equivalents increased from $1.7 million as of December 31,
1998 to $3.2 million as of September 30, 1999. Net cash used in operating
activities of $0.2 million and net cash used in investing activities of $4.0
million for the year ended December 31, 1998 was offset with borrowings of $1.9
million during 1998 from the second credit agreement for the purchase of
equipment and the $10.0 million investment by Omnicom Group in 1997 as described
below. Net cash used in operating activities of $4.7 million and net cash used
in investing activities of $5.8 million for the nine months ended September 30,
1999 was more than offset by the issuance of Series B convertible preferred
stock and borrowings under the revolving credit facility as described below.
Capital expenditures were as follows (in millions):
<TABLE>
<S> <C>
For the years ended December 31,
1996...................................................... $0.5
1997...................................................... 1.1
1998...................................................... 5.6
Nine months ended September 30, 1999........................ 6.2
</TABLE>
Capital expenditures were used primarily for computer equipment, computer
software, other internal software implementations and leasehold improvements.
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PREFERRED STOCK FINANCING
We raised $10.0 million through the issuance of 3,351,288 shares of Series
A convertible preferred stock to Omnicom Group in January 1997. In February
1999, we issued 1,488,000 shares of Series B convertible preferred stock to
Omnicom Group for net cash proceeds of $7.7 million plus the settlement of a
$3.0 million short-term bridge loan that was obtained in January 1999. For the
nine months ended September 30, 1999, we paid $38,000 in interest on this loan.
BANK AND OTHER BORROWINGS
In 1996, we had two credit agreements with a commercial lending
institution, Silicon Valley Bank, that allowed us to borrow against the purchase
of equipment and against our accounts receivable. As of September 30, 1999 we
had no amounts outstanding against these agreements. On August 27, 1999, we
entered into a revolving credit facility with Omnicom Group to be used for
working capital purposes. This credit facility allows us to borrow up to $30.0
million at the lender's commercial paper rate, based on the published 30 day
commercial lending rate in The Wall Street Journal at the last day of the month,
plus 3.0% until the closing of our proposed initial public offering. Thereafter,
we may borrow up to $15.0 million at the lender's commercial paper rate plus
1.25% through September 30, 2002. The revolving credit facility expires on
September 30, 2002. This credit facility contains some restrictions and any
borrowings pursuant to this agreement require us to comply with financial
covenants and are collateralized by some of our investments. These financial
covenants include minimum revenue targets and limitations on capital equipment
purchases. As of September 30, 1999, we had approximately $4.7 million in
outstanding debt, of which $4.0 million relates to this revolving credit
facility. For the nine months ended September 30, 1999, we accrued $12,000 in
interest on this loan. See Note 5 of Notes to Financial Statements.
We anticipate that the net proceeds of this proposed initial public
offering, together with our existing liquidity sources and expected cash flows
from operations, if any, will be sufficient to meet our present growth
strategies and related working capital and capital expenditure requirements for
at least the next 12 months. Thereafter, to the extent that we are unable to
fund our operations from cash flows, we may need to obtain additional equity or
debt financing. There can be no assurance that such additional financing will be
readily available or can be obtained, if at all, on terms, which are favorable
to us.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
To date, we have not utilized derivative financial instruments or
derivative commodity instruments. We invest our cash in money market funds,
which are subject to minimal credit and market risk. We believe the market risks
associated with these financial instruments are immaterial.
FOREIGN CURRENCY RISK
We face foreign currency risks primarily as a result of the revenues we
receive from services delivered through our foreign subsidiaries. These
subsidiaries incur most of their expenses in the local currency. Accordingly,
our foreign subsidiaries use the local currency as their functional currency.
We are also exposed to foreign exchange rate fluctuations, primarily with
respect to the British Pound and the Euro, as the financial results of foreign
subsidiaries are translated into United States dollars for consolidation. As
exchange rates vary, these results, when translated, may vary from expectations
and adversely impact net income (loss) and overall profitability. The
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<PAGE> 36
effect of foreign exchange rate fluctuation for the nine months ended September
30, 1999 was not material.
YEAR 2000 READINESS
The year 2000 problem exists because many computer systems and software
products use only the last two digits to refer to a year. This convention could
affect date-sensitive calculations that treat "00" as the year 1900, rather than
as the year 2000. As a result, computer systems and software used by many
companies, including us, our vendors, our clients and our potential clients, may
need to be upgraded to comply with such year 2000 requirements.
We have identified all of the major systems and software products and have
sought external and internal resources to renovate and test the systems and
products. Although we believe that our principal internal systems are year 2000
compliant, some of our systems are not yet certified. We have received year 2000
compliance statements from the suppliers of some of our principal internal
systems, and have sought similar statements from other vendors. In particular,
we have received a compliance statement from Peoplesoft, the supplier of our
enterprise resource planning software. Our review of our year 2000 readiness
programs, including our assessment of our internal systems as well as those of
third parties with whom we have material interactions, has been completed.
The year 2000 problem may also affect software or code that we develop or
third party software products that are incorporated into the services that we
provide for our clients. Although our clients license software directly from
third parties, we generally discuss year 2000 issues with these suppliers and
sometimes perform internal testing on their products, but we do not guarantee
that the software licensed by these suppliers is year 2000 compliant. Any
failure on our part to provide year 2000 compliant services to our clients could
result in a re-deployment of internal resources to remediate these problems and,
as a result, hamper our ability to work or take on additional projects. This may
result in financial loss, harm to our reputation and potential liability to
others and could harm our business, financial condition and results of
operations. In addition, our current or potential clients may incur significant
expenses to achieve year 2000 compliance. If our clients are not year 2000
compliant, they may experience material costs to remedy problems, or they may
face litigation costs. In either case, year 2000 issues could reduce or
eliminate the budgets that current or potential clients could have for purchases
of our services. As a result, our business, financial condition and results of
operations could be materially affected.
We have funded our year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. At this time, we cannot
estimate the costs associated with remediating the year 2000 problem. However,
we may experience unexpected problems associated with year 2000 compliance that
may adversely affect our costs and as a result, our results of operations. In
addition, we expect that additional costs will be incurred for personnel to
monitor the results of the year 2000 project to ensure client satisfaction. For
example, we may experience material problems and costs with year 2000 compliance
that could seriously harm our business, financial condition and results of
operations, including:
- operational disruptions and inefficiencies for us, our clients and
vendors that provide us with internal systems that will divert
management's time and attention and financial and human resources from
ordinary business activities;
- business disputes and claims for pricing adjustments by our clients,
some of which could result in litigation or contract termination; and
- harm to our reputation to the extent that our client deliverables
experience errors or interruptions of service.
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The principal risks associated with the year 2000 problem can be grouped
into three categories:
- failure to successfully ready our operations for the next century;
- disruption of our operations due to operational failures of our
significant vendors; and
- inability of our customers to adequately prepare their operations for
the next century.
The only risk largely under our control is preparing our internal
operations for the year 2000.
Operational failures among our significant vendors could jeopardize our
operations, but the seriousness of this risk depends on the nature and duration
of the failures. Despite our continuing assessment, we are unable, however, to
estimate the likelihood of significant disruptions during the year 2000 among
our basic infrastructure suppliers.
We monitored our internal systems and the work that we have done for
clients during December 1999 and through the first days of January 2000. The few
issues noted were dealt with at the time they arose. We believe there were no
significant disruptions of either client or internal operations. We continue to
monitor both our internal systems and client work.
Operational failures during the year 2000 among our current or potential
clients could result in losses of expected or potential revenue streams. If our
clients are not year 2000 compliant, they may experience material costs to
remedy problems, or they may face litigation costs. In either case, year 2000
issues could reduce or eliminate the budgets that current or potential clients
could have for purchases of our services. The year 2000 problem may also affect
software or code that we have developed or third party software products that
are incorporated into the services that we provide for our clients. Any failure
on our part to provide year 2000 compliant services to our clients could result
in a re-deployment of internal resources to remediate these problems and, as a
result, hamper our ability to work or take on additional projects. As a result,
these failures could have a material adverse effect on our business, financial
condition and results of operations.
In view of this unknown probability of occurrence and impact on operations,
we consider the need to cease normal operations for an indefinite period of time
while we attempt to respond to our significant vendors' year 2000 problems to be
our worst case scenario.
We have developed year 2000 contingency plans to address situations that
did or may continue to result if we were unable to successfully ready our
operations for the next century. We cannot, however, guarantee that our
contingency plans will shield operations from potential failures that may occur.
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BUSINESS
OVERVIEW
Organic is a leading international Internet professional services firm
focused on the customer-to-business market. We believe that the Internet has
caused a shift in the balance of power and control from businesses to customers,
and has created the first truly global marketplace. Our services help our
clients address the challenges and opportunities these changes present.
We believe the key to our success, and what differentiates us, is our
complete focus on our clients' customers. We view the ultimate customer, whether
a business partner or consumer, as the central and most influential participant
in a commercial relationship. This customer-to-business approach encompasses
both traditional business-to-consumer and business-to-business interactions on
the Internet. We believe that demand for our services will grow as companies
seek customer-focused solutions to manage these relationships. We built Organic
by anticipating customer needs, developing innovative solutions and delivering
services required to build and operate successful online businesses, including:
- iBusiness refers to our management consulting, creative design and
engineering implementation services through which we develop online
business plans and create Web sites;
- Media refers to our marketing services through which we conceive,
design, plan and manage online marketing campaigns including electronic
mail promotions and affiliate program management;
- Communications refers to our public relations services through which we
plan and manage our clients' press and publication relationships as
well as product and company launches; and
- Logistics refers to our customer service and fulfillment consulting and
transaction management services through which we evaluate and manage
product fulfillment and customer call center facilities.
Clients that use our services tend to spend proportionally more during the
second and third quarters due to their requirements that their projects be
completed in time for commercial holidays. By expanding our business into Asia,
Europe and Latin America, we believe we have established the presence to deliver
our services globally.
Founded in 1993 as a sole proprietorship and incorporated in January 1995,
we have a history as an innovator in the Internet professional services
industry. We have designed and developed a number of Web sites that were the
first in their industry category, including AT&T, Club Med and Volvo. We led the
development of the Apache Web server, a computer software program that delivers
Web pages for customers to view. Our employees also initiated the development of
network-based tools for measuring Web site performance which led to the
establishment of Accrue Software (Nasdaq: ACRU), an independent company.
We have performed work for over 250 clients and have gained significant
experience by working with both major offline and emerging Internet companies,
including Barnes & Noble, Blockbuster, Boo.com, CDNOW, Chase Manhattan Bank,
Compaq, DaimlerChrysler, Tommy Hilfiger and Washington Mutual. We have
organically grown our business, creating one of the largest independent Internet
professional services organization with nearly 700 employees in seven offices
worldwide.
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INDUSTRY BACKGROUND
CUSTOMER EMPOWERMENT
The Internet has created an environment for businesses where the
competition is only "one click away". Online customers can reach a large number
of vendors and can compare pricing and product information in order to obtain
higher levels of service and lower prices. These factors have increased the
importance of customer satisfaction and loyalty as well as the quality of the
online experience, forcing many businesses to redefine the way they build and
maintain relationships with their customers.
As the number of Internet users and the value of transactions over the
Internet grow, businesses are becoming increasingly aware of the importance of
focusing their online strategies on attracting, servicing and retaining
customers. International Data Corporation estimates that the number of Internet
users worldwide will grow from 142 million in 1998 to 502 million by 2003.
International Data Corporation also estimates that electronic commerce, which
totaled approximately $50 billion in 1998, is expected to increase to
approximately $1.3 trillion by 2003. This growth in both the number of users and
the value of electronic commerce creates significant opportunities and
challenges for businesses on the Internet.
BUSINESSES FACE SIGNIFICANT OPPORTUNITIES AND CHALLENGES ONLINE
Increased competition for customers forces both traditional and online
businesses to create or redefine themselves as the global reach of the Internet
removes traditional geographic boundaries. Companies that have never had direct
relationships with their end customers can establish them, in some cases
bypassing traditional intermediaries. In addition, companies now have the
opportunity to form lasting relationships directly with new customers. Some
companies must also integrate their online and offline business strategies. In
addressing these changes, businesses face significant opportunities and
challenges including:
CREATING STRATEGIES TO ADDRESS ONLINE OPPORTUNITIES. Developing strategies
that can be quickly evaluated and implemented is a critical factor in improving
the time-to-market for online businesses. Companies that can quickly identify
opportunities, target and service diverse groups of customers, define and
develop sustainable online business models, and evaluate their online success
may improve their performance.
CREATING A POSITIVE CUSTOMER EXPERIENCE. Companies must create online
businesses that deliver consistent, engaging and responsive customer
experiences. If done effectively, the foundation for a long-term relationship
between the business and the customer is formed.
CONNECTING WITH POTENTIAL CUSTOMERS ONLINE. Understanding how to
communicate with online customers requires businesses to develop new knowledge
and skill sets. These skill sets include identifying, targeting, attracting and
retaining customers.
MANAGING INTERNET TECHNOLOGY. Internet technology differs from traditional
information technology. Therefore, many businesses do not possess the technical
skills required to design, build and maintain a functional and reliable online
business. Internet technology requires the expertise to select and build
platforms that can handle high volumes of transactions.
EFFECTIVELY UTILIZING CUSTOMER DATA. Businesses can collect, store and
analyze significant quantities of customer information. This information if
properly analyzed can be used to improve the total customer experience and
increase loyalty.
MEETING CUSTOMER SERVICE AND FULFILLMENT EXPECTATIONS. Often overlooked,
customer service and fulfillment services can create long-lasting, positive or
negative, impressions with customers. Businesses that can distinguish themselves
by offering quality customer service and fulfillment will maximize the value of
their customer relationships.
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To capitalize on these opportunities and overcome these challenges, online
businesses need to focus on delivering a positive customer experience.
Increasingly, this requires the ability to draw upon significant experience in a
variety of disciplines, manage large multi-disciplinary teams and successfully
deliver an integrated solution worldwide.
DEMAND FOR INTERNET PROFESSIONAL SERVICES
Few businesses have the internal capabilities to address the opportunities
and challenges of the Internet. The complexity of conducting business online,
the rapidly changing technological environment, the need to improve
time-to-market and the limited supply of technically proficient internal
personnel creates significant demand for Internet professional services.
According to a 1998 Dataquest survey, 83% of Fortune 1000 companies currently
purchase, or plan to purchase, Internet professional services solutions such as
those we provide. Furthermore, International Data Corporation estimates the
worldwide market for Internet professional services will grow from $7.8 billion
in 1998 to $78.6 billion in 2003, which represents a compound annual growth rate
of more than 58%.
We believe that companies seek Internet professional services firms that
deliver complete and integrated global services with a focus on establishing,
maintaining and enhancing customer relationships with the appropriate
technology. We believe that such firms must have the capabilities to design and
build online businesses, use technology as a strategic tool, employ effective
marketing strategies and improve customer service and fulfillment to enhance the
customer experience.
THE ORGANIC SOLUTION
We have developed an integrated solution to address the evolving needs of
the customer and our clients. The key elements of the Organic solution are:
CUSTOMER-TO-BUSINESS MARKET FOCUS
We are exclusively focused on, and have built our reputation in, the large
and growing customer-to-business market. The customer-to-business market
encompasses both the traditional business-to-consumer and business-to-business
markets, but views the ultimate customer as the central and most influential
participant in a commercial relationship.
We recognize that a complete focus on the customer has become important to
our clients as the Internet allows every customer to demand positive online
experiences. We help our clients transform their businesses by building them
from the customer's perspective, enhancing their ability to create and maintain
a direct relationship with their customers and effectively incorporate customer
feedback into their business. We believe that we provide a unique value
proposition to our clients because we approach our solutions as potential
drivers of growth in overall customer satisfaction rather than as isolated
assignments. This approach requires a comprehensive and integrated skill set.
Therefore, our projects are typically of substantial size. For the nine months
ended September 30, 1999, 66% of our revenues were generated from engagements
with a value of more than $1.0 million.
COMPREHENSIVE AND INTEGRATED SERVICE OFFERING
We deliver value to our clients and their ultimate customers by addressing
all of the points of contact in the customer experience. These contact points
include advertising and communicating with customers as well as selling and
delivering goods or services to them. Since
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our inception, we have sought to provide an integrated solution by expanding our
service offering to meet our clients' evolving needs, including:
- iBusiness refers to our management consulting, creative design and
engineering implementation services through which we develop online
business plans and create Web sites;
- Media refers to our marketing services through which we conceive,
design, plan and manage online marketing campaigns including electronic
mail promotions and affiliate program management;
- Communications refers to our public relations services through which we
plan and manage our clients' press and publication relationships as
well as product and company launches; and
- Logistics refers to our customer service and fulfillment consulting and
transaction management services through which we evaluate and manage
product fulfillment and customer call center facilities.
We believe that these disciplines are highly dependent and must be
integrated to create a positive customer experience. Our approach helps us
maintain long-term relationships with our clients. This also encourages our
clients to use more than one of our service offerings and enables us to assist
our clients with the implementation of their online businesses and the
refinement of their strategies. Furthermore, the opportunity to have an ongoing
role in our clients' online businesses provides us with a recurring revenue
base.
GLOBAL PRESENCE
The Internet has removed geographic barriers. Many of our multi-national
clients demand a consistent brand image and tailored customer experience, which
often requires localized content and specific knowledge about local practices
and customs. We believe that establishing a global presence is critical to our
clients' and ultimately to our success. Therefore, we will continue to expand
internationally, as well as in the U.S. We currently have offices in three
international locations including London, Sao Paulo and Singapore. Currently we
serve 23 clients internationally, including Boo.com, Brahma Beer and
DaimlerChrysler. We believe that our global presence allows us to establish and
deepen relationships with multi-national clients and grow with them by
effectively meeting the needs of their customers on a global basis.
TECHNOLOGY AS A STRATEGIC TOOL
Technology is a critical element in our service offerings and influences
our solutions. We combine custom software with third party software and
integrate them into the existing technical infrastructure of our clients. Using
this approach, we create systems that can handle a high volume of transactions
from the Internet as well as the changing demands of customers over time. For
example, we obtain information from clients about their potential business and
customer needs, and recommend various hardware and software.
In addition to managing the implementation of Internet solutions, we also
introduce new technology to our clients.
Examples include:
- We provide rich media online, including Web audio and video;
- We develop online, transaction-enabled advertising banners, which allow
an entire electronic commerce transaction to occur through the banner;
and
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- We develop customer service and fulfillment solutions, which use
transaction management software to connect our clients' Web sites
seamlessly to fulfillment centers.
These innovations use technology as a strategic tool to deliver a unique
and positive customer experience.
COLLABORATIVE AND BALANCED TEAM APPROACH
Our client teams work together to design, build and maintain successful
online businesses. Client teams contain individuals from each discipline
required by the engagement and are managed by a multidisciplinary group of team
leaders including a client service representative, known as a client partner, an
interactive strategist, a creative leader, a technical leader and a project
manager that work in close coordination to ensure successful execution of an
engagement. Marketing and public relations and customer service and fulfillment
leaders round out each team depending on the scope of the engagement. These team
leaders work together as peers to actively manage and monitor each client
engagement through the use of milestones, planning and implementation processes
and regular feedback mechanisms.
From planning to design to problem-solving the expertise of every
discipline is involved and team members share knowledge and ideas. This ensures
that the strategy we design can be implemented and the technology we recommend
meets customer needs. Our corporate culture promotes the open discussion of
strategic, design, creative and technical challenges. We believe that this
culture allows us to solve problems efficiently and effectively, helping us to
deliver on the high expectations of our clients and their customers.
OUR GROWTH STRATEGY
Our objective is to be the leading Internet professional services firm
focused on the customer-to-business market. To achieve this objective, the key
elements of our growth strategy include:
HIRE AND RETAIN THE BEST PEOPLE
We view our culture and commitment to professional development to be an
asset in attracting and retaining our professionals. We have a group of
recruiters that identify and hire outstanding professionals, an extensive
training and development program to foster employee satisfaction and competitive
compensation and benefits programs. Given our growth we also provide our
employees with the opportunity for professional mobility and focus on developing
our managers from within the organization. We have invested in local human
resources teams for our offices that monitor employee morale and daily human
resources operations.
LEVERAGE OUR BUSINESS PROCESSES AND INFRASTRUCTURE
We have developed a business model that can accommodate our growth and
serve our expanding client base. To support this model, we continue to improve
our internal processes by which we manage our business and corporate knowledge
including our proprietary workflow methods, the reuse of common programming
elements and our use of prototypes. We will continue to invest in our
infrastructure including our management information systems, our financial
planning processes and controls and our Intranet. Our strategy for office
expansion, known as office-in-a-box, is designed to provide both a systematic
approach and the processes necessary to efficiently and effectively implement
critical business functions in a new office on a global basis. We believe that
the development and evolution of these processes and infrastructure will allow
us to continue to effectively manage our growing business operations.
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CONTINUE OUR TRACK RECORD OF INNOVATION
Our ability to innovate will continue to be an important factor
differentiating us from our competitors. We have demonstrated a track record of
innovation. We led the development of the Apache Web server and initiated the
development of network-based tools for measuring Web site performance which led
to the establishment of Accrue Software (Nasdaq: ACRU), an independent company.
We continue to identify and address the changing needs of our clients and their
customers through the creation of new service offerings. Our customer service
and fulfillment services and our practice known as Value Optimization through
Improved Customer Engagements, or VOICE, an offering that helps businesses
incorporate the needs of the customer into online business operations are two
more such examples. We will continue to develop additional service offerings as
we anticipate new customer needs.
EXPAND OUR RELATIONSHIPS WITH OUR EXISTING CLIENT BASE
We intend to use our service offerings to expand relationships with our
existing clients as their needs change. The Internet has proven to be a highly
dynamic and powerful medium and the extent of its global impact on traditional
businesses and the creation of new commercial opportunities is not fully known.
This gives us the opportunity to sell additional services to our existing
clients as their needs change or the scope of our engagement grows. By expanding
relationships with our existing clients, we can reduce the cost of acquiring
additional revenues, strengthen our partnership with our current clients and
increase recurring revenues.
EFFECTIVELY TARGET AND SOLICIT NEW CLIENTS
We believe that by targeting new clients we will improve our long-term
prospect for success. We will target new clients that understand the Internet
and that will benefit from using more than one of our service offerings,
however, they may use just one of our services. We also pursue engagements that
enhance our overall franchise in the Internet professional services industry by
allowing us to implement Internet solutions for new industries, technologies and
business models. By effectively targeting new clients, we believe that we can
build mutually beneficial long-term client relationships and gain valuable
experience.
CONTINUE OUR GLOBAL EXPANSION
To be a global leader, we believe that we need to expand into non-U.S.
markets that we anticipate will have an increasing number of Internet customers.
To meet our global growth objectives we intend to open new offices, both in the
U.S. and internationally, to expand our base of clients and to deepen our
relationships with our existing clients. In addition to organic growth, we may
make small strategic acquisitions in selected international markets to acquire
local talent and experience as appropriate.
To effectively manage and achieve our planned global growth, we anticipate
the need to open a number of new offices over the next several years. To manage
our office expansion program we have assembled and trained an experienced
corporate development team, which has successfully opened four offices since
1998. The corporate development team led the design of our office-in-a-box
program to provide a systematic set of procedures and tools to open new offices,
including workflow, project management, recruiting, training and budgeting. We
currently have U.S. offices in San Francisco, New York, Chicago and Detroit, and
international offices in London, Sao Paulo and Singapore.
ORGANIC SERVICES
We provide services focused on the total customer experience. We developed
our service offerings to meet the changing needs of our clients and their
customers and we anticipate that
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these offerings will continue to evolve and expand. Each of our services is
implemented through a team, which consists of interdisciplinary team members.
Our current service offerings include:
CONSULTING SERVICES
The value of our consulting offering lies in our ability to understand our
clients' business objectives, collaborate with our creative and engineering
teams and make recommendations that clients can use to create online businesses.
Our ability to deliver prototypes provides our clients with the opportunity to
have a time-to-market advantage.
SERVICES PROVIDED. Our consulting teams provide Internet-focused business
strategy expertise, strategic marketing, branding and research services, and
customer service and technology consulting. Our team helps clients identify
online market opportunities, define and develop sustainable online business
models, understand competitive differentiation, identify, analyze and segment
online target markets, develop compelling online brand strategies and evaluate
their online efforts.
Our research services focus on five key areas including audience profiling,
concept testing, site development and usability, brand strategy and market
positioning and messaging. Our researchers use surveys, usability testing,
one-on-one interviews and focus groups during the development of online
businesses.
IMPLEMENTATION. Our consulting teams work with our clients and other
specialists within Organic. These teams create a plan, test multiple scenarios
and refine that plan based on the rapid prototyping of potential strategies. In
addition, our teams share ideas and best practices through education and
brainstorming sessions, summits and workshops.
CREATIVE SERVICES
Our creative teams design a user experience that enhances the interaction
and communication between our clients and their customers consistent with our
clients' strategic goals and the needs of their customers.
SERVICES PROVIDED. Our creative services involve the creation or extension
of a client's online brand identity, defining the theme or unifying concept for
the business or media campaign and creating an experience and message to attract
and retain customers. At the simplest level, our services involve Web site
design, but they also include the design and implementation of the other
creative elements of a customer interface, such as online banner advertisements.
Our creative team works closely with our strategy and engineering teams to
ensure that the technical architecture and the user interface of a client's
online business work together to create a consistent, engaging and responsive
customer experience.
IMPLEMENTATION. We implement our creative services through experts in four
key areas, including:
- visual design, which focuses on the visual appearance of a Web site to
the customer;
- editorial, which focuses on making interesting text-based content;
- information architecture, which focuses on site navigation; and
- interactive art production, which focuses on transforming visual images
into an electronic format.
Our creative staff has expertise and training as animators,
cinematographers, editors and sound, multi-media and game designers. Our use of
prototypes to evaluate interface design, content and customer behavior improves
our ability to quickly test multiple scenarios and incorporate feedback into the
design and implementation of a solution. The prototyping process
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also allows us to investigate new uses for applications, technologies and
platforms including broadband and interactive television.
ENGINEERING SERVICES
Our engineering teams combine traditional software engineering and new
technologies to implement technical infrastructure recommendations and software
that can be adapted for the growth of our clients' businesses.
SERVICES PROVIDED. We combine custom software with third party software and
integrate them into the existing technical infrastructure of our clients. Our
Internet expertise includes all aspects of technical design, development and
integration related to electronic commerce; Web-based applications development;
database systems; content and transaction management tools; and Internet
features including community, personalization and customization. We also
incorporate the ability to measure site performance and track customer behavior
information allowing our clients to calculate their return on investment.
IMPLEMENTATION. Our engineering teams analyze a problem and recommend,
design and deploy a solution. Our engineering teams implement interface designs
developed in conjunction with our creative teams using interactive technologies
including dynamic hypertext markup language, or DHTML, Shockwave and Flash.
These technologies allow us to create Web sites that include interactive
content, audio and video versus traditional text-based Web sites. Throughout all
phases of development, a group of quality assurance specialists work in
conjunction with our development teams to ensure that our solutions meet our
client's needs.
MEDIA SERVICES
Our marketing services build brands, generate awareness and drive traffic
and transactions for our clients' online businesses. We believe we are a
significant buyer and manager of online media, and that our accumulated
purchasing power and analysis of customer behavior data delivers measurable
results for our clients through lower customer acquisition costs, higher
customer retention rates and increased revenues.
SERVICES PROVIDED. Our media teams use their knowledge of customer behavior
to design online marketing campaigns and also offer services including direct
response, electronic mail promotion, sampling, sponsorships, brand development
and affiliate program management. In collaboration with our engineering teams,
we have created new "beyond the banner" advertising vehicles using DHTML
technology. These advertisements allow entire transactions to be completed
within the banner, facilitating commerce by reducing the time and effort
required to complete a transaction. This innovation also delivers a consistent
branding message and effectively shares information between the Web site and the
advertisement. As appropriate, we also extend our media expertise offline either
directly or through arrangements with offline agencies.
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IMPLEMENTATION. Creating an online marketing program begins with research
and strategic planning from a team that provides overall direction consistent
with our client's strategy. The team generally includes an art director, a
writer, a technical lead, a performance analyst and a media planner and buyer.
The team collaborates to develop advertising designs, promotional or sponsorship
ideas, media recommendations and test scenarios and metrics for each campaign.
After a marketing program launches, our team analyzes the success of the
campaign by reviewing response rates, traffic and transaction volumes and then
uses this feedback to refine the campaign or future campaigns.
COMMUNICATIONS SERVICES
Our public relations services assist our clients with the management of
their ongoing press and publication relationships.
SERVICES PROVIDED. Our communications services include:
- strategic message and identity development, which helps clients
position themselves in their markets and differentiate themselves from
their competitors in the eyes of current and potential customers;
- product and company launch or relaunch services, which aim to create
awareness of and position a product or company with customers; and
- broadcast, online and print media and analyst relations services, which
help clients enhance their brand recognition.
IMPLEMENTATION. We work with our clients to assess their public
communication objectives, formulate short-term and long-term public relations
plans and utilize our industry knowledge and expertise to implement these plans.
CUSTOMER SERVICE AND FULFILLMENT SERVICES
Our customer service and fulfillment offering includes both consulting and
transaction management services. We deliver a complete electronic commerce
experience to our clients' customers. We provide advice on best practices based
on facility visits and audits of 20 electronic commerce fulfillment and customer
service providers as well as our proprietary database which contains the
logistical features of 500 leading Web sites and profiles of current relevant
Web-based applications, including live chat, electronic mail and collaborative
filtering.
SERVICES PROVIDED. Our consulting services include a needs and capabilities
assessment, consulting services, technology assessment services, third party
vendor selection and negotiation, development of performance monitoring
procedures and the integration of customer service and fulfillment functions
into our clients' Web operations.
Our transaction management services provide a complete outsourced solution,
including customer service, fulfillment and transportation management services.
Our fulfillment specialists monitor the performance of third party fulfillment
houses, identify and implement service enhancements and can manage all of the
vendors used by our clients. In addition to fulfillment services we also help
our clients improve their customer service experience by designing, and managing
highly automated third party call centers. Our staff incorporates telephone,
electronic mail and live chat services that extend beyond traditional order
taking and tracking functions in ways that help our clients improve and extend
their relationship with their customers and potentially increase satisfaction
and loyalty.
IMPLEMENTATION. Our customer service and fulfillment professionals are
experts in electronic commerce distribution and focus on integrating order
management, transportation management, customer fulfillment, distribution,
payment processing, call center and data management activities.
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INNOVATIVE SERVICE OFFERINGS
Driven by the needs of our clients and their customers we continue to
develop innovative service offerings. We are developing a service offering
called Value Optimization through Improved Customer Engagements, or VOICE. We
believe that if a company can effectively collect, analyze and use customer
information it will improve its business. We developed our VOICE service to
gather information from customers, understand customer behavior and generate
useful recommendations for our clients. We believe that VOICE's innovation is
based on its use of both behavioral psychology and statistical modeling. We
continue to develop innovative service offerings as we anticipate new customer
needs.
CLIENTS
We believe that our continued success depends on maintaining a broad client
base of both large, established companies and emerging Internet companies. For
the nine months ended September 30, 1999, approximately 75% of our revenues were
derived from established, offline companies either extending their businesses or
creating a new presence or identity online. Since our founding in 1993, we have
performed work for over 250 clients. Consistent with our strategy, we have
derived approximately one-third of our revenues for the nine months ended
September 30, 1999 from clients who have used more than one of our service
offerings.
The following is a partial list of our clients that generated over $100,000
in revenues for us during the nine months ended September 30, 1999, which we
believe is representative of our overall client base:
ESTABLISHED COMPANIES
Avis
Barnes & Noble
Blockbuster
Brahma Beer
British Telecom
Chase Manhattan Bank
Compaq
DaimlerChrysler
Gap
Garnett Hill
Global Sport Interactive
Home Depot
Iomega
Knowledge Universe
Lucent
Nickelodeon
Payless Shoe Source
Tommy Hilfiger
United Missouri Bank
Washington Mutual
EMERGING INTERNET COMPANIES
Boo.com
CDNOW
Deja.com
E/Town
FTD.com
Guild.com
KeeBoo
JPKids
Lucy.com
Party Host.com
Textbooks.com
We currently derive a significant portion of our revenues from a limited
number of clients. For the nine months ended September 30, 1999, our five
largest clients accounted for approximately 41% of our revenues. During this
period DaimlerChrysler and Blockbuster accounted for approximately 12% and 10%
of our total revenues, respectively.
In exchange for our services we have from time to time made investments in
some of our Internet clients. Our venture catalyst investment strategy has been
focused on select early stage clients with attractive business models seeking
alternative forms of payment and/or who are interested in more closely aligning
our goals through equity-based compensation. In general, these equity
investments are structured so our clients pay for all of the costs related to
their engagement in cash and use equity incentives to compensate us for a
portion of our profit margin. As of September 30, 1999, we made equity
investments in the following clients: Stan Lee Media, HomeGrocer.com, Worldly
Information Networks and Next Planet Over.
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CLIENT CASE STUDIES
Each of the case studies that follow demonstrate our ability to deliver
global, integrated solutions with complex technologies. Tommy Hilfiger,
DaimlerChrysler and Compaq accounted for approximately 4%, 12% and 6% of our
total revenues for the nine months ended September 30, 1999.
TOMMY.COM
The work that we are performing for Tommy.com, Inc., a subsidiary of Tommy
Hilfiger Corporation, illustrates the value that our service offerings can
deliver to our customers. Our services include design, content creation,
branding, site construction and establishing a framework for broadband
technologies. We are also managing the call centers that customers who visit
Tommy.com are directed to contact. We believe that all of these services are
critical to delivering a customer experience that fulfills the promise regarding
brand and product that are presented on the Tommy.com Web site.
CLIENT CHALLENGE. In launching its online efforts, Tommy.com faced the
challenge of building an online presence that would further define and extend
its brand through a deeper interaction with customers. We were asked to help
Tommy.com convey the meaning and extend the consistent message of the existing
brand onto the Internet.
ORGANIC SOLUTION. We are delivering a solution that uses a number of our
service offerings in order to ensure the success of Tommy.com's online
initiative. We are building Tommy.com's new online presence on a solid
technological foundation consisting of custom developed software that is
integrated with Tommy.com's existing systems creating a unified platform. Using
this architecture, we are creating a rich media interface to communicate the
Tommy Hilfiger brand to customers through audio, video, text and other visuals.
We are also assisting Tommy.com to create original audio, video and editorial
online content to augment existing content and to build an interactive forum.
The platform we are building is able to handle a high volume of transactions and
allows for broadband delivery in the future.
DAIMLERCHRYSLER
The work that we are performing for DaimlerChrysler demonstrates our
ability to create a successful strategic relationship and to deliver services on
a global basis to large international clients.
CLIENT CHALLENGE. In creating its online initiative, DaimlerChrysler needed
to broaden its mission to include interactive strategies and to address its
growing technical needs in the global marketplace. It had a variety of Web sites
in different countries that were controlled locally. To implement its global
strategy, DaimlerChrysler needed to create a unifying image for all of its
Internet properties. This required a global team approach to interact and build
consensus with both local and corporate constituencies within DaimlerChrysler.
ORGANIC SOLUTION. We have begun to deliver a solution that is designed to
create a unified Web strategy that presents DaimlerChrysler brands consistently
worldwide in a way that appeals to local customers. We focused our initial
efforts on Europe. A team comprised of personnel from our London, New York and
Detroit offices collaborated to:
- conduct audits of the Web sites in each local market to develop a
cohesive long-term European strategy;
- develop Web sites to incorporate both the corporate and local market
customer messages; and
- leverage technology and information across the organization.
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We developed the content and copy for branded Web sites and implemented
multi-lingual functionality for global audiences, a process commonly referred to
as localization.
To transition from locally to centrally controlled Web sites, we developed
a phased approach to conform all Web sites with our recommended global
architecture, while allowing local design input. The first phase included
transforming the content of each local Web site from 10 pages with limited
functionality and product information to 300 pages using a template with
multiple car information and expanded functionality that could be easily
replicated to add other countries. We leveraged technologies created in the
U.S., including electronic mail fulfillment and user data capture for use across
Europe. In the second phase, we plan to redesign the application infrastructure
to create a dynamic, personalized experience and extensively use Shockwave and
Flash technology to enable rich media experiences for new vehicle introductions.
Recently the scope of our efforts for DaimlerChrysler has expanded to include
the Asia-Pacific region, South America and the Middle East.
COMPAQ
The work we performed for Compaq Computer Corporation illustrates our
skills with cutting-edge Internet technology. In working with Compaq, we
developed a dynamic, highly technical Web site, to connect Compaq, a Fortune 500
company, with consumers in the online world.
CLIENT CHALLENGE. Compaq wanted to build a Web site to showcase the Sting
World Tour and enhance Compaq's position as an Internet savvy company. Compaq
wanted to create a Web site that would have a life span of 18 months, the length
of the tour, and would be able to take advantage of broadband technologies as
they become more available.
ORGANIC SOLUTION. Our solution was to create a dynamic Web site featuring
tour information, information about Sting and a behind the scenes section to
showcase the Compaq technology supporting the Web site. We performed the systems
integration and database design using Compaq ProLiant servers and Microsoft
software technology. Repeat visits to the Web site are enhanced through the use
of the community tools and the Songline Engine -- a real time tool to create and
compose original audio, video and text based on rich media available throughout
the Web site. It encourages word of mouth marketing by giving users the ability
to invite others to view a Songline creation on the site. In addition to the
Songline Engine, we developed a rich media interface using Flash and other
technologies and also created a registration engine to capture potential
customer information, allowing for targeted marketing efforts.
Our solution makes use of some of the latest Internet technologies. We
employed Flash extensively to enable the user to experience a true next
generation Web site sponsored by Compaq. We also designed the Web site's
architecture to allow for a long life span and eventual integration of materials
for broadband delivery. In addition, we developed custom publishing and content
management tools to allow geographically diverse teams to manage the Web site
and update rich media portions of the system through a Web-based interface.
These tools reduce the overall operating costs and resources necessary to
maintain the Web site.
SALES AND MARKETING
Our local business development professionals and client partners market and
sell our services. Opportunities are prioritized by client engagement type,
vertical industry and the opportunity to innovate. Our marketing efforts are
focused on assignments which may use more than one service offering and/or
include large, multi-national clients. Extended engagements, defined as
multi-year and recurring revenue opportunities with the potential to evolve into
relationships that use all of our service offerings are also prioritized. We
also pursue basic engagements, which tend to be smaller in size or shorter in
duration, when new vertical markets or innovation opportunities exist.
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We target vertical industries based on the size of the market opportunity
and the influence of the Internet. Current industry verticals include apparel,
automotive, consumer electronics, education, entertainment and content,
financial services, healthcare, travel and home categories.
In addition to new clients, a key component of our growth strategy is the
ability to penetrate existing client accounts through the cross selling of
additional services. We currently manage opportunities with existing clients
through our account management process. In this process, a client partner is
responsible for understanding the client's needs and how other Organic services
could be beneficial. All members of the client team meet on a monthly basis to
review business development plans with respect to each client and evaluate our
progress on earlier initiatives.
Our business development group is complemented by a variety of marketing
programs designed to generate demand and strengthen our brand. We have built our
reputation through client references, industry conferences, trade publications
and our Web site. To promote our brand, we will continue to pursue a marketing
strategy through both Internet and traditional media-based channels to increase
our visibility with potential clients and prospective employees. In addition to
these formal marketing efforts we have historically established a number of new
client relationships based on referrals from previous engagements.
MAINTAINING THE ORGANIC CULTURE
OUR CULTURE AND EMPLOYEES
We view the Organic culture as one of our most strategic assets. We have
built a creative and adaptive environment that inspires individuals to excel.
The influence of our culture extends to the design of our office space, which
has an open plan with few offices or cubicles to promote a barrier-free
environment. Our organization is centered on people, and espouses the core
values of collaboration, innovation and learning. We are committed to recruiting
outstanding professionals, providing ongoing, role specific and general
management training and development and offering competitive compensation and
benefits packages. Our learning transfer occurs both through structured,
moderated sessions and informal employee gatherings. Examples of structured
sessions include our specialized summits, new hire orientation seminars and
local all hands meetings. Unstructured employee gatherings include Wednesday
bagel mornings and Friday afternoon socials during which employees from all
disciplines and functions within an Organic office can come together in a
supportive setting to share and generate ideas, or just to relax and have fun.
As of September 30, 1999, we had 681 full-time employees. Of these,
approximately 30 were strategy consultants, 41 were media and communications
specialists, 117 were creative specialists and 152 were engineers and technical
professionals. Experts in other functional groups included 11 in business
development, 58 in client services and 79 in project management. None of our
employees is represented by a labor union. We have not experienced any work
stoppages and believe our relationship with our employees is good.
RECRUITING
Given our historical and anticipated growth, identifying and hiring
outstanding professionals that fit within the Organic culture is one of the most
important functions within Organic. Our recruiting department consists of 15
professionals domestically and internationally, and includes 10 full-time
recruiters. The recruiting department is organized along geographic lines so
that we can develop an in-depth knowledge of the local market and scale in
accordance with our expansion strategy. As we open and expand new offices, they
will usually be supported by the recruiting department of an existing office
until the new office reaches sufficient size, at which point a dedicated
recruiting professional is assigned.
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We recruit through a broad array of channels, including:
- general and job specific advertising;
- internal hires;
- job fairs;
- open houses; and
- trade shows.
We are currently implementing a number of key recruiting initiatives
including:
- an enterprise-wide, Web-based hiring automation system with a
PeopleSoft interface;
- an internal sourcing team focused on proactive identification of key
talent; and
- a college relations program to target highly qualified students and
promote our image at colleges and universities around the world.
Our new recruiting system is designed to enhance our ability to maintain
detailed performance metrics to monitor and control open positions, time to fill
open positions, cost per hire, source of hire and quality of hire.
TRAINING AND DEVELOPMENT
We have an extensive training and development program, which is designed to
increase employee productivity, complement our recruiting and retention efforts
by enhancing employee job satisfaction and promote knowledge sharing. Our
training and development initiatives include new hire orientation, ongoing
management and professional skills training and annual summits for a number of
functions including:
- creative;
- project management;
- engineering;
- media;
- business development;
- strategy; and
- client services personnel.
Training and development also complements our office expansion strategy by
promoting consistency across all of our offices, service lines and departments.
As we continue to open new offices and expand existing offices, we can deploy
existing employees who have mastered the skills required and understand the
Organic culture.
RESEARCH AND DEVELOPMENT
Our research and development, or R&D team, is focused on assisting local
teams with solving problems. Our R&D team also maintains relationships with
companies that provide knowledge and recommendations on software, hardware and
training that will speed team problem solving.
We focus on three service lines: engineering, creative and strategy. Our
engineering R&D efforts involve investigating new technologies, products and
standards. We also develop platforms that allow for rapid solution delivery.
While developing core skill sets, our engineering team has taken a
technology-agnostic stance, allowing our clients to benefit from objective
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recommendations. Our engineering R&D supports our teams with the knowledge to
quickly select the best technology solution, and if necessary, provide the
support to implement it.
Our creative R&D focuses on both extending and enabling our engineering
team efforts. Three areas of particular emphasis are exploratory prototypes,
re-use strategies for information design and strategic creative partnerships.
Our creative R&D team also collaborates with local creative teams, as well as
our strategic consulting and VOICE teams to increase our understanding of the
patterns and interfaces that allow our solutions to connect with their intended
audience. Behavioral knowledge and communication expertise are intrinsic to
success on any interactive platform; therefore, creative research, analysis and
invention are all methodically gathered and shared with our teams.
Our R&D teams also work closely with our strategy teams throughout the
organization to create new and enhanced business models, revenue streams and
cost savings opportunities for our clients. The end result is faster, more
robust, more efficient solutions for developing our client's businesses.
KNOWLEDGE MANAGEMENT
We capture and share knowledge through our Intranet, training and
development classes, discipline summits, off-site management meetings and our
office-in-a-box tools and processes. We re-use technology when appropriate
through the development of standard software platforms, centrally-managed
software licensing, software re-use and strategic technology partnerships. We
also share best practice creative design solutions across our teams for use with
our clients.
INTRANET
The mission of our Intranet is to create a sense of community, enhance
communication and simplify processes. Our workflow processes are accessible
through the Intranet, and teams are expected to follow them as standard
procedure on client engagements. We encourage constant improvement in these
processes, which are discussed at our various discipline summits. Although every
solution created for a client is unique, many of the underlying functional
elements can either be re-used for a period of time or share common building
blocks that serve as a base for other engagements.
LEARNING AND SUMMITS
In recognition of the need to create and maintain relationships with our
employees, we have a number of initiatives that focus on participatory learning,
culture sharing and knowledge transfer. We provide general training and
development classes through our human resources department to both new hires and
current employees. In addition, each of the discipline heads is responsible for
the development and communication of best practices and tools throughout the
organization. We share ideas at various summits that are held each year within
the strategic consulting, creative, project management, engineering, media and
business development disciplines. Our senior executives also participate twice a
year in off-site management sessions.
OFFICE-IN-A-BOX
The corporate development team has created our office-in-a-box program to
systematize the process of opening new offices. The program provides a plan for
new office initiation, including process documents, monitoring and control tools
and training plans. The office-in-a-box information exists in centralized
hardcopy form as well as electronically on our Intranet. It includes manuals on
departmental descriptions, organization charts, job descriptions, roles and
responsibilities, contact lists, workflows, policies and procedures and
templates, formats and example documents.
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COMPETITION
The market for Internet professional services is relatively new, intensely
competitive, quickly evolving and subject to rapid technological change.
Further, our industry is experiencing rapid consolidation. Our principal current
national and international competitors include the following:
- other providers of Internet professional services, including
AGENCY.COM, iXL, Proxicom, Razorfish, Scient, USWeb/CKS and Viant;
- large information technology consulting services providers, including
Andersen Consulting, Cambridge Technology Partners, Cap Gemini, CSC,
EDS, IBM and Sapient;
- strategic consulting firms, including Bain & Company, Booz Allen &
Hamilton and Boston Consulting Group; and
- internal information technology, marketing and other departments of
current and potential clients.
We anticipate facing additional competition from new entrants into our
markets due to low barriers to entry.
We believe that the principal factors upon which we compete are the ability
to offer a comprehensive suite of services, the ability to handle large, complex
projects, the ability to attract and retain the best professionals through our
culture, the blending of strategy, creative and engineering expertise, brand
recognition and reputation, client service and price. Although we believe that
few of our competitors currently offer as comprehensive a suite of services as
we offer, many competitors have announced an intention to expand their service
offerings. Many of our competitors have longer operating histories, larger
client bases, longer relationships with clients, greater brand or name
recognition and significantly greater financial, technical, marketing and public
relations resources than we have. These competitors, as well as new competitors,
could develop or offer services that are comparable to or superior to ours, or
are less expensive. The entry of new competitors or changes in the service
offerings of existing competitors would harm our business, financial condition
and results of operations.
INTELLECTUAL PROPERTY
We rely on a combination of nondisclosure and other contractual
arrangements with our employees and third parties, copyright, trademark, service
mark and trade secret laws to protect our intellectual property. We are pursuing
the protection of our trademarks in the United States and internationally,
including filing for trademark registration on foreign registries and enforcing
our rights against potential infringement. We have obtained trademark
registrations in the U.S. for the "Organic" and "Organic Online" marks and have
applied for registration of the "Organic Media" mark and some of our other
trademarks and service marks. We are pursuing expanded international trademark
and service mark protection. In addition, although we do not currently pursue
patent protection for our intellectual property, we may do so in the future, as
appropriate.
If we fail to adequately protect our intellectual property rights and
proprietary information or if we become involved in litigation relating to our
intellectual property rights and proprietary technology, our business could be
harmed. Any actions we take may not be adequate to protect our proprietary
rights and other companies may develop technologies that are similar or superior
to our proprietary technology. In addition, the legal status of intellectual
property on the Internet is currently subject to various uncertainties.
Although we believe that our products and services do not infringe on the
intellectual property rights of others and that we have all rights needed to use
the intellectual property employed in our business, it is possible that we could
in the future become subject to claims alleging infringement of third party
intellectual property rights. Any claims could subject us to costly litigation,
and may require us to pay damages and develop non-infringing intellectual
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property or acquire licenses to the intellectual property that is the subject of
the alleged infringement.
FACILITIES
Our headquarters are located in a leased facility in San Francisco,
California consisting of approximately 52,000 square feet of office space. The
primary lease for this office space expires in September 2002. We also have
entered into a lease for a new headquarters location in San Francisco consisting
of approximately 210,000 square feet of office space, commencing September 2000
and expiring in September 2010. We also lease office space in Chicago, Detroit,
New York, London, Sao Paulo and Singapore. We are currently exploring real
estate options consistent with our future growth plans. We do not anticipate
acquiring property or buildings in the foreseeable future.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation incidental to the
conduct of our business. We are not currently party to any material legal
proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding our executive officers
and directors as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jonathan Nelson.................. 32 Chief Executive Officer and Chairman of the Board
Michael Hudes.................... 38 President and Director
Susan L. Field................... 40 Executive Vice President and Chief Financial Officer
Larry K. Geisel.................. 58 Executive Vice President and Chief Operating Officer
Arthur I. Williams............... 32 Executive Vice President, Global Operations
Daniel J. Lynch.................. 34 President, Logistics
Margaret Maxwell Zagel........... 50 Vice President, Chief Legal and Administrative
Officer and Secretary
Matthew Bernardini............... 26 Vice President, Chief Technology Officer
Marita C. Scarfi................. 33 Vice President, Finance
Janis M. Nakano Spivack.......... 36 Vice President, Chief Creative Officer
Lynda Ward Pierce................ 36 Vice President, Human Resources
Gary F. Hromadko................. 47 Director
Gerald Bruce Redditt............. 48 Director
</TABLE>
Biographies of our executive officers and directors are as follows:
JONATHAN NELSON co-founded our company in 1993 and has served as our Chief
Executive Officer and Chairman of the Board since January 1995. From February
1996 to May 1996, Mr. Nelson served as President and Chief Executive Officer of
Accrue Software, a developer of network based tools for measuring Web site
performance. Mr. Nelson also served as Chairman of the Board of Accrue from
February 1996 to November 1999.
MICHAEL HUDES has served as our President and as a member of our board of
directors since October 1995 and until August 1999 he also served as our Chief
Operating Officer. From October 1993 to September 1995, Mr. Hudes was the
Director of Marketing for daVinci Time & Space, an interactive media company.
SUSAN L. FIELD has served as our Executive Vice President and Chief
Financial Officer since June 1999. From June 1997 to April 1999, Ms. Field was
employed at Sears, Roebuck and Co., a multi-line retailer providing merchandise
and services, most recently as the Senior Vice President -- Strategy, Planning
and Corporate Development. From August 1985 to June 1997, Ms. Field served in
various capacities at Merrill Lynch & Co., a global investment bank, most
recently as a Managing Director.
LARRY K. GEISEL has served as our Executive Vice President and Chief
Operating Officer since September 1999. From April 1998 to September 1999, Mr.
Geisel served as the Executive Vice President, Chief Technical Officer of
Knowledge Universe, Inc., a holding company focused on educational products and
services. From February 1996 to April 1998, Mr. Geisel was the Senior Vice
President, Chief Information Officer of Netscape Communications, Inc., a
provider of client and server software, development tools and commercial
applications. From February 1994 to February 1996, Mr. Geisel was an Executive
Vice President of Xerox Corporation, a provider of various document services.
ARTHUR I. WILLIAMS has served as our Executive Vice President, Global
Operations since December 1999. From June 1998 to December 1999, Mr. Williams
was the Executive Vice
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<PAGE> 56
President North America Operations of AGENCY.COM, Ltd., an online marketing and
advertising agency, specializing in the development of Web sites. From June 1994
to June 1998, Mr. Williams was the Chief Executive Officer and President of
Spiral Media, Inc., a designer of digital media and developer of original
content.
DANIEL J. LYNCH has served as President, Logistics since May 1999. From
February 1993 to March 1999, Mr. Lynch served as the Senior Vice President,
Marketing and Sales of Technicolor Entertainment, a film processing and
distribution company.
MARGARET MAXWELL ZAGEL has served as our Vice President, Chief Legal and
Administrative Officer and Secretary since August 1999. From March 1998 to March
1999, Ms. Zagel served as the Vice President, General Counsel and Secretary of
Tellabs Operations, Inc., a manufacturer of telecommunications equipment
solutions. From September 1984 to January 1998, Ms. Zagel served as General
Counsel of Grant Thornton LLP, an accounting and management consulting firm.
MATTHEW BERNARDINI has served as our Vice President, Chief Technology
Officer since July 1999, and prior to that, from October 1997 to July 1999, he
served as our Director of Engineering. From January 1996 to August 1997, Mr.
Bernardini was Vice President, Technology of Meta4Digital Design, an interactive
marketing company. From May 1995 to January 1996, Mr. Bernardini was an
independent consultant, working as a programmer and developer.
MARITA C. SCARFI has served as our Vice President, Finance since January
1998. She served as our Director of Finance from January 1997 to January 1998
and as our Controller from July 1996 to July 1997. From August 1988 to July
1996, Ms. Scarfi served as a Manager of Business Assurance for Coopers &
Lybrand, an accounting firm.
JANIS M. NAKANO SPIVACK has served as our Vice President, Chief Creative
Officer since November 1996. From October 1993 to October 1996, Ms. Spivack was
a partner of leftBrain-rightBrain, a provider of consulting, technical and
design production expertise to both Web site builders and individual companies.
From October 1993 to January 1997, Ms. Spivack was also the President of
GoFISH!, a private interactive, online directory of production companies.
LYNDA WARD PIERCE has served as our Vice President, Human Resources since
July 1999. From August 1998 to July 1999, Ms. Pierce served as the Director of
Human Resources of The Metzler Group, Inc., a provider of consulting services to
the utilities industry. From April 1997 to August 1998, Ms. Pierce served as the
Director of Human Resources for LECG, Inc., a provider of expert analysis,
litigation support and management consulting. From October 1996 to March 1997,
Ms. Pierce served as the Director of Human Resources for Party America, Inc., a
party merchandise retailer. From April 1991 to October 1996, Ms. Pierce served
as the Manager of Human Resources of Mervyn's, a department store.
GARY F. HROMADKO has served as one of our directors since January 1997 and
has served as a director of Organic United Kingdom, one of our wholly-owned
subsidiaries, since February 1999. Since 1993, Mr. Hromadko has been a private
venture investor in early stage technology companies.
GERALD BRUCE REDDITT has served as a member of our board of directors since
October 1998. Since May 1998, Mr. Redditt has served as an Executive Vice
President of Omnicom Group Inc., a strategic and financial holding company. From
July 1995 to May 1998, Mr. Redditt served as an Executive Vice President of Sony
Pictures Entertainment, a creator and distributor of entertainment products,
services and technology. From March 1991 to July 1995, Mr. Redditt served as a
Corporate Vice President of GTE Corporation, a telecommunications company. Since
January 1999, Mr. Redditt has served as a director of AGENCY.COM, Ltd.
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BOARD COMPOSITION
Our bylaws authorize the number of directors to be not less than five nor
more than nine. The number of directors on the Board is currently fixed at six.
Our bylaws provide that following the completion of this offering our board of
directors will be divided into three classes of directors designated Class I,
Class II and Class III. Each class will have a three-year term. Initially, two
directors will serve in Class I, two directors will serve in Class II and two
directors will serve in Class III. The initial directors in each class will hold
office for terms of one year, two years or three years. Thereafter each class
will serve a three-year term. Executive officers are elected by and serve at the
direction of the board of directors.
BOARD COMMITTEES
The board of directors has established a compensation committee and an
audit committee. The compensation committee, consisting of Mr. Hromadko and Mr.
Redditt, reviews and approves the salaries, bonuses and other compensation
payable to our executive officers and administers and makes recommendations
concerning our employee benefit plans.
The audit committee, currently consisting of Mr. Hromadko and Mr. Redditt,
recommends the selection of independent public accountants to the board of
directors, reviews the scope and results of the audit and other services
provided by our independent accounts, and reviews our accounting practices and
systems of internal accounting controls.
DIRECTOR COMPENSATION
Our directors currently are not compensated for their services. However, in
the future we intend to compensate our non-employee directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of our compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of our board of directors or compensation
committee.
There are no family relationships among any of our directors or executive
officers other than between Michael Hudes and Daniel Lynch, who are
brothers-in-law.
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<PAGE> 58
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table contains information in summary form concerning the
compensation paid to our chief executive officer and each of our four most
highly compensated executive officers whose total salary, bonus and other
compensation exceeded $100,000 during the fiscal year ended December 31, 1999.
In accordance with the rules of the SEC, the compensation described in this
table does not include perquisites and other personal benefits received by the
executive officers named in the table below which do not exceed the lesser of
$50,000 or 10% of the total salary and bonus reported for these officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER 1999
1999 ANNUAL COMPENSATION
COMPENSATION --------------
------------------- TOTAL HEALTH
NAME AND PRINCIPAL POSITION SALARY BONUS(1) INSURANCE
- --------------------------- -------- -------- --------------
<S> <C> <C> <C>
Jonathan Nelson
Chief Executive Officer and Chairman of the Board..... $180,000 -- $3,072
Michael Hudes
President and Director.............................. 212,755 -- 5,792
Janis Nakano Spivack
Vice President, Chief Creative Officer.............. 171,250 -- --
Susan Field
Executive Vice President, Chief Financial Officer... 130,773 50,000 --
Matthew Bernardini
Vice President, Chief Technology Officer............ 166,967 5,000 --
</TABLE>
- -------------------------
(1) Year end bonuses for 1999 have not yet been determined. Bonuses for Ms.
Field and Mr. Bernardini were interim bonuses.
OPTION GRANTS DURING FISCAL 1999
The following table sets forth information concerning grants of stock
options to each of the executive officers named in the table above during the
fiscal year ended December 31, 1999. All options granted to these executive
officers in the last fiscal year were granted under our 1997 stock option plan.
Each option vests and becomes exercisable over a period of four years. The
percentage of total options set forth below is based on an aggregate of
15,294,525 options granted to employees in fiscal 1999. All options were granted
at a fair market value as determined by the board of directors on the date of
grant. The board of directors determined the fair market value based on our
financial results and prospects and the share price in arms-length transactions.
The exercise price may in some cases be paid by delivery of other shares or by
offset of the shares subject to options. The deemed value for the date of grant
has been adjusted solely for financial accounting purposes. Potential realizable
values are net of exercise price, but before taxes associated with exercise.
Amounts represent hypothetical gains that could be achieved for the options if
exercised at the end of the option term. The assumed 5% and 10% rates of stock
price appreciation are based on the exercise price of the options and are
provided
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<PAGE> 59
in accordance with the rules of the SEC and do not represent our estimate or
projection of the future common stock price.
OPTIONS GRANTED IN FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OPTION TERM
OPTIONS FISCAL YEAR PRICE PER EXPIRATION ----------------------
NAME GRANTED 1999 SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Nelson........... -- -- -- -- -- --
Michael Hudes............. -- -- -- -- -- --
Janis Nakano Spivack...... 67,500 0.4% $2.6667 11/22/09 $113,202 $ 286,877
Susan Field............... 1,755,000 11.5% $0.8333 6/23/09 $919,722 $2,330,755
Matthew Bernardini........ 382,500 2.5% $1.3333 7/13/09 $320,736 $ 812,809
</TABLE>
OPTION EXERCISES
The following table sets forth information concerning exercisable and
unexercisable stock options held by each of the executive officers named in the
summary compensation table at December 31, 1999. The value of unexercised
in-the-money options represents the positive spread between the exercise price
of the stock options and the deemed fair market value of our common stock as of
December 31, 1999, which our board of directors determined was $2.6667 per
share. All options were granted under our 1997 stock option plan. These options
vest over four years and otherwise generally conform to the terms of our 1997
stock option plan.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR ENDED DECEMBER 31, 1999
AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan Nelson...... -- -- -- -- -- --
Michael Hudes........ -- 553,500 922,500 $1,421,880 $2,369,800
Janis Nakano
Spivack............ 183,282 $409,737 15,937 250,781 $ 40,940 $ 470,829
Susan Field.......... -- -- -- 1,755,000 -- $3,217,500
Matthew Bernardini... -- -- 60,938 456,562 $ 152,994 $ 690,706
</TABLE>
EMPLOYMENT AGREEMENTS
JONATHAN NELSON
On January 29, 1997, Jonathan Nelson entered into an employment agreement
with us to serve as our Chief Executive Officer. Mr. Nelson currently serves as
our Chief Executive Officer and as a member of our board of directors. As
amended on February 24, 1997, the employment agreement provides Mr. Nelson with
an annual base salary of $90,000. In addition, Mr. Nelson is eligible to receive
discretionary bonus compensation in an amount determined by the board of
directors.
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<PAGE> 60
Under the terms of his agreement, Mr. Nelson's employment shall continue
until either party gives the other party 90 days advance written notice of the
expiration of the employment agreement. Should we terminate Mr. Nelson's
employment for cause, we must pay Mr. Nelson all compensation due on the date of
termination. Cause is defined as:
- repeated failure or refusal by Mr. Nelson to materially perform his
duties and responsibilities, or his failure to devote substantially all
of his business time and attention exclusively to our business and
affairs;
- willful misappropriation of our funds or property;
- use of alcohol or illegal drugs, which interferes with his performance
and which continues after written warning;
- conviction in a court of law of, or entering a plea of guilty or no
contest to, any felony or any crime involving moral turpitude,
dishonesty or theft;
- any commission in bad faith of any act which injures or could
reasonably injure our reputation, business or business relationships;
or
- any material breach of his employment agreement, which is not cured
within 30 days of our written notice.
Should we terminate Mr. Nelson's employment without cause and without 90
days advance written notice, Mr. Nelson is entitled to receive from us, so long
as Mr. Nelson is not in breach of the non-competition and protection of
confidential information provisions of his employment agreement,
- his applicable salary compensation less any income earned from
subsequent employment, limited to 90 days once written notice is given,
and
- any unpaid reimbursable expenses outstanding, and any unused accrued
vacation, as of the date of termination.
Under the terms of his employment agreement, Mr. Nelson agrees that while
he is employed by us and for a period of two years after the date of his
termination, he shall not, except on our behalf:
- solicit any client business;
- solicit any of our employees or exclusive consultants; or
- render to or for any client any services that we provide.
Additionally, Mr. Nelson also agrees that he will not at any time
- disclose any confidential information or trade secret of ours or our
clients; or
- use any confidential information or trade secret for his own benefit,
or for the benefit of third parties.
MICHAEL HUDES
On January 29, 1997, Michael Hudes entered into an employment agreement
with us to serve as our President. Mr. Hudes currently serves as our President
and a member of our board of directors. As amended on February 24, 1997, the
employment agreement provides Mr. Hudes with an annual base salary of $140,000.
In addition, Mr. Hudes is eligible to receive discretionary bonus compensation
in an amount determined by the board of directors.
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Under the terms of his agreement, Mr. Hudes' employment shall continue
until either party gives the other party 90 days advance written notice of the
expiration of the employment agreement. Should we terminate Mr. Hudes'
employment for cause, we must pay Mr. Hudes all compensation due on the date of
termination. Cause is defined as:
- repeated failure or refusal by Mr. Hudes to materially perform his
duties and responsibilities, or his failure to devote substantially all
of his business time and attention exclusively to our business and
affairs;
- willful misappropriation of our funds or property;
- use of alcohol or illegal drugs, which interferes with his performance
and which continues after written warning;
- conviction in a court of law of, or entering a plea of guilty or no
contest to, any felony or any crime involving moral turpitude,
dishonesty or theft;
- any commission in bad faith of any act which injures or could
reasonably injure our reputation, business or business relationships;
or
- any material breach of his employment agreement, which is not cured
within 30 days of our written notice.
Should we terminate Mr. Hudes' employment without cause and without 90 days
advance written notice, Mr. Hudes is entitled to receive from us, so long as Mr.
Hudes is not in breach of the non-competition and protection of confidential
information provisions of his employment agreement,
- his applicable salary compensation less any income earned from
subsequent employment, limited to 90 days once written notice is given,
and
- any unpaid reimbursable expenses outstanding, and any unused accrued
vacation, as of the date of termination.
Under the terms of his employment agreement, Mr. Hudes agrees that while he
is employed by us and for a period of two years after the date of his
termination, he shall not, except on our behalf:
- solicit any client business;
- solicit any of our employees or exclusive consultants; or
- render to or for any client any services that we provide.
Additionally, Mr. Hudes also agrees that he will not at any time
- disclose any confidential information or trade secret of ours or our
clients; or
- use any confidential information or trade secret for his own benefit,
or for the benefit of third parties.
SUSAN L. FIELD
On June 22, 1999, Susan L. Field entered into an employment agreement with
us to serve as our Executive Vice President and Chief Financial Officer. The
employment agreement provides Ms. Field with an annual base salary of $250,000
and a bonus of up to 40% of her base salary upon achievement of specific goals
and objectives. Additionally, Ms. Field was paid a signing bonus of $50,000 in
connection with her entering the employment agreement.
Ms. Field's employment agreement also provides her with an incentive stock
option for the purchase of 480,000 shares of our common stock pursuant to our
1997 stock option plan at an exercise price of $0.8333 per share, and a
nonstatutory stock option for the purchase of
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<PAGE> 62
1,125,000 shares of our common stock pursuant to our 1997 stock option plan, at
an exercise price of $0.8333 per share. These options contain a four year
vesting period, with 25% vesting after the first continuous year of employment
and the remaining option shares vesting in equal monthly portions through the
fourth year. Also, Ms. Field is entitled to an additional nonstatutory stock
option grant of 150,000 shares of common stock pursuant to our 1997 stock option
plan, at an exercise price of $0.8333 per share. Of these shares, 75,000 will
vest upon the closing of this offering and 75,000 of the shares will vest upon
our hiring employees to fill at least two key management positions and our
retaining these employees for nine continuous months of employment.
Under the terms of her agreement, Ms. Field's employment may be terminated
by either party at any time with or without cause and with or without notice.
Should we terminate Ms. Field's employment for cause or should she voluntarily
resign, she will not be entitled to severance pay, pay in lieu of notice, or any
other compensation or benefits, other than payment of accrued salary and
vacation. Cause is defined as:
- conviction of any felony or of any crime against us;
- participation of any fraud against us;
- willful breach of any duties to us, including persistent unsatisfactory
job performance;
- breach of provisions in the employment agreement or of her proprietary
information and invention agreement; or
- engagement of conduct determined by our board of directors to
demonstrate gross unfitness to serve.
In the event Ms. Field's employment is terminated without cause, we will
provide her with
- a payment equal to three months of her salary, less standard
withholdings and deductions and
- a one-year acceleration of vesting of the common stock subject to
purchase pursuant to the options granted to her as of the date of the
employment agreement.
Under the terms of her employment agreement, Ms. Field agrees that while
she is employed by us, she will not in any capacity whatsoever engage in, become
financially interested in, be employed by or have any business connection with
any of our competitors.
In connection with her employment agreement, Ms. Field entered into a
proprietary information and invention agreement, which provides that she:
- will not use any of our proprietary information without our prior
written authorization;
- will assign to us in the future her interest in any and all inventions,
subject to a limited exclusion; and
- will not, for a period of one year after the termination of her
employment, solicit any of our employees or clients.
BENEFIT PLANS
1997 STOCK OPTION PLAN
Our 1997 stock option plan was approved by our board of directors and our
stockholders in April 1997 and was amended in November 1998, February 1999,
September 1999 and November 1999. Our 1997 stock option plan provides for the
grant to our employees, including officers and employee directors, of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code and
for the grant of nonstatutory stock options to our employees, outside directors
and consultants. Our 1997 stock option plan is currently administered by our
board of
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directors which selects the optionees, determines the number of shares to be
subject to each option and determines the exercise price of each option. Our
1997 stock option plan authorizes the issuance of an aggregate of up to
22,725,000 shares of common stock. The maximum number of shares that may be
granted to any individual under our 1997 stock option plan in any year is
956,250. As of September 30, 1999, options to purchase an aggregate of
15,712,932 shares of common stock were outstanding under the 1997 stock option
plan, and an aggregate of 5,392,953 shares of common stock remained available
for future grants.
The exercise price of all incentive stock options granted under our 1997
stock option plan must be at least equal to the fair market value of the common
stock on the date of grant. The exercise price of all nonstatutory stock options
granted under our 1997 stock option plan shall be determined by the
administrator, but in no event may be less than 85% of the fair market value on
the date of grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all our classes of stock, the exercise
price of any incentive or nonstatutory option granted must equal at least 110%
of the fair market value on the grant date and the maximum term of any these
options must not exceed five years. The term of all other options granted under
our 1997 stock option plan may not exceed ten years.
In the event a participant in our 1997 stock option plan ceases to be an
employee, director or consultant, other than upon the participant's death or
disability, the participant may exercise his or her vested options for a period
of three months following termination, unless a different exercise period is
specified in his or her option agreement.
In the event of our merger with or into another corporation or a sale of
substantially all of our assets, our 1997 stock option plan requires that each
outstanding option be assumed or an equivalent option substituted by the
successor corporation; provided, however, that in the event the successor
corporation refuses to assume or substitute for the outstanding options, the
vesting of these options and the time during which these options may be
exercised shall be accelerated prior to such event and the options terminated if
not exercised after such acceleration and at or prior to such event.
In the event of a change of control, all participants shall receive two
additional years of vesting for all outstanding options and all stock acquired
through the exercise of an option. In addition, if a participant is employed by
us or a subsidiary at the time of the change of control and, prior to the
one-year anniversary of the change of control, the participant is either
terminated for reasons other than for cause or terminates employment for good
reason, the participant shall have the greater of 90 days from the date of
termination or the period otherwise specified for exercise after termination to
exercise any vested options. Under the 1997 stock option plan, a change of
control is defined as:
- acquisition of 25% or more of our stock by any individual or entity;
- a change of a majority of the members on our board of directors;
- consummation of our reorganization, merger or consolidation or the sale
or disposition of more than 50% of our operating assets;
- a tender offer made for our stock; or
- approval of a plan of complete liquidation by our stockholders.
Our 1997 stock option plan will terminate in 2007. Our board of directors
has authority to amend or terminate our 1997 stock option plan, provided that
such action will not impair the rights of the holder of any outstanding options
without the written consent of that holder.
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1999 LONG-TERM STOCK INCENTIVE PLAN
Our 1999 long-term stock incentive plan was approved by our board of
directors and our stockholders in November 1999. Our 1999 long-term stock
incentive plan provides for the grant to our employees, including officers and
employee directors, of incentive stock options within the meaning of Section 422
of the Internal Revenue Code and for the grant of nonstatutory stock options to
our employees, directors and consultants, stock appreciation rights and other
types of awards. Our 1999 long-term stock incentive plan will be administered by
our compensation committee which selects the optionees, determines the number of
shares to be subject to each option, determines the exercise price of each
option and determines the vesting and exercise periods of each option. Our 1999
long-term stock incentive plan authorizes the issuance of an aggregate of up to
10,500,000 shares of common stock. No options to purchase shares of common stock
have yet been granted under this plan, therefore options to purchase 10,500,000
shares of common stock remain available for grant.
The exercise price of all incentive stock options granted under our 1999
long-term stock incentive plan must be at least equal to the fair market value
of the common stock on the date of grant. The exercise price of all nonstatutory
stock options granted under our 1999 long-term stock incentive plan shall be
determined by the compensation committee, but in no event may be less than 85%
of the fair market value on the date of grant. With respect to any participant
who owns stock possessing more than 10% of the voting power of all our classes
of stock, the exercise price of any incentive or nonstatutory option granted
must equal at least 110% of the fair market value on the grant date and the
maximum term of any these options must not exceed five years. The term of all
other options granted under our 1999 long-term stock incentive plan may not
exceed ten years.
In the event a participant in our 1999 long-term stock incentive plan
terminates employment, or is terminated by us for any reason other than cause,
any options which have become exercisable prior to the time of termination,
shall remain exercisable for six months from the date of termination if
termination was caused by death or disability, or 30 days from the date of
termination if termination was caused by reasons other than death or disability.
In the event of a change of control, all participants shall receive two
additional years of vesting for all outstanding options and share appreciation
rights, all stock acquired through the exercise of an option or a share
appreciation right, and all other awards. In addition, if a participant is
employed by us or a subsidiary at the time of the change of control and, prior
to the one-year anniversary of the change of control, the participant is either
terminated for reasons other than for cause or terminates employment for good
reason, the participant shall have the greater of 90 days from the date of
termination or the period otherwise specified for exercise after termination to
exercise any vested options. Under the 1999 long-term stock incentive plan, a
change of control is defined as:
- acquisition of 25% or more of our stock by any individual or entity;
- a change of a majority of the members on our board of directors;
- consummation of our reorganization, merger or consolidation or the sale
or disposition of more than 50% of our operating assets;
- a tender offer made for our stock; or
- a plan of complete liquidation by our stockholders.
Unless terminated sooner, our 1999 long-term stock incentive plan will
terminate in 2009. Our board of directors has authority to amend or terminate
our 1999 long-term stock incentive plan, provided that this action will not
impair the rights of any participant without the written consent of that
participant.
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2000 EMPLOYEE STOCK PURCHASE PLAN
Our stock purchase plan was approved by the board of directors on January
7, 2000 and has been approved by a majority of our stockholders.
The stock purchase plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code in order to
provide our employees with an opportunity to purchase common stock through
payroll deductions. An aggregate of 10,000,000 shares of common stock has been
reserved for issuance and are available for purchase under the stock purchase
plan during the 10 year term of the plan, subject to adjustment in the event of
a stock split, stock dividend or other similar change in our common stock or our
capital structure. All Organic employees whose customary employment is for more
than five months in any calendar year and more than 20 hours per week are
eligible to participate in the stock purchase plan. Employees hired after the
consummation of our initial public offering are eligible to participate in the
stock purchase plan at the beginning of the next offering period.
The stock purchase plan designates offering periods and purchase periods.
Offering periods are generally overlapping periods of 24 months. The initial
offering period begins on the effective date of the stock purchase plan, which
is the first trading day on or after this registration statement is declared
effective and ends on the last trading day in the period ending June 30, 2000.
Purchase periods are generally six month periods, with the initial purchase
period commencing on the first trading day on or after this registration
statement is declared effective and ending on June 30, 2000.
Each employee who is eligible to and wishes to participate chooses a
percentage of his or her compensation, not exceeding 15%, that will be used to
purchase Organic stock. In no event may an employee purchase more than $25,000
worth of stock in a 12 month period or more than 1,250 shares in any six month
purchase period. The percentage designated by the employee will be deducted from
each paycheck of the employee and credited to an account. At the end of a six
month purchase period the amount in the account will be used to purchase Organic
stock. The price of the Organic stock purchased will be the lesser of 85% of the
market price on that date or 85% of the market price, or the case of the initial
offering period, the offering price, on the first day of the offering period
which will begin from six to twenty-four months prior to the purchase date. If
the value of the stock at the end of any purchase period is lower than the value
of the stock on the first day of the next offering period, then all participants
will be automatically withdrawn from the prior offering period immediately after
the exercise of their option and automatically reenrolled in the immediately
following offering period.
The stock purchase plan will be administered by our board of directors or
compensation committee, which will have the authority to terminate or amend the
stock purchase plan, subject to specified restrictions, and otherwise to
administer the stock purchase plan and to resolve all questions relating to the
administration of the stock purchase plan.
401(k) PLAN
In January 1997, we established a 401(k) Plan. All employees with at least
one month of service are eligible to participate in the plan. Employees may
contribute up to 20% of their pre-tax covered compensation through salary
deductions. In 1999, we began contributing 25% of every pre-tax dollar an
employee contributes up to the first 5% of the employee's pre-tax covered
compensation. Employees are 50% vested in the employer's contributions after one
year of service and fully vested after two years. The 401(k) Plan is intended to
qualify under Section 401 of the Internal Revenue Code so that all contributions
and income earned in the plan are not taxable to employees until withdrawn and
our contributions will be deductible by us when made. Our matching contribution
expense was not material for the nine months ended September 30, 1999. In
addition, we may make a discretionary profit-sharing contribution to all
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eligible employees, regardless of whether an employee is participating in the
401(k) Plan. However, no such contributions have been made through September 30,
1999.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation and bylaws provide that we will indemnify
all of our directors and officers to the fullest extent permitted by Delaware
law. Our certificate of incorporation and bylaws also authorize us to indemnify
our employees and other agents, at our option, to the fullest extent permitted
by Delaware. We intend to enter into agreements to indemnify our directors and
officers, in addition to indemnification provided for in our charter documents.
These agreements, among other things, will provide for the indemnification of
our directors and officers for some types of expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of Organic,
arising out of such person's services as one of our directors or officers or any
other company or enterprise to which such person provides services at our
request to the fullest extent permitted by applicable law. We believe that these
provisions and agreements will assist us in attracting and retaining qualified
persons to serve as directors and officers.
Delaware law permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for any breach of the
director's duty of loyalty to the corporation or its stockholders, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, under Section 174 of the General Corporation Law of the State
of Delaware, or for any transaction from which the director derived an improper
personal benefit. Our certificate of incorporation provides for the elimination
of personal liability of a director for breach of fiduciary duty, as permitted
by Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the provisions contained in our charter documents, Delaware law or otherwise, we
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by one of
our directors, officers or controlling persons in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer or
controlling person, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of this issue.
We intend to purchase and maintain insurance on behalf of the officers and
directors insuring them against liabilities that they may incur in such
capacities or arising out of such status.
There is no pending litigation or proceeding involving one of our directors
or officers as to which indemnification is being sought, nor are we aware of any
pending or threatened litigation that may result in claims for indemnification
by any director or officer.
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RELATED PARTY TRANSACTIONS
ORGANIC HOLDINGS
On January 29, 1997, our predecessor company changed its name from Organic
Online, Inc. to Organic Holdings, Inc., and we were formed as a subsidiary under
the name Organic Online, Inc. At that time, we exchanged 18,323,712 shares of
our Series A preferred stock and nine shares of our common stock for
substantially all of the assets and liabilities of Organic Holdings. Organic
Holdings retained some of our non-operating assets and liabilities.
Our directors Jonathan Nelson, Michael Hudes and Gary Hromadko are also
directors of Organic Holdings.
OMNICOM GROUP
In January 1997, we issued 3,351,288 shares of our Series A preferred stock
at $2.9833 per share to Omnicom Group for net cash proceeds of $10.0 million.
In February 1999, we issued 1,488,000 shares of our Series B preferred
stock at $7.2067 per share to Omnicom Group for net cash proceeds of $7.7
million plus the settlement of a $3.0 million short-term bridge loan that we
obtained from Omnicom Group in January 1999.
On August 27, 1999, we entered into a revolving credit facility with
Omnicom Group, which allows us to borrow up to $30.0 million at the lender's
commercial paper rate plus 3.0% until the closing of this offering. Thereafter,
we may borrow up to $15.0 million from Omnicom Group at the lender's commercial
paper rate plus 1.25% through September 30, 2002. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for further information. Additionally, in connection with the
revolving credit facility, we issued a warrant to purchase 2,249,076 shares of
our common stock to Omnicom Group at an exercise price of $0.0033 per share.
One of our directors, Bruce Redditt, has served as Executive Vice President
of Omnicom Group since 1998.
OFFICER LOAN
On March 31, 1999, we loaned $200,000 to Michael Hudes at an interest rate
of 7%. This loan was secured by a pledge by Mr. Hudes to us of his shares of our
common stock, with principal and interest payments due upon the second, fourth,
sixth, eighth and tenth anniversaries of the loan. The amount becomes payable
upon the expiration of the lock-up period as long as the offering price is at
least $10.00 per share and the aggregate proceeds are at least $75.0 million.
STOCK OPTION GRANTS TO OFFICERS
On March 20, 1997, we issued to Marita Scarfi options to purchase 765,000
shares of our common stock at an exercise price of $0.0011 per share which
became exercisable on July 15, 1997.
On December 8, 1997, we issued to Janis Nakano Spivack options to purchase
382,500 shares of our common stock at an exercise price of $0.0978 per share
which became exercisable on November 17, 1998. On the same date, we issued to
Matthew Bernardini options to purchase 90,000 shares of our common stock at the
same exercise price which became exercisable on October 15, 1998.
On June 24, 1998, we issued to Michael Hudes options to purchase 1,476,000
shares of our common stock at an exercise price of $0.0978 per share which
became exercisable on June 1, 1999.
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On November 25, 1998, we issued to Matthew Bernardini options to purchase
45,000 shares of our common stock at an exercise price of $0.3889 per share
which became exercisable on November 1, 1999.
On June 23, 1999, we issued to Susan Field options to purchase 1,755,000
shares of our common stock at an exercise price of $0.8333 per share which
become exercisable on June 23, 2000.
On July 13, 1999, we issued to Matthew Bernardini options to purchase
382,500 shares of our common stock at an exercise price of $1.3333 per share
which become exercisable on July 13, 2000.
On August 26, 1999, we issued to (a) Margaret Maxwell Zagel options to
purchase 225,000 shares of our common stock which become exercisable on August
26, 2000, (b) Lynda Ward Pierce options to purchase 90,000 shares of our common
stock which become exercisable on July 21, 2000, and (c) Larry Geisel options to
purchase 1,200,000 shares of our common stock which become exercisable on
September 8, 2000. Each of these officers were issued these options at an
exercise price of $1.6667 per share.
On November 22, 1999, we issued to (a) Daniel Lynch options to purchase
845,070 shares of our common stock which became exercisable on January 1, 1999,
(b) Janis Nakano Spivack options to purchase 67,500 shares of our common stock
which become exercisable on November 22, 2000, (c) Lynda Ward Pierce options to
purchase 90,000 shares of our common stock which become exercisable on November
22, 2000, and (d) Arthur Williams options to purchase 690,000 shares of our
common stock which become exercisable on December 14, 2000. Each of these
officers were issued these options at an exercise price of $2.6667 per share.
We intend to enter into indemnification agreements with each of our
directors and officers. These indemnification agreements will require us to
indemnify these individuals to the fullest extent permitted by Delaware law.
We also have entered into various employment agreements with our officers.
See "Management -- Employment Agreements" for a more detailed description.
We believe that all of the transactions set forth above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. We intend that all future transactions, including loans, between us and
our officers, directors, principal stockholders and their affiliates will be
approved by a majority of the board of directors, including a majority of the
independent and disinterested outside directors on the board of directors, and
will be on terms no less favorable to us than could be obtained from
unaffiliated third parties.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of December 31, 1999 and as adjusted to reflect the sale of the shares of
common stock in this offering by:
- each person or entity known by us to own beneficially more than five
percent of our common stock;
- our chief executive officer, each of the executive officers named in
the summary compensation table and each of our directors; and
- all of our executive officers and directors as a group.
The beneficial ownership is calculated based on 74,578,218 shares of our
common stock outstanding as of December 31, 1999 and 80,078,218 shares
outstanding immediately following the completion of this offering. Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Unless otherwise
indicated, each person or entity named in the table has sole voting power and
investment power, or shares voting and investment power with his or her spouse,
with respect to all shares of capital stock listed as owned by such person.
Shares issuable upon the exercise of options that are currently exercisable or
become exercisable within sixty days of December 31, 1999 are considered
outstanding for the purpose of calculating the percentage of outstanding shares
of our common stock held by the individual, but not for the purpose of
calculating the percentage of outstanding shares of our common stock held by
another individual.
The address of each of the executive officers and directors is c/o Organic,
Inc., 510 Third Street, San Francisco, California 94107.
<TABLE>
<CAPTION>
PERCENTAGE
OF SHARES
SHARES ISSUABLE BENEFICIALLY OWNED
UPON EXERCISE --------------------
NUMBER OF SHARES OF STOCK OPTIONS PRIOR TO AFTER
NAME AND ADDRESS BENEFICIALLY OWNED OR WARRANTS OFFERING OFFERING
---------------- ------------------ ---------------- -------- --------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022....... 17,534,025 2,249,076 26.5% 24.7%
Organic Holdings, Inc.
c/o Organic, Inc.
510 Third Street
San Francisco, California
94107.......................... 51,954,975 -- 69.7% 64.9%
NAMED EXECUTIVE OFFICERS AND
DIRECTORS
Jonathan Nelson.................. 51,954,975 -- 69.7% 64.9%
Michael Hudes.................... -- 553,500 * *
Janis Nakano Spivack............. 183,282 15,937 * *
Susan Field...................... -- -- * *
Matthew Bernardini............... -- 60,938 * *
Gary F. Hromadko................. -- -- * *
Bruce Redditt.................... -- -- * *
All executive officers and
directors as a group
(12 persons)................... 52,138,257 630,375 70.8% 65.9%
</TABLE>
- ---------------
* Represents beneficial ownership of less than one percent of the common stock.
Shares beneficially owned by Jonathan Nelson consist of 51,954,975 shares owned
by Organic Holdings, Inc., of which Mr. Nelson is the majority stockholder.
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DESCRIPTION OF CAPITAL STOCK
Following the closing of this offering, our authorized capital stock will
consist of 80,000,000 shares of common stock and 25,000,000 shares of
undesignated preferred stock. The following description of our capital stock
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of our certificate of incorporation and bylaws, which are
included as exhibits to the registration statement of which this prospectus is a
part, and by the provisions of applicable law.
COMMON STOCK
As of September 30, 1999, after giving effect to the conversion of all
outstanding shares of our Series A and Series B preferred stock prior to the
closing of this offering, 71,108,124 shares of common stock were issued and
outstanding and held by approximately 50 stockholders. The holders of our common
stock are entitled to one vote for each share held of record upon such matters
and in such manner as may be provided by law. Subject to preferences applicable
to any outstanding shares of preferred stock, the holders of common stock are
entitled to receive ratably dividends, if any, as may be declared by the board
of directors out of funds legally available for dividend payments. In the event
we liquidate, dissolve or wind up, the holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities and
liquidation preferences of any outstanding shares of the preferred stock.
Holders of common stock have no preemptive rights or rights to convert their
common stock into any other securities. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable.
PREFERRED STOCK
As of September 30, 1999, there were 23,163,000 shares of preferred stock
outstanding and held of record by two stockholders. In connection with the
closing of this offering, all outstanding shares of our Series A and Series B
preferred stock will automatically be converted into common stock on a
one-for-three basis. Upon the closing of this offering, our board of directors
will be authorized, absent any limitations prescribed by law, without
stockholder approval, to issue up to an aggregate of 25,000,000 shares of
preferred stock, in one or more series, each of the series to have rights and
preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by the
board of directors. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred
stock that maybe issued in the future. Issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of our outstanding voting stock. We have no present plans to
issue any shares of preferred stock.
WARRANTS
As of September 30, 1999, a warrant to purchase an aggregate of 2,249,076
shares of our common stock issued to Omnicom Group was outstanding at an
exercise price of $0.0033 per share. This warrant contains provisions for the
adjustment of the exercise price and the aggregate number of shares issuable
upon the exercise of the warrant in the event of stock dividends, stock splits,
reorganizations and reclassifications and consolidations. Upon the closing of
this offering, this warrant to purchase common stock will expire.
DELAWARE LAW AND PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
Provisions of Delaware law and our certificate of incorporation and bylaws
could make our acquisition by means of a tender offer, a proxy contest, or
otherwise, and the removal of
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incumbent officers and directors more difficult. These provisions are expected
to discourage types of coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control to first negotiate with us.
We believe that the benefits of increased protection of our potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to acquire
or restructure us outweighs the disadvantages of discouraging proposals,
including proposals that are priced above the then current market value of our
common stock, because, among other things, negotiation of these proposals could
result in an improvement of their terms.
We are subject to Section 203 of the Delaware General Corporation Law. This
provision generally prohibits any Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three years
following the date the stockholder became an interested stockholder, unless:
- prior to that date the board of directors approved either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
- upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock outstanding at the time the transaction
began; or
- on or following that date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested
stockholder.
Section 203 defines a business combination to include:
- any merger or consolidation involving the corporation and the
interested stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- subject to some exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by
or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Our bylaws provide that following the completion of this offering our board
of directors will be divided into three classes of directors designated Class I,
Class II and Class III. Each class will have a three-year term. Initially, two
directors will serve in Class I, two directors will serve in Class II and two
directors will serve in Class III. The initial directors in each class will hold
office for terms of one year, two years or three years. Thereafter each class
will serve a three-year term.
We believe that a classified board of directors will help to assure the
continuity and stability of the board of directors and our business strategies
and policies as determined by the board of directors, since a majority of the
directors at any given time will have had prior experience as our directors. We
believe that this, in turn, will permit the board of directors to more
effectively represent the interest of our stockholders. With a classified board
of directors, at least two
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annual meetings of our stockholders, instead of one, will generally be required
to effect a change in the majority of the board of directors. As a result, a
provision relating to a classified board of directors may discourage proxy
contests for the election of directors or purchases of a substantial block of
our common stock because its provisions could operate to prevent obtaining
control of the board of directors in a relatively short period of time. The
classification provision and the prohibition on stockholder action by written
consent also could have the effect of discouraging a third party from making a
tender offer or otherwise attempting to obtain control of us. Under Delaware
law, a director on a classified board may be removed by the stockholders of the
corporation only for cause.
Our bylaws provide that special meetings of the stockholders may be called
only by our President or at the direction of the board of directors, by our
Secretary. Our bylaws require advance written notice, which generally must be
received by our Secretary not less than 30 days prior to the meeting, by a
stockholder of a proposal or director nomination which a stockholder desires to
present at a meeting of stockholders. Our certificate of incorporation does not
include a provision for cumulative voting in the election of directors. Under
cumulative voting, a minority stockholder holding a sufficient number of shares
may be able to ensure the election of one or more directors. The absence of
cumulative voting may have the effect of limiting the ability of minority
stockholders to effect changes in the board of directors and, as a result, may
have the effect of deterring hostile takeover or delaying or preventing changes
in control or our management.
STOCKHOLDER RIGHTS PLAN
We have adopted a Stockholder Rights Plan under which holders of shares of
common stock are entitled to purchase one one-hundredth of a share of Series C
Preferred Stock at a purchase price of $300.00, subject to certain antidilution
adjustments. The rights will expire 10 years after issuance and will be
exercisable on a stock acquisition date. A "stock acquisition date" will occur
if (1) a person or group becomes the beneficial owner of 15% or more of our
common stock; (2) persons currently holding 15% or more of the common stock
acquire an additional 1% or more of the common stock; or (3) a person or group
commences a tender or exchange offer that would result in the offeror
beneficially owning 15% or more of the common stock. If a stock acquisition date
occurs, each right, unless redeemed by us, entitles the holder to purchase an
amount of our common stock, or in certain circumstances a combination of
securities and/or assets or the common stock of the acquiror, having a market
value of twice the exercise price of the right. Rights held by the acquiring
person will become void and will not be exercisable to purchase shares at the
bargain purchase price.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire us on terms
not approved by our board of directors, except pursuant to an offer conditioned
on a substantial number of rights being acquired. The rights should not
interfere with any merger or other business combination approved by the board of
directors since the rights may be redeemed by us at $0.01 per right at any time
before a stock acquisition date.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe. Its
address is 150 Royall Street, Canton, Massachusetts 02021, and its telephone
number is (781) 575-3400.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this offering
because of contractual restrictions on resale. Sales of substantial amounts of
our common stock in the public market after the restrictions lapse or are
released could adversely affect the prevailing market price and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have 78,857,200 outstanding shares
of common stock. Of these shares, the 5,500,000 shares sold in the offering,
plus any shares issued upon exercise of the underwriters' over-allotment option,
will be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates" as that term is defined in Rule 144 under the
Securities Act. In general, affiliates include officers, directors or 10%
stockholders.
The remaining 73,357,200 shares outstanding are "restricted securities"
within the meaning of Rule 144. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rules 144, 144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of the restricted securities in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the common stock.
Our directors, officers and stockholders have entered into lock-up
agreements in connection with this offering generally providing that they will
not offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of our common stock or any securities exercisable for or convertible
into our common stock without the prior written consent of Goldman, Sachs & Co.
The lock-up restrictions will expire on the date which is 180 days after the
date of this prospectus. Notwithstanding possible earlier eligibility for sale
under the provisions of Rules 144, 144(k) and 701, shares subject to lock-up
agreements will not be salable until these agreements expire or are waived by
Goldman, Sachs & Co. Taking into account the lock-up agreements, and assuming
Goldman, Sachs & Co. does not release stockholders from these agreements, the
following shares will be eligible for sale in the public market at the following
times:
- Beginning on the date of this prospectus, only the shares sold in the
offering will be immediately available for sale in the public market.
- Beginning 180 days after the date of this prospectus, shares
will be freely tradable pursuant to Rule 144(k), and an additional
shares will be eligible for sale subject to volume
limitations, as explained below, pursuant to Rules 144 and 701.
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding
which will equal approximately 788,572 shares immediately after the
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice, and the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been our affiliate and
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
these shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
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Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written compensatory
plan or contract to resell these shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell these shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act within 180 days following the date of this prospectus to
register shares to be issued pursuant to our employee benefit plans. As a
result, any options or rights exercised under the 1997 stock option plan, the
1999 long-term stock incentive plan, the 2000 employee stock purchase plan we
intend to adopt or any other benefit plan after the effectiveness of the
registration statement will also be freely tradable in the public market.
However, these shares held by affiliates will still be subject to the volume
limitation, manner of sale, notice and public information requirements of Rule
144 unless otherwise resaleable under Rule 701. As of September 30, 1999, there
were outstanding options for the purchase of 15,712,932 shares of common stock,
of which options to purchase 2,525,502 shares were vested and exercisable.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Morrison & Foerster LLP, San Francisco, California. Certain legal matters in
connection with the offering will be passed upon for the underwriters by Wilson
Sonsini Goodrich & Rosati, P.C., Palo Alto, California.
EXPERTS
The audited financial statements included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
We have filed with Securities and Exchange Commission in Washington, D.C. a
Registration Statement on Form S-1 under the Securities Act with respect to the
common stock offered in this prospectus. This prospectus, filed as part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and its exhibits and schedules, certain portions of which
have been omitted as permitted by the rules and regulations of the SEC. For
further information about us and the common stock, we refer you to the
Registration Statement and to its exhibits and schedules. Statements in this
prospectus about the contents of any contract, agreement or other document are
not necessarily complete and, in each instance, we refer you to the copy of such
contract, agreement or document filed as an exhibit to the Registration
Statement, and each such statement being qualified in all respects by reference
to the document to which it refers. Anyone may inspect the Registration
Statement and its exhibits and schedules without charge at the public reference
facilities the SEC maintains at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the regional offices of the SEC located at 7 World Trade Center, Suite
1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661. You may obtain copies of all or any part of these materials
from the SEC upon the payment of certain fees prescribed by the SEC. You may
also inspect these reports and other information without charge at a Web site
maintained by the SEC. The address of this site is http://www.sec.gov.
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Upon completion of this offering, we will become subject to the
informational requirements of the Exchange Act and will be required to file
reports, proxy statements and other information with the SEC. You will be able
to inspect and copy these reports, proxy statements and other information at the
public reference facilities maintained by the SEC and at the SEC's regional
offices at the addresses noted above. You also will be able to obtain copies of
this material from the Public Reference Section of the SEC as described above,
or inspect them without charge at the SEC's Web site. We have applied for
quotation of our common stock on the Nasdaq National Market. If we receive
approval for quotation on the Nasdaq National Market, then you will be able to
inspect reports, proxy and information statements and other information
concerning us at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.
74
<PAGE> 76
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of PricewaterhouseCoopers LLP, Independent
Accountants............................................... F-2
Consolidated Balance Sheet.................................. F-3
Consolidated Statement of Operations........................ F-4
Consolidated Statement of Stockholders' Equity.............. F-5
Consolidated Statement of Cash Flows........................ F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 77
REPORT OF PRICEWATERHOUSECOOPERS LLP,
INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Organic, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Organic,
Inc. ("the Company") at December 31, 1997, 1998 and September 30, 1999, and the
results of its operations and its cash flows for the years ended December 31,
1996, 1997, and 1998 and the nine months ended September 30, 1999, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
November 22, 1999
San Francisco, California
To the Board of Directors and Stockholders of Organic, Inc.
- ---------------
The above report will be signed upon completion of the stock split described in
Note 1 to the financial statements, assuming that from January 10, 2000, no
other events shall have occurred that would affect the accompanying financial
statements and notes thereto.
PricewaterhouseCoopers LLP
January 10, 2000
San Francisco, California
F-2
<PAGE> 78
ORGANIC, INC.
CONSOLIDATED BALANCE SHEET
AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
----------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
------- ------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 4,264 $ 1,667 $ 3,204
Short-term investments...................................... 1,871 400 --
Accounts receivable, net of allowance of $96 at December 31,
1997, $283 at December 31, 1998, and $564 at September 30,
1999...................................................... 2,597 5,447 18,084
Accounts receivable -- media spending....................... -- 1,472 2,762
Costs in excess of billings................................. 3 574 5,707
Deposits and prepaid expenses............................... 160 287 612
Other assets................................................ 4 108 318
Deferred tax asset, current................................. 988 -- --
------- ------- --------
Total current assets.................................... 9,887 9,955 30,687
Property and equipment, net................................. 1,313 6,570 9,604
Long-term investments....................................... 100 602 1,289
Deferred bank facility charge, net of accumulated
amortization of $460...................................... -- -- 16,089
Other assets................................................ 126 478 850
------- ------- --------
Total assets............................................ $11,426 $17,605 $ 58,519
======= ======= ========
LIABILITIES
Accounts payable............................................ $ 722 $ 3,899 $ 5,996
Current portion of long-term debt........................... 364 2,735 4,302
Current portion of obligations under capital leases......... -- 36 42
Accrued expenses............................................ 67 674 4,182
Accrued employee costs...................................... 93 187 3,157
Deferred revenue............................................ 351 1,013 3,106
Deferred revenue -- media spending.......................... -- 1,072 6,794
------- ------- --------
Total current liabilities............................... 1,597 9,616 27,579
Long-term debt, net of current portion...................... 604 553 430
Obligations under capital leases, net of current portion.... -- 108 108
Deferred rent............................................... -- 138 338
------- ------- --------
Total liabilities....................................... 2,201 10,415 28,455
------- ------- --------
Commitments and contingencies (Note 10)
Minority interest in consolidated subsidiary................ -- -- 280
STOCKHOLDERS' EQUITY
Convertible Series A preferred stock, $.0001 par value,
21,675,000 shares authorized, issued and outstanding at
December 31, 1997 and 1998 and September 30, 1999
(aggregate liquidation preference $64,664) (none pro
forma).................................................... 1 1 1 $ --
Convertible Series B preferred stock, $.0001 par value,
1,488,000 shares authorized, issued and outstanding at
September 30, 1999 (aggregate liquidation preference
$10,724) (none pro forma)................................. -- -- -- --
Common stock, $.0001 par value, 200,000,000 shares
authorized, 7,002, 902,817 and 1,619,124 shares issued and
outstanding at December 31, 1997, December 31, 1998 and
September 30, 1999, respectively (73,357,200 pro forma)... -- -- -- 1
Additional paid-in capital.................................. 11,251 13,585 81,488 81,495
Deferred compensation....................................... (61) (1,664) (33,032) (33,032)
Accumulated deficit......................................... (1,966) (4,732) (18,659) (18,659)
Accumulated other comprehensive income...................... -- -- (14) (14)
------- ------- -------- --------
Total stockholders' equity.............................. 9,225 7,190 29,784 $ 29,791
------- ------- -------- ========
Total liabilities and stockholders' equity.............. $11,426 $17,605 $ 58,519
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 79
ORGANIC, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 4,294 $ 6,780 $ 27,734 $ 20,744 $ 51,781
Operating expenses:
Professional services (exclusive of $0,
$0, $183, $57 and $2,803 reported
below of stock-based compensation for
the years ended 1996, 1997 and 1998
and for the nine months ended
September 30, 1998 and 1999,
respectively)........................ 1,889 4,285 16,801 11,191 29,929
Selling, general and administrative
(exclusive of $53, $87, $511, $234
and $6,845 reported below of
stock-based compensation for the
years ended 1996, 1997 and 1998 and
for the nine months ended September
30, 1998 and 1999, respectively)..... 2,104 5,473 12,068 7,276 26,018
Stock compensation and other stock-
based charges........................ 53 87 694 291 9,648
----------- ------- ----------- ----------- -----------
Total operating expenses............. 4,046 9,845 29,563 18,758 65,595
----------- ------- ----------- ----------- -----------
Operating income (loss).................. 248 (3,065) (1,829) 1,986 (13,814)
Minority interest in operations of
consolidated subsidiary................ (106) -- -- -- (38)
Interest and other income, net........... 4 283 73 73 (11)
----------- ------- ----------- ----------- -----------
Net income (loss) before taxes....... 146 (2,782) (1,756) 2,059 (13,863)
Income tax expense (benefit)............. (91) (997) 1,010 913 64
----------- ------- ----------- ----------- -----------
Net income (loss).................... $ 237 $(1,785) $ (2,766) $ 1,146 $ (13,927)
=========== ======= =========== =========== ===========
Basic net income (loss) per share........ $ 26,286 $ (668) $ (10.81) $ 8.41 $ (11.51)
=========== ======= =========== =========== ===========
Diluted net income (loss) per share...... $ 0.00 $ (668) $ (10.81) $ 0.02 $ (11.51)
=========== ======= =========== =========== ===========
Weighted average common shares
outstanding:
Basic.................................. 9 2,671 255,888 136,259 1,209,591
=========== ======= =========== =========== ===========
Diluted................................ 65,025,009 2,671 255,888 65,424,719 1,209,591
=========== ======= =========== =========== ===========
Unaudited pro forma basic and diluted net
loss per share......................... $ (0.04) $ (0.20)
=========== ===========
Weighted average common shares
outstanding -- unaudited pro forma
basic and diluted...................... 65,280,888 70,389,036
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 80
ORGANIC, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------- ------------------ PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
---------- ------ --------- ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995................ -- $-- -- $-- $ 900 $ (145) $ (418)
Deferred stock-based compensation........... -- -- -- -- 426 (426) --
Amortization of deferred stock-based
compensation.............................. -- -- -- -- -- 53 --
Cash received in connection with investments
in Organic Holdings prior to
reorganization............................ -- -- -- -- 400 -- --
Adjustments related to certain assets and
liabilities retained by Organic
Holdings.................................. -- -- -- -- (105) -- --
Net income.................................. -- -- -- -- -- -- 237
---------- -- --------- -- ------- -------- --------
BALANCE AT DECEMBER 31, 1996................ -- -- -- -- 1,621 (518) (181)
Issuance of Series A preferred stock on
reorganization............................ 18,323,712 1 9 -- (1) -- --
Issuance of Series A preferred stock........ 3,351,288 -- -- -- 10,000 -- --
Common stock options exercised.............. -- -- 6,993 -- 1 -- --
Amortization of deferred stock-based
compensation.............................. -- -- -- -- -- 87 --
Reduction in deferred stock-based
compensation expense related to stock
options cancelled......................... -- -- -- -- (370) 370 --
Net loss.................................... -- -- -- -- -- -- (1,785)
---------- -- --------- -- ------- -------- --------
BALANCE AT DECEMBER 31, 1997................ 21,675,000 1 7,002 -- 11,251 (61) (1,966)
Common stock options exercised.............. -- -- 895,815 -- 37 -- --
Deferred stock-based compensation........... -- -- -- -- 2,348 (2,348) --
Amortization of deferred stock-based
compensation.............................. -- -- -- -- -- 694 --
Reduction in deferred stock-based
compensation expense related to stock
options cancelled......................... -- -- -- -- (51) 51 --
Net loss.................................... -- -- -- -- -- -- (2,766)
---------- -- --------- -- ------- -------- --------
BALANCE AT DECEMBER 31, 1998................ 21,675,000 1 902,817 -- 13,585 (1,664) (4,732)
Net loss.................................... -- -- -- -- -- -- (13,927)
Foreign currency translation adjustment..... -- -- -- -- -- -- --
Comprehensive loss..........................
Issuance of Series B preferred stock, net of
issuance costs of $6...................... 1,488,000 -- -- -- 10,718 -- --
Common stock options exercised.............. -- -- 716,307 -- 81 -- --
Deferred stock-based compensation........... -- -- -- -- 42,021 (42,021) --
Amortization of deferred stock-based
compensation.............................. -- -- -- -- -- 9,188 --
Reduction in deferred stock-based
compensation expense related to stock
options cancelled......................... -- -- -- -- (1,465) 1,465 --
Issuance of common stock warrants........... -- -- -- -- 16,548 -- --
---------- -- --------- -- ------- -------- --------
BALANCE AT SEPTEMBER 30, 1999............... 23,163,000 $1 1,619,124 $-- $81,488 $(33,032) $(18,659)
========== == ========= == ======= ======== ========
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE STOCKHOLDERS'
INCOME EQUITY
------------- -------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1995................ $ -- $ 337
Deferred stock-based compensation........... -- --
Amortization of deferred stock-based
compensation.............................. -- 53
Cash received in connection with investments
in Organic Holdings prior to
reorganization............................ -- 400
Adjustments related to certain assets and
liabilities retained by Organic
Holdings.................................. -- (105)
Net income.................................. -- 237
---- --------
BALANCE AT DECEMBER 31, 1996................ -- 922
Issuance of Series A preferred stock on
reorganization............................ -- --
Issuance of Series A preferred stock........ -- 10,000
Common stock options exercised.............. -- 1
Amortization of deferred stock-based
compensation.............................. -- 87
Reduction in deferred stock-based
compensation expense related to stock
options cancelled......................... -- --
Net loss.................................... -- (1,785)
---- --------
BALANCE AT DECEMBER 31, 1997................ -- 9,225
Common stock options exercised.............. -- 37
Deferred stock-based compensation........... -- --
Amortization of deferred stock-based
compensation.............................. -- 694
Reduction in deferred stock-based
compensation expense related to stock
options cancelled......................... -- --
Net loss.................................... -- (2,766)
---- --------
BALANCE AT DECEMBER 31, 1998................ -- 7,190
--------
Net loss.................................... -- (13,927)
Foreign currency translation adjustment..... (14) (14)
--------
Comprehensive loss.......................... (13,941)
Issuance of Series B preferred stock, net of
issuance costs of $6...................... -- 10,718
Common stock options exercised.............. -- 81
Deferred stock-based compensation........... -- --
Amortization of deferred stock-based
compensation.............................. -- 9,188
Reduction in deferred stock-based
compensation expense related to stock
options cancelled......................... -- --
Issuance of common stock warrants........... -- 16,548
---- --------
BALANCE AT SEPTEMBER 30, 1999............... $(14) $ 29,784
==== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 81
ORGANIC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
AMOUNTS IN THOUSANDS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------------
1996 1997 1998 1998 1999
----- ------- ------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 237 $(1,785) $(2,766) $ 1,146 $(13,927)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization............................. 203 432 1,248 765 2,226
Stock-based compensation and other stock-based charges.... 53 87 694 291 9,648
Provision for doubtful accounts........................... -- -- 280 180 637
Write-off of fixed assets................................. -- -- 12 -- 1,171
Minority interest in operations of consolidated
subsidiary.............................................. -- -- -- -- 280
Provision (benefit) for deferred income taxes............. (91) (1,000) 1,000 830 --
Revenue recognized in exchange for investments............ (90) (100) (577) (252) (687)
Changes in assets and liabilities:
Increase in accounts receivable......................... (159) (1,911) (4,622) (6,651) (14,763)
(Increase) decrease in costs in excess of billings...... 40 34 (571) (355) (5,133)
Increase in deposits and prepaid expenses............... (22) (138) (127) (58) (325)
Increase in other assets................................ (72) (76) (480) (405) (466)
Increase in accounts payable and accrued expenses....... 87 603 3,878 1,406 8,576
Increase (decrease) in deferred revenue................. (139) 235 1,734 2,132 7,814
Increase in deferred rent............................... -- -- 138 19 200
Decrease in income taxes payable........................ (111) -- -- -- --
----- ------- ------- ------- --------
Net cash used in operating activities................. (64) (3,619) (159) (952) (4,749)
----- ------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (509) (1,099) (5,579) (3,143) (6,195)
Purchase of short-term investments.......................... -- (2,271) (1,865) (1,865) (2,005)
Proceeds from the sale and maturity of short-term
investments............................................... -- 400 3,336 1,880 2,405
Proceeds from the sale of long-term investments............. -- -- 75 75 --
----- ------- ------- ------- --------
Net cash used in investing activities................. (509) (2,970) (4,033) (3,053) (5,795)
----- ------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from investment in Organic Holdings................ 400 -- -- -- --
Proceeds from issuance of convertible preferred stock,
net....................................................... -- 10,000 -- -- 7,718
Proceeds from exercises of common stock options............. -- 1 37 34 81
Proceeds from long-term debt................................ 350 757 1,938 1,100 7,000
Payments on notes payable -- related party.................. -- (8) -- -- --
Payments on capital leases.................................. -- -- (25) (16) (29)
Payments on long-term debt.................................. -- (140) (355) (212) (2,675)
----- ------- ------- ------- --------
Net cash provided by financing activities............. 750 10,610 1,595 906 12,095
Effect of exchange rate changes on cash and cash
equivalents......................................... -- -- -- -- (14)
----- ------- ------- ------- --------
Net increase (decrease) in cash and cash
equivalents....................................... 177 4,021 (2,597) (3,099) 1,537
Cash and cash equivalents at beginning of period............ 66 243 4,264 4,264 1,667
----- ------- ------- ------- --------
Cash and cash equivalents at end of period.................. $ 243 $ 4,264 $ 1,667 $ 1,165 $ 3,204
===== ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest...................................... $ 13 $ 44 $ 138 $ 81 $ 231
===== ======= ======= ======= ========
Cash paid for income taxes.................................. $ 115 $ 5 $ 90 $ 90 $ 86
===== ======= ======= ======= ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired under financing
obligations............................................... $ -- $ -- $ 906 $ 906 $ 153
===== ======= ======= ======= ========
Conversion of debt into preferred stock..................... $ -- $ -- $ -- $ -- $ 3,000
===== ======= ======= ======= ========
Issuance of common stock warrants........................... $ -- $ -- $ -- $ -- $ 16,548
===== ======= ======= ======= ========
Notes payable issued for investment......................... $ 8 $ -- $ -- $ -- $ --
===== ======= ======= ======= ========
Deferred stock-based compensation........................... $ 426 $ -- $ 2,348 $ 1,058 $ 42,021
===== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 82
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 1 -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Organic, Inc. ("Organic" or "the Company") is an international Internet
professional services firm focused on the customer-to-business market. Organic
provides services to our clients including management consulting, creative
design and engineering implementation services; marketing services; public
relations services; and customer service and fulfillment consulting and
transaction management services. The marketing and public relations services are
typically provided under long-term agreements. The customer service and
fulfillment consulting and transaction management services are typically
provided under contracts that range from a few months to over a year.
The accompanying financial statements present the results of operations of the
Company and its predecessor, Organic Online, Inc. On January 29, 1997, Organic
Online Inc. was renamed Organic Holdings, Inc. and the Company was formed as a
subsidiary under the name Organic Online, Inc. The Company exchanged 18,323,712
shares of Series A convertible preferred stock and nine shares of common stock
for substantially all of the assets and liabilities of Organic Holdings, Inc.
Certain non-operating assets and liabilities (approximately $0.3 million, net)
were retained by Organic Holdings, Inc. and have been excluded from the
accompanying financial statements. Because this reorganization did not result in
a change in control of the Company, there was no change in the basis of
accounting at the time of the reorganization. The Company changed its name from
Organic Online, Inc. to Organic, Inc. on January 28, 1999.
CONSOLIDATION AND BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements include the accounts of the Company's
wholly owned subsidiaries, Organic Media, Inc., Organic Online, Ltd., and
Organic.com Private Ltd. and its share of a 70% owned subsidiary, Organic Brazil
Comunicacao Interativa Limitada. All intercompany transactions have been
eliminated in consolidation.
On May 25, 1999 the Company's Board of Directors effected a 3-for-1 split of its
outstanding shares of common and preferred stock. Prior to this offering, the
Company intends to effect a 3-for-1 split of its outstanding shares of common
stock. All share and per share information included in these financial
statements have been retroactively adjusted to reflect these stock splits.
INTERIM FINANCIAL STATEMENTS
The accompanying interim consolidated financial statements and related footnote
information as of and for the nine months ended September 30, 1998 are unaudited
but include, in management's opinion, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly, in all material respects,
the consolidated financial position, results of operations and cash flows.
Results for the nine months ended September 30, 1998 and 1999 are not
necessarily indicative of results for the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of
F-7
<PAGE> 83
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of cash and investments in a money
market fund. The Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents. The Company
maintains its cash in bank deposit accounts that, at times, may exceed federally
insured limits.
SHORT-TERM INVESTMENTS
The Company's investments in certain debt and equity securities are categorized
as available for sale securities, as defined by Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". At December 31, 1997 and 1998, the fair value of
the investments approximated their cost.
CONCENTRATION OF CREDIT RISK
The Company extends credit to customers based on an evaluation of their
financial condition and collateral is not required. The Company performs ongoing
credit evaluations of its customers and maintains an allowance for doubtful
accounts. Revenue derived from customers outside the United States has not been
significant. At December 31, 1997 and 1998, and September 30, 1999, three
customers, two customers and one customer accounted for 48%, 24%, and 21% of
total accounts receivable, respectively. In the year ended 1996, three customers
accounted for 30% of the Company's revenues. In the year ended 1997, no
customers accounted for more than 10% of the Company's revenues. In the year
ended 1998, one customer accounted for 12% of the Company's revenues. For the
nine months ended September 30, 1998 and 1999, one customer and two customers
accounted for 16% and 22% of the Company's revenues, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, less accumulated depreciation and
amortization. Depreciation and amortization are calculated using the
straight-line method over the estimated useful lives of the related assets
ranging from three to five years. Leasehold improvements and equipment under
capital leases are amortized over the lease term or estimated useful lives,
whichever is shorter. Repairs and maintenance costs are charged to expense when
incurred. When assets are sold or retired, the cost and the related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
included in operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's cash and cash equivalents, short-term
investments, accounts receivable, and accounts payable approximate fair value
because of the short-term maturity of these instruments. Fair values are based
on quoted market prices and assumptions concerning the amount and timing of
estimated future cash flows and assumed discount rates reflecting varying
degrees of perceived risk. Based upon borrowing rates currently available to the
Company with similar terms, the carrying value of long-term debt and capital
lease obligations approximate fair value.
F-8
<PAGE> 84
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of foreign subsidiaries are
measured using the currency of the respective countries as the functional
currency. Assets and liabilities are translated into the reporting currency
(U.S. dollars) at the foreign exchange rate in effect at the balance sheet date,
while revenues and expenses for the year are translated at the average exchange
rate in effect during the year. Translation gains and losses are not included in
determining net income or loss but are accumulated and reported in stockholders'
equity, as a component of other comprehensive income, on a net of tax basis. The
Company has not entered into hedging contracts during any of the periods
presented.
REVENUE RECOGNITION
Revenue on contracts is recorded using the percentage-of-completion method,
retainer basis, or on a time and materials basis. Under the
percentage-of-completion method, revenue on contracts is recognized based on the
percentage of costs incurred to date to total estimated project costs. Earned
but unbilled project revenues are classified under current assets as costs in
excess of billings. Deferred revenue includes billings in excess of project
revenues earned, amounts payable on behalf of and billed to customers, and cash
received and other amounts billed in advance for services to be performed. The
Company periodically evaluates the estimated costs to complete its contracts.
Provisions for losses are recognized on uncompleted contracts when they become
known. Under the retainer basis, which relates primarily to media and
communications, revenue on contracts is recognized over the life of the contract
on a straight-line basis. Under the time and materials basis, revenue on
contracts is recognized based on agreed-upon hourly rates for the positions that
recorded time on the project during the period plus any materials used and
charged against the project. Sales of other services are recorded as revenue
when services are rendered.
ADVERTISING EXPENSES
The Company expenses the cost of advertising and promoting its services as
incurred. These costs are included in selling, general and administrative on the
statement of operations.
INCOME TAXES
Amounts provided for income tax expense are based on income reported for
financial statement purposes and do not necessarily represent amounts currently
payable under tax laws. Deferred taxes, which arise principally from temporary
differences between the period in which certain income and expenses are
recognized for financial reporting purposes and the period in which they affect
taxable income, are included in the amounts provided for income taxes. Under
this method, the computation of deferred tax assets and liabilities give
recognition to enacted tax rates in effect in the year the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts that the Company expects to
realize.
NET INCOME (LOSS) PER SHARE
The Company computes basic and diluted net income (loss) per share in accordance
with SFAS No. 128, "Earnings Per Share", and SEC Staff Accounting Bulletin
("SAB") No. 98. Under the provisions of SFAS No. 128 and SAB No. 98, basic net
income (loss) per share is computed by dividing net income (loss) available to
common stockholders for the period by the weighted
F-9
<PAGE> 85
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
average number of common shares outstanding during the period. Diluted net
income per share is computed by dividing net income available to common
stockholders for the period by the weighted average number of common and common
equivalent shares outstanding during the period. For those periods in which the
Company has incurred a net loss, diluted net loss per share is equivalent to
basic net loss per share since the assumed exercise of the Company's stock
options and a warrant and the assumed conversion of the Company's preferred
stock would be anti-dilutive and, accordingly, have been excluded from the
calculation.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Unaudited pro forma net loss per share for the year ended December 31, 1998 and
nine months ended September 30, 1999 included in the statement of operations is
computed using the weighted average number of common shares outstanding,
adjusted to include the pro forma effects of the conversion of Series A and
Series B convertible preferred stock and the exercise of a warrant for common
stock as if such conversion had occurred on January 1, 1998 for the year ended
December 31, 1998 and on January 1, 1999 for the nine months ended September 30,
1999, or at the date of original issuance, if later.
PRO FORMA BALANCE SHEET (UNAUDITED)
Effective upon the closing of the Company's proposed initial public offering,
subject to certain conditions as described in Note 6, the outstanding shares of
Series A and Series B convertible preferred stock will automatically convert
into 65,025,000 and 4,464,000 shares of common stock, respectively, and a
warrant is exercisable for 2,249,076 shares of common stock. The unaudited pro
forma amounts included on the balance sheet reflect these conversions and the
assumed exercise, as if they had occurred on September 30, 1999.
COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires that an enterprise report and display, by major components and as a
single total, the change in its net assets during the period from non-owner
sources. The adoption of this Statement did not have an impact on the Company's
consolidated financial position, results of operations or cash flows.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with the
provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees", and complies with the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation". Under APB No. 25,
compensation expense is based on the difference, if any, on the date of grant
between the fair value of the Company's common stock and the exercise price of
the options to purchase that stock.
SEGMENT REPORTING
The Company manages its operations on a geographical basis and, to date, has
provided services primarily in the United States. Through September 30, 1999,
foreign operations have not been significant in either revenue or investment in
long-lived assets. Revenues from major customers are disclosed above in
"Concentration of Credit Risk".
F-10
<PAGE> 86
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". The
Statement will require the Company to recognize all derivatives on the balance
sheet at fair value. SFAS No. 133 requires that derivative instruments used to
hedge be identified specifically to assets, liabilities, unrecognized firm
commitments or forecasted transactions. The gains or losses resulting from
changes in the fair value of derivative instruments will either be recognized in
current earnings or in other comprehensive income, depending on the use of the
derivative and whether the hedging instrument is effective or ineffective when
hedging changes in fair value or cash flows. This Statement, as amended, is
effective for fiscal years beginning after June 15, 2000. Management believes
that the adoption of this Statement will not have a material effect on the
Company's consolidated financial position or results of operations.
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use". This SOP provides guidance on
accounting for certain costs in connection with obtaining or developing computer
software for internal use and requires that entities capitalize such costs once
certain criteria are met. The Company adopted SOP 98-1 as of January 1, 1999.
The adoption of this SOP did not have a material effect on the Company's
consolidated financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities". This SOP requires that entities expense start-up costs and
organization costs as they are incurred. The Company adopted SOP 98-5 as of
January 1, 1999. The adoption of this SOP did not have a material effect on the
Company's consolidated financial position or results of operations.
NOTE 2 -- PROPERTY AND EQUIPMENT, NET
Property and equipment are carried at cost, less accumulated depreciation and
amortization. As of December 31, 1997 and 1998, and September 30, 1999, the
amounts were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1997 1998 1999
------ ------- -------------
<S> <C> <C> <C>
Computer hardware..................................... $1,322 $ 4,354 $ 7,780
Computer software..................................... 208 1,461 1,707
Equipment............................................. 159 721 986
Furniture............................................. 40 243 278
Leasehold improvements................................ 214 1,638 2,432
------ ------- -------
$1,943 $ 8,417 $13,183
Less: accumulated depreciation and amortization....... (630) (1,847) (3,579)
------ ------- -------
$1,313 $ 6,570 $ 9,604
====== ======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1997 and 1998, and
for the nine months ended September 30, 1998 and 1999 were $196, $401, $1,220,
$744 and $2,144, respectively.
F-11
<PAGE> 87
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
Included in the above is equipment acquired under capital leases of $169 at
December 31, 1998 and $204 at September 30, 1999. Accumulated amortization on
equipment acquired under capital leases was $28 and $66 at December 31, 1998 and
September 30, 1999 respectively.
NOTE 3 -- INVESTMENTS
The Company's investments comprise of common stock received from its customers
in exchange for services. The common stock, all of which is from privately held
companies, has been recorded on the financial statements based on the estimated
fair value of the services provided to the customers. The Company records a
writedown for any declines in value that are judged to be other than temporary.
During the years ended December 31, 1996, 1997 and 1998, and nine months ended
September 30, 1998 and 1999, the Company received common stock that was recorded
at $90, $100, $577, $252 and $687, respectively.
NOTE 4 -- ACCRUED EXPENSES AND EMPLOYEE COSTS
The following table presents the detailed categories of the Company's accrued
expenses and employee costs that, on an individual basis, exceed five percent of
total current liabilities:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 30,
1997 1998 1999
---- ---- -------------
<S> <C> <C> <C>
Accrued vacation....................................... $ 92 $183 $ 639
Accrued bonuses........................................ -- -- 2,407
Other.................................................. 68 678 4,293
---- ---- ------
$160 $861 $7,339
==== ==== ======
</TABLE>
NOTE 5 -- DEBT
The Company had the following debt outstanding at December 31, 1998 and 1999 and
September 30, 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1997 1998 1999
----- ------- -------------
<S> <C> <C> <C>
Revolving credit facility.............................. $ -- $ -- $ 4,000
Amounts borrowed under equipment line of credit........ 968 2,551 --
Amounts borrowed under software financing agreements... -- 737 732
----- ------- -------
968 3,288 4,732
Less: current portion.................................. (364) (2,735) (4,302)
----- ------- -------
Total long-term debt................................... $ 604 $ 553 $ 430
===== ======= =======
</TABLE>
The revolving credit facility was established in August 1999 with Omnicom Group
and allows the Company to borrow up to $30.0 million at the lender's commercial
paper rate, based on the published 30 day commercial lending rate in The Wall
Street Journal at the last day of the month, plus 3.0% until the closing of the
Company's proposed initial public offering. Thereafter, the Company may borrow
up to $15.0 million at the lender's commercial paper rate plus 1.25%
F-12
<PAGE> 88
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
through September 30, 2002. Interest is payable quarterly. A portion of the
funds was used to repay the amounts borrowed under the equipment line of credit.
Borrowings under the revolving loan agreement are collateralized by certain
long-term investments of the Company and are subject to certain financial
covenants, including minimum revenue targets and limitations on capital
equipment purchases. At September 30, 1999, the Company was in compliance with
these covenants.
In connection with this agreement, the Company issued warrants to purchase
2,249,076 shares of its common stock at $0.0033 per share (Note 6).
The equipment line of credit, together with an additional credit agreement
permitting borrowings through September 30, 1999 with the same financial
institution, allows the Company to borrow up to $1.5 million for equipment
purchases and $2.5 million limited to 75% of eligible accounts receivable and
any outstanding letters of credit up to $1.0 million. At September 30, 1999, the
Company had $144 in outstanding letters of credit under this agreement. Interest
for amounts borrowed under the equipment line of credit was at the bank's prime
lending rate plus 0.50%.
The amounts borrowed under the software financing agreements bear interest at
rates of 6.89% and 8.25% and are repayable $73, $307, $329, and $22, during the
three months ended December 31, 1999 and for each of the years through 2002,
respectively.
NOTE 6 -- COMMON AND CONVERTIBLE PREFERRED STOCK
COMMON AND CONVERTIBLE PREFERRED STOCK
At September 30, 1999, the Company had authorized 35,000,000 shares and
25,000,000 shares of common stock and preferred stock, respectively. Of the
25,000,000 authorized shares of preferred stock, the Company has designated
21,675,000 shares as Series A preferred stock and 1,488,000 shares as Series B
preferred stock. In November 1999, the Company's Board of Directors approved an
amendment to the Articles of Incorporation to increase the number of authorized
common shares to 200,000,000.
VOTING RIGHTS
Preferred stockholders receive one vote for each share of common stock into
which the preferred shares are convertible.
LIQUIDATION PREFERENCE
In the event of liquidation, Series A and B preferred stockholders are entitled
to receive $2.9833 and $7.2067 per share, respectively, plus any declared but
unpaid dividends prior to and in preference to any distribution to the holders
of the Company's common stock. If assets remain upon completion of this
liquidation distribution, the remaining assets of the Company would be
distributed ratably among the holders of the Company's common stock.
DIVIDENDS
Holders of Series A and B preferred stock are entitled to receive noncumulative
dividends at an annual rate of $0.1667 per share, payable when and if declared
by the Company's Board of Directors. The Company may not pay a dividend on its
common stock until Series A and B preferred stock dividends have been paid. The
Company may not pay a dividend if the resulting
F-13
<PAGE> 89
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
aggregate stockholders' equity of the Company falls below $14.0 million. The
Company's Board of Directors through September 30, 1999 has declared no
dividends.
CONVERSION
Currently, at the option of the holder, each share of Series A and B preferred
stock is convertible into one share of the Company's common stock, subject to
adjustments under certain conditions as provided for in the Company's Articles
of Incorporation. Following the 3-for-1 split of the Company's outstanding
common stock, the conversion rate will be one share of preferred stock for three
shares of common stock. Each share of Series A and B preferred stock will be
automatically converted into common stock upon the earlier of i) a vote or
written consent by at least a majority of such shares when fewer than 2,100,000
shares of Series A preferred stock remain outstanding or ii) the closing of the
sale of the Company's common stock at a public offering price equal to or
exceeding $1.11 per share with aggregate proceeds of at least $7.5 million.
WARRANTS
In connection with the revolving credit facility (Note 5), the Company issued a
warrant that entitles the lender to purchase 2,249,076 shares of the Company's
common stock at an exercise price of $0.0033 per share. The warrant is
exercisable until the earlier of an initial public offering of the Company's
common stock or the expiration of the credit facility on September 30, 2002. The
fair value of the warrant of $7.36 per share was estimated using the
Black-Scholes pricing model with the following weighted average assumptions:
risk-free interest rate of 6.77%, expected life of six months, expected dividend
rate of 0%, and volatility of 110%. The Company recorded $16,548 as a deferred
bank facility charge that is being amortized on a straight-line basis over the
life of the revolving credit facility of three years.
NOTE 7 -- STOCK OPTIONS
In April 1997, the Company adopted the 1997 Stock Option Plan ("the Plan") which
authorizes the Board of Directors to grant incentive stock options and
nonstatutory stock options. Incentive stock options ("ISO") may be granted only
to Company employees (including officers and directors who are also employees).
Nonstatutory stock options ("NSO") may be granted to employees, outside
directors and consultants. The maximum number of options, as amended, cannot
exceed 22,725,000 shares of the Company's common stock.
The stock options vest at a rate of 25% of the options granted after one year
from date of grant, with the remaining options vesting on a pro rata monthly
basis over the next 36 months. Options generally expire ten years from the date
of grant; however, in the case of a stock option granted to a person owning more
than 10% of the combined voting power of all classes of the Company's stock, the
term of the option will be five years from the date of the grant. All cancelled
or expired options become available for future grants.
In accordance with the Plan, the stated exercise price shall not be less than
85% of the estimated fair value of the shares on the date of grant as determined
by the Board of Directors, provided, however, that (i) the exercise price of an
ISO and NSO shall not be less than 100% and 85% of the estimated fair value of
the shares on the date of grant, respectively, and (ii) the exercise price of an
ISO and NSO granted to a 10% shareholder shall not be less than 110% of the
estimated fair value of the shares on the date of grant, respectively.
F-14
<PAGE> 90
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
The Company accounts for the Plan in accordance with APB No. 25, "Accounting for
Stock Issued to Employees" and related Interpretations. In connection with
certain stock grants, the Company recognized deferred compensation that is being
amortized over the vesting period of the options. Total stock-based compensation
expense for the years ended December 31, 1996, 1997 and 1998 and nine months
ended September 30, 1998 and 1999 was $53, $87, $694, $291, and $9,188,
respectively, for options granted to employees where the deemed fair value of
the stock for accounting purposes exceeded the exercise price of the option at
the grant date.
The following table summarizes the transactions under the Plan.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------- -----------------------------------------------
1997 1998 1998 1999
---------------------- ---------------------- ---------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
---------- --------- ---------- --------- ---------- --------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of period.... -- $ -- 8,230,005 $0.09 8,230,005 $0.09 10,649,958 $0.13
Granted.............. 10,364,850 0.09 7,543,575 0.14 4,005,450 0.10 9,528,150 1.14
Exercised............ (6,993) 0.10 (895,815) 0.04 (348,606) 0.10 (716,307) 0.11
Expired or
cancelled.......... (2,127,852) 0.10 (4,227,807) 0.10 (2,935,179) 0.10 (3,748,869) 0.19
---------- ---------- ---------- ----------
Options outstanding,
end of period........ 8,230,005 $0.09 10,649,958 $0.13 8,951,670 $0.09 15,712,932 $0.72
========== ========== ========== ==========
Options exercisable,
end of period........ 1,870,734 $0.08 1,451,949 $0.10 1,879,107 $0.08 2,525,502 $0.09
========== ========== ========== ==========
</TABLE>
The following table summarizes information about stock options outstanding under
the Plan.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT OPTIONS EXERCISABLE AT
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------------------------------ -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
------------------------ ----------- ---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.00...................... 239,202 10.79 years $0.00 79,827 $0.00
0.10 - 0.56...................... 7,732,080 10.08 0.20 2,445,675 0.10
0.67 - 1.33...................... 5,050,650 9.73 1.02 -- --
1.67 - 2.00...................... 2,691,000 9.92 1.75 -- --
---------- ---------
15,712,932 9.95 $0.72 2,525,502 $0.09
========== =========
</TABLE>
At December 31, 1997 and 1998, and September 30, 1998 and 1999, 14,488,002,
11,172,234, 13,417,731, and 5,392,953 shares, respectively, were available for
future stock option grants under the Plan.
F-15
<PAGE> 91
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
The weighted-average fair value of Plan options granted was $0.02 and $0.34 for
the years ended December 31, 1997 and 1998, respectively, and $0.28 and $4.64
for the nine months ended September 30, 1998 and 1999. The fair value of each
option grant has been estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions:
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Risk-free interest rates.......................... 6.09% 5.72% 5.12% 5.12% 5.78%
Expected lives (years)............................ 4 4 4 4 4
Expected dividend yields.......................... 0% 0% 0% 0% 0%
Expected volatility............................... 0% 0% 0% 0% 0%
</TABLE>
Because the determination of fair value of all options granted after such time
as the Company becomes a public entity will include an expected volatility
factor in addition to the factors described above and because additional grants
are made each year, the results below may not be representative of future
periods.
Had the Company accounted for compensation expense on stock options granted to
employees according to SFAS No. 123, "Accounting for Stock-Based Compensation",
the Company's net income (loss) and net income (loss) per share would have
decreased (increased) to the pro forma amounts indicated in the following table.
Since no options were granted prior to 1997 under this Plan, the pro forma
results indicated for those periods presented in the following table do not
reflect the full effect of amortization over the entire vesting period, and
thus, may not be representative of future periods.
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------ ------------------------
1997 1998 1998 1999
------- ------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss) -- as reported.......... $(1,785) $(2,766) $1,146 $(13,927)
Net income (loss) -- pro forma............ (1,808) (2,883) 1,079 (14,761)
Basic net income per common share -- as
reported................................ $ (668) $(10.81) $ 8.41 $ (11.51)
Basic net income per common share -- pro
forma................................... (677) (11.27) 7.92 (12.20)
Diluted net income (loss) per common
share -- as reported.................... $ (668) $(10.81) $ 0.02 $ (11.51)
Diluted net income (loss) per common
share -- pro forma...................... (677) (11.27) 0.02 (12.20)
</TABLE>
F-16
<PAGE> 92
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
Prior to the adoption of the 1997 Stock Plan, the Company did not have a formal
stock option plan and options were granted to employees and directors to
purchase shares of the Company's predecessor, Organic Online Inc., at various
exercise prices. For the years ended December 31, 1996, 1997 and 1998, and nine
months ended September 30, 1998 and 1999, the employees and directors were
granted 58,000, 24,000, 5,000, 5,000, and 225,409 options, respectively, under
this arrangement. As of September 30, 1999, the number of options outstanding
under this arrangement was 364,517.
NOTE 8 -- INCOME TAXES
As of September 30, 1999, the Company had net operating loss carryforwards of
approximately $2.7 million for federal and state income tax purposes arising
from the taxable loss in the years ended December 31, 1997 and 1998. The federal
net operating loss carryforwards expire in the years 2012 and 2018,
respectively. The state net operating loss carryforwards expire in the years
2005. Valuation allowances have been provided against the net deferred tax
assets due to the uncertainty of their realization.
The Company's ability to utilize its net operating loss carryforwards to offset
future taxable income may be subject to restrictions attributable to equity
transactions that result in changes in ownership as defined in the Tax Reform
Act of 1986. These restrictions may limit, on an annual basis, the Company's
future use of its net operating loss carryforwards.
The difference between the income tax expense (benefit) at the federal statutory
rate of 34% and the Company's effective tax rate is due primarily to net
operating loss carryforwards and the valuation allowance.
Effective January 1, 1996, the Company became an S-Corporation and accordingly,
was not subject to income tax in 1996. The tax benefit in 1996 represents the
reversal of the net deferred tax liabilities at the date the Company changed
from a C-Corporation to an S-Corporation. Upon the formation of the Company into
Organic Online (see Note 1), in January 1997, the Company operated as a
C-Corporation.
F-17
<PAGE> 93
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
The components of income tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- --------------------
1997 1998 1998 1999
------- ------ ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C>
Current
Federal........................................ $ -- $ -- $ 60 $--
State........................................ 3 10 23 9
Foreign...................................... -- -- -- 55
------- ------ ---- ---
Total currently payable................... 3 10 83 64
------- ------ ---- ---
Deferred
Federal...................................... (753) 753 629 --
State........................................ (247) 247 201 --
------- ------ ---- ---
Total deferred............................ (1,000) 1,000 830 --
------- ------ ---- ---
Total income tax expense (benefit)........ $ (997) $1,010 $913 $64
======= ====== ==== ===
</TABLE>
The components of the deferred tax assets of the Company were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1997 1998 1999
------ ------- -------------
<S> <C> <C> <C>
Accumulated depreciation.............................. $ 12 $ (26) $ 203
Compensation costs.................................... -- -- 1,365
Organizational costs.................................. -- 6 11
Tax credits........................................... -- 9 66
Accruals and reserves................................. 132 243 2,028
Net operating loss carryforward....................... 856 1,240 1,371
------ ------- -------
Gross deferred tax asset......................... 1,000 1,472 5,044
Valuation allowance................................... -- (1,472) (5,044)
------ ------- -------
Net deferred tax asset........................... $1,000 $ -- $ --
====== ======= =======
</TABLE>
NOTE 9 -- 401(k) SAVINGS PLAN
In January 1997, the Company established a defined contribution plan authorized
under Section 401(k) of the Internal Revenue Code. All benefits-eligible
employees with at least one month of service are eligible to participate in the
plan. Employees may contribute up to 20 percent of their pre-tax covered
compensation through salary deductions. In 1999, the Company began contributing
25 percent of every pre-tax dollar an employee contributes up to the first 5
percent of the employee's pre-tax covered compensation. Employees are 50 percent
vested in the employer's contributions after one year of service and fully
vested after two years.
F-18
<PAGE> 94
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
All employer contributions are tax deductible by the Company. The Company's
matching contribution expense was $57 for the nine months ended September 30,
1999. In addition, the Company may make a discretionary profit-sharing
contribution to all eligible employees, regardless of whether an employee is
participating in the 401(k) plan. However, no such contributions have been made
through September 30, 1999.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
The Company leases various office space and office equipment under
non-cancelable operating and capital leases with initial or remaining terms of
one year or more. Total rent expense under operating leases was $70, $207, and
$876 for the years ended December 31, 1996, 1997 and 1998, respectively, and
$526 and $1,815 for the nine months ended September 30, 1998 and 1999,
respectively. At September 30, 1999, the future minimum lease payments under all
lease arrangements are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
Three months ending December 31, 1999....................... $ 546 $ 15
Years ending December 31, 2000.............................. 2,050 62
2001...................................................... 1,607 49
2002...................................................... 1,553 46
2003...................................................... 1,354 26
2004...................................................... 1,118 1
Thereafter.................................................. 4,368 --
------- ----
Total minimum lease payments................................ $12,596 199
=======
Less: amount representing interest.......................... 49
----
Present value of net minimum payments....................... 150
Less: current portion of obligations under capital leases... 42
----
Long-term obligations under capital leases.................. $108
====
</TABLE>
The Company has one lease in San Francisco, California that contains an
escalation clause that will become effective upon the consummation of the
proposed initial public offering. There are no restrictions on paying dividends,
incurring additional debt or negotiating additional leases under the terms of
the present lease agreements.
F-19
<PAGE> 95
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
NOTE 11 -- EARNINGS PER SHARE
The following table presents a reconciliation of basic and diluted net income
per share for the year ended December 31, 1996 and nine months ended September
30, 1998.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
YEAR ENDED ENDED SEPTEMBER 30,
DECEMBER 31, 1996 1998
---------------------- -----------------------
BASIC DILUTED BASIC DILUTED
------- ----------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income applicable to common stock... $ 237 $ 237 $ 1,146 $ 1,146
======= =========== ======== ===========
Weighted average common shares
outstanding............................. 9 9 136,259 136,259
Additional shares due to:
Assumed conversion of dilutive stock
options............................ -- -- -- 263,460
Assumed conversion of Series A
convertible preferred stock........ -- 65,025,000 -- 65,025,000
------- ----------- -------- -----------
Adjusted weighted average common shares
outstanding........................... 9 65,025,009 136,259 65,424,719
======= =========== ======== ===========
Net income per share.................... $26,286 $ 0.00 $ 8.41 $ 0.02
======= =========== ======== ===========
</TABLE>
The following table sets forth common stock equivalents that were not included
in the calculation of diluted net loss per share because to do so would be
anti-dilutive for those periods presented.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, FOR THE NINE MONTHS
------------------------ ENDED SEPTEMBER 30,
1997 1998 1999
---------- ---------- -------------------
<S> <C> <C> <C>
Weighted average effect of common stock
equivalents:
Series A convertible preferred stock... 65,025,000 65,025,000 65,025,000
Series B convertible preferred
stock............................. -- -- 4,006,154
Common stock options................. 2,671 2,313,711 9,056,148
Common stock warrants................ -- -- 148,291
</TABLE>
NOTE 12 -- RELATED PARTY TRANSACTIONS
On March 31, 1999, the Company entered into a promissory note agreement for $200
with an Executive of the Company. This note bears an annual interest rate of 7%
with interest payments due every other year beginning on March 31, 2001. Under
the terms of this agreement, the entire principal amount will become payable
upon the consummation of the Company's proposed initial public offering, as long
as the offering price is at least $10 per share and the aggregate proceeds are
at least $75.0 million.
Concurrent with the reorganization in January 1997, the Company issued 3,351,288
shares of Series A convertible preferred stock to Omnicom Group for cash
proceeds of $10.0 million. In
F-20
<PAGE> 96
ORGANIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS
February 1999, the Company issued 1,488,000 shares of Series B convertible
preferred stock to Omnicom Group for net cash proceeds of $7,718 plus the
settlement of a $3.0 million short-term bridge loan that was obtained from
Omnicom Group in January 1999. See Note 5 and 6 for detailed information on the
Company's revolving credit facility agreement with Omnicom Group and related
warrants. In the future, the Company expects to have transactions in the
ordinary course of business with Omnicom Group.
NOTE 13 -- SUBSEQUENT EVENTS
On November 4, 1999, the Company entered into a lease for office space in New
York. The office space consists of approximately 110,000 square feet and has a
lease term of 15 years, with a projected commencement date of June 1, 2000. The
monthly lease payment will be approximately $275, $298, and $321 during the
first five years, subsequent five years and last five years, respectively. The
lease has been guaranteed by Omnicom Group for up to $4.5 million.
On November 8, 1999, the Company entered into a lease for new headquarters
office space in San Francisco. In accordance with this lease agreement, the
Company provided a $10.0 million letter of credit to the landlord to secure this
space. The office space consists of approximately 212,000 square feet and has a
lease term of 10 years, with a projected commencement date of September 1, 2000.
The anticipated monthly lease payment during the first year will be
approximately $705 with an annual escalation clause of approximately 4%. The
Company expects to sublease a portion of the office space.
In October 1999, the Company's Board of Directors approved 360,000 options at
$2.33 per share. In November 1999 the Company's Board of Directors approved
3,996,375 stock options at $2.67 per share, an increase in the number of
authorized common shares to 200,000,000, adopted the 1999 long-term stock
incentive plan of 10,500,000 authorized shares, and the 2000 employee stock
purchase plan of 10,000,000 authorized shares.
F-21
<PAGE> 97
UNDERWRITING
Organic and the underwriters named below (the "Underwriters") have entered
into an underwriting agreement with respect to the shares being offered. Subject
to the conditions in the underwriting agreement, each underwriter has severally
agreed to purchase the number of shares indicated in the following table.
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation and
Thomas Weisel Partners LLC are the representatives of the underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Thomas Weisel Partners LLC..................................
---------
Total............................................. 5,500,000
=========
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 825,000
shares from us to cover such sales. They may exercise that option for 30 days.
If any shares are purchased pursuant to this option, the underwriters will
severally purchase shares in approximately the same proportion as set forth in
the table above.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to Organic per share of
common stock. The underwriting fee is expected to be 7% of the initial public
offering price.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by Organic. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid By Organic No Exercise Full Exercise
--------------- ----------- -------------
<S> <C> <C>
Per share............................................... $ $
Total................................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per
share from the initial public offering price. If all the shares are not sold at
the initial public offering price, the representatives may from time to time
reduce the offering price and change the other selling terms.
Each officer, director and shareholder of Organic has agreed with the
underwriters not to dispose of or hedge any of the common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus continuing through the date 180 days after the
date of this prospectus, except with the prior written consent of Goldman, Sachs
& Co. This agreement does not apply to any existing employee benefit plan. See
"Shares Eligible for Future Sale" for a discussion of certain transfer
restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price for the common stock will be negotiated among us
and the representatives of the underwriters. The primary factors to be
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, will be Organic's historical
performance, estimates of the business potential and earnings prospects of
Organic, an assessment of
U-1
<PAGE> 98
Organic's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
Organic has applied to have the common stock listed on the Nasdaq National
Market under the symbol "OGNC".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect that market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered. Organic currently
anticipates that it will undertake a directed share program, pursuant to which
it will direct the underwriters to reserve up to shares of its
common stock for sale at the initial public offering price to directors,
officers and friends of Organic, through a directed share program. The number of
shares of common stock available for sale to the general public will be reduced
to the extent such persons purchase any reserved shares. Any shares not so
purchased will be offered by the underwriters to the general public on the same
basis as other shares offered hereby.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998 Thomas Weisel Partners has been named as a lead or co-manager of 106 filed
public offerings of equity securities, of which 79 have been completed, and has
acted as a syndicate member in an additional 54 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or other controlling persons, except for
our contractual relationship with us under the terms of the underwriting
agreement entered into in connection with this offering.
Organic estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$ .
Organic has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
U-2
<PAGE> 99
INSIDE BACK COVER:
ORGANIC LOGO
HEADLINE: Connecting Customers to Businesses
SUBHEAD: Organic continuing a track record of growth and innovation.
IMAGE: Timeline illustrating, BY YEAR (1993, 1994, 1995, 1996, 1997, 1998,
1999);
EMPLOYEE GROWTH: 4, 10+, 20+, 40+, 70+, 270+, 680+
SIGNIFICANT BUSINESS OR SERVICE ADDITIONS: Apache, Accrue, Consulting, Media,
Communications, VOICE, Logistics
ADDITION OF LOCATIONS: San Francisco, New York, Chicago, Brazil, Detroit,
London, Singapore
IMAGE: SCREENSHOTS OF THREE WEB PAGES FROM DAIMLERCHRYSLER, LUCENT
TECHNOLOGIES AND TOMMY HILFIGER WEB SITES.
<PAGE> 100
- ----------------------------------------------------------
- ----------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 8
Special Note Regarding Forward-Looking
Statements............................ 21
Use of Proceeds......................... 22
Dividend Policy......................... 22
Capitalization.......................... 23
Dilution................................ 24
Selected Consolidated Financial Data.... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 27
Business................................ 37
Management.............................. 54
Related Party Transactions.............. 66
Principal Stockholders.................. 68
Description of Capital Stock............ 69
Shares Eligible for Future Sale......... 72
Legal Matters........................... 73
Experts................................. 73
Available Information................... 73
Index to Consolidated Financial
Statements............................ F-1
Underwriting............................ U-1
</TABLE>
-------------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as underwriter and with respect to an unsold allotment or
subscription.
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
5,500,000 Shares
ORGANIC, INC.
Common Stock
-------------------------
[ORGANIC LOGO]
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
THOMAS WEISEL PARTNERS LLC
Representatives of the Underwriters
- ----------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be paid by the Registrant in connection with the distribution of
the securities being registered, other than underwriting discounts and
commissions, are as follows:
<TABLE>
<CAPTION>
AMOUNT*
----------
<S> <C>
Securities and Exchange Commission Filing Fee............... $ 23,378
NASD Filing Fee............................................. 8,000
Nasdaq National Market Listing Fee.......................... 95,000
Accounting Fees and Expenses................................ 345,000
Blue Sky Fees and Expenses.................................. 3,000
Legal Fees and Expenses..................................... 300,000
Transfer Agent and Registrar Fees and Expenses.............. 15,000
Printing Expenses........................................... 225,000
Miscellaneous Expenses...................................... 50,000
----------
Total.................................................. $1,064,378
==========
</TABLE>
- ---------------
* All amounts are estimates except the SEC filing fee, the NASD filing fee and
the Nasdaq National Market listing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to award,
or a corporation's board of directors to grant, indemnity to officers, directors
and other corporate agents under certain circumstances and subject to certain
limitations. Our certificate of incorporation and bylaws provide that we shall
indemnify our directors, officers, employees and agents to the full extent
permitted by Delaware General Corporation Law, including in circumstances in
which indemnification is otherwise discretionary under Delaware law. In
addition, we intend to enter into separate indemnification agreements with our
directors, officers and certain employees which would require us, among other
things, to indemnify them against certain liabilities which may arise by reason
of their status as directors, officers or certain other employees. We also
intend to maintain director and officer liability insurance, if available on
reasonable terms.
These indemnification provisions and the indemnification agreement to be entered
into between us and our officers and directors may be sufficiently broad to
permit indemnification of our officers and directors for liabilities, including
reimbursement of expenses incurred, arising under the Securities Act.
The underwriting agreement filed as Exhibit 1.1 to this registration statement
provides for indemnification by the underwriters of us and our officers and
directors for certain liabilities arising under the Securities Act, or
otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
From our incorporation to September 30, 1999, we have granted or issued and sold
the following unregistered securities:
1. Stock options to employees, officers, directors and consultants under our
1997 stock option plan exercisable for up to an aggregate of 15,712,932 shares
of our common stock, with a weighted average exercise price of $0.72 per share.
II-1
<PAGE> 102
2. An aggregate of 1,619,115 shares exercised under our 1997 stock option plan,
with a weighted average exercise price of $.07 per share.
3. On January 29, 1997, we sold to Organic Holdings, Inc. 9 shares of our common
stock at $0.3333 per share for $1.00, and 18,323,712 shares of our Series A
preferred stock at $2.9833 per share for a total of $54,663,751.
4. On January 29, 1997, we sold to Omnicom Group Inc. 3,351,288 shares of our
Series A preferred stock at $2.9833 per share for an aggregate total of
approximately $10,000,000.
5. On January 7, 1999, we sold to Omnicom Group Inc. 1,488,000 shares of our
Series B preferred stock at $7.2067 per share for a total of $10,723,520.
6. On September 13, 1999, we issued a warrant to Omnicom Group Inc. to purchase
2,249,076 shares of common stock at $0.0033 per share for a total of $7,497.
The issuances of the securities in all of the transactions above were deemed to
be exempt from registration under the Securities Act in reliance on Section 4(2)
of the Securities Act by an issuer not involving a public offering, where the
purchasers represented their intention to acquire the securities for investment
only and not with a view to distribution and received or had access to adequate
information about the Registrant, or were deemed to be exempted in reliance on
Rule 701 promulgated under the Securities Act as transactions pursuant to a
compensatory benefit plan or written compensation contract.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The exhibits are as set forth in the Exhibit Index.
(b) Financial Statement Schedules
All schedules have been omitted since they are not required or are not
applicable or the required information is shown in the financial statements or
related notes.
ITEM 17. UNDERTAKINGS
We hereby undertake 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.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by one of our directors, officers
or controlling persons 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, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
We hereby undertake that:
(1) For purposes of any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by us
pursuant to Rule 424(b)(1) or (4) or 497(h)
II-2
<PAGE> 103
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Organic, Inc. has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California on the 10th day of January, 2000.
ORGANIC, INC.
By: /s/ JONATHAN NELSON
-----------------------------------
Jonathan Nelson
Chief Executive Officer and
Chairman of the Board
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
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JONATHAN NELSON Chief Executive Officer January 10, 2000
- ----------------------------------------------------- and Chairman of the
Jonathan Nelson Board (Principal
Executive Officer)
/s/ MICHAEL HUDES* President and Director January 10, 2000
- -----------------------------------------------------
Michael Hudes
/s/ SUSAN L. FIELD Executive Vice President January 10, 2000
- ----------------------------------------------------- and Chief Financial
Susan L. Field Officer (Principal
Financial and Accounting
Officer)
/s/ GARY F. HROMADKO* Director January 10, 2000
- -----------------------------------------------------
Gary F. Hromadko
/s/ GERALD BRUCE REDDITT* Director January 10, 2000
- -----------------------------------------------------
Gerald Bruce Redditt
*By: /s/ SUSAN L. FIELD
------------------------------------------------
Attorney-in-fact
</TABLE>
II-4
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
------- --------
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Certificate of Incorporation of Registrant*
3.2 Bylaws of Registrant*
4.1 Reference is made to Exhibits 3.1 and 3.2
4.2 Specimen Stock Certificate of Registrant
4.3 Form of Rights Agreement between Registrant and ,
as Rights Agent*
5.1 Opinion of Morrison & Foerster LLP as to the legality of the
common stock
10.1 Form of Indemnification Agreement between Registrant and
each of its executive officers and directors**
10.2 Registrant's 1997 Stock Option Plan, as amended and
restated, including forms of agreements thereunder
10.3 Registrant's 1999 Long-Term Stock Incentive Plan, including
forms of agreements thereunder
10.4 Employment Agreement between Registrant and Jonathan Nelson,
dated January 29, 1997, and amendment on February 24,
1997**
10.5 Employment Agreement between Registrant and Michael Hudes,
dated January 29, 1997, and amendment on February 24,
1997**
10.6 Employment Agreement between Registrant and Susan L. Field,
dated June 22, 1999**
10.7 Loan Agreement between Registrant and Omnicom Group Inc.
dated as of August 27, 1999**
10.8 Guaranty and Security Agreement by and among Registrant,
Organic Media, Inc. and Omnicom Group Inc., dated August
27, 1999**
10.9 Revolving Note of Registrant payable to Omnicom Group Inc.,
dated August 27, 1999**
10.10 Lease between 500 Third Street Associates and Registrant,
dated July 22, 1996
10.11 Lease between 500 Third Street Associates and Registrant,
dated July 22, 1996
10.12 Lease between 500 Third Street Associates and Registrant,
dated December 5, 1996
10.13 Lease between Trustees of the Masonic Hall and Asylum Fund
and Registrant, dated June 1998
10.14 Lease between Trustees of the Masonic Hall and Asylum Fund
and Registrant, dated September 15, 1999*
10.15 Lease between Baker Hamilton Properties, LLC and Registrant,
dated November 8, 1999
10.16 Lease between 233 Broadway Owners LLC and Registrant, dated
November 4, 1999
10.17 Registrant's 2000 Employee Stock Purchase Plan
21.1 Subsidiaries of Registrant**
23.1 Consent of Morrison & Foerster LLP. Reference is made to
Exhibit 5.1
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
24.1 Power of Attorney of Gerald Bruce Redditt
27.1 Financial Data Schedule as of and for the year ended
December 31, 1997**
27.2 Financial Data Schedule as of and for the year ended
December 31, 1998**
27.3 Financial Data Schedule as of and for the nine months ended
September 30, 1999**
</TABLE>
- ---------------
* To be filed by amendment
** Previously filed
<PAGE> 1
EXHIBIT 4.2
[ORGANIC LOGO]
ORGANIC, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
fully paid and non-assessable shares, $.0001 par value, of the COMMON STOCK of
ORGANIC, INC.
(hereinafter called the "Corporation"), transferrable on the books of the
Corporation in person, or by duly authorized attorney, upon surrender of this
certificate properly addressed. This certificate and the share represented
hereby are issued and shall be held subject to all the provisions, of the
Articles of Incorporation of the Corporation and all amendments thereto (copies
of which are on file in the office of the Transfer Agent), to all of which the
holder of this certificate by acceptance hereof asserts. This certificate is not
valid until countersigned by a Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signature of its duly authorized officers.
Dated:
[SEAL]
/s/ MARGARET MAXWELL ZAGEL /s/ MICHAEL HUDES
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
EquiServe
TRANSFER AGENT
AND REGISTRAR
By
AUTHORIZED OFFICER
<PAGE> 2
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ...................Custodian...............
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act........................................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,___________________________hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated________________________
_______________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature(s) Guaranteed
_____________________________________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 5.1
January 10, 2000
Organic, Inc.
510 3rd Street, Suite 540
San Francisco, CA 94107
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-1
of Organic, Inc., a Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission (the "Registration Statement") on November
24, 1999, as amended, relating to the registration under the Securities Act of
1933, as amended, of up to 6,325,000 shares of the Company's common stock,
$0.0001 par value per share (the "Stock"), which are authorized but unissued
stock to be offered and sold by the Company (including up to 825,000 shares
subject to the underwriters' over-allotment option). The Stock is to be sold to
the underwriters named in the Registration Statement for resale to the public.
As counsel to the Company, we have examined the proceedings taken by the
Company in connection with the issuance and sale of the Stock.
We are of the opinion that the up to 6,325,000 shares of Stock to be
offered and sold by the Company have been duly authorized and, when issued and
sold by the Company in the manner described in the Registration Statement and in
accordance with the resolutions adopted by the Board of Directors of the
Company, will be validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
Morrison & Foerster LLP
<PAGE> 1
EXHIBIT 10.2
ORGANIC, INC.
1997 STOCK OPTION PLAN
ADOPTED APRIL 25, 1997
AMENDED NOVEMBER 25, 1998 (TO INCREASE SHARES)
AMENDED FEBRUARY 25, 1999 (TO CHANGE NAME)
AMENDED SEPTEMBER 24, 1999 (TO INCREASE SHARES)
AMENDED NOVEMBER 22, 1999 (TO INCLUDE CHANGE OF CONTROL PROVISIONS)
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "COMMON STOCK" means the Company's common stock, or any stock resulting
from the conversion of such common stock.
1
<PAGE> 2
(f) "COMPANY" means Organic, Inc., a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock of the Company determined as follows and in each case in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations:
(1) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable; or
(2) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock Option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
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(o) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the Securities Law.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "PLAN" means this 1997 Stock Option Plan.
(x) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
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(z) "SECURITIES LAW" means the California Corporate Securities Law of 1968.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be granted;
whether an Option will be an Incentive Stock Option or a Nonstatutory Stock
Option; the provisions of each Option granted (which need not be identical),
including the time or times such Option may be exercised in whole or in part;
and the number of shares for which an Option shall be granted to each such
person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a Committee of the
Board composed of not fewer than two (2) members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Non-Employee Directors and/or
Outside Directors any of the administrative powers the Committee is authorized
to exercise (and references in this Plan to the Board shall thereafter be to the
Committee or such a subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. Additionally, prior to the Listing
Date, and notwithstanding anything to the contrary contained herein, the Board
may delegate administration of the Plan to any person or persons and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. Notwithstanding anything in this Section 3 to the contrary, the Board
or the Committee may delegate to a committee of one or more members of the Board
the authority to grant Options to eligible persons who (1) are not then subject
to Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
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4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Seven Million Five Hundred Seventy Five Thousand
(7,575,000) shares of Common Stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not purchased under such Option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Option if, at the time
of grant, such person owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.
(c) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than Three Hundred Eighteen Thousand Seven Hundred Fifty (318,750) shares
of Common Stock in any calendar year. This subsection 5(c) shall not apply prior
to the Listing Date and, following the Listing Date, shall not apply until (i)
the earliest of: (A) the first material modification of the Plan (including any
increase to the number of shares reserved for issuance under the Plan in
accordance with Section 4); (B) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of stockholders at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
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(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another Option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock held for the
requisite period to avoid a charge to the Company's earnings, (B) according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock) with the person to
whom the Option is granted or to whom the Option is transferred pursuant to
subsection 6(d), or (C) in any other form of legal consideration that may be
acceptable to the Board. In the case of any deferred payment arrangement,
interest shall be compounded at least annually and shall be charged at the
minimum rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement. In addition, the "par value"
of the stock will be paid in cash to the extent required by applicable law.
(d) TRANSFERABILITY. An Option shall not be transferable except by will or
by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person. The
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary but, to the extent necessary under then applicable
law, in each case will provide for vesting of at least twenty percent (20%) per
year of the total number of shares subject to the Option. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
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(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or any
person to whom an Option is transferred under subsection 6(d), as a condition of
exercising any such Option, (1) to give written assurances satisfactory to the
Company as to the Optionee's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (2)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the Option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the Option has been registered under a then currently effective
registration statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may require the Optionee to provide such other
representations, written assurances or information which the Company shall
determine is necessary, desirable or appropriate to comply with applicable
securities and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. The Company may, upon advice
of counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3) months following
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer period as specified in the Option Agreement), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, at the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as
an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer period as specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the
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shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the option
as of the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the Option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such longer or shorter period, which in
no event shall be less than six (6) months, specified in the Option Agreement),
or (ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the Plan.
If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Should the right of repurchase be assigned by the Company, the assignee
shall pay the Company cash equal to the difference between the original purchase
price and the stock's Fair Market Value if the original purchase price is less
than the stock's Fair Market Value.
(k) RIGHT OF REPURCHASE. The Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase all or
any part of the vested shares exercised pursuant to the Option; provided,
however, that (i) such repurchase right shall be exercisable only within (A) the
ninety (90) day period following the termination of employment or the
relationship as a Director or Consultant, or (B) such longer period as may be
agreed to by the Company and the Optionee (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock")), (ii) such repurchase right shall be
exercisable for less than all of the vested shares only with the Optionee's
consent, and (iii) such right shall be exercisable only for cash or cancellation
of purchase money indebtedness for the shares at a repurchase price equal to the
greater of (A) the stock's Fair Market Value at the time of such termination or
(B) the original purchase price paid for such shares by the Optionee. Should the
right of repurchase be assigned by the Company, the
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assignee shall pay the Company cash equal to the difference between the original
purchase price and the stock's Fair Market Value if the original purchase price
is less than the stock's Fair Market Value.
(l) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option.
(m) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of Common Stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of Common Stock.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Subject to any applicable provisions of the Securities Law and related
regulations relied upon as a condition of issuing securities pursuant to the
Plan, the Board shall have the power to accelerate the time at which an Option
may first be exercised or the time during which an Option or any part thereof
will vest pursuant to subsection 6(e), notwithstanding the provisions in the
Option stating the time at which it may first be exercised or the time during
which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with
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respect to, any shares subject to such Option unless and until such person has
satisfied all requirements for exercise of the Option pursuant to its terms.
(c) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option term, a balance
sheet and an income statement. This Section shall not apply (i) after the
Listing Date, or (ii) when issuance is limited to key employees whose duties in
connection with the Company assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, to remove any Director as provided in the Company's Bylaws and
the provisions of the Delaware General Corporation Law, or to terminate the
relationship of any Consultant subject to the terms of that Consultant's
agreement with the Company or Affiliate to which such Consultant is providing
services.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(f) (1) The Board or the Committee shall have the authority to effect, at
any time and from time to time, and with the consent of the affected holders of
Options, (i) the repricing of any outstanding Options under the Plan and/or (ii)
the cancellation of any outstanding Options and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers of
shares of Common Stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option or, in the
case of a ten percent (10%) stockholder (as defined in subsection 5(b)), not
less than one hundred and ten percent (110%) of the Fair Market Value) per share
of Common Stock on the new grant date.
(2) shares subject to an Option canceled under this subsection
9(f) shall continue to be counted, for the applicable period in which it was
granted, against the maximum award of Options permitted to be granted pursuant
to subsection 5(c) of the Plan. The repricing of an Option under this subsection
9(f), resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and the grant of a substitute Option; in the
event of such repricing, both the original and the substituted Options shall be
counted for the applicable period against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c) of the Plan. The provisions
of this subsection 9(f)(2) shall be applicable only to the extent required by
Section 162(m) of the Code.
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10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person during any calendar
year pursuant to subsection 5(c), and the outstanding Options will be
appropriately adjusted in the type(s) and number of securities and price per
share of stock subject to such outstanding Options. Such adjustments shall be
made by the Board or Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then: (i) any surviving or acquiring corporation shall assume Options
outstanding under the Plan or shall substitute similar options (including an
option to acquire the same consideration paid to stockholders in the transaction
described in this Subsection 10(b)) for those outstanding under the Plan, or
(ii) in the event any surviving or acquiring corporation refuses to assume such
Options or to substitute similar Options for those outstanding under the Plan,
(A) with respect to Options held by persons then performing services as
Employees, Directors or Consultants and subject to any applicable provisions of
the Securities Law and related regulations relied upon as a condition of issuing
securities pursuant to the Plan, the vesting of such Options and the time during
which such Options may be exercised shall be accelerated prior to such event and
the Options terminated if not exercised after such acceleration and at or prior
to such event, and (B) with respect to any other Options outstanding under the
Plan, such Options shall be terminated if not exercised prior to such event. The
Board shall use its best efforts to provide Optionees with prior notice of such
transaction.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 under the
Exchange Act or any Nasdaq or securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
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(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Option was granted and (ii) such
person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on April 24, 2007, which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated
(b) All nights and obligations under any Option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
14. CHANGE IN CONTROL.
(a) Subject to the provisions of Section 10 (relating to the adjustment of
shares), and except as otherwise provided in the Plan or the Option Agreement
reflecting the applicable Option, upon the occurrence of a Change in Control:
(1) If an Optionee who is employed by the Company or an Affiliate at
the time of a Change in Control holds one or more outstanding Options, such
Optionee shall be credited with two years of additional vesting service for
purposes of the vesting of Options, and the vesting of any Common Stock
purchased by the Optionee under an Option.
(2) If an Optionee who is employed by the Company or an Affiliate at
the time of a Change in Control holds any Option granted under the Plan and
prior to the one-year anniversary of the Change in Control such Optionee is
either (i) terminated by the Company for
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reasons other than Cause or (ii) terminates employment for Good Reason, such
Optionee shall become fully vested in any Options granted under the Plan and
shall have the greater of (i) 90 days from the date of such termination or (ii)
the period otherwise specified for exercise after termination had the Optionee
been fully vested in the Options on the date of termination to exercise such
Options; provided, however, that in no event shall the Option be exercisable at
a date that is later than the date it would have been exercisable if the
Optionee had remained employed by the Company or an Affiliate.
(b) For purposes of the Plan, the term "Change in Control" means the
occurrence, after an initial public offering of the stock of the Company of the
events described in any of paragraphs (1), (2), (3), (4) or (5) below:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty-five percent (25%) or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock"), or (ii)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (i), the following acquisitions shall not constitute a Change
in Control: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or exchange
privilege unless the security being so exercised, converted or exchanged was
acquired directly from the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company (a
"Company Plan"), (D) any acquisition by an underwriter temporarily holding
securities pursuant to an offering of such securities; or (E) any acquisition by
any corporation pursuant to a transaction which complies with subsections
(b)(3)(A), (b)(3)(B), and (b)(3)(C) of this definition; provided further, that
for purposes of clause (B), if any Person (other than the Company or any Company
Plan) shall become the beneficial owner of twenty-five percent (25%) or more of
the Outstanding Company Common Stock or twenty-five percent (25%) or more of the
Outstanding Company Voting Securities by reason of an acquisition by the
Company, and such Person shall, after such acquisition by the Company, become
the beneficial owner of any additional shares of the Outstanding Company Common
Stock or any additional Outstanding Company Voting Securities (other than
pursuant to any dividend reinvestment plan or arrangement maintained by the
Company) and such beneficial ownership is publicly announced, such additional
beneficial ownership shall constitute a Change in Control.
(2) Individuals who, as of the date hereof, constitute the
Board of Directors of the Company (for purposes of this subsection (b), the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Incumbent Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company shareholders, was approved by a vote of a least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest (as such terms
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<PAGE> 14
are used in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors of the Company.
(3) Consummation, including receipt of any necessary regulatory
approval, of (i) a reorganization, merger or consolidation involving the Company
or (ii) the sale or other disposition of more than 50% of the operating assets
of the Company (determined on a consolidated basis), other than in connection
with a sale-leaseback or other arrangement resulting in the continued
utilization of such assets (or the operating products of such assets) by the
Company (any transaction described in part (i) or (ii) being referred to as a
"Corporate Transaction"); excluding, however, a Corporate Transaction pursuant
to which all of paragraphs (A), (B), and (C) below are applicable:
(A) All or substantially of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without limitation, a
corporation which, as a result of such transaction, owns the Company or all or
substantially all of the assets of the Company either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be.
(B) No Person (other than the Company, any Company Plan or
related trust, the corporation resulting from such Corporate Transaction, and
any Person which beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, twenty-five percent (25%) or more than the
Outstanding Company Common Stock or the Outstanding Company Voting Securities,
as the case may be) will beneficially own, directly or indirectly, twenty-five
percent (25%) or more of, respectively, the then outstanding common stock of the
corporation resulting from such Corporate Transaction or the combined voting
power of the then outstanding voting securities of such corporation.
(C) Individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction.
(4) A tender offer (for which a filing has been made with the
Securities and Exchange Commission (the "SEC") which purports to comply with the
requirements of Section 14(d) of the Exchange Act and the corresponding SEC
rules) is made for the stock of the Company, which has not been negotiated and
approved by the Board, provided that in case of a tender offer described in this
subsection (b)(4), the Change in Control will be deemed to have occurred upon
the first to occur of (A) any time during the offer period when the Person (as
defined in subsection (b)(1), above) making the offer beneficially owns or has
accepted for payment stock of the Company with 25% or more of the combined
voting power of the then
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<PAGE> 15
Outstanding Company Voting Securities or (B) 3 business days before the offer is
to terminate, unless the offer is withdrawn first, if the Person making the
offer could own, by the terms of the offer plus any shares beneficially owned by
that Person, stock with 50% or more of the combined voting power of the then
Outstanding Company Voting Securities when the offer terminates.
(5) Approval by the shareholders of the Company of a plan of
complete liquidation or dissolution of the Company.
(c) For purposes of the Plan the term "Cause" shall mean any of the
following: (1) the willful and continued failure by the Optionee to
substantially perform his duties, other than by reason of his being Disabled (as
defined below), (2) the willful engaging by the Optionee in conduct which is
demonstrably and materially injurious to the Company or its affiliates, (3)
conduct by the Optionee that involves theft or fraud or, dishonesty in
connection with his duties, (4) Optionee's violation of a non-compete or
confidentiality agreement, or (5) conviction of a felony involving moral
turpitude.
(d) For purposes of the Plan, the term "Good Reason" shall mean any of the
following which occur without the Optionee's consent and which are not corrected
by the Company within 10 days of written notice to the Company by the Optionee:
(1) a diminution of the Optionee's duties or the assignment to him of duties
that are inconsistent in any substantial respect with the position, authority or
responsibilities associated with his position, (2) a reduction in the Optionee's
salary rate or bonus potential; or (3) a relocation of the Optionee, that occurs
after a Change of Control and without the Optionee's consent, of over 100 miles
from the Optionee's primary employment location as of the date of the Change of
Control, except for required travel on Company business to an extent
substantially consistent with the Optionee's business travel obligations prior
to the date of the Change of Control.
(e) The term "Disability" shall mean the inability of the Optionee, after
reasonable accommodation, to continue to perform his duties on a full-time basis
as a result of mental or physical illness, sickness or injury and the Company
determines that such disability is of a long-term nature.
15. POTENTIAL CHANGE IN CONTROL.
If the Optionee's employment is terminated by the Company without Cause
during a Potential Change in Control, and such date of termination occurs not
more than 60 days prior to the occurrence of a Change in Control, then the
Optionee shall be entitled to receive the benefits that he would have received
under Section 14, determined as though his employment was terminated by the
Company without Cause immediately after the Change in Control. A "Potential
Change in Control" shall exist during any period in which the circumstances
described in subsections (a), (b), or (c) below exist (provided, however, that a
Potential Change in Control shall cease to exist not later than the occurrence
of a Change in Control):
(a) The Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control, provided that a Potential
Change in Control described
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<PAGE> 16
in this subsection 15(a) shall cease to exist upon the expiration or other
termination of all such agreements.
(b) Any person (including the Company) publicly announces an intention to
take or to consider taking actions the consummation of which would constitute a
Change in Control; provided that a Potential Change in Control described in this
subsection 15(b) shall cease to exist upon the withdrawal of such intention, or
upon a reasonable determination by the Board that there is no reasonable chance
that such actions would be consummated.
(c) The Board adopts a resolution to the effect that, for purposes of the
Plan, a Potential Change in Control exists; provided that a Potential Change in
Control described in this paragraph 15(c) shall cease to exist upon a reasonable
determination by the Board that the reasons that gave rise to the resolution
providing for the existence of a Potential Change in Control have expired or no
longer exist.
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<PAGE> 17
INCENTIVE STOCK OPTION
[[1]], Optionee:
Organic Online, Inc. (the "Company"), pursuant to its 1997 Stock Option
Plan, as amended (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of (i) Rule 701 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act") and (ii) Section 25102(o) of the California Corporate
Securities Law of 1968. Defined terms not explicitly defined in this option but
defined in the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
14. Total Number of Shares Subject to this Option. THE TOTAL NUMBER OF SHARES
OF COMMON STOCK SUBJECT TO THIS OPTION IS [[2]].
15. Vesting. SUBJECT TO THE LIMITATIONS CONTAINED HEREIN, TWENTY-FIVE PERCENT
(25%) OF THE SHARES WILL VEST (BECOME EXERCISABLE) ON [[3]] AND THE
REMAINING SHARES WILL VEST IN THIRTY-SIX (36) EQUAL MONTHLY INSTALLMENTS
THEREAFTER UNTIL EITHER (i) YOU CEASE TO PROVIDE SERVICES TO THE COMPANY
FOR ANY REASON, OR (ii) THIS OPTION BECOMES FULLY VESTED.
16. Exercise Price and Method of Payment.
(a) EXERCISE PRICE. The exercise price of this option is $0.88 per share,
being not less than the fair market value of the Common Stock on the date of
grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(1) Payment of the exercise price per share in cash (including check)
at the time of exercise;
(2) Payment pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of Common
Stock, results in either the receipt of cash (or check) by the Company or the
receipt of irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds;
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<PAGE> 18
(3) Provided that at the time of exercise the Company's Common Stock
is publicly traded and quoted regularly in the Wall Street Journal, payment by
delivery of already-owned shares of Common Stock, held for the period required
to avoid a charge to the Company's reported earnings, and owned free and clear
of any liens, claims, encumbrances or security interests, which Common Stock
shall be valued at its fair market value on the date of exercise; or
(4) Provided that the option exercise price for the installment, or
portion thereof, being purchased exceeds $500, payment pursuant to the deferred
payment alternative as described in paragraph 3(c) hereof; or
(5) Payment by a combination of the methods of payment permitted by
subparagraph 3(b)(i) through 3(b)(iv) above.
(c) CONDITIONS OF DEFERRED PAYMENT. In the event that you elect to make
payment of the exercise price pursuant to the deferred payment alternative:
(1) Not less than twenty-five percent (25%) of the aggregate exercise
price shall be due at the time of exercise, not less than twenty-five percent
(25%) of said exercise price, plus accrued interest, shall be due each year
after the date of exercise, and final payment of the remainder of the exercise
price, plus accrued interest, shall be due three (3) years from date of exercise
or, at the Company's election, upon termination of your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the
Company;
(2) Interest shall be payable at least annually and shall be charged
at the minimum rate of interest necessary to avoid the treatment as interest,
under any applicable provisions of the Code, of any portion of any amounts other
than amounts stated to be interest under the deferred payment arrangement; and
(3) In order to elect the deferred payment alternative, you must, as a
part of your written notice of exercise, give notice of the election of this
payment alternative and, in order to secure the payment of the deferred exercise
price to the Company hereunder, if the Company so requests, you must tender to
the Company a promissory note and a security agreement covering the purchased
shares, both in form and substance satisfactory to the Company, or such other or
additional documentation as the Company may request.
17. Exercise Prior to Vesting Permitted.
(a) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of this option
you may elect, at any time during your Continuous Status as an Employee,
Director or Consultant with the Company or an Affiliate of the Company, to
exercise the option as to any part or all of the shares subject to this option
at any time during the term hereof, including without limitation, a time prior
to the date of earliest exercise ("vesting") stated in paragraph 2 hereof;
provided, however, that:
(1) a partial exercise of this option shall be deemed to cover first
vested shares and then the earliest vesting installment of unvested shares;
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(2) any shares so purchased from installments which have not vested as
of the date of exercise shall be subject to the purchase option in favor of the
Company as described in the Early Exercise Stock Purchase Agreement;
(3) you shall enter into an Early Exercise Stock Purchase Agreement in
the form provided by the Company with a vesting schedule that will result in the
same vesting as if no early exercise had occurred; and
(4) this option shall not be exercisable under this paragraph 4 to the
extent such exercise would cause the aggregate fair market value of any shares
subject to incentive stock options granted you by the Company or any Affiliate
(valued as of their grant date) which would become exercisable for the first
time during any calendar year to exceed $100,000.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided in this
paragraph 4 to purchase shares upon the exercise of this option prior to the
vesting dates shall cease upon termination of your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the Company
and may not be exercised after the date thereof.
18. Whole Shares. THIS OPTION MAY ONLY BE EXERCISED FOR WHOLE SHARES.
19. Securities Law Compliance. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, THIS OPTION MAY NOT BE EXERCISED UNLESS THE SHARES
ISSUABLE UPON EXERCISE OF THIS OPTION ARE THEN REGISTERED UNDER THE
SECURITIES ACT OR, IF SUCH SHARES ARE NOT THEN SO REGISTERED, THE COMPANY
HAS DETERMINED THAT SUCH EXERCISE AND ISSUANCE WOULD BE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
20. Term. THE TERM OF THIS OPTION COMMENCES ON JULY 21, 1997, THE DATE OF
GRANT, AND EXPIRES ON JULY 20, 2007 (THE "EXPIRATION DATE"), WHICH DATE
SHALL BE NO MORE THAN TEN (10) YEARS FROM DATE THIS OPTION IS GRANTED,
UNLESS THIS OPTION EXPIRES SOONER AS SET FORTH BELOW OR IN THE PLAN. IN NO
EVENT MAY THIS OPTION BE EXERCISED ON OR AFTER THE EXPIRATION DATE. THIS
OPTION SHALL TERMINATE PRIOR TO THE EXPIRATION DATE AS FOLLOWS: THREE
MONTHS AFTER JANUARY 1, 1998 IF THE TERMINATION OF YOUR CONTINUOUS STATUS
AS AN EMPLOYEE, DIRECTOR OR CONSULTANT WITH THE COMPANY OR AN AFFILIATE OF
THE COMPANY OCCURS PRIOR TO JANUARY 1, 1998, OR THREE MONTHS AFTER THE
TERMINATION OF YOUR CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT WITH THE COMPANY OR AN AFFILIATE OF THE COMPANY IF SUCH
TERMINATION OCCURS AFTER JANUARY 1, 1998, UNLESS ONE OF THE FOLLOWING
CIRCUMSTANCES EXISTS:
(a) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your disability. This option will then expire on the
earlier of the Expiration Date set forth above or twelve (12) months following
such termination of Continuous Status as an Employee, Director or Consultant.
You should be aware that if your disability is not considered a permanent and
total disability within the meaning of Section 422(c)(6) of the Code, and you
exercise this option more than three (3) months following the date of your
termination of employment, your exercise will be treated for tax purposes as the
exercise of a "nonstatutory stock option" instead of an "incentive stock
option."
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<PAGE> 20
(b) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your death or your death occurs within three (3) months
following your termination of Continuous Status as an Employee, Director or
Consultant for any other reason. This option will then expire on the earlier of
the Expiration Date set forth above or twelve (12) months after your death.
(c) If during any part of such three (3)-month period you may not exercise
your option solely because of the condition set forth in paragraph 6 above, then
your option will not expire until the earlier of the Expiration Date set forth
above or until this option shall have been exercisable for an aggregate period
of three (3) months after your termination of Continuous Status as an Employee,
Director or Consultant.
(d) If your exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of (i) the Expiration Date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
However, this option may be exercised following termination of Continuous
Status as an Employee, Director or Consultant only as to that number of shares
as to which it was exercisable on the date of termination of Continuous Status
as an Employee, Director or Consultant under the provisions of paragraph 2 of
this option.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.
21. Exercise.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in the form attached hereto or as otherwise
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require pursuant to subsection 6(f) of the Plan.
(b) By exercising this option you agree that:
(1) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
payment by you to the
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<PAGE> 21
Company of any tax withholding obligation of the Company arising by reason of
(1) the exercise of this option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise;
(2) you will notify the Company in writing within fifteen (15) days
after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of this option that occurs within two (2) years after the
date of this option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of this option; and
(3) the Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that you not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Securities Act as may be requested by the Company or the
representative of the underwriters. You further agree that the Company may
impose stoptransfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
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22. Transferability. THIS OPTION IS NOT TRANSFERABLE, EXCEPT BY WILL OR BY THE
LAWS OF DESCENT AND DISTRIBUTION, AND IS EXERCISABLE DURING YOUR LIFE ONLY
BY YOU. NOTWITHSTANDING THE FOREGOING, BY DELIVERING WRITTEN NOTICE TO THE
COMPANY, IN A FORM SATISFACTORY TO THE COMPANY, YOU MAY DESIGNATE A THIRD
PARTY WHO, IN THE EVENT OF YOUR DEATH, SHALL THEREAFTER BE ENTITLED TO
EXERCISE THIS OPTION.
23. Option Not a Service Contract. THIS OPTION IS NOT AN EMPLOYMENT CONTRACT
AND NOTHING IN THIS OPTION SHALL BE DEEMED TO CREATE IN ANY WAY WHATSOEVER
ANY OBLIGATION ON YOUR PART TO CONTINUE IN THE EMPLOY OF THE COMPANY, OR OF
THE COMPANY TO CONTINUE YOUR EMPLOYMENT WITH THE COMPANY. IN ADDITION,
NOTHING IN THIS OPTION SHALL OBLIGATE THE COMPANY OR ANY AFFILIATE OF THE
COMPANY, OR THEIR RESPECTIVE STOCKHOLDERS, BOARD OF DIRECTORS, OFFICERS OR
EMPLOYEES TO CONTINUE ANY RELATIONSHIP WHICH YOU MIGHT HAVE AS A DIRECTOR
OR CONSULTANT FOR THE COMPANY OR AFFILIATE OF THE COMPANY.
24. Notices. ANY NOTICES PROVIDED FOR IN THIS OPTION OR THE PLAN SHALL BE GIVEN
IN WRITING AND SHALL BE DEEMED EFFECTIVELY GIVEN UPON RECEIPT OR, IN THE
CASE OF NOTICES DELIVERED BY THE COMPANY TO YOU, FIVE (5) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAIL, POSTAGE PREPAID, ADDRESSED TO YOU AT THE
ADDRESS SPECIFIED BELOW OR AT SUCH OTHER ADDRESS AS YOU HEREAFTER DESIGNATE
BY WRITTEN NOTICE TO THE COMPANY.
25. Governing Plan Document. THIS OPTION IS SUBJECT TO ALL THE PROVISIONS OF
THE PLAN, A COPY OF WHICH IS ATTACHED HERETO AND ITS PROVISIONS ARE HEREBY
MADE A PART OF THIS OPTION, INCLUDING WITHOUT LIMITATION THE PROVISIONS OF
SECTION 6 OF THE PLAN RELATING TO OPTION PROVISIONS, AND IS FURTHER SUBJECT
TO ALL INTERPRETATIONS, AMENDMENTS, RULES AND REGULATIONS WHICH MAY FROM
TIME TO TIME BE PROMULGATED AND ADOPTED PURSUANT TO THE PLAN. IN THE EVENT
OF ANY CONFLICT BETWEEN THE PROVISIONS OF THIS OPTION AND THOSE OF THE
PLAN, THE PROVISIONS OF THE PLAN SHALL CONTROL.
26. Right of First Refusal. NO OPTIONEE SHALL SELL, ASSIGN, PLEDGE, OR IN ANY
MANNER TRANSFER ANY OF THE SHARES OF STOCK OF THE COMPANY OR ANY RIGHT OR
INTEREST THEREIN, WHETHER VOLUNTARILY OR BY OPERATION OF LAW, OR BY GIFT OR
OTHERWISE, EXCEPT BY A TRANSFER WHICH MEETS THE REQUIREMENTS SET FORTH
HEREIN:
(a) If the optionee desires to sell or otherwise transfer any of its shares
of stock acquired upon exercise of this option in an "arms-length" transaction,
then the optionee shall first give written notice thereof to the Company. The
notice shall name the proposed transferee and state the number of shares to be
transferred, the proposed consideration, and all other terms and conditions of
the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the Company
shall have the option to purchase all (by not less than all) of the shares
specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the optionee, the Company
shall have the option to purchase a lesser portion of the shares specified in
said notice at the price and upon the terms set forth therein. In the event of a
gift, property settlement or other transfer which would not be considered to
have been made on an "arms length" basis and in which the proposed transferee is
not paying the full price for the shares, the price shall be
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<PAGE> 23
deemed to be the Fair Market Value of the stock at such time as determined in
good faith by the Board. In the event the Company elects to purchase all of the
shares or, with consent of the optionee, a lesser portion of the shares, it
shall give written notice to the transferring optionee of its election and
settlement for said shares shall be made as provided below in paragraph (d).
(c) The Company may assign its rights hereunder.
(d) In the event the Company and/or its assignee(s) elect to acquire any of
the shares of the transferring optionee as specified in said transferring
optionee's notice, the Secretary of the Company shall so notify the transferring
optionee and settlement thereof shall be made in cash within thirty (30) days
after the Secretary of the Company receives said transferring optionee's notice;
provided that if the terms of payment set forth in said transferring optionee's
notice were other than cash against delivery, the Company and/or its assignee(s)
shall pay for said shares on the same terms and conditions set forth in said
transferring optionee's notice.
(e) In the event the Company and/or its assignees(s) do not elect to
acquire all of the shares specified in the transferring optionee's notice, said
transferring optionee may, within the sixty (60)-day period following the
expiration of the option rights granted to the Company and/or its assignees(s)
herein, transfer the shares specified in said transferring optionee's notice
which were not acquired by the Company and/or its assignees(s) as specified in
said transferring optionee's notice.
(f) Notwithstanding anything to the contrary contained herein, the
following transaction shall be exempt from the provisions of this paragraph 13:
an optionee's bona fide pledge or mortgage of any shares with a commercial
lending institution, provided that any subsequent transfer of said shares by
said institution shall be conducted in the manner set forth in this paragraph
13.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this paragraph 13, and
there shall be no further transfer of such stock except in accord with this
paragraph 13.
(g) The provisions of this paragraph 13 may be waived with respect to any
transfer either by the Company, upon duly authorized action of its Board, or by
the stockholders, upon the express written consent of the owners of a majority
of the voting power of the Company (excluding the votes represented by those
shares to be transferred by the transferring optionee).
(h) Any sale or transfer, or purported sale or transfer, of securities of
the Company shall be null and void unless the terms, conditions, and provisions
of this paragraph 13 are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate upon the date
securities of the Company are first offered to the public pursuant to a
registration statement filed with, and declared effective by, the SEC under the
Securities Act.
(j) The certificates representing shares of stock of the Company shall bear
on their face the following legend so long as the foregoing right of first
refusal remains in effect:
7
<PAGE> 24
"The shares represented by this Certificate are subject to a right of first
refusal option in favor of the Corporation and/or its Assignee(s)."
Dated July 21, 1997.
Very truly yours,
Organic Online, Inc.
By:__________________________________
Duly authorized on behalf of the
Board of Directors
ATTACHMENTS:
1997 Stock Option Plan
Notice of Exercise
8
<PAGE> 25
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE ____________
(Initial)
OTHER _______________________
_______________________
_______________________
______________________________
OPTIONEE
Address:
9
<PAGE> 26
NONSTATUTORY STOCK OPTION
1~, Optionee:
Organic Online, Inc. (the "Company"), pursuant to its 1997 Stock Option
Plan, as amended (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is not intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of (i) Rule 701 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act") and (ii) Section 25102(o) of the California Corporate
Securities Law of 1968. Defined terms not explicitly defined in this agreement
but defined in the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
27. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. THE TOTAL NUMBER OF SHARES
OF COMMON STOCK SUBJECT TO THIS OPTION IS 2~.
28. VESTING. SUBJECT TO THE LIMITATIONS CONTAINED HEREIN, TWENTY-FIVE PERCENT
(25%) OF THE SHARES WILL VEST (BECOME EXERCISABLE) ON 3 ~ AND THE REMAINING
SHARES WILL VEST IN THIRTY-SIX (36) EQUAL MONTHLY INSTALLMENTS THEREAFTER
UNTIL EITHER (i) YOU CEASE TO PROVIDE SERVICES TO THE COMPANY FOR ANY
REASON, OR (ii) THIS OPTION BECOMES FULLY VESTED.
29. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is $_____ per share,
being not less than eighty-five percent (85%) of the fair market value of the
Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(1) Payment of the exercise price per share in cash (including check)
at the time of exercise;
(2) Payment pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of Common
Stock, results in either the receipt of cash (or check) by the Company or the
receipt of irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds;
<PAGE> 27
(3) Provided that at the time of exercise the Company's Common Stock
is publicly traded and quoted regularly in the Wall Street Journal, payment by
delivery of already-owned shares of Common Stock, held for the period required
to avoid a charge to the Company's reported earnings, and owned free and clear
of any liens, claims, encumbrances or security interests, which Common Stock
shall be valued at its fair market value on the date of exercise;
(4) Provided that the option exercise price for the installment, or
portion thereof, being purchased exceeds five hundred dollars ($500), payment
pursuant to the deferred payment alternative as described in paragraph 3(c)
hereof; or
(5) Payment by a combination of the methods of payment permitted by
subparagraph 3(b)(i) through 3(b)(iv) above.
(c) CONDITIONS OF DEFERRED PAYMENT. In the event that you elect to make
payment of the exercise price pursuant to the deferred payment alternative:
(1) Not less than twenty-five percent (25%) of the aggregate exercise
price shall be due at the time of exercise, not less than twenty-five percent
(25%) of said exercise price, plus accrued interest, shall be due each year
after the date of exercise, and final payment of the remainder of the exercise
price, plus accrued interest, shall be due three (3) years from date of exercise
or, at the Company's election, upon termination of your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the
Company;
(2) Interest shall be payable at least annually and shall be charged
at the minimum rate of interest necessary to avoid the treatment as interest,
under any applicable provisions of the Code, of any portion of any amounts other
than amounts stated to be interest under the deferred payment arrangement; and
(3) In order to elect the deferred payment alternative, you must, as a
part of your written notice of exercise, give notice of the election of this
payment alternative and, in order to secure the payment of the deferred exercise
price to the Company hereunder, if the Company so requests, you must tender to
the Company a promissory note and a security agreement covering the purchased
shares, both in form and substance satisfactory to the Company, or such other or
additional documentation as the Company may request.
30. EXERCISE PRIOR TO VESTING PERMITTED.
(a) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of this option
you may elect, at any time during your Continuous Status as an Employee,
Director or Consultant with the Company or an Affiliate of the Company, to
exercise the option as to any part or all of the shares subject to this option
at any time during the term hereof, including without limitation, a time prior
to the date of earliest exercise ("vesting") stated in paragraph 2 hereof;
provided, however, that:
(1) a partial exercise of this option shall be deemed to cover first
vested shares and then the earliest vesting installment of unvested shares;
2
<PAGE> 28
(2) any shares so purchased from installments which have not vested as
of the date of exercise shall be subject to the purchase option in favor of the
Company as described in the Early Exercise Stock Purchase Agreement; and
(3) you shall enter into an Early Exercise Stock Purchase Agreement in
the form provided by the Company with a vesting schedule that will result in the
same vesting as if no early exercise had occurred.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided in this
paragraph 4 to purchase shares upon the exercise of this option prior to the
vesting dates shall cease upon termination of your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the Company
and may not be exercised after the date thereof.
31. WHOLE SHARES. THIS OPTION MAY ONLY BE EXERCISED FOR WHOLE SHARES.
32. SECURITIES LAW COMPLIANCE. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, THIS OPTION MAY NOT BE EXERCISED UNLESS THE SHARES
ISSUABLE UPON EXERCISE OF THIS OPTION ARE THEN REGISTERED UNDER THE
SECURITIES ACT OR, IF SUCH SHARES ARE NOT THEN SO REGISTERED, THE COMPANY
HAS DETERMINED THAT SUCH EXERCISE AND ISSUANCE WOULD BE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
33. TERM. THE TERM OF THIS OPTION COMMENCES ON _______________________, THE
DATE OF GRANT, AND EXPIRES ON __________________________ (THE "EXPIRATION
DATE"), WHICH DATE SHALL BE NO MORE THAN TEN (10) YEARS FROM DATE THIS
OPTION IS GRANTED, UNLESS THIS OPTION EXPIRES SOONER AS SET FORTH BELOW OR
IN THE PLAN. IN NO EVENT MAY THIS OPTION BE EXERCISED ON OR AFTER THE
EXPIRATION DATE. THIS OPTION SHALL TERMINATE PRIOR TO THE EXPIRATION DATE
AS FOLLOWS: THREE MONTHS AFTER JANUARY 1, 1998 IF THE TERMINATION OF YOUR
CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT WITH THE COMPANY
OR AN AFFILIATE OF THE COMPANY OCCURS PRIOR TO JANUARY 1, 1998, OR THREE
MONTHS AFTER THE TERMINATION OF YOUR CONTINUOUS STATUS AS AN EMPLOYEE,
DIRECTOR OR CONSULTANT WITH THE COMPANY OR AN AFFILIATE OF THE COMPANY IF
SUCH TERMINATION OCCURS AFTER JANUARY 1, 1998, UNLESS ONE OF THE FOLLOWING
CIRCUMSTANCES EXISTS:
(a) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your disability. This option will then expire on the
earlier of the Expiration Date set forth above or twelve (12) months following
such termination of Continuous Status as an Employee, Director or Consultant.
(b) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your death or your death occurs within three (3) months
following your termination of Continuous Status as an Employee, Director or
Consultant for any other reason. This option will then expire on the earlier of
the Expiration Date set forth above or twelve (12) months after your death.
(c) If during any part of such three (3)-month period you may not exercise
your option solely because of the condition set forth in paragraph 6 above, then
your option will not expire until the earlier of the Expiration Date set forth
above or until this option shall have been
3
<PAGE> 29
exercisable for an aggregate period of three (3) months after your termination
of Continuous Status as an Employee, Director or Consultant.
(d) If your exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under Section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of (i) the Expiration Date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
However, this option may be exercised following termination of Continuous
Status as an Employee, Director or Consultant only as to that number of shares
as to which it was exercisable on the date of termination of Continuous Status
as an Employee, Director or Consultant under the provisions of paragraph 2 of
this option.
34. EXERCISE.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to subsection 6(f)
of the Plan.
(b) By exercising this option you agree that:
(1) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of this option; (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise; or (3) the disposition of shares acquired upon such exercise. You also
agree that the exercise of this option has not been completed and that the
Company is under no obligation to issue any shares of Common Stock to you until
such an arrangement is established or the Company's tax withholding obligations
are satisfied, as determined by the Company; and
(2) the Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that you not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Securities Act as may be requested by the Company or the
representative of the underwriters. You further agree that the Company may
impose stop transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
35. TRANSFERABILITY. THIS OPTION IS NOT TRANSFERABLE, EXCEPT BY WILL OR BY THE
LAWS OF DESCENT AND DISTRIBUTION, AND IS EXERCISABLE DURING YOUR LIFE ONLY
BY YOU. NOTWITHSTANDING THE FOREGOING, BY DELIVERING WRITTEN NOTICE TO THE
COMPANY, IN A
4
<PAGE> 30
FORM SATISFACTORY TO THE COMPANY, YOU MAY DESIGNATE A THIRD PARTY WHO, IN
THE EVENT OF YOUR DEATH, SHALL THEREAFTER BE ENTITLED TO EXERCISE THIS
OPTION.
36. OPTION NOT A SERVICE CONTRACT. THIS OPTION IS NOT AN EMPLOYMENT CONTRACT
AND NOTHING IN THIS OPTION SHALL BE DEEMED TO CREATE IN ANY WAY WHATSOEVER
ANY OBLIGATION ON YOUR PART TO CONTINUE IN THE EMPLOY OF THE COMPANY, OR OF
THE COMPANY TO CONTINUE YOUR EMPLOYMENT WITH THE COMPANY. IN ADDITION,
NOTHING IN THIS OPTION SHALL OBLIGATE THE COMPANY OR ANY AFFILIATE OF THE
COMPANY, OR THEIR RESPECTIVE STOCKHOLDERS, BOARD OF DIRECTORS, OFFICERS OR
EMPLOYEES TO CONTINUE ANY RELATIONSHIP WHICH YOU MIGHT HAVE AS A DIRECTOR
OR CONSULTANT FOR THE COMPANY OR AFFILIATE OF THE COMPANY.
37. NOTICES. ANY NOTICES PROVIDED FOR IN THIS OPTION OR THE PLAN SHALL BE GIVEN
IN WRITING AND SHALL BE DEEMED EFFECTIVELY GIVEN UPON RECEIPT OR, IN THE
CASE OF NOTICES DELIVERED BY THE COMPANY TO YOU, FIVE (5) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAIL, POSTAGE PREPAID, ADDRESSED TO YOU AT THE
ADDRESS SPECIFIED BELOW OR AT SUCH OTHER ADDRESS AS YOU HEREAFTER DESIGNATE
BY WRITTEN NOTICE TO THE COMPANY.
38. GOVERNING PLAN DOCUMENT. THIS OPTION IS SUBJECT TO ALL THE PROVISIONS OF
THE PLAN, A COPY OF WHICH IS ATTACHED HERETO AND ITS PROVISIONS ARE HEREBY
MADE A PART OF THIS OPTION, INCLUDING WITHOUT LIMITATION THE PROVISIONS OF
SECTION 6 OF THE PLAN RELATING TO OPTION PROVISIONS, AND IS FURTHER SUBJECT
TO ALL INTERPRETATIONS, AMENDMENTS, RULES AND REGULATIONS WHICH MAY FROM
TIME TO TIME BE PROMULGATED AND ADOPTED PURSUANT TO THE PLAN. IN THE EVENT
OF ANY CONFLICT BETWEEN THE PROVISIONS OF THIS OPTION AND THOSE OF THE
PLAN, THE PROVISIONS OF THE PLAN SHALL CONTROL.
39. RIGHT OF FIRST REFUSAL. NO OPTIONEE SHALL SELL, ASSIGN, PLEDGE, OR IN ANY
MANNER TRANSFER ANY OF THE SHARES OF STOCK OF THE COMPANY OR ANY RIGHT OR
INTEREST THEREIN, WHETHER VOLUNTARILY OR BY OPERATION OF LAW, OR BY GIFT OR
OTHERWISE, EXCEPT BY A TRANSFER WHICH MEETS THE REQUIREMENTS SET FORTH
HEREIN:
(a) If the optionee desires to sell or otherwise transfer any of his shares
of stock acquired upon exercise of this option in an "arms-length" transaction,
then the optionee shall first give written notice thereof to the Company. The
notice shall name the proposed transferee and state the number of shares to be
transferred, the proposed consideration, and all other terms and conditions of
the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the Company
shall have the option to purchase all (by not less than all) of the shares
specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the optionee, the Company
shall have the option to purchase a lesser portion of the shares specified in
said notice at the price and upon the terms set forth therein. In the event of a
gift, property settlement or other transfer which would not be considered to
have been made on an "arms-length" basis and in which the proposed transferee is
not paying the full price for the shares, the price shall be deemed to be the
Fair Market Value of the stock at such time as determined in good faith by the
Board. In the event the Company elects to purchase all of the shares or, with
consent of the
5
<PAGE> 31
optionee, a lesser portion of the shares, it shall give written notice to the
transferring optionee of its election and settlement for said shares shall be
made as provided below in paragraph (d).
(c) The Company may assign its rights hereunder.
(d) In the event the Company and/or its assignee(s) elect to acquire any of
the shares of the transferring optionee as specified in said transferring
optionee's notice, the Secretary of the Company shall so notify the transferring
optionee and settlement thereof shall be made in cash within thirty (30) days
after the Secretary of the Company receives said transferring optionee's notice;
provided that if the terms of payment set forth in said transferring optionee's
notice were other than cash against delivery, the Company and/or its assignee(s)
shall pay for said shares on the same terms and conditions set forth in said
transferring optionee's notice.
(e) In the event the Company and/or its assignees(s) do not elect to
acquire all of the shares specified in the transferring optionee's notice, said
transferring optionee may, within the sixty (60)-day period following the
expiration of the option rights granted to the Company and/or its assignees(s)
herein, transfer the shares specified in said transferring optionee's notice
which were not acquired by the Company and/or its assignees(s) as specified in
said transferring optionee's notice.
(f) Notwithstanding anything to the contrary contained herein, the
following transaction shall be exempt from the provisions of this paragraph 13:
a optionee's bona fide pledge or mortgage of any shares with a commercial
lending institution, provided that any subsequent transfer of said shares by
said institution shall be conducted in the manner set forth in this paragraph
13.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this paragraph 13, and
there shall be no further transfer of such stock except in accord with this
paragraph 13.
(g) The provisions of this paragraph 13 may be waived with respect to any
transfer either by the Company, upon duly authorized action of its Board, or by
the stockholders, upon the express written consent of the owners of a majority
of the voting power of the Company (excluding the votes represented by those
shares to be transferred by the transferring optionee).
(h) Any sale or transfer, or purported sale or transfer, of securities of
the Company shall be null and void unless the terms, conditions, and provisions
of this paragraph 13 are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate upon the date
securities of the Company are first offered to the public pursuant to a
registration statement filed with, and declared effective by, the SEC under the
Securities Act.
6
<PAGE> 32
(j) The certificates representing shares of stock of the Company shall bear
on their face the following legend so long as the foregoing right of first
refusal remains in effect:
"The shares represented by this Certificate are subject to a right of
first refusal option in favor of the Corporation and/or its Assignee(s).
Dated _____________.
Very truly yours,
Organic Online, Inc.
By: ___________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1997 Stock Option Plan
Amendment No. 1 to 1997 Stock Option Plan
Notice of Exercise
7
<PAGE> 33
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets forth
the entire understanding between the undersigned optionee and the Company and
its Affiliates regarding the acquisition of stock in the Company and supersedes
all prior oral and written agreements on that subject with the exception of (i)
the options previously granted and delivered to the undersigned under stock
option plans of the Company, and (ii) the following agreements only:
NONE __________
(Initial)
OTHER ______________________________
______________________________
______________________________
________________________________
OPTIONEE
Address:________________________
________________________
8
<PAGE> 34
NOTICE OF EXERCISE
Organic Online, Inc.
510 Third Street, Suite 540
San Francisco, CA 94107
Date of Exercise:_____________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
<TABLE>
<CAPTION>
Type of option: Nonstatutory
<S> <C>
Stock option dated: __________________
Number of shares as
to which option is
exercised: __________________
Certificates to be
issued in name of: __________________
Total exercise price: $__________________
Cash payment delivered
herewith: $__________________
Promissory note delivered
herewith: $__________________
Value of _______ shares
of common stock delivered
herewith(1): $__________________
</TABLE>
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Company's 1997 Stock Option Plan,
as amended, and (ii) to provide for the payment by me to you (in the mariner
designated by you) of your withholding obligation, if any, relating to the
exercise of this option.
- --------
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
1
<PAGE> 35
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock (the "Shares"), which are being
acquired by me for my own account upon exercise of the Option as set forth
above:
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are deemed to
constitute "restricted securities" under Rule 701 and Rule 144 promulgated under
the Securities Act. I warrant and represent to the Company that I have no
present intention of distributing or selling said Shares, except as permitted
under the Securities Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for
at least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended) under Rule 701 and that more
restrictive conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of any securities of the Company under the Securities Act, I will
not sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or
representatives of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
__________________________________
1~
2
<PAGE> 1
EXHIBIT 10.3
ORGANIC INC. 1999
LONG-TERM STOCK INCENTIVE PLAN
<PAGE> 2
ORGANIC INC. 1999
LONG-TERM STOCK INCENTIVE PLAN
SECTION 1
GENERAL
1.1. Purpose. The Organic Inc. 1999 Long-Term Stock Incentive Plan (the
"Plan") has been established by Organic Inc. (the "Company") to (i) attract and
retain persons eligible to participate in the Plan; (ii) motivate Participants,
by means of appropriate incentives, to achieve long-range goals; (iii) provide
incentive compensation opportunities that are competitive with those of other
similar companies; and (iv) further identify Participants' interests with those
of the Company's other shareholders through compensation that is based on the
Company's common stock; and thereby promote the long-term financial interest of
the Company and the Subsidiaries, including the growth in value of the Company's
equity and enhancement of long-term shareholder return.
1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Individuals (including transferees of Eligible Individuals to the
extent the transfer is permitted by the Plan and the applicable Award
Agreement), those persons who will be granted one or more Awards under the Plan,
and thereby become "Participants" in the Plan.
1.3. Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth in
the Plan (including the definition provisions of Section 8 of the Plan).
SECTION 2
OPTIONS AND SARS
2.1. Definitions.
(a) The grant of an "Option" entitles the Participant to purchase shares of
Stock at an Exercise Price established by the Committee. Any Option
granted under this Section 2 may be either an incentive stock option (an
"ISO") or a non-qualified option (an "NQO"), as determined in the
discretion of the Committee. An "ISO" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock option"
described in section 422(b) of the Code. An "NQO" is an Option that is
not intended to be an "incentive stock option" as that term is described
in section 422(b) of the Code.
(b) A stock appreciation right (an "SAR") entitles the Participant to
receive, in cash or Stock (as determined in accordance with subsection
2.5), value equal to (or otherwise based on)
<PAGE> 3
the excess of: (a) the Fair Market Value of a specified number of shares
of Stock at the time of exercise; over (b) an Exercise Price established
by the Committee.
2.2. Exercise Price. The "Exercise Price" of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; provided that, for NQOs and SARs, the Exercise Price shall not
be less than 85% of the Fair Market Value of a share of Stock on the date of
grant, and for ISOs, the Exercise Price shall not be less than 100% of the Fair
Market Value of a share of Stock on the date of grant; and further provided that
the Exercise Price of for an Option or SAR with respect to a share of Stock
shall not be less than the par value of a share of Stock.
2.3. Exercise. An Option and an SAR shall be exercisable in accordance
with such terms and conditions and during such periods as may be established by
the Committee.
2.4. Payment of Option Exercise Price. The payment of the Exercise Price
of an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the full
Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the
case of an exercise arrangement approved by the Committee and described
in paragraph 2.4(c), payment may be made as soon as practicable after
the exercise).
(b) The Exercise Price shall be payable in cash or by tendering, by either
actual delivery of shares or by attestation, shares of Stock acceptable
to the Committee, and valued at Fair Market Value as of the day of
exercise, or in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by irrevocably authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the Option and remit to the Company a
sufficient portion of the sale proceeds to pay the entire Exercise Price
and any tax withholding resulting from such exercise.
2.5. Settlement of Award. Settlement of Options and SARs is subject to
subsection 4.7.
SECTION 3
OTHER STOCK AWARDS
3.1. Definitions.
-2-
<PAGE> 4
(a) A "Stock Unit" Award is the grant of a right to receive shares of Stock
in the future.
(b) A "Performance Share" Award is a grant of a right to receive shares of
Stock or Stock Units which is contingent on the achievement of
performance or other objectives during a specified period.
(c) A "Performance Unit" Award is a grant of a right to receive a designated
dollar value amount of Stock which is contingent on the achievement of
performance or other objectives during a specified period.
(d) A "Restricted Stock" Award is a grant of shares of Stock, and a
"Restricted Stock Unit" Award is the grant of a right to receive shares
of Stock in the future, with such shares of Stock or right to future
delivery of such shares of Stock subject to a risk of forfeiture or
other restrictions that will lapse upon the achievement of one or more
goals relating to completion of service by the Participant, or
achievement of performance or other objectives, as determined by the
Committee.
3.2. Restrictions on Awards. Each Stock Unit Award, Restricted Stock
Award, Restricted Stock Unit Award, Performance Share Award , and Performance
Unit Award shall be subject to such conditions, restrictions and contingencies
as the Committee shall determine.
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective as of December 15 (the "Effective Date");
provided, however, that to the extent that Awards are granted under the Plan
prior to its approval by shareholders, the Awards shall be contingent on
approval of the Plan by the shareholders of the Company. The Plan shall only
remain in effect until the 10-year anniversary of the date the Plan is adopted
by the Board or the date the Plan is approved by shareholders, whichever is
earlier.
4.2. Shares Subject to Plan. The shares of Stock for which Awards may be
granted under the Plan shall be subject to the following:
(a) The shares of Stock with respect to which Awards may be made under the
Plan shall be shares currently authorized but unissued or currently held
or subsequently acquired by the Company as treasury shares, including
shares purchased in the open market or in private transactions.
(b) Subject to the following provisions of this subsection 4.2, the maximum
number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be 3,500,000 shares of Stock,
plus an annual increase on the first day of each of the Company's fiscal
years beginning in 2000 and ending in 2009, equal to the lesser of (i)
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1,000,000 Shares, (ii) four percent (4%) of the Shares outstanding on
the last day of the immediately preceding fiscal year, or (iii) such
lesser number of shares as is determined by the Board.
(c) To the extent provided by the Committee, any Award may be settled in
cash rather than Stock. To the extent any shares of Stock covered by an
Award are not delivered to a Participant or beneficiary because the
Award is forfeited or canceled, or the shares of Stock are not delivered
because the Award is settled in cash or used to satisfy the applicable
tax withholding obligation, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of
Stock available for delivery under the Plan.
(d) If the exercise price of any stock option granted under the Plan is
satisfied by tendering shares of Stock to the Company (by either actual
delivery or by attestation), only the number of shares of Stock issued
net of the shares of Stock tendered shall be deemed delivered for
purposes of determining the maximum number of shares of Stock available
for delivery under the Plan.
(e) Subject to paragraph 4.2(f), the maximum number of shares of Stock that
may be issued by Options intended to be ISOs shall be 3,500,000 shares.
(f) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares),
the Committee may adjust Awards to preserve the benefits or potential
benefits of the Awards. Action by the Committee may include: (i)
adjustment of the number and kind of shares which may be delivered under
the Plan; (ii) adjustment of the number and kind of shares subject to
outstanding Awards; (iii) adjustment of the Exercise Price of
outstanding Options and SARs; and (iv) any other adjustments that the
Committee determines to be equitable.
4.3. General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have
no liability to deliver any shares of Stock under the Plan or make any
other distribution of benefits under the Plan unless such delivery or
distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.
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(b) To the extent that the Plan provides for issuance of stock certificates
to reflect the issuance of shares of Stock, the issuance may be effected
on a non-certificated basis, to the extent not prohibited by applicable
law or the applicable rules of any stock exchange.
4.4. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan.
4.5. Grant and Use of Awards. In the discretion of the Committee, a
Participant may be granted any Award permitted under the provisions of the Plan,
and more than one Award may be granted to a Participant. Awards may be granted
as alternatives to or replacement of awards granted or outstanding under the
Plan, or any other plan or arrangement of the Company or a Subsidiary (including
a plan or arrangement of a business or entity, all or a portion of which is
acquired by the Company or a Subsidiary). Subject to the overall limitation on
the number of shares of Stock that may be delivered under the Plan, the
Committee may use available shares of Stock as the form of payment for
compensation, grants or rights earned or due under any other compensation plans
or arrangements of the Company or a Subsidiary, including the plans and
arrangements of the Company or a Subsidiary assumed in business combinations.
4.6. Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock,
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.
4.7. Settlement of Awards. The obligation to make payments and
distributions with respect to Awards may be satisfied through cash payments, the
delivery of shares of Stock, the granting of replacement Awards, or combination
thereof as the Committee shall determine. Satisfaction of any such obligations
under an Award, which is sometimes referred to as "settlement" of the Award, may
be subject to such conditions, restrictions and contingencies as the Committee
shall determine. The Committee may permit or require the deferral of any Award
payment, subject to such rules and procedures as it may establish, which may
include provisions for the payment or crediting of interest or dividend
equivalents, and may include converting such
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credits into deferred Stock equivalents. Each Subsidiary shall be liable for
payment of cash due under the Plan with respect to any Participant to the extent
that such benefits are attributable to the services rendered for that Subsidiary
by the Participant. Any disputes relating to liability of a Subsidiary for cash
payments shall be resolved by the Committee.
4.8. Transferability. Awards under the Plan are not transferable except
as designated by the Participant by will or by the laws of descent and
distribution.
4.9. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.
4.10. Agreement With Company. An Award under the Plan shall be subject
to such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any Award
to any Participant shall be reflected in such form of written document as is
determined by the Committee. A copy of such document shall be provided to the
Participant, and the Committee may, but need not require that the Participant
sign a copy of such document. Such document is referred to in the Plan as an
"Award Agreement" regardless of whether any Participant signature is required.
4.11. Action by Company or Subsidiary. Any action required or permitted
to be taken by the Company or any Subsidiary shall be by resolution of its board
of directors, or by action of one or more members of the board (including a
committee of the board) who are duly authorized to act for the board, or (except
to the extent prohibited by applicable law or applicable rules of any stock
exchange) by a duly authorized officer of such company.
4.12. Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
4.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets,
funds or property of the Company or any Subsidiary whatsoever,
including, without limitation, any specific funds, assets, or other
property which the Company or any Subsidiary, in its sole discretion,
may set aside in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the Stock or amounts,
if any, payable under the Plan, unsecured by any assets of the Company
or any Subsidiary, and nothing contained in the Plan shall constitute a
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guarantee that the assets of the Company or any Subsidiary shall be
sufficient to pay any benefits to any person.
(b) The Plan does not constitute a contract of employment, and selection as
a Participant will not give any participating employee or other
individual the right to be retained in the employ of the Company or any
Subsidiary or the right to continue to provide services to the Company
or any Subsidiary, nor any right or claim to any benefit under the Plan,
unless such right or claim has specifically accrued under the terms of
the Plan. Except as otherwise provided in the Plan, no Award under the
Plan shall confer upon the holder thereof any rights as a shareholder of
the Company prior to the date on which the individual fulfills all
conditions for receipt of such rights.
4.14. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
SECTION 5
CHANGE IN CONTROL
5.1. Change in Control. Subject to the provisions of paragraph 4.2(f)
(relating to the adjustment of shares), and except as otherwise provided in the
Plan or the Award Agreement reflecting the applicable Award, upon the occurrence
of a Change in Control:
(a) If a Participant who is employed by the Company or an Affiliate at the
time of a Change in Control holds one or more outstanding Options, such
Participant shall be credited with two years of additional vesting
service for purposes of the vesting of Options (regardless of whether in
tandem with SARs), and the vesting of any Stock purchased by the
Participant under an Option.
(b) If a Participant who is employed by the Company or an Affiliate at the
time of a Change in Control holds one or more outstanding SARs, such
Participant shall be credited with two years of additional vesting
service for purposes of the vesting of SARs (regardless of whether in
tandem with Options), and the vesting of any cash or stock acquired by
the Participant under such SAR.
(c) If a Participant who is employed by the Company or an Affiliate at the
time of a Change in Control holds one or more of the following Awards:
Stock Units, Restricted Stock, Restricted Stock Units, or Performance
Shares, such Participant shall be credited with two years of additional
vesting service for purposes of the vesting of all such awards.
(d) If a Participant who is employed by the Company or an Affiliate at the
time of a Change in Control holds any Option or SAR granted under the
Plan and prior to the one-year
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anniversary of the Change in Control such Participant is either (i)
terminated by the Company for reasons other than Cause or (ii)
terminates employment for Good Reason, such Participant shall become
fully vested in any Awards granted under the Plan and shall have the
greater of (i) 90 days from the date of such termination or (ii) the
period otherwise specified for exercise after termination had the
Participant been fully vested in the Awards on the date of termination
to exercise such Awards; provided, however, that in no event shall the
Option or SAR be exercisable at a date that is later than the date it
would have been exercisable if the Participant had remained employed by
the Company or a Subsidiary.
5.2. Potential Change in Control. If the Participant's employment is
terminated by the Company without Cause during a Potential Change in Control,
and such date of termination occurs not more than 60 days prior to the
occurrence of a Change in Control, then the Participant shall be entitled to
receive the benefits that he would have received under paragraph 5.1(d),
determined as though his employment was terminated by the Company without Cause
immediately after the Change in Control. A "Potential Change in Control" shall
exist during any period in which the circumstances described in paragraphs (a),
(b), or (c) below exist (provided, however, that a Potential Change in Control
shall cease to exist not later than the occurrence of a Change in Control):
(a) The Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control, provided that a
Potential Change in Control described in this paragraph 5.2(a) shall
cease to exist upon the expiration or other termination of all such
agreements.
(b) Any person (including the Company) publicly announces an intention to
take or to consider taking actions the consummation of which would
constitute a Change in Control; provided that a Potential Change in
Control described in this paragraph 5.2(b) shall cease to exist upon the
withdrawal of such intention, or upon a reasonable determination by the
Board that there is no reasonable chance that such actions would be
consummated.
(c) The Board adopts a resolution to the effect that, for purposes of the
Plan, a Potential Change in Control exists; provided that a Potential
Change in Control described in this paragraph 5.2(c) shall cease to
exist upon a reasonable determination by the Board that the reasons that
gave rise to the resolution providing for the existence of a Potential
Change in Control have expired or no longer exist.
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SECTION 6
COMMITTEE
6.1. Administration. The authority to control and manage the operation
and administration of the Plan shall be vested in a committee (the "Committee")
in accordance with this Section 6. The Committee shall be selected by the Board.
If the Committee does not exist, or for any other reason determined by the
Board, the Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.
6.2. Powers of Committee. The Committee's administration of the Plan
shall be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Individuals
those persons who shall receive Awards, to determine the time or times
of receipt, to determine the types of Awards and the number of shares
covered by the Awards, to establish the terms, conditions, performance
criteria, restrictions, and other provisions of such Awards, and
(subject to the restrictions imposed by Section 7) to cancel or suspend
Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes of
the Awards in jurisdictions outside the United States, the Committee
will have the authority and discretion to modify those restrictions as
the Committee determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions outside of the
United States.
(c) The Committee will have the authority and discretion to interpret the
Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any Award
Agreement made pursuant to the Plan, and to make all other
determinations that may be necessary or advisable for the administration
of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made by
it under the Plan is final and binding on all persons.
(e) In controlling and managing the operation and administration of the
Plan, the Committee shall take action in a manner that conforms to the
articles and by-laws of the Company, and applicable state corporate law.
6.3. Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
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6.4. Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to discharge its duties. The records of the
Company and Subsidiaries as to an employee's or Participant's employment (or
other provision of services), termination of employment (or cessation of the
provision of services), leave of absence, reemployment and compensation shall be
conclusive on all persons unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
such evidence, data or information as the Committee considers desirable to carry
out the terms of the Plan.
SECTION 7
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that
no amendment or termination may, in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; and further provided that adjustments
pursuant to paragraph 4.2(f) shall not be subject to the foregoing limitations
of this Section 7.
SECTION 8
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
(a) Award. The term "Award" shall mean any award or benefit granted under
the Plan, including, without limitation, the grant of Options, SARs,
Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit
Awards, Performance Unit Awards] and Performance Share Awards.
(b) Board. The term "Board" shall mean the Board of Directors of the
Company.
(c) Cause. The term "Cause" shall mean any of the following: (1) the willful
and continued failure by the Participant to substantially perform his
duties, other than by reason of his being Disabled (as defined below),
(2) the willful engaging by the Participant in conduct which is
demonstrably and materially injurious to the Company or its affiliates,
(3) conduct by the Participant that involves theft or fraud or,
dishonesty in connection with his duties, (4) Participant's violation of
a non-compete or confidentiality agreement, or (5) conviction of felony
involving moral turpitude.
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(d) Change in Control. For purposes of the Plan, the term "Change in
Control" means the occurrence, after an initial public offering of the
stock of the Company of the events described in any of paragraphs (i),
(ii), (iii), (iv) or (v) below:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty-five percent (25%) or more of either (i) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock"), or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(i), the following acquisitions shall not constitute a Change in
Control: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company), (B) any acquisition
by the Company, (C) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company (a "Company Plan"), (D) any acquisition by an
underwriter temporarily holding securities pursuant to an offering of
such securities; or (E) any acquisition by any corporation pursuant to a
transaction which complies with subsections (b)(iii)(A), (b)(iii)(B),
and (b)(iii)(C) of this definition; provided further, that for purposes
of clause (B), if any Person (other than the Company or any Company
Plan) shall become the beneficial owner of twenty-five percent (25%) or
more of the Outstanding Company Common Stock or twenty-five percent
(25%) or more of the Outstanding Company Voting Securities by reason of
an acquisition by the Company, and such Person shall, after such
acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Company Common Stock or any
additional Outstanding Company Voting Securities (other than pursuant to
any dividend reinvestment plan or arrangement maintained by the Company)
and such beneficial ownership is publicly announced, such additional
beneficial ownership shall constitute a Change in Control.
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors of the Company (for purposes of this subsection (b), the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Incumbent Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company shareholders, was approved by a
vote of a least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest (as such terms are used in Rule
14a-11 promulgated
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under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board of
Directors of the Company.
(iii) Consummation, including receipt of any necessary regulatory
approval, of (i) a reorganization, merger or consolidation involving the
Company or (ii) the sale or other disposition of more than 50% of the
operating assets of the Company (determined on a consolidated basis),
other than in connection with a sale-leaseback or other arrangement
resulting in the continued utilization of such assets (or the operating
products of such assets) by the Company (any transaction described in
part (i) or (ii) being referred to as a "Corporate Transaction");
excluding, however, a Corporate Transaction pursuant to which all of
paragraphs (A), (B), and (C) below are applicable:
(A) All or substantially of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction beneficially
own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which, as a result
of such transaction, owns the Company or all or substantially
all of the assets of the Company either directly or through one
or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
(B) No Person (other than the Company, any Company Plan or related
trust, the corporation resulting from such Corporate
Transaction, and any Person which beneficially owned,
immediately prior to such Corporate Transaction, directly or
indirectly, twenty-five percent (25%) or more than the
Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be) will beneficially own,
directly or indirectly, twenty-five percent (25%) or more of,
respectively, the then outstanding common stock of the
corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding voting securities
of such corporation.
(C) Individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate
Transaction.
(iv) A tender offer (for which a filing has been made with the
Securities and Exchange Commission (the "SEC") which purports to comply
with the requirements of Section
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14(d) of the Exchange Act and the corresponding SEC rules) is made for
the stock of the Company, which has not been negotiated and approved by
the Board, provided that in case of a tender offer described in this
subsection (iv), the Change in Control will be deemed to have occurred
upon the first to occur of (A) any time during the offer period when the
Person (as defined in subsection (b)(i), above) making the offer
beneficially owns or has accepted for payment stock of the Company with
25% or more of the combined voting power of the then Outstanding Company
Voting Securities or (B) 3 business days before the offer is to
terminate, unless the offer is withdrawn first, if the Person making the
offer could own, by the terms of the offer plus any shares beneficially
owned by that Person, stock with 50% or more of the combined voting
power of the then Outstanding Company Voting Securities when the offer
terminates.
(v) Approval by the shareholders of the Company of a plan of complete
liquidation or dissolution of the Company.
(e) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include
reference to any successor provision of the Code.
(f) Disability. The term "Disability" shall mean the inability of the
Participant, after reasonable accommodation, to continue to perform his
duties on a full-time basis as a result of mental or physical illness,
sickness or injury and the Company determines that such disability is of
a long-term nature.
(g) Eligible Individual. The term "Eligible Individual" shall mean any
employee of the Company or a Subsidiary, and any consultant, director,
or other person providing services to the Company or a Subsidiary. An
Award may be granted to an individual, in connection with hiring,
retention or otherwise, prior to the date the employee first performs
services for the Company or the Subsidiaries, provided that such Awards
shall not become vested prior to the date the employee first performs
such services.
(h) Fair Market Value. For purposes of determining the "Fair Market Value"
of a share of Stock as of any date, the following rules shall apply,
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations, subject to the following:
(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National
Market or the Nasdaq SmallCap, the "Fair Market Value" of a share of
Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in Stock) on the last
market trading day prior to the day of determination, as reported in the
Wall Street Journal or such other source as the Board deems reliable.
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(ii) In the absence of an established market for the Stock, the "Fair
Market Value" shall be determined in good faith by the Board.
(i) Good Reason. The term "Good Reason" shall mean any of the following
which occur without the Participant's consent and which are not
corrected by the Company within 10 days of written notice to the Company
by the Participant: (1) a diminution of the Participant's duties or the
assignment to him of duties that are inconsistent in any substantial
respect with the position, authority or responsibilities associated with
his position, (2) a reduction in the Participant's salary rate or bonus
potential; or (3) a relocation of the Participant, that occurs after a
Change of Control and without the Participant's consent, of over 100
miles from the Participant's primary employment location as of the date
of the Change of Control, except for required travel on Company business
to an extent substantially consistent with the Participant's business
travel obligations prior to the date of the Change of Control.
(j) Subsidiaries. The term "Subsidiary" means any company during any period
in which it is a "subsidiary corporation" (as that term is defined in
Code section 424(f)) with respect to the Company.
(k) Stock. The term "Stock" shall mean shares of common stock of the
Company.
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ORGANIC INC. 1999
LONG-TERM STOCK INCENTIVE PLAN
Appendix A
Notwithstanding any other provision of the Plan to the contrary, the
following provisions shall be applicable to the Plan:
1. Exercise Price. With respect to any Option or SAR granted to any
person who possesses more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or Parent (as defined in Code
section 424(e)) of the Company such Option or SAR shall have an exercise price
not less than 110% of the Fair Market Value of a share of Stock on the date of
grant.
2. Expiration. All Options granted under the Plan shall expire not later
than the 10-year anniversary of the date of grant.
3. Transferability. Awards granted pursuant to the Plan are not
transferable except by the laws of descent and distribution.
4. Adjustment. In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reclassification, reorganization,
merger, consolidation, split-up, spin-off, combination or exchange of shares),
the Committee shall adjust Awards to preserve the benefits or potential benefits
of the Awards. Action by the Committee may include: (i) adjustment of the number
and kind of shares which may be delivered under the Plan; (ii) adjustment of the
number and kind of shares subject to outstanding Awards; (iii) adjustment of the
Exercise Price of outstanding Options and SARs; and (iv) any other adjustments
that the Committee determines to be equitable.
5. Exercisability. Any Option granted under the Plan shall become
exercisable at a rate of at least 20% per year over 5 years from the date the
Option is granted, provided the Participant is employed by the Company at such
time. In addition, if the Participant resigns from employment, or is terminated
by the Company for any reason other than cause (as defined by applicable law),
any Options which have become exercisable prior to the time of such termination,
shall remain exercisable for:
(a) 6 months from the date of such termination if such termination was
caused by death or Disability; or
(b) 30 days from the date of such termination if such termination was caused
by reasons other than death or Disability.
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ISO AGREEMENT
THIS AGREEMENT, entered into as of the Grant Date (as defined in
paragraph 1), by and between the Participant and Organic Inc. (the "Company");
WITNESSETH THAT:
WHEREAS, the Company maintains the Organic Inc. 1999 Long-Term Stock
Incentive Plan (the "Plan"), which is incorporated into and forms a part of this
Agreement, and the Participant has been selected by the committee administering
the Plan (the "Committee") to receive an Incentive Stock Option Award under the
Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:
1. Terms of Award. The following terms used in this Agreement shall have
the meanings set forth in this paragraph 1:
(a) The "Participant" is _________________.
(b) The "Grant Date" is _________________.
(c) The number of "Covered Shares" shall be _____________ shares
of Stock.
(d) The "Exercise Price" is $_____________ per share.
Other terms used in this Agreement are defined pursuant to paragraph 13 or
elsewhere in this Agreement.
2. Award and Exercise Price. This Agreement specifies the terms of the
option (the "Option") granted to the Participant to purchase the number of
Covered Shares of Stock at the Exercise Price per share as set forth in
paragraph 1. The Option is intended to constitute an "incentive stock option" as
that term is used in Code section 422. To the extent that the aggregate fair
market value (determined at the time of grant) of Shares with respect to which
incentive stock options are exercisable for the first time by the Participant
during any calendar year under all plans of the Company and its Subsidiaries
exceeds $100,000, the options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
nonstatutory stock options. It should be understood that there is no assurance
that the Option will, in fact, be treated as an incentive stock option.
3. Date of Exercise. Subject to the limitations of this Agreement, and
unless the Participant chooses to exercise the Option prior to vesting pursuant
to paragraph 4, the Option shall become exercisable with respect to 1/4 of the
Covered Shares on the one-year anniversary of the Grant Date (but only if the
Date of Termination has not occurred before the one-year
<PAGE> 18
anniversary). After such one-year anniversary, the Option shall become
exercisable with respect to an additional 1/48 of the Covered Shares on each
subsequent one-month anniversary of the Grant Date (but only if the Date of
Termination has not occurred before the respective one-month anniversary), until
such time as this Option is fully exercisable. Covered Shares as to which the
Option is exercisable in accordance with this paragraph 3 (regardless of whether
the Option has been exercised with respect to those shares) are sometimes
referred to as "vested shares," and Covered Shares as to which the Option is not
exercisable in accordance with this paragraph 3, until such time as the Option
would have become exercisable with respect to those shares (regardless of
whether the Option has been exercised with respect to those shares in accordance
with paragraph 4) are sometimes referred to as "unnvested shares." If the
Participant is employed by the Company or an Affiliate at the time of a Change
in Control holds one or more outstanding Options, such Participant shall be
credited with two years of additional vesting service for purposes of the
vesting of Options, and the vesting of any Stock purchased by the Participant
under an Option.
Notwithstanding the foregoing provisions of this paragraph 3, the Option shall
become fully vested and exercisable upon the Date of Termination, if the Date of
Termination occurs by reason of the Participant's death or Disability. The
Option may be exercised on or after the Date of Termination only as to that
portion of the Covered Shares for which it was exercisable (or became
exercisable) immediately prior to the Date of Termination.
[THE FOLLOWING PARAGRAPH PROVIDES FOR FULL VESTING UPON TERMINATION OF
EMPLOYMENT IN THE 13TH MONTH AFTER A CHANGE IN CONTROL.]
[Notwithstanding any other provision, if a Change in Control occurs, and the
Participant terminates employment with the Company for any reason during the 30
day period which begins on the one-year anniversary of the Change in Control,
any Awards granted to the Participant shall become fully vested and exercisable
on such date of termination, and the Participant shall have the greater of (i)
90 days from the date of such termination or (ii) the period otherwise specified
for exercise after termination had the Participant been fully vested in the
Awards on the date of termination to exercise such Awards.]
4. Exercise Prior to Vesting. Subject to the provisions of the Option,
the Participant may elect, at any time prior to his Termination Date, to
exercise the Option as to any part or all of the Covered Shares subject to this
Option at any time prior to the Expiration Date, including, without limitation,
a time prior to the date on which the Option would otherwise be exercisable in
accordance with paragraph 3; provided, however, that:
(a) A partial exercise of the Option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares.
(b) Any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase
Agreement.
<PAGE> 19
(c) The Participant shall be required to enter into an Early
Exercise Stock Purchase Agreement in the form provided by the Company with a
vesting schedule that will result in the same vesting as if no early exercise
had occurred.
(d) The Option shall not be exercisable under this paragraph 4 to
the extent such exercise would cause the aggregate Fair Market Value of any
shares subject to incentive stock options granted by the Company or any
Subsidiary (valued as of their grant date) which would become exercisable for
the first time during any calendar year to exceed $100,000.
The election provided in this paragraph 4 to purchase shares upon the exercise
of the Option prior to the Vesting Date shall cease upon the Participant's
Termination Date.
5. Expiration. The Option shall not be exercisable after the Company's
close of business on the last business day that occurs prior to the Expiration
Date. The "Expiration Date" shall be earliest to occur of:
(a) the ten-year anniversary of the Grant Date;
(b) if the Date of Termination occurs by reason of death,
Disability or Retirement, the one- year anniversary of such Date of Termination;
or
(c) if the Date of Termination occurs for reasons other than
death, Disability, or Retirement, the 90-day anniversary of such Date of
Termination.
6. Method of Option Exercise. Subject to the terms of this Agreement and
the Plan, the Option may be exercised in whole or in part by filing a written
notice with the Secretary of the Company at its corporate headquarters prior to
the Company's close of business on the last business day that occurs prior to
the Expiration Date. Such notice shall specify the number of shares of Stock
which the Participant elects to purchase, and shall be accompanied by payment of
the Exercise Price, or a portion of the Exercise Price as specified below if the
Participant elects to use the deferred payment alternative described below in
paragraph 8, for such shares of Stock indicated by the Participant's election.
The Option shall not be exercisable if and to the extent the Company determines
that such exercise would violate applicable state or Federal securities laws or
the rules and regulations of any securities exchange on which the Stock is
traded. If the Company makes such a determination, it shall use all reasonable
efforts to obtain compliance with such laws, rules and regulations. In making
any determination hereunder, the Company may rely on the opinion of counsel for
the Company.
7. Payment of Exercise Price. Payment of the Exercise Price may be made
by any of the following methods or any combination thereof,
(a) By cash or by check payable to the Company;
(b) Except as otherwise provided by the Committee before the
Option is exercised and provided that the Company's common stock is publicly
traded and quoted regularly in the Wall Street Journal, by delivery of shares of
Stock owned by the Participant and
<PAGE> 20
acceptable to the Committee having an aggregate Fair Market Value (valued as of
the date of exercise) that is equal to the amount of cash that would otherwise
be required; or
(c) By authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.
8. Deferral Payment Alternative. Provided that the Exercise Price for
the installment, or portion thereof, being purchased exceeds $500, the
Participant may pay the Exercise Price pursuant to the deferred payment
alternative as follows:
(a) Not less than twenty-five percent (25%) of the aggregate
Exercise Price shall be due at the time of exercise, not less than twenty-five
percent (25%) of said Exercise Price, plus accrued interest, shall be due each
year after the date of exercise, and final payment of the remainder of the
Exercise Price, plus accrued interest, shall be due three (3) years from date of
exercise or, at the Company's election, upon the Participant's Termination Date;
(b) Interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement; and
(c) In order to elect the deferred payment alternative, the
Participant must, as a part of his written notice of exercise, give notice of
the election of this payment alternative and, in order to secure the payment of
the deferred Exercise Price to the Company hereunder, if the Company so
requests, the Participant must tender to the Company a promissory note and a
security agreement covering the purchased shares, both in form and substance
satisfactory to the Company, or such other or additional documentation as the
Company may request.
9. Limit on Stock Sales. Any shares that a Participant acquires as a
result of the exercise of the Option shall be subject to the following
restrictions regarding sale or transfer:
(a) The Participant must notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the shares of the
Stock issued upon exercise of this Option that occurs within two (2) years after
the date of the Grant Date or within one (1) year after such shares of Stock are
transferred upon exercise of the Option; and
(b) The Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require that the Participant
not sell or otherwise transfer or dispose of any shares of Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. The Participant further agrees that the
Company may impose stop-transfer
<PAGE> 21
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
10. Right of First Refusal by the Company. The Participant shall not
sell, assign, pledge or in any manner transfer any of the shares of Stock or any
right or interest therein, whether voluntarily or by operation of law, or by
gift or otherwise, except by a transfer which meets the following requirements:
(a) If the Participant desires to sell or otherwise transfer any
of its shares of stock acquired upon exercise of the Option in an "arms-length"
transaction, then the Participant shall first give written notice thereof to the
Company. The notice shall name the proposed transferee and state the number of
shares to be transferred, the proposed consideration, and all other terms and
conditions of the proposed transfer. (b) For thirty (30) days following receipt
of such notice, the Company shall have the option to purchase all (but not less
than all) of the shares specified in the notice at the price and upon the terms
set forth in such notice; provided, however, that, with the consent of the
Participant, the Company shall have the option to purchase a lesser portion of
the shares of Stock specified in said notice at the price and upon the terms set
forth therein. In the event of a gift, property settlement or other transfer
which would not be considered to have been made on an "arms length" basis and in
which the proposed transferee is not paying the full price for the shares, the
price shall be deemed to be the Fair Market Value of the stock at such time as
determined in good faith by the Board. In the event the Company elects to
purchase all of the shares or, with consent of the Participant, a lesser portion
of the shares, it shall give written notice to the transferring Participant of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(c) The Company may assign its rights hereunder.
(d) In the event the Company and/or its assignee(s) elect to
acquire any of the shares of the transferring Participant as specified in said
transferring Participant's notice, the Secretary of the Company shall so notify
the transferring Participant and settlement thereof shall be made in cash within
thirty (30) days after the Secretary of the Company receives said transferring
Participant's notice; provided that if the terms of payment set forth in said
transferring Participant's notice were other than cash against delivery, the
Company and/or its assignee(s) shall pay for said shares on the same terms and
conditions set forth in said transferring Participant's notice.
(e) In the event the Company and/or its assignee(s) do not elect
to acquire all of the shares specified in the transferring Participant's notice,
said transferring Participant may, within the sixty (60)-day period following
the expiration of the option rights granted to the Company and/or its
assignee(s) herein, transfer the shares specified in said transferring
Participant's notice which were not acquired by the Company and/or its
assignee(s) as specified in said transferring Participant's notice.
<PAGE> 22
(f) Notwithstanding anything to the contrary contained herein,
the following transaction shall be exempt from the provisions of this paragraph
10: an Participant's bona fide pledge or mortgage of any shares with a
commercial lending institution, provided that any subsequent transfer of said
shares by said institution shall be conducted in the manner set forth in this
paragraph 10. In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock subject to the provisions of this paragraph
10, and there shall be no further transfer of such stock except in accord with
this paragraph 10.
(g) The provisions of this paragraph 10 may be waived with
respect to any transfer either by the Company, upon duly authorized action of
its Board, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the Company (excluding the votes
represented by those shares to be transferred by the transferring Participant).
(h) Any sale or transfer, or purported sale or transfer, of
securities of the Company shall be null and void unless the terms, conditions
and provisions of this paragraph 10 are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate upon the
date securities of the Company are first offered to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933.
(j) The certificates representing shares of stock of the Company
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"The shares represented by this Certificate are subject to a
right of first refusal option in favor of the Company and/or its
Assignee(s)."
11. Withholding. All deliveries and distributions under this Agreement
are subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules and limitations as may be established by
the Committee from time to time, such withholding obligations may be satisfied
through the surrender of shares of Stock which the Participant already owns, or
to which the Participant is otherwise entitled under the Plan.
12. Transferability. The Option is not transferable other than as
designated by the Participant by will or by the laws of descent and
distribution, and during the Participant's life, may be exercised only by the
Participant.
13. Definitions. For purposes of this Agreement, the terms used in this
Agreement shall be subject to the following:
(a) Change in Control. The term "Change in Control" shall be
defined as that term is defined in the Plan.
(b) Date of Termination. The "Date of Termination" shall be the
first day occurring on or after the Grant Date on which the Participant is not
employed by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a
<PAGE> 23
termination of employment shall not be deemed to occur by reason of a transfer
of the Participant between the Company and a Subsidiary or between two
Subsidiaries; and further provided that the Participant's employment shall not
be considered terminated while the Participant is on a leave of absence from the
Company or a Subsidiary approved by the Participant's employer. If, as a result
of a sale or other transaction, the Participant's employer ceases to be a
Subsidiary (and the Participant's employer is or becomes an entity that is
separate from the Company), and the Participant is not, at the end of the 30-day
period following the transaction, employed by the Company or an entity that is
then a Subsidiary, then the occurrence of such transaction shall be treated as
the Participant's Date of Termination caused by the Participant being discharged
by the employer.
(c) Disability. Except as otherwise provided by the Committee,
the Participant shall be considered to have a "Disability" during the period in
which the Participant is unable, by reason of a medically determinable physical
or mental impairment, to engage in any substantial gainful activity, which
condition, in the opinion of a physician selected by the Committee, is expected
to have a duration of not less than 120 days.
(d) Retirement. "Retirement" of the Participant shall mean, with
the approval of the Committee, the occurrence of the Participant's Date of
Termination on or after the date the Participant attains age 55.
(e) Plan Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan is similarly
used in this Agreement.
14. Whole Shares. This Option may only be exercised for whole shares. In
lieu of issuing a fraction of a share upon any exercise of the Option, resulting
from an adjustment of the Option pursuant to paragraph 4.2(f) of the Plan or
otherwise, the Company will be entitled to pay to the Participant an amount
equal to the Fair Market Value of such fractional share.
15. Heirs and Successors. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business. If any
rights exercisable by the Participant or benefits deliverable to the Participant
under this Agreement have not been exercised or delivered, respectively, at the
time of the Participant's death, such rights shall be exercisable by the
Designated Beneficiary, and such benefits shall be delivered to the Designated
Beneficiary, in accordance with the provisions of this Agreement and the Plan.
The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Participant fails
to designate a beneficiary, or if the Designated Beneficiary does not survive
the Participant, any rights that would have been exercisable by the Participant
and any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant. If a
deceased Participant designates a beneficiary and the Designated Beneficiary
survives the Participant but dies before the Designated Beneficiary's exercise
of all rights under this Agreement or before the complete distribution of
benefits to the
<PAGE> 24
Designated Beneficiary under this Agreement, then any rights that would have
been exercisable by the Designated Beneficiary shall be exercised by the legal
representative of the estate of the Designated Beneficiary, and any benefits
distributable to the Designated Beneficiary shall be distributed to the legal
representative of the estate of the Designated Beneficiary.
16. Administration. The authority to manage and control the operation
and administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the Plan. Any interpretation of the Agreement by the Committee and
any decision made by it with respect to the Agreement is final and binding on
all persons.
17. Plan Governs. Notwithstanding anything in this Agreement to the
contrary, the terms of this Agreement shall be subject to the terms of the Plan,
a copy of which may be obtained by the Participant from the office of the
Secretary of the Company; and this Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.
18. Not An Employment Contract. The Option will not confer on the
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate or modify
the terms of such Participant's employment or other service at any time.
19. Notices. Any written notices provided for in this Agreement or the
Plan shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail. Notices sent by mail shall be deemed received three business days after
mailing but in no event later than the date of actual receipt. Notices shall be
directed, if to the Participant, at the Participant's address indicated by the
Company's records, or if to the Company, at the Company's principal executive
office.
20. No Rights As Shareholder. The Participant shall not have any rights
of a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.
21. Amendment. This Agreement may be amended by written agreement of the
Participant and the Company, without the consent of any other person.
<PAGE> 25
IN WITNESS WHEREOF, the Participant has executed this Agreement, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the Grant Date.
Participant
------------------------------------
Organic Inc.
By:
---------------------------------
Its:
--------------------------------
<PAGE> 26
NQO AGREEMENT
THIS AGREEMENT, entered into as of the Grant Date (as defined in
paragraph 1), by and between the Participant and Organic Inc. (the "Company");
WITNESSETH THAT:
WHEREAS, the Company maintains the Organic Inc. 1999 Long-Term Stock
Incentive Plan (the "Plan"), which is incorporated into and forms a part of this
Agreement, and the Participant has been selected by the committee administering
the Plan (the "Committee") to receive a Non-Qualified Stock Option Award under
the Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:
1. Terms of Award. The following terms used in this Agreement shall have
the meanings set forth in this paragraph 1:
(a) The "Participant" is ________________.
(b) The "Grant Date" is ________________.
(c) The number of "Covered Shares" shall be _____________ shares
of Stock.
(d) The "Exercise Price" is $_____________ per share.
Other terms used in this Agreement are defined pursuant to paragraph 13 or
elsewhere in this Agreement.
2. Award and Exercise Price. This Agreement specifies the terms of the
option (the "Option") granted to the Participant to purchase the number of
Covered Shares of Stock at the Exercise Price per share as set forth in
paragraph 1. The Option is not intended to constitute an "incentive stock
option" as that term is used in Code section 422.
3. Date of Exercise. Subject to the limitations of this Agreement, and
unless the Participant chooses to exercise the Option prior to vesting pursuant
to paragraph 4, the Option shall become exercisable with respect to 1/4 of the
Covered Shares on the one-year anniversary of the Grant Date (but only if the
Date of Termination has not occurred before the one-year anniversary). After
such one-year anniversary, the Option shall become exercisable with respect to
an additional 1/48 of the Covered Shares on each subsequent one-month
anniversary of the Grant Date (but only if the Date of Termination has not
occurred before the respective one-month anniversary), until such time as this
Option is fully exercisable. Covered Shares as to which the Option is
exercisable in accordance with this paragraph 3 (regardless of whether the
Option has been exercised with respect to those shares) are sometimes referred
to as "vested shares," and
<PAGE> 27
Covered Shares as to which the Option is not exercisable in accordance with this
paragraph 3, until such time as the Option would have become exercisable with
respect to those shares (regardless of whether the Option has been exercised
with respect to those shares in accordance with paragraph 4) are sometimes
referred to as "unnvested shares." If the Participant is employed by the Company
or an Affiliate at the time of a Change in Control holds one or more outstanding
Options, such Participant shall be credited with two years of additional vesting
service for purposes of the vesting of Options, and the vesting of any Stock
purchased by the Participant under an Option.
Notwithstanding the foregoing provisions of this paragraph 3, the Option shall
become fully vested and exercisable upon the Date of Termination, if the Date of
Termination occurs by reason of the Participant's death or Disability. The
Option may be exercised on or after the Date of Termination only as to that
portion of the Covered Shares for which it was exercisable (or became
exercisable) immediately prior to the Date of Termination.
[THE FOLLOWING PARAGRAPH PROVIDES FOR FULL VESTING UPON TERMINATION OF
EMPLOYMENT IN THE 13TH MONTH AFTER A CHANGE IN CONTROL.]
[Notwithstanding any other provision, if a Change in Control occurs, and the
Participant terminates employment with the Company for any reason during the 30
day period which begins on the one-year anniversary of the Change in Control,
any Awards granted to the Participant shall become fully vested and exercisable
on such date of termination, and the Participant shall have the greater of (i)
90 days from the date of such termination or (ii) the period otherwise specified
for exercise after termination had the Participant been fully vested in the
Awards on the date of termination to exercise such Awards.]
4. Exercise Prior to Vesting. Subject to the provisions of the Option,
the Participant may elect, at any time prior to his Termination Date, to
exercise the Option as to any part or all of the Covered Shares subject to this
Option at any time prior to the Expiration Date, including, without limitation,
a time prior to the date on which the Option would otherwise be exercisable in
accordance with paragraph 3; provided, however, that:
(a) A partial exercise of the Option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares.
(b) Any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase
Agreement.
(c) The Participant shall be required to enter into an Early
Exercise Stock Purchase Agreement in the form provided by the Company with a
vesting schedule that will result in the same vesting as if no early exercise
had occurred.
The election provided in this paragraph 4 to purchase shares upon the exercise
of the Option prior to the Vesting Date shall cease upon the Participant's
Termination Date.
<PAGE> 28
5. Expiration. The Option shall not be exercisable after the Company's
close of business on the last business day that occurs prior to the Expiration
Date. The "Expiration Date" shall be earliest to occur of:
(a) the ten-year anniversary of the Grant Date;
(b) if the Date of Termination occurs by reason of death,
Disability or Retirement, the one- year anniversary of such Date of Termination;
or
(c) if the Date of Termination occurs for reasons other than
death, Disability, or Retirement, the 90-day anniversary of such Date of
Termination.
6. Method of Option Exercise. Subject to the terms of this Agreement and
the Plan, the Option may be exercised in whole or in part by filing a written
notice with the Secretary of the Company at its corporate headquarters prior to
the Company's close of business on the last business day that occurs prior to
the Expiration Date. Such notice shall specify the number of shares of Stock
which the Participant elects to purchase, and shall be accompanied by payment of
the Exercise Price, or a portion of the Exercise Price as specified below if the
Participant elects to use the deferred payment alternative described below in
paragraph 8, for such shares of Stock indicated by the Participant's election.
The Option shall not be exercisable if and to the extent the Company determines
that such exercise would violate applicable state or Federal securities laws or
the rules and regulations of any securities exchange on which the Stock is
traded. If the Company makes such a determination, it shall use all reasonable
efforts to obtain compliance with such laws, rules and regulations. In making
any determination hereunder, the Company may rely on the opinion of counsel for
the Company.
7. Payment of Exercise Price. Payment of the Exercise Price may be made
by any of the following methods or any combination thereof,
(a) By cash or by check payable to the Company;
(b) Except as otherwise provided by the Committee before the
Option is exercised and provided that the Company's common stock is publicly
traded and quoted regularly in the Wall Street Journal, by delivery of shares of
Stock owned by the Participant and acceptable to the Committee having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to
the amount of cash that would otherwise be required; or
(c) By authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.
8. Deferral Payment Alternative. Provided that the Exercise Price for
the installment, or portion thereof, being purchased exceeds $500, the
Participant may pay the Exercise Price pursuant to the deferred payment
alternative as follows:
<PAGE> 29
(a) Not less than twenty-five percent (25%) of the aggregate
Exercise Price shall be due at the time of exercise, not less than twenty-five
percent (25%) of said Exercise Price, plus accrued interest, shall be due each
year after the date of exercise, and final payment of the remainder of the
Exercise Price, plus accrued interest, shall be due three (3) years from date of
exercise or, at the Company's election, upon the Participant's Termination Date;
(b) Interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement; and
(c) In order to elect the deferred payment alternative, the
Participant must, as a part of his written notice of exercise, give notice of
the election of this payment alternative and, in order to secure the payment of
the deferred Exercise Price to the Company hereunder, if the Company so
requests, the Participant must tender to the Company a promissory note and a
security agreement covering the purchased shares, both in form and substance
satisfactory to the Company, or such other or additional documentation as the
Company may request.
9. Limit on Stock Sales. With respect to any shares that a Participant
acquires as a result of the exercise of the Option, the Company (or a
representative of the underwriters) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that the Participant not sell or otherwise transfer
or dispose of any shares of Stock or other securities of the Company during such
period (not to exceed one hundred eighty (180) days) following the effective
date of the registration statement of the Company filed under the Securities Act
as may be requested by the Company or the representative of the underwriters.
The Participant further agrees that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
10. Right of First Refusal by the Company. The Participant shall not
sell, assign, pledge or in any manner transfer any of the shares of Stock or any
right or interest therein, whether voluntarily or by operation of law, or by
gift or otherwise, except by a transfer which meets the following requirements:
(a) If the Participant desires to sell or otherwise transfer any
of its shares of stock acquired upon exercise of the Option in an "arms-length"
transaction, then the Participant shall first give written notice thereof to the
Company. The notice shall name the proposed transferee and state the number of
shares to be transferred, the proposed consideration, and all other terms and
conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice, the
Company shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the Participant, the
Company shall have the option to purchase a lesser portion of the shares of
Stock specified in said notice at the price and upon the terms set forth
therein. In the event of a gift, property settlement or other transfer which
would not be considered to have been made on an
<PAGE> 30
"arms length" basis and in which the proposed transferee is not paying the full
price for the shares, the price shall be deemed to be the Fair Market Value of
the stock at such time as determined in good faith by the Board. In the event
the Company elects to purchase all of the shares or, with consent of the
Participant, a lesser portion of the shares, it shall give written notice to the
transferring Participant of its election and settlement for said shares shall be
made as provided below in paragraph (d).
(c) The Company may assign its rights hereunder.
(d) In the event the Company and/or its assignee(s) elect to
acquire any of the shares of the transferring Participant as specified in said
transferring Participant's notice, the Secretary of the Company shall so notify
the transferring Participant and settlement thereof shall be made in cash within
thirty (30) days after the Secretary of the Company receives said transferring
Participant's notice; provided that if the terms of payment set forth in said
transferring Participant's notice were other than cash against delivery, the
Company and/or its assignee(s) shall pay for said shares on the same terms and
conditions set forth in said transferring Participant's notice.
(e) In the event the Company and/or its assignee(s) do not elect
to acquire all of the shares specified in the transferring Participant's notice,
said transferring Participant may, within the sixty (60)-day period following
the expiration of the option rights granted to the Company and/or its
assignee(s) herein, transfer the shares specified in said transferring
Participant's notice which were not acquired by the Company and/or its
assignee(s) as specified in said transferring Participant's notice.
(f) Notwithstanding anything to the contrary contained herein,
the following transaction shall be exempt from the provisions of this paragraph
10: an Participant's bona fide pledge or mortgage of any shares with a
commercial lending institution, provided that any subsequent transfer of said
shares by said institution shall be conducted in the manner set forth in this
paragraph 10. In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock subject to the provisions of this paragraph
10, and there shall be no further transfer of such stock except in accord with
this paragraph 10.
(g) The provisions of this paragraph 10 may be waived with
respect to any transfer either by the Company, upon duly authorized action of
its Board, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the Company (excluding the votes
represented by those shares to be transferred by the transferring Participant).
(h) Any sale or transfer, or purported sale or transfer, of
securities of the Company shall be null and void unless the terms, conditions
and provisions of this paragraph 10 are strictly observed and followed.
(i) The foregoing right of first refusal shall terminate upon the
date securities of the Company are first offered to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933.
<PAGE> 31
(j) The certificates representing shares of stock of the Company
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"The shares represented by this Certificate are subject to a
right of first refusal option in favor of the Company and/or its
Assignee(s)."
11. Withholding. All deliveries and distributions under this Agreement
are subject to withholding of all applicable taxes. At the election of the
Participant, and subject to such rules and limitations as may be established by
the Committee from time to time, such withholding obligations may be satisfied
through the surrender of shares of Stock which the Participant already owns, or
to which the Participant is otherwise entitled under the Plan.
12. Transferability. The Option is not transferable other than as
designated by the Participant by will or by the laws of descent and
distribution, and during the Participant's life, may be exercised only by the
Participant.
13. Definitions. For purposes of this Agreement, the terms used in this
Agreement shall be subject to the following:
(a) Change in Control. The term "Change in Control" shall be
defined as that term is defined in the Plan.
(b) Date of Termination. The "Date of Termination" shall be the
first day occurring on or after the Grant Date on which the Participant is not
employed by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a termination of employment shall not
be deemed to occur by reason of a transfer of the Participant between the
Company and a Subsidiary or between two Subsidiaries; and further provided that
the Participant's employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant's employer. If, as a result of a sale or other transaction,
the Participant's employer ceases to be a Subsidiary (and the Participant's
employer is or becomes an entity that is separate from the Company), and the
Participant is not, at the end of the 30-day period following the transaction,
employed by the Company or an entity that is then a Subsidiary, then the
occurrence of such transaction shall be treated as the Participant's Date of
Termination caused by the Participant being discharged by the employer.
(c) Disability. Except as otherwise provided by the Committee,
the Participant shall be considered to have a "Disability" during the period in
which the Participant is unable, by reason of a medically determinable physical
or mental impairment, to engage in any substantial gainful activity, which
condition, in the opinion of a physician selected by the Committee, is expected
to have a duration of not less than 120 days.
(d) Retirement. "Retirement" of the Participant shall mean, with
the approval of the Committee, the occurrence of the Participant's Date of
Termination on or after the date the Participant attains age 55.
<PAGE> 32
(e) Plan Definitions. Except where the context clearly implies or
indicates the contrary, a word, term, or phrase used in the Plan is similarly
used in this Agreement.
14. Whole Shares. This Option may only be exercised for whole shares. In
lieu of issuing a fraction of a share upon any exercise of the Option, resulting
from an adjustment of the Option pursuant to paragraph 4.2(f) of the Plan or
otherwise, the Company will be entitled to pay to the Participant an amount
equal to the Fair Market Value of such fractional share.
15. Heirs and Successors. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company's assets and business. If any
rights exercisable by the Participant or benefits deliverable to the Participant
under this Agreement have not been exercised or delivered, respectively, at the
time of the Participant's death, such rights shall be exercisable by the
Designated Beneficiary, and such benefits shall be delivered to the Designated
Beneficiary, in accordance with the provisions of this Agreement and the Plan.
The "Designated Beneficiary" shall be the beneficiary or beneficiaries
designated by the Participant in a writing filed with the Committee in such form
and at such time as the Committee shall require. If a deceased Participant fails
to designate a beneficiary, or if the Designated Beneficiary does not survive
the Participant, any rights that would have been exercisable by the Participant
and any benefits distributable to the Participant shall be exercised by or
distributed to the legal representative of the estate of the Participant. If a
deceased Participant designates a beneficiary and the Designated Beneficiary
survives the Participant but dies before the Designated Beneficiary's exercise
of all rights under this Agreement or before the complete distribution of
benefits to the Designated Beneficiary under this Agreement, then any rights
that would have been exercisable by the Designated Beneficiary shall be
exercised by the legal representative of the estate of the Designated
Beneficiary, and any benefits distributable to the Designated Beneficiary shall
be distributed to the legal representative of the estate of the Designated
Beneficiary.
16. Administration. The authority to manage and control the operation
and administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the Plan. Any interpretation of the Agreement by the Committee and
any decision made by it with respect to the Agreement is final and binding on
all persons.
17. Plan Governs. Notwithstanding anything in this Agreement to the
contrary, the terms of this Agreement shall be subject to the terms of the Plan,
a copy of which may be obtained by the Participant from the office of the
Secretary of the Company; and this Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.
18. Not An Employment Contract. The Option will not confer on the
Participant any right with respect to continuance of employment or other service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would
<PAGE> 33
otherwise have to terminate or modify the terms of such Participant's employment
or other service at any time.
19. Notices. Any written notices provided for in this Agreement or the
Plan shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail. Notices sent by mail shall be deemed received three business days after
mailing but in no event later than the date of actual receipt. Notices shall be
directed, if to the Participant, at the Participant's address indicated by the
Company's records, or if to the Company, at the Company's principal executive
office.
20. No Rights As Shareholder. The Participant shall not have any rights
of a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.
21. Amendment. This Agreement may be amended by written agreement of the
Participant and the Company, without the consent of any other person.
IN WITNESS WHEREOF, the Participant has executed this Agreement, and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the Grant Date.
Participant
------------------------------------
Organic Inc.
By:
---------------------------------
Its:
--------------------------------
<PAGE> 1
EXHIBIT 10.10
LEASE
500 THIRD STREET
INTEREAL CORPORATION, AGENTS
(415) 778-3900
THIS LEASE, made on July 22, 1996, between 500 Third Street Associates,
herein called Lessor and Organic Online, Inc., herein called Lessee.
THIS LEASE is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed - and that this Lease is made upon the condition
of said performance.
WITNESSETH:
ARTICLE 1
PREMISES
Lessor hereby leases to Lessee and Lessee leases from Lessor for the
term, at the rental, and upon all of the conditions set forth herein a portion
of that certain real property situated in the City and County of San Francisco,
State of California, commonly known as the 500 Third Street Building, located at
the Northeast corner of Third and Bryant Streets. Said portion is more
particularly described as: 520 THIRD STREET, SUITE 515 a suite of approximately
1,914 SQUARE FEET, as diagrammed on Exhibit "B" attached to and made a part of
this lease. Said real property, including the land and the improvements therein
or so much as Lessee is entitled to occupy or use under terms of this lease, is
herein called "the Premises".
ARTICLE 2
TERM
Except as otherwise provided in this Lease, the term of this Lease shall
be on a month to month basis commencing on April 1, 1996 unless sooner
terminated pursuant to any provisions hereof.
ARTICLE 3
POSSESSION
Notwithstanding said commencement date, if for any reason Lessor cannot
deliver possession of the Premises to Lessee on said date, Lessor shall not be
subject to any liability therefor, nor shall such failure affect the validity of
this
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<PAGE> 2
Lease or the obligations of Lessee hereunder or extend the term hereof, but in
such case, Lessee shall not be obligated to pay rent until possession of the
Premises is tendered to Lessee; provided, however, that if Lessor shall not have
delivered possession of the Premises within sixty (60) days from said
commencement date, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. If Lessee occupies the Premises
prior to said commencement date, such occupancy shall be subject to all
provisions hereof, such occupancy shall not advance the termination date, and
Lessee shall pay rent for such period at the initial monthly rates set forth
below.
ARTICLE 4
BASE RENT
Lessee shall pay to Lessor as base rent for the Premises the sum of One
Thousand Four Hundred Thirty Five Dollars 50/100 ($1,435.50), commencing April
1, 1996, in advance on or before the first day of each calendar month of the
term of this Lease without deduction, offset, prior notice or demand, in lawful
money of the United States. Base rent for any period during the term hereof
which is for less than one month shall be a pro rata portion of the monthly
installment calculated on a 30-day month basis and payable in advance.
ARTICLE 5
SECURITY DEPOSIT
Lessee has deposited with Lessor the sum of One Thousand Four Hundred
Thirty Five Dollars and 50/100 ($1,435.50). Said sum shall be held by Lessor as
security for the faithful performance by Lessee of all the terms, covenants, and
conditions of this Lease to be kept and performed by Lessee during the term
hereof. If Lessee defaults with respect to any provision of this lease,
including, but not limited to the provisions relating to the payment of rent,
Lessor may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any other sum in
default, or for the payment of any amount which Lessor may spend or become
obligated to spend by reason of Lessee's default, or to compensate Lessor for
any other loss or damage which Lessor may suffer by reason of Lessee's default.
If any portion of said deposit is so used or applied, Lessee shall within five
(5) days after written demand therefor, deposit cash with Lessor in an amount
sufficient to restore the security deposit to its original amount and Lessee's
failure to do so shall be a material breach of this Lease. Lessor shall not be
required to keep this security deposit separate from its general funds, and
Lessee shall not be entitled to interest on such deposit. If Lessee shall fully
and faithfully perform every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to Lessee (or, at
Lessor's option, to the last assignee of Lessee's interest here_____) at the
expiration of the
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Lease term. In the event of termination of Lessor's interest in this Lease,
Lessor shall transfer said deposit to Lessor's successor in interest.
ARTICLE 6
RENT ADJUSTMENTS
Notwithstanding anything contained in this Article, the rental payable
by Lessee shall in no event be less than the base rent specified in Article four
(4) herein above. For the purposes of this Article, the following terms are
defined as follows:
Base Year: The calendar year in which this Lease term commences,
(1996).
Comparison Year: Each calendar year of the term after the Base Year.
(A) Direct Expenses: All direct costs of operation and maintenance, as
determined by generally accepted accounting practices, shall include the
following costs by way of illustration, but not be limited to: real property
taxes and assessments; rent taxes, gross receipt taxes, (whether assessed
against the Lessor or assessed against the Lessee and collected by the Lessor,
or both), water and sewer charges, insurance premiums, utilities, janitorial
services, labor, costs incurred in the management of the Building, if any, air
conditioning & heating, elevator maintenance, supplies, material, equipment, and
tools, including maintenance, costs, and upkeep of all parking and common areas.
("Direct Expenses" shall not include depreciation on the Building of which the
Premises are a part or -equipment therein, loan payments, executive salaries or
real estate brokers' commissions, or costs paid directly by Lessee).
If the Direct Expenses paid or incurred by the Lessor for the Comparison
Year on account of the operation or maintenance of the Building of which the
Premises are part are in excess of the Direct Expenses paid or incurred for the
Base Year, then the Lessee shall pay 1.27% of the increase. This percentage is
that portion of the total rentable area of the Building occupied by the Lessee
hereunder. Lessor shall endeavor to give to Lessee on or before the first day of
March of each year following the respective Comparison Year a statement of the
increase in rent payable by Lessee hereunder, but failure by Lessor to give such
statement by said date shall not constitute a waiver by Lessor of its right to
require an increase in rent. Upon receipt of the statement for the first
Comparison Year, Lessee shall pay in full the total amount of increase due for
the first Comparison Year, and in addition for the then current year, the amount
of any such increase shall be used as an estimate for said current year and this
amount shall be divided into twelve (12) equal monthly installments and Lessee
shall pay to Lessor, concurrently with the regular monthly rent payment next due
following the receipt of such statement, an amount equal to one (1) monthly
installment multiplied by the number of months from January in the calendar year
in which said statement is submitted to the month of such payment, both months
inclusive. Subsequent installments shall be payable concurrently with the
regular monthly rent payments for the balance of that calendar
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<PAGE> 4
year and shall continue until the next Comparison Year's statement is rendered.
If the next or any succeeding Comparison Year results in a greater increase in
Direct Expenses, then upon receipt of a statement from Lessor, Lessee shall pay
a lump sum equal to such total increase in Direct Expenses over the Base Year,
less the total of the monthly installments of estimated increases paid in the
previous calendar year for which comparison is then being made to the Base Year;
and the estimated monthly installments to be paid for the next year, following
said Comparison Year, shall be adjusted to reflect such increase. If in any
Comparison Year the Lessee's share of Direct Expenses be less than the preceding
year, then upon receipt of Lessor's statement, any overpayment made by Lessee on
the monthly installment basis provided above shall be credited towards the next
monthly rent, falling due and the estimated monthly installments of Direct
Expenses to be paid shall be adjusted to reflect such lower Direct Expenses for
the most recent Comparison Year. Even though the term has expired and Lessee has
vacated the Premises, when the final determination is made of Lessee's share of
Direct Expenses for the year in which this Lease terminates, Lessee shall
immediately pay any increase due over the estimated expenses paid and conversely
any overpayment made in the event said expenses decrease shall be immediately
rebated by Lessor to Lessee.
(B) C.P.I. In addition, on January 1, 1997 and each anniversary date
thereafter the base rent as set forth in Article four (4) above shall be
annually increased by the percentage of increase, if any, in the Consumer Price
Index for revised urban wage earners and clerical workers - San Francisco
Oakland Area - as published by the United States Department of Labor's Bureau of
Labor Statistics. The base period, for purposes of such adjustment, shall be
January 1996, the base index for which is 458.4 The comparison period shall be
January 1997 and each January thereafter. Should the aforementioned Index be
discontinued the parties shall select another similar Index which reflects
consumer prices and if the parties cannot agree on another Index it shall be
selected by binding arbitration. (By way of illustration only, if the January
figure in which this Lease is executed is 140 and the January 1986 figure is
160, then the monthly rent payable for the ensuing calendar year shall be
increased by 14.29%).
(C) Utilities. Lessee shall pay prior to delinquency for all water, gas,
hear, light, power, telephone, sewage, air conditioning and ventilating,
scavenger, janitorial, landscaping and all other materials and utilities
supplied to the Premises. If any such services are not separately metered to
Lessee, Lessee shall pay a pro rata share of all charges which are jointly
metered, the determination to be made by Lessor, and payment to be made by
Lessee together with rent as estimated by Lessor. Pro rata share for purposes
hereof shall be 1.27% and may be adjusted reasonably to reflect actual usage and
cost.
4
<PAGE> 5
ARTICLE 7
PROPERTY TAXES
Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
ARTICLE 8
USE
The Premises shall be used and occupied by Lessee for only the following
purposes and for no other purposes whatsoever without obtaining the prior
written consent of Lessor: Multi Media software design, production space and
computer server hosting.
(A) Lessee shall not do or permit anything to be done in or about the
Premises which will increase the existing rate of insurance upon the Premises
(unless Lessee shall pay any increased premium as a result of such use or acts)
or cause the cancellation of any insurance policy covering said Premises or any
building of which the Premises may be a part, nor shall Lessee sell or permit to
be kept, used or sold in or about said Premises any articles which may be
prohibited by a standard form policy of fire insurance.
(B) Lessee shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of any building of which the Premises may be a part or
injure or annoy them or use or allow the Premises to be used for any unlawful or
objectionable purpose, nor shall Lessee cause, maintain or permit any nuisance
in, on or about the Premises. Lessee shall not commit or suffer to be committed
any waste in or upon the Premises.
(C) Lessee shall not use the Premises or permit anything to be done in
or about the Premises which will in any way conflict with any law, statute,
zoning restriction, ordinance or governmental rule or regulation or requirements
or duly constituted public authorities now in force or which may hereafter be
enacted or promulgated. Lessee shall at its sole cost and expense promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises. The judgment of any court of competent jurisdiction or the
admission of Lessee in any action against Lessee, whether Lessor be a party
thereto or not, that Lessee has violated any law,
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<PAGE> 6
statute, ordinance or governmental rule, regulation or covenant, shall be
conclusive of that fact as between Lessor and Lessee.
(D) Lessee understands and acknowledges that using this premises as
permanent lodging or residence is prohibited by this lease and by local zoning
ordinances. Lessee further understands and acknowledges that Lessee may not
"build out" or construct any tenant improvements in this premises incident to
use of this premises as a residence, including, but not limited to, a kitchen or
a bedroom. Lessee certifies that the premises shall not be used as a residence.
Further, Lessee expressly agrees to indemnify the Lessor and to hold the Lessor
harmless in the event Lessor is subject to any liability, either civil or
criminal, including, but not limited to, any expense, fines, levies, liens or
other assessments, expenses or liabilities incurred as a result of any
proceeding by any person or governmental entity, as a result of Lessee's
violation of these terms.
ARTICLE 9
CONDITION OF PREMISES
If the Premises are completed as of the date of execution hereof, then
Lessee, by execution of this Lease, shall be deemed to have accepted the
Premises in the condition existing as of the date of execution and in any event
this Lease shall be subject to all applicable zoning ordinances and to any
municipal, county and state laws and regulations governing and regulating the
use of the Premises. Lessee acknowledges that neither Lessor nor Lessor's agent
has made any representation or warranty as to the suitability of the Premises
for the conduct of Lessee's business.
ARTICLE 10
MAINTENANCE, REPAIR AND ALTERATIONS
Lessee shall keep in good order, condition and repair the Premises and
every part thereof, structural and non structural, (whether or not such portion
of the Premises requiring repair, or the means of repairing the same are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises) including, without limiting the generality
of the foregoing, all plumbing, air conditioning, (Lessee shall procure and
maintain, at Lessee's expense, an air conditioning system maintenance contract,
if applicable) ventilating, electrical, lighting facilities and equipment within
the Premises, fixtures, walls, (interior and exterior), ceilings, floors,
windows, doors, plate glass and skylights located within the Premises.
(A) Lessor's Rights. If Lessee fails to perform Lessee's obligations
under this Article 10, or under any other paragraph of the Lease, Lessor shall
at its option provide reasonable time for Lessee to cure and (but shall not be
required to) enter upon the Premises after ten (10) days' prior written notice
to Lessee (except in the case of an emergency, in which case no notice shall be
required), perform such obligations on Lessee's behalf and put the same in good
order, condition and repair,
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<PAGE> 7
and the cost thereof together with interest thereon at the maximum rate then
allowable by law shall become due and payable as additional rental to Lessor
together with Lessee's next rental installment.
(B) Lessor's Obligations. Except for the obligations of Lessor under
Article 9 (relating to Lessor's warranty), Article 14 (relating to destruction
of the Premises) and under Article 15 (relating to condemnation of the
Premises), it is intended by the parties hereto that Lessor have no obligation,
in any manner whatsoever, to repair and maintain the Premises [EXCEPT LESSOR
SHALL MAINTAIN STRUCTURAL ELEMENTS OF THE PREMISES LOCATED THEREON] nor the
equipment therein, all of which obligations are intended to be that of the
Lessee under Article 10 hereof. Lessee expressly waives the benefit of any
statute now or hereinafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the Premises in good order, condition and repair.
(C) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease, [EXCEPT AS AGREED BETWEEN
PARTIES IN WRITING]. In any event, whether or not in excess of $2,500 in
cumulative cost, Lessee shall make no change or alteration to the exterior of
the Premises nor the exterior of the building(s) on the Premises without
Lessor's prior written consent.
(1) As used in this Article 10 (C) the term "Utility
Installation" shall mean carpeting, window coverings, air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing, and fencing. Lessor may require that Lessee remove any
or all of said alterations, improvements, additions or Utility Installations at
the expiration of the term, and restore the Premises to their prior condition.
Lessor may require Lessee to provide Lessor, at Lessee's sole cost and expense,
a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such improvements, to insure Lessor against any liability for
mechanic's and materialmen's liens and to insure completion of the work. Should
Lessee make any alterations or improvements, additions or Utility Installations
without the prior approval of Lessor, Lessor may require that Lessee remove any
or all of the same.
(2) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in written
form, with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work and the compliance by Lessee of all
conditions of said permit in a prompt and expeditious manner.
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<PAGE> 8
(3) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanics' lien
against the Premises or any interest therein. Lessee shall give Lessor not less
than ten (10) days' notice prior to the commencement of any work in the
Premises, and Lessor shall have the right to post notices of non-responsibility
in or on the Premises as provided by law. If Lessee shall, in good faith,
contest the validity of any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Lessor or the Premises, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorneys fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
(4) Unless Lessor requires their removal, as set forth in
Article 10 (C), all alterations, improvement, additions and [_____] which may be
made on the Premises, shall become the property of the Lessor and remain upon
and be surrendered with the Premises at the expiration of the term.
Notwithstanding the provisions of this Article 10 (C), Lessee's machinery and
equipment, other than that which is affixed to the Premises so that it cannot be
removed without material damage to the Premises, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of Article 11.
ARTICLE 11
SURRENDER OF PREMISES
On the last day of the term hereof, or on any sooner termination, Lessee
shall surrender the Premises to Lessor in the same condition as when received,
ordinary wear and tear excepted, clean and free of debris. Lessee shall repair
any damage to the Premises occasioned by the installation or removal of Lessee's
trade fixtures, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines, power
panels, electrical distributions systems, lighting fixtures, plumbing and on the
Premises in the same condition as received.
ARTICLE 12
LIABILITY INSURANCE
Lessee shall, at Lessee's expense, obtain and keep in force during the
term of this Lease a policy of comprehensive public liability insurance insuring
Lessor and Lessee against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises and all area appurtenant thereto. The
limit of said insurance shall not, however, limit the liability of the Lessee
hereunder. Lessee may carry said insurance under a blanket policy, providing,
however, said insurance by Lessee shall have a Lessor's protective liability
endorsement attached thereto. If Lessee shall fail to procure and maintain said
insurance, Lessor may, but shall not
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be required to, procure and maintain same, but at the expense of the Lessee.
Insurance required hereunder, shall be in companies rated A+ or better in
"Best's Insurance Guide". Lessee shall deliver to Lessor prior to occupancy of
the Premises copies of policies of liability insurance required herein or
certificates evidencing the existence and amounts of such -insurance with loss
payable clauses satisfactory to Lessor. No policy shall be cancelable or subject
to reduction of coverage except after ten (10) days' prior written notice to
Lessor.
ARTICLE 13
SUBROGATION
As long as their respective insurers so permit, Lessor and Lessee hereby
mutually waive their respective rights of recovery against each other for any
loss insured by fire, extended coverage and other property insurance policies
existing for the benefit of the respective parties. Each party shall obtain any
special endorsements, if required by their insurer to evidence compliance with
the aforementioned waiver.
ARTICLE 14
DAMAGE OR DESTRUCTION
(A) Partial Damage -- Insured. In the event improvements on the Premises
are damaged by any casualty which is covered under an insurance policy required
to be maintained pursuant to Article 13, then Lessor shall repair such damage as
soon as reasonably possible and this Lease shall continue in full force and
effect.
(B) Partial Damage -- Uninsured. In the event the improvements on the
Premises are damaged, except by a negligent or willful act or omission of
Lessee, by any casualty not covered under an insurance policy required to be
maintained pursuant to Section 14.2, then Lessor may, at Lessor's option,
either:
(1) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or
(2) give written notice to Lessee within thirty (30) days after
the date of occurrence of such damage of Lessor's intention to cancel and
terminate this Lease as of the date of the occurrence of the damage. In the
event Lessor elects to terminate this Lease pursuant to this Article 14 (B),
Lessee shall have the right within ten (10) days after receipt of the required
notice to notify Lessor in writing of Lessee's intention to repair such damage
at Lessee's expense, without reimbursement from Lessor, in which event this
Lease shall continue in full force and effect, and Lessee shall proceed to make
such repairs as soon as reasonably possible. If Lessee does not give such notice
within the ten (10) day period, this Lease shall be canceled and terminated as
of the date of the occurrence of such damage.
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(C) Total Destruction. If the Premises are totally destroyed during the
term of this Lease from any cause whether or not covered by the insurance
required under Article 13 (including any destruction required by any authorized
public authority), this Lease shall automatically terminate as of the date of
such total destruction.
(D) Damage Near End of The Term. If the Premises are partially destroyed
or damaged during the last six (6) months of the term of this Lease, Lessor may
at Lessor's option cancel and terminate this Lease as of the date of occurrence
of such damage by giving written notice to Lessee of Lessor's election to do so
within thirty (30) days after the date of occurrence of such damage.
(E) Lessor's Obligations. The Lessor shall not be required to repair any
injury or damage by fire or other cause, or to make any restoration or
replacement of any panelings, decorations, office fixtures, partitions,
railings, ceilings, floor covering, equipment, machinery or fixtures or any
other improvements or property installed in the Premises by Lessee or at the
direct or indirect expense of Lessee. Lessee shall be required to restore or
replace same in the event of damage.
(F) Abatement of Rent; Lessee's Remedies.
(1) If the premises are partially destroyed or damaged and
Lessor or Lessee repairs them pursuant to this Lease, the rent payable hereunder
for the period during which such damage and repair continues shall be abated in
proportion to the extent to which Lessee's use of the Premises is impaired.
Except for abatement of rent, if any, Lessee shall have no claim against Lessor
for any damage suffered by reason of any such damage, destruction, repair or
restoration, except for gross negligence on the part of Lessor.
(2) If Lessor shall be obligated to repair or restore the
Premises under this Section 14 and shall not commence such repair or restoration
within ninety (90) days after such obligation shall accrue, Lessee at Lessee's
option may cancel and terminate this Lease by written notice to Lessor at any
time prior to the commencement of such repair or restoration. In such event this
Lease shall terminate as of the date of such notice.
(G) Termination -- Advance Payments. Upon termination of this Lease
pursuant to Article 14, an equitable adjustment shall be made concerning advance
rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
ARTICLE 15
CONDEMNATION
(A) If the premises or any portion thereof are taken under the power of
eminent domain, or sold by Lessor under the threat of the exercise of said power
(all of which is herein referred to as "condemnation"), this Lease shall
terminate as to
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the part so taken as of the date the condemning authority takes title or
possession, whichever occurs first. If more than ten percent (10%) of the floor
area of any buildings on the Premises, or more than twenty-five percent (25%) of
the land area of the Premises not covered with buildings, is taken by
condemnation, either Lessor or Lessee may terminate this Lease as of the date
the condemning authority takes possession, by notice in writing of `Such
election within twenty (20) days after Lessor shall have notified Lessee of the
taking, or in the absence of such notice then within twenty (20) days after the
condemning authority shall have taken possession.
(B) If this Lease is not terminated by either Lessor or Lessee then it
shall remain in full force and effect as to the portion of the Premises
remaining, provided the rent shall be reduced in the proportion that the floor
area of the buildings taken within the Premises bears to the total floor area of
all buildings located on the Premises. In the event this Lease is not so
terminated then Lessor agrees, at Lessor's sole cost, to restore the Premises to
a complete unit of like quality and character as existed prior to the
condemnation as soon as reasonably possible. All awards for the taking of any
part of the Premises or any payment made under the threat of the exercise of
compensation for diminution of value of a leasehold or for the taking of the fee
or as severance damages; provided, however, that Lessee shall be entitled to any
award for loss of or damage to Lessee's trade fixtures and removable personal
property. In the event that this Lease is not terminated by reason of such in
connection with such condemnation Lessor shall, to the extent of severance
damages received by Lessor in connection with such condemnation, repair any
damage to the Premises caused by such condemnation except to the extent that
Lessee has been reimbursed therefor by the condemning authority. Lessee shall
pay any amount in excess of such severance damages required to complete such
repair.
ARTICLE 16
LIENS
Lessee shall keep the Premises and the property in which the Premises
are situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by Lessee. Lessor may require, at Lessor's
sole option, that Lessee shall provide to Lessor, at Lessee's sole cost and
expense, a Lien and completion bond in an amount equal to one and one-half times
any and all estimated cost of any improvements, additions, or alterations in the
Premises, to insure Lessor against any liability for mechanics' and
materialmen's liens and to insure completion of the work.
ARTICLE 17
ASSIGNMENT AND SUBLETTING
Lessee shall not mortgage, pledge, hypothecate or encumber this Lease or
any interest therein. Lessee shall not assign this Lease or sublet, or suffer
any other person (the agents and servants of Lessee excepted) to occupy or use,
the Premises, or any part thereof, or any right or privilege appurtenant thereto
without the prior
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written consent of Lessor first had and obtained, which consent shall not be
unreasonably withheld. Lessor's consent to one assignment or subletting shall
not be deemed to be a consent to any subsequent assignment or subletting, nor
shall Lessor's consent release Lessee from any of its obligations under this
Lease unless such consent expressly so provides. Any assignment, subletting,
occupation or use without the consent of Lessor shall be void and, at the option
of Lessor, shall terminate this Lease.
(A) In the event at any time or times during the term of this Lease
Lessee desires to sublet all or part of the Premises, Lessor reserves the prior
right and option to:
(1) sublet from Lessee any portion of the premises proposed by
Lessee to be sublet for the term for which such portion is proposed to be sublet
but at the same rent (including escalation as provided for in Article 6 hereof)
as Lessee is required to pay to Lessor under this Lease for the same space,
computed on a pro rata of square footage basis or
(2) terminate this Lease as it pertains to the portion of the
Premises so proposed by Lessee to be sublet. Lessee shall notify Lessor in
writing if Lessee proposes to sublet all or any part of the Premises,
designating the space proposed to be sublet and the terms of the proposed
subletting. Lessor shall be allowed fifteen (15) days after Lessor's foregoing
option. If Lessor fails to exercise its said option, all the provisions of
Article 17 subparagraph (1) above, respecting subletting, nevertheless shall be
in full force and effect and nothing contained in this subparagraph (2) shall be
construed as a waiver by Lessor of any of its rights under said subparagraph
(1).
(B) Lessor's foregoing right and option shall continue throughout the
entire term of this Lease.
(C) In no event shall Lessee assign this Lease or sublet the Premises or
any portion thereof to any then-existing lessee of the building.
ARTICLE 18
HOLD HARMLESS
Lessee shall indemnify and hold harmless Lessor against and from any and
all claims arising from Lessee's use of the Premises for the conduct of its
business or from any activity, work, or other thing done, permitted or suffered
by the Lessee in or about the Premises, and shall further indemnify and hold
harmless Lessor against and from any and all claims arising from any breach or
default in the performance of any obligation on Lessee's part to be performed
under the terms of this Lease, or arising from any act or negligence of the
Lessee, or any officer, agent, employee, guest, or invitee of Lessee, and from
all and against all cost, attorney's fees, expenses and liabilities incurred in
or about any such claim or any action or proceeding brought thereon, and, in any
case, action or proceeding be brought
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against Lessor by reason of any such claim, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor. Lessee as a material part of the consideration to Lessor hereby assumes
all risk of damage to property or injury to persons, in, upon or about the
Premises, from any cause other than Lessor's negligence, and Lessee hereby
waives all claims in respect thereof against Lessor. Lessor or its agents shall
not be liable for any damage to property entrusted to employees of the Building,
nor for loss or damage to any property by theft or otherwise, nor for any injury
to or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface or from any other place resulting from dampness or
any other cause whatsoever, unless caused by or due to the negligence of Lessor,
its agents, servants or employees. Lessor or its agents shall not be liable for
interference with the light or other incorporeal hereditaments, loss of business
by Lessee, nor shall Lessor be liable for any latent defect in the Premises or
in the Building. Lessee shall give prompt notice to Lessor in case of fire or
accidents in the Premises or in the Building or of defects therein or in the
fixtures or equipment.
ARTICLE 19
RULES AND REGULATIONS
Lessee shall faithfully observe and comply with the rules and
regulations, indicated on Exhibit "A" attached hereto and hereby reference
thereto made a part hereof, that Lessor shall from time to time promulgate.
Lessor reserves the right from time to time to make all reasonable modifications
to said rules. The additions and modifications to those rules shall be binding
upon Lessee upon delivery of a copy of them to Lessee. Lessor shall not
unreasonably be responsible to Lessee for the nonperformance of any said rules
by any other tenants or occupants.
ARTICLE 20
HOLDING OVER
If Lessee remains in possession of the Premises or any part thereof
after the expiration of the term hereof, with the express written consent of
Lessor, such occupancy shall be a tenancy from month to month and a rental in
the amount equal to 125% of the last monthly rental, plus all other charges
payable hereunder, and upon all the terms hereof applicable to a month to month
tenancy.
ARTICLE 21
ENTRY BY LESSOR
Lessor reserves and shall at any and all times have the right to enter
the Premises, inspect the same, supply janitorial service and any other service
to be provided by Lessor to Lessee hereunder, to submit said Premises to
prospective purchasers or tenants, to post notices of non-responsibility, and to
alter, improve or repair the Premises and any portion of the Building of which
the Premises are a part
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that Lessor may deem necessary or desirable, without abatement of rent and may
for that purpose erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, always
providing that the entrance to the Premises shall not be blocked thereby, and
further providing that the business of the Lessee shall not be interfered with
unreasonably. Lessee hereby waives any claim for damages or for any injury or
inconvenience to or interference with Lessee's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby. For
each of the aforesaid purposes, Lessor shall at all times have and retain a key
with which to unlock all of the doors in, upon and about the Premises, excluding
Lessee's vaults, safes and files, and Lessor shall have the right to use any and
all means which Lessor may deem proper to open said doors in an emergency, in
order to obtain entry to the Premises without liability to Lessee except for any
failure to exercise due care for Lessee's property. Any entry to the Premises
obtained by Lessor by any of said means, or otherwise shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or
a detainer of, the Premises, or an eviction of Lessee from the Premises or any
portion thereof.
ARTICLE 22
ESTOPPEL
Lessee shall at any time and from time to time upon not less than ten
(10) days' prior written notice from lessor execute, acknowledge and deliver to
Lessor a statement in writing,
(A) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease as so modified, is in full force and effect), and the date to
which the rental and other charges are paid in advance, if any, and
(B) acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of the Lessor hereunder, or specifying such defaults if any
are claimed.
Any such statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the real property of which the Premises
are a part.
ARTICLE 23
RECONSTRUCTION
In the event the Premises or the Building of which the Premises are a
part are damaged by fire or other perils covered by extended coverage insurance,
Lessor agrees to forthwith repair the same; and this Lease shall remain in full
force and effect, except that Lessee shall be entitled to a proportionate
reduction of the rent while such repairs are being made, such proportionate
reduction to be based upon the extent to which the making of such repairs shall
materially interfere with the
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business carried on by the Lessee in the Premises. If the damage is due to the
fault or neglect of Lessee or its employees, there shall be no abatement of
rent.
(A) In the event the Premises or the Building of which the Premises are
a part are damaged as a result of any cause other than the perils covered by
fire and extended coverage insurance, then Lessor shall forthwith repair the
same, provided the extent of the destruction be less than ten (10%) per cent of
the full replacement cost, then Lessor shall have the option;
(1) to repair or restore such damage, this Lease continuing in
full force and effect, but the rent to be proportionately reduced as herein
above in this Article provided; or
(2) give notice to Lessee at any time within sixty (60) days
after such damage terminating this Lease as of the date specified in such
notice, which date shall be no less than thirty (30) days and no more than sixty
(60) days after the giving of such notice. In the event of giving such notice,
this Lease shall expire and all interest of the Lessee in the Premises shall
terminate on the date so specified in such notice and the rent, reduced by a
proportionate amount, based upon the extent, if any, to which such damage
materially interfered with the business carried on by the Lessee in the
Premises, shall be paid up to date of said such termination.
(B) Notwithstanding anything to the contrary contained in this Article,
Lessor shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twelve (12) months of the term of this Lease
or any extension thereof. Lessor shall not be required to repair any injury or
damage by fire or other cause, or to make any repairs or replacements of any
panels, decoration, office fixtures, railings, floor covering, partitions, or
any other property installed in the Premises by Lessee.
(C) The Lessee shall not be entitled to any compensation or damages from
Lessor for loss of the use of the whole or any part of the Premises, Lessee's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration.
ARTICLE 24
AUTHORITY OF PARTIES
Corporate Authority. If Lessee is a corporation, each individual
executing this lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
Limited Partnerships. If the Lessor herein is a limited partnership, it
is understood and agreed that any claims by Lessee on Lessor shall be limited to
the
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assets of the limited partnership, and furthermore, Lessee expressly waives any
and all rights to proceed against the individual partners or the officers,
directors or shareholders of any corporate partner, except to the extent of
their interest in said limited partnership.
ARTICLE 25
DEFAULT
The occurrence of any one or more of the following events shall
constitute a default and breach of the Lease by Lessee.
(A) The vacating or abandonment of the Premises by Lessee.
(B) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice,
thereof by Lessor to Lessee.
(C) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Lessee, other than described in Article 25 (B) above, where such failure shall
continue for a period of thirty (30) days after written notice thereof by Lessor
to Lessee; provided, however, that if the nature of Lessee's default is such
that more than thirty (30) days are reasonable required for its cure, then
Lessee shall not be deemed to be in default if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(D) The making by Lessee of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Lessee of
a petition to have Lessee adjudged a bankrupt, or a petition or reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where possession is not restored to Lessee within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
ARTICLE 26
REMEDIES IN DEFAULT
In the event of any such material default or breach by Lessee, Lessor
may at any time thereafter, with notice but without limiting Lessor in the
exercise of a right or remedy which Lessor may have by reason of such default or
breach:
(A) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
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surrender possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorney's fees, any real
estate commission actually paid; the worth at the time of award by the court
having jurisdiction thereof of the amount by which the unpaid rent for the
balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonable avoided;
that portion of the leasing commission paid by Lessor and applicable to the
unexpired term of this Lease. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of ten (10%) per cent per annum. In
the event Lessee shall have abandoned the Premises, Lessor shall have the option
of:
(1) taking possession of the Premises and recovering from Lessee
the amount specified in this paragraph, or
(2) proceeding under the provision of the following Article 26
(B).
(B) Maintain Lessee's right to possession, in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(C) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decision of the State in which the Premises are located.
ARTICLE 27
GENERAL PROVISIONS
(A) Plats and Riders. Clauses, plats and riders, if any, signed by the
Lessor and the Lessee and endorsed on or affixed to this Lease are a part
hereof.
(B) Waiver. The waiver by Lessor of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of
any term, covenant or condition of this Lease, other than the failure of the
Lessee to pay the particular rental so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of the acceptance of such rent.
(C) Notices. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Lessee to the Lessor shall be sent by
United States Mail, postage prepaid, addressed to the Lessor at the Office of
the Building, or to such other person or place as the Lessor may from time to
time designate in a notice to the Lessee.
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(D) Joint Obligation. If there be more than one Lessee the obligations
hereunder imposed upon Lessees shall be joint and several.
(E) Marginal Headings. The marginal headings and Article titles to the
Articles of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
(F) Time. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
(G) Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties thereto.
(H) Recordation. Neither Lessor nor Lessee shall record this Lease or a
short form memorandum hereof without the prior written consent of the other
party.
(I) Quiet Possession. Upon Lessee paying the rent reserved hereunder and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
(J) Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent or other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or of a sum due from Lessee shall not be received by Lessor
or Lessor's designee within ten (10) days after said amount is due, then Lessee
shall pay to Lessor a late charge equal to ten (10%) per cent of such over due
amount. The parties hereby agree that such late charges represent a fair and
reasonable estimate of the cost that Lessor will incur by reason of the late
payment by Lessee. Acceptance of such late charges by the Lessor shall in no
event constitute a waiver of Lessee's default with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder.
(K) Prior Agreements. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
(L) Inability to Perform. This Lease and the obligations of the Lessee
hereunder shall not be affected or impaired because the Lessor is unable to
fulfill
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any of its obligations hereunder or is delayed in doing so, if such inability or
delay is caused by reason of strike, labor troubles, acts of God, or any other
cause beyond the reasonable control of the Lessor.
(M) Attorneys' Fees. In the event of any action or proceeding brought by
either party against the other under this Lease the prevailing party shall be
entitled to recover all costs and expenses including the fees of its attorneys
in such action or proceeding in such amount as the court may adjudge reasonable
as attorneys' fees.
(N) Sale of Premises by Lessor. In the event of any sale of the
Building, Lessor shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Lessor under this Lease.
(O) Subordination, Attornment. Upon request of the Lessor, Lessee will
in writing subordinate its rights hereunder to the lien of any first mortgage,
or first deed of trust to any bank, insurance company or other lending
institution, now or hereafter in force against the land and Building of which
the Premises are a part, and upon any buildings hereafter placed upon the land
of which the Premises are a part, and to all advances made or hereafter to be
made upon the security thereof. In the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any
mortgage or deed or trust made by the Lessor covering the Premises, the Lessee
shall attorn to the purchaser upon any such foreclosure or sale and recognize
such purchaser as the Lessor under this Lease. The provision of this Article to
the contrary notwithstanding, and so long as Lessee is not in default hereunder,
this Lease shall remain in full force and effect for the full term hereof.
(P) Name. Lessee shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Lessee in the Premises.
(Q) Separability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
(R) Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
(S) Choice of Law. This Lease shall be governed by the laws of the State
in which the Premises are located.
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(T) Signs and Auctions. Lessee shall not place any sign upon the
Premises or Building or conduct any auction thereon without Lessor's prior
written consent.
ARTICLE 28
REMODELING OF BUILDING
Lessee acknowledges that Lessor intends to engage in extensive
remodeling of the building of which the leasehold premises form a part, and
agrees that Lessor may, for some period of time within the lease term, relocate
all or a portion of the leasehold premises to another part of the building for
the purpose of completing renovation or repairs. In such event Lessor shall use
its best efforts to provide comparable space and minimize inconvenience to
Lessee.
ARTICLE 29
RELOCATION
Lessor reserves the right to relocate the premises to substantially
comparable space within the building. Lessor will give Lessee written notice of
its intention to relocate the premises, and Lessee will complete its relocation
within thirty (30) days after Lessor's notice. The base monthly rent of the new
space will not exceed the base monthly rent for the former premises. If Lessee
does not wish to relocate its premises, Lessee may terminate this lease
effective as of thirty (30) days after Lessor's initial notice. Upon Lessee's
vacation and abandonment of the premises, Lessor will pay to Lessee a sum equal
to one monthly installment of the base monthly rent payable under this lease,
and will return the unused portion of the security deposit, and Lessor's and
Lessee's obligations to each other will then end. If Lessee does relocate within
the building, then effective on the date of such relocation this lease will be
amended by deleting the description of the former premises and substituting for
it a description of the new space. Lessor agrees to pay the reasonable costs of
moving Lessee to the new space.
ARTICLE 30
NON-DISCRIMINATION
Lessee herein covenants by and for himself, his heirs, executors,
administrators and assigns, and all persons claiming under or through him, and
this Lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any
person or group of persons on account of race, color, creed, national origin or
ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure or
enjoyment of the premises herein leased, nor shall Lessee himself, or any
persons claiming under or through him, establish or permit any such practice or
practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of Lessees, Lessors, sublessors, sublessees
or vendees in the premises herein leased.
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ARTICLE 31
LESSOR'S AGENTS
It is understood and agreed that this Lease is executed by Bressie and
Company solely in their capacity as Lessor's agents and said Bressie and Company
shall not be obligated to perform any of the terms, conditions or covenants to
be performed by Lessor herein, nor in any way be liable hereunder.
ARTICLE 32
BROKERS
Lessee warrants that it has had no dealings with any real estate broker
or agents in connection with the negotiation of this Lease excepting only
[_____] and it knows of no other real estate broker or agent who is entitled to
a commission in connection with this Lease.
If this Lease has been filled in, it has been prepared for submission to
your attorney for his approval. No representation or recommendation is made by
the real estate broker or its agents or employees as to the legal sufficiency,
legal effect, or tax consequences of this Lease or the transactions relating
thereto.
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THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE AND ON THE DATE
SPECIFIED IMMEDIATELY ADJACENT TO THEIR RESPECTIVE SIGNATURES.
Lessor: 500 Third Street Associates
c/o Interal Corporation
520 Third Street, Suite 555
San Francisco, CA 94107
By: /s/ Elbert P. Bressie
Title: G.P.
Dated: 8/15/96
Lessee: Organic Online, Inc.
By: /s/ J.D. Davids
Its: Director of Finance
Title:
-------------------------------------
Dated: 8/13/96
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EXHIBIT "A"
RULES AND REGULATIONS
1. No sign placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building without the written consent of Lessee first had and
obtained and Lessee shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant.
All approved sign or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by Lessee.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly from
outside the Premises; provided, however, that Lessee may furnish and install a
Building standard window covering at all exterior windows. Tenant shall not
without prior written consent of Lessee cause or otherwise sunscreen any window.
2. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the Lessors or used by them for any
purpose other than for ingress and egress from their respective Premises.
3. Tenant shall not alter any lock or install any new or additional
locks or any bolts on any doors or windows of the Premises.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown 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 employees or invitees shall have
caused it.
5. Tenant shall not overload the floor of the Premises or in any way
deface the Premises or any part thereof.
6. No furniture, freight or equipment of any kind shall be brought into
the Building without the prior notice to Lessee and all moving of the same into
or out of the Building shall be done at such time and in such manner as Lessee
shall designate. Lessee shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the building and
also the times and manner of moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Lessee, stand on
supports of such thickness as is necessary to properly distribute the weight.
Lessee will not be responsible for loss of or damage to any such safe or
property from any cause and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
the Tenant.
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7. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Lessee or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other Lessors or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building.
8. No cooking shall be done or permitted by any Tenant on the Premises,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging, or for any improper, objectionable or immoral purposes.
9. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Lessee.
10. Lessee will direct electricians as to where and how telephone and
telegraph wire are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Lessee. The location of telephones, call
boxes and other office equipment affixed to the Premises shall be subject to the
approval of the Lessee.
11. On Saturdays, Sundays and legal holidays, and on other days between
the hours of 6:00 P.M. and 8:00 A.M. the following day, access to the Building,
or to the halls, corridors, elevators or stairways in the Building, or to the
Premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge and has a pass or is properly identified.
The Lessee shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Lessee reserves
the right to prevent access to the Building during the continuance of the same
by closing of the doors or otherwise, for the safety of the Lessors and
protection of property in the Building and the Building.
12. Lessee reserves the right to exclude or expel from the Building any
person who, in the judgment of Lessee, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
13. No vending machine or machines of any description shall be
installed, maintained or operated upon the Premises without the written consent
of the Lessee.
14. Lessee shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the Premises are a part.
15. Tenant shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate to prevent same.
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16. Without the written consent of Lessee, Tenant shall not use the name
of the Building in connection with or in promoting or advertising the business
of Tenant except as Tenant's address.
17. Lessee shall have the right to control and operate the public
portions of the Building, and the public facilities, and heating and air
conditioning, as well as facilities furnished for the common use of the Lessors,
in such manner as it deems best for the benefit of the Lessors generally.
18. All entrance doors in the Premises shall be left locked when the
Premises are not in use, and all doors opening to public corridors shall be kept
closed except for normal ingress and egress from the Premises.
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ADDENDUM
TENANT IMPROVEMENTS
Space will be delivered in an AS-IS condition. Tenant to perform and pay
for any improvements. All permanent changes to be made with a building permit
and with Lessor's prior permission.
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EXHIBIT 10.11
LEASE
500 THIRD STREET
INTEREAL CORPORATION, AGENTS
(415) 778-3900
THIS LEASE, made on July 22,1996, between 500 Third Street Associates,
herein called Lessor and Organic Online, Inc., herein called Lessee.
THIS LEASE is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition of
said performance.
WITNESSETH:
ARTICLE 1
PREMISES
Lessor hereby leases to Lessee and Lessee leases from Lessor for the
term, at the rental, and upon all of the conditions set forth herein a portion
of that certain real property situated in the City and County of San Francisco,
State of California, commonly known as the 500 Third Street Building, located at
the Northeast corner of Third and Bryant Streets. Said portion is more
particularly described as: 510 THIRD STREET, SUITE 540/548/550/560 a suite of
approximately 6,519 SQUARE FEET, as diagrammed on Exhibit "B" attached to and
made a part of this lease. Said real property, including the land and the
improvements therein or so much as Lessee is entitled to occupy or use under
terms of this lease, is herein called "the Premises".
ARTICLE 2
TERM
Except as otherwise provided in this Lease, the term of this Lease
shall be two (2) years commencing on October 1, 1995 and ending on September
36,1997 unless sooner terminated pursuant to any provisions hereof.
ARTICLE 3
POSSESSION
Notwithstanding said commencement date, if for any reason Lessor cannot
deliver possession of the Premises to Lessee on said date, Lessor shall not be
subject to any liability therefor, nor shall such failure affect the validity of
this
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Lease or the obligations of Lessee hereunder or extend the term hereof, but in
such case, Lessee shall not be obligated to pay rent until possession of the
Premises is tendered to Lessee; provided, however, that if Lessor shall not have
delivered possession of the Premises within sixty (60) days from said
commencement date, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. If Lessee occupies the Premises
prior to said commencement date, such occupancy shall be subject to all
provisions hereof, such occupancy shall not advance the termination date, and
Lessee shall pay rent for such period at the initial monthly rates set forth
below.
ARTICLE 4
BASE RENT
Lessee shall pay to Lessor as base rent for the Premises the sum of
Four Thousand Five Hundred Fourteen Dollars and 00/100 ($4,514.00), commencing
October 1, 1995, in advance on or before the first day of each calendar month of
the term of this Lease without deduction, offset, prior notice or demand, in
lawful money of the United States. Base rent for any period during the term
hereof which is for less than one month shall be a pro rata portion of the
monthly installment calculated on a 30-day month basis and payable in advance.
ARTICLE 5
SECURITY DEPOSIT
Lessee has deposited with Lessor the sum of Four Thousand Five Hundred
Fourteen Dollars and 00/100 ($4,514.00). Said sum shall be held by Lessor as
security for the faithful performance by Lessee of all the terms, covenants, and
conditions of this Lease to be kept and performed by Lessee during the term
hereof. If Lessee defaults with respect to any provision of this lease,
including, but not limited to the provisions relating to the payment of rent,
Lessor may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any other sum in
default, or for the payment of any amount which Lessor may spend or become
obligated to spend by reason of Lessee's default, or to compensate Lessor for
any other loss or damage which Lessor may suffer by reason of Lessee's default.
If any portion of said deposit is so used or applied, Lessee shall within five
(5) days after written demand therefor, deposit cash with Lessor in an amount
sufficient to restore the security deposit to its original amount and Lessee's
failure to do so shall be a material breach of this Lease. Lessor shall not be
required to keep this security deposit separate from its general funds, and
Lessee shall not be entitled to interest on such deposit. If Lessee shall fully
and faithfully perform every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to Lessee (or, at
Lessor's option, to the last assignee of Lessee's interest hereunder) at the
expiration of the Lease term.
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In the event of termination of Lessor's interest in this Lease, Lessor shall
transfer said deposit to Lessor's successor in interest.
ARTICLE 6
RENT ADJUSTMENTS
Notwithstanding anything contained in this Article, the rental payable
by Lessee shall in no event be less than the base rent specified in Article four
(4) herein above. For the purposes of this Article-the following terms are
defined as follows:
Base Year: The calendar year in which this Lease term
commences, (1996).
Comparison Year. Each calendar year of the term after the Base Year.
A. Direct Expenses: All direct costs of operation and maintenance, as
determined by generally accepted accounting practices, shall include the
following costs by way of illustration, but not be limited to: real property
taxes and assessments; rent taxes, gross receipt taxes, (whether assessed
against the Lessor or assessed against the Lessee and collected by the Lessor,
or both), water and sewer charges, insurance premiums, utilities, janitorial
services, labor, costs incurred in the management of the Building, if any, air
conditioning & heating, elevator maintenance, supplies, material, equipment, and
tools, including maintenance, costs, and upkeep of all parking and common areas.
("Direct Expenses" shall not include depreciation on the Building of which the
Premises are a part or equipment therein, loan payments, executive salaries or
real estate brokers' commissions, or costs paid directly by Lessee).
If the Direct Expenses paid or incurred by the Lessor for the
Comparison Year on account of the operation or maintenance of the Building of
which the Premises area part are in excess of the Direct Expenses paid or
incurred for the Base Year, then the Lessee shall pay 4.34% of the increase.
This percentage is that portion of the total rentable area of the Building
occupied by the Lessee hereunder. Lessor shall endeavor to give to Lessee on or
before the first day of March of each year following the respective Comparison
Year a statement of the increase in rent payable by Lessee hereunder, but
failure by Lessor to give such statement by said date shall not constitute a
waiver by Lessor of its right to require an increase in rent. Upon receipt of
the statement for the first Comparison Year, Lessee shall pay in full the total
amount of increase due for the first Comparison Year, and in addition for the
then current year, the amount of any such increase shall be used as an estimate
for said current year and this amount shall be divided into twelve (12) equal
monthly installments and Lessee shall pay to Lessor, concurrently with the
regular monthly rent payment next due following the receipt of such statement,
an amount equal to one (1) monthly installment multiplied by the number of
months from January in the calendar year in which said statement is submitted to
the month of such payment, both months inclusive. Subsequent installments shall
be payable
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concurrently with the regular monthly rent payments for the balance of that
calendar year and shall continue until the next Comparison Year's statement is
rendered. If the next or any succeeding Comparison Year results in a greater
increase in Direct Expenses, then upon receipt of a statement from Lessor,
Lessee shall pay a lump sum equal to such total increase in Direct Expenses over
the Base Year, less the total of the monthly installments of estimated increases
paid in the previous calendar year for which comparison is then being made to
the Base Year; and the estimated monthly installments to be paid for the next
year, following said Comparison Year, shall be adjusted to reflect such
increase. If in any Comparison Year the Lessee's share of Direct Expenses be
less than the preceding year, then upon receipt of Lessor's statement, any
overpayment made by Lessee on the monthly installment basis provided above shall
be credited towards the next monthly rent falling due and the estimated monthly
installments of Direct Expenses to be paid shall be adjusted to reflect such
lower Direct Expenses for the most recent Comparison Year. Even though the term
has expired and Lessee has vacated the Premises, when the final determination is
made of Lessee's share of Direct Expenses for the year in which this Lease
terminates, Lessee shall immediately pay any increase due over the estimated
expenses paid and conversely any overpayment made in the event said expenses
decrease shall be immediately rebated by Lessor to Lessee.
B. C.P.I. In addition, on October 1, 1996 and each anniversary date
thereafter the base rent as set forth in Article four (4) above shall be
annually increased by the percentage of increase, if any, in the Consumer Price
Index for revised urban wage earners and clerical workers - San Francisco
Oakland Area -- as published by the United States Department of Labor's Bureau
of Labor Statistics. The base period, for comparison purposes of such
adjustment, shall be January 1995, the base index for which is 447.7. The
comparison period shall be April 1, 1996 and each January thereafter. Should the
aforementioned Index be discontinued the parties shall select another similar
Index which reflects consumer prices and if the parties cannot agree on another
Index it shall be selected by binding arbitration. (By way of illustration only,
if the January figure in which this Lease is executed is 140 and the January
1986 figure is 160, then the monthly rent payable for the ensuing calendar year
shall be increased by 14.29%).
C. UTILITIES. Lessee shall pay prior to delinquency for all water, gas,
hear, light, power, telephone, sewage, air conditioning and ventilating,
scavenger, janitorial, landscaping and all other materials and utilities
supplied to the Premises. If any such services are not separately metered to
Lessee, Lessee shall pay a pro rata share of all charges which are jointly
metered, the determination to be made by Lessor, and payment to be made by
Lessee together with rent as estimated by Lessor. Pro rata share for purposes
hereof shall be 4.34% and may be adjusted reasonably to reflect actual usage and
cost.
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ARTICLE 7
PROPERTY TAXES
Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
ARTICLE 8
USE
The Premises shall be used and occupied by Lessee for only the
following purposes and for no other purposes whatsoever without obtaining the
prior written consent of Lessor: Multi Media software design, production space
and computer server hosting.
A. Lessee shall not do or permit anything to be done in or about the
Premises which will increase the existing rate of insurance upon the Premises
(unless Lessee shall pay any increased premium as a result of such use or acts)
or cause the cancellation of any insurance policy covering said Premises or any
building of which the Premises may be a part, nor shall Lessee sell or permit to
be kept, used or sold in or about said Premises any articles which may be
prohibited by a standard form policy of fire insurance.
B. Lessee shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of any building of which the Premises may be a part or
injure or annoy them or use or allow the Premises to be used for any unlawful or
objectionable purpose, not shall Lessee cause, maintain or permit any nuisance
in, on or about the Premises Lessee shall not commit or suffer to be committed
any waste in or upon the Premises.
C. Lessee shall not use the Premises or permit anything to be done in
or about the Premises which will in any way conflict with any law, statute,
zoning restriction, ordinance or governmental rule or regulation or requirements
or duly constituted public authorities now in force or which may hereafter be
enacted or promulgated. Lessee shall at its sole cost and expense promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises. The judgment of any court of competent jurisdiction or the
admission of Lessee in any action against Lessee, whether Lessor be a party
thereto or not, that Lessee has violated any law,
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statute, ordinance or governmental rule, regulation or covenant, shall be
conclusive of that fact as between Lessor and Lessee.
D. Lessee understands and acknowledges that using this premises as
permanent lodging or residence is prohibited by this lease and by local zoning
ordinances. Lessee further understands and acknowledges that Lessee may not
"build out" or construct any tenant improvements in this premises incident to
use of this premises as a residence, including, but not limited to, a kitchen or
a bedroom. Lessee certifies that the premises shall not be used as a residence.
Further, Lessee expressly agrees to indemnify the Lessor and to hold the Lessor
harmless in the event Lessor is subject to any liability, either civil or
criminal, including, but not limited to, any expense, fines, levies, liens or
other assessments, expenses or liabilities incurred as a result of any
proceeding by any person or governmental entity, as a result of Lessee's
violation of these terms.
ARTICLE 9
CONDITION OF PREMISES
If the Premises are completed as of the date of execution hereof, then
Lessee, by execution of this Lease, shall be deemed to have accepted the
Premises in the condition existing as of the date of execution and in any event
this Lease shall be subject to all applicable zoning ordinances and to any
municipal, county and state laws and regulations governing and regulating the
use of the Premises. Lessee acknowledges that neither Lessor nor Lessor's agent
has made any representation or warranty as to the suitability of the Premises
for the conduct of Lessee's business.
ARTICLE 10
MAINTENANCE, REPAIR AND ALTERATIONS
Lessee shall keep in good order, condition and repair the Premises and
every part thereof, structural and non structural, (whether or not such portion
of the Premises requiring repair, or the means of repairing the same are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises including, without limiting the generality
of the foregoing, all plumbing, air conditioning, (Lessee shall procure and
maintain, at Lessee's expense, an air conditioning system maintenance contract,
if applicable) ventilating, electrical, lighting facilities and equipment within
the Premises, fixtures, walls, (interior and exterior), ceilings, floors,
windows, doors, plate glass and skylights located within the Premises.
A. Lessor's Rights. If Lessee fails to perform Lessee's obligations
under this Article 10, or under any other paragraph of the Lease, Lessor shall
at its option provide reasonable time for Lessee to cure and (but shall not be
required to) enter upon the Premises after ten (10) days' prior written notice
to Lessee (except in the case of an emergency, in which case no notice shall be
required), perform such obligations on Lessee's behalf and put the same in good
order, condition and repair,
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and the cost thereof together with interest thereon at the maximum rate then
allowable by law shall become due and payable as additional rental to Lessor
together with Lessee's next rental installment.
B. Lessor's Obligations. Except for the obligations of Lessor under
Article 9 (relating to Lessor's warranty), Article 14 (relating to destruction
of the Premises) and under Article 15 (relating to condemnation of the
Premises), it is intended by the parties hereto that Lessor have no obligation,
in any manner whatsoever, to repair and maintain the Premises EXCEPT LESSOR
SHALL MAINTAIN STRUCTURAL ELEMENTS OF THE PREMISES located thereon nor the
equipment therein, all of which obligations are intended to be that of the
Lessee under Article 10 hereof. Lessee expressly waives the benefit of any
statute now or hereinafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the Premises in good order, condition and repair.
C. Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease, EXCEPT AS AGREED BETWEEN PARTIES
IN WRITING. In any event, whether or not in excess of $2,500 in cumulative cost,
Lessee shall make no change or alteration to the exterior of the Premises nor
the exterior of the building(s) on the Premises without Lessor's prior written
consent.
(1) As used in this Article 10 (C) the term "Utility
Installation" shall mean carpeting, window coverings, air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing, and fencing. Lessor may require that Lessee" remove any
or all of said alterations, improvements, additions or Utility Installations at
the expiration of the term, and restore the Premises to their prior condition.
Lessor may require Lessee to provide Lessor, at Lessee's sole cost and expense,
a lien and completion bond in an amount equal to one and one-half times the
estimated cost of such improvements, to insure Lessor against any liability for
mechanic's and materialmen's liens and to insure completion of the work. Should
Lessee make any alterations or improvements, additions or Utility Installations
without the prior approval of Lessor, Lessor may require that Lessee remove any
or all of the same.
(2) Any alterations, improvements, additions or Utility
Installations in, or about the Premises that Lessee shall desire to make and
which requires the consent of the Lessor shall be presented to Lessor in written
form, with proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work and the compliance by Lessee of all
conditions of said permit in a prompt and expeditious manner.
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(3) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanics' lien
against the Premises or any interest therein. Lessee shall give Lessor not less
than ten (10) days' notice prior to the commencement of any work in the
Premises, and Lessor shall have the right to post notices of non-responsibility
in or on the Premises as provided by law. If Lessee shall, in good faith,
contest the validity of any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Lessor or the Premises, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorneys fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
(4) Unless Lessor requires their removal, as set forth in
Article 10 (C), all alterations, improvement, additions and which may be made on
the Premises, shall become the property of the Lessor and remain upon and be
surrendered with the Premises at the expiration of the term. Notwithstanding the
provisions of this Article 10 (C), Lessee's machinery and equipment, other than
that which is affixed to the Premises so that it cannot be removed without
material damage to the Premises, shall remain the property of Lessee and may be
removed by Lessee subject to the provisions of Article 11.
ARTICLE 11
SURRENDER OF PREMISES
On the last day of the term hereof, or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as when
received, ordinary wear and tear excepted, clean and free of debris. Lessee
shall repair any damage to the Premises, occasioned by the installation or
removal of Lessee's trade fixtures, furnishings and equipment. Notwithstanding
anything to the contrary otherwise stated in this Lease, Lessee shall leave the
air lines, power panels, electrical distributions systems, lighting fixtures,
plumbing and on the Premises in the same condition as received.
ARTICLE 12
LIABILITY INSURANCE
Lessee shall, at Lessee's expense, obtain and keep in force during the
term of this Lease a policy of comprehensive public liability insurance insuring
Lessor and Lessee against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises and all area appurtenant thereto. The
limit of said insurance shall not, however, limit the liability of the Lessee
hereunder. Lessee may carry said insurance under a blanket policy, providing,
however, said insurance by Lessee shall have a Lessor's protective liability
endorsement attached thereto. If Lessee shall fail to procure and maintain said
insurance, Lessor may, but shall not
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be required to, procure and maintain same, but at the expense of the Lessee.
Insurance required hereunder, shall be in companies rated A+ or better in
"Best's Insurance Guide". Lessee shall deliver to Lessor prior to occupancy of
the Premises insurance with loss payable clauses satisfactory to Lessor. No
policy shall be cancelable or subject to reduction of coverage except after ten
(10) days' prior written notice to Lessor.
ARTICLE 13
SUBROGATION
As long as their respective insurers so permit, Lessor and Lessee
hereby mutually waive their respective rights of recovery against each other for
any loss insured by fire, extended coverage and other property insurance
policies existing for the benefit of the respective parties. Each party shall
obtain any special endorsements, if required by their insurer to evidence
compliance with the aforementioned waiver.
ARTICLE 14
DAMAGE OR DESTRUCTION
A. Partial Damage -- Insured. In the event improvements on the Premises
are damaged by any casualty which is covered under an insurance policy required
to be maintained pursuant to Article 13, then Lessor shall repair such damage as
soon as reasonably possible and this Lease shall continue in full force and
effect.
B. Partial Damage -- Uninsured. In the event the improvements on the
Premises are damaged, except by a negligent or willful act or omission of
Lessee, by any casualty not covered under an insurance policy required to be
maintained pursuant to Section 14.2, then Lessor may, at Lessor's option,
either:
(1) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or
(2) give written notice to Lessee within thirty (30) days
after the date of occurrence of such damage of Lessor's intention to cancel and
terminate this Lease as of the date of the occurrence of the damage. In the
event Lessor elects to terminate this Lease pursuant to this Article 14 (B),
Lessee shall have the right within ten (10) days after receipt of the required
notice to notify Lessor in writing of Lessee's intention to repair such damage
at Lessee's expense, without reimbursement from Lessor, in which event this
Lease shall continue in full force and effect, and Lessee shall proceed to make
such repairs as soon as reasonably possible. If Lessee does not give such notice
within the ten (10) day period, this Lease shall be canceled and terminated as
of the date of the occurrence of such damage.
C. Total Destruction, If the Premises are totally destroyed during the
term of this Lease from any cause whether or not covered by the insurance
required under Article 13 (including any destruction required by any authorized
public
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authority), this Lease shall automatically terminate as of the date of such
total destruction.
D. Damage Near End of The Term. If the Premises are partially destroyed
or damaged during the last six (6) months of the term of this Lease, Lessor may
at Lessor's option cancel and terminate this Lease as of the date of occurrence
of such damage by giving written notice to Lessee of Lessor's election to do so
within thirty (30) days after the date of occurrence of such damage.
E. Lessor's Obligations. The Lessor shall not be required to repair any
injury or damage by fire or other cause, or to make any restoration or
replacement of any panelings, decorations, office fixtures, partitions,
railings, ceilings, floor covering, equipment, machinery or fixtures or any
other improvements or property installed in the Premises by, Lessee or at the
direct or indirect expense of Lessee. Lessee shall be required to restore or
replace same in the event of damage.
F. Abatement of Rent; Lessee's Remedies.
(1) If the premises are partially destroyed or damaged and
Lessor or Lessee repairs them pursuant to this Lease, the rent payable hereunder
for the period during which such damage and repair continues shall be abated in
proportion to the extent to which Lessee's use of the Premises is impaired.
Except for abatement of rent, if any, Lessee shall have no claim against Lessor
for any damage suffered by reason of any such damage, destruction, repair or
restoration, except for gross negligence on the part of Lessor.
(2) If Lessor shall be obligated to repair or restore the
Premises under this Section 14 and shall not commence such repair or restoration
within ninety (90) days after such obligation shall accrue, Lessee at Lessee's
option may cancel and terminate this Lease by written notice to Lessor at any
time prior to the commencement of such repair or restoration. In such event this
Lease shall terminate as of the date of such notice.
G. Termination -- Advance Payments. Upon termination of this Lease
pursuant to Article 14, an equitable adjustment shall be made concerning advance
rent and any advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
ARTICLE 15
CONDEMNATION
A. If the premises or any portion thereof are taken under the power of
eminent domain, or sold by Lessor under the threat of the exercise of said power
(all of which is herein referred to as "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever occurs first. If more than ten percent (10%) of
the floor area of any buildings on the Premises, or more than twenty-five
percent (25%) of the land area
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of the Premises not covered with buildings, is taken by condemnation, either
Lessor or Lessee may terminate this Lease, as of the date the condemning
authority takes possession, by notice in writing of such election within twenty
(20) days after Lessor shall have notified Lessee of the taking, or in the
absence of such notice then within twenty (20) days after the condemning
authority shall have taken possession.
B. If this Lease is not terminated by either Lessor or Lessee then it
shall remain in full force and effect as to the portion of the Premises
remaining, provided the rent shall be reduced in the proportion that the floor
area of the buildings taken within the Premises bears to the total floor area of
all buildings located on the Premises. In the event this Lease is not so
terminated then Lessor agrees, at Lessor's sole cost, to restore the Premises to
a complete unit of like quality and character as existed prior to the
condemnation as soon as reasonably possible. All awards for the taking of any
part of the Premises or any payment made under the threat of the exercise of
compensation for diminution of value of a leasehold or for the taking of the fee
or as severance damages; provided, however, that Lessee shall be entitled to any
award for loss of or damage to Lessee's trade fixtures and removable personal
property. In the event that this Lease is not terminated by reason of such in
connection with such condemnation, Lessor shall, to the extent of severance
damages received by Lessor in connection with such condemnation, repair any
damage to the Premises caused by such condemnation except to the extent that
Lessee has been reimbursed therefor by the condemning authority. Lessee shall
pay any amount in excess of such severance damages required to complete such
repair.
ARTICLE 16
LIENS
Lessee shall keep the Premises and the property in which the Premises
are situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by Lessee. Lessor may require, at Lessor's
sole option, that Lessee shall provide to Lessor, at Lessee's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half times
any and all estimated cost of any improvements, additions, or alterations in the
Premises, to insure Lessor against any liability for mechanics' and
materialmen's liens and to insure completion of the work.
ARTICLE 17
ASSIGNMENT AND SUBLETTING
Lessee shall not mortgage, pledge, hypothecate or encumber this Lease
or any interest therein. Lessee shall not assign this Lease or sublet, or suffer
any other person (the agents and servants of Lessee excepted) to occupy or use,
the Premises, or any part thereof, or any right or privilege appurtenant thereto
without the prior written consent of Lessor first had and obtained, which
consent shall not be unreasonably withheld. Lessor's consent to one assignment
or subletting shall not be deemed to be a consent to any subsequent assignment
or subletting, nor shall Lessor's consent release Lessee from any of its
obligations under this Lease unless
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such consent expressly so provides. Any assignment, subletting, occupation or
use without the consent of Lessor shall be void and, at the option of Lessor,
shall terminate this Lease.
A. In the event at any time or times during the term of this Lease
Lessee desires to sublet all or part of the Premises, Lessor reserves the prior
right and option to:
(1) sublet from Lessee any portion of the premises proposed by
Lessee to be sublet for the term for which such portion is proposed to be sublet
but at the same rent (including escalation as provided for in Article 6 hereof)
as Lessee is required to pay to Lessor under this Lease for the same space,
computed on a pro rata of square footage basis or
(2) terminate this Lease as it pertains to the portion of the
Premises so proposed by Lessee to be sublet. Lessee shall notify Lessor in
writing if Lessee proposes to sublet all or any part of the Premises,
designating the space proposed to be sublet and the terms of the proposed
subletting. Lessor shall be allowed fifteen (15) days after Lessor's foregoing
option. If Lessor fails to exercise its said option, all the provisions of
Article 17 subparagraph (1) above, respecting subletting, nevertheless shall be
in full force and effect and nothing contained in this subparagraph (2) shall be
construed as a waiver by Lessor of any of its rights under said subparagraph
(1).
B. Lessor's foregoing right and option shall continue throughout the
entire term of this Lease.
C. In no event shall Lessee assign this Lease or sublet the Premises or
any portion thereof to any then-existing lessee of the building.
ARTICLE 18
HOLD HARMLESS
Lessee shall indemnify and hold harmless Lessor against and from any
and all claims arising from Lessee's use of the Premises for the conduct of its
business or from any activity, work, or other thing done, permitted or suffered
by the Lessee in or about the Premises, and shall further indemnify and hold
harmless Lessor against and from any and all claims arising from any breach or
default in the performance of any obligation on Lessee's part to be performed
under the terms of this Lease, or arising from any act or negligence of the
Lessee, or any officer, agent, employee, guest, or invitee of Lessee, and from
all and against all cost, attorney's fees, expenses and liabilities incurred in
or about any such claim or any action or proceeding brought thereon, and, in any
case, action or proceeding brought against Lessor by reason of any such claim,
Lessee upon notice from Lessor shall defend the same at Lessee's expense by
counsel reasonably satisfactory to Lessor. Lessee as a material part of the
consideration to Lessor hereby assumes all risk of damage to property or injury
to persons, in, upon or about the Premises, from any cause
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other than Lessor's negligence, and Lessee hereby waives all claims in respect
thereof against Lessor. Lessor or its agents shall not be liable for any damage
to property entrusted to employees of the Building, nor for loss or damage to
any property by theft or otherwise, nor for any injury to or damage to persons
or property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place resulting from dampness or any other cause
whatsoever, unless caused by or due to the negligence of Lessor, its agents,
servants or employees. Lessor or its agents shall not be liable for interference
with the light or other incorporeal hereditaments, loss of business by Lessee,
nor shall Lessor be liable for any latent defect in the Premises or in the
Building. Lessee shall give prompt notice to Lessor in case of fire or accidents
in the Premises or in the Building or of defects therein or in the fixtures or
equipment.
ARTICLE 19
RULES AND REGULATIONS
Lessee shall faithfully observe and comply with the rules and
regulations, indicated on Exhibit "A" attached hereto and hereby reference
thereto made a part hereof, that Lessor shall from time to time promulgate.
Lessor reserves the right from time to time to make all reasonable modifications
to said rules. The additions and modifications to those rules shall be binding
upon Lessee upon delivery of a copy of them to Lessee. Lessor shall not
unreasonably be responsible to Lessee for the nonperformance of any said rules
by any other tenants or occupants.
ARTICLE 20
HOLDING OVER
If Lessee remains in possession of the Premises or any part thereof
after the expiration of the term hereof, with the express written consent of
Lessor, such occupancy shall be a tenancy from month to month and a rental in
the amount equal to 125% of the last monthly rental, plus all other charges
payable hereunder, and upon all the terms hereof applicable to a month to month
tenancy.
ARTICLE 21
ENTRY BY LESSOR
Lessor reserves and shall at any and all times have the right to enter
the Premises, inspect the same, supply janitorial service and any other service
to be provided by Lessor to Lessee hereunder, to submit said Premises to
prospective purchasers or tenants, to post notices of non-responsibility, and to
alter, improve or repair the Premises and any portion of the Building of which
the Premises are a part that Lessor may deem necessary or desirable, without
abatement of rent and may for that purpose erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed, always providing that the entrance to the Premises shall not be
blocked thereby, and further providing that the
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business of the Lessee shall not be interfered with unreasonably. Lessee hereby
waives any claim for damages or for any injury or inconvenience to or
interference with Lessee's business, any loss of occupancy or quiet enjoyment of
the Premises, and any other loss occasioned thereby. For each of the aforesaid
purposes, Lessor shall at all times have and retain a key with which to unlock
all of the doors in, upon and about the Premises, excluding Lessee's vaults,
safes and files, and Lessor shall have the right to use any and all means which
Lessor may deem proper to open said doors in an emergency, in order to obtain
entry to the Premises without liability to Lessee except for any failure to
exercise due care for Lessee's property. Any entry to the Premises obtained by
Lessor by any of said means, or otherwise shall not under any circumstances be
construed or deemed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Lessee from the Premises or any portion thereof.
ARTICLE 22
ESTOPPEL
Lessee shall at any time and from time to time upon not less than ten
(10) days' prior written notice from lessor execute, acknowledge and deliver to
Lessor a statement in writing,
A. A) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease as so modified, is in full force and effect), and the date to
which the rental and other charges are paid in advance, if any, and
B. acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of the Lessor hereunder, or specifying such defaults if any
are claimed.
Any such statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the real property of which the Premises
are a part.
ARTICLE 23
RECONSTRUCTION
In the event the Premises or the Building of which the Premises are a
part are damaged by fire or other perils covered by extended coverage insurance,
Lessor agrees to forthwith repair the same; and this Lease shall remain in full
force and effect, except that Lessee shall be entitled to a proportionate
reduction of the rent while such repairs are being made, such proportionate
reduction to be based upon the extent to which the making of such repairs shall
materially interfere with the business carried on by the Lessee in the Premises.
If the damage is due to the fault or neglect of Lessee or its employees, there
shall be no abatement of rent.
A. In the event the Premises or the Building of which the Premises are
a part are damaged as a result of any cause other than the perils covered by
fire and
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extended coverage insurance, then Lessor shall forthwith repair the same,
provided the extent of the destruction be less than ten (10%) per cent of the
full replacement cost, then Lessor shall have the option;
(1) to repair or restore such damage, this Lease continuing in
full force and effect, but the rent to be proportionately reduced as herein
above in this Article provided; or
(2) give notice to Lessee at any time within sixty (60) days
after such damage terminating this Lease as of the date specified in such
notice, which date shall be no less than thirty (30) days and no more than sixty
(60) days after the giving of such notice. In the event of giving such notice,
this Lease shall expire and all interest of the Lessee in the Premises shall
terminate on the date so specified in such notice and the rent, reduced by a
proportionate amount, based upon the extent, if any, to which such damage
materially interfered with the business carried on by the Lessee in the
Premises, shall be paid up to date of said such termination.
B. Notwithstanding anything to the contrary contained in this Article,
Lessor shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twelve (12) months of the term of this Lease
or any extension thereof. Lessor shall not be required to repair any injury or
damage by fire or other cause, or to make any repairs or replacements of any
panels, decoration, office fixtures, railings, floor covering, partitions, or
any other property installed in the Premises by Lessee.
C. The Lessee shall not be entitled to any compensation or damages from
Lessor for loss of the use of the whole or any part of the Premises, Lessee's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration.
ARTICLE 24
AUTHORITY OF PARTIES
Corporate Authority. If Lessee is a corporation, each individual
executing this lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
Limited Partnerships. If the Lessor herein is a limited partnership, it
is understood and agreed that any claims by Lessee on Lessor shall be limited to
the assets of the limited partnership, and furthermore, Lessee expressly waives
any and all rights to proceed against the individual partners or the officers,
directors or shareholders of any corporate partner, except to the extent of
their interest in said limited partnership.
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ARTICLE 25
DEFAULT
The occurrence of any one or more of the following events shall
constitute a default and breach of the Lease by Lessee.
A. The vacating or abandonment of the Premises by Lessee.
B. The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof by Lessor to Lessee.
C. The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Lessee, other than described in Article 25 (B) above, where such failure shall
continue for a period of thirty (30) days after written notice thereof by Lessor
to Lessee; provided, however, that if the nature of Lessee's default is such
that more than thirty (30) days are reasonable required for its cure, then
Lessee shall not be deemed to be in default if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
D. The making by Lessee of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Lessee of
a petition to have Lessee adjudged a bankrupt, or a petition or reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where possession is not restored to Lessee within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
ARTICLE 26
REMEDIES IN DEFAULT
In the event of any such material default or breach by Lessee, Lessor
may at any time thereafter, with notice but without limiting Lessor in the
exercise of a right or remedy which Lessor may have by reason of such default or
breach:
A. Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorney's fees, any real
estate commission actually paid;
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the worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Lessee proves could be reasonable avoided; that portion of the leasing
commission paid by Lessor and applicable to the unexpired term of this Lease.
Unpaid installments of rent or other sums shall bear interest from the date due
at the rate of ten (10%) per cent per annum. In the event Lessee shall have
abandoned the Premises, Lessor shall have the option of:
(1) taking possession of the Premises and recovering from
Lessee the amount specified this paragraph, or
(2) proceeding under the provision of the following Article 26
(B).
B. Maintain Lessee's right to possession, in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
C. Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decision of the State in which the Premises are located.
ARTICLE 27
GENERAL PROVISIONS
(i) Plats and Riders. Clauses, plats and riders, if
any, signed by the Lessor and the Lessee and endorsed on or affixed to this
Lease are a part hereof.
(ii) Waiver. The waiver by Lessor of any term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition on any subsequent breach of the same or any
other term, covenant or condition herein contained. The subsequent acceptance of
rent hereunder by Lessor shall not be deemed to be a waiver of any preceding
breach by Lessee of any term, covenant or condition of this Lease, other than
the failure of the Lessee to pay the particular rental so accepted, regardless
of Lessor's knowledge of such preceding breach at the time of the acceptance of
such rent.
C. Notices. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Lessee to the Lessor shall be sent by
United States Mail, postage prepaid, addressed to the Lessor at the Office of
the Building, or to such other person or place as the Lessor may from time to
time designate in a notice to the Lessee.
D. Joint Obligation. If there be more than one Lessee the obligations
hereunder imposed upon Lessees shall be joint and several.
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E. Marginal Headings. The marginal headings and Article titles to the
Articles of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
F. Time. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
G. Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties thereto.
H. Recordation. Neither Lessor nor Lessee shall record this Lease or a
short form memorandum hereof without the prior written consent of the other
party.
I. Quiet Possession. Upon Lessee paying the rent reserved hereunder and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
J. Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent or other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or of a sum due from Lessee shall not be received by Lessor
or Lessor's designee within ten (10) days after said amount is due, then Lessee
shall pay to Lessor a late charge equal to ten (10%) per cent of such over due
amount. The parties hereby agree that such late charges represent a fair and
reasonable estimate of the cost that Lessor will incur by reason of the late
payment by Lessee. Acceptance of such late charges by the Lessor shall in no
event constitute a waiver of Lessee's default with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder.
K. Prior Agreements. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
L. Inability to Perform. This Lease and the obligations of the Lessee
hereunder shall not be affected or impaired because the Lessor is unable to
fulfill any of its obligations hereunder or is delayed in doing so, if such
inability or delay
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is caused by reason of strike, labor troubles, acts of God, or any other cause
beyond the reasonable control of the Lessor.
M. Attorneys' Fees. In the event of any action or proceeding brought by
either party against the other under this Lease the prevailing party shall be
entitled to recover all costs and expenses including the fees of its attorneys
in such action or proceeding in such amount as the court may adjudge reasonable
as attorneys' fees.
N. Sale of Premises by Lessor. In the event of any sale of the
Building, Lessor shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Lessor under this Lease.
O. Subordination, Attornment. Upon request of the Lessor, Lessee will
in writing subordinate its rights hereunder to the lien of any first mortgage,
or first deed of trust to any bank, insurance company or other lending
institution, now or hereafter in force against the land and Building of which
the Premises are a part, and upon any buildings hereafter placed upon the land
of which the Premises are a part, and to all advances made or hereafter to be
made upon the security thereof. In the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any
mortgage or deed or trust made by the Lessor covering the Premises, the Lessee
shall attorn to the purchaser upon any such foreclosure or sale and recognize
such purchaser as the Lessor under this Lease. The provision of this Article to
the contrary notwithstanding, and so long as Lessee is not in default hereunder,
this Lease shall remain in full force and effect for the full term hereof.
P. Name. Lessee shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Lessee in the Premises.
Q. Separability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
R. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
S. Choice of Law. This Lease shall be governed by the laws of the State
in which the Premises are located.
T. Signs and Auctions. Lessee shall not place any sign upon the
Premises or Building or conduct any auction thereon without Lessor's prior
written consent.
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ARTICLE 28
REMODELING OF BUILDING
Lessee acknowledges that Lessor intends to engage in extensive
remodeling of the building of which the leasehold premises form a part, and
agrees that Lessor may, for some period of time within the lease term, relocate
all or a portion of the leasehold premises to another part of the building for
the purpose of completing renovation or repairs. In such event Lessor shall use
its best efforts to provide comparable space and minimize inconvenience to
Lessee.
ARTICLE 29
RELOCATION
Lessor reserves the right to relocate the premises to substantially
comparable space within the building. Lessor will give Lessee written notice of
its intention to relocate the premises, and Lessee will complete its relocation
within thirty (30) days after Lessor's notice. The base monthly rent of the new
space will not exceed the base monthly rent for the former premises. If Lessee
does not wish to relocate its premises, Lessee may terminate this lease
effective as of thirty (30) days after Lessor's initial notice. Upon Lessee's
vacation and abandonment of the premises, Lessor will pay to Lessee a sum equal
to one monthly installment of the base monthly rent payable under this lease,
and will return the unused portion of the security deposit, and Lessor's and
Lessee's obligations to each other will then end. If Lessee does relocate within
the building then effective on the date of such relocation this lease will be
amended by deleting the description of the former premises and substituting for
it a description of the new space. Lessor agrees to pay the reasonable costs of
moving Lessee to the new space.
ARTICLE 30
NON-DISCRIMINATION
Lessee herein covenants by and for himself, his heirs, executors,
administrators and assigns, and all persons claiming under or through him, and
this Lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any
person or group of persons on account of race, color, creed, national origin or
ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure or
enjoyment of the premises herein leased, nor shall Lessee himself, or any
persons claiming under or through him, establish or permit any such practice or
practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of Lessees, Lessors, sublessors, sublessees
or vendees in the premises herein leased.
ARTICLE 31
LESSOR'S AGENTS
It is understood and agreed that this Lease is executed by Bressie and
Company solely in their capacity as Lessor's agents and said Bressie and Company
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shall not be obligated to perform any of the terms, conditions or covenants to
be performed by Lessor herein, nor in any way be liable hereunder.
ARTICLE 32
BROKERS
Lessee warrants that it has had no dealings with any real estate broker
or agents in connection with the negotiation of this Lease excepting only None
and it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE
BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTIONS
RELATING THERETO.
THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE AND ON THE
DATE SPECIFIED IMMEDIATELY ADJACENT TO THEIR RESPECTIVE SIGNATURES.
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Lessor: 500 Third Street Associates
c/o Intereal Corporation
520 Third Street, Suite 555
San Francisco, CA 94107
By: /s/
---------------------------
Title: G.P.
Dated: 8/15/96
Lessee: Organic Online, Inc.
By: /s/
---------------------------
Director of Finance
Its: __________________________
Title: ________________________
Dated: 8/15/96
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EXHIBIT "A"
RULES AND REGULATIONS
1. No sign placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or any part of the outside or
inside of the Building without the written consent of Lessee first had and
obtained and Lessee shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant. All approved sign or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by Lessee.
Tenant shall not place anything or allow anything to be placed near the glass of
any window, door, partition or wall which may appear unsightly from outside the
Premises; provided, however, that Lessee may furnish and install a Building
standard window covering at all exterior windows. Tenant shall not without prior
written consent of Lessee cause or otherwise sunscreen any window.
2. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the Lessors or used by them for any
purpose other than for ingress and egress from their respective Premises.
3. Tenant shall not alter any lock or install any new or additional
locks or any bolts on any doors or windows of the Premises.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown 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 employees or invitees shall have
caused it.
5. Tenant shall not overload the floor of the Premises or in any way
deface the Premises or any part thereof.
6. No furniture, freight or equipment of any kind shall be brought into
the Building without the prior notice to Lessee and all moving of the same into
or out of the Building shall be done at such time and in such manner as Lessee
shall designate. Lessee shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the building and
also the times and manner of moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Lessee, stand on
supports of such thickness as is necessary to properly distribute the weight.
Lessee will not be responsible for loss of or damage to any such safe or
property from any cause and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
the Tenant.
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7. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Lessee or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other Lessors or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building.
8. No cooking shall be done or permitted by any Tenant on the Premises,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging, or for any improper, objectionable or immoral purposes,
9. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Lessee.
10. Lessee will direct electricians as to where and how telephone and
telegraph wire are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Lessee. The location of telephones, call
boxes and other office equipment affixed to the Premises shall be subject to the
approval of the Lessee.
11. On Saturdays, Sundays and legal holidays, and on other days between
the hours of 6:00 P.M. and 8:00 A.M. the following day, access to the Building,
or to the halls, corridors, elevators or stairways in the Building, or to the
Premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge and has a pass or is properly identified.
The Lessee shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Lessee reserves
the right to prevent access to the Building during the continuance of the same
by closing of the doors or otherwise, for the safety of the Lessors and
protection of property in the Building and the Building.
12. Lessee reserves the right to exclude or expel from the Building any
person who, in the judgment of Lessee, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
13. No vending machine or machines of any description shall be
installed, maintained or operated upon the Premises without the written consent
of the Lessee.
14. Lessee shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the Premises are a part.
15. Tenant shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate to prevent same.
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16. Without the written consent of Lessee, Tenant shall not use the
name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
17. Lessee shall have the right to control and operate the public
portions of the Building, and the public facilities, and heating and air
conditioning, as well as facilities furnished for the common use of the Lessors,
in such manner as it deems best for the benefit of the Lessors generally.
18. All entrance doors in the Premises shall be left locked when the
Premises are not in use, and all doors opening to public corridors shall be kept
closed except for normal ingress and egress from the Premises.
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ADDENDUM TO LEASE
IMPROVEMENTS: PREMISES WORK:
Lessor shall at it's sole cost and expense paint the premises white. In
addition Lessor shall remove the hung ceiling framework and remove and remove
and replace broken or missing windows. All other improvements to said premises
shall be accomplished by Lessee at his sole cost and expense.
Tenant agrees that the space, apart from said improvements, is provided
in an as is condition.
Tenant agrees that any walls removed by tenant shall be restored at
Lessors option upon vacating space.
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NOTICE OF CHANGE OF TERMS OF TENANCY
INTEREAL CORPORATION, AGENTS
(415)778-3900
To: ORGANIC ONLINE, INC.
520 Third Street, Suite 540
San Francisco, CA 94107
Dated: September 3, 1996
REFERENCE IS MADE to that certain lease dated July 22,1996 by and
between 500 THIRD STREET ASSOCIATES, as Landlord, and ORGANIC ONLINE, INC., as
Tenant.
PLEASE TAKE NOTICE that the terms of the tenancy under which you hold
possession of the described premises, Suite 540...., are hereby changed as
follows:
THE PREMISES THEREOF shall include Suite 510 consisting of 2,066
rentable square feet for a total of 8,585 which represents 5.72% of the total
building square footage.
THE BASE RENT THEREOF shall be increased by $1,549.50 for a total of
$6,063.50 effective September 1, 1996. Rent will be adjusted periodically
pursuant to the market conditions.
SECURITY DEPOSIT shall be increased by $1,549.50 to a total of
$6,063.50.
EXCEPT FOR THESE CHANGES herein above specified, all other terms and
conditions of your said tenancy remain the same.
ACCEPTED FOR LESSOR: ACCEPTED FOR LESSEE
500 THIRD STREET ASSOCIATES ORGANIC ONLINE, INC.
By: /s/ Elbert P. Bressie By: /s/ J. D. Davids
Its:______________________________ Its: Director of Finance
Date: 12/28/96 Date: 12/30/96
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cc: Accounting
File
Office of the Building
28
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CONSENT TO ASSIGNMENT OF LEASE
THIS CONSENT To ASSIGNMENT OF LEASE (the "Consent") is entered into as
of January ___, 1997, by and among ORGANIC ONLINE, INC., a California
corporation (the "Company"), 500 THIRD STREET ASSOCIATES ("Lessor") and ORGANIC
ONLINE, INC., a Delaware corporation and a wholly-owned subsidiary of the
Company (the "Subsidiary").
RECITALS
A. The Company and Lessor are parties to those certain leases described
in Exhibit A attached hereto (collectively, the "Leases").
B. Pursuant to the terms of an Asset Purchase Agreement (the
"Agreement") to be entered into between the Company and Subsidiary concurrently
with the date of this Consent, the Company will transfer substantially all of
its assets and liabilities to Subsidiary and the Company will change its name to
"Organic Holdings, Inc."
C. The assets being transferred by the Company to Subsidiary pursuant
to the terms of the Agreement include the Company's rights and obligations under
the Leases.
D. The parties desire to obtain Lessor's consent to the assignment of
the Leases pursuant to Article 17 of the Leases and Subsidiary's agreement that
it shall be bound by the terms of the Leases.
In consideration of the foregoing recitals and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1.1 Consent to Assignment. Lessor hereby consents to the
Company' s assignment to Subsidiary of all of the Company's rights, benefits and
obligations under the Leases.
1.2 Agreement to be Bound. Subsidiary hereby agrees to be
bound by all of the Company's rights, benefits and obligations under the Leases
and after the date of this Consent, each and every reference in the Leases to
"Lessee" shall mean Subsidiary.
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IN WITNESS WHEREOF, the parties hereto have executed this Consent as of
the date set forth in the first paragraph hereof.
the "Company"
ORGANIC ONLINE, INC.,
a California company
By: /s/ J.D. Davids
------------------------------------
J.D. Davids, Director of Finance
[Print Name and Title]
"Lessor"
500 THIRD STREET ASSOCIATES
By: /s/ Elbert P. Bressie
------------------------------------
G.P.
[Print Name and Title]
"Subsidiary"
ORGANIC ONLINE, INC.
a Delaware company
By: /s/ Elbert P. Bressie
------------------------------------
J.D. Davids, Director of Finance
[Print Name and Title]
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EXHIBIT A
(THE LEASES)
1. Lease dated July 22, 1996, between Lessor and the Company, relating
to the Company's business offices at 510 Third Street, Suites 540, 548, 550 and
560, San Francisco, California.
2. Lease dated July 22, 1996, between Lessor and the Company, relating
to the Company's business offices at 510 Third Street, Suite 515, San Francisco,
California.
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NOTICE OF CHANGE OF TERMS OF TENANCY
To: ORGANIC ONLINE, INC.
520 Third Street, Suite 540
San Francisco, CA 94107
Dated: March 28,1997
REFERENCE IS MADE to that certain lease dated June 22,1996 and the
Notice of Change of Terms of Tenancy dated September 3, 1996 by and between
Organic Online, Inc., Tenant and 500 Third Street, Associates, Landlord;
PLEASE TAKE NOTICE that the terms of the tenancy under which you hold
possession of the following described premises, Suite 540... which shall
hereafter be designated as Suite 550-570 are hereby changed as follows:
Article 1. Premises: Shall be adjusted to delete Suite 515 include an
additional 6,661 square feet and they shall be known as Suite 520,
approximately 2,060. s.f., Suite 530, approximately 2,060 s.f., Suite
540, approximately 2,060 s.f., Suite 536, approximately 220 s.f., and
Suite 580, approximately 261 s.f. All suites are accepted in an "as-is"
condition.
Article 2. Term: Month to month. Commencing April, 1997.
Article 4. Base Rent: Lessee shall pay to Lessor an additional base
rent in the sum of $5,701.00 per month. The base rent is subject to a
C.P.I. increase on the anniversary date.
Article 5. Security Deposit: Shall be increased by $5,701.00 to equal
one months rent.
Right of First Refusal: Tenant shall have the Right of First Refusal to
lease space on the Fifth Floor of 510 Third Street on a longer term
basis. In addition a Right of First Refusal is granted for the Third
Floor of 510 Third Street on terms to be agreed upon before June 1,
1998 and delivered on June 1, 1998 or before if space is available.
EXCEPT FOR THESE CHANGES herein specified all other terms and
conditions of your said Tenancy are hereby ratified and affirmed.
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ACCEPTED FOR TENANT: ACCEPTED FOR LANDLORD
ORGANIC ONLINE, INC. 500 THIRD STREET ASSOCIATES
By: /s/ J.D. Davids By: /s/ Elbert P. Bressie
Date: 4/7/97 Date: 4/7/97
cc: Accounting, File
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<PAGE> 34
NOTICE OF CHANGE OF TERMS OF TENANCY
INTEREAL CORPORATION, Agents
(415)778-3900
To: ORGANIC ONLINE, INC.
520 THIRD STREET, SUITE 540
SAN FRANCISCO, CA 94107
DATED: October 16,1997
REFERENCE IS MADE to that certain Lease dated July 22,1996, and that
Notice of Change of Terms of Tenancy dated September 3, 1996 and Notice of
Change of Terms of Tenancy dated March 28,1997 by and between 500 THIRD STREET
ASSOCIATES, as Landlord, and ORGANIC ONLINE, INC., as Tenant.
PLEASE TAKE NOTICE that the terms of the tenancies under which you hold
possession of the premises herein described as Suite 510 through Suite
580, and Penthouse are hereby changed to the following extent:
Article 1. Premises: Shall include a total of 16,409 square feet
situate on the northwesterly 1/2 of the fifth floor plus the penthouse
which represents approximately 10.94% of the total building square
footage.
Article 2. Term: Five (5) years, commencing October 1, 1997 and
expiring on September 30, 2002,
Article 4. Base Rent: Shall be an average of $1.075 s.f. per month or:
October 1, 1997 - September 30, 1998 $16,409.00/mo.
October 1, 1998 - September 30, 1999 $17,024.00/mo.
October 1, 1999 - September 30, 2000 $17,640.00/mo.
October 1, 2000 - September 30, 2001 $18,255.00/mo.
October 1, 2001 - September 30, 2002 $18,870.00/mo.
Rent Adjustment: Base rent as detailed in Article 4 above shall be
adjusted on each anniversary date by an amount proportional to the
increase in the Consumer Price Index pursuant to the provisions of
Article 6.b. of the above cited Lease.
Tenant Improvements: Lessee shall accomplish and pay for at its sole
cost improvements to said premises as provided for in plans drawn by
Van Meter, Williams and Pollack dated June 17, 1997 and designated Job
#6703 which shall be built under a building permit and according to
provisions of said Lease. Lessee shall obtain the written approval for
all such plans and improvements from Lessor prior to their
commencement.
Option to Extend: Lessor grants Lessee an Option to Extend this Lease
for said premises and any expansions for the period of five (5) years
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commencing October 1, 2002 on the same terms and conditions except for
a further option and except that the rent shall be at a rate equal to
90% of the then fair market price, but in no event shall the rent
including any escalations be less than that chargeable during the last
month of the base term. Lessee shall give Lessor written notice that it
is exercising its option on or before 180 day prior to the expiration
of said original terms. If such notice is not received by March 31,
2002 then it shall expire and be of no further force or effect.
Right of First Refusal: Lessor grants to Lessee a right of first
refusal on Suite 505 containing 2,158 square feet on the northwesterly
1/2 of the 3rd floor of 510 Third Street, containing approximately
15,000 square feet. Lessee must respond within 4 working days of a
written notice of a bonafide offer. If no written response accompanied
by a deposit in the amount of first month's rent and a security deposit
equal to one months rent, is received by Lessor within said 4 day time
period then Lessor shall be deemed to have satisfied this provision and
can conclude that Lessee does not wish to lease said space. Lessor
shall then be free to enter into a lease with a third party on terms
substantially equal to terms presented to Lessee.
Recognizing that Lessor is leasing said space at a rent below current
market levels, then parties agree that in the event that Jonathan
Nelson voluntarily or involuntarily shall sell or transfer or cause to
be sold or transferred, the controlling interest of Organic Online,
Inc. or its survivors or assignees or if Organic Online, Inc., its
survivors or assignees becomes a publicly traded company and Jonathan
Nelson thereby at that time or at a later date becomes owner of a less
than controlling interest in Organic Online Inc., then Jonathan Nelson
shall in writing so advise Lessor and Lessor shall have the right at
any time thereafter (upon sixty (60) days' prior written notice to
Lessee) to adjust the base rent to a base rent that is equal to the
then prevailing rent in the market place for comparable space. If
parties should fail to agree on the value of said proposed rent as
being a fair market rate, then the matter shall be settled by
arbitration. Lessor and Lessee shall name a mutually acceptable
arbitrator who shall be a licensed California real estate broker and
recognized as an expert in rents and values of comparable local spaces.
If parties fail to agree upon a mutually acceptable arbitrator then
they shall each pick an arbitrator of similar competency and
credentials who shall in turn agree upon a third neutral arbitrator and
the three arbitrators shall establish said base rent which shall in no
event be less than that then required by the provisions of said lease.
Lessor and Lessee shall mutually share the expense of said arbitration.
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EXCEPT FOR THESE CHANGES herein above specified, all other terms and
conditions of your said tenancy shall remain the same.
ACCEPTED FOR LESSOR: ACCEPTED FOR LESSEE
500 THIRD STREET ASSOCIATES ORGANIC ONLINE, INC.
By: /s/ Elbert P. Bressie By: /s/ Marita Scarfi
Its: G.P. Its: Director of Finance
Date: 10/21/97 Date: 21 October 1997
cc: Accounting
File
Office of the Building
36
<PAGE> 1
EXHIBIT 10.12
LEASE
500 THIRD STREET
INTEREAL CORPORATION, AGENTS
(415) 778-3900
THIS LEASE, made on December 5, 1996, between 500 Third Street Associates,
herein called Lessor and Organic Online, Inc., herein called Lessee.
THIS LEASE is subject to the terms, covenants and conditions herein set
forth and the Tenant covenants as a material part of the consideration for this
Lease to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed and that this Lease is made upon the condition of
said performance.
WITNESSETH:
ARTICLE 1
PREMISES
Lessor hereby leases to Lessee and Lessee leases from Lessor for the term,
at the rental, and upon all of the conditions set forth herein a portion of that
certain real property situated in the City and County of San Francisco, State of
California, commonly known as the 500 Third Street Building, located at the
Northeast corner of Third and Bryant Streets. Said portion is more particularly
described as: 510 THIRD STREET, PENTHOUSE SUITE a suite of approximately 1,159
SQUARE FEET, as diagrammed on Exhibit "B" attached to and made a part of this
lease. Said real property, including the land and the improvements therein or so
much as Lessee is entitled to occupy or use under terms of this lease, is herein
called "the Premises".
ARTICLE 2
TERM
Except as otherwise provided in this Lease, the term of this Lease shall
be on a month to month basis commencing on October 15,1996 unless sooner
terminated pursuant to any provisions hereof.
ARTICLE 3
POSSESSION
Notwithstanding said commencement date, if for any reason Lessor cannot
deliver possession of the Premises to Lessee on said date, Lessor shall not be
subject to any liability therefor, nor shall such failure affect the validity of
this
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Lease or the obligations of Lessee hereunder or extend the term hereof, but in
such case, Lessee shall not be obligated to pay rent until possession of the
Premises is tendered to Lessee; provided, however, that if Lessor shall not have
delivered possession of the Premises within sixty (60) days from said
commencement date, Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. If Lessee occupies the Premises
prior to said commencement date, such occupancy shall be subject to all
provisions hereof, such occupancy shall not advance the termination date, and
Lessee shall pay rent for such period at the initial monthly rates set forth
below.
ARTICLE 4
BASE RENT
Lessee shall pay to Lessor as base rent for the Premises the sum of ONE
THOUSAND ONE HUNDRED FIFTY NINE DOLLARS 00/100 ($1,159.00), commencing October
15, 1996, in advance on or before the first day of each calendar month of the
term of this Lease without deduction, offset, prior notice or demand, in lawful
money of the United States. Base rent for any period during the term hereof
which is for less than one month shall be a pro rata portion of the monthly
installment calculated on a 30-day month basis and payable in advance.
ARTICLE 5
SECURITY DEPOSIT
Lessee has deposited with Lessor the sum of ONE THOUSAND ONE HUNDRED FIFTY
NINE DOLLARS AND 00/100 ($1,159.00) 00). Said sum shall be held by Lessor as
security for the faithful performance by Lessee of all the terms, covenants, and
conditions of this Lease to be kept and performed by Lessee during the term
hereof. If Lessee defaults with respect to any provision of this lease,
including, but not limited to the provisions relating to the payment of rent,
Lessor may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any other sum in
default, or for the payment of any amount which Lessor may spend or become
obligated to spend by reason of Lessee's default, or to compensate Lessor for
any other loss or damage which Lessor may suffer by reason of Lessee's default.
If any portion of said deposit is so used or applied, Lessee shall within five
(5) days after written demand therefor, deposit cash with Lessor in an amount
sufficient to restore the security deposit to its original amount and Lessee's
failure to do so shall be a material breach of this Lease. Lessor shall not be
required to keep this security deposit separate from its general funds, and
Lessee shall not be entitled to interest on such deposit. If Lessee shall fully
and faithfully perform every provision of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to Lessee (or, at
Lessor's option, to the last assignee of Lessee's interest hereunder) at the
expiration of the
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Lease term. In the event of termination of Lessor's interest in this Lease,
Lessor shall transfer said deposit to Lessor's successor in interest.
ARTICLE 6
RENT ADJUSTMENTS
Notwithstanding anything contained in this Article, the rental payable by
Lessee shall in no event be less than the base rent specified in Article four
(4) herein above. For the purposes of this Article, the following terms are
defined as follows:
Base Year: The calendar year in which this Lease term commences,
(1996).
Comparison Year: Each calendar year of the term after the Base Year.
(A) Direct Expenses: All direct costs of operation and maintenance, as
determined by generally accepted accounting practices, shall include the
following costs by way of illustration, but not be limited to: real property
taxes and assessments; rent taxes, gross receipt taxes, (whether assessed
against the Lessor or assessed against the Lessee and collected by the Lessor,
or both), water and sewer charges, insurance premiums, utilities, janitorial
services, labor, costs incurred in the management of the Building, if any, air
conditioning & heating, elevator maintenance, supplies, material, equipment, and
tools, including maintenance, costs, and upkeep of all parking and common areas.
("Direct Expenses" shall not include depreciation on the Building of which the
Premises are a part or equipment therein, loan payments, executive salaries or
real estate brokers' commissions, or costs paid directly by Lessee).
If the Direct Expenses paid or incurred by the Lessor for the Comparison
Year on account of the operation or maintenance of the Building of which the
Premises area part are in excess of the Direct Expenses paid or incurred for the
Base Year, then the Lessee shall pay .7727% of the increase. This percentage is
that portion of the total rentable area of the Building occupied by the Lessee
hereunder. Lessor shall endeavor to give to Lessee on or before the first day of
March of each year following the respective Comparison Year a statement of the
increase in rent payable by Lessee hereunder, but failure by Lessor to give such
statement by said date shall not constitute a waiver by Lessor of its right to
require an increase in rent. Upon receipt of the statement for the first
Comparison Year, Lessee shall pay in full the total amount of increase due for
the first Comparison Year, and in addition for the then current year, the amount
of any such increase shall be used as an estimate for said current year and this
amount shall be divided into twelve (12) equal monthly installments and Lessee
shall pay to Lessor, concurrently with the regular monthly rent payment next due
following the receipt of such statement, an amount equal to one (1) monthly
installment multiplied by the number of months from January in the calendar year
in which said statement is submitted to the month of such payment, both months
inclusive. Subsequent installments shall be payable
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concurrently with the regular monthly rent payments for the balance of that
calendar year and shall continue until the next Comparison Year's statement is
rendered. If the next or any succeeding Comparison Year results in a greater
increase in Direct Expenses, then upon receipt of a statement from Lessor,
Lessee shall pay a lump sum equal to such total increase in Direct Expenses over
the Base Year, less the total of the monthly installments of estimated increases
paid in the previous calendar year for which comparison is then being made to
the Base Year; and the estimated monthly installments to be paid for the next
year, following said Comparison Year, shall be adjusted to reflect such
increase. If in any Comparison Year the Lessee's share of Direct Expenses be
less than the preceding year, then upon receipt of Lessor's statement, any
overpayment made by Lessee on the monthly installment basis provided above shall
be credited towards the next monthly rent falling due and the estimated monthly
installments of Direct Expenses to be paid shall be adjusted to reflect such
lower Direct Expenses for the most recent Comparison Year. Even though the term
has expired and Lessee has vacated the Premises, when the final determination is
made of Lessee's share of Direct Expenses for the year in which this Lease
terminates, Lessee shall immediately pay any increase due over the estimated
expenses paid and conversely any overpayment made in the event said expenses
decrease shall be immediately rebated by Lessor to Lessee.
(B) C.P.I. In addition, on October 15, 1997, and each anniversary date
thereafter the base rent as set forth in Article four (4) above shall be
annually increased by the percentage of increase, if any, in the Consumer Price
Index for revised urban wage earners and clerical workers - San Francisco
Oakland Area - as published by the United States Department of Labor's Bureau of
Labor Statistics. The base period, for purposes of such adjustment, shall be
July, 1996, the base index for which is 467.0. The comparison period shall be
July, 1997 and each July thereafter. Should the aforementioned Index be
discontinued the parties shall select another similar Index which reflects
consumer prices and if the parties cannot agree on another Index it shall be
selected by binding arbitration. (By way of illustration only, if the January
figure in which this Lease is executed is 140 and the January 1986 figure is
160, then the monthly rent payable for the ensuing calendar year shall be
increased by 14.29%).
(C) UTILITIES. Lessee shall pay prior to delinquency for all water, gas,
hear, light, power, telephone, sewage, air conditioning and ventilating,
scavenger, janitorial, landscaping and all other materials and utilities
supplied to the Premises. If any such services are not separately metered to
Lessee, Lessee shall pay a pro rata share of all charges which are jointly
metered, the determination to be made by Lessor, and payment to be made by
Lessee together with rent as estimated by Lessor. Pro rata share for purposes
hereof shall be .7727% and may be adjusted reasonably to reflect actual usage
and cost.
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ARTICLE 7
PROPERTY TAXES
Lessee shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible, Lessee
shall cause said trade fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
ARTICLE 8
USE
The Premises shall be used and occupied by Lessee for only the following
purposes and for no other purposes whatsoever without obtaining the prior
written consent of Lessor: Multi Media software design, production space and
computer server hosting.
(A) Lessee shall not do or permit anything to be done in or about the
Premises which will increase the existing rate of insurance upon the Premises
(unless Lessee shall pay any increased premium as a result of such use or acts)
or cause the cancellation of any insurance policy covering said Premises or any
building of which the Premises may be a part, nor shall Lessee sell or permit to
be kept, used or sold in or about said Premises any articles which may be
prohibited by a standard form policy of fire insurance.
(B) Lessee shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
tenants or occupants of any building of which the Premises may be a part or
injure or annoy them or use or allow the Premises to be used for any unlawful or
objectionable purpose, not shall Lessee cause, maintain or permit any nuisance
in, on or about the Premises. Lessee shall not commit or suffer to be committed
any waste in or upon the Premises.
(C) Lessee shall not use the Premises or permit anything to be done in or
about the Premises which will in any way conflict with any law, statute, zoning
restriction, ordinance or governmental rule or regulation or requirements or
duly constituted public authorities now in force or which may hereafter be
enacted or promulgated. Lessee shall at its sole cost and expense promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now in force or which may hereafter be in force and with the
requirements of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises. The judgment of any court of competent jurisdiction or the
admission of Lessee in any action against Lessee, whether Lessor be a party
thereto or not, that Lessee has violated any law,
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statute, ordinance or governmental rule, regulation or covenant, shall be
conclusive of that fact as between Lessor and Lessee.
(D) Lessee understands and acknowledges that using this premises as
permanent lodging or residence is prohibited by this lease and by local zoning
ordinances. Lessee further understands and acknowledges that Lessee may not
"build out" or construct any tenant improvements in this premises incident to
use of this premises as a residence, including, but not limited to, a kitchen or
a bedroom. Lessee certifies that the premises shall not be used as a residence.
Further, Lessee expressly agrees to indemnify the Lessor and to hold the Lessor
harmless in the event Lessor is subject to any liability, either civil or
criminal, including, but not limited to, any expense, fines, levies, liens or
other assessments, expenses or liabilities incurred as a result of any
proceeding by any person or governmental entity, as a result of Lessee's
violation of these terms.
ARTICLE 9
CONDITION OF PREMISES
If the Premises are completed as of the date of execution hereof, then
Lessee, by execution of this Lease, shall be deemed to have accepted the
Premises in the condition existing as of the date of execution and in any event
this Lease shall be subject to all applicable zoning ordinances and to any
municipal, county and state laws and regulations governing and regulating the
use of the Premises. Lessee acknowledges that neither Lessor nor Lessor's agent
has made any representation or warranty as to the suitability of the Premises
for the conduct of Lessee's business.
ARTICLE 10
MAINTENANCE, REPAIR AND ALTERATIONS
Lessee shall keep in good order, condition and repair the Premises and
every part thereof, structural and non structural, (whether or not such portion
of the Premises requiring repair, or the means of repairing the same are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises) including, without limiting the generality
of the foregoing, all plumbing, air conditioning, (Lessee shall procure and
maintain, at Lessee's expense, an air conditioning system maintenance contract,
if applicable) ventilating, electrical, lighting facilities and equipment within
the Premises, fixtures, walls, (interior and exterior), ceilings, floors,
windows, doors, plate glass and skylights located within the Premises.
(A) Lessor's Rights. If Lessee fails to perform Lessee's obligations under
this Article 10, or under any other paragraph of the Lease, Lessor shall at its
option provide reasonable time for Lessee to cure and (but shall not be required
to) enter upon the Premises after ten (10) days' prior written notice to Lessee
(except in the case of an emergency, in which case no notice shall be required),
perform such obligations on Lessee's behalf and put the same in good order,
condition and repair,
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and the cost thereof together with interest thereon at the maximum rate then
allowable by law shall become due and payable as additional rental to Lessor
together with Lessee's next rental installment.
(B) Lessor's Obligations. Except for the obligations of Lessor under
Article 9 (relating to Lessor's warranty), Article 14 (relating to destruction
of the Premises) and under Article 15 (relating to condemnation of the
Premises), it is intended by the parties hereto that Lessor have no obligation,
in any manner whatsoever, to repair and maintain the Premises except Lessor
shall maintain structural elements of the Premises located thereon nor the
equipment therein, all of which obligations are intended to be that of the
Lessee under Article 10 hereof. Lessee expressly waives the benefit of any
statute now or hereinafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor's expense or to terminate this Lease because of
Lessor's failure to keep the Premises in good order, condition and repair.
(C) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, or Utility Installations in, on or about
the Premises, except for nonstructural alterations not exceeding $2,500 in
cumulative costs during the term of this Lease, except as agreed between parties
in writing. In any event, whether or not in excess of $2,500 in cumulative cost,
Lessee shall make no change or alteration to the exterior of the Premises nor
the exterior of the building(s) on the Premises without Lessor's prior written
consent.
(1) As used in this Article 10 (C) the term "Utility Installation"
shall mean carpeting, window coverings, air lines, power panels, electrical
distribution systems, lighting fixtures, space heaters, air conditioning,
plumbing, and fencing. Lessor may require that Lessee remove any or all of said
alterations, improvements, additions or Utility Installations at the expiration
of the term, and restore the Premises to their prior condition. Lessor may
require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such improvements, to insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should Lessee make any
alterations or improvements, additions or Utility Installations without the
prior approval of Lessor, Lessor may require that Lessee remove any or all of
the same.
(2) Any alterations, improvements, additions or Utility Installations
in, or about the Premises that Lessee shall desire to make and which requires
the consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.
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(3) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' lien against
the Premises or any interest therein. Lessee shall give Lessor not less than ten
(10) days' notice prior to the commencement of any work in the Premises, and
Lessor shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises, upon the condition that
if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.
(4) Unless Lessor requires their removal, as set forth in Article 10
(C), all alterations, improvement, additions and which may be made on the
Premises, shall become the property of the Lessor and remain upon and be
surrendered with the Premises at the expiration of the term. Notwithstanding the
provisions of this Article 10 (C), Lessee's machinery and equipment, other than
that which is affixed to the Premises so that it cannot be removed without
material damage to the Premises, shall remain the property of Lessee and may be
removed by Lessee subject to the provisions of Article 11.
ARTICLE 11
SURRENDER OF PREMISES
On the last day of the term hereof, or on any sooner termination, Lessee
shall surrender the Premises to Lessor in the same condition as when received,
ordinary wear and tear excepted, clean and free of debris. Lessee shall repair
any damage to the Premises occasioned by the installation or removal of Lessee's
trade fixtures, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines, power
panels, electrical distributions systems, lighting fixtures, plumbing and on the
Premises in the same condition as received.
ARTICLE 12
LIABILITY INSURANCE
Lessee shall, at Lessee's expense, obtain and keep in force during the
term of this Lease a policy of comprehensive public liability insurance insuring
Lessor and Lessee against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises and all area appurtenant thereto. The
limit of said insurance shall not, however, limit the liability of the Lessee
hereunder. Lessee may carry said insurance under a blanket policy, providing,
however, said insurance by Lessee shall have a Lessor's protective liability
endorsement attached thereto. If Lessee shall fail to procure and maintain said
insurance, Lessor may, but shall not
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be required to, procure and maintain same, but at the expense of the Lessee.
Insurance required hereunder, shall be in companies rated A+ or better in
"Best's Insurance Guide". Lessee shall deliver to Lessor prior to occupancy of
the Premises copies of policies of liability insurance required herein or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Lessor. No policy shall be cancelable or subject
to reduction of coverage except after ten (10) days' prior written notice to
Lessor.
ARTICLE 13
SUBROGATION
As long as their respective insurers so permit, Lessor and Lessee hereby
mutually waive their respective rights of recovery against each other for any
loss insured by fire, extended coverage and other property insurance policies
existing for the benefit of the respective parties. Each party shall obtain any
special endorsements, if required by their insurer to evidence compliance with
the aforementioned waiver.
ARTICLE 14
DAMAGE OR DESTRUCTION
(A) Partial Damage -- Insured. In the event improvements on the Premises
are damaged by any casualty which is covered under an insurance policy required
to be maintained pursuant to Article 13, then Lessor shall repair such damage as
soon as reasonably possible and this Lease shall continue in full force and
effect.
(B) Partial Damage -- Uninsured. In the event the improvements on the
Premises are damaged, except by a negligent or willful act or omission of
Lessee, by any casualty not covered under an insurance policy required to be
maintained pursuant to Section 14.2, then Lessor may, at Lessor's option, either
(1) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(2) give written notice to Lessee within thirty (30) days after the
date of occurrence of such damage of Lessor's intention to cancel and terminate
this Lease as of the date of the occurrence of the damage. In the event Lessor
elects to terminate this Lease pursuant to this Article 14 (B), Lessee shall
have the right within ten (10) days after receipt of the required notice to
notify Lessor in writing of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within the
ten (10) day period, this Lease shall be canceled and terminated as of the date
of the occurrence of such damage.
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(C) Total Destruction. If the Premises are totally destroyed during the
term of this Lease from any cause whether or not covered by the insurance
required under Article 13 (including any destruction required by any authorized
public authority), this Lease shall automatically terminate as of the date of
such total destruction.
(D) Damage Near End of The Term. If the Premises are partially destroyed
or damaged during the last six (6) months of the term of this Lease, Lessor may
at Lessor's option cancel and terminate this Lease as of the date of occurrence
of such damage by giving written notice to Lessee of Lessor's election to do so
within thirty (30) days after the date of occurrence of such damage.
(E) Lessor's Obligations. The Lessor shall not be required to repair any
injury or damage by fire or other cause, or to make any restoration or
replacement of any panelings, decorations, office fixtures, partitions,
railings, ceilings, floor covering, equipment, machinery or fixtures or any
other improvements or property installed in the Premises by' Lessee or at the
direct or indirect expense of Lessee. Lessee shall be required to restore or
replace same in the event of damage.
(F) Abatement of Rent; Lessee's Remedies.
(1) If the premises are partially destroyed or damaged and Lessor or
Lessee repairs them pursuant to this Lease, the rent payable hereunder for the
period during which such damage and repair continues shall be abated in
proportion to the extent to which Lessee's use of the Premises is impaired.
Except for abatement of rent, if any, Lessee shall have no claim against Lessor
for any damage suffered by reason of any such damage, destruction, repair or
restoration, except for gross negligence on the part of Lessor.
(2) If Lessor shall be obligated to repair or restore the Premises
under this Section 14 and shall not commence such repair or restoration within
ninety (90) days after such obligation shall accrue, Lessee at Lessee's option
may cancel and terminate this Lease by written notice to Lessor at any time
prior to the commencement of such repair or restoration. In such event this
Lease shall terminate as of the date of such notice.
(G) Termination Advance Payments. Upon termination of this Lease pursuant
to Article 14, an equitable adjustment shall be made concerning advance rent and
any advance payments made by Lessee to Lessor. Lessor shall, in addition, return
to Lessee so much of Lessee's security deposit as has not theretofore been
applied by Lessor.
ARTICLE 15
CONDEMNATION
(A) If the premises or any portion thereof are taken under the power of
eminent domain, or sold by Lessor under the threat of the exercise of said power
(all of which is herein referred to as "condemnation"), this Lease shall
terminate as to
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the part so taken as of the date the condemning authority takes title or
possession, whichever occurs first. If more than ten percent (10%) of the floor
area of any buildings on the Premises, or more than twenty-five percent (25%) of
the land area of the Premises not covered with buildings, is taken by
condemnation, either Lessor or Lessee may terminate this Lease, as of the date
the condemning authority takes possession, by notice in writing of such election
within twenty (20) days after Lessor shall have notified Lessee of the taking,
or in the absence of such notice then within twenty (20) days after the
condemning authority shall have taken possession.
(B) If this Lease is not terminated by either Lessor or Lessee then it
shall remain in full force and effect as to the portion of the Premises
remaining, provided the rent shall be reduced in the proportion that the floor
area of the buildings taken within the Premises bears to the total floor area of
all buildings located on the Premises. In the event this Lease is not so
terminated then Lessor agrees, at Lessor's sole cost, to restore the Premises to
a complete unit of like quality and character as existed prior to the
condemnation as soon as reasonably possible. All awards for the taking of any
part of the Premises or any payment made under the threat of the exercise of
compensation for diminution of value of a leasehold or for the taking of the fee
or as severance damages; provided, however, that Lessee shall be entitled to any
award for loss of or damage to Lessee's trade fixtures and removable personal
property. In the event that this Lease is not terminated by reason of such in
connection with such condemnation, Lessor shall, to the extent of severance
damages received by Lessor in connection with such condemnation, repair any
damage to the Premises caused by such condemnation except to the extent that
Lessee has been reimbursed therefor by the condemning authority. Lessee shall
pay any amount in excess of such severance damages required to complete such
repair.
ARTICLE 16
LIENS
Lessee shall keep the Premises and the property in which the Premises are
situated free from any liens arising out of any work performed, materials
furnished or obligations incurred by Lessee. Lessor may require, at Lessor's
sole option, that Lessee shall provide to Lessor, at Lessee's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half times
any and all estimated cost of any improvements, additions, or alterations in the
Premises, to insure Lessor against any liability for mechanics' and
materialmen's liens and to insure completion of the work.
ARTICLE 17
ASSIGNMENT AND SUBLETTING
Lessee shall not mortgage, pledge, hypothecate or encumber this Lease or
any interest therein. Lessee shall not assign this Lease or sublet, or suffer
any other person (the agents and servants of Lessee excepted) to occupy or use,
the Premises, or any part thereof, or any right or privilege appurtenant thereto
without the prior
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written consent of Lessor first had and obtained, which consent shall not be
unreasonably withheld. Lessor's consent to one assignment or subletting shall
not be deemed to be a consent to any subsequent assignment or subletting, nor
shall Lessor's consent release Lessee from any of its obligations under this
Lease unless such consent expressly so provides. Any assignment, subletting,
occupation or use without the consent of Lessor shall be void and, at the option
of Lessor, shall terminate this Lease.
(A) In the event at any time or times during the term of this Lease Lessee
desires to sublet all or part of the Premises, Lessor reserves the prior right
and option to:
(1) sublet from Lessee any portion of the premises proposed by Lessee
to be sublet for the term for which such portion is proposed to be sublet but at
the same rent (including escalation as provided for in Article 6 hereof) as
Lessee is required to pay to Lessor under this Lease for the same space,
computed on a pro rata of square footage basis or
(2) terminate this Lease as it pertains to the portion of the Premises
so proposed by Lessee to be sublet. Lessee shall notify Lessor in writing if
Lessee proposes to sublet all or any part of the Premises, designating the space
proposed to be sublet and the terms of the proposed subletting. Lessor shall be
allowed fifteen (15) days after Lessor's foregoing option. If Lessor fails to
exercise its said option, all the provisions of Article 17 subparagraph (1)
above, respecting subletting, nevertheless shall be in full force and effect and
nothing contained in this subparagraph (2) shall be construed as a waiver by
Lessor of any of its rights under said subparagraph (1).
(B) Lessor's foregoing right and option shall continue throughout the
entire term of this Lease.
(C) In no event shall Lessee assign this Lease or sublet the Premises or
any portion thereof to any then-existing lessee of the building.
ARTICLE 18
HOLD HARMLESS
Lessee shall indemnify and hold harmless Lessor against and from any and
all claims arising from Lessee's use of the Premises for the conduct of its
business or from any activity, work, or other thing done, permitted or suffered
by the Lessee in or about the Premises, and shall further indemnify and hold
harmless Lessor against and from any and all claims arising from any breach or
default in the performance of any obligation on Lessee's part to be performed
under the terms of this Lease, or arising from any act or negligence of the
Lessee, or any officer, agent, employee, guest, or invitee of Lessee, and from
all and against all cost, attorney's fees, expenses and liabilities incurred in
or about any such claim or any action or proceeding brought thereon, and, in any
case, action or proceeding be brought
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against Lessor by reason of any such claim, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor. Lessee as a material part of the consideration to Lessor hereby assumes
all risk of damage to property or injury to persons, in, upon or about the
Premises, from any cause other than Lessor's negligence, and Lessee hereby
waives all claims in respect thereof against Lessor. Lessor or its agents shall
not be liable for any damage to property entrusted to employees of the Building,
nor for loss or damage to any property by theft or otherwise, nor for any injury
to or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface or from any other place resulting from dampness or
any other cause whatsoever, unless caused by or due to the negligence of Lessor,
its agents, servants or employees. Lessor or its agents shall not be liable for
interference with the light or other incorporeal hereditaments, loss of business
by Lessee, nor shall Lessor be liable for any latent defect in the Premises or
in the Building. Lessee shall give prompt notice to Lessor in case of fire or
accidents in the Premises or in the Building or of defects therein or in the
fixtures or equipment.
ARTICLE 19
RULES AND REGULATIONS
Lessee shall faithfully observe and comply with the rules and regulations,
indicated on Exhibit "A" attached hereto and hereby reference thereto made a
part hereof, that Lessor shall from time to time promulgate. Lessor reserves the
right from time to time to make all reasonable modifications to said rules. The
additions and modifications to those rules shall be binding upon Lessee upon
delivery of a copy of them to Lessee. Lessor shall not unreasonably be
responsible to Lessee for the nonperformance of any said rules by any other
tenants or occupants.
ARTICLE 20
HOLDING OVER
If Lessee remains in possession of the Premises or any part thereof after
the expiration of the term hereof, with the express written consent of Lessor,
such occupancy shall be a tenancy from month to month and a rental in the amount
equal to 125% of the last monthly rental, plus all other charges payable
hereunder, and upon all the terms hereof applicable to a month to month tenancy.
ARTICLE 21
ENTRY BY LESSOR
Lessor reserves and shall at any and all times have the right to enter the
Premises, inspect the same, supply janitorial service and any other service to
be provided by Lessor to Lessee hereunder, to submit said Premises to
prospective purchasers or tenants, to post notices of non-responsibility, and to
alter, improve or repair the Premises and any portion of the Building of which
the Premises are a part
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that Lessor may deem necessary or desirable, without abatement of rent and may
for that purpose erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, always
providing that the entrance to the Premises shall not be blocked thereby, and
further providing that the business of the Lessee shall not be interfered with
unreasonably. Lessee hereby waives any claim for damages or for any injury or
inconvenience to or interference with Lessee's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby. For
each of the aforesaid purposes, Lessor shall at all times have and retain a key
with which to unlock all of the doors in, upon and about the Premises, excluding
Lessee's vaults, safes and files, and Lessor shall have the right to use any and
all means which Lessor may deem proper to open said doors in an emergency, in
order to obtain entry to the Premises without liability to Lessee except for any
failure to exercise due care for Lessee's property. Any entry to the Premises
obtained by Lessor by any of said means, or otherwise shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or
a detainer of, the Premises, or an eviction of Lessee from the Premises or any
portion thereof.
ARTICLE 22
ESTOPPEL
Lessee shall at any time and from time to time upon not less than ten (10)
days' prior written notice from lessor execute, acknowledge and deliver to
Lessor a statement in writing,
(A) certifying that this Lease is unmodified and in full force and effect
(or, if modified, stating the nature of such modification and certifying that
this Lease as so modified, is in full force and effect), and the date to which
the rental and other charges are paid in advance, if any, and
(B) acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of the Lessor hereunder, or specifying such defaults if any
are claimed.
Any such statement may be relied upon by any prospective purchaser or
encumbrancer of all or any portion of the real property of which the Premises
are a part.
ARTICLE 23
RECONSTRUCTION
In the event the Premises or the Building of which the Premises are a part
are damaged by fire or other perils covered by extended coverage insurance,
Lessor agrees to forthwith repair the same; and this Lease shall remain in full
force and effect, except that Lessee shall be entitled to a proportionate
reduction of the rent while such repairs are being made, such proportionate
reduction to be based upon the extent to which the making of such repairs shall
materially interfere with the
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business carried on by the Lessee in the Premises. If the damage is due to the
fault or neglect of Lessee or its employees, there shall be no abatement of
rent.
(A) In the event the Premises or the Building of which the Premises are a
part are damaged as a result of any cause other than the perils covered by fire
and extended coverage insurance, then Lessor shall forthwith repair the same,
provided the extent of the destruction be less than ten (10%) percent of the
full replacement cost, then Lessor shall have the option;
(1) to repair or restore such damage, this Lease continuing in full
force and effect, but the rent to be proportionately reduced as herein above in
this Article provided; or
(2) give notice to Lessee at any time within sixty (60) days after
such damage terminating this Lease as of the date specified in such notice,
which date shall be no less than thirty (30) days and no more than sixty (60)
days after the giving of such notice. In the event of giving such notice, this
Lease shall expire and all interest of the Lessee in the Premises shall
terminate on the date so specified in such notice and the rent, reduced by a
proportionate amount, based upon the extent, if any, to which such damage
materially interfered with the business carried on by the Lessee in the
Premises, shall be paid up to date of said such termination.
(B) Notwithstanding anything to the contrary contained in this Article,
Lessor shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twelve (12) months of the term of this Lease
or any extension thereof. Lessor shall not be required to repair any injury or
damage by fire or other cause, or to make any repairs or replacements of any
panels, decoration, office fixtures, railings, floor covering, partitions, or
any other property installed in the Premises by Lessee.
(C) The Lessee shall not be entitled to any compensation or damages from
Lessor for loss of the use of the whole or any part of the Premises, Lessee's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration.
ARTICLE 24
AUTHORITY OF PARTIES
Corporate Authority. If Lessee is a corporation, each individual executing
this lease an behalf of said corporation represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said corporation, in
accordance with a duly adopted resolution of the board of directors of said
corporation or in accordance with the by-laws of said corporation, and that this
Lease is binding upon said corporation in accordance with its terms.
Limited Partnerships. If the Lessor herein is a limited partnership, it is
understood and agreed that any claims by Lessee on Lessor shall be limited to
the
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assets of the limited partnership, and furthermore, Lessee expressly waives any
and all rights to proceed against the individual partners or the officers,
directors or shareholders of any corporate partner, except to the extent of
their interest in said limited partnership.
ARTICLE 25
DEFAULT
The occurrence of any one or more of the following events shall constitute
a default and breach of the Lease by Lessee.
(A) The vacating or abandonment of the Premises by Lessee.
(B) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of three (3) days after written notice thereof by
Lessor to Lessee.
(C) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Lessee, other than described in Article 25 (B) above, where such failure shall
continue for a period of thirty (30) days after written notice thereof by Lessor
to Lessee; provided, however, that if the nature of Lessee's default is such
that more than thirty (30) days are reasonable required for its cure, then
Lessee shall not be deemed to be in default if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(D) The making by Lessee of any general assignment or general arrangement
for the benefit of creditors; or the filing by or against Lessee of a petition
to have Lessee adjudged a bankrupt, or a petition or reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where possession is not restored to Lessee within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
ARTICLE 26
REMEDIES IN DEFAULT
In the event of any such material default or breach by Lessee, Lessor may
at any time thereafter, with notice but without limiting Lessor in the exercise
of a right or remedy which Lessor may have by reason of such default or breach:
(A) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
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<PAGE> 17
surrender possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorney's fees, any real
estate commission actually paid; the worth at the time of award by the court
having jurisdiction thereof of the amount by which the unpaid rent for the
balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonable avoided;
that portion of the leasing commission paid by Lessor and applicable to the
unexpired term of this Lease. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of ten (10%) percent per annum. In
the event Lessee shall have abandoned the Premises, Lessor shall have the option
of
(1) taking possession of the Premises and recovering from Lessee the
amount specified in this paragraph, or
(2) proceeding under the provision of the following Article 26 (B).
(B) Maintain Lessee's right to possession, in which case this Lease shall
continue in effect whether or not Lessee shall have abandoned the Premises. In
such event Lessor shall be entitled to enforce all of Lessor's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due hereunder.
(C) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decision of the State in which the Premises are located.
ARTICLE 27
GENERAL PROVISIONS
(i) Plats and Riders. Clauses, plats and riders, if any, signed by the
Lessor and the Lessee and endorsed on or affixed to this Lease are a part
hereof.
(ii) Waiver. The waiver by Lessor of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition on any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of
any term, covenant or condition of this Lease, other than the failure of the
Lessee to pay the particular rental so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of the acceptance of such rent.
(iii) Notices. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Lessee to the Lessor shall be sent by
United States Mail, postage prepaid, addressed to the Lessor at the Office of
the Building, or to such other person or place as the Lessor may from time to
time designate in a notice to the Lessee.
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(iv) Joint Obligation. If there be more than one Lessee the obligations
hereunder imposed upon Lessees shall be joint and several.
(v) Marginal Headings. The marginal headings and Article titles to the
Articles of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
(vi) Time. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
(vii) Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties thereto.
(viii) Recordation. Neither Lessor nor Lessee shall record this Lease or a
short form memorandum hereof without the prior written consent of the other
party.
(ix) Quiet Possession. Upon Lessee paying the rent reserved hereunder and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
(x) Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent or other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or of a sum due from Lessee shall not be received by Lessor
or Lessor's designee within ten (10) days after said amount is due, then Lessee
shall pay to Lessor a late charge equal to ten percent (10%) of such over due
amount. The parties hereby agree that such late charges represent a fair and
reasonable estimate of the cost that Lessor will incur by reason of the late
payment by Lessee. Acceptance of such late charges by the Lessor shall in no
event constitute a waiver of Lessee's default with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted hereunder.
(xi) Prior Agreements. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
(xii) Inability to Perform. This Lease and the obligations of the Lessee
hereunder shall not be affected or impaired because the Lessor is unable to
fulfill
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<PAGE> 19
any of its obligations hereunder or is delayed in doing so, if such inability or
delay is caused by reason of strike, labor troubles, acts of God, or any other
cause beyond the reasonable control of the Lessor.
(xiii) Attorneys' Fees. In the event of any action or proceeding brought
by either party against the other under this Lease the prevailing party shall be
entitled to recover all costs and expenses including the fees of its attorneys
in such action or proceeding in such amount as the court may adjudge reasonable
as attorneys' fees.
(xiv) Sale of Premises by Lessor. In the event of any sale of the
Building, Lessor shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Lessor under this Lease.
(xv) Subordination, Attornment. Upon request of the Lessor, Lessee will in
writing subordinate its rights hereunder to the lien of any first mortgage, or
first deed of trust to any bank, insurance company or other lending institution,
now or hereafter in force against the land and Building of which the Premises
are a part, and upon any buildings hereafter placed upon the land of which the
Premises are a part, and to all advances made or hereafter to be made upon the
security thereof. In the event any proceedings are brought for foreclosure, or
in the event of the exercise of the power of sale under any mortgage or deed or
trust made by the Lessor covering the Premises, the Lessee shall attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as the
Lessor under this Lease. The provision of this Article to the contrary
notwithstanding, and so long as Lessee is not in default hereunder, this Lease
shall remain in full force and effect for the full term hereof.
(xvi) Name. Lessee shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Lessee in the Premises.
(xvii) Separability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
(xviii) Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
(xix) Choice of Law. This Lease shall be governed by the laws of the State
in which the Premises are located.
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(xx) Signs and Auctions. Lessee shall not place any sign upon the Premises
or Building or conduct any auction thereon without Lessor's prior written
consent.
ARTICLE 28
REMODELING OF BUILDING
Lessee acknowledges that Lessor intends to engage in extensive remodeling
of the building of which the leasehold premises form a part, and agrees that
Lessor may, for some period of time within the lease term, relocate all or a
portion of the leasehold premises to another part of the building for the
purpose of completing renovation or repairs. In such event Lessor shall use its
best efforts to provide comparable space and minimize inconvenience to Lessee.
ARTICLE 29
RELOCATION
Lessor reserves the right to relocate the premises to substantially
comparable space within the building. Lessor will give Lessee written notice of
its intention to relocate the premises, and Lessee will complete its relocation
within thirty (30) days after Lessor's notice. The base monthly rent of the new
space will not exceed the base monthly rent for the former premises. If Lessee
does not wish to relocate its premises, Lessee may terminate this lease
effective as of thirty (30) days after Lessor's initial notice. Upon Lessee's
vacation and abandonment of the premises, Lessor will pay to Lessee a sum equal
to one monthly installment of the base monthly rent payable under this lease,
and will return the unused portion of the security deposit, and Lessor's and
Lessee's obligations to each other will then end. If Lessee does relocate within
the building, then effective on the date of such relocation this lease will be
amended by deleting the description of the former premises and substituting for
it a description of the new space. Lessor agrees to pay the reasonable costs of
moving Lessee to the new space.
ARTICLE 30
NON-DISCRIMINATION
Lessee herein covenants by and for himself, his heirs, executors,
administrators and assigns, and all persons claiming under or through him, and
this Lease is made and accepted upon and subject to the following conditions:
That there shall be no discrimination against or segregation of any person
or group of persons on account of race, color, creed, national origin or
ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure or
enjoyment of the premises herein leased, nor shall Lessee himself, or any
persons claiming under or through him, establish or permit any such practice or
practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of Lessees, Lessors, sublessors, sublessees
or vendees in the premises herein leased.
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ARTICLE 31
LESSOR'S AGENTS
It is understood and agreed that this Lease is executed by Bressie and
Company solely in their capacity as Lessor's agents and said Bressie and Company
shall not be obligated to perform any of the terms, conditions or covenants to
be performed by Lessor herein, nor in any way be liable hereunder.
ARTICLE 32
BROKERS
Lessee warrants that it has had no dealings with any real estate broker or
agents in connection with the negotiation of this Lease excepting only None and
it knows of no other real estate broker or agent who is entitled to a commission
in connection with this Lease.
If this Lease has been filled in, it has been prepared for submission to
your attorney for his approval. No representation or recommendation is made by
the real estate broker or its agents or employees as to the legal sufficiency,
legal effect, or tax consequences of this Lease or the transactions relating
thereto.
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<PAGE> 22
THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE AND ON THE DATE
SPECIFIED IMMEDIATELY ADJACENT TO THEIR RESPECTIVE SIGNATURES.
LESSOR:
500 Third Street Associates
c/o Intereal Corporation
520 Third Street, Suite 555
San Francisco, CA 94107
By: /s/ Elbert P. Bressie
--------------------------------
Title:
------------------------------
Date: 12/26/96
LESSEE:
Organic Online, Inc.
By: /s/ J.D. Davids
--------------------------------
Title: Director of Finance
Date: 12/30/96
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<PAGE> 23
EXHIBIT "A"
RULES AND REGULATIONS
1. No sign placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building without the written consent of Lessee first had and
obtained and Lessee shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant. All approved sign or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by Lessee.
Tenant shall not place anything or allow anything to be placed near the glass of
any window, door, partition or wall which may appear unsightly from outside the
Premises; provided, however, that Lessee may furnish and install a Building
standard window covering at all exterior windows. Tenant shall not without prior
written consent of Lessee cause or otherwise sunscreen any window.
2. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the Lessors or used by them for any
purpose other than for ingress and egress from their respective Premises.
3. Tenant shall not alter any lock or install any new or additional locks
or any bolts on any doors or windows of the Premises.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown 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 employees or invitees shall have
caused it.
5. Tenant shall not overload the floor of the Premises or in any way
deface the Premises or any part thereof.
6. No furniture, freight or equipment of any kind shall be brought into
the Building without the prior notice to Lessee and all moving of the same into
or out of the Building shall be done at such time and in such manner as Lessee
shall designate. Lessee shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the building and
also the times and manner of moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Lessee, stand on
supports of such thickness as is necessary to properly distribute the weight.
Lessee will not be responsible for loss of or damage to any such safe or
property from any cause and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
the Tenant.
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<PAGE> 24
7. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Lessee or other
occupants of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other Lessors or those having business therein, nor
shall any animals or birds be brought in or kept in or about the Premises or the
Building.
8. No cooking shall be done or permitted by any Tenant on the Premises,
nor shall the Premises be used for the storage of merchandise, for washing
clothes, for lodging, or for any improper, objectionable or immoral purposes.
9. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Lessee.
10. Lessee will direct electricians as to where and how telephone and
telegraph wire are to be introduced. No boring or cutting for wires will be
allowed without the consent of the Lessee. The location of telephones, call
boxes and other office equipment affixed to the Premises shall be subject to the
approval of the Lessee.
11. On Saturdays, Sundays and legal holidays, and on other days between
the hours of 6:00 P.M. and 8:00 A.M. the following day, access to the Building,
or to the halls, corridors, elevators or stairways in the Building, or to the
Premises may be refused unless the person seeking access is known to the person
or employee of the Building in charge and has a pass or is properly identified.
The Lessee shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Lessee reserves
the right to prevent access to the Building during the continuance of the same
by closing of the doors or otherwise, for the safety of the Lessors and
protection of property in the Building and the Building.
12. Lessee reserves the right to exclude or expel from the Building any
person who, in the judgment of Lessee, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.
13. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Lessee.
14. Lessee shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the Building of
which the Premises are a part.
15. Tenant shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate to prevent same.
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<PAGE> 25
16. Without the written consent of Lessee, Tenant shall not use the name
of the Building in connection with or in promoting or advertising the business
of Tenant except as Tenant's address.
17. Lessee shall have the right to control and operate the public portions
of the Building, and the public facilities, and heating and air conditioning, as
well as facilities furnished for the common use of the Lessors, in such manner
as it deems best for the benefit of the Lessors generally.
18. All entrance doors in the Premises shall be left locked when the
Premises are not in use, and all doors opening to public corridors shall be kept
closed except for normal ingress and egress from the Premises.
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<PAGE> 1
EXHIBIT 10.13
-----------------------------------------------
STANDARD FORM OF OFFICE LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
-----------------------------------------------
Agreement of Lease, made as of this ____________________ day of June 1998,
between TRUSTEES OF THE MASONIC HALL AND ASYLUM FUND, having an address at 71
West 23rd Street, New York, New York 10010 party of the first part, hereinafter
referred to as OWNER, and ORGANIC ONLINE, INC., having an address at 71 West
23rd Street, New York, New York 10010 from and after the Commencement Date,
party of the second part, hereinafter referred to as TENANT,
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner the
entire fourteenth (14th) and fifteenth (15th) floors and the Additional
Designated Floor as shown on Exhibit A annexed hereto (the "demised premises")
in the building known as 71 West 23rd Street (the "Building") in the Borough of
Manhattan, City of New York, for the term of ten (10) years and five (5) months
(or until such term shall sooner cease and expire as hereinafter provided) to
commence on the Commencement Date (hereinafter defined), and to end on the
Expiration Date (hereinafter defined) both dates inclusive, at an annual rental
rate as set forth in Article 37b 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 and private, at the time of payment, in equal monthly
installments in advance on the first day of each month during said term, at the
office of Owner or such other place as Owner may designate, without any set off
or deduction whatsoever, except that Tenant shall pay the first ______ monthly
installment(s) on the execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or thereafter,
Tenant shall be in default in the payment of rent to Owner pursuant to the terms
of another lease with Owner or with Owner's predecessor in interest, Owner may
at Owner's option and without notice to Tenant add the amount of such arrears to
any monthly installment of rent payable hereunder and the same shall be payable
to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby 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 general and
administrative offices only and for no other purpose.
Tenant Alterations:
3. Tenant shall make no changes in or to the demised premises of any nature
without Owner's prior written consent. Subject to the prior written consent of
Owner, and to the provisions of this article, Tenant, at Tenant's expense, may
make alterations, installations, additions or improvements which are
non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises by using
contractors or mechanics first approved in each instance by Owner. [Insert 3.1]
Tenant shall, before making any alterations, additions, installations or
<PAGE> 2
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 [Insert 3.2] is filed against the demised
premises, or the building of which the same forms a part, for work claimed to
have been done for, or materials furnished to, Tenant, whether or not done
pursuant to this article, the same shall be discharged by Tenant within thirty
days thereafter, at Tenant's expense, by payment or filing the bond required by
law. [Insert 3.3] 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 [Insert 3.4] 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. 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 may be removed from the premises by Owner, at Tenant's
expense.
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 the contractor for
the trade or trades in question, selected from a list of at least two
contractors per trade submitted by Owner. 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 [Insert 4.1] demised premises,
and the public
<PAGE> 3
portions of the building interior and [Insert 4.2] (to the extent such systems
presently exist) 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 Owner or others making 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
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.
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, 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 [Insert 6.1] 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
<PAGE> 4
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 [Insert 6.2] 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 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 judgement, to absorb and prevent
vibration, noise and annoyance.
Subordination:
7. This lease is subject and subordinate to all ground or underlying leases and
to all mortgages which may now or hereafter affect such leases or the real
property of which demised premises are a part and to all renewals,
modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages. This clause shall be self-operative and no
further instrument 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 from time to time execute promptly any certificate that Owner may
request.
Property Loss, Damage Reimbursement Indemnity:
8. Owner or its agents shall not be liable for any damage to property of Tenant
or of others entrusted to employees of the building, nor for loss of or damage
to any property of Tenant by theft or otherwise, nor for any injury or damage to
persons or property resulting from any cause of whatsoever nature, unless caused
by or due to the negligence 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
<PAGE> 5
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 this lease extends to the acts and omissions of any
sub-tenant, and any agent, contractor, employee, invitee or licensee of any
sub-tenant. In case any action or proceeding is brought against Owner by reason
of any such claim, Tenant, upon written notice from Owner, will, at Tenant's
expense, resist or defend such action or proceeding by counsel approved by Owner
in writing, such approval not to be unreasonably withheld.
Destruction, Fire and Other Casualty:
9. (a) If the demised premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give immediate notice thereof to Owner and this
lease shall continue in full force and effect except as hereinafter set forth.
(b) If the demised premises are partially damaged or rendered partially unusable
RIDER [9.1] by fire or other casualty, the damages 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
useable. (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 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. (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
[rider to be added if necessary] 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
<PAGE> 6
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 moveable 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 benefiting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
Eminent Domain:
10. If the whole or any part of the demised premises shall be acquired or
condemned by Eminent Domain for any public or quasi public use or purpose, then
and in that event, the term of this lease shall cease and terminate from the
date of title vesting in such proceeding and Tenant shall have no claim for the
value of any unexpired term of said lease and assigns to Owner, Tenant's entire
interest in any such award. 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 fixture and
equipment at the end of the term and provided further such claim does not reduce
Owner's award.
Assignment, Mortgage, Etc.:
<PAGE> 7
11. Tenant, for itself, its heirs, distributees, executors, administrators,
legal representative, successor 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. [insert 11.1] 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 the
assignee, under-tenant or occupant as tenant, or a release of Tenant from the
further performance by Tenant of covenants on the part of Tenant herein
contained. The consent by Owner to an 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, 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 the 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 term 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
<PAGE> 8
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. 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 be diminished or required by any federal,
state or municipal authority or public utility, Owner shall not be subject to
any liability not 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. 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.
See paragraph 37C(5) for substitution
Bankruptcy:
16. [(a) Anything elsewhere in this lease to the contrary notwithstanding, this
lease may be cancelled by Owner by the sending of a written notice to Tenant
within a reasonable time after the happening of any one or more of the following
events: (1) the commencement of a case in bankruptcy or under the laws of any
state naming Tenant as the debtor; or (2) the making by Tenant of an assignment
or any other arrangement for the benefit of creditors under any state statute.]
Neither Tenant nor any person claiming through or under Tenant, or by reason of
any statute or order of court, shall thereafter be entitled to possession of the
premises demised but shall forthwith quit and surrender the premises. If this
lease shall be assigned in accordance with its terms, the provisions of
<PAGE> 9
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 re-let 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 re-letting shall be deemed to be
the fair and reasonable rental value for the part or the whole of the premises
so re-let during the term of the re-letting. Nothing herein contained shall
limit or prejudice the right of the Owner to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.
Default:
17. (1) If Tenant defaults 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 vacant or deserted [insert 7.2]; 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 [insert 17.1] of Title 11 of the
U.S. Code (bankruptcy code); or if Tenant shall fail to move into or take
possession of the premises within thirty (30) days after the commencement of the
term of this lease, 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 curing such default within such fifteen (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 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 five (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.
<PAGE> 10
(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,
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 other wise, (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, 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 sole judgment, considers advisable and necessary
for the purpose of re-letting the demised premises, and the making of such
alterations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to re-let the demised
premises, or in the event that the demised premises are re-let, for failure to
collect the rent thereof under such re-letting, and in no event shall Tenant be
entitled to receive any excess, if any, of such net rents collected over the
sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall
<PAGE> 11
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 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 in the observance or performance of any term or
covenant on Tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any article of this lease, after notice if
required and upon expiration of any applicable grace 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 incurs any obligations for the payment of money,
including but not limited to reasonable attorneys' fees, in instituting,
prosecuting or defending any action or proceeding, 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 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 deem necessary for the security of the
building and its occupants.
No Representations by Owner:
21. [Neither] [Insert 21.1] 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
<PAGE> 12
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 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"
[Insert 21.2] 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 [Insert 22.1] 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
<PAGE> 13
Tenant is not responsible for Owner's inability to obtain possession or complete
construction) until after Owner shall have given Tenant written notice that the
Owner is able to deliver possession in 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 the preamble to this 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 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
and/or additional 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 to any such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
Waiver of Trial by Jury:
26. It is mutually agreed by and between Owner and Tenant that the respective
parties hereto shall and they hereby do waive trial by jury in any action
proceeding or counterclaim brought by either of the parties hereto against the
other (except for personal injury or property damage) on any matters whatsoever
arising out of or in any way connected with this lease, the relationship of
Owner and Tenant, Tenant's use of or occupancy of said premises, and any
emergency statutory or any other statutory remedy. It is further mutually agreed
that in the event Owner commences any 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.
<PAGE> 14
Inability to Perform:
27. This Lease and the obligation of Tenant to pay rent hereunder and perform
all of the other covenants and agreements hereunder on part of Tenant to be
performed shall in no wise be affected, impaired or excused because Owner is
unable to fulfill any of its obligations under this lease or to supply or is
delayed in supplying any service expressly or impliedly to be supplied or is
unable to make, or is delayed in making any repair, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment,
fixtures, or other materials 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 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 which have been or are affected, either
directly or indirectly, by war or other emergency. [Insert 27.1]
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 [Insert 28.1] addressed to
Tenant at the [Rider to be added if necessary.] 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 [Insert 28.1] 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
beyond the applicable grace period provided in this lease for the curing of such
defaults, 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 other
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 lavatory [Inset 29.1]
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. If, however, said premises are to be kept clean by
Tenant, it shall be done at Tenant's sole expense, in a manner reasonably
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
<PAGE> 15
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. [Insert 29.2], 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 [Insert 29.3] [RIDER to be added in respect
to rates and conditions for such additional service]; (f) Owner reserves the
right to stop services of the heating, elevators, plumbing, air-conditioning,
electric, 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 proceed diligently with
alterations necessary therefor without in any wise affecting this lease or the
obligation of Tenant hereunder.
Captions:
30. The Captions are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope of this lease nor the intent
of any 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 premises form a part, so that
in the event of any sale or sales of said land and building or of said lease, or
in the event of a lease of said building, or of the land and building, the said
Owner shall be and hereby is entirely freed and relieved of all covenants and
obligations of Owner hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the purchaser, at any such sale, or the said lessee of
the building, or of the land and building, that the purchaser or the lessee of
the building has assumed and agreed to carry out any and all covenants and
obligations of Owner, hereunder. The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning. The term
"business days" as used in this lease shall exclude Saturdays, Sundays and all
days as 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
<PAGE> 16
Engineers contract with respect to HVAC service. Wherever it is expressly
provided in this lease that consent shall not be unreasonably withheld, such
consent shall not be unreasonably delayed.
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 to cause such excavation, license to enter upon the demised premises
for the purpose of doing such work as said person shall deem necessary to
preserve the wall or the building of which demised premises form a part from
injury or damage and to support the same by proper foundations without any claim
for damages or indemnity against Owner, or diminution or abatement of rent.
Rules and Regulations:
33. Tenant and Tenant's servants, employees, agents, visitors, and licensees
shall observe faithfully, and comply strictly with, the Rules and Regulations
[Insert 33.1] 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 [Insert 33.2] [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 fifteen (15) days
after the giving of notice thereof. Nothing in this lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease, as against any
other tenant and Owner shall not be liable to Tenant for violation of the same
by any other tenant, its servants, employees, agents, visitors or licensees.
See paragraph 55 for substitution
Security:
<PAGE> 17
[Insert 34.1]
Estoppel Certificate:
35. 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 and in full force and effect (or, if there have
been modifications, that the same is in full force and effect (as modified and
stating the modifications), 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.
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,
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.
See Rider Annexed 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.
Witness for Owner: TRUSTEES OF THE MASONIC HALL AND
ASYLUM FUND
<PAGE> 18
___________________________________ BY:________________________________
Witness for Tenant: ORGANIC ONLINE, INC.
___________________________________ BY:________________________________
ACKNOWLEDGEMENTS
<TABLE>
<S> <C>
CORPORATE OWNER CORPORATE TENANT
STATE OF NEW YORK, ss.: STATE OF NEW YORK, ss.:
County of County of
On this _______ day of ____________, 1999__, On this _______ day of ____________,
before me personally came ______ 1999__, before me personally came ______
___________________, to me known, who being ___________________, to me known, who
by me duly sworn, did depose and say that he being by me duly sworn, did depose and
resides in _________________ say that he resides in _________________
_________________; that he is the _____ _________________; that he is the _____
___________________ of ____________ ___________________ of ____________
______________ the corporation described in ______________ the corporation described
and which executed the foregoing instrument, in and which executed the foregoing
as OWNER; that he knows the seal of said instrument, as TENANT; that he knows the
corporation; the seal affixed to said seal of said corporation; the seal
instrument is such corporate seal; that it affixed to said instrument is such
was so affixed by order of the Board of corporate seal; that it was so affixed by
Directors of said corporation, and that he order of the Board of Directors of said
signed his name thereto by like order. corporation, and that he signed his name
thereto by like order.
____________________________ ____________________________
INDIVIDUAL OWNER INDIVIDUAL TENANT
STATE OF NEW YORK, ss.: STATE OF NEW YORK, ss.:
County of County of
On this _______ day of ____________, 1999__, On this _______ day of ____________,
before me personally came ______ 1999__, before me personally came ______
___________________, to be known and known ___________________, to be known and
to me to be the individual described in and known to me to be the individual
who, as OWNER, executed the foregoing described in and who, as TENANT, executed
instrument and acknowledged to me that the foregoing instrument and acknowledged
_________________________ he executed to me that _________________________ he
executed
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
the same. the same.
____________________________ ____________________________
</TABLE>
<PAGE> 20
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
Owner making the within lease with Tenant, the undersigned guarantees to Owner,
Owner's successors and assigns, the full performance and observance of all the
covenants, conditions and agreements, therein provided to be performed and
observed by Tenant, including the "Rules and Regulations" as therein provided,
without requiring any notice of non-payment, non-performance, or non-observance,
or proof, or notice, or demand, whereby to charge the undersigned therefor, all
of which the undersigned hereby expressly waives and expressly agrees that the
validity of this agreement and the obligations of the guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion by
Owner against Tenant of any of the rights or remedies reserved to Owner pursuant
to the provisions of the within lease. The undersigned further covenants and
agrees that this guaranty shall remain and continue in full force and effect as
to any renewal, modification or extension of this lease and during any period
when Tenant is occupying the premises as a "statutory tenant." As a further
inducement to Owner to make this lease and in consideration thereof, Owner and
the undersigned covenant and agree that in any action or proceeding brought by
either Owner or the undersigned against the other on any matters whatsoever
arising out of, under, or by virtue of the terms of this lease or of this
guarantee that Owner and the undersigned shall and do hereby waive trial by
jury.
Dated:_______________________________________ 19______
_____________________________________________
Guarantor
_____________________________________________
Witness
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND
MADE A PART OF THIS LEASE
IN ACCORDANCE WITH ARTICLE 33.
1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or encumbered by any
Tenant or used for any purpose other than for ingress or egress from the demised
premises and for delivery of merchandise and equipment in a prompt and efficient
manner using elevators and passageways designated for such delivery by Owner.
There shall not be used in any space, or in the public hall of the building,
either by any Tenant or by jobbers or others in the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and
sideguards. If said premises are situated on the ground floor of the building,
Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in
front of said premises clean and free from ice, snow, dirt and rubbish.
<PAGE> 21
2. The water and wash closets and plumbing fixtures shall not be used for any
purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No carpet, rug, or other article shall be hung or shaken out of any window of
the building and no Tenant shall sweep or throw or permit to be swept or thrown
from the demised premises any dirt or other substances into any of the corridors
or halls, elevators, or out of the doors or windows or stairways of the building
and Tenant shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the demised premises, or permit or suffer the demised
premises to be occupied or used in a manner offensive or objectionable to Owner
or other occupants of the building by reason of noise, odors, and/or vibrations,
or interfere in any way with other Tenants or those having business therein, nor
shall any bicycles, vehicles, animals, fish, or birds be kept in or about the
building. Smoking or carrying lighted cigars or cigarettes in the elevators of
the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls of the
building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premise 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 mark, paint, drill into, or in any way deface any part of the
demised premises or the building of which they form a part. No boring, cutting
or stringing of wires shall be permitted, except with the prior written consent
of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other
similar floor covering, so that the same shall come in direct contact with the
floor of the demised premises, and, if linoleum or other similar floor covering
is desired to be used an interlining of builder's deadening felt shall be first
affixed to the floor, by a paste or other material, soluble in water, the use of
cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by,
<PAGE> 22
such Tenant, and in the event of the loss of any keys, so furnished, such Tenant
shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of any
description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to exclude from the
building all freight which violates any of these Rules and Regulations of the
lease or which these Rules and Regulations are a part.
9. Canvassing, soliciting and peddling in the building is prohibited and each
Tenant shall cooperate to prevent the same.
10. Owner reserves the right to exclude from the building 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 have a claim against
Owner by reason of Owner excluding from the building any person who does not
present such pass.
11. Owner shall have the right to prohibit any advertising by any Tenant which,
in Owner's opinion, tends to impair the reputation of the building or its
desirability as a building for offices, and upon written notice from Owner,
Tenant shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the demised
premises, any inflammable, combustible, explosive, or hazardous fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in or emanate
from the demised premises.
13. If the building contains central air conditioning and ventilation, Tenant
agrees to keep all windows closed at all times and to abide by all rules and
regulations issued by Owner with respect to such services. If Tenant requires
air conditioning or ventilation after the usual hours, Tenant shall give notice
in writing to the building superintendent prior to 3:00 p.m. in the case of
services required on week days, and prior to 3:00 p.m. on the day prior in case
of after hours service required on weekends or on holidays. Tenant shall
cooperate with Owner 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.
14. Tenant shall not move any safe, heavy machinery, heavy equipment, bulky
matter, or fixtures into or out of the building without Owner's prior written
consent. If such safe, machinery, equipment, bulky matter or fixtures requires
special handling, all work in connection therewith shall comply with the
Administrative Code of the City of
<PAGE> 23
New York and all other laws and regulations applicable thereto and shall be done
during such hours as Owner may designate.
15 Refuse and Trash. (1) Compliance by Tenant. Tenant covenants and agrees, at
its sole cost and expense, to comply with all present and future laws, orders,
and regulations of all state, federal, municipal, and local governments,
departments, commissions and boards regarding the collection, sorting,
separation and recycling of waste products, garbage, refuse and trash. Tenant
shall sort and separate such waste products, garbage, refuse and trash into such
categories as provided by law. Each separately sorted category of waste
products, garbage, refuse and trash shall be placed in separate receptacles
reasonably approved by Owner. Such separate receptacles may, at Owner's option,
be removed from the demised premises in accordance with a collection schedule
prescribed by law. Tenant shall remove, or cause to be removed by a contractor
acceptable to Owner, at Owner's sole discretion, such items as Owner may
expressly designate. (2) Owner's Rights in Event of Noncompliance. Owner has the
option to refuse to collect or accept from Tenant waste products, garbage,
refuse or trash (a) that is not separated and sorted as required by law or (b)
which consists of such items as Owner may expressly designate for Tenant's
removal, and to require Tenant to arrange for such collection at Tenant's sole
cost and expense, utilizing a contractor satisfactory to Owner. Tenant shall pay
all costs, expenses, fines, penalties, or damages that may be imposed on Owner
or Tenant by reason of Tenant's failure to comply with the provisions of this
Building Rule 15, and, at Tenant's sole cost and expense, shall indemnity,
defend and hold Owner harmless (including reasonable legal fees and expenses)
from and against any actions, claims and suits arising from such noncompliance,
utilizing counsel reasonably satisfactory to Owner.
<PAGE> 24
INSERTS TO AGREEMENT OF LEASE BETWEEN TRUSTEES OF THE
MASONIC HALL AND ASYLUM FUND, AS OWNER, AND ORGANIC
ONLINE, INC., AS TENANT, DATED AS OF JUNE __, 1998
(3.1) Anything contained in this Article 3 or in Section 37C(3) of this lease
to the contrary notwithstanding, Owner's consent shall not be
unreasonably withheld or delayed with respect to any cosmetic,
networking, telephone, nonstructural Tenant's Changes, provided that (x)
consent for such Tenant's Change is not required by any third party
(such as, by way of example, a mortgagee or ground lessor), and (y) such
Tenant's Change (i) is not visible from the outside of the Building,
(ii) does not affect any part of the Building other than the demised
premises, (iii) does not affect any services required to be furnished by
Owner to any other tenant or occupant of the Building, (iv) does not
affect the proper functioning of any Building Systems (hereinafter
defined), (v) does not impair or diminish the value or utility of the
Building, and (vi) does not affect the certificate of occupancy for the
Building or the demised premises. Owner's consent shall not be required
with respect to those nonstructural Tenant's Changes which are merely
cosmetic or decorative in nature, comply with the provisions of clauses
(1) - (vi) above, and the cost of which are less than twenty thousand
dollars ($20,000), provided, however, that such Tenant's Changes shall
otherwise be performed in accordance with the provisions of this lease.
With respect to mere cosmetic and/or decorative Tenant's Changes, Tenant
shall only be required to submit to Owner a reasonably detailed
schematic design or description and such other information as shall be
reasonably requested by Owner. The term "Building Systems" shall mean
the mechanical, gas, electrical, sanitary, heating, air-conditioning,
ventilating, elevator, plumbing, life-safety and other service systems
of the Building.
(3.2) or U.C.C. financing statement
(3.3) or otherwise
(3.4) given together with Owner's consent to Tenant's alterations (provided,
however, that Tenant's request for consent for such alterations must
specifically state that if Owner does not require removal of the
alterations when giving its consent thereto, Owner shall have waived its
right to have Tenant remove the same prior to the expiration of the term
of this lease),
(4.1) the
(4.2) Building Systems
(6.1) (collectively, "Requirements")
(6.2) that which would otherwise be in effect.
(9.1) or totally inaccessible
Inserts - i
<PAGE> 25
(11.1) , which consent to a sublease or to an assignment shall be governed by
the terms of Article 47 hereof.
(17.1) Section 365
(17.2) for a period in excess of thirty (30) days
(21.1) Except as expressly provided herein, neither
(21.2) subject to the performance by Owner of the work ("Owner's Work") set
forth on Exhibit "B" annexed hereto and made a part hereof,
(22.1) and damage by fire or other insurable casualty
(27.1) or by reason of any other cause beyond Owner's reasonable control
(28.1) or by overnight mail or courier service
(29.1) and drinking
(29.1) and drinking
(29.2) and on Saturdays from 8:00 a.m. to 1:00 p.m., upon Tenant's prior
request
(29.3) For overtime air-conditioning, the following rates shall apply:
<TABLE>
<S> <C>
Sundays and holidays from 8:00 a.m. to 4:00 p.m. $150.00 (flat rate)
Saturdays after 1:00 p.m. $25.00/hour
</TABLE>
(33.1) hereinafter set forth and annexed hereto and made a part hereof as
Exhibit "C"
(33.2) by informal arbitration pursuant to Article 46 hereof.
Inserts - ii
<PAGE> 26
RIDER ATTACHED TO AND FORMING PART OF LEASE DATED AS OF JUNE _, 1998 BETWEEN
TRUSTEES OF THE MASONIC HALL AND ASYLUM FUND, OWNER, AND ORGANIC ONLINE, INC.,
TENANT
PREMISES: 71 WEST 23RD STREET
NEW YORK, NEW YORK
ENTIRE 14TH AND 15TH FLOORS AND THE ADDITIONAL DESIGNATED FLOOR
I. APPLICATION OF THIS RIDER
A. Rider Provisions Paramount. 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 as Exhibit "C", 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.
B. Additional Definitions. For the purpose of this lease and all
agreements supplemental to this lease, and all communications with respect
thereto, unless the context otherwise requires:
1. The term "The Additional Designated Floor" shall mean the
eighth floor or other floor in the Building for which Owner is able to deliver
possession to Tenant, provided, however, that such possession is delivered by
Owner to Tenant on or before July 1, 1999 pursuant to written notice given by
Owner to Tenant not later than 30 days prior to such delivery of possession.
2. The term "fixed rent" shall mean rent consisting of base rent
at the annual rate of:
a. Six Hundred Seventy Six Thousand Dollars and 00/100 ($676,000.00) per
annum (i.e., $56,333.33 per month) for the period commencing on the
Commencement Date and ending on the earlier of (a) delivery to Tenant of
possession of the Additional Designated Floor and (b) the day
immediately preceding the fifth anniversary of the Commencement Date; on
the day immediately preceding the fifth anniversary of the Commencement
Date; and
b. One Million Fourteen Thousand Dollars and 00/100 ($1,014,000.00) per
annum (i.e. $84,500.00 per month) for the period commencing upon
delivery to Tenant of possession of the Additional Designated Floor and
ending on the day immediately preceding the fifth anniversary of the
Commencement Date; and
c. One Million Ninety Two Thousand Dollars and 00/100 ($1,092,000.00) per
annum (i.e. $91,000.00 per month) for the period commencing on the
fifth
1
<PAGE> 27
anniversary of the Commencement Date and ending on the Expiration Date
provided, however, that in the event Owner shall have been unable to
deliver to Tenant possession of the Additional Designated Floor, the
base rent for the period commencing on the fifth anniversary of the
Commencement Date and ending on the Expiration Date shall be Seven
Hundred Twenty Eight Thousand and 00/100 ($728,000.00) per annum (i.e.
$60,666.67 per month).
The rentable area of the demised premises is agreed to be 26,000 square feet for
all purposes of this lease until Owner shall have delivered to Tenant possession
of the Additional Designated Floor at which time the rentable area of the
demised premises is agreed to be 39,000 square feet for all purposes of this
lease.
3. The term "additional rent" shall mean all sums of money, other
than fixed rent, as shall become due and payable from Tenant to Owner hereunder,
and Owner shall have the same remedies therefor as for a default in payment of
fixed rent.
4. The terms "rent" and "rents" shall mean and include fixed rent
and/or additional rent and/or escalation rent hereunder.
5. The term "Commencement Date" shall mean the date of full
execution and delivery of this lease, and the term "Expiration Date" shall mean
the last day of the calendar month in which the ten (10) year five (5) month
anniversary of the Commencement Date occurs.
6. 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. Tenant's
obligations hereunder shall be construed in every instance as conditions as well
as covenants. Such provisions shall be deemed to mean that if the performance of
the covenant will involve incurrence of expense such expense shall be borne by
the party responsible for such performance except where this lease expressly
provides otherwise.
7. The term "Tenant" shall mean Tenant herein named or any
permitted assignee or other successor in interest (immediate or remote) of
Tenant herein named, when Tenant herein named 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 corporation, all of the individuals,
firms and/or corporations or other entities comprising Tenant.
8. Any transfer by operation of law or otherwise, of Tenant's
interest in this lease or of any subtenant's interest in a sublease hereunder,
or, unless Tenant or the subtenant is an entity the securities of which are
registered under appropriate statutory authority and listed and traded on a
national exchange, of a 50% or greater interest in Tenant, or in a subtenant
hereunder (whether stock, partnership interest or otherwise), in a single
transaction or a related series of transactions, shall be deemed an assignment
of
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this lease within the meaning of Article 11 or an assignment of the sublease
within the meaning of Article 47, as the case may be.
9. All references in this lease to numbered Articles and lettered
Exhibits are references to Articles of this lease and Exhibits annex ed to (and
thereby made part of) this lease, as the case may be, unless expressly otherwise
designated in the context.
10. The words "include", "including" and "such as" shall each be
construed as if followed by the phrase "without being limited to". The words
"herein", "hereof", "hereby", "hereunder" and words of similar import shall be
construed to refer to this lease as a whole and not to any particular Article or
subdivision thereof unless expressly so stated. 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. 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, as the sense of
the context may permit.
11. The term "Specialty Alterations" shall mean Tenant's Changes
(hereinafter defined) consisting of kitchens, executive bathrooms, raised
computer floors, computer installations, vaults, libraries, internal staircases,
dumbwaiters, pneumatic tubes, vertical and horizontal transportation systems,
and other Tenant's Changes of a similar character.
12. The term "Initial Tenant's Changes" shall mean the changes
made by Tenant to initially prepare the demised premises for Tenant's occupancy.
13. The terms "substantial completion" or "substantially
completed" or words of similar import shall mean that Owners Work has been
substantially completed, it being agreed that Owner's Work shall be deemed
substantially complete notwithstanding the fact that minor or insubstantial
details of construction or demolition and/or mechanical adjustment and/or
decorative items remain to be performed.
14. The term "Applicable Rate" shall mean the lesser of (a) two
(2) percentage points above the then current rate of interest publicly announced
from time to time by The Chase Manhattan Bank, or its successor, as its "prime
lending rate" (or such other term as may be used by The Chase Manhattan Bank,
from time to time, for the rate presently referred to as its "prime lending
rate"), and (b) the maximum rate permitted by applicable law.
C. Some Qualifications of Certain Preceding Printed Articles.
1. Notwithstanding Tenant's agreement to pay the fixed rent in
lawful money which shall be legal tender, Owner shall accept, subject to
collection, and Tenant shall pay all fixed rent and additional rent falling due
under this lease by currently dated, unendorsed check of Tenant, payable to
Owner or its designed agent and drawn on a bank or trust company which is a
member of the New York Clearing House. If Tenant shall default in timely payment
of any rent twice in any period of twenty-four (24) months, and
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whether or not such default shall be cured, Owner, may by notice given to Tenant
at any time thereafter, require Tenant to make all further rent payments by
currently dated, unendorsed certified or official bank check payable to Owner on
a bank or trust company that is a member of the New York Clearing House.
2. The use of the demised premises for the purposes specified in
Article 2 shall not in any event be deemed to include, and Tenant shall not use,
or permit the use of the demised premises or any part thereof for:
i. the conduct of a public auction of any kind or of any gaming or gambling
activities, or of any political or club activities, whether private or
public;
ii. the conduct of a school of any kind (other than a training center for
employees of Tenant);
iii. the conduct of a cafeteria or restaurant other than private dining
facilities for Tenant's officers, employees and business guests;
iv. the conduct of any business, occupation or activity which, in the
reasonable judgment of Owner, may (i) create or foster an unusual risk
to the security of the Building or of any of its tenants or occupants,
(ii) impair the reputation of the Building for the highest class of
office and commercial uses, or (iii) interfere with or disturb the
occupancy of other tenants in the Building; or
v. the conduct of meetings, shows or exhibits for the general public.
In no event shall the demised premises be used or occupied by anyone (as
assignee of this lease or as subtenant or licensee), who shall not have a
financial standing, or shall not be of a character, or shall not be engaged in a
business, or shall not use the demised premises in a manner, which shall be in
keeping with the standards in such respects of the other tenancies in the
Building.
In no event shall Tenant cause or permit, as the result of any
intentional or unintentional act or omission on the part of Tenant, its agents,
employees, tenants, subtenants or other occupants of the demised premises to
release Hazardous Substances (hereinafter defined) in or from any portion of the
demised premises in violation of any Environmental Laws (hereinafter defined).
Tenant shall indemnify, defend and hold harmless Owner and any property
manager(s) engaged by Owner, their successors, assigns, and each of their
affiliated companies, partners, shareholders, agents, directors, officers and
employees (collectively, "Indemnitees") from and against any and all claims,
demands, penalties, fines, liabilities, settlements, suits, damages, losses,
injuries, costs and expenses of whatever kind or nature, known or unknown,
contingent or otherwise, including, without limitations, attorneys' and
consultants' fees and disbursements and investigation and laboratory fees
arising out of, or in any way related to: (i) the presence, disposal, release or
threat of release of any Hazardous Substance as a result of any act or omission
of Tenant, its agents, employees, tenants, subtenants, invitees or other
occupants of the demised premises, in or from or affecting the demised premises;
(ii) any personal injury (including wrongful death) or property damage (real or
personal) arising
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out of related to any such Hazardous Substance; (iii) any lawsuit brought or
threatened, settlement reached or government order relating to such Hazardous
Substance; and (iv) any violations of any Environmental Laws. As used herein the
term "Hazardous Substance" shall mean solid waste, hazardous waste, hazardous
substance, petroleum product or similar term as used and defined in the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Hazardous Material Transportation Act, the
Federal Water Pollution Control Act, the Superfund Amendments and
Reauthorization Act of 1986, any laws relating to underground storage tanks, and
any similar or successor federal law, state law or local statutes or ordinances
and any rules, regulations and policies promulgated thereunder, as any of the
same may be amended from time to time (collectively, "Environmental Laws").
Tenant's indemnity hereunder shall survive the expiration or sooner termination
of this lease.
3. Supplementing Article 3:
i. Tenant shall cause any permitted alterations, decorations,
installations, additions or improvements (herein called "Tenant's
Changes"; Tenant's Changes shall also include Initial Tenant's Changes)
in or about the demised premises, referred to in Article 3, to be
performed in compliance with all applicable Requirements, and in such
manner as not to interfere with, delay, or impose any additional expense
upon Owner in the construction, maintenance or operation of the
Building, or interfere with or disturb the occupancy of other tenants in
the Building, and so as to maintain harmonious labor relations in the
Building. Tenant with diligence and dispatch, shall procure the
cancellation or discharge of all notices of violation arising from or
otherwise connected with Tenant's Changes which shall be issued by the
Department of Buildings or any other public authority having or
asserting jurisdiction.
ii. Owner shall not unreasonably withhold or delay any consent or approval
required under Article 3 to Tenant's contractor for the construction of
the Tenant's Changes, provided that such contractors are licensed and
experienced in the nature of the Tenant's Changes being performed, and
provided further that Owner may require that any and all mechanical,
electrical and air-conditioning work on behalf of Tenant shall be
supervised by Owner's in-house personnel, if appropriate personnel are
available or by the contractors regularly employed by Owner for such
work in the Building. Any such supervision by Owner's personnel shall be
reasonable in scope, taking into account the type of work being done on
behalf of Tenant. Owner may require submission to it of plans and
specifications for any proposed Tenant's Changes and in granting its
consent to any Tenant's Changes may impose such conditions (in addition
to those expressly provided in this lease) as to guaranty of completion
and payment and of restoration and otherwise as Owner may consider
desirable. In no event shall Owner be required to consent to any
Tenant's Changes which could physically affect any part of the Building
outside of the demised premises or might adversely affect the proper
functioning of any of the Building Systems. In the event that Owner does
not
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have appropriate in-house personnel available, Owner may require Tenant
to reimburse Owner for Owner's reasonable out-of-pocket costs and
expenses to unrelated third parties for (x) review of Tenant's plans and
specifications for such Tenant's Changes, and (y) supervision of
compliance with the requirements of this lease in the performance of
such Tenant's Changes.
iii. All counters, screens, grilles, railings, suspended lighting fixtures,
panelling, business machines and equipment which are installed in the
demised premises by or for the account of Tenant, and can be removed
without structural damage to or defacement of the Building, and all
furniture, furnishings and other articles of personal property owned by
Tenant and located in the demised premises (all of which are herein
called "Tenants Property") shall be and remain the property of Tenant
and may be removed by it at any time during the term of this lease.
However, if any of Tenants Property is removed, or upon the removal of
Tenant's Changes and/or Specialty Alterations, Tenant shall repair or
pay the cost of repairing any damage to the Building resulting from such
removal. Any items of Tenants Property which shall remain In the demised
premises after Tenant surrenders the demised premises, at the option of
Owner, may be deemed to have been abandoned, and in such case either may
be retained by Owner as Its property or may be disposed of at Tenant's
cost, without accountability, In such manner as Owner may see fit.
iv. Within thirty (30) days after the completion of any Tenant's Changes
(including the Initial Tenant's Changes), Tenant shall deliver to Owner
a full set of architectural, structural, mechanical and electrical
drawings and specifications showing the demised premises "as built" by
the performance of such Tenant's Changes.
4. Supplementing and modifying Article 13, entry upon the demised
premises pursuant to Article 13 shall be accomplished at such times and in such
manner, and (except in the case of emergency) upon such reasonable notice, which
notice may be oral, as to minimize to the extent practicable (without the
necessity of incurring any additional monetary expense) under the circumstances
interference with Tenant's use of the demised premises or inconvenience to
Tenant.
5. Supplementing Article 16, insert at the beginning thereof in
place of the first sentence thereof, the following: "If, at or before the date
fixed as the Commencement Date of the term of this lease or if at any time
during the term hereby demised:
a. Tenant shall file a petition commencing a voluntary case under the
Federal Bankruptcy Code (Title 11 of the United States Code), as now or
hereafter in effect, or under similar law, or file a petition in
bankruptcy or for reorganization or for an arrangement pursuant to any
state bankruptcy law or any similar state law or, if Tenant is then a
banking organization, shall file an application for voluntary
liquidation or dissolution applicable to banking organizations; or
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b. an involuntary case against Tenant as debtor is commenced by a petition
under the Federal Bankruptcy Code (Title 11 of the United States Code),
as now or hereafter in effect, or under similar law, or a petition or
answer proposing the adjudication of Tenant as a bankrupt or its
reorganization pursuant to any state bankruptcy law or any similar state
law shall be filed in any court and shall not be dismissed, discharged
or denied within sixty (60) days after the filing thereof, or if Tenant
shall consent or acquiesce in the filing thereof; or
c. a custodian, receiver, United States Trustee, trustee or liquidator of
Tenant or of all or substantially all of Tenant's property or of
Tenant's property in the demised premises shall be appointed in any
proceedings brought by Tenant; or if any such custodian, receiver,
United States Trustee, trustee or liquidator shall be appointed in any
proceedings brought against Tenant and shall not be discharged within
sixty (60) days after such appointment, or if Tenant shall consent to or
acquiesce in such appointment; or
d. if Tenant shall generally not pay Tenant's debts as such debts become
due, or shall make an assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they become
due; or
e. if Tenant is then a banking organization, if the Superintendent of Banks
of the State of New York or any other public officer having like
authority and power over Tenant as a banking organization shall take
possession of the business and property of Tenant at the demised
premises;
then, Owner may, at its option, cancel or terminate this lease by giving Tenant
written notice to such effect within a reasonable time after receipt of notice
of the happening of any one or more of such events."
6. Notwithstanding the specific provisions of Article 17:
i. In case of default in the payment of fixed rent, additional rent or
escalation rent reserved herein, Tenant shall have a grace period of
five (5) days after notice of the existence of such default from Owner
within which to cure such default and if such payment is not made before
the expiration of such five (5) day grace period, Owner may serve a five
(5) day notice of cancellation of this lease as, and with the effects,
provided in Article 17(1).
ii. In case of any other default referred to in Article 17(1) the Tenant
shall be given ten (10) days (instead of five (5) days) after notice of
the existence of such default from Owner within which to cure such
default, except where failure to cure within a shorter period may
subject Owner to criminal action or penalty, or where such default can
be cured by payment of money, in either of which cases the provisions of
Article 17(1), as written shall govern and except, further, that where
any other such default can be completely cured or remedied in the
exercise of due diligence but not within such grace period of ten (10)
days, such grace period shall be deemed extended to such period as may
be
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reasonably necessary to do the work or take such other steps as shall be
required to correct such default, provided Tenant shall have diligently
commenced curing such default promptly after receipt of notice thereof
and shall thereafter proceed diligently to remedy the same completely.
iii. Nothing in subparagraph (a) of this paragraph shall be deemed to require
Owner to give the notices provided for therein prior to the commencement
of a summary proceeding for nonpayment of rent or a plenary action for
the recovery of rent on account of any default in the payment of rent,
it being acknowledged and agreed by both parties that the sole purpose
of such notices is to create a conditional limitation hereunder, and in
the event such notices are given by Owner, Tenant shall become a
holdover tenant and this lease shall terminate forthwith at the
expiration of the applicable notice period with the effects provided in
Article 17(1).
7. Supplementing Articles 17 and 18:
i. Tenant expressly recognizes that Tenant's due and punctual performance
of all its obligations under this lease throughout the term hereof is of
paramount importance to Owner and, without limiting the provisions of
Articles 17 and 37C(7), Tenant agrees that, if Tenant (i) shall fail to
pay for five (5) business days after it becomes due an installment of
fixed rent or additional rent for two (2) consecutive months or for a
total of three (3) months in any period of twelve (12) months, or (ii)
shall default in the timely performance of any other obligation of
Tenant under this lease with respect to which Owner shall have given
Tenant notice of default, and such default shall occur more than two (2)
times in any period of twelve (12) months, then notwithstanding that
such failure or other default shall have been cured within the
applicable grace period provided in said Articles, any further similar
default shall be deemed to be deliberate and Owner thereafter may,
without further notice of default, serve a five (5) day notice of
cancellation of this lease as and with the effects provided in
subparagraph (1) of Article 17.
ii. Instead of the liquidated damages determined pursuant to Article 18(c),
Owner may, at its election, recover from Tenant as liquidated damages an
amount determined pursuant to Article 16(b).
8. The parties recognize and agree that the damage to Owner
resulting from Tenant's failure to timely surrender the demised premises to
Owner will be substantial, will exceed the amount of fixed rent, additional rent
and escalation rent theretofore payable hereunder and will be impossible to
accurately measure. Tenant therefore agrees that if possession of the demised
premises is not surrendered to Owner within one (1) day after the Expiration
Date or the sooner expiration of the term of this lease, Tenant shall pay Owner
as liquidated damages for each day during which Tenant holds over in the demised
premises after the Expiration Date or earlier expiration of the term of this
lease, a sum equal to one and one half (1-1/2) times the greater of (a) the then
fair market rental value of the demised premises (on a per diem basis) and (b)
the average
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fixed rent, additional rent and escalation rent which was payable on a per diem
basis under this lease on the last day of the term thereof. Tenant's obligations
hereunder shall survive the Expiration Date or earlier expiration of the term of
this lease.
9. Supplementing Article 28, "requests" or "approvals" by Owner
or Tenant under this lease shall be deemed to be notices. All notices shall be
in writing.
10. If Tenant shall fail to pay any installment of fixed rent or
any amount of additional rent for more than five (5) business days after it
shall have become due and payable, then, whether or not a notice of default has
been given therefor pursuant to the provisions of Section 37C(6)(a), Tenant
shall pay Owner a late charge and as additional rent a sum equal to interest at
the Applicable Rate on the amount unpaid, computed from the date such payment
was due through and including the date of payment. Such late charge shall be
without prejudice to any of Owner's rights and remedies hereunder or at law for
nonpayment or late payment of rent and shall be in addition thereto.
11. In the event that Tenant and Owner have entered into a
stipulation, whether entered into in court or otherwise, for the repayment of
any of Tenant's rent arrears, any monies received pursuant to said stipulation
shall first be applied to current rent and then any arrears. Further, until such
time as Tenant has fully and completely complied with the terms and provisions
of the stipulation, Tenant shall not be in good standing pursuant to the terms
and provisions of this lease and may not exercise any rights or remedies which
it has, or may have, under or pursuant to this lease.
II. ELECTRICITY
A. For purposes of this Article, the following terms shall have the
following meanings:
1. The term "Owner's Cost", shall mean, the average cost per
kilowatt hour and average cost per kilowatt demand, by time of day, if
applicable, to Owner of purchasing electricity for the building, including,
without limitation, fuel adjustment charges (as determined for each month of the
relevant period and not averaged) rate adjustment charges, sales tax, and/or any
other factors, used by the public utility company (the "Utility" servicing the
building in computing its charges to Owner applied to the kilowatt hours of
energy and kilowatts of demand purchased by Owner during a given period, and
further including transmission and transformer losses (to be determined by Owner
if such losses are not measured by the Submeter, as defined herein); and
2. The term "Owner's Statement", shall mean an instrument
containing a computation (or estimate thereof), of Owner's Cost (hereinabove
defined), or any other computation to be made by Owner pursuant to the
provisions of this Article.
B. Subject to the provisions of subdivision 4 of paragraph C hereof,
Tenant agrees that Owner 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 (2).
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1. Submetering. Owner may, at Tenant's sole reasonable cost and
expense, install a meter or meters (collectively, the "Submeter"), at a location
designated by Owner, 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 Owner to the demised premises in the manner
provided for in this subdivision (1). If and so long as electric current is
supplied by Owner 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 Owner or Owner's designated agent,
as additional rent for such service, the amounts, as determined by the Submeter,
for the purpose of measuring Tenant's consumption and demand. In the event said
air conditioning units are used by other tenants of the Building, the electric
charges for such units shall be allocated by Owner proportionately, on the basis
of the respective amount of rentable square feet occupied by such tenants,
including Tenant. The additional rent payable by Tenant pursuant to this
subdivision (1), shall be computed in the same manner as that for computation of
Owner's Cost, as applied to the demised premises, plus a fee (the "Overhead
Charge") equal to twelve (12%) percent of such charge to Owner, representing
administrative/overhead costs to Owner. 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, Owner 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 Owner within ten (10) days after demand
therefor, or by Owner crediting Tenant with the amount of any overpayment, as
the case may be. Owner, at its option, may from time to time, increase the
Electricity Additional Rent based upon, among other things, any increase in
Owner's Cost. The periods to be used for the aforesaid computation shall be as
Owner, in its sole discretion, reasonably exercised, 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 Owner's option, separately as above set forth, or cumulatively. Bills
for the Electricity Additional Rent ("Bills"), shall be rendered to Tenant at
such time as Owner may elect.
Owner 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, Owner, at Owner'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 Owner, within ten (10) days after demand therefor, the amount set forth on
Owner's estimate and, after rendition of a subsequent Owner's Statement, an
appropriate reconciliation shall be made for any deficiency owed by Tenant, or
any overage paid by Tenant, or (y) render a Owner'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
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which Tenant shall have completed the Initial Tenant's Changes, if any, 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 Owner's
Statement detailing such computation.
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 Owner 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 Owner's Cost by Tenant's average kilowatt hour and average kilowatt
demand 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 Section B (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 number of square feet
of rentable area of the demised premises, plus twelve (12%) 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 (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 Owner's Cost by Tenant's
average kilowatt hour and average kilowatt demand usage determined by the
estimate of an electrical consultant selected by Owner, plus twelve (12%)
percent of the resulting total. When a survey has been made by the electrical
consultant selected by Owner (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 Owner's Cost then, the
ERIF for such relevant period shall be recomputed, effective on and after the
change in Owner's Cost, by applying such changed rate and/or charges to the
aforedescribed consumption and demand. Notwithstanding the foregoing, on the
Commencement Date, the ERIF shall be $2.50 per square foot of rentable area in
the demised premises.
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 Owner'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 of the
survey, shall be redetermined by the Consultant in accordance with the survey
results and the provisions of this subdivision (2).
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The determination by the Consultant shall be binding and conclusive on
Owner and Tenant from and after the delivery of copies of such determinations to
Owner 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 Owner 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 seven (7%) percent or less of the determinations made by the
Consultant then the determinations made by the Consultant shall be binding upon
the parties. If Owner or the Consultant and Tenant's consultant can not agree
within the said seven (7%) 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 Owner or the Consultant and Tenant's
consultant cannot agree upon such a third electrical consultant, the matter
shall be submitted to arbitration in accordance with Article 46. Any charges of
such third consultant 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 Owner 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. Owner shall not be liable in any way to Tenant for any failure
or defect in the supply or character of electric service furnished to the
demised premises by reason of any requirement, act or omission of the Utility or
for any other reason not attributable to the gross negligence of Owner, whether
electricity is provided by public or private utility or by any electricity
generation system owned and operated by Owner.
2. Tenant shall at all times comply with the rules, regulations,
terms and conditions applicable to service, equipment, wiring and requirements
of the Utility. Tenant shall not use any electrical equipment which, in Owner's
reasonable judgment, would exceed the capacity of the existing risers serving
the demised premises (the "Basic Capacity"), or interfere with the electrical
service to other tenants of the Building. Tenant agrees not to connect any
additional electrical equipment to the Building electric distribution system,
other than lamps, personal computers, copiers, typewriters and other small
office machines which consume comparable amounts of electricity, without Owner's
prior consent. In the event that, in Owner's sole judgment, reasonably
exercised, Tenant's electrical requirements require in excess of the Basic
Capacity and necessitate installation of an additional riser, risers or other
proper and necessary equipment, Owner shall so notify Tenant of same. Within
five (5) business days after receipt of such notice, Tenant shall either cease
such use of such additional electricity or shall request that additional
electrical capacity (specifying the amount requested) be made available to
Tenant. Owner, in its sole judgment, reasonably exercised, shall
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determine whether to make available such additional electrical capacity to
Tenant and the amount of such additional electrical capacity to be made
available. If Owner shall agree to make available additional electrical capacity
and the same necessitates installation of an additional riser, risers or other
proper and necessary equipment, including, without limitation, any switchgear,
the same shall be installed by Owner. Any such installation shall be made at
Tenant's sole cost and expense, and shall be chargeable and collectible as
additional rent and paid within ten (10) days after the rendition of a bill to
Tenant therefor. Tenant shall furnish and install, at its expense, all original
and replacement lighting tubes, lamps, bulbs and ballasts required in the
demised premises.
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. If required due to changes in requirements of law or the
Utility, Owner shall have the right at any time, and from time to time, during
the term of this lease, upon forty-five (45) 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. In addition, if Owner shall elect
to terminate furnishing electricity to a majority of the tenants in the Building
then receiving electricity from Owner, Owner 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, upon forty-five (45) days' written
notice to the Tenant in which event Tenant may make application directly to the
Utility for Tenant's entire separate supply of electric current to the demised
premises and Owner shall permit its wires and conduits, to the extent available
and safely capable in Owner's sole judgment, reasonably exercised, to be used
for such purpose. Any meters, risers or other equipment or connections necessary
to enable Tenant to obtain electric current directly from the Utility shall be
installed at Tenant's sole cost and expense, subject to the provisions of this
lease. Rigid conduit only will be allowed. Owner, upon the expiration of the
aforesaid forty-five (45) days' written notice to the Tenant may discontinue
furnishing the electric current but this lease shall otherwise remain in full
force and effect. Owner will permit Tenant to continue to receive electricity
from Owner on a redistribution basis for such period of time as is reasonably
required by Tenant to arrange to obtain electricity service directly from the
Utility. Commencing when Tenant receives such direct service and as long as
Tenant shall continue to receive such service, 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 Owner (whether such initial determinations, statements or estimates
are subject to dispute or not pursuant to the provisions of this Article),
Tenant shall pay to Owner 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
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parties shall make adjustment for any deficiency owed by Tenant, or any overage
paid by Tenant.
6. Notwithstanding any provisions of this Article 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 or more than one hundred twelve
(112%) percent of Owners Cost unless otherwise provided herein.
7. If any tax is imposed upon Owner'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, a portion of such taxes
(based on the amount of the Electricity Additional Rent as applied to the
appropriate tax rate) shall be passed on to, and included in the bill of, and
paid by Tenant to Owner as additional rent.
D. The provisions of this Article are subject to any requirements or
demands imposed by the Utility.
III. SUPERIOR LEASES AND MORTGAGES
A. For the purposes of this Article a "Mortgagee" shall mean the holder
of a mortgage affecting the Building and "Lessor" shall mean the holder of a
superior lease affecting the Building.
B. If the date of expiration of any superior lease shall be the same day
as the Expiration Date, the term shall end and expire twelve (12) hours prior to
the expiration of the superior lease. If, in connection with the financing of
the Land, the Building or the interest of the lessee under any superior lease,
or if in connection with the entering into of a superior lease, any lending
institution or Lessor shall request reasonable modifications of this lease that
do not increase Tenant's monetary obligations under this lease, or materially
adversely affect or diminish the rights, or materially increase the other
obligations of Tenant under this lease, Tenant shall make such modifications.
1. Neither the Mortgagee nor the Lessor, as the case may be, nor
anyone claiming by, through or under such Mortgagee or Lessor, as the case may
be, including a purchaser at a foreclosure sale, shall be:
a. liable for any act or omission of any prior landlord (including, without
limitation, the then defaulting Owner), or
b. subject to any defense or offsets which Tenant may have against any
prior landlord (including, without limitation, the then defaulting
Owner), or
c. bound by any payment of rental which Tenant may have made to any prior
landlord (including, without limitation, the then defaulting Owner) more
than thirty (30) days in advance of the date upon which such payment was
due, or
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d. bound by any obligation to make any payment to or on behalf of Tenant,
or
e. bound by any obligation to perform any work or to make improvements to
the demised premises, except for (i) repairs and maintenance pursuant to
the provisions of Article 4 hereof, the need for which repairs and
maintenance first arises after the date upon which such owner, Lessor,
or Mortgagee shall be entitled to possession of the demised premises,
(ii) repairs to the demised premises or any part thereof as a result of
damage by fire or other casualty pursuant to Article 9 hereof, but only
to the extent that such repairs can be reasonably made from the net
proceeds of any Insurance actually made available to such Lessor or
Mortgagee, and (iii) repairs to the demised premises as a result of a
partial condemnation pursuant to Article 10 hereof, but only to the
extent that such repairs can be reasonably made from the net proceeds of
any award made available to such Lessor or Mortgagee, or
f. bound by any amendment or modification of this lease made without its
consent, or
g. bound to return Tenant's security deposit, if any, until such deposit
has come into its actual possession and Tenant would be entitled to such
security deposit pursuant to the terms of this lease.
C. If at any time prior to the expiration of the term, any superior
lease shall terminate or be terminated for any reason or any Mortgagee comes
into possession of the Land or the Building or the estate created by any
superior lease by receiver or otherwise, Tenant agrees, at the election and upon
demand of any owner of the Land or the Building, or of the Lessor, or of any
Mortgagee in possession of the Land or the Building, to attorn, from time to
time, to any such owner, Lessor or Mortgagee or any person acquiring the
interest of Owner as a result of any such termination, or as a result of a
foreclosure of such Mortgage or the granting of a deed in lieu of foreclosure,
upon the then executory terms and conditions of this lease, subject to the
provisions of Section 39B hereof, for the remainder of the term, provided that
such owner, Lessor or Mortgagee, as the case may be, or receiver caused to be
appointed by any of the foregoing, shall then be entitled to possession of the
demised premises. The provisions of this Section 39C shall enure to the benefit
of any such owner, Lessor or Mortgage, shall apply notwithstanding that, as a
matter of law, this lease may terminate upon the termination of any superior
lease, and shall be self-operative upon any such demand, and no further
instrument shall be required to give effect to said provisions. Tenant, however,
upon demand of any such owner, Lessor or Mortgagee, shall execute, at Tenant's
expense, from time to time, instruments, in recordable form, in confirmation of
the foregoing provisions of this Section 39C, satisfactory to any such owner,
Lessor or Mortgagee, acknowledging such attornment and setting forth the terms
and conditions of its tenancy. Nothing contained in this Section 39C shall be
construed to impair any right otherwise exercisable by any such owner, Lessor or
Mortgagee.
D. 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 Owner until
Tenant shall have
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given written notice of such act or omission to all Lessors and Mortgagees at
their addresses provided to Tenant, and if any such Lessor or Mortgagee, as the
case may be, shall have notified Tenant within ten (10) business days following
receipt of such notice of its intention to remedy such act or omission, until a
reasonable period of time shall have elapsed following the giving of such
notice, during which period such Lessors and Mortgagees shall have the right,
but not the obligation, to remedy such act or omission.
E. Owner represents that, as of the date of this lease, there are no
superior leases or mortgages affecting the Building. Owner agrees that it shall
use reasonable efforts to obtain a non-disturbance and attornment agreement from
any future Mortgagees or Lessors, provided, however, that the failure to obtain
such agreement(s) shall not be deemed a default on the part of Owner.
IV. ESTOPPEL CERTIFICATE
Each party shall, at any time and from time to time, at the request of
the other party, upon not less than five (5) days' notice, if given in person,
or ten (10) days' notice, if given by mail, execute and deliver to the other a
statement certifying that this lease is unmodified and in full force and effect
[or if there has been any modification, that the same is in full force and
effect as modified and stating the modification(s)], certifying the dates to
which the fixed rent, additional rent and escalation rent have been paid, and
stating whether or not, to the best knowledge of the signer, the other party is
in default in performance of any of its obligations under this lease, and, if
so, specifying each such default of which the signer may have knowledge, it
being intended that any such statement delivered pursuant hereto may be relied
upon by others with whom the party requesting such certificate may be dealing.
V. INDEMNIFICATION AND LIABILITY OF OWNER
A. Tenant shall indemnify and save harmless Owner against and from (a)
any and all claims (i) arising from (x) the conduct of business in or management
(other than by Owner or any of its employees, agents or contractors) of the
demised premises or (y) any work or thing whatsoever done, or any condition
created (other than by Owner or any of its employees, agents or contractors) in
or about the demised premises during the term of this lease or during the period
of time, if any, prior to the Commencement Date that Tenant may have been given
access to the demised premises pursuant to this lease, or (ii) arising from any
act or omission of Tenant or any of its subtenants or licensees or its or their
employees, agents or contractors, and (b) all costs, expenses and liabilities
incurred in or in connection with each such claim or action or proceeding
brought thereon. Tenant's indemnity hereunder shall survive the expiration or
sooner termination of this lease. In case any action or proceeding be brought
against Owner by reason of any such claim, Tenant, upon notice from Owner, shall
resist and defend such action or proceeding by counsel chosen by Tenant who
shall be reasonably satisfactory to Owner. Tenant or its counsel shall keep
Owner fully apprised at all times of the status of such defense. Counsel for
Tenant's insurer shall be deemed satisfactory to Owner.
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B. Tenant shall look only to Owner's estate(s) in the Land and Building
(or the proceeds thereof) for the satisfaction of Tenant's remedies for the
collection of any judgment (or other judicial process) requiring the payment of
money by Owner in the event of any default by Owner under this lease, and no
other property or other assets of Owner 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 landlord and tenant hereunder or
Tenant's use and occupancy of the demised premises.
VI. RENT ESCALATION
A. Real Estate Taxes
1. In the event that at any time during the term of this lease,
the Owner shall be required to pay real estate taxes levied by the City of New
York against the Building and the Land, the taxes imposed for the first fiscal
year in which such obligation commences (the "Base Tax Year") shall be deemed
the "basic taxes". If during any fiscal year of the City of New York during the
term of this lease subsequent to the Base Tax Year, the real estate taxes levied
by the City of New York against the Land and Building shall be greater then the
basic taxes, Tenant agrees to pay to Owner, as additional rent, the product of
the following: (i) the amount of the excess of such real estate taxes over the
basic taxes; and (ii) a fraction, the numerator of which is the number of
rentable square feet of the demised premises, and the denominator of which is
the number of rentable square feet in the Building subject to real estate taxes.
However, in no event shall Tenant have any obligation under this Section in the
event that real estate taxes for any fiscal year are less than the basic taxes.
2. In the event that as a result of administrative or court
proceedings, the real estate taxes for any fiscal year after the Base Tax Year
shall be reduced, Owner shall make an appropriate payment to the Tenant upon
receiving a refund or a tax bill reflecting such reduction from the City of New
York, so that the aggregate payment from Tenant to Owner with reference to such
fiscal year of the City of New York pursuant to the provisions of this Article
shall be brought to the amount which it would have been if the reduced taxes for
such fiscal year were the original taxes levied upon the Land and Building.
Owner's obligation to make such payments shall survive the end or termination of
the term of this lease.
(a) In the event that as a result of administrative or court proceedings,
the real estate taxes for the Base Tax Year shall be reduced, Tenant
shall promptly, upon demand, make appropriate payment(s) to Owner
reflecting such reduction from the City of New York, so that the
aggregate payment from Tenant to Owner with reference to the following
fiscal years of the City of New York pursuant to the provisions of this
Article shall be brought to the amount which it would have been if the
reduced taxes for such Base Tax Year were the original taxes levied upon
the Land and Building. Tenant's obligation to make such payments shall
survive the end or termination of the term of this lease.
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3. If the term of this lease shall end or be terminated (for any
reason other than the Tenant's default) on a day other than the end of a fiscal
year of the City of New York and such end or termination shall be during a
fiscal year of the City of New York as to which a payment is agreed to be made
by Tenant pursuant to the provisions of this Article, then such payment shall be
reduced by the proportion thereof which the number of days elapsed from the end
or termination of the term hereof to the end of the then current fiscal year of
the City of New York bears to 365.
4. Any sum payable by Tenant in accordance with this Article
shall be paid on or before the last day of the fourth month of the fiscal year
of the City of New York to which such payment is applicable. At least thirty
(30) days prior to such due date, Owner shall furnish Tenant with a certified
statement of such sum and the calculations on which it is based. The obligation
to make such payment shall survive the end or termination of this lease. Tenant
shall not be required to anticipate payment of its proportionate share of any
special Borough-wide assessment levied against the Land and Building unless
Owner shall, in its sole discretion, elect to anticipate payment thereof.
5. All mention herein of "real estate taxes levied by the City of
New York" shall be deemed to refer to the aggregate of all Borough-wide levies
against the Land and Building, whether called City taxes, City and Borough
assessments or by any other term.
6. If the attorneys for Owner in any administrative or court
proceedings succeed or shall have succeeded in reducing the assessed valuation
for real estate tax purposes of the real estate known as 71 West 23rd Street,
the Borough of Manhattan, City of New York, for any fiscal year of the City of
New York subsequent to the Base Tax Year, the whole or any part of which shall
be included within the term of this lease, and as a result of such attorneys'
services there shall be payment by Owner to Tenant or a saving of additional
rent payable pursuant to this Article, Tenant agrees to pay to Owner as
additional rent, upon demand, that portion of such saving of additional rent or
payment by Owner to Tenant resulting from such services shall bear to the total
tax savings or refund from the City of New York on the entire real estate
resulting from their services. The obligation to make the payment required by
this Article shall survive the end or termination of the term of this lease.
7. Any dispute arising under this Article shall be submitted to
arbitration in accordance with Article 46. The right to dispute the amount of
any sum payable under this Article upon Tenant's part shall be deemed waived
unless the same shall be asserted by service of a notice upon Owner within
twenty (20) days of rendition of a bill or statement therefor.
B. Porter's Wage Increase
1. For the purposes of this Article:
i. The term "Base Wage Year" shall mean the calendar year ending December
31, 1998.
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ii. The term "Escalation Year" shall mean each calendar year which shall
include any part of the term of this lease commencing after the Base
Wage Year.
iii. The term "R.A.B." shall mean the Realty Advisory Board on Labor
Relations, Incorporated, or its successor.
iv. The term "Local 32B" shall mean Local 32B-32J of the Building Service
Employees International Union, AFL-CIO, or its successor.
v. The term "Class A Office Buildings" shall mean office buildings in the
same class or category as the building under any building operating
agreement between R.A.B. and Local 32B, regardless of the designation
given to such office buildings in any such agreement.
vi. The term "Wage Rates" with respect to the Base Wage Year or any
Escalation Year shall mean the regular average hourly wage rate required
to be paid to Porters in Class A Office Buildings pursuant to any
agreement between R.A.B. and Local 32B in effect during such Escalation
Year, provided that if any such agreement shall require Porters to be
regularly employed on days or during hours when overtime or other
premium pay rates are in effect, then the term "regular average hourly
wage rate" shall mean the regular average hourly wage rate for the hours
in a calendar week which Porters are required to be regularly employed
(whether or not actually at work in the building), e.g., if, for
example, an agreement between R.A.B. and Local 32B would require the
regular employment of Porters for forty (40) hours during a calendar
week at a regular hourly wage rate of $4.00 for the first thirty (30)
hours and at an overtime hourly average wage of $5.00 for the remaining
ten (10) hours, then the regular average hourly wage rate under this
subsection would be the sum arrived at by dividing the total weekly
average wages of $170.00 by the total number of required hours of
employment which is forty (40) and resulting in a regular average hourly
wage rate of $4.25. The computation of the regular average hourly wage
rate shall be on the same basis whether based on an hourly or other pay
scale but predicated on the number of hours in such respective work
weeks, whether paid by landlord or any independent contractor. Such
regular average hourly wage rate shall not include any so called "fringe
benefits". If there is no such agreement in effect as of the date of
Owner's Statement on which such regular average hourly wage rate is
determinable, the computations shall be made on the basis of the regular
average hourly wage rate being paid by Owner or by the contractor
performing porter or cleaning services for Owner as of the date of such
Owner's Statement and appropriate retroactive adjustments shall be made
when the regular average hourly wage rate paid as of such Owner's
Statement is finally determined. If length of service shall be a factor
in determining any element of wages, it shall be conclusively presumed
that all employees have two (2) years of service. The terms hereof shall
be effective whether or not the Building is a Class A office building or
employs such a Porter, as Wage Rate is intended to be a substitute
comparative index as opposed to an actual operating expense
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calculation and is not intended to reflect the actual cost of wages and
other expenses for the Building and increases or decreases thereto.
vii. The term "Porters" shall mean that classification of employee engaged in
the general maintenance and operation of Class A Office Buildings most
nearly comparable to the classification now applicable to porters in the
current agreements between R.A.B. and Local 32B (which classification is
presently termed "others" in said agreement).
2.
i. For each Escalation Year commencing during the term of this lease,
Tenant shall pay ("Tenant's Operating Payment") a sum equal to the
number of square feet of rentable area in the demised premises
multiplied by the number of cents (inclusive of any fractions of a cent)
of any increase in Wage Rates above those in effect as of December 31 of
the Base Wage Year. Any such payment shall be effective as of, and
retroactive to, if necessary, the date of such increase in Wage Rates.
ii. Owner shall furnish to Tenant, prior to the commencement of each
Escalation Year, a written statement setting forth Owner's estimate of
Tenant's Operating Payment for such Escalation Year. Tenant shall pay to
Owner on the first day of each month during any Escalation Year, an
amount equal to one-twelfth (1/12th) of Owner's estimate of Tenant's
Operating Payment for such Escalation Year. If, however, Owner 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 Owner on the first day of each month an amount equal
to the monthly sum payable by Tenant to Owner under this subparagraph
(b) in respect of the last month of the preceding Escalation Year; (b)
promptly after such estimate is furnished to Tenant or together
therewith, Owner 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 thirty (30) days after demand
therefor, or (ii) if there shall have been an overpayment, Owner shall
either refund to Tenant with reasonable promptness 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 Owner an amount equal to one-twelfth (1/12th) of Tenant's
Operating Payment shown on such estimate. Owner may at any time or from
time to time furnish to Tenant a revised statement of Owner's estimate
of Tenant's Operating Payment for such Escalation Year; and in such
case, Tenant's Operating Payment for such
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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.
iii. After the end of each Escalation Year Owner shall furnish to Tenant an
Owner's Statement for such Escalation Year. If the Owner'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,
Owner 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 Owner'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 thirty (30) days after demand
thereof.
iv. The computation under this Article is intended to constitute a formula
for an agreed rental escalation and may or may not constitute an actual
reimbursement to Owner for its costs and expenses paid by Owner with
respect to the Building.
v. 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 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 1 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 Owner's Statement. In no event
shall fixed rent ever be reduced by operation of this Article and the
rights and obligations of Owner and Tenant under the provisions of this
Article with respect to any additional rent shall survive the
termination of this lease.
3. Owner's failure to render Owner's Statements with respect to
any Escalation Year shall not prejudice Owner's right to thereafter render a
Owner's Statement with respect thereto or with respect to any subsequent
Escalation Year. Nothing herein contained shall restrict Owner from issuing
Owner's Statements at any time there is an increase in Wage Rates during any
Escalation Year or any time thereafter.
VII. ABATEMENT OF RENT
Provided Tenant is not in default (beyond any applicable grace and cure
periods) of the terms and conditions of this lease, the fixed rent payable
hereunder shall be abated (i) with respect to the fourteenth (14th) floor
portion of the demised premises for the fifth (5th), sixth (6th), thirteenth
(13th) and fourteenth (14th) months of the term, (ii) with respect to the
fifteenth (15th) floor portion of the demised premises for the period commencing
on the date of substantial completion of Owner's Work (hereinafter defined)
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and ending on the date which is five (5) months thereafter and with respect to
the Designated Additional Floor for the seventh, eighth and ninth months and the
sixteenth and seventeenth months of the term. Notwithstanding the foregoing,
Tenant shall be required to pay for its consumption of electricity commencing on
the Commencement Date and there shall be no abatement therefor.
VIII. RESTRICTIONS ON SIGNS
A. No lettering, sign, advertisement, notice, or object shall be
displayed in or on the windows or doors, or on the outside of the demised
premises, or at any point inside the demised premises, where the same might be
visible outside of the demised premises, except that the name and logotype of
Tenant and its subtenants may be displayed on or next to the entrance doors of
the demised premises, subject to the approval of Owner (which shall not be
unreasonably withheld) as to the size, color, material, style and location of
such display.
B. Owner shall make available to six (6) listings in the lobby
directories of the Building. The initial listings shall be without charge to
Tenant. From time to time, but not more frequently than once every three (3)
months, Owner shall make changes to the lobby directory to reflect such changes
in the listings therein as Tenant shall request, and Tenant promptly after
request shall pay to Owner Owner's out-of-pocket costs for each change Tenant
requests.
IX. CONSENTS
A. Wherever in this lease it is provided that either party shall not
unreasonably withhold consent or approval or shall exercise its judgment
reasonably, such consent or approval or exercise of judgment (hereinafter
referred to collectively as "consent") shall also not be unreasonably delayed.
If a party considers that the other party has unreasonably withheld or delayed a
consent it shall so notify the other party within ten (10) days after receipt of
notice of denial of the requested consent, or in case notice of denial is not
received within twenty (20) days after making its request for the consent,
within ten (10) days after the expiration of such twenty (20) day period; and
within ten (10) days after giving the first mentioned notice it may submit the
question of whether the withholding or delaying of such consent is unreasonable
to determination by informal arbitration in the manner provided in Article 46.
Failure to give such first mentioned notice or to make such submission to
arbitration within the period hereinabove provided therefor shall preclude any
further right to dispute the reasonableness of such withholding of consent. A
consent shall not be deemed to have been unreasonably withheld or delayed unless
the aggrieved party complies with the foregoing procedure and it shall be so
determined by arbitration as aforesaid, in the event of such determination, the
requested consent shall be deemed to have been granted for all purposes of this
lease; however, except to the extent otherwise provided below in this Section A,
the party who shall have refused or failed to give such consent shall not have
any liability to the other party therefor and the only remedy for an
unreasonable withholding or delaying of consent by either party shall be as
provided in this Article. Notwithstanding the
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foregoing, the party in whose favor such a determination has been made and has
become final shall be entitled to recover from the other party its reasonable
counsel fees and arbitration fees paid and court costs awarded in connection
with such determination.
B. Wherever in this lease or any Exhibit it is provided that the
approval of a representative of either party (such as Owner's engineer or
architect or Tenant's designer or engineer) is required for any particular
matter, such approval shall be deemed to be a consent of the party for the
purposes of Section A of this Article, provided that a true copy of the notice
requesting such approval is given to the party so represented before the other
party may claim that such approval has been unreasonably withheld or delayed.
C. Whenever Tenant shall submit to Owner any plan, agreement or other
document for Owner's consent or approval and Owner shall require the expert
opinion of Owner's counsel, architect, engineer or other representative or agent
of Owner as to the form or substance thereof, Tenant shall pay to Owner, Owner's
out-of-pocket cost of obtaining such expert opinion with ten (10) days after
Owner's demand therefor.
X. INFORMAL ARBITRATION
A. Every dispute between the parties which is specifically provided in
this lease to be determined by informal arbitration shall be submitted to
Chairman of the Board of Directors of the Management Division of the Real Estate
Board of New York, Inc. (or to such officer of said Real Estate Board or of any
similar organization then successor thereto, having like authority or duties),
for determination by him or by such other, impartial person or persons as he may
designate, and such determination, when made and rendered to the parties in
writing, shall be final and conclusive on the parties. Such submission may be
made by either party on notice to the other ("Notice of Dispute") and the other
party may then, within ten (10) days after receipt of the Notice of Dispute
present its statement of the matter in dispute (the "Reply") to such arbitrator,
upon notice to the first party. The expenses of such informal arbitration shall
be borne by the parties equally.
B. If at the time such dispute is to be submitted neither the Real
Estate Board of New York, Inc. nor any such successor organization shall exist,
or if at such time the appropriate officer of said Real Estate Board or of such
successor organization shall be unwilling or unable to accept the submission, or
if despite diligent efforts made in good faith by either party, the arbitrator
is not appointed or does not commence hearing the matter within thirty (30) days
after the receipt of the Reply, or if the arbitrator to whom the matter is
submitted shall fail to render his decision to the parties in writing within
sixty (60) days after the receipt of the Reply, then in any such event, at the
instance of either party, if the event shall not be due to its fault or neglect,
the matter in dispute shall be determined by arbitration in the City and County
of New York in accordance with the Commercial Arbitration Rules then obtaining
of the American Arbitration Association (or any organization then successor
thereto). The expenses of such procedure shall be borne by the parties equally.
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XI. ASSIGNMENT AND SUBLETTING
Notwithstanding the provisions of Articles 11 and 37B(7), and in
modification and amplification thereof:
A. If this lease be assigned, whether or not in violation of the
provisions of this lease, Owner, may collect rent from the assignee. If the
demised premises or any part thereof be sublet or be used or occupied by anybody
other than Tenant whether or not in violation of this lease, Owner may, after
default by Tenant and expiration of Tenant's time to cure such default, if any,
collect rent from the undertenant or occupant. In either event, Owner may apply
the net amount collected to the rents herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of any of the
provisions of Article 11 or of this Article, or the acceptance of the assignee,
undertenant or occupant as a tenant, or a release of Tenant from the further
performance by Tenant of Tenant's obligations under this lease. The consent by
Owner to assignment, mortgaging, underletting or use or occupancy by others
shall not in any way be considered to relieve Tenant from obtaining the express
consent of Owner to any other or further assignment, mortgaging or underletting
or use or occupancy by others not expressly permitted by this Article.
References in this lease to use or occupancy by others, that is anyone other
than Tenant, shall not be construed as limited to subtenants and those claiming
under or through subtenants but as including also licensees and others claiming
under or through Tenant, immediately or remotely.
B.
1. Tenant may, without Owner's consent (provided Tenant complies
with Section D below), assign this lease for the use set forth in Article 2 to a
corporation or other business entity (herein sometimes called a "successor
corporation") into or with which Tenant shall be merged, or consolidated, or to
which substantially all of Tenant's assets may be transferred, provided that (a)
the successor corporation shall have assumed substantially all of Tenant's
obligations and liabilities, including all obligations under this lease, by
operation of law or appropriate instruments of merger, consolidation or
transfer, (b) the successor corporation shall have a net worth and annual
income, and cash flow, determined in accordance with generally accepted
accounting principles, consistently applied, after giving effect to such
assignment, equal to the greater of Tenant's net worth and annual income and
cash flow, as so determined, on (i) the date immediately preceding the date of
such assignment, and (ii) the Commencement Date, and (c) the purpose of such
merger, consolidation or transfer is not to effect a transfer of Tenant's
leasehold interest in the demised premises in circumvention of the requirements
set forth elsewhere in this lease. In case of an assignment by merger or in
consolidation, a true copy of the instrument of merger or consolidation
containing the successor corporation's assumption of Tenant's obligations and
liabilities, assuming Tenant's liabilities under this lease, shall be acceptable
to Owner in lieu of the agreement mentioned in the first sentence of Section G
below.
2. Tenant may, without Owner's consent (provided Tenant complies
with Section D below), sublet any part or parts of the demised premises for the
use set forth in
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Article 2 to a corporation or other business entity (herein sometimes called a
"related corporation") which shall control, be controlled by or be under common
control with Tenant, provided (i) Tenant shall comply with Section E below, and
(ii) such subtenant shall continue to be a related corporation of Tenant. Any
related corporation may use and occupy a part of the demised premises for any of
the purposes permitted by this lease, subject to compliance with Tenant's
obligations under this lease, provided Tenant shall notify Owner with reasonable
promptness of (i) the name of the related corporation, (ii) the manner in which
the related corporation is related to Tenant, and (iii) the period of time
during which the related corporation will use the demised premises. However such
use shall not be deemed to vest in any such related corporation any right or
interest in this lease or the demised premises. As used herein in defining a
related corporation, control shall be deemed established by the right to
exercise, directly or indirectly, more than 50% of the voting rights
attributable to the controlled corporation, and with respect to an entity which
is not a corporation, the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of the controlled
entity.
C.
1. If Tenant shall desire to assign this lease or to sublet the
demised premises, in whole or in part, to anyone other than a related or
successor corporation, only for the use set forth in Article 2, Tenant shall
submit to Owner a request for Owner's consent to such assignment or subletting,
which request shall contain or be accompanied by the following information: (i)
the name and address of the proposed assignee or subtenant; (ii) a description
identifying the space to be sublet and Tenant's improvements included therein;
(iii) the basic terms and conditions, including the effective date of the
proposed assignment or subletting; (iv) the nature and character of the business
of the proposed assignee or subtenant and of its proposed use of the demised
premises or part thereof; and (v) current financial information and any other
information Owner may reasonably request with respect to the proposed assignee
or subtenant.
2. Upon receiving such request, Owner shall have the option, in
the case of a proposed sublease, to sublet from Tenant the area proposed for the
term proposed and upon all the applicable covenants, agreements, terms,
provisions and conditions contained in this lease, at a rental rate with
provisions for additional rent as provided in this lease for the entire demised
premises or, if less than the whole is sublet, equal to an equitable
apportionment on square foot basis of such rent and additional rent. In the
event Owner fails to exercise such option by notice to Tenant, in writing, given
by certified mail, return receipt requested, within thirty (30) days of the date
of mailing of the aforesaid request from Tenant, such option shall terminate
with respect to the particular subletting as to which consent shall have been
requested by Tenant. If, however, said option is exercised, Owner, as such
subtenant, shall have the right to further sublet the premises covered by such
option without the consent of Tenant and shall also have the right to make any
change, alterations and improvements in such sublet space, provided, however,
that if such sublease resulting from the exercise of such option shall terminate
more than one (1) year prior to the end of the term of this lease, Owner shall
restore the sublet premises to substantially their previous condition,
reasonable wear and tear excepted.
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3. Anything in this Article 47 contained to the contrary
notwithstanding, Owner shall have the right, within thirty (30) days after
receipt of Tenant's request for consent to a proposed subtenant for the entire
demised premises or of an assignment of this lease to notify Tenant, in writing,
of its intention to recapture the demised premises as of the effective
commencement date of the proposed sublease or assignment and, in that event: (a)
Tenant shall vacate and surrender to Owner the demised premises as if said date
were the date herein set forth as the termination date of this lease; and (b)
upon Tenant's vacating and surrendering the demised premises, Owner and Tenant
shall have no further liability to each other as of said date, except with
respect to any unpaid accrued rent and/or additional rent and except with
respect to any other obligation or matter which, by the terms of this lease,
survives the termination of this lease.
D. If Tenant requests Owner's consent to a sublet and Owner does not
exercise either of its options set forth in Sections C(2) and (3) of this
Article, as applicable, Owner shall not unreasonably withhold its consent to the
proposed subletting referred to in Tenant's notice given pursuant to Section C,
provided that:
1. The proposed subtenant is (i) of a financial standing
satisfactory to Owner, (ii) engaged in a business reasonably satisfactory to
Owner, and (iii) will use the demised premises as permitted under Article 2 (and
otherwise in accordance with this lease) and in such a manner so as to not
violate any negative covenants as to use contained in any other lease made
between Owner and other tenant(s) of the Building.
2. The proposed subtenant is a reputable entity.
3. The proposed subtenant is not then a tenant or occupant of any
part of the Building or a corporation or other entity which controls or is
controlled by such tenant or occupant or is under common control with such
tenant or occupant.
4. If Owner should have, or within six (6) months will have,
suitable space available in the Building, the proposed subtenant shall not then
be a prospective tenant with whom Owner shall have been negotiating for the
leasing of space in the Building.
5. The subletting 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 consent of Owner in each instance.
6. No subletting shall end later than one day before the
Expiration Date of this lease.
7. The subletting is subject to the express condition, and by
accepting a sublease hereunder each subtenant shall be conclusively deemed to
have agreed, that if this lease should be terminated prior to the Expiration
Date or if Owner should succeed to Tenant's estate in the demised premises,
then, at Owner's election, the subtenant shall
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attorn to and recognize Owner as the subtenant's landlord under the sublease and
the subtenant shall promptly execute and deliver any instrument Owner may
reasonably request to evidence such attornment.
8. If the demised premises are to be divided, the areas to be
sublet shall have direct access to the public corridor, elevators, stairwells
and toilets on the same floor of the Building. All access corridors shall not be
less than six feet in width and shall be constructed in compliance with all
applicable laws and requirements of public authorities.
9. There shall be no more than three (3) entities (including
Tenant) in the demised premises as a result of any subletting.
10. Tenant is not in default under this lease or any other lease
at the time in effect between Owner and Tenant with respect to premises in the
Building.
11. Tenant shall reimburse Owner for any reasonable expenses that
may be incurred by Owner in connection with the proposed sublease including,
without limitation, the reasonable costs of making investigations as to the
acceptability of a proposed subtenant and reasonable legal expenses incurred in
connection with the granting of any requested consent to the sublease.
E. Tenant shall furnish Owner with a counterpart (which may be a
conformed or reproduced copy) of each sublease or assignment made hereunder
promptly after the date of its execution. Tenant shall remain fully liable for
the performance of all of Tenant's obligations hereunder notwithstanding any
subletting provided for herein, and without limiting the generality of the
foregoing, shall remain fully responsible and liable to Owner for all acts and
omissions of any subtenant or anyone claiming under or through any subtenant
which shall be in violation of any of the obligations of this lease and any such
violation shall be deemed to be a violation by Tenant.
F. Notwithstanding any assignment and assumption by the assignee of the
obligations of Tenant hereunder, Tenant herein named, and each immediate or
remote successor in interest of Tenant herein named, shall remain liable jointly
and severally (as a primary obligor) with its assignee and all subsequent
assignees for the performance of Tenant's obligations hereunder, and, without
limiting the generality of the foregoing, shall remain fully and directly
responsible and liable to Owner for all acts and omissions on the part of any
assignee subsequent to it in violation of any of the obligations of this lease.
G. Notwithstanding anything to the contrary hereinabove set forth, no
assignment of this lease shall be binding upon Owner unless the assignee shall
execute and deliver to Owner an agreement, in recordable form, whereby such
assignee agrees unconditionally to be personally bound by and to perform all of
the obligations of Tenant hereunder and further expressly agrees that
notwithstanding such assignment the provisions of this Article shall continue to
be binding upon such assignee with respect to all future assignments and
transfers. A failure or refusal of such assignee to execute or deliver such
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an agreement in recordable form shall not release the assignee from its
liability for the obligations of Tenant hereunder assumed by acceptance of the
assignment of this lease.
H.
1. If Tenant shall receive any consideration from its assignee
for or in consideration of Tenant's interests in the Tenant's Changes, other
than from a related or successor corporation, then, Tenant shall account to
Owner therefor and shall pay over to Owner such consideration as and when such
consideration is received, and from which shall be deducted the reasonable
expenses incurred by Tenant in connection with such assignment, including
(without limitation) brokerage commissions, advertising costs, reasonable
attorneys' fees and disbursements and decorating and remodeling costs, to be
amortized over the then remaining term of this lease.
2. If Tenant shall receive any rents and/or consideration from
its subtenant, other then from a related corporation, which for any period,
shall exceed the per square foot rates of the fixed rent and all additional rent
and escalation rent payable under this lease for the same period; or if Tenant
shall receive from its subtenant any consideration for the sale or use of
Tenant's Property or Tenant's right to use the Tenant's Changes; then, in each
instance Tenant shall account to Owner therefor and shall pay over to Owner such
excess rents and such other consideration, as and when received, and from which
shall be deducted the reasonable expenses incurred by Tenant in connection with
such subletting, including (without limitation) brokerage commissions,
advertising costs, reasonable attorneys' fees and disbursements and decorating
and remodeling costs, to be amortized over the then remaining term of this
lease.
XII. BROKERAGE
Each party represents and warrants to the other that it has not dealt
with any broker or person in connection with this lease except Newmark Company
Real Estate, Inc. and Julien J. Studley, Inc. and Stone Company (a California
Licensed Real Estate Broker), which brokers shall be paid their commissions in
connection with this lease by Owner. The execution and delivery of this lease by
each party shall be conclusive evidence that such party has relied upon the
foregoing representation and warranty. Tenant shall indemnify and hold Owner
harmless from and against any and all claims for commission, fee or other
compensation by any other person who shall claim to have dealt with Tenant in
connection with this lease and for any and all costs incurred by Owner in
connection with such claims, including, without limitation, reasonable
attorneys' fees and disbursements. Owner shall indemnify and hold Tenant
harmless from and against any and all claims for commission, fee or other
compensation by any person who shall claim to have dealt with Owner in
connection with this lease and for any and all costs incurred by Tenant in
connection with such claims, including, without limitation, reasonable
attorneys' fees and disbursements. The provisions of this Article shall survive
the expiration or prior termination of this lease.
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XIII. RENT CONTROL
If at the commencement of, or at any time(s) during the term of this
lease, the rent(s) reserved in this lease shall not be fully collectible for
reason of any Federal, State, County or City law, proclamation, order or
regulation, or direction of a public officer or body pursuant to law, Tenant
shall enter into such agreement(s) and take such other steps (without additional
expense to Tenant) as Owner may request and as may be legally permissible to
permit Owner to collect the maximum rents which may from time to time during the
continuance of such legal rent restriction be legally permissible (and not in
excess of the amounts reserved therefor under this lease). Upon the termination
of such legal rent restriction prior to the expiration of the term of this
lease, (a) the rents shall become and thereafter be payable hereunder in
accordance with the amounts reserved in this lease for the periods following
such termination, and (b) Tenant shall pay to Owner, if legally permissible, an
amount equal to (i) the rents which would have been paid pursuant to this lease
but for such legal rent restriction, less (ii) the rents paid by Tenant to Owner
during the period(s) such legal rent restriction was in effect. Any security
deposited by Tenant may be retained by Owner for one year after such termination
of this lease, to secure collection of any amount Owner may be entitled to
receive pursuant to clause (b) above.
XIV. CONDITION OF THE DEMISED PREMISES
A. Tenant has inspected the demised premises and shall take possession
of the demised premises "as is" (except for latent defects, provided Tenant
gives Owner prompt notice thereof), and Owner shall have no obligation to alter,
improve, decorate or otherwise prepare the demised premises for Tenant's
occupancy, except for Owner's Work as set forth on Exhibit "B". Owner has made
no representations as to the date on which it will complete Owner's Work and
Owner shall be under no penalty or liability to Tenant whatsoever by reason of
any delay in such performance and this lease and the Commencement Date shall not
be affected thereby. If, for any reason whatsoever, Owner's Work is not
substantially completed by the Commencement Date, Owner shall have the right to
enter the demised premises subsequent to the Commencement Date to complete
Owner's Work and the payment of fixed rent, additional rent and escalation rent
shall not be affected thereby or by the failure to substantially complete
Owner's Work by the Work Date. Tenant, in compliance with the further provisions
of this Article, Building regulations and procedures, and other applicable
provisions of this lease, shall perform the Initial Tenant's Changes. In
addition, Tenant shall make any and all modifications and additions and
replacements to the existing sprinkler and alarm systems as may be necessitated
by the Initial Tenant's Changes.
B. Tenant shall prepare and shall submit to Owner for its approval
(which shall not be unreasonably withheld) complete, finished, detailed and
fully dimensioned architectural, electric and engineering plans and drawings,
and specifications for the Initial Tenant's Changes ("Tenant's Plans"),
employing engineers approved by Owner (which approval, subject to the provisions
of Section 37C(3), shall not be unreasonably withheld). Tenant's Plans shall be
practicable and shall conform to the existing physical condition of the
Building, the filed plans and specifications for the Building, and all
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Requirements. In the event Owner refuses to approve Tenant's Plans it shall
advise Tenant of those revisions or corrections Owner requires, and Tenant shall
promptly thereafter cause revised Tenant's Plans to be submitted to Owner for
its approval.
C. Upon Owner's approval of Tenant's Plans, Tenant shall cause Tenant's
Plans (including mechanical plans and specifications) to be filed with the
governmental agencies having jurisdiction thereof, in order to obtain, and shall
obtain, all governmental permits, approvals, licenses, authorizations, waivers,
consents and certificates (collectively, "Permits") which may be required in
connection with the performance of the Initial Tenant's Changes. Owner shall
with reasonable promptness sign the applications for such Permits prepared by
Tenant which require Owner's signature and Tenant shall indemnify and hold Owner
harmless against any claim, cost, liability or expense resulting from any error,
omission or other impropriety or deficiency in any such application. The Initial
Tenant's Changes shall be governed by the provisions of Article 3 and Section
37C(3) with respect to Tenant's Changes as if the Initial Tenant's Changes were
Tenant's Changes as modified and supplemented by this Article. Tenant shall
employ, as its general contractor for the performance of the Initial Tenant's
Changes, such contractor as Tenant may select and Owner shall, in the reasonable
exercise of its judgment (and subject to the provisions of Section 37C(3)),
approve. Owner shall permit Tenant's contractors and suppliers to move
construction materials, supplies and equipment for the Initial Tenant's Changes
to the demised premises and to remove construction waste and debris therefrom,
by an elevator to be designated by Owner, at times appointed by Owner after
normal business hours or on other than business days, giving effect to other
previously made appointments. Tenant's contractors and suppliers shall pay
Owner's actual cost basis for the use of such elevator except for use during (i)
the hours of 8:00 a.m. and 6:00 p.m. Mondays through Fridays or (ii) Tenant's
initial move into the demised premises. Such elevator use shall be subject to
reasonable scheduling and supervision by Owner. Tenant shall, and shall cause
its contractors and suppliers to, comply with Owner's rules and regulations, and
Owner's directions for the coordination and control of construction activities
in the Building and the protection and security of the Building and its systems
and occupants.
D. Throughout the performance of any Tenant's Changes (including the
Initial Tenant's Changes) in or about the demised premises, Tenant shall
maintain, or cause to be maintained:
a. Worker's Compensation insurance coverage in statutory limits for all
eligible workmen engaged in the Tenant's Changes;
b. Public Liability insurance, of which Owner shall be a named insured, in
limits of $1,000,000/$1,000,000 for bodily injury and death,
$500,000/$1,000,000 for property damage and $2,000,000 umbrella coverage
for bodily injury, death and property damage, which shall also include
blanket contract liability coverage for Tenant's indemnity obligations
to Owner under this lease; and
c. Builder's All-Risk insurance in an amount equal to the value of the
Tenant's Changes on the completion thereof.
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Tenant shall submit to Owner, before commencement of any Tenant's Changes in or
about the demised premises, certificates of such Worker's Compensation, Public
Liability and Builder's All-Risk insurance.
E. Tenant represents and warrants that its use of the demised premises
and any Alterations made by or on behalf of Tenant to the demised premises will
conform to all Requirements, including (without limitation) the Americans With
Disabilities Act ("ADA") of July 26, 1990, Publ. L. No. 101-336, 104 Stat. 327,
42 U.S.C. Section 12101, et seq., as amended from time to time, and the
regulations promulgated pursuant thereto. Tenant hereby indemnifies and holds
Owner harmless from and against any and all claims, damages, suits, liabilities
and attorneys' fees (including, but not limited to appellate attorneys' fees)
asserted against or suffered by Owner in any way relating to or arising from, in
whole or in part, an actual or asserted claim that the demised premises, or any
portion thereof, is in violation of any Requirements, including (without
limitation) the ADA, or any regulations promulgated pursuant thereto.
F.
1. Subject to the provisions of this Section, Owner shall
contribute an amount not to exceed Three Hundred Twenty Five Thousand and 00/100
($325,000.00) Dollars (the "Tenant Fund") for each of the fifteenth floor and
the Designated Additional Floor toward (i) first, the cost of the performance of
the Initial Tenant's Changes (other than Soft Costs, as defined below) on the
fifteenth (15th) floor portion and the Designated Additional Floor of the
demised premises only; and (ii) second, to the extent that the Tenant Fund
exceeds the costs of the Initial Tenant's Changes (exclusive of Soft Costs), the
fees of architects, engineers, expediters and consultants incurred in connection
with the performance of the Initial Tenant's Changes (the costs in this clause
(ii) being collectively referred to herein as "Soft Costs").
2. Owner shall disburse a portion of the Tenant Fund to Tenant or
as Tenant may direct from time to time, within thirty (30) days after receipt of
the receipt of the items set forth in Section 50F(3) hereof, provided that on
the date of disbursement from the Tenant Fund, no event of default shall have
occurred and be continuing. Disbursements from the Tenant Fund shall not be made
more frequently than monthly, and shall be in an amount equal to the aggregate
amounts theretofore paid or payable (as certified by an executive officer of
Tenant and by Tenant's independent, licensed architect) to Tenant's contractors,
subcontractors, subcontractors and materialmen with respect to the Initial
Tenant's Changes, or on account of Soft Costs, which in either case have not
been the subject of a previous disbursement from the Tenant Fund; provided,
however, that in no event shall Tenant be entitled to a disbursement from the
Tenant Fund on account of any Soft Costs unless and until the performance of the
Initial Tenant's Changes have been completed, and all of the costs incurred in
connection therewith (other than Soft Costs) shall have been paid in full.
3. Owner's obligation to make disbursements from the Tenant Fund
shall be subject Owner's receipt of: (i) a request for such disbursement
certified by Tenant's architect in accordance with Section 50F(2) hereof, (ii)
copies of all receipts, invoices
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and bills for the work completed and materials furnished in connection with the
Initial Tenant's Changes and incorporated in the demised premises, or with
respect to Soft Costs, which in either case are to be paid from the requested
disbursement or which have been paid by Tenant and for which Tenant is seeking
reimbursement, (iii) copies of all contracts, work orders, change orders and
other materials relating to the work or materials, or Soft Costs, which in
either case are the subject of the requested disbursements or reimbursement;
(iv) with respect to disbursements of the Tenant Fund to cover costs other than
Soft Costs, a certificate of Tenant's independent licensed architect stating
that (A) that, in his opinion, the portion of the Initial Tenant's Changes
theretofore completed and for which the disbursement is requested was performed
in a good and workmanlike manner and substantially in accordance with the final
detail plans and specifications for such Initial Tenant's Changes, as approved
by Owner, (B) the percentage of completion of the Initial Tenant's Changes as of
the date of such certificate, and (C) the estimated total costs to complete the
performance of the Initial Tenant's Changes, and (v) with respect to the first
disbursement of the Tenant Fund to cover Soft Costs, the general releases and
waivers of lien, and architect's certificate, described in Section 50F(5)
hereof.
4. In no event shall the aggregate amount paid by Owner to Tenant
under this Section 50F exceed the amount of the Tenant Fund. Upon the completion
of the Initial Tenant's Changes and payment of Soft Costs, and satisfaction of
the conditions set forth in Section 50F(5) hereof, any amount of the Tenant Fund
which has not been previously disbursed shall be retained by Owner. Upon the
disbursement of the entire Tenant Fund, Owner shall have no further obligation
or liability whatsoever to Tenant for further disbursement of any portion of the
Tenant Fund to Tenant. It is expressly understood and agreed that Tenant shall
promptly commence and diligently prosecute to completion, at its sole cost and
expense, the Initial Tenant's Changes and pay Soft Costs, whether or not the
Tenant Fund is sufficient to fund such completion and Soft Costs. Any costs to
complete the Initial Tenant's Changes and pay Soft Costs in excess of the Tenant
Fund shall be the sole responsibility and obligation of the Tenant.
5. Within thirty (30) days after completion of the Initial
Tenant's Changes, Tenant shall deliver to Owner general releases and waivers of
lien from all contractors, subcontractors and material men involved in the
performance of the Initial Tenant's Changes, and the materials furnished in
connection therewith, and a certificate from Tenant's independent licensed
architect certifying that (i) in his opinion the Initial Tenant's Changes, have
been performed in a good and workmanlike manner and completed substantially in
accordance with the final detailed plans and specifications for such Initial
Tenant's Changes, as approved by Owner and (ii) to his knowledge all
contractors, subcontractors and materialmen have been paid for the Initial
Tenant's Changes, and materials furnished through such date.
6. The Tenant Fund shall be available to Tenant until December
31, 1999 with respect to the fifteenth (15) floor and July 31, 2000 with respect
to the Designated Additional Floor.
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7. Owner shall in no way whatsoever be obligated to contribute
any sums toward the cost of the Initial Tenant's Changes except as expressly
provided herein.
G. Tenant shall indemnify and save harmless Owner and its agents from
and against any and all claims, actions, liabilities and obligations arising
from any work in connection with, or other matters related to, the Initial
Tenant Changes and all other Tenant Changes.
XV. INSURANCE
A. Tenant shall at all times keep Tenant's Property and all other
alterations, installations and improvements made by Tenant in the demised
premises now or hereafter included in the demised premises insured under an "all
risk" insurance policy and against such other hazards and risks as Owner may
from time to time reasonably designate, for the "full replacement cost" thereof.
Such full replacement cost shall be determined from time to time but not more
frequently than once in any twelve (12) calendar month period at the request of
Owner or any superior Mortgagee or Lessee by an appraiser, engineer, architect
or contractor designated by Owner or such Mortgagee or Lessee.
B. In addition to fire, lightning and extended coverage insurance,
Tenant will maintain personal injury or property damage insurance, under a
policy of general public liability insurance, with such limits as may reasonably
be requested by Owner from time to time, but not less than $2,000,000/$2,000,000
in respect to bodily injury or death and $500,000/$1,000,000 for property
damage, and $2,000,000 umbrella coverage for bodily injury, death and property
damage, and the policy or policies evidencing such insurance shall include Owner
as an additional insured, but only with respect to liability arising out of the
ownership, maintenance or use of the demised premises.
C. All policies required to be maintained pursuant to the provisions of
this lease shall be issued by a responsible insurance company or companies
authorized to do business in the State of New York and approved by Owner. All
policies required to be maintained pursuant to the provisions of this lease
shall have a written undertaking from the insurer to notify all insureds
thereunder at least thirty (30) days prior to cancellation thereof. Tenant may
provide any insurance required pursuant to the provisions of this lease under a
so-called blanket policy or policies covering other parties and locations so
long as the coverage under such policy or policies is not thereby diminished.
Upon request, Tenant shall furnish Owner with a certificate of insurance
evidencing any such policy or a certificate naming Owner as an additional
insured.
D. Neither party to this lease shall be liable for any damage by fire or
other peril includable in the coverage afforded by the standard form of fire
insurance policy with extended coverage endorsement attached (whether or not
such coverage is in effect), no matter how caused, it being understood that the
damaged party will look solely to its insurer for reimbursement. Any waiver of
rights contained in this paragraph shall be ineffective if such waiver shall be
unobtainable, or result in an increase in the cost of insurance of the waiving
party, unless the other party shall pay such increase within ten (10) days after
notice thereof.
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XVI. OPTION TO EXPAND
A. Provided that (i) Tenant named herein or a corporation or partnership
which controls, is controlled by, or is under common control with the Tenant
named herein is the tenant under the lease, (ii) Tenant is not in default under
this lease either as of the date of the giving of Tenant's Notice (hereinafter
defined) or the Inclusion Date (hereinafter defined), (iii) this lease is
otherwise in full force and effect, (iv) no other tenant under a lease (existing
as of the date hereof, except as provided below) for premises in the building
has a right of first offer or refusal or other contractual right for the
Additional Space (hereinafter defined) then Tenant shall have the option to
include any space on the sixteenth (16th) floor of the Building (the "Additional
Space"), upon the same terms and subject to the conditions of this lease
including, without limitation, the base year factors set forth herein and to
such additional terms and conditions as are hereinafter set forth.
Notwithstanding the foregoing, the portion of the Additional Space consisting of
Suite 1610 may first be offered to other tenant(s) of the Building, and in the
event that none of such tenants exercises any right which it may have pursuant
to their leases (whether or not such leases exist as of the date hereof) to
lease Suite 1610, Tenant shall have the option to include Suite 1610 as part of
the demised premises as set forth herein.
B. In the event that all or any portion of Additional Space shall become
or is about to become available for leasing, Owner shall give notice thereof to
Tenant (the "Availability Notice") stating (i) the portion of Additional Space
which has become or is about to become available for leasing and (ii) the
expected date such Additional Space will be available for leasing (the
"Inclusion Date") and, in such event, Tenant shall have the option, exercisable
only by notice ("Tenant's Notice") given to Owner within five (5) business days
next following the date of the giving of such Availability Notice, to add such
Additional Space to the demised premises. In the event that such Additional
Space shall become available for leasing sooner than the applicable Inclusion
Date because of the earlier termination of the term of the lease affecting such
Additional Space, Owner shall have the right to accelerate the Inclusion Date by
not less than fifteen (15) days' prior notice to Tenant. In the event Tenant
shall send a Tenant's Notice to Owner the applicable Additional Space shall be
added to and included in the demised premises effective as of the Inclusion
Date.
C. The fixed rent for the Additional Space shall be equal to 90% of the
fair market annual rental value for the demised premises determined as of the
date of the Availability Notice as determined pursuant to the provisions of this
Article, but in no event less than the fixed rent (on a per square foot basis)
then being paid for the balance of the demised premises. Owner shall give Tenant
written notice (the "Additional Space Determination Notice") of Owner's
determination of the fixed rent payable for the Additional Space no later than
thirty (30) days after its receipt of the Tenant's Notice.
D. In the event Tenant disputes the annual fair market rental value as
determined by Owner in the Additional Space Determination Notice, then within
ten (10) days after the giving of the Additional Space Determination Notice,
Tenant may request that such annual fair market rental value shall be determined
by arbitration, as set forth in Article 53 hereof.
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E. Notwithstanding anything contained herein to the contrary, if Owner
is unable to give Tenant possession of all or any portion of any applicable
Additional Space on the applicable Inclusion Date by reason of the holding over
or retention of possession of any tenant or other occupant, (a) the Inclusion
Date applicable to such Additional Space shall be the date Owner shall give
Tenant possession of such Additional Space, (b) the expiration date hereof shall
not be affected thereby, (c) the validity of this lease shall not be affected in
such circumstances, and (d) Tenant waives any rights under Section 223-a of the
Real Property Law of New York or any successor statue of similar import to
rescind this lease and further waives the rights to recover any damages which
may result from the failure of Owner to deliver possession of such Additional
Space.
F. Tenant shall accept any Additional Space in its "as is" condition and
state of repair existing as of the Inclusion Date (excluding any latent defects,
provided Tenant gives Owner prompt notice thereof) and understands and agrees
that Owner shall perform no work and incur no expense in connection with the
preparation of such Additional Space for Tenant's occupancy.
G. The expiration or earlier termination of this lease shall terminate
and render void all of Tenant's options of or elections under this Article
whether or not the same shall have been exercised and nothing contained in this
Article shall prevent Owner from exercising any right or action granted to or
reserved by Owner in this lease to terminate this lease. None of Tenant's
options or elections set forth in this Article may be severed from this lease or
separately sold, assigned or transferred.
H. If Tenant does not send Tenant's Notice with respect to any
Additional Space which is the subject of an Availability Notice pursuant to the
provisions of this Article within the applicable time period, time being of the
essence, then this Article shall have no further force and effect with respect
to the such Additional Space, and Tenant shall have forever waived and
relinquished its right to such Additional Space and Owner shall at any and all
times thereafter be entitled to lease such Additional Space to any other person
or entity at such rental and upon such terms and conditions as Owner in its sole
discretion may desire.
I. If by the commencement of the Extended Term the annual fair market
rental value of demised premises has not yet been determined, Tenant shall,
until such determination, pay fixed rent for the demised premises as determined
by Owner in its Fair Market Determination Notice, and when the determination has
actually been made by the arbitrator, an appropriate adjustment, if any, shall
be made retroactive to the commencement of the Extended Term.
J. Time shall be of the essence with respect to the delivery of all
notices provided for in this Article.
XVII. OPTION TO RENEW
A. Provided that (i) Tenant named herein or a corporation or partnership
which controls, is controlled by, or is under common control with the Tenant
named herein is
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the tenant under this lease, (ii) Tenant is not in default under this lease
either as of the Inclusion Date or as of the date of the giving of Renewal
Notice (as hereinafter defined), beyond any applicable notice and applicable
grace period, and (iii) this lease is otherwise in full force and effect, then
Tenant shall have the right to extend the term of this lease for an additional
three (3) years commencing on the date which is the day after the Expiration
Date and expiring on such date which is three (3) years from the Expiration Date
(the "Extended Term"). Tenant's right hereunder shall be exercised by Tenant by
written notice (the "Renewal Notice") (by certified mail, return receipt
requested) not earlier than 360 days, nor later than 240 days, prior to the
Expiration Date, time being of the essence with respect thereto. In the event
that Tenant's option is not properly exercised in a timely manner, Tenant shall
have no further rights to extend or renew this lease and in no event shall
Tenant have any right to extend the term of this lease for more than three (3)
years from the Expiration Date. Any exercise by Tenant under this Article shall
be irrevocable. In the event that the lease shall be extended pursuant to this
Article, then, upon request of Owner, Tenant shall execute and deliver to Owner
an agreement confirming such extension.
B.
i. The fixed rent for the Extended Term shall be ninety (90%) percent of
the fair market annual rental value for the demised premises determined
as of the date of the Renewal Notice as determined pursuant to the
provisions of this Article. Owner shall give Tenant written notice (the
"Extended Term Determination Notice") of Owner's determination of the
fixed rent payable for the Extended Term no later than thirty (30) days
after its receipt of the Renewal Notice.
ii. In the event Tenant disputes the annual fair market rental value as
determined by Owner in the Extended Term Determination Notice, then
within twenty (20) days after the giving of the Extended Term
Determination Notice, Tenant may request that such annual fair market
rental value shall be determined by arbitration, as follows:
b. Within thirty (30) days after notice by Tenant requesting arbitration of
the issue the parties shall agree upon a single arbitrator to determine
such annual fair market rental value. If Owner and Tenant shall have
failed to agree upon such single arbitrator within such period of thirty
(30) days, then such single arbitrator shall be appointed by the Real
Estate Board of New York, or its successor pursuant to its rules, or if
at such time such association is not in existence and has no successor,
then by the presiding Justice of the Appellate Division, First
Department, of the Supreme Court of the State of New York, or any
successor court, upon request of either Owner or Tenant as the case may
be. The arbitrator selected or appointed shall be a real estate
appraiser or broker having at lease ten (10) years of experience in
acting as a broker or appraiser of office space in high rise office
building in the Borough of Manhattan, City of New York.
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c. Within ten (10) days following the selection or appointment of the
single arbitrator, each party shall deliver to the arbitrator a
determination (the "Fair Market Determination") of what it believes is
the annual fair market rental value of the demised premises as of the
date of the Renewal Notice. Time shall be of the essence with respect to
the delivery of the Fair Market Determination to the arbitrator.
d. The arbitrator, selected or appointed, shall determine the issue and
render its decision as promptly as practicable choosing either Owner's
or Tenant's Fair Market Determination, and if only one (1) party submits
a Fair Market Determination to the arbitrator then it shall choose the
Fair Market Determination so submitted to it. The decision of such
arbitrator shall be in writing and shall be final and binding upon Owner
and Tenant whether or not a judgment shall be entered in any court.
Duplicate original counterparts of such decision shall be sent by the
arbitrator to both Owner and Tenant.
C. The term "annual fair market rental value" shall mean the amount
which Owner would have received from leasing the demised premises for the period
of the Extended Term to an unaffiliated person or entity which is not then a
tenant in the Building, assuming that such space were to be delivered in "as is"
condition, and taking into account the rental which such other tenant would most
likely have paid for such space. Moreover, in making such determinations,
neither the parties nor the arbitrator shall reduce such annual fair market
rental value by reason of any costs or expenses (including brokerage
commissions, cost of improvements necessary to prepare the space for such
tenant's occupancy, rent concession, or lost rental income during any vacancy
period) saved by Owner by reason of Owner's not having to find a new tenant for
such space. Accordingly, relevant factors which may be considered in determining
such annual fair market rental value may include:
(ii) Owner and the prospective tenant are typically motivated.
(iii) Owner and the prospective tenant are well informed and well
advised and each is acting in what it considers its own best interest.
(iv) A reasonable time under then existing market conditions would have
been allowed for exposure of the demised premises on the open market.
(v) That if the demised premises or any portion thereof have been
destroyed or damaged by fire or other casualty, such damage would have
been fully restored by Owner before the term of the prospective tenant's
lease commenced.
(vi) Market rents then being charged under leases entered into not more
than ninety (90) days before the date of the Renewal Notice for similar
space in similar office buildings in the Borough of Manhattan, City of
New York that contain similar structural and technological features
(including market rents being charged at the Building for comparable
space under leases entered into not more than ninety (90) days before
the date of the Renewal Notice).
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(vii) The age and condition of the Building and the number of rentable
square feet in the demised premises.
D. If by the commencement of the Extended Term the annual fair market
rental value of demised premises has not yet been determined, Tenant shall,
until such determination, pay fixed rent for the demised premises as determined
by Owner in its Fair Market Determination Notice, and when the determination has
actually been made by the arbitrator, an appropriate adjustment, if any, shall
be made retroactive to the commencement of the Extended Term.
E. Time shall be of the essence with respect to the delivery of all
notices provided for in this Article.
XVIII. ADVANCE RENTAL
Owner acknowledges receipt from Tenant of $56,333.33 to be applied by
Owner against the rent first becoming due hereunder. Owner further acknowledges
receipt from Tenant of $400,000 to be applied, if Tenant shall faithfully
perform all obligations imposed under this Lease, pro tanto by Owner against the
fixed rent becoming due in the 20th, 21st, 22nd 23rd and 24th months of the
term. If Tenant shall fail to perform such obligations, Owner shall be entitled
to apply the advance rental, pro tanto, against any damages which it may sustain
by reason of Tenant's failure to perform such obligations, but such application
shall not preclude Owner from recovering greater damages if the same can be
established.
XIX. SECURITY
Tenant shall deposit a "clean", unconditional, irrevocable and
transferable letter of credit in the amount of $600,000.00 (the "Letter of
Credit"), satisfactory to Owner, issued by and drawn on a bank satisfactory to
Owner, having its principal place of business or its duly licensed branch in the
State of New York and which is a member of the New York Clearing House
Association, for the account of Owner, for a term of not less than one (1) year,
as security for the faithful performance and observance by Tenant of the terms,
covenants and conditions of this Lease, including, without limitation, the
surrender of possession of the demised premises to Owner as herein provided. If
a default shall occur and be continuing, Owner may present the Letter of Credit
for payment and apply the whole or any part of the proceeds thereof (i) toward
the payment of any fixed rent or additional rent as to which Tenant is in
default, (ii) toward any sum which Owner may expend or be required to expend by
reason of Tenant's default in respect of any of the terms, covenants and
conditions of this Lease, including, without limitation, any damage, liability
or expense (including, without limitation, reasonable attorneys' fees and
disbursements) incurred or suffered by Owner, and (iii) toward any damage or
deficiency incurred or suffered by Owner in the reletting of the demised
premises, whether such damages or deficiency accrue or accrues before or after
summary proceedings or other re-entry by Owner. If Owner applies or retains any
part of the proceeds of the Letter of Credit, Tenant, upon demand, shall
promptly deposit with
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<PAGE> 64
Owner the amount so applied or retained so that Owner shall have the full
deposit on hand at all times during the term of this Lease. In the event of a
sale or leasing of the Building, Owner shall have the right to transfer the
Letter of Credit to such vendee or lessee and Owner shall thereupon be released
by Tenant from all liability for the return of the Letter of Credit, and Tenant
shall cause the bank which issued the Letter of Credit to issue an amendment to
the Letter of Credit naming such vendee or lessee as the beneficiary thereunder.
Tenant shall look solely to the new landlord for the return of the Letter of
Credit. The provisions hereof shall apply to every transfer or assignment of the
Letter of Credit made to a new landlord. Tenant shall renew any Letter of Credit
from time to time, at least thirty (30) days prior to the expiration thereof,
and deliver to Owner a new Letter of Credit or an endorsement to the Letter of
Credit, and any other evidence required by Owner that the Letter of Credit has
been renewed for a period of at least one (1) year. If Tenant shall fail to
renew the Letter of Credit as aforesaid, Owner may present the Letter of Credit
for payment and retain the proceeds thereof as security in lieu of the Letter of
Credit.
XX. MISCELLANEOUS ADDITIONAL PROVISIONS
A. This lease is offered for signature by Tenant and it is understood
that this lease shall not be binding upon Owner or Tenant unless and until Owner
and Tenant shall each have executed and unconditionally delivered a fully
executed copy of this lease to the other.
B. This lease shall be deemed to have been made in New York County, New
York, and shall be construed in accordance with the laws of the State of New
York. All actions or proceedings relating, directly or indirectly, to this lease
shall be litigated only in courts located within the County of New York. Tenant,
and its successors and assigns hereby subject themselves to the jurisdiction of
any state or federal court located within such county, waive the personal
service of any process upon them in any action or proceeding therein and consent
that such process be served by certified or registered mail, return receipt
requested, directed to the Tenant and any successor at Tenant's address
hereinabove set forth, and to any assignee at the address set forth in the
instrument of assignment. Such service shall be deemed made two (2) business
days after such process is so mailed.
C. All agreements provided for in this lease, whether between the
parties or between either or both of the parties hereto and one or more other
parties shall be in writing.
D. Tenant represents and warrants to Owner as follows:
(viii) It has full power and authority to execute and deliver this lease
and all documents pertaining thereto and to perform all obligations on
its part to be performed hereunder.
(ix) It is a duly formed and validly existing sole proprietorship,
limited partnership, general partnership or corporation (as the case may
be) in good
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standing in the State of New York, and, if different, in the state in
which it is organized.
(x) It is authorized to transact business in the State of New York.
(xi) The execution and delivery of this lease and the performance of all
transactions contemplated thereby have been duly authorized by all
necessary action required under the circumstances, and will not result
in a violation of any of the agreements under which it is organized and
operating or to which it is a party or otherwise bound.
(xii) The party or parties executing this lease on its behalf are duly
authorized to do so.
(xiii) It is aware of no fact or condition which would prevent this
Lease, when executed, by Owner and Tenant, from becoming the valid and
binding obligation of Owner and Tenant, enforceable in accordance with
its terms.
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TRUSTEES OF THE MASONIC HALL
AND ASYLUM FUND
By:
-------------------------------------
ORGANIC ONLINE, INC.
By:
-------------------------------------
Name:
Title:
41
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EXHIBIT B
OWNER'S WORK
Owner will, at its expense, perform the following work and installations
all of which shall be of material, design, capacity, finish and color (if
applicable) to the standard adopted by Owner for the Building (but in no event
more than the type and quantity of work set forth below):
The fourteenth (14th) floor portion of the demised premises is being
delivered "as is" (excluding any latent defects, provided Tenant gives Owner
prompt notice thereof).
The fifteenth (15th) floor portion of the demised premises shall be
delivered as a clean, open shell, with the existing installation demolished and
removed.
The Additional Designated Floor portion of the demised premises shall be
delivered as a clean, open shell, with the existing installation demolished and
removed.
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EXHIBIT C
RULES AND REGULATIONS
(1) The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls, in each case, outside the demised premises shall
not be obstructed or encumbered by Tenant or used for any purpose other than
ingress and egress to and from the demised premises. Tenant shall use the
freight elevators for delivery of bulky merchandise and equipment which shall be
performed in a prompt and efficient manner.
(2) The exterior windows that reflect or admit light and air into the
demised premises or the halls, passageways of the Building shall not be covered
or obstructed by Tenant, other than by window treatments.
(3) 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.
(4) Tenant, or any of Tenant's employees, agents, invitees or licensees,
shall not at any time bring or keep upon the demised premises any inflammable,
combustible or explosive fluid, chemical or substance except such as are
incidental to usual office occupancy.
(5) Tenant shall promptly provide Owner with a master key or card or the
keys to all additional locks or bolts of any kind which shall be placed upon any
of the doors or windows of the demised premises by Tenant.
(6) No bicycles, vehicles or animals of any kind except for seeing eye
dogs shall be brought into or kept by Tenant in or about the demised premises or
the Building.
(7) Tenant shall, at its expense, provide artificial light for the
employees of Owner while doing janitor service or other cleaning, and in making
repairs or alterations in the demised premises.
(8) Canvassing, soliciting and peddling in the Building is prohibited
and Tenant shall cooperate to prevent the same, other than by employees of
Tenant conducted within the demised premises.
(9) There shall not be used in any space outside of the demised
premises, either by Tenant or by jobbers or others, the delivery or receipt of
merchandise, any hand trucks, except those equipped with rubber tires and side
guards.
(10) Owner shall have the right to require that all messengers and other
persons delivering packages, papers and other materials to Tenant (i) be
directed to deliver such packages, papers and other materials to a person
designated by Owner who will promptly distribute the same to Tenant or (ii) be
promptly escorted by a person designated by Owner to deliver the same to Tenant.
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<PAGE> 1
EXHIBIT 10.15
LEASE
BETWEEN
BAKER HAMILTON PROPERTIES, LLC (LANDLORD)
AND
ORGANIC, INC. (TENANT)
THE BAKER HAMILTON BUILDING
601 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article 1 BASIC LEASE PROVISIONS..................................................................................1
Article 2 PREMISES, TERM AND FAILURE TO GIVE POSSESSION...........................................................8
Article 3 RENT...................................................................................................11
Article 4 ADDITIONAL RENT........................................................................................11
Article 5 SECURITY DEPOSIT.......................................................................................13
Article 6 SERVICES...............................................................................................14
Article 7 POSSESSION, USE AND CONDITION OF PREMISES..............................................................17
Article 8 MAINTENANCE............................................................................................19
Article 9 ALTERATIONS AND IMPROVEMENTS...........................................................................20
Article 10 ASSIGNMENT AND SUBLETTING.............................................................................22
Article 11 DEFAULT AND REMEDIES..................................................................................26
Article 12 SURRENDER OF PREMISES.................................................................................30
Article 13 HOLDING OVER..........................................................................................31
Article 14 DAMAGE BY FIRE OR OTHER CASUALTY......................................................................31
Article 15 EMINENT DOMAIN........................................................................................33
Article 16 INSURANCE.............................................................................................33
Article 17 WAIVER OF CLAIMS AND INDEMNITY........................................................................35
Article 18 RULES AND REGULATIONS.................................................................................36
Article 19 LANDLORD'S RESERVED RIGHTS............................................................................37
Article 20 ESTOPPEL CERTIFICATE..................................................................................37
Article 21 REAL ESTATE BROKERS...................................................................................38
Article 22 MORTGAGEE PROTECTION..................................................................................38
Article 23 NOTICES...............................................................................................40
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Article 24 MISCELLANEOUS.........................................................................................40
Article 25 LETTER OF CREDIT......................................................................................45
Article 26 RIGHT OF FIRST OFFER..................................................................................47
Article 27 ROOF RIGHTS...........................................................................................47
Article 28 SIGNAGE...............................................................................................49
Article 29 PARKING...............................................................................................51
Article 30 BASEMENT..............................................................................................52
Article 31 GENERATOR SPACE.......................................................................................52
</TABLE>
ii
<PAGE> 4
OFFICE LEASE
ARTICLE 1
BASIC LEASE PROVISIONS
1.1 BASIC LEASE PROVISIONS
In the event of any conflict between these Basic Lease Provisions and
any other Lease provision, such other Lease provision shall control.
(1) BUILDING AND ADDRESS:
The Baker Hamilton Building
601 Townsend Street
San Francisco, California
(2) LANDLORD AND ADDRESS:
Notices to Landlord shall be addressed to:
Baker Hamilton Properties, LLC
c/o Ronaldo Cianciarulo
700 Seventh Street, #107
San Francisco, CA 94107
With a copy to:
Shartsis, Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, California 94901
Attention: Adam Elsesser, Esq.
(3) TENANT AND CURRENT ADDRESS:
(a) Name: Organic, Inc.
(b) State of incorporation: Delaware
Notices to Tenant shall be addressed:
Organic, Inc.
601 Townsend Street
San Francisco, California
Attention: Chief Financial Officer
With a copy to:
Coblentz, Patch, Duffy & Bass, LLP
222 Kearny Street
1
<PAGE> 5
San Francisco, CA 94108-4510
Attention: Barbara A. Milanovich, Esq.
(4) DATE OF LEASE: as of November 8, 1999
(5) LEASE TERM: Ten (10) years
(6) PROJECTED DELIVERY DATE: June 1, 2000
(7) PROJECTED COMMENCEMENT DATE: September 1, 2000
(8) PROJECTED EXPIRATION DATE: 120 months after the Commencement
Date
(9) MONTHLY AND ANNUAL BASE RENT:
<TABLE>
<CAPTION>
ANNUAL RATE/SF
PERIOD FROM/TO MONTHLY ANNUAL OF RENTABLE AREA
<S> <C> <C> <C>
Commencement Date - 1st $ 705,106.66 $ 8,461,280.00 $40.00
Full 12 calendar months
Months 13-24 $ 733,310.93 $ 8,799,731.20 $41.60
Months 25-36 $ 762,572.85 $ 9,150,874.30 $43.26
Months 37-48 $ 793,245.00 $ 9,518,940.00 $45.00
Months 49-60 $ 824,798.51 $ 9,897,582.20 $46.79
Months 61-72 $ 857,938.50 $10,295,262.00 $48.67
Months 73-84 $ 892,136.16 $10,705,634.00 $50.61
Months 85-96 $ 927,920.33 $11,135,044.00 $52.64
Months 97-108 $ 964,939.41 $11,579,261.00 $54.74
Months 109-120 $1,003,543.00 $12,042,516.00 $56.93
</TABLE>
<TABLE>
<S> <C>
(10) RENTABLE AREA OF THE PREMISES: 211,532 square feet
(11) RENTABLE AREA OF THE BUILDING: 211,532 square feet, subject to
adjustment pursuant to the Lease
(12) SECURITY DEPOSIT: $0 Cash
$10,000,000 Letter of Credit
(13) TENANT'S USE OF PREMISES: General office use
(14) BROKERS:
Landlord's Broker: CB Richard Ellis
Tenant's Broker: Julien J. Studley, Inc.
</TABLE>
2
<PAGE> 6
1.2 ENUMERATION OF EXHIBITS, RIDER(S) AND ADDENDUM
The Exhibits, Rider(s) and Addendum set forth below and attached to
this Lease are incorporated in this Lease by this reference:
EXHIBIT A Plan of Premises
EXHIBIT B Work Letter Agreement
EXHIBIT C Rules and Regulations
EXHIBIT D Signage
EXHIBIT E Site Plan for Adjacent Building
RIDER 1 Commencement Date Agreement
1.3 DEFINITIONS
For purposes hereof, the following terms shall have the following
meanings:
AFFILIATE: Any corporation or other business entity (i) in which Tenant
has more than a 50% ownership interest, or (ii) a successor to Tenant by merger,
consolidation or reorganization, or (iii) an entity which acquires all or
substantially all of the assets or stock of Tenant.
ANNUAL BASE RENT: The annual rent specified in Section 1.1(9).
BUILDING: The office building located at the address specified in
Section 1.1(1).
COMMENCEMENT DATE: The date specified in Section 1.1(6) as the
Projected Commencement Date, unless changed by operation of Article Two.
COMMON AREAS: All areas of the Project made available by Landlord from
time to time for the general common use or benefit of the tenants of the
Building, and their employees and invitees, or the public, as such areas
currently exist and as they may be reasonably changed from time to time;
provided Landlord provides advance notice to Tenant thereof.
DECORATION: Tenant Alterations which do not require a building permit
and which do not involve any of the structural elements of the Building, or any
of the Building's systems, including its electrical, mechanical, plumbing,
security, heating, ventilating, air-conditioning, communication, and fire and
life safety systems.
DEFAULT RATE: Two (2) percentage points above the rate then most
recently announced by Bank of America N.T.&S.A. at its San Francisco main office
as its base lending reference rate, from time to time announced, but in no event
higher than the maximum rate permitted by Law.
DELIVERY DATE: The date that Landlord delivers the Premises to Tenant
with the portion of Landlord's Work Substantially Complete so as to enable
Tenant to commence full-time performance of Tenant's Work without interference.
3
<PAGE> 7
DIRECT EXPENSES: The following costs and expenses of maintaining and
operating the Premises which are paid to the utility provider or service
provider directly by Tenant. Direct Expenses shall be paid by Tenant from and
after the Commencement Date of the Lease. No Direct Expenses shall be included
in Operating Expenses.
ENVIRONMENTAL LAWS: All Laws governing the use, storage, disposal or
generation of any Hazardous Material, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and the Resource Conservation and Recovery Act of 1976, as amended.
EXPIRATION DATE: The date specified in Section 1.1(7) unless changed by
operation of Article Two.
FORCE MAJEURE: Any accident, casualty, act of God, war or civil
commotion, strike or labor troubles, or any cause whatsoever beyond the
reasonable control of Landlord or Tenant, including water shortages, energy
shortages or governmental preemption in connection with an act of God, a
national emergency, or by reason of Law, or by reason of the conditions of
supply and demand which have been or are affected by act of God, war or other
emergency.
HAZARDOUS MATERIAL: Such substances, material and wastes which are or
become regulated under any Environmental Law; or which are classified as
hazardous or toxic under any Environmental Law; and explosives and firearms,
radioactive material, asbestos, polychlorinated biphenyls, and petroleum
products.
INDEMNITEES: Collectively, Landlord, any Mortgagee or ground lessor of
the Property, the property manager and the leasing manager for the Property and
their respective partners, members, directors, officers, agents and employees.
LAND: The parcel(s) of real estate on which the Building and Project
are located.
LANDLORD DELAY: Any event that actually delays the completion of Tenant
s Work that is caused by (i) Landlord's failure to approve plans and other
submittals within the time periods specified in the Work Letter, or (ii)
Landlord's failure to fund the Tenant Improvement Allowance as specified in the
Work Letter, or (iii) or any other act or omission of Landlord, its employees,
agents, or contractors; provided however, that with respect to clause (iii),
Tenant shall provide Landlord with written notice of any alleged Landlord Delay
and no Landlord Delay shall be deemed to have occurred if Landlord cures such
Landlord Delay within one (1) business day of receipt of Tenant's notice.
LANDLORD WORK: The construction or installation of improvements to the
Premises, to be furnished by Landlord, specifically described in Schedule 1 of
the Work Letter.
LAWS OR LAW: All laws, ordinances, rules, regulations, other
requirements, orders, rulings or decisions adopted or made by any governmental
body, agency, department or judicial authority having jurisdiction over the
Property, the Premises or Tenant's activities at the Premises and any covenants,
conditions or restrictions of record which affect the Property.
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LEASE YEAR: Each calendar year during the Term, provided the first
Lease Year shall be the partial year commencing on the Commencement Date and
ending on the first December 31st following the Commencement Date, and the last
Lease Year shall be the partial year commencing on the last January 1st of the
Term and ending on the Expiration Date.
MONTHLY BASE RENT: The monthly rent specified in Section 1.1(9).
MORTGAGEE: Any holder of a mortgage, deed of trust or other security
instrument encumbering the Property.
NATIONAL HOLIDAYS: New Year's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day and other holidays recognized by
the Landlord and the employees servicing the Building in accordance with their
contracts.
OPERATING EXPENSES: All actual commercially reasonable costs, expenses
and disbursements of every kind and nature which Landlord shall pay or become
obligated to pay in connection with the ownership, management, operation,
maintenance, replacement and repair of the Building which are not Direct
Expenses. Operating Expenses shall include but not be limited to (i) wages,
salaries, benefits and fees of all personnel or entities engaged in the
operation, repair, maintenance, management, or safekeeping of the Building
prorated to reflect time spent working on the Building; the costs of all
supplies and materials (including work clothes and uniforms) used in the
operation, repair, maintenance and security; (ii) cost of performance by
Landlord's personnel of, or of all service agreements for, maintenance,
janitorial services, access control, alarm service, window cleaning, elevator
maintenance and landscaping (such cost shall include the rental of personal
property used by Landlord's personnel in the maintenance and repair); (iii) cost
of utilities, including water, sewer, power, electricity, gas, fuel, lighting
and all air-conditioning, heating and ventilating costs to the Building which
are not Direct Expenses; (iv) accounting costs and reasonable legal fees
actually incurred by Landlord or paid by Landlord to third parties (exclusive of
legal fees with respect to disputes with individual tenants, negotiations of
tenant leases, none of which shall be included as an Operating Expense), and all
association dues; (v) cost of repairs and general maintenance for any portion of
the Building; (vi) cost of improvements or equipment which are capital in nature
and which are for the purpose of reducing Operating Expenses (provided Landlord
makes a commercially reasonable determination the same are likely to reduce
Operating Expenses) or complying with applicable Laws enacted after the
Commencement Date, all such costs, including interest thereon, shall be
amortized on a straight-line basis over the useful life of the capital
investment items, as reasonably determined by Landlord; (vii) the Building
management office rent or rental value consistent with comparable buildings in
the area; (viii) the cost of premiums and commercially reasonable deductibles
for insurance obtained by Landlord in connection with this Building; (ix) a
fixed management fee of four percent (4%) of the Annual Base Rent (whether or
not Landlord engages a manager for the Building or manages the Building with
Landlord's personnel), such fee and all items reimbursable to the Building
manager, if any, pursuant to any management contract for the Building; (x)
amounts payable to any associations created under any conditions, covenants and
restriction governing the Building. Notwithstanding the foregoing, Operating
Expenses shall not include, (i) costs of alterations of the premises of tenants
of the Building, (ii) costs of capital improvements or capital repairs or
capital equipment to the Building (except for amortized portion of capital
improvements installed for the purpose of
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reducing or controlling Operating Expenses or complying with applicable Laws),
(iii) depreciation charges, (iv) interest and principal payments on loans
(except for loans for capital improvements which Landlord is allowed to include
in Operating Expenses as provided above), (v) ground rental payments, (vi) real
estate brokerage and leasing commissions, (vii) advertising and marketing
expenses, (viii) costs of Landlord reimbursed by insurance proceeds or other
third parties, (ix) expenses incurred in negotiating leases of tenants in the
Building or enforcing lease obligations of tenants in the Building, (x)
Landlord's or Landlord's property manager's corporate general overhead or
corporate general administrative expenses, (xi) deductibles under any earthquake
policy in excess of the commercially reasonable deductible under Landlord's
casualty policy of insurance, (xii) costs of repairs resulting from any faulty
workmanship or defect in the design or construction of Landlord's Work, (xiii)
costs of traffic studies or environmental reports, or other costs associated
with converting the Building to office use, (xiv) costs, taxes and fees assessed
by or payable to public authorities in connection with the construction,
renovation, and/or, expansion of the Project, including, without limitation,
costs, taxes and fees for transit, housing, schools, child care and art work;
(xv) costs associated with providing parking, (xvi) costs arising from the
presence of Hazardous Materials existing on the Delivery Date, including,
without limitation, the presence of Hazardous Materials in the soil or
groundwater, (xvii) costs for sculpture, paintings or other objects of art;
(xviii) penalties, fines, late payment charges or interest incurred as a result
of Landlord's failure to make any payment when due, and (xix) costs associated
with the operation of the business of the limited liability company or other
entity which constitutes Landlord, as distinguished from the costs of operation
of the Building, including accounting and legal costs. If any Operating Expense,
though paid in one year, relates to more than one calendar year, at the option
of Landlord, such expense may be proportionately allocated among such related
calendar years.
PREMISES: The space located in the Building on floors 1, 2 and 3 and
depicted on Exhibit A attached hereto.
PROJECT or PROPERTY: The Project consists of the office building
located at the street address specified in Section 1.1.1(1) in San Francisco,
California, landscaping and improvements, together with the Land, any associated
interests in real property, and the personal property, fixtures, machinery,
equipment, systems and apparatus located thereon.
REAL PROPERTY: The Property excluding any personal property.
RENT: Collectively, Monthly Base Rent, Operating Expenses, Taxes and
Direct Expenses, and all other charges, payments, late fees or other amounts
required to be paid by Tenant under this Lease.
ADDITIONAL RENT: Any amounts owed by Tenant for payment of Operating
Expenses or Taxes. The Additional Rent shall be determined and paid as provided
in Article Four.
ADDITIONAL RENT DEPOSIT: An amount equal to Landlord's reasonable
estimate of the Additional Rent owed by Tenant for any Lease Year. As soon as
the budget for the first year of the Term is determined, Landlord shall submit
the same to Tenant for Tenant's review, and Landlord shall make available to
Tenant, within ten (10) days after request, the bids, contracts,
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and other backup information used to prepare such budget. On or before the
beginning of each Lease Year or with Landlord's Statement (defined in Article
Four), Landlord may reasonably estimate and notify Tenant in writing of its
estimate of the (i) Taxes for such year and (ii) Operating Expenses for such
year. Prior to the first determination by Landlord of the actual amount of Taxes
and Operating Expenses, Landlord may reasonably estimate such amounts in the
foregoing calculation. The last estimate by Landlord shall remain in effect as
the applicable Additional Rent Deposit unless and until Landlord notifies Tenant
in writing of a change, which notice may be given by Landlord from time to time.
Within ten (10) days after request by Tenant, Landlord shall provide a written
explanation of the cause for any revision in Landlord's estimate of the
Additional Rent.
RENTABLE AREA OF THE PREMISES: The amount of square footage set forth
in Section 1.1(10).
RENTABLE AREA OF THE BUILDING: The amount of square footage set forth
in Section 1.1 (11) which represents the sum of the rentable area of all space
intended for office occupancy in the Project, as determined by Landlord from
time to time. Landlord shall notify Tenant of any adjustments in such rentable
area and any corresponding change in Tenant's Share.
SECURITY DEPOSIT: The funds specified in Section 1.1(12), if any,
deposited by Tenant with Landlord as security for Tenant's performance of its
obligations under this Lease.
STANDARD OPERATING HOURS: Monday through Friday from 8:00 A.M. to 6:00
P.M. and Saturdays from 9:00 A.M. to 1:00 P.M., excluding National Holidays.
SUBSTANTIALLY COMPLETE: The completion of the Landlord Work or Tenant
Work, as the case may be, except for minor insubstantial details of
construction, decoration or mechanical adjustments which remain to be done.
TAXES: All federal, state and local governmental taxes, assessments and
charges of every kind or nature, whether general, special, ordinary or
extraordinary, which Landlord shall pay or become obligated to pay because of or
in connection with the ownership, leasing, management, control or operation of
the Property or any of its components (including any personal property used in
connection therewith), which may also include any rental or similar taxes levied
in lieu of or in addition to general real and/or personal property taxes. For
purposes hereof, Taxes for any year shall be Taxes which are assessed for any
period of such year, whether or not such Taxes are billed and payable in a
subsequent calendar year. There shall be included in Taxes for any year the
amount of all fees, costs and expenses (including reasonable attorneys' fees)
paid by Landlord during such year in seeking or obtaining any refund or
reduction of Taxes. Taxes for any year shall be reduced by the net amount of any
tax refund received by Landlord attributable to such year. If a special
assessment payable in installments is levied against any part of the Property,
Taxes for any year shall include only the installment of such assessment and any
interest payable or paid during such year. Taxes shall not include any transfer
taxes, federal or state inheritance, general income, gift or estate taxes,
except that if a change occurs in the method of taxation resulting in whole or
in part in the substitution of any
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such taxes, or any other assessment, for any Taxes as above defined, such
substituted taxes or assessments shall be included in the Taxes.
TENANT ADDITIONS: Collectively, Tenant Work and Tenant Alterations.
TENANT ALTERATIONS: Any alterations, improvements, additions,
installations or construction in or to the Premises or any Building systems
serving the Premises (excluding Landlord Work or Tenant Work); and any
supplementary air-conditioning systems installed by Landlord or by Tenant at
Landlord's request pursuant to Section 6.1(b).
TENANT WORK: All work furnished to the Premises by Tenant under the
Work Letter.
TENANT'S SHARE: The percentage that represents the ratio of the
Rentable Area of the Premises to the Rentable Area of the Office Portion of the
Project, as determined by Landlord from time to time.
TERM: The term of this Lease commencing on the Commencement Date and
expiring on the Expiration Date.
TERMINATION DATE: The Expiration Date or such earlier date as this
Lease terminates or Tenant's right to possession of the Premises terminates.
WORK LETTER: The Agreement regarding the Landlord Work and Tenant Work
set forth on Exhibit B attached hereto.
ARTICLE 2
PREMISES, TERM AND FAILURE TO GIVE POSSESSION
2.1 LEASE OF PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the Premises for the Term and upon the terms, covenants and conditions provided
in this Lease.
2.2 TERM
(a) The Commencement Date shall be the earlier of (i) Tenant's
Substantial Completion of Tenant's Work, or (ii) the date that is ninety (90)
days following the Delivery Date as the same may be extended due to Landlord
Delay.
(b) Within thirty (30) days following the occurrence of the
Commencement Date, Landlord and Tenant shall enter into an agreement in the form
attached hereto as Rider I confirming the Commencement Date and the Expiration
Date. If Tenant fails to enter into such agreement, then the Commencement Date
and the Expiration Date shall be the dates designated by Landlord in such
agreement.
(c) Landlord shall use diligent efforts to obtain financing
adequate to pay for the cost of Landlord's Work and the Tenant Improvement
Allowance on or before March 1, 2000. If Landlord fails to obtain such financing
or reasonable evidence of Landlord's ability to
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pay for Landlord's Work and the Tenant Improvement Allowance on or before March
1, 2000, Tenant shall thereafter have the right to terminate this Lease upon
written notice to Landlord.
2.3 FAILURE TO GIVE POSSESSION
If despite its diligent efforts the Landlord shall be unable to give
possession of the Premises on the Projected Delivery Date by reason of the
following: (i) the portion of Landlord Work necessary to enable Tenant to
commence full-time performance of Tenant's Work is not Substantially Complete,
(ii) the holding over or retention of possession of any tenant, tenants or
occupants, or (iii) for any other reason, then Landlord shall not be subject to
any liability for the failure to give possession on said date. Under such
circumstances the rent reserved and covenanted to be paid herein shall not
commence until the Commencement Date as specified in Section 2.2(a). No such
failure to give possession on the Projected Delivery Date shall affect the
validity of this Lease or the obligations of the Tenant hereunder; provided,
however, this Lease shall be amended so that the Term shall be extended by the
period of time possession is delayed. In the event of any dispute as to whether
the Landlord Work is Substantially Complete, the decision of Landlord's
architect shall be final and binding on the parties. In the event that Landlord
fails to deliver possession of the Premises to Tenant by December 31, 2000,
Tenant shall have the right, which must be exercised no later than January 15,
2001, to terminate this Lease and upon receipt of such notice, this Lease shall
be terminated and of no further force and effect.
2.4 CONDITION OF PREMISES
Tenant shall notify Landlord in writing within thirty (30) days after
the later of Substantial Completion of the Landlord Work or when Tenant takes
possession of the Premises of any defects in the Premises claimed by Tenant or
in the materials or workmanship furnished by Landlord in completing the Landlord
Work. Except for defects stated in such notice, Tenant shall be conclusively
deemed to have accepted the Premises "AS IS" in the condition existing on the
date Tenant first takes possession, and to have waived all claims relating to
the condition of the Premises except for latent defects. Landlord shall proceed
diligently to correct the defects stated in such notice unless Landlord disputes
the existence of any such defects. In the event of any dispute as to the
existence of any such defects, the decision of Landlord's architect shall be
final and binding on the parties. No agreement of Landlord to alter, remodel,
decorate, clean or improve the Premises or the Real Property and no
representation regarding the condition of the Premises or the Real Property has
been made by or on behalf of Landlord to Tenant, except as may be specifically
stated in this Lease or in the Work Letter.
2.5 OPTION TO EXTEND
(a) Landlord hereby grants Tenant options to extend the term of the
Lease for two (2) additional periods of five (5) years each, the first of which
shall commence immediately after the expiration of the initial term and if the
first option term is properly exercised, the second of which shall commence
immediately after the expiration of the first option term, upon the same
material terms and conditions contained herein, except that (i) the Monthly Base
Rent for the Premises shall be equal to the fair market rent for the Premises
determined in the manner set forth in subparagraph (b) below, (ii) Tenant shall
accept the Premises in an "as is" condition
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without any obligation of Landlord to repaint, remodel, repair, improve or alter
the Premises, and (iii) there shall be no further options to extend the term of
the Lease.
(b) Tenant's election to exercise the option granted herein must be
given to Landlord in writing no less than 18 months prior to expiration of the
initial term and if Tenant properly exercises the first option, Tenant's
election to exercise the second option granted herein must be given to Landlord
in writing no less than 18 months prior to the expiration of the first option
term. If Tenant properly exercises the option granted herein, references in the
Lease to the term shall be deemed to mean the option term unless the context
clearly provides otherwise. Notwithstanding anything to the contrary contained,
herein, all option rights of Tenant pursuant to this Section 2.5 shall
automatically terminate without notice and shall be of no further force and
effect, whether or not Tenant has timely exercised the option granted herein, if
(i) a Default exists at the time of exercise of the option or at the time of
commencement of the option term, or (ii) Tenant has subleased 50% or more of the
Premises or has assigned the Lease other than to an Affiliate.
(c) If Tenant properly exercises its option to extend the term of
the Lease, the Monthly Base Rent during such option term shall be determined in
the following manner. The Monthly Base Rent shall be increased to an amount
equal to the fair market rent for the Premises as of the commencement of the
option term for a term equal to the option term, as specified by Landlord by
notice to Tenant not less than ninety (90) days prior to commencement of the
option term, subject to Tenant's right of arbitration as set forth below. If
Tenant believes that the fair market rent specified by Landlord exceeds the
actual fair market rent for the Premises as of commencement of the option term,
then Tenant shall so notify Landlord within ten (10) business days following
receipt of Landlord's notice. If Tenant fails to so notify Landlord within said
ten (10) business days, Landlord's determination of the fair market rent for the
Premises shall be final and binding upon the parties.
(d) If the parties are unable to agree upon the fair market rent
for the Premises within ten (10) days after Landlord's receipt of notice of
Tenant's objection, the amount of Monthly Base Rent as of commencement of the
option term shall be determined as follows:
(i) Within 20 days after receipt of Landlord's notice
specifying fair market rent, Tenant, at its sole expense, shall obtain
and deliver in writing to Landlord a determination of the fair market
rent for the Premises for a term equal to the option term from a broker
("Tenant's Broker") licensed in the State of California and engaged in
the office brokerage business in the south of Market Street area of San
Francisco for at least the immediately preceding five (5) years
("Broker Qualifications"). If Landlord accepts such determination, the
Monthly Base Rent for the option term shall be increased to an amount
equal to of the amount determined by Tenant's broker.
(ii) If Landlord does not accept such determination, within 15
days after receipt of the determination of Tenant's Broker, Landlord
shall, at its sole expense, designate a broker ("Landlord's Broker")
with the Broker Qualifications who shall deliver in writing to Tenant
its determination of the fair market rent for the Premises for a term
equal to the option term within twenty (20) days after appointment.
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(iii) Landlord's Broker and Tenant's Broker shall name a third
broker with the Broker Qualifications ("Third Broker"). The Third
Broker shall choose one of the two estimates of fair market rent
submitted by Landlord's Broker and Tenant's Broker, which must be the
one that is closer to the fair market rent as determined by the third
broker. The Third Broker's determination of fair market rent shall be
binding upon Landlord and Tenant. If the Third Broker believes that
expert advice would materially assist him/her, he/she may retain one or
more qualified persons, including but not limited to legal counsel,
brokers, architects or engineers, to provide such expert advice.
(iv) Landlord shall pay the costs and fees of Landlord's Broker
in connection with any determination hereunder, and Tenant shall pay
the costs and fees of Tenant's Broker in connection with such
determination. The costs and fees of the Third Broker shall be paid
one-half by Landlord and one-half by Tenant.
(e) If the amount of the fair market rent is not known as of the
commencement of the option term, then Tenant shall continue to pay the Monthly
Base Rent in effect at the expiration of the initial Term until the amount of
the fair market basic rent is determined. When such determination is made,
Tenant shall pay any deficiency to Landlord upon demand.
(f) Notwithstanding any provision of this Section 1, in no event
shall the Monthly Base Rent payable during either option term be less than the
Monthly Base Rent in effect immediately prior to the expiration of the initial
term or the first option term as the case may be.
ARTICLE 3
RENT
Tenant agrees to pay to Landlord at the office specified in Section
1.1(2), or to such other persons, or at such other places designated by
Landlord, without any prior demand therefor in immediately available funds and
without any deduction or offset whatsoever, Rent, including Monthly Base Rent
and Additional Rent in accordance with Article Four, during the Term. Monthly
Base Rent shall be paid monthly in advance on the first day of each month of the
Term, except that the first installment of Monthly Base Rent shall be paid by
Tenant to Landlord concurrently with execution of this Lease.* Monthly Base Rent
shall be prorated for partial months within the Term. Unpaid Rent shall bear
interest at the Default Rate from the date due until paid. Tenant's covenant to
pay Rent shall be independent of every other covenant in this Lease.
ARTICLE 4
ADDITIONAL RENT
4.1 ADDITIONAL RENT
Tenant shall pay to Landlord Additional Rent with respect to each Lease
Year as follows:
- -------------
* If this Lease terminates prior to the Commencement Date for any reason,
Landlord shall return the first installment of Monthly Base Rent to Tenant
within ten (10) days after such termination.
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(i) The Additional Rent Deposit representing Tenant's Share of
Operating Expenses for the applicable Lease Year monthly during the
Term with the payment of Monthly Base Rent; and
(ii) The Additional Rent Deposit representing Tenant's Share of
Taxes for the applicable Lease Year monthly during the Term with the
payment of Monthly Base Rent.
4.2 STATEMENT OF LANDLORD
As soon as feasible after the expiration of each Lease Year, Landlord
will furnish Tenant a statement ("Landlord's Statement") showing the following:
(i) Operating Expenses and Taxes for the applicable Lease Year;
(ii) The amount of Additional Rent due Landlord for the last
Lease Year, less credit for Additional Rent Deposits paid, if any; and
(iii) Any change in the Rent Adjustment Deposit due monthly in
the current Lease Year, including the amount or revised amount due for
months preceding any such change pursuant to Landlord's Statement.
Tenant shall pay to Landlord within ten (10) days after receipt of such
statement any amounts for Additional Rent then due in accordance with Landlord's
Statement. Any amounts due from Landlord to Tenant pursuant to this Section
shall be credited to the Additional Rent Deposit next coming due, or refunded to
Tenant if the Term has already expired provided Tenant is not in default
hereunder. No interest or penalties shall accrue on any amounts that Landlord is
obligated to credit or refund to Tenant by reason of this Section 4.2.
Landlord's failure to deliver Landlord's Statement or to compute the amount of
the Rent Adjustments shall not constitute a waiver by Landlord of its right to
deliver such items nor constitute a waiver or release of Tenant's obligations to
pay such amounts. The Additional Rent Deposit shall be credited against
Additional Rent due for the applicable Lease Year. During the last complete
calendar year or during any partial calendar year in which the Lease terminates,
Landlord may include in the Additional Rent Deposit its estimate of Additional
Rent which may not be finally determined until after the termination of this
Lease. Tenant's obligation to pay Additional Rent and Landlord's obligation to
refund any overpayment of Additional Rent survives the expiration or termination
of the Lease.
4.3 BOOKS AND RECORDS
Landlord shall maintain books and records showing Operating Expenses
and Taxes in accordance with sound accounting and management practices,
consistently applied. The Tenant or its representative (which representative
shall be a certified public accountant licensed to do business in the state in
which the Property is located and whose primary business is certified public
accounting) shall have the right, for a period of thirty (30) days following the
date upon which Landlord's Statement is delivered to Tenant, to examine the
Landlord's books and records with respect to the items in the foregoing
statement of Operating Expenses and Taxes during normal business hours, upon
written notice, delivered at least three (3) business days in advance.
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If Tenant does not object in writing to Landlord's Statement within sixty (60)
days of Tenant's receipt thereof, specifying the nature of the item in dispute
and the reasons therefor, then Landlord's Statement shall be considered final
and accepted by Tenant. Any amount due to the Landlord as shown on Landlord's
Statement, whether or not disputed by Tenant as provided herein shall be paid by
Tenant when due as provided above, without prejudice to any such written
exception.
4.4 NET LEASE
This shall be a triple net Lease and Monthly Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Direct
Expenses and Operating Expenses and Taxes are intended to pass on to Tenant and
reimburse Landlord for all costs and expenses of the nature described in Article
4 incurred in connection with the ownership, management, maintenance, repair,
preservation, replacement and operation of the Building and/or Project and its
supporting facilities and such additional facilities now and in subsequent years
as may be determined by Landlord to be necessary or desirable to the Building
and/or Project.
4.5 TENANT OR LEASE SPECIFIC TAXES
In addition to Monthly Base Rent, Additional Rent and other charges to
be paid by Tenant, Tenant shall pay to Landlord, upon demand, any and all taxes
payable by Landlord (other than federal or state inheritance, general income,
gift or estate taxes) whether or not now customary or within the contemplation
of the parties hereto: (a) upon, allocable to, or measured by the Rent payable
hereunder, including any gross receipts tax or excise tax levied by any
governmental or taxing body with respect to the receipt of such rent; or (b)
upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or
any portion thereof; (c) upon the measured value of Tenant's personal property
located in the Premises or in any storeroom or any other place in the Premises
or the Property, or the areas used in connection with the operation of the
Property, it being the intention of Landlord and Tenant that, to the extent
possible, such personal property taxes shall be billed to and paid directly by
Tenant; (d) resulting from Tenant Work or Tenant Alterations to the Premises,
whether title thereto is in Landlord or Tenant; or (e) upon this transaction.
4.6 PROTEST OF TAXES
In the event Tenant desires to contest with the applicable authorities
the amount of Taxes assessed against the Building and Landlord declines to
initiate such contest, Tenant, at its sole cost and expense, shall have the
right to contest such Taxes, and Landlord shall cooperate with Tenant in such
contest.
ARTICLE 5
SECURITY DEPOSIT
Tenant concurrently with the execution of this Lease shall pay to
Landlord in immediately available funds the Security Deposit. The Security
Deposit may be applied by
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Landlord to cure, in whole or part, any Default of Tenant under this Lease, and
upon notice by Landlord of such application, Tenant shall replenish the Security
Deposit in full by paying to Landlord within ten (10) days of demand the amount
so applied. Landlord's application of the Security Deposit shall not constitute
a waiver of Tenant's default to the extent that the Security Deposit does not
fully compensate Landlord for all losses, damages, costs and expenses incurred
by Landlord in connection with such default and shall not prejudice any other
rights or remedies available to Landlord under this Lease or by Law. Landlord
shall not pay any interest on the Security Deposit. Landlord shall not be
required to keep the Security Deposit separate from its general accounts. The
Security Deposit shall not be deemed an advance payment of Rent or a measure of
damages for any default by Tenant under this Lease, nor shall it be a bar or
defense of any action that Landlord may at any time commence against Tenant. In
the absence of evidence satisfactory to Landlord of an assignment of the right
to receive the Security Deposit or the remaining balance thereof, Landlord may
return the Security Deposit to the original Tenant, regardless of one or more
assignments of this Lease. Upon the transfer of Landlord's interest under this
Lease, Landlord's obligation to Tenant with respect to the Security Deposit
shall terminate upon transfer to the transferee of the Security Deposit, or any
balance thereof. If Tenant shall fully and faithfully comply with all the terms,
provisions, covenants, and conditions of this Lease, the Security Deposit, or
any balance thereof, shall be returned to Tenant within thirty (30) days after
Landlord recovers possession of the Premises. Tenant hereby waives any and all
rights of Tenant under the provisions of Section 1950.7 of the California Civil
Code or other Law regarding security deposits.
ARTICLE 6
SERVICES
6.1 LANDLORD'S GENERAL SERVICES
(a) So long as the Lease is in full force and effect and Tenant has
paid all Rent then due, Landlord shall furnish the following services, the
quality of which shall be consistent with comparable buildings:
(i) heat, ventilation and air-conditioning ("HVAC") during
Standard Operating Hours as necessary in Landlord's reasonable judgment
for the comfortable occupancy of the Building under normal business
office operations, subject to compliance with all applicable voluntary
and mandatory regulations and Laws;
(ii) tempered and cold water for use in lavatories in common
with other tenants from the regular supply of the Building;
(iii) customary cleaning and janitorial services five (5) days
per week, excluding National Holidays;
(iv) washing of the outside windows in the Premises weather
permitting at intervals determined by Landlord; and
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(v) automatic passenger and swing/freight elevator service in
common with other tenants of the Building. Freight elevator service
will be subject to reasonable scheduling by Landlord.
(b) Landlord shall not enter into any service contracts to provide
the foregoing services, the cost of which are above the market cost for
comparable services in comparable buildings.
(c) If Tenant uses heat generating machines or equipment in the
Premises to an extent which adversely affects the temperature otherwise
maintained by the air-cooling system or whenever the occupancy or electrical
load adversely affects the temperature otherwise maintained by the air-cooling
system, Landlord reserves the right to install or to require Tenant to install
supplementary air-conditioning units in the Premises. Tenant shall bear all
costs and expenses related to the installation, maintenance and operation of
such units.
6.2 ELECTRICAL SERVICES
The Premises shall be separately metered for the provision of
electricity and Tenant shall pay such charges directly to the utility providing
such electricity, as Direct Expenses. Tenant's use of electric current shall at
no time exceed the capacity of the wiring, feeders and risers providing electric
current to the Premises or the Building. The consent of Landlord to the
installation of electric equipment shall not relieve Tenant from the obligation
to limit usage of electricity to no more than such capacity.
6.3 TELEPHONE SERVICES
All telegraph, telephone, and communication connections which Tenant
may desire shall be subject to Landlord's prior written approval, in Landlord's
reasonable discretion, and the location of all wires and the work in connection
therewith shall be performed by contractors approved by Landlord and shall be
subject to the direction of Landlord, except that such approval is not required
as to Tenant's telephone equipment (including cabling) within the Premises and
from the Premises in a route designated by Landlord to any telephone cabinet or
panel provided (as existing or as installed as part of Landlord's Work or
Tenant's Work) for Tenant's connection to the telephone cable serving the
Building so long as Tenant's equipment does not require connections different
than or additional to those to the telephone cabinet or panel provided. Tenant
shall be entitled to its equitable share of space within any such shared
telephone cabinet or panel. If Tenant fails to maintain all telephone cables and
communication wiring in the Premises and such failure affects or interferes with
the operation or maintenance of any other telephone cables or communication
wiring serving the Building, Landlord or any vendor hired by Landlord may enter
into and upon the Premises forthwith and perform such repairs, restorations or
alterations as Landlord deems necessary in order to eliminate any such
interference (and Landlord may recover from Tenant all of Landlord's costs in
connection therewith). If required by Landlord, no later than the Termination
Date Tenant shall remove all telephone cables and communication wiring installed
by Tenant for and during Tenant's occupancy. Tenant agrees that neither Landlord
nor any of its agents or employees shall be liable to Tenant, or any of Tenant's
employees, agents, customers or invitees or anyone claiming through, by or under
Tenant, for any damages, injuries, losses, expenses, claims or causes of
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action because of any interruption, diminution, delay or discontinuance at any
time for any reason in the furnishing of any telephone or other communication
service to the Premises and the Building.
6.4 DELAYS IN FURNISHING SERVICES
Tenant agrees that Landlord shall not be in breach of this Lease nor be
liable to Tenant for damages or otherwise, for any failure to furnish, or a
delay in furnishing, or a change in the quantity or character of any service
when such failure, delay or change is occasioned, in whole or in part, by
repairs, improvements or mechanical breakdowns by the act or default of Tenant
or other parties or by an event of Force Majeure. No such failure, delay or
change shall be deemed to be an eviction or disturbance of Tenant's use and
possession of the Premises, or relieve Tenant from paying Rent or from
performing any other obligations of Tenant under this Lease, without any
deduction or offset. Failure to any extent to make available, or any slowdown,
stoppage, or interruption of, the specified utility services resulting from any
cause, including changes in service provider or Landlord's compliance with any
voluntary or similar governmental or business guidelines now or hereafter
published or any requirements now or hereafter established by any governmental
agency, board, or bureau having jurisdiction over the operation of the Property
shall not render Landlord liable in any respect for damages to either persons,
property, or business, nor be construed as an eviction of Tenant or work an
abatement of Rent, nor relieve Tenant of Tenant's obligations for fulfillment of
any covenant or agreement hereof. Should any equipment or machinery furnished by
Landlord break down or for any cause cease to function properly, Landlord shall
use reasonable diligence to repair same promptly, but Tenant shall have no claim
for abatement of Rent or damages on account of any interruption of service
occasioned thereby or resulting therefrom.
6.5 CHOICE OF SERVICE PROVIDER
Tenant acknowledges that Landlord may, at Landlord's sole option (after
consultation with Tenant), to the extent permitted by applicable law, elect to
change, from time to time, the company or companies which provide services
(including electrical service, gas service and water services) to the Building,
the Premises and/or its occupants. Notwithstanding anything to the contrary set
forth in this Lease, Tenant acknowledges that Landlord has not and does not make
any representations or warranties concerning the identity or identities of the
company or companies which provide services to the Building and the Premises or
its occupants and Tenant acknowledges that the choice of service providers and
matters concerning the engagement and termination thereof shall be solely that
of Landlord. The foregoing provision is not intended to modify, amend, change or
otherwise derogate any provision of this Lease concerning the nature or type of
service to be provided or any specific information concerning the amount thereof
to be provided. Tenant agrees to cooperate with Landlord and each of its service
providers in connection with any change in service or provider.
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ARTICLE 7
POSSESSION, USE AND CONDITION OF PREMISES
7.1 POSSESSION AND USE OF PREMISES
(a) Tenant shall occupy and use the Premises only for the Use
specified in Section 1.1(13) to conduct Tenant's business. Tenant hereby
acknowledges that Landlord is pursuing certification of the Building as a
National Historic Landmark and will fully cooperate with Landlord in that
process. Tenant further acknowledges that the Tenant Work, Tenant Alteration or
Decoration will not violate the Historic Guidelines attached as Schedule 2 to
the Work Letter. Landlord represents and warrants that it has obtained the
necessary approvals from the San Francisco Planning Department for using the
Premises as office space.
(b) Tenant shall not occupy or use the Premises (or permit the use
or occupancy of the Premises) for any purpose or in any manner which: (1) is
unlawful or in violation of any Law or Environmental Law; (2) may be dangerous
to persons or property or which may increase the cost of, or invalidate, any
policy of insurance carried on the Building or covering its operations; (3) is
contrary to or prohibited by the terms and conditions of this Lease or the Rules
and Regulations; or (4) would create or continue a nuisance.
(c) Tenant shall comply with all Environmental Laws pertaining to
Tenant's occupancy and use of the Premises and concerning the proper storage,
handling and disposal of any Hazardous Material introduced to the Premises, the
Building or the Property by Tenant or other occupants of the Premises, or their
employees, servants, agents, contractors, customers or invitees. Landlord shall
comply with all Environmental Laws applicable to the Property other than those
to be complied with by Tenant pursuant to the preceding sentence. Tenant shall
not generate, store, handle or dispose of any Hazardous Material in, on, or
about the Property without the prior written consent of Landlord, which may be
withheld in Landlord's sole discretion, except that such consent shall not be
required to the extent of Hazardous Material packaged and contained in office
products for consumer use in general business offices in quantities for ordinary
day to day use provided such use does not give rise to, or pose a risk of,
exposure to or release of Hazardous Material. In the event that Tenant is
notified of any investigation or violation of any Environmental Law arising from
Tenant's activities at the Premises, Tenant shall immediately deliver to
Landlord a copy of such notice. In such event or in the event Landlord
reasonably believes that a violation of Environmental Law exists, Landlord may
conduct such tests and studies relating to compliance by Tenant with
Environmental Laws or the alleged presence of Hazardous Materials upon the
Premises as Landlord deems desirable, all of which shall be completed at
Tenant's expense. Landlord's inspection and testing rights are for Landlord's
own protection only, and Landlord has not, and shall not be deemed to have
assumed any responsibility to Tenant or any other party for compliance with
Environmental Laws, as a result of the exercise, or non-exercise of such rights.
Tenant hereby indemnifies, and agrees to defend, protect and hold harmless, the
Indemnitees from any and all loss, claim, demand, action, expense, liability and
cost (including attorneys' fees and expenses) arising out of or in any way
related to the presence of any Hazardous Material introduced to the Premises
during the Lease Term by any party other than Landlord, or its employees or
agents. In case of any action or proceeding brought against the Indemnitees by
reason of any such claim, upon notice from Landlord, Tenant covenants to defend
such action or proceeding by counsel
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reasonably approved by Landlord. Landlord reserves the right to settle,
compromise or dispose of any and all actions, claims and demands related to the
foregoing indemnity on commercially reasonable terms. If any Hazardous Material
is released, discharged or disposed of on or about the Property and such
release, discharge or disposal is not caused by Tenant or other occupants of the
Premises, or their employees, servants, agents, contractors customers or
invitees, such release, discharge or disposal shall be deemed casualty damage
under Article Fourteen to the extent that the Premises are affected thereby; in
such case, Landlord and Tenant shall have the obligations and rights respecting
such casualty damage provided under such Article.
(d) Landlord and Tenant acknowledge that the Americans With
Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.) and regulations and
guidelines promulgated thereunder, as all of the same may be amended and
supplemented from time to time (collectively referred to herein as the "ADA")
establish requirements for business operations, accessibility and barrier
removal, and that such requirements may or may not apply to the Premises, the
Building and the Project depending on, among other things: (1) whether Tenant's
business is deemed a "public accommodation" or "commercial facility", (2)
whether such requirements are "readily achievable", and (3) whether a given
alteration affects a "primary function area" or triggers "path of travel"
requirements. The parties hereby agree that: (a) Landlord shall be responsible
for ADA Title III compliance in the Common Areas, except as provided below, (b)
Tenant shall be responsible for ADA Title III compliance in the Premises,
including any leasehold improvements or other work to be performed in the
Premises under or in connection with this Lease, (c) Landlord may perform, or
require that Tenant perform, and Tenant shall be responsible for the cost of,
ADA Title III "path of travel" requirements triggered by Tenant Additions in the
Premises, and (d) Landlord may perform, or require Tenant to perform, and Tenant
shall be responsible for the cost of, ADA Title III compliance in the Common
Areas necessitated by the Building being deemed to be a "public accommodation"
instead of a "commercial facility" as a result of Tenant's use of the Premises.
Tenant shall be solely responsible for requirements under Title I of the ADA
relating to Tenant's employees.
7.2 LANDLORD ACCESS TO PREMISES, APPROVALS
(a) Tenant shall permit Landlord to erect, use and maintain pipes,
ducts, wiring and conduits in and through the Premises, so long as Tenant's use,
layout or design of the Premises is not materially affected or altered. Subject
to notification as provided in Section 7.2(b) below, Landlord or Landlord's
agents shall have the right to enter upon the Premises in the event of an
emergency, or to inspect the Premises, to perform services, to conduct safety
and other testing in the Premises and to make such repairs, alterations,
improvements or additions to the Premises or the Building or other parts of the
Property as Landlord may deem necessary or desirable (including all alterations,
improvements and additions in connection with a change in service provider or
providers). Janitorial and cleaning services shall be performed after normal
business hours. Any entry or work by Landlord may be during normal business
hours and Landlord shall use reasonable efforts to ensure that any entry or work
shall not materially interfere with Tenant's occupancy of the Premises.
(b) If Tenant shall not be personally present to permit an entry
into the Premises when for any reason an entry therein shall be necessary or
permissible, Landlord (or Landlord's agents), after giving Tenant reasonable
prior notice (unless Landlord believes an
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emergency situation exists), may enter the Premises (accompanied by a
representative of Tenant if Tenant desires) without rendering Landlord or its
agents liable therefor, and without relieving Tenant of any obligations under
this Lease. Tenant shall have the right to restrict access to certain areas in
the Premises, which Landlord shall only have the right to enter in an emergency
or to perform its obligations under the Lease.
(c) Subject to notification as provided in Section 7.2(b) above,
Landlord may enter the Premises for the purpose of conducting such inspections,
tests and studies as Landlord may deem desirable or necessary to confirm
Tenant's compliance with all Laws and Environmental Laws or for other purposes
necessary in Landlord's reasonable judgment to ensure the sound condition of the
Property and the systems serving the Property. Landlord's rights under this
Section 7.2(c) are for Landlord's own protection only, and Landlord has not, and
shall not be deemed to have assumed, any responsibility to Tenant or any other
party as a result of the exercise or non-exercise of such rights, for compliance
with Laws or Environmental Laws or for the accuracy or sufficiency of any item
or the quality or suitability of any item for its intended use.
(d) Landlord may do any of the foregoing, or undertake any of the
inspection or work described in the preceding paragraphs without such action
constituting an actual or constructive eviction of Tenant, in whole or in part,
or giving rise to an abatement of Rent by reason of loss or interruption of
business of the Tenant, or otherwise.
(e) The review, approval or consent of Landlord with respect to any
item required or permitted under this Lease is for Landlord's own protection
only, and Landlord has not, and shall not be deemed to have assumed, any
responsibility to Tenant or any other party, as a result of the exercise or
non-exercise of such rights, for compliance with Laws or Environmental Laws or
for the accuracy or sufficiency of any item or the quality or suitability of any
item for its intended use.
7.3 QUIET ENJOYMENT
Landlord covenants, in lieu of any implied covenant of quiet possession
or quiet enjoyment, that so long as Tenant is in compliance with the covenants
and conditions set forth in this Lease, Tenant shall have the right to quiet
enjoyment of the Premises without hindrance or interference from Landlord or
those claiming through Landlord, and subject to the covenants and conditions set
forth in the Lease and to the rights of any Mortgagee or ground lessor.
ARTICLE 8
MAINTENANCE
8.1 LANDLORD'S MAINTENANCE
Subject to the provisions of Articles Four and Fourteen, Landlord shall
maintain in good order, condition and repair and in accordance with all Laws and
Environmental Laws and make necessary repairs to the foundations, roofs,
exterior walls, doors, windows and the structural elements of the Building,
elevators, the electrical, plumbing, heating, ventilating, air-conditioning,
mechanical, communication, security and the fire and life safety systems of the
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Building and those corridors, washrooms and lobbies which are Common Areas of
the Building, except that: (a) Landlord shall not be responsible for the
maintenance or repair of any floor or wall coverings in the Premises or any such
supplemental or special systems to the Building's standard systems and of any
corridors, washrooms and lobbies which are part of the Premises; and (b) the
cost of performing any of said maintenance or repairs whether to the Premises or
to the Building caused by the negligence of Tenant, its employees, agents,
servants, licensees, subtenants, contractors or invitees, shall be paid by
Tenant, subject to the waivers set forth in Section 16.4. Landlord shall not be
liable to Tenant for any expense, injury, loss or damage resulting from work
done in or upon, or in connection with the use of, any adjacent or nearby
building, land, street or alley.
8.2 TENANT'S MAINTENANCE
Subject to the provisions of Article Fourteen, Tenant, at its expense,
shall keep and maintain the Premises and all Tenant Additions in good order,
condition and repair and in accordance with all Laws and Environmental Laws.
Tenant shall not permit waste and shall promptly and adequately repair all
damages to the Premises and replace or repair all damaged or broken glass in the
interior of the Premises, fixtures or appurtenances. Any repairs or maintenance
shall be completed with materials of similar quality to the original materials.
Any such repairs or maintenance shall be performed only by contractors or
mechanics approved by Landlord, which approval shall not be unreasonably
withheld, and whose work will not cause or threaten to cause disharmony or
interference with Landlord or other tenants in the Building and their respective
agents and contractors performing work in or about the Building. If Tenant fails
to perform any of its obligations set forth in this Section 8.2, Landlord may,
in its sole discretion after ten (10) days written notice to Tenant (except
without notice in the case of emergencies), perform the same, and Tenant shall
pay to Landlord any costs or expenses incurred by Landlord upon demand.
ARTICLE 9
ALTERATIONS AND IMPROVEMENTS
9.1 TENANT ALTERATIONS
(a) Except for completion of Tenant Work undertaken by Tenant
pursuant to the Work Letter, the following provisions shall apply to the
completion of any Tenant Alterations:
(i) Tenant shall not, except as provided herein, without the
prior written consent of Landlord, which consent shall not be
unreasonably withheld make or cause to be made any Tenant Alterations
in or to the Premises. Notwithstanding the foregoing, Landlord shall
have the right in its discretion to approve any Tenant Alterations that
affect the structure of the Building or its systems. Prior to making
any Tenant Alterations, Tenant shall give Landlord ten (10) days prior
written notice (or such earlier notice as would be necessary pursuant
to applicable Law) to permit Landlord sufficient time to post
appropriate notices of nonresponsibility. Subject to all other
requirements of this Article Nine, Tenant may undertake Decoration work
without Landlord's prior written consent. Tenant shall furnish Landlord
with the names and
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addresses of all contractors and subcontractors and copies of all
contracts. All Tenant Alterations shall be completed at such time and
in such manner as Landlord may from time to time designate, and only by
contractors or mechanics approved by Landlord, which approval shall not
be unreasonably withheld, provided, however, that Landlord may, in its
sole discretion, specify the engineers and contractors to perform all
work relating to the Building's systems (including the mechanical,
heating, plumbing, security, ventilating, air-conditioning, electrical,
communication and the fire and life safety systems in the Building).
Tenant acknowledges that all contractors or mechanics must be union
affiliated. The contractors, mechanics and engineers who may be used
are further limited to those whose work will not cause or threaten to
cause disharmony or interference with Landlord or other tenants in the
Building and their respective agents and contractors performing work in
or about the Building. Landlord may further condition its consent upon
Landlord approving prior to the commencement of any work or delivery of
materials to the Premises related to the Tenant Alterations such of the
following as specified by Landlord: architectural plans and
specifications, opinions from Landlord's engineers stating that the
Tenant Alterations will not in any way adversely affect the Building's
systems, necessary permits and licenses, certificates of insurance, and
such other documents in such form reasonably requested by Landlord.
Landlord may, in the exercise of reasonable judgment, request that
Tenant provide Landlord with appropriate evidence of Tenant's ability
to complete and pay for the completion of the Tenant Alterations such
as a performance bond or letter of credit. Upon completion of the
Tenant Alterations, Tenant shall deliver to Landlord an as-built mylar
and digitized (if available) set of plans and specifications for the
Tenant Alterations.
(ii) Tenant shall pay the cost of all Tenant Alterations and
the cost of decorating the Premises and any work to the Property
occasioned thereby. Upon completion of Tenant Alterations, Tenant shall
furnish Landlord with contractors' affidavits and full and final
waivers of lien and receipted bills covering all labor and materials
expended and used in connection therewith and such other documentation
reasonably requested by Landlord or Mortgagee. In addition, Tenant
shall pay Landlord immediately following completion of the Tenant
Alterations a supervisory fee of 5% of the total cost of the Tenant
Alterations, except for Decoration work.
(iii) Tenant agrees to complete all Tenant Alterations (i) in
accordance with all Laws, Environmental Laws, all requirements of
applicable insurance companies and in accordance with Landlord's
standard construction rules and regulations, and (ii) in a good and
workmanlike manner with the use of good grades of materials. Tenant
shall notify Landlord immediately if Tenant receives any notice of
violation of any Law in connection with completion of any Tenant
Alterations and shall immediately take such steps as are necessary to
remedy such violation. In no event shall such supervision or right to
supervise by Landlord nor shall any approvals given by Landlord under
this Lease constitute any warranty by Landlord to Tenant of the
adequacy of the design, workmanship or quality of such work or
materials for Tenant's intended use or of compliance with the
requirements of this Section or impose any liability upon Landlord in
connection with the performance of such work.
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(b) All Tenant Additions whether installed by Landlord or Tenant,
shall without compensation or credit to Tenant, become part of the Premises and
the property of Landlord at the time of their installation and shall remain in
the Premises, unless pursuant to Article Twelve, Tenant may remove them or is
required to remove them at Landlord's request.
9.2 LIENS
Tenant shall not permit any lien or claim for lien of any mechanic,
laborer or supplier or any other lien to be filed against the Building, the
Land, the Premises, or any other part of the Property arising out of work
performed by, or at the direction of, or on behalf of Tenant. If any such lien
or claim for lien is filed, Tenant shall within ten (10) days of receiving
notice of such lien or claim (a) have such lien or claim for lien released of
record or (b) deliver to Landlord a bond in form, content, amount, and issued by
surety, satisfactory to Landlord, indemnifying, protecting, defending and
holding harmless the Indemnitees against all costs and liabilities resulting
from such lien or claim for lien and the foreclosure or attempted foreclosure
thereof. If Tenant fails to take any of these actions, Landlord, in addition to
its rights and remedies under Article Eleven, without investigating the validity
of such lien or claim for lien, may pay or discharge the same and Tenant shall,
as payment of additional Rent hereunder, reimburse Landlord upon demand for the
amount so paid by Landlord, including Landlord's expenses and attorneys' fees.
ARTICLE 10
ASSIGNMENT AND SUBLETTING
10.1 ASSIGNMENT AND SUBLETTING
(a) Without the prior written consent of Landlord, which may be
granted or withheld in Landlord's reasonable discretion (and subject to
Landlord's right of Recapture under Section 10.2), Tenant may not sublease,
assign, mortgage, pledge, hypothecate or otherwise transfer or permit the
transfer of this Lease or the encumbering of Tenant's interest therein in whole
or in part, by operation of Law or otherwise or permit the use or occupancy of
the Premises, or any part thereof, by anyone other than Tenant. Tenant agrees
that the provisions governing sublease and assignment set forth in this Article
Ten shall be deemed to be reasonable. If Tenant desires to enter into any
sublease of the Premises or assignment of this Lease, Tenant shall deliver
written notice thereof to Landlord ("Tenant's Notice"), together with the
identity of the proposed subtenant or assignee and the proposed principal terms
thereof and financial and other information sufficient for Landlord to make an
informed judgment with respect to such proposed subtenant or assignee at least
thirty-five (35) days prior to the commencement date of the term of the proposed
sublease or assignment. If Tenant proposes to sublease less than all of the
Rentable Area of the Premises, the space proposed to be sublet and the space
retained by Tenant must each be a marketable unit as reasonably determined by
Landlord and otherwise in compliance with all Laws. Landlord shall notify Tenant
in writing of its approval or disapproval of the proposed sublease or assignment
or its decision to exercise its rights under Section 10.2 as soon as reasonably
possible and in any event within thirty (30) days after receipt of Tenant's
Notice (and all required information). Tenant shall submit for Landlord's
approval (which approval shall not be unreasonably withheld) any advertising
which Tenant or its agents intend to use with respect to the space proposed to
be sublet.
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(b) With respect to Landlord's consent to an assignment or
sublease, Landlord may take into consideration any factors that Landlord may
deem relevant, and the reasons for which Landlord's denial shall be deemed to be
reasonable shall include, without limitation, the following:
(i) the business reputation or creditworthiness of any
proposed subtenant or assignee is not acceptable to Landlord; or
(ii) in Landlord's reasonable judgment the proposed assignee
or sublessee would diminish the value or reputation of the Building or
Landlord; or
(iii) any proposed assignee's or sublessee's use of the
Premises would violate Section 7.1 of the Lease or would violate the
provisions of any other leases of tenants in the Project; or
(iv) the proposed sublessee or assignee is an existing tenant
of Landlord in the Building or a prospective tenant of Landlord in the
Project as demonstrated by a written proposal dated within ninety (90)
days prior to the date of Tenant's request, provided Landlord within
five (5) days upon request of Tenant shall provide Tenant a list of all
such existing or prospective tenants; or
(v) the proposed sublessee or assignee would materially
increase the estimated pedestrian and vehicular traffic to and from the
Premises and the Building;
(vi) the proposed assignee or subtenant is a governmental
authority or agency, an organization or person enjoying sovereign or
diplomatic immunity, a medical or dental practice or any user that will
attract a volume, frequency or type of visitor or employee to the
Building which is not, in Landlord's judgment, consistent with the
standards of the Building;
(vii) in Landlord's reasonable judgment, the use of the
Premises by the proposed assignee or subtenant would entail any
alterations which would lessen the value of the leasehold improvements
in the Premises or make the Premises more difficult to re-lease at the
expiration of the Term;
(viii) Landlord (or any affiliate of Landlord) has experienced
previous default by or is in litigation with the proposed assignee or
subtenant;
(ix) Tenant is in default past any applicable notice and cure
period of any obligation of Tenant under this Lease; or
(x) in the case of a subletting of less than the entire
Premises, if the subletting would result in a division of the Premises
into more than four (4) subparcels (in addition to the remaining
balance of the Premises) or would require access to be provided through
space leased or held for lease to another tenant or improvements to be
made outside of the Premises.
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With respect to clause (iv) above, Landlord shall keep Tenant apprised
of any additions or deletions from the list. In addition, if Landlord falls to
successfully conclude negotiations with any existing or prospective tenants
within sixty (60) days after the name of such existing or prospective tenant
first appears on Landlord's list, Tenant shall thereafter have the right to
sublease the Premises or assign this Lease to any such persons.
(c) Any sublease or assignment shall be expressly subject to the
terms and conditions of this Lease. Any subtenant or assignee shall execute such
documents as Landlord may reasonably require to evidence such subtenant or
assignee's assumption of the obligations and liabilities of Tenant under this
Lease. Tenant shall deliver to Landlord a copy of all agreements executed by
Tenant and the proposed subtenant and assignee with respect to the Premises.
Landlord's approval of a sublease, assignment, hypothecation, transfer or third
party use or occupancy shall not constitute a waiver of Tenant's obligation to
obtain Landlord's consent to further assignments or subleases, hypothecations,
transfers or third party use or occupancy.
(d) If Tenant is a corporation, limited liability company,
partnership or similar entity, Landlord's consent shall not be required with
respect to an assignment or subletting of this Lease to an Affiliate of Tenant,
provided that (i) the assignee is a reputable entity of good character, (ii) a
duplicate original instrument of assignment or sublease agreement in form and
substance reasonably satisfactory to Landlord, duly executed by Tenant and such
assignee or subtenant, shall have been delivered to Landlord promptly following
the effective date of any such assignment or subletting, (iii) in the case of an
assignment, an instrument in form and substance satisfactory to Landlord, duly
executed by the assignee, in which such assignee assumes observance and
performance of, and agrees to be personally bound by, all of the terms,
covenants and conditions of this lease on Tenant's part to be performed and
observed shall have been delivered to Landlord promptly following the effective
date of such assignment, (iv) in the case of an assignment, such assignment is
for a legitimate business purpose and not principally for the purpose of
avoiding the restrictions on assignment otherwise applicable under this Article
8 and (v) in the case of an assignment, such assignee has a Net Worth (as
hereinafter defined), computed in accordance with generally accepted accounting
principles (excluding goodwill and intangible assets) at least equal to or
greater than the greater of (a) Tenant's Net Worth as of the date of this Lease
and (b) Tenant's Net Worth immediately preceding such assignment. "Net Worth" of
Tenant for purposes of this Article shall be the net worth of Tenant (excluding
any guarantors) established under generally accepted accounting principles
consistently applied. Transfers of stock in a corporation whose shares are sold
in an initial public offering or traded in the "over-the-counter" market or any
recognized national securities exchange shall not constitute an assignment for
purposes of this Lease, provided that the principal purpose of such transfer or
transfers is not to avoid the restrictions on assignment otherwise applicable
under this Article.
10.2 RECAPTURE
Landlord shall have the option to exclude from the Premises covered by
this Lease ("Recapture") the space proposed to be sublet or subject to the
assignment, effective as of the proposed commencement date of such sublease or
assignment. If Landlord elects to Recapture, Tenant shall surrender possession
of the space proposed to be subleased or subject to the
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assignment to Landlord on the effective date of Recapture of such space from the
Premises, such date being the Termination Date for such space. Effective as of
the date of Recapture of any portion of the Premises pursuant to this section,
the Monthly Base Rent, Rentable Area of the Premises and Tenant's Share shall be
adjusted accordingly. Notwithstanding the foregoing, Landlord's right of
Recapture shall not apply to (i) Subleases for a term (together with any option
to extend) of four (4) years or less, or (ii) an assignment or sublease to an
Affiliate as defined under (ii) or (iii) in the definition of Affiliate in
Section 1.3.
10.3 EXCESS RENT
Tenant shall pay Landlord on the fifth day of each month during the
term of the sublease or assignment, fifty percent (50%) of the amount by which
the sum of all rent and other consideration (direct or indirect) received from
the subtenant or assignee for such month exceeds: (i) that portion of the
Monthly Base Rent and Additional Rent due under this Lease for said month which
is allocable to the space sublet or assigned; and (ii) the following costs and
expenses for the subletting or assignment of such space: (1) brokerage
commissions and attorneys' fees and expenses, (2) the actual costs paid in
making any improvements or substitutions in the Premises required by any
sublease or assignment, and (3) the actual costs of moving costs or other out of
pocket expenses paid to subtenant or assignee. All such costs and expenses shall
be amortized over the term of the sublease or assignment pursuant to sound
accounting principles.
10.4 TENANT LIABILITY
In the event of any sublease or assignment, whether or not with
Landlord's consent, Tenant shall not be released or discharged from any
liability, whether past, present or future, under this Lease, including any
liability arising from the exercise of any renewal or expansion option, to the
extent such exercise is expressly permitted by Landlord. Tenant's liability
shall remain primary, and in the event of default by any subtenant, assignee or
successor of Tenant in performance or observance of any of the covenants or
conditions of this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against said subtenant, assignee or
successor. After any assignment, Landlord may consent to subsequent assignments
or subletting of this Lease, or amendments or modifications of this Lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant, and
without obtaining its or their consent thereto, and such action shall not
relieve Tenant or any successor of Tenant of liability under this Lease. If
Landlord grants consent to such sublease or assignment, Tenant shall pay all
reasonable attorneys' fees and expenses incurred by Landlord with respect to
such assignment or sublease. In addition, if Tenant has any options to extend
the term of this Lease or to add other space to the Premises, such options shall
not be available to any subtenant or assignee, directly or indirectly without
Landlord's express written consent, which may be withheld in Landlord's sole
discretion.
10.5 ASSUMPTION AND ATTORNMENT
If Tenant shall assign this Lease, the assignee shall expressly assume
all of the obligations of Tenant in a written instrument satisfactory to
Landlord and furnished to Landlord prior to the effective date of the
assignment. If Tenant shall sublease the Premises as permitted
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herein, Tenant shall, at Landlord's option, within fifteen (15) days following
any request by Landlord, obtain and furnish to Landlord the written agreement of
such subtenant on Landlord's standard form to the effect that the subtenant will
attorn to Landlord and will pay all subrent directly to Landlord upon a Default
by Tenant.
ARTICLE 11
DEFAULT AND REMEDIES
11.1 EVENTS OF DEFAULT
The occurrence or existence of any one or more of the following shall
constitute a "Default" by Tenant under this Lease:
(i) Tenant fails to pay any installment or other payment of
Rent including Additional Rent within five (5) days after written
notice of such delinquency;
(ii) Tenant fails to observe or perform any of the other
covenants, conditions or provisions of this Lease or the Work Letter
and fails to cure such default within thirty (30) days after written
notice thereof to Tenant (unless such cure reasonably requires
additional time to cure and then only to the extent Tenant is
diligently pursuing such cure), unless the default involves a hazardous
condition, which shall be cured forthwith or unless the failure to
perform is a Default for which this Lease specifies there is no cure or
grace period;
(iii) the interest of Tenant in this Lease is levied upon
under execution or other legal process;
(iv) a petition is filed by or against Tenant to declare
Tenant bankrupt or seeking a plan of reorganization or arrangement
under any Chapter of the Bankruptcy Act, or any amendment, replacement
or substitution therefor, or to delay payment of, reduce or modify
Tenant's debts, which in the case of an involuntary action is not
discharged within thirty (30) days; or, Tenant is declared insolvent by
Law or any assignment of Tenant's property is made for the benefit of
creditors; or a receiver is appointed for Tenant or Tenant's property,
which appointment is not discharged within thirty (30) days; or any
action taken by or against Tenant to reorganize or modify Tenant's
capital structure in a materially adverse way which in the case of an
involuntary action is not discharged within thirty (30) days; or
(v) upon the dissolution of Tenant.
11.2 LANDLORD'S REMEDIES
(a) A Default shall constitute a breach of the Lease for which
Landlord shall have the rights and remedies set forth in this Section 11.2 and
all other rights and remedies set forth in this Lease or now or hereafter
allowed by Law, whether legal or equitable, and all rights and remedies of
Landlord shall be cumulative and none shall exclude any other right or remedy.
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(b) With respect to a Default, at any time Landlord may terminate
Tenant's right to possession by written notice to Tenant stating such election.
Any written notice required pursuant to Section 11.1 shall constitute notice of
unlawful detainer pursuant to California Code of Civil Procedure Section 1161
if, at Landlord's sole discretion, it states Landlord's election that Tenant's
right to possession is terminated after expiration of any period required by Law
or any longer period required by Section 11.1. Upon the expiration of the period
stated in Landlord's written notice of termination (and unless such notice
provides an option to cure within such period and Tenant cures the Default
within such period), Tenant's right to possession shall terminate and this Lease
shall terminate, and Tenant shall remain liable as hereinafter provided. Upon
such termination in writing of Tenant's right to possession, Landlord shall have
the right, subject to applicable Law, to reenter the Premises and dispossess
Tenant and the legal representatives of Tenant and all other occupants of the
Premises by unlawful detainer or other summary proceedings, or otherwise as
permitted by Law, regain possession of the Premises and remove their property
(including their trade fixtures, personal property and those Tenant Additions
which Tenant is required or permitted to remove under Article Twelve), but
Landlord shall not be obligated to effect such removal, and such property may,
at Landlord's option, be stored elsewhere, sold or otherwise dealt with as
permitted by Law, at the risk of, expense of and for the account of Tenant, and
the proceeds of any sale shall be applied pursuant to Law. Landlord shall in no
event be responsible for the value, preservation or safekeeping of any such
property. Tenant hereby waives all claims for damages that may be caused by
Landlord's removing or storing Tenant's personal property pursuant to this
Section or Section 12.1, and Tenant hereby indemnifies, and agrees to defend,
protect and hold harmless, the Indemnitees from any and all loss, claims,
demands, actions, expenses, liability and cost (including attorneys' fees and
expenses) arising out of or in any way related to such removal or storage. Upon
such written termination of Tenant's right to possession and this Lease,
Landlord shall have the right to recover damages for Tenant's Default as
provided herein or by Law, including the following damages provided by
California Civil Code Section 1951.2:
(i) the worth at the time of award of the unpaid Rent which
had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the
time of award exceeds the amount of such Rent loss that Tenant proves
could reasonably have been avoided;
(iii) the worth at the time of award of the amount by which
the unpaid Rent for the balance of the term of this Lease after the
time of award exceeds the amount of such Rent loss that Tenant proves
could be reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including, without limitation,
Landlord's unamortized costs of tenant improvements, leasing
commissions and legal fees incurred in connection with entering into
this Lease. The word "rent" as used in this Section 11.2 shall have the
same meaning as the defined term Rent in this Lease. The "worth at the
time of award" of the amount referred to in clauses (1) and (2) above
is computed by allowing interest at the Default Rate. The
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worth at the time of award of the amount referred to in clause (3)
above is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%). For the purpose of determining unpaid Rent under clause
(3) above, the monthly Rent reserved in this Lease shall be deemed to
be the sum of the Monthly Base Rent, monthly storage space rent, if
any, parking charges, and the amounts last payable by Tenant as
Additional Rent for the calendar year in which Landlord terminated this
Lease as provided hereinabove.
(c) Even if Tenant is in Default, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession
by written notice as provided in Section 11.2(b) above, and Landlord may enforce
all its rights and remedies under this Lease, including the right to recover
Rent as it becomes due under this Lease. In such event, Landlord shall have all
of the rights and remedies of a landlord under California Civil Code Section
1951.4 (lessor may continue Lease in effect after Tenant's Default and
abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations), or any successor
statute. During such time as Tenant is in Default, if Landlord has not
terminated this Lease by written notice and if Tenant requests Landlord's
consent to an assignment of this Lease or a sublease of the Premises, subject to
Landlord's option to recapture pursuant to Section 10.2, Landlord shall not
unreasonably withhold its consent to such assignment or sublease. Tenant
acknowledges and agrees that the provisions of Article Ten shall be deemed to
constitute reasonable limitations of Tenant's right to assign or sublet. Tenant
acknowledges and agrees that in the absence of written notice pursuant to
Section 11.2(b) above terminating Tenant's right to possession, no other act of
Landlord shall constitute a termination of Tenant's right to possession or an
acceptance of Tenant's surrender of the Premises, including acts of maintenance
or preservation or efforts to relet the Premises or the appointment of a
receiver upon initiative of Landlord to protect Landlord's interest under this
Lease or the withholding of consent to a subletting or assignment, or
terminating a subletting or assignment, if in accordance with other provisions
of this Lease.
(d) Tenant hereby waives any and all rights to relief from
forfeiture, redemption or reinstatement granted by Law (including California
Civil Code of Procedure Sections 1174 and 1179) in the event of Tenant being
evicted or dispossessed or in the event of Landlord obtaining possession of the
Premises;
(e) Notwithstanding any other provision of this Lease, a notice to
Tenant given under this Article or given pursuant to California Code of Civil
Procedure Section 1161, and any notice served by mail shall be deemed served,
and the requisite waiting period deemed to begin under said Code of Civil
Procedure Section upon mailing, without any additional waiting requirement under
Code of Civil Procedure Section 1011 et seq. or by other Law. For purposes of
Code of Civil Procedure Section 1162, Tenant's "place of residence", "usual
place of business", "the property" and "the place where the property is
situated" shall mean and be the Premises, whether or not Tenant has vacated same
at the time of service.
(f) The voluntary or other surrender or termination of this Lease,
or a mutual termination or cancellation, shall not constitute a merger and shall
terminate all or any existing assignments or subleases, except if and as
otherwise specified in writing by Landlord.
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(g) No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant, and no exercise by Landlord of its rights
pursuant to Section 25.13 to perform any duty which Tenant fails timely to
perform, shall impair any right or remedy or be construed as a waiver, unless
such waiver is in writing signed by Landlord. The waiver by Landlord of any
breach of this Lease shall not be deemed a waiver of any subsequent breach of
the same or any other provision of this Lease.
11.3 ATTORNEY'S FEES
In the event any party brings any suit or other proceeding with respect
to the subject matter or enforcement of this Lease, the prevailing party (as
determined by the court, agency or other authority before which such suit or
proceeding is commenced) shall, in addition to such other relief as may be
awarded, be entitled to recover reasonable attorneys' fees, expenses and costs
of investigation, including court. costs, expert witness fees, costs and
expenses of investigation, and all attorneys' fees, costs and expenses in any
such suit or proceeding (including in any action or participation in or in
connection with any case or proceeding under the Bankruptcy Code, 11 United
States Code Section 101 et seq., or any successor statutes, in establishing or
enforcing the right to indemnification, in appellate proceedings, or in
connection with the enforcement or collection of any judgment obtained in any
such suit or proceeding).
11.4 BANKRUPTCY
The following provisions shall apply in the event of the bankruptcy or
insolvency of Tenant:
(a) In connection with any proceeding under Chapter 7 of the
Bankruptcy Code where the trustee of Tenant elects to assume this Lease for the
purposes of assigning it, such election or assignment, may only be made upon
compliance with the provisions of this Article. In the event the trustee rejects
this Lease then Landlord shall immediately be entitled to possession of the
Premises without further obligation to Tenant or the trustee.
(b) Any election to assume this Lease under Chapters 11 or 13 of
the Bankruptcy Code by Tenant as debtor-in-possession or by Tenant's trustee
(the "Electing Party") must provide for the Electing Party to cure or provide to
Landlord adequate assurance that it will cure all monetary defaults under this
Lease within fifteen (15) days from the date of assumption and it will cure all
nonmonetary defaults under this Lease within thirty (30) days from the date of
assumption. Landlord and Tenant acknowledge such condition to be commercially
reasonable.
(c) If the Electing Party has assumed this Lease or elects to
assign Tenant's interest under this Lease to any other person, such interest may
be assigned only if the intended assignee has provided adequate assurance of
future performance (as herein defined), of all of the obligations imposed on
Tenant under this Lease. For the purposes hereof, "adequate assurance of future
performance" means that Landlord has ascertained that the following conditions
has been satisfied: (i) The assignee has submitted a current financial
statement, certified by its chief financial officer, which shows a net worth and
working capital in amounts sufficient to assure the future performance by the
assignee of Tenant's obligations under this Lease; and (ii) Landlord has
obtained consents or waivers from any third parties that may be required under a
lease,
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mortgage, financing arrangement, or other agreement by which Landlord is bound,
to enable Landlord to permit such assignment.
(d) Landlord's acceptance of rent or any other payment from any
trustee, receiver, or other entity will not be deemed a waiver of Landlord's
right to terminate this Lease for any transfer of Tenant's interest under this
Lease without its consent, or Landlord's claim for any amount of Rent due from
Tenant.
11.5 LANDLORD'S DEFAULT
Landlord shall be in default hereunder in the event Landlord has not
begun and pursued with reasonable diligence the cure of any failure of Landlord
to meet its obligations hereunder within thirty (30) days after the receipt by
Landlord of written notice from Tenant of the alleged failure to perform. In no
event shall Tenant have the right to terminate or rescind this Lease as a result
of Landlord's default as to any covenant or agreement contained in this Lease.
Tenant hereby waives such remedies of termination and rescission and hereby
agrees that Tenant's remedies for default hereunder and for breach of any
promise or inducement shall be limited to a suit for damages and/or injunction.
ARTICLE 12
SURRENDER OF PREMISES
12.1 IN GENERAL
Upon the Termination Date, Tenant shall surrender and vacate the
Premises immediately and deliver possession thereof to Landlord in a clean, good
and tenantable condition, ordinary wear and tear, and damage caused by Landlord
excepted. Tenant shall deliver to Landlord all keys to the Premises. Tenant
shall remove from the Premises all movable personal property of Tenant and
Tenant's trade fixtures, including, subject to Section 6.4, cabling for any of
the foregoing. Tenant shall be entitled to remove such Tenant Alterations, which
at the time of their installation Landlord and Tenant agreed may be removed by
Tenant. Tenant shall also remove such other Tenant Alterations as required by
Landlord (provided Landlord notifies Tenant at the time Tenant requests
Landlord's approval that such Tenant Alterations must be removed), including any
Tenant Alterations containing Hazardous Materials. Tenant immediately shall
repair all damage resulting from removal of any of Tenant's property,
furnishings or Tenant Alterations installed or created by Tenant. If any of the
Tenant Alterations which were installed by Tenant involved the lowering of
ceilings or raising of floors, then Tenant shall also be obligated to return
such surfaces to their condition prior to the commencement of this Lease. In the
event Tenant shall fail to remove those items described above, Landlord may (but
shall not be obligated to), at Tenant's expense, remove any of such property and
store, sell or otherwise deal with such property as provided in Section 11.2(b).
12.2 LANDLORD'S RIGHTS
All property which may be removed from the Premises by Landlord shall
be conclusively presumed to have been abandoned by Tenant and Landlord may deal
with such property as provided in Section 11.2(b), including the waiver and
indemnity obligations provided in that
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Section. Tenant shall also reimburse Landlord for all costs and expenses
incurred by Landlord in removing any of Tenant Additions and in restoring the
Premises to the condition required by this Lease at the Termination Date.
ARTICLE 13
HOLDING OVER
In the event that Tenant holds over in possession of the Premises after
the Termination Date, Tenant shall pay Landlord two hundred percent (200%) of
the monthly Rent payable for the month immediately preceding the holding over
(including increases for Rent Adjustments which Landlord may reasonably
estimate. Tenant shall also pay all damages sustained by Landlord by reason of
such retention of possession. The provisions of this Article shall not
constitute a waiver by Landlord of any reentry rights of Landlord and Tenant's
continued occupancy of the Premises shall be as a tenancy in sufferance.
ARTICLE 14
DAMAGE BY FIRE OR OTHER CASUALTY
14.1 SUBSTANTIAL UNTENANTABILITY
(a) If any fire or other casualty (whether insured or uninsured)
renders all or a substantial portion of the Premises or the Building
untenantable, Landlord shall, within sixty (60) days after the occurrence of
such damage, estimate the length of time that will be required to substantially
complete the repair and restoration and shall by notice advise Tenant of such
estimate ("Landlord's Notice"). If Landlord reasonably estimates that the amount
of time required to substantially complete such repair and restoration will
exceed one year from the date such damage occurred, then Landlord shall notify
Tenant and this Lease shall terminate as of the date of such damage.
(b) Unless this Lease is terminated as provided in the preceding
subparagraph, Landlord shall proceed with reasonable promptness to repair and
restore the Building and Premises to its condition as existed prior to such
casualty, subject to reasonable delays for insurance adjustments and Force
Majeure delays, and also subject to zoning Laws and building codes then in
effect. Landlord shall have no liability to Tenant, and Tenant shall not be
entitled to terminate this Lease if such repairs and restoration are not in fact
completed within the time period estimated by Landlord so long as Landlord shall
proceed with reasonable diligence to complete such repairs and restoration.
(c) Tenant acknowledges that Landlord shall be entitled to the
full proceeds of any insurance coverage, whether carried by Landlord or Tenant,
for damages to the Premises, except for those proceeds of Tenant's insurance of
its own personal property and equipment which would be removable by Tenant at
the Termination Date. All such insurance proceeds shall be payable to Landlord
whether or not the Premises are to be repaired and restored, provided, however,
if this Lease is not terminated and the parties proceed to repair and restore
Tenant Additions at Tenant's cost, to the extent Landlord received proceeds of
Tenant's insurance covering Tenant Additions, such proceeds shall be applied to
reimburse Tenant for its cost of repairing and restoring Tenant Additions.
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(d) Notwithstanding anything to the contrary herein set forth: (i)
Landlord shall have no duty pursuant to this Section to repair or restore any
portion of any Tenant Additions or to expend for any repair or restoration of
the Premises or Building amounts in excess of insurance proceeds paid to
Landlord and available for repair or restoration, except for the amount of the
deductible under Landlord's standard casualty policy of insurance (provided that
Tenant shall have the right to pay the difference between the deductible under
Landlord's earthquake insurance policy and the deductible under Landlord's
standard casualty policy of insurance and if paid, such amortized amount
(amortized on a straight line basis over the remaining Term together with
interest at the prime rate plus 1%) shall be credited against the Monthly Base
Rent; and (ii) Tenant shall not have the night to terminate this Lease pursuant
to this Section if any damage or destruction was caused by the act or negligence
of Tenant, its agent or employees. Whether or not the Lease is terminated
pursuant to this Article Fourteen, in no event shall Tenant be entitled to any
compensation or damages for loss of the use of the whole or any part of the
Premises or for any inconvenience or annoyance occasioned by any such damage,
destruction, rebuilding or restoration of the Premises or the Building.
(e) Tenant shall perform any repair or restoration of the Premises
in accordance with the provisions of Article Nine.
14.2 INSUBSTANTIAL UNTENANTABILITY
If the Premises or the Building is damaged by a casualty but neither is
rendered substantially untenantable and Landlord estimates that the time to
substantially complete the repair or restoration will not exceed one year from
the date such damage occurred, then Landlord shall proceed to repair and restore
the Building or the Premises other than Tenant Additions, with reasonable
promptness, unless such damage is to the Premises and occurs during the last six
(6) months of the Term, in which event either Tenant or Landlord shall have the
right to terminate this Lease as of the date of such casualty by giving written
notice thereof to the other within thirty (30) days after the date of such
casualty. Notwithstanding the aforesaid, Landlord's obligation to repair shall
be limited in accordance with the provisions of Section 14.1 above.
14.3 RENT ABATEMENT
Except for the casualty caused by the negligence or willful act of
Tenant or its agents, employees, contractors or invitees which is not covered by
Landlord's rent interruption insurance, if all or any part of the Premises are
rendered untenantable by casualty and this Lease is not terminated, Monthly Base
Rent and Additional Rent shall abate for that part of the Premises which is
untenantable (and which Tenant does not occupy) on a per them basis from the
date of the casualty until the repair and restoration work in the Premises is
Substantially Complete.
14.4 WAIVER OF STATUTORY REMEDIES
The provisions of this Lease, including this Article Fourteen, constitute an
express agreement between Landlord and Tenant with respect to damage to, or
destruction of, the Premises or the Property or any part of either, and any Law,
including Sections 1932(2), 1933(4), 1941 and 1942 of the California Civil Code,
with respect to any rights or obligations concerning
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damage or destruction shall have no application to this Lease or to any damage
to or destruction of the Premises or the Property, and are hereby waived.
ARTICLE 15
EMINENT DOMAIN
15.1 TAKING OF WHOLE OR SUBSTANTIAL PART
In the event the whole or any substantial part of the Building or of
the Premises is taken or condemned by any competent authority for any public use
or purpose (including a deed given in lieu of condemnation) and is thereby
rendered untenantable, this Lease shall terminate as of the date title or
possession vests in such authority, and Monthly Base Rent and Additional Rent
shall be apportioned as of the Termination Date. Notwithstanding anything to the
contrary herein set forth, in the event the taking is temporary (for less than
the remaining term of the Lease), Landlord may elect either (i) to terminate
this Lease or (ii) permit Tenant to receive the entire award attributable to the
Premises in which case Tenant shall continue to pay Rent and this Lease shall
not terminate.
15.2 TAKING OF PART
In the event a part of the Building or the Premises is taken or
condemned by any competent authority (or a deed is delivered in lieu of
condemnation) and this Lease is not terminated, the Lease shall be amended to
reduce or increase, as the case may be, the Monthly Base Rent and Tenant's
Proportionate Share to reflect the Rentable Area of the Premises or Building, as
the case may be, remaining after any such taking or condemnation. Landlord, upon
receipt and to the extent of the award in condemnation (or proceeds of sale)
shall make necessary repairs and restorations to the Premises (exclusive of
Tenant Additions) and to the Building to the extent necessary to constitute the
portion of the Building not so taken or condemned as a complete architectural
and economically efficient unit.
15.3 COMPENSATION
Landlord shall be entitled to receive the entire award (or sale proceeds) from
any such taking, condemnation or sale without any payment to Tenant, and Tenant
hereby assigns to Landlord Tenant's interest, if any, in such award; provided,
however, Tenant shall have the right separately to pursue against the condemning
authority a separate award in respect of the loss, if any, to Tenant Additions
paid for by Tenant without any credit or allowance from Landlord so long as
there is no diminution of Landlord's award as a result.
ARTICLE 16
INSURANCE
16.1 TENANT'S INSURANCE
Tenant, at Tenant's expense, agrees to maintain in force, with a
company or companies acceptable to Landlord, during the Term: (a) Commercial
General Liability Insurance on a primary basis and without any right of
contribution from any insurance carried by Landlord covering the Premises on an
occurrence basis against all claims for personal injury, bodily injury,
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death and property damage, including contractual liability covering the
indemnification provisions in this Lease, and such insurance shall be for such
limits that are reasonably required by Landlord from time to time but not less
than a combined single limit of Three Million and No/100 Dollars
($3,000,000.00); (b) Workers' Compensation and Employers' Liability Insurance to
the extent required by and in accordance with the Laws of the State of
California; (c) "All Risks" property insurance in an amount adequate to cover
the full replacement cost of all Tenant Additions, equipment, installations,
fixtures and contents of the Premises in the event of loss; (d) in the event a
motor vehicle is to be used by Tenant in connection with its business operation
from the Premises, Comprehensive Automobile Liability Insurance coverage with
limits of not less than One Million and No/100 Dollars ($1,000,000.00) combined
single limit coverage against bodily injury liability and property damage
liability arising out of the use by or on behalf of Tenant, its agents and
employees in connection with this Lease, of any owned, non-owned or hired motor
vehicles; and (e) such other insurance or coverages as Landlord reasonably
requires.
16.2 FORM OF POLICIES
Each policy referred to in 16.1 shall satisfy the following
requirements. Each policy shall (i) name Landlord and the Indemnitees as
additional insureds (except "All Risks" property insurance and Workers'
Compensation and Employers' Liability Insurance), (ii) be issued by one or more
responsible insurance companies licensed to do business in the State of
California reasonably satisfactory to Landlord, (iii) where applicable, provide
for deductible amounts satisfactory to Landlord and not permit coinsurance, (iv)
shall provide that such insurance may not be canceled or amended without thirty
(30) days' prior written notice to the Landlord, and (v) each policy of
"All-Risks" property insurance shall provide that the policy shall not be
invalidated should the insured waive in writing prior to a loss, any or all
rights of recovery against any other party for losses covered by such policies.
Tenant shall deliver to Landlord, certificates of insurance and at Landlord's
request, copies of all policies and renewals thereof to be maintained by Tenant
hereunder, not less than ten (10) days prior to the Commencement Date and not
less than ten (10) days prior to the expiration date of each policy.
16.3 LANDLORD'S INSURANCE
Landlord agrees to purchase and keep in full force and effect during
the Term hereof, including any extensions or renewals thereof, insurance under
policies issued by insurers of recognized responsibility, qualified to do
business in the State of California on the Building in amounts not less than the
then full replacement cost (without depreciation) of the Building (above
foundations and excluding Tenant Additions), against fire and such other risks
as may be included in standard forms of all risk coverage insurance reasonably
available from time to time together with twelve months rental interruption
insurance and insurance against earthquakes. At Tenant's election, at Tenant's
expense, Landlord's earthquake policy shall include coverage for Tenant
Additions. Landlord agrees to maintain in force during the Term Commercial
General Liability Insurance covering the Building on an occurrence basis against
all claims for personal injury, bodily injury, death, and property damage. Such
insurance shall be for a combined single limit of not less than Two Million and
No/100 Dollars ($2,000,000.00). Neither Landlord's obligation to carry such
insurance nor the carrying of such insurance shall be deemed to be an indemnity
by Landlord with respect to any claim, liability, loss, cost or expense due, in
whole or
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in part, to Tenant's negligent acts or omissions or willful misconduct. Without
obligation to do so, Landlord may, in its sole discretion from time to time,
carry insurance in amounts greater and/or for coverage additional to the
coverage and amounts set forth above.
16.4 WAIVER OF SUBROGATION
(a) Each party agrees that, if obtainable at no, or minimal,
additional cost, and so long as the same is permitted under the laws of the
State of California, it will include in its "All Risks" policies required under
this Lease, appropriate clauses pursuant to which the insurance companies (i)
waive all right of subrogation against the other party with respect to losses
payable under such policies and/or (ii) agree that such policies shall not be
invalidated should the insured waive in writing prior to a loss any or all right
of recovery against any party for losses covered by such policies.
(b) Provided that Landlord's right of full recovery under its
policy or policies aforesaid is not adversely affected or prejudiced thereby,
Landlord hereby waives any and all right of recovery which it might otherwise
have against Tenant, its servants, agents and employees, for loss or damage
occurring to the Real Property and the fixtures, appurtenances and equipment
therein, to the extent the same is covered by Landlord's insurance,
notwithstanding that such loss or damage may result from the negligence or fault
of Tenant, its servants, agents or employees. Provided that Tenant's right of
full recovery under its aforesaid policy or policies is not adversely affected
or prejudiced thereby, Tenant hereby waives any and all right of recovery which
it might otherwise have against Landlord, its servants, and employees and
against every other tenant of the Real Property who shall have executed a
similar waiver as set forth in this Section 16.4 for loss or damage to Tenant
Additions and to Tenant's furniture, furnishings, fixtures and other property of
Tenant to the extent the same is coverable by Tenant's insurance required under
this Lease, notwithstanding that such loss or damage may result from the
negligence or fault of Landlord, its servants, agents or employees, or such
other tenant and the servants, agents or employees thereof.
16.5 NOTICE OF CASUALTY
Tenant shall give Landlord notice in case of a fire or accident in the
Premises promptly after Tenant is aware of such event.
ARTICLE 17
WAIVER OF CLAIMS AND INDEMNITY
17.1 WAIVER OF CLAIMS
To the extent permitted by Law, Tenant releases the Indemnitees from,
and waives all claims for, damage to person or property sustained by the Tenant
or any occupant of the Premises or the Property resulting directly or indirectly
from any existing or future condition, defect, matter or thing in and about the
Premises or the Property or any part of either or any equipment or appurtenance
therein, or resulting from any accident in or about the Premises or the
Property, or resulting directly or indirectly from any act or neglect of any
tenant or occupant of the Property or of any other person, including Landlord's
agents and servants, except to the
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extent caused by the gross negligence or willful misconduct of any of the
Indemnitees. To the extent permitted by Law, Tenant hereby waives any
consequential damages, compensation or claims for inconvenience or loss of
business, rents, or profits as a result of such injury or damage.
Notwithstanding the foregoing, Tenant shall not be liable for any such damage
caused by its acts or neglect if Landlord or a tenant has recovered the full
amount of the damage from proceeds of insurance policies and the insurance
company has waived its right of subrogation against Tenant.
17.2 INDEMNITY BY TENANT
To the extent permitted by Law, Tenant hereby indemnifies, and agrees
to protect, defend and hold the Indemnitees harmless, against any and all
actions, claims, demands, liability, costs and expenses, including attorneys'
fees and expenses for the defense thereof, arising from Tenant's occupancy of
the Premises, from the undertaking of any Tenant Additions or repairs to the
Premises, from the conduct of Tenant's business on the Premises, or from any
breach or default on the part of Tenant in the performance of any covenant or
agreement on the part of Tenant to be performed pursuant to the terms of this
Lease, or from any willful act or negligence of Tenant, its agents, contractors,
servants, employees, customers or invitees, in or about the Premises or the
Property or any part of either. In case of any action or proceeding brought
against the Indemnitees by reason of any such claim, upon notice from Landlord,
Tenant covenants to defend such action or proceeding by counsel chosen by
Landlord, in Landlord's reasonable discretion. Landlord reserves the night to
settle, compromise or dispose of any and all actions, claims and demands related
to the foregoing indemnity. The foregoing indemnity shall not operate to relieve
Indemnitees of liability to the extent such liability is caused by their willful
or wrongful act. Further, the foregoing indemnity is subject to and shall not
diminish any waivers in effect in accordance with Section 16.4 by Landlord or
its insurers to the extent of amounts, if any, paid to Landlord under its
"All-Risks" property insurance.
17.3 INDEMNITY BY LANDLORD
To the extent permitted by Law, Landlord hereby indemnifies Tenant, and
agrees to protect, defend and hold Tenant harmless, against any and all actions,
claims, demands, liability, costs and expenses, including attorneys' fees and
expenses for the defense thereof, arising from any willful act or gross
negligence of Landlord, its agents, contractors, servants, employees, customers
or invitees, in or about the Building or from any breach or default on the part
of Landlord in the performance of any covenant or agreement on the part of
Landlord to be performed pursuant to the terms of this Lease.
ARTICLE 18
RULES AND REGULATIONS
18.1 RULES
Tenant agrees for itself and for its subtenants, employees, agents, and
invitees to comply with the Rules and Regulations listed on Exhibit C attached
hereto and with all reasonable modifications and additions thereto which
Landlord may make from time to time.
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18.2 ENFORCEMENT
Nothing in this Lease shall be construed to impose upon the Landlord
any duty or obligation to enforce the Rules and Regulations or as hereafter
adopted and Landlord shall not be liable to Tenant for violation of the same by
any other tenant, its servants, employees, agents, visitors or licensees.
Landlord shall use reasonable efforts to enforce the rules and regulations of
the Project in a uniform and nondiscriminatory manner.
ARTICLE 19
LANDLORD'S RESERVED RIGHTS
Landlord shall have the following rights exercisable without notice to
Tenant and without liability to Tenant for damage or injury to persons, property
or business and without giving rise to any claim for offset or abatement of
Rent: (1) to change the Building's name or street address upon thirty (30) days'
prior written notice to Tenant; (2) subject to the terms of Article 28 below, to
install and maintain all signs on the exterior and/or interior of the Building;
(3) to designate and/or approve prior to installation, all types of signs,
window shades, blinds, drapes, or other similar items, and all internal lighting
that may be visible from the exterior of the Premises; (4) upon reasonable
notice to Tenant, to display the Premises to prospective purchasers and lenders
at reasonable hours at any time during the Term and to prospective tenants at
reasonable hours during the last twelve (12) months of the Term; (5) to grant to
any party the exclusive right to conduct any business or render any service in
or to the Building, provided such exclusive right shall not operate to prohibit
Tenant's permitted use of the Premises; (6) to change the arrangement and/or
location of entrances or passageways, doors and doorways, corridors, elevators,
stairs, washrooms or public portions of the Building, provided that such action
shall first be discussed with Tenant and shall not materially and adversely
interfere with Tenant's access to the Premises or the Building; and (7) to close
the Building after Standard Operating Hours, except that Tenant and its
employees and invitees shall be entitled to admission at all times, under such
regulations as Landlord prescribes for security purposes.
ARTICLE 20
ESTOPPEL CERTIFICATE
20.1 IN GENERAL
(a) Within ten (10) days after request therefor by Landlord,
Mortgagee or any prospective mortgagee or owner, Tenant agrees as directed in
such request to execute an Estoppel Certificate in recordable form, binding upon
Tenant, certifying (i) that this Lease is unmodified and in full force and
effect (or if there have been modifications, a description of such modifications
and that this Lease as modified is in full force and effect); (ii) the dates to
which Rent has been paid; (iii) that Tenant is in the possession of the Premises
if that is the case; (iv) to Tenant's knowledge that Landlord is not in default
under this Lease, or, if Tenant believes Landlord is in default, the nature
thereof in detail; (v) that Tenant has no offsets or defenses to the performance
of its obligations under this Lease (or if Tenant believes there are any offsets
or defenses, a full and complete explanation thereof); (vi) that the Premises
have been completed in accordance with the terms and provisions hereof or the
Work Letter, that Tenant has accepted the Premises and the condition thereof and
of all improvements thereto and has no claims against
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Landlord or any other party with respect thereto; (vii) that if an assignment of
rents or leases has been served upon the Tenant by a Mortgagee, Tenant will
acknowledge receipt thereof and agree to be bound by the provisions thereof,
(viii) that Tenant will give to the Mortgagee copies of all notices required or
permitted to be given by Tenant to Landlord; and (ix) to any other information
reasonably requested.
(b) Within ten (10) days after request therefor by Tenant,
Landlord agrees as directed in such request to execute an Estoppel Certificate
in recordable form, binding upon Landlord, certifying (i) that this Lease is
unmodified and in full force and effect (or if there, have been modifications, a
description of such modifications and that this Lease as modified is in full
force and effect); (ii) the dates to which Rent has been paid; (iii) that Tenant
is in the possession of the Premises if that is the case; (iv) to Landlord's
knowledge that Tenant is not in default under this Lease, or, if Landlord
believes Tenant is in default, the nature thereof in detail; and (v) that the
Premises have been completed in accordance with the terms and provisions hereof
or the Work Letter.
20.2 ENFORCEMENT
In the event that Tenant fails to deliver an Estoppel Certificate, then
such failure shall be a Default. In addition to any other remedy available to
Landlord, Landlord may impose a charge equal to $500.00 for each day that Tenant
fails to deliver an Estoppel Certificate and Tenant shall be deemed to have
irrevocably appointed Landlord as Tenant's attorney-in-fact to execute and
deliver such Estoppel Certificate.
ARTICLE 21
REAL ESTATE BROKERS
Tenant represents that, except for the broker(s) listed in Section
1.1(14), Tenant has not dealt with any real estate broker, sales person, or
finder in connection with this Lease, and no such person initiated or
participated in the negotiation of this Lease, or showed the Premises to Tenant.
Tenant hereby agrees to indemnify, protect, defend and hold Landlord and the
Indemnitees, harmless from and against any and all liabilities and claims for
commissions and fees arising out of a breach of the foregoing representation.
Landlord agrees to pay any commission to which the broker(s) listed in
Section 1.1(14) is entitled in connection with this Lease pursuant to Landlord's
written agreement with such broker(s).
ARTICLE 22
MORTGAGEE PROTECTION
22.1 SUBORDINATION, NONDISTURBANCE AND ATTORNMENT
Subject to Tenant's obtaining a nondisturbance agreement from future
lenders as provided below, this Lease is and shall be expressly subject and
subordinate at all times to (i) any ground or underlying lease of the Real
Property, now or hereafter existing, and all amendments, extensions, renewals
and modifications to any such lease, and (ii) the lien of any mortgage or
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trust deed now or hereafter encumbering fee title to the Real Property and/or
the leasehold estate under any such lease, and all amendments, extensions,
renewals, replacements and modifications of such mortgage or trust deed and/or
the obligation secured thereby, unless such ground lease or ground lessor, or
mortgage, trust deed or Mortgagee, expressly provides or elects that the Lease
shall be superior to such lease or mortgage or trust deed. If any such mortgage
or trust deed is foreclosed (including any sale of the Real Property pursuant to
a power of sale), or if any such lease is terminated, upon request of the
Mortgagee or ground lessor, as the case may be, Tenant shall attorn to the
purchaser at the foreclosure sale or to the ground lessor under such lease, as
the case may be, and such purchaser or ground lessor shall recognize Tenant's
rights under this Lease, provided, however, that such purchaser or ground lessor
shall not be (i) bound by any payment of Rent for more than one month in advance
except payments in the nature of security for the performance by Tenant of its
obligations under this Lease; (ii) subject to any offset, defense or damages
arising out of a default of any obligations of any preceding Landlord; or (iii)
bound by any amendment or modification of this Lease made without the written
consent of the Mortgagee or ground lessor; or (iv) liable for any security
deposits not actually received in cash by such purchaser or ground lessor. With
respect to any future lender, Tenant shall execute promptly any reasonable
certificate or instrument that Landlord or any mortgagee may request to evidence
such subordination provided that such document provides that so long as an Event
of Default has not occurred with respect to Tenant, such mortgagee shall grant
Tenant nondisturbance and recognize Tenant's rights under this Lease. In
confirmation of such subordination and nondisturbance, however, Tenant shall
execute promptly any reasonable certificate or instrument that Landlord,
Mortgagee or ground lessor may request. Tenant hereby constitutes Landlord as
Tenant's attorney-in-fact to execute such certificate or instrument for and on
behalf of Tenant upon Tenant's failure to do so within fifteen (15) days of a
request to do so. Upon request by such successor in interest, Tenant shall
execute and deliver reasonable instruments confirming the attornment provided
for herein. Landlord shall use its commercially reasonable efforts to obtain a
non-disturbance agreement from its current lender.
22.2 MORTGAGEE PROTECTION
Tenant agrees to give any Mortgagee or ground lessor, by registered or
certified mail, a copy of any notice of default served upon the Landlord,
provided that prior to such notice Tenant has received notice (by way of service
on Tenant of a copy of an assignment of rents and leases, or otherwise) of the
address of such Mortgagee or ground lessor. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then the Mortgagee or ground lessor shall have an additional thirty
(30) days after receipt of notice thereof within which to cure such default or
if such default cannot be cured within that time, then such additional notice
time as may be necessary, if, within such thirty (30) days, any Mortgagee or
ground lessor has commenced and is diligently pursuing the remedies necessary to
cure such default (including commencement of foreclosure proceedings or other
proceedings to acquire possession of the Real Property, if necessary to effect
such cure). Until the time allowed as aforesaid for Mortgagee or ground lessor
to cure such defaults has expired without cure, Tenant shall have no night to,
and shall not, terminate this Lease on account of default. This Lease may not be
modified or amended so as to reduce the Rent or shorten the Term, or so as to
adversely affect in any other respect to any material extent the rights of the
Landlord, nor shall this Lease be canceled or surrendered, without the prior
written consent, in each instance, of the ground lessor or the Mortgagee.
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22.3 MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE
If Mortgagee of Landlord requires a modification of this Lease which
shall not result in any increased cost or expense to Tenant or in any other
substantial and adverse change in the rights and obligations of Tenant
hereunder, then Tenant agrees that the Lease may be so modified.
22.4 FINANCIALS
At the reasonable request of Landlord from time to time, Tenant shall
provide to Landlord Tenant's financial statements or other information
discussing financial worth of Tenant which Landlord shall use solely for
purposes of this Lease and in connection with the ownership, management,
financing and disposition of the Building.
ARTICLE 23
NOTICES
(a) All notices, demands or requests provided for or permitted to
be given pursuant to this Lease must be in writing and shall be personally
delivered, sent by Federal Express or other reputable overnight courier service,
or mailed by first class, registered or certified United States mail, return
receipt requested, postage prepaid, addressed to the parties hereto at their
respective addresses listed in Sections 1.1(2) and (3).
(b) Notices, demands or requests sent by mail or overnight courier
service as described above shall be effective upon deposit in the mail or with
such courier service. However, the time period in which a response to any such
notice, demand or request must be given shall commence to ran from (i) in the
case of delivery by mail, the date of receipt on the return receipt of the
notice, demand or request by the addressee thereof, or (ii) in the case of
delivery by Federal Express or other overnight courier service, the date of
acceptance of delivery by an employee, officer, director or partner of Landlord
or Tenant. Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given, as indicated by advice
from Federal Express or other overnight courier service or by mail return
receipt, shall be deemed to be receipt of notice, demand or request sent.
Notices may also be served by personal service upon any officer, director or
partner of Landlord or Tenant, and shall be effective upon such service.
(c) By giving to the other party at least thirty (30) days written
notice thereof, either party shall have the right from time to time during the
term of this Lease to change their respective addresses for notices, statements,
demands and requests, provided such new address shall be within the United
States of America.
ARTICLE 24
MISCELLANEOUS
24.1 LATE CHARGES
(a) All payments required hereunder (other than the Monthly Base
Rent and Additional Rent which shall be due as provided herein) to Landlord
shall be paid within thirty
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(30) days after Landlord's demand therefor. All such amounts (including Monthly
Base Rent and Additional Rent) not paid when due shall bear interest from the
date due until the date paid at the Default Rate in effect on the date such
payment was due.
(b) In the event Tenant is more than two (2) days late after
receipt of written notice of delinquency from Landlord in paying any installment
of Monthly Base Rent due under this Lease (provided after three (3) such notices
during any calendar year, no such notice shall be required), Tenant shall pay
Landlord a late charge equal to five percent (5%) of the delinquent installment
of Rent. The parties agree that (i) such delinquency will cause Landlord to
incur costs and expenses not contemplated herein, the exact amount of which will
be difficult to calculate, including the cost and expense that will be incurred
by Landlord in processing each delinquent payment of rent by Tenant, (ii) the
amount of such late charge represents a reasonable estimate of such costs and
expenses and that such late charge shall be paid to Landlord for each delinquent
payment in addition to all Rent otherwise due hereunder. The parties further
agree that the payment of late charges and the payment of interest provided for
in subparagraph (a) above are distinct and separate from one another in that the
payment of interest is to compensate Landlord for its inability to use the money
improperly withheld by Tenant, while the payment of late charges is to
compensate Landlord for its additional administrative expenses in handling and
processing delinquent payments.
(c) Payment of interest at the, Default Rate and/or of late
charges shall not excuse or cure any default by Tenant under this Lease, nor
shall the foregoing provisions of this Article or any such payments prevent
Landlord from exercising any right or remedy available to Landlord upon Tenant's
failure to pay Rent when due, including the right to terminate this Lease.
24.2 NO JURY TRIAL; VENUE, JURISDICTION
Each party hereto (which includes any assignee, successor, heir or
personal representative of a party) shall not seek a jury trial, hereby waives
trial by jury, and hereby further waives any objection to venue in the County in
which the Project is located, and agrees and consents to personal jurisdiction
of the courts of the State of California, in any action or proceeding or
counterclaim brought by any party hereto against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
or any claim of injury or damage, or the enforcement of any remedy under any
statute, emergency or otherwise, whether any of -the foregoing is based on this
Lease or on tort law. No party will seek to consolidate any such action in which
a jury has been waived with any other action in which a jury trial cannot or has
not been waived. It is the intention of the parties that these provisions shall
be subject to no exceptions. By execution of this Lease the parties agree that
this provision may be filed by any party hereto with the clerk or judge before
whom any action is instituted, which filing shall constitute the written consent
to a waiver of jury trial pursuant to and in accordance with Section 631 of the
California Code of Civil Procedure. No party has in any way agreed with or
represented to any other party that the provisions of this Section will not be
fully enforced in all instances. The provisions of this Section shall survive
the expiration or earlier termination of this Lease.
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24.3 TENANT AUTHORITY
Each party represents and warrants to the other, that it has full
authority and power to enter into and perform its obligations under this Lease,
that the person executing this Lease is fully empowered to do so, and that no
consent or authorization is necessary from any third party. Landlord may request
that Tenant provide Landlord evidence of Tenant's authority.
24.4 ENTIRE AGREEMENT
(a) This Lease, the Exhibits attached hereto and the Work Letter
contain the entire agreement between Landlord and Tenant concerning the Premises
and there are no other agreements, either oral or written, and no other
representations or statements, either oral or written, on which Tenant has
relied.
(b) This Lease shall not be modified except by a writing executed
by Landlord and Tenant.
24.5 EXCULPATION
(a) Tenant agrees, on its behalf and on behalf of its successors
and assigns, that any liability or obligation under this Lease shall only be
enforced against Landlord's equity interest in the Property and all sales
proceeds, insurance proceeds, or condemnation awards and in no event against any
other assets of the Landlord, or Landlord's officers or directors or partners,
and that any liability of Landlord with respect to this Lease shall be so
limited and Tenant shall not be entitled to any judgment in excess of such
amount; provided that the foregoing limitation shall not apply in the event of
fraud on the part of Landlord.
(b) In the event of any sale or other transfer of the Building,
Landlord shall be entirely freed and relieved of all agreements and obligations
of Landlord hereunder accruing or to be performed after the date of such sale or
transfer.
24.6 ACCORD AND SATISFACTION
No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of Rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or any letter
accompanying any check or payment of Rent shall be deemed an accord and
satisfaction. Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such installment or payment of Rent
or pursue any other remedies available to Landlord. No receipt of money by
Landlord from Tenant after the termination of this Lease or Tenant's right of
possession of the Premises shall reinstate, continue or extend the Term. Receipt
or acceptance of payment from anyone other than Tenant, including an assignee of
Tenant, is not a waiver of any breach of Article Ten, and Landlord may accept
such payment on account of the amount due without prejudice to Landlord's right
to pursue any remedies available to Landlord.
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24.7 BINDING EFFECT
Subject to the provisions of Article Ten, this Lease shall be binding
upon and inure to the benefit of Landlord and Tenant and their respective heirs,
legal representatives, successors and permitted assigns.
24.8 CAPTIONS
The Article and Section captions in this Lease are inserted only as a
matter of convenience and in no way define, limit, construe, or describe the
scope or intent of such Articles and Sections.
24.9 TIME, APPLICABLE LAW, CONSTRUCTION
Time is of the essence of this Lease and each and all of its
provisions. This Lease shall be construed in accordance with the Laws of the
State of California. If more than one person signs this Lease as Tenant, the
obligations hereunder imposed shall be joint and several. If any term, covenant
or condition of this Lease or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder of
this Lease, or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each item, covenant or condition of this Lease
shall be valid and be enforced to the fullest extent permitted by Law. Wherever
the term "including" or "includes" is used in this Lease, it shall have the same
meaning as if followed by the phrase "but not limited to". The language in all
parts of this Lease shall be construed according to its normal and usual meaning
and not strictly for or against either Landlord or Tenant.
24.10 ABANDONMENT
In the event Tenant vacates or abandons the Premises, Landlord shall
(i) have the right to enter into the Premises in order to show the space to
prospective tenants, (ii) have the right to reduce the services provided to
Tenant pursuant to the terms of this Lease to such levels as Landlord reasonably
determines to be adequate services for an unoccupied premises and (iii) during
the last six (6) months of the Term, have the right to prepare the Premises for
occupancy by another tenant upon the end of the Term. Tenant expressly
acknowledges that in the absence of written notice pursuant to Section 11.2(b)
or pursuant to California Civil Code Section 1951.3 terminating Tenant's right
to possession, none of the foregoing acts of Landlord or any other act of
Landlord shall constitute a termination of Tenant's right to possession or an
acceptance of Tenant's surrender of the Premises, and the Lease shall continue
in effect.
24.11 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES
If Tenant fails timely to perform any of its duties under this Lease or
the Work Letter after notice and expiration of applicable cure period (except in
the case of an emergency), Landlord shall have the right (but not the
obligation), to perform such duty on behalf and at the expense of Tenant without
further notice to Tenant, and all sums expended or expenses incurred by Landlord
in performing such duty shall be deemed to be additional Rent under this Lease
and shall be due and payable upon demand by Landlord.
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24.12 SECURITY SYSTEM
Landlord shall not be obligated to provide or maintain any security
patrol or security system. Landlord shall not be responsible for the quality of
any such patrol or system which may be provided hereunder or for damage or
injury to Tenant, its employees, invitees or others due to the failure, action
or inaction of such patrol or system. Tenant shall be entitled to install its
own card reader access system for the Premises; provided that if such system is
installed on the exterior doors of the Premises, Tenant shall make such system
available for use by Landlord and any other tenant of the Building, subject to
reasonable terms and conditions.
24.13 NO LIGHT, AIR OR VIEW EASEMENTS
Any diminution or shutting off of light, air or view by any structure
which may be erected on lands of or adjacent to the Project shall in no way
affect this Lease or impose any liability on Landlord.
24.14 CONSENT
Except as expressly provided to the contrary in the Lease, any time the
consent of Landlord or Tenant is required, such consent shall not be
unreasonably withheld, conditioned or delayed. Whenever the Lease grants
Landlord or Tenant the right to take action, exercise discretion, establish
rules and regulations or make allocations or other determinations, Landlord and
Tenant shall act reasonably and in good faith.
24.15 SURVIVAL
The waivers of the right of jury trial, the other waivers of claims or
rights, the releases and the indemnification obligations shall survive the
expiration or termination of this Lease, and so shall all other obligations or
agreements which by their terms survive expiration or termination of the Lease.
24.16 MEMORANDUM OF LEASE
Tenant shall have the right to have a Memorandum of Lease recorded in
the Official Records of the County of San Francisco.
24.17 LIABILITY
Notwithstanding anything to the contrary contained in this Lease,
Landlord shall be responsible for any damages, costs, liabilities or claims
caused by the gross negligence of Landlord, its employees, agents or
contractors.
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ARTICLE 25
LETTER OF CREDIT
25.1 DELIVERY OF LETTER OF CREDIT
In lieu of depositing a security deposit with Landlord, Tenant shall,
on execution of this Lease, deliver to Landlord and cause to be in effect during
the Lease Term an unconditional, irrevocable letter of credit ("LOC") in the
amount specified for the Letter of Credit in the Basic Lease Information, as it
may be increased as provided in this Lease (the "LOC Amount") for an initial
term of one (1) year and which shall thereafter renew automatically from year to
year, unless the LOC bank notifies Landlord at least thirty (30) days prior to
such expiration date of the LOC. The LOC shall be in a form reasonably
acceptable to Landlord and shall be issued by an LOC bank selected by Tenant and
acceptable to Landlord. An LOC bank is a bank that accepts deposits, maintains
accounts, has a local office that will negotiate a letter of credit, and the
deposits of which are insured by the Federal Deposit Insurance Corporation.
Tenant shall pay all expenses, points, or fees incurred by Tenant in obtaining
the LOC. The LOC shall not be mortgaged, assigned or encumbered in any manner
whatsoever by Tenant without the prior written consent of Landlord. Tenant
acknowledges that Landlord has the right to transfer or mortgage its interest in
the Project the Building and in this Lease and Tenant agrees that in the event
of any such transfer or mortgage, Landlord, at its cost, shall have the right to
transfer or assign the LOC and/or the LOC Security Deposit (as defined below) to
the transferee or mortgagee, and in the event of such transfer, Tenant shall
look solely to such transferee or mortgagee for the return of the LOC and/or the
LOC Security Deposit.*
25.2 REPLACEMENT OF LETTER OF CREDIT
Tenant may, from time to time, replace any existing LOC with a new LOC
if the new LOC (a) becomes effective at least thirty (30) days before expiration
of the LOC that it replaces; (b) is in the required LOC amount; (c) is issued by
an LOC bank acceptable to Landlord; and (d) otherwise complies with the
requirements of this Paragraph.
25.3 LANDLORD'S RIGHT TO DRAW ON LETTER OF CREDIT
Landlord shall hold the LOC as security for the performance of Tenant's
obligations under this Lease. If, after notice and failure to cure within any
applicable period provided in this Lease, Tenant defaults on any provision of
this Lease, Landlord may, without prejudice to any other remedy it has, draw on
that portion of the LOC necessary to (a) pay Rent or other sum in default; (b)
pay or reimburse Landlord for any amount that Landlord may spend or become
obligated to spend in exercising Landlord's rights under Paragraph 24.12 (Right
of Landlord to Perform Tenant's Covenant); and/or (c) compensate Landlord for
any expense, loss, or damage that Landlord may suffer because of Tenant's
default. If Tenant fails to renew or replace the LOC at least twenty (20) days
before its expiration, Landlord may, without prejudice to any other remedy it
has, draw on the entire amount of the LOC.
- ------------
* Upon termination of this Lease for any reason (other than a Default on the
part of Tenant), Landlord shall return the LOC to Tenant within ten (10) days
after such termination.
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25.4 LOC SECURITY DEPOSIT
Any amount of the LOC that is drawn on by Landlord but not applied by
Landlord shall be held by Landlord as a security deposit (the "LOC Security
Deposit") in accordance with Paragraph 5 of this Lease. Tenant shall
thereafter have the right to replace the LOC Security Deposit with a LOC
meeting the requirements of this Article 25.
25.5 RESTORATION OF LETTER OF CREDIT AND LOC SECURITY DEPOSIT
If Landlord draws on any portion of the LOC and/or applies all or any
portion of such draw, Tenant shall, within five (5) business days after demand
by Landlord, either (a) deposit cash with Landlord in an amount that, when
added to the amount remaining under the LOC and the amount of any LOC Security
Deposit, shall equal the LOC Amount then required under this Paragraph; or
(b) reinstate the LOC to the full LOC Amount.
25.6 REDUCTION OF LETTER OF CREDIT
(a) At any time after the end of the 12th month of the Term
hereof, and only in the event Tenant satisfies each of the following conditions
to Landlord's reasonable satisfaction, the LOC Amount may be reduced to an
amount equal to $8,000,000: (i) Tenant is not and has not been in default under
the terms of this Lease beyond any applicable cure period; (ii) Tenant maintains
a tangible net worth in excess of $125,000,000 which amount shall be determined
by Landlord to its satisfaction prior to any reduction in the LOC Amount, and in
connection with such determination, Tenant shall deliver to Landlord for review
Tenant's financial statements prepared in accordance with generally accepted
accounting principles and audited by a nationally recognized public accounting
firm acceptable to Landlord, and any other financial information reasonably
requested by Landlord ("Tenant's Financial Information"); (iii) Tenant provides
to Landlord ten (10) days prior written notice of any such reduction; and (iv)
the LOC provides that the issuing bank shall notify Landlord in writing at least
five (5) business days prior to any such reduction. In the event that such
reduction to the LOC is made, and, subsequently, Tenant falls to meet any of the
above conditions for a period of thirty (30) days following delivery by Landlord
of written notice of any such failure, Tenant shall within forty-eight (48)
hours, increase the face amount of the LOC to an amount equal to $10,000,000.
(b) At any time after the sixtieth (60th) month of the Term
hereof, and only in the event Tenant satisfies all of the following conditions
to Landlord's reasonable satisfaction, the LOC Amount may be reduced to an
amount equal to $6,000,000: (i) Tenant is not and has not been in default under
the terms of this Lease beyond any applicable cure period; (ii) Tenant maintains
a tangible net worth in excess of $200,000,000 which amount shall be determined
by Landlord to its satisfaction prior to any reduction in the LOC Amount, and in
connection with such determination, Tenant shall deliver to Landlord for review
Tenant's Financial Information; (iii) Tenant provides to Landlord ten (10) days
prior written notice of any such reduction; and (iv) the LOC provides that the
issuing bank shall notify Landlord in writing at least five (5) business days
prior to any such reduction. In the event that such reduction to the LOC is made
and, subsequently, Tenant fails to meet any of the above conditions for a period
of thirty (30) days following delivery by Landlord of written notice of any such
failure, Tenant shall within forty-eight (48) hours, increase the face amount of
the LOC to an amount equal to $7,000,000.
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ARTICLE 26
RIGHT OF FIRST OFFER
Provided Tenant is not, and has not been, in default of any terms and
conditions of this Lease, Tenant shall have a one-time right of first offer to
lease or purchase the entire building or site of approximately 55,000 square
feet (the "Expansion Space") that is adjacent to the Building, as shown on
Exhibit E at such time as such Expansion Space is made available for lease or
purchase by Landlord. Upon notification by Landlord in writing of the
availability of the Expansion Space and the terms and conditions on which
Landlord is willing to lease such Expansion Space to Tenant, Tenant shall have
five (5) business days to notify Landlord in writing of Tenant's desire to
exercise Tenant's right of first offer on the terms and conditions. In the event
Tenant fails to give Landlord notice of Tenant's election to lease such
Expansion Space within such time period, Tenant shall have no further right,
title or interest in such Expansion Space and this right of first offer shall
terminate. If, on the other hand, Tenant exercises its right of first offer in
the manner prescribed, Tenant shall immediately deliver to Landlord payment for
the first month's rent for such Expansion Space (in the same manner as provided
for in this Lease), and the lease for such Expansion Space shall be consummated
without delay in accordance with the terms and conditions set forth in
Landlord's notice. Notwithstanding anything to the contrary herein contained,
Tenant's right to the Expansion Space shall be conditioned upon the following:
(i) at the time Tenant agrees to accept the Expansion Space and at the time of
the commencement of the term for the Expansion Space, Tenant or its Affiliates
shall be in possession of and occupying the primary premises for the conduct of
its business therein and the same shall not be occupied by any assignee,
subtenant or licensee and, provided further, that the option for additional
space shall be applicable hereunder only in the Expansion Space will actually be
occupied by Tenant and (ii) the agreement of acceptance shall constitute a
representation by Tenant to Landlord, effective as of the date of the agreement
of acceptance and as of the date of commencement of the lease for the Expansion
Space, that Tenant does not intend to assign the lease for the Expansion Space,
in whole or in part or sublet all or any portion of the Premises, the election
to expand being for the purpose of utilizing the Expansion Space for Tenant's
purposes in the conduct of Tenant's business therein.
ARTICLE 27
ROOF RIGHTS
(a) During the Term, Tenant shall have the nonexclusive right to
install on the roof of the Building antennas, supplemental HVAC, microwaves,
satellites or DDS dishes in a area designated by Landlord that is not greater
than ten (10) feet in diameter and does not exceed two hundred (200) pounds
installed, which shall be enclosed by a screen and the nonexclusive right to run
connecting lines or cables thereto from the Premises (such satellite
dish/antennae and such connecting lines and related equipment herein referred to
collectively as the "Equipment"). Tenant shall not penetrate the roof in
connection with any installation or reinstallation of the Equipment without
Landlord's prior written consent, which may be withheld in Landlord's sole
discretion. The plans and specifications for all the Equipment shall be
delivered by Tenant to Landlord for Landlord's review and approval. Such plans
and specifications, including, without limitation, the location of the
Equipment, shall be approved by Landlord in writing prior to any installation.
In no event shall the Equipment or any portion thereof be visible from street
level. Prior to the commencement of any installation or other work performed on
or about the Building,
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Landlord shall approve all contractors and subcontractors which shall perform
such work. Tenant shall be responsible for any damage to the roof, conduit
systems or other portions of the Building or Building systems as a result of
Tenant's installation, maintenance and/or removal of the Equipment.
(b) Tenant, at Tenant's sole cost and expense, shall comply with
all Laws regarding the installation, construction, operation, maintenance and
removal of the Equipment and shall be solely responsible for obtaining and
maintaining in force all permits, licenses and approvals necessary for such
operations.
(c) Tenant shall be responsible for and promptly shall pay all
taxes, assessments, charges, fees and other governmental impositions levied or
assessed on the Equipment or based on the operation thereof.
(d) Landlord may require Tenant, at Landlord's sole cost and
expense, to relocate the Equipment during the Term to a location approved by
Tenant, which approval shall not be unreasonably withheld, conditioned or
delayed. Tenant shall not change the location of, or alter or install additional
Equipment or paint any of the other Equipment without Landlord's prior written
consent.
(e) Operation of the Equipment shall not interfere in any manner
with equipment systems or utility systems of other tenants of the Project,
including without limitation, telephones, dictation equipment, lighting, heat
and air conditioning, computers, electrical systems and elevators. If operation
of the Equipment causes such interference, Tenant agrees to cooperate with such
other tenants to eliminate such interference.
(f) Tenant shall maintain the Equipment in good condition and
repair, at Tenant's sole cost and expense. Landlord may from time to time
require that Tenant repaint the satellite dishes at Tenant's expense to keep the
same in an attractive condition. In the event that Tenant fails to repair and
maintain the Equipment in accordance with this Lease, Landlord may, but shall
not be obligated to, make any such repairs or perform any maintenance to the
Equipment and Tenant shall reimburse Landlord upon demand for all costs and
expenses incurred by Landlord in connection therewith, plus a reasonable
administrative fee.
(g) Tenant may access the roof for repair and maintenance of the
Equipment, only during normal business hours, on not less than 24 hours prior
written notice to Landlord, except in emergency. Tenant shall designate in
writing to Landlord all persons whom Tenant authorizes to have access to the
roof for such purposes. Upon such designation and prior identification to
Landlord's building security personnel, such authorized persons shall be granted
access to the roof by Landlord's building engineer. Tenant shall be responsible
for all costs and expenses incurred by Landlord in connection with Tenant's
access to the roof pursuant to this Paragraph. Landlord or Landlord's agent may
accompany Tenant during such access.
(h) Tenant shall indemnify, defend, protect and hold harmless
Landlord from and against any and all claims related to the Equipment or
operation of the same as if the Equipment were located wholly within the
Premises. Tenant shall provide evidence satisfactory to Landlord that Tenant's
property and liability insurance policies required under this Lease
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include coverage for the Equipment and any claim, loss, damage, or liability
relating to the Equipment.
(i) Landlord shall have no responsibility or liability whatsoever
relating to (i) maintenance or repair of the Equipment, (ii) damage to the
Equipment; (iii) damage to persons or property relating to the Equipment or the
operation thereof, or (iv) interference with use of the Equipment arising out of
utility interruption or any other cause, except for injury to persons or damage
to property caused solely by the active negligence or intentional misconduct of
Landlord, its agents or any other parties related to Landlord. In no event shall
Landlord be responsible for consequential damages. Upon installation of the
Equipment, Tenant shall accept the area where the Equipment is located in its
"as is" condition. Tenant acknowledges that the roof location of the Equipment
is suitable for Tenant's needs, and acknowledges that Landlord shall have no
obligation whatsoever to improve, maintain or repair the area in which the
Equipment will be installed.
(j) Tenant shall use the Equipment solely for Tenant's operations
associated with the Permitted Use and within Tenant's Premises and shall not use
or allow use of the Equipment, for consideration or otherwise, for the benefit
of other tenants in the Building or any other person or entity.
Tenant shall, at Tenant's sole cost and expense, remove such portions of the
Equipment as Landlord may designate upon the expiration or earlier termination
of this Lease, and restore the affected areas to their condition prior to
installation of the Equipment. If Tenant fails to so remove the Equipment,
Landlord reserves the right to do so, and the expense of the same shall be
immediately due and payable from Tenant to Landlord as additional rent, together
with interest and late charges as provided in this Lease, plus a reasonable
administrative fee.
ARTICLE 28
SIGNAGE
Tenant shall be entitled to the exterior signs to be located as shown
on Exhibit D attached hereto, which Tenant must exercise by May 1, 2000. Any
locations for exterior signs not elected by Tenant by May 1, 2000, shall be
available for Landlord for its own use, including, without limitation, leasing
to third parties. Such signage rights are subject to the following terms and
conditions:
(a) Tenant shall submit plans and drawings for such signage to the
City of San Francisco and to any other public authorities having jurisdiction
and shall obtain written approval from each such jurisdiction prior to
installation, and shall fully comply with all applicable Laws (Tenant
acknowledges that as of the date of this Lease, Landlord does not have approval
for any signage).
(b) Tenant shall, at Tenant's sole cost and expense, design,
construct and install such.
(c) All signs shall be subject to Landlord's prior written
approval, which Landlord shall have the right to withhold in its absolute and
sole discretion.
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(d) Tenant shall maintain its signage in good condition and
repair, and all costs of maintenance and repair shall be borne by Tenant.
Maintenance shall include, without limitation, cleaning and, if such signage is
illuminated, relamping at reasonable intervals. Tenant shall be responsible for
any electrical energy used in connection with its signs.
(e) Tenant's signage rights granted hereby shall be deemed revoked
and terminate upon occurrence of any of the following events:
(i) Tenant shall be in default and shall not have cured said
default for a period of ninety (90) days after notice.
(ii) Except with respect to Affiliates, Tenant shall assign
this Lease or sublet any portion of the Premises without Landlord's
prior written consent in accordance with Article 10, or Tenant occupies
less than fifty (50%) of the Premises.
(iii) This Lease shall terminate or otherwise no longer be in
effect.
(f) Upon the expiration or earlier termination of this Lease or at
such other time that Tenant's signage rights are terminated pursuant to the
terms hereof, Landlord shall cause Tenant's signage to be removed from the
Building and the Building to be repaired and restored to the condition which
existed prior to the installation of Tenant's signage (including, if necessary,
the replacement of any precast concrete panels), all at the sole cost and
expense of Tenant and otherwise in accordance with Article 9 of this Lease,
without further notice from Landlord notwithstanding anything to the contrary
contained in this Lease. Tenant shall pay all costs and expenses for such
removal and restoration within thirty (30) days following delivery of an invoice
therefor.
(g) Tenant shall pay, on a monthly basis, the charges for each
such sign set forth in Exhibit D.
(h) If Tenant shall fail to exercise the foregoing option by May
1, 2000, and exterior signage on the Building subsequently becomes available for
lease after the initial leasing thereof, prior to granting rights to such
exterior signage to a third party, Landlord shall notify Tenant of the
availability of such signage and the terms and conditions on which Landlord is
willing to offer such signage to third parties. Tenant shall have five (5)
business days to notify Landlord in writing of Tenant's desire to accept such
signage rights upon the terms and conditions set forth in Landlord's notice. If
Tenant fails to give such notice to Landlord within said five (5) business days,
Landlord shall thereafter have the right to offer such signage to third parties
on terms and conditions determined in Landlord's sole discretion, provided that
if signage becomes available again more than twenty-four (24) months after
Landlord's offer of such signage to Tenant, Landlord shall thereafter re-offer
signage rights to Tenant in accordance with this Article 28.
(i) Landlord agrees that it will not enter into any agreement for
signage rights with Scient, Viant, or any of the top 20 ranked Interactive
Agencies as measured by Advertising Age for the preceding year (or if
Advertising Age shall no longer be published, as measured by an equivalent
publication). This restriction shall terminate if Tenant shall (except with
respect to Affiliates) assign this Lease or sublet any portion of the Premises
without Landlord's prior
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written consent in accordance with Article 10, or Tenant occupies less than
fifty (50%) of the Premises.
ARTICLE 29
PARKING
During the Term, Tenant shall lease 212 parking spaces on an
unreserved, nonexclusive, first come, first served basis, for passenger-size
automobiles, in the parking garage adjacent to the Building.
Tenant shall at all times comply and shall cause all Tenant's Parties
and visitors to comply with all Regulations and any rules and regulations
established from time to time by Landlord relating to parking at the Project,
including any keycard, sticker or other identification or entrance system, and
hours of operation, as applicable.
Landlord shall have no liability for any damage to property or other
items located in the parking areas of the Project, nor for any personal injuries
or death arising out of the use of parking areas in the Project by Tenant or any
Tenant's Parties. Without limiting the foregoing, if Landlord arranges for the
parking areas to be operated by an independent contractor not affiliated with
Landlord, Tenant acknowledges that Landlord shall have no liability for claims
arising through acts or omissions of such independent contractor. In all events,
Tenant agrees to look first to its insurance carrier and to require that
Tenant's Parties look first to their respective insurance carriers for payment
of any losses sustained in connection with any use of the parking areas.
Landlord reserves the night to assign specific spaces, and to reserve
spaces for visitors, small cars, disabled persons or for other tenants or
guests, and Tenant shall not park and shall not allow Tenant's Parties to park
in any such assigned or reserved spaces. Tenant may validate visitor parking by
such method as Landlord may approve, at the validation rate from time to time 60
generally applicable to visitor parking. Landlord may utilize a valet system of
parking in such garage and Tenant shall comply with such rules established
therefor. Landlord also reserves the right to alter, modify, relocate or close
all or any portion of the parking area in order to make repairs or perform
maintenance service, or to restripe or renovate the parking areas, or if
required by casualty, condemnation, act of God, Laws or for any other reason
deemed reasonable by Landlord.
Tenant shall pay to Landlord (or Landlord's parking contractor, if so
directed in writing by Landlord), as Additional Rent hereunder, the monthly
charges established from time to time by Landlord for parking in such parking
garage, based on the prevailing market rate for covered standard parking in the
vicinity of the Building. Such parking charges shall be payable in advance with
Tenant's payment of Monthly Base Rent and are considered as a material part of
the rental received by Landlord hereunder. In the event the parking spaces are
unavailable for use for a period in excess of five (5) days, Tenant shall be
entitled to an abatement of rent for such spaces from and after the fifth day
until such time as the spaces are available. Tenant may sublease such spaces at
the same charge that Tenant is paying Landlord for the spaces. No deductions
from the monthly parking charge shall be made for days on which the Tenant does
not use any of the parking spaces entitled to be used by Tenant.
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ARTICLE 30
BASEMENT
Tenant acknowledges that Landlord may convert the storage space in the
basement of the Building to office space. Any such conversion shall be at no
cost to Tenant and shall be performed in a manner so as not to interrupt or
interfere with the conduct of Tenant's business. Further, any such conversion
shall not reduce the size of the Premises (except in an immaterial amount to
accommodate the entryway to the basement and ducts in locations reasonably
approved by Tenant), or interfere with or adversely affect Tenant's access to or
use of the Premises, or impair the security of the Premises. Without limiting
the generality of the foregoing, Tenant's cabling and the security of its server
and other equipment shall not be impaired. Landlord shall cause any such
additional tenants to pay their pro rata share of Operating Expenses, and
Tenant's Share shall be reduced accordingly.
ARTICLE 31
GENERATOR SPACE
31.1 GENERALLY
During the Term, Tenant shall have the right, subject to applicable
codes, rules and regulations, to install a diesel-operated generator, together
with transformer and fuel tank, together with related wining, vents and
equipment as well as conduits (collectively, the "Generator"), to provide
emergency additional electrical capacity to the Premises. The Generator shall be
placed in a location reasonably designated by Landlord (the "Generator Space").
31.2 INSTALLATION
Prior to commencing the installation of the Generator and any related
equipment and materials located on the Generator Space or in other parts of the
Building, including, but not limited to all switch gear and wiring,
(collectively, the "Related Equipment"), Tenant shall submit plans and
specifications regarding the installation of the Generator and any Related
Equipment to Landlord for Landlord's review and approval, which will not be
unreasonably withheld, conditioned or delayed. Tenant's right to install the
Generator shall be subject to Landlord's prior written approval of the manner in
which the Generator is installed and the measures that will be taken to
eliminate interference with other tenants and any vibrations or sound
disturbances from the operation of the Generator. Landlord shall have the right
to require an acceptable enclosure (e.g. wood fencing and landscaping) to hide
or disguise the existence of the Generator and to minimize any adverse effect
that the installation of the Generator may have on the appearance of the
Building and Property. Tenant shall be solely responsible for obtaining all
necessary governmental and regulatory approvals of, and for the cost of
installing, operating, maintaining and removing, the Generator and all Related
Equipment. Tenant shall also be responsible for the cost of all utilities
consumed in the operation of the Generator.
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31.3 MAINTENANCE, REMOVAL
The Generator and Related Equipment shall remain the personal property
of Tenant, and shall be removed by Tenant at its own expense at the termination
of this Lease. Tenant shall repair any damage caused by such removal, including
the patching of any holes to match, as closely as possible, the color
surrounding the area where the Generator and appurtenance were attached. Tenant
agrees to maintain the Generator, including without limitation, any enclosure
installed around the Generator, in good condition and repair, and any such
maintenance shall be performed in a manner to avoid any unreasonable
interference with any other tenants or Landlord.
31.4 ACCESS
Tenant, subject to the reasonable rules and regulations enacted by
Landlord, to Force Majeure and events of casualty, shall have access to the
Generator and its surrounding area for the purpose of installing, operating,
repairing, maintaining and removing the Generator and Related Equipment at all
times.
31.5 USE
Tenant agrees that it will not refuel the storage tank during Normal
Business Hours and will only run the Generator during emergency circumstances.
The Generator shall be tested only before or after Normal Business Hours, and
only upon at least 24 hours prior written notice to Landlord. Any spills or
leaks from the Generator or any use of the Generator which results in a release
of Hazardous Materials of any kind must be immediately reported to Landlord and
the costs for any such clean-up shall be borne solely by the Tenant. Landlord
shall not be liable in-any way for any claims, damages, fines, judgments,
penalties, costs, expenses, liabilities, or losses relating to any violation by
Tenant of any environmental laws incurred by or assessed against Landlord
arising in connection with the Generator.
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IN WITNESS WHEREOF, this Lease has been executed as of the date set
forth in Section 1.1(4) hereof.
TENANT: LANDLORD:
ORGANIC, INC. BAKER HAMILTON PROPERTIES, LLC.
a Delaware corporation
By:________________________________ By:________________________________
Print Name:________________________ Print Name:________________________
Its:_______________________________ Its:_______________________________
By:________________________________
Print Name:________________________
Its:_______________________________
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EXHIBIT B
WORK LETTER AGREEMENT
This Work Letter ("Work Letter") is made and entered into as of
November 8, 1999, by and between Baker Hamilton Properties, LLC ("Landlord"),
and Organic, Inc. ("Tenant").
RECITALS
A. Pursuant to the terms of that certain Lease of even date herewith
(the "Lease"), Landlord leased to Tenant, and Tenant hired from Landlord, those
certain premises consisting of approximately 213,000 square feet of space (the
"Premises"), located at 601 Townsend Street, San Francisco, California (the
"Building"), as more particularly described in the Lease.
B. Subject to the terms and provisions hereof, Landlord has agreed that
Tenant may construct certain tenant improvements in the Premises. Accordingly,
Landlord and Tenant now desire to set forth the terms and conditions upon which
Tenant shall construct the tenant improvements in the Premises, as more
particularly set forth hereinbelow. Capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Lease.
NOW THEREFORE, the parties agree as follows:
1. General Requirements for Construction
1.1. Landlord's Work. Landlord shall diligently complete Landlord's
Work in a good and workmanlike manner, in compliance with all applicable Laws.
1.2. Tenant's Obligation to Construct. Tenant shall construct and
install, in a good and workmanlike manner, first-class tenant improvements and
fixtures (the "Tenant Improvements") in accordance with the Final Plans (as
defined in Section 2.2 below) and otherwise in strict compliance with this Work
Letter. Tenant shall be solely responsible for all cost and expenses related to
the construction and installation of the Tenant Improvements, subject to
reimbursement by Landlord pursuant to Section 4 below.
1.3. Tenant's Access to the Premises. Tenant shall coordinate with
the Landlord for access to the Premises and the scheduling of construction work
therein. Landlord agrees to permit Tenant and its contractor and subcontractors
access to the Premises as soon as reasonably possible prior to the Delivery
Date, so long as such access shall not interfere with the performance of
Landlord Work. Any damage to the Building caused by Tenant or its contractor or
subcontractors in connection with the construction of the Tenant Improvements
shall be immediately repaired at Tenant's sole cost and expense.
2. Development of Plans
2.1. Preliminary Plans. Prior to Tenant's commencement of the
construction and installation of the Tenant Improvements, Tenant shall prepare
and deliver to Landlord preliminary plans and specifications (the "Preliminary
Plans") setting forth the Tenant Improvements to be constructed in the Premises.
Within five (5) business days following
Exhibit B - Page 1
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delivery of the Preliminary Plans, Landlord shall approve the Preliminary Plans
or deliver to Tenant written notice of Landlord's disapproval of the Preliminary
Plans. Such notice shall specify all changes that must be made to the
Preliminary Plans as a condition of Landlord's approval thereof. Promptly
following receipt of Landlord's notice of disapproval, Tenant shall deliver a
revised set of Preliminary Plans to Landlord, which Preliminary Plans shall
incorporate all changes specified in Landlord's notice of disapproval. Landlord
shall reasonably approve or disapprove the revised Preliminary Plans within two
(2) business days after receipt thereof.
2.2 Final Plans. As soon as the Preliminary Plans are approved by
Landlord, Tenant shall prepare final plans, specifications and working drawings
for the Tenant Improvements (the "Final Plans") that are consistent with and
logical evolutions of the approved Preliminary Plans and shall deliver the same
to Landlord for approval. Concurrently with the delivery of the Final Plans,
Tenant shall deliver to Landlord for Landlord's approval a schedule of values
("Schedule of Values") allocating costs to the various portions of the work
involved in the construction and installation of the Tenant Improvements and
setting forth Tenant's reasonable, good faith estimate of the timing of
Landlord's disbursements of the Tenant Improvement Allowance (as defined in
Section 4.1 below) and the amount of each such disbursement. If Landlord
disapproves the Final Plans and/or the Schedule of Values, Landlord shall
deliver to Tenant, as soon as reasonably possible but within five (5) business
days following receipt thereof, written notice of such disapproval. Such notice
shall specify all changes that must be made to the Final Plans and/or the
Schedule of Values as a condition of Landlord's approval thereof. Promptly
following receipt of Landlord's notice of disapproval, Tenant shall deliver a
revised set of Final Plans and/or Schedule of Values to Landlord, which Final
Plans and/or Schedule of Values shall incorporate all changes specified in
Landlord's notice of disapproval. Landlord shall approve or disapprove revised
Final Plans and/or the Schedule Values within two (2) business days after
receipt thereof. As soon as Landlord approves the Final Plans and the Schedule
of Values submitted by Tenant, Landlord and Tenant shall each sign the same.
Except as otherwise specifically provided in this Work Letter, the term "Final
Plans" as hereinafter used shall mean the final plans, specifications, working
drawings and Schedule of Values approved by Landlord for the construction of the
Tenant Improvements.
2.3. Form of Final Plans, Approval of Architect. The Final Plans
shall include tracings and other reproducible drawings, shall be in a form
satisfactory for filing with appropriate governmental authorities and shall
conform to all applicable codes, rules, regulations and ordinances of all
governing authorities. All plans submitted by Tenant to Landlord shall be
prepared by an architect selected by Tenant and approved by Landlord. Landlord
hereby approves Gensler Architecture Design & Planning as Tenant's architect.
Landlord's approval of Tenant's architect shall not constitute Landlord's
warranty that said architect is professionally qualified.
2.4. Landlord's Approval. If the Final Plans otherwise conform to
the Preliminary Plans and this Work Letter, Landlord's approval thereof shall
not be unreasonably withheld. If the Final Plans show work requiring a
modification or change to the shell of the Building, Landlord shall not be
deemed unreasonable if Landlord disapproves such Final Plans. Landlord may, at
Landlord's option, have the Preliminary Plans or the Final Plans reviewed by
Landlord's architect, engineer and/or construction manager; provided, however,
that any such review shall be performed within the time periods set forth above
for Landlord's review of the
Exhibit B - Page 2
<PAGE> 60
Preliminary Plans and the Final Plans. In no event shall the approval by
Landlord (or Landlord's architect, engineer or construction manager) of the
Preliminary Plans or the Final Plans constitute a representation or warranty by
Landlord (or Landlord's architect, engineer or construction manager) of (i) the
accuracy or completeness thereof, (ii) the absence of design defects or
construction flaws therein, or (ill) the compliance thereof with applicable
laws; and the parties agree that Landlord (and Landlord's architect, engineer
and construction manager) shall incur no liability by reason of such approval.
2.5. Changes. There shall be no material changes to the Final Plans
without the prior written consent of Landlord. All change orders requested by
Tenant shall be made in writing and shall specify any added or reduced cost
resulting therefrom. Any change proposed by Tenant shall be approved or
disapproved by Landlord as soon as reasonably possible and `in any event within
two (2) business days following Landlord's receipt of plans and specifications
therefor. Landlord's failure to approve any proposed change within said two (2)
day period shall be deemed Landlord's approval thereof.
3. Construction of Tenant Improvements
3.1. Permits and Approvals. Tenant shall submit the Final Plans to
all appropriate governmental agencies for approval and shall not commence
construction or installation of the Tenant Improvements described therein unless
and until Tenant has obtained all necessary permits and approvals required for
the construction and installation of the same and has delivered a copy or copies
thereof to Landlord.
3.2. Construction Documents. Prior to the commencement of
construction and installation of the Tenant Improvements, Tenant shall submit to
Landlord, for Landlord's approval, the following (collectively, the
"Construction Documents"): (a) the name of the proposed general contractor and a
copy of the proposed construction contract for the Tenant Improvements, which
shall be consistent with the terms hereof, (b) a written assignment of such
construction contract containing the written consent of Tenant's general
contractor to such assignment provided that Landlord assumes in writing all
obligations of Tenant under said contract, (c) a copy of the architect's
contract for the Tenant Improvements, which shall be consistent with the terms
hereof, (d) a written assignment of such architect's contract containing the
written consent of Tenant's architect to such assignment provided that Landlord
assumes in writing all obligations of Tenant under said contract, and (e) a list
of all subcontractors and materials suppliers proposed to be used by Tenant in
connection with the construction of the Tenant Improvements. Within five (5)
business days following the delivery of all of the Construction Documents,
Landlord shall approve such information or deliver to Tenant written notice of
Landlord's disapproval of all or any information contained therein, provided
Landlord shall not have approval rights over Tenant's architect's contract or
the general contractor's contract. If Landlord disapproves the general
contractor, any subcontractor or materials supplier, the parties shall negotiate
in good faith to select another contractor, subcontractor or materials supplier
mutually acceptable to the parties. Landlord shall be entitled to withhold its
approval of the general contractor, any subcontractor, or any materials
supplier, who, in Landlord's determination, is financially or otherwise
professionally unqualified to construct the Tenant Improvements. In addition,
Landlord may condition its approval of a general contractor upon Tenant
obtaining a performance bond and labor and materials payment bond, each in an
amount
Exhibit B - Page 3
<PAGE> 61
equal to one hundred percent (100%) of the estimated cost of the Tenant
Improvements and in a form acceptable to Landlord, in the event Landlord
reasonably determines that such bonds are necessary to ensure lien-free
completion of the Tenant Improvements. Landlord's failure to disapprove a
contractor, subcontractor or materials supplier shall not constitute Landlord's
warranty that any contractor, subcontractor or supplier not so disapproved is in
fact qualified. Following approval by Landlord, Tenant shall not materially
amend or consent to the material amendment of the construction contract or the
bonds, if the same are required, without Landlord's prior written approval.
3.3. Commencement and Completion of Construction. Following Tenant's
satisfaction of all of the requirements of Section 2 above and this Section 3,
Tenant shall commence construction and installation of the Tenant Improvements
in accordance with the Final Plans and shall pursue the same diligently to
completion. Tenant covenants to give Landlord at least ten (10) days' prior
written notice of its commencement of construction or delivery of materials
related thereto to enable Landlord to post a notice of nonresponsibility
respecting the Tenant Improvements to be constructed in the Premises.
All work done in connection with the Tenant Improvements shall be
performed in compliance with all applicable laws, ordinances, rules, orders and
regulations of all federal, state, county and municipal governments or agencies
now in force or that may be enacted hereafter, with the requirements and
standards of any insurance underwriting board, inspection bureau or insurance
carrier insuring the Premises pursuant to the terms of the Lease, and with all
directives, rules and regulations of the fire marshal, health officer, building
inspector, or other proper officers of any governmental agency now having or
hereafter acquiring jurisdiction.
3.4. Building Systems. In no event shall Tenant interfere with the
provision of heating, plumbing, electrical or mechanical system services to the
Building, make any structural changes to the Building, make any changes to the
heating, plumbing, electrical or mechanical systems of the Building, or make any
changes to the Premises which would weaken or impair the structural integrity of
the Building, alter the aesthetic appearance of the Building exterior, or which
would affect any warranties applicable to the Building or any improvements
constructed or installed by Landlord therein, without Landlord's prior written
consent, which consent may be withheld in Landlord's sole discretion.
3.5. Inspections. In addition to any right of Landlord under the
Lease and this Work Letter to enter the Premises for the purpose of posting
notices of nonresponsibility, Landlord and its officers, agents or employees
shall have the right at all reasonable times to enter upon the Premises and
inspect the Tenant Improvements and to determine that the same are in conformity
with the Final Plans and all of the requirements of this Work Letter. Landlord,
however, is under no obligation to supervise, inspect or inform Tenant of the
progress of construction and Tenant shall not rely upon Landlord therefor.
Neither the right herein granted to Landlord to make such inspections, nor the
making of such inspections by Landlord, shall operate as a waiver of any rights
of Landlord to require that the construction and installation of the Tenant
Improvements conform with the Final Plans and all the requirements of this Work
Letter.
Exhibit B - Page 4
<PAGE> 62
3.6. Protection Against Lien Claims. Subject to timely payment of
the Tenant Improvement Allowance, Tenant agrees to fully pay and discharge all
claims for labor done and materials and services furnished in connection with
the construction of the Tenant Improvements, to diligently file or procure the
filing of a valid notice of completion within ten (10) days following completion
of construction of the Tenant Improvements, to diligently file or procure the
filing of a notice of cessation upon any cessation of labor on the Tenant
Improvements for a continuous period of thirty (30) days or more, and to take
all reasonable steps to forestall the assertion of claims of lien against the
Premises or the Project, or any part thereof, or any right or interest
appurtenant thereto. Upon the request of Landlord, Tenant shall provide Landlord
with satisfactory evidence of the release or removal (including removal by
appropriate surety bond) of all liens recorded against the Premises, the
Project, or any portion thereof, and all stop notices received by Tenant.
3.7. Insurance
(a) At least five (5) days prior to the date Tenant commences
construction of the Tenant Improvements, Tenant shall submit to Landlord
evidence of the following insurance coverage: (i) general liability insurance as
required by Paragraph 19 of the Lease, which shall include contractor's
protective liability coverage; (ii) workers' compensation insurance as required
by Paragraph 19 of the Lease, with limits in accordance with the statutory
requirements of the State of California; and (iii) broad form "Builder's Risk"
property damage insurance with limits of not less than one hundred percent
(100%) of the estimated value of the Tenant Improvements (which insurance may be
carried by Tenant's contractor). All such policies shall provide that thirty
(30) days' written notice must be given to Landlord prior to termination or
cancellation. The insurance specified in (i) and (iii) above shall name Landlord
and Landlord's property manager as additional insureds and shall provide that
Landlord, although an additional insured, may recover for any loss suffered by
Landlord or Landlord's agents by reason of the negligence of Tenant or Tenant's
contractors, subcontractors and/or employees. Tenant hereby waives, and Tenant
shall use commercially reasonable efforts to cause each of its contractors and
subcontractors to waive, all rights to recover against Landlord and its agents,
contractors and employees for any loss or damage arising from a cause covered by
insurance required to be carried by Tenant hereunder to the extent of such
coverage and shall cause each property insurer to waive all rights of
subrogation against Landlord and its agents, contractors and employees in
connection therewith to the same extent.
(b) At least five (5) days prior to the date Tenant commences
construction of the Tenant Improvements, Tenant shall deliver to Landlord
certificates of insurance from the carrier(s) providing insurance to Tenant's
contractor(s) evidencing the following types of coverage in such amounts as are
reasonably determined by Landlord to be necessary: (i) commercial general
liability insurance; (ii) business automobile liability insurance; (iii)
workers' compensation insurance; and (iv) umbrella liability insurance. The
insurance specified in (i), (ii) and (iv) above shall name Landlord and
Landlord's property manager as additional insureds, and all such policies shall
provide that thirty (30) days' written notice must be given to Landlord prior to
termination or cancellation.
3.8. Final Documents. Following completion of the Tenant
Improvements, Tenant shall comply with the following: (a) Tenant shall obtain
and deliver to Landlord a copy
Exhibit B - Page 5
<PAGE> 63
of the certificate of occupancy for the Tenant Improvements from the
governmental agency having jurisdiction thereof; (b) Tenant shall promptly cause
a notice of completion to be validly recorded for the Tenant Improvements; (c)
Tenant shall furnish Landlord with unconditional waivers of lien in statutory
form from all parties performing labor and/or supplying equipment and/or
materials in connection with the Tenant Improvements, including Tenant's
architect(s); (d) Tenant shall deliver to Landlord a certificate of Tenant's
architect(s) certifying completion of the Tenant Improvements in substantial
accordance with the Final Plans; (e) Tenant shall deliver to Landlord a
certificate of Tenant's contractor(s) certifying completion of the Tenant
Improvements in substantial accordance with the construction contract(s)
approved by Landlord; (f) Tenant shall deliver to Landlord a full set of
reproducible as-built drawings (signed and dated by the general contractor and
each responsible subcontractor) for the Tenant Improvements; and (g) Tenant
shall deliver to Landlord copies of all written construction and equipment
warranties and manuals related to the Tenant Improvements.
3.9. Indemnification. Tenant shall, at Tenant's sole cost and
expense, defend, indemnify, save and hold Landlord harmless from and against any
and all claims, liabilities, demands, losses, expenses, damages or causes of
actions (whether legal or equitable in nature) asserted by any person, firm,
corporation, governmental body or agency or entity arising out of the
construction of the Tenant Improvements, except to the extent caused by the
gross negligence or willful misconduct of Landlord, its employees, agents,
contractors, subcontractors or material suppliers. Tenant shall pay to Landlord
upon demand all claims, judgments, damages, losses or expenses (including
attorneys' fees) incurred by Landlord as a result of any legal action arising
out of the construction of the Tenant Improvements, except to the extent caused
by the gross negligence or willful misconduct of Landlord, its employees,
agents, contractors, subcontractors or material suppliers.
4. Tenant Improvement Allowance
4.1. Amount of Allowance. Subject to the terms and conditions of
this Work Letter, Landlord shall pay to Tenant an amount not in excess of
$5,288,300 (the "Tenant Improvement Allowance") on account of all construction
costs, space planning and design fees, architecture and engineering fees, permit
fees and construction management fees (including Landlord's construction
management fee) incurred by Tenant in designing and constructing the Tenant
Improvements in the Premises. In no event shall Tenant be entitled to any cash
payment, credit, offset or other benefit whatsoever based on any excess of the
Tenant Improvement Allowance over the actual costs of the construction and
installation of the Tenant Improvements.
4.2. Tenant's Cost. Any cost incurred in the design or construction
of the Tenant Improvements in excess of the Tenant Improvement Allowance shall
be borne by Tenant in accordance with the terms and conditions set forth below.
Prior to the construction of the Tenant Improvements, Tenant shall cause its
general contractor to submit an estimate of the total cost of constructing the
Tenant Improvements. In the event that the aggregate of the cost estimated by
Tenant's general contractor and the cost of designing the Tenant Improvements
(collectively, the "Improvements Cost") exceeds the Tenant Improvement
Allowance, Landlord and Tenant shall determine Landlord's share of the
Improvements Cost ("Landlord's Share") and Tenant's share of the Improvements
Cost ("Tenant's Share") as follows:
Exhibit B - Page 6
<PAGE> 64
(a) Landlord's Share shall be a fraction, the numerator of
which is the Tenant Improvement Allowance, and the denominator of which is the
Improvements Cost.
(b) Tenant's Share shall be a fraction, the numerator of which
is the portion of the Improvements Cost that exceeds the Tenant Improvement
Allowance, and the denominator of which is the Improvements Cost.
(c) If Tenant has not sold its shares in an initial public
offering prior to the commencement of construction of the Tenant Improvements,
Tenant shall deposit in a separate bank account ("Tenant's Construction
Account') funds equal to Tenant's Share of the Improvements Cost and shall
deliver to Landlord reasonable evidence of the establishment of Tenant's
Construction Account and the deposit therein of Tenant's Share of the
Improvements Cost. Tenant's Construction Account shall be used only for the
purpose of funding Tenant's Share of the Improvements Cost, and Tenant shall
instruct the bank maintaining Tenant's Construction Account to send to Landlord
duplicate statements of each disbursement or withdrawal from Tenant's
Construction Account. In the event of any change order or other event which
would increase the Improvements Cost, Tenant's Share shall be appropriately
adjusted to reflect the increase in the Improvements Cost, and Tenant shall
promptly deposit sufficient funds into Tenant's Construction Account to equal
the then outstanding unpaid amount of Tenant's Share of such increased
Improvements Cost.
4.3. Procedure for Disbursement of the Tenant Improvement Allowance.
Landlord shall reimburse Tenant for architectural fees and other approved "soft"
costs within thirty-five (35) days of receipt of invoices. During the
construction of the Tenant Improvements, Landlord shall make progress payments
of the Tenant Improvement Allowance as follows: on or before the twenty-fifth
(25th) day of each calendar month during the construction of the Tenant
Improvements, but in no event more frequently than once every thirty (30) days,
Tenant shall deliver to Landlord: (i) an application for payment from Tenant's
contractor, which application shall be approved by Tenant's architect, showing
the schedule, by trade, of the percentage of completion of the Tenant
Improvements, and detailing the portion of the work completed and not completed;
(ii) invoices; and (iii) executed conditional mechanic's lien releases from
Tenant's contractor and all of its subcontractors and materialmen, which lien
releases shall comply with the appropriate provisions of California Civil Code
Section 3262(d). Tenant's submission of said documents shall be deemed to be
Tenant's payment request for the amount approved by Tenant's architect. Thirty
(30) days after receipt of the foregoing documents, Landlord shall deliver to
Tenant a check made payable to Tenant or the contractor directly in an amount
equal to the lesser of (a) Landlord's Share of the application for payment, and
(b) the balance of the Tenant Improvement Allowance, provided that Landlord does
not reasonably dispute any request for payment. If Landlord reasonably disputes
any request for payment, Landlord shall promptly notify Tenant in writing of the
grounds for such disapproval, and Landlord shall pay the undisputed portion of
the request for payment. Following substantial completion of the Tenant
Improvements and prior to Landlord's final disbursement of the Tenant
Improvement Allowance (which shall include a retention of ten percent (10%) of
the Tenant Improvement Allowance), Tenant shall comply with the requirements set
forth in Section 3.8 above, together with the following: (a) Tenant shall have
submitted to Landlord a cost breakdown of Tenant's final and total construction
costs incurred in connection with the Tenant Improvements, together with
receipted invoices showing evidence of full payment therefor; (b) Tenant shall
have completed
Exhibit B - Page 7
<PAGE> 65
Landlord's punchlist items, which list shall be provided by Landlord to Tenant
in accordance with Section 5 below; and (c) the Lease shall be in full force and
effect and there shall exist no event of default under the Lease or this Work
Letter, and no condition, event or act which, with the passage of time or the
giving of notice, or both, would constitute an event of default under the Lease
or this Work Letter. Landlord shall pay the final disbursement of the Tenant
Improvement Allowance within thirty (30) days after satisfaction of the
foregoing requirements.
4.4 Construction Management. Landlord shall retain a third party to
supervise Tenant's construction of the Tenant Improvements (but not to provide
construction management services for such work), the cost of which shall be
payable in monthly installments out of the Tenant Improvement Allowance, not to
exceed $75,000. Tenant shall have the right to rely on the acts of such third
party as if such third party were the Landlord.
5. Walk-Through of Tenant Improvements. Within two (2) business days
following the completion of the Tenant Improvements, Tenant shall notify
Landlord of the completion thereof and shall provide Landlord an opportunity to
inspect the Tenant Improvements. Within three (3) business days following
Tenant's notice, Landlord (or its representative) shall walk-through and inspect
Tenant's work on the Tenant Improvements and shall either approve Tenant's work
or advise Tenant in writing of any defects or uncompleted items. Tenant shall
promptly repair such defects or uncompleted items to Landlord's reasonable
satisfaction. Landlord's approval of the Tenant Improvements, or Landlord's
failure to advise Tenant of any defects or uncompleted items in the Tenant
Improvements, shall not relieve Tenant of responsibility for constructing and
installing the Tenant Improvements in accordance with the Final Plans and this
Work Letter, and in compliance with all applicable laws.
6. Default. Each of the following events shall constitute an event of
default ("Default") under this Work Letter:
(a) Failure to comply with those conditions set forth in this
Work Letter which are required to be fulfilled by Tenant prior to the
commencement and installation of Tenant Improvements, which failure shall not be
cured within fifteen (15) days after Tenant's receipt of written notice thereof
from Landlord (or such longer period as may be reasonably required);
(b) Failure to commence and/or complete construction of the
Tenant Improvements in compliance with this Work Letter, which failure shall not
be cured within fifteen (15) days after Tenant's receipt of written notice
thereof from Landlord (or such longer period as may be reasonably required); and
(c) The default or breach by Tenant of any provision of the
Lease, which continues after Tenant's receipt of notice and expiration of the
applicable cure period set forth in the Lease.
7. Remedies. In the event of a Default by Tenant hereunder, Landlord
shall thereafter have no further obligation to disburse any portion of the
Tenant Improvement Allowance unless and until such Default is cured. In
addition, upon the occurrence of a Default by Tenant hereunder, Landlord shall
have the right (but not the obligation), at Tenant's sole cost
Exhibit B - Page 8
<PAGE> 66
and expense, to enter upon the Premises and take over and complete construction
and installation only as to those areas where the construction or installation
of the Tenant Improvements has been commenced and such other areas to the extent
necessary to relet the Premises, and to make disbursements from the Tenant
Improvement Allowance toward completion of the Tenant Improvements. In
connection therewith, Landlord may discharge or replace the contractors or
subcontractors performing such work. In no event shall Landlord be required to
expend its own funds to complete the Tenant Improvements if the Tenant
Improvement Allowance is insufficient. Where substantial deviations from the
Final Plans have occurred which have not been approved by Landlord, or defective
or unworkmanlike labor or materials are being used in construction of the Tenant
Improvements, Landlord shall have the right to demand that such labor or
materials be corrected, and if the same are not so corrected, shall have the
right to immediately order the stoppage of all construction until such condition
is corrected. After issuance of such an order in writing, no further work shall
be done on the Tenant Improvements without the prior written consent of Landlord
unless and until said condition has been fully corrected.
8. Miscellaneous. Time is of the essence of this Work Letter. The
invalidity or unenforceability of any one or more provisions of this Work Letter
will in no way affect the validity or enforceability of any other provision.
This Work Letter and the Lease to which this Work Letter is attached constitute
the entire agreement of the parties with respect to the subject matter hereof.
This Work Letter may not be modified or amended except by a written agreement
signed by Landlord and Tenant. The captions of the paragraphs of this Work
Letter are for convenience and reference only, and in no way modify, amplify or
interpret the provisions of this Work Letter.
9. Attorneys' Fees. If any action or proceeding is commenced to enforce
the provisions of this Work Letter, the prevailing party in such action or
proceeding will have the right to recover from the other party its reasonable
attorneys' fees and costs and expenses of litigation.
10. Conflict. In the event of any conflict between the terms of the
Lease and the terms of this Work Letter concerning the construction of the
Tenant Improvements, the terms of this Work Letter shall prevail.
11. Consents. Any time that the consent or approval of Landlord is
required pursuant to this Work Letter, such consent or approval shall not be
unreasonably withheld, conditioned or delayed, unless such consent or approval
relates to matters affecting the Building structure or Building systems.
Landlord and Tenant agree to act reasonably and in good faith under this Work
Letter, so as to minimize any delays in the construction of Landlord Work and
the Tenant Improvements.
12. Historical Significance . Any actual delay in the design and
construction of the Tenant Improvements resulting from Landlord's application
for certification of the Building as a National Historic Landmark shall
constitute a Landlord Delay; provided, however, that Tenant must comply with the
Historic Guidelines attached hereto as Schedule 2 and any delay caused by
Landlord requiring Tenant to comply with such guidelines shall not constitute a
Landlord Delay.
Exhibit B - Page 9
<PAGE> 67
Landlord, at its expense, shall be responsible for submitting all applications
and coordinating such certification.
Exhibit B - Page 10
<PAGE> 68
SCHEDULE 1
LANDLORD'S WORK
1. Base building main sprinkler loop including sprinkler heads at a
minimum density required by code. Tenant, at Tenant's expense, may
elect to have Landlord install rapid response sprinkler heads.
2. Fire alarms, smoke detectors, strobe lights, exit door lights, and
supporting power panel requirements installed per code in the common
areas.
3. HVAC: Approximately six rooftop package units (totaling approximately
630 tons or a minimum of one ton per 350 square feet) of cooling to the
Premises. The system to be designed for VAV modulation utilizing
variable speed drives. Supply air delivered to each floor shall be not
less than 0.15 cfm per square foot.
4. Subject to PG&E engineering, the building electrical power design
provides approximately 3500 amp service, 480/277 volt, 3-phase, 4-wire
service with provisions for an additional 3500 amp future service (if
Tenant desires, at its expense). The main electrical room is located in
the basement and conduits are provided from the main electrical room to
the stacked core electrical rooms at each floor. The tenant will be
responsible for all panels, feeders, boards, etc. The building is
designed to easily accommodate up to three standby 400 KW
rooftop-mounted generators should tenant(s) wish to provide and
maintain them. There are six 4-inch conduits for PacBell service and
eight 4-inch conduits for alternate service providers from separate
boxes (one for PacBell and one for alternate service providers) outside
the building connected to the main telephone room in the basement.
Secondary raceways and distribution wiring for power and lighting shall
be paid for by the tenant.
5. New men's and women's restrooms on each floor of the leased Premises
pursuant to the drawings listed as Exhibit A to Schedule 1, which shall
be ADA compliant.
6. Main ground floor lobby finished to building standard, or at Tenant's
election, Tenant shall receive an allowance equal to Landlord's
budgeted amount for such work. And drywall installation in the core
shall be taped and textured and ready for Tenant' finishes.
7. Finished fire stairs designed to meet current governmental codes
pursuant to the drawings listed as Exhibit A to Schedule 1.
8. Two new traction passenger elevators will be installed to service the
office floors pursuant to the drawings listed as Exhibit A to Schedule
1.
9. Construction of a structured parking garage adjacent to the Building.
10. The Building is required to conform to the 1994 seismic code. However,
the Landlord intends to upgrade the Building to the 1997 seismic code.
11. Existing floors to be sheathed in plywood.
page 1
<PAGE> 69
12. Windows and perimeter walls will be repaired, as necessary, sealed and
finished to a water-tight condition (to the extent possible consistent
with the Historic Guidelines).
13. All finishes shall be consistent with a first-class office building.
The final plans for Landlord's Work are being completed as of the date
of this Lease and therefore the exact plans together with specific
specifications and plans are subject to changes based upon all governmental
requirements and physical limitations.
page 2
<PAGE> 70
Tanner Leddy Maytum Stacy
Drawings for the Baker & Hamilton Development
<TABLE>
<CAPTION>
<S> <C> <C>
BH A2.1 Basement Floor Plan dated 5 November 1999 Issued for Lease
BH A2.2 First Floor Plan dated 5 November 1999 Issued for Lease
BH A2.3 Second Floor Plan dated 5 November 1999 Issued for Lease
BH A2.4 Third Floor Plan dated 5 November 1999 Issued for Lease
BH A2.5 Roof Plan dated 5 November 1999 Issued for Lease
BH A3.1 Elevations dated 5 November 1999 Issued for Lease
BH A3.2 Elevations dated 5 November 1999 Issued for Lease
</TABLE>
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<PAGE> 71
SCHEDULE 2
THE BAKER & HAMILTON BUILDING
TENANT IMPROVEMENTS DESIGN CRITERIA
The building owner has established the following special criteria as a
guide to the tenant for the design and construction of tenant improvements in
the historic Baker & Hamilton Building.
The Baker & Hamilton Building has been designated Landmark Structure
No. 193 in the Planning Code of the City and County of San Francisco. Certain
tenant improvements may require special review and approval for a Certificate of
Appropriateness by the San Francisco Landmark Preservation Advisory Board.
As an official city landmark, the building is a "qualified historic
building", as defined by the State Historic Building Code. All tenant
improvements are required to comply with the State Historic Building Code, in
conjunction with the current editions of the San Francisco Building Codes. The
building is classified as Type IV Heavy Timber construction in the San Francisco
Building Code.
The building owner has applied for certification of the historic
building and its rehabilitation by the State Historic Preservation Office and
the National Park Service. Once certified, the rehabilitation will qualify for
preservation tax incentives for the owner. To preserve these tax incentives, any
modifications including tenant improvements made within a five year period after
occupancy of the rehabilitated building must comply with the Secretary of
Interior Standards for Rehabilitation. Design and construction documents for
tenant improvements will be reviewed by the State Historic Preservation Office
and the National Park Service for certification compliance. All tenant
improvements will be required to comply with these certification requirements
including the Secret airy of Interior Standards for Rehabilitation.
In addition, the building owner has established the following general
design criteria for tenant improvements:
1. The historic timber structural components (columns, beams, trusses,
decking) shall remain unpainted and exposed to view. Suspended ceilings
and furring of columns are discouraged.
2. The historic masonry walls shall remain unpainted and exposed to view.
Furring of masonry walls is discouraged.
3. The uninterrupted quality of the interior spaces shall be maintained.
New interior partitions shall be kept to a reasonable minimum. Where
necessary, partitions shall be designed to minimize view obstruction of
the ceiling structure and preserve natural light reaching interior
spaces.
4. Historic construction shall be maintained and preserved. Penetrations
and attachments to historic construction shall be minimized and shall
be designed to be reversible without significant damage.
<PAGE> 72
5. New partitions and ceilings shall not subdivide or cross directly
behind historic windows so as to be visible from the exterior.
6. New mechanical and electrical systems shall be carefully designed and
exposed to view where possible. Exposed wiring, conduit, piping and
ducts shall be designed and installed in neatly organized layouts using
attractive components.
7. Window shading systems are discouraged. Where allowed, shading systems
shall be compatible with the historic windows.
8. Impact sound attenuating flooring materials such as carpet and pad
shall be used where the tenant is located over another tenant's space.
Where hard flooring materials are required, impact sound dampening
underlayments shall be used.
<PAGE> 73
EXHIBIT C
RULES AND REGULATIONS
1. No sidewalks, entrance, passages, courts, elevators, vestibules,
stairways, corridors or halls shall be obstructed or encumbered by Tenant or
used for any purpose other than ingress and egress to and from the Premises.
2. No awning or other projection shall be attached to the outside walls
or windows of the Project without the prior written consent of Landlord. No
curtains, blinds, shades, drapes or screens visible from outside the Building
shall be attached to or hung in, or used in connection with any window or door
of the Premises, without the prior written consent of Landlord. Such awnings,
projections, curtains, blinds, shades, drapes, screens and other fixtures must
be of a quality, type, design, color, material and general appearance approved
by Landlord, and shall be attached in the manner approved by Landlord. All
lighting fixtures visible from outside the Building hung in offices or spaces
along the perimeter of the Premises must be of a quality, type, design, bulb
color, size and general appearance approved by Landlord.
3. No sign, advertisement, notice, lettering, decoration or other thing
shall be exhibited, inscribed, painted or affixed by Tenant on any part of the
outside or inside of the Premises or of the Project visible from outside the
Building, without the prior written consent of Landlord. In the event of the
violation of the foregoing by Tenant, Landlord may remove same without any
liability, and may charge the expense incurred by such removal to Tenant.
4. The sashes, sash doors, skylights, windows and doors that reflect or
admit light or air into the halls, passageways or other public places in the
Project shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels or other articles be placed on the window sills or in the public
portions of the Project.
5. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Project, nor placed in public portions
thereof without the prior written consent of Landlord.
6. 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 or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by Tenant to
the extent that Tenant or Tenant's agents, servants, employees, contractors,
visitors or licensees shall have caused the same.
7. Tenant shall not mark, paint, drill into (except in connection with
the hanging of art work or similar items) or in any way deface any part of the
Premises or the Project. No boring, cutting or stringing of wires shall be
permitted, except with the prior written consent of Landlord, and as Landlord
may direct.
8. Prior to leaving the Premises for the day, Tenant shall extinguish
all lights.
9. Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of the Project, or
neighboring buildings or premises, or those
Exhibit C - Page 1
<PAGE> 74
having business with them. Tenant shall not throw anything out of the doors,
windows or skylights or down the passageways.
10. Except as expressly permitted in the Lease, neither Tenant nor any
of Tenant's agents, servants, employees, contractors, visitors or licensees
shall at any time bring or keep upon the Premises any flammable, combustible or
explosive fluid, chemical or substance.
11. No additional locks, bolts or mail slots of any kind shall be
placed upon any of the doors or windows by Tenant, nor shall any change be made
in existing locks or the mechanism thereof. Tenant must, upon the termination of
the tenancy, restore to Landlord all keys of stores, offices and toilet rooms,
either furnished to, or otherwise procured by Tenant.
12. All removals, or the carrying in or out of any safes, freight,
furniture, construction material, bulky matter or heavy equipment of any
description must take place during the hours which Landlord or its agent may
reasonably determine from time to time. Landlord reserves the right to prescribe
the weight and position of all safes, which must be placed upon two-inch thick
plank strips to distribute the weight. The moving of safes, freight, furniture,
fixtures, bulky matter or heavy equipment of any kind must be made upon previous
notice to the Building Manager and in a manner and at times reasonably
prescribed by him, and the persons employed by Tenant for such work are subject
to Landlord's prior reasonable approval. Landlord reserves the right to inspect
all safes, freight or other bulky articles to be brought into the Project and to
exclude from the Project all safes, freight or other bulky articles which
violate any of these Rules and Regulations or the Lease of which these Rules and
Regulations are a part.
13. Tenant shall not purchase spring water, towels, janitorial or
maintenance or other like service from any company or persons not approved by
Landlord. Landlord shall approve a sufficient number of sources of such services
to provide Tenant with a reasonable selection, but only in such instances and to
such extent as Landlord in its reasonable judgment shall consider consistent
with security and proper operation of the Project.
14. Landlord shall have the night to prohibit any advertising or
business conducted by Tenant referring to the Project which, in Landlord's
reasonable opinion, tends to impair the reputation of the Project or its
desirability as a first class building for offices and/or commercial services
and upon notice from Landlord, Tenant shall refrain from or discontinue such
advertising.
15. Landlord reserves the right to exclude from the Project between the
hours of 6:00 p.m. and 8:00 a.m. Monday through Friday, after 1:00 p.m. on
Saturdays and at all hours Sundays and legal holidays, all persons who do not
present a pass to the Project issued by Landlord. Landlord may furnish passes to
Tenant so that Tenant may validate and issue same. Tenant shall safeguard said
passes and shall be responsible for all acts of persons in or about the Project
who possess a pass issued to Tenant.
16. Tenant's contractors shall, while in the Premises or elsewhere in
the Project, be subject to and under the control and direction of the Building
Manager (but not as agent or servant of said Building Manager or of Landlord).
Exhibit C - Page 2
<PAGE> 75
17. If the Premises is or becomes infested with vermin as a result of
the use or any misuse or neglect of the Premises by Tenant, its agents,
servants, employees, contractors, visitors or licensees, Tenant shall forthwith
at Tenant's expense cause the same to be exterminated from time to time to the
satisfaction of Landlord and shall employ such licensed exterminators as shall
be approved in writing in advance by Landlord.
18. The requirements of Tenant will be attended to only upon
application at the office of the Project. Project personnel shall not perform
any work or do anything outside of their regular duties unless under special
instructions from the office of the Landlord.
19. Canvassing, soliciting and peddling in the Project are prohibited
and Tenant shall cooperate to prevent the same.
20. No air conditioning unit or system or other apparatus shall be
installed or used by Tenant without the written consent of Landlord.
21. There shall not be used in any premises, or in the public halls,
plaza areas, lobbies, or elsewhere in the Project, either by Tenant or by
jobbers or others, in the delivery or receipt of merchandise, any hand trucks or
doilies, except those equipped with rubber tires and sideguards.
22. If required by applicable laws, Tenant shall install and maintain,
at Tenant's sole cost and expense, an adequate visibly marked (at all times
properly operational) fire extinguisher next to any duplicating or photocopying
machine or similar heat producing equipment, which may or may not contain
combustible material, in the Premises.
23. Tenant shall not use the name of the Project for any purpose other
than as the address of the business to be conducted by Tenant in the Premises,
nor shall Tenant use any picture of the Project in its advertising, stationery
or in any other manner without the prior written permission of Landlord.
Landlord expressly reserves the right at any time to change said name without in
any manner being liable to Tenant therefor.
24. Tenant shall not prepare any food nor do any cooking, operate or
conduct any restaurant, luncheonette or cafeteria for the sale or service of
food or beverages to its employees or to others, except that food and beverage
preparation by Tenant's employees using microwave ovens or coffee makers shall
be permitted provided no odors of cooking or other processes emanate from the
Premises. Tenant shall not install or permit the installation or use of any
vending machine or permit the delivery of any food or beverage to the Premises
except by such persons and in such manner as are reasonably approved in advance
in writing by Landlord.
25. The Premises shall not be used as an employment agency, a public
stenographer or typist, a labor union office, a physician's or dentist's office,
a dance or music studio, a school, a beauty salon, or barber shop, the business
of photographic, multilith or multigraph reproductions or offset printing (not
precluding using any part of the Premises for photographic, multilith or
multigraph reproductions solely in connection with Tenant's own business and/or
activities), a restaurant or bar, an establishment for the sale of
confectionery, soda, beverages, sandwiches, ice cream or baked goods, an
establishment for preparing, dispensing or consumption of food or beverages of
any kind in any manner whatsoever, or news or cigar stand,
Exhibit C - Page 3
<PAGE> 76
or a radio, television or recording studio, theatre or exhibition hall, or
manufacturing, or the storage or sale of merchandise, goods, services or
property of any kind at wholesale, retail or auction, or for lodging, sleeping
or for any immoral purposes.
26. Business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense in settings sufficient in Landlord's
judgment to absorb and prevent vibration, noise and annoyance. Tenant shall not
install any machine or equipment which causes noise, heat, cold or vibration to
be transmitted to the structure of the building in which the Premises are
located without Landlord's prior written consent, which consent may be
conditioned on such terms as Landlord may require. Tenant shall not place a load
upon any floor of the Premises exceeding the floor load per square foot that
such floor was designed to carry and which is allowed by Law.
27. Smoking is prohibited in the Premises, the Building and all
enclosed Common Areas of the Project, including all lobbies, all hallways, all
elevators and all lavatories.
28. In the event of any conflict between the provisions of the Lease
and the Rules and Regulations, the Lease shall govern.
Exhibit C - Page 4
<PAGE> 77
RIDER 1
COMMENCEMENT DATE AGREEMENT
Baker Hamilton Properties, LLC ("Landlord"), and Organic, Inc., a
_____________ corporation ("Tenant"), have entered into a certain Lease, dated
as of November _, 1999 (the "Lease").
WHEREAS, Landlord and Tenant wish to confirm and memorialize the
Commencement Date and Expiration Date of the Lease as provided for in Section
2.2(b) of the Lease;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein and in the Lease, Landlord and Tenant agree as
follows:
1. Unless otherwise defined herein, all capitalized terms shall have
the same meaning ascribed to them in the Lease.
2. The Commencement Date (as defined in the Lease) of the Lease is
_______________.
3. The Expiration Date (as defined in the Lease) of the Lease is
_________________.
4. Tenant hereby confirms the following:
(a) That it has accepted possession of the premises pursuant to the
terms of the Lease;
(b) That the Landlord Work is Substantially Complete; and
(c) That the Lease is in full force and effect.
5. Except as expressly modified hereby, all terms and provisions of the
Lease are hereby ratified and confirmed and shall remain in full force and
effect and binding on the parties hereto.
6. The Lease and this Commencement Date Agreement contain all of the
terms, covenants, conditions and agreements between the Landlord and the Tenant
relating to the subject matter herein. No prior other agreements or
understandings pertaining to such matters are valid or of any force and effect.
Exhibit C - Page 5
<PAGE> 78
TENANT: LANDLORD:
ORGANIC, INC. BAKER HAMILTON PROPERTIES, LLC.
a Delaware corporation
By:________________________________ By:________________________________
Print Name_________________________ Print Name:________________________
Its:_______________________________ Its:_______________________________
By:________________________________
Print Name_________________________
Its:_______________________________
<PAGE> 1
EXHIBIT 10.16
THIS LEASE ("Lease") entered into as of the 4th day of November, 1999,
between 233 BROADWAY OWNERS LLC, a New York limited liability company, with an
office c/o The Witkoff Group LLC, 220 East 42nd Street, New York, New York 10017
("Landlord") and ORGANIC INC., a Delaware corporation, with an office at 510
Third Street, 5th Floor, San Francisco, California 94107 ("Tenant").
FUNDAMENTAL LEASE PROVISIONS
Landlord shall lease the Premises (as hereinafter defined) to Tenant,
and Tenant shall let the Premises from Landlord, pursuant to the following
Fundamental Lease Provisions:
Premises: The Premises shall consist of the following areas upon
delivery of such areas to Tenant in accordance with the
provisions of Section 7.1(b):
(i) the entire thirteenth (13th) floor consisting of
27,845 rentable square feet and marked on the
drawing attached hereto as Exhibit A-1;
(ii) the entire fourteenth (14th) floor consisting of
26,976 rentable square feet and marked on the
drawing attached hereto as Exhibit A-2;
(iii) the entire fifteenth (15th) floor consisting of
28,098 rentable square feet and marked on the
drawing attached hereto as Exhibit A-3;
(iv) the entire sixteenth (16th) floor consisting of
28,098 rentable square feet and marked on the
drawing attached hereto as Exhibit A-4;
(v) approximately 4,000 rentable square feet located
on the eighteenth (18th) floor, and
(vi) a portion of the roof shown at a location to be
designated (subject to the reasonable approval of
Landlord and Tenant) sufficient to allow Tenant to
install a satellite antenna.
All of the foregoing located at 233 Broadway, New York,
New York, excluding all vertical penetrations, subject
to expansion pursuant to Article 38.
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Rentable Area
of Premises: On the Lease Commencement Date, 110,017 rentable square
feet, which area is composed of 27,845 rentable square
feet on the thirteenth floor, 26,976 rentable square
feet on the fourteenth floor, 28,098 rentable square
feet on the fifteenth floor, and 28,098 rentable square
feet on the sixteenth floor, subject to expansion
pursuant to the provisions of Article 38. The space
located on the eighteenth floor as long as such space is
used as storage space, shipping, receiving or a
mailroom, and the roof space, shall not be included
within the Rentable Area of the Premises.
Lease Commencement
Date: Subject to the provisions set forth in Article 40, the
first day following the occurrence of the following
events: (i) the date that Landlord and Tenant have both
executed this Lease; (ii) Landlord's lender shall have
approved this Lease; and (iii) Landlord, Landlord's
lender and Tenant have executed a subordination,
nondisturbance and attornment agreement substantially in
the form attached hereto as Exhibit B.
Term: The period of years (or any portion thereof) commencing
on the Base Rent Commencement Date and ending, unless
otherwise terminated in accordance with the terms
hereof, on the Expiration Date, as same may be extended
pursuant to the provisions of Section 2.4 or with
respect to the eighteenth floor, sooner as more
particularly set forth in Article 39.
Base Rent
Commencement Date: The first day following the sixth (6th) month
anniversary of Tenant's completion of Tenant's Work,
provided, however, the Base Rent shall commence no later
than the first day following the ninth (9th) month
anniversary of the Beneficial Occupancy Date. The
aforesaid date shall be extended on the basis of (i) one
day of extension for each day that the Base Rent is
abated under this Lease prior to the Base Rent
Commencement Date for Tenant or (ii) one day of
extension for each day of delay deemed to be a Landlord
Delay.
Base Rent: The Base Rent for the Premises (other than the storage
space and the roof space) shall be as follows:
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(i) For each Lease Year during the period commencing
on the Base Rent Commencement Date through the
fifth (5th) anniversary of the Base Rent
Commencement Date, $30.00 multiplied by the
Rentable Area of the Premises;
(ii) For each Lease Year during the period commencing
on the first day following the fifth (5th)
anniversary of the Base Rent Commencement Date
through the tenth (10th) anniversary of the Base
Rent Commencement Date, $32.50 multiplied by the
Rentable Area of the Premises; and
(iii) For each Lease Year during the period commencing
on the first day following the tenth (10th)
anniversary of the Base Rent Commencement Date
through the fifteenth (15th) anniversary of the
Base Rent Commencement Date, $35.00 multiplied by
the Rentable Area of the Premises.
The Base Rent for the eighteenth floor storage space
shall be as follows:
(i) For each Lease Year during the period commencing
on the Base Rent Commencement Date through April
30, 2003, $15.00 multiplied by the rentable area
of the eighteenth floor storage space.
There shall be no Base Rent due and payable for the roof
space.
The base rent for any storage space leased pursuant to
Section 2.6 shall be fifty percent (50%) of the then
existing Base Rent (adjusted as and when Base Rent is
adjusted under this Lease).
The Base Rent for each Lease Year shall be payable in
twelve (12) equal monthly installments.
The Base Rent for the Renewal Term shall be determined
pursuant to the provisions of Section 2.4.
The aforesaid Base Rent is not applicable to any
expansion space leased pursuant to the provisions of
Article 38. The Base Rent for such expansion space shall
be as set forth in Article 38.
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To the extent that delivery of possession of any such
floor is delayed as a result of a Landlord Delay, with
respect to the particular floor for which possession is
delayed, the Base Rent Commencement Date will be delayed
one additional day for each day of delay (i.e. if
Landlord delays delivery of such space for 30 days, the
rent abatement period shall be 13 months from the
Beneficial Occupancy Date rather than 12 months).
Tenant Improvement
Allowance: The Tenant Improvement Allowance shall equal $40.50
multiplied by the Rentable Area of the Premises.
With respect to the roof and storage space, there shall
be no Tenant Improvement Allowance.
The aforesaid amounts shall be advanced by Landlord to
Tenant in accordance with the provisions of Section 7.6.
Beneficial Occupancy
Date: As defined in Section 7.3(a).
Tenant's Proportionate
Share: 12.22%.
Tenant's Proportionate Share shall be subject to
increase pursuant to the provisions of Article 38 and
decrease pursuant to the provisions of Section 5.11.
Security Deposit: None.
Permitted Use: General and administrative office use, which may include
a cafeteria, telecommunications facilities, data
services, conference center, mail or other commonly used
facilities of Tenant for use for Tenant's employees and
such ancillary uses which are consistent with the Class
A nature of the Building and which are compatible with
general and administrative office use.
Tenant's Notice
Address/Contact: Organic, Inc.
510 Third Avenue, 5th Floor
San Francisco, California
Attention: Colleen Brennan
Telephone: (___) __________
Telecopy: (___) __________
with copies to:
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Organic, Inc.
71 West 23rd Street
New York, New York
Attention: Kate Swan
Telephone: (___) __________
Telecopy: (___) __________
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Chairperson, Real Estate Department
Telephone: (212) 468-4800
Telecopy: (212) 468-4888
and
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Legal Department
Telephone: (212) 415-3600
Telecopy: (212) 415-3530
Landlord's Notice
Address/Contact: 233 Broadway Owners LLC
c/o The Witkoff Group LLC
220 East 42nd Street
New York, New York 10017
Attention: Mr. Steven C. Witkoff
Telephone: (212) 672-4770
Telecopy: (212) 672-4726
with copies to:
The Witkoff Group LLC
220 East 42nd Street
New York, New York 10017
Attention: James F. Stomber, Jr.
Telephone: (212) 672-4770
Telecopy: (212) 672-3434
1. DEFINITIONS AND BASIC PROVISIONS.
1.1 Fundamental Lease Provisions. The Fundamental Lease Provisions set
forth on pages 1 through 5, inclusive, (the "Fundamental Lease Provisions")
shall be read in conjunction with all other provisions of this Lease applicable
thereto. Each reference
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<PAGE> 6
in this Lease to any of the Fundamental Lease Provisions shall be construed to
incorporate all of the terms provided for under such provisions. If there is any
conflict between any of the Fundamental Lease Provisions and any other
provisions of this Lease, the latter shall control. The listing in the
Fundamental Lease Provisions of monetary amounts payable by Tenant shall not be
construed to be an exhaustive list of all monetary amounts payable by Tenant
under this Lease.
1.2 Definitions. In addition to other terms defined herein, the
following terms shall have the meanings set forth herein unless the context
otherwise requires:
1.2.1 "AAA" shall mean the American Arbitration Association
and its successors.
1.2.2 "Abatement Application" shall mean Abatement Application
as defined in Section 41.8(b).
1.2.3 "Actual LMP Benefits" shall mean Actual LMP Benefits as
defined Section 41.5.
1.2.4 "ADA" shall mean ADA as defined in Section 38.5(a).
1.2.5 "Additional Rent" shall mean Tenant's Tax Payment,
Tenant's Operating Payment and any and all other sums other than Base Rent due
and payable by Tenant to Landlord under this Lease.
1.2.6 "Alterations" shall mean Alterations as defined in
Section 12.1.
1.2.7 "Applicable Laws" shall mean Applicable Laws as defined
in Section 33.2(a).
1.2.8 "Application for Payment" shall mean Application for
Payment as defined in Section 7.6(b).
1.2.9 "Approved Contractors" shall mean those contractors
selected by Tenant and approved by Landlord, such approval not to be
unreasonably withheld, delayed or conditioned.
1.2.10 "Assignment" shall mean Assignment as defined in
Section 19.1.
1.2.11 "Available for Leasing" shall mean Available for
Leasing as defined in Section 43.2(e).
1.2.12 "Available Space" shall mean Available Space as defined
in Section 43.2.
1.2.13 "Available Space Scheduled Date" shall mean Available
Space Scheduled Date as defined in Section 43.2(b).
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1.2.14 "Bankruptcy Code" shall mean the Bankruptcy Code of
1978, as same may be amended.
1.2.15 "Base Operating Expenses" shall mean the Base Operating
Expenses as defined in Section 5.1(a).
1.2.16 "Base Rent" shall mean the Base Rent as set forth in
the Fundamental Lease Provisions.
1.2.17 "Base Rent Commencement Date" shall mean the Base Rent
Commencement Date as defined in the Fundamental Lease Provisions.
1.2.18 "Base Tax Factor" shall mean Base Tax Factor as defined
in Section 5.1(b).
1.2.19 "Beneficial Occupancy Date" shall mean the Beneficial
Occupancy Date as defined in Section 7.3(a).
1.2.20 "Building" shall mean the building located on the Land
and having the street address 233 Broadway, New York, New York.
1.2.21 "Business Hours" shall mean Business Hours as defined
in Section 8.3.
1.2.22 "Calendar Year" shall mean Calendar Year as defined in
Section 5.1(f).
1.2.23 "Class E Life-Safety System" shall mean Class E
Life-Safety System as defined in Section 11.2(a).
1.2.24 "Common Area" or "Common Areas" shall mean those areas
of the Building, whether interior or exterior, open to the public, or all of the
tenants of the Building and not leased to a particular tenant, including, but
not limited to, the lobby of the Building.
1.2.25 "Condenser Water" shall mean Condenser Water as defined
in Section 8.1(f).
1.2.26 "Effective Date" shall mean Effective Date as defined
in Section 43.2(d).
1.2.27 "Election to Lease Notice" shall mean Election to Lease
Notice as defined in Section 43.2(c).
1.2.28 "Electrical Rates" shall mean Electrical Rates as
defined in Section 8.6(d).
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1.2.29 "Escalation Year" shall mean Escalation Year as defined
in Section 5.1(d).
1.2.30 "Event of Default" shall mean an Event of Default as
defined in Section 25.1.
1.2.31 "Existing Lease" shall mean Existing Lease as defined
in Section 2.4.
1.2.32 "Expansion Space Tenant Improvement Allowance" shall
mean Expansion Space Tenant Improvement Allowance as defined in Section 38.5(b).
1.2.33 "Expiration Date" shall mean 11:59 p.m., New York, New
York time on the last day of the month in which the fifteenth (15th) anniversary
of the Base Rent Commencement Date, subject to extension pursuant to the
provisions of Section 2.5.
1.2.34 "External Shafts" shall mean External Shafts as defined
in Section 7.2(b).
1.2.35 "Fair Market Rental Value" shall mean the annual rate
or rates a prospective tenant would pay for rental of premises of comparable
size and quality in similar office buildings in the area of the Building for a
term comparable to the then remaining Term or renewal term, as the case may be,
and otherwise on terms comparable to the terms and provisions of the Lease,
provided that Fair Market Rental Value determined in connection with any renewal
Term shall include the terms and conditions of this Lease for such renewal term,
including brokerage commissions, if any, arising in connection therewith, and
with respect to any expansion space, the other terms and conditions set forth in
Article 38. Fair Market Rental Value shall be determined upon the assumption
that (i) the types or forms of rent which a landlord would be able to obtain in
a new lease made under then-existing market conditions shall be similar to the
forms of Rent provided for in Articles 4 and 5 and consist of a base rentable
rate and additional rent payments based upon a tenant's proportionate share of
real estate taxes, operating expenses and other charges and expenses payable by
Tenant hereunder, (ii) any escalation for operating expenses will be based upon
actual increases in operating costs, and (iii) the prospective tenant will
accept the premises "as is" and will have the benefit of all improvements and
installments which are the property of the Landlord within the Premises.
1.2.36 "First Party" shall mean First Party as defined in
Section 2.5(d).
1.2.37 "Force Majeure" shall mean Force Majeure as defined in
Section 37.7.
1.2.38 "Fundamental Lease Provisions" shall mean the
Fundamental Lease Provisions as defined in Section 1.1.
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<PAGE> 9
1.2.39 "Further Benefits" shall mean Further Benefits as
defined in Section 41.9.
1.2.40 "Further Cooperation" shall mean Further Cooperation as
defined in Section 41.9.
1.2.41 "General Contractor" shall mean any licensed general
contractor retained by Tenant and approved by Landlord, which contractor must be
an Approved Contractor. Tenant shall give Landlord, Landlord's managing agent or
their respective affiliates bona fide opportunities to bid on all of the
Tenant's Work and all Alterations as a potential General Contractor and shall
not discriminate against Landlord, Landlord's managing agent or their respective
affiliates.
1.2.42 "Governmental Authorities" shall mean the United
States, the State of New York, the City of New York and all political
subdivisions thereof, and any agency, department, commission, board, bureau or
instrumentality of any of them, now or hereafter having or claiming jurisdiction
over the Premises.
1.2.43 "Hazardous Materials" shall mean Hazardous Materials as
defined in Section 33.6.
1.2.44 "Holidays" shall mean Holidays as defined in Section
8.3.
1.2.45 "HVAC" shall mean HVAC as defined in Section 8.1(f).
1.2.46 "Index" shall mean the Consumer Price Index as measured
by the U.S. Department of Labor revised Consumer Price Index for urban wage
earners and clerical workers, New York-Northeastern N.J. region, all items
figure, (1982-84 - 100) published by the Bureau of Labor Statistics, or if such
index shall be ceased to be published, such comparable index reasonable selected
by the Landlord and adjusted so as to fairly reflect increases in the cost of
living.
1.2.47 "Insurance Requirements" shall mean Insurance
Requirements as defined in Section 10.1.
1.2.48 "Land" shall mean the parcel of land more particularly
described in Exhibit C annexed hereto.
1.2.49 "Landlord" shall mean 233 Broadway Owners LLC, a New
York limited company, its successors or assigns.
1.2.50 "Landlord's Approval Criteria" shall mean Landlord's
Approval Criteria as defined in Section 7.2(c).
1.2.51 "Landlord Delay" shall mean Landlord Delay as defined
in Section 7.1(c).
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1.2.52 "Landlord's Restoration Work" shall mean Landlord's
Restoration Work as defined in Section 23.2.
1.2.53 "Landlord's Statement" shall mean Landlord's Statement
as defined in Section 5.3(b).
1.2.54 "Landlord's Work" shall mean Landlord's Work as defined
in Section 7.1(a).
1.2.55 "Landlord's Work Modifications" shall mean Landlord's
Work Modifications as defined in Section 7.1(e).
1.2.56 "Lease" shall mean the Lease as defined in the first
paragraph.
1.2.57 "Lease Commencement Date" shall mean the Lease
Commencement Date as defined in the Fundamental Lease Provisions.
1.2.58 "Lease Notice" shall mean Lease Notice as defined in
Section 43.2(c).
1.2.59 "Lease Year" or "Lease Years" shall mean each twelve
(12) month period beginning on the Term Commencement Date and each twelve (12)
month period thereafter beginning on the anniversary of the Term Commencement
Date; provided, however, if the Term Commencement Date is a day other than the
first day of a calendar, the first "Lease Year" shall include the number of days
from the Lease Commencement Date through the last day of the calendar month in
which the Lease Commencement Date occurs.
1.2.60 "Legal Requirements" shall mean Legal Requirements as
defined in Section 10.1.
1.2.61 "LMP Abatement Benefits" shall mean LMP Abatement
Benefits as defined in Section 41.3.
1.2.62 "Lower Manhattan Plan" shall mean Lower Manhattan Plan
as defined in Section 4 1.1.
1.2.63 "Net Profits" shall mean Net Profits as defined in
Section 19.4(c).
1.2.64 "Notice" shall mean a Notice as defined in Section 3
1.1(b).
1.2.65 "Operating Expenses" shall mean Operating Expenses as
defined in Section 5.1(e).
1.2.66 "Permitted Use" shall mean Permitted Use as defined in
the Fundamental Lease Provisions.
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1.2.67 "Premises" shall mean the Premises as defined in the
Fundamental Lease Provisions.
1.2.68 "Prime Rate" shall mean the Prime Rate as defined in
Section 6.1.
1.2.69 "Related Corporation" shall mean any natural person,
corporation, partnership, joint venture, association or other business or legal
entity which directly or indirectly controls, is controlled by, or is under
common control with Tenant or Omnicom Group Inc., but only for such period as
such Related Corporation occupies the portion of the Premises (or the entire
Premises, in the case of an Assignment) for any of the Permitted Uses and such
Related Corporation continues to qualify as a Related Corporation, under the
terms of this Lease. "Control" shall be deemed to mean ownership or control of
not less than twenty-five percent (25%) of all of the outstanding voting stock
of such corporation or not less than twenty-five percent (25%) of all of the
legal and equitable interest in any other entity. For all purposes under this
Lease, Omnicom Group Inc. shall be deemed to be a Related Corporation.
1.2.70 "Rent" shall include Base Rent and all Additional Rent
and other sums required to be paid by Tenant to Landlord under this Lease.
1.2.71 "Rentable Area of the Premises" shall mean the Rentable
Area of the Premises as defined in the Fundamental Lease Provisions.
1.2.72 "Rent Inclusion Date" shall mean Rent Inclusion Date as
defined in Section 8.6(b).
1.2.73 "Right of First Offer" shall mean Right of First Offer
as defined in Section 43.2(a).
1.2.74 "Second Party" shall mean Second Party as defined in
Section 2.5(d).
1.2.75 "Second Period" shall mean Second Period as defined in
the Fundamental Lease Provisions.
1.2.76 "Security Area" shall mean Security Area as defined in
Section 3 5.1.
1.2.77 "Structural Alteration" shall mean an Alteration which
(i) affects a Building system (including, without limitation, utility, life
safety, electrical, plumbing, sewage line and HVAC systems), (ii) affects the
structural integrity of the Building, or (iii) involves a vertical penetration
of the Building, including core drilling or other similar item.
1.2.78 "Substantially Completed" shall mean Substantially
Completed as defined in Section 7.3(b).
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1.2.79 "Successor Landlord" shall mean a Successor Landlord as
defined in Section 20.2.
1.2.80 "Sublease" shall mean a Sublease as defined in Section
19. 1.
1.2.81 "Superior Landlord" shall mean a Superior Landlord as
defined in Section 20.1.
1.2.82 "Superior Lease" shall mean a Superior Lease as defined
in Section 20.1.
1.2.83 "Superior Mortgage" shall mean a Superior Mortgage as
defined in Section 20.1.
1.2.84 "Superior Mortgage" shall mean a Superior Mortgagee as
defined in Section 20.1.
1.2.85 "Taxes" shall mean Taxes as defined in Section 5.1(g).
1.2.86 "Tax Year" shall mean Tax Year as defined in Section
5.1(c).
1.2.87 "Tenant" shall mean the Tenant as defined in Section
2.6.
1.2.88 "Tenant Delay" shall mean Tenant Delay as defined in
Section 7.1(b).
1.2.89 "Tenant Improvement Allowance" shall mean Tenant
Improvement Allowance as defined in the Fundamental Lease Provisions.
1.2.90 "Tenant's Corridor Signs" shall mean Tenant's Corridor
Signs as defined in Section 14.1.
1.2.91 "Tenant's Electric Consumption" shall mean Tenant's
Electric Consumption as defined in Section 8.6(b).
1.2.92 "Tenant's Furnishings" shall mean Tenant's Furnishings
as defined in Section 7.4(b).
1.2.93 "Tenant's Modifications" shall mean Tenant's
Modifications as defined in Section 7.2(c).
1.2.94 "Tenant's Operating Payment" shall mean Tenant's
Operating Payment as defined in Section 5.3(a).
1.2.95 "Tenant's Plans" shall mean the Tenant's Plans as
defined in Section 7.2(c).
1.2.96 "Tenant's Proportionate Share" shall mean a fraction,
expressed as a percentage, the numerator of which is the Rentable Area of the
Premises
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(as same may be increased in accordance with the provisions of this Lease) and
the denominator of which is 900,642. Tenant's Proportionate Share shall be
calculated each time that the Rentable Area of the Premises changes.
1.2.97 "Tenant's Punch List Items" shall mean Tenant's Punch
List Items as defined in Section 7.5.
1.2.98 "Tenant's Restoration Work" shall mean Tenant's
Restoration Work as defined in Section 23.3.
1.2.99 "Tenant's Tax Payment" shall mean Tenant's Tax Payment
as defined in Section 5.2(a).
1.2.100 "Tenant's Work" shall mean Tenant's Work as defined in
Section 7.2(a).
1.2.101 "Term" shall mean the Term as defined in the
Fundamental Lease Provisions.
1.2.102 "Term Commencement Date" shall mean the Term
Commencement Date as defined in the Fundamental Lease Provisions.
1.2.103 "Three Broker Method" shall mean three Broker Method
as defined in Section 2.5(d).
1.2.104 "Year-End Statement" shall mean Year-End Statement as
defined in Section 5.3(c).
2. LANDLORD'S AUTHORITY; PREMISES; TERM, RENEWAL.
2.1 Landlord is the owner of the Land and the Building and Landlord
represents and warrants that it has full right and authority to lease the
Premises to Tenant and to otherwise enter into this Lease on the terms and
conditions set forth herein.
2.2 Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises, together with all improvements and appurtenances attached thereto or
installed therein. All portions of the Premises shall be delivered by Landlord
and Tenant in accordance with Section 7.1(b) herein.
2.3 The term of this Lease shall commence on the Lease Commencement
Date and end, unless otherwise terminated pursuant to the terms hereof, on the
Expiration Date, both dates inclusive.
2.4 (a) Provided no Event of Default under this Lease has occurred
at the time Notice is given or at the expiration of the initial Term and that
Tenant is in occupancy of the Premises at the expiration of the initial Term,
Tenant shall have the right and option, to renew the Term for one (1)
consecutive period of five (5) years. It shall also be a precondition to such
renewal that Omnicom Group Inc. confirm in writing
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that the Guaranty of Lease (to the extent same has not terminated in accordance
with its terms) has been extended to cover the renewal period, to reaffirm all
of the terms and conditions of such Guaranty and to affirm that Omnicom has no
defenses, offsets, or counterclaims to the enforcement of the Guaranty existing
on the date of the reaffirmation. In the event Omnicom does not so reaffirm the
Guaranty (to the extent same has not terminated in accordance with its terms),
Tenant must deliver to Landlord a substitute guarantor, acceptable to Landlord
in its sole discretion, who shall execute a substitute Guaranty of Lease in
substantially the form attached hereto as Exhibit D. Tenant may exercise such
option by giving Notice to Landlord of such exercise not less than thirteen (13)
months prior to the expiration of the initial Term. In such Notice, Tenant shall
specify whether Omnicom shall confirm its guaranty or shall specify the
substitute guarantor (to the extent same has not terminated in accordance with
its terms). If a substitute guarantor is required hereunder and is proposed,
Tenant shall also simultaneously deliver to Landlord sufficient financial
information to enable Landlord to judge the acceptability of such guarantor. The
renewal Term shall commence immediately upon the expiration of the initial Term,
and, upon the giving of such Notice and delivery of such extended guaranty from
Omnicom or such substitute guaranty by a guarantor acceptable to Landlord, as
the case may be, this Lease shall automatically be extended for the five (5)
year period(s) and no instrument of renewal need be executed. At the time Tenant
gives Notice of its election to renew, Tenant shall also specify in such Notice
the full floors of the Premises which Tenant desires to continue its occupancy
and those full floors which Tenant desires to vacate. Tenant's Notice of the
floors it desires to occupy and to vacate, as the case may be, shall be
irrevocable without Landlord's prior approval. Within sixty (60) days after
receipt of Tenant's Notice, Landlord shall give Tenant Notice of the proposed
Base Rent for the portion of the Premises being renewed and if a substitute
guarantor is proposed, the acceptability of such substitute guarantor. In the
event that Tenant fails to give such Notice to Landlord as herein provided or
fails to obtain an extension of the Omnicom guaranty or fails to obtain a
substitute guarantor which is acceptable to Landlord, as the case may be, this
Lease shall automatically terminate at the end of the initial Term and Tenant
shall have no further right or option to extend this Lease. Tenant's right to so
extend the Term is personal to Organic or a Related Corporation and may not be
exercised by any independent assignee (except a permitted assignee of the entire
Premises) or subtenant.
(b) Tenant may exercise such renewal option for less than the
entire Premises, provided, however, if Tenant is renewing this Lease for less
than the entire Premises, Tenant may only renew this Lease:
(i) if Tenant occupies a full floor, for the entire
floor;
(ii) if Tenant occupies more than one full floor, for
contiguous full floors;
(iii) if Tenant occupies contiguous full floors in a
block of space, from the top or from the bottom of such block of space;
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(iv) if Tenant occupies a portion of a floor, for that
portion of such floor; and
(v) if Tenant occupies a full floor and a portion of a
floor, for the entire floor and the portion of such floor so occupied by Tenant.
(c) The renewal Term shall be upon the same covenants,
agreements, provisions, terms and conditions as the original Term, except that
Tenant shall have no further options to renew or extend the Term beyond the
expiration of the renewal term and that annual Base Rent during the first
renewal Term for all space other than the 18th floor storage space shall equal
the Fair Market Rental Value of the Premises as of the commencement date of the
renewal Term. Within thirty (30) days after Landlord delivers to Tenant
Landlord's proposed Base Rent, Tenant shall deliver to Landlord its proposed
Base Rent. If Landlord and Tenant agree on a Base Rent for the renewal Term, the
new Base Rent shall be the rent so agreed upon and same shall be effective as of
the first day of the renewal Term. If Landlord and Tenant cannot agree on the
Fair Market Rental Value, within thirty (30) days after Tenant delivers to
Landlord Notice of its proposed Base Rent, or if Tenant objects to Landlord's
proposed Fair Market Rental Value, Tenant may rescind its Notice to extend the
Term. Such Notice shall be irrevocable and this Lease shall automatically
terminate at the end of the applicable initial Term. If Tenant does not rescind
its Notice as aforesaid, the Fair Market Rental Value shall be determined by the
Three Broker Method.
(d) The "Three Broker Method" used to determine Fair Market
Rental Value shall be applied as follows. Either Landlord or Tenant (the "First
Party") may initiate a determination of the Fair Market Rental Value by giving
Notice to the other (the "Second Party") of the name of a real estate broker who
has at least ten (10) years of experience as a broker for the leasing of office
space in downtown Manhattan and is not related to or affiliated with either
Landlord or Tenant or any affiliate of either of the foregoing parties. Within
ten (10) days after receipt of such Notice, the Second Party shall name a real
estate broker who meets the same criteria by Notice to the First Party. If the
Second Party fails to name such a broker within such ten (10) day period, then
the Fair Market Rental Value established by the broker named by the First Party
shall be the Fair Market Rental Value. If the Second Party does name such a
broker within such ten (10) day period, then within fifteen (15) days after the
Second Party names a broker the two brokers shall together appoint a third
broker who meets the same criteria and within an additional fifteen (15) days
the three brokers shall jointly determine the Fair Market Rental Value. Each
broker shall consider only the components set forth in the definition of Fair
Market Rental Value. The Fair Market Rental Value determined by the brokers
shall not be greater than the Fair Market Rental Value proposed by Landlord, nor
less than the Fair Market Rental Value proposed by Tenant. If the three brokers
cannot agree to a Fair Market Rental Value, the average of the determinations of
the brokers who are the closest to each other shall be binding and conclusive
(or, if the middle broker is exactly midway between the other two, the middle
determination shall be binding and conclusive). Each party shall pay all costs,
fees and expenses of the broker selected by it and the parties shall equally
share the costs, fees and expenses of the third party broker.
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2.5 In the event Tenant shall lease any additional space in the
Building other than pursuant to the expansion options as described in Article
38, such space shall be measured based upon the then prevailing measurement
standards of the New York Real Estate Board, on the basis of a full floor with a
twenty percent (20%) loss factor.
2.6 Tenant shall have the option for a thirty (30) day period
commencing on the date of this Lease to elect to lease up to 10,000 rentable
square feet for storage space within the Building. Such space shall be used only
for storage and shall be at a location designated by Landlord and reasonably
acceptable to Tenant. The Base Rent for such space shall be fifty percent (50%)
of the existing Base Rent, adjusted as and when Base Rent is adjusted under this
Lease. Tenant may exercise this option by delivery to Landlord of a Notice
setting forth the exercise of this option at any time with the aforesaid thirty
(30) day period.
3. RENTABLE AREA.
3.1 For the purposes of this Lease the Building shall consist of
900,642 rentable square feet. The parties have had an opportunity to measure the
Premises and all rentable square footages set forth in this Lease are binding
and conclusive, notwithstanding any subsequent measurement or change in
measurement methodology.
4. BASE RENT.
4.1 During the period beginning on the Base Rent Commencement Dates to
and including the Expiration Date, the Base Rent for the Premises shall be at
the rate set forth in the Fundamental Lease Provisions for the appropriate
period described therein. All payments of Base Rent shall be payable by Tenant,
in United States dollars, in equal monthly installments as set forth in the
Fundamental Lease Provisions, on or before the first day of each month, in
advance, payable to Landlord or Landlord's agent at the address to which Notices
to Landlord are to be sent hereunder, or such other place as Landlord may from
time to time designate by a Notice, without any prior demand therefor and
without any deductions or set-off whatsoever, except as otherwise permitted by
this Lease. If any Base Rent Commencement Date or the Expiration Date occurs on
a day other than the first or last day, respectively, of a calendar month, then
the Base Rent for the month in question shall be pro-rated on a per diem basis
based on the number of days in the month in question.
4.2 Tenant shall commence the payment of Base Rent on the applicable
Base Rent Commencement Dates.
5. ADDITIONAL RENT - ESCALATIONS.
5.1 For the purposes of this Lease, the following terms shall have the
following meanings:
(a) "Base Operating Expenses" shall mean Operating Expenses
for Calendar Year 2000, subject to any increase for additional services as more
particularly set forth in clause (xix) of this Section 5.1(a).
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(b) "Base Tax Factor" shall mean Taxes for the 2000-2001 Tax
Year.
(c) "Tax Year" shall mean the twelve (12) month period
commencing July 1 of each year, or such other period of twelve (12) months as
the fiscal year for real estate tax purposes in the City of New York.
(d) "Escalation Year" shall mean each Calendar Year which
shall include any part of the Term.
(e) "Operating Expenses" shall mean all expenses, costs and
disbursements which Landlord shall pay or become obligated to pay because of, or
in connection with, the ownership, management, operation, repair and maintenance
of the Building or the Land, including, without limitation:
(i) Wages, salaries, disability benefits, pensions,
contributions, hospitalization, retirement plans, all fringe benefits and group
insurance and other indirect expenses respecting employees of Landlord and
Landlord's contractors and agents engaged in the operation, maintenance and
repair of the Building or the Land up to and including the grade of building
manager; uniforms and working clothes for such parties and the cleaning thereof;
expenses imposed upon Landlord pursuant to any requirements of Governmental
Authorities or any collective bargaining agreement with respect to such
employees; worker's compensation insurance, payroll, social security,
unemployment and other similar taxes with respect to such employees;
(ii) All supplies and materials used in the operation,
management, maintenance and repair of the Building;
(iii) Fuel expenses for heating, ventilating and air
conditioning for the Building and any other utility expenses relating to the
Building;
(iv) Water and sewer rents or charges, however termed;
(v) Cost of operation, maintenance, service, repair
and replacement of the Building systems which provide heating, ventilating and
air conditioning to the Building;
(vi) Cost of repairs, maintenance and replacement of
heating, ventilating and air conditioning equipment installed by Landlord and
located inside the on-floor heating, ventilating and air conditioning machinery
rooms excluding therefrom any supplemental heating, ventilating and air
conditioning equipment installed by Tenant servicing the Premises;
(vii) Cost of all maintenance and service for the
Common Areas and the equipment therein, including but not limited to, security,
metal, all Building elevators and elevator cab maintenance (whether or not such
elevator services the Premises), lobby and interior and exterior plaza
maintenance, lobby decoration and display, removal of snow, ice and debris,
cleaning services, trash removal,
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Common Area landscape maintenance and interior and exterior window repairs,
replacements and cleaning;
(viii) Expenditures for capital improvements, which
expenditures under generally accepted accounting principles, consistently
applied, are required to be amortized over the useful life of the capital
improvement, including (w) expenditures for capital improvements for equipment
used in cleaning, maintenance and providing Building services, (x) expenditures
for equipment which reduces any component cost included in Operating Expenses,
(y) expenditures for capital improvements required by Governmental Authorities
for capital improvements required by Governmental Authorities in the future but
not required on the date hereof, and (z) expenditures for equipment or
improvements acquired or made in lieu of repair, maintenance or replacement,
which expenditures reduce any component cost included in Operating Expenses,
provided that the amount included in Operating Expenses in any Calendar Year
shall not exceed the reduction in the component cost of Operating Expenses
resulting from such expenditures in such Calendar Year;
(ix) Fire, extended coverage, special extended
coverage, owner's protective, and other casualty coverage, boiler and machinery,
sprinkler, apparatus, public liability and umbrella liability and property
damage, rent or rental value and plate glass insurance and any other insurance
which Landlord may deem necessary or which is required by any mortgagee of the
Building and/or the Land;
(x) Maintenance of the exterior of the Building
(including interior and exterior window repairs, replacements and cleaning) and
improvements which are appropriate for the continued operation of the Building
as a Class A office building but excluding repairs and general maintenance paid
by the proceeds of insurance or by Tenant or other third parties;
(xi) Rental of equipment used in cleaning and
maintenance;
(xii) Painting and decoration of non-tenant areas;
(xiii) A property management fee not to exceed two
percent (2%) per annum;
(xiv) Cost of maintenance, operation and inspection of
any sprinkler system and alarm system;
(xv) Cost of extermination service administered in the
Building and general office areas of tenants (but not any kitchen, cafeteria or
special food preparation areas) for rodent and pest control;
(xvi) The cost of any additional services not provided
to the Building at the commencement of the Term but thereafter provided by
Landlord in order to comply with Legal Requirements;
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(xvii) Electricity for the operation of elevators,
Building systems and the Building (not otherwise provided directly to or
otherwise chargeable to tenants, but including certain convenience outlets on
each floor of the Building and any voltage loss resulting from the supply of
electricity to any floors in the Building) and for lighting of Common Areas (the
division of electricity between electricity chargeable to tenants and
electricity chargeable to the Building is 70% for Building-wide electric and 30%
for tenants' electric);
(xviii) Sales, excise and other taxes imposed upon the
services, materials or expenses enumerated herein; and
(xix) Subject to the exclusions from Operating
Expenses set forth below, such other expenses, costs and disbursements paid or
incurred by Landlord for services (A) which are initially provided to the
Building after the date of this Lease, provided that the cost of providing such
services during the initial twelve (12) month period that such services are
provided to the Building shall be included with Base Operating Expenses
(thereafter Tenant shall be responsible for its Proportionate Share of any
increase in the cost of such service), and (B) upon Tenant's prior written
consent, for additional services not provided to the Building as of the date of
this Lease.
"Operating Expenses" shall be deemed not to include the
following:
(i) The portion of electric allocable to tenants under
Section 5.1 (e)(vvii) for supplying electric current, ventilating or air
conditioning, or supplying other services, for use within premises occupied by
tenants;
(ii) Real estate brokerage and leasing commissions
incurred by Landlord in connection with the leasing of the Building;
(iii) Wages, salaries or other compensation or
benefits paid to any persons above the grade of building manager,
(iv) Expenditures for capital improvements other than
as set forth in Section 5. 1 (e)(viii), except that Operating Expenses shall
include the cost during the Term, which costs under generally accepted
accounting principles, consistently applied, are required to be amortized over
the useful life of the capital improvement, of (w) expenditures for capital
improvements for equipment used in cleaning, maintenance and providing Building
services, (x) expenditures for equipment which reduces any component cost
included in Operating Expenses, (y) expenditures for capital improvements
required by Governmental Authorities in the future but not required on the date
hereof, and (z) expenditures for equipment or improvements acquired or made in
lieu of repair, maintenance or replacement, which expenditures reduce any
component cost included in Operating Expenses, provided that the amount included
in Operating Expenses in any Calendar Year shall not exceed the reduction in the
component cost of Operating Expenses resulting from such expenditures in such
Calendar Year;
(v) Advertising and promotional expenditures incurred
by Landlord for the Building;
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(vi) Legal fees incurred in disputes with tenants and
other legal and auditing fees (including legal fees incurred for services which
do not generally benefit the tenants of the Building on a Building wide basis),
other than legal and auditing fees incurred (x) in connection with the
maintenance, management and operation of the Land and/or the Building or (y) in
connection with the preparation of statements required pursuant to this Article
5 or (z) in connection with any assessment reduction challenge, appeal or other
contest by Landlord to reduce Taxes or any other component of Operating
Expenses;
(vii) Depreciation and amortization of the Building,
except that Operating Expenses shall include annual depreciation and
amortization of capital improvements for expenditures covered under clause (iv)
above;
(viii) Expenses for preparing, renovating or
redecorating space to be occupied by tenants as part of their demised premises
or for tenants renewing their leases;
(ix) Taxes;
(x) Any rent under any ground or underlying lease;
(xi) Debt service on any mortgage encumbering the Land
or Building;
(xii) Transfer, gains, franchise, inheritance, estate
and income taxes imposed upon Landlord;
(xiii) Costs for which Landlord receives compensation
through the proceeds of insurance or for which Landlord would have been
compensated by insurance had it carried the coverage required under the Lease;
(xiv) Costs incurred with respect to a sale of all or
any portion of the Building or any interest therein or in any person of whatever
tier owning an interest therein;
(xv) Costs of any financing and refinancing of
mortgage loans encumbering the Building;
(xvi) Amounts otherwise includable in Operating
Expenses but reimbursed to Landlord directly by Tenant or other tenants;
(xvii) Lease takeover costs incurred by Landlord in
connection with leases in the Building;
(xviii) To the extent any costs includable in
Operating Expenses are incurred with respect to both the Building and other
properties (including, without limitation, salaries, fringe benefits and other
compensation of Landlord's personnel who provide services to both the Building
and other properties), there shall be
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excluded from Operating Expenses a fair and reasonable percentage thereof which
is properly allocable to such other properties;
(xix) Cost of any judgment, settlement, or arbitration
award resulting from any liability of Landlord (other than a liability for
amounts otherwise includable in Operating Expenses hereunder);
(xx) Cost of providing any service customarily
provided by a managing agent as part of its base or standard management fee;
(xxi) Any profits that Landlord receives on so-called
sundry charges to individual tenants;
(xii) Costs relating to withdrawal liability or
unfunded pension liability under the Multi-Employer Pension Plan Act or similar
law except to the extent that such costs would otherwise be included in fringe
benefits, which are includable as Operating Expenses;
(xxiii) Cost of installing, operating and maintaining
any specialty facility, such as an observatory, broadcasting facilities,
luncheon club, athletic or recreational club, child care or similar facility,
cafeteria or dining facility;
(xxiv) Costs of acquisition of any sculptures,
paintings and other objects of art located within or outside the Building,
provided, however, the costs of maintaining such objects in the public areas of
the Building shall be included in Operating Expenses;
(xxv) Any profits received by Landlord on account of
computations where the aggregate of the proportionate shares for all tenants in
the Building equals a number greater than 100;
(xxvi) Except as otherwise provided in this Lease,
costs of remedying violations of municipal building code requirements or other
Legal Requirements that arise by reason of Landlord's failure to construct,
maintain or operate the Building or any part thereof in compliance with such
building code requirements or other Legal Requirements and regulations (but not
for violations caused by Tenant); and
(xxvii) Costs incurred in connection with making any
additions to, or building additional stories on, the Building or its plazas, or
adding buildings or other structures adjoining the Building (which increase the
square footage of the Building), or connecting the Building to other structures
adjoining the Building.
In computing Operating Expenses, Landlord shall include only
those expenses, costs and disbursements which Landlord has paid, or is required
to amortize pursuant to Section 5.1(e)(viii), because of or in connection with
the ownership, management, operation, repair and maintenance of the Building
and/or the Land, in a manner consistent with the standards of Class A office
buildings, all of which shall be subject to the foregoing exclusions from
Operating Expenses set forth in this
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Section 5.1(e). There shall be credited as a deduction to Operating Expenses all
amounts collected from specific tenants of the Building to the extent the amount
billed to such tenant and subsequently collected were included in Operating
Expenses. Operating Expenses shall be net only and for that purpose shall be
deemed reduced by the amount of all reimbursements, recoupments, payments,
discounts, credits, reductions, allowances or the like actually received by
Landlord in connection with Operating Expenses; provided, however, that Landlord
shall include in Operating Expenses the reasonable costs and expenses, if any,
incurred by Landlord in obtaining such reimbursements, recoupments, payments,
discounts, credits, reductions, allowances or the like; provided, further,
however, Landlord shall use reasonable and customary efforts to take any action
to receive such reimbursement, recoupment, payment, discount, credit, reduction,
allowance or the like. In the event Landlord obtains any services, equipment or
materials from a Related Corporation of Landlord, the cost of such services,
equipment or material shall not exceed the reasonable, fair market value of such
services, equipment or materials as if same was obtained from an independent,
non-affiliated party.
Operating Expenses shall be categorized in the categories set
forth on Exhibit E.
In the event the Building is not ninety five percent (95%)
occupied by tenants during all or any portion of a Calendar Year, then Landlord
shall make appropriate adjustments in the cost of those components of Operating
Expenses which vary with the occupancy level of the Building, to reflect the
Operating Expenses which would have been paid or incurred by Landlord for such
Calendar Year or portion thereof had the Building been ninety-five percent (95%)
occupied by tenants during such Calendar Year or portion thereof.
(f) "Calendar Year" shall mean each calendar year, commencing
with the calendar year in which the Term Commencement Date occurs, and each
subsequent calendar year in which any part of the Term falls, through and
including the calendar year in which the Term expires.
(g) "Taxes" shall mean all real estate taxes and/or payments
in lieu of real estate taxes and assessments, special or otherwise, levied or
assessed upon the Land and/or the Building, including any business improvement
district taxes. Should the City of New York, the State of New York, or any
political subdivision thereof, or any other Governmental Authority having
jurisdiction over the Land and/or the Building (i) impose a tax, assessment,
charge or fee, in substitution (whether in whole or in part) for such real
estate taxes or payments in lieu of real estate taxes, or (ii) impose an income
or franchise tax or a tax on rents in substitution (whether in whole or in part)
for such real estate taxes, all such taxes, assessments, charges or fees shall
be deemed to constitute Taxes hereunder. Taxes shall not include any
inheritance, estate, succession, transfer, gift, franchise, net income or
capital stock tax imposed against Landlord, or any penalties, interest or late
charges incurred in connection therewith. Tenant shall not be responsible for
any increase in Taxes resulting from physical additions or improvements
(excluding any tenant improvements and/or capital expenditures) to the Building
or any sale or refinancing of the Building.
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5.2 (a) If Taxes payable in any Tax Year falling wholly or
partially within the Term shall be in such amount as shall constitute an
increase above the Base Tax Factor, Tenant shall pay as Additional Rent for such
Tax Year a sum ("Tenant's Tax Payment") equal to Tenant's Proportionate Share of
such excess. Tenant's Tax Payment for each Tax Year shall be due and payable in
two semi-annual installments on the first day of July and January during each
Tax Year and shall be set forth in the first instance in a Landlord's Statement
given to Tenant. If a Landlord's Statement is furnished to Tenant after the
commencement of a Tax Year in respect of which such Landlord's Statement is
rendered, Tenant shall, within thirty (30) 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 any overpayment. Landlord shall
either pay to Tenant, or, at Tenant's election, credit against subsequent
payments of Base Rent and Additional Rent under this Lease the amount of Tenants
overpayment If there shall be any increase in Taxes for any Tax Year, whether
during or after such Tax Year, or if there shall be any decrease in the Taxes
for any Tax Year during such Tax Year, Landlord may furnish a revised Landlord's
Statement for such Tax Year, and Tenant's Tax Payment for such Tax Year shall be
adjusted and paid or credited or refunded, as the case may be, substantially in
the same manner as provided in the preceding sentence. If during the Term, Taxes
are required to be paid (either to the appropriate taxing authorities or as tax
escrow payments to the Superior Landlord or the Superior Mortgagee), in full or
in monthly, quarterly, or other installments (but no more frequently than
monthly) on any other date or dates than as presently required, then Tenant's
Tax Payments shall be correspondingly accelerated or revised so that said
Tenant's Tax Payments are due at least thirty (30) days prior to the date
payments are due to the taxing authorities or the Superior Landlord or the
Superior Mortgagee. If Landlord makes an early payment or prepayment of Taxes
entitling Landlord to a discount and if Tenant shall have paid Tenant's Tax
Payment to Landlord with respect to such discounted Taxes in advance of
Landlord's early payment or prepayment, then Tenant shall be entitled to
Tenant's Proportionate Share of such discount. In addition, if any tax exemption
or abatement relating to all or part of the Land applies generally to real
property located in downtown Manhattan (as opposed to resulting from a specific
exemption or abatement program related to the specific acts of Landlord or of
any tenant), then Tenant shall be entitled to Tenant's Proportionate Share (the
share in effect for the Tax Year in question) of such abatement or exemption.
Otherwise, the benefit of any discount for any early payment or prepayment of
Taxes, as well as any tax exemption or abatement relating to all or any part of
the Land, shall accrue solely to the benefit of Landlord and such discount or
exemption shall not be subtracted from Taxes.
(b) If the real estate tax fiscal year of The City of New York
shall be changed at any time after the date hereof, any Taxes for such fiscal
year, a part of which is included within a particular Tax Year and a part of
which is not so included, shall be apportioned on the basis of the number of
days in such fiscal year included in the particular Tax Year for the purposes of
making the computations under this Section.
(c) If Landlord shall receive a refund of Taxes for any Tax
Year, Landlord shall, at Landlord's election, either credit Tenant's
Proportionate Share (the share in effect for the Tax Year in question) of such
refund against subsequent
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payments of Base and Additional Rent under this Lease, or pay Tenant's
Proportionate Share (the share in effect for the Tax Year in question) of the
refund to Tenant, in either case, after deducting from such refund the costs and
expenses incurred by Landlord in obtaining such refund. Landlord shall be
obligated to use its best efforts to file any application or institute any
proceeding seeking a reduction in Taxes or assessed valuation. Tenant agrees to
cooperate fully with Landlord in prosecuting any such reduction.
(d) Tenant's Tax Payment and any credits with respect thereto
as provided in this Section shall be made as provided in this Section regardless
of the fact that Tenant may be exempt, in whole or in part, from the payment of
any taxes by reasons of Tenant's diplomatic or other tax exempt status or for
any other reason whatsoever.
(e) In the event of a termination of this Lease, any
Additional Rent under this Section shall be paid or adjusted within thirty (30)
days after submission of Landlord's Statement. Except to the extent that
overpayments made by Tenant under this Section 5.2 may be credited against Base
Rent as herein provided, in no event shall Base Rent ever be reduced by
operation of this Section, and the rights and obligations of Landlord and Tenant
under the provisions of this Section with respect to any Additional Rent shall
survive the termination of this Lease; provided however, that Landlord shall be
deemed to have waived any right to Additional Rent pursuant to this Section 5.2
for which Landlord has not submitted a Landlord's Statement within twenty-four
(24) months after the end of the Tax Year which is in effect upon the expiration
or sooner termination of this Lease.
(f) Each Landlord's Statement furnished by Landlord with
respect to Tenant's Tax Payment shall be accompanied by a copy of the real
estate tax bill for the Tax Year referred to therein, but Landlord shall have no
obligation to deliver more than one such copy of the real estate tax bill in
respect of any Tax Year.
5.3 (a) For each Calendar Year during the Term, Tenant shall pay,
as Additional Rent, an operating payment ("Tenant's Operating Payment"), which
payment shall be equal to Tenant's Proportionate Share of the amount by which
Operating Expenses for such Calendar Year exceed Base Operating Expenses
provided, however, that the percentage increase in Tenant's Operating Payment in
any Calendar Year from the prior Calendar Year's payment shall not exceed
seventy-five percent (75%) of the percentage increase in the Index for the prior
Calendar Year, provided further if the percentage increase in Operating Expenses
for the prior Calendar Year exceeded four percent (4%), the percentage increase
in Tenant's Operating Payment shall not be less than four percent (4%).
(b) Landlord shall furnish to Tenant, prior to the
commencement of each Calendar Year, a Landlord's Statement (Landlord's
Statement") setting forth Tenant's Tax Payment and Landlord's estimate of
Tenant's Operating Payment for such Calendar Year, and the method of calculation
of Tenant's Operating Payment for such Calendar Year. Landlord's estimate of
Tenant's Tax Payment and Tenant's Operating Payments set forth in Landlord's
Statement shall not exceed the prior
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year's Tenant's Tax Payment and Tenant's Operating Payments increased by an
amount equal to five percent (5%) of such payments, unless such increase is
otherwise documented. Tenant shall pay to Landlord on the first day of each
month during such Calendar Year an amount equal to one-twelfth (1/12th) of
Landlord's estimate of Tenant's Operating Payment for such Calendar Year. If,
however, Landlord shall furnish any such estimate for a Calendar Year subsequent
to the commencement thereof, then (x) 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 in respect of the last month of
the preceding Calendar Year; (y) 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
Calendar Year were greater or less than the installments of the Tenant's
Operating Payment to be made for such Calendar Year in accordance with such
estimate, and (i) if there shall be a deficiency Tenant shall pay the amount
thereof within thirty (30) days after demand therefor, or (ii) if there shall
have been an overpayment, Landlord shall, at Landlord's option, promptly either
refund to Tenant the amount thereof or credit the amount thereof against
subsequent payments of Base and Additional Rent under this Lease; and (z) 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 Calendar
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 furnish to Tenant a revised Landlord's Statement of Landlord's
estimate of Tenant's Operating Payment for such Calendar Year; and in such case,
Tenant's Operating Payment for such Calendar Year shall be adjusted and paid or
refunded, as the case may be, substantially in the same manner as provided in
the preceding sentence.
(c) Within one hundred twenty (120) days after the end of each
Calendar Year Landlord shall furnish to Tenant a statement (the "Year-End
Statement") for such Calendar Year of Tenant's Operating Payment then in effect.
Each such Year-End Statement for any Calendar Year in which Tenant's Operating
Payment is due shall be accompanied by a computation of Operating Expenses for
the Building prepared by the Building manager 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 for such Calendar Year, Landlord shall, at Landlord's option, either
refund to Tenant the amount of such excess within thirty (30) days after the
furnishing of the Landlord's Statement to Tenant or credit the amount of such
excess against subsequent payments of Base and Additional Rent under this Lease;
and if the Landlord's Statement for such Calendar Year shall show that the sums
so paid by Tenant were less than Tenant's Operating Payment for such Calendar
Year, Tenant shall pay the amount of such deficiency within thirty (30) days
after demand therefor.
(d) In the event of a termination of this Lease, any
Additional Rent under this Section shall be paid or adjusted within thirty (30)
days after submission of Landlord's Statement. Except to the extent that
overpayments made by Tenant under this Section 5.3 may be credited against Base
Rent as herein provided, in no event shall
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Base Rent ever be reduced by operation of this Section and the rights and
obligations of Landlord and Tenant under the provisions of this Section with
respect to any Additional Rent shall survive the termination of this Lease;
provided however, that Landlord shall be deemed to have waived any right to
Additional Rent pursuant to this Section 5.3 for which Landlord has not
submitted a Landlord's Statement within thirty-six (36) months after the end of
the Escalation Year which is in effect upon the expiration or sooner termination
of this Lease.
5.4 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 Section for the 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 Lease Commencement Date to December 31 or
from January 1 to the Expiration Date, as the case may be, both inclusive, shall
bear to the total number of days in such Escalation Year.
5.5 The computations of Additional Rent under this Article are intended
to constitute a formula for an agreed rental adjustment, may or may not include
all costs and expenses incurred by Landlord with respect to the Building and
accordingly may or may not constitute an actual reimbursement to Landlord for
costs and expenses paid by Landlord with respect to the Building.
5.6 Landlord shall keep, for a period of three (3) years (five years,
if a dispute with respect to such year is pending) after any Year-End Statement
required under this Article 5 is delivered to Tenant, either at the Building or
at Landlord's offices in New York, New York, records in reasonable detail of the
Operating Expenses for the period covered by such statement. After the
expiration of the aforesaid three or five year period, Landlord shall have no
obligation to retain such records.
5.7 Each Year-End Statement shall be conclusive and binding upon Tenant
unless within three hundred sixty-five (365) days after its receipt of any such
statement Tenant shall, by Notice to Landlord, dispute the correctness of said
statement. Landlord shall permit Tenant, at Tenant's expense, within the
aforesaid three hundred sixty five (365) day period (or if a dispute is pending
during the pendency of such dispute), to examine, copy and audit such records
during business hours at reasonable times following reasonable Notice at the
office where Landlord is keeping such records. If Tenant fails to send the
aforesaid Notice within three hundred sixty-five (365) days after its receipt of
the Year-End Statement, Tenant shall be conclusively deemed to have accepted
such Year-End Statement and waived any right to audit such Year-End Statement or
Landlord's records pertaining thereto; provided, however, if Tenant thereafter
properly and timely disputes any such statement, Tenant may audit any statement
issued in the past five years provided Landlord has maintained the records
required under Section 5.6 for the periods set forth in Section 5.6. In the
event Landlord is not required under Section 5.6 to maintain the records, and in
fact has not maintained the records, Tenant shall have no right to dispute the
statement corresponding to such records. Any such Notice shall set forth in
reasonable detail the basis of such dispute. Any such dispute that is not
settled by Landlord and Tenant within twenty (20) days after
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the delivery of such Notice, or such longer period to which they may mutually
agree, may, at the option of either party, be submitted to arbitration in
accordance with Article 34 of this Lease. Pending the determination of any such
dispute by agreement or otherwise, Tenant shall pay Tenant's Tax Payment and
Tenant's Operating Payment in accordance with the applicable Year-End Statement,
and such payment shall be without prejudice to Tenant's position. If it is
determined that Landlord owes Tenant a refund, Landlord shall pay to Tenant any
unpaid amounts within thirty (30) days after the resolution of any dispute
regarding same together with interest on such unpaid amount at the rate set
forth in Section 6.1.
5.8 Landlord shall have the right at any time within fifteen (15)
months from the delivery of any Year-End Statement to Tenant to render revised
Year-End Statements to Tenant reflecting any adjustment in Operating Expenses,
Tenant's Operating Payment and/or Tenant's Tax Payment. Within thirty (30) days
after Tenants receipt of any Year-End Statement, Tenant shall pay Landlord any
deficiency, or receive a credit from Landlord for any excess against any ensuing
payments hereunder, in either case, between the amount due pursuant to the
revised Year-End Statement and the Year-End Statement to which such revised
Year-End Statement pertains. Each such revised Year-End Statement shall be
conclusive and binding upon Tenant unless within ninety (90) days after its
receipt of any such revised statements Tenant shall, by Notice to Landlord,
dispute the correctness of said revised statement. If Tenant fails to send the
aforesaid Notice within ninety (90) days after its receipt of the revised
Year-End Statement, Tenant shall be conclusively deemed to have accepted such
revised Year-End Statement and waived any right to audit such revised Year-End
Statement or Landlord's records pertaining thereto. Any such Notice shall set
forth in reasonable detail the basis of such dispute. Any such dispute that is
not settled by Landlord and Tenant within twenty (20) days after the delivery of
such Notice, or such longer period to which they may mutually agree, may, at the
option of either party, be submitted to arbitration in accordance with Article
34 of this Lease. Pending the determination of any such dispute by agreement or
otherwise, Tenant shall pay Tenant's Tax Payment and Tenant's Operating Payment
in accordance with the applicable revised Year-End Statement, and such payment
shall be without prejudice to Tenant's position. If it is determined that
Landlord owes Tenant a refund, Landlord shall pay to Tenant the amount
determined to be owed to Tenant within thirty (30) days after the resolution of
any dispute regarding same together with interest in such unpaid amount at the
rate set forth in Section 6.1.
5.9 Each and every payment required under this Article 5, as well as
any other amounts which are owed by Tenant to Landlord under this Lease, whether
requiring lump sum payments or constituting projected monthly amounts in
addition to the Base Rent, shall for all purposes be treated and considered as
Additional Rent. The failure of Tenant to pay such Additional Rent as and when
due without demand shall have the same effect as failure to pay any installment
of Base Rent and shall afford Landlord all remedies provided in the Lease
therefor.
5.10 Both Tenant's obligation for payment of Additional Rent for any
period during the Term of the Lease and Landlord's obligation to refund excess
payments on account of Additional Rent for any period during the Term of the
Lease shall survive the
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expiration or any sooner termination of the Lease, subject, however, to the
provisions of Section 5.8 hereof.
5.11 Landlord may convert the Building into a condominium form of
ownership and the Premises may become part of a unit comprising a portion of the
Building. In the event of such a conversion, this Lease shall remain in full
force and effect. Landlord and Tenant agree to recalculate "Tenant's
Proportionate Share' in a fair and equitable manner to reflect such conversion.
When Tenant's Proportionate Share has been recalculated, Landlord and Tenant
shall execute and deliver an agreement setting forth such recalculation and
confirming Tenant's Proportionate Share.
6. LATE CHARGE.
6.1 Any installment of Base Rent or Additional Rent hereunder that is
not paid within five (5) days of the date when due hereunder shall bear interest
from the due date until paid at the rate of two percent (2%) over the then
"Prime Rate" as published in The Wall Street Journal or The New York Times for
ninety (90) day unsecured loans to major corporate borrowers (unless such rate
is usurious as applied to Tenant in which case the highest rate permitted by law
shall apply). In the event the Prime Rate is no longer the reference rate for
ninety (90) day unsecured loans, then the rate for 90 day Treasury bills plus
three percent (3%) shall be used as the replacement or successor reference rate
to the Prime Rate in determining the interest to be paid by Tenant pursuant to
this Section.
7. LANDLORD'S WORK.
7.1 Landlord shall have no obligation to perform any work in, or make
any alterations or improvements to (i) any floor within the Premises in
connection with Tenant's initial occupancy of the Premises other than the work
described in Exhibit F annexed hereto (individually for each floor and
collectively, for all floors, "Landlord's Work") and (ii) any floor acquired in
connection with any one or more of Tenant's expansion options which are set
forth in Article 38 herein, other than as described in Exhibit F.
Notwithstanding the foregoing, Landlord shall install on each floor of the
Premises the HVAC equipment described in Exhibit U attached hereto.
(b) For the purpose of this Lease, the term "Tenant Delay"
shall mean any delay that Landlord actually encounters in the prosecution of
Landlord's Work caused solely by any act, neglect, failure or omission of
Tenant, its agents, employees or contractors, including, without limitation, (i)
any delay in Tenant making a submission or furnishing a response under Sections
7.1 or 7.2, or (ii) any delay due to the implementation of any Landlord's Work
Modification or making any deposit in connection therewith. Any delays in the
completion of Landlord's Work caused by Tenant Delay shall not serve to defer
the applicable Base Rent Commencement Date. For the purpose of this Lease, the
term "Landlord Delay" shall mean any delay that Tenant actually encounters in
the prosecution of Tenant's Work caused solely by any act neglect, failure or
omission of Landlord, its agents, employees or contractors, including without
limitation, (i) any delay in Landlord making a submission or furnishing a
response not caused by a Tenant Delay, (ii) any delay in the prosecution of or
completion
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of Landlord's Work not caused by a Tenant Delay, (iii) any other failure defined
as Landlord Delay under the Lease, and (iv) any delay in Tenant's prosecution of
Tenant's Work caused by the performance of Landlord's Work taking precedence
over the performance of Tenant's Work.
(c) It is understood by Landlord and Tenant that the schedule
for completion of Landlord's Work is contingent upon the absence of change
orders or other modifications or revisions requested by Tenant, other than minor
or a de minimis number of changes. Any change order, revision or other
modification requested by Tenant shall be in writing, shall set forth in detail
the nature of the revision or modification and shall have attached thereto all
appropriate drawings and specifications to illustrate such revision or
modification (collectively, "Landlord's Work Modifications"). In the event
Tenant requests a Landlord's Work Modification, Tenant shall submit such
Landlord's Work Modification to Landlord for Landlord's review and approval.
Within fifteen (15) days after Landlord's receipt of any Landlord's Work
Modification, Landlord shall furnish Tenant with a statement of the cost of the
implementation of Landlord's Work Modification, together with Landlord's
estimate of the period of Tenant Delay which would result on account thereof and
Landlord (i) shall give its approval thereto, or (ii) Landlord shall request
revisions or modifications to such Landlord's Work Modification. Within five (5)
days following Landlord's request, Tenant shall revise the Landlord's Work
Modification and submit such revisions or modifications to Landlord for
Landlord's approval. Within two (2) days following receipt by Landlord of such
revisions or modifications, Landlord shall give its written approval thereto or
shall request further revisions or modifications. The preceding two sentences
shall be implemented repeatedly until Landlord gives its written approval to the
Landlord's Work Modification. Landlord shall not be required to stop or postpone
the performance of Landlord's Work, or any portion thereof, because Landlord has
received from Tenant a Landlord's Work Modification affecting Landlord's Work,
or a portion thereof, unless Tenant delivers to Landlord a Notice with such
Landlord's Work Modification specifically requesting such stoppage or
postponement, in which event such stoppage or postponement shall be deemed to be
Tenant Delay commencing on the date of delivery of such Notice to Landlord and
Tenant shall be responsible for all costs arising therefrom, regardless whether
the Landlord's Work Modification is implemented. Within two (2) business days of
its receipt of the aforesaid approval, Tenant shall instruct Landlord by a
Notice to either (i) proceed with such Landlord's Work Modification or (ii)
withdraw such Landlord's Work Modification. If Tenant shall instruct Landlord to
proceed with such Landlord's Work Modification, the same shall be binding upon
Tenant. Tenant shall pay, as Additional Rent, the net cost, if any, of the
implementation of such Landlord's Work Modification. Landlord may pay the cost
of any Landlord's Work Modification by applying the Tenant Improvement Allowance
to such costs. Landlord may require Tenant, as a condition of the approval of
such Landlord's Work Modification, to deposit up to ten percent (10%) of the
cost of the Landlord's Work Modification, with Landlord prior to Landlord
implementing such Landlord's Work Modification. Otherwise, Tenant shall pay the
cost of the Landlord's Work Modification within thirty (30) days of receipt of
an invoice therefor.
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(d) To the extent there is any conflict between Landlord's
Work described in Exhibit F and the body of this Lease, Landlord's Work shall
control, provided, however, in the event and to the extent the Lease provides
for Landlord's approval or consent, Tenant shall obtain such approval or
consent. Notwithstanding the foregoing, to the extent that any plans and
specifications are approved by Landlord, such plans and specifications shall
govern.
(e) In the event Tenant exercises the option to terminate this
Lease pursuant to Section 40.1, Tenant shall, within thirty (30) days of receipt
of an invoice therefor, reimburse Landlord for all reasonable fees and actual
expenses incurred by Landlord in regard to the Lease, including any real estate
commissions paid by Landlord.
7.2 (a) For the purposes of this Lease, the term "Tenant's Work"
shall mean the work, installations, improvements and equipment described in
Tenant's Plans. Tenant, at Tenant's sole cost and expense, shall perform, or
cause to be performed, Tenant's Work subject to the provisions of this Article 7
and substantially in accordance with Tenant's Plans, as modified by Change
Orders approved by Landlord pursuant to Article 7.
(b) Except as otherwise set forth in Tenant's Plans, Tenant
may not connect into any portion of the Building located outside of the Premises
or to any pipes, shafts or conduits outside of the Premises (collectively, the
"External Shafts") without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed.
(c) From time to time, Tenant, at its expense, shall prepare
and submit to Landlord complete drawings (including sprinkler, HVAC, electrical,
plumbing, telephone, reflected ceiling and partition plans) for Tenant's Work
("Tenant's Plans"). Tenant's Plans shall consist of six (6) copies, including
one (1) sepia. Tenant may submit to Landlord Tenant's Plans in stages determined
by Tenant. In the event Tenant submits Tenant's Plans in stages and Landlord
reasonably requires a stage which has not been submitted in order to approve the
earlier submission, Landlord may defer such approval until Landlord receives the
necessary submissions and such delay shall not be deemed to be a Landlord Delay.
Within thirty (30) days of submission, Landlord (i) shall give its approval on
an applicable floor by floor basis thereto or (ii) if Landlord reasonably
believes that Tenant's Plans may adversely affect the structure or systems of
the Building or do not comply with all Legal Requirements, Insurance
Requirements or any provision of this Lease (the "Landlord's Approval
Criteria"), Landlord shall request revisions or modifications ("Tenant's
Modifications") to Tenant's Plans in order that same shall comply with
Landlord's Approval Criteria. Tenant shall revise the Tenant's Plans and submit
Tenant's Modifications to Landlord for Landlord's approval. Landlord shall
approve or request revisions or modifications to such revised plans within five
(5) business days of receipt of such revised plans. The preceding procedure
shall be implemented repeatedly until Landlord gives its written approval to the
Tenant's Modifications. Within seven (7) days after Landlord has given its
written approval of Tenant's Plans, as modified by Tenant's Modifications,
Tenant shall transmit to Landlord five (5) copies of final Tenant's Plans which
incorporate Tenant's Modifications.
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(d) Tenant shall retain the General Contractor to construct
Tenant's Work in a good and workmanlike manner. In the event Landlord determines
that the employment of the General Contractor shall, or during the course of
Tenant's prosecution of Tenant's Work does, interfere with construction
performed by, or cause any conflict or labor dispute with, any other contractor,
subcontractor or other party engaged in the construction, maintenance or
operation of the Building or the Premises, Landlord shall have the right to
require the replacement of the General Contractor with another contractor
selected by Tenant and approved by Landlord. Landlord may disapprove any
contractors and subcontractors for cause or if such contractors or
subcontractors are or become known to be a probable cause of a labor dispute
relating to the Building or the Premises or in the event any such Approved
Contractor changes its nature or method of operation to an extent which is
reasonably deemed by Landlord to be inconsistent with the then standards of the
Building.
7.3 (a) Possession of the Premises shall be delivered to Tenant
when Landlord's Work is Substantially Completed. All of the floors of the
Premises shall be delivered to Tenant at one time by Landlord. For the purposes
of this Lease, the term "Beneficial Occupancy Date" shall be deemed to mean the
date upon which Landlord's Work in the Premises (not including the payment of
the Tenant Improvement Allowance) is Substantially Completed and Landlord shall
have delivered to Tenant Notice setting forth that Landlord's Work in the
Premises (not including the payment of the Tenant Improvement Allowance) is
Substantially Completed. Landlord shall give not less than ten (10) business
days Notice of the date of expected Substantial Completion of Landlord's Work in
the Premises (not including the payment of the Tenant Improvement Allowance).
Promptly after the occurrence of any Beneficial Occupancy Date, Landlord and
Tenant shall execute an agreement in the form annexed hereto as Exhibit G
confirming such Beneficial Occupancy Date and specifying that Landlord's Work
(not including payment of the Tenant Improvement Allowance) has been
Substantially Completed, but the failure of the parties to execute such an
agreement shall not defer the applicable Beneficial Occupancy Date, the Term
Commencement Date or the Base Rent Commencement Date, or otherwise affect or
invalidate this Lease.
(b) Landlord's Work shall be deemed "Substantially Completed"
when all of the following have occurred, and such shall be certified in writing
to Tenant by Landlord and Tenant's architect (Tenant represents that Tenant's
architect has agreed to so certify the completion of Landlord's Work, when and
to the extent appropriate):
(i) Landlord's Work within the Premises (not including
the payment of any Tenant Improvement Allowance) shall have been substantially
completed, the completion or non-completion of which does not delay or
materially interfere with Tenant's ability to construct Tenant's Work, and
(ii) reasonable means of access to the Premises
(taking into account that portions of Landlord's Work may still be continuing)
shall exist.
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7.4 (a) Prior to the applicable Beneficial Occupancy Date, Tenant
may inspect the progress of Landlord's Work upon reasonable prior Notice to
Landlord. Tenant shall be accompanied by a representative of Landlord during
such inspection. Tenant shall give Notice to Landlord of any defects in
Landlord's Work which Tenant receives knowledge thereof during such inspection
within five (5) days after Tenant receives such knowledge. Landlord shall
promptly correct such defects.
(b) Commencing on the applicable Beneficial Occupancy Date and
provided Tenant has complied with the provisions of Section 7.2, Tenant shall be
permitted to enter upon the Premises and commence construction of Tenant's Work
and may bring and install into the Premises installations, furniture and
equipment necessary for Tenant's occupancy of the Premises ("Tenant's
Furnishings"). Unless Tenant has reserved access to the Building with Landlord,
Tenant shall have access on a "first-come, first-serve" basis in common with
Landlord and other tenants in the Building. Tenant shall access the Premises for
the delivery and installation of Tenant's Work and Tenant's Furnishings by way
of the Building freight elevators only, and Tenant shall not be permitted to use
the passenger elevators for the delivery to or removal from the Premises of any
Tenant's Furnishings or for any material or supplies necessary to construct
Tenant's Work. During Business Hours, Tenant's use of the freight elevators
shall be on a non-exclusive basis. During Non-Business Hours, Tenant may reserve
the use of the freight elevator and Tenant shall pay for Landlord's providing
such freight elevator service within thirty (30) days after Tenant's receipt of
an invoice therefor at the rate charged to all of the tenants of the Building.
Landlord shall provide Tenant one weekend of elevator service for Tenant's
initial move-in at no cost to Tenant. Use of the freight elevators may be
reserved by Tenant only upon twenty-four (24) hours Notice to Landlord (Landlord
shall not unreasonably withhold its approval to Tenant reserving an elevator on
less than twenty-four hours Notice, provided an operator is available and the
elevator has not been reserved by any other party eligible to reserve such
elevator). Use of the freight elevators may not be reserved more than fourteen
(14) days in advance of its intended use, unless otherwise consented to by
Landlord. Landlord reserves the right to reasonably restrict and regulate the
types and amounts of equipment and installations which may be transported to and
from the Premises by means of the freight elevators to the extent any such
equipment or installation exceeds the load requirements of the freight elevators
as established by Landlord. Any such equipment or installations which exceeds
the manufacturer's specifications for such freight elevators shall not be
transported by means of the freight elevators but shall be delivered to and
removed from the Premises by Tenant at Tenant's expense by a material hoist or
hoists maintained by Tenant in accordance with all Legal Requirements and
Insurance Requirements.
7.5 Upon the delivery of the applicable portion of the Premises to
Tenant it shall be presumed that all applicable Landlord's Work (except the
payment of the Tenant Improvement Allowance) has been satisfactorily performed
in accordance with the requirements of Sections 7.1 and 7.2, except with respect
to latent defects or to the extent that specific deficiencies in such work are
listed on a punch list ("Tenant's Punch List Items") which shall be prepared by
Tenant and furnished to Landlord within thirty (30) days after the applicable
Beneficial Occupancy Date. Tenant waives any claims as to any deficiencies in
the completion of Landlord's Work not specified in Tenant's Punch List
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Items, except for latent defects. As quickly as reasonably possible, after its
receipt of Tenant's Punch List Items, Landlord shall substantially complete all
such items listed thereon.
7.6 (a) Tenant shall qualify for the Tenant Improvement Allowance
for the Premises on the Beneficial Occupancy Date. The Tenant Improvement
Allowance shall be distributed as follows: (i) twenty-five percent (25%) of the
total allowance applicable to the Premises on the thirty-first (31st) day
following the Beneficial Occupancy Date; (ii) twenty-five percent (25%) of the
total allowance applicable to the Premises on the sixty-first (61st) day
following the Beneficial Occupancy Date; (iii) twenty-five percent (25%) of the
total allowance applicable to the Premises on the ninety-first (91st) day
following the Beneficial Occupancy Date; (iv) fifteen percent (15%) of the total
allowance applicable to the Premises on the one hundred twenty-first (121st) day
following the Beneficial Occupancy Date and (v) ten percent (10%) of the total
allowance applicable to the Premises within thirty (30) days after the
satisfaction of the requirements set forth in Section 7.6(b). At the time Tenant
makes any payments to any contractors performing Tenant's Work, Tenant shall
obtain from such contractors and any subcontractors of such contractors,
mechanic's lien waivers and/or releases of lien satisfactory to Landlord and
shall submit same to Landlord within thirty (30) days of receipt.
Notwithstanding the foregoing, Landlord will not unreasonably withhold its
consent, upon the written request of Tenant, to issuing payment directly to a
reasonable number of contractors, provided Tenant complies with Landlord's
reasonable conditions in regard thereto.
(b) Upon final completion of the Tenant's Work with respect to
the Premises and Tenant's occupancy of the Premises for the Permitted Use,
Landlord shall not advance the final portion of the Tenant Improvement Allowance
applicable to the Premises (i.e. the 10% set forth in clause (v) of Section
7.6(a)) until Tenant submits a final application for payment ("Application for
Payment"), in the form attached hereto as Exhibit H along with (1) final
releases of lien or final waiver of liens, (2) delivery of building department
filing documents, permits and approvals and other evidence reasonably
satisfactory to Landlord that the work is in compliance with all laws, orders
and regulations of all Federal, State, municipal and local governments,
departments, commissions and boards and the orders, rules and regulations of the
National Board of Fire Underwriters, and (3) the completion of an inspection by
Landlord confirming that the work set forth in Tenant's Plans has been completed
in accordance with Tenant's Plans and in strict accordance with the provisions
of this Lease. In the event of any dispute between a contractor and Tenant that
does not allow Tenant to deliver to Landlord final lien releases or waivers of
lien (or such other documentation required by Landlord for such final payment)
and the amount in dispute is less than $50,000, Landlord will advance to Tenant
the remaining portion of the Tenant Improvement Allowance. Notwithstanding the
foregoing, at the option of Tenant, Landlord shall, in lieu of advancing to
Tenant any remaining portion of the Tenant Improvement Allowance, credit this
unadvanced portion of the Tenant Improvement Allowance to the next payments of
Base Rent or Additional Rent due under this Lease. Tenant may request, and
Landlord agrees to make, advances of the Tenant Improvement Allowance directly
to contractors upon receipt of specific directions from Tenant.
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7.7 Any dispute arising out of or in connection with this Article shall
be determined by arbitration in accordance with the provisions of Article 34.
8. LANDLORD'S OBLIGATIONS - UTILITIES AND SERVICES.
8.1 Landlord shall furnish the following services commencing on the
Term Commencement Date while Tenant is occupying the Premises:
(a) Cleaning services for the Premises (including bathrooms),
including the exterior and interior of the windows thereof (subject to Tenant
maintaining unrestricted access to such windows), but excusing any portions of
the Premises used for the storage, preparation, service or consumption of food
or beverages (other than pantries normally found in office uses), substantially
in accordance with the cleaning specifications annexed hereto as Exhibit I;
(b) Sewer service and an adequate quantity of hot and cold
water for cleaning and drinking purposes supplied to the lavatories and pantries
on the floors on which the Premises are located;
(c) Maintenance service to the Building and the Land, so that
the same shall be kept in good order and repair and shall be kept reasonably
free from debris, snow and ice;
(d) Passenger elevator service to the Premises during Business
Hours consistent with the first class standards of the Building (Landlord has
advised Tenant that Landlord is remodeling the elevators and at various times
more than one elevator may be out of service to complete such remodeling and
same shall not constitute a breach of this Lease), provided during non-Business
Hours, at least one (1) elevator shall serve the Premises and Landlord shall
provide at least one (1) passenger elevator which shall connect all of the
floors of the Premises;
(e) Freight elevator service in common with other tenants of
the Building during Business Hours and available upon request during
non-Business Hours in accordance with the provisions of Sections 8.5 and 7.4(b);
(f) Through the Building heating, air conditioning and
ventilation system, for distribution through Tenant's duct work system, heated,
conditioned and outside air, at such temperatures and pressures and in such
volumes and velocities as are set forth in Exhibit J annexed hereto
(collectively, "HVAC"). Tenant acknowledges that Landlord's sole obligation
hereunder shall be to bring air to the air distribution source(s) for the
Premises. Tenant shall be responsible for the distribution of such air
throughout the Premises by means of the duct work system installed by Tenant as
part of Tenant's Work. There shall be no charge for non-Business Hours HVAC, nor
any tonnage charges. Landlord and Tenant further agree to operate the HVAC
equipment in accordance with its design criteria unless a recognized energy
conservation law, program, guideline, regulation or recommendation promulgated
by any Governmental Authority shall provide for any reduction in operations
below such design criteria in which case such HVAC equipment shall be operated
so as to provide reduced service in
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accordance with such law, program, guideline, regulation or recommendation.
Landlord represents that, to its knowledge, the Building currently is in
compliance with applicable Legal Requirements relating to air quality and
Landlord shall be responsible during the Term for the compliance by the Building
with applicable Legal Requirements relating to air quality. Notwithstanding the
foregoing, however, Landlord shall not be responsible for compliance with Legal
Requirements relating to air quality to the extent such compliance requires
modifications to any Alterations installed by Tenant (including, without
limitation, any installations, air conditioning systems or duct work installed
by Tenant as part of Tenant's Work), nor shall Landlord be responsible therefor
to the extent that Tenant's use, manner of use of the Premises or the actions or
inactions of Tenant or its agents, representatives or contractors causes the
Premises or the Building not be in compliance with applicable Legal Requirements
relating to air quality;
(g) Lighting and electricity to the Common Areas; and
(h) A security program with respect to ingress to and egress
from the Building. Notwithstanding anything to the contrary herein, during the
period of construction of Landlord's Work and Tenant's Work and until Tenant
occupies the Premises for the conduct of Tenant's business, Landlord shall only
be required to provide minimal security in order to protect the Premises from
damage and vandalism. Landlord shall have no obligation to provide additional
security to protect Tenant's property and installations and Tenant shall procure
from Landlord, and Landlord shall supply to Tenant, any additional security
Tenant deems necessary or appropriate at Tenant's sole cost and expense. Tenant
agrees to pay Landlord, as Additional Rent, for such security within thirty (30)
days after Tenant's receipt of an invoice therefore.
8.2 In addition to the services to be furnished or caused to be
furnished by Landlord in accordance with Section 8.1, Landlord, at Tenant's
expense, shall furnish or cause to be furnished the following additional
services while Tenant is occupying the Premises:
(a) Cleaning services for the kitchen (other than pantries
normally found in office uses), cafeteria and other areas not customarily found
in office uses located in the Premises therein in accordance with the cleaning
specifications annexed hereto as Exhibit I;
(b) Removal of trash and other debris from kitchen (other than
pantries normally found in office uses), cafeteria and other areas not
customarily found in office uses of the Premises at the end of Business Hours;
(c) Refrigerated storage of such kitchen and cafeteria trash
and debris. Tenant covenants all kitchen or cafeteria trash and debris collected
during Business Hours shall be stored by Tenant within the Premises in
refrigerated storage areas;
(d) Extermination service administered to any kitchen,
cafeteria or special food preparation areas on a regular basis, as reasonably
determined by
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Landlord, for rodent and pest control or, in the event of infestation caused by
or resulting from such areas, as the same may be required, as reasonably
determined by Landlord, to eliminate such infestation;
(e) Relamping of lighting fixtures within the Premises and
replacement of bulbs and ballasts; and
(f) Installation and/or replacement of locks within the
Premises and the supplying of keys therefor.
Landlord shall provide Tenant with the appropriate contracts or other
documentation evidencing the cost to Landlord of providing the services
described in sub-paragraphs (a), (b), (d) and (e) above. Tenant shall be billed
for the services described in subparagraph (c) based upon a cubic foot cost to
be reasonably determined by Landlord. Tenant shall be billed for the services
described in sub-paragraphs (a), (b), and (c) above based on invoices delivered
by Landlord to Tenant on not less than a monthly basis and Tenant shall pay, as
Additional Rent, the amount stated in such invoices within thirty (30) days
after its receipt thereof. All services supplied by Landlord shall be reasonably
and competitively priced, which prices shall be competitive with the cost of
similar services supplied to tenants in similar buildings in the general
vicinity of the Building. Notwithstanding anything to the contrary herein,
Landlord shall have no obligation to provide the services described in
sub-paragraphs (d), (e) and (f) above unless Landlord receives a request, either
written or oral, for such service or services from Tenant; provided, however, in
the event the Premises contain any kitchen, cafeteria or special food
preparation areas, Landlord may require Tenant to retain Landlord to provide the
services contained in sub-paragraph (d) above. In the event Landlord receives
such request, either written or oral, from Tenant and provides such service or
services, Tenant shall pay, as Additional Rent, for Landlord's furnishing of
such service or services within thirty (30) days after its receipt of an invoice
therefor.
8.3 Business Hours shall be from 8 a.m. to 6 p.m. Monday through
Friday, in all cases, excluding Holidays. "Holidays" shall mean those days
designated from time to time as holidays by the union holiday schedule covering
the majority of employees at the Building, those days designated from time to
time as holidays pursuant to the laws of the State of New York. Except as
otherwise expressly provided herein, Landlord shall have no obligation to
provide any services on Sundays.
8.4 Landlord shall provide Tenant and its contractors and employees
access to the Premises, and the services referred to in Section 8.1(b), Section
8.1(d), Section 8.1(f), Section 8.1(g) and Section 8.1(h), 24 hours a day, 365
(or 366) days a year.
8.5 If Tenant shall desire freight elevator service at any time other
than during Business Hours, such service or services shall be supplied to Tenant
only at the request of Tenant, which request shall be made, not later than 2:00
p.m. on the preceding business day, not later than 6:00 P.M. on the business day
preceding such required extra usage (or before 12:00 P.M. on Friday for weekend
overtime service), and Tenant shall pay to Landlord, as Additional Rent, the
charges set forth below for the furnishing of such
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service or services within thirty (30) days after receipt of an invoice
therefor. If Tenant gives such Notice after 2:00 P.M., Landlord shall endeavor
(at no additional cost to Landlord) to provide such non-Business Hours services
to Tenant. As of the date of this Lease, the hourly charge for freight elevator
service during non-Business Hours is $52.50. The foregoing charges shall on the
first day of the fourth year following the initial three (3) year period, and
the first day of every fourth year thereafter through the Term of this Lease, be
adjusted by Landlord by the percentage increase in the Index between the month
in which the Base Rent Commencement Date occurs and the calendar month
immediately preceding the commencement of each such fourth year.
8.6 (a) Electric current will be supplied to the Premises by
Landlord so long as legally permissible in the Building to service the Premises
for the uses herein permitted and Tenant covenants and agrees to purchase the
same from Landlord and to pay for the same as Additional Rent. Tenant's
electrical demand and consumption in the Premises shall be determined by a
meter(s) or submeter(s) installed for the purpose of measuring the same and
shall measure the electric current supplied to the Premises only. There shall be
at least one (1) meter per floor for Tenant's use, which meter shall be
installed by Landlord at Landlord's sole cost and expense. If Tenant requires
additional meters, Tenant shall install same at its cost. The charge to Tenant
for such supply of electric current to the Premises shall be the sum of: (i) the
amount obtained by applying to Tenant's measured electrical consumption an
amount equal to the total of Landlord's actual electric cost for each kilowatt
hour usage for the Building for the period in question divided by the total
number of kilowatt hours of electricity consumed in the Building for such
period, (ii) the amount obtained by applying to Tenant's measured electrical
demand the actual public utility rate schedule then applicable to Landlord for
the purchase of electricity for the Building, (iii) any surcharges or charges
incurred or taxes payable by Landlord in connection with such electricity
consumption or increase or decrease thereof by reason of fuel adjustment or any
substitutions for the public utility electric rates then applicable to Landlord
or additions thereto and (iv) a service charge equal to five percent (5%) of the
amounts set forth in clauses (i), (ii) and (iii) of this Section 8.6(a). All
such additional meters or submeters or other related equipment shall be
installed by Landlord at Tenant's sole cost and expense, and Tenant shall pay
such costs and expenses as Additional Rent within thirty (30) days after receipt
of an invoice therefor. Bills shall be rendered monthly, commencing with the
first full month following the Term Commencement Date, the amounts computed from
such meter readings shall be Additional Rent and shall be due and payable,
without set-off or deduction, thirty (30) days after the rendition of such
bills. If any tax is imposed upon Landlord's receipts for the sale or resale of
electrical energy to Tenant, the pro rata share allocable to the electrical
energy service received by Tenant shall be passed on to Tenant to the extent
permitted by law. In the event any portion of the Premises cannot be metered,
Tenants consumption of electricity shall be determined based upon an electrical
survey as more particularly described in Section 8.6(b).
(b) Only if required by any Legal Requirement and it is not
possible to supply electricity by metering as set forth in Section 8.6(a),
electricity may be provided to Tenant on a so-called "rent inclusion" basis. In
such event, Tenant agrees that Section 8.6(a) shall no longer be applicable, and
the Base Rent shall be increased to
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compensate Landlord for supplying Tenant with electric current as an additional
service as provided in this Section 8.6(b). In the event that Landlord shall
provide electricity on a rent inclusion basis, Tenant agrees that the Base Rent
shall be increased to compensate Landlord for supplying Tenant with electric
current in the Premises as an additional service based upon the submetered
charges for Tenant's usage for the immediately preceding twelve (12) month
period (or if less than twelve (12) months of the Term shall have elapsed as of
the Rent Inclusion Date (as defined below), such shorter period extrapolated to
an annual amount) commencing on the date on which Landlord is no longer
permitted to supply electricity to the Premises on a submetered basis (such date
being herein referred to as the "Rent Inclusion Date") and continuing until such
time as such sum may be increased as hereinafter provided. Landlord will furnish
electricity to Tenant through presently installed electrical facilities for
Tenant's use of such lighting, electrical appliances, air conditioning systems
and equipment as presently exist or as Tenant may be permitted to install in the
Premises (Tenant shall be permitted without Landlord's prior approval or consent
to install equipment ordinarily and customarily found in an office setting),
subject to Landlord's consent which will not be unreasonably withheld or
delayed, except as expressly otherwise provided in this Article. Tenant agrees
that an electrical engineer or utility consultant, selected by Landlord, may,
from time to time during the Term (but not more often than annually unless
Tenant adds equipment significantly beyond the immediately prior load
requirements or Tenant changes the use of the applicable portion of the
Premises), make a survey of the electric lighting and power load by metering or
otherwise to determine Tenant's average monthly electrical energy consumption in
the Premises ("Tenants Electric Consumption") based upon (i) the connected load
rating of each item consuming electric energy, (ii) Tenant's usage which shall
be determined by multiplying the connected load rating of each item by the hours
of usage as determined by the consultant, and (iii) the actual Electric Rates
charged to Landlord by Consolidated Edison Company of New York, Inc. or any
successor thereto applicable to Landlord, inclusive of all surcharges or taxes
thereon including any sales tax as a result of the resale of such energy to
Tenant. The findings of such engineers or consultant as to the proper Base Rent
adjustment based on Tenant's Electric Consumption shall be conclusive and
binding upon the parties and shall be retroactively applied to the period after
the date of the survey and any adjustment in Base Rent shall be included in the
Base Rent payable monthly on the first day of each and every month in advance
for each month from the Rent Inclusion Date (except that if the amount of such
fixed rent increase shall not have been determined on the Rent Inclusion Date,
then, upon such subsequent determination, Tenant shall pay for the period from
the Rent Inclusion Date to the date of such determination, the uncollected
amount of such increase in Base Rent).
(c) If the Electric Rates on which the initial determination
of said consultant shall be increased or decreased, then the sum included in
Base Rent by reason of this Section shall be increased or decreased by the same
percentage as such change in the Electric Rates, retroactive to the date of such
increase or decrease in such Electric Rates, and the amount payable from the
effective date of such increase to the last day of the month in which Tenant
shall be billed therefor shall be paid within thirty (30) days after Landlord
furnishes Tenant with a statement thereof.
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(d) The term "Electric Rates" shall be deemed to mean the
rates at which Landlord purchases electrical energy from the public utility
supplying electrical service to the Building, including any surcharges or
charges incurred or taxes payable by Landlord in connection therewith or in
connection with the furnishing of electrical energy by Landlord on a
rent-inclusion basis or increase or decrease thereof by reason of fuel
adjustment or any substitutions for such Electric Rates or otherwise.
(e) In the event Tenant shall dispute any findings under this
Section of the engineer or consultant designated by Landlord, Tenant may, within
ninety (90) days after receiving Notice of such findings, designate by Notice to
Landlord an independent engineer or utility consultant to make, at Tenant's sole
cost and expense, another determination of the increased average monthly
electrical consumption or the value to Tenant of the potential additional energy
to be made available to Tenant, as the case may be. If the electrical engineer
or utility consultant selected by Tenant shall determine that such increased
consumption or value, as the case may be, of such electrical energy is less than
as determined by Landlord's engineer or consultant and the two engineers or
consultants are unable to adjust such difference within twenty (20) days after
the determination made by Tenant's engineer or consultant is delivered to
Landlord, the dispute shall be determined by arbitration in accordance with the
provisions of Article 34 of this Lease. Pending a final determination pursuant
to such arbitration however, Tenant shall pay to Landlord for such electrical
energy based on the determination of Landlord's engineer or consultants; and if
it is determined that Tenant has overpaid, Landlord shall reimburse Tenant for
any overpayment at the conclusion of such arbitration. If Tenant shall not
dispute the findings as provided in this Section, the determination by
Landlord's engineer or consultants shall be deemed final and conclusive.
(f) In the event that electricity is included on a rent
inclusion basis pursuant to Section 8.6(b) and Landlord elects to purchase
capital equipment or make other capital expenditures to reduce Landlord's cost
of electricity, Landlord shall receive the full benefit of such capital
expenditure, and Tenant shall continue to pay Base Rent for electricity, and
such Base Rent shall be calculated as hereinabove described, without regard to
the fact that Landlord has reduced its cost of electricity by virtue of such
capital expenditure, unless such capital expenditure is included in Operating
Expenses and Tenant pays Landlord for Tenant's Proportionate Share of such
capital expenditure pursuant to Section 5.3 hereof, in which event the Base Rent
allocable to the furnishing of electricity by Landlord on a rent inclusion basis
shall be equitably decreased to reflect such reduced cost of electricity to
Landlord.
(g) Tenant's use of electrical energy in the Premises shall
never exceed that portion of the capacity allocable to Tenant of (i) the
existing feeders to the Building or the electricity available to Tenant through
then existing risers or wiring installations to the Premises or (ii) any of the
electrical conductors, machinery and equipment in or otherwise serving the
Premises (in any event, giving due consideration to the needs of existing and
potential tenants using the same risers, wiring installations or other
equipment, as well as to Landlord's electrical needs in connection with the
operating of the Building and the provision of emergency services). Landlord
represents
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that such facilities shall be capable of providing up to six (6) watts per
usable square foot (connected load) of electricity to the Premises exclusive of
HVAC and shall be available at the electrical closet on the applicable floor. No
additional riser or risers or other equipment to supply Tenant's electrical
requirements shall be installed without Landlord's prior approval, which may be
withheld in Landlord's sole and absolute discretion. Only conduit complying with
Legal Requirements will be allowed. In order to insure that the electrical
capacity of the Building facilities is not exceeded and to avert possible
adverse effect upon the Building's electrical system, Tenant shall not, without
the prior consent of Landlord, make or perform or permit any alteration to
wiring installations or other electrical facilities in or serving the Premises.
Any additional risers, feeders, or other equipment proper or necessary to supply
Tenant's electrical requirements, upon written request of Tenant, will be
installed by Landlord at the sole cost and expense of Tenant if, in Landlord's
reasonable judgment, such increase in capacity will not interfere with
Landlord's present or anticipated future electrical needs with respect to the
Building and/or existing or future tenants of the Building or cause permanent
damage or injury to the Building or entail excessive or unreasonable alterations
or interfere with or disturb other tenants. Landlord, its agents and engineers
and consultants may survey the electrical fixtures, appliances and equipment in
the Premises and Tenant's use of electrical energy therein from time to time to
determine whether Tenant is complying with its obligations under this Section.
If Tenant is in substantial compliance with its obligations under this Lease,
the cost of such survey shall be borne by Landlord. If Tenant is not in
substantial compliance with its obligations, the cost of such surveys shall be
made at the sole cost and expense of Tenant. Each increase in the Base Rent
under this Section shall be effective on the date such additional electrical
energy is made available to Tenant.
(h) Landlord reserves the right to terminate the furnishing of
electrical energy to Tenant at any time upon ninety (90) days' prior Notice to
Tenant unless such Notice is not possible under the circumstances, in which
event Landlord will give Tenant such reasonable notice as is possible and only
if Landlord also shall terminate or have terminated the furnishing of electrical
energy to at least seventy-five (75%) percent of the office tenants of the
Building and if such termination required by any Legal Requirement. If Landlord
shall so discontinue the furnishing of electrical energy, (i) Tenant shall
arrange to obtain electrical energy directly from the public utility company
furnishing electrical energy to the Building, (ii) Landlord shall permit the
existing feeders, risers, wiring and other electrical facilities servicing the
Premises to be used by Tenant for such purpose to the extent that they are
available, suitable and legally permissible, (iii) from and after the effective
date of such discontinuance, Landlord shall not be obligated to furnish
electrical energy to Tenant and, if electricity is then being provided on a
rent-inclusion basis, the Base Rent payable under this Lease shall be reduced to
the amount which would have been then payable as Base Rent, as of such date but
for the adjustments for electrical energy under Section 8.6(b) above, (iv) this
Lease shall otherwise remain in full force and effect and such discontinuance
shall be without liability of Landlord to Tenant, and (v) if Landlord shall
discontinue the furnishing of electrical energy as hereinabove provided Landlord
shall, at Landlord's expense, install at locations in the Building selected by
Landlord and maintain any and all necessary electrical meter equipment, panel
boards, feeders, risers, wiring and other conductors and
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equipment which may be required to obtain electrical energy directly from the
public utility supplying the same.
(i) Except as set forth in Section 18.2, Landlord shall incur
no liability whatsoever and it shall not constitute a termination of this Lease
or an eviction (constructive or otherwise) hereunder should electricity or any
other utility become unavailable from the public utility company furnishing
electrical energy to the Building, or any public authority or any other person,
firm or corporation, including Landlord, supplying such utility or due to Force
Majeure.
8.7 Landlord shall cause the Building to be managed as a Class A office
building, consistent with the standards of other Class A office buildings
similar in size and quality in New York, New York.
8.8 Landlord agrees that any service which Landlord performs under this
Lease and which Tenant is obligated to reimburse Landlord therefor shall be
charged on a reasonable and competitive basis and shall not exceed the amount
charged in similar Class A Buildings for similar services.
8.9 Tenant shall have the right to select any telecommunication
provider to the Premises so long as such telecommunication provider does not and
is not reasonably likely to cause a Conflict and Landlord agrees to provide
reasonable cooperation to Tenant in granting access to the Building to such
telecommunication provider; provided, that, any repairs, work or alterations
being performed in the Building by Landlord shall at all times [(EXCEPT IN THE
CASE OF AN EMERGENCY)] take precedence over any work being performed in the
Building by Tenant's telecommunications provider.
9. USE.
9.1 The Premises shall be used solely for the Permitted Use set forth
in the Fundamental Lease Provisions and for no other purposes. Tenant shall not
offer, sell or market any real estate services or real estate related services
to other tenants in the Building other than to Related Corporations, which
services are in competition with services offered by Landlord to tenants in the
Building and Tenant shall not offer telecommunication services utilizing the
Building, Building Equipment or any conduits, or shafts, whether located within
the Premises or outside the Premises, to other tenants in the Building.
9.2 Tenant shall not use, occupy, suffer or permit the Premises, the
Building or any part of either to be used in any manner, or suffer or permit
anything to be brought into or kept therein, which would (a) make unobtainable
at standard rates from any reputable insurance company authorized to do business
in the State of New York, any fire insurance with extended coverage or
liability, elevator, boiler, umbrella or other insurance, (b) cause, or be
likely to cause, injury or damage to the Building or to any equipment contained
therein or on the Premises, (e) constitute a public or private nuisance, (d)
violate any certificate of occupancy for the Building, provided, however, that
Landlord shall not modify or alter such certificate to conflict with Tenant's
Permitted
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Use, (e) emit objectionable noise, fumes, vibrations, heat, chilled air, vapors
or odors into or from the Building, except through exhausts vented to the
outside of the Building at locations approved by Landlord, or the equipment
contained therein, (f) impair or interfere with any of the Building services,
including the furnishing of electrical energy, or the proper and economical
cleaning, heating, ventilating, air conditioning or other services of the
Building, the equipment contained therein or the Premises or (g) violate any
Legal Requirement or Insurance Requirement. The restrictions imposed by this
Section, and the application thereof, shall not be limited or modified by the
terms of any other provision of this Lease.
9.3 Tenant or Tenant's assignees, subtenants, employees, agents,
contractors, invitees or licensees shall not do or permit anything to be done in
or about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Building or injure them or use or
allow the Premises to be used for any purpose which is unlawful, nor shall
Tenant cause, maintain or permit any nuisance in, on or about the Premises.
9.4 Tenant has requested the right to install a kitchen within the
Premises at a location to be determined. Landlord shall not unreasonably
withhold or delay in its consent to an installation of a kitchen subject to such
reasonable restrictions as Landlord may impose, including, but not limited to,
Tenant, at its sole cost and expense, obtaining all permits and approvals,
determination of adequate exhaust through an acceptable route through the
Building, determination of adequate utilities and Tenant shall be responsible
for any unusual or significant increase in the use of utilities and compliance
with all other provisions of this Lease. If Tenant does install a kitchen,
Tenant shall retain Landlord to provide the services listed in Section 8.2(a),
(b), (c) and (d).
10. COMPLIANCE WITH LAWS.
10.1 (a) Tenant at its sole cost and expense, shall comply with all
requirements of Governmental Authorities ("Legal Requirements") and all
requirements of insurance companies providing coverage for the Building and/or
the Premises or recommendations of the National Board of Fire Underwriters
("Insurance Requirements") and give Landlord prompt notice of any lack of
compliance, except that Tenant shall have no obligation to pay the costs of any
structural alteration of the Premises or the Building required solely by reason
of a Permitted Use unless and to the extent said alteration (i) is necessitated
by a condition which has been otherwise created by, or at the instance of,
Tenant any subtenants or any other occupant of the Premises, including, but not
limited to, the installation of Tenant's Work, (ii) is attributable to the use,
other than a Permitted Use, to which Tenant, any subtenants or any other
occupant of the Premises puts the Premises or any part thereof, or Tenant's, any
subtenant's or any other occupant's of the Premises manner of use of the
Premises, (iii) is required by reason of a breach of Tenant's obligations
hereunder, (iv) is occasioned, in whole or in part, by any act, omission or
negligence of Tenant or any person claiming by, through or under Tenant, or any
of their assignees, subtenants, employees, agents, contractors, invitees or
licensees, or (v) with respect to the Premises only, is necessitated by reason
of the failure of Tenant or the Tenant's Plans to comply with any Legal
Requirement, including,
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without limitation, the Americans with Disabilities Act of 1990. Any such
structural alteration of the Premises or the Building required as a result of
clause (i), (ii), (iii), (iv) or (v) of the immediately preceding sentence shall
be performed by Landlord, at Tenant's expense, and Tenant shall pay for the
same, as Additional Rent, within thirty (30) days of its receipt of an invoice
therefor. Tenant shall pay all costs, expenses, fines, penalties and damages
which may be imposed upon Landlord and/or any mortgagee of the Land and/or the
Building by reason of or arising out of Tenant's failure fully and promptly to
comply with the provisions of this Section.
(b) Landlord, at its sole cost and expense, shall comply with
all Legal Requirements and all Insurance Requirements except to the extent
Tenant is obligated to comply with same pursuant to Section 10.1 (a), and
Landlord shall give Tenant prompt Notice of any lack of compliance by Tenant.
Landlord shall have no obligation to comply with Legal Requirements or Insurance
Requirements regarding Tenant's Work. This Section shall not in any manner
relieve Tenant from its obligations to comply with Legal Requirements or
Insurance Requirement as set forth in Section 10.1(a) or prevent Landlord from
seeking reimbursement for such compliance to the extent Tenant is obligated to
pay same.
10.2 Tenant, at its sole cost and expense, after Notice to Landlord, by
appropriate proceedings prosecuted diligently and in good faith, may contest the
validity or applicability of any Legal Requirement or Insurance Requirement
provided that: (a) Landlord shall not be subject to civil fines, quasi-criminal
violations, criminal penalty or prosecution for a crime, nor shall the Building
or the Land, or any part thereof, be subject to being condemned or vacated, by
reason of non-compliance or otherwise by reason of such contest; (b) such
non-compliance or contest shall not constitute or result in any violation of the
terms of any mortgage encumbering the Land and/or the Building, or if any such
mortgage shall condition such non-compliance or contest upon the taking of
action or furnishing of security by Landlord or affirmative title insurance
coverage preserving the priority of such mortgage notwithstanding the
determination of such noncompliance or contest, such action shall be taken and
such security or such affirmative title insurance coverage shall be furnished at
the expense of Tenant; (c) such non-compliance or contest shall not result in
the termination, suspension, cancellation, lapse or waiver of any insurance
policies or coverages maintained by Landlord or required to be maintained by
Tenant under this Lease; (d) such non-compliance or contest shall not result in
the termination, suspension, cancellation, lapse or waiver of any certificate of
occupancy for the Building or any portion thereof; and (e) Tenant shall keep
Landlord regularly advised in writing as to the status of such proceedings and
shall provide Landlord with copies of all submissions and documents delivered or
received by Tenant in connection therewith.
10.3 Any improvements or Alterations made or work performed by or on
behalf of Tenant or any person claiming through or under Tenant pursuant to this
Article shall be made in conformity with and subject to the provisions of this
Lease, including, without limitation, Article 12.
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11. REPAIRS.
11.1 Tenant, at its sole cost and expense, shall take good care of, and
make all interior non-structural repairs to, the Premises, all repairs to
Tenant's equipment, and all repairs to the HVAC system(s) installed by Tenant.
Tenant shall make and be responsible for (or, at Landlord's election, Landlord
shall make at Tenant's expense) all repairs, inside the Premises, ordinary or
extraordinary, as and when needed to preserve the Premises in working order and
condition and to keep the Premises in compliance with all Legal Requirements and
Insurance Requirements and to prevent any disruption of, or adverse effect on,
the Building, the Building systems, the quiet enjoyment of other tenants or to
prevent any damage to the personal property of other tenants, except that Tenant
shall not be responsible for the costs of any structural repairs or repairs to
Building systems unless the need therefor arises out of (i) the performance of
or existence of improvements made by Tenant, any subtenants or any other
occupant of the Premises or their contractors, (ii) the installation, use or
operation of equipment therein by Tenant, any subtenant or any other occupant of
the Premises, (iii) the moving of any such equipment in or out of the Building
or the Premises, (iv) the acts, omissions, negligence or misuse of or by Tenant,
any subtenants or any of its or their employees, agents, contractors, occupants,
licensees or invitees or their use or occupancy of the Premises (except fire or
other casualty caused by Tenant's negligence, if the fire or other casualty
insurance policies insuring Landlord are not invalidated and the rights of
Landlord are not adversely affected by this provision), or (v) Legal
Requirements or Insurance Requirements to the extent set forth in Section
10.1(a) or as otherwise provided in Section 11.1. Any such structural alteration
of the Premises required as a result of clause (i), (ii), (iii), (iv) or (v) of
the immediately preceding sentence shall be performed by Landlord, at Tenant's
expense, and Tenant shall pay for the same, as Additional Rent, within thirty
(30) days after its receipt of an invoice therefor. Tenant, at its sole cost and
expense, shall promptly replace or repair scratched, damaged or broken doors and
glass which are visible from outside the Premises, which damage and repair is
caused solely by any act, omission, negligence or misuse by Tenant or any of its
subtenants, or any of its or their agents, employees, contractors, occupants,
licensees or invitees and Tenant shall be responsible for all repairs of damaged
wall and floor coverings, which are visible from outside the Premises
(including, without limitation, where Tenant shall lease an entire floor, the
walls, elevator doors and floor coverings in the elevator lobby and the walls,
wall coverings, title and fixtures in the lavatories) where such damage is
caused solely by any act, omission, negligence or misuse or by Tenant or any of
its subtenants, or any of its or their agents, employees, contractors,
occupants, licensees or invitees. If any damage is caused by parties other than
Tenant or any of its subtenants, or any of its or their agents, employees,
contractors, occupants, licensees or invitees, Landlord, at its sole cost and
expense, shall be responsible for repairing same. Any broken window glass caused
solely by any act, omission, negligence or misuse or by Tenant or any of its
subtenants, or any of its or their agents, employees, contractors, occupants,
licensees or invitees shall be repaired by Landlord at Tenant's expense, and
Tenant shall pay for the same, as Additional Rent, within thirty (30) days after
its receipt of an invoice therefor. Tenant promptly and at its sole cost and
expense, shall make all non-structural repairs in or to the Premises for which
it is responsible. In the event Tenant fails to promptly make any repair or
alteration required by Tenant to be performed under this Section 11.1,
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Landlord, at Tenant's sole cost and expense, shall have the right to make such
repairs or alterations and Tenant shall pay for such repairs or alterations, as
Additional Rent, within thirty (30) days after its receipt of an invoice
therefor. All repairs made by or on behalf of Tenant shall be made in conformity
with the provisions of Article 12, including the use of Approved Contractors,
and shall be at least equal to the standards found in Class A office buildings
similar in size and quality to the Building in New York, New York.
11.2 (a) Landlord shall make all necessary repairs to the roof and
all structural repairs to the Building. Any such structural or roof repairs
occasioned by the acts, omissions, negligence or misuse of or by Tenant or any
of its subtenants or any of its or their employees, agents, contractors,
occupants, licensees or invitees or their use or occupancy of the Premises shall
be made by Landlord at Tenant's expense. Landlord's repair obligations under
this Section 11.2(a) shall exclude, however, (i) repairs (A) of Tenant's
personal property or improvements made by or at the request of Tenant
(including, without limitation, any Alterations), (B) not occasioned by
Landlord's or Landlord's agents', employees' and on-site contractors' wrongful
acts or negligence or (C) caused by Tenant or any of its subtenants or any of
its or their employees, agents, contractors, occupants, licensees or invitees,
and (ii) repairs which Tenant is obligated to make pursuant to Section 11.1 and
the other provisions of this Lease. Landlord shall perform all maintenance of,
and promptly after the receipt of a Notice from Tenant of the necessity of
repair, make all necessary repairs to, the air distribution source(s) for the
Premises and any security and life safety systems or devices which may be
installed in the Premises by Landlord. Any repairs to the air distribution
source(s) for the Premises and any security and life safety systems or devices
occasioned by the acts or omissions or negligence of Tenant or any of its
subtenants, or, its or their employees, agents, contractors, licensees or
invitees, shall be performed by Landlord at Tenant's expense and Tenant shall
pay for the same, as Additional Rent, within thirty (30) days after its receipt
of an invoice therefor. Except for the foregoing repair obligation, Landlord
shall have no liability for the failure of any such Building system, provided,
however, Landlord shall during the term of this Lease maintain a Class E
life-safety system (or its equivalent) ("Class E Life Safety System") in the
Building. Tenant shall be permitted to connect into such Class E Life-Safety
System. The cost of all repairs and maintenance by Landlord hereunder shall be
included in Operating Expenses except to the extent Landlord is reimbursed for
such cost by Tenant or as may be specifically excluded by Article 5 hereof.
(b) Tenant, at its sole expense, shall operate or cause to be
operated in a first-class manner any air conditioning system and any life safety
or security system within the Premises to prevent any adverse effect on any
Building system(s). Any maintenance or repair of such air conditioning system
and any life safety or security system shall be performed by Landlord upon
Tenants request and at Tenant's expense and Tenant shall pay for such
maintenance and repair, as Additional Rent, within thirty (30) days after
Tenant's receipt of an invoice therefor. Landlord reserves the right (i) to make
emergency repairs to any such Tenant's system without Notice, at Tenant's
expense, and (ii) to require changes to be made by Tenant to any such Tenant's
system if the operation thereof adversely affects, in Landlord's reasonable
opinion, the Building's
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systems. Tenant shall have no access to Building systems unless Landlord shall
consent thereto.
(c) Except as may be specifically set forth in this Lease, no
liability of Landlord to Tenant shall accrue under this Section unless and until
Tenant has given Notice to Landlord of the necessity of any specific repair for
which Landlord has agreed to be responsible under this Lease, and a sufficient
time has elapsed in which to make such repair with same not being performed. In
no event shall any failure by Landlord to make any such repairs give to Tenant
any right to make such repairs or withhold payment of Base Rent or Additional
Rent or to offset any costs incurred by Tenant against any payment of Base Rent
or Additional Rent.
12. ALTERATIONS BY TENANT.
12.1 Tenant shall not make or perform or permit the making or
performance of any alterations, additions, installations or improvements to or
removals from (collectively, "Alterations") the Premises without Landlord's
prior written consent, except that Tenant may, without Landlord's prior consent,
make or perform or permit the making or performance of any nonstructural
Alteration that has a cost less than $100,000 a per occurrence basis, which
amount shall be adjusted each Lease Year by the percentage increase in the Index
between the month in which the Term Commencement Date occurs and the calendar
month immediately preceding the first month of the applicable Lease Year.
Landlord agrees not to unreasonably withhold its consent to non-structural
Alterations provided the same, in Landlord's reasonable opinion, do not
adversely affect Building systems (including, without limitation, utility, life
safety, electrical, plumbing and sewage lines and HVAC systems) and will not
result in any increase in Operating Expenses beyond a de minimis degree (unless
Tenant agrees in writing to pay for any such increase). Tenant shall furnish
Landlord with plans and specifications for any non-structural Alterations prior
to Tenant's commencement of the construction or installation of the same. Any
Structural Alterations requested by Tenant and approved by Landlord shall be
performed by Landlord, at Tenant's expense, provided the same does not adversely
affect beyond a de minimis degree Building systems (including, without
limitation, utility, life safety, electrical, plumbing and sewage lines and HVAC
systems) and will not result in any increase in Operating Expenses (unless
Tenant agrees in writing to pay for any such increase). Tenant shall request in
writing Landlord's written consent not less than thirty (30) days prior to the
proposed commencement of the construction of such Structural Alterations, which
written request shall be accompanied by plans and specifications (prepared by a
licensed structural engineer reasonably acceptable to Landlord) for such
Structural Alterations, which plans and specifications shall be subject to the
approval of Landlord, which approval shall not be unreasonably withheld or
delayed. Landlord's granting of consent to Structural Alterations may be
conditioned on a requirement that Tenant (x) deposit with Landlord, prior to
Landlord's commencement of installation of any such Structural Alterations, an
amount not in excess of ten percent (10%) of the cost of such installation, as
determined by Landlord, and (y) on or prior to the Expiration Date or earlier
termination of this Lease, arrange with Landlord for the removal, at Tenant's
expense, of all vertical penetrations throughout the Premises in excess of three
(3) penetrations and the
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restoration of such penetrations to their condition prior to the construction of
such penetrations. Tenant shall pay, as Additional Rent the reasonable
out-of-pocket costs for the installation of such Structural Alteration, together
with costs incurred by Landlord in its review of the plans and specifications
therefor, within thirty (30) days after its receipt of an invoice therefor.
12.2 In the event that in connection with any Alteration (whether
structural or non-structural), installation of any wires, conduits, pipes or
mechanical equipment outside the Premises is required, Tenant shall request
Landlord's consent therefor not less than twenty (20) days prior to the
commencement of the construction of such Alterations, which consent shall be
accompanied by plans and specifications to be reviewed and approved by Landlord
showing the location of such wires, conduits, pipes or mechanical equipment.
Landlord's granting of consent to the installation of any such wires, conduits,
pipes or mechanical equipment may be conditioned on a requirement that Tenant
deposit with Landlord, prior to Landlord's commencement of such installation,
the cost, or a portion thereof, of such installation as determined by Landlord.
Without limiting the reasons for the granting or withholding of consent by
Landlord, Landlord may withhold such consent if in Landlord's opinion,
reasonably exercised, such installation will adversely affect Building systems
or will cause or create a hazardous condition or interfere with or disturb other
tenants following the completion of the Alteration. The installation of such
wires, conduits, pipes or mechanical equipment shall be performed (a) by
Landlord at Tenant's expense, and Tenant shall pay for the same, as Additional
Rent, along with costs incurred by Landlord in its review of the plans and
specifications therefor, within thirty (30) days after its receipt of an invoice
therefor; (b) in a manner consistent with the terms of this Lease or those of
another tenant's lease, to the extent such installation is outside of the
Premises and requires entry into another tenant's premises; (c) during
non-Business Hours and weekends, to the extent possible; (d) upon five (5) days
Notice to Landlord prior to such installation; (e) by Approved Contractors. Any
damage arising from such installation shall be repaired by Landlord, at Tenant's
sole cost and expense.
12.3 All non-structural Alterations performed by or on behalf of Tenant
pursuant to Section 12.1 shall be done in a good and workmanlike manner by the
Approved Contractors and in accordance with all Legal Requirements and Insurance
Requirements. The Approved Contractors are hereby deemed approved by Landlord
for the performance of non-structural Alterations, provided, however, that in
the event Landlord determines that the employment of any Approved Contractor,
during the course of its prosecution of a non-structural Alteration or any other
work for or on behalf of Tenant (including, without limitation, Tenant's Work),
interferes with construction performed by, or causes any conflict or labor
dispute with, any other contractor, subcontractor or other party engaged in the
construction, maintenance or operation of the Building, Tenant shall select
another Approved Contractor and shall cause the Approved Contractor being
replaced to promptly remove its equipment and personnel from the Building.
Landlord hereby expressly reserves the right to require the deletion of
contractors and subcontractors from the list of Approved Contractors for cause
or if such contractors or subcontractors are or become known to be a probable
cause of a labor dispute relating to the Building or the Premises or in the
event any such Approved
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Contractor changes its nature or method of operation to an extent which is
reasonably deemed by Landlord to be inconsistent with the then standards of the
Building. Subject to the two immediately preceding sentences, Tenant may add
contractors and subcontractors to the list of Approved Contractors with
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed. Tenant shall, at Tenant's expense, before making any
Alterations, obtain all permits, approvals and certificates required by any
Governmental Authority and (upon completion thereof) certificates of occupancy
and any other certificates of final approval thereof and shall promptly deliver
copies of such permits, approvals and certificates to Landlord. In addition,
Tenant or Tenant's contractors or sub-contractors shall provide Landlord, prior
to the commencement of any Alterations, with certificates evidencing appropriate
builder's risk, liability and worker's compensation insurance coverage during
the prosecution of any such Alterations in amounts set forth in the Building
Guidelines regarding Tenant's Work reasonably deemed appropriate by Landlord.
Landlord shall, upon Tenant's request and at Tenant's expense, furnish or
execute promptly any documents, information, consents or other materials which
are necessary or desirable in connection with Tenant's efforts to obtain any
license or permit for the making of any Alterations.
12.4 Any and all Alterations made by or on behalf of Tenant in, to or
upon the Premises as well as any fixtures installed on the Premises by Tenant,
shall, upon such installation, become the property of Landlord and shall remain
upon and be surrendered with the Premises except with respect to vertical
penetrations in excess of three (3) as set forth in Section 12. 1. Nothing in
this Section 12.4 shall be construed to give Landlord title to or to prevent
Tenant's removal of trade fixtures or moveable office furniture or equipment,
but upon removal of any of the same from the Premises, Tenant shall immediately
and at its expense repair any damage to the Building or the Premises caused by
such removal, except structural damage, which shall be repaired by Landlord at
Landlord's expense. All Alterations permitted or required to be removed by
Tenant remaining in the Premises after the end of the Term shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord's
property or removed from the Premises by Landlord. If the Alterations remaining
after the end of the Term of the Lease are Alterations that Tenant was required
to remove, Landlord may remove such Alterations at Tenant's sole cost and
expense, which expense shall be fair and reasonable.
12.5 Tenant, at its expense and with reasonable diligence and dispatch,
shall procure the cancellation or discharge of all notices of violation or lien
arising from or in connection with any Alterations, or any other work, labor,
services or materials done for or supplied to Tenant, or any person claiming by,
through or under Tenant, which shall not be the result of any act, omission or
negligence of Landlord or its agents, servants, employees or contractors. Tenant
shall promptly provide Landlord with copies of cancellation, discharge, release
or satisfaction of any such notices of violations or liens. Tenant shall have no
authority to create any liens for labor or materials on or against the Land, the
Building or the Premises. Tenant may contest the validity of any lien filed
against Landlord, the Land, the Building or the Premises for any work, labor,
services or materials claimed to have been performed for or furnished to Tenant
or any person or entity holding the Premises or any portion thereof by, through
or under Tenant, provided Tenant, prior to instituting such contest, (x) causes
any such lien to be discharged,
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bonded or removed by deposit or otherwise within thirty (30) days after Tenant
receives Notice from Landlord of the filing of the same, (y) delivers to
Landlord a copy of the bond or other evidence of the discharge or removal and
(z) if required by Landlord, delivers to Landlord an endorsement to the title
insurance coverage under the title insurance policies insuring Landlord and its
mortgagee evidencing the discharge, removal or bonding of such lien, together
with evidence of payment by Tenant for such coverage.
12.6 The performance of any Alterations, whether structural or
nonstructural, by or on behalf of Tenant shall be subject to the provisions of
Section 18.3.
12.7 Tenant's obligations under this Article shall survive the
expiration or earlier termination of this Lease.
13. INSPECTIONS.
13.1 Landlord may enter the Premises from time to time upon twenty four
(24) hours verbal notice to Tenant to inspect the Premises to insure compliance
with the provisions of this Lease. Landlord shall exercise its rights under this
Section in a reasonable manner as to not unreasonably interfere with Tenant's
occupancy of the Premises. In the event Landlord reasonably determines that
Tenant is not in compliance with any provision of this Lease, Landlord shall
give Tenant Notice of such noncompliance and Tenant shall, at Tenants sole cost
and expense, promptly comply with the provisions of this Lease. In the event
Tenant fails to promptly comply with such Notice, Landlord, at Tenant's sole
cost and expense, shall have right, but not the obligation, to take such steps
as reasonably necessary to cause the Premises to comply with this Lease and
Tenant shall pay the costs of compliance, as Additional Rent, within thirty (30)
days after its receipt of a invoice therefor.
13.2 In no event shall the failure of Landlord to take steps to cause
compliance give way to any liability on the part of Landlord. Tenant shall be
solely responsible for any liability arising by reason of Tenant's failure to
comply with the provisions of this Lease.
14. SIGNS.
14.1 Tenant (including Related Corporations), at Tenant's sole cost and
expense, shall have the right to install or erect such interior signs as Tenant
deems necessary or appropriate in or on the Premises provided that the same are
in keeping with first-class office signage and that in locations where Tenant
does not occupy a full floor within the Premises, such signage shall be subject
to the reasonable approval of Landlord. Tenant (including Related Corporations)
and any subtenants or assignees of Tenant shall also have the right to install
in the public corridor of the floors on which the Premises are located, signs
("Tenant's Corridor Sign") bearing Tenant's name and/or logo. The location,
specifications and design of Tenant's Corridor Signs in locations where Tenant
does not occupy a full floor within the Premises shall be subject to the prior
written approval of Landlord, which approval shall not be unreasonably withheld
or delayed, and
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which shall be compatible with any other tenant signs in the public corridor of
the floors on which the Premises are located.
14.2 Any signs installed or erected by or for Tenant shall remain
Tenant's property, shall be maintained by Tenant at Tenant's expense and shall
be removed by Tenant at the expiration or earlier termination of this Lease, and
Tenant shall repair any damage caused by such removal. Tenant shall procure and
pay for all governmental permits required for the installation of any sign in or
on the Premises and provide Landlord with copies of all such permits promptly
upon Tenant's receipt of the same.
14.3 Tenant's installation, maintenance and removal of Tenant's
Corridor Signs shall be subject to the provisions of Section 18.3.
15. BUILDING DIRECTORY.
15.1 Landlord shall install and maintain a directory board selected by
Landlord in the ground floor lobby of the Building containing the names of
tenants. Landlord, at Landlord's option, may elect to install a computerized
directory in lieu of a directory board. In the event a computerized directory is
installed, Tenant shall have the right, at no cost to Tenant, to use the number
of spaces or slots necessary for Tenant to inscribe the names of Tenant and the
names of Tenant's officers and/or employees located in the Building. In the
event a directory board is installed, Tenant shall have the right to use the
number of spaces or slots equal to the product of (x) Tenants Proportionate
Share at any given time, multiplied by (y) the total number of spaces or slots
on said directory board. In the spaces or slots so allocated on the directory
board to Tenant, Tenant may inscribe Tenant's name and the names of Tenant's
and/or officers located in the Building provided that such listings do not
exceed the number of spaces or slots allocated to Tenant pursuant to the
immediately preceding sentence. Tenant may propose directory board designs for
boards listing Tenant's names. The proposed board shall be subject to Landlord's
approval, which approval shall not be unreasonably withheld, and the approval of
New York City Landmarks Commission.
15.2 Tenant shall be permitted to install at the entrance to the
Building a sign with Tenant's name thereon, provided such sign is consistent
with signage of any other tenant at such location, the design and size of same
have been approved by Landlord in its reasonable discretion, and Tenant at its
sole cost and expense shall obtain any approvals required by Legal Requirements,
including the approval of New York City Landmarks Commission.
16. INSURANCE: WAIVER OF SUBROGATION.
16.1 Landlord shall keep the Building (excluding any Tenant's Work or
Tenant owned or installed property) and Landlord's property therein insured for
the replacement value (without deducting depreciation) thereof (exclusive of the
costs of foundations, excavations and footings) against loss or damage by perils
customarily included under standard "all-risk" (including boiler and machinery)
policies and shall maintain liability insurance in amounts consistent with those
of similar Class A Buildings.
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16.2 Tenant shall maintain, and shall cause any of its subtenants to
maintain, for the benefit of, and name as an additional insured, Landlord, any
mortgagee of Landlord, the Building management entity, and Tenant, as their
interests may appear, (a) commercial general liability insurance, including
contractual liability insurance or self-insurance covering Tenant's indemnity
obligations hereunder, against claims for bodily injury or death, personal
injury and property damage, occurring upon, in or about the Premises; with
limits of liability with respect to bodily injury or death, personal injury, and
property damage of $1,000,000 per occurrence and a $2,000,000 general aggregate;
(b) business automobile coverage with limits of liability of $1,000,000 combined
single limit per accident for bodily injury and property damage; (c) umbrella
liability of not less than $5,000,000 per occurrence and general aggregate; (d)
insurance against loss or damage by such risks as are insurable under an "all
risk" insurance policy, to Tenant's Work, any Alterations installed by Tenant,
Tenant's Furnishings and Tenant's other personal property, for the full
replacement cost thereof; (e) during such time as Tenant shall be constructing
any Alterations, builder's risk insurance, completed value form, covering all
physical loss and other costs and expenses (including, without limitation,
architectural and engineering costs, general contractor overhead, project
management expenses and legal fees) incurred in connection therewith, in an
amount reasonably satisfactory to Landlord. If the aforesaid commercial general
liability and/or umbrella policy is written for multiple locations, the policy
must have an amendment that will ensure that the aggregate limit of insurance
will apply separately to each location. Certificates of insurance, showing that
such insurance is in force and will not be cancelled without thirty (30) days'
prior written notice to Landlord shall be furnished to Landlord prior to
Tenant's entering the Premises for the purpose of installing Tenant Work or
Tenant's Furnishings. Thereafter, certificates showing renewal of, or
substitution for, policies which expire shall be furnished not less than thirty
(30) days prior to the expiration of each policy. Tenant's coverage may be
effected by blanket policies covering the Premises and other properties of
Tenant, or by self-insurance provided the requirements of Section 16.8 are
satisfied.
16.3 All insurance required to be maintained by Tenant hereunder shall
be written in form and substance satisfactory to Landlord by an insurance
company with an A.M. Best's rating of at least A licensed to do business in the
State of New York, which shall be reasonably satisfactory to Landlord. Upon
failure of Tenant to procure, maintain and pay all premiums therefor, Landlord
may, at its option, do so, and Tenant agrees to pay the cost thereof to
Landlord, as Additional Rent within thirty (30) days after Tenant's receipt of
an invoice therefor.
16.4 Landlord and Tenant each waive all rights of recovery against the
other and against the officers, employees, agents, and representatives of the
other, on account of loss by or damage to the waiving party or its property or
the property of others under its control, to the extent that such loss or damage
is insured be obtainable without additional charge, the insured party shall so
notify the other party promptly and, if the other party shall pay the insurer's
additional charge therefor, such waiver or agreement shall included in the
policy against under any policy which either may have in force at the time of
loss or damage against under any policy which either may have in force at the
time of loss or damage.
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16.5 Except to the extent expressly provided in Section 16.5, nothing
contained in this Lease shall relieve Tenant of any liability to Landlord or to
its insurance carriers or any other party which Tenant may have under law or
pursuant to the provisions of this Lease, by reason of any damage to the
Premises or the Building by fire or other casualty.
17. TENANT'S EQUIPMENT.
17.1 Tenant shall not install any equipment of any kind or nature
whatsoever in the Premises which will or may necessitate any changes,
replacements or additions to, or in the electrical capacity or existing capacity
of, the water system, heating system, plumbing system, air conditioning system,
life safety system or any other system of the Premises and/or the Building
without first obtaining the prior written consent of Landlord, which consent may
be subject to, among other things Tenant's compliance with the provisions of
Section 8.6 and Articles 11 and 12 of this Lease. If Tenant installs business
machines and/or mechanical equipment which cause unreasonable levels of noise or
vibration in the Building or which, in Landlord's reasonable judgment, exceed
the floor loads set forth in Exhibit M, then Tenant, at Tenant's expense, shall
promptly install and maintain noise or vibration eliminators or other devices
sufficient to eliminate such noise and vibration. Landlord reserves the right to
inspect the Premises to insure compliance with this Section.
17.2 Landlord shall have the right to approve the weight and position
of safes and other heavy equipment or fixtures, which shall, if reasonably
considered necessary by the Landlord, stand on weight distribution platforms or
like devices approved in advance by Landlord. Landlord's approval under the
preceding sentence shall not be unreasonably withheld or delayed provided any
such safes and other heavy equipment or fixtures will not exceed the maximum
floor load of the floor in question which is set forth in Exhibit M after such
weight distribution platform or like device is installed. Any and all
non-structural damage or injury to the Premises caused by moving the property of
Tenant into or out of the Premises, or due to the same being on the Premises,
shall be repaired by, and at the sole cost of, Tenant. All structural damage or
injury to the Premises caused by moving such property into or out of the
Premises, or due to the same being on the Premises, shall be repaired by
Landlord, at Tenant's expense, and Tenant shall pay for the same, as Additional
Rent, within thirty (30) days after its receipt of an invoice therefor.
17.3 No furniture, equipment or other bulky matter of any description
will be received into the Premises or carried in the passenger elevators except
as approved by Landlord, and all such furniture, equipment, and other bulky
matter shall be delivered only by way of the freight elevators. Except as set
forth in Section 7.4(b), in the event Tenant requests overtime service in
accordance with the provisions of this Lease, such overtime service shall be at
Tenant's sole cost and expense in accordance with the provisions of this Lease.
All movement of furniture, equipment and other materials outside the Premises
shall be at Tenant's expense and under the supervision of Landlord who shall,
however, not be responsible for any damage to or charges for moving the same.
Tenant shall pay for Landlord's supervision, as Additional Rent, within thirty
(30) days after its receipt of an invoice therefor. The charges for such
supervision shall be
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applied uniformly to all tenants of the Building. Tenant shall promptly remove
from the sidewalks adjacent to the Building any of the Tenant's furniture,
equipment or other material there delivered or deposited.
18. NON-LIABILITY AND INDEMNIFICATION.
18.1 Neither Landlord nor Landlord's agents, employees, officers,
directors, shareholders, members, partners, partners of such partners or
principals (disclosed or undisclosed) nor its mortgagees shall be liable to
Tenant for, and Tenant shall save and hold Landlord and its agents, employees,
contractors, officers, directors, shareholders, members, partners, partners of
such partners and principals (disclosed or undisclosed) and their mortgagees
harmless from and shall defend and indemnify such parties against, any loss,
liability, claim, damage, expense (including reasonable attorneys' fees and
disbursements), penalty or fine incurred in connection with or arising from the
Premises or by reason of Tenant's or any other occupant's use of the Premises
including, without limitation, any injury to Tenant, Tenant's agents, employees,
contractors, invitees or licensees or any other occupant of the Premises, or to
any other person or for any damage to, or loss (by theft or otherwise) of any of
Tenant's property or of the property of any other person, irrespective of the
cause of such injury, damage or loss unless due to the intentional acts or
negligence of Landlord or Landlord's agents, its employees, contractors,
invitees or licensees.
18.2 Neither any (a) performance by Landlord, Tenant or others of any
repairs or improvements in or to the Land, Building or Premises, (b) failure of
Landlord or others to make any such repairs or improvements, (c) damage to the
Building equipment, Premises or Tenant's personal property, (d) injury to any
persons, caused by other tenants or persons in the Building, or by operations in
the construction of any private, public or quasi-public work, or by any other
cause, (e) latent defect in the Building, Building equipment or Premises, (f)
temporary covering or bricking up of any windows of the Premises for any reason
whatsoever including, without limitation, Landlord's own acts, any Legal
Requirement or any Insurance Requirement, nor (g) inconvenience or annoyance to
Tenant or injury to or interruption of Tenant's business by reason of any of the
events or occurrences referred to in the foregoing subdivisions (a) through (f)
shall impose any liability on Landlord to Tenant, any occupant or any third
party claiming by, through or under Tenant. Landlord, in making any repairs,
alterations or improvements hereunder, shall prosecute the same utilizing such
reasonable methods in order to minimize any disruption to Tenant's use of the
Premises or the conduct of its business therein. Without limiting the foregoing,
to the extent that any disruption of Building service is caused by parties other
than Tenant or Tenant's agents, employees, contractors, invitees or licensees,
and such disruption results in the cessation of any or all services to the
Premises or a portion thereof, and Tenant is unable to conduct its business
within the Premises or the portion thereof so affected for three (3) consecutive
business days or more, Tenant shall be entitled to an abatement of Base Rent and
Additional Rent for the portion of the Premises so affected commencing on the
fourth (4th) business day following such cessation of services and continuing
until such services are restored. In no event, however, shall Landlord be liable
for injury or damage to Tenant or its property unless such injury or damage is
caused by the intentional acts or negligence of Landlord
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or Landlord's agents, its employees, contractors, invitees or licensees. No
representation is made that the communications or security systems, devices or
procedures of the Building will be effective to prevent injury to Tenant or any
other person or damage to, or loss (by theft or otherwise) of any of Tenant's
personal property or the property of any other person and in no event shall
Landlord be liable to Tenant for any failure of Tenant's computer,
telecommunications or data base systems. Landlord reserves the right to
discontinue or modify such communications or security systems or procedures
without liability so long as Landlord shall continue to maintain communications
or security systems comparable to those of Class A office buildings in The City
of New York.
18.3 Tenant hereby indemnifies Landlord and its agents, employees,
contractors, officers, directors, shareholders, members, partners, partners of
such partners, and principals (disclosed or undisclosed) and their respective
mortgagees, successors and assigns against liability or expense (including
reasonable attorneys' fees and disbursements) in connection with or arising from
(i) (a) any default by Tenant in the performance of any provisions of this
Lease, and/or (b) the use or occupancy or manner of use or occupancy of the
Premises by Tenant or any person claiming by, through or under Tenant, and/or
(c) claims for death, personal injury or property damage arising out of the
acts, omissions or negligence of Tenant, or the contractors, agents, employees,
invitees or licensees of Tenant in connection with the performance of any
Alterations or any other work, labor, services or materials done for or supplied
to Tenant, including, without limitation, the installation, maintenance (or
failure to maintain) or removal of Tenant's Corridor Signs, and/or (d) any acts,
omissions or negligence of Tenant or any such person, or the contractors,
agents, employees, invitees or licensees of Tenant or any such person, in or
about the Premises or the Building either prior to, during or after the
expiration of the Term, provided, however, that such indemnity applies only to
the extent that any of the foregoing are not covered by Tenant's insurance and
did not result subject to the provisions of Section 18.5, from Landlord's or any
of Landlord's agents, employees' or contractors' negligence, willful misconduct
or intentional acts, and (ii) claims arising from any notices of violation or
mechanic's liens arising from or in connection with the performance of any
Alterations or any other work, labor, services or materials done for or supplied
to Tenant, including, without limitation, the installation, maintenance (or
failure to maintain) or removal of Tenant's Corridor Signs. If any action, suit
or proceeding arising from any of the foregoing is brought against Landlord,
Tenant will resist and defend such action, suit or proceeding or cause the same
to be resisted and defended by counsel designated by Tenant (which counsel shall
be reasonably satisfactory to Landlord), unless, due to a conflict of interest
or Landlord's negligence or wrongful acts, Landlord requires such action, suit
or proceeding to be resisted and defended by counsel of its own selection and is
represented by such counsel reasonably satisfactory to Landlord (in which case
Tenant shall be liable for the payment of Landlord's attorney's fees), provided
that prior to the occurrence and continuance of an Event of Default, Landlord
shall not settle or release any claim without the written consent of Tenant,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, if Tenant has a duty to defend Landlord in any action, suit or
proceeding described in the immediately proceeding sentence, and Tenant's
insurer assumes Tenant's duty to defend Landlord, the counsel that the insurer
shall designate shall be deemed to be acceptable to Lender, provided such
counsel regularly represents
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insurance companies in similar types of actions, suits or proceedings. If and to
the extent that the foregoing provisions of this Section 18.3 may be
unenforceable for any reason, Tenant hereby agrees to make the maximum
contribution to payment and satisfaction of each of the indemnified liabilities
which is permissible under applicable law.
18.4 Tenant shall pay to Landlord, as Additional Rent, within thirty
(30) days after written demand therefor, sums equal to all losses and other
liabilities referred to in Section 18.3. The obligations of Tenant under this
Article 18 shall survive the expiration or earlier termination of this Lease.
18.5 Notwithstanding anything contained in this Lease to the contrary,
when the claim is caused by the joint negligence or willful misconduct of (a)
Tenant and Landlord, (b) Tenant and a third party unrelated to Tenant, except
Tenant's agents, employees, or invitees or (c) Landlord and a third party
unrelated to Landlord, except Landlord's agents or employees, as the case may
be, Tenant's or Landlord's duty, as the case may be, to defend, indemnify and
hold the other party harmless shall be in proportion to Tenant's or Landlord's,
as the case may be, allocable shares of the joint negligence or willful
misconduct.
19. ASSIGNMENT AND SUBLETTING.
19.1 Neither this Lease nor any part hereof, nor the interest of Tenant
thereunder, shall, by operation of law or otherwise, be assigned, mortgaged,
pledged, encumbered, sublet or otherwise transferred by Tenant, Tenant's legal
representatives or successors in interest, and neither the Premises nor any part
thereof shall be encumbered in any manner by reason of any act or omission on
the part of Tenant, or anyone claiming under or through Tenant (all of which are
collectively referred to herein as an "Assignment"), or shall be sublet or be
used, occupied, or utilized for desk space (except independent contractors
retained by Tenant on a short term basis in furtherance of Tenant's normal
business) or for mailing privileges by anyone other than Tenant (all of which
are collectively referred to herein as a "Sublease"), without the prior written
consent of Landlord in each instance, which consent shall not be unreasonably
withheld or delayed, except as expressly otherwise provided in this Article.
Except for a sale or other transfer of stock to a Related Corporation or the
sale of stock of Tenant or a Related Corporation whose stock is listed and
traded on a nationally recognized stock exchange, a transfer of twenty-five
percent (25%) or more in interest of Tenant (whether a partnership interest or
membership in a limited liability company) or a transfer of twenty-five percent
(25%) or more in interest in the controlling general partner, any partner or
member holding a majority interest in Tenant or majority stockholder of Tenant
(whether such transfers are through a single transaction or a series of
transactions and whether stock, partnership interest, or otherwise) by any
party(s) in interest shall be deemed an Assignment of this Lease.
19.2 If this Lease be assigned, whether or not in violation of the
terms of this Lease, Landlord may collect rent from the assignee. If the
Premises or any part thereof be sublet or be used or occupied by anybody other
than Tenant, whether or not in violation of this Lease, Landlord may, after
default by Tenant and expiration of Tenant's time to
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cure such default, if any, collect rent from the subtenant or occupant. In
either event Landlord may apply the net amount collected to the rent herein
reserved, but no Assignment, Sublease, occupancy, or collection or application
of rent shall be deemed a waiver of any of the provisions of Section 19.1, or
the acceptance of the assignee, subtenant, or occupant as a tenant, or be deemed
to relieve, impair, release, or discharge Tenant of its obligations fully to
perform the terms of this Lease on Tenants part to be performed. The consent by
Landlord to an Assignment, Sublease, transfer or encumbering pursuant to any
provision of this Lease shall not in any way be deemed consent to, or be deemed
to relieve Tenant from obtaining Landlord's written consent to, any other or
further Assignment, Sublease, transfer or encumbering. References in this Lease
to use or occupancy by anyone other than Tenant shall include, without
limitation, subtenants, licensees and others claiming under Tenant or under any
subtenant, immediately or remotely. The listing of any name other than that of
Tenant, or a Related Corporation, on any door of the Premises or on any
directory or in any elevator in the Building, or otherwise, shall not operate to
vest in the person so named any right or interest in this Lease or the Premises,
or be deemed to constitute, or serve as a substitute for, any consent of
Landlord required under this Article, and it is understood that any such listing
shall constitute a privilege extended by Landlord, revocable at Landlord's will
by Notice to Tenant. Tenant agrees to pay, as Additional Rent, within thirty
(30) days after Tenant's receipt of an invoice therefor, Landlord's reasonable
attorneys' fees and disbursements incurred by Landlord in connection with any
proposed Assignment or Sublease, including the costs of making investigations as
to the acceptability of a proposed subtenant or assignee.
19.3 Tenant may sublet all or part of the Premises to, or permit all or
part of the Premises to be used or occupied by, a Related Corporation for any of
the Permitted Uses without any requirement of obtaining Landlord's consent, but
only for such period as such Related Corporation occupies the portion of the
Premises sublet for any of the Permitted Uses and such Related Corporation
continues to qualify as a Related Corporation, as the case may be, under the
terms of this Lease, subject, however, to compliance with Tenant's obligations
under this Lease. At such time as a Related Corporation does not meet the
foregoing requirement, such Related Corporation and Tenant must comply with the
provisions of Sections 19.1 and 19.2. Prior to the date that a Related
Corporation occupies any portion of the Premises, whether pursuant to a sublease
or not, Tenant shall deliver a Notice to Landlord setting forth the name of the
Related Corporation occupying such space and a description of the space so
occupied and a contact party at the Related Corporation.
19.4 (a) Tenant may sublet the Premises, or portions thereof,
subject to Landlord's consent, which consent shall not be unreasonably withheld
or delayed, and subject to the following conditions:
(i) The nature of the proposed subtenant's business
and its reputations is in keeping with the character of the Building as a Class
A office building and its tenancies and such proposed subtenant shall not be a
governmental agency or charitable organization or a corporation or other
organization whose operations are or would be subject to any environmental
restrictions;
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(ii) The purposes for which the proposed subtenant
intends to use the applicable portion of the Premises are uses expressly
permitted by this Lease;
(iii) Any such subletting will result in there being
no more than four (4) subtenants on a floor excluding Related Corporations;
(iv) The proposed sublease shall prohibit any
assignment or further subletting, except in compliance with this Sections 19.3
and 19.4;
(v) No Event of Default shall have occurred and be
continuing hereunder;
(vi) During the first three (3) Lease Years following
the Base Rent Commencement Date, the proposed subtenant (unless such subtenant
during such three year period was a Related Corporation) shall not then be a
tenant in the Building unless such proposed subtenant occupies contiguous space
to the space being sublet or has not, within one hundred eighty (180) days
preceding the date Landlord's consent was sought for subleasing to such tenant,
submitted to Landlord, or to which Landlord has submitted, a bona fide written
proposal for the rental of comparable space in the Building (meaning space
equivalent in size, location and length of term to the proposed sublease);
(vii) No subletting shall be for a term ending later
than one (1) day prior to the expiration of the Term;
(viii) Each sublease shall provide that it is subject
and subordinate to this Lease and to the matters to which this Lease is or shall
be subordinate;
(ix) Each sublease shall provide that, if by reason of
a default on the part of Tenant under this Lease, this Lease or the leasehold
estate created hereunder is terminated, then such subtenant shall, at the option
of Landlord, which shall be exercised in the sole and absolute discretion of the
Landlord, attorn to Landlord on the terms and conditions set forth in the
sublease, and will recognize Landlord as such subtenant's Landlord under such
sublease, provided that Landlord accepts such attornment, having no obligation
to do so;
(x) Tenant shall not have the right to publicly
advertise the rental rate of space for subletting to anyone other than brokers;
and
(xi) Tenant shall give Landlord a Notice containing:
(a) the material terms of the proposed sublease, (b) information relevant to
subparagraphs (i) and (ii) above, (e) a certification that the remaining
requirements of this Section 19.4(a) have been met, and (d) a copy of the term
sheet and if same has been prepared, a copy of the proposed sublease.
(b) Landlord shall, within, twenty (20) days after receiving
the information under Section 19.4(a), give Notice to Tenant to permit or deny
the proposed
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sublease. If Landlord does not give Notice within the aforesaid twenty (20) day
period, then Tenant may sublease part or all of the Premises upon the terms
Tenant gave in the information under Section 19.4(a)(xi). No sublease of this
Lease by Tenant shall be valid unless, within five (5) days after execution
thereof, Tenant shall deliver to Landlord an executed copy of such sublease in
form and substance reasonably satisfactory to Landlord, duly executed by Tenant
and by the sublessee.
(c) In the event Tenant sublets all or any part of the
Premises to anyone (other than a Related Corporation) for rents which for any
period shall exceed the Base Rent, Tenants Tax Payment and Tenant's Operating
Payments payable for the subleased space under this Lease for the same period,
Tenant shall pay Landlord, as Additional. Rent, fifty percent (50%) of any Net
Profits that Tenant actually receives from such subletting. The term "Net
Profits" shall mean (x) the excess of such rents under any sublease for the
Premises over the Base Rent, Tenant's Tax Payment and Tenant's Operating
Payment, payable for the subleased space under this Lease, less (i) brokerage
commissions actually paid by Tenant in connection incurred by Tenant in
connection with such subletting, (ii) reasonable attorneys' fees actually
incurred by Tenant in connection with such subletting, (iii) reasonable
advertising fees actually incurred by Tenant in connection with such subletting,
(iv) the cost of any reasonable alterations and reasonable rent concession
period for the benefit of such subtenant, (v) any actual vacancy period
commencing on the date that Tenant, a Related Corporation vacates such vacant
space, provided, however, such vacancy period shall not extend beyond six (6)
months and (vi) all other reasonable out-of-pocket expenses paid by Tenant
directly in connection with such subletting. Landlord's portion of Net Profits
shall be paid to Landlord by Tenant after Tenant has been paid the costs set
forth in this Section 19.4(c) within thirty (30) days after Tenant receives
same. If in connection with any such subletting Tenant is to receive an amount
from the subtenant for the sale of Tenant's Work or any Alterations, Tenant
shall pay Landlord, as Additional Rent, within thirty (30) days of Tenant's
receipt of same, fifty percent (50%) of such amount, after deduction of any net
amortized or undepreciated cost of such Tenant's Work or Alterations.
Notwithstanding anything contained to the contrary in this Section 19.4, if
Tenant subleases any option space leased by Tenant pursuant to Article 38 within
twelve (12) months of the Beneficial Occupancy Date for such space, Landlord
shall be entitled to one hundred percent (100%) of the Net Profits from such
sublease and Tenant shall not be entitled to any portion of such Net Profits.
19.5 (a) Notwithstanding anything contained in the Article, in the
event that at any time during the Term Tenant desires to assign its entire
interest in this Lease, Tenant:
(i) shall submit to Landlord a Notice setting forth
the name and address of the proposed assignee and a detailed description of such
person's business, character and financial references (including its most recent
balance sheet and income statements certified by its chief financial officer or
a certified public accountant), and any other information reasonably requested
by Landlord, which information shall be kept confidential by Landlord unless the
disclosure thereof is required by Legal Requirements, or judicial order,
provided however, Landlord may disclose such
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information to any direct (or indirect) partner, member or shareholder of
Landlord and to any party who has provided or is providing financing to
Landlord; and
(ii) shall submit to Landlord (a) the material terms
of the proposed assignment, (b) an agreement by Tenant to indemnify Landlord
against liability resulting from any claims that in connection with the proposed
assignment may be made against Landlord by any brokers or other persons claiming
a commission or similar compensation and (c) a copy of the term sheet for such
assignment and if same has been prepared, a copy of the proposed assignment.
(b) Tenant may at any time during the Term assign this Lease,
subject to Landlord's consent, which consent shall not be unreasonably withheld
or delayed, provided, however, Landlord's consent shall not be required if
Tenant's assignment is to a Related Corporation and provided further that under
no circumstances shall any such assignment relieve Tenant from the performance
of any of the obligations of Tenant under this Lease and subject to the
following conditions:
(i) The nature of the proposed assignee's business and
its reputation is in keeping with the character of the Building as a Class A
office building and its tenancies and such assignee shall not be a governmental
agency, charitable organization or a corporation or other organization whose
operations are or would be subject to environmental restrictions;
(ii) The purposes for which the proposed assignee
intends to use the Premises are uses expressly permitted by this Lease;
(iii) No Event of Default shall have occurred and be
continuing hereunder; and
(iv) No assignment of this Lease by Tenant shall be
valid unless, within five (5) days after the execution thereof, Tenant shall
deliver to Landlord an executed copy of such assignment in form and substance
reasonably satisfactory, duly executed by Tenant and by the assignee.
(c) Landlord shall, within twenty (20) days after receiving
all of the information under Section 19.5(a) and Section 19.5(b)(i) and (ii)
which information must be full and complete, give Notice to Tenant to permit or
deny the proposed assignment. If Landlord denies consent, it must explain the
reasons for the denial. If Landlord does not give Notice within the aforesaid
twenty (20) day period, then Tenant may assign the entire Premises upon the
terms Tenant gave in the information under Sections 19.5(a)(i) and (ii) and
Sections 19.5(b)(i) and (ii).
(d) In the event that Tenant fails to execute and deliver any
assignment within ninety (90) days after Tenant shall have delivered the Notice
described in Section 19.5(a), then Tenant shall again comply with all the
provisions and conditions of this Section 19.5 before assigning this Lease.
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(e) No assignment of part of this Lease (other than to a
successor or Related Corporation) shall be permitted. No assignment of this
Lease by Tenant shall be valid unless, within thirty (30) days after execution
thereof, Tenant shall deliver to Landlord a duplicate original instrument of
assignment and assumption in form and substance reasonably satisfactory to
Landlord, duly executed by Tenant and by the assignee, in which such assignee
shall assume performance of all of the provisions of this Lease and evidence
reasonably satisfactory to Landlord that the provisions of this Section 19.5(a)
have been satisfied. No assignment of this Lease shall serve to relieve Tenant
of its obligations hereunder, including, without limitation, the obligations to
pay Base Rent and Additional Rent.
(f) Notwithstanding anything to the contrary contained herein,
if Tenant shall actually receive any consideration from its assignee (other than
a successor or Related Corporation) in connection with the assignment of this
Lease, Tenant shall pay over to Landlord fifty percent (50%) of the
consideration actually received within ten (10) days after such consideration is
received by Tenant (including, without limitation, sums paid for sale of Tenants
Work or any Alterations) reduced by (i) the net unamortized or undepreciated
cost of Tenants Work in excess of the Tenant Improvement Allowance or
Alterations, determined on the basis of an amortization or depreciation period
for the then remaining Term; (ii) reasonable brokerage commissions actually paid
by Tenant in connection with such assignment, (iii) reasonable attorneys' fees
actually incurred by Tenant in connection with such assignment, (iv) reasonable
advertising fees, (v) the cost of reasonable alterations and reasonable rent
concession period for the benefit of such assignee, (vi) any actual vacancy
period commencing on the date that Tenant or a Related Corporation vacates such
space, provided, however, such vacancy period shall not extend beyond six (6)
months and (vii) all other reasonable out-of-pocket expenses paid by Tenant
directly in connection with such assignment. Notwithstanding anything contained
to the contrary in this Section 19.5, if Tenant assigns any portion of the
option space leased by Tenant pursuant to Article 38 within twelve (12) months
of the Beneficial Occupancy Date of such space, Landlord shall be entitled to
one hundred percent (100%) of the consideration received from such assignment
and Tenant shall not be entitled to any portion of such consideration.
20. SUBORDINATION AND ATTORNMENT.
20.1 This Lease and all rights of Tenant hereunder are subject and
subordinate in all respects to (a) all present and future ground leases,
operating leases, superior leases, overriding leases and underlying leases and
grants of term of the Land and the Building or any portion thereof
(collectively, including the applicable items set forth in subdivision (d) of
this Section 20. 1, the "Superior Lease") whether or not the Superior Lease
shall also cover other lands or buildings, (b) all mortgages and building loan
agreements, including leasehold mortgages and spreader and consolidation
agreements, which may now or hereafter affect the Land or the Building
(collectively, including the applicable items set forth in subdivisions (c) and
(d) of this Section 20. 1, the "Superior Mortgage"), whether or not the Superior
Mortgage shall also cover other lands or buildings or leases, (c) each advance
made or to be made under the Superior Mortgage, and (d) all renewals,
modifications, replacements, substitutions and extensions of the Superior Lease
and the
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Superior Mortgage. The provisions of this Section shall be self-operative and no
further instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver, at its own cost and
expense, any instrument, in recordable form, that Landlord, the landlord under
any Superior Lease (the "Superior Landlord") or the holder of any Superior
Mortgage (the "Superior Mortgage") may reasonably request to evidence such
subordination. If Tenant fails to execute, acknowledge and deliver any such
instrument of subordination within thirty (30) days after request therefor,
Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's
attorney-in-fact, coupled with an interest, to execute, acknowledge and deliver
any such instruments for and on behalf of Tenant. Tenant agrees to subordinate
this Lease to all future Superior Mortgages and all renewals, modifications,
replacements, substitutions of such Superior Mortgage, provided such Superior
Mortgagee delivers to the Tenant a subordination, nondisturbance and attornment
agreement substantially in the form attached hereto as Exhibit B. Any Superior
Mortgagee may elect that this Lease shall have priority over such Superior
Mortgage and, upon notification thereof by such Superior Mortgagee to Tenant,
this Lease shall be deemed to have priority over such Superior Mortgage, whether
this Lease is dated prior to or subsequent to the date of such Superior
Mortgage. If, in connection with the obtaining, continuing or renewing of
financing for which the Building or the Land represents collateral, in whole or
in part, any bank, insurance company, pension fund or other lending institution
shall request reasonable modifications of this Lease as a condition of its
granting such financing, Tenant will not unreasonably withhold its consent
thereto, provided that such modifications do not increase the Base Rent or
Additional Rent payable by Tenant hereunder or increases the obligations of
Tenant hereunder or materially affects beyond a de minimis degree Tenant's
rights hereunder.
20.2 For purposes of this Section 20.2, the term "Successor Landlord"
shall mean and include (i) any person, including but not limited to any Superior
Landlord or Superior Mortgagee, who, prior to the termination of this Lease,
acquires or succeeds to the interest of Landlord under this Lease through
summary proceedings, foreclosure action, assignment, deed in lieu of foreclosure
or otherwise, and (ii) the successors and assigns of any person referred to in
clause (i) of this sentence. Upon any Successor Landlord's so acquiring, or so
succeeding to, the interest of Landlord under this Lease, Tenant shall, at the
election and upon the request of the Successor Landlord, and without further
instruments of attornment, fully attorn to and recognize such Successor Landlord
as Tenant's landlord under this Lease upon the then executory terms of this
Lease. No Successor Landlord shall be bound by any prepayment of rent or
additional rent for more than one month in advance or any amendment or
modification of this Lease made without the consent of such Successor Landlord,
which consent shall not be unreasonably withheld or delayed. Tenant waives the
provisions of any statute or rule of law now or hereafter in effect which may
give or purport to give Tenant any right of election to terminate this Lease or
to surrender possession of the Premises in the event any Superior Lease is
terminated. The foregoing provisions of this Section shall inure to the benefit
of any such Successor Landlord, shall be self-operative, and no further
instrument shall be required to give effect to said provisions. Upon demand of
any such Successor Landlord, Tenant agrees to execute instruments to evidence
and confirm the foregoing provisions of this Section reasonably satisfactory to
any such Successor Landlord. Tenant hereby
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irrevocably constitutes and appoints Landlord attorney-in-fact for Tenant to
execute any such instrument for and on behalf of Tenant, such appointment being
coupled with an interest. Nothing contained in this Section shall be construed
to impair any right otherwise exercisable by any such owner, holder or lessee.
20.3 Simultaneously with the mutual execution and delivery of this
Lease by Landlord to Tenant, Landlord agrees to deliver to Tenant a
subordination, non-disturbance and attornment agreement in the form attached
hereto as Exhibit B.
21. ACCESS, CHANGE IN FACILITIES.
21.1 All parts (except non-glass surfaces facing the interior of the
Premises) of all walls, windows and doors bounding the Premises, all balconies,
stairs, landings and roofs adjacent to the Premises, all space in or adjacent to
the Premises presently being used as of the date of this Lease for columns,
shafts, stacks, stairways, risers, elevator shafts and machinery, conduits, air
conditioning rooms, telephone rooms, fan rooms, heating, ventilating, air
conditioning, plumbing, electrical and other mechanical facilities, service
closets and other Building equipment, and the use thereof, as well as access
thereto through the Premises for the purposes of operation, decoration,
cleaning, maintenance, safety, security, alteration and repair, are hereby
exclusively reserved to Landlord, except to the extent otherwise specifically
provided in this Lease. Landlord reserves the right, at any time, without
incurring any liability to Tenant therefor, to make such changes in or to the
Building and the Building equipment, as well as in the entrances, doors,
lobbies, interior and exterior plaza areas, corridors, elevators (provided,
however, Landlord shall during Business Hours and subject to maintenance and
repairs, maintain two (2) passenger elevators to service the Premises), Building
stairs, landings, toilets and other public parts of the Building, as it may deem
necessary or desirable, provided any such change (a) does not unreasonably
deprive Tenant of access to the Premises, (b) does not materially and adversely
interfere with the use of the Premises or the services furnished to the Premises
for an unreasonable length of time or (c) does not materially reduce the size,
or materially and dramatically change the size or nature, of the lobby of the
Building. Notwithstanding the foregoing Tenant shall have the right, at its
discretion, to laminate over any elevator banks within the Premises which are
not servicing the applicable floor in the Premises, provided, (i) such
lamination is permitted by, and Tenant complies with, all Legal Requirements and
Insurance Requirements, (ii) Tenant obtains all necessary permits required to
construct and maintain such lamination and (iii) at the end of the Term and
prior to Tenant vacating the floor on which such lamination exists, Tenant
removes such lamination and restores, at Tenant's sole cost and expense, the
area to the condition existing prior to such lamination. If Landlord shall make
material changes to the lobby, Landlord will advise Tenant of the changes and
seek Tenant's advice and input.
21.2 Landlord may install, use, control and maintain pipes, fans,
ducts, wires and conduits within or through the Premises, or through the walls,
columns and ceilings therein, provided that the installation work and resulting
construction will not unreasonably interfere with Tenant's use and occupancy of
the Premises nor diminish, beyond a de minimis degree, the rentable square
footage or wall area and all such pipes,
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fans, ducts, wires and conduits are concealed. Tenant hereby grants Landlord
access through the Premises in connection with Landlord's installation, use,
control and maintenance of such pipes, fans, ducts, wires and conduits. Where
access doors are required by Landlord in or adjacent to the Premises for
mechanical trades, Landlord shall furnish them and have all keys to such access
doors. Tenant shall cooperate with Landlord in the location of Landlord's access
doors for such facilities.
21.3 Landlord shall have the right to take all reasonable measures as
Landlord may deem advisable for the security of the Building and its occupants,
including, without limitation, the search of all persons entering or leaving the
Building, the evacuation of the Building for cause, suspected cause or for drill
purposes.
21.4 Landlord and Landlord's agents shall have the right to enter the
Premises at all reasonable times, upon reasonable prior notice, whether or not
during Business Hours, for any of the purposes specified in this Article and (a)
to examine the Premises or for the purpose of performing any obligation of
Landlord or exercising any right reserved to Landlord in this Lease (or to the
Superior Landlord in any Superior Lease); (b) to exhibit the Premises to
prospective mortgagees or purchasers of the Building; (c) to exhibit the
Premises to prospective tenants, but only within the last twenty-four (24)
months of the initial Term or the last twelve (12) months of the renewal Term;
(d) to make or cause to be made such repairs or improvements, or to perform such
maintenance, including the maintenance of Building equipment, as Landlord may
deem necessary or desirable or required by any Governmental Authority, Legal
Requirement or Insurance Requirement; and (e) to take into and temporarily
store, during the course of such repairs, improvements or maintenance, upon the
Premises all materials that may be required in connection therewith. If Tenant,
its agents or employees, after reasonable prior notice has been afforded Tenant
shall not be present or shall not permit an entry into the Premises at any time
when such entry shall be permissible, Landlord may use a master key or forcibly
enter the Premises without any liability therefor.
21.5 The exercise of any rights retained by Landlord pursuant to this
Article 21 shall be without liability to Tenant or any person claiming through
Tenant for damage or injury to property, person or business and without
effecting an eviction, constructive or actual, or disturbance of Tenant's use of
possession or giving rise to any claim for set off or abatement of Base Rent or
Additional Rent.
22. RULES AND REGULATIONS.
22.1 Tenant and Tenant's agents, employees, licensees and invitees will
fully and promptly comply with all requirements of the rules and regulations of
the Building and related facilities which are attached hereto as Exhibit N.
Landlord shall at all times have the right to change such rules and regulations
and/or Building services or to promulgate other reasonable rules and regulations
and/or Building services in such manner as may be deemed reasonably advisable
for safety, care, or cleanliness of the Building and related facilities or
premises, and for preservation of good order therein, all of which rules and
regulations and/or Building services, changes and amendments will be forwarded
to Tenant in writing and shall be carried out and observed by Tenant. Tenant
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shall further be responsible for the compliance with such rules and regulations
and/or Building services by the employees, servants, agents, visitors, licensees
and invitees of Tenant. In the event of any conflict between the provisions of
this Lease and the provisions of the rules and regulations, then the provisions
of this Lease shall control. Landlord shall enforce such rules and regulations
in a nondiscriminatory manner throughout the Building.
23. DAMAGE OR DESTRUCTION.
23.1 If the Premises or any part thereof shall be damaged or rendered
untenantable by fire or other casualty and if Tenant gives prompt Notice thereof
to Landlord and this Lease is not terminated pursuant to any provision of this
Article, Landlord, at Landlord's expense, shall perform Landlord's Restoration
Work, subject to Legal Requirements then in effect, and Tenant, at Tenant's
expense, shall perform Tenant's Restoration Work, with reasonable dispatch and
continuity. The Base Rent and Additional Rent shall be equitably abated to the
extent that the Premises shall have been rendered untenantable, such abatement
shall commence on the date of such damage, provided Tenant has given prompt
Notice of such damage to Landlord, and shall continue until 20 days following
the date the Premises shall no longer be untenantable or, in the event of Tenant
Delay or any delay in Tenant's performance of Tenant's Restoration Work, until
the date the Premises would have been tenantable but for such Tenant Delay or
other delay in Tenant's performance of Tenant's Restoration Work; provided,
however, should Tenant occupy a portion of the Premises for the conduct of its
business during the period the repair work is taking place and prior to the date
the Premises are no longer untenantable, the Base Rent and Additional Rent
allocable to such occupied portion, based upon the proportion which the occupied
portion of the Premises bears to the total area of the Premises, shall be
payable by Tenant from the date of such occupancy.
23.2 "Landlords Restoration Work" shall include all of the work
necessary to repair, restore, replace and rebuild Landlord's Work to
substantially the same condition as that in which it was immediately prior to
the occurrence of the fire or other casualty; provided, however, that Landlord's
Restoration Work shall not include the repair, restoration, replacement or the
rebuilding of (i) Tenants Work or Tenant's Furnishings, (ii) any Alteration made
or installed by or on behalf of Tenant pursuant to Article 12 hereof or (iii)
any part of the furniture, business equipment or other personal property which
may have been placed by Tenant within the Premises.
23.3 "Tenant's Restoration Work" shall include all of the work (other
than Landlords Work) necessary to repair, restore, replace and rebuild the
Premises (including Tenant's Work) to substantially the same condition as that
in which it was in immediately prior to the occurrence of the fire or other
casualty.
23.4 If the Premises shall be totally damaged or rendered wholly
untenantable by fire or other casualty, Landlord has not terminated this Lease
pursuant to Section 23.5 and Landlord has not substantially completed Landlords
Restoration Work within twelve (12) months (subject to (i) Tenant Delay or (ii)
delays in Tenant's performance of
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Tenants Restoration Work which result in delays in the performance of Landlord's
Restoration Work or (iii) Force Majeure) from the date Landlord receives (i)
final adjustment of all insurance claims relating to the casualty, (ii) all
permits and approvals necessary to perform Landlord's Restoration Work, and all
such permits and approvals are final and non-appealable (or the time for appeal
has expired), and (iii) written confirmation from the Superior Mortgagee that
the Superior Mortgagee has agreed to advance insurance proceeds to Landlord for
the performance of Landlord's Restoration Work, Tenant may serve Notice on
Landlord of its intention to terminate this Lease, and if within fortyfive (45)
days after Landlord's receipt of such Notice, subject to (i) Tenant Delay or
(ii) delays in Tenant's performance of Tenant's Restoration Work which result in
delays in the performance of Landlord's Work or (iii) Force Majeure, Landlord
shall not have completed Landlord's Restoration Work, this Lease shall terminate
on the expiration of such forty-five (45) day period as if such termination date
were the Expiration Date, without prejudice to Landlord's and Tenant's rights
under this Lease in effect prior to such termination. Upon Landlord's completion
of Landlord's Restoration Work, Tenant shall have no further right to terminate
this Lease pursuant to this Section 23.4.
23.5 If the Premises shall be totally damaged or rendered wholly
untenantable by fire or other casualty or if the Building shall be so damaged by
fire or other casualty that alteration or reconstruction of more than thirty
percent (30%) of the rentable area of the Building, in Landlord's architect's
reasonable opinion, shall be required (whether or not the Premises shall have
been so damaged), then (a) Landlord, at its option, may terminate this Lease, by
giving Tenant thirty (30) days' Notice of such termination, within ninety (90)
days after the date of such fire or other casualty or (b) and such damage occurs
in the final three (3) years of the Term, including any renewal Term, Tenant, at
its option, may terminate this Lease, by giving Landlord thirty (30) days'
Notice of such termination, within ninety (90) days after the date of such fire
or other casualty. In the event that such Notice of termination shall be given,
this Lease shall terminate as of the date provided in such notice of termination
with the same effect as if that date were the Expiration Date, without prejudice
to Landlord's and Tenants rights under this Lease in effect prior to such
termination.
23.6 Landlord shall not be liable for any inconvenience to Tenant or
injury to the business of Tenant resulting in any way from any such damage by
fire or other casualty, or the repair thereof. Landlord will not carry insurance
of any kind on Tenant's Work, any Alterations or any personal property of
Tenant, and Landlord shall not be obligated to repair any damage thereto, or
replace the same, or bear any of the risk of loss with respect thereto.
23.7 The provisions of this Article shall be considered an express
agreement governing any case of damage to or destruction of the Building or the
Premises or any part of either by fire or other casualty, and 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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24. EMINENT DOMAIN.
24.1 In the event that all of the Land, the Building or the Premises
shall be acquired or condemned by eminent domain, this Lease shall terminate as
of the date of the vesting of title in the condemning authority as if said date
were the Expiration Date. If only a part of the Premises shall be so acquired or
condemned then, except as otherwise provided in this Article, this Lease shall
continue in full force and effect, but from and after the date of the vesting of
title, the Base Rent shall be reduced by an amount equal to the product obtained
by multiplying (i) the Base Rent in effect immediately prior to such
condemnation by (ii) a fraction, the numerator of which is the number of
rentable square feet of the Premises taken and the denominator of which is the
number of rentable square feet of the Premises immediately prior to the
condemnation. Tenant's Proportionate Share shall also be reduced to equal a
fraction, the numerator of which is the number of rentable square feet of the
Premises after the taking and the denominator of which is the number of rentable
square feet of the Building after the taking. The aforesaid calculations shall
be reasonably determined by Landlord, whose calculations shall be conclusive
absent manifest error.
24.2 If more than twenty-five percent (25%) of the Land or the Building
shall be so acquired or condemned so that continued operation of the remaining
portion of the Building shall be impracticable or uneconomical as determined by
Landlord, then (i) whether or not the Premises shall be affected, Landlord may,
within ninety (90) days following the date of vesting of title, give Tenant
thirty (30) days' Notice of termination of this Lease or (ii) if more than
twenty-five percent (25%) of the total area of the then Premises is acquired or
condemned, and the taking of such portion of the Premises renders the balance of
the Premises impracticable or uneconomical as determined by Tenant for the
Permitted Use, Tenant may, within ninety (90) days following the date upon which
Tenant shall have received Notice of vesting of title, give to Landlord thirty
(30) days' Notice of termination of this Lease. In the event any such thirty
(30) day Notice of termination is given by Landlord or Tenant, this Lease shall
terminate upon the expiration of said thirty (30) days with the same effect as
if that date were the Expiration Date, without prejudice to Landlord's or
Tenant's rights under this Lease in effect prior to such termination, and Rent
shall be apportioned as of such date or sooner termination.
24.3 In the event of any such acquisition or condemnation of all or any
part of the Land or the Building, Landlord shall receive the entire award for
any such acquisition or condemnation. Tenant shall have no claim against
Landlord or the condemning authority for the value of any unexpired portion of
the Term and agrees not to join in any claim made by Landlord and to execute all
further documents that may be required in order to facilitate the collection of
the award by Landlord. Tenant hereby appoints Landlord as attorney-in-fact for
Tenant, which appointment, being coupled with an interest is irrevocable, to
sign such further documentation on behalf of Tenant. Tenant shall, however,
retain the right to make a separate claim for (i) the value of any personal
property taken or Tenant's Work so taken, and (ii) its moving expenses, provided
same does not diminish or delay the award otherwise obtainable by Landlord.
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24.4 Upon Landlord's receipt of the condemnation award referred to in
Section 24.3, and provided that this Lease has not been terminated pursuant to
the provisions of Section 24.1 or Section 24.2, Landlord shall promptly perform
Landlord's Restoration Work to the extent such condemnation award is sufficient
for such purpose, the Superior Mortgagee has agreed in writing to advance the
condemnation award to Landlord for the performance of Landlords Restoration Work
and provided Landlord receives all permits and approvals necessary to perform
Landlord's Restoration Work and all such permits and approvals are final and
non-appealable (or the time for appeal has expired). Tenant shall perform
Tenant's Restoration Work whether or not Tenant's award is sufficient for such
purpose.
24.5 If the temporary use or occupancy of all or part of the Premises
shall be condemned or taken, this Lease shall remain unaffected by such
condemnation or taking and Tenant shall continue to be responsible for all of
its obligations hereunder (except to the extent prevented from so doing by
reason of such condemnation or taking) and it shall continue to pay the Base
Rent and Additional Rent as provided hereunder. Tenant shall have the right to
claim, prove and receive so much of any award for such condemnation or taking
for temporary use or occupancy as represents compensation for the use and
occupancy of the Premises and, if so awarded, for the loss of value or utility
of Tenant's personal property, Tenant's Work and any Alterations and Tenant's
moving expenses, up to and including the Expiration Date or the date of
termination of the condemnation or taking for temporary use or occupancy,
whichever is earlier, and Landlord shall be entitled to claim, prove and receive
the balance of any such award. Notwithstanding the foregoing, however, the
rights and interests of Landlord and Tenant to any award received or receivable
with respect to a condemnation or taking for temporary use or occupancy shall be
in all other respects governed by the applicable provisions of the Superior
Lease and/or the Superior Mortgage.
24.6 If the grade of any street upon which the Land is situated or
abuts shall be changed, this Lease shall nevertheless continue in full force and
effect, and Landlord shall be entitled to collect and keep the entire award that
may be made. Tenant hereby assigns to Landlord all of its right in and to every
such award or any part thereof.
24.7 The terms "condemnation" and "acquisition" as used herein shall
include any agreement in lieu of or in anticipation of the exercise of the power
of eminent domain between Landlord and any Governmental Authority authorized to
exercise the power of eminent domain.
25. CONDITIONS OF LIMITATION.
25.1 This Lease and the Term and estate hereby granted are subject to
the limitations that:
(a) if Tenant shall file a voluntary petition in bankruptcy or
insolvency, or commence an action under the Bankruptcy Code, or shall be
adjudicated a debtor, or insolvent, or shall file any petition or answer seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under
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the Bankruptcy Code or any other present or any future federal bankruptcy act or
any other present or future applicable federal, state or other statute or law
(foreign or domestic), or shall make an assignment for the benefit of creditors
or shall seek or consent or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any part of Tenant's property; or
(b) if, within ninety (90) days after the commencement of any
proceeding and/or action against Tenant, whether by the filing of a petition or
otherwise, seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under the Bankruptcy Code or any
other present or future federal bankruptcy act or any other present or future
applicable federal, state or other statute or law (foreign or domestic), such
proceeding shall not have been dismissed, or if, within ninety (90) days after
the appointment of any trustee, custodian, receiver or liquidator of Tenant or
of all or any part of Tenant's property, without the consent or acquiescence of
Tenant, such appointment shall not have been vacated or otherwise discharged, or
if any execution or attachment shall be issued against Tenant or any of Tenant's
property pursuant to which the Premises shall be taken or occupied or attempted
to be taken or occupied; or
(c) if Tenant shall default in the payment when due of any
Base Rent or Additional Rent and such default continues for a period of five (5)
days after the date such payment was due; or
(d) if Tenant shall default in the performance of any term of
this Lease on Tenant's part to be performed (other than the payment of Base Rent
and Additional Rent) and Tenant shall fail to remedy such default within thirty
(30) days after Notice of such default, or if such default is of such a nature
that it cannot be completely remedied within said period of thirty (30) days if
Tenant shall not (x) promptly upon the giving by Landlord of such Notice, advise
Landlord of Tenants intention to institute all steps necessary to remedy such
situation, (y) promptly institute and thereafter diligently prosecute to
completion all steps necessary to remedy the same, and (z) complete such remedy
within a reasonable time after the date of the giving of said Notice by Landlord
and in any event prior to such time as would either (i) subject Landlord,
Landlord's agents, any Superior Landlord or Superior Mortgagee to criminal
prosecution or civil liability, including, without limitation, the imposition or
threatened imposition of an order to vacate or revocation or suspension of the
certificate of occupancy for the Building or the Premises, or (ii) cause a
default under any Superior Lease or any Superior Mortgage; or
(e) if Tenant shall default in the making of any payment under
the Existing Lease as set forth in Section 2.4 above after any notice and grace
period set forth in such Lease;
(f) then in any of said events an event of default ("Event of
Default") shall be deemed to exist.
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26. REMEDIES.
If an Event of Default shall exist, the following provisions shall
apply and Landlord shall have the rights and remedies set forth therein which
rights and remedies may be exercised upon or at any time following the
occurrence of an Event of Default:
26.1 (a) By Notice to Tenant, Landlord shall have the right to
accelerate all Base Rent and any other sums due hereunder and otherwise payable
in installments over the remainder of the Term, and, at Landlord's option, any
other Additional Rent to the extent that such Additional Rent can be determined
and calculated to a fixed sum; and the amount of accelerated rent, without
further Notice or demand for payment, shall be due and payable by Tenant within
five (5) days after Landlord has so notified Tenant. Additional Rent which has
not been included, in whole or in part, in accelerated rent shall be due and
payable by Tenant during the remainder of the Term, in the amounts and at the
times otherwise provided for in this Lease.
(b) Notwithstanding the foregoing or the application of any
rule of law based on election of remedies or otherwise, if Tenant fails to pay
the accelerated rent in full when due, Landlord thereafter shall have the right
by Notice to Tenant, (i) to terminate Tenant's further right to possession of
the Premises, or (ii) to terminate this Lease under Section 26.2 below, and to
recover by an action at law all Base Rent and Additional Rent; and if Tenant
shall have paid part but not all of the accelerated rent, the portion thereof
attributable to the period equivalent to the part of the Term remaining after
Landlord's termination of possession or termination of this Lease shall be
applied by Landlord against Tenant's obligations owing to Landlord as determined
by the applicable provisions of Sections 26.3 and 26.4 below.
26.2 (a) By Notice to Tenant, Landlord shall have the right to
terminate the Lease as of a date specified in the Notice of termination and in
such case, Tenant's rights, including any based on any option to renew, and to
the possession and use of the Premises shall end absolutely as of the
termination date; and this Lease shall also terminate in all respects except for
the provisions hereof regarding Landlord's damages and Tenant's liabilities
arising prior to, out of and following the Event of Default and the ensuing
termination, including the payment of Base Rent and Additional Rent.
(b) Following such termination (as well as upon any other
termination of this Lease by expiration of the Term or otherwise) Landlord
immediately shall have the right to recover possession of the Premises; and to
that end, Landlord may enter the Premises and take possession, with the giving
of Notice to Tenant and no further Notice to quit or any other further Notice
shall be necessary, with or without legal process or proceedings, and in so
doing Landlord may remove Tenant's property (including any Alterations to the
Premises made by Tenant), as well as the property of others as may be in the
Premises, and make disposition thereof in such a manner as Landlord may deem to
be commercially reasonable and necessary under the circumstances.
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26.3 (a) Unless and until Landlord shall have terminated this Lease
under Section 26.2 above, Tenant shall remain fully liable and responsible to
perform all of the covenants and to observe all the conditions of this Lease
throughout the remainder of the Term; and, in addition, Tenant shall pay to
Landlord, upon demand and as Additional Rent, the total sum of all costs, losses
and expenses, including reasonable counsel fees, as Landlord incurs, directly or
indirectly, because of any Event of Default having occurred. The termination of
this Lease shall not relieve Tenant of its obligations to pay any Base Rent or
Additional Rent which may be due, included any accelerated Base Rent or
Additional Rent.
(b) If Landlord either terminates Tenant's right to possession
without terminating this Lease or terminates this Lease and Tenant's leasehold
estate as above provided, Landlord shall have the unrestricted right to relet
the Premises or any part(s) thereof to such tenant(s) on such terms and for such
period(s) as Landlord may deem appropriate. The failure of Landlord to relet the
Premises or any part(s) thereof shall not release or affect Tenant's liability
for damages hereunder. Landlord shall in no event be liable in any way
whatsoever for failure to relet the Premises, or in the event the Premises are
relet, for failure to collect the rent thereof under such reletting, and in no
event shall Tenant be entitled to receive the excess, if any, of the net rents
collected by Landlord over the sums payable by Tenant hereunder.
26.4 (a) The damages which Landlord shall be entitled to recover
from Tenant shall be the sum of
(1) all Base Rent and Additional Rent accrued and
unpaid as of the termination date; and
(2) all costs and expenses incurred by Landlord in
recovering possession of the Premises, including counsel fees and the cost of
removal and storage of Tenant's property, improvements and Alterations
therefrom, (ii) the costs and expenses of restoring the Premises to the
condition in which the same were to have been surrendered by Tenant as of the
expiration of the Term, and (iii) the costs of reletting (exclusive of those
covered by the foregoing (ii)) including broker-age fees and counsel fees; and
(3) all Base Rent and Additional Rent (to the extent
that the amount(s) of Additional Rent has been then determined) otherwise
payable by Tenant over the remainder of the Term,
Less (deducting from the total determined under sub-paragraphs (1)(2)
and (3)) all rent and all other additional rent to the extent determinable as
aforesaid (to the extent that like charges would have been payable by Tenant)
which Landlord receives from other tenant(s) by reason of the reletting of the
Premises or any part thereof during or attributable to any period falling within
the otherwise remainder of the Term.
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(b) The damage sums payable by Tenant under the preceding
provisions of this Section 26.4 shall be payable on demand from time to time as
the amounts are determined.
26.5 Landlord shall have all rights and remedies now or hereafter
existing at law with respect to the enforcement of Tenant's obligations
hereunder and the recovery of the Premises. No right or remedy herein conferred
upon or reserved to Landlord or Tenant shall be exclusive of any other right or
remedy, but shall be cumulative and in addition to all other rights and remedies
given hereunder or now or hereafter existing at law. Landlord and Tenant shall
be entitled to injunctive relief in case of the violation, or attempted or
threatened violation, of any covenant, agreement, condition or provision of this
Lease, or to a decree compelling performance of any covenant, agreement,
condition or provision of this Lease.
26.6 Nothing herein contained shall limit or prejudice the right of
Landlord to exercise any or all rights and remedies available to Landlord by
reason of default or to prove for and obtain in proceedings under any bankruptcy
or insolvency laws, an amount equal to the maximum allowed by any law in effect
at the time when, and governing the proceedings in which, the damages are to be
proved, whether or not the amount be greater, equal to or less than the amount
of the loss or damage referred to above.
26.7 No delay or forbearance by Landlord in exercising any right or
remedy hereunder, or Landlord's undertaking or performing any act or matter
which is not expressly required to be undertaken by Landlord shall be construed,
respectively, to be a waiver of Landlord's rights or to represent any agreement
by Landlord to undertake or perform such act or matter thereafter. Waiver by
Landlord of any breach by Tenant of any covenant or condition herein contained
(which waiver shall be effective only if so expressed in writing by Landlord) or
failure by the Landlord to exercise any right or remedy in respect of any such
breach shall not constitute a waiver or relinquishment for the future of
Landlord's right to have any such covenant or condition duly performed or
observed by Tenant or of Landlords rights arising because of any subsequent
breach of any such covenant or condition nor bar any right or remedy of Landlord
in respect of such breach or any subsequent breach. Landlord's receipt and
acceptance of any payment from Tenant which is tendered not in conformity with
the provisions of this Lease or following an Event of Default (regardless of any
endorsement or notation on any check or any statement in any letter accompanying
any payment) shall not operate as an accord and satisfaction or a waiver of the
right of Landlord to recover any payments then owing by Tenant which are not
paid in full, or act as a bar to the termination of the Lease and the recovery
of the Premises because of Tenant's previous default.
27. SURRENDER OF PREMISES.
27.1 No act or thing done by Landlord or its agents during the Term
shall be deemed an acceptance of a surrender of the Premises, and no agreement
to accept a surrender of the Premises shall be valid unless the same be made in
writing and signed by Landlord.
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27.2 On the Expiration Date or upon the sooner termination of this
Lease or upon any re-entry by Landlord upon the Premises, Tenant shall, at its
sole cost and expense, quit, surrender, vacate and deliver the Premises to
Landlord "broom clean" and in working order, condition and repair except for
ordinary wear, tear and damage by fire or other insured casualty, together with
all improvements which have been made upon the Premises (except as otherwise
provided for in this Lease and subject to the provisions of Articles 11 and 12).
Tenant shall remove from the Premises and the Building all of Tenant's personal
property and personal effects of all persons claiming through or under Tenant,
and shall promptly pay Landlord the cost to repair all damage to the Premises
and the Building occasioned by such removal within thirty (30) days of the
Expiration Date, unless Landlord intends to demolish the Premises to allow the
next tenant to construct its tenant improvements and the damage caused by Tenant
will be eliminated or repaired as a result of such new construction.
27.3 If the Expiration Date or the date of sooner termination of this
Lease shall fall on a day which is not a business day, then Tenant's obligations
under Section 27.2 shall be performed on or prior to the immediately preceding
business day.
27.4 Any Alterations or any personal property of Tenant which shall
remain in the Premises after the termination of this Lease shall be deemed to
have been abandoned and either may be retained by Landlord as its property or
may be disposed of, at Tenant's expense, in such manner as Landlord may
determine.
27.5 If the Premises are not surrendered upon the termination of this
Lease, with respect to only such portion not surrendered, Tenant hereby
indemnifies Landlord and holds it harmless against any loss, cost, expense
and/or liability (including attorney's fees), excluding consequential damages,
resulting from or incurred by Landlord in connection with any delay by Tenant in
so surrendering the Premises.
27.6 In the event Tenant remains in possession of tile Premises after
the termination of this Lease without the consent of Landlord, Tenant, at the
option of Landlord and without waiving the liability of Tenant, shall be deemed
to be occupying the Premises as a tenant from month-to-month, at a monthly
rental equal to the Base Rent and Additional Rent payable during the last month
of the Term for the first thirty (30) days of such holdover and 1.5 times the
Base Rent and Additional Rent payable thereafter, subject to all of the other
terms of this Lease, insofar as the same are applicable to a month-to-month
tenancy.
27.7 Tenant's obligations under this Article shall survive the
expiration or earlier termination of this Lease.
28. BROKERAGE.
28.1 Each party warrants that it has had no dealings with any broker or
agent in connection with the negotiation or execution of this Lease except for
Insignia/ESG Inc. (on behalf of Landlord) and WF Realty LLC (on behalf of
Tenant). Landlord shall be solely responsible for any potential claims of which
it has knowledge. Landlord shall be
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responsible for paying any commissions to said brokers pursuant to a separate
agreement(s) with them. Landlord shall have no liability for any brokerage
commission arising from a sublease or assignment by Tenant. The provisions of
this Article shall survive the expiration or sooner termination of this Lease.
29. TENANT ESTOPPEL CERTIFICATES.
29.1 Tenant agrees to execute and return within ten (10) business days
after request by Landlord or the holder of any Superior Mortgage, a certificate
prepared by Landlord and signed by Tenant (i) substantially in the form annexed
hereto as Exhibit O, which certificate may also set forth such further
information with respect to the Lease or the Premises as Landlord or any
Superior Mortgagee may reasonably request. Any such certificate delivered by
Tenant pursuant hereto shall be binding upon Tenant and may be relied upon by
Landlord, any Superior Mortgagee or prospective mortgagee, or any prospective
purchaser of the Land and/or the Building or any part thereof or any interest
therein. Tenant shall, as soon as possible but in any event within ten (10)
business days following receipt of said proposed certificate from Landlord,
return a fully executed, dated and notarized copy of said certificate to
Landlord. In the event Tenant shall fail to return a fully executed copy of such
certificate (or a fully executed copy of a modified certificate acceptable to
Landlord) to Landlord within the foregoing ten (10) business day period, then an
Event of Default shall exist under this Lease.
30. LANDLORD ESTOPPEL CERTIFICATES.
30.1 Landlord agrees to furnish within ten (10) business days after
request by Tenant a certificate signed by Landlord stating the date to which
Base Rent and Additional Rent has been paid by Tenant and confirming the absence
or existence of defaults hereunder of which Landlord has knowledge.
31. NOTICES.
31.1 Each provision of this Lease, or of any applicable governmental
laws, ordinances, regulations, and other requirements with reference to the
sending, mailing or delivery of any notice, or with reference to the making of
any payment by Tenant to Landlord, shall be deemed to be complied with when and
if the following steps are taken:
(a) All Base Rent, Additional Rent and other payments required
to be made by Tenant to Landlord hereunder shall be payable to Landlord at the
address set forth in the Fundamental Lease Provisions or at such other address
as Landlord may specify from time to time by written notice delivered in
accordance herewith.
(b) All notices, requests, demands or other communications
(each, a "Notice") with respect to this Lease, whether or not herein expressly
provided for, shall be in writing and shall be given by a receipted hand
delivery or by United States certified or registered mail, postage prepaid,
return receipt requested, or by receipted express mail or receipted overnight
courier, or by telecopier (with a requirement of electronic confirmation of
receipt if a Notice is sent by telecopier) to the parties
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(including the parties entitled to receive a copy of such Notice as set forth in
the Fundamental Lease Provisions) at their respective addresses or telecopy
numbers as set forth in the Fundamental Lease Provisions. Any such addresses for
the giving of Notice may be changed by either party by giving Notice thereof to
the other. Notices shall be deemed given when so mailed, except for any Notice
of default, which shall be deemed given when received and except for Notices
sent by telecopier, which shall be deemed given when sent.
32. PERSONAL MATTERS.
32.1 The liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease shall be limited to the interest of Landlord in
the Building, including any rental income, insurance proceeds, condemnation
awards or sales or refinancing proceeds then being held by Landlord and not
previously distributed to its members and any future rental income, insurance
proceeds, condemnation awards or sales or refinancing proceeds to the extent
levied upon by Tenant and in no event shall Tenant make any claim against the
members, shareholders, officers, directors, individuals, partners or joint
venturers of Landlord, or any partners of such partners or joint venturers, for
any deficiency nor shall any such members, shareholders, officers, directors,
individuals, partners or joint venturers, or any partners of such partners or
joint venturers, have or be subject to any personal liability and the assets of
such parties shall not be subject to levy, attachment or other enforcement of a
remedy sought by Tenant or anyone claiming by, through or under Tenant for any
breach or claim hereunder. This clause shall not be deemed to limit or deny any
remedies which Tenant may have in the event of default by Landlord hereunder
which do not involve the personal liability of Landlord.
33. ENVIRONMENTAL MATTERS.
33.1 Tenant shall not engage in operations at the Premises which
involve the generation, manufacture, refining, transportation, treatment,
storage, handling or disposal of Hazardous Materials. Tenant further covenants
that it will not cause or permit to exist, as a result of an intentional or
unintentional action or omission on Tenants part, the releasing, spilling,
leaking, pumping, pouring, emitting, emptying or dumping from, on or about the
Premises of any Hazardous Materials.
33.2 (a) Tenant its agents, employees, on-site contractors, and
invitees, shall be in compliance with all applicable state, federal, and local
environmental and safety laws and regulations, shall obtain and maintain all
permits, licenses, and authorizations required for Tenant's business, equipment,
and operations on and in connection with the Premises, shall comply with all
terms and conditions of such permits, licenses, and authorizations, and shall
comply with all applicable laws, statutes, rules, regulations, requirements,
orders, and directives of Governmental Authorities including, without
limitation, the Resource Conservation and Recovery Act (42 U.S.C., Section 6901
et seq.); the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C., Section 9601 et seq.); the New York Environmental Conservation
Law; all applicable fire and municipal building codes, and any amendments
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thereto and any applicable guidelines or regulations promulgated thereunder
(collectively, the "Applicable Laws").
(b) Tenant shall certify to Landlord, on request, that (i)
Tenant, its agents, employees, on-site contractors, and invitees, are in
compliance with the requirements of all Applicable Laws, (ii) no disposal of
Hazardous Materials has occurred on, in, under or about the Premises for which
Tenant is responsible, and (iii) no release of Hazardous Materials has occurred
on, in, under or about the Premises for which Tenant is responsible.
(c) Tenant shall indemnify, defend, and hold Landlord harmless
from and against any and all claims, judgments, damages, penalties, fines,
liabilities, losses, and costs and expenses (including attorney's fees and court
costs) which arise at any time during or after the Term as a result of or in
connection with (i) Tenant's breach of any prohibition or requirements set forth
in this Section, and (ii) any Hazardous Materials present or occurring in the
Premises as a result of Tenant's, its agents', employees', on-site contractors',
or invitees' activities or omissions on or in connection with the Premises. This
obligation by Tenant to indemnify, defend, and hold harmless Landlord includes,
without limitation, costs incurred in connection with any investigation of site
conditions, preparation of any remedial or cleanup plan, or any cleanup,
remedial, removal, or restoration work required by Landlord or any Governmental
Authority because of any Hazardous Materials occurring or present in, on, under,
or about the Premises, diminution in value of the Premises, damages for the loss
or amenity of the Premises, and sums paid in settlement of claims, penalties,
attorneys' fees, court costs, consultant and laboratory fees, and expert's fees
as a result of Tenant's, its agents', employees', on-site contractors, or
invitees' activities or omissions on or in connection with the Premises. Without
limiting the foregoing, if any Hazardous Materials attributable to Tenant, its
agents', employees', on-site contractors' or invitees' activities of any of
them, are found on, under or about the Premises, Tenant shall promptly take all
actions, at its sole expense, necessary to return the Premises to the condition
existing prior to the introduction of Hazardous Materials to the Premises in
accordance with Applicable Laws; provided (i) that, except in emergency
situations (in which case Notice shall be given to Landlord as soon as
practicable), Landlord's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld or delayed, and (ii) if it is
impossible to return the Premises to such condition, as determined by Landlord
in its reasonable judgment, then Tenant may substitute an alternative action
which will achieve and maintain the safe condition of the Premises, if such
alternative is acceptable to Landlord in its sole reasonable discretion.
33.3 In the event of Tenant's failure to comply in full with this
Article 33, Landlord may, at Landlord's option, perform any and all of Tenant's
obligations as aforesaid and all costs and expenses incurred by Landlord in the
exercise of this right shall be deemed to be Additional Rent payable on demand
and with interest until payment at the rate provided in Section 6.1.
33.4 (a) Landlord shall not engage in operations at the Premises
which involve the generation, manufacture, refining, transportation, treatment,
storage,
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handling or disposal of Hazardous Materials. Landlord further covenants that it
will not cause or permit to exist, as a result of an intentional or
unintentional action or omission on Landlord's part, the releasing, spilling,
leaking, pumping, pouring, emitting, emptying or dumping from, on or about the
Premises of any Hazardous Materials.
(b) Landlord shall indemnify, defend, and hold Tenant harmless
from and against any and all claims, judgments, damages, penalties, fines,
liabilities, losses, and costs and expenses (including attorney's fees and court
costs) which arise at any time during or after the Term as a result of or in
connection with (i) Landlord's breach of any prohibition or requirements set
forth in this Section, and (ii) any Hazardous Materials present or occurring in
the Premises as a result of Landlord's, its agents', employees' or on-site
contractors' activities or omissions on or in connection with the Premises. This
obligation by Landlord to indemnify, defend, and hold harmless Tenant includes,
without limitation, costs incurred in connection with any investigation of site
conditions, preparation of any remedial or cleanup plan, or any cleanup,
remedial, removal, or restoration work required by any Governmental Authority
because of any Hazardous Materials occurring or present in, on, under, or about
the Premises, damages for the loss or amenity of the Premises, and sums paid in
settlement of claims, penalties, attorneys' fees, court costs, consultant and
laboratory fees, and expert's fees as a result of Landlord's, its agents',
employees' or on-site contractors' activities or omissions on or in connection
with the Premises. Without limiting the foregoing, if any Hazardous Materials
attributable to Landlord, its agents', employees' or on-site contractors'
activities of any of them, are found on, under or about the Premises, Landlord
shall promptly take all actions, at its sole expense, necessary to return the
Premises to the condition existing prior to the introduction of Hazardous
Materials to the Premises in accordance with Applicable Laws; provided (i) that,
except in emergency situations (in which case Notice shall be given to Tenant as
soon as practicable), Tenant's approval of such actions shall first be obtained,
which approval shall not be unreasonably withheld or delayed, and (ii) if it is
impossible to return the Premises to such condition, as determined by Tenant in
its reasonable judgment, then Landlord may substitute an alternative action
which will achieve and maintain the safe condition of the Premises, if such
alternative is acceptable to Tenant in its reasonable discretion.
33.5 Landlord, its agents, employees, and on-site contractors shall be
in compliance with all Applicable Laws, shall obtain and maintain all permits,
licenses, and authorizations required for Landlord's business, equipment, and
operations on and in connection with the Premises, shall comply with all terms
and conditions of such permits, licenses, and authorizations, and shall comply
with all Applicable Laws.
33.6 As used herein, the term "Hazardous Materials" means any
hazardous, toxic, flammable, or explosive substance, material, or waste which is
or becomes regulated by any Governmental Authority. The term Hazardous Materials
includes, without limitation, any material or substance which is (i) petroleum,
(ii) asbestos, (iii) designated as a "hazardous substance" pursuant to Section
311 of the Federal Water Pollution Control Act (33 U.S.C., Section 1317), (iv)
defined as "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 U.S.C., Section 6901 et seq., (v) defined as a
"hazardous substance" pursuant to
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Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C., Section 9601 et seq., (vi) defined as a "hazardous
substance" or "hazardous waste" under the New York Environmental Conservation
Law, or (vii) defined as a "hazardous" or "toxic" substance in any law similar
to or in any amendment of any of the foregoing laws. Hazardous Materials shall
not include any materials stored on or used at the Premises in quantities which
do not violate Applicable Law and which materials are used in the ordinary
conduct of Landlord's or Tenant's, as the case may be, business at the Premises.
33.7 This Article 33 shall survive the expiration or sooner termination
of this Lease.
34. ARBITRATION.
34.1 Any controversy or claim between Tenant and Landlord arising out
of or relating to this Lease and specifically made subject to this Article 34
shall be determined by arbitration in New York, New York in accordance with the
Commercial Arbitration Rules then pertaining of the AAA, subject, however, to
the following provisions:
(a) The AAA shall provide the parties with an identical list
of names of persons selected from its panel of arbitrators having not less than
ten (10) years experience in the area of the dispute from which a single neutral
arbitrator mutually acceptable to the parties will be appointed within ten (10)
days of receipt of such list;
(b) If the AAA shall be unable to appoint an arbitrator
mutually acceptable to the parties, or if the parties cannot agree upon an
acceptable arbitrator within the ten (10) days of the receipt of a list of the
arbitrators, it shall appoint a single neutral arbitrator having not less than
ten (10) years experience in the area of the dispute;
(c) The hearings shall occur on consecutive weekdays and shall
commence not later than thirty (30) days after the appointment of the
arbitrator, unless the parties shall agree otherwise in writing;
(d) All fees and expenses of the arbitrator and the AAA shall
be borne equally by Landlord and Tenant; and
(e) Within thirty (30) days after the close of hearings, the
arbitrator shall render a written decision on each issue presented, setting
forth specifically the reasons therefor.
35. SECURITY AREA.
35.1 Notwithstanding anything to the contrary contained in this Lease,
in the event that at any time during the Term Tenant shall give a Notice to
Landlord designating an area of the Premises which is used by Tenant for the
storage of money, securities or valuable or confidential documents as the
"Security Area", then from and after the date designated in such Notice, which
shall be not less than five (5) days after the date of
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Landlord's receipt of Tenant's Notice, except in the event of an emergency
Landlord and its agents shall not exercise any right to enter the Security Area,
unless Landlord is accompanied by an employee of Tenant, provided that Tenant
shall make an employee available to accompany Landlord or its agents during such
entry at any time during Business Hours. The location, installation and
maintenance of the Security Area by Tenant shall comply with all requirements of
Article 12, Insurance Requirements and Legal Requirements.
36. NO RECORDING.
36.1 Neither party shall have the right to record this Lease and same
shall not be recorded. Any recording or attempted recording of this Lease by
Tenant shall constitute an Event of Default; provided, however, either party may
request that a memorandum of lease in the form attached hereto as Exhibit P be
recorded.
37. MISCELLANEOUS.
37.1 Neither Landlord nor Landlord's agents or brokers have made any
representations or promises with respect to the Premises or the Building except
as herein expressly set forth and no rights, easements or licenses are acquired
by Tenant by implication or otherwise except as expressly set forth in the
provisions of this Lease.
37.2 The submission of this Lease to Tenant shall not be construed as
an offer, nor shall Tenant have any rights with respect thereto unless and until
Landlord and Tenant shall execute a copy of this Lease and Landlord delivers a
fully executed copy to Tenant and Landlord delivers to Tenant evidence of the
written approval of the Landlord's mortgagee to this Lease (which evidence shall
be in the form of a subordination, nondisturbance and attornment in the form
attached as Exhibit B executed by Lehman Brothers).
37.3 Any approval by Landlord or Landlord's architects and/or engineers
of any of Tenant's drawings, plans and specifications which are prepared in
connection with Tenant's Work, any Alterations or construction of other
improvements in the Premises shall not in any way be construed or operate to
bind Landlord or to constitute a representation or warranty of Landlord as to
the adequacy or sufficiency of such drawings, plans and specifications, or the
improvements to which they relate, for any use, purpose, or condition, but such
approval shall merely be the consent of Landlord as may be required hereunder in
connection with Tenant's Work, any Alterations or the construction of other
improvements in the Premises in accordance with such drawings, plans and
specifications.
37.4 If Tenant signs as a corporation, each of the persons executing
this Lease on behalf of Tenant does hereby covenant and warrant that Tenant is a
duly authorized and existing corporation, qualified to do business in New York,
that the corporation has full right and authority to enter into this Lease, and
that each of the persons signing on behalf of the corporation were authorized to
do so.
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37.5 The liability of Tenant to Landlord for any default by Tenant
under this Lease shall be limited to the assets of Tenant and in no event shall
Landlord make any claim against the members, shareholders, officers or directors
of Tenant for any deficiency, nor shall any such members, shareholders, officers
or directors of Tenant be subject to any personal liability or the assets of
such parties be subject to levy, attachment or other enforcement of a remedy
sought by Landlord or anyone claiming by, through or under Landlord for any such
a claim hereunder. This clause shall not be deemed to limit or deny any remedies
which Landlord may have in the event of default by Tenant hereunder which do not
involve the personal liability of Tenant.
37.6 Although this Lease was drawn by Landlord, both Landlord and
Tenant have had significant comment with respect to the terms and provisions
contained therein. Accordingly, this Lease shall not be construed either for or
against Landlord or Tenant, but shall be construed simply according to its fair
meaning.
37.7 Whenever a period of time is herein prescribed for action to be
taken by a party, such party shall not be liable or responsible for, and there
shall be excluded from the computation for any such period of time, any delays
caused by or attributable to acts of God, unusual weather conditions, strikes,
lockouts, labor disputes, inability to obtain an adequate supply of materials,
fuel, water, electricity, or other supplies, casualty, governmental action,
accidents, breakage, repairs or any other causes of any kind whatsoever which
are beyond the reasonable control of such party (collectively, "Force Majeure").
37.8 If any clause or provision of this Lease is illegal, invalid, or
unenforceable under present or future laws effective during the Term, then and
in that event, the remainder of this Lease shall not be affected thereby. In
lieu of each clause or provision of this Lease that is illegal, invalid or
unenforceable, there shall be added as a part of this Lease a clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible and legal, valid and enforceable.
37.9 This Lease may not be altered, changed or amended, except by
instrument in writing signed by both parties hereto. No provision of this Lease
shall be deemed to have been waived by Landlord unless such waiver be in writing
signed by Landlord and addressed to Tenant, nor shall any custom or practice
which may evolve between the parties in the administration of the terms hereof
be construed to waive or lessen the right of Landlord to insist upon the
performance by Tenant in strict accordance with the terms hereof.
37.10 Provided Tenant has performed all of the terms and conditions of
this Lease, including the payment of Base Rent and Additional Rent, to be
performed by Tenant, Tenant shall peaceably and quietly hold and enjoy the
Premises for the Term, without hindrance from Landlord or anyone claiming
through Landlord, subject to the terms and conditions of this Lease.
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37.11 Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
37.12 The captions contained in this Lease are for the convenience of
reference only, and in no way limit or enlarge the terms and conditions of this
Lease.
37.13 Nothing contained in this Lease shall be deemed or construed to
create a partnership or joint venture of or between Landlord and Tenant, or to
create any other relationship between the parties hereto other than that of
Landlord and Tenant.
37.14 The term "Landlord" as used in this Lease shall mean only the
owner, or the mortgagee in possession, for the time being, of the Building, or
the owner of a lease of the Building, so that in the event Landlord shall sell
or convey the Building to any party, and such party shall have assumed in
writing the obligations of Landlord arising from and after the date of such
sale, all liabilities and obligations on the part of the Landlord under this
Lease accruing thereafter shall terminate, and thereupon all such liabilities,
and obligations shall be binding on the new landlord, and it shall be so deemed
and construed without further agreement between Landlord and its successors in
interest.
37.15 The provisions of this Lease shall be binding upon, and shall
inure to the benefit of, the parties hereto with respect to the matters set
forth herein and to the extent permitted under this Lease to each of their
respective representatives, successors and assigns.
37.16 This Lease, together with the Exhibits attached hereto, contains
and embodies the entire agreement of the parties hereto, and no representations,
inducements or agreements, oral or otherwise, between the parties not contained
in this Lease, and the Exhibits annexed hereto, shall be of any force or effect.
37.17 This Lease and the rights and obligations of both parties hereto
hereunder shall be governed by the laws of the State of New York.
37.18 If the Base 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, and as may be legally permissible, to permit Landlord
to collect the maximum Base 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 Base Rent and Additional Rent
payable under this Lease. Upon the termination of such legal rent restriction,
(A) the Base Rent and Additional Rent, after such termination, shall become
payable under this Lease in the amount of the Base 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 Base
Rent and Additional Rent which would have been paid pursuant to this Lease, but
for such rent restriction, less (ii) the Base Rent and Additional Rent paid by
Tenant to Landlord during the period that such rent restriction was in effect.
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37.19 To the extent either Landlord's or Tenant's approval, or consent
is required under the terms of this Lease, such consent, unless otherwise
specifically set forth in this Lease, shall not be unreasonably withheld or
delayed by the party whose consent is requested.
37.20 In any instance in this Lease where amounts, Tenant's
Proportionate Share, rentable or usable square footage, dates, or any other such
information or data changes are required, Landlord shall prepare, and Tenant and
Landlord shall mutually execute, an agreement confirming such information or
data, and amend the Memorandum of Lease and Subordination, Non-Disturbance and
Attornment Agreement accordingly.
37.21 Landlord has advised Tenant that Landlord may condominiumize
portions of the Building and operate such portions as single independent units,
subject to the terms of this Lease, for financing or other purposes. If Landlord
shall so change the ownership structure of the Building, for purposes of this
Lease, Tenant's Proportionate Share shall be proportionately adjusted to reflect
the reduced rentable square footage of the Building comprising the unit in which
the Premises are located (the "Premises Unit"). In such event, Taxes will only
include the Taxes assessed against the Premises Unit, and will not include Taxes
assessed against any other portions of the Building, and Operating Expenses
shall only include those Operating Expenses properly allocable to the Premises
Unit. Notwithstanding any provisions of this Section 37.21 to the contrary, in
no event shall any such change in the structure of the Building reduce any of
Tenant's rights or increase any of Tenant's obligations under this Lease.
38. EXPANSION OPTION.
38.1 Tenant shall have the right to expand the Premises in accordance
with the terms of this Article. Unless waived by Landlord, it shall be a
condition precedent to the exercise of each option set forth below that no Event
of Default exists on the date Notice of the exercise of the expansion option is
given by Tenant and on the effective date on which the applicable space is added
to the Premises. Except as set forth in this Article, all of the space leased by
Tenant under this Article shall be part of the Premises and subject to all of
the other provisions of this Lease. All options granted under this Section 38.1
are personal to Tenant and the applicable Related Corporation and may not be
exercised by any assignee or subtenant.
38.2 Tenant shall have the following additional expansion options, any
one or more of which may be exercised by Tenant:
(a) The entire seventeenth (17th) floor of the Building
composed of 28,098 rentable square feet marked on the drawing attached hereto as
Exhibit Q. Tenant must give Notice of the exercise of its option with respect to
this space by no later than August 31, 2000 or Landlord shall have the right to
lease such space for a term not to exceed ten (10) years.
(b) The entire nineteenth (19th) floor of the Building
composed of 28,098 rentable square feet marked on the drawing attached hereto as
Exhibit R,
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provided Tenant exercises the option set forth in Section 38.2(a) by not later
than February 28, 2000. Prior to February 28, 2000, Landlord shall not actively
market such space. Tenant must give Notice of the exercise of its option with
respect to this space by no later than August 31, 2000 or the option shall
expire.
(c) The entire twelfth (12th) floor of the Building composed
of 27,845 rentable square feet marked on the drawing attached hereto as Exhibit
S. Tenant must give Notice of the exercise of its option with respect to this
space by no later than the first day of the thirteenth (13th) month prior to the
ten (10) year anniversary of the Base Rent Commencement Date or the option shall
expire.
(d) The entire eighteenth (18th) floor of the Building
composed of 28,098 rentable square feet marked on the drawing attached hereto as
Exhibit T. Tenant must give Notice of the exercise of its option with respect to
this space by no later than July 30, 2002 or the option shall expire.
Notwithstanding anything contained in this Lease to the contrary, if Tenant has
elected, prior to the exercise of this option, to exercise the option set forth
in Section 39.2 to convert the storage space to office use, Tenant shall only be
entitled to receive concessions with regard to the portion of the eighteenth
floor not previously leased by Tenant.
38.3 Time is of the essence with respect to each of Tenant's Notice
deadlines set forth in Section 38.2.
38.4 In the event that Tenant properly exercises an expansion option as
set forth in Section 38.2, any area leased within the first three (3) years from
the Beneficial Occupancy Date, the applicable area will be leased to Tenant
effective as of the day that Landlord Substantially Completes Landlord's Work
within the applicable area. Upon delivery of any space to Tenant, Tenant's
Proportionate Share shall be adjusted accordingly. In the event Tenant exercises
any option prior to the third (3rd) anniversary of the Beneficial Occupancy
Date, the Base Rent shall be the then existing Base Rent and the concessions
shall be the same as the initial concessions (i.e., six months free rent from
completion of work but not more than nine months free rent from delivery of such
space to Tenant, tenant improvement allowance of $40.50 per rentable square
foot). In the event Tenant exercises any option after the third anniversary of
the Beneficial Occupancy Date, the Base Rent shall be the Fair Market Value of
such space (with such value being determined in accordance with Section 2.4(c)).
38.5 Except as otherwise specifically provided in this Article 38, any
failure by Tenant to exercise any option under this Article 38 shall not
adversely affect or diminish the rights of Tenant under this Article 38 or under
Article 43 of the Lease.
39. EIGHTEENTH FLOOR STORAGE SPACE.
39.1 On the execution of this Lease, Tenant has leased approximately
4,000 rentable square feet in the eighteenth floor of the Building as storage,
shipping, receiving or mailroom space, in its as-is condition. The location of
such space shall be designated by Landlord by not later than thirty (30) days
after the date of this Lease and the location
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of same shall be reasonably acceptable to Tenant. The expiration date for
Tenant's use of such space shall be April 30, 2003 unless Tenant exercises the
option set forth in Section 38.2.
39.2 At any time prior to April 30, 2003, Tenant on not less than
thirty (30) days prior Notice to Landlord may convert the use of such space from
storage, shipping, receiving or mailroom space to general office use. Upon the
date of conversation, the Base Rent shall be the then existing Base Rent,
Tenant's Proportionate Share shall be adjusted accordingly and Tenant shall be
entitled to receive the initial concessions (i.e., six months free rent from
completion of work but not more than nine months free rent from delivery of such
space to Tenant, tenant improvement allowance of $40.50 per rentable square
foot) granted to Tenant, prorated accordingly.
40. TERMINATION RIGHT OF TENANT
40.1 Tenant has the option, which may be exercised by Tenant in its
sole and absolute discretion, to terminate this Lease in the event the City of
New York does not, within sixty (60) days of the date of this Lease, grant to
Tenant an economic incentive program acceptable to Tenant. Tenant shall
terminate this Lease by delivering a Notice to Landlord within five (5) days of
the end of such sixty (60) day period. Notwithstanding the foregoing, Landlord
shall commence performing Landlord's Work on the execution of this Lease, and
Tenant shall reimburse Landlord for any costs Landlord incurs regarding
Landlord's Work commencing on the date of the Lease. Said costs shall be
reimbursed to Landlord within ten (10) days of the delivery of an invoice to
Tenant.
41. THE LOWER MANHATTAN PLAN.
41.1 For purposes of this Article 41, unless otherwise defined in this
Lease, all terms used herein shall have the meanings ascribed to them in Title 4
of Article 4 of the New York Real Property Tax Law (the "Lower Manhattan Plan").
Landlord represents the Building qualifies for the benefits of the Lower
Manhattan Plan. Landlord makes no representations as to whether Tenant qualifies
for such benefits. It shall be Tenant's responsibility to determine whether it
qualifies for such benefits.
41.2 For purposes of the Lower Manhattan Plan, Tenant's Percentage
Share shall mean Tenant's Proportionate Share.
41.3 Provided Tenant is eligible for the real estate tax abatement of
the Lower Manhattan Plan (the "LMP Abatement Benefits") with respect to the
Premises, Landlord agrees to comply with the provisions and requirements of the
Lower Manhattan Plan and the rules promulgated thereunder as the same relate to
the Premises and to Landlord (in connection with Tenant's eligibility for the
LMP Abatement Benefits); provided, however, that Tenant shall promptly pay to
Landlord, as Additional Rent hereunder, within twenty (20) days after Tenant's
receipt of an invoice therefor, the amount of any reasonable out-of-pocket costs
incurred by Landlord in connection with such compliance, including, without
limitation the amount of any administrative charges or fees (generally
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filing fees of a de minimis amount) imposed by the New York City Department of
Finance (the "Department") in connection with such compliance.
41.4 Tenant shall indemnify and hold harmless Landlord from and against
any and all claims arising from or in connection with Tenant's failure to comply
with the provisions and requirements of the Lower Manhattan Plan and the rules
promulgated thereunder as the same relate to the Premises, together with all
costs, expenses and liabilities incurred in connection with each such claim or
action or proceeding brought thereon, including, without limitation, all
attorneys' fees and expenses.
41.5 In accordance with the Lower Manhattan Plan and notwithstanding
anything to the contrary contained in this Lease, Landlord agrees to allow
Tenant a credit against the Base Rent and Additional Rent payable by Tenant
hereunder in an amount that, in the aggregate, equals the full amount of any
abatement of Taxes granted for the Premises pursuant to the Lower Manhattan Plan
and actually received by Landlord (the "Actual LMP Benefits"). Landlord shall,
within thirty (30) days after its receipt of the Actual LMP Benefits, credit the
full amount thereof against the next installment(s) of Base Rent and or
Additional Rent becoming due hereunder.
41.6 In accordance with Section 499-c(5) of the Lower Manhattan Plan,
Landlord agrees and informs Tenant that:
(1) the rent, including amounts payable by Tenant for
Taxes, provided Tenant qualifies for the benefit of the Lower Manhattan Plan
will accurately reflect any abatement of Taxes granted pursuant to Title 4 of
Article 4 of the New York Property Tax Law for the Premises.
(2) at least thirty-five dollars ($35.00) per square
foot must be spent on improvements to the Premises.
(3) all abatements granted with respect to the
Premises pursuant to Title 4 of Article 4 of the New York Real Property Law will
be revoked if, during the Benefit Period, real estate taxes or water or sewer
charges or other lienable charges are unpaid for more than one year, unless such
delinquent amounts are paid as provided in subdivision four of section four
hundred ninety-nine of Title 4 of the New York Real Property Law. In the event
the aforesaid abatement is revoked because Landlord failed to pay the aforesaid
charges, Landlord shall indemnify Tenant from any loss of benefits which Tenant
incurs, including any retroactive revocation of benefits.
41.7 Nothing contained herein shall be construed to impose any
obligation on Landlord to perform any improvements to the Premises and/or the
common areas to establish Tenant's eligibility for the LMP Abatement Benefits.
Landlord represents that it has performed all of the obligations imposed upon
Landlord for the Building to be eligible for LMP Abatement Benefits which can be
performed as of the date of execution of this Lease.
41.8 (a) Landlord, upon not less than thirty (30) business days
advance written notice from Tenant, agrees to cooperate with Tenant to execute,
deliver
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and file, together with the Abatement Application, the affidavit required by
Section 499-C(7) of the Lower Manhattan Plan.
(b) Landlord, upon not less than thirty (30) business days
advance written notice from Tenant, agrees to cooperate with Tenant to execute,
deliver and file, within sixty (60) days after receipt of such notice, an
application (the "Abatement Application") for a certificate of abatement in
accordance with Section 499-D of the Lower Manhattan Plan. Landlord further
agrees to provide all other information required by the Department pursuant to
Section 499-D of the Lower Manhattan Plan and to otherwise comply with the
provisions of said Section 499-D.
(c) For so long as Tenant continues to be eligible for the LMP
Abatement Benefits with respect to the Premises, Landlord, upon not less than
thirty (30) business days advance written notice from Tenant, agrees to
cooperate with Tenant to annually execute, deliver and file a certificate of
continuing eligibility in accordance with Section 499-F of the Lower Manhattan
Plan.
(d) Tenant shall promptly pay to Landlord, as Additional Rent,
within twenty (20) days after Tenant's receipt of an invoice therefor, the
amount of any reasonable out-of-pocket costs incurred by Landlord in connection
with the performance of Landlord's obligations pursuant to this Section,
including, without limitation, the amount of any administrative charges or fees
imposed by the Department in connection with such compliance.
41.9 Landlord agrees to provide Tenant with such further cooperation
("Further Cooperation") as may reasonably be requested by Tenant to assist
Tenant in obtaining any incentives, subsidies, refunds or payments ("Further
Benefits") made available to Tenant by (i) any modification to or amendment of
the Lower Manhattan Plan, (ii) any program of the New York City Industrial
Development Agency or any other governmental agency or (iii) any public utility;
provided, and on condition that:
(a) such Further Cooperation shall be at no cost to Landlord;
and
(b) Tenant shall indemnify and hold harmless Landlord from and
against any and all claims arising from or in connection with such Further
Cooperation and the receipt by Tenant of such Further Benefits together with all
costs, expenses and liabilities incurred in connection with each such claim or
action or proceeding brought thereof, including, without limitation, all
attorneys' fees and expenses.
42. GUARANTEE, SECURITY DEPOSIT.
42.1 In order to induce Landlord to execute and deliver this Lease,
Tenant shall procure and deliver to Landlord a guarantee in the form attached
hereto as Exhibit D duly executed by Omnicom Group Inc.
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42.2 The obligations under this Lease imposed upon Tenant shall be the
joint and several obligations of Tenant and Omnicom. Landlord need not first
proceed against Tenant before proceeding against such guarantor nor shall any
such guarantor be released from its guaranty for any reason whatsoever,
including, without limitation, in case of any amendments hereto or waivers
hereof. Any guarantee shall be a guarantee of payment and not a guarantee of
collection.
42.3 At any time during the Term and until the conditions set forth in
Section 23 of the Guaranty have been satisfied, Tenant may substitute a letter
of credit in the amount of the obligations still outstanding under the Guaranty.
In the event Tenant so substitutes the letter of credit, the provisions of
Section 42.4 shall be applicable.
42.4 The letter of credit and the issuer bank must be in all respects
acceptable to Landlord and the letter of credit must provide for partial draws
and that the same may be drawn upon by Landlord pursuant to the provisions of
this Section. 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 Base Rent or Additional Rent or if Tenant does not deliver to
Landlord a replacement letter of credit not later than thirty (30) days before
the expiration of the letter of credit, Landlord may apply or retain the whole
or any part of the security deposit so deposited to the extent required for the
payment of any Base Rent and Additional Rent or any other sum as to which Tenant
is in default or for any sum which Landlord may expend or may be required to
expend by reason of Tenant's default in respect of any of the terms, covenants
and conditions of this Lease. If Landlord applies or retains any part of the
security deposit so deposited, 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, provisions, covenants and conditions of
this Lease, the security shall be returned to Tenant after the Expiration Date
and after delivery of the entire possession of the Premises to Landlord. In the
event of a sale of the Building, Landlord shall have the right to transfer the
security deposit to the vendee or lessee and Landlord shall whereupon be
released by Tenant from all liability for the return of the security deposit;
and Tenant agrees to look solely to the new landlord for the return of the
security deposit; and it is agreed that the provisions hereof shall apply to
every transfer or assignment made of the security deposit to a new landlord.
Tenant further covenants that it will not assign or encumber or attempt to
assign or encumber the security deposit and that neither Landlord nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
43. RIGHT OF FIRST REFUSAL.
43.1 Provided no Event of Default shall have occurred and be continuing
and Tenant has not exercised its expansion options set forth in Section 38.2(a)
or (b), as the case may be, then Tenant shall have the right to exercise the
rights set forth in this Article 43.
43.2 (a) In the event any of the following space (the "Available
Space") becomes Available For Leasing, Tenant shall have the right ("Right of
First
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Offer") to have Landlord submit written Notice (the "Lease Notice") to Tenant of
Landlord's desire to lease the Available Space, which Lease Notice shall be
deemed an offer to Tenant to lease the Available Space:
(i) the nineteenth (19th) floor if Tenant does not
exercise the options set forth in Section 38.2(b), provided, however, prior to
February 28, 2001, Tenant shall only be required to exercise this option if
Landlord has negotiated and is prepared to enter into a lease with a third party
for such space; or
(ii) commencing in the fourth (4th) Lease year,
following the Base Rent Commencement Date, any portion of the twelfth (12th)
floor, at any time prior to the date Tenant must exercise the option set forth
in Section 38.2(c).
(b) The Lease Notice shall set forth, (i) the date on which
Landlord anticipates the Available Space being available for occupancy (the
"Available Space Scheduled Date") and (ii) such other matters as Landlord may
deem appropriate for such Lease, provided, however, all Available Space shall
have expiration dates co-terminus with the Lease, including the Expiration Date.
(c) Tenant shall have ten (10) days following Tenant's receipt
of the Lease Notice to deliver to Landlord written Notice (the "Election to
Lease Notice") of Tenant's desire to lease from Landlord the particular
Available Space being offered to Tenant (Tenant shall not be permitted to rent a
portion of the Available Space then being offered to Tenant, but must lease all
of the space being offered). Time shall be of the essence with respect to said
ten (10) day period and the failure or refusal of Tenant for any reason
whatsoever to deliver to Landlord the Election to Lease Notice in the time and
manner herein prescribed shall be deemed an irrevocable waiver of Tenant's Right
of First Offer, whereupon Tenant's Right of First Offer shall lapse, and be of
no further force or effect as to such Available Space (or any portion thereof)
for the remainder of the Term of the Lease.
(d) If Tenant shall timely and in the manner herein prescribed
deliver its Election to Lease Notice to Landlord, then, on the date on which
Landlord delivers vacant possession of the Available Space to Tenant (the
"Effective Date"), such Available Space shall become, and be deemed to comprise,
part of the Premises as if originally included in the demise hereunder, upon the
terms, covenants and provisions set forth in this Lease, except that (i) the
Base Rent for the Available Space shall be the Fair Market Value of such space,
as determined i accordance with Section 1.2.35 and Section 2.4(d) (taking into
account the work to be performed by Landlord), multiplied by the rentable square
feet of the Available Space (as determined by Landlord in Landlord's reasonable
discretion) and such amount will be added to the Base Rent otherwise payable
under the terms of this Lease and (ii) Tenant's Proportionate Share shall be
adjusted accordingly. The Available Space shall be delivered fully demolished.
(e) The Available Space shall be deemed "Available for
Leasing" if
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(i) the current lease for the Available Space has
expired (after any extension or renewal thereof) prior to the Expiration Date,
and
(ii) the Available Space (or any portion thereof) is
not subject to an expansion option, right of first refusal, right of first offer
or other right or obligation to lease such space granted by Landlord prior to
the date of this lease to any other tenant in the Building. As of the date of
execution of this Lease, there are no options, rights of first refusal, rights
of first offer or other rights or obligations covering the space on either of
the 19th or 12th floors.
(f) If, for any reason, Landlord is unable to deliver
possession of the Available Space to Tenant on or prior to the Available Space
Scheduled Date, then this Lease and the obligations of Tenant hereunder,
including, without limitation, any obligation of Tenant hereunder to lease the
Available Space, shall not be impaired under such circumstances and Landlord
shall not be subject to any liability on account of such failure. Landlord shall
use its best efforts to dispossess any holdover tenant, including the
enforcement of any holdover terms and commencement and prosecution of a
dispossess action. In the event Landlord does not deliver the Available Premises
within six (6) months of the Available Space Scheduled Date, regardless of
fault, Tenant may cancel the option set forth in this Section as to the
undelivered Available Space, and neither Landlord or Tenant shall have any
liability to each other.
44. SURRENDER SPACE.
44.1 Tenant shall have the right, which right may be exercised once
during the Term of this Lease, to reduce the space constituting the Premises by
surrendering one floor of the Premises, provided the following conditions are
complied with by Tenant:
(a) at the time of the exercise of the option provided in this
Article, no Event of Default has occurred and is continuing;
(b) Tenant shall give Landlord Notice of the exercise of this
right at any time after a date which is five (5) years after the Base Rent
Commencement Date, and the date for surrendering such space shall be not earlier
than twelve (12) months from the date that the aforesaid Notice is delivered to
Landlord;
(c) The space surrendered shall be (i) one full floor or (ii)
located on the uppermost or lowest floors occupied by Tenant;
(d) Tenant shall pay to Landlord within twenty (20) days after
Landlord delivers to Tenant an invoice, a cancellation fee equal to (i) three
(3) months Base Rent on the space to be surrendered and (ii) the unamortized or
undepreciated costs associated with such space determined on the basis of an
amortization or depreciation period for the then remaining Term, which cost
shall include, but not be limited to, the following costs which Landlord has
incurred with respect to such space: free rent, the Tenant Improvement
Allowance, brokerage commissions (both to ESG/Insignia and WF Realty LLC) and
the cost of any reasonable alterations required to separate the surrendered
space from the remaining portions of the Premises and to make the
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surrendered space tenantable and rentable. If Tenant fails to timely pay such
fee, the surrender right set forth in this Section shall become null and void
and Tenant shall have no further right to surrender any space. After Tenant pays
to Landlord such fee, Landlord and Tenant shall execute and deliver to each
other an agreement setting forth (i) a description of the portion of the
Premises so surrendered, (ii) the effective date of such surrender, and (iii)
the reduction in Base Rent and in Tenant's Proportionate Share resulting from
such surrender. The parties shall also execute and deliver to each other and
record an amendment to the Memorandum of Lease setting forth a description of
the portion of the Premises so surrendered and the effective date of such
surrender.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
LANDLORD:
233 BROADWAY OWNERS LLC,
a New York limited liability company
By: /s/ James F. Stomber, Jr.
-------------------------------
, Manager
TENANT:
ORGANIC, INC, a Delaware corporation
By: /s/ Margaret Maxwell Zagel
-------------------------------
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Exhibit A-1
Location Map of Thirteenth Floor Premises
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Exhibit A-2
Location Map of Fourteenth Floor Premises
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Exhibit A-3
Location Map of Fifteenth Floor Premises
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Exhibit A-4
Location Map of Sixteenth Floor Premises
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Exhibit A-5
Location Map of Eighteenth Floor Premises
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Exhibit B
Subordination, Nondisturbance and Attornment Agreement
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SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
233 BROADWAY OWNERS LLC,
LANDLORD
ORGANIC,
TENANT
LEHMAN BROTHERS HOLDINGS INC.
LENDER
Premises:
a portion of the building located at
233 Broadway
New York, New York
Record and Return to:
Jill D. Block, Esq.
Shapiro, Shapses, Block LLP
315 Park Avenue South
19th Floor
New York, New York 10010
<PAGE> 97
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT dated this
____ day of ________, 1999 among 233 BROADWAY OWNERS LLC, with an address at c/o
The Witkoff Group LLC ("Landlord"), ORGANIC, a New York corporation with an
address at __________, New York, New York _________ ("Tenant"), and LEHMAN
BROTHERS HOLDINGS INC., a Delaware corporation with an address at 3 World
Financial Center, New York, New York 10285 ("Lender").
W I T N E S S E T H:
WHEREAS, on December 4, 1998 Lender made (i) a loan to Landlord in the
principal amount of $105,000,000.00 of which the principal sum of $105,000,000
is now outstanding (the "Senior Loan") secured by a first mortgage lien and
security interest (the "Senior Mortgage") encumbering the real property and
improvements known as and located at 233 Broadway Owners LLC, New York, New York
and more particularly described on Exhibit A hereto (the "Mortgaged Property"),
and (ii) a certain subordinate loan to Landlord in the principal amount of
$56,135,706.41 (the "Subordinate Loan") secured by a subordinate mortgage lien
and security interest (the "Subordinate Mortgage") encumbering the Mortgaged
Property;
WHEREAS, Landlord and Tenant are parties to that certain Lease
affecting a portion of the Mortgaged Property (such portion, the "Premises")
dated ________, 1999 (the "Lease").
WHEREAS, as security for its obligations in respect of the Loan
Landlord has assigned to Lender all of Landlord's right, title and interest in
and to all existing and future leases affecting the Mortgaged Property,
including the Lease, and the rents payable thereunder;
WHEREAS, the Lease is subject and subordinate to the Senior Mortgage
and the Subordinate Mortgage, and Tenant's right, title and interest in, to and
under the Lease are subject and subordinate to Lender's right, title and
interest in, to and under the Senior Mortgage and the Subordinate Mortgage:
WHEREAS, Tenant has requested that Lender give certain assurances that,
subject to the terms and conditions of this Agreement, Tenant's possession of
the Premises will not be disturbed by reason of foreclosure of the lien of
either the Senior Mortgage or the Subordinate Mortgage, or both, as the case may
be;
WHEREAS, Lender is only willing to provide such assurances to Tenant
upon and subject to the express terms and conditions of this Agreement; and
WHEREAS, Landlord and Tenant have agreed to execute and deliver this
Agreement to Lender.
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NOW, THEREFORE, in consideration of the mutual premises herein
contained, and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto do mutually
covenant and agree as follows:
1. The Lease is and at all times hereafter shall be subject
and subordinate in all respects to the Senior Mortgage and the Subordinate
Mortgage and to all renewals, modifications, substitutions, consolidations and
extensions thereof, and to all other future mortgages affecting the Mortgaged
Property held by Lender.
2. Any provision in the Lease to the contrary notwithstanding,
a notice by Tenant to Landlord of a default under the Lease by Landlord, which
default is of such a nature as to give Tenant a right to terminate the Lease, to
reduce the rent payable under the Lease or to credit or offset against future
rents, shall be effective only if: (a) such notice is also given to Lender; and
(b) Lender shall not have cured or remedied such default by the later to occur
of: (i) thirty (30) days after Lenders receipt of such notice; or (ii) thirty
(30) days after the expiration of any applicable notice or grace period under
the Lease; provided, however, that if: (A) such default is not reasonably
capable of being cured within the applicable period; and (B) Lender shall
diligently proceed with its efforts to cure, Lender shall have a reasonable
additional period to cure such default. Lender shall have the right, but not the
obligation, to remedy or cure any such default.
3. So long as Tenant is not in default in the payment of rent,
additional rent or other charges, or in the performance of any of the terms,
covenants or conditions of the Lease, such default continuing beyond any
applicable notice or grace period, Tenant's occupancy of the Premises during the
original or any renewal term of the Lease or any extension thereof shall not be
disturbed by Lender by reason of foreclosure of the Senior Mortgage or the
Subordinate Mortgage, or both, as the case may be, the acceptance by Lender or
its designee of a deed in lieu of foreclosure, or the exercise of any remedy
available at law, in equity or under the Senior Mortgage or the Subordinate
Mortgage.
4. Lenders receipt of the rents payable by Tenant under the
Lease, pursuant to the Senior Mortgage and the Subordinate Mortgage or any
assignment of the Lease, shall not obligate Lender to perform Landlord's
obligations under the Lease. Tenant shall make all payments under the Lease to
Lender or its designee upon receipt of written notice that such right has
accrued, and Tenant agrees not to prepay any sums payable by Tenant under the
Lease. Lender's receipt of such rent shall not relieve Landlord of its
obligations under the Lease, and Tenant shall continue to look solely to
Landlord for performance of such obligations.
5. Upon Lender's succession to the rights of Landlord under
the Lease, whether through possession, termination or cancellation of the Lease,
surrender, assignment, judicial action, subletting, foreclosure, delivery of a
deed in lieu of foreclosure or otherwise, Tenant will attorn to and recognize
Lender as the landlord under the Lease, and Lender will accept such attornment
and recognize Tenant's rights of possession and use of the Premises in
accordance with the terms of the Lease. Without
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further evidence of such attornment and acceptance, Tenant shall be bound by,
and shall comply with, each and every term, provision, covenant and obligation
contained in the Lease on Tenants part to be performed. Nothing contained in
this Agreement, or in any other instrument including, without limitation, the
Lease, shall impose upon Lender an obligation to complete or renovate the
Premises for the benefit of Tenant. Tenant's agreement to attorn shall not be
construed as amending Landlord's obligations under the Lease.
6. Lender shall not in any way or to any extent be:
(a) liable for any act or omission of any prior
landlord (including Landlord) in contravention of any provision of the Lease;
(b) subject to any offset, claim or defense which
Tenant might have against any prior landlord (including Landlord), unless Lender
has been given notice and an opportunity to cure the condition giving rise to
such offset, claim or defense as provided in Section 2 hereof;
(c) bound by any rent or additional rent which Tenant
might have paid more than thirty (30) days in advance to any prior landlord
(including Landlord);
(d) bound by any agreement or modification of the
Lease or of any Lease guaranty made without Lenders prior written consent; or
(e) in any way responsible for any security or other
deposit which was delivered to Landlord, and not forfeited by Tenant, but which
was not subsequently delivered to Lender.
7. If Lender or its designee acquires title to the Mortgaged
Property as a result of foreclosure of the Senior Mortgage or Subordinate
Mortgage, acceptance of a deed in lieu of foreclosure, or by obtaining control
of the Premises pursuant to the remedies available to Lender at law, in equity,
under the Senior Mortgage or Subordinate Mortgage, or otherwise, Tenant shall
have no recourse to any assets of Lender or such designee and, except for any
right that might exist as set forth in Section 6(b) hereof, Tenants sole remedy
for any act or omission of Lender or such designee in contravention of any
provision of the Lease shall be to terminate the Lease without recourse. Lenders
acquisition of title to or control of the Mortgaged Property, or the performance
by Lender of any of the obligations of Landlord under the Lease, shall in no
event be construed as an assumption of the Lease by Lender. Upon Lender's or its
designee's acquisition of title to the Mortgaged Property, the Lease shall be
deemed automatically modified to include the provisions contained herein
notwithstanding any other provisions of the Lease.
8. Tenant shall execute such other documents as Lender, in its
sole discretion, may deem necessary or appropriate to evidence the subordination
of the Lease to the Senior Mortgage and Subordinate Mortgage; provided, however,
that such
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<PAGE> 100
documents shall not materially adversely affect the parties' rights or
obligations under the Lease.
9. Any notice, demand, statement, request or consent given or
made hereunder shall be in writing and shall be deemed given on the next
business day if sent by Federal Express or other reputable overnight courier and
designated for next business day delivery, or on the third day following the day
such notice is deposited with the United States postal service first class
certified mail, return receipt requested, addressed to the address, as set forth
above, of the party to whom such notice is to be given, or to such other address
or additional party as Landlord, Tenant or Lender, as the case may be, shall in
like manner designate in writing. A copy of each notice, demand statement,
request or consent given or made hereunder shall be delivered in the manner
herein provided for the giving of notice to the following address:
Copies of notices to Landlord to:
James F. Stomber, Jr., Esq.
233 Broadway Owners LLC
c/o The Witkoff Group LLC
220 East 42nd Street
New York, New York 10017
Copies of notices to Tenant to:
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Chairperson, Real Estate Division
Copies of notices to Lender to:
Jill D. Block, Esq.
Shapiro, Shapses, Block LLP
315 Park Avenue South, 19th Fl.
New York, New York 10010
10. This Agreement shall be binding upon and shall inure to
the parties, their respective heirs, successors and assigns.
11. This Agreement shall be governed by, and construed in
accordance with, the laws of the State in which the Mortgaged Property is
located, without giving effect to conflict of laws principles or otherwise.
12. This Agreement may be executed in any number of
counterparts and each such duplicate original shall be deemed to be an original.
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<PAGE> 101
13. This Agreement may not be changed, amended or modified in
any manner other than by an agreement in writing specifically referring to this
Agreement and executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LEHMAN BROTHERS HOLDINGS INC.
By:
------------------------------------
Name:
Title:
233 BROADWAY OWNERS LLC
By:
------------------------------------
Name:
Title:
ORGANIC
By:
------------------------------------
Name:
Title:
5
<PAGE> 102
EXHIBIT A
Legal Description
<PAGE> 103
Exhibit C
Legal Description of the Land
ALL that certain plot, piece or parcel of land, situate, lying and
being in the Borough of Manhattan, County of New York, City and State of New
York, bounded and described as follows:
<PAGE> 104
SCHEDULE A
AS TO PARCEL A (BLOCK 123 LOT 3)
ALL that certain lot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:
BEGINNING at a point on the northerly side of Barclay Street, distant one
hundred ninety-two feet six and one-half inches Westerly from the corner formed
by the intersection of the said northerly side of Barclay Street and the
westerly side of Broadway, which point is opposite the center line of a party
wall;
RUNNING THENCE Northerly on a line forming an angle of 90 degrees 23 minutes 30
seconds on its westerly side with the northerly side of Barclay Street and
through the center line of said party wall seventy-five feet one and three
eighths inches to the median line of the block;
THENCE Westerly along said median line of the block and running through the
southerly wall of the one story brick building on the premises adjoining on the
North twenty-six feet and one-eighth of an inch to a point opposite the center
line of a twelve inch party wall of the one story building on premises described
herein and one story building on premises adjoining on the west;
THENCE Southerly on a line forming an angle of 89 degrees 53 minutes 40 seconds
on its easterly side with the last described line and through the center line of
said party wall seventy-four feet eleven and three-quarters inches to the
northerly side of Barclay Street; and
RUNNING THENCE Easterly along the northerly side of Barclay Street twenty-five
feet to the point or place of BEGINNING.
<PAGE> 105
Exhibit D
GUARANTY OF LEASE
THIS GUARANTY OF LEASE (the "Guaranty") made this ____ day of
__________ 1999, by OMNICOM GROUP INC. ("Guarantor"), a New York corporation
with an office at 437 Madison Avenue, New York, New York 10022, to and for the
benefit of 233 BROADWAY OWNERS LLC ("Landlord"), a New York limited liability
company.
W I T N E S S E T H:
WHEREAS, by lease dated of even date herewith (the "Lease") between
Landlord, as landlord, and Organic ("Tenant"), as tenant, Landlord leases to
Tenant, and Tenant leases from Landlord, the Premises under and as defined in
the Lease;
WHEREAS, Guarantor will benefit from Tenant's entering Into the Lease;
WHEREAS, Guarantor is executing and delivering this Guaranty as a
material inducement to Landlord entering into the Lease; and
WHEREAS, Landlord is unwilling to enter into the Lease unless Guarantor
executes and delivers this Guaranty to Landlord,
NOW, THEREFORE, in consideration of the execution and delivery of the
Lease by Landlord and in order to induce Landlord to accept the Lease and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Guarantor, for itself, its successors and assigns, hereby
agrees with Landlord for the benefit of Landlord, its successors and assigns, as
follows:
1. Definitions. Terms not otherwise defined herein shall have the
meaning described to them in the Lease.
2. Guaranty. Guarantor hereby guarantees to Landlord, within five (5)
days of receipt of written notice from Landlord to Guarantor, the full and
prompt payment, when due, of the Base Rent and Additional Rent and all other
sums and charges, however characterized, payable by Tenant under the Lease, and
further hereby guarantees the full and timely performance and observance of all
covenants, terms, conditions and agreements therein provided to be performed and
observed by Tenant subject to and in accordance with the provisions of the
Lease, and Guarantor hereby covenants and agrees to and with Landlord that if
Tenant, its successor or assigns should default at any time in the payment of
rent or any other sum or default at any time In the, payment of rent or any
other sum or charge payable under the Lease, or if Tenant, its successors or
assigns should default In the performance and observance of any of the
covenants, terms,
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conditions or agreements contained in the Lease, Guarantor will, upon expiration
of any grace period provided Tenant under the Lease, forthwith upon demand
therefor pay such rent and other sums and charges, and any arrears thereof, to
Landlord, subject to any defense or right of set-off or counterclaim permitted
pursuant to the provisions of the Lease that Tenant may assert, and will
forthwith faithfully perform and fulfill all such terms, covenants, conditions
and agreements on demand, and will pay to Landlord all damages, costs and
expenses that may result from any default by Tenant, its successors or assigns,
under the Lease, including without limitation, all costs or expenses, including
reasonable attorneys' fees and disbursements, incurred by Landlord or caused by
any such default and/or in any way relating to the enforcement or protection of
the rights of Landlord under this Guaranty or under the Lease, successive
recoveries may be had under this Guaranty. (All of the obligations guaranteed or
undertaken by Guarantor in this Section are hereinafter referred to as the
"Obligations").
3. Absolute Guaranty. Subject to the terms of the Lease and any
defenses, counterclaims or offsets which Tenant may have against Landlord which
are permitted pursuant to the terms of this Lease, this Guaranty is an
irrevocable, absolute and unconditional guaranty of payment and of performance.
It shall be enforceable against Guarantor Without the necessity of any suit or
proceeding on Landlord's part of any kind or nature whatsoever against Tenant,
its successors or assigns, and without the necessity of nonpayment,
nonperformance or non-observance or any notice of acceptance of this Guaranty
and without need for demand for payment under this Guaranty or of any other
notice or demand to which Guarantor might otherwise be entitled, all of which
Guarantor hereby expressly waives.
4. No Discharge. This Guaranty shall be a continuing guaranty and
Guarantor expressly agrees that the liability of Guarantor hereunder shall in no
way be terminated, affected, modified, released, impaired or diminished by
reason of:
(a) any assignment or subletting of the Premises or any part
thereof in accordance with the terms of the Lease;
(b) the amendment, modification or supplement of, or change
in, any of the terms, covenants, conditions or provisions of the Lease or this
Guaranty;
(c) any extension of time that may be granted by Landlord to
Tenant, Guarantor or their respective successors or assigns for (i) the payment
of any sum owing or payable under, or arising out of or on account of the Lease
or this Guaranty, or (ii) the performance of any obligation under the Lease or
this Guaranty;
(d) a changed or different use of the Premises, (provided that
no such change may be made unless consented to by Landlord pursuant to the
applicable provisions of the Lease), or by reason of any dealings or
transactions or matters occurring between Landlord and Tenant, and their
respective successors or assigns, whether or not notice thereof is given to
Guarantor;
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<PAGE> 107
(e) any enforcement, assertion or exercise or any failure,
omission or delay on the part of the Landlord to enforce, assert or exercise
against Tenant, its successors or assigns, any right, power or remedy conferred
on or available to Landlord in or by the Lease or this Guaranty or allowed at
law or in equity, or any action on the part of Landlord granting indulgence or
extension in any form whatsoever;
(f) the waiver by Landlord of the performance or observance by
Tenant or Guarantor of any of the agreements, covenants, terms or conditions
contained in the Lease or this Guaranty;
(g) the doing or the omission of any of the acts referred to
in the Lease or this Guaranty (including, without limitation, the giving of any
consent) provided such act or omission does not constitute a default by Landlord
under the Lease and same does not continue beyond any grace period set forth in
the Lease for such default;
(h) (i) the voluntary or involuntary liquidation,
dissolution, sale of all or substantially all of the assets, marshalling of
assets and liabilities, receivership, conservatorship, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar proceeding affecting, Tenant or
any of its assets (collectively "Bankruptcy Proceedings"); (ii) the release or
discharge of Tenant in any Bankruptcy Proceedings; (iii) the impairment,
limitation or modification of the liability of Tenant, or the estate of Tenant
in bankruptcy, or of any remedy for the enforcement of Tenants liability under
the Lease, resulting from any Bankruptcy Proceedings, by operation of any
current or future law or court decision with respect to bankruptcy or creditor's
rights; or (iv) the rejection of disaffirmance of the Lease in any Bankruptcy
Proceedings;
(i) the release of Tenant or Guarantor from the performance or
observance of any of the agreements, covenants, terms or conditions contained in
the Lease or this Guaranty by operation of law;
(j) the surrender by the holder thereof of any security for
the performance or observance of any of the agreements, covenants, terms or
conditions contained in the Lease;
(k) the inability or failure of Landlord to enforce any
provision of the Lease, or any remedies contained in the Lease, for any reason;
or
(l) the disposition by Guarantor of part or all of the
outstanding stock of Tenant.
5. Assignment and Subletting. Landlord's consent to any assignment or
subletting of or any portion of the Premises by any party by Tenant or Tenant's
successors or assigns made either with or without notice to Guarantor, shall in
no manner whatsoever release Guarantor from any liability hereunder.
6. Bankruptcy. In the event of the rejection or disaffirmance of the
Lease by Tenant or Tenant's trustee in bankruptcy pursuant to the bankruptcy
laws or any other
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<PAGE> 108
law affecting creditors' rights or in any Bankruptcy Proceeding, Guarantor will,
and does hereby (Without the necessity of any further agreement or act), assume
all obligations and liabilities of Tenant under the Lease, to the same extent as
if (a) it were originally named Tenant under the Lease, and (b) there had been
no such rejection or disaffirmance; and Guarantor will confirm such assumption
in writing, at the request of Landlord, upon or after such rejection or
disaffirmance; and Guarantor shall upon such assumption (to the extent permitted
by law) have all of the obligations and liabilities of Tenant under the Lease.
7. Right of Separate Actions. Landlord may bring and prosecute a
separate action against Guarantor to enforce its liabilities hereunder, whether
or not any action is brought against Tenant or any other person and whether or
not Tenant or any other person is joined in any such action or actions. Nothing
shall prohibit Landlord from exercising its rights against Guarantor, Tenant,
any security for the Obligations, and any other person simultaneously, jointly
and/or severally. Guarantor shall be bound by each and every ruling, order and
judgment obtained by Landlord against Tenant in respect of the Obligations,
whether or not Guarantor is a party to the action or proceeding in which such
ruling, order to judgment Is Issued or rendered.
8. Waiver of Rights of Subrogation. Guarantor hereby irrevocably waives
any rights to be subrogated to the rights of Landlord with respect to the
Obligations until such time as the Obligations are satisfied. Guarantor hereby
agrees that it will not institute or take any action seeking reimbursement
against Tenant until such time as Landlord shall have received payment in full
in cash in satisfaction of all of the Obligations. No failure on the part of
Landlord to exercise, and no delay in exercising, any right remedy or power
hereunder under shall operate as a waiver thereof, nor shall any single or
partial exercise by Landlord of any right, remedy or power hereunder preclude
any other or future exercise of any other right, remedy or power.
9. Waiver of Notice, Consent, Etc. (a) This Guaranty shall be construed
as a continuing, absolute and unconditional guarantee of payment and
performance.
(b) Guarantor hereby waives notice of acceptance of this
Guaranty by Landlord and of presentment, demand, protest, notice of protest and
of dishonor and all other notices relative to this Guaranty of every kind and
description now or hereafter provided by any agreement between Tenant and
Landlord or any statute or rule of law.
(c) Guarantor waives any and all notice of the creation or
accrual of any of the Obligations or of the reliance by Landlord upon this
Guaranty. Said Obligations, and each of them, shall conclusively be deemed to
have been created, contracted, or incurred in reliance upon this Guaranty and
all dealings between Tenant and Landlord shall likewise be conclusively presumed
to have been made or consummated in reliance upon this Guaranty.
(d) Guarantor hereby agrees that any term, covenant, and
provision contained in the Lease may be altered, modified, waived, released or
cancelled by Landlord, all without any further consent of Guarantor, and
Guarantor agrees that this
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Guaranty and its liability hereunder shall be in no way affected, diminished or
released by any such alteration, modification, release, waiver or cancellation.
10. Waiver of Election of Remedies. Guarantor waives any right to
require or compel Landlord to (a) proceed against Tenant or any other guarantor;
(b) proceed against or exhaust any security for the Obligations; or (c) pursue
any other remedy in Landlord's power whatsoever, and the failure of Landlord to
do any of the foregoing shall not exonerate, release or discharge Guarantor from
its absolute, unconditional and independent liabilities to Landlord hereunder.
Guarantor hereby waives any and all legal requirements that Landlord shall or
may institute, any action or proceedings at law or in equity against Tenant, or
anyone else, in respect of the Lease or resort to or seek to realize upon the
security held by Landlord, as a condition precedent to bringing an action
against Guarantor upon this Guaranty.
11. Continuing Guaranty. Until all Obligations are satisfied, Guarantor
shall not be released by any act or thing which might, but for this provisions,
be deemed a legal or equitable discharge of a surety, or by reason of any
waiver, extension, modification, forbearance or delay or other act or omission
of Landlord or its failure to proceed promptly or otherwise, or by reason of any
action taken or omitted or circumstance which may or might vary the risk or
affect the rights or remedies of Guarantor or by reason of any further dealings
between Tenant and Landlord, whether relating to the Lease or not, and Guarantor
hereby expressly waives and surrenders any defenses to its liability hereunder
based upon any of the foregoing acts, omissions, things or agreements or waivers
of Landlord; it being the purpose and intent of the parties hereto that the
obligations of Guarantor hereunder are absolute and unconditional under any and
all circumstances.
12. Remedies Cumulative. Guarantor hereby Waives notice of acceptance
of this Guaranty, notice of any obligations or liabilities contracted or
incurred by Tenant, and extensions of time granted to Tenant under the Lease.
13. Joinder of Actions. All of Landlord's rights and remedies under the
Lease and this Guaranty are intended to be distinct, separate and cumulative,
and no such right and remedy therein or herein mentioned, whether exercised by
Landlord or not, is intended to be an exclusion of or a waiver of any of the
others. The obligation of Guarantor hereunder shall not be released by
Landlord's receipt, application or release of any security given for the
performance and observance or covenants and conditions required to be performed
or observed by Tenant under the Lease, nor shall Guarantor be released by the
maintenance of or execution upon any lien which Landlord may have or assert
against Tenant and/or Tenant's assets.
14. Notices. All notices, demands, Instructions and other
communications required or permitted to be given to or made upon either party
hereto or any other person shall be in writing and shall be either personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested or by prepaid courier, and shall be deemed to be given for
purpose of this Guaranty in regard to registered or certified mail, three (3)
days after mailing, and in regard to personal delivery or prepaid courier,
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<PAGE> 110
on the day that such writing is delivered. Unless otherwise specified by notice
in accordance with the foregoing provisions of this Section, notices, demands,
instructions and other communications in writing shall be given to or made upon
the following persons at their respective addresses. indicated, below:
If to Guarantor:
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Attention: Legal Department
Telephone: 212-415-3600
Telecopy: 212-415-3530
with a courtesy copy to:
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Chairperson, Real Estate Department
Telephone: 212-468-4800
Telecopy: 212-468-4888
If to Landlord,
233 Broadway Owners LLC
c/o The Witkoff Group LLC
220 East 42nd Street
New York, New York 10017
Attention: Mr. Steven C. Witkoff
Telephone: 212-672-4700
Telecopy: 212-672-4726
with a courtesy copy to:
The Witkoff Group LLC
220 East 42 nd Street
New York, New York 10017
Attention: James F. Stomber, Jr., Esq.
Telephone: 212-672-4770
Telecopy: 212-672-3434
or at such other address as any of the parties may from time to time designate
by written notice given as herein required. Rejection or refusal to accept or
inability to deliver because of changed addresses or because no notice of
changed address was given shall be deemed a receipt of such notice.
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<PAGE> 111
15. Entire Agreement. This Guaranty represents the entire agreement
between Guarantor and Landlord with respect to the matters referred to herein
and therein and no waiver or modification hereof or thereof shall be effective
unless in writing and signed by Landlord and Guarantor.
16. GOVERNING LAW. THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED, ENFORCED, AND INTERPRETED ACCORDING TO THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE IN AND PERFORMED IN
THE STATE OF NEW YORK.
17. Successors and Assigns. This Guaranty shall be binding upon
Guarantor and upon its successors and assigns and shall inure to the benefit of
Landlord and its endorsees, successors and assigns.
18. Construction. Each and every provision of this guaranty has been
mutually negotiated, prepared and drafted; each party has been represented by
counsel; and in connection with the construction of any provision hereby or
deletions herefrom, no consideration shall be given to the issue of which party
actually prepared, drafted, requested or negotiated any provision or deletion.
19. Representations of Guarantor. Guarantor hereby represents, warrants
and covenants as follows:
(a) This Guaranty has been duly executed and delivered and
constitute the valid and binding obligation of Guarantor and is enforceable
against Guarantor in accordance with its terms subject, as to enforcement only,
to bankruptcy, insolvency, moratorium and other similar laws at the time in
effect affecting the enforceability of the rights of creditors generally and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) Guarantor is not insolvent (as such term is defined in
Section 101(29) of the Bankruptcy Code of 1978, as amended) and will not be
rendered insolvent (as such term is defined in Section 101(29) of the Bankruptcy
Code of 1978, as amended) by execution of this Guaranty or by the consummation
of the transaction contemplated thereby.
(c) The consummation of the transactions contemplated hereby
and the performance by Guarantor of its Obligations under this Guaranty will not
result in any breach of, give rise to a lien under, or constitute a default
under, any mortgage, deed of trust, lease, bank loan or credit agreement,
partnership agreement, corporate charter, by-laws or other agreement or
instrument to which Guarantor is a party or by which it may be bound or
affected.
(d) Guarantor is deriving or expects to derive a financial or
other advantage from each any every Obligation.
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20. Time of the Essence. Time shall be of the essence with regard to
the performance by Guarantor of its Obligations under this Guaranty.
21. Severability of Provisions. Any provision of this Guaranty which is
guaranty which is prohibited or unenforced shall be ineffective to the extent of
such prohibition or unenforceability without affecting the validity or
unenforceability provision.
22. Maximum Liability. Notwithstanding any other provision of this
Guaranty, the maximum liability of Guarantor under this Guaranty, whether for
any claim or in the aggregate for all claims, shall not exceed $4,500,000.
23. Reduction of Guaranty. The liability of Guarantor under this
Guaranty shall be reduced from $4,500,000 to $2,250,000 at such time as the net
income of Tenant for each of two (2) consecutive fiscal years equal or exceeds
Four Million Dollars ($4,000,000) and the net worth of Tenant for each of such
years is greater than Fifty Million Dollars ($50,000,000). The net income and
net worth shall be determined in accordance with generally accepted accounting
principles, consistently applied and shall be certified to Landlord during the
term of this Guaranty by the Chief Financial Officer of Tenant.
24. Termination of Guaranty. This Guaranty shall terminate only after
this Guaranty has been reduced in accordance with Section 23 upon the earlier to
occur of (i) Guarantor making payment to Landlord of the maximum liability of
Guarantor under this Guaranty as set forth in Section 22 of this Guaranty or
(ii) for each of two (2) consecutive fiscal years, the net income of Tenant
equals or exceeds Four Million Dollars ($4,000,000) and the net worth of Tenant
in each of such years shall equal or exceed Fifty Million Dollars ($50,000,000).
The net income and net worth shall be determined in accordance with generally
accepted accounting principles, consistently applied and shall be certified to
Landlord during the term of this Guaranty by the Chief Financial Officer of
Tenant.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty the day
and year first above written.
OMNICOM GROUP INC.
By:
------------------------------------
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<PAGE> 113
Exhibit E
Operating Expenses
EXPENSES
Payroll
Cleaning
Utilities
Electrical
HVAC
Elevator
Security
General Building Repairs
Trash Removal
Fire Safety Equipment & Maintenance
Management Fee
Administrative Expenses
Insurance
TOTAL OPERATING EXPENSES
Electric Income
Tenant Services Income
NET OPERATING EXPENSES
104
<PAGE> 114
Exhibit F
Landlords Work
105
<PAGE> 115
BUILDING EVALUATION: ARCHITECTURAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
ADA - Code Compliance The Landlord agrees to provide an ADA
entrance into the building, extending access
to the tenants' floors. The Landlord agrees
to upgrade the #26 car to be ADA compliant
and to upgrade the call buttons on the
Tenant's floors to comply with ADA
requirements. All ADA upgrades to existing
base building toilets shall be done by
Landlord. The Landlord agrees to upgrade and
modify the building class "E" system to
comply with ADA. The Tenant agrees to provide
speaker/strobes and fire pull stations within
the leased spaces.
Asbestos/Lead Hazard - The Landlord agrees to provide a fully
Code Compliance demolished tenant space clean of any existing
debris, asbestos containing materials. The
Landlord agrees to provide ACP-5's.
Convectors The Landlord agrees to replace or repair the
existing convector units, respective wiring,
switches and plumbing as required. Convectors
to be made operational.
Building Accessibility The Landlord agrees to provide the Tenant,
elevator accessibility from the lobby to all
floors being leased now by the Tenant without
Interruption or change of elevator banks.
Building/Tenant Signage The Landlord agrees to allow the Tenant to
install exterior signage, as well as interior
signage within the lobby(s) provided that all
such work has Landmark Preservation and
Landlord approval, not to be unreasonably
withheld. The Landlord agrees to provide
Tenants name in main lobby directory.
Existing Utilities/Structures Tenants Landlord agrees to mark out and
to Other identify any utilities to remain that are
traversing tenants space, that currently
serve adjacent Tenant spaces.
<PAGE> 116
BUILDING EVALUATION: ARCHITECTURAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
Architectural Issues for The Landlord agrees to demolish all of the
Landlord Guidelines following:
- Floors down to the existing base building
Demolition/Patching floor slab inclusive of but not limited to
the removal of all VAT/VCT carpet, wood
and tile flooring.
- Ceilings, down to base building ceiling
slab inclusive of but not limited to all
black iron, all suspended ceiling systems,
all hangers, straps and GWB ceiling, all
HVAC ducts, all abandoned
electrical/telephone wiring and conduits,
chandeliers and other ceiling mounted
devices and accessories rendered useless
to tenant.
- Walls and column enclosures except those
that are required to remain to enclose
existing plumbing, mechanical and
electrical chases and to maintain required
fire ratings.
Additionally;
- The Landlord agrees to fireproof all
existing exposed structural steel upon his
demolition and extend all corewalls,
column enclosures and fire rated wells to
underside of slab above where missing or
defective.
- The Landlord also agrees to patch the
floor slab flush at areas to existing
holes, divers and/or tripping hazards
prior to tenant reconstruction work.
- The Landlord agrees to provide existing
fire stopping at all rated walls and
floor/shaft openings and at all existing
beam penetrations.
- The Landlord agrees to allow the tenants
contractors to use larger capacity
steel-wheeled containers for rubbish
removal during non-business hours.
- The Landlord agrees to remove all
abandoned electrical telephone/data
wiring, devices and fixtures within the
proposed tenant spaces, back to the
existing electrical closet or telephone
closets.
- The Landlord agrees to clean and repair
all perimeter F.C./convector units to
fully function condition.
- The Landlord agrees to permit tenant to
trench and puncture the floor slab to the
extent that it does not effect the
structural integrity of the slab; as
reasonably determined and approved by the
Landlord.
Ceilings/Lighting The Landlord agrees to allow the Tenant to
design all lighting and ceilings on all
single tenant leased floors including
elevator and corridor routes.
<PAGE> 117
BUILDING EVALUATION: ARCHITECTURAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
Lease Issues The Landlord agrees to remove the existing
mechanical rooms/equipment on all Tenant
leased floors and relocate to a new
mechanical room, as reasonably approved by
Landlord and Tenant. The Landlord shall
provide a fire rated room including doors,
frames and all required dampers.
The Landlord agrees to remove all abandoned
HVAC equipment, piping and ductwork from the
Tenant's leased floors.
The Landlord agrees to allow the Tenant to
obtain a proposal, but not limited the Tenant
to the use of, the Landlord's security
vendor.
The Landlord agrees to allow the Tenant to
obtain a proposal, but not limited the Tenant
to the use of the Landlord's building
department expeditor.
The Landlord agrees to allow the Tenant to
obtain a proposal, but not limited to the
Tenant to the use of the Landlord's General
Contractors and Subcontractors.
The Landlord agrees to provide their
signature on the Landlord's department filing
applications with the first submission plan
review within five (5) business days after
Landlord's receipt of documents. No
construction work shall proceed without both
Building Department approval and Landlord
approval.
The Landlord agrees to allow the Tenant to
make modifications to the existing single
Tenant common corridor and lobbies.
<PAGE> 118
BUILDING EVALUATION: ELECTRICAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
Code Compliance Prior to turning the space over to the
Tenant, the Landlord has to correct any
violations cited by Now York City with
respect to electric and telephone closets in
a combined room in connection with the New
York City electrical and building codes
(NYCEC & BYCBC).
Fire Alarm The Landlord agrees to provide all
existing re-entry floors occupied by Tenant
with suitable electrified hardware and fire
alarm Interface.
Prior to turning the space over to the
Tenant, the Landlord shall completely upgrade
the Class "E" fire alarm system as per code
and comply with ADA requirements (lower
mounting height of fire pull stations, warden
stations and installed strobe lights in
toilets).
The Landlord agrees to provide on all floors
occupied by the Tenant an existing base
building fire alarm system that is adequate
to support the Tenants' fit out, including
security system interface. The system shall
be adequate to support bass building spaces
and functions.
The Landlord agrees to provide data gathering
panels on every other Tenant occupied floor
with sufficient alarm input points to support
the proposed occupancy. In conjunction with
the building's fire alarm vendor, the
Tenant's contractor shall provide the number
of connecting points required.
Electrical System The Landlord agrees to provide 200 amps of
Capacity and metering additional electrical capacity for the
Tenants' use to support a computer data
center and supplemental mechanical equipment
of area (i.e. computer room, data center)
requiring additional power.
The Landlord agrees to provide sub-metering
for each floor. Supplemental power to be
sub-metered at the Tenant's expense.
The Landlord agrees to provide base building
feeders adequate to support voltage drop as
defined by NYC electrical code.
<PAGE> 119
BUILDING EVALUATION: ELECTRICAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
Distribution For each Tenant's occupied floor the Landlord
agrees to provide the followings,
o One new electrical closet per floor.
o Landlord to provide 400 Amp to feed the 2
panelboards on each floor, (2) 42-pole
circuit breaker panel boards.
Demolition The Landlord agrees to remove all abandoned
wires and cables and existing conduits
(Tel./Elec./Data.).
The Landlord agrees to remove and/or relocate
abandoned wires and conduits in Tenant
occupied floors serving other Tenants on
floors above or below.
The Landlord agrees to cut back to the floor
wall or ceiling and remove wires and conduits
made obsolete In the Tenant's occupied space
and existing electrical closets. In addition,
all obsolete lighting and receptacle
panelboards shall be removed.
Emergency Power NO GENERATOR.
Access and Poke through The Landlord agrees to permit access to the
ceiling of floors below Tenant's space to
allow the Installation of poke-through
devices subject to approval by the Landlord,
at the Tenant's sole cost and expense, and
provided it does not compromise the
structural Integrity of the building.
Landlord agrees to permit the installation of
poke-through devices in Tenant occupied
floors, at the Tenant's sole cost and
expense, and provided it does not compromise
the structural integrity of the building.
Tel./Comm. and Data For each occupied floor, the Landlord agrees
to provide a base building telephone riser.
Landlord agrees to allowed space on
non-Tenant floors as required to permit
vertical system Infrastructure cabling (i.e.
telecommunications) between Tenant floors and
between Tenant space and base building
service entry locations (i.e. telephone)
subject to Landlord's approval, which may not
be unreasonably withheld or delayed
<PAGE> 120
BUILDING EVALUATION: ELECTRICAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
Cable Television The Landlord agrees to provide cable
television service to each Tenant floor.
Miscellaneous The Landlord agrees to fire stop all existing
slab penetrations; notably those located in
electric and telephone closets.
The Landlord agrees to allow the use of
Greenfield for electrical power wiring and
voice data applications in all partitions.
EMT will be utilized in all open spaces and
within suspended ceiling cavities.
<PAGE> 121
BUILDING EVALUATION: PLUMBING/FIRE PROTECTION
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
General The Landlord agrees to identify wet columns
(water, drain and vents) on each floor for
Tenant's use.
The Landlord agrees to deliver all toilets
and janitors closets on Tenant floors, fully
functional.
The Landlord agrees to allow sanitary drains
to run below Tenant's floor when required, at
Tenant's sole expense, provided it does not
compromise structural integrity of the
building.
The Landlord agrees to demolish and remove
all abandoned previous Tenant plumbing
systems/equipment back to risers. The Tenant
reserves the right to keep existing systems
and/or equipment within the Tenants space
provided no additional cost to Landlord.
The Landlord agrees to provide all plumbing
services (water, floor drains, etc) to
Janitor's closets.
Fire Protection The Landlord agrees to provide a complete and
to code, NYC compliant fire standpipe and
sprinkler system. The Landlord agrees to
provide sprinkler control valve(s) on each
floor for sprinkler loop connection and
distribution by Tenant. The Landlord shall
provide all tamper switches, flow switches
and wiring to building system.
<PAGE> 122
BUILDING EVALUATION: ARCHITECTURAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
Final Overview The Landlord agrees to provide the tenant
with all available base building
Architectural, Structural, Mechanical,
Plumbing and Electrical drawings and related
data.
The Landlord agrees to provide tenant with a
structurally sound space, free of any
structural deficiencies, and all existing
structural deficiencies discovered shall be
remedied in an expeditious manner, by
Landlord.
The Landlord stated that the building's
floors are designed to a 50 psf or greater.
The Landlord agrees to allow tenant to modify
floor/ceiling structure, as required to
accommodate any additional loading imposed by
tenant modifications.
The Landlord agrees to continue all facade
upgrade on the entire existing building, and
to repair any water penetration problems
along windows, walls and roofs.
<PAGE> 123
BUILDING EVALUATION: MECHANICAL
WOOLWORTH BUILDING
233 Broadway, New York Date September 30, 1999
Project: Floors 13 through 16 Rev. October 26, 1999
Project 3448
Lease Issues The Landlord agrees to demolish and remove
all abandoned existing previous tenant
mechanical systems/equipment back to base
Landlord system, excluding perimeter fan
coils.
See HVAC Specs Lease Exhibit
Per the NYC Electrical Code, The Landlord
agrees to provide fire/smoke dampers, as
required at all fire rated base building
mechanical room enclosures.
The Landlord agrees to supply an additional
of 10 Tons of condenser water for Tenant's
supplemental AC system requirements.
The Tenant agrees to Install air-cooled
condensers utilizing existing louvers on the
West Facade or install new louvers on
Interior courtyard facade. The Tenant shall
provide and install landmark approved louvers
as required. The Landlord shall assist with
the Landmark approval.
The Landlord agrees to provide air and water
reports at building core. This report shall
include supply and return air volumes and
temperatures, total static pressures and
outside air quantity.
The Landlord agrees to allow the Tenant
Install a kitchen exhaust duct riser subject
to Identifying a usable existing shaft. The
Landlord agrees to allow the Tenant space on
non-Tenant floors to construct a duct riser
within an existing shaft and terminating
kitchen exhausts on roof set backs, if deep
enough and pending mutually agreed locations
by the Landlord and Tenant, and subject to
Landmarks approval.
<PAGE> 124
Exhibit G
Confirmation of Beneficial Occupancy Date Agreement
AGREEMENT made this _____ day of _______________,199_ between 233
BROADWAY OWNERS LLC, a New York limited liability company, having an office c/o
The Witkoff Group LLC, 220 East 42nd Street, New York, New York 10017
("Landlord") and ORGANIC, a ________________ corporation, having an office at
__________________________________ ("Tenant").
WITNESSETH:
1. Landlord and Tenant have heretofore entered into a Lease dated as of
_______________, 199__ (hereinafter referred to as the "Lease") for the leasing
by Landlord to Tenant certain premises, all as in the Lease more particularly
described (collectively, the "Premises"), in the building known as 233 Broadway,
New York, New York.
2. Pursuant to Section 7.3(a) of the Lease, Landlord and Tenant agree
that the Beneficial Occupancy Date for the ______ floor portion of the Premises
was _______________, 199__.
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Confirmation of Beneficial Occupancy Date Agreement as of the day and year first
above written.
Landlord:
233 BROADWAY OWNERS LLC
By:
------------------------------------
Its:
-----------------------------------
Tenant:
ORGANIC
By:
------------------------------------
Its:
-----------------------------------
106
<PAGE> 125
Exhibit H
Form of Application for Payment
To be mutually agreed upon by Landlord and Tenant.
107
<PAGE> 126
Exhibit I
Cleaning Specifications for the Premises
108
<PAGE> 127
CLEANING SPECIFICATIONS
OBJECTIVES:
This Agreement is based upon the stated objectives and maintaining a program of
cleaning, sanitation and preservation of the premises on a level consistent with
the status and quality of the company to provide promptly and efficiently all
services listed In the specifications and to perform these services as indicated
at a cost that is feasible and appropriate.
AREAS TO BE COVERED:
The Contractor shall perform the following services throughout the premises, all
office areas, entrance lobbies. stairways, sidewalks, driveway, loading docks,
stairwell, lavatories, passageways and elevators. Services utility and
mechanical area shall be convered at the discretion of the Property Manager. The
areas stated above are to receive complete general cleaning maintenance
according to the specifications listed below.
The Contractor shag prepare a work assignment plan and develop schedules to
provide all coverage in all areas stated. This plan must be approved by the
Property Manager.
1. GENERAL OFFICE AREAS AND EMPLOYEE LOUNGE
A. NIGHTLY:
WASTEPAPER, RECYCLING AND TRASH CONTAINERS
1. All wastepaper, trash containers and recycling containers shall be
emptied, wiped clean and returned to original location. All wet
waste containers "shall be supplied with plastic bags (at
Contractors cost), which shall be changed as needed.
DESK AND CHAIRS:
2. Hand dust and wipe clean with damp or chemically treated cloth all
furniture, file cabinets, fixtures. Desk shall be dusted
thoroughly on all surfaces. including tops, sides and legs,
provided that tops are cleared of all paper.
WATER FOUNTAINS:
3. To ensure clean, health conditions at the water fountains, the
dispensing area and bowls shall be washed clean and polished. The
metal housing and all bright metal fixture units shell also be
washed clean and polished.
4. Damp wipe vinyl seating. Wash all composition and vinyl tile
flooring. Vacuum where required. Clean all wood surfaces and clean
under serving counters.
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<PAGE> 128
VINYL RESILIENT TILE FLOORS:
5. Remove all gum and foreign matter on sight. Spot clean resilient
floor as necessary. The vinyl tile floor in the service elevator
shall be swept and spray buffed nightly. All resilient tile floors
shall be mopped with a chemically treated dust mop. All spills and
adherents must be removed the same day of occurrence, especially
vending machine areas.
RECEIVING AND STORAGE AREAS.
6. All concrete floor shall be swept nightly using an oil base
sweeping compound. An sweeping compound shall be removed from
entire floor after work is finished.
B. PERIODICALLY/WEEKLY
1. Hand Dust Clean the following using a treated dust cloth:
Window sills
Pictures and frames
Counters
Fan Coil Cover, Thermostat Covers
Ledges and shelves under six (6) feet
Coat Racks and Trees
Baseboards and Moldings
Telephones, all types including office
Panel Boxes, Fire Extinguisher, Cabinets
Fire Hose Cabinet and Lamp Shades
Fire Warden Frames
2. Remove dirt smudges and marks with suitable cleaning agent from
the following:
Walls
Door, jambs and stops
Pushplates and kickplates
3. Clean all interior window metal and other unpainted interior metal
surfaces of the perimeter walls once per year using a metal
cleaning product.
4. Clean all interior window blinds using ultrasonic tanks or other
approved methods.
CARPETS:
5. Vacuum all rugs end carpeted areas throughout (three days per
week). All spills, spots and adherents must be removed the same
day of occurrence. Sweep all private stairways and vacuum if
carpeted.
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<PAGE> 129
II. LAVATORY CLEANING (WOMEN AND MEN'S ROOM):
A. NIGHTLY:
COMMODES & URINALS:
1. Commodes and urinals shall be washed and dried inside and outside
including under the lip of each bowl and urinal. All seats shall
be washed and disinfected and dried top and bottom.
WASH BASINS & GENERAL:
2. Wash basins shall be washed and dried inside and outside. All
bright metal fixture units and plumbing shall be polished. This
work shall be performed using an acceptable, nonpungent germicidal
disinfectant solution.
Wash all mirrors and powder shelves. Empty paper towel receptacles
and remove paper to designated area. Fill toilet holders. Tissue
and Towels furnished by the Owner. Fill soap and paper towel
dispensers. Clean and wash waste receptacle and dispensers. Empty
and wash clean sanitary disposal receptacle. Remove fingermarks
from painted surfaces. Remove all graffiti. All sanitary napkin
dispensers to be supplied and maintained by the Owner. Containers
are to be filled daily and money collected shall be retained and
controlled by the Owner.
TILE FLOORS:
3. Damp map all floors with a germicidal disinfectant to kill all
bacteria.
STALL PARTITIONS:
4. All stall partitions shall be damp wiped and dried. The two
stabilizing bars shall be free of dust and lint at all times.
NOTE: Report all mechanical deficiencies (i.e. dripping faucets, etc.) to a
Building Management representation.
B. PERIODIC/BI-MONTHLY:
WALLS, FLOORS AND CEILINGS:
1. Wash all stall partitions, door and ceramic walls, using a
germicidal disinfectant solution with a pH high enough to kill all
bacteria that may be present.
2. Wash all walls, entrance and egress doors, jambs stops and frames.
3. Scrub and wash all floors with a germicidal disinfectant to kill
all bacteria.
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<PAGE> 130
C. EVERY THREE MONTHS:
1. Vacuum, wash and dry all wall and ceiling grills.
2. Clean all light fixtures, ceiling diffusers and exhaust grills,
remove lens, if necessary.
II. MAIN ENTRANCE - GROUND FLOOR-REAR VESTIBULE-HALLWAYS-LOADING DOCKS
The entrance lobby is to be kept neat and clean at all times, the
following minimum cleaning operations shall be maintained to
attain this effect.
A. NIGHTLY:
1. Sweep all floors, stairs and ramps with chemically treated dust
mop.
2. Wash all stout floors, with a mild detergent and rinse properly
and buff to assure the floor remains with a high luster. All
floors, shall be mopped nightly, scrubbed and spray buffed or
refinished as required.
3. Empty and damp wipe and dry all metal ashtrays.
4. Damp wipe the Lobby console.
5. Damp wipe all ledges.
6. Damp wipe elevator starter panels and lobby call buttons.
7. Clean all metal doors, hand rails, and all revolving doors and
rums of revolving door interior and exterior. Clean and buff
elevator doors.
V. STAIRSTEPS AND LANDINGS:
A. WEEKLY:
1. All stairsteps and landings shall be swept. All handrails, side
panels and risen shall be damp wiped. Remove all fingermarks and
other smudges from walls, both sides of fire doors on each floor
and all spills and other adherents from all steps and landings.
2. All tile or concrete floors shall be mopped nightly, scrubbed
weekly. Spot clean soil and fingermarks from painted or washable
surfaces once per week.
VI. SIDEWALKS AND PLAZAS:
A. GENERAL:
1. Remove all gum and foreign matter on sight.
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2. Scrub clean and/or spray clean entrance stairs, sidewalks and
driveways as often as necessary.
3. Clean white marble garden planters as needed.
4. Sweep stain and sidewalks daily.
5. Scrub clean exterior sidewalk terrazzo with power scrubbing
machine, a portion of the side walk (1/5) per night (April 1st to
October 31st).
VII. PASSENGER ELEVATORS:
A. NIGHTLY:
1. Vacuum rugs of all elevators and remove gum marks. Shampoo monthly
or as needed.
2. Wipe down panels of elevator cabs and remove any graffiti. Polish
same.
3. Wipe down all metal in cab. Indicators and elevator doors shall be
wiped down nightly using an approved cleaner.
4. Elevator threshold saddle vacuumed nightly to eliminate any
debris.
5. Remove foreign matter from top of light fixtures in elevator cab.
B. WEEKLY:
1. Clean all ceiling diffusers and lights in each car weekly.
2. Clean and polish door saddles and frames on all floors once a week
and vacuum tracks.
C. MONTHLY:
1. Shampoo carpets once per month.
VIII. BUILDING AREAS:
A. NIGHTLY:
1. All ramps, loading docks, truck arms, garbage storage room and
street to be kept in a neat and clean condition at all times.
2. Keep wastepaper, cardboard and rubbish stored in approved
receptacles or assigned rooms,
3. Hose down loading dock
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B. MONTHLY:
1. Clean ramps, loading dock, trucking area, compactor area and
garbage storage room floors.
2. Clean all mechanical equipment areas. Floors to be washed, spray
buffed, stripped and washed, as directed by the Property Manager.
GENERAL CLEANING NOTES:
1. Stop sinks are to be cleaned after use. Mops, rags and equipment
am to be cleaned and stored. Electric, telephone closets and
storerooms are to be kept free from debris and other material.
Report storage of extraneous material and equipment to Building
Management. Maintain entire building exterior so that there is
uniformity of color, brightness and cleanliness at all times.
2. Adjust venetian blinds to uniform standard. Wipe clean all vending
machines, empty and clean all vending waste receptacles.
3. Upon completion of nightly chores, lights are to be extinguished,
doors closed and locked where possible and offices left in a neat
and orderly fashion.
ROOFS:
1. The Contractor shall familiarize himself with all roof details.
These areas shall be kept clean of debris at all times.
SNOW REMOVAL:
Promptly remove all snow and ice from all sidewalks, entrances and plazas upon
commencement of snowfall, and continuously thereafter using snowblowers as well
as shovels.
TRAINING:
1. All on-cite supervision must speak English. All personnel must be
instructed on a regular basis in the following areas:
a) Emergency evacuation procedures.
b) OSHA Right to Know Compliance (MSDS)
c) OSHA Bloodborne Pathogens Standard (1910.1030)
d) OSHA Personnel Protection Equipment Standards (1910.132, 133, 135,
136, 138)
e) Comprehensive Work-Safety Program relating to proper signage for
wet floors, electrical equipment, use in occupied areas, chemical
safety, etc.
f) All other regulatory agency requirements.
g) Train janitorial staff in techniques that focus on Indoor Air
Quality.
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CLEANING MATERIALS:
1. Materials-Safety Data Sheets will be provided to the Property
Manger for all cleaning materials used at the facility and any
additional information on emission characteristics.
2. Use "Environmentally Preferable Products" such as low-toxicity
cleaners, polishes, waxes, shampoos and oils.
3. Dilute and apply chemicals properly, these techniques must be
outlined in a written document, copy of which will be supplied to
Building Management.
4. Use recommend type vacuum cleaner with a motor greater than six
(6) amperes with a least 5-micron sealed, dual bag, filtration
system.
QUALITY ASSURANCE$:
1. Monthly quality assurance inspections will be conducted by the
Contractors Senior Management personnel not directly assigned to
the site, The Property Manager will be notified in advance of said
inspections and may chose, at his/her discretion, to conduct the
inspection jointly.
IX. DUTIES OF DAY PORTERS:
A. DAILY:
1. Sweep lobby two times a day, five days a week, using an approved
chemically treated cloth.
2. Clean all windows inside and out in the lobby once a day.
3. Empty and strain all exterior cigarette urns.
4. If carpeted, elevator cab floors to be vacuumed cleaned two times
a day more often if necessary.
5. Wipe clean and remove fingermarks from all metal and bright work
throughout interior of lobby up to hand reach daily, five times a
week
6. Sweep sidewalks, ramps, loading dock trucking area, etc., daily
and scrub and clean when necessary.
7. Lay down and remove lobby runners as necessary.
8. Police all men's lavatories twice each day, more often if needed.
9. Fill all dispensers as required. Tissue and paper towels to be
furnished by Owner.
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10. Police all lobby plants throughout.
11. Perform work assigned by the Building Management Office.
X. EXTERMINATION
1. The Contractor shall finish expert technicians equipped with the latest
and most modern equipment and chemicals at minimum protection for Post Control
Service of the entire building and keep the building five of insects, roaches,
waterbugs, ants, silverfish and/or rodent pests. The fees stated in this
contract shall include all labor and material any emergency or additional
services that may be required except Glue Boards shall be charged extra when
used.
Services will be rendered to all public areas, lobbies, ladies' and men's rooms,
ground floor areas, slop sink closets, elevator pits, cafeteria and loading dock
as well as all areas on all floors, mechanical areas and roof.
Should emergency service be necessary, such service and material will be
supplied at no additional cost. Service will be rendered once each week.
Scheduling for any special service and requests for routine service treatment
shall be coordinated with the Company's Building Management Office.
All areas shall be treated after 4:00 p.m. in order to achieve optimum results
and to cause on conflict with the Company's normal routines.
2. PEST CONTROL LOG.
Provide a Pest Control Log which will contain the following records and current
data:
a) An outline of the Pest Control Programming and frequency of same.
b) A current list of material (chemical and non-chemical) used in your
Pest Control Program. Material Safety Data Sheets (MSDS) for all
chemicals used at Building.
c) Exterminating service reports completed and logged after each.
d) Problem reporting form for recording and documenting problems which
might rise between services.
Interim roach control treatment will be instituted utilizing the application of
residual and non-residual insecticides.
An effective Rodent Control Program shall be instituted and maintained by the
use of rodenticide baits, dust, mechanical devices and glue boards.
XI. FLOOR MAINTENANCE:
Floor maintenance shall be performed for all Company space and additional
designated areas throughout the building and shall include carpet care,
stripping, scrubbing and
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<PAGE> 135
refinishing all vinyl tile floors and granite floors. The cleaning Contractor
shall prepare a work assignment plan, develop work schedule and flow charts to
provide full coverage of these areas. According to the following specifications:
ALL VINYL TILE FLOORS (AVAILABLE FROM CLEANING CONTRACTOR AT ADDITIONAL COST).
a) Stripped, scrubbed and refinished as required, but not less than once
per month.
b) Spray buffed once per week.
c) Spot cleaned as required.
- - WEEKLY
Clean interior/exterior glass doors.
- - FOUR (4) TIMES PER YEAR:
- Clean window interior and exterior (4 times per year)
- Clean all interior partition glass (Available from cleaning Contractor
at additional cost).
XIII. KITCHEN (AVAILABLE FROM CLEANING CONTRACTOR AT ADDITIONAL COST):
1. Damp wipe entire ceiling in kitchen and dishwashing area (2 times
per year). 2. Wash all ceramic tile walls throughout third floor
(2 times per year).
3. Wax wood surfaces as required.
4. Strip and re-wax composition tile floors monthly.
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Exhibit J
HVAC Specifications
The heating, air conditioning an ventilation systems of the Building
are designed to meet the following criteria:
<TABLE>
<S> <C>
-----------------------------------------------------------------------
Summer
-----------------------------------------------------------------------
Indoor 76(degree)FDB, 50%RH-/+10%
-----------------------------------------------------------------------
Outdoor 92(degree)FDB, 78(degree)WB
-----------------------------------------------------------------------
Winter
-----------------------------------------------------------------------
Indoor 68(degree)FDB, no RH Control
-----------------------------------------------------------------------
Outdoor 11(degree)FDB
-----------------------------------------------------------------------
Design Population 100 usable Sq. Ft./Person
-----------------------------------------------------------------------
Interior Zones Variable Volume
-----------------------------------------------------------------------
Perimeter Zones Constant Volume
-----------------------------------------------------------------------
HVAC Allowance Lights (Watt/Sq. Ft.) 1 - 1.5 Watts/usable Sq. Ft.
-----------------------------------------------------------------------
Equipment 1.3 - 1.8 Watts/usable Sq. Ft.
-----------------------------------------------------------------------
Total 3.2 Watts/usable Sq. Ft.
-----------------------------------------------------------------------
Average Interior Air Circulation .92 CFM/usable Sq. Ft.
-----------------------------------------------------------------------
</TABLE>
109
<PAGE> 137
Exhibit K
INTENTIONALLY DELETED
110
<PAGE> 138
Exhibit L
INTENTIONALLY DELETED
111
<PAGE> 139
Exhibit M
Floor Loads
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Floor Live Load Lbs. Per Square Foot
- -------------------------------------------------------------------------------
<S> <C>
13 50
- -------------------------------------------------------------------------------
14 50
- -------------------------------------------------------------------------------
15 50
- -------------------------------------------------------------------------------
16 50
- -------------------------------------------------------------------------------
17 50
- -------------------------------------------------------------------------------
18 50
- -------------------------------------------------------------------------------
19 50
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
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Exhibit N
Rules and Regulations
1. The sidewalks, driveways, entrances, passages, courts, lobbies,
esplanade areas, atrium, plazas, elevators, escalators, stairways, vestibules,
corridors, halls and other public portions of the Building ("Public Areas")
shall not be obstructed or encumbered by any tenant or used for any purpose
other than ingress and egress to and from the Premises, and no tenant shall
permit any of its employees, agents, licensees or invitees to congregate or
loiter in any of the Public Areas. No tenant shall invite to, or permit to
visit, its premises persons in such numbers or under such conditions as may
interfere with the use and enjoyment by others of the Public Areas. Fire exists
and stairways are for emergency use only, and they shall not be used for any
other purposes by any tenant, or the employees, agents, licensees or invitees of
any tenant. Landlord reserves the right to control and operate, and to restrict
and regulate the use of, the Public Areas and the public facilities, as well as
facilities furnished for the common use of the tenants, in such manner as it
deems best for the benefit of the tenants generally, including the right to
allocate certain elevators for delivery service, and the right to designate
which Building entrances shall be used by persons making deliveries in the
Building. No doormat of any kind whatsoever shall be placed or left in any
public hall or outside any entry door of the 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 Premises,
without the consent of Landlord. Such curtains, blinds, shades or screens must
be of a quality, type, design and color, and attached in the manner, approved by
Landlord. In order that the Building can and will maintain a uniform appearance
to those persons outside of the Building, each tenant occupying the perimeter
areas of the Building shall (a) use only building standard lighting in areas
where lighting is visible from the outside of the Building and (b) use only
building standard blinds in window areas which are visible from the outside of
the Building.
3. No sign, insignia, advertisement lettering, notice or other object
shall be exhibited, inscribed, painted or affixed by any tenant on any part of
the outside or inside of the Premises or the Building or on corridor
walls-without the prior consent of Landlord. Signs on each entrance door of the
Premises shall conform to building standard signs, samples of which are on
display in Landlord's rental office. Such signs shall, at the expense of Tenant
be inscribed, painted or affixed by signmakers approved by Landlord. In the
event of the violation of the foregoing by any tenant, Landlord may remove the
same without any liability, and may charge the expense incurred in such removal
to the tenant or tenants violating this rule. Interior signs, elevator cab
designations, if any, and lettering on doors and, subject to the Lease to which
these Rules and Regulations are attached (the "Lease"), the Building directory
shall, if and when approved by Landlord, be inscribed, painted or affixed for
each tenant by Landlord, at the expense of such
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tenant, and shall be of a size, color and style acceptable to Landlord. Only
Tenant named in the Lease shall be entitled to appear on the directory tablet.
Additional names may be added in Landlord's sole discretion under such terms and
conditions as the Landlord may approve.
4. Neither the sashes, sash doors, skylights or windows that reflect or
admit light and air into the halls, passageways or other public places in the
Building nor the heating, ventilating and air conditioning vents and doors shall
be covered or obstructed by any tenant, nor shall any bottles, parcels or other
articles be placed on the window sills or on the peripheral heating enclosures.
Tenant shall have no right to remove or change shades, blinds or other window
coverings within the Premises without Landlord's consent. Tenant acknowledges
that although the windows are not hermetically sealed Tenant is not permitted to
open such windows.
5. No showcases or other articles shall be put by Tenant in front of or
affixed to any part of the exterior of the Building, nor placed in the Public
Areas.
6. No acids, vapors or other harmful materials shall be discharged, or
permitted to be discharged, into the waster lines, vents or flues of the
Building. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed and
constructed, and no sweepings, rubbish, rags, acids or other foreign substances
shall be thrown or deposited therein. Nothing shall be swept or thrown into the
Public Areas or other areas of the Building, or into or upon any heating or
ventilating vents or registers or plumbing apparatus in the Building, or upon
adjoining buildings or land or the street. The cost of repairing any damage
resulting from any misuse of such fixtures, vents, registers and apparatus and
the cost of repairing any damage to the Building, or to any facilities of the
Building, or to any adjoining building or property, caused by any tenant, or the
employees, agents, licensees or invitees of such tenant, shall be paid by such
tenant. Any cuspidors or similar containers or receptacles shall be emptied,
cared for and cleaned by and at the expense of such tenant.
7. Except as otherwise permitted in the Lease; Tenant shall not mark,
paint, drill into, or in any way deface, any part of the Premises of the
Building; no boring, cutting or stringing of wires shall be permitted, except
with the prior written consent of, and as directed by, Landlord; no telephone,
telegraph or other wires or instruments shall be introduced into the Building by
any tenant except in a manner approved by Landlord; Tenant shall not lay
linoleum, or other similar floor covering, so that the same shall come in direct
contact with the floor of its 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 vehicles, 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, the playing of
musical instruments, recordings, radio or television, which, in the judgment of
Landlord, might
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disturb other tenants in the Building, shall be made or permitted by any tenant.
Nothing shall be done or permitted by any tenant which would impair or interfere
with the use or enjoyment by any other tenant of any other space in the
Building.
10. Nothing shall be done or permitted in the Premises, and nothing
shall be brought into, or kept in or about the Premises, which would impair or
interfere with any of the Building Equipment or the services of the Building or
the proper and economic heating, ventilating, air conditioning, cleaning or
other services of the Building or the Premises, nor shall there be installed by
any tenant any ventilating, air conditioning, electric or other equipment of any
kind which, in the judgment of Landlord, might cause any such impairment or
interference. No tenant, nor the employees, agents, licensees or invitees of any
tenant, shall at any time bring or keep upon its premises any inflammable,
combustible or explosive fluid, chemical or substance.
11. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by any tenant, nor shall any changes be made in locks or
the mechanism thereof. Duplicate keys for the Premises and toilet rooms shall be
procured only from Landlord, and Landlord may make a reasonable charge therefor
based upon Landlord's actual cost. Each tenant shall, upon the expiration or
sooner termination of the Lease of which these Rules and Regulations are a part,
turn over to Landlord all keys to 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 of replacement locks. Notwithstanding the foregoing, Tenant may, wit
Landlord's prior consent, install a security system in the Premises which uses
master codes or cards instead of keys provided that Tenant shall provide
Landlord with the master code or card for such system.
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 shall take place only during such hours and in such elevators as
Landlord may from time to time reasonably determine, which may involve overtime
work for Landlord's employees. Tenant shall reimburse Landlord for extra costs
reasonably incurred by Landlord including but not limited to the cost of such
overtime work. 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 apart. Landlord may require any person leaving
the Building with any package or other object or matter to submit a 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 or
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 any tenant for
damages or loss arising from the admission, exclusion or rejection of any person
to or from the Premises or the Building under the provisions of Rule 12 or of
Rule 15 hereof.
13. No tenant shall use or occupy, or permit any portion of its
premises to be used or occupied, as an office for a public stenographer or
public typist, or for the
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possession, storage, manufacture or sale of narcotics or dope or as a barber,
beauty or manicure shop, telephone or telegraph agency, telephone or secretarial
service, messenger service, travel or tourist agency, retail, wholesale or
discount shop for sale of merchandise, retail service shop, labor union,
classroom, company engaged in the business of renting office or desk space, or
for a public finance (personal loan) business, or as a hiring employment agency,
or as a stock brokerage board room. No tenant shall engage or pay any employee
in its premises, except those actually working for such tenant on its premises,
nor advertise for laborers giving an address at the Building. No tenant shall
use its premises or any part thereof, or permit the Premises or any part thereof
to be used, as a restaurant, shop, booth or other stand, or for the conduct of
any business or occupation which predominantly involves direct patronage of the
general public, or for manufacturing, or for the sale at retail or auction of
merchandise, goods or property of any kind.
14. Landlord shall have the right to prohibit any advertising or
identifying sign by any tenant which, in the judgment of Landlord, tends to
impair the appearance or reputation of the Building or the desirability of the
Building as a building for offices, and upon written notice from Landlord, such
tenant shall refrain from and discontinue such advertising or identifying sign.
15. Landlord reserves the right to exclude from the Building all
employees of any tenant who does not present a pas to the Building signed by
such tenant. Landlord or its agent will furnish passes to persons for whom any
tenant requests same in writing. Landlord reserves the right to require all
other persons entering the Building to sign a register, to be announced to the
tenant such person is visiting, and to be accepted as a visitor by such tenant
or to be otherwise properly identified (and, if not so accepted or identified,
reserves the right to exclude such persons from the Building) and to require
persons leaving the Building to sign a register or to surrender a pass given to
such person by the tenant visited. Each tenant shall be responsible for all
persons for whom it requests any such pass or any person whom such tenant so
accepts, and such tenant shall be liable to Landlord for all acts or omissions
of such persons. Any person whose presence in the Building at any time shall, in
the judgment of Landlord, be prejudicial to the safety, character, security,
reputation or interests of the Building or the tenants of the Building may be
denied access to the Building or may be ejected from the building. In the event
of invasion, riot, public excitement or other commotion, Landlord may prevent
all access to the Building during the continuance of the same by closing the
doors or otherwise, for the safety of tenants and the protection of property in
the Building.
16. Unless Landlord shall otherwise request, each tenant, before
closing and leaving its premises at any time, shall see that all lights are
turned out. All entrance doors in the Premises shall be kept locked by each
tenant when its premises are not in use. Entrance doors shall not be left open
at any time.
17. Each tenant shall, at the expense of such tenant, provide light,
power and water for the employees of Landlord, and the agents, contractors and
employees of Landlord, while doing janitor service or other cleaning in the
premises demised to such tenant and while making repairs or alterations in its
premises.
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18. The premises shall not be used for lodging or sleeping or for any
immoral or illegal purpose.
19. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
20. Canvassing, soliciting and peddling in the Building are prohibited
and each tenant shall cooperate to prevent the same.
21. The employees, agents, licensees and invitees of any tenant shall
not loiter around the Public Areas or the front, roof or any part of the
Building used in common by other occupants of the Building.
22. There shall not be used in any space, or in the Public Areas,
either by any tenant or by others, in the moving or delivery or receipt of
safes, freight, furniture, packages, boxes, crates, paper, office material or
any other matter or thing, any hand trucks except those equipped with rubber
tires, side guards and such other safeguards as Landlord shall require. No hand
trucks shall be used in passenger elevators.
23. No tenant shall cause or permit any odors of cooking or other
processes, or any unusual or objectionable odors, to emanate from its premises
which would annoy other tenants or create a public or private nuisance. No
cooking shall be done in the Premises except as is expressly permitted in the
Lease of which these Rules and Regulations are a part, except that Tenant shall
be permitted to use microwave ovens in any breakroom or lunch room located in
the Premises.
24. All paneling, doors, trim or other wood products not considered
furniture shall be of fire-retardant materials. Before installation of any such
materials, certification of the materials' fire-retardant characteristics shall
be submitted to and approved by Landlord, and installed in a manner approved by
Landlord.
25. Landlord reserves the right to rescind, alter, waive or add, as to
one or more or all tenants, any rule or regulation at any time prescribed for
all tenants of the Building generally when, in the reasonable judgment of
Landlord, Landlord deems it necessary or desirable for the reputation, safety,
character, security, care, appearance or interests of the Building, or the
preservation of good order therein, or the operation or maintenance of the
Building, or the equipment thereof, or the comfort of tenants or others in the
Building. No rescission, alteration, waiver or addition of any rule or
regulation in respect of one tenant shall operate as a rescission, alteration or
waiver in respect of any other tenant.
26. In the event of any conflict or inconsistency between-the
provisions of this Exhibit N and the Lease, the provisions of the Lease shall
prevail.
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Exhibit O
Form of Tenant Estoppel Certificate
TENANT ESTOPPEL CERTIFICATE AND AGREEMENT
(PREMISES: 233 BROADWAY, NEW YORK CITY)
THIS IS TO CERTIFY THAT:
1. The undersigned is the Lessee (the "Tenant") under that certain lease
(the "Lease") dated as specified in 6(a) below, by and between 233
Broadway Owners LLC, as Lessor (the "Landlord"), and the undersigned or
the person specified in 6(b) below, as Lessee, covering those certain
premises commonly known and designated as the floors or portions
thereof specified in 6(c) below (the "Premises"), at 233 Broadway, in
the Borough of Manhattan, City, County and State of New York.
2. The Lease (i) constitutes the entire agreement between the undersigned
and the Landlord with respect to the Premises, (ii) has not been
modified, changed, altered, or amended in any respect (except as
indicated in 6(h) below), and (iii) is the only Lease between the
undersigned and the Landlord affecting the Premises.
3. The undersigned has accepted and now occupies the entire premises
covered by the Lease, and all improvements required by the terms of the
Lease to be made by the Landlord have been completed to the
satisfaction of the undersigned.
4. (i) No party to the Lease is in default, (ii) the Lease is in full
force and effect, (iii) full rental is accruing thereunder and (iv) as
of the date hereof the undersigned has no charge, lien or claim of
offset (and no claim for any credit or deduction) under the Lease or
otherwise, against rents or other charges due or to become due
thereunder or on account of any prepayment of rent more than 30 days in
advance of its due date.
5. Since the date of the Lease, there has been no material adverse change
in the financial condition of the undersigned, and there are no
actions, whether voluntary or otherwise, pending against the
undersigned under the bankruptcy, reorganization, arrangement,
moratorium, or similar laws of the United States, any state thereof, or
any other jurisdiction.
6. (a) The date of the Lease is
(b) The original Lessee of the Lease, if different from the
undersigned, was __________.
(c) The premises covered by the Lease are Suite ___, ___ floor.
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(d) The term of the Lease began (or is scheduled to begin) on and the
expiration date is ___________.
(e) The fixed rent and additional rent for the Premises has been paid
to and including ____________.
(f) The monthly fixed rent currently being paid pursuant to the Lease
is $________ which includes $________ for electricity and
$________ for the Additional Rent Escalation. Tenant has paid ____
for the Real Estate Tax Escalation for the period _______ through
_______.
(g) The Landlord is holding a security deposit for the Tenant in the
amount of ________.
(h) The following are exceptions to the statements in 2(ii):
7. There are no tenant allowances, tenant improvement contributions,
settlement amounts, rebates or other obligations owing from Landlord to
Tenant except: _______
8. A true and correct copy of the Lease and all amendments thereto is
attached to this letter.
9. This estoppel certificate may be relied upon by 233 Broadway Owners LLC
and _______________________________________________.
Dated: ______________________________
By: _________________________________
Title: ______________________________
Signed On: __________________________
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Exhibit P
Memorandum of Lease
THIS MEMORANDUM OF LEASE (hereinafter referred to as the "Memorandum of
Lease") is made and entered into as of the ____ day of November, 1999 by and
between 233 BROADWAY OWNERS LLC, a New York limited liability company, with an
office c/o The Witkoff Group LLC, with an office at 220 East 42nd Street, New
York, New York 10017 (hereinafter referred to as "Landlord"), and ORGANIC INC.,
a Delaware corporation, with an office at 5 10 Third Street, 5th Floor, San
Francisco, California 94107 (hereinafter referred to as "Tenant").
W I T N E S S E T H:
For and in consideration of the sum of One Dollar ($1.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and the further consideration of the covenants and undertakings
hereinafter set forth, as well as each and every covenant, agreement and
undertaking set forth in that certain Lease between Landlord and Tenant dated as
of the date hereof (hereinafter referred to as the "Lease"), an executed copy
whereof is in the possession of each party hereto and all of which terms and
conditions are by reference made a part hereof as fully and completely as if
herein specifically set out in full, Landlord and Tenant do hereby covenant and
agree as follows:
1. LEASED PREMISES. Subject in all respects to the terms, provisions
and conditions of the Lease, by virtue of the Lease, Landlord has leased to
Tenant a leasehold estate and Tenant has leased from Landlord on the date of
execution of the Lease: (i) the thirteenth (13th), fourteenth (14th), fifteenth
(15th) and sixteenth (16th) floors, in accordance with the terms of the Lease
(collectively, "the Premises"), in that certain building (the "Building")
located at 233 Broadway, New York, New York more particularly described on
Schedule A annexed hereto (the "Land").
2. TERM. Subject in all respects to the terms, provisions and
conditions of the Lease, the original term of the Lease shall commence on the
date hereof (the "Term Commencement Date") and, unless sooner terminated
pursuant to law or pursuant to any of the terms of the Lease, shall end on the
last day of the month in which the fifteenth anniversary of the Base Rent
Commencement Date occurs (the "Expiration Date"). In addition, subject to the
terms, provisions and conditions of the Lease, Tenant shall have the option to
extend the term of the Lease beyond the Expiration Date for up to one (1) period
of five (5) years.
3. EXPANSION AND REDUCTION OF PREMISES. Subject in all respects to the
terms, provisions, conditions and expansion options set forth in the Lease,
Tenant may elect to expand the Premises to include the floors in the Building
set forth below:
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(a) The twelfth (12th) floor compromised of 27,845 rentable square
feet.
(b) The seventeenth (17th) floor comprised of 28,098 rentable square
feet.
(c) The eighteenth (18th) floor comprised of 28,098 rentable square
feet.
(d) The nineteenth (19th) floor comprised of 28,098 rentable square
feet.
4. USE. Subject in all respects to the terms, provisions and conditions
of the Lease, Tenant shall use the Premises for general and administrative
office use, which may include a cafeteria, telecommunication facilities, data
services, conference center mail or other commonly used facilities of Tenant for
use for Tenant's employees and such ancillary uses which are consistent with the
Class A nature of the Building.
5. CONFLICTING PROVISIONS. In the event that any conflict exists
between the terms and provisions of this Memorandum of Lease and the terms and
provisions of the Lease, the terms and provisions of the Lease shall be deemed
controlling in all respects.
6. EFFECT OF MEMORANDUM OF LEASE. Landlord and Tenant have executed,
delivered and shall record this Memorandum of Lease for the purpose of giving
notice to third persons of the existence and effect of the Lease without
recording the entire Lease itself. It is acknowledged that the complete,
detailed terms, covenants and conditions of the Lease appear in the Lease
itself, copies of which are in the possession of the parties hereto. Nothing
contained herein is intended to or does change, modify or affect any of the
terms or provisions of the Lease or the rights, duties, obligations, conditions
and agreements created thereby, all of which remain in fall force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Lease as of the day and year first above written.
LANDLORD:
233 Broadway Owners LLC
By:
------------------------------------
TENANT:
Organic, Inc.
By:
------------------------------------
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Exhibit Q
Location Map of Seventeenth Floor Option Space
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Exhibit R
Location Map of Nineteenth Floor Option Space
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Exhibit S
Location Map of Twelfth Floor Option Space
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Exhibit T
Location Map of Eighteenth Floor Option Space
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Exhibit U
Landlord's HVAC Equipment
The Landlord agrees to provide two (2) new 40 Ton DX AHU's to serve the
flow. AHU's shall be equipped with variable speed drives, DX Coils, hot water
heating coils and full capacity economizer coils with a condenser entering water
temperature of 53(degree) F. Landlord shall bear all costs of operating and
maintaining building provided heating and cooling systems.
AHU's to provide discharge air of sufficient quantity and temperature
to maintain a space temperature of 20(degree)F year round . Outside air shall be
supplied at a rate of twenty CFM per person based on occupancy of one person per
100 square foot. Power and lighting allowable heat gains shall be 6 watts per
square foot.
The Landlord agrees to provide complete mechanical systems including
mechanical equipment rooms, condenser waterpiping, return air boots, supply air
ductwork extending outside of MER for Tenants connection, outside air
connection, and all related louvers, plenums, dampers, fire dampers, controls,
etc. Sound levels outside MER shall not exceed NC-45.
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SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT
233 BROADWAY OWNERS LLC,
LANDLORD
ORGANIC,
TENANT
LEHMAN BROTHERS HOLDINGS INC.
LENDER
PREMISES:
A PORTION OF THE BUILDING LOCATED AT
233 BROADWAY
NEW YORK, NEW YORK
RECORD AND RETURN TO:
JILL D. BLOCK, ESQ.
SHAPIRO, SHAPSES, BLOCK LLP
315 PARK AVENUE SOUTH
19TH FLOOR
NEW YORK, NEW YORK 10010
<PAGE> 155
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT dated this
_______ day of __________, 1999 among 233 BROADWAY OWNERS LLC, with an address
at c/o The Witkoff Group LLC ("Landlord"), ORGANIC, a New York corporation with
an address at ______________, New York, New York ______ ("Tenant"). and LEHMAN
BROTHERS HOLDINGS INC., a Delaware corporation with an address at 3 World
Financial Center, New York, New York 10285 ("Lender").
W I T N E S S E T H:
WHEREAS, on December 4, 1998 Lender made (i) a loan to Landlord in the
principal amount of $105,000,000.00 of which the principal sum of $105,000,000
is now outstanding (the "Senior Loan") secured by a first mortgage lien and
security interest (the "Senior Mortgage") encumbering the real property and
improvements known as and located at 233 Broadway Owners LLC, New York, New York
and more particularly described on Exhibit A hereto (the "Mortgaged Property"),
and (ii) a certain subordinate loan to Landlord in the principal amount of
$56,135,706.41 (the "Subordinate Loan") secured by a subordinate mortgage lien
and security interest (the "Subordinate Mortgage") encumbering the Mortgaged
Property;
WHEREAS, Landlord and Tenant are parties to that certain Lease
affecting a portion of the Mortgaged Property (such portion, the "Premises")
dated __________, 1999 (the "Lease").
WHEREAS, as security for its obligations in respect of the Loan
Landlord has assigned to Lender all of Landlord's right, title and interest in
and to all existing and future leases affecting the Mortgaged Property,
including the Lease, and the rents payable thereunder;
WHEREAS, the Lease is subject and subordinate to the Senior Mortgage
and the Subordinate Mortgage, and Tenant's right, title and interest in, to and
under the Lease are subject and subordinate to Lender's right, title and
interest in, to and under the Senior Mortgage and the Subordinate Mortgage;
WHEREAS, Tenant has requested that Lender give certain assurances that,
subject to the terms and conditions of this Agreement, Tenants possession of the
Premises will not be disturbed by reason of foreclosure of the lien of either
the Senior Mortgage or the Subordinate Mortgage, or both, as the case may be;
WHEREAS, Lender is only willing to provide such assurances to Tenant
upon and subject to the express terms and conditions of this Agreement; and
WHEREAS, Landlord and Tenant have agreed to execute and deliver this
Agreement to Lender.
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NOW, THEREFORE, in consideration of the mutual premises herein
contained, and for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto do mutually
covenant and agree as follows:
1. The Lease is and at all times hereafter shall be subject and
subordinate in all respects to the Senior Mortgage and the Subordinate Mortgage
and to all renewals, modifications, substitutions, consolidations and extensions
thereof, and to all other future mortgages affecting the Mortgaged Property held
by Lender.
2. Any provision in the Lease to the contrary notwithstanding, a notice
by Tenant to Landlord of a default under the Lease by Landlord, which default is
of such a nature as to give Tenant a right to terminate the Lease, to reduce the
rent payable under the Lease or to credit or offset against future rents, shall
be effective only if: (a) such notice is also given to Lender; and (b) Lender
shall not have cured or remedied such default by the later to occur of: (i)
thirty (30) days after Lenders receipt of such notice; or (ii) thirty (30) days
after the expiration of any applicable notice or grace period under the Lease;
provided, however, that if: (A) such default is not reasonably capable of being
cured within the applicable period; and (B) Lender shall diligently proceed with
its efforts to cure, Lender shall have a reasonable additional period to cure
such default. Lender shall have the right, but not the obligation, to remedy or
cure any such default.
3. So long as Tenant Is not In default in the payment of rent,
additional rent or other charges, or in the performance of any of the terms,
covenants or conditions of the Lease, such default continuing beyond any
applicable notice or grace period, Tenants occupancy of the Premises during the
original or any renewal term of the Lease or any extension thereof shall not be
disturbed by Lender by reason of foreclosure of the Senior Mortgage or the
Subordinate Mortgage, or both, as the case may be, the acceptance by Lender or
Its designee of a deed in lieu of foreclosure, or the exercise of any remedy
available at law, in equity or under the Senior Mortgage or the Subordinate
Mortgage.
4. Lender's receipt of the rents payable by Tenant under the Lease,
pursuant to the Senior Mortgage and the Subordinate Mortgage or any assignment
of the Lease, shall not obligate Lender to perform Landlord's obligations under
the Lease. Tenant shall make all payments under the Lease to Lender or its
designee upon receipt of written notice that such right has accrued, and Tenant
agrees not to prepay any sums payable by Tenant under the Lease. Lenders receipt
of such rent shall not relieve Landlord of its obligations under the Lease, and
Tenant shall continue to look solely to Landlord for performance of such
obligations.
5. Upon Lender's succession to the rights of Landlord under the Lease,
whether through possession, termination or cancellation of the Lease, surrender,
assignment, judicial action, subletting, foreclosure, delivery of a deed in lieu
of foreclosure or otherwise, Tenant will attorn to and recognize Lender as the
landlord under the Lease, and Lender will accept such attornment and recognize
Tenant's rights of possession and use of the Premises in accordance with the
terms of the Lease. Without further evidence of such attornment and acceptance,
Tenant shall be bound by, and shall comply with, each and every term, provision,
covenant and obligation contained in the
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Lease on Tenant's part to be performed. Nothing contained in this Agreement, or
in any other instrument including, without limitation, the Lease, shall impose
upon Lender an obligation to complete or renovate the Premises for the benefit
of Tenant. Tenant's agreement to attorn shall not be construed as amending
Landlord's obligations under the Lease.
6. Lender shall not in any way or to any extent be:
(a) viable for any act or omission of any prior landlord
(including Landlord) in contravention of any provision of the Lease;
(b) Subject to any offset, claim or defense which Tenant might
have against any prior landlord (including Landlord), unless Lender has been
given notice and an opportunity to cure the condition giving rise to such
offset, claim or defense as provided in Section 2 hereof;
(c) bound by any rent or additional rent which Tenant might
have paid more than thirty (30) days in advance to any prior landlord (including
Landlord);
(d) bound by any agreement or modification of the Lease or of
any Lease guaranty made Without Lenders prior written consent; or
(e) in any way responsible for any security or other deposit
which was delivered to Landlord, and not forfeited by Tenant, but which was not
subsequently delivered to Lender.
7. If Lender or its designee acquires title to the Mortgaged Property
as a result of foreclosure of the Senior Mortgage or Subordinate Mortgage,
acceptance of a deed in lieu of foreclosure, or by obtaining control of the
Premises pursuant to the remedies available to Lender at law, in equity, under
the Senior Mortgage or Subordinate Mortgage, or otherwise, Tenant shall have no
recourse to any assets of Lender or such designee and, except for any right that
might exist as set forth in Section 6(b) hereof, Tenant's sole remedy for any
act or omission of Lender or such designee in contravention of any provision of
the Lease shall be to terminate the Lease without recourse. Lenders acquisition
of title to or control of the Mortgaged Property, or the performance by Lender
of any of the obligations of Landlord under the Lease, shall in no event be
construed as an assumption of the Lease by Lender. Upon Lenders or its
designee's acquisition of title to the Mortgaged Property, the Lease shall be
deemed automatically modified to include the provisions contained herein
notwithstanding any other provisions of the Lease.
8. Tenant shall execute such other documents as Lender, in its sole
discretion, may deem necessary or appropriate to evidence the subordination of
the Lease to the Senior Mortgage and Subordinate Mortgage; provided, however,
that such documents shall not materially adversely affect the parties' rights or
obligations under the Lease.
9. Any notice, demand, statement, request or consent given or made
hereunder shall be in writing and shall be deemed given on the next business day
if sent
3
<PAGE> 158
by Federal Express or other reputable overnight courier and designated for next
business day delivery, or on the third day following the day such notice is
deposited with the United States postal service first class certified mail,
return receipt requested, addressed to the address, as set forth above, of the
party to whom such notice is to be given, or to such other address or additional
party as Landlord, Tenant or Lender, as the case may be, shall in like manner
designate in writing.
A copy of each notice, demand statement, request or consent given or
made hereunder shall be delivered in the manner herein provided for the giving
of notice to the following address:
Copies of notices to Landlord to:
James F. Stomber, Jr., Esq.
233 Broadway Owners LLC
c/o The Witkoff Group LLC
220 East 42nd Street
New York, New York 10017
Copies of notices to Tenant to:
Davis & Gilbert LLP
1740 Broadway
New York, New York 10019
Attention: Chairperson, Real Estate Division
Copies of notices to Lender to:
Jill D. Block, Esq.
Shapiro, Shapses, Block LLP
315 Park Avenue South, 19th Fl.
New York, New York 10010
10. This Agreement shall be binding upon and shall inure to the
parties, their respective heirs, successors and assigns.
11. This Agreement shall be governed by, and construed in accordance
with, the laws of the State in which the Mortgaged Property is located, without
giving effect to conflict of laws principles or otherwise.
12. This Agreement may be executed in any number of counterparts and
each such duplicate original shall be deemed to be an original.
13. This Agreement may not be changed, amended or modified in any
manner other than by an agreement in writing specifically referring to this
Agreement and executed by the parties hereto.
4
<PAGE> 159
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LEHMAN BROTHERS HOLDINGS INC.
By:
------------------------------------
Name:
Title:
233 BROADWAY OWNERS LLC
By:
------------------------------------
Name:
Title:
ORGANIC
By:
------------------------------------
Name:
Title:
5
<PAGE> 160
STATE OF NEW YORK )
:ss.:
COUNTY OF NEW YORK )
On this ___ day of ______________, in the year 1999, before me
personally appeared, to me known, who, being by me duly sworn, did depose and
say that he resides at _____________________; that he is an Authorized Signatory
of LEHMAN BROTHERS HOLDINGS INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by
authority of the board of directors of said corporation.
----------------------------------------
Notary Public
STATE OF _________________ )
:ss.:
COUNTY OF ________________ )
On the ____ day of _____________ in the year 1999 before me, the
undersigned, personally appeared __________________ personally known to me or
proved to me on the basis of satisfactory evidence to be the individual(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
----------------------------------------
Notary Public
STATE OF _________________ )
:ss.:
COUNTY OF ________________ )
On the ___ day of ___________, 1999, before me personally came _________________
to me known, who, being by me duly sworn, did depose and say that he resides at
No. _____________________________________ that he is the ________________ of
ORGANIC, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that t was so affixed by order of the
board of directors of said corporation, and that he signed his name thereto by
like order.
----------------------------------------
Notary Public
<PAGE> 161
EXHIBIT A
Legal Description
<PAGE> 162
Memorandum of Lease
THIS MEMORANDUM OF LEASE (hereinafter referred to as the "Memorandum of
Lease") is made and entered into as of the __________ day of November, 1999 by
and between 233 BROADWAY OWNERS LLC, a New York limited liability company, with
an office c/o The Witkoff Group LLC, with an office at 220 East 42d Street, New
York, New York 10017 (hereinafter referred to as "Landlord"), and ORGANIC INC.,
a Delaware corporation, with an office at 510 Third Street, 5th Floor, San
Francisco, California 94107 (hereinafter referred to as "Tenant").
WITNESSETH:
For and in consideration of the sum of One Dollar ($1.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and the further consideration of the covenants and undertakings
hereinafter set forth, as well as each and every covenant, agreement and
undertaking set forth in that certain Lease between Landlord and Tenant dated as
of the date hereof (hereinafter referred to as the "Lease"), an executed copy
whereof is in the possession of each party hereto and all of which terms and
conditions are by reference made a part hereof as fully and completely as if
herein specifically set out in full, Landlord and Tenant do hereby covenant and
agree as follows:
1. LEASED PREMISES. Subject in all respects to the terms, provisions
and conditions of the Lease, by virtue of the Lease, Landlord has leased to
Tenant a leasehold estate and Tenant has leased from Landlord on the date of
execution of the Lease: (i) the thirteenth (13th), fourteenth (14th), fifteenth
(15th) and sixteenth (16th) floors, in accordance with the terms of the Lease
(collectively, "the Premises"), in that certain building (the "Building")
located at 233 Broadway, New York, New York more particularly described on
Schedule A annexed hereto (the "Land").
2. TERM. Subject in all respects to the terms, provisions and
conditions of the Lease, the original term of the Lease shall commence on the
date hereof (the "Term Commencement Date") and, unless sooner terminated
pursuant to law or pursuant to any of the terms of the Lease, shall end on the
last day of the month in which the fifteenth anniversary of the Base Rent
Commencement Date occurs (the "Expiration Date"). In addition, subject to the
terms, provisions and conditions of the Lease, Tenant shall, have the option to
extend the term of the Lease beyond the Expiration Date for up to one (1) period
of five (5) years.
3. EXPANSION AND REDUCTION OF PREMISES. Subject in all respects to the
terms, provisions, conditions and expansion options set forth in the Lease,
Tenant may elect to expand the Premises to include the floors in the Building
set forth below:
(a) The twelfth (12th) floor compromised of 27,845 rentable
square feet.
<PAGE> 163
(b) The seventeenth (17th) floor comprised of 28,098 rentable
square feet.
(c) The eighteenth (18th) floor comprised of 28,098 rentable
square feet.
(d) The nineteenth (19th) floor comprised of 28,098 rentable
square feet.
4. USE. Subject in all respects to the terms, provisions and conditions
of the Lease, Tenant shall use the Premises for general and administrative
office use, which may include a cafeteria, telecommunication facilities, data
services, conference center mail or other commonly used facilities of Tenant for
use for Tenant's employees and such ancillary uses which are consistent with the
Class A nature of the Building.
5. CONFLICTING PROVISIONS. In the event that any conflict exists
between the terms and provisions of this Memorandum of Lease and the terms and
provisions of the Lease, the terms and provisions of the Lease shall be deemed
controlling in all respects.
6. EFFECT OF MEMORANDUM OF LEASE. Landlord and Tenant have executed,
delivered and shall record this Memorandum of Lease for the purpose of giving
notice to third persons of the existence and effect of the Lease without
recording the entire Lease itself. It is acknowledged that the complete,
detailed terms, covenants and conditions of the Lease appear in the Lease
itself, copies of which are in the possession of the parties hereto. Nothing
contained herein is intended to or does change, modify or affect any of the
terms or provisions of the Lease or the rights, duties, obligations, conditions
and agreements created thereby, all of which remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Lease as of the day and year first above written.
LANDLORD:
233 Broadway Owners LLC
By:
------------------------------------
<PAGE> 164
TENANT:
Organic, Inc.
By:
------------------------------------
<PAGE> 165
LEASE
233 BROADWAY OWNERS LLC,
a New York
limited liability company (LANDLORD)
and
ORGANIC, INC.
a Delaware corporation (TENANT)
233 BROADWAY
NEW YORK, NEW YORK
<PAGE> 166
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. DEFINITIONS AND BASIC PROVISIONS...........................................5
2. LANDLORD'S AUTHORITY; PREMISES; TERM, RENEWAL.............................13
3. RENTABLE AREA.............................................................16
4. BASE RENT.................................................................16
5. ADDITIONAL RENT - ESCALATIONS.............................................16
6. LATE CHARGE...............................................................28
7. LANDLORD'S WORK...........................................................28
8. LANDLORD'S OBLIGATIONS - UTILITIES AND SERVICES...........................34
9. USE.......................................................................41
10. COMPLIANCE WITH LAWS.....................................................42
11. REPAIRS..................................................................44
12. ALTERATIONS BY TENANT....................................................46
13. INSPECTIONS..............................................................49
14. SIGNS....................................................................49
15. BUILDING DIRECTORY.......................................................50
16. INSURANCE: WAIVER OF SUBROGATION.........................................50
17. TENANT'S EQUIPMENT.......................................................52
18. NON-LIABILITY AND INDEMNIFICATION........................................53
19. ASSIGNMENT AND SUBLETTING................................................55
20. SUBORDINATION AND ATTORNMENT.............................................60
21. ACCESS, CHANGE IN FACILITIES.............................................62
</TABLE>
<PAGE> 167
<TABLE>
<S> <C>
22. RULES AND REGULATIONS....................................................64
23. DAMAGE OR DESTRUCTION....................................................64
24. EMINENT DOMAIN...........................................................66
25. CONDITIONS OF LIMITATION.................................................68
26. REMEDIES.................................................................69
27. SURRENDER OF PREMISES....................................................72
28. BROKERAGE................................................................73
29. TENANT ESTOPPEL CERTIFICATES.............................................73
30. LANDLORD ESTOPPEL CERTIFICATES...........................................73
31. NOTICES..................................................................73
32. PERSONAL MATTERS.........................................................74
33. ENVIRONMENTAL MATTERS....................................................74
34. ARBITRATION..............................................................77
35. SECURITY AREA............................................................78
36. NO RECORDING.............................................................78
37. MISCELLANEOUS............................................................78
38. EXPANSION OPTION.........................................................81
39. EIGHTEENTH FLOOR STORAGE SPACE...........................................83
40. TERMINATION RIGHT OF TENANT..............................................83
41. THE LOWER MANHATTAN PLAN.................................................83
42. GUARANTEE, SECURITY DEPOSIT..............................................86
43. RIGHT OF FIRST REFUSAL...................................................87
44. SURRENDER SPACE..........................................................88
</TABLE>
<PAGE> 168
EXHIBITS
Exhibit A-1 Location Map of Thirteenth Floor Premises
Exhibit A-2 Location Map of Fourteenth Floor Premises
Exhibit A-3 Location Map of Fifteenth Floor Premises
Exhibit A-4 Location Map of Sixteenth Floor Premises
Exhibit B Form of Subordination, Nondisturbance and Attornment Agreement
Exhibit C Legal Description of the Land
Exhibit D Form of Guaranty of Lease
Exhibit E Operating Expenses
Exhibit F Landlord's Work
Exhibit G Confirmation of Beneficial Occupancy Date Agreement
Exhibit H Form of Application for Payment
Exhibit I Cleaning Specifications for the Premises
Exhibit J HVAC Specifications
Exhibit K INTENTIONALLY DELETED
Exhibit L INTENTIONALLY DELETED
Exhibit M Floor Loads
Exhibit N Rules and Regulations
Exhibit 0 Form of Tenant Estoppel Certificate
Exhibit P Memorandum of Lease
Exhibit Q Location Map of Seventeenth Option Space
Exhibit R Location Map of Nineteenth Floor Option Space
Exhibit S Location Map of Twelfth Floor Option Space
<PAGE> 169
Exhibit T Location Map of Eighteenth Floor Option Space
Exhibit U Landlord's HVAC Equipment
<PAGE> 1
EXHIBIT 10.17
ORGANIC INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Organic Inc. 2000
Employee Stock Purchase Plan.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Organic Inc., a Delaware corporation and
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean the (i) base salary payable to a
Participant by the Company or any Designated Subsidiary during such
participant's period of participation in one or more offering periods under the
Plan plus (ii) all overtime payments, bonuses, commissions, current
profit-sharing distributions and other incentive-type payments. Such
Compensation shall be calculated before deduction of (A) any income or
employment tax withholdings or (B) any pre-tax contributions made by the
Participant to any Code Section 401(k) salary deferral plan or any Code Section
125 cafeteria benefit program now or hereafter established by the Company or any
Designated Subsidiary. However, Compensation shall NOT include any contributions
(other than Code Section 401(k) or Code Section 125 contributions) made on the
Participant's behalf by the Company or any Designated Subsidiary to any employee
benefit or welfare plan now or hereafter established.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
<PAGE> 2
(g) "Employee" shall mean any individual who is an Employee of
the Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship will be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sale price for the Common Stock (or the mean of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) or system on the
date of such determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or;
(2) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board, or;
(4) For the purposes of the Enrollment Date under the
first Offering Period under the Plan, the Fair Market Value of the Common Stock
shall be the price to public as set forth in the final prospectus included
within the Registration Statement on Form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Common Stock.
(k) "Offering Period" shall mean the period of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be
<PAGE> 3
exercised, commencing on the first Trading Day on or after January 1 and July 1
of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
shall be the period of approximately twenty-four (24) months commencing with the
first Trading Day on or after the date on which the Company's registration
statement on Form S-1 (or any successor form thereof) is declared effective by
the Securities and Exchange Commission and terminating on the last Trading Day
in the period ending June 30, 2002. The duration and timing of Offering Periods
may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date; provided,
however, that the first Purchase Period of the first Offering Period under the
Plan shall be the period of approximately twenty-four (24) months commencing
with the first Trading Day on or after the date on which the Company's
registration statement on Form S-1 (or any successor thereof) is declared
effective by the Securities and Exchange Commission and terminating on the last
Trading Day in the period ending June 30, 2002.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign,
of which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) if, immediately after
the grant,
<PAGE> 4
such Employee (or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own capital stock of the
Company and/or hold outstanding options to purchase such stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of the capital stock of the Company or of any Subsidiary, or (ii) which permits
his or her rights to purchase stock under all employee stock purchase plans of
the Company and its subsidiaries to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) worth of stock (determined at the fair market value
of the shares at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after January 1 and July 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof; provided, however, that the first Offering
Period shall be the period of approximately twenty-four (24) months commencing
with the first Trading Day on or after the date on which the Company's
registration statement on Form S-1 (or any successor form thereof) is declared
effective by the Securities and Exchange Commission and terminating on the last
Trading Day in the period ending June 30, 2002. The Board shall have the power
to change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without shareholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period. Such amount shall be a whole percentage of the
participant's Compensation and shall not exceed fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed fifteen percent (15%) of the participant's Compensation during
said Offering Period.
<PAGE> 5
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b) (8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than 1,500
shares of the Company's Common Stock (subject to any adjustment pursuant to
Section 18), and provided further, that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. Exercise of the option
<PAGE> 6
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof, and shall expire on the last day of the
Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account will be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions will not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, he or she will be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option will be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option will be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
<PAGE> 7
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be ____________,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 18 hereof. On January 1 each year commencing with January 1, 2001,
the aggregate number of shares of the Company's Common Stock available under the
Plan shall automatically be increased by the number of shares necessary to cause
the number of shares of Company Common Stock then available for purchase to be
restored to ______________. If, on a given Exercise Date, the number of shares
with respect to which options are to be exercised exceeds the number of shares
then available under the Plan, the Company shall make a pro rata allocation of
the shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will
be registered in the name of the participant or in the name of the participant
and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be only administered by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
<PAGE> 8
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease
<PAGE> 9
in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Periods then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Offering
Periods then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for his option has been changed to the New Exercise Date and that his
option will be exercised automatically on the New Exercise Date, unless prior to
such date he has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
19. Amendment or Termination.
<PAGE> 10
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 18 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
<PAGE> 11
22. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. To the extent
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated November 22, 1999 relating to the financial statements of Organic,
Inc. which appear in such Registration Statement. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/S/ PRICEWATERHOUSECOOPERS LLP
- -----------------------------------------
San Francisco, California
January 10, 1999
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, Gerald Bruce
Redditt, constitutes and appoints Jonathan Nelson, Michael Hudes and Susan L.
Field, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for them and in their name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to Registration Statement No. 333-91627,
and any subsequent registration statement filed pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------- ------------------ ------------------
<S> <C> <C>
/s/ GERALD BRUCE REDDITT Director January 7, 2000
-----------------------------
Gerald Bruce Redditt
</TABLE>
